##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 1-11412
 BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED
  Not Applicable
    
    Bermuda(Translation of Registrants name into English)
    
    (Jurisdiction of Incorporation or Organization)
 Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong
  Title of each class
    
    Exchange on which registeredAmerican Depositary Shares
    
    New York Stock Exchange, Inc.Ordinary Shares, par value US$0.01 per share
    
    The Stock Exchange of Hong Kong Limited
 Securities registered or to be registered pursuant to Section 12(g) of the Act: None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 Number of outstanding shares of each of the issuers classes of capital or common stock as of December 31, 2006:
    o þ
  o þ
  þ o
  o þ o
  o þ
  o þ




---



##### 



Table of Contents
 PageITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    2ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3. KEY INFORMATION
    
    
    2ITEM 4. INFORMATION ON THE COMPANY
    
    
    21ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    52ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    68ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    81ITEM 8. FINANCIAL INFORMATION
    
    
    86ITEM 9. THE OFFER AND LISTING
    
    
    88ITEM 10. ADDITIONAL INFORMATION
    
    
    90ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    103ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    105Part IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    105ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    105ITEM 15. CONTROLS AND PROCEDURES
    
    
    105ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    108ITEM 16B. CODE OF ETHICS
    
    
    108ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    108ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
    
    
    109ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    109Part IIIITEM 17. FINANCIAL STATEMENTS
    
    
    110ITEM 18. FINANCIAL STATEMENTS
    
    
    110ITEM 19. EXHIBITS
    
    
    110EX-1.2 AMENDMENTS TO BYE-LAWS OF BRILLIANCE CHINA AUTOMOTIVEEX-7.1 STATEMENT EXPLAINING RATIOS CALCULATIONEX-8.1 LIST OF SIGNIFICANT SUBSIDIARIESEX-12.1 SECTION 302 CERTIFICATION OF THE CEOEX-12.2 SECTION 302 CERTIFICATION OF THE CFOEX-13.1 SECTION 906 CERTIFICATION OF THE CEO AND CFO
  i




---



##### Table of Contents



CONVENTIONS
  FORWARD-LOOKING STATEMENTS
  
    
    unexpected adverse effects on the economy of the Peoples Republic of
China, or China, and Chinas automobile sector in particular;
    
    increased competition from other domestic and international automobile
manufacturers;
    
    increased costs for raw materials and components;
    
    possible further revaluation of the Renminbi against foreign currencies; and
    
    fluctuations in foreign exchange rates.
  CURRENCY TRANSLATION
  1




---



##### Table of Contents



ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 Selected Financial Data
 Historical Financial Information of Brilliance China Automotive
  2




---



##### Table of Contents



(Amounts in millions,
    
    As of and for the years ended December 31,except per share/ADS and operating data)
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2006(Rmb)
    
    (US$)Income Statement Data:Total Sales
    
    
    7,319.5
    
    
    
    10,109.6
    
    
    
    6,542.0
    
    
    
    5,469.0
    
    
    
    10,484.8
    
    
    
    1,343.5Cost of sales
    
    
    5,411.3
    
    
    
    7,727.1
    
    
    
    5,491.3
    
    
    
    5,012.0
    
    
    
    9,960.6
    
    
    
    1,276.3Gross Profit
    
    
    1,908.1
    
    
    
    2,382.4
    
    
    
    1,050.7
    
    
    
    457.0
    
    
    
    524.2
    
    
    
    67.2Selling, general and administrative expenses
    
    
    1,067.2
    
    
    
    1,410.1
    
    
    
    1,510.4
    
    
    
    1,195.3
    
    
    
    1,384.7
    
    
    
    177.4Net income (loss)
    
    
    610.5
    
    
    
    780.8
    
    
    
    1.2
    
    
    
    (671.3
    )
    
    
    (386.1
    )
    
    
    (49.5
    )Balance Sheet Data:Total assets
    
    
    13,853.7
    
    
    
    18,288.2
    
    
    
    17,776.4
    
    
    
    14,692.3
    
    
    
    14,580.4
    
    
    
    1,868.3Current assets
    
    
    8,263.0
    
    
    
    10,286.5
    
    
    
    9,428.3
    
    
    
    7,110.2
    
    
    
    7,768.6
    
    
    
    995.5Current liabilities
    
    
    7,332.7
    
    
    
    8,031.0
    
    
    
    8,187.7
    
    
    
    8,059.8
    
    
    
    7,181.5
    
    
    
    920.2Capital stock
    
    
    303.2
    
    
    
    303.4
    
    
    
    303.4
    
    
    
    303.4
    
    
    
    303.4
    
    
    
    38.9Total shareholders equity
    
    
    6,005.3
    
    
    
    6,886.3
    
    
    
    6,857.7
    
    
    
    6,139.7
    
    
    
    5,765.9
    
    
    
    738.8Cash Flow Statement Data:Payment for capital expenditure
    
    
    798.8
    
    
    
    955.9
    
    
    
    999.1
    
    
    
    558.0
    
    
    
    304.2
    
    
    
    39.0Depreciation and amortization
    
    
    270.6
    
    
    
    677.8
    
    
    
    603.0
    
    
    
    616.6
    
    
    
    811.5
    
    
    
    104.0Net cash flows provided by (used in) operating activities
    
    
    1,913.0
    
    
    
    753.4
    
    
    
    (712.4
    )
    
    
    883.4
    
    
    
    1,145.6
    
    
    
    146.8Net cash flows provided by (used in) investing activities
    
    
    (2,209.9
    )
    
    
    (2,491.3
    )
    
    
    (729.2
    )
    
    
    338.4
    
    
    
    514.8
    
    
    
    66.0Net cash flows provided by (used in) financing activities
    
    
    365.9
    
    
    
    2,281.1
    
    
    
    853.9
    
    
    
    (1,622.9
    )
    
    
    (1,035.7
    )
    
    
    132.7Per Share/ADS Data:Basic earnings (loss) per share
    
    
    0.17
    
    
    
    0.21
    
    
    
    0.0003
    
    
    
    (0.1830
    )
    
    
    (0.1053
    )
    
    
    (0.01
    )Basic earnings (loss) per ADS
    
    
    16.65
    
    
    
    21.30
    
    
    
    0.03
    
    
    
    (18.30
    )
    
    
    (10.53
    )
    
    
    (1.3
    )Diluted earnings (loss) per share
    
    
    0.17
    
    
    
    0.21
    
    
    
    0.0003
    
    
    
    (0.1830
    )
    
    
    (0.1053
    )
    
    
    (0.01
    )Diluted earnings (loss) per ADS
    
    
    16.65
    
    
    
    21.16
    
    
    
    0.03
    
    
    
    (18.30
    )
    
    
    (10.53
    )
    
    
    (1.3
    )Cash dividends declared per ADS(1)
    
    
    1.48
    
    
    
    2.12
    
    
    
    1.07
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aOperating Data:Production
volume (units)Minibus  Deluxe model
    
    
    8,620
    
    
    
    9,291
    
    
    
    7,682
    
    
    
    8,752
    
    
    
    14,277Minibus  Mid-priced model
    
    
    56,959
    
    
    
    65,734
    
    
    
    56,215
    
    
    
    48,131
    
    
    
    53,811Subtotal  Minibuses
    
    
    65,579
    
    
    
    75,025
    
    
    
    63,897
    
    
    
    56,883
    
    
    
    68,088Zhonghua Sedans(2)
    
    
    8,890
    
    
    
    27,054
    
    
    
    11,806
    
    
    
    6,854
    
    
    
    63,560Total
    
    
    74,469
    
    
    
    102,079
    
    
    
    75,703
    
    
    
    63,737
    
    
    
    131,648Sales volume
(units)Minibus  Deluxe model
    
    
    9,017
    
    
    
    9,004
    
    
    
    6,626
    
    
    
    9,940
    
    
    
    14,196Minibus  Mid-priced model
    
    
    56,121
    
    
    
    65,614
    
    
    
    54,992
    
    
    
    50,060
    
    
    
    52,049Subtotal  Minibuses
    
    
    65,138
    
    
    
    74,618
    
    
    
    61,618
    
    
    
    60,000
    
    
    
    66,245Zhonghua Sedans(2)
    
    
    8,816
    
    
    
    25,600
    
    
    
    10,982
    
    
    
    9,000
    
    
    
    62,281Total
    
    
    73,954
    
    
    
    100,218
    
    
    
    72,600
    
    
    
    69,000
    
    
    
    128,526
 3




---



##### Table of Contents



(1)
    
    Calculated using the respective U.S. dollar to Renminbi year-end
noon buying rates for the years presented. Brilliance China
Automotive declared cash dividends per ordinary share in H.K.
dollars in each of 2004, 2003 and 2002.(2)
    
    Commercial production of Zhonghua sedans began in August 2002. Exchange Rate Information
  Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    High
    
    Low2002
    
    
    8.2800
    
    
    
    8.2772
    
    
    
    8.2800
    
    
    
    8.27652003
    
    
    8.2767
    
    
    
    8.2771
    
    
    
    8.2800
    
    
    
    8.27652004
    
    
    8.2765
    
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.27642005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9574
    
    
    
    8.0702
    
    
    
    7.8041January 2007
    
    
    7.7714
    
    
    
    7.7883
    
    
    
    7.8127
    
    
    
    7.7705February 2007
    
    
    7.7410
    
    
    
    7.7468
    
    
    
    7.7632
    
    
    
    7.7410March 2007
    
    
    7.7232
    
    
    
    7.7338
    
    
    
    7.7454
    
    
    
    7.7232April 2007
    
    
    7.7090
    
    
    
    7.7190
    
    
    
    7.7345
    
    
    
    7.7090May 2007
    
    
    7.6516
    
    
    
    7.6758
    
    
    
    7.7065
    
    
    
    7.6463June 2007
(through June 20, 2007)
    
    
    7.6180
    
    
    
    7.6465
    
    
    
    7.6680
    
    
    
    7.6175
 
 Source:
    
    The noon buying rate in New York for cable transfers
payable in foreign currencies as certified for
customs purposes by the Federal Reserve Bank of New
York.(1)
    
    Determined by averaging the rates on the last business day of each
month during the respective year and on the last business day of each
week during the respective month.
 4




---



##### Table of Contents



Risk Factors
  Risks Relating to Brilliance China Automotive Minibus and Sedan Businesses
 Brilliance China Automotive experienced a net loss of Rmb 386.1 million in 2006 and may not be
profitable in 2007 or in subsequent years.
    If demand for minibuses and sedans in China does not increase, and if Shenyang Automotive does not
increase its market share, the ability of Shenyang Automotive to increase its sales volume will be
adversely impacted.
  5




---



##### Table of Contents



Delays in the development of new products, lack of consumer acceptance of new products and
unforeseen shifts in consumer preferences may have a negative effect on Brilliance China
Automotives financial results.
  Brilliance China Automotive has experienced a management turnover and could continue to have
problems retaining and recruiting key personnel in the future.
   6




---



##### Table of Contents



There are risks involved in Brilliance China Automotives joint venture with BMW to produce BMW
sedans in China.
  Failure by Brilliance China Automotive to continue to form and maintain alliances with foreign
automobile manufacturers could adversely affect its competitiveness.
  The inability of Shenyang Automotive to access Toyotas technical resources to upgrade Shenyang
Automotives products, or Toyotas provision of assistance to any of Shenyang Automotives
competitors could negatively impact Shenyang Automotives sales and competitive position.
  7




---



##### Table of Contents



Any delay or disruption in Shenyang Automotives ability to obtain engines from Toyota could limit
Shenyang Automotives ability to produce its deluxe minibuses.
  Any delay or disruption in Shenyang Automotives ability to obtain engines could limit Shenyang
Automotives ability to produce its Zhonghua sedans.
  8




---



##### Table of Contents



If Brilliance China Automotive fails to upgrade its existing production facilities or build new
facilities in a timely and cost-efficient manner, its businesses, financial condition and results
of operation may be negatively affected.
  Shenyang Automotives competitors may have access to more advanced technology, greater financial
resources and more substantial support from the Chinese government, which could negatively affect
Shenyang Automotives competitive position.
  Huachen, as Brilliance China Automotives substantial shareholder, may not always act in the best
interest of other shareholders.
  9




---



##### Table of Contents



Significant changes in the cost or availability of raw materials or components may have a material
adverse impact on Brilliance China Automotives results of operations.
  Product liabilities and recall claims may adversely affect Brilliance China Automotives results of
operation.
  Brilliance China Automotives business and future growth depend on availability of funding.
  10




---



##### Table of Contents



Brilliance China Automotive is required to comply with increasingly stringent environmental, safety
and other standards applicable to its vehicles and manufacturing facilities.
  Brilliance China Automotive is exposed to potential risks and increased costs from the requirements
to evaluate internal control over financial reporting under the Sarbanes-Oxley Act of 2002, and has
identified material weaknesses in its internal control as a result of such evaluation.
   11




---



##### Table of Contents



There is no assurance that the research and development carried out by Brilliance China Automotive
will materialize in products that can achieve market acceptance.
  12




---



##### Table of Contents



Brilliance China Automotives intellectual property rights may be infringed by third parties and
Brilliance China Automotive may also face infringement claims brought by third parties.
   Brilliance China Automotive has uninsured risks.
  Brilliance China Automotives Zhonghua local brand may not succeed and Brilliance China
Automotive may subsequently suffer losses as PRC consumers give more weight to brand recognition as
they make automobile purchase decisions.
 13




---



##### Table of Contents



Risks Relating to the Minibus and Sedan Industries in China
 Chinas automobile demands may become more volatile due to macroeconomic factors.
   
    
    economic and monetary policies implemented by the Chinese government;
    
    availability of automobile consumption loans;
    
    availability of automobile insurance policies;
    
    consumer confidence;
    
    volatility in petroleum, diesel and other commodity prices; and
    
    development of transportation infrastructure, for example express ways.
  14




---



##### Table of Contents



Competition is intense in Chinas automobile industry.
   Reduced tariffs and import restrictions on foreign-made motor vehicles and motor vehicle components
as a result of Chinas entry into the WTO may lead to increased competition for Brilliance China
Automotive.
   15




---



##### Table of Contents



The automobile industry is heavily regulated in China, and automobile-related regulations may
become even more stringent in the future.
  
    
    crash test requirements and other safety standards in relation to automobile and automotive parts
and components;
 
    
    emission standards;
 
    
    maximum fuel consumption;
 
    
    minimum warranty requirements;
 
    
    automobile recall requirements;
 
    
    noise, waste, discharge and other pollution controls relating to manufacturing of automobiles;
 
    
    restrictions on road use, including time restriction and segmental restriction; and
 
    
    market entry requirements and/or minimum production requirements for automobile and automotive
components and parts manufacturers.
  16




---



##### Table of Contents



Chinas automobile industry is significantly dependent upon the economy of China.
  Increase in fuel prices may adversely affect demand for automobiles.
  
    
    have an adverse impact on Chinas economy and may thereby result in a slow down for
automobile demand;
    
    increase Brilliance China Automotives production costs due to increase in costs of
petrochemical products; and
    
    discourage customers from purchasing automobiles due to increased running costs.
  Chinas re-adjustment of consumption taxes on vehicles may cause decline of demand for certain
models Brilliance China Automotive currently manufactures.
  17




---



##### Table of Contents



Risks Relating to Chinas Economy and Regulatory System
 Chinas economic, political and social conditions, as well as government policies, could affect
Brilliance China Automotives businesses.
  
    
    extent of government involvement;
    
    level of development;
    
    growth rate;
    
    control of foreign exchange; and
    
    allocation of resources.
   18




---



##### Table of Contents



Exchange rate fluctuations may affect the results of operations of Brilliance China Automotive.
   Significant changes to Chinas income tax regime could have a material adverse effect on Brilliance
China Automotives results of operations.
  Budgetary constraints on Chinas government entities and state enterprises could affect Shenyang
Automotives sales and pricing of products.
  19




---



##### Table of Contents



Any significant failure or disruption of Chinas banking system could materially and adversely
affect Brilliance China Automotives ability to obtain credit.
  Shenyang Automotives ability to obtain sufficient foreign exchange to satisfy its requirements is
dependent on authorization of the State Administration of Foreign Exchange of China.
  There are inherent uncertainties in Chinas legal system which may affect Brilliance China
Automotive.
   20




---



##### Table of Contents



There can be no assurance that there will not be another significant outbreak of a highly
contagious disease in China.
   
 ITEM 4. INFORMATION ON THE COMPANY
 History and Development of Brilliance China Automotive
    21




---



##### Table of Contents



22




---



##### Table of Contents



23




---



##### Table of Contents



Business Overview
    24




---



##### Table of Contents



Principal Products
    25




---



##### Table of Contents



DeluxeMinibus(Granvia or
    
    Deluxe
    
    Mid-priced
    
    Zhonghua
    
    ZhonghuaGranse
    
    Minibus
    
    Minibus
    
    Sedan
    
    SedanModel(1))
    
    (Hiase Model)
    
    (Hiase Model)
    
    Zunchi
    
    JunjieMaximum number
of passengers
    
    78
    
    15
    
    15
    
    5
    
    5Engine type
    
    Toyota 4-cylinder
2.7-liter gasoline
engine and
Mianyang
Xinchen 2.7-liter
gasoline engine
    
    Toyota 4-cylinder
2.4-liter gasoline
engine and
Mitsubishi
2.4-liter gasoline
engine
    
    Mianyang Xinchen
and XinguangBrilliance
4-cylinder
2.2-liter gasoline
engine
    
    Mitsubishi
4-cylinder 1.8,
2.0 and 2.4-liter
gasoline
engine
    
    Mitsubishi
4-cylinder
1.8 and 2.0-liter
and Mitsubishi &
Harbin DongAn
1.6-liter gasoline
engineHorsepower
(bhp)
    
    105
    
    100.6
    
    92.5
    
    122170
    
    134173Price Range in Rmb(2)
    
    119,800239,800
    
    121,800156,800
    
    64,800101,800
    
    105,800209,800
    
    85,800157,800Fuel Consumption
(Liters/100 km)(3)(4)
    
    10
    
    10
    
    9.8
    
    6.5  7.6
    
    6.2  7.6Maximum speed(4)
    
    158 km/hr
    
    130 km/hr
    
    130 km/hr
    
    185  210 km/hr
    
    180  210 km/hrDomestic component content
    
    > 80%
    
    > 85%
    
    100%
    
    92100%
    
    9099%Length
    
    4.7 m
    
    4.8 m
    
    4.8 m
    
    4.88 m
    

    4.65 m
 
 (1)
    
    Known as Grace before February 2004.(2)
    
    Actual price depends on specific model.(3)
    
    Based on an average speed of 50-55 kilometers per hour for minibuses and 80 kilometers per hour for sedans.  26




---



##### Table of Contents



BMW Brilliance
    
    BMW Brilliance3-Series Sedan
    
    5-Series SedanModels
    
    320i and 325i
    
    523Li, 525Li and 530LiMaximum
number ofpassengers
    
    5
    
    5Engine types
    
    BMW 4 and 6-cylinder
2.0-liter and 2.5-liter
gasoline engines
    
    BMW 6-cylinder
2.5-liter and 3.0-liter
gasoline enginesHorsepower
(bhp)
    
    150  218
    
    177258Price range in Rmb(1)
    
    339,800461,000
    
    477,600699,000Fuel Consumption
(Liters/100 km)(2)
    
    7.9  9.0
    
    9.4  9.5Maximum speed
    
    215  242 km/hr
    
    227  250 km/hrLength
    
    4.52 m
    
    4.98 m
 
 (1)
    
    Actual price depends on specific model.(2)
    
    Based on an average speed of 80 kilometers per hour. Deluxe minibus
   Mid-priced minibus
 27




---



##### Table of Contents



Zhonghua sedans
  28




---



##### Table of Contents



2004
    
    2005
    
    2006Revenue
    
    
    
    
    
    Revenue
    
    
    
    
    
    Revenue(Rmb millions)
    
    %
    
    (Rmb millions)
    
    %
    
    (Rmb millions)
    
    %Minibus salesDeluxe minibus
    
    
    960
    
    
    
    14.7
    
    
    
    958
    
    
    
    17.5
    
    
    
    1,460
    
    
    
    13.9Mid-priced minibus
    
    
    3,797
    
    
    
    58.1
    
    
    
    2,989
    
    
    
    54.7
    
    
    
    3,020
    
    
    
    28.8Zhonghua sedan
    
    
    1,324
    
    
    
    20.2
    
    
    
    863
    
    
    
    15.8
    
    
    
    5,190
    
    
    
    49.5Subtotal
    
    
    6,081
    
    
    
    93.0
    
    
    
    4,810
    
    
    
    88.0
    
    
    
    9,670
    
    
    
    92.2Other sources of income(1)
    
    
    461
    
    
    
    7.0
    
    
    
    659
    
    
    
    12.0
    
    
    
    815
    
    
    
    7.8Total
    
    
    6,542
    
    
    
    100.0
    
    
    
    5,469
    
    
    
    100.0
    
    
    
    10,485
    
    
    
    100.0
 
 (1)
    
    Including sales of components and scrap metal. 29




---



##### Table of Contents



2004
    
    2005
    
    2006Province/
    
    Revenue
    
    
    
    
    
    Revenue
    
    
    
    
    
    RevenueMunicipality
    
    (Rmb millions)
    
    %
    
    (Rmb millions)
    
    %
    
    (Rmb millions)
    
    %Beijing
    
    
    1,131
    
    
    
    18.6
    
    
    
    755
    
    
    
    15.7
    
    
    
    1,180
    
    
    
    12.2Guangdong
    
    
    821
    
    
    
    13.5
    
    
    
    529
    
    
    
    11.0
    
    
    
    1,057
    
    
    
    10.9Liaoning
    
    
    644
    
    
    
    10.6
    
    
    
    567
    
    
    
    11.8
    
    
    
    1,673
    
    
    
    17.3Shanghai
    
    
    566
    
    
    
    9.3
    
    
    
    452
    
    
    
    9.4
    
    
    
    803
    
    
    
    8.3Jiangsu
    
    
    389
    
    
    
    6.4
    
    
    
    283
    
    
    
    5.9
    
    
    
    667
    
    
    
    6.9Zhejiang
    
    
    328
    
    
    
    5.4
    
    
    
    188
    
    
    
    3.9
    
    
    
    474
    
    
    
    4.9Shandong
    
    
    237
    
    
    
    3.9
    
    
    
    183
    
    
    
    3.8
    
    
    
    522
    
    
    
    5.4Tianjin
    
    
    183
    
    
    
    3.0
    
    
    
    115
    
    
    
    2.4
    
    
    
    193
    
    
    
    2.0Heilongjiang
    
    
    134
    
    
    
    2.2
    
    
    
    82
    
    
    
    1.7
    
    
    
    184
    
    
    
    1.9Hebei
    
    
    128
    
    
    
    2.1
    
    
    
    87
    
    
    
    1.8
    
    
    
    222
    
    
    
    2.3Hubei
    
    
    128
    
    
    
    2.1
    
    
    
    82
    
    
    
    1.7
    
    
    
    164
    
    
    
    1.7Hunan
    
    
    128
    
    
    
    2.1
    
    
    
    96
    
    
    
    2.0
    
    
    
    203
    
    
    
    2.1Shaanxi
    
    
    128
    
    
    
    2.1
    
    
    
    77
    
    
    
    1.6
    
    
    
    163
    
    
    
    1.7Henan
    
    
    110
    
    
    
    1.8
    
    
    
    106
    
    
    
    2.2
    
    
    
    193
    
    
    
    2.0Sichuan
    
    
    103
    
    
    
    1.7
    
    
    
    115
    
    
    
    2.4
    
    
    
    221
    
    
    
    2.3Shanxi
    
    
    103
    
    
    
    1.7
    
    
    
    72
    
    
    
    1.5
    
    
    
    164
    
    
    
    1.7Fujian
    
    
    91
    
    
    
    1.5
    
    
    
    63
    
    
    
    1.3
    
    
    
    173
    
    
    
    1.8Jilin
    
    
    85
    
    
    
    1.4
    
    
    
    72
    
    
    
    1.5
    
    
    
    116
    
    
    
    1.2Chongqing
    
    
    85
    
    
    
    1.4
    
    
    
    48
    
    
    
    1.0
    
    
    
    172
    
    
    
    1.8Xinjiang
    
    
    79
    
    
    
    1.3
    
    
    
    63
    
    
    
    1.3
    
    
    
    106
    
    
    
    1.1Yunnan
    
    
    79
    
    
    
    1.3
    
    
    
    43
    
    
    
    0.9
    
    
    
    126
    
    
    
    1.3Anhui
    
    
    79
    
    
    
    1.3
    
    
    
    53
    
    
    
    1.1
    
    
    
    135
    
    
    
    1.4Guangxi
    
    
    73
    
    
    
    1.2
    
    
    
    34
    
    
    
    0.7
    
    
    
    77
    
    
    
    0.8Jiangxi
    
    
    55
    
    
    
    0.9
    
    
    
    34
    
    
    
    0.7
    
    
    
    58
    
    
    
    0.6Inner Mongolia
    
    
    49
    
    
    
    0.8
    
    
    
    34
    
    
    
    0.7
    
    
    
    107
    
    
    
    1.1Guizhou
    
    
    30
    
    
    
    0.5
    
    
    
    19
    
    
    
    0.4
    
    
    
    58
    
    
    
    0.6Hainan
    
    
    18
    
    
    
    0.3
    
    
    
    106
    
    
    
    2.2
    
    
    
    26
    
    
    
    0.3Other(1)
    
    
    97
    
    
    
    1.6
    
    
    
    452
    
    
    
    9.4
    
    
    
    433
    
    
    
    4.4Total
    
    
    6,081
    
    
    
    100.0
    
    
    
    4,810
    
    
    
    100.0
    
    
    
    9,670
    
    
    
    100.0
 
 (1)
    
    Gansu, Ningxia, Tibet and Qinghai as well as export to other countries. BMW Brilliance
  30




---



##### Table of Contents



Production Process
 Minibus Production Process and Equipment
 
    
    Stamping. Shenyang Automotive produces its own semi-finished steel sheets
for stamping on a roll, drop and stack production line. Stamping is carried out at
seven production stations that utilize 31 domestic and imported presses, the largest of
which is calibrated at 3,200 tons and is used to stamp roofs and side panels for the
deluxe and mid-priced minibuses. The 175 dies used for stamping and cutting body
components for the Hiase and Granse minibuses were purchased from Toyota. Substantially
all of the stamped metal vehicle components utilized in Shenyang Automotives minibuses
are produced in this stamping workshop.
 31




---



##### Table of Contents




    
    Welding. The welding workshop consists of 2 production lines and 14
process conveying lines, among which the Hiase has 7 lines and the Granse has 7 lines.
Each line is focused on a different section of the minibus. These lines were
manufactured with Toyota technology and utilize a combination of manual welding and
automatic robotic welding, the latter of which is utilized for the more difficult
welding points. Each welding station is equipped with a domestically manufactured
testing machine. The annual production capacity based on two shifts is 120,000 units
among which 80,000 units are dedicated to the Hiase minibuses and 40,000 units to the
Granse.
 
    
    Painting. Shenyang Automotive currently operates a 36,347 square meter
painting workshop that was set up in April 2004 to enhance the production capacity. The
new painting workshop has three floors, each with its own function. The new workshop
has an annual production capacity of 120,000 units, with space reserved for expansion
up to an annual production capacity of 150,000. The new workshop uses a painting method
that combines the use of a conveyor, automated machine and robotic machine. Steps taken
to prepare the vehicle body for painting include de-greasing, rinsing, phosphatization
and electrophoretic coating. Using the 3C1B process, each of three coats of paint is
applied by a sprayer to the minibus body and dried in a heated drying chamber. The
specialized pre-painting preparation of the vehicle allows the frame to withstand
corrosion for 10 to 15 years. Also, the high standard of cleanliness in the painting
workshop and the advanced paint sprayers used allow Shenyang Automotive to reduce
environmental pollution, provide better working conditions for the painting workshop
employees, conserve raw materials and ensure that each minibus receives three
consistent, high-quality coats of paint. Finally, various quality control tests are
conducted, including measurement of the luster and thickness of the paint on each
vehicle.
 
    
    Assembly. Shenyang Automotives final assembly workshop is equipped with a
combination single slot, hanging and double slot conveyor. The conveyor is 570 meters
long, has 88 separate workstations and is capable of producing minibuses at the rate of
one every 160 seconds. Shenyang Automotive also developed jointly with the Shenyang
Automation Research Center an automated lifting system that is used in the assembly of
the power train, rear chassis and crank case, as well as a computerized hydraulic
machine for carrying out the transfer from a single rail conveyor onto a hanging line
conveyor  the first of its kind to be developed in China.
 
    
    Testing. Shenyang Automotive employs an advanced comprehensive vehicle
testing system to ensure that each vehicle conforms to specifications, including wheel
alignment, exhaust emissions, steering, braking and engine performance and testing, and
windshield leakage testing. All of these final testing procedures are also supported by
a comprehensive quality control staff that monitors each step of the production
process. See  Business Overview  Quality Control below.
 Zhonghua Sedan Production Process and Equipment
 
    
    Stamping. At present, 324 pieces for 232 types of large and medium press
parts of the Zhonghua sedan (including Zunchi and Junjie) are produced in the stamping
(or
 32




---



##### Table of Contents



pressing) workshop. There are 1,029 imported and domestically produced molds, five
large and medium pressing lines, among which the line producing large (2,300 ton) parts
was imported from Schuler of Germany, which can supply parts for five production lines.
There is also a 100-ton molding press imported from Kawasaki of Japan. The other
pressing lines were purchased from domestic equipment manufacturers.
 
    
    Welding. The welding workshop is required to assemble and weld 394
separate panels, 30 machined parts, 10 roll-pressed parts and 30 standard parts. This
line was designed, manufactured and installed by Kuka of Germany. The welding line
consists of 26 zones and 347 stations, and is capable of spot-welding, carbon dioxide
welding, project welding, T-stud welding, sealing, brazing and hemming. At present,
there are 43 working robots in this workshop, which are used to weld, seal and inspect
at the most important stations on the line. The SKID apparatus that transports
components both on the ground and overhead adds speed and efficiency to the welding
process.
 
    
    Painting. Zhonghua sedans and the BMW-branded sedans share the same
painting line. The equipment used in the painting line is provided by Durr of Germany,
and the paint supply system was imported from Graco of the United States. Steps
involved in the body painting process include pre-treatment, E-coat, sealing, PVC,
primer, top-coat and cavity wax. The painting line is highly mechanized and automated,
with a central control system imported from Siemens. The painting line may switch
paints of different colors within 10 seconds and 15 paints of different colors may be
used in the same painting line. All of the paints and other materials utilized in
paint workshop are high quality products sourced both from within China and abroad.
 
    
    Assembly and Testing. The performance of the assembly and testing workshop
is guided by an information system based on bar code technology. The layout of the
final assembly shop is designed by Schenck Engineering of Germany and consists of the
body buffer line, main production line, test line, water proof line, finishing line and
marriage line, as well as various sub-lines and a rework area. The assembly line
utilizes a double-track conveyer system for transporting the vehicles through each
process.
 
    
    Instrument Production.The instrument panel workshop, occupying an area of
6,540 square meters, produces Zhonghua instrument panels. The processes include vacuum
shaping, foaming, hydrocutting and welding, and use seven different machines. The
workshop has a high production capacity for the production of parts and assembly of
instrument panels.
 BMW Sedan Production Process
  33




---



##### Table of Contents




    
    Welding. The manufacturing and welding process in the welding workshop is
performed according to the BMW Groups global standard. The dimensional quality is
checked with a CMM Machine from Wenzel Company of Germany. The sourced welding
equipment is from standard suppliers in Germany. The welding workshop contains stud
welding, spot welding, mig welding and sealing operations. The line operators have been
trained by the BMW Groups specialists and the process is controlled by the BMW Groups
specialists from Germany. The quality checks and audits are consistent with those
performed at other BMW Group plants.
 
    
    Painting. All of the equipment used in the painting line is provided by
Durr of Germany, and the paint supply system was imported from Graco of the United
States. Steps involved in the body painting process are highly mechanized and
automated, with a central control system imported from Siemens. All of the paints and
other materials utilized in the paint workshop are high quality products sourced both
from within China and abroad.
 
    
    Assembly. The assembly workshop consists of two areas, both using conveyor
systems designed by the German supplier AFT with 60 line stations in total, as well as
handling devices for heavy parts from Dalmec Company and filling equipment from Durr of
Germany.
 
    
    Testing. The finishing and testing equipment is located in the second area
of the assembly workshop. A wide range of special equipment used in BMW Groups plants
worldwide is used to test 100% of the cars produced.
 Raw Materials and Components
 Raw Materials
  Components
 34




---



##### Table of Contents



Other
Significant Subsidiaries, Jointly Controlled Entities and Associated
Companies
 35




---



##### Table of Contents



Mianyang Xinchen
   Ningbo Yuming
  Xinguang Brilliance
 36




---



##### Table of Contents



Xing Yuan Dong, Ningbo Brilliance Ruixing and Mianyang Brilliance Ruian
    37




---



##### Table of Contents



Shenyang Aerospace
  Brilliance Dongxing and Xingchen Automotive Seats
  Brilliance JinBei Engine Plant
   38




---



##### Table of Contents



Shenyang Brilliance Power Train Machinery Co., Ltd.
  Shenyang Chenfa Automobile Component Co., Ltd.
  Sales and Marketing
  39




---



##### Table of Contents



2004
    
    2005
    
    2006Units
    
    
    
    
    
    Units
    
    
    
    
    
    UnitsSold
    
    %
    
    Sold
    
    %
    
    Sold
    
    %Shenyang AutomotiveDeluxe minibus
    
    
    6,626
    
    
    
    9.1
    
    
    
    9,940
    
    
    
    14.4
    
    
    
    14,196
    
    
    
    11.0Mid-priced minibus
    
    
    54,992
    
    
    
    75.8
    
    
    
    50,060
    
    
    
    72.6
    
    
    
    52,049
    
    
    
    40.5Zhonghua sedan
    
    
    10,982
    
    
    
    15.1
    
    
    
    9,000
    
    
    
    13.0
    
    
    
    62,281
    
    
    
    48.5Total
    
    
    72,600
    
    
    
    100.0
    
    
    
    69,000
    
    
    
    100.0
    
    
    
    128,526
    
    
    
    100.0BMW BrillianceBMW sedan
    
    
    8,708
    
    
    
    100.0
    
    
    
    17,501
    
    
    
    100.0
    
    
    
    23,600
    
    
    
    100.0
    40




---



##### Table of Contents



2004
    
    2005
    
    2006Minibuses
    
    Sedans
    
    Minibuses
    
    Sedans
    
    Minibuses
    
    SedansProvince/Municipality
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %Beijing
    
    
    13,031
    
    
    
    21.1
    
    
    
    1,002
    
    
    
    9.1
    
    
    
    10,395
    
    
    
    17.3
    
    
    
    453
    
    
    
    5.0
    
    
    
    10,480
    
    
    
    15.8
    
    
    
    5,201
    
    
    
    8.4Guangdong
    
    
    9,385
    
    
    
    15.2
    
    
    
    825
    
    
    
    7.5
    
    
    
    7,107
    
    
    
    11.8
    
    
    
    467
    
    
    
    5.2
    
    
    
    7,959
    
    
    
    12.0
    
    
    
    6,114
    
    
    
    9.8Liaoning
    
    
    6,173
    
    
    
    10.0
    
    
    
    1,145
    
    
    
    10.4
    
    
    
    6,461
    
    
    
    10.8
    
    
    
    1,650
    
    
    
    18.3
    
    
    
    7,113
    
    
    
    10.7
    
    
    
    15,089
    
    
    
    24.2Shanghai
    
    
    6,933
    
    
    
    11.3
    
    
    
    296
    
    
    
    2.7
    
    
    
    6,347
    
    
    
    10.6
    
    
    
    141
    
    
    
    1.6
    
    
    
    7,509
    
    
    
    11.3
    
    
    
    3,130
    
    
    
    5.0Jiangsu
    
    
    4,254
    
    
    
    6.9
    
    
    
    569
    
    
    
    5.2
    
    
    
    3,915
    
    
    
    6.5
    
    
    
    138
    
    
    
    1.5
    
    
    
    4,899
    
    
    
    7.4
    
    
    
    3,934
    
    
    
    6.3Zhejiang
    
    
    3,534
    
    
    
    5.7
    
    
    
    505
    
    
    
    4.6
    
    
    
    2,578
    
    
    
    4.3
    
    
    
    88
    
    
    
    1.0
    
    
    
    2,955
    
    
    
    4.5
    
    
    
    3,319
    
    
    
    5.3Shandong
    
    
    1,927
    
    
    
    3.1
    
    
    
    812
    
    
    
    7.4
    
    
    
    2,313
    
    
    
    3.9
    
    
    
    296
    
    
    
    3.3
    
    
    
    2,377
    
    
    
    3.6
    
    
    
    4,593
    
    
    
    7.4Tianjin
    
    
    1,512
    
    
    
    2.5
    
    
    
    552
    
    
    
    5.0
    
    
    
    1,468
    
    
    
    2.4
    
    
    
    185
    
    
    
    2.1
    
    
    
    1,596
    
    
    
    2.4
    
    
    
    974
    
    
    
    1.6Heilongjiang
    
    
    1,094
    
    
    
    1.8
    
    
    
    334
    
    
    
    3.0
    
    
    
    1,079
    
    
    
    1.8
    
    
    
    94
    
    
    
    1.0
    
    
    
    1,337
    
    
    
    2.0
    
    
    
    1,051
    
    
    
    1.7Hebei
    
    
    1,089
    
    
    
    1.8
    
    
    
    361
    
    
    
    3.3
    
    
    
    1,187
    
    
    
    2.0
    
    
    
    44
    
    
    
    0.5
    
    
    
    1,621
    
    
    
    2.5
    
    
    
    1,387
    
    
    
    2.2Hubei
    
    
    1,104
    
    
    
    1.8
    
    
    
    373
    
    
    
    3.4
    
    
    
    1,136
    
    
    
    1.9
    
    
    
    53
    
    
    
    0.6
    
    
    
    1,333
    
    
    
    2.0
    
    
    
    830
    
    
    
    1.3Hunan
    
    
    1,006
    
    
    
    1.6
    
    
    
    408
    
    
    
    3.7
    
    
    
    1,125
    
    
    
    1.9
    
    
    
    275
    
    
    
    3.1
    
    
    
    1,141
    
    
    
    1.7
    
    
    
    1,510
    
    
    
    2.4Shaanxi
    
    
    993
    
    
    
    1.6
    
    
    
    447
    
    
    
    4.1
    
    
    
    958
    
    
    
    1.6
    
    
    
    126
    
    
    
    1.4
    
    
    
    1,064
    
    
    
    1.6
    
    
    
    1,090
    
    
    
    1.7Henan
    
    
    937
    
    
    
    1.5
    
    
    
    299
    
    
    
    2.7
    
    
    
    1,285
    
    
    
    2.1
    
    
    
    207
    
    
    
    2.3
    
    
    
    1,287
    
    
    
    1.9
    
    
    
    1,297
    
    
    
    2.1Sichuan
    
    
    751
    
    
    
    1.2
    
    
    
    386
    
    
    
    3.5
    
    
    
    1,007
    
    
    
    1.7
    
    
    
    623
    
    
    
    7.0
    
    
    
    1,369
    
    
    
    2.1
    
    
    
    1,631
    
    
    
    2.6Shanxi
    
    
    815
    
    
    
    1.3
    
    
    
    323
    
    
    
    3.0
    
    
    
    922
    
    
    
    1.5
    
    
    
    143
    
    
    
    1.6
    
    
    
    1,064
    
    
    
    1.6
    
    
    
    1,062
    
    
    
    1.7Fujian
    
    
    811
    
    
    
    1.3
    
    
    
    229
    
    
    
    2.1
    
    
    
    824
    
    
    
    1.3
    
    
    
    98
    
    
    
    1.1
    
    
    
    1,067
    
    
    
    1.6
    
    
    
    1,288
    
    
    
    2.1Jilin
    
    
    845
    
    
    
    1.4
    
    
    
    146
    
    
    
    1.3
    
    
    
    950
    
    
    
    1.6
    
    
    
    55
    
    
    
    0.6
    
    
    
    971
    
    
    
    1.5
    
    
    
    625
    
    
    
    1.0Chongqing
    
    
    549
    
    
    
    0.9
    
    
    
    351
    
    
    
    3.2
    
    
    
    476
    
    
    
    0.8
    
    
    
    232
    
    
    
    2.6
    
    
    
    909
    
    
    
    1.4
    
    
    
    1,364
    
    
    
    2.2Xinjiang
    
    
    764
    
    
    
    1.3
    
    
    
    166
    
    
    
    1.5
    
    
    
    830
    
    
    
    1.4
    
    
    
    90
    
    
    
    1.0
    
    
    
    693
    
    
    
    1.0
    
    
    
    672
    
    
    
    1.1Yunnan
    
    
    674
    
    
    
    1.1
    
    
    
    244
    
    
    
    2.2
    
    
    
    551
    
    
    
    0.9
    
    
    
    90
    
    
    
    1.0
    
    
    
    841
    
    
    
    1.3
    
    
    
    841
    
    
    
    1.4Anhui
    
    
    748
    
    
    
    1.2
    
    
    
    201
    
    
    
    1.8
    
    
    
    663
    
    
    
    1.1
    
    
    
    101
    
    
    
    1.1
    
    
    
    847
    
    
    
    1.3
    
    
    
    894
    
    
    
    1.4Guangxi
    
    
    681
    
    
    
    1.1
    
    
    
    161
    
    
    
    1.5
    
    
    
    478
    
    
    
    0.8
    
    
    
    30
    
    
    
    0.3
    
    
    
    463
    
    
    
    0.7
    
    
    
    564
    
    
    
    0.9Jiangxi
    
    
    440
    
    
    
    0.7
    
    
    
    193
    
    
    
    1.8
    
    
    
    396
    
    
    
    0.7
    
    
    
    120
    
    
    
    1.3
    
    
    
    398
    
    
    
    0.6
    
    
    
    428
    
    
    
    0.7Inner Mongolia
    
    
    355
    
    
    
    0.6
    
    
    
    203
    
    
    
    1.9
    
    
    
    414
    
    
    
    0.7
    
    
    
    92
    
    
    
    1.0
    
    
    
    619
    
    
    
    0.9
    
    
    
    794
    
    
    
    1.3Guizhou
    
    
    139
    
    
    
    0.2
    
    
    
    166
    
    
    
    1.5
    
    
    
    161
    
    
    
    0.3
    
    
    
    110
    
    
    
    1.2
    
    
    
    276
    
    
    
    0.4
    
    
    
    545
    
    
    
    0.9Hainan
    
    
    175
    
    
    
    0.3
    
    
    
    39
    
    
    
    0.4
    
    
    
    1,519
    
    
    
    2.5
    
    
    
    31
    
    
    
    0.3
    
    
    
    123
    
    
    
    0.2
    
    
    
    229
    
    
    
    0.4Other(1)
    
    
    899
    
    
    
    1.5
    
    
    
    246
    
    
    
    2.2
    
    
    
    3,455
    
    
    
    5.8
    
    
    
    2,968
    
    
    
    33.0
    
    
    
    3,934
    
    
    
    6.0
    
    
    
    1,825
    
    
    
    2.9Total
    
    
    61,618
    
    
    
    100.0
    
    
    
    10,982
    
    
    
    100.0
    
    
    
    60,000
    
    
    
    100.0
    
    
    
    9,000
    
    
    
    100.0
    
    
    
    66,245
    
    
    
    100.0
    
    
    
    62,281
    
    
    
    100.0
 41




---



##### Table of Contents



(1)
    
    Gansu, Ningxia, Tibet and Qinghai as well as export to other countries.      Competition
  42




---



##### Table of Contents



Minibus
 
    
    Southeast Motors. Southeast Motors is currently 25% owned by Taiwan China
Motors, 50% owned by Fujian Provincial Automobile Industry Company and 25% owned by
Mitsubishi. Southeast Motors has launched over thirty different models of light
passenger vehicles (including minibuses) under the Delica and Freeca brand names and
also launched the MPV in 2004. Southeast Motors had an annual production capacity of
60,000 minibuses. According to Qing Xing Che Yao Wen, a publication issued by Chinas
Light Car Market Analysis Association, Southeast
 43




---



##### Table of Contents




    
    Nanjing Iveco.In 1995, Italys Fiat Auto Company and Yuejin Group
established Nanjing Iveco Automotive Company, Ltd., a 50-50 equity joint venture, for
the manufacture of 33 models of five-ton passenger, goods and off-road vehicles in the
Iveco S series. Models currently in production include the A30, A40 and A49 passenger
vehicles, as well as a separate series of goods vehicles. Nanjing Iveco has an annual
production capacity of 60,000 vehicles. According to Qing Xing Che Yao Wen, in 2006,
Nanjing Iveco sold 20,060 vehicles, representing an 11.3% increase from 18,018
minibuses in 2005. Its minibuses are currently priced between Rmb 119,000 to Rmb
206,900.
    
    Jiangling Motors.Jiangling Motors Corp. of Jiangxi Province is currently
50% owned by the Ford Motor Company and 50% owned by the Changan Group. Jiangling
Motors produced China Transit, a Ford brand minibus, light trucks and pick-ups. At
present, China Transit is available in 15-seat, 12-seat and 9-seat versions. According
to Qing Xing Che Yao Wen, in 2006, Jiangling Motors sold a total of 23,029 minibuses,
representing a 25.9% increase from 18,289 vehicles in 2005. Production capacity was
approximately 100,000 per year. Its minibuses are currently priced between Rmb 105,800
to Rmb 177,900.
 Zhonghua Sedan
  
    
    First Auto Works Group of the PRC. First Auto Works is one of the largest
automotive companies in the PRC. First Auto Works Hongqi sedan was launched in 2001
and is considered one of the PRC governments showcase PRC-made sedans. Its Hongqi
Mingshi is priced at approximately Rmb 159,800 to Rmb 198,800. According to the
monthly report issued by Chinas Association of National Passenger Vehicle Market
Information, First Auto Works sold 10,280 Honqi Mingshi sedans in 2006, representing a
13.8% increase from the 9,036 units in 2005. First Auto Works introduced the Besturn
2.0-liter and 2.3-liter sedans in August 2006, with selling prices from Rmb 151,800 to
Rmb 208,800.
    
    Shanghai Volkswagen Automotive. Shanghai Volkswagen Automotive was one of
the original state-designed automobile manufacturers in the PRC. It is currently 50%
owned by Volkswagen AG of Germany and 50% owned by Shanghai Automotive Industry Corp.
It still holds a dominant share of the PRC sedan market and competes with the Zhonghua
sedan through the Santana 3000 sedans. The Santana 3000 has a 1.78-liter engine and
sells for between Rmb 118,000 to Rmb 149,000. According to the monthly report issued by
Chinas Association of National Passenger Vehicle
 44




---



##### Table of Contents




    
    Beijing Hyundai. Beijing Hyundai was established in 2002 as a 50-50 joint
venture between Beijing Auto Investment and Hyundai Motor Co. of South Korea. It
currently produces and sells the Sonata 2.0-liter, Sonata 2.5-liter and Sonata
2.7-liter, and the Elantra 1.6-liter and 1.8-liter models. The Sonata 2.0-liter sells
for approximately Rmb 149,800 to Rmb 228,000. The Elantra 1.8-liter sedan sells for
approximately Rmb 112,800 to Rmb 151,800. According to the monthly report issued by
Chinas Association of National Passenger Vehicle Market Information, in 2006, Beijing
Hyundai sold 37,095 units and 169,716 units of the Sonata 2.0-liter and the Elantra,
respectively, representing a decrease of 17.6 % and 3.9 %, respectively, from that of
45,006 and 176,589 respectively, in 2005.
 BMW Sedans
  
    
    FAW Volkswagen. FAW Volkswagen is 10% owned by Audi AG, 30% by Volkswagen
AG and 60% by First Auto Works of China. FAW Volkswagen produces and sells the Audi A4
and A6 sedans and the Volkswagen Jetta and Bora sedans in the PRC. FAW Volkswagens
Audi sedans have a dominant share of the PRCs premium sedan market because of its
strong sales to the PRC government. FAW Volkswagen sold 45,176 and 61,686 units of Audi
A6 sedans in 2005 and 2006, respectively. The Audi A4 sedan was formally launched in
the PRC market in 2003 and had a total sales volume of 10,791 and 15,536 in 2005 and
2006, respectively. A new Audi A6 was launched in June 2005. The Audi A4 sedan
currently sells for between Rmb 275,400 and Rmb 500,900, and the new Audi A6 sedan
sells for between Rmb 347,200 and Rmb 856,300.
    
    Beijing Benz.Beijing Benz Daimler Chrysler Auto Co. Ltd., or Beijing Benz,
a 50-50 joint venture between Daimler Chrysler and Beijing Automotive Industry Holding
Company, obtained a license to produce the Mercedes-Benz C-Class and E-Class sedans in
the PRC in August 2005. Beijing Benz launched its domestically produced models of E280
and E200K in December 2005. These E-Class sedans currently are sold for between Rmb 525,000
and Rmb 648,000 in the PRC. The vehicles are produced in a new facility in Beijing with
an initial production capacity of 20,000 units per year. The C-Class sedans currently
available for sale in China at Rmb 398,000 are imported. Beijing Benz will commence
producing the new C-Class sedan in late 2007.
    
    Lexus. Lexus sedans are imported from Japan by Toyota Motor (China)
Investment Co., Ltd. In 2006, the sales volume of Lexus in China was 13,344 units. The
new IS and ES models were introduced into the PRC in August 2006 and sales of these two
 45




---



##### Table of Contents



Governmental Regulation
      46




---



##### Table of Contents



Quality Control
   47




---



##### Table of Contents



After-Sales Service
    48




---



##### Table of Contents



Environmental Matters
   Insurance
  Organizational Structure
  49




---



##### Table of Contents



EffectiveInterest held byJurisdiction of
    
    
    Brilliance ChinaName of Companies
    
    Incorporation
    
    
    AutomotiveSubsidiariesShenyang Brilliance JinBei Automobile Co., Ltd.
    
    China
    
    
    51.0
    %Ningbo Yuming Machinery Industrial Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang XingYuanDong Automobile Component Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Jianhua Motors Engine Co., Ltd.
    
    China
    
    
    60.8
    %Ningbo Brilliance Ruixing Auto Components Co., Ltd.
    
    China
    
    
    100.0
    %Mianyang Brilliance Ruian Automotive Components Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang JinBei Automotive Industry Holdings Company Ltd.
    
    China
    
    
    99.0
    %Shenyang XinJinBei Investment and Development Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Brilliance Dongxing Automotive Component Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Jindong Development Co., Ltd.
    
    China
    
    
    75.5
    %Shenyang Chenfa Automobile Component Co., Ltd.
    
    China
    
    
    100.0
    %Shanghai Hidea Auto Design Co., Ltd.
    
    China
    
    
    63.3
    %Shenyang Brilliance Power Train Machinery Co., Ltd.
    
    China
    
    
    75.0
    %China Brilliance Automotive Components Group Limited
    
    Bermuda
    
    
    100.0
    %Southern State Investment Limited
    
    BVI
    
    
    100.0
    %Beston Asia Investment Limited
    
    BVI
    
    
    100.0
    %Pure Shine Limited
    
    BVI
    
    
    100.0
    %Key Choices Group Limited
    
    BVI
    
    
    100.0
    %Brilliance China Automotive Finance Ltd.
    
    BVI
    
    
    100.0
    %Brilliance China Finance Limited
    
    BVI
    
    
    100.0
    %Jointly Controlled EntitiesMianyang Xinchen Engine Co., Ltd.
    
    China
    
    
    50.0
    %Shenyang Xinguang Brilliance Automobile Engine Co., Ltd.
    
    China
    
    
    50.0
    %BMW Brilliance Automotive Ltd.
    
    China
    
    
    49.5
    %Associated CompaniesShenyang Aerospace Mitsubishi Motors Engine Manufacturing
Co., Ltd.
    
    China
    
    
    12.8
    %Shenyang JinBei Vehicle Dies Manufacturing Co., Ltd.
    
    China
    
    
    48.0
    %
 Property, Production Facilities and Equipment
   50




---



##### Table of Contents



51




---



##### Table of Contents



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion should be read in conjunction with the rest of this annual report,
including the consolidated financial statements and notes thereto contained elsewhere in this
annual report. The results discussed below are not necessarily indicative of the results to be
expected in any future periods.
 Overview
    52




---



##### Table of Contents



53




---



##### Table of Contents



Production Volumes and Sales
   54




---



##### Table of Contents



Costs and Expenses
   .
 55




---



##### Table of Contents



Results of Operations
 Year ended December 31,2006
    
    
    2005
    
    
    2004(Rmb thousands)Sales to third parties
    
    
    9,067,505
    
    
    
    3,859,151
    
    
    
    4,402,141Sales to affiliated companies
    
    
    1,417,249
    
    
    
    1,609,839
    
    
    
    2,139,857Total sales
    
    
    10,484,754
    
    
    
    5,468,990
    
    
    
    6,541,998Cost of sales
    
    
    (9,960,587
    )
    
    
    (5,011,955
    )
    
    
    (5,491,250
    )Gross profit
    
    
    524,167
    
    
    
    457,035
    
    
    
    1,050,748Selling, general and administrative expenses
    
    
    (1,384,718
    )
    
    
    (1,195,336
    )
    
    
    (1,510,442
    )Interest expense
    
    
    (177,001
    )
    
    
    (182,354
    )
    
    
    (182,458
    )Interest income
    
    
    90,738
    
    
    
    60,189
    
    
    
    58,800Equity in earnings of associated companies and jointly
controlled entities, net
    
    
    149,320
    
    
    
    48,995
    
    
    
    126,261Subsidy income
    
    
    50,176
    
    
    
    3,139
    
    
    
    1,815Other income, net
    
    
    106,150
    
    
    
    43,650
    
    
    
    25,709Impairment loss on intangible assets
    
    
    
    
    
    
    (173,000
    )
    
    
    (50,000
    )Impairment
loss on goodwill(1)
    
    
    (73,343
    )
    
    
    (257,720
    )
    
    
    (47,320
    )(Loss) before taxation and minority interests
    
    
    (714,511
    )
    
    
    (1,195,402
    )
    
    
    (526,887
    )(Provision) benefit for income taxes
    
    
    (47,879
    )
    
    
    (101,884
    )
    
    
    63,110Minority interests
    
    
    376,282
    
    
    
    625,997
    
    
    
    464,991Net (loss) income
    
    
    (386,108
    )
    
    
    (671,289
    )
    
    
    1,214
 
 (1)
    
    In 2006, an impairment loss on goodwill of Rmb 73.3 million in
relation to one of Brilliance China Automotives jointly controlled
entities was recognized. Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
   56




---



##### Table of Contents



57




---



##### Table of Contents



Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
     58




---



##### Table of Contents



59




---



##### Table of Contents



Contingent Liabilities and Outstanding Guarantees
  
    
    Corporate guarantees of approximately Rmb 120 million (US$15.4 million)
for revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua
Holdings Co., Ltd., or Shanghai Shenhua. The guarantee arose from the mutual
negotiation between Shenyang Automotive and Shanghai Shenhua. Associated with the
corporate guarantee, Shanghai Shenhua also provided a cross guarantee for the bank
facilities of Shenyang Automotive. The guarantee was for revolving activities of
Shanghai Shenhua and will be terminated upon mutual agreements between Shenyang
Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the repayment of its
bank loans or notes when they fall due, Shenyang Automotive is required to repay the
outstanding balance. There is no recourse or collateralization provision in the
guarantee. Default by Shanghai Shenhua and its affiliated companies is considered
remote by management and therefore no provision for the guarantors obligation under
the guarantee was recorded as of December 31, 2006.
    
    A joint and several proportional corporate guarantee with a shareholder of
Shenyang Aerospace on a Shenyang Aerospaces long-term bank loan. As of December 31,
2006, no amount is outstanding on the loan. The guarantee was provided by Brilliance
China Automotive and a shareholder of Shenyang Aerospace for its long-term loan
financing needs during its start-up period. If Shenyang Aerospace defaults on the
repayment of its bank loan when it falls due, Brilliance China Automotive and the
shareholder are jointly and severally liable to repay the outstanding balance. There
is no recourse or collateralization provision in the guarantee.
    
    Corporate guarantees of bank loans amounting to Rmb 295 million (US$37.8
million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2006, drawn by JinBei. Bank deposits of Rmb 312 million
(US$40.0 million) were pledged as a collateral for the corporate guarantees. However,
default by JinBei is considered remote by management and therefore no provision for the
guarantors obligation under the guarantee was recorded as of December 31, 2006.
  60




---



##### Table of Contents



Liquidity and Capital Resources
  Payment due by period(Rmb thousands)Contractual Obligations
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    More than 5 yearsNotes payable (1)
    
    
    2,141,947
    
    
    
    2,141,947
    
    
    
    
    
    
    
    
    
    
    
    Notes payable to affiliated companies (2)
    
    
    37,288
    
    
    
    37,288
    
    
    
    
    
    
    
    
    
    
    
    Convertible bonds (3)
    
    
    1,755,488
    
    
    
    
    
    
    
    1,755,488
    
    
    
    
    
    
    
    Financing from BMW Brilliance (4)
    
    
    165,271
    
    
    
    165,271
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations (relating to
offices and property)
    
    
    88,149
    
    
    
    18,943
    
    
    
    24,627
    
    
    
    4,053
    
    
    
    40,526Unconditional purchase obligations
    
    
    186,260
    
    
    
    186,260
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,374,403
    
    
    
    2,549,709
    
    
    
    1,780,115
    
    
    
    4,053
    
    
    
    40,526
 
 (1)
    
    Approximately Rmb 1.7 billion of the Rmb 2.1 billion notes payable had effective interest
rates of 3% to 4%. The remaining Rmb 0.4 billion notes payable were interest free.(2)
    
    Notes payable to affiliated companies are non-interest bearing.(3)
    
    Included in the amount is a total accreted redemption premium payable on June 7, 2009 of
approximately Rmb 327.4 million (US$41.9 million). The accreted redemption premium as of
December 31, 2006 of approximately Rmb 59.2 million (US$7.5 million) was calculated based on
the outstanding principal of the convertible bonds using the effective interest method.(4)
    
    Accrued interest of approximately Rmb 51.9 million was calculated on the outstanding
principal using the compound interest method at an effective annual rate of 11.127% on a
quarterly basis. Cash Flows
    61




---



##### Table of Contents




    
    a decrease in net loss of Rmb 386.1 million (US$49.5 million) in 2006
compared to Rmb 671.3 million in 2005;
    
    an increase in notes and accounts payable in the amount of Rmb 1,487.9
million (US$190.7 million) for the year ended December 31, 2006, as compared to a
decrease of Rmb 333.3 million for the year ended December 31, 2005; and
    
    an increase in amounts due to affiliated companies of Rmb 363.5 million
(US$46.6 million) for the year ended December 31, 2006, as compared to an increase of
Rmb 171.9 million for the year ended December 31, 2005.
   Debt Changes
  62




---



##### Table of Contents



Capital Expenditures
  Foreign Currency Requirements
  63




---



##### Table of Contents



Research and Development, Patents and Licenses, etc.
  Trend information
  
    
    Increased Demand for Motor Vehicles. The rate of increase in Chinas
gross domestic product has been one of the highest in the world over the past decade,
and this growth has fueled demand for automobiles. In fact, demand in the Chinese
automobile industry has been growing over the past several years at a faster rate than
the growth in Chinas gross domestic product. This trend is expected to have a
favorable impact on Brilliance China Automotives sales volume for both minibuses and
sedans.
 
    
    Competition. As a result of Chinas accession to the WTO, domestic
production of automobiles (including minibuses and sedans) is expected to continue
increasing, particularly through Sino-foreign joint ventures that are being established
for this purpose. Formation of new Sino-foreign joint ventures and further investments
by foreign auto makers to increase the capacity of existing operations could result in
overcapacity and increased domestic competition for Brilliance China Automotive and
greater downward pressure on vehicle prices as competitors begin to employ a higher
ratio of domestically produced components and as more competitors achieve economies of
scale due to increased volume of production.
    
    Price. Retail prices in the automotive market are expected to continue to
fall as a result of the localization of production and sourcing of components as
described
 64




---



##### Table of Contents



immediately above as well as increased competition. A decrease in average selling
prices may lower margins and cause industry-wide deterioration of profitability. Any
decline in vehicle prices will likely have an adverse effect on Brilliance China
Automotives gross income and profits.
    
    Growth, Consolidation and Development. On June 2, 2004, the NDRC issued a
new automotive policy for China to encourage consolidation in the industry and further
the development and sophistication of the automobile industry in areas such as consumer
financing and research and development. The policy acknowledges the success of Chinas
automobile industry and seeks to encourage this pillar industry to foster further
growth, particularly of domestically produced and branded products and research and
development, through consolidation of smaller, less-efficient manufacturers and
increased foreign and domestic investment. By encouraging industry consolidation and
establishing clearer guidelines for foreign investment, the policy encourages existing
players in the industry to grow and provides incentives for targeted investment from
both domestic and foreign sources. On December 26, 2006, the NDRC issued a circular to
assess the current PRC automobile industry and developments since the 2004 policy.
Consistent with the 2004 policy, the NDRC continues to stress the importance of stable
growth and preventing overcapacity in the automobile industry, and to encourage
industry consolidation and reorganization among sectors, in particular the components
sector. The NDRC also encouraged more research and development be focused on new
products, such as environmental friendly models, in order to enhance and upgrade
domestic products. The NDRC also imposed, among other things, a requirement that
annual sales of automobile manufacturers in China must reach certain levels in order
for them to build new manufacturing plants. Given the high capacity utilization rates
already achieved at its production plants, Brilliance China Automotive does not expect
this policy to restrict its capacity expansion plans in the future.
    
    Improvements in Chinas Infrastructure. China continues to improve and
expand its roadway system. By making automobile travel a more practical and accessible
mode of transportation for motorists in China, such improvements in Chinas
infrastructure will likely add to demand for automobiles.
    
    Rising Fuel Prices.Chinas fuel prices reached historical heights in May
2006 and may continue to increase. Any further increases in fuel prices will likely
have a negative influence on Brilliance China Automotives sales volume.
 Critical Accounting Policies
   65




---



##### Table of Contents



Revenue Recognition
   Warranties
  Inventories
  66




---



##### Table of Contents



Impairment of long-lived assets
  Deferred Taxation
  Transactions with affiliated companies
  Recent Accounting Pronouncements
   67




---



##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Senior Management
   Year FirstElected or AppointedName
    
    Age
    
    Position
    
    Director or OfficerExecutive DirectorsWu Xiao An
    
    45
    
    Chairman of the Board and Executive Vice President
    
    
    1994Qi Yumin
    
    47
    
    President and Chief Executive Officer
    
    
    2006He Guohua
    
    56
    
    Director
    
    
    2005Wang Shiping
    
    50
    
    Director
    
    
    2005Lei Xiaoyang
    
    50
    
    Director and Chief Financial Officer(1)
    
    
    2003Independent Non-Executive DirectorsXu Bingjin
    
    67
    
    Director
    
    
    2003Song Jian
    
    50
    
    Director
    
    
    2004Jiang Bo
    
    47
    
    Director
    
    
    2004OthersHuang Yu
    
    33
    
    Qualified Accountant
    
    
    2007
 68




---



##### Table of Contents



(1)
    
    Mr. Lei Xiaoyang was redesignated as an executive director effective June 2005 and has been
the Chief Financial Officer since October 2006. Executive Directors
  
   69




---



##### Table of Contents



Independent Non-Executive Directors
    70




---



##### Table of Contents



Others
   Compensation
  Board Practices
  Service Agreements
  71




---



##### Table of Contents



Audit Committee
  Meetings
  Authority and Duties
   
    
    be primarily responsible for the appointment, re-appointment and removal
of the external auditor, the remuneration and terms of the engagement of the external
auditor, and the resignation or dismissal of the external auditor;
    
    review and monitor the external auditors independence and objectivity and
the effectiveness of the audit process in accordance with applicable standards, and to
oversee the work of external auditor (including resolution of disagreements between
management and the external auditor regarding financial reporting). The committee
should establish with the external auditor the nature and scope of the audit and
reporting obligations before the audit commences;
    
    develop and implement policy on the engagement of an external auditor to
supply non-audit services. For this purpose, external auditor shall include any
entity that is under common control, ownership or management with the audit firm or any
entity
 72




---



##### Table of Contents



that a reasonable and informed third party having knowledge of all relevant information
would reasonably conclude as part of the audit firm nationally or internationally. The
committee should identify to the Board any matters in respect of which it considers that
action or improvement is needed and make recommendations as to the steps to be taken;
 
    
    monitor the integrity of financial statements of Brilliance China
Automotive and Brilliance China Automotives annual reports and accounts, interim
reports and, if prepared for publication, quarterly reports, and to review significant
financial reporting judgments contained in them. In this regard, in reviewing
Brilliance China Automotives reports and accounts before submission to the board, the
committee should focus particularly on:
 
    
    changes in accounting policies and practices;
    
    accounting policies which require difficult, subjective or complex
judgments (also known as critical accounting policies);
    
    significant adjustments resulting from audits;
    
    going concern assumptions and any qualifications;
    
    compliance with accounting standards; and
    
    compliance with listing rules of stock exchange(s) and other
applicable legal and regulatory requirements and guidance in relation to financial
reporting;
 
    
    In regard to the review of financial information:
 
    
    members of the committee must liaise with the board, senior management
and the person appointed as Brilliance China Automotives qualified accountant;
    
    the committee must meet at least once a year with the external
auditor; and
    
    the committee should consider any significant or unusual items that
are, or may need to be, reflected in such reports and accounts and must give due
consideration to any matters that have been raised by Brilliance China Automotives
qualified accountant, compliance officer (if any) or auditor;
 
    
    establish procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing matters,
including procedures for the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters;
    
    review Brilliance China Automotives financial controls, internal control
and risk management systems;
    
    discuss with the management the system of internal control and ensure that
management has discharged its duty to establish and maintain an effective internal
control system;
 73




---



##### Table of Contents




    
    discuss policies with respect to risk assessment and risk management;
    
    consider the findings of investigations of internal control matters as
delegated by the board, or on the committees own initiative, and review managements
response;
    
    where an internal audit function exists, to ensure co-ordination between
the internal and external auditors, to ensure that the internal audit function is
adequately resourced and has appropriate standing within Brilliance China Automotive,
and to review and monitor the effectiveness of the internal audit function;
    
    where an internal audit function exists, to meet separately, periodically,
with management, with internal auditors (or other personnel responsible for the
internal audit function) and with external auditors;
    
    review Brilliance China Automotives financial and accounting policies and
practices;
    
    review the external auditors management letter, any material queries
raised by the external auditor to management in respect of the accounting records,
financial accounts or systems of control, and managements response;
    
    review with the external auditor any audit problems or difficulties and
managements response;
    
    ensure that the board provides a timely response to the issues raised in
the external auditors management letter;
    
    report to the board on the matters set out in the code provision of Rule
C.3 of Appendix 14 to the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited;
    
    give pre-approval of other services and fees of the external auditor;
    
    set clear hiring policies for employees or former employees of the
external auditors;
    
    report regularly to the board of the result of their review of the
financial reporting system and internal control procedures and recommendations (if any)
thereon; and
    
    consider other topics, as determined from time to time by the board.
  Remuneration Committee
  74




---



##### Table of Contents



Meetings
  Authority and Duties
  75




---



##### Table of Contents




    
    make recommendations to the board on the policy and structure for all
remuneration of the directors and senior management of Brilliance China Automotive and
its subsidiaries and on the establishment of a formal and transparent procedure for
developing the policy of Brilliance China Automotive and its subsidiaries on such
remuneration;
    
    determine the specific remuneration packages of all executive directors
and senior management, including benefits in kind, pension rights and compensation
payments, including any compensation payable for loss or termination of their office or
appointment, and make recommendations to the board on the remuneration of non-executive
directors;
    
    review and approve performance-based remuneration in accordance with
corporate goals and objectives resolved by the board from time to time;
    
    review and approve the compensation payable to executive directors and
senior management in connection with any loss or termination of their office or
appointment in order to ensure that such compensation is determined in accordance with
relevant contractual terms and that such compensation is otherwise fair and not
excessive for Brilliance China Automotive and its subsidiaries;
    
    review and approve compensation arrangements relating to dismissal or
removal of directors for misconduct to ensure that such arrangements are determined in
accordance with relevant contractual terms and that any compensation payment is
otherwise reasonable and appropriate;
    
    ensure that no director or any of his associates is involved, directly or
indirectly, in deciding such directors remuneration; and
    
    in respect of any service agreement to be entered into between Brilliance
China Automotive/its subsidiaries and its respective director or proposed director, the
prior approval of which by the shareholders of Brilliance China Automotive in general
meeting is required pursuant to the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (the Listing Rules), to review and provide
recommendations to the shareholders of Brilliance China Automotive (other than the
shareholders who are directors with a material interest in the relevant service
agreements and their respective associates (as defined in the Listing Rules)) as to
whether the terms of the service agreements are fair and reasonable and whether such
service agreements are in the interests of Brilliance China Automotive and the
shareholders as a whole, and to advise shareholders on how to vote.
 Summary Corporate Governance Differences
  76




---



##### Table of Contents



NYSE
    
    Brilliance China AutomotiveListed companies must have a
majority of independent
directors. Companies must
identify which directors are
independent and disclose the
basis for that determination.
    
    Brilliance China Automotive is not
required to have a majority of
independent directors. Under the rules
of The Stock Exchange of Hong Kong
Limited, Brilliance China Automotive is
required to have at least three
independent non-executive directors.
Brilliance China Automotive identifies
the status of each director based on
standards set forth by The Stock
Exchange of Hong Kong Limited. Every
independent non-executive director has
to declare his independency at the time
of his appointment and on an annual
basis. The Board has to assess the
independence of all the independent
non-executive directors and to consider
if it is satisfied of their
independence.Non-management directors must
meet at executive sessions
without management.
    
    Non-management directors are not
required to meet at executive sessions
without management.Listed companies must have a
nominating/corporate governance
committee composed entirely of
independent directors.
    
    Brilliance China Automotive is not
required to have a nominating/corporate
governance committee composed entirely
of independent directors and does not
have such a committee.Listed companies must have a
compensation committee composed
entirely of independent
directors.
    
    Brilliance China Automotive has
established a remuneration committee.
The remuneration committee must consist
of not less than three members, a
majority of whom must be independent
non-executive directors.Listed companies must adopt and
disclose a code of business
conduct and ethics for
directors, officers and
employees, and promptly disclose
any waivers of the code for
directors or executive officers.
    
    Brilliance China Automotive is not
required to adopt a code of business
conduct and ethics for directors,
officers and employees and is not
required to promptly disclose any
waivers of any such code for directors
or executive officers. Brilliance China
Automotive has adopted a Model Code for
Securities Transactions by Directors
and a Code for Securities Transactions
by Employees that, among other things,
sets forth a policy for
 77




---



##### Table of Contents



NYSE
    
    Brilliance China Automotivecompliance with securities laws, primarily insider
trading, and has also adopted an
Employee Handbook that, among other
things, contains procedures for
compliance with securities laws, a
policy on confidential information and
a code of conduct.
 Employees
    Number ofFunctional Area
    
    EmployeesAdministrative Personnel
    
    
    1,387Technical Personnel
    
    
    1,508Production Workers
    
    
    8,109Total
    
    
    11,004
   Share Ownership
  78




---



##### Table of Contents



Employee Share Option Schemes
 The 1999 Share Option Scheme
    Number of share options2006
    
    2005At January 1
    
    
    2,800,000
    
    
    
    14,490,000Cancelled/Lapsed during the year
    
    
    
    
    
    
    (11,690,000
    )At December 31,
    
    
    2,800,000
    
    
    
    2,800,000
  New Share Option Scheme
  79




---



##### Table of Contents



(a)
    
    the closing price of the common stock on the relevant stock exchange as stated
in such stock exchanges quotation sheet on the date of the grant, which must be a
trading date;(b)
    
    the average closing price of the common stock on the relevant stock exchange as
stated in such stock exchanges quotation sheets for the five trading days immediately
preceding the date of the grant; or(c)
    
    the nominal value of the common stock.
   Call Option Agreements
   80




---



##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Major Shareholders
  Percent ofNumber of Shares
    
    CapitalTitle of Class
    
    Identity of Person or Group
    
    Owned
    
    StockOrdinary Shares
    
    Huachen Automotive Group Holdings Company Limited(1)
    
    
    1,446,121,500
    
    
    
    39.42
    %Ordinary Shares
    
    Brandes Investment Partners, L.P.
    
    
    333,852,000
    
    
    
    9.10
    %Ordinary Shares
    
    Deutsche Bank Aktiengesellschaft(2)
    
    
    252,551,134
    
    
    
    6.88
    %Ordinary Shares
    
    Templeton Asset Management Ltd.
    
    
    222,446,000
    
    
    
    6.06
    %Ordinary Shares
    
    The Northern Trust Company (ALA)(3)
    
    
    190,012,000
    
    
    
    5.18
    %
 
 (1)
    
    Huachen Automotive Group Holdings Company Limited, or Huachen, is a
wholly-owned subsidiary of the Liaoning Provincial
Government.(2)
    
    Deutsche Bank Aktiengesellschaft also has 59,307,300
ordinary shares held in a short position as of December 31,
2006.(3)
    
    The Northern Trust Company (ALA), or NTC, is an approved lending
agent under the Securities Futures Ordinance of Hong Kong.
The 190,012,000 ordinary shares represent ordinary shares
in NTCs lending pool, or shares that NTC holds as agent
for a third party to which NTC is authorized to lend, and
shares that have been lent by NTC but for which NTC still
has a right to require the return of such shares.  81




---



##### Table of Contents



Related Party Transactions
    2006
    
    2005
    
    2004(Rmb thousands)Sales to JinBei and its affiliated companies
    
    
    178,414
    
    
    
    69,432
    
    
    
    38,127Purchases from JinBei and its affiliated companies
    
    
    895,457
    
    
    
    383,808
    
    
    
    764,311Sales to Shanghai Shenhua and its affiliated companies
    
    
    1,052,689
    
    
    
    1,469,402
    
    
    
    1,895,881Purchases from Shanghai Shenhua and its affiliated
companies
    
    
    16,668
    
    
    
    85,354
    
    
    
    214,467Purchases from shareholders of Shenyang Aerospace
    
    
    90,505
    
    
    
    1,987
    
    
    
    39,019Subcontracting charges to BMW Brilliance
    
    
    254,479
    
    
    
    112,160
    
    
    
    178,685Purchases from other affiliated companies of Brilliance
Holdings Limited
    
    
    117,336
    
    
    
    66,441
    
    
    
    89,690
 82




---



##### Table of Contents



2006
    
    2005
    
    2004(Rmb thousands)Purchases from associated companies and jointly
controlled entities
    
    
    942,878
    
    
    
    524,221
    
    
    
    898,914Purchases from affiliated companies of the joint
venture partner of Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    342Sales to associated companies and jointly controlled
entities
    
    
    186,146
    
    
    
    71,005
    
    
    
    205,849Consideration paid to the joint venture partner of
Ningbo Yuming for acquisition of further interests in
Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    10,000Purchase of intangible asset from an affiliated company
of the joint venture partner of Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    6,940Finance charge to a jointly controlled entity
    
    
    16,748
    
    
    
    17,329
    
    
    
    17,850Operating lease rental on land and buildings charged by: a jointly controlled entity
    
    
    908
    
    
    
    2,206
    
    
    
    12,840 Shanghai Shenhua and its affiliated companies
    
    
    1,148
    
    
    
    
    
    
    
     JinBei and its affiliated companies
    
    
    60
    
    
    
    
    
    
    
    Mould testing income from a jointly controlled entity
    
    
    4,320
    
    
    
    
    
    
    
    Operating lease rental from a jointly controlled entity
    
    
    34,863
    
    
    
    15,078
    
    
    
    15,364Sales of property, plant and equipment to JinBei and
its affiliated companies
    
    
    
    
    
    
    
    
    
    
    4,407Sales of property, plant and equipment to a jointly
controlled entity
    
    
    80,332
    
    
    
    263
    
    
    
    1,105Purchase of machinery from JinBei and its affiliated
companies
    
    
    
    
    
    
    
    
    
    
    58,089Service income from a jointly controlled entity
    
    
    35,067
    
    
    
    43,671
    
    
    
    
    83




---



##### Table of Contents




    
    a corporate guarantee of approximately Rmb 120 million (US$15.4 million)
for revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua.
However, default by Shanghai Shenhua and its affiliated companies is considered remote
by management and therefore no provision for the guarantors obligation under the
guarantee was recorded as of December 31, 2006;
    
    a joint and several proportional corporate guarantee with a shareholder of
Shenyang Aerospace on Shenyang Aeropspaces long-term bank loan with no amount
outstanding as of December 31, 2006. There is no recourse or collateralization
provision in the guarantee; and
    
    corporate guarantees for bank loans amounting to Rmb 295 million (US$37.8
million) drawn by JinBei. Bank deposits of Rmb 312 million were pledged as a collateral
for the corporate guarantees. However, default by JinBei is considered remote by
management and therefore no provision for the guarantors obligation under the
guarantee was recorded as of December 31, 2006.
  2006
    
    2005
    
    2004(Rmb thousands)Notes receivable from affiliated companiesNotes receivable from affiliated companies of JinBei
    
    
    16,620
    
    
    
    9,446
    
    
    
    22,500Notes receivable from Shanghai Shenhua
    
    
    63,750
    
    
    
    328,482
    
    
    
    601,348Notes
receivable from associated companies and jointly controlled entities
    
    
    1,107
    
    
    
    1,042
    
    
    
    21,295Total(1)
    
    
    81,477
    
    
    
    338,970
    
    
    
    645,143
 84




---



##### Table of Contents



2006
    
    2005
    
    2004(Rmb thousands)Amounts due from affiliated companiesDue from Shanghai Shenhua and its affiliated companies
    
    
    431,310
    
    
    
    276,763
    
    
    
    386,710Due from affiliated companies of JinBei
    
    
    93,446
    
    
    
    62,877
    
    
    
    58,312Due from affiliated companies of Brilliance Holdings
Limited
    
    
    55,040
    
    
    
    54,222
    
    
    
    Due from jointly controlled entities
    
    
    21,470
    
    
    
    13,380
    
    
    
    26,643Due from an associated company
    
    
    
    
    
    
    1,505
    
    
    
    882Due from BMW Brilliance Accounts receivables
    
    
    247,564
    
    
    
    192,185
    
    
    
    48,581 Consideration receivable arising from the
disposal of machinery and equipment(2)
    
    
    134,527
    
    
    
    269,003
    
    
    
    269,003Dividend receivable from a jointly controlled entity
    
    
    76,173
    
    
    
    
    
    
    
    Dividend receivable from an associate
    
    
    21,000
    
    
    
    
    
    
    
    Provision for doubtful debts
    
    
    (29,720
    )
    
    
    (29,720
    )
    
    
    (24,720
    )Total
    
    
    1,050,810
    
    
    
    840,215
    
    
    
    765,411
 
 (1)
    
    The notes receivable from affiliated companies are guaranteed by
banks in China and have maturities of six months or less. The
fair value of the notes receivable approximates their carrying
value.(2)
    
    The outstanding balance is unsecured, non-interest bearing and
will be settled by BMW Brilliance when certain conditions
specified in the agreement of sale are fulfilled.  2006
    
    2005
    
    2004(Rmb thousands)Advances to affiliated companiesAdvances to JinBei and its affiliated companies
    
    
    23,740
    
    
    
    16,185
    
    
    
    16,786Advances to associated companies and jointly controlled
entities
    
    
    6,553
    
    
    
    7,226
    
    
    
    22,528Advances to Shanghai Shenhua and its affiliated companies
    
    
    14,044
    
    
    
    9,045
    
    
    
    Advances to affiliated companies of Brilliance Holdings
Limited
    
    
    15,273
    
    
    
    15,273
    
    
    
    Advances to other affiliated companies
    
    
    689
    
    
    
    452
    
    
    
    138Provision for doubtful debts
    
    
    (2,214
    )
    
    
    (9,250
    )
    
    
    (1,975
    )Total
    
    
    58,085
    
    
    
    38,931
    
    
    
    37,477
  2006
    
    2005
    
    2004(Rmb thousands)Advances from affiliated companiesAdvances from Brilliance Holdings Limited and
its affiliated companies
    
    
    12,728
    
    
    
    28,558
    
    
    
    14,319Advances from associated companies and jointly
controlled entities
    
    
    1,279
    
    
    
    607
    
    
    
    Advances from affiliated companies of Shanghai
Shenhua
    
    
    820
    
    
    
    236
    
    
    
    230
 85




---



##### Table of Contents



2006
    
    2005
    
    2004(Rmb thousands)Advances from JinBei and its affiliated companies
    
    
    6,925
    
    
    
    1,088
    
    
    
    945Advances from other affiliated companies
    
    
    
    
    
    
    
    
    
    
    382Financing received from BMW Brilliance
    
    
    113,343
    
    
    
    74,605
    
    
    
    74,605Total
    
    
    135,095
    
    
    
    105,094
    
    
    
    90,481
   2006
    
    2005
    
    2004(Rmb thousands)Notes payable to affiliated companiesNotes payable to affiliated companies of JinBei
    
    
    7,249
    
    
    
    8,139
    
    
    
    24,229Notes payable to associated companies and
jointly controlled entities
    
    
    30,039
    
    
    
    22,491
    
    
    
    91,892Notes payable to other affiliated companies
    
    
    
    
    
    
    
    
    
    
    925Notes payable to affiliated companies of
Brilliance Holdings Limited
    
    
    
    
    
    
    43,462
    
    
    
    Notes payable to Shanghai Shenhua
    
    
    
    
    
    
    
    
    
    
    4,116Total
    
    
    37,288
    
    
    
    74,092
    
    
    
    121,162Amounts due to affiliated companiesDue to affiliated companies of JinBei
    
    
    281,721
    
    
    
    142,438
    
    
    
    195,166Due to affiliated companies of Brilliance
Holdings Limited
    
    
    
    
    
    
    22,025
    
    
    
    8,705Due to affiliated companies of Shanghai Shenhua
    
    
    10,719
    
    
    
    4,191
    
    
    
    40,570Due to associated companies and jointly
controlled entities
    
    
    680,943
    
    
    
    465,023
    
    
    
    276,951Due to other affiliated companies
    
    
    9,910
    
    
    
    130
    
    
    
    1,330Total
    
    
    983,293
    
    
    
    633,807
    
    
    
    522,722
   
 ITEM 8. FINANCIAL INFORMATION
 Consolidated Statements and Other Financial Information
  86




---



##### Table of Contents



Legal Proceedings
 Yang Rong Employment Proceedings
 sine die sine die
  Dividends
  87




---



##### Table of Contents




    
    Brilliance China Automotive is, or would after payment be, unable to pay
its liabilities as they become due; or
    
    the realizable value of Brilliance China Automotives assets would thereby
be less than the aggregate of its liabilities and its issued share capital and share
premium account. As a Bermuda company, Brilliance China Automotive must abide by these
criteria in formulating its dividend policy.
  
    
    satisfy all tax liabilities;
    
    provide for losses in previous years;
    
    in the case of a Sino-foreign joint venture, also make appropriation, in
proportions determined at the sole discretion of the board of directors of the joint
venture, to a general reserve fund, an enterprise expansion fund and a staff welfare
and employee bonus fund. During the year ended December 31, 2006, Shenyang Automotive
was not required to and therefore did not make any additional contributions into these
funds. Distributions of profits to investors are required to be in proportion to each
partys shareholdings in the joint venture; and
    
    in the case of a wholly foreign owned enterprise, appropriate 10% of
profit after providing for taxes and losses in previous years to a general reserve fund
until the balance of the fund reaches 50% of its share capital. Any further
appropriation thereafter is optional. The appropriation to an enterprise expansion fund
and a staff welfare fund is at the sole discretion of the board of directors of the
wholly foreign owned enterprise. During the year ended December 31, 2006, Xing Yuan
Dong, Ningbo Yuming and Shenyang Chenfa made an additional Rmb 16.6 million (US$2.1
million) to the general reserve fund, enterprise expansion fund and staff welfare fund.
 Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
  88




---



##### Table of Contents



The New York Stock
    
    The Stock Exchange ofExchange, Inc.
    
    Hong Kong Limited(US$)
    
    (HK$)ADSs
    
    Ordinary SharesHigh
    
    Low
    
    High
    
    Low2002:
    
    1st quarter
    
    
    21.48
    
    
    
    16.00
    
    
    
    1.70
    
    
    
    1.262nd quarter
    
    
    18.50
    
    
    
    12.34
    
    
    
    1.49
    
    
    
    0.983rd quarter
    
    
    15.15
    
    
    
    12.10
    
    
    
    1.22
    
    
    
    0.984th quarter
    
    
    19.00
    
    
    
    10.65
    
    
    
    1.49
    
    
    
    0.802003:
    
    1st quarter
    
    
    25.49
    
    
    
    18.11
    
    
    
    2.03
    
    
    
    1.422nd quarter
    
    
    29.29
    
    
    
    20.48
    
    
    
    2.28
    
    
    
    1.563rd quarter
    
    
    34.49
    
    
    
    26.80
    
    
    
    2.73
    
    
    
    2.104th quarter
    
    
    61.30
    
    
    
    34.20
    
    
    
    4.75
    
    
    
    2.652004:
    
    1st quarter
    
    
    62.75
    
    
    
    39.52
    
    
    
    4.85
    
    
    
    3.852nd quarter
    
    
    48.25
    
    
    
    28.55
    
    
    
    3.73
    
    
    
    2.153rd quarter
    
    
    32.20
    
    
    
    19.21
    
    
    
    2.53
    
    
    
    1.524th quarter
    
    
    24.40
    
    
    
    17.75
    
    
    
    1.93
    
    
    
    1.402005:
    
    1st quarter
    
    
    22.73
    
    
    
    14.76
    
    
    
    1.78
    
    
    
    1.222nd quarter
    
    
    20.00
    
    
    
    15.75
    
    
    
    1.61
    
    
    
    1.263rd quarter
    
    
    19.10
    
    
    
    13.41
    
    
    
    1.50
    
    
    
    0.984th quarter
    
    
    15.25
    
    
    
    12.56
    
    
    
    1.18
    
    
    
    0.972006:
    
    1st quarter
    
    
    23.66
    
    
    
    14.52
    
    
    
    1.57
    
    
    
    1.122nd quarter
    
    
    19.25
    
    
    
    14.05
    
    
    
    1.55
    
    
    
    1.103rd quarter
    
    
    16.93
    
    
    
    14.40
    
    
    
    1.33
    
    
    
    1.154th quarter
    
    
    18.81
    
    
    
    15.15
    
    
    
    1.46
    
    
    
    1.172007:
    
    January
    
    
    22.47
    
    
    
    19.87
    
    
    
    1.76
    
    
    
    1.33February
    
    
    29.98
    
    
    
    20.00
    
    
    
    2.55
    
    
    
    1.57March
    
    
    28.25
    
    
    
    23.09
    
    
    
    2.18
    
    
    
    1.83April
    
    
    25.85
    
    
    
    21.26
    
    
    
    1.99
    
    
    
    1.64May
    
    
    25.24
    
    
    
    21.14
    
    
    
    1.96
    
    
    
    1.67June (through June 20)
    
    
    24.19
    
    
    
    22.73
    
    
    
    1.89
    
    
    
    1.78
   89




---



##### Table of Contents



ITEM 10. ADDITIONAL INFORMATION
 Memorandum of Association and Bye-laws
  General
   Directors
 Disclosure of interests in contracts with Brilliance China Automotive or its subsidiaries
  90




---



##### Table of Contents




    
    any contract or arrangement for the giving by Brilliance China Automotive
of any security or indemnity to the director or his associates in respect of money lent
by him or any of his associates or obligations incurred or undertaken by him or his
associates at the request of or for the benefit of Brilliance China Automotive or any
of its subsidiaries;
    
    any contract or arrangement for the giving by Brilliance China Automotive
of any security or indemnity to a third party in respect of a debt or obligation of
Brilliance China Automotive, or any of its subsidiaries, for which the director or his
associates have assumed responsibility or guaranteed or secured in whole or in part
whether solely or jointly;
    
    any contract or arrangement concerning an offer of the shares, debentures
or other securities of or by Brilliance China Automotive or any other company which
Brilliance China Automotive may promote or be interested in for subscription or
purchase where the director or his associates are interested as a participant in the
underwriting or sub-underwriting of the offer;
    
    any contract or arrangement concerning any other company in which the
director or his associates are interested whether directly or indirectly, as an officer
or executive or shareholder or in which the director or his associates are beneficially
interested in shares of that company, other than a company in which the director
together with any of his associates beneficially own 5% or more of the issued shares of
any class of shares of such company (or of any third company through which his/their
interest is derived) or of the voting rights;
    
    any proposal or arrangement concerning the adoption, modification or
operation of any employees share scheme or any share incentive or share option scheme
under which the director or his associates may benefit;
    
    any proposal or arrangement for the benefit of employees of Brilliance
China Automotive or its subsidiaries including the adoption, modification or operation
of a
 91




---



##### Table of Contents



pension fund or retirement, death or disability benefit scheme which relates both to
directors, their associates and employees of Brilliance China Automotive or any of its
subsidiaries and does not give the director or their associates any privilege or
advantage not generally accorded to the class of persons to whom such scheme or fund
relates; and
    
    any contract or arrangement in which the director or his associates are
interested in the same manner as other holders of shares or debentures or securities of
Brilliance China Automotive by virtue only of their interest in shares or debentures or
other securities of Brilliance China Automotive.
 Remuneration
  Borrowing powers
  Alterations to constitutional documents
  Variation of rights of existing shares or classes of shares
  92




---



##### Table of Contents



Special resolutions  majority required
  Voting rights and right to demand a poll
   
    
    by the chairman of the meeting;
    
    by at least three members present in person, or by a duly authorized
corporate representative, or by proxy for the time being entitled to vote at the
meeting;
    
    by any member or members present in person, or by a duly authorized
corporate representative, or by proxy, and representing not less than one-tenth of the
total voting rights of all the members having the right to attend and vote at the
meeting; or
    
    by any member or members present in person, or by a duly authorized
corporate representative, or by proxy having the right to attend and vote at the
meeting, and in respect of whose shares, sums have been paid up in the aggregate equal
to not less than one-tenth of the total sum paid up on all the shares having that
right.
 93




---



##### Table of Contents



Requirements for annual general meetings
  Notices of annual general meetings
  Quorum for meetings and separate class meetings
  Dividends
    
    
    that such dividend be satisfied wholly or in part in the form of an
allotment of shares credited as fully paid up, on the basis that the shares so allotted
shall be of the same class or classes as the class or classes of shares already held by
the allottee, provided that the members will be entitled to elect to receive such
dividend (or part of it) in cash in lieu of such allotment; or
 94




---



##### Table of Contents




    
    that the members entitled to such dividend will be entitled to elect to
receive an allotment of shares credited as fully paid up in lieu of the whole or such
part of the dividend as the board of directors may think fit, on the basis that the
shares so allotted shall be of the same class or classes as the class or classes of
shares already held by the allottee.
    Procedures on liquidation
   Transfer of shares
  95




---



##### Table of Contents




    
    the sum, if any, as the board of directors shall determine to be paid to
Brilliance China Automotive has been paid;
    
    the shares are free of any lien in favor of Brilliance China Automotive;
    
    the instrument of transfer is properly stamped, and is in respect of only
one class of shares;
    
    the instrument of transfer is lodged at the relevant registration or
transfer office accompanied by the relevant share certificate(s), and other evidence as
the board of directors may reasonably require to show the right of the transferor to
make the transfer has been presented (particularly if the instrument of transfer is
executed by some other person on his behalf); and
    
    in some circumstances, the permission of the Bermuda Monetary Authority
has been obtained.
 96




---



##### Table of Contents



Recent Amendments to the Bye-laws
   
    
    Bye-law 1(A): To amend the existing definition of associates and
Clearing House and to add a new definition for subsidiaries
    
    Bye-law 70: To reflect the requirement of voting by poll in respect of
certain transactions under the Listing Rules
    
    Bye-law 76: To provide for circumstances under which shareholders are
required to abstain from voting or restricted to vote for or against any particular
resolution as required by the revised Appendix 3 to the Listing Rules
    
    Bye-laws 98(E), 98(H) and 98(K): To be consistent with the provisions of
the revised Appendix 3 to the Listing Rules so that, subject to certain exceptions, a
director shall abstain from voting at the board meeting on any contract or arrangement
in which he and/or any of his associates has/have a material interest nor shall he be
counted towards the quorum of the relevant board meeting
    
    Bye-law 103: To be consistent with the revised Appendix 3 to the Listing
Rules which stipulates the minimum seven-day period for lodgment by a shareholder of
the
 97




---



##### Table of Contents



notice to nominate a director and the nomination shall commence no earlier than the day
after the despatch of the notice of the general meeting appointed for such election and
end no later than seven days before the date of such general meeting
   
    
    Bye-law 6(A): To reflect the existing authorized share capital of
Brilliance China Automotive
    
    Bye-law 70: To facilitate the process for demanding a poll at general
meetings
    
    Bye-law 99: To provide for retirement by rotation of every director at
annual general meetings of Brilliance China Automotive in compliance with code
provision A.4.2 of the Code on Corporate Governance Practices issued by The Stock
Exchange of Hong Kong Limited
    
    Bye-law 102 (A) and (B): To specify that any director of Brilliance China
Automotive appointed to fill a casual vacancy shall hold office until the next
following general meeting, instead of the next following annual general meeting
 98




---



##### Table of Contents



Material Contracts
  (a)
    
    Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Wu Xiao An;(b)
    
    Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Qi Yumin;(c)
    
    Purchase Agreement, dated May 8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited; and(d)
    
    Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.
 Exchange Controls
    99




---



##### Table of Contents




    
    the acquisition or holding of land in Bermuda (except that required for
its business and held by way of lease or tenancy for terms of not more than 50 years)
without the express authorization of the Bermuda legislature;
    
    the taking of mortgages on land in Bermuda to secure an amount in excess
of BD$50,000 without the consent of the Minister of Finance of Bermuda;
    
    the acquisition of securities secured on any land in Bermuda, other than
certain types of Bermuda government securities; or
    
    the carrying on of business of any kind in Bermuda, except in furtherance
of the business of Brilliance China Automotive carried on outside Bermuda or under a
license granted by the Minister of Finance of Bermuda.
   100




---



##### Table of Contents



Taxation
 Income tax
        101




---



##### Table of Contents



Value Added Tax and Consumption Tax
  Customs Duties
  Documents on Display
  102




---



##### Table of Contents



ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Exchange Rates
     103




---



##### Table of Contents



Interest Rates
   Tariff Reductions
    104




---



##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Material Modifications to the Rights of Security Holders
  Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   105




---



##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
     1.
    
    Revenue Recognition
  2.
    
    Investments
  3.
    
    Credit Approval
  106




---



##### Table of Contents



4.
    
    Monitoring of Credit Risks
  5.
    
    Monitoring of Payments in Advance
   Revenue recognition
 Investments
 Credit Approval
 Monitoring of Credit Risks
 Monitoring of Payments in Advance
 107




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
    
    The Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited, including the Model Code for Securities Transactions by Directors of
Listed Issuers;
    
    Non-Statutory Guidelines on Directors Duties issued by the Hong Kong
Companies Registry in January 2004;
    
    Guide for Independent Non-Executive Directors issued by The Hong Kong
Institute of Directors in 2000;
    
    Guidelines for Directors issued by The Hong Kong Institute of Directors in
2005; and
    
    Code for Securities Transactions by Employees.
 
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 108




---



##### Table of Contents



Total Fees2006
    
    2005
    
    2004(Rmb thousands)Audit fees
    
    
    2,800
    
    
    
    3,146
    
    
    
    4,452Audit-related fees
    
    
    1,900
    
    
    
    723
    
    
    
    662Tax fees
    
    
    
    
    
    
    
    
    
    
    Other fees
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,700
    
    
    
    3,869
    
    
    
    5,114
 Audit Fees
  Audit-Related Fees
  Pre-Approval Policies and Procedures
  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  
 PART III
 109




---



##### Table of Contents



ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
  1.1
    
    Amended and Restated Bye-Laws of Brilliance China Automotive, dated June 25,
2004.*1.2
    
    Amendments to Bye-Laws of Brilliance China Automotive dated
February 12, 2007 and June 24,
2005.2.1
    
    Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.**4.1
    
    Form of Service Agreement for Executive Director.**4.2
    
    Purchase Agreement, dated May 8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited.**7.1
    
    Statement explaining how certain ratios were calculated in the annual report.8.1
    
    List of significant subsidiaries, jointly controlled entities and associated
companies of Brilliance China Automotive as of December 31, 2006.12.1
    
    Section 302 Certification of the Chief Executive Officer.12.2
    
    Section 302 Certification of the Chief Financial Officer.13.1
    
    Section 906 Certification of the Chief Executive Officer and Chief Financial
Officer.
 
 *
    
    Incorporated by reference from the Registrants annual report on Form 20-F
filed with the SEC on June 24, 2005.**
    
    Incorporated by reference from the Registrants annual report on Form 20-F
filed with the SEC on June 26, 2006. 110




---



##### Table of Contents



SIGNATURE
  BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED/s/ WU Xiao AnWU Xiao AnChairman  111




---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED AND SUBSIDIARIES
 PageReport of Independent Registered Public Accounting Firm of Moores
Rowland Mazars, dated April 20, 2007
    
    F-2Consolidated Statements of Income and Comprehensive Income for the
years ended December 31, 2006, 2005 and 2004
    
    F-3Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    F-4Consolidated Statements of Cash Flows for the years ended December
31, 2006, 2005 and 2004
    
    F-6Consolidated Statements of Changes in Shareholders Equity for the
years ended December 31, 2006, 2005 and 2004
    
    F-9Notes to Consolidated Financial Statements
    
    F-10
 F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Shareholders of
Brilliance China Automotive Holdings Limited
    Moores Rowland Mazars  Chartered Accountants
Certified Public Accountants
 
 F-2




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Income and Comprehensive Income
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000(except for share and ADS data)Sales to third parties
    
    
    9,067,505
    
    
    
    3,859,151
    
    
    
    4,402,141Sales to affiliated companies
    
    
    1,417,249
    
    
    
    1,609,839
    
    
    
    2,139,857Total sales
    
    
    10,484,754
    
    
    
    5,468,990
    
    
    
    6,541,998Cost of sales (include purchase of goods and
subcontracting charges from affiliated
companies) (2006: RMB2,317,393,000,
2005: RMB1,174,732,000, 2004: RMB2,185,428,000)
    
    
    (9,960,587
    )
    
    
    (5,011,955
    )
    
    
    (5,491,250
    )Gross profit
    
    
    524,167
    
    
    
    457,035
    
    
    
    1,050,748Selling, general and administrative expenses
    
    
    (1,384,718
    )
    
    
    (1,195,336
    )
    
    
    (1,510,442
    )Interest expenses
    
    
    (177,001
    )
    
    
    (182,354
    )
    
    
    (182,458
    )Interest income
    
    
    90,738
    
    
    
    60,189
    
    
    
    58,800Equity in earnings of associated companies
and jointly controlled entities, net
    
    
    149,320
    
    
    
    48,995
    
    
    
    126,261Subsidy income
    
    
    50,176
    
    
    
    3,139
    
    
    
    1,815Other income, net
    
    
    106,150
    
    
    
    43,650
    
    
    
    25,709Impairment loss on intangible assets
    
    
    
    
    
    
    (173,000
    )
    
    
    (50,000
    )Impairment loss on goodwill
    
    
    (73,343
    )
    
    
    (257,720
    )
    
    
    (47,320
    )Loss before taxation and minority interests
    
    
    (714,511
    )
    
    
    (1,195,402
    )
    
    
    (526,887
    )(Provision) benefit for income taxes
    
    
    (47,879
    )
    
    
    (101,884
    )
    
    
    63,110Minority interests
    
    
    376,282
    
    
    
    625,997
    
    
    
    464,991Net (loss) income
    
    
    (386,108
    )
    
    
    (671,289
    )
    
    
    1,214Other comprehensive income (loss)Fair value adjustment for securities
available-for-sale
    
    
    1,052
    
    
    
    (27,227
    )
    
    
    28,468Comprehensive (loss) income
    
    
    (385,056
    )
    
    
    (698,516
    )
    
    
    29,682Basic (loss) earnings per share
    
    
    RMB(0.1053
    )
    
    
    RMB(0.1830
    )
    
    
    RMB0.0003Basic (loss) earnings per ADS
    
    
    RMB(10.53
    )
    
    
    RMB(18.30
    )
    
    
    RMB0.03Diluted (loss) earnings per share
    
    
    RMB(0.1053
    )
    
    
    RMB(0.1830
    )
    
    
    RMB0.0003Diluted (loss) earnings per ADS
    
    
    RMB(10.53
    )
    
    
    RMB(18.30
    )
    
    
    RMB0.03Weighted average number of shares outstanding
    
    
    3,668,390,900
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900Weighted average number of ADSs outstanding
    
    
    36,683,909
    
    
    
    36,683,909
    
    
    
    36,683,909Net (loss) income adjusted for the dilutive
effect of convertible bonds
    
    
    (386,108
    )
    
    
    (671,289
    )
    
    
    1,214Weighted average number of shares
outstanding adjusted for dilutive effect of
stock options and convertible bonds
    
    
    3,668,390,900
    
    
    
    3,668,390,900
    
    
    
    3,683,795,968Weighted average number of ADSs outstanding
adjusted for dilutive effect of stock
options and convertible bonds
    
    
    36,683,909
    
    
    
    36,683,909
    
    
    
    36,837,960
  F-3




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Balance Sheets
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000AssetsCurrent assetsCash and cash equivalents
    
    
    1,468,075
    
    
    
    843,400Short-term bank deposits
    
    
    616,787
    
    
    
    1,053,832Pledged short-term bank deposits
    
    
    1,625,149
    
    
    
    1,932,649Deferred expenses  current portion
    
    
    6,283
    
    
    
    8,920Notes receivable
    
    
    197,668
    
    
    
    377,505Notes receivable from affiliated companies
    
    
    81,477
    
    
    
    338,970Accounts receivable, net
    
    
    632,158
    
    
    
    124,958Due from affiliated companies
    
    
    1,050,810
    
    
    
    840,215Inventories, net
    
    
    1,346,843
    
    
    
    1,046,818Other receivables
    
    
    423,017
    
    
    
    432,019Prepayments and other current assets
    
    
    143,583
    
    
    
    57,707Income tax recoverable
    
    
    815
    
    
    
    12,476Other taxes recoverable
    
    
    117,830
    
    
    
    1,766Advances to affiliated companies
    
    
    58,085
    
    
    
    38,931Total current assets
    
    
    7,768,580
    
    
    
    7,110,166Property, plant and equipment
    
    
    3,865,210
    
    
    
    4,362,762Intangible assets
    
    
    420,978
    
    
    
    584,811Interests in associated companies and jointly controlled entities
    
    
    1,413,135
    
    
    
    1,520,696Investment securities
    
    
    23,736
    
    
    
    22,684Goodwill
    
    
    339,710
    
    
    
    339,710Prepayment for a long-term investment
    
    
    600,000
    
    
    
    600,000Deferred expenses  non-current portion
    
    
    21,466
    
    
    
    16,353Long-term land lease prepayments
    
    
    120,099
    
    
    
    124,157Other long-term assets
    
    
    7,450
    
    
    
    10,966Total assets
    
    
    14,580,364
    
    
    
    14,692,305
 F-4




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Balance Sheets
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Liabilities and shareholders equityCurrent liabilitiesConvertible bonds due 2008
    
    
    
    
    
    
    1,639,550Short-term bank loans
    
    
    500,000
    
    
    
    496,500Notes payable
    
    
    2,141,947
    
    
    
    3,026,952Notes payable to affiliated companies
    
    
    37,288
    
    
    
    74,092Accounts payable
    
    
    2,299,267
    
    
    
    928,892Due to affiliated companies
    
    
    983,293
    
    
    
    633,807Customer advances
    
    
    425,778
    
    
    
    318,978Other payables
    
    
    403,040
    
    
    
    434,651Dividends payable
    
    
    3,299
    
    
    
    3,406Accrued expenses and other current liabilities
    
    
    159,222
    
    
    
    265,908Income tax payable
    
    
    11,411
    
    
    
    14,309Other taxes payable
    
    
    81,841
    
    
    
    117,695Advances from affiliated companies
    
    
    135,095
    
    
    
    105,094Total current liabilities
    
    
    7,181,481
    
    
    
    8,059,834Convertible bonds due 2011
    
    
    1,486,568
    
    
    
    Deferred income
    
    
    109,502
    
    
    
    79,602Total liabilities
    
    
    8,777,551
    
    
    
    8,139,436Minority interests
    
    
    36,900
    
    
    
    413,181Shareholders equityCapital stockCommon stock (5,000,000,000 shares of US$0.01
each authorized and 3,668,390,900 shares of
US$0.01 each issued and outstanding as of
December 31, 2006 and 2005)
    
    
    303,388
    
    
    
    303,388Additional paid-in capital
    
    
    2,325,690
    
    
    
    2,325,690Accumulated other comprehensive income
    
    
    41,472
    
    
    
    40,420Dedicated capital
    
    
    184,193
    
    
    
    167,631Capital reserve
    
    
    120,000
    
    
    
    120,000Share option reserve
    
    
    11,281
    
    
    
    Retained earnings
    
    
    2,779,889
    
    
    
    3,182,559Total shareholders equity
    
    
    5,765,913
    
    
    
    6,139,688Total liabilities and shareholders equity
    
    
    14,580,364
    
    
    
    14,692,305
 
 F-5




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Cash Flows
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Cash flows from operating activities:Net (loss) income
    
    
    (386,108
    )
    
    
    (671,289
    )
    
    
    1,214Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Deferred income tax
    
    
    
    
    
    
    114,005
    
    
    
    (74,450
    )Depreciation of property, plant and equipment
    
    
    601,045
    
    
    
    399,744
    
    
    
    365,638Amortization of long-term land lease prepayments
    
    
    4,058
    
    
    
    3,886
    
    
    
    2,369Amortization of intangible assets
    
    
    181,444
    
    
    
    204,009
    
    
    
    226,041Amortization of deferred expenses
    
    
    24,962
    
    
    
    8,920
    
    
    
    8,920Minority interests in net loss of consolidated
subsidiaries
    
    
    (376,282
    )
    
    
    (625,998
    )
    
    
    (464,991
    )Provision for doubtful debts and write off of bad
debts
    
    
    28,272
    
    
    
    55,703
    
    
    
    55,292Write back of provision for doubtful debts
    
    
    (76
    )
    
    
    (7,459
    )
    
    
    (1,000
    )Provision for impairment of intangible assets
    
    
    
    
    
    
    173,000
    
    
    
    50,000Provision for impairment of property, plant and
equipment
    
    
    29,160
    
    
    
    48,299
    
    
    
    10,000Provision for impairment of investment in a
jointly controlled entity
    
    
    73,343
    
    
    
    179,030
    
    
    
    47,320Provision for impairment of goodwill in a
subsidiary
    
    
    
    
    
    
    78,690
    
    
    
    Write back of provision for inventories sold
    
    
    (163,094
    )
    
    
    (39,638
    )
    
    
    (15,522
    )Gain on disposal of property, plant and equipment
    
    
    (3,055
    )
    
    
    (341
    )
    
    
    12,519Write off of property, plant and equipment
    
    
    8,251
    
    
    
    
    
    
    
    Gain on disposal of a jointly controlled entity
    
    
    
    
    
    
    (2,098
    )
    
    
    Government grant recognized
    
    
    (1,850
    )
    
    
    (941
    )
    
    
    Unrealized exchange gain
    
    
    (69,259
    )
    
    
    (40,829
    )
    
    
    Equity in earnings of associated companies and
jointly controlled entities, net
    
    
    (149,320
    )
    
    
    (48,995
    )
    
    
    (126,261
    )Amortisation of finance costs of convertible bonds
    
    
    68,419
    
    
    
    12,419
    
    
    
    12,401Write off of other non-current assets
    
    
    1,798
    
    
    
    
    
    
    
    Share option costs
    
    
    11,281
    
    
    
    
    
    
    
    Gain on disposal of an associate
    
    
    (384
    )
    
    
    
    
    
    
    Loss on disposal of an associate
    
    
    709
    
    
    
    
    
    
    
    Gain on buy back of convertible bonds due 2008
    
    
    (10,733
    )
    
    
    
    
    
    
    
 F-6




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Cash Flows
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000(Increase) decrease in operating assets:Accounts receivable
    
    
    (521,656
    )
    
    
    (69,974
    )
    
    
    32,858Notes receivable
    
    
    179,837
    
    
    
    243,394
    
    
    
    206,553Notes receivable from affiliated companies
    
    
    257,493
    
    
    
    306,173
    
    
    
    (117,968
    )Due from affiliated companies
    
    
    (191,724
    )
    
    
    (79,804
    )
    
    
    (10,157
    )Inventories
    
    
    (137,250
    )
    
    
    569,524
    
    
    
    (328,154
    )Other receivables
    
    
    75,113
    
    
    
    7,278
    
    
    
    50,625Prepayments and other current assets
    
    
    (85,876
    )
    
    
    69,374
    
    
    
    191,443Increase (decrease) in operating liabilities:Notes and accounts payable
    
    
    1,487,870
    
    
    
    (333,250
    )
    
    
    (391,075
    )Due to affiliated companies
    
    
    363,459
    
    
    
    171,871
    
    
    
    (162,132
    )Notes payable to affiliated companies
    
    
    (36,804
    )
    
    
    (47,070
    )
    
    
    Customer advances
    
    
    106,800
    
    
    
    53,486
    
    
    
    48,656Other payables
    
    
    25,566
    
    
    
    43,423
    
    
    
    (121,962
    )Accrued expenses and other current liabilities
    
    
    (106,686
    )
    
    
    (8,277
    )
    
    
    85,409Import tariff and taxes payable
    
    
    (143,155
    )
    
    
    117,152
    
    
    
    (306,000
    )Net cash provided by (used in) operating activities
    
    
    1,145,568
    
    
    
    883,417
    
    
    
    (712,414
    )Cash flows from investing activities:Capital expenditures
    
    
    (304,152
    )
    
    
    (558,028
    )
    
    
    (999,058
    )Proceeds from disposal of property, plant and
equipment
    
    
    3,314
    
    
    
    9,487
    
    
    
    18,204Decrease (increase) in short-term bank deposits
    
    
    437,045
    
    
    
    (45,230
    )
    
    
    661,994Decrease (increase) in pledged short-term bank
deposits
    
    
    307,500
    
    
    
    844,542
    
    
    
    (512,607
    )(Increase) decrease in advances to affiliated
companies
    
    
    (12,944
    )
    
    
    (8,729
    )
    
    
    204,030Increase in long term investment
    
    
    
    
    
    
    
    
    
    
    (4,138
    )Increase in other long-term assets
    
    
    
    
    
    
    
    
    
    
    (6,523
    )Decrease (increase) in other non-current assets
    
    
    1,719
    
    
    
    12,866
    
    
    
    (6,843
    )Decrease (increase) in interests in associated
companies and jointly controlled entities
    
    
    
    
    
    
    11,517
    
    
    
    (12,250
    )Dividends received from associated companies and
jointly controlled entities
    
    
    81,000
    
    
    
    72,000
    
    
    
    15,103Payment for acquisition of further interest in a
subsidiary
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Proceeds received from disposal of investment in
associated companies
    
    
    1,350
    
    
    
    
    
    
    
    20,000Advances to a joint venture partner of a
non-wholly owned subsidiary
    
    
    
    
    
    
    
    
    
    
    (97,156
    )Net cash provided by (used in) investing activities
    
    
    514,832
    
    
    
    338,425
    
    
    
    (729,244
    )
 F-7




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Cash Flows
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Cash flows from financing activities:Proceeds from short-term bank loans
    
    
    650,000
    
    
    
    501,202
    
    
    
    900,000Repayment of short-term bank loans
    
    
    (646,500
    )
    
    
    (4,702
    )
    
    
    (900,000
    )Issuance of notes payable
    
    
    4,530,000
    
    
    
    7,934,900
    
    
    
    12,405,435Repayment of notes payable
    
    
    (5,532,500
    )
    
    
    (10,106,000
    )
    
    
    (11,376,454
    )Increase (decrease) in advances from affiliated
companies
    
    
    102,480
    
    
    
    (9,434
    )
    
    
    (2,161
    )Dividends paid
    
    
    
    
    
    
    (19,450
    )
    
    
    (88,974
    )Dividends paid to joint venture partners
    
    
    
    
    
    
    
    
    
    
    (83,987
    )Proceeds from issuance of convertible bonds due
2011
    
    
    1,460,779
    
    
    
    
    
    
    
    Payment of direct expenses incurred in connection
with the issuance of convertible bonds due 2011
    
    
    (31,414
    )
    
    
    
    
    
    
    Buy back and redemption of convertible bonds due
2008
    
    
    (1,598,320
    )
    
    
    
    
    
    
    Receipts of government grants
    
    
    29,750
    
    
    
    80,543
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,035,725
    )
    
    
    (1,622,941
    )
    
    
    853,859Net increase (decrease) in cash and cash
equivalents
    
    
    624,675
    
    
    
    (401,099
    )
    
    
    (587,799
    )Cash and cash equivalents, beginning of year
    
    
    843,400
    
    
    
    1,244,499
    
    
    
    1,832,298Cash and cash equivalents, end of year
    
    
    1,468,075
    
    
    
    843,400
    
    
    
    1,244,499
 
 F-8




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Changes in Shareholders Equity
 Common stockAccumulatedAdditional
    
    
    otherpaid-in
    
    
    comprehensive
    
    
    Dedicated
    
    
    Capital
    
    
    Share option
    
    
    RetainedNumber of
    
    
    Amount
    
    
    capital
    
    
    income
    
    
    capital
    
    
    reserve
    
    
    reserve
    
    
    earnings
    
    
    Totalshares issued
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Balance as of December 31,
2003
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    39,179
    
    
    
    112,168
    
    
    
    120,000
    
    
    
    
    
    
    
    3,985,882
    
    
    
    6,886,307Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,214
    
    
    
    1,214Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,184
    
    
    
    
    
    
    
    
    
    
    
    (46,184
    )
    
    
    Net unrealized gain on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,468Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,335
    )
    
    
    (58,335
    )Balance as of December 31,
2004
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    67,647
    
    
    
    158,352
    
    
    
    120,000
    
    
    
    
    
    
    
    3,882,577
    
    
    
    6,857,654Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (671,289
    )
    
    
    (671,289
    )Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    (9,279
    )
    
    
    Net unrealized loss on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,227
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,227
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,450
    )
    
    
    (19,450
    )Balance as of December 31,
2005
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    40,420
    
    
    
    167,631
    
    
    
    120,000
    
    
    
    
    
    
    
    3,182,559
    
    
    
    6,139,688Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386,108
    )
    
    
    (386,108
    )Share option costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,281
    
    
    
    
    
    
    
    11,281Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,562
    
    
    
    
    
    
    
    
    
    
    
    (16,562
    )
    
    
    Net unrealized gain on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,052Balance as of December 31,
2006
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    41,472
    
    
    
    184,193
    
    
    
    120,000
    
    
    
    11,281
    
    
    
    2,779,889
    
    
    
    5,765,913
  
 F-9




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 1. ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT
   Percentage of effectiveequity interest/votingPlace of
    
    right attributable toestablishment/
    
    the CompanyName
    
    incorporation
    
    Directly
    
    Indirectly
    
    Principal activitiesShenyang Brilliance JinBei
Automobile Co., Ltd. (Shenyang
Automotive)
    
    Shenyang, the PRC
    
    
    51
    %
    
    
    
    
    
    Manufacture,
assembly and sale
of minibuses and
sedansNingbo Yuming Machinery
Industrial Co., Ltd. (Ningbo
Yuming)
    
    Ningbo, the PRC
    
    
    
    
    
    
    100
    %
    
    Manufacture and
sale of automotive
componentsShenyang XingYuanDong
Automobile Component Co., Ltd.
(Xing Yuan Dong)
    
    Shenyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsNingbo Brilliance Ruixing Auto
Components Co., Ltd. (Ningbo
Ruixing)
    
    Ningbo, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsMianyang Brilliance Ruian
Automotive Components Co., Ltd.
(Mianyang Ruian)
    
    Mianyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsShenyang Brilliance Dongxing
Automotive Component Co., Ltd.
(Dongxing Automotive)
    
    Shenyang, the PRC
    
    
    
    
    
    
    100
    %
    
    Manufacture and
trading of
automotive
components and
remodeling
minibuses and
sedansShenyang Jindong Development
Co., Ltd.
    
    Shenyang, the PRC
    
    
    
    
    
    
    75.5
    %
    
    Trading of
automotive
componentsBrilliance China Automotive
Finance Ltd.
    
    British Virgin
Islands
    
    
    100
    %
    
    
    
    
    
    FinancingBrilliance China Finance Limited
    
    British Virgin
Islands
    
    
    100
    %
    
    
    
    
    
    FinancingShenyang ChenFa Automobile
Component Co., Ltd.
    
    Shenyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Development,
manufacture and
sale of engines
componentsShenyang XinJinBei Investment
and Development Co., Ltd.
(SXID)
    
    Shenyang, the PRC
    
    
    
    
    
    
    100
    %
    
    Investment holdingShenyang JinBei Automotive
Industry Holdings Co., Ltd.
(SJAI)
    
    Shenyang, the PRC
    
    
    
    
    
    
    99
    %
    
    Investment holding
 F-10




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 Percentage of effectiveequity interest/votingPlace of
    
    right attributable toestablishment/
    
    the CompanyName
    
    incorporation
    
    Directly
    
    Indirectly
    
    Principal activitiesShanghai Hidea Auto Design Co.,
Ltd
    
    Shenyang, the PRC
    
    
    
    
    
    
    63.25
    %
    
    Design of automotiveShenyang Brilliance Power Train
Machinery Co., Ltd
    
    Shenyang, the PRC
    
    
    49
    %
    
    
    26.01
    %
    
    Manufacture and
sale of power train
   2. BASIS OF PRESENTATION
   
    
    Reclassification of certain items, designated as
construction-in-progress in the statutory financial statements, as
property, plant and equipment;
    
    Reclassification of certain items, designated as long-term land lease
prepayments, from property, plant and equipment in the statutory
financial statements;
    
    Reclassification of certain items, designated as reserves
appropriated from net income in the statutory financial statements,
as charges to income;
    
    Recognition of deferred income taxes;
    
    Recognition of provision for impairment loss of long-lived assets;
    
    Recognition of research and development expenditures as intangible
assets and related amortization; and
    
    Recognition of stock-based compensation.
 F-11




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Basis of consolidation
     (b) Sales
  (c) Cash, cash equivalents and short-term bank deposits
   F-12




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (d) Inventories
   (e) Property, plant and equipment and long-term land lease prepayments
   Buildings
    
    
    5
    %Machinery and equipment (excluding special tools and moulds)
    
    
    10
    %Furniture, fixtures and office equipment
    
    
    20
    %Motor vehicles
    
    
    20
    %
     (f) Intangible assets
  F-13




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (g) Impairment of long-lived assets
  (h) Goodwill
    (i) Investments in associated companies and jointly controlled entities
  F-14




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (j) Investment securities
   (k) Taxation
 Income Tax
       F-15




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
    Value Added Tax (VAT) and Consumption Tax
   (l) Deferred taxation
   (m) Foreign currency translation
   F-16




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (n) Warranty
    2006
    
    
    2005RMB000
    
    
    RMB000Balance as of January 1,
    
    
    22,460
    
    
    
    21,058Accrual for warranties issued during the year
    
    
    42,102
    
    
    
    32,396Settlement made during the year
    
    
    (37,214
    )
    
    
    (30,994
    )Balance as of December 31,
    
    
    27,348
    
    
    
    22,460
 (o) Advertising expenses
  (p) Research and development expenses
  (q) Operating leases
   (r) Stock-based compensation
  F-17




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
    (s) (Loss) earnings per share and (loss) earnings per ADS
    Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Net (loss) income for the year
    
    
    (386,108
    )
    
    
    (671,289
    )
    
    
    1,214
  Year ended December 31,2006
    
    
    2005
    
    
    2004Weighted average number of
shares of common stock used in
calculation of basic (loss)
earnings per share
    
    
    3,668,390,900
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    15,405,068Weighted average number of
shares of common stock adjusted
for dilutive effect of stock
options and convertible bonds
used in calculation of diluted
(loss) earnings per share
    
    
    3,668,390,900
    
    
    
    3,668,390,900
    
    
    
    3,683,795,968
 F-18




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
      Year ended December 31,2006
    
    
    2005
    
    
    2004Weighted average number of ADSs
used in calculation of basic
(loss) earnings per ADS
    
    
    36,683,909
    
    
    
    36,683,909
    
    
    
    36,683,909Dilutive effect of stock options
    
    
    
    
    
    
    
    
    
    
    154,051Weighted average number of ADSs
adjusted for dilutive effect of
stock options and convertible
bonds used in calculation of
diluted (loss) earnings per ADS
    
    
    36,683,909
    
    
    
    36,683,909
    
    
    
    36,837,960
 (t) Segmental information
  (u) Comprehensive income
  F-19




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  (v) Convertible bonds
  (w) Guarantees
  (x) Allowance for doubtful accounts
  (y) Fair value of financial instruments
  (z) Other new accounting pronouncements
  
 F-20




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
   4. SUBSIDY INCOME
  5. INCOME TAXES
   Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Current taxation
    
    
    (47,879
    )
    
    
    12,121
    
    
    
    (11,340
    )Deferred taxation
    
    
    
    
    
    
    (114,005
    )
    
    
    74,450(47,879
    )
    
    
    (101,884
    )
    
    
    63,110
  Year ended December 31,2006
    
    
    2005
    
    
    2004%
    
    
    %
    
    
    %Average statutory tax rate (including
state and local income tax)
    
    
    5.17
    
    
    
    10.25
    
    
    
    17.44Effect of statutory tax holiday
    
    
    5.87
    
    
    
    3.07
    
    
    
    15.44Effect of non-deductible expenses
    
    
    (7.02
    )
    
    
    (2.62
    )
    
    
    (5.38
    )Effect of valuation allowances
    
    
    (8.77
    )
    
    
    (22.93
    )
    
    
    (15.06
    )Others, not individually significant
    
    
    (1.95
    )
    
    
    3.71
    
    
    
    (0.46
    )Effective tax rate
    
    
    (6.70
    )
    
    
    (8.52
    )
    
    
    11.98
 F-21




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
   As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Deferred tax asset:Research and development costs
    
    
    62,008
    
    
    
    57,519Provisions and accruals
    
    
    56,893
    
    
    
    46,488Provision for impairment of property, plant and equipment
    
    
    7,541
    
    
    
    7,619Amortization and provision for impairment of intangible assets
    
    
    116,737
    
    
    
    102,436Tax losses carry forward
    
    
    209,905
    
    
    
    185,868453,084
    
    
    
    399,930Valuation allowance (Note)
    
    
    (453,084
    )
    
    
    (399,930
    )Net deferred tax assets
    
    
    
    
    
    
    
 Note:
 6. PLEDGED SHORT-TERM BANK DEPOSITS
  7. ACCOUNTS RECEIVABLE, NET
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Accounts receivable
    
    
    694,981
    
    
    
    173,325Less: Allowance for doubtful debts
    
    
    (62,823
    )
    
    
    (48,367
    )632,158
    
    
    
    124,958
 F-22




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  2006
    
    
    2005RMB000
    
    
    RMB000Balance as of January 1,
    
    
    48,367
    
    
    
    47,718Additional provision
    
    
    14,456
    
    
    
    1,177Write-back of provision
    
    
    
    
    
    
    (528
    )Balance as of December 31,
    
    
    62,823
    
    
    
    48,367
 8. NOTES RECEIVABLE
  9. OTHER RECEIVABLES
  10. INVENTORIES, NET
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Raw materials
    
    
    598,970
    
    
    
    564,596Work-in-progress
    
    
    174,328
    
    
    
    64,025Finished goods
    
    
    573,545
    
    
    
    418,1971,346,843
    
    
    
    1,046,818
 F-23




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 11. PROPERTY, PLANT AND EQUIPMENT AND LONG-TERM LAND LEASE PREPAYMENTS
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Buildings
    
    
    1,238,713
    
    
    
    1,260,101Machineries and equipment
    
    
    4,439,080
    
    
    
    4,136,064Motor vehicles
    
    
    116,133
    
    
    
    117,497Furniture, fixtures and office equipment
    
    
    423,321
    
    
    
    382,017Construction-in-progress
    
    
    233,104
    
    
    
    454,5916,450,351
    
    
    
    6,350,270Less: Accumulated provision for impairment losses
    
    
    (125,028
    )
    
    
    (95,868
    )6,325,323
    
    
    
    6,254,402Less: Accumulated depreciation
    
    
    (2,460,113
    )
    
    
    (1,891,640
    )Net book value
    
    
    3,865,210
    
    
    
    4,362,762
 (a)
    
    During the years ended December 31, 2006, 2005 and 2004, capitalized interest expenses
amounted to approximately RMB6.8 million, RMB23.9 million and RMB 18.4 million, respectively.(b)
    
    In December 2003, Shenyang Automotive disposed of certain machineries and equipment at their
net book value to the Groups jointly controlled entity, BMW Brilliance Automotive Ltd (BMW
Brilliance), at a consideration mutually agreed by both parties. The agreement of sale
includes an option for BMW Brilliance to require Shenyang Automotive to purchase back such
machineries and equipment at the purchase price less depreciation over a specified period upon
the occurrence of certain events, including the passing of a valid resolution pursuant to the
joint venture contract by the board of directors of BMW Brilliance. These machineries and
equipment are maintained and operated by BMW Brilliance for the manufacturing of its products.
BMW Brilliance will provide certain services to Shenyang Automotive upon the payment of a
service fee which is determined based on the number of Zhonghua sedans produced by Shenyang
Automotive using these machineries and equipment at a predetermined formulated unit charge. As
of the date of approval of 2006 financial statements, the basis of service fees has not yet
been finalized and service fees of approximately RMB411,440,073, RMB308,283,000 and
RMB196,125,000 have been accrued as of December 31, 2006, 2005 and 2004, respectively.(c)
    
    In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option
for BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the
purchase price less depreciation upon the occurrence of certain events, including the passing
of a valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. For financial reporting purposes, as of December 31, 2006 and 2005, the net book
value of the buildings, amounting to approximately RMB134,348,000 and RMB142,556,000,
respectively, were retained as assets on the balance sheet of the Group and the portion of
consideration received from BMW Brilliance up to December 31, 2006, amounting to approximately
RMB113,343,000 (2005: RMB74,605,000), was treated as financing and will be partially offset
against the lease rental payable in future years. The remaining balance of approximately
RMB61,030,000 (2005: RMB99,768,000) will be received from BMW Brilliance and will be accounted
for as additional financing.(d)
    
    As a result of the retirement from use and the change in use  from production to rental  of
certain property, plant and equipment of the Groups minibus and automotive components
segment, the Group assessed the recoverability of the carrying value of these long-lived
assets, which resulted in impairment losses of approximately RMB29.1 million, RMB48.3 million
and RMB10.0 million for the years ended December 31, 2006, 2005 and 2004 respectively. These
losses reflect the amounts by which the carrying values of these assets exceeded their
estimated fair values determined by their estimated discounted future cash flows. The
impairment loss was recorded as a component of Selling, general and administrative expenses
in the Consolidated Statement of Income and Comprehensive Income for the years.
 F-24




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 12. INTANGIBLE ASSETS
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000CostBeginning of year
    
    
    1,521,722
    
    
    
    1,512,342Additions
    
    
    17,611
    
    
    
    9,380End of year
    
    
    1,539,333
    
    
    
    1,521,722Accumulated amortizationBeginning of year
    
    
    (713,911
    )
    
    
    (509,902
    )Amortization for the year
    
    
    (181,444
    )
    
    
    (204,009
    )End of year
    
    
    (895,355
    )
    
    
    (713,911
    )Accumulated impairmentBeginning of year
    
    
    (223,000
    )
    
    
    (50,000
    )Impairment loss provision for the year
    
    
    
    
    
    
    (173,000
    )End of year
    
    
    (223,000
    )
    
    
    (223,000
    )Net book valueEnd of year
    
    
    420,978
    
    
    
    584,811Beginning of year
    
    
    584,811
    
    
    
    952,440
  (a)
    
    Sedan design rights, which include rights, titles and interests in certain design and
engineering agreements and a technical assistance agreement related to Zhonghua sedans; and
 (b)
    
    Components and parts technology rights, which include rights, titles and interests in the
design of the components and spare parts for Zhonghua sedans contributed by JinBei, as capital
into Shenyang Automobile in 2003.
   F-25




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 13. INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES
  Percentage of effectiveequity interest heldPlace of
    
    indirectly by theName of company
    
    establishment
    
    Company
    
    Principal activitiesAssociated companies:Shenyang Aerospace
Mitsubishi Motors Engine
Manufacturing Co., Ltd.
(Shenyang Aerospace)
(Note 1)
    
    Shenyang, the PRC
    
    
    12.77%
    
    
    Manufacture and
sale of automotive
enginesShenyang JinBei Vehicle
Dies Manufacturing Co.,
Ltd. (Shenyang JinBei
Vehicle)
    
    Shenyang, the PRC
    
    
    48%
   
   
    Manufacture and
sale of automotive
componentsJointly controlled entities:Mianyang Xinchen Engine
Co., Ltd. (Mianyang
Xinchen) (Note 2)
    
    Mianyang, the PRC
    
    
    50%
    
    
    Manufacture and
sale of automotive
engines for
minibuses and light
duty trucksShenyang Xinguang
Brilliance Automobile
Engine Co., Ltd. (Xinguang
Brilliance)
    
    Shenyang, the PRC
    
    
    50%

    
    
    Manufacture and
sale of automotive
engines for
minibuses and light
duty trucksBMW Brilliance
    
    Shenyang, the PRC
    
    
    49.5%
    
    
    Manufacture and
sale of BMW sedans
 
 Notes:(1)
    
    On September 29, 2005, the Group entered into an agreement with a shareholder of Shenyang
Aerospace to dispose of 2% of the Groups interest in Shenyang Aerospace for a cash consideration
of RMB 50 million. The disposal is yet to be completed as at the date of these financial
statements.(2)
    
    On August 7, 2006, the Group entered into an agreement with an independent third party to
dispose 3.5% of the Groups interest in Mianyang Xinchen for a cash consideration of approximately
RMB16.4 million. The disposal is yet to be completed as at the date of these financial statements.(3)
    
    During the year ended December 31, 2006, the Group disposed of two associates, Chongqing FuHua
Automotive Sales Service Co., Ltd. (Chongqing FuHua)and Chongqing Baosheng Automotive Sale and
Service Co., Ltd. (Chongqing Baosheng) to affiliated companies of Shanghai Shenhua and other
third parties for a consideration of approximately RMB9 million and RMB4.5 million respectively. F-26




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Interests in associated companies:Shenyang Aerospace
    
    
    357,893
    
    
    
    349,401Chongqing FuHua
    
    
    
    
    
    
    9,709Chongqing Baosheng
    
    
    
    
    
    
    4,116Shenyang JinBei Vehicle
    
    
    14,087
    
    
    
    371,980
    
    
    
    363,226Interests in jointly controlled entities:Mianyang Xinchen
    
    
    304,462
    
    
    
    311,102Xinguang Brilliance
    
    
    28,523
    
    
    
    244,890BMW Brilliance
    
    
    708,170
    
    
    
    601,4781,041,155
    
    
    
    1,157,4701,413,135
    
    
    
    1,520,696
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Shenyang Aerospace
    
    
    31,983
    
    
    
    31,983Mianyang Xinchen
    
    
    91,410
    
    
    
    91,410Xinguang Brilliance
    
    
    
    
    
    
    73,343123,393
    
    
    
    196,736
 F-27




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Manufacture andsale of minibuses
    
    
    Manufacture andand automotive
    
    
    sale of Zhonghuacomponents
    
    
    sedans
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000Balance as of January 1, 2006
    
    
    164,753
    
    
    
    31,983
    
    
    
    196,736Impairment losses
    
    
    (73,343
    )
    
    
    
    
    
    
    (73,343
    )Balance as of December 31, 2006
    
    
    91,410
    
    
    
    31,983
    
    
    
    123,393
   As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Associated companies:Shenyang Aerospace
    
    
    50,183
    
    
    
    28,386Chongqing FuHua
    
    
    
    
    
    
    192Chongqing Baosheng
    
    
    
    
    
    
    477Shenyeng JinBei Vehicle
    
    
    (265
    )
    
    
    49,918
    
    
    
    29,055Jointly controlled entities:Mianyang Xinchen
    
    
    (414
    )
    
    
    1,978Xinguang Brilliance
    
    
    (80,219
    )
    
    
    (13,296
    )BMW Brilliance
    
    
    106,692
    
    
    
    31,582Shanghai Kowin Automobile Company Co., Ltd.
    
    
    
    
    
    
    (324
    )26,059
    
    
    
    19,94075,977
    
    
    
    48,995
 F-28




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Year ended December 31,2006
    
    
    2005RMB000
    
    
    RMB000Revenue
    
    
    2,113,735
    
    
    
    1,807,849Profit before taxation, net
    
    
    209,438
    
    
    
    147,361Net income
    
    
    187,388
    
    
    
    131,955
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Current assets
    
    
    889,889
    
    
    
    908,750Non-current assets
    
    
    1,906,025
    
    
    
    2,020,235Total assets
    
    
    2,795,914
    
    
    
    2,928,985Current liabilities
    
    
    (634,616
    )
    
    
    (940,641
    )Long-term liabilities
    
    
    (580,000
    )
    
    
    (470,967
    )Total liabilities
    
    
    (1,214,616
    )
    
    
    (1,411,608
    )Total shareholders equity
    
    
    1,581,298
    
    
    
    1,517,377
 F-29




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Year ended December 31,2006
    
    
    2005RMB000
    
    
    RMB000Revenue
    
    
    8,953,086
    
    
    
    6,597,047Profit before taxation, net
    
    
    159,091
    
    
    
    23,277Net income
    
    
    197,063
    
    
    
    23,277
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Current assets
    
    
    6,051,057
    
    
    
    3,983,194Non-current assets
    
    
    2,101,276
    
    
    
    1,727,924Total assets
    
    
    8,152,333
    
    
    
    5,711,118Current liabilities
    
    
    (5,530,655
    )
    
    
    (3,579,826
    )Long-term liabilities
    
    
    (700,979
    )
    
    
    (420,000
    )Total liabilities
    
    
    (6,231,634
    )
    
    
    (3,999,826
    )Total shareholders equity
    
    
    1,920,699
    
    
    
    1,711,292
 14. INVESTMENT SECURITIES
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Available-for-sale securities at cost
    
    
    17,305
    
    
    
    17,305Gross unrealized gain
    
    
    29,520
    
    
    
    28,468Gross unrealized loss
    
    
    (27,227
    )
    
    
    (27,227
    )19,598
    
    
    
    18,546Unlisted securities at cost
    
    
    4,138
    
    
    
    4,13823,736
    
    
    
    22,684
   F-30




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  15. GOODWILL
   16. PREPAYMENT FOR A LONG-TERM INVESTMENT
    F-31




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 17. DEFERRED EXPENSES
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Direct expenses incurred in connection with the
issuance of convertible bonds due 2008 (Note
18(a))
    
    
    44,599
    
    
    
    44,599Amortization
    
    
    (40,623
    )
    
    
    (19,326
    )Buy back / redemption
    
    
    (3,976
    )
    
    
    
    
    
    
    25,273Direct expenses incurred in connection with the
issuance of convertible bonds due 2011 (Note
18(b))
    
    
    31,414
    
    
    
    Amortization
    
    
    (3,665
    )
    
    
    27,749
    
    
    
    25,273Non-current portion
    
    
    21,466
    
    
    
    16,353Current portion
    
    
    6,283
    
    
    
    8,92027,749
    
    
    
    25,273
 18. CONVERTIBLE BONDS
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Convertible bonds issued at par
    
    
    1,654,300
    
    
    
    1,654,300Accreted redemption premium
    
    
    35,270
    
    
    
    26,008Buy back
    
    
    (673,847
    )
    
    
    Redemption
    
    
    (939,351
    )
    
    
    Exchange gain
    
    
    (76,372
    )
    
    
    (40,758
    )
    
    
    
    1,639,550
   (i)
    
    The convertible bonds due 2008 will mature on November 28, 2008. At any time from November
28, 2005 through November 14, 2008, all, or from time to time, some of the aggregate
outstanding principal
 F-32




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 amount of the convertible bonds due 2008 is redeemable at the option of Brilliance China
Automotive Finance Ltd. at the early redemption amount if the closing price of the shares of
the Company on the SEHK for each of the last 20 consecutive trading days has been at least
130% of the conversion price or if at least 90% in principal amount of the convertible bonds
due 2008 has been converted, redeemed or purchased and cancelled. Unless previously converted,
redeemed or purchased and cancelled, the convertible bonds due 2008 will be redeemed at 100%
of their outstanding principal amount on November 28, 2008.(ii)
    
    All or some of the convertible bonds due 2008 may be redeemed at the option of the relevant
holder on November 28, 2006 at 102.27% of their principal amount. The convertible bonds due
2008 may also be redeemed, in whole or in part, at the option of the holders at the Early
Redemption Amount on the occurrence of a change of control of the Company. The convertible
bonds due 2008 may also be redeemed at the option of the holders if the shares of the Company
cease to be listed or admitted to trading on the SEHK.
    As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Convertible bonds issued at par
    
    
    1,460,779
    
    
    
    Accreted redemption premium
    
    
    59,157
    
    
    
    Exchange gain
    
    
    (33,368
    )
    
    
    1,486,568
    
    
    
    
   Conversion price reset
  F-33




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Redemption
  (i)
    
    on or at any time after June 7, 2008 and prior to June 7, 2009, if the closing price of the shares of the Company on the SEHK for each of the last 30 consecutive trading days has been at
least 145% of the applicable early redemption amount divided by the conversion ratio
(principal amount of the convertible bonds due 2011 divided by the conversion price);
 (ii)
    
    on or at any time after June 7, 2009 and prior to May 8, 2011, if the closing price of the shares of the Company on the SEHK for each of the last 30 consecutive trading days has been at
least 130% of the applicable early redemption amount divided by the conversion ratio; or
 (iii)
    
    at any time, if more than 90% in principal amount of the convertible bonds due 2011 has been
converted, redeemed or purchased and cancelled.
    19. NOTES PAYABLE
  F-34




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 20. TAXES PAYABLE
  As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Income tax payable
    
    
    11,411
    
    
    
    14,309VAT payable
    
    
    10,651
    
    
    
    47,087Others
    
    
    71,190
    
    
    
    70,608Other taxes payable
    
    
    81,841
    
    
    
    117,69593,252
    
    
    
    132,004
 21. COMMITMENTS AND CONTINGENCIES
 (a) Commitments
   OperatingleaseRMB000Within one year
    
    
    18,943One to two years
    
    
    13,566Two to three years
    
    
    7,008Three to four years
    
    
    4,053Four to five years
    
    
    4,053Over five years
    
    
    40,526Total minimum lease payments
    
    
    88,149
 (b) Operating lease income
  F-35




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
   As of December 31,2006RMB000Buildings
    
    
    97,358Accumulated depreciation
    
    
    (15,161
    )Net investment in operating leases
    
    
    82,197
  As of December 31,2006RMB000Within one year
    
    
    19,611One to two years
    
    
    14,174Two to three years
    
    
    14,174Three to four years
    
    
    14,174Four to five years
    
    
    14,175Over five years
    
    
    90,952Total
    
    
    167,260
  (c) Contingent liabilities
 (i)
    
    As of December 31, 2006, the Group had provided the following guarantees:
 (1)
    
    Corporate guarantees of approximately RMB120 million (2005: RMB120 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua:The guarantee arose from the mutual negotiation between Shenyang Automotive and Shanghai
Shenhua. Associated with the corporate guarantee, Shanghai Shenhua also provided a cross
guarantee for the bank facilities of Shenyang Automotive. The guarantee was for revolving
activities of Shanghai Shenhua and will be terminated upon mutual agreements between
Shenyang Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the repayment
of its bank
loans or notes when they fall due, Shenyang Automotive is required to repay the
outstanding balance. There is no recourse or collateralization provision in the
guarantee. As of December 31, 2006, the guarantee provided for the bank loans and notes
drawn by affiliated companies of Shanghai Shenhua was approximately RMB120 million (2005:
RMB120 million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2006. However, default by Shanghai Shenhua and its
affiliated companies is considered remote by management and therefore no liability for
the guarantors obligation under the guarantee existed as of December 31, 2006.
 F-36




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (2)
    
    A joint and several proportional corporate guarantee with a shareholder of Shenyang
Aerospace on a long-term bank loan of approximately RMBNil million (2005: RMB111 million)
drawn by Shenyang Aerospace which will expire in 2008:The guarantee was provided by the Group and a shareholder of Shenyang Aerospace for its
long-term loan financing needs during its start-up period. If Shenyang Aerospace defaults
on the repayment of its bank loan when it falls due, the Group and the shareholder are
jointly and severally liable to repay the outstanding balance. There is no recourse or
collateralization provision in the guarantee.(3)
    
    Corporate guarantees of bank loans amounting to RMB295 million (2005: RMB295
million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2006, drawn by JinBei. Bank deposits of RMB312 million
(2005: RMB311 million) were pledged as collateral for the corporate guarantees. However,
default by JinBei is considered remote by management and therefore no liability for the
guarantors obligation under the guarantee existed as of December 31, 2006.
 (ii)
    
    On or about October 25, 2002, the Company was served with a claim lodged by Mr. Yang Rong
(Mr. Yang) in the Labour Tribunal in Hong Kong against the Company for alleged wrongful
repudiation and/or breach of his employment contract. The claim was for approximately US$4.3
million (equivalent to approximately RMB35.6 million) with respect to loss of salary. In
addition, Mr. Yang claimed unspecified damages in respect of bonuses and share options. The
claim was dismissed by the Labour Tribunal in Hong Kong on January 28, 2003. Mr. Yang
subsequently applied for a review of this decision. At the review hearing on July 4, 2003, the
Labour Tribunal ordered the case to be transferred to the High Court in Hong Kong. The claim
has therefore been transferred to the High Court and registered as High Court Action No. 2701
of 2003 (the Action).On September 16, 2003, a Statement of Claim was served on the Company. On November 4, 2003,
the Company filed a Defence and Counterclaim with the High Court. Mr. Yang filed a Reply to
Defence and Defence to Counterclaim on April 26, 2004. On July 21, 2004, Mr. Yang obtained
leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim. The
Company filed and served a Reply to Defence to Counterclaim on September 4, 2004. Pleadings
closed on September 18, 2004. The parties filed and served Lists of Documents on October 26,
2004 and witness statements were exchanged on February 28, 2005.The parties applied by consent to adjourn sine diea checklist hearing fixed for April 20,
2005, as the respective parties anticipated that they would be filing supplemental evidence
and amending their pleadings. The Court approved the application and made an Order on April
19, 2005 that the checklist hearing be vacated and adjourned sine diewith liberty to restore.Pursuant to a request made by Mr. Yang on June 2, 2005 for further and better particulars of
the Defence and Counterclaim, the Company filed and served its Answer to Mr. Yangs request on
July 4, 2005.On August 17, 2005, in compliance with its continuing discovery obligations, the Company filed
and served a Supplemental List of Documents. Subsequently, on September 5, 2005, Mr. Yang also
filed and served a Supplemental List of Documents.There has been no material progress in the litigation.The directors of the Company do not believe the Action will have any significant impact on the
financial position of the Company and of the Group. The directors of the Company intend to
continue vigorously defending the action.
 F-37




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 22. CAPITAL STOCK
 As of December 31,2006
    
    
    2005
    
    
    2004Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number ofshares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    shares
    
    
    Amount000
    
    
    000
    
    
    000
    
    
    000
    
    
    000
    
    
    000Authorized:Common stock
of US$0.01 each
(Note)
    
    
    5,000,000
    
    
    
    US$50,000
    
    
    
    5,000,000
    
    
    
    US$50,000
    
    
    
    5,000,000
    
    
    US$50,000Issued and fully paid:Common stock
of US$0.01 each
    
    
    3,668,391
    
    
    RMB303,388
    
    
    
    3,668,391
    
    
    RMB303,388
    
    
    
    3,668,391
    
    
    RMB303,388
 Note
 23. STOCK OPTIONS
 Original share option scheme approved in 1999
  (a)
    
    a price being not less than 80%, of the average closing price of the common stock on the
relevant stock exchange as stated in such stock exchanges quotation sheets for the five
trading days immediately preceding the relevant date in respect of such options; and
 (b)
    
    the nominal value of the common stock.
   No. of share options000As of January 1, 2005Granted
    
    
    14,490Exercised
    
    
    Cancelled/lapsed
    
    
    (11,690
    )As of December 31, 2005
    
    
    2,800Granted
    
    
    Exercised
    
    
    Cancelled/lapsed
    
    
    As of December 31, 2006
    
    
    2,800
 F-38




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 New share option scheme approved in 2002
  (a)
    
    the closing price of the common stocks on the relevant stock exchange as stated in such stock
exchanges quotation sheet on the date of the offer of grant, which must be a trading date;
 (b)
    
    the average closing price of the common stocks on the relevant stock exchange as stated in
such stock exchanges quotation sheets for the five trading days immediately preceding the
date of the offer of grant; and(c)
    
    the nominal value of the common stock.
  No. of share options2006
    
    
    2005000
    
    
    000Granted during the year and as at 31st December,
    
    
    35,750
    
    
    
    
    F-39




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 Call Option Agreements
      F-40




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 24. DISTRIBUTION OF PROFIT
    Year ended December 31,2006
    
    
    2005RMB000
    
    
    RMB0002005 and 2004 final dividends of HK$Nil and
HK$0.005 per share, respectively
    
    
    
    
    
    
    19,450
  25. RELATED PARTY TRANSACTIONS
  Name
    
    RelationshipJinBei
    
    A shareholder of Shenyang AutomotiveShanghai Shenhua
    
    Common directorship of certain directors of the CompanyBrilliance Holdings Limited (BHL)
    
    Common directorship of certain directors of the Company
   F-41




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (b)
    
    Amounts due from affiliated companies consisted of the following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Due from related parties: Shanghai Shenhua and its affiliated companies
    
    
    431,310
    
    
    
    276,763 Affiliated companies of JinBei
    
    
    93,446
    
    
    
    62,877 Affiliated companies of BHL
    
    
    55,040
    
    
    
    54,222 Jointly controlled entities
    
    
    21,470
    
    
    
    13,380 An associated company
    
    
    
    
    
    
    1,505 BMW Brilliance Accounts receivables
    
    
    247,564
    
    
    
    192,185 Consideration receivable arising from the
disposal of machinery and equipment (note
(i))
    
    
    134,527
    
    
    
    269,003Dividend receivable from a jointly controlled entity
    
    
    76,173
    
    
    
    Dividend receivable from an associate
    
    
    21,000
    
    
    
    Less: Provision for doubtful debts
    
    
    (29,720
    )
    
    
    (29,720
    )1,050,810
    
    
    
    840,215
 (i)
    
    The outstanding balance is unsecured, non-interest bearing and will be settled by BMW
Brilliance when certain conditions specified in the agreement of sale are fulfilled (See also
Note 11(b)).(ii)
    
    Except for (i) above, the amounts due from affiliated companies are unsecured, non-interest
bearing and have no fixed repayment term.(c)
    
    Notes receivable from affiliated companies arising from trading activities consisted of the
following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Notes receivable from related parties: Affiliated companies of JinBei
    
    
    16,620
    
    
    
    9,446 Shanghai Shenhua
    
    
    63,750
    
    
    
    328,482 Associated companies and jointly controlled entities
    
    
    1,107
    
    
    
    1,04281,477
    
    
    
    338,970
  F-42




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (d)
    
    Amounts due to affiliated companies arising from trading activities consisted of the following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Due to related parties: Associated companies and jointly controlled entities
    
    
    680,943
    
    
    
    465,023 Affiliated companies of Shanghai Shenhua
    
    
    10,719
    
    
    
    4,191 Affiliated companies of JinBei
    
    
    281,721
    
    
    
    142,438 Affiliated companies of BHL
    
    
    
    
    
    
    22,025 Other affiliated companies
    
    
    9,910
    
    
    
    130983,293
    
    
    
    633,807
  (e)
    
    Notes payable to affiliated companies arising from trading activities consisted of the
following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Notes payable to related parties: Affiliated companies of BHL
    
    
    
    
    
    
    43,462 An affiliated company of JinBei
    
    
    7,249
    
    
    
    8,139 Associated companies and jointly controlled entities
    
    
    30,039
    
    
    
    22,49137,288
    
    
    
    74,092
 F-43




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (f)
    
    Save as disclosed elsewhere in the financial statements, significant transactions with
affiliated companies consisted of the following:
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Sales of goods: JinBei and its affiliated companies
    
    
    178,414
    
    
    
    69,432
    
    
    
    38,127 Shanghai Shenhua and its affiliated companies
    
    
    1,052,689
    
    
    
    1,469,402
    
    
    
    1,895,881 Associated companies and jointly controlled entities
    
    
    186,146
    
    
    
    71,005
    
    
    
    205,8491,417,249
    
    
    
    1,609,839
    
    
    
    2,139,857Purchase of goods: JinBei and its affiliated companies
    
    
    895,457
    
    
    
    383,808
    
    
    
    764,311 Shanghai Shenhua and its affiliated companies
    
    
    16,668
    
    
    
    85,354
    
    
    
    214,467 Affiliated companies of BHL
    
    
    117,336
    
    
    
    66,441
    
    
    
    89,690 Associated companies and jointly controlled entities
    
    
    942,878
    
    
    
    524,221
    
    
    
    898,914 Affiliated companies of the joint venture partner of
Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    342 Affiliated companies of the joint venture partner of
Xinguang Brilliance
    
    
    68
    
    
    
    761
    
    
    
     Shareholders of Shenyang Aerospace
    
    
    90,505
    
    
    
    1,987
    
    
    
    39,019Subcontracting charges to a jointly controlled entity
    
    
    254,479
    
    
    
    112,160
    
    
    
    178,6852,317,391
    
    
    
    1,174,732
    
    
    
    2,185,428Consideration paid to the joint venture partner of
Ningbo Yuming for acquisition of further interests in
Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    10,000Purchase of intangible asset from an affiliated company
of the joint venture partner of Ningbo Yuming
    
    
    
    
    
    
    
    
    
    
    6,940Finance charge to a jointly controlled entity
    
    
    16,748
    
    
    
    17,329
    
    
    
    17,850Operating lease rental on land and buildings charged by: A jointly controlled entity
    
    
    908
    
    
    
    2,206
    
    
    
    12,840 Shanghai Shenhua and its affiliated companies
    
    
    1,148
    
    
    
    
    
    
    
     JinBei and its affiliated companies
    
    
    60
    
    
    
    
    
    
    
    Mould testing income from a jointly controlled entity
    
    
    4,320
    
    
    
    
    
    
    
    Operating lease rental from a jointly controlled entity
    
    
    34,863
    
    
    
    15,078
    
    
    
    15,364Proceeds from sale of property, plant and equipment JinBei and its affiliated companies
    
    
    
    
    
    
    
    
    
    
    4,407 A jointly controlled entity
    
    
    80,332
    
    
    
    263
    
    
    
    1,105Purchase of machinery from affiliated companies of
JinBei
    
    
    
    
    
    
    
    
    
    
    58,089Service income from a jointly controlled entity
    
    
    35,067
    
    
    
    43,671
    
    
    
    
  F-44




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 i. Trademark license
  ii. Guarantees provided to affiliated companies
  (g)
    
    Advances to affiliated companies consisted of the following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Advances to related parties: Associated companies and jointly controlled entities
    
    
    6,553
    
    
    
    7,226Affiliated companies of BHL
    
    
    15,273
    
    
    
    15,273 Shanghai Shenhua and its affiliated companies
    
    
    14,044
    
    
    
    9,045JinBei and its affiliated companies
    
    
    23,740
    
    
    
    16,185 Other affiliated companies
    
    
    689
    
    
    
    45260,299
    
    
    
    48,181Less: provision for doubtful debts
    
    
    (2,214
    )
    
    
    (9,250
    )58,085
    
    
    
    38,931
   F-45




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (h)
    
    Advances from affiliated companies consisted of the following:
 As of December 31,2006
    
    
    2005RMB000
    
    
    RMB000Advances from related parties: Associated companies and jointly controlled entities
    
    
    1,279
    
    
    
    607BHL and its affiliated companies
    
    
    12,728
    
    
    
    28,558 Affiliated companies of Shanghai Shenhua
    
    
    820
    
    
    
    236JinBei and its affiliated companies
    
    
    6,925
    
    
    
    1,088 Financing received from BMW Brilliance (Note 11(c))
    
    
    113,343
    
    
    
    74,605135,095
    
    
    
    105,094
  26. RETIREMENT PLAN AND EMPLOYEES BENEFIT
   27. EXECUTIVE BONUS PLAN
  F-46




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 28. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Cash paid for:Interest (net of amount capitalized: 2006: RMB6,766,000; 2005: RMB
23,875,000; 2004: RMB18,369,000)
    
    
    92,744
    
    
    
    111,303
    
    
    
    154,041Income taxes
    
    
    39,240
    
    
    
    33,975
    
    
    
    127,538
   29. OTHER SUPPLEMENTAL INFORMATION
  Year ended December 31,2006
    
    
    2005
    
    
    2004RMB000
    
    
    RMB000
    
    
    RMB000Import tariffs
    
    
    31,616
    
    
    
    15,224
    
    
    
    56,857Research and development costs
    
    
    214,021
    
    
    
    235,177
    
    
    
    479,928Foreign exchange (gains) losses, net
    
    
    (32,955
    )
    
    
    (21,487
    )
    
    
    6,044Provision for impairments of property, plant and
equipment
    
    
    29,160
    
    
    
    48,299
    
    
    
    10,000Provision for doubtful debts and write off of bad debts
    
    
    28,272
    
    
    
    55,703
    
    
    
    55,292
 30. SEGMENT INFORMATION
     F-47




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 Business segments  2006
 Manufactureand sale of
    
    
    Manufactureminibuses and
    
    
    and sale of
    
    
    Manufactureautomotive
    
    
    Zhonghua
    
    
    and sale ofcomponents
    
    
    sedans
    
    
    BMW sedans
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Total revenues from reportable segments
    
    
    5,533,953
    
    
    
    5,190,129
    
    
    
    
    
    
    
    10,724,082Elimination of intersegment revenues
    
    
    (239,328
    )
    
    
    
    
    
    
    
    
    
    
    (239,328
    )Revenues from external customers
    
    
    5,294,625
    
    
    
    5,190,129
    
    
    
    
    
    
    
    10,484,754Segment income (loss) before taxation and
minority interests
    
    
    145,602
    
    
    
    (830,404
    )
    
    
    106,692
    
    
    
    (578,110
    )Unallocated amounts corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,138
    )interest income less interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,263
    )Income before taxation and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (714,511
    )Segment assets as of December 31, 2006
    
    
    6,237,217
    
    
    
    5,274,223
    
    
    
    708,170
    
    
    
    12,219,610Unallocated amounts  corporate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,360,754Total assets as of December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,580,364Other disclosures:Depreciation of fixed assets
    
    
    223,233
    
    
    
    377,812
    
    
    
    
    
    
    
    601,045Amortization of long-term land lease
prepayments
    
    
    2,485
    
    
    
    1,573
    
    
    
    
    
    
    
    4,058Amortization on intangible assets
    
    
    2,603
    
    
    
    178,841
    
    
    
    
    
    
    
    181,444Impairment of equity method goodwill (Note
13)
    
    
    73,343
    
    
    
    
    
    
    
    
    
    
    
    73,343Capital expenditure
    
    
    106,130
    
    
    
    144,935
    
    
    
    
    
    
    
    251,065Equity in earnings of associated companies
and jointly controlled entities
    
    
    (7,556
    )
    
    
    50,184
    
    
    
    106,692
    
    
    
    149,320Equity method goodwill (Note 13)
    
    
    91,410
    
    
    
    31,983
    
    
    
    
    
    
    
    123,393Goodwill (Note 15)
    
    
    339,710
    
    
    
    
    
    
    
    
    
    
    
    339,710
 F-48




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Manufacture andsale of
    
    
    Manufacture andminibuses and
    
    
    sale ofautomotive
    
    
    Zhonghua
    
    
    Manufacture andcomponents
    
    
    sedans
    
    
    sale of BMW
    
    
    TotalRMB000
    
    
    RMB000
    
    
    sedans
    
    
    RMB000(Restated)
    
    
    (Restated)
    
    
    RMB000
    
    
    (Restated)Total revenues from reportable segments
    
    
    4,837,379
    
    
    
    863,140
    
    
    
    
    
    
    
    5,700,519Elimination of intersegment revenues
    
    
    (231,529
    )
    
    
    
    
    
    
    
    
    
    
    (231,529
    )Revenues from external customers
    
    
    4,605,850
    
    
    
    863,140
    
    
    
    
    
    
    
    5,468,990Segment (loss) income before taxation and
minority interests
    
    
    (75,047
    )
    
    
    (970,603
    )
    
    
    32,250
    
    
    
    (1,013,400
    )Unallocated amounts corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,837
    ) interest income less interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,165
    )Income before taxation and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,195,402
    )Segment assets as of December 31, 2005
    
    
    6,995,223
    
    
    
    4,630,005
    
    
    
    615,304
    
    
    
    12,240,532Unallocated amounts  corporate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,451,773Total assets as of December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,692,305Other disclosures:Depreciation of fixed assets
    
    
    245,598
    
    
    
    154,146
    
    
    
    
    
    
    
    399,744Amortization of long-term land lease
prepayments
    
    
    2,848
    
    
    
    1,038
    
    
    
    
    
    
    
    3,886Amortization on intangible assets
    
    
    4,746
    
    
    
    199,263
    
    
    
    
    
    
    
    204,009Impairment of equity method goodwill (Note
13)
    
    
    179,030
    
    
    
    
    
    
    
    
    
    
    
    179,030Impairment of goodwill in a subsidiary (Note
15)
    
    
    78,690
    
    
    
    
    
    
    
    
    
    
    
    78,690Capital expenditure
    
    
    165,225
    
    
    
    420,447
    
    
    
    
    
    
    
    585,672Equity in earnings of associated companies
and jointly controlled entities
    
    
    (11,642
    )
    
    
    28,387
    
    
    
    32,250
    
    
    
    48,995Equity method goodwill (Note 13)
    
    
    164,753
    
    
    
    31,983
    
    
    
    
    
    
    
    196,736Goodwill (Note 15)
    
    
    339,710
    
    
    
    
    
    
    
    
    
    
    
    339,710
 F-49




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 31. ACCUMULATED OTHER COMPREHENSIVE INCOME
  Unrealized gain(loss) on
    
    
    
    
    
    
    Accumulativemarketable
    
    
    Foreign currency
    
    
    otheravailable-for-sale
    
    
    translation
    
    
    comprehensivesecurities
    
    
    adjustments
    
    
    incomeRMB000
    
    
    RMB000
    
    
    RMB000Balance as of January 1, 2005
    
    
    28,468
    
    
    
    39,179
    
    
    
    67,647Current year change
    
    
    (27,227
    )
    
    
    
    
    
    
    (27,227
    )Balance as of December 31, 2005
    
    
    1,241
    
    
    
    39,179
    
    
    
    40,420Current year change
    
    
    1,052
    
    
    
    
    
    
    
    1,052Balance as of December 31, 2006
    
    
    2,293
    
    
    
    39,179
    
    
    
    41,472
 32. COMPARATIVE FIGURES
  33. APPROVAL OF FINANCIAL STATEMENTS
  F-50