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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 20-F


(Mark One)

|  |  |                                                                                                 
|- |  | ------------------------------------------------------------------------------------------------
|o |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

|  |  |                                                                                     
|- |  | ------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For the fiscal year ended:December 31, 2002                                         

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For the transition period from ______ to ______                                         

Commission file number: 1-11412

BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED




(Exact name of Registrant as specified in its charter)


|                                                |  |                                                
|----------------------------------------------- |  | -----------------------------------------------
|Not Applicable                                  |  | Bermuda                                        
|                                                |  |                                                
|(Translation of Registrants name into English) |  | (Jurisdiction of Incorporation or Organization)

Suite 2303-06, 23rd Floor
Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong




(Address of Principal Executive Offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

|                                             |  |                                        
|-------------------------------------------- |  | ---------------------------------------
|                                             |  | Name of each exchange                  
|Title of each class                          |  | on which registered                    
|                                             |  |                                        
|American 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

Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of December 31, 2002:

Ordinary shares, par value US$0.01 per share: 3,666,052,900

2,055,180 American Depositary Shares, each representing 100 ordinary shares

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  X  No  ___

Indicate by check mark which financial statement item the registrant has
elected to follow.

Item 17        Item 18  X





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CONTENTS


TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|FORWARD-LOOKING STATEMENTS                                                           
|CURRENCY TRANSLATION                                                                 
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                        
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                      
|ITEM 3. KEY INFORMATION                                                              
|ITEM 4. INFORMATION ON THE COMPANY                                                   
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|ITEM 8. FINANCIAL INFORMATION                                                        
|ITEM 9. THE OFFER AND LISTING                                                        
|ITEM 10. ADDITIONAL INFORMATION                                                      
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                             
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES                                          
|ITEM 16. [RESERVED]                                                                  
|ITEM 17. FINANCIAL STATEMENTS                                                        
|ITEM 18. FINANCIAL STATEMENTS                                                        
|ITEM 19. EXHIBITS                                                                    
|Report of Independent Public Accountants                                             
|Consolidated Statements of Income and Comprehensive Income                           
|Consolidated Balance Sheets                                                          
|Consolidated Statements of Cash Flows                                                
|Consolidated Statements of Changes in Shareholders Equity                           
|Notes to Consolidated Financial Statements                                           
|AMENDMENT TO BYE-LAWS OF BRILLIANCE CHINA                                            
|AGREEMENT, DATED DECEMBER 1,2002                                                     
|JOINT VENTURE CONTRACT DATED MARCH 27,2003                                           
|AGREEMENT DATED APRIL 28, 2003                                                       
|CAPITAL INCREASE AGREEMENT                                                           
|AMENDED JOINT VENTURE AGREEMENT                                                      
|SHARE OPTION SCHEME OF BRILLIANCE CHINA                                              
|STATEMENTS EXPLAINING HOW RATIOS CALCULATED                                          
|LIST OF SIGNIFICANT SUBSIDIARIES                                                     
|SECTION 906 CERTIFICATION FROM CEO                                                   
|SECTION 906 CERTIFICATION FROM CEO                                                   
|AMENDMENT TO ARTICLES OF ASSOCIATION                                                 



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FORWARD-LOOKING STATEMENTS

Certain information contained in this annual report that does not relate
to historical financial information may be deemed to constitute forward-looking
statements. The words or phrases will likely result, are expected to,
will continue, is anticipated, estimate, project, believe or similar
expressions identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results and those presently anticipated or
projected. Brilliance China Automotive wishes to caution readers not to place
undue reliance on any these forward- looking statements, which speak only as of
the date made. Among the factors that could cause Brilliance China
Automotives actual results in the future to differ materially from any
opinions or statements expressed with respect to future periods include:



| |  |  | unexpected adverse effects on the economy of the Peoples Republic
of China, or China, and Chinas automobile sector in particular;                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increased competition from other domestic and international automobile manufacturers;                                                                        
|
| |  |  | our relative inexperience in manufacturing and selling sedans;                                                                                               
|
| |  |  | uncertainties relating to our proposed joint venture with
Bayerische Motoren Werke Aktiengesellschaft, or BMW, for the production
of BMW sedans in China; and
|
| |  |  | fluctuations in foreign exchange rates.                                                                                                                      

When considering these forward-looking statements, you should keep in mind
the factors described in Item 3Key InformationRisk Factors and other
cautionary statements appearing in Item 5Operating and Financial Review and
Prospects of this annual report. These risk factors and statements describe
circumstances that could cause actual results to differ materially from those
contained in any forward-looking statement.




CURRENCY TRANSLATION

Unless otherwise specified, all references in this annual report to U.S.
dollars or US$ are to United States dollars; all references to Renminbi or
Rmb are to Renminbi, which is the legal tender currency of China; all
references to H.K. dollars or HK$ are to Hong Kong dollars, which is the
legal tender currency of Hong Kong and all references to Euro and Euros are
to the legal tender currency of the European Monetary Union. On December 31,
2002, the noon buying rates in New York City for cable transfers of Renminbi,
Hong Kong dollars and Euros, as certified for customs purposes by the Federal
Reserve Bank of New York was US$1.00 = Rmb 8.28, US$1.00 = HK$7.80 and Euro
1.00 = US$1.05. Translations of amounts from Renminbi and Hong Kong dollars to
U.S. dollars for the convenience of the reader have been made at those rates.
No representation is made that the Renminbi or Hong Kong dollar amounts could
have been, or could be converted into U.S. dollars at those rates or at any
other rates. In addition, all financial information presented herein has been
prepared in accordance with United States generally accepted accounting
principles, or U.S. GAAP.





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PART I




ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.




ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.




ITEM 3. KEY INFORMATION

Selected Financial Data

Historical Financial Information of Brilliance China Automotive

The following table presents the selected consolidated financial
information and operating information of Brilliance China Automotive and its
subsidiaries as of and for the years ended December 31, 1998, 1999, 2000, 2001
and 2002, which have been derived from our audited consolidated financial
statements. The selected financial information for the years ended December
31, 2000, 2001 and 2002 and as of December 31, 2001 and 2002 should be read in
conjunction with, and is qualified in its entirety by reference to, the
financial statements, prepared in accordance with U.S. GAAP, included elsewhere
in this annual report, the accompanying notes thereto and Item 5. Operating
and Financial Review and Prospects. The financial statements and footnotes
for the years ended December 31, 1998 and 1999 and as of December 31, 1998,
1999 and 2000 are not included in this annual report.

|                                     |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |         |      |  |  | 
|------------------------------------ | -------------------------------------------------- | ----------------------------------- |  | ------- | ----- | ---- |  | -------- | ----- | ------------------------------------------ |  | -------- | ----- | ---------------------------- |  | -------- | ----- |  |  | -------- | ----- |  |  | ------- | ---- |  |  | 
|                                     |                                                    |                                     |  |         |       |      |  |          |       | As of and for the years ended December 31, |  |          |       |                             
|                                     |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                             
|(Amounts in millions,                |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |        
|except per share and operating data) |                                                    | 1998                                |  | 1999    |       | 2000 |  | 2001     |       | 2002                                       |  | 2002    
|                                     |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |         
|                                     |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       | (Rmb, except operating data) |  |          |       |  |  | (US$)   
|Income Statement Data:               |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |        
|                                     | Sales                                              |                                     |  | 3,227.3 |       |      |  | 4,351.2  |       |                                            |  | 6,306.4  |       |                              |  | 6,218.4  |       |  |  | 7,319.5  |       |  |  | 884.0   |     
|                                     | Cost of sales                                      |                                     |  | 2,179.9 |       |      |  | 2,866.2  |       |                                            |  | 4,436.2  |       |                              |  | 4,308.0  |       |  |  | 5,411.3  |       |  |  | 653.5   |     
|                                     | Selling, general and administrative expenses       |                                     |  | 415.7   |       |      |  | 505.8    |       |                                            |  | 663.2    |       |                              |  | 673.4    |       |  |  | 1,067.2  |       |  |  | 128.9   |     
|                                     | Net income                                         |                                     |  | 309.5   |       |      |  | 649.0    |       |                                            |  | 870.0    |       |                              |  | 887.1    |       |  |  | 610.5    |       |  |  | 73.7    |     
|Balance Sheet Data:                  |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |        
|                                     | Total assets                                       |                                     |  | 3,457.2 |       |      |  | 7,032.7  |       |                                            |  | 10,552.4 |       |                              |  | 11,696.5 |       |  |  | 13,853.7 |       |  |  | 1,673.2 |     
|                                     | Current assets                                     |                                     |  | 2,165.1 |       |      |  | 4,782.3  |       |                                            |  | 6,076.7  |       |                              |  | 6,127.1  |       |  |  | 8,263.0  |       |  |  | 997.9   |     
|                                     | Current liabilities                                |                                     |  | 1,435.3 |       |      |  | 3,541.3  |       |                                            |  | 6,177.7  |       |                              |  | 5,741.7  |       |  |  | 7,332.7  |       |  |  | 885.6   |     
|                                     | Equity                                             |                                     |  | 1,256.7 |       |      |  | 2,549.0  |       |                                            |  | 3,836.3  |       |                              |  | 5,419.8  |       |  |  | 6,005.3  |       |  |  | 725.3   |     
|Cash Flow Statement Data:            |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |        
|                                     | Capital expenditures                               |                                     |  | 176.8   |       |      |  | 929.9    |       |                                            |  | 1,016.2  |       |                              |  | 782.5    |       |  |  | 798.8    |       |  |  | 96.5    |     
|                                     | Depreciation and amortization                      |                                     |  | 128.7   |       |      |  | 81.8     |       |                                            |  | 114.0    |       |                              |  | 118.1    |       |  |  | 270.6    |       |  |  | 32.7    |     
|                                     | Net cash flows from operations                     |                                     |  | 517.0   |       |      |  | 1,658.2  |       |                                            |  | 201.4    |       |                              |  | 1,326.8  |       |  |  | 1,913.0  |       |  |  | 231.0   |     
|                                     | Net cash flows used in investing activities        |                                     |  | (445.3  | )     |      |  | (2,894.2 | )     |                                            |  | (2,833.2 | )     |                              |  | (1,398.8 | )     |  |  | (2,209.9 | )     |  |  | (266.9  | )   
|                                     | Net cash flows from (used in) financing activities |                                     |  | 348.5   |       |      |  | 1,891.0  |       |                                            |  | 2,597.8  |       |                              |  | (45.8    | )     |  |  | 365.9    |       |  |  | 44.2    |     
|Per Share/ADS Data:                  |                                                    |                                     |  |         |       |      |  |          |       |                                            |  |          |       |                              |  |          |       |  |  |          |       |  |  |        
|                                     |                                                    | Basic earnings per share in Rmb (a) |  |         | 0.12  |      |  |          | 0.24  |                                            |  |          | 0.28  |                              |  |          | 0.25  |  |  |          | 0.17  |  |  |         | 0.02 | 
|                                     |                                                    | Basic earnings per ADS in Rmb (b)   |  |         | 11.86 |      |  |          | 24.08 |                                            |  |          | 27.61 |                              |  |          | 25.10 |  |  |          | 16.65 |  |  |         | 2.01 | 

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|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |      |  |  | 
|------------------------------------ | ------------------------- | --------------------------------------------- | --------------------------- | -------------------- | ----- | ------ | ------ | ----- | ----- | ------------------------------------------ | ------ | ------ | ----- | ---------------------------- | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ------ |  | ---- |  |  | 
|                                     |                           |                                               |                             |                      |       |        |        |       |       | As of and for the years ended December 31, |        |        |       |                             
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                             
|(Amounts in millions,                |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        | 
|except per share and operating data) |                           | 1998                                          |                             | 1999                 |       | 2000   |        | 2001  |       | 2002                                       |        | 2002  
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |       
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       | (Rmb, except operating data) |        |       |       |        |        | (US$)
|                                     |                           | Diluted earnings per share in Rmb (a)         |                             |                      | 0.12  |        |        |       | 0.24  |                                            |        |        | 0.27  |                              |        |       | 0.25  |        |        |       | 0.17  |        |        |  | 0.02 | 
|                                     |                           | Diluted earnings per ADS in Rmb (b)           |                             |                      | 11.86 |        |        |       | 24.08 |                                            |        |        | 26.80 |                              |        |       | 25.10 |        |        |       | 16.65 |        |        |  | 2.01 | 
|                                     |                           | Cash
dividends declared per ADS in Rmb (b, c) |                             |                      | 0.44  |        |        |       | 0.40  |                                            |        |        | 0.48  |                              |        |       | 0.96  |        |        |       | 0.96  |        |        |  | 0.12 | 
|Operating Data:                      |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        | 
|                                     | Production volume (units) |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |     
|                                     |                           |                                               | Minibus  Deluxe model      |                      |       | 5,051  |        |       |       | 7,697                                      |        |        |       | 10,603                       |        |       |       | 9,413  |        |       |       | 8,620  |        |  |      |  | 
|                                     |                           |                                               | Minibus  Mid-priced model  |                      |       | 22,480 |        |       |       | 35,219                                     |        |        |       | 50,617                       |        |       |       | 51,423 |        |       |       | 56,959 |        |  |      |  | 
|                                     |                           |                                               | Minibus  Standard model(d) |                      |       | 2,271  |        |       |       | 1,212                                      |        |        |       | 0                            |        |       |       | 0      |        |       |       | 0      |        |  |      |  | 
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |      |  |  | 
|                                     |                           |                                               |                             | Subtotal  Minibuses |       |        | 29,802 |       |       |                                            | 44,128 |        |       |                              | 61,220 |       |       |        | 60,836 |       |       |        | 65,579 |  |      |  |  | 
|                                     |                           |                                               | Sedans(e)                   |                      |       | 0      |        |       |       | 0                                          |        |        |       | 0                            |        |       |       | 0      |        |       |       | 8,890  |        |  |      |  | 
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |      |  |  | 
|                                     |                           |                                               |                             | Total                |       |        | 29,802 |       |       |                                            | 44,128 |        |       |                              | 61,220 |       |       |        | 60,836 |       |       |        | 74,469 |  |      |  |  | 
|                                     | Sales volume (units)      |                                               |                             | 5,214                |       |        |        | 7,387 |       |                                            |        | 10,145 |       |                              |        | 9,653 |       |        |        | 9,017 |       |        |        |  |     
|                                     |                           |                                               | Minibus  Deluxe model      |                      |       | 5,214  |        |       |       | 7,387                                      |        |        |       | 10,145                       |        |       |       | 9,653  |        |       |       | 9,017  |        |  |      |  | 
|                                     |                           |                                               | Minibus  Mid-priced model  |                      |       | 22,384 |        |       |       | 33,547                                     |        |        |       | 49,873                       |        |       |       | 53,356 |        |       |       | 56,121 |        |  |      |  | 
|                                     |                           |                                               | Minibus  Standard model(d) |                      |       | 2,313  |        |       |       | 1,265                                      |        |        |       | 0                            |        |       |       | 0      |        |       |       | 0      |        |  |      |  | 
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |      |  |  | 
|                                     |                           |                                               |                             | Subtotal  Minibuses |       |        | 29,911 |       |       |                                            | 42,199 |        |       |                              | 60,018 |       |       |        | 63,009 |       |       |        | 65,138 |  |      |  |  | 
|                                     |                           |                                               | Sedan(e)                    |                      |       | 0      |        |       |       | 0                                          |        |        |       | 0                            |        |       |       | 0      |        |       |       | 8,816  |        |  |      |  | 
|                                     |                           |                                               |                             |                      |       |        |        |       |       |                                            |        |        |       |                              |        |       |       |        |        |       |       |        |        |  |      |  |  | 
|                                     |                           |                                               |                             | Total                |       |        | 29,911 |       |       |                                            | 42,199 |        |       |                              | 60,018 |       |       |        | 63,009 |       |       |        | 73,954 |  |      |  |  | 



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|(a) |  | The weighted average number of shares outstanding for the years ended
December 31, 1998, 1999 and 2000 was adjusted to retrospectively take into
account the effect of the bonus share issuances effected in 1999 and on
April 14, 2000.                                                                                                                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | On April 14, 2000, Brilliance China Automotives shares traded on the New
York Stock Exchange Inc. were converted to ADSs at a ratio of 100 shares
to 1 ADS. The calculation of earnings and cash dividends per ADS is based
on the weighted average number of ADSs outstanding during the years
presented. The weighted average number of ADSs outstanding is calculated
based on the assumptions that the ADS had been in existence throughout all
the years presented and that all of the outstanding shares were held in
the form of ADSs (at the ratio of 100 shares for each ADS).
|   
|(c) |  | Calculated at an exchange rate of US$1.00=Rmb 8.28, the noon buying rate
for Renminbi on December 31, 2002, as if ADSs were in issue during the
years presented. Brilliance China Automotive declared cash dividends per
ordinary share in each of 2002, 2001, 2000, 1999 and 1998. In 1998 and
1999, the dividends were paid in U.S. dollars. In 2000, 2001 and 2002,
the dividends were paid in H.K. dollars.                                                                                                                                                                         
|   
|(d) |  | Commercial production of the standard minibus ceased at the end of 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(e) |  | Commercial production of the Zhonghua sedan began in August 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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Exchange Rate Information

The following table sets forth certain information concerning exchange
rates between Renminbi and U.S. dollars for the periods indicated:

|                                  |  |                     |        |             |  |      |        |     |  |  |        |  |  |  |        | 
|--------------------------------- |  | ------------------- | ------ | ----------- |  | ---- | ------ | --- |  |  | ------ |  |  |  | ------ | 
|                                  |  | Noon Buying Rate(1)
|                                  |  |                    
|Period                            |  | Period End          |        | Average (2) |  | High |        | Low
|                                  |  |                     |        |             |  |      |        |    
|1998                              |  |                     | 8.2789 |             |  |      | 8.2968 |     |  |  | 8.3180 |  |  |  | 8.2774 | 
|1999                              |  |                     | 8.2795 |             |  |      | 8.2785 |     |  |  | 8.2800 |  |  |  | 8.2770 | 
|2000                              |  |                     | 8.2773 |             |  |      | 8.2784 |     |  |  | 8.2799 |  |  |  | 8.2765 | 
|2001                              |  |                     | 8.2761 |             |  |      | 8.2769 |     |  |  | 8.2776 |  |  |  | 8.2761 | 
|2002                              |  |                     | 8.2800 |             |  |      | 8.2772 |     |  |  | 8.2800 |  |  |  | 8.2765 | 
|January 2003                      |  |                     | 8.2768 |             |  |      | 8.2775 |     |  |  | 8.2800 |  |  |  | 8.2766 | 
|February 2003                     |  |                     | 8.2775 |             |  |      | 8.2780 |     |  |  | 8.2800 |  |  |  | 8.2768 | 
|March 2003                        |  |                     | 8.2774 |             |  |      | 8.2773 |     |  |  | 8.2776 |  |  |  | 8.2770 | 
|April 2003                        |  |                     | 8.2771 |             |  |      | 8.2771 |     |  |  | 8.2774 |  |  |  | 8.2769 | 
|May 2003                          |  |                     | 8.2768 |             |  |      | 8.2769 |     |  |  | 8.2771 |  |  |  | 8.2768 | 
|June 2003 (through June 23, 2003) |  |                     | 8.2773 |             |  |      | 8.2770 |     |  |  | 8.2773 |  |  |  | 8.2768 | 



---

|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.                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|        |  | Notes:                                                                                                                                                                                                                                          
|       
|        |  | (1) Since January 1, 1994, the date of the unification of Chinas foreign
currency exchange system, there have not been significant differences
between the noon buying rate, the Peoples Bank of China rate and the
Shanghai swap center rate.
|       
|        |  | (2) 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.                                                                  

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Risk Factors

Brilliance China Automotive is subject to various changing competitive,
economic, political and social conditions in China, as well as special concerns
and significant risks not usually encountered by a United States company.
These include the following:

Risks Relating to Brilliance China Automotives Minibus and Sedan Businesses

If Brilliance China Automotive cannot generate sufficient earnings or obtain
financing to fund the upgrading of Shenyang Automotives production facilities
in a timely manner, its businesses, financial condition and results of
operation may be negatively affected.

Brilliance China Automotives core business strategy is based on the
upgrading of the production facilities of Shenyang Brilliance JinBei Automobile
Co., Ltd. (formerly known as Shenyang JinBei Passenger Vehicle Manufacturing
Company, Ltd.), or Shenyang Automotive, including new molding and painting
facilities. However, there can be no assurance that Brilliance China
Automotive will generate sufficient earnings or be able to secure adequate
financing to permit the timely upgrading of these production facilities. Any
failure or delay in securing financing could result in construction or
installation delays, reductions in the scale of its upgrading plans and higher
costs, which could limit Shenyang Automotives future growth and have a
material adverse effect upon Brilliance China Automotives businesses,
financial condition and results of operations.

If demand for minibuses and sedans in China does not increase, and if Shenyang
Automotive does not increase its market share, the ability of Shenyang
Automotive to increase its sales volume will be adversely impacted.

The success of Brilliance China Automotives business strategy will depend
on the ability of Shenyang Automotive to increase substantially its sales
volume. Such an increase can only be achieved if Shenyang Automotive increases
its market share or if there is an overall increase in the size of the Chinese
minibus and sedan markets. Shenyang Automotives sales of minibuses increased
by nearly 9% from 60,018 units to 65,138 units, between 2000 and 2002, and
overall sales of minibuses in China increased by 34.4% from 247,670 units in
2000 to 332,893 units in 2002. Shenyang Automotive also sold 8,816 units of
its Zhonghua sedan in 2002, beginning with this products formal launch in
August 2002. Overall unit sales of sedans also increased between 2000 and 2002
by 84.6% from 610,138 units in 2000 to 1,126,029 units in 2002. However, there
can be no assurance that demand for our minibuses and sedans will continue to
increase. A decline in the rate of such demand relative to domestic minibus
and sedan production capacity could have an adverse impact on the ability of
Shenyang Automotive to increase its sales volume.

Delays in the development of new products that will be accepted by the Chinese
market may have a negative effect on Brilliance China Automotives financial
results.

Meeting consumer demand with new vehicles developed over increasingly
shorter product development cycle times is critical to Brilliance China
Automotives continued success. Brilliance China Automotives ability to
strengthen its position within its traditional minibus segment while expanding
into additional market segments with innovative new products such as sedans
will play a key role in determining its future success. Potential delays in
bringing new vehicles, such as the new Grace minibus, to market, shifts in
consumer preferences or lack of market acceptance of its models would adversely
affect Brilliance China Automotives financial results.

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There are significant risks involved in Shenyang Automotives recent commercial
introduction of new sedan models.

The commercial introduction by Shenyang Automotive of new sedan models in
August 2002 involved and continues to involve significant risks, including the
ability of Brilliance China Automotive and Shenyang Automotive to obtain
adequate financing, dependence on components suppliers and competition from
other Chinese and foreign passenger vehicle producers. While Shenyang
Automotive has been able to successfully develop, manufacture and launch its
Zhonghua sedans, there can be no assurance that Shenyang Automotive will be
able to continue to successfully market and sell these sedans.

There are significant risks involved in Brilliance China Automotives recent
joint venture with BMW to produce BMW sedans in China.

On March 27, 2003, Brilliance China Automotive, through its indirect
subsidiary, Shenyang JinBei Automotive Industry Holdings Company Limited, or
SJAI, entered into a joint venture contract with BMW Holding BV to produce and
sell BMW-designed and branded sedans in China. On April 28, 2003, Brilliance
China Automotive increased its effective interest in SJAI from 81% to 89.1% and
thereby increased its effective interest in the joint venture with BMW Holding
BV from 40.5% to 44.55%. There are significant risks involved in this joint
venture, including, but not limited to, the ability of the joint venture to
obtain adequate financing as and when necessary, source necessary components at
competitive prices and successfully develop, manufacture and sell BMW sedans in
China. In addition, performance of all of the obligations of SJAI, including
capital contribution obligations, will be guaranteed by Brilliance China
Automotive.

The ownership of Brilliance China Automotive by its largest shareholder is
currently the subject of litigation in Bermuda.

On January 21, 2003, a writ dated January 21, 2003, brought by Broadsino
Finance Company Limited, or Broadsino, as plaintiff was filed with the Supreme
Court of Bermuda and an ex parte court order dated January 22, 2003 granted by
the Supreme Court of Bermuda in favor of Broadsino was served on the registered
office of Brilliance China Automotive in Bermuda. The writ alleged that the
interest of the Chinese Financial Education Development Foundation, a former
significant shareholder, in 1,446,121,500 shares of Brilliance China
Automotive, representing a 39.45% ownership interest, was held in trust for
Broadsino and was improperly transferred to Huachen Automotive Group Holdings
Company Limited, or Huachen. Upon application by Brilliance China Automotive,
the court order was discharged by a judgment of the Supreme Court of Bermuda
given on February 11, 2003. Further proceedings are pending to strike out the
writ and statement of claim brought by Broadsino. The strike-out proceedings
are scheduled to be heard by the Supreme Court of Bermuda on or about July 22
and 23, 2003. The directors do not believe this litigation will have a
significant impact on the financial position of Brilliance China Automotive.
See Item 8  Financial Information  Legal Proceedings for further details of
this pending litigation.

Failure by Brilliance China Automotive to continue to form and maintain
alliances with foreign automobile manufacturers could adversely affect its
competitiveness.

In order for Brilliance China Automotive to remain competitive and obtain
additional technology and financing, it is crucial that it enters into and
maintains alliances with foreign motor vehicle manufacturers. This is
particularly true since China entered the World Trade Organization, or WTO, in
November 2001. As a result of the reduction in import restrictions, more
automobile manufacturers will be entering the Chinese motor vehicle market. If
Brilliance China Automotive cannot maintain its existing alliances with Toyota
and BMW or form strategic alliances with other foreign automobile

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manufacturers regarding the establishment of joint ventures and the
procurement of necessary components on commercially beneficial terms, its
competitive position will be adversely affected.

The inability of Shenyang Automotive to access Toyotas technical resources to
upgrade its products, or Toyotas provision of assistance to any of Shenyang
Automotives competitors could negatively impact Shenyang Automotives sales
and competitive position.

Shenyang Automotive has historically relied to a significant extent on
Toyota for technical assistance for its minibuses. Toyota provided substantial
technical assistance and training to Shenyang Automotive under an agreement
that expired in 1995. On December 17, 2001, Shenyang Automotive entered into
an agreement with Toyota for the technology transfer of the fifth generation of
the Toyota minibus  the Granvia  for which production based upon
semi-knockdown kits from Toyota commenced in 2002. The Granvia is scheduled to
enter into commercial production using domestic parts and components by the end
of 2003. The development of the Granvia, which will be marketed under the
brand name of Grace when sold in China by Brilliance China Automotive, is
supported by a technical team from Toyota. Although Shenyang Automotive has
introduced new products, including its successful mid-priced minibus,
incorporating styling and engineering refinements and modifications without
assistance from Toyota, lack of access to Toyotas technical resources may
limit Shenyang Automotives ability to upgrade significantly its existing
Toyota-designed products. Failure to update its existing models could
eventually result in Shenyang Automotives products becoming technologically
inferior to its competitors products, which could have an adverse impact on
Shenyang Automotives sales. Although Brilliance China Automotive has no
knowledge of any intention of Toyota to produce, or assist a current or
potential competitor in the production of, minibuses similar to those of
Shenyang Automotive in China, neither Brilliance China Automotive nor Shenyang
Automotive could prohibit Toyota from doing so.

As a result of equity restrictions on Sino-foreign joint ventures, Brilliance
China Automotives ability to increase its investments in its joint ventures
will be limited by the ability of its partners to contribute proportionate
funds on a timely basis, which could have a negative impact on the business
prospects of these joint ventures.

Brilliance China Automotive owns equity interests of 51%, 50% and 50%,
respectively, in Shenyang Automotive, Mianyang Xinchen and Shenyang Xinguang,
each of which is a Sino-foreign equity joint venture. Foreign ownership of
motor vehicle and motor vehicle engine manufacturers established in China
subsequent to the adoption of relevant government policies in 1994 is limited
to 50%. Brilliance China Automotive therefore is not allowed to increase its
equity stake in any of those joint ventures. Brilliance China Automotive and
its joint venture partner would accordingly be required to make proportionate
investments in order to maintain their respective ownership interests in the
event any of these joint ventures required additional equity investment. There
can be no assurance that sufficient funds will be available to Brilliance China
Automotives joint venture partners if and when Brilliance China Automotive
seeks to increase its investment in the joint ventures. To the extent that
Brilliance China Automotives partners do not agree to additional equity
investments or are unable to contribute proportionate funds on a timely basis,
planned capital expenditures may have to be reduced or restructured, and the
business prospects of these joint ventures may be adversely affected.

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

While Shenyang Automotive is currently in the process of replacing the
Toyota engines used in some of its minibus models with Mitsubishi and Mianyang
Xinchen engines, currently most of the engines installed in Shenyang
Automotives deluxe minibuses are purchased from Toyota on a

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commercial basis. Shenyang Automotive generally maintains an inventory of
Toyota engines sufficient to sustain two months of planned production. To
date, Shenyang Automotive has not experienced any material disruption to its
supply of engines from Toyota. Changes in regulatory requirements, tariffs and
other trade barriers and price or exchange controls could, however, hinder
Brilliance China Automotives ability to import these engines. An extended
disruption or reduction in Shenyang Automotives supply of Toyota engines would
consequently limit Shenyang Automotives ability to produce deluxe minibuses.

Shenyang Automotives competitors may have access to more advanced technology,
greater financial resources and more substantial support from the Chinese
government, which could negatively affect Shenyang Automotives competitive
position.

Some of Shenyang Automotives competitors have formed joint ventures with,
or licensed technology from, foreign automobile manufacturers, and others may
do so in the future. These competitors may have access to greater financial
resources than Brilliance China Automotive or to technology and equipment that
are more advanced than the technology and equipment utilized by Brilliance
China Automotive. In addition, some of Shenyang Automotives potential
competitors may receive substantial support from the Chinese government,
including priority access to loans, favorable import quotas and tariffs,
expedited approvals of proposed projects and preferential tax treatment.

Huachen, as Brilliance China Automotives substantial shareholder, may not
always act in the best interest of other shareholders.

Huachen, a wholly owned subsidiary of the Liaoning Provincial Government,
currently owns 39.45% of the issued and outstanding shares of Brilliance China
Automotive, which it recently acquired from the Chinese Financial Education
Development Foundation. Accordingly, as the ultimate beneficial owner, the
Liaoning Provincial Government is entitled to cast 39.45% of the votes on all
matters to be voted on by the shareholders of Brilliance China Automotive (to
the extent it is not required to abstain from exercising its voting rights
under the applicable laws and regulations), and will therefore exert
substantial influence over the election of Brilliance China Automotives
directors, the outcome of actions requiring majority shareholder approval and
the business in general of Brilliance China Automotive. Such significant
influence could preclude the ability of minority shareholders to influence
important business decisions of Brilliance China Automotive, and may result in
actions or omissions by Brilliance China Automotive that are not be in the best
interest of the minority shareholders.

Currency exchange risks could affect Brilliance China Automotives cross-border
transactions.

Brilliance China Automotive is subject to risks associated with
cross-border transactions, including foreign currency exchange rate risks
relating to its purchase of automotive components from Toyota in Japan and
other overseas suppliers. During 2002, imported components comprised
approximately 35.0% and 12.4% of the total costs of the deluxe minibus
(including the Grace minibus) and the Zhonghua sedan, respectively (not
including foreign-manufactured components subsumed within larger components,
such as engines, purchased from Chinese domestic manufacturers).

Risks Relating to the Minibus and Sedan Industries in China

Competition in the Chinese minibus and sedan industry could lead to further
competitive pricing pressure.

The Chinese minibus and sedan industry is highly competitive in terms of
vehicle quality, pricing, choice of models, reliability, safety, fuel economy,
customer service and financing terms. Increasing capacity within the industry
is likely to intensify further competitive pricing pressure, particularly in
the

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event of an economic downturn in China.

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

The Chinese government imposes restrictions, quotas and tariffs on the
import of foreign-made motor vehicles, as well as motor vehicle components.
However, as a result of Chinas admission to the WTO, which regulates trading
and tariffs among its signatory states, in November 2001, China has committed
to reducing its import restrictions on motor vehicles and motor vehicle
components. In addition, China will be required to conform its import tariffs
to the uniform tariffs under the WTO. Effective January 1, 2002, China has
reduced its import tariffs on motor vehicles and automotive components from
between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to
50.7% and between 14% to 31.4%, respectively. This range was lowered further
to between 4.8% and 25% for automotive components effective January 1, 2003.
In addition, tariffs on vehicles with nine seats or less and engine sizes of
three liters or below fell from 43.9% in 2002 to 38.2% for 2003, while tariffs
on vehicles with more than nine seats and engines of more than three liters
decreased from 50.7% in 2002 to 43.0% for 2003. All of these tariffs levels
are scheduled to be further reduced by 2006. Although lower tariffs and
reduced import restrictions may benefit Brilliance China Automotive in terms of
lower cost of imported components, lower tariffs and reduced import
restrictions could also lead to a substantial increase in the number of
minibuses, sport utility vehicles, sedans and other motor vehicles imported
into China, thereby significantly increasing competition in Brilliance China
Automotives current and proposed markets.

Extensive Chinese government regulations on the automobile industry may limit
the flexibility of Brilliance China Automotive to respond to market conditions
and competition.

The Chinese government has implemented extensive policies and regulations
for the passenger automobile industry, including policies and regulations
relating to market entry, vehicle safety and emissions standards, pollution
levels of vehicle production facilities, pricing, vehicle and component import
tariffs and foreign ownership of interests in vehicle and component
manufacturers. In addition, every new product type must be approved by the
Chinese government before it can be introduced into the market. This approval
process can sometimes be lengthy, and can impact the ability of Brilliance
China Automotive to introduce new products in a timely manner. This regulatory
framework may limit the flexibility of Brilliance China Automotive to respond
to market conditions or competition. The cost of complying with these policies
and regulations can also be significant.

Risks Relating to the Chinese Economy and Regulatory System

SARS could have a long-term adverse impact on our business.

The spread of a disease referred to as severe acute respiratory syndrome
(SARS) in China and other regions in Asia, including Hong Kong, Singapore and
Taiwan, could disrupt our business. While the long-term impact of the SARS
outbreak is unclear at this time, the prolonged existence of the SARS outbreak,
or the perception that the SARS outbreak has not been contained, may have an
adverse effect on the Chinese economy. Any economic downturn as a result of
the SARS outbreak may have an adverse effect on the overall level of business,
productivity and growth, particularly in China. The Chinese government has
recently revised downward its gross domestic product growth forecasts for 2003
due to the SARS outbreak. These uncertainties could also have an adverse
impact on consumer confidence and our level of sales, and consequently could
adversely affect our overall results of operations and financial position.

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Budgetary constraints on Chinese government entities and state enterprises
could affect Shenyang Automotives sales and pricing of products.

Brilliance China Automotive believes that approximately 32.1% and 11.7% of
Shenyang Automotives 2002 revenues from minibuses and sedans, respectively,
were derived from sales to governmental agencies and certain state-run
enterprises. Because of Shenyang Automotives customer composition, sales and
pricing of its products can be affected by budgetary constraints applicable to
government entities and state enterprises.

Brilliance China Automotives results of operations and financial position are
affected to a significant degree by economic, political and legal developments
in China.

Substantially all of Brilliance China Automotives assets are located in
China and substantially all of Brilliance China Automotives revenues are
derived from China. Accordingly, Brilliance China Automotives results of
operations and financial position are subject to a significant degree to
economic, political and legal developments in China. Since 1978, the Chinese
government has been reforming Chinas economic system. Many of the reforms are
unprecedented or experimental, and are expected to undergo future change.
Other political, economic and social factors, such as political changes,
changes in the rates of economic growth, unemployment or inflation, or in the
disparities in per capita wealth between regions within China, could lead to
further adjustment of the reform measures. There can be no assurance that the
reforms in the economic system in China will continue or that Brilliance China
Automotive will not be adversely affected by changes in political, economic and
social conditions in China, including changes in political leadership or by the
adoption of additional or revised reform measures.

Any significant banking failure or disruption of the Chinese banking system
could materially and adversely affect Brilliance China Automotives ability to
obtain credit.

Most major banks in China are owned by the Chinese government. Most of
these banks have historically extended significant amounts of loans according
to governmental policy rather than for commercial reasons. As a result, these
banks currently have significant loans outstanding to state-owned enterprises,
many of which have incurred recurring and material losses. Consequently, many
banks in China have substantial levels of loans that are not current with
respect to payments of either interest or principal and may not have made
adequate provisions to cover potential losses on these loans. Any significant
banking failure or disruption of the Chinese banking system could materially
and adversely affect Brilliance China Automotives ability to obtain credit and
the economic environment in which it conducts its business and may also affect
its customers and distributors.

Shenyang Automotives ability to obtain sufficient foreign exchange to satisfy
its requirements is dependent on authorization of the State Administration of
Foreign Exchange.

Substantially all of the revenues of Brilliance China Automotive and its
subsidiaries are denominated in Renminbi, while some of their operating
expenses and capital expenditures are denominated in foreign currencies. The
Renminbi currently is not a freely convertible currency. The State
Administration of Foreign Exchange, under the authority of the Peoples Bank of
China, regulates the conversion of Renminbi into foreign currency. There can
be no assurance that the current authorizations for foreign-invested
enterprises, such as Shenyang Automotive, to retain their foreign exchange to
satisfy foreign exchange liabilities or to pay dividends in the future will not
be limited or eliminated or that Shenyang Automotive will be able to obtain
sufficient foreign exchange to pay dividends and to satisfy its other foreign
exchange requirements.

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See also Government Regulation and Environmental Matters in Item
4Information on Brilliance China Automotive, Item 5Operating and Financial
Review and Prospects, Item 8Financial InformationLegal Proceedings and
Item 11Quantitative and Qualitative Disclosures About Market Risk.

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ITEM 4. INFORMATION ON THE COMPANY

History and Development of Brilliance China Automotive

Brilliance China Automotive Holdings Limited was established as an
exempted company with limited liability under the laws of Bermuda on June 9,
1992. Brilliance China Automotives principal place of business is Suites
2303-06, 23rd Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong,
telephone number: (852) 2523-7227.

Brilliance China Automotive was initially established to hold a 51%
interest in Shenyang Brilliance JinBei Automobile Co., Ltd. (formerly known as
Shenyang JinBei Passenger Vehicle Manufacturing Company, Ltd.), or Shenyang
Automotive, currently the leading manufacturer and distributor of minibuses in
China. Shenyang Automotive was established as a Sino-foreign equity joint
venture enterprise under the laws of China on July 22, 1991. The other 49% of
Shenyang Automotive is owned by Shenyang JinBei Automotive Company Limited
(formerly known as Shenyang Brilliance Automotive Company Limited and
FAW-JinBei Automotive Company Limited), or JinBei. The term of Shenyang
Automotive is perpetual as a result of an amendment made to Shenyang
Automotives joint venture contract in February 2003.

Prior to May 1998, Brilliance China Automotives sole operating asset was
its interest in Shenyang Automotive. On May 18, 1998, Brilliance China
Automotive acquired 50% and 51% equity interests, respectively, in Mianyang
Xinchen Engine Co., Ltd., or Mianyang Xinchen, a manufacturer of gasoline
engines for use in passenger vehicles and light duty trucks, and Ningbo Yuming
Machinery Industrial Co., Ltd., or Ningbo Yuming, a producer of automobile
windows and window molding and stripping. Mianyang Xinchen is a Sino-foreign
equity joint venture whose 50-year term will expire in 2048. Ningbo Yuming is
a wholly foreign-owned enterprise with a 50-year term that will expire in 2043.
On December 11, 2000, Brilliance China Automotive acquired from Brilliance
Holdings Limited, an affiliated company, a 50% equity interest in Shenyang
Xinguang Brilliance Automobile Engine Co., Ltd., a Sino-foreign equity joint
venture manufacturer of gasoline engines for use in passenger vehicles and
light duty trucks. Shenyang Automotive is a major customer of each of these
companies. Brilliance China Automotive believes that the acquisition of these
components suppliers has enabled it to maintain quality and ensure a stable
supply of certain key components required for the production needs of Shenyang
Automotive.

On November 23, 1998, Brilliance China Automotive purchased a 33.69%
equity interest in Compass Pacific Holdings Limited (formerly known as Whimsy
Entertainment Company, Limited), or Compass Pacific. Compass Pacific is an
exempted company incorporated in Bermuda with limited liability engaged in
operating and franchising indoor family entertainment centers, trading game
equipment and merchandise and manufacturing and selling automobile components
in China. Compass Pacifics shares are publicly listed on The Stock Exchange
of Hong Kong Limited. As a result of a share issuance by Compass Pacific on
October 5, 2000, Brilliance China Automotives equity interest in Compass
Pacific was diluted to 12.89%. Since November 2002, certain directors of
Brilliance China Automotive have ceased to be directors of Compass Pacific. As
such, the directors consider that Brilliance China Automotive is not in a
position to exert significant influence over Compass Pacific, and the interest
in Compass Pacific has been reclassified from an associated company to an
investment in securities.

On October 12, 1998, June 9, 2000 and July 3, 2000, Brilliance China
Automotive established Shenyang XingYuanDong Automobile Component Co., Ltd., or
Xing Yuan Dong, Ningbo Brilliance Ruixing Auto Components Co. Ltd., or Ningbo
Brilliance Ruixing, and Mianyang Brilliance Ruian Automotive Components Co.,
Ltd., or Mianyang Brilliance Ruian, respectively, as its wholly owned

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subsidiaries to centralize and consolidate the sourcing of automotive
parts and components for Shenyang Automotive. In 2001, all three companies, in
order to maintain their preferential tax treatment from the Chinese government,
also began manufacturing automotive components for Shenyang Automotive.

Under an acquisition agreement dated April 25, 1998 between Shenyang
Automotive and Shenyang State Assets Administration Bureau, Shenyang Automotive
was to acquire a 21% indirect interest in Shenyang Aerospace Mitsubishi Motors
Engine Manufacturing Co., Ltd., or Shenyang Aerospace, a Sino-foreign equity
joint venture. A revised agreement was subsequently signed on August 15, 1999
among Shenyang Automotive, Shenyang State Assets Administration Bureau,
Shanghai Brilliance Industrial Company Limited and Xing Yuan Dong, under which
Shenyang Automotives interest in Shenyang Aerospace was reduced to 16.8% in
exchange for cash consideration and the remaining 4.2% interest was transferred
to Xing Yuan Dong at cost. At the completion of the transfer on May 25, 2000,
Brilliance China Automotives indirect effective interest in Shenyang Aerospace
was 12.77%.

At the end of 1998, Shenyang Automotive began to construct new production
lines for the manufacture of sedans and multi-purpose vehicles, or MPVs. These
new production lines were completed in mid-2002, and reached a total annual
production capacity of 100,000 sedans or MPVs by the end of 2002.

Beginning in 1999, Shenyang Automotive implemented an expansion of its
minibus facilities that resulted in an increase in its production capacity for
deluxe and mid-priced minibuses from 40,000 units to 70,000 units. Current
annual capacity is 70,000 units for the painting workshop, and 80,000 to
100,000 units for the pressing, welding and assembly workshops. Shenyang
Automotive is currently constructing a new painting facility and upgrading its
pressing, welding and assembly workshops in order to reach a capacity of
120,000 units per year. This construction and upgrading is scheduled to be
completed by the end of 2003.

On March 27, 2001, Brilliance China Automotive entered into a technical
assistance agreement with BMW relating to technical support and training to be
provided to Shenyang Automotive by BMW in connection with the commencement of
production of its new Zhonghua sedan model. BMW continues to provide
services to Shenyang Automotive pursuant to this agreement. However,
Brilliance China Automotive and BMW are currently in discussions regarding a
similar agreement to be entered into directly between Shenyang Automotive and
BMW that, when executed, would supersede the existing technical assistance
agreement.

In December 2001, Brilliance China Automotive acquired a 100% equity
interest in Shenyang Brilliance Dongxing Automotive Component Co., Ltd., or
Dongxing, a foreign-invested manufacturer of automotive components in China
from Brilliance Holdings Limited, an affiliated company.

On December 17, 2001, Shenyang Automotive entered into an agreement with
Toyota Motor Corporation for the transfer of technology relating to the fifth
generation of the Toyota minibus, the Granvia, which will be marketed under the
brand name Grace when sold in China by Shenyang Automotive. Under the
agreement, Shenyang Automotive pays Toyota an entry fee of 150 million Japanese
Yen, a technical service fee covering the secondment of Toyota employees to
Shenyang Automotive and a commission of 2% of the local added value.
Production of this new minibus model based on semi-knockdown kits from Toyota
began in the second half of 2002 and commercial production using domestic parts
and components is scheduled to commence by the end of 2003.

The Zhonghua sedan, designed by the world-renowned Italdesign, was
launched to the market in China in August 2002, after approval for production
and sale of the Zhonghua sedan was obtained

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from the Chinese government in May 2002. From August 2002 to December
2002, Shenyang Automotive sold 8,816 Zhonghua sedans in China.

On March 27, 2003, Brilliance China Automotive, through its indirect
subsidiary, SJAI, entered into a joint venture contract with BMW Holding BV to
produce and sell BMW sedans in China. On April 28, 2003, Brilliance China
Automotive increased its effective interest in SJAI from 81% to 89.1% and
thereby increased its effective interest in the joint venture with BMW Holding
BV from 40.5% to 44.55%. Commercial production of BMW-designed and branded
sedans is scheduled to commence in the fourth quarter of 2003 based on
knockdown kits supplied by BMW. This joint venture contract prohibits
Brilliance China Automotive from entering into similar ventures with other
automobile manufacturers for the manufacture and sale of premium sedans in
China.

Business Overview

Brilliance China Automotives core businesses are the manufacture and sale
of minibuses and sedans in China through its subsidiary, Shenyang Automotive.
In 2002, Shenyang Automotive sold 65,138 minibuses and 8,816 sedans,
representing approximately 19.6% and 0.8% of all minibuses and sedans sold in
China, respectively, during the same period.

Shenyang Automotives production facilities are located in the industrial
city of Shenyang, the capital of Liaoning Province in northeastern China.
Shenyang Automotives principal products are the deluxe minibus, the mid-priced
minibus and the Zhonghua sedan, with mid-priced minibuses accounting for
approximately 62.8% of Shenyang Automotives total sales revenue in 2002.
Since market demand has shifted to high-end models, Shenyang Automotive stopped
the production of its low-end domestically designed standard minibuses as of
the end of 1999. The deluxe and mid-priced minibuses are 8 to 15-seat
minibuses adapted from Toyotas Hiace minibus. In early 2000, Shenyang
Automotive successfully launched an electronic fuel injection mid-priced
minibus model, which passed the stricter gasoline vehicle emission standards
implemented on January 1, 2000 by Beijing, Tianjin and Yunnan Province. These
emission standards have since been adopted nationwide in China. In early 2001,
Shenyang Automotive began to install multiple electronic fuel injection
engines, which are currently used in all of Shenyang Automotives mid-priced
minibuses. With the installation of this new engine in the mid-priced minibus,
currently all of Shenyang Automotives minibuses meet European II emission
standards, which are among the highest international standards. Shenyang
Automotive has also begun to use new and improved engines developed by Mianyang
Xinchen to replace some of the Toyota engines used in its deluxe minibuses.

Shenyang Automotive is currently producing the fifth generation of the
Toyota minibus, the Granvia, based on semi-knockdown kits supplied by Toyota
and is scheduled to commence commercial production of the Granvia using
domestic parts and components by the end of 2003. In August 2002, Shenyang
Automotive also successfully launched its Zhonghua sedan to the Chinese
market.

Shenyang Automotive currently has an annual production capacity (based on
two shifts per day) of 70,000 units of deluxe and mid-priced minibuses and
100,000 units of sedans. Shenyang Automotive also recently established a joint
venture with BMW for the production of BMW sedans in China and plans on
establishing the related domestic components and distribution networks for this
joint venture with BMW. See Item 4Information on Brilliance China
AutomotiveBusiness Overview below.

Despite a challenging year, Shenyang Automotive still achieved growth in
terms of unit sales volume. Shenyang Automotives sales volume grew 17.4% from
63,009 units in 2001 to 73,954 units, which includes 65,138 minibuses and 8,816
units of its Zhonghua sedan, in 2002. Shenyang Automotives sales growth in
China has been supported by a substantial network of over 800 minibus

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distributors and 76 sedan distributors, as well as 296 after-sales service
centers for minibuses and 88 for sedans. Shenyang Automotive also continued to
implement its 4S sales center system, combining sales, service, spare parts
and survey in one location. As of the end of 2002, Shenyang Automotive had 74
and 30 authorized 4S dealership outlets for minibuses and sedans, respectively.

For the year ended December 31, 2002, Brilliance China Automotive reported
sales of Rmb 7,319.5 million (US$884.0 million) and net income of Rmb 610.5
million (US$73.7 million), representing an increase of approximately 17.7% and
a decrease of approximately 31.2%, respectively, compared to 2001.

Principal Products

Shenyang Automotives principal products are (1) minibuses and automotive
components and (2) sedans.

Shenyang Automotives principal minibus products are the deluxe minibus
and the mid-priced minibus, which constituted approximately 21.4% and 74.2% of
total 2002 minibus and automotive components sales revenue, respectively.
These vehicles are used primarily for passenger transportation but can also be
modified for use as police vans, ambulances or other specialty vehicles.
Shenyang Automotive sells all of its minibuses under the JinBei brand name in
a variety of models designed to meet the requirements of particular market
segments. Brilliance China Automotive believes that Shenyang Automotives
minibuses have established a reputation in China for high quality and
reliability that has enabled Shenyang Automotive to maintain its market-leading
position in recent years. Since market demand has shifted to high-end models,
Shenyang Automotive stopped the production of its low-end domestically designed
standard minibuses as of the end of 1999 and commenced production of the
high-end Grace model in 2002 based on semi-knockdown kits from Toyota.

Shenyang Automotives Zhonghua sedan was introduced to the commercial
market in China in August 2002. The initial model was a five-seat manual
transmission sedan with a 4-cylinder, 2.0-liter Mitsubishi engine. Shenyang
Automotive now also produces manual transmission Zhonghua sedans with
2.4-liter engines and automatic transmission versions with 2.0-liter engines.
Brilliance China Automotive plans on increasing its market share in the Chinese
sedan market in 2003 with both Shenyang Automotives Zhonghua sedan and the
BMW sedans to be produced by the joint venture between Brilliance China
Automotives 89.1% indirectly owned subsidiary, SJAI, and BMW Holding BV.

The following table sets forth certain information with respect to
Shenyang Automotives principal products.

|                             |  |                    |         |                    |  |                      |                   |                    |  |                    |                  |                  |  |                  |         |               |  |  |         | 
|---------------------------- |  | ------------------ | ------- | ------------------ |  | -------------------- | ----------------- | ------------------ |  | ------------------ | ---------------- | ---------------- |  | ---------------- | ------- | ------------- |  |  | ------- | 
|                             |  | Granvia ("Grace")  |         |                    |  |                      |                   |                    |  |                    |                  | "Zhonghua" sedan |  | "Zhonghua" sedan
|                             |  | minibus            |         | Deluxe minibus     |  | Mid-priced minibus   |                   | version 2.0        |  | version 2.4       
|                             |  |                    |         |                    |  |                      |                   |                    |  |                   
|Maximum number of
passengers |  |                    | 7-8     |                    |  |                      | 15                |                    |  |                    | 15               |                  |  |                  | 5       |               |  |  | 5       | 
|Engine type                  |  | Toyota 4-cylinder, |         | Toyota 4-cylinder, |  | Mianyang Xinchen and |                   | Mitsubishi         |  | Mitsubishi        
|                             |  | 2.7-liter gasoline |         | 2.4-liter gasoline |  | Shenyang Xinguang    |                   | 4-cylinder         |  | 4-cylinder        
|                             |  | engine             |         | engine             |  | 4-cylinder,          |                   | 2.0-liter gasoline |  | 2.4-liter gasoline
|                             |  |                    |         |                    |  |                      |                   |                    |  | 2.2-liter gasoline |                  | engine           |  | engine          
|                             |  |                    |         |                    |  |                      |                   |                    |  | engine             |                  |                  |  |                  |         |               |  | 
|Horsepower                   |  |                    | 105     |                    |  |                      | 100.6             |                    |  |                    | 92.5             |                  |  |                  | 95      |               |  |  | 100     | 
|Price range in Rmb
(1)       |  |                    | 363,000 |                    |  |                      | 178,800  277,800 |                    |  |                    | 73,800  159,800 |                  |  |                  | 169,800 |               |  |  | 188,800 | 
|Miles per gallon (2)         |  |                    | 28      |                    |  |                      | 27.5              |                    |  |                    | 25               |                  |  | 34.7 (manual)/   |         | 33.5 (manual)
|                             |  |                    |         |                    |  |                      |                   |                    |  |                    |                  |                  |  | 28.7 (automatic) |         |               |  | 

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|                           |  |                   |       |                |  |                    |       |             |  |             |       |                  |  |                  |        |   |  |  |        |  
|-------------------------- |  | ----------------- | ----- | -------------- |  | ------------------ | ----- | ----------- |  | ----------- | ----- | ---------------- |  | ---------------- | ------ | - |  |  | ------ | -
|                           |  | Granvia ("Grace") |       |                |  |                    |       |             |  |             |       | "Zhonghua" sedan |  | "Zhonghua" sedan
|                           |  | minibus           |       | Deluxe minibus |  | Mid-priced minibus |       | version 2.0 |  | version 2.4
|                           |  |                   |       |                |  |                    |       |             |  |            
|Maximum speed              |  | 158 km/hr         |       | 130 km/hr      |  | 130 km/hr          |       | 180 km/hr   |  | 195 km/hr  
|Domestic component
content |  |                   | 0     | %(3)           |  |                    | 80    | %           |  |             | 100   | %                |  |                  | 60-65  | % |  |  | 60-65  | %
|Length                     |  |                   | 4.7 m |                |  |                    | 4.8 m |             |  |             | 4.8 m |                  |  |                  | 4.88 m |   |  |  | 4.88 m |  



---

|(1) |  | Actual price depends on specific model.                                              
|--- |  | -------------------------------------------------------------------------------------
|   
|(2) |  | At an average speed of 50-55 km per hour for minibuses and 80 km per hour
for sedans.
|   
|(3) |  | Currently produced based on semi-knockdown kits supplied by Toyota.                  

Deluxe minibus. The deluxe minibus has historically been Shenyang
Automotives flagship product and is among the highest quality, most
technologically advanced minibuses currently produced in China. Shenyang
Automotives predecessor began assembling deluxe minibuses under license from
Toyota in 1989. The deluxe minibus is used primarily as a passenger vehicle
and features air conditioning, and optional power steering, power windows,
automatic locks, a rear window wiper, full interior carpeting and alternative
interior configurations.

Shenyang Automotives high-end products have been further improved to
incorporate more user-friendly features to meet diversified customer demands.
In the deluxe line, Shenyang Automotive has introduced a locally developed
model, based on the Toyota 441N, which is equipped with an anti-lock braking
system, improved helix rear suspension and refined interior trim. It has the
highest technical content among Shenyang Automotives product lines.

On December 17, 2001, Shenyang Automotive entered into an agreement with
Toyota for the technology transfer of the fifth generation of the Toyota
minibus  the Granvia  for which production based upon semi-knockdown kits
from Toyota commenced in 2002. The Granvia is scheduled to enter into
commercial production using domestic parts and components by the end of 2003.
The development of the Granvia, which will be marketed under the brand name
Grace when sold in China by Shenyang Automotive, is supported by a technical
team from Toyota. The Grace minibus exhibits several improvements over the
fourth generation minibus, including more responsive performance when carrying
heavy loads, better handling, better maneuverability, 360-degree interior
moveable seats, and a more luxurious and comfortable interior.

Mid-priced minibus. The mid-priced minibus was developed by Shenyang
Automotive and was commercially introduced in the second half of 1996. It is
aimed at the fast-growing mid-price segment of the minibus market. Shenyang
Automotive produces two principal mid-priced minibus models, both of which are
based on the deluxe minibus and share the same styling and body of the deluxe
minibus, with the principal difference being the engine. By equipping the
majority of these models with a domestically manufactured Mianyang Xinchen and
Shenyang Xinguang engine, Shenyang Automotive is able to sell them for
significantly less than the deluxe minibus, yet still maintain function and
quality standards for these models that are only slightly lower than the deluxe
minibus. This has allowed the mid-priced minibus models to compete more
effectively in terms of price with other domestically produced products. See
Item 4Information on Brilliance China AutomotiveBusiness
OverviewCompetition. These mid-priced models include the Aurora, a version
derived from a similar model from the deluxe line but with more local content,
and the Shuttler, which features a multi-point injection (MPI) system and
improved air conditioning and seats and can be used as both a passenger and
goods vehicle.

In 2002, Shenyang Automotive introduced three new minibus models to the
market, including mid-priced minibuses that utilize Mitsubishi engines. As a
result, Shenyang Automotive has further consolidated its position in the market
place, while continuing to remain price competitive with its rivals.

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Shenyang Automotive invested approximately Rmb 129.0 million (US$15.6
million) in 2002 on a mold for the new Grace minibus. In 2003, Shenyang
Automotive is currently investing or planning to invest approximately Rmb 350.0
million (US$42.3 million) on new minibus painting facilities, Rmb 250.0 million
(US$30.2 million) for new molds for the Grace minibus, and Rmb 250.0 million
(US$30.2 million) on upgrading the minibus welding and assembling workshops.
The new painting facilities are expected to boost minibus capacity from the
current level of 70,000 units to 120,000 units by the end of 2003.

Zhonghua sedan.The Zhonghua sedan was designed by Italdesign and was
commercially introduced by Shenyang Automotive in August 2002. The sedan is
designed for the mid-priced sedan market segments, including governmental
institutions, businesses and individual users in China. This new sedan model
was specifically designed for the Chinese market and will utilize a high degree
of domestic component content and thereby offer cost advantages to consumers.
See  Sedan Project below for more details on the Zhonghua sedan. In 2003,
Shenyang Automotive plans to spend approximately Rmb 150.0 million (US$18.1
million) on upgrading the Zhonghua production facilities and related dies and
tools.

The following table sets forth Brilliance China Automotives revenues by
category, for the years 2000 through 2002:

|                           |                    |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |       |       |  |  |       |      | 
|-------------------------- | ------------------ |  | ------------- | ----- | ---- |  | ------------- | ---- | ------- |  | ------------- | ----- | - |  | ------- | ---- |  |  | ----- | ----- |  |  | ----- | ---- | 
|                           |                    |  | 2000          |       | 2001 |  | 2002         
|                           |                    |  |               |       |      |  |              
|                           |                    |  | Revenue       |       |      |  |               |      | Revenue |  |               |       |   |  | Revenue |      |  |  |      
|                           |                    |  | (Rmb million) |       | %    |  | (Rmb million) |      | %       |  | (Rmb million) |       | %
|                           |                    |  |               |       |      |  |               |      |         |  |               |       |  
|Minibus sales              |                    |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |       |       |  |  |       |     
|                           | Deluxe minibus     |  |               | 1,742 |      |  |               | 27.6 |         |  |               | 1,599 |   |  |         | 25.7 |  |  |       | 1,324 |  |  |       | 18.1 | 
|                           | Mid-priced minibus |  |               | 4,120 |      |  |               | 65.3 |         |  |               | 4,375 |   |  |         | 70.4 |  |  |       | 4,600 |  |  |       | 62.8 | 
|Zhonghua sedan(1)        |                    |  |              |       |      |  |              |      |         |  |              |       |   |  |        |      |  |  | 1,117 |       |  |  | 15.3  |     
|                           |                    |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |       |       |  |  |       |     
|Subtotal                   |                    |  | 5,862         |       |      |  | 92.9          |      |         |  | 5,974         |       |   |  | 96.1    |      |  |  | 7,042 |       |  |  | 96.2  |     
|Other sources of income(2) |                    |  | 444           |       |      |  | 7.1           |      |         |  | 244           |       |   |  | 3.9     |      |  |  | 277   |       |  |  | 3.8   |     
|                           |                    |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |       |       |  |  |       |     
|Total                      |                    |  | 6,306         |       |      |  | 100.0         |      |         |  | 6,218         |       |   |  | 100.0   |      |  |  | 7,319 |       |  |  | 100.0 |     
|                           |                    |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |       |       |  |  |       |     



---

|(1) |  | Commercial launch of the Zhonghua sedan occurred in August 2002.
|--- |  | ------------------------------------------------------------------
|   
|(2) |  | Including sales of components.                                    

The following table sets forth the geographic breakdown of Shenyang
Automotives minibus and sedan sales revenue throughout China for the years
2000 through 2002:

|             |  |               |       |      |  |               |      |         |  |               |       |   |  |         |      |  |  |  |       |  |  |  |      | 
|------------ |  | ------------- | ----- | ---- |  | ------------- | ---- | ------- |  | ------------- | ----- | - |  | ------- | ---- |  |  |  | ----- |  |  |  | ---- | 
|             |  | 2000          |       | 2001 |  | 2002         
|             |  |               |       |      |  |              
|Province/    |  | Revenue       |       |      |  |               |      | Revenue |  |               |       |   |  | Revenue |      |  |  | 
|Municipality |  | (Rmb million) |       | %    |  | (Rmb million) |      | %       |  | (Rmb million) |       | %
|             |  |               |       |      |  |               |      |         |  |               |       |  
|Liaoning     |  |               | 787   |      |  |               | 13.4 |         |  |               | 763   |   |  |         | 12.8 |  |  |  | 773   |  |  |  | 11.0 | 
|Guangdong    |  |               | 2,018 |      |  |               | 34.4 |         |  |               | 1,855 |   |  |         | 31.1 |  |  |  | 1,445 |  |  |  | 20.5 | 
|Beijing      |  |               | 765   |      |  |               | 13.1 |         |  |               | 770   |   |  |         | 12.9 |  |  |  | 1,122 |  |  |  | 15.9 | 
|Shanghai     |  |               | 687   |      |  |               | 11.7 |         |  |               | 1,072 |   |  |         | 17.9 |  |  |  | 1,129 |  |  |  | 16.0 | 

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|             |  |               |       |      |  |               |       |         |  |               |       |   |  |         |       |  |  |  |       |  |  |  |       | 
|------------ |  | ------------- | ----- | ---- |  | ------------- | ----- | ------- |  | ------------- | ----- | - |  | ------- | ----- |  |  |  | ----- |  |  |  | ----- | 
|             |  | 2000          |       | 2001 |  | 2002         
|             |  |               |       |      |  |              
|Province/    |  | Revenue       |       |      |  |               |       | Revenue |  |               |       |   |  | Revenue |       |  |  | 
|Municipality |  | (Rmb million) |       | %    |  | (Rmb million) |       | %       |  | (Rmb million) |       | %
|             |  |               |       |      |  |               |       |         |  |               |       |  
|Sichuan      |  |               | 179   |      |  |               | 3.1   |         |  |               | 248   |   |  |         | 4.2   |  |  |  | 133   |  |  |  | 1.9   | 
|Jiangsu      |  |               | 281   |      |  |               | 4.8   |         |  |               | 47    |   |  |         | 0.8   |  |  |  | 303   |  |  |  | 4.3   | 
|Shandong     |  |               | 241   |      |  |               | 4.1   |         |  |               | 222   |   |  |         | 3.7   |  |  |  | 238   |  |  |  | 3.4   | 
|Henan        |  |               | 76    |      |  |               | 1.3   |         |  |               | 87    |   |  |         | 1.5   |  |  |  | 80    |  |  |  | 1.2   | 
|Heilongjiang |  |               | 103   |      |  |               | 1.8   |         |  |               | 107   |   |  |         | 1.8   |  |  |  | 147   |  |  |  | 2.1   | 
|Tianjin      |  |               | 78    |      |  |               | 1.3   |         |  |               | 98    |   |  |         | 1.6   |  |  |  | 115   |  |  |  | 1.6   | 
|Others       |  |               | 647   |      |  |               | 11.0  |         |  |               | 705   |   |  |         | 11.7  |  |  |  | 1,557 |  |  |  | 22.1  | 
|             |  |               |       |      |  |               |       |         |  |               |       |   |  |         |       |  |  |  |       |  |  |  |       | 
|Total        |  |               | 5,862 |      |  |               | 100.0 |         |  |               | 5,974 |   |  |         | 100.0 |  |  |  | 7,042 |  |  |  | 100.0 | 
|             |  |               |       |      |  |               |       |         |  |               |       |   |  |         |       |  |  |  |       |  |  |  |       | 

Sedan Project

The prototype of Shenyang Automotives Zhonghua sedan was presented to
the market on December 16, 2000. The sedan is designed for the mid-priced
sedan market segments, including governmental institutions, businesses and
individual users in China. This new sedan model was specifically designed for
the Chinese market and will utilize a high degree of domestic component content
and thereby offer cost advantages to consumers. The Zhonghua sedan was
approved by the Chinese government in May 2002, and was introduced to the
Chinese consumer market in August 2002.

On March 27, 2001, Brilliance China Automotive entered into a technical
assistance agreement with BMW under which BMW engineers provide consulting
services to help in the initial stages of production of Zhonghua sedans at
Shenyang Automotives new sedan production facilities in Shenyang, including
assistance in achieving and maintaining the desired level of production
quality. BMW continues to provide services to Shenyang Automotive pursuant to
this agreement. However, Brilliance China Automotive and BMW are currently in
discussions regarding a similar agreement to be entered into directly between
Shenyang Automotive and BMW that, when executed, would supersede the existing
technical assistance agreement.

BMW Joint Venture

On March 14, 2003, Brilliance China Automotive received formal approval
from the Chinese government with respect to the feasibility study for the
establishment of a joint venture between BMW Holding BV, a wholly owned
subsidiary of BMW AG, and SJAI, an indirect subsidiary of Brilliance China
Automotive. On March 27, 2003, SJAI entered into a joint venture contract with
BMW Holding BV in relation to the establishment of the joint venture in China.
On April 28, 2003, Brilliance China Automotive, through its indirectly
90%-owned subsidiary, Shenyang Xinjinbei Investment and Development Co., Ltd.,
entered into an agreement with the 10% shareholder of SJAI to acquire an
additional 9% interest in SJAI. As a result, SJAI is currently 89.1%
indirectly owned by Brilliance China Automotive. Accordingly, Brilliance China
Automotives effective interest in the joint venture with BMW has increased
from 40.5% to 44.55%. The above transactions were approved by Brilliance China
Automotives shareholders at the special general meeting of shareholders held
on May 26, 2003. On May 22, 2003, the business license for the joint venture
was issued by the Shenyang City Administration for

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Industry and Commerce. Commercial production of BMW-designed and branded
sedans is scheduled to commence in the fourth quarter of 2003 based on
knockdown kits supplied by BMW.

The registered capital and total investment cost of the joint venture is
Euro 150 million and Euro 450 million, respectively (equivalent to
approximately Rmb 1,367 million and Rmb 4,100 million, respectively). The
joint venture is to be 50%-owned by each of SJAI and BMW Holding BV and is for
a term of 15 years starting from May 22, 2003, the date of issuance of the
joint ventures business license, which may be extended by mutual consent of
the parties to the joint venture. The business scope of the joint venture is
to produce and sell BMW-designed and branded passenger cars, engines, parts and
components and to provide after-sales services (including repair and
maintenance and spare parts) relating to its products. Profits of the joint
venture will be shared as to 50% by each of SJAI and BMW Holding BV, in
proportion to their respective contributions to the registered capital of the
joint venture.

Brilliance China Automotive has agreed to provide a guarantee to BMW
Holding BV in relation to the performance by SJAI of its obligations under the
joint venture contract. A reciprocal guarantee will be provided by BMW AG to
SJAI in respect of the obligations of BMW Holding BV under the joint venture
contract. In addition, Brilliance China Automotive will be indemnified by
Shenyang Automobile Industry Asset Management Company Limited and Shenyang
JinBei Automobile Industry Company Limited with respect to 9.9% and 1%,
respectively, of its liabilities under this guarantee to BMW Holding BV.

Production Process

The automotive production process employed by Shenyang Automotive is
generally divided into five stages: stamping, welding, painting, assembly and
testing. In each stage, Shenyang Automotive utilizes equipment primarily
imported from Europe and Japan. Much of Shenyang Automotives equipment
represents what Brilliance China Automotive believes to be among the highest
levels of technology currently being utilized in China for the production of
minibuses and sedans. Each stage of the manufacturing process is also
carefully monitored both by quality control engineers and through specialized
testing equipment to ensure that the final product achieves the specified
quality standards.

Minibus Production Process and Equipment



| |  | Stamping.Shenyang Automotive produces its own
semi-finished steel sheets for stamping on a roll,
drop and stack production line. Stamping is carried
out at nine production stations that utilize 38
domestic and imported presses, the largest of which
is calibrated at 3200 tons and is used to stamp roofs
and side panels for the deluxe and mid-priced
minibuses. The 198 dies used for stamping and
cutting body components for the deluxe minibus and
mid-priced minibus were purchased from Toyota.
Substantially all of the stamped metal vehicle
components utilized in Shenyang Automotives
minibuses are produced in this stamping workshop.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Welding.The welding workshop consists of nine
production stations that are each 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.                                                                                                                                                                                                                                    
| 
| |  | Painting.The painting line is 1,056 meters long and
employs computer-controlled painting technology.
Steps taken to prepare the vehicle body for painting
include de-greasing, rinsing, phosphatization and
electrophoretic coating. After each of the three
coats of paint is applied by sprayer to the minibus
body, it is dried in a heated drying chamber. The
specialized pre-painting                                                                                                                                                                                                                                                                 

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|  |  | 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 580 meters long, has 86 separate
workstations and is capable of producing
minibuses at the rate of one every six minutes.
Shenyang Automotive also developed jointly with
the Shenyang Automation Research Center of the
China Science Institute an automated lifting
system that is used in the assembly of the power
train, rear chassis and crank case, as well as a
computerized hydraulic machine for carrying out
the transfer from a single rail conveyor onto a
hanging line conveyor  the first of its kind to
be developed in China.
| 
| |  | Testing.Shenyang Automotive employs an
advanced comprehensive vehicle testing system to
ensure that each vehicle conforms to
specifications, including wheel alignment,
exhaust emissions, steering, braking and engine
and transmission performance. All of these
final testing procedures are also supported by a
comprehensive quality control staff that
monitors each step of the production process.
See Item 4Information on Brilliance China
AutomotiveBusiness OverviewQuality Control
below.                                                                                                                                                                                         

Zhonghua Sedan Production Process and Equipment



| |  | Stamping. At present, 104 pieces of large and
medium parts of the Zhonghua sedan are
produced in the stamping (or pressing) workshop.
There are five large and medium pressing lines,
among which the line producing large (2,300 ton)
parts was imported from Schuler of Germany and
is equipped with robots to handle automated
production. There is also a 6300KN uncoiling
and blanking line from Schuler, which can supply
parts for up to seven production lines, as well
as a 100-ton die spotting press imported from
Kawasaki of Japan. The other pressing lines
were purchased from a domestic equipment
manufacturer.                                                      
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Welding. The welding workshop is required to
assemble and weld 279 separate panels, 12
machined parts, 8 roll-pressed parts and 36
standard parts. This line was designed,
manufactured and installed by Kuka of Germany.
The welding line consists of six zones and 223
stations, and is capable of spot-welding, carbon
dioxide welding, project welding, T-stud
welding, sealing, brazing and hemming. At
present, there are 37 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. All of 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. There is also a
water-based paint station that has been reserved
for future usage. All of the paints and other
materials utilized in paint workshop are high
quality products sourced both from within China
and abroad.                                                            

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| |  | Assembly and Testing. 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. Other major equipment on the final
assembly line include ECOS testers from DSA of Germany, marriage equipment
from Fori of the United States, an oil filling machine from Graco of the
United States, and a multi-nut runner machine from Atlas of Germany.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Raw Materials and Components

To ensure its supply of high-quality domestic raw materials, components
and spare parts, Shenyang Automotive has established a stable relationship with
263 suppliers in China. Shenyang Automotive sources the majority of its
important components and raw materials from at least two different suppliers to
ensure availability and increase competition among suppliers. In 2002,
approximately 68.3% of Shenyang Automotives components sourcing was handled
through Xing Yuan Dong and Ningbo Brilliance Ruixing, Brilliance China
Automotives wholly owned subsidiaries.

Shenyang Automotive has adopted a system that regularly evaluates its
existing suppliers. These suppliers range from well-known international
suppliers to domestic suppliers with special technology and know-how. In 2001,
after conducting a comprehensive survey of its suppliers against an array of
criteria, such as quality problem feedback ratio, production capacity, quality
assurance systems and after-sales services, Shenyang Automotive retained 29
suppliers out of 69 and made further improvements on 64 components.
Implementing this process has enabled Shenyang Automotive to build a stronger
supplier network as the foundation for future growth.

Shenyang Automotive has made significant progress in increasing the
domestic component content of the deluxe minibus, which is currently at 80%.
The principal components of the deluxe minibus that continue to be imported are
the engine and the rear axle, each of which is imported from Toyota. Shenyang
Automotive is currently in the process of developing deluxe minibuses that
would utilize engines from Mianyang Xinchen and Mitsubishi in order to expand
the product choices for our customers. These new models will likely result in
a change in our deluxe minibus domestic component ratio due to the use of the
domestically manufactured Mianyang Xinchen engines. The mid-priced minibus
sources 100% of its components domestically. The Zhonghua sedan sources
approximately 65% of its components domestically. Brilliance China Automotive
calculates domestic component content by looking through larger components,
such as engines, produced by domestic Chinese entities to determine the
percentage of such components own components that were manufactured outside
China.

Because certain components are imported from Toyota and other suppliers in
Japan and Europe, the availability of foreign exchange, exchange rates, import
restrictions and the level of import duties may affect the availability of
certain components and Shenyang Automotives costs of production. See Item
5Operating and Financial Review and ProspectsLiquidity and Capital
Resources.

Shenyang Automotive is required to pay import duties on imported
automobile components. Shenyang Automotive was subject to an average tariff
rate of 23.5% and 22.8% on imported components used in its minibuses and
Zhonghua sedans, respectively, in 2002. The Zhonghua sedan also incurred
import tariffs ranging from 7% to 31.4% on its steering wheels, airbags,
electronics and ABS in 2002. During 2002, imported components comprised
approximately 35.0% and 12.4%, respectively, of the total cost of each deluxe
minibus (including Grace minibuses) and sedan produced (not including
foreign-manufactured components subsumed within larger components, such as
engines, purchased from Chinese domestic manufacturers). The total aggregate
import tariffs paid by Shenyang Automotive for 2002 were approximately Rmb 94.6
million (US$11.4 million). However, as a result of Chinas admission to the

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WTO, import tariffs on motor vehicle components decreased to between 14%
and 31.4%, effective January 1, 2002 and to between 4.8% and 25% effective
January 1, 2003. A decrease in import tariffs will result in a decrease in the
percentage of the total cost of deluxe minibuses and sedans that imported
components comprise.

By increasing domestic component content, Shenyang Automotive has been
able to reduce its cost of sales and, as a result, reduce the sales price of
the deluxe minibus in an effort to increase unit sales. Brilliance China
Automotive intends to continue its efforts to increase domestic component
content for both minibuses and sedans, while at the same time emphasizing
quality. See Item 5Operating and Financial Review and Prospects.

Other Significant Subsidiaries and Associated Companies

Brilliance China Automotive believes that the acquisition of interests in
strategic components suppliers has and will continue to broaden its revenue
base, increase the reliability of the supply of certain core components of
Shenyang Automotives minibuses and sedans, enhance Shenyang Automotives
ability to monitor component quality and facilitate greater coordination among
the management and engineering personnel of Shenyang Automotive and its
principal suppliers.

Mianyang Xinchen

Mianyang Xinchen, directly and indirectly through Xing Yuan Dong (as
described below), accounted for 5.1% of Shenyang Automotives purchases of
parts and components in 2002. Mianyang Xinchens principal product is the 2.2
liter 491Q gasoline engine. In 2000, Mianyang Xinchen also began producing the
491QE electronic fuel injection engine on a mass production basis to satisfy
the markets demand for products that can meet new higher emission standards.
In 2001, Mianyang Xinchen developed three additional passenger vehicle gasoline
engines. As a result, Shenyang Automotive has access to engines suited to a
full range of light-duty passenger vehicles. Shenyang Automotive, which
installs Mianyang Xinchens 491Q engine in most of its mid-priced minibuses,
accounted for 65.6% of Mianyang Xinchens sales in 2002. Mianyang Xinchens
overall annual sales of gasoline engines in 2002 increased by 21.5% from 2001.
In 2002, the after-sales repair ratio for Mianyang Xinchens products decreased
to 6.7% from 9.4% in 2001. Mianyang Xinchens annual production capacity
increased to 100,000 to 120,000 gasoline engines (depending on number of
shifts) as a result of the completion of its second phase expansion project in
2002. Mianyang Xinchen has financed this expansion primarily with internally
generated funds.

Ningbo Yuming

Ningbo Yuming, directly and indirectly through Xing Yuan Dong and Ningbo
Brilliance Ruixing (as described below), accounted for 3.4% of Shenyang
Automotives purchases of parts and components in 2002. Ningbo Yumings
principal products are automobile window molding and stripping. In June 1999,
Ningbo Yuming also succeeded in developing a front independent suspension
system (including high performance front axle) for use in light passenger
vehicles. After successful road tests and examinations, bulk production of
these systems commenced in August 1999. Annual production and sales volume of
these systems was approximately 70,000 units in 2002. Ningbo Yuming intends to
further develop front axles for use in different types of light goods vehicles
to enlarge its market share in the safety components market. Ningbo Yuming
received ISO-9002 accreditation in December 1999. Shenyang Automotive, which
uses Ningbo Yumings products in all of its deluxe minibuses and mid-priced
minibuses, accounted for approximately 99.3% of Ningbo Yumings sales in 2002,
both directly and indirectly through Xing Yuan Dong and Ningbo Brilliance
Ruixing. However, beginning in the second half of 2002, all sales by Ningbo
Yuming to Shenyang Automotive were made directly. Shenyang

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Automotive also granted Ningbo Yuming the status of Class A Supplier in
1999, which it continues to hold.

Shenyang Xinguang

Shenyang Xinguang is principally engaged in the manufacture and sale of
gasoline engines for use in passenger vehicles and light duty trucks. In 2002,
engine purchases by Shenyang Automotive for use in mid-priced minibuses
accounted for 68.3% of Shenyang Xinguangs total sales. Shenyang Xinguang
currently produces 491Q engines and has a production capacity of 50,000 engines
per year. It manufactured and sold 31,368 and 31,322 491Q engines,
respectively, in 2002, and plans to sell approximately 40,000 units of 491Q
engines in 2003.

Shenyang Xinguang intends to further develop upgraded versions of the
491Q engine in 2003 and 2004. These new 16-valve engines will have greater
power and will be designed to satisfy European III emission standards. They
will be suitable for use in JinBei minibuses (models SY6480A) and Zhonghua
sedans. Shenyang Xinguang plans to produce this new engine by using part of
its existing 491Q facilities, together with a new production line. Planned
capacity for this new engine is 50,000 units per year, based on two daily
shifts.

Xing Yuan Dong, Ningbo Brilliance Ruixing and Mianyang Brilliance Ruian

Xing Yuan Dong assists Shenyang Automotive in obtaining and developing a
reliable supply of domestically produced parts and components. Xing Yuan Dong
also facilitates development of locally produced automotive parts and
components and acts to improve the quality of these components. When a
customized component is needed, Xing Yuan Dong provides potential suppliers
with designs and specifications for the customized parts and components
required by Shenyang Automotive. These potential suppliers liaise with Xing
Yuan Dong and discuss details of production. Xing Yuan Dong then selects
appropriate suppliers and offers technical assistance and cost evaluations.
Xing Yuan Dong continuously strives to reduce the number of Shenyang
Automotives suppliers, lower costs, increase the efficiency and commitment of
the remaining suppliers, streamline the component purchasing process and ensure
a steady supply of high quality components. In 2001, Xing Yuan Dong, in order
to maintain its preferential tax treatment from the Chinese government, also
began manufacturing automotive components for Shenyang Automotive. In 2002,
99.9% of Xing Yuan Dongs sales were to Shenyang Automotive.

In December 2001, Xing Yuan Dong entered into an agreement with two
affiliated companies to establish China Zhengtong Investment Holdings Co.,
Ltd., or Zhengtong. Under this agreement, Xing Yuan Dong contributed cash
amounting to Rmb 480.0 million to acquire a 47.1% equity interest in Zhengtong.
Zhengtongs principal activity is investment holding. In December 2002, Xing
Yuan Dong disposed of its entire equity interest in Zhengtong to an affiliated
company at cost, or Rmb 480.0 million.

Ningbo Brilliance Ruixing was established on June 9, 2000 as a wholly
owned subsidiary of Brilliance China Automotive to facilitate the trading and
development of automotive components between Ningbo Yuming and Shenyang
Automotive. To date, 100% of Ningbo Brilliance Ruixings sales have been made
to Shenyang Automotive and 100% of Ningbo Brilliance Ruixings purchases were
from Ningbo Yuming. Beginning in the second half of 2002, Ningbo Brilliance
Ruixing also began manufacturing automotive components for Shenyang Automotive.

Mianyang Brilliance Ruian was established on July 3, 2000 as a wholly
owned subsidiary of Brilliance China Automotive to facilitate the trading and
development of automotive components for Mianyang Xinchen. To date, 100% of
Mianyang Brilliance Ruians sales have been made to Mianyang

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Xinchen. In 2001, Mianyang Brilliance Ruian also began manufacturing
automotive components for Shenyang Automotive.

Shenyang Aerospace

Shenyang Aerospace was formed for the purpose of manufacturing 2.0-liter,
122 horsepower and 2.4-liter, 130 horsepower Mitsubishi gasoline engines.
Shenyang Aerospace commenced trial operation in March 1999. Shenyang
Automotive plans to source some of the engines for its sedans designed by
Italdesign from Shenyang Aerospace. Shenyang Automotive also began using these
engines in its deluxe minibuses on a commercial basis. In addition, Shenyang
Aerospaces engines are also suitable for sale domestically to other passenger
vehicle producers. The joint venture contract for Shenyang Aerospace calls for
30% of its planned annual production volume of 150,000 units to be exported
through the marketing channels of its foreign partners, though the agreement
has yet to be implemented. Mitsubishi Motors Corporation, Mitsubishi
Corporation, China Aerospace Automotive Industry Group Co., MCIC Holdings Sdn.
Bhd. and Brilliance China Automotive own equity interests of 25.0%, 9.3%,
30.0%, 14.7% and 12.8%, respectively, in Shenyang Aerospace.

Dongxing Automotive and Xingchen Automotive Seats

In December 2001, Brilliance China Automotive entered into an agreement
with Brilliance Holdings Limited for the acquisition of the entire issued share
capital of Key Choices Group Limited at a consideration of approximately Rmb
278.0 million. Key Choices is an investment holding company and its principal
assets are the 100% equity interest in the registered capital of Dongxing
Automotive and a 90% equity interest in the registered capital of Shenyang
Xingchen Automotive Seats Co., Ltd., or Xingchen Automotive Seats. Dongxing
Automotive is a foreign-invested enterprise established in China whose
principal products are automotive components for use in passenger vehicles.
Xingchen Automotive Seats is a Sino-foreign equity joint established in China
in December 2001 that formerly was principally engaged in the manufacturing of
automotive seats. However, Xinchen Automotive Seats ceased its operations in
the second half of 2002.

Sales and Marketing

The following table sets forth by vehicle model, for the years 2000
through 2002, the number of Shenyang Automotive minibuses and sedans sold and
the percentage of unit sales represented by each model:

|                   |  |            |        |      |  |            |       |   |  |            |        |   |  |  |       |  |  |  |        |  |  |  |       | 
|------------------ |  | ---------- | ------ | ---- |  | ---------- | ----- | - |  | ---------- | ------ | - |  |  | ----- |  |  |  | ------ |  |  |  | ----- | 
|                   |  | 2000       |        | 2001 |  | 2002      
|                   |  |            |        |      |  |           
|                   |  | Units Sold |        | %    |  | Units Sold |       | % |  | Units Sold |        | %
|                   |  |            |        |      |  |            |       |   |  |            |        |  
|Deluxe minibus     |  |            | 10,145 |      |  |            | 16.9  |   |  |            | 9,653  |   |  |  | 15.3  |  |  |  | 9,017  |  |  |  | 12.2  | 
|Mid-priced minibus |  |            | 49,873 |      |  |            | 83.1  |   |  |            | 53,356 |   |  |  | 84.7  |  |  |  | 56,121 |  |  |  | 75.9  | 
|Sedan(1)           |  |            |       |      |  |            |      |   |  |            |       |   |  |  |      |  |  |  | 8,816  |  |  |  | 11.9  | 
|                   |  |            |        |      |  |            |       |   |  |            |        |   |  |  |       |  |  |  |        |  |  |  |       | 
|Total              |  |            | 60,018 |      |  |            | 100.0 |   |  |            | 63,009 |   |  |  | 100.0 |  |  |  | 73,954 |  |  |  | 100.0 | 
|                   |  |            |        |      |  |            |       |   |  |            |        |   |  |  |       |  |  |  |        |  |  |  |       | 



|(1) |  | Commercial launch of the Zhonghua sedan occurred in August 2002.
|--- |  | ------------------------------------------------------------------

Shenyang Automotives marketing efforts are supervised by its General
Manager and are conducted primarily through a regionalized sales program under
which Shenyang Automotive has divided

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China into six major sales regions and three sales belts, each headed by
an experienced senior executive. These regions are further subdivided into 30
provincial sales regions for minibuses and 26 provincial sales regions for
sedans. Each of these sales regions corresponds to a separate province in
China. These units are responsible for meeting defined sales targets, with the
executives compensation linked to performance. In addition, Shenyang
Automotive implements a commission compensation package for its sales personnel
and rewards with bonuses its non-sales personnel who develop customer leads
that result in minibus sales. The retail prices and commission scales are both
nationally unified by Shenyang Automotive, thereby preventing cross-regional
sales and counter-productive price wars. Shenyang Automotives products are
marketed through a sales network of over 800 exclusive and non-exclusive
distributors nationwide, as well as through annual automobile industry trade
shows and at special sales shows sponsored by JinBei and Shenyang Automotive.
All of Shenyang Automotives 2002 unit sales of minibuses and sedans were made
to its distributors.

Shenyang Automotives sales growth in China has been supported by a
substantial network of over 800 minibus distributors and 76 sedan distributors,
as well as 296 after-sales service centers for minibuses and 88 for sedans.
Shenyang Automotive also continued to implement its 4S sales center system,
combining sales, service, spare parts and survey in one location. As of the
end of 2002, Shenyang Automotive had 74 and 30 authorized 4S dealership outlets
for minibuses and sedans, respectively.

Most of Shenyang Automotives minibus and sedan sales were made on a cash
basis in 2002. In addition, in order to incentivize customers and facilitate
sales, Shenyang Automotive also accepts three-month to six-month bank-endorsed
notes as payment for its minibuses. For initial sedan sales in 2002, deposits
were received from the customers prior to the delivery of the vehicles.

Shenyang Automotive has focused intensively on standardizing the sales and
marketing methods adopted by its 83 first tier dealers (including 74 authorized
dealership outlets), 262 second tier dealers and hundreds of retailers.
Shenyang Automotive has also revoked sales authorization from those dealers
that have not continued to follow these guidelines.

Shenyang Automotive has 21 regional distribution centers in order to
shorten delivery lead-times. Also, by utilizing transportation methods such as
trucking, rail and shipping, Shenyang Automotive ensures that most vehicles are
not driven until they reach the end users. In 2002, all finished products were
delivered to customers with zero mileage.

The following table sets forth the geographic breakdown of Shenyang
Automotives minibus and sedan unit sales throughout China for the years 2000
through 2002:

|             |  |       |        |      |  |       |      |   |  |           |        |        |  |  |      |  |  |       |        |   |  |       |      |   |  |  |       |  |  |  |      | 
|------------ |  | ----- | ------ | ---- |  | ----- | ---- | - |  | --------- | ------ | ------ |  |  | ---- |  |  | ----- | ------ | - |  | ----- | ---- | - |  |  | ----- |  |  |  | ---- | 
|             |  | 2000  |        | 2001 |  | 2002 
|             |  |       |        |      |  |      
|Province/    |  |       |        |      |  |       |      |   |  |           |        |        |  |  |      |  |  |       |        |   |  |       |      |   |  |  |       |  |  |  |      | 
|Municipality |  | Units |        | %    |  | Units |      | % |  | Minibuses |        | Sedans
|             |  |       |        |      |  |       |      |   |  |           |        |       
|             |  |       |        |      |  |       |      |   |  |           |        |        |  |  |      |  |  | Units |        | % |  | Units |      | %
|             |  |       |        |      |  |       |      |   |  |           |        |        |  |  |      |  |  |       |        |   |  |       |      |  
|Guangdong    |  |       | 19,570 |      |  |       | 32.6 |   |  |           | 18,595 |        |  |  | 29.5 |  |  |       | 14,067 |   |  |       | 21.6 |   |  |  | 1,302 |  |  |  | 14.8 | 
|Beijing      |  |       | 7,425  |      |  |       | 12.4 |   |  |           | 8,257  |        |  |  | 13.1 |  |  |       | 10,994 |   |  |       | 16.9 |   |  |  | 955   |  |  |  | 10.8 | 
|Shanghai     |  |       | 6,673  |      |  |       | 11.1 |   |  |           | 11,527 |        |  |  | 18.3 |  |  |       | 11,030 |   |  |       | 16.9 |   |  |  | 987   |  |  |  | 11.2 | 
|Liaoning     |  |       | 7,640  |      |  |       | 12.7 |   |  |           | 7,357  |        |  |  | 11.7 |  |  |       | 6,713  |   |  |       | 10.3 |   |  |  | 1,281 |  |  |  | 14.5 | 
|Jiangsu      |  |       | 2,728  |      |  |       | 4.9  |   |  |           | 535    |        |  |  | 0.8  |  |  |       | 2,113  |   |  |       | 3.2  |   |  |  | 872   |  |  |  | 9.9  | 

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|             |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  |       |        |   |  |       |       |   |  |  |       |  |  |  |       | 
|------------ |  | ----- | ------ | ---- |  | ----- | ----- | - |  | --------- | ------ | ------ |  |  | ----- |  |  | ----- | ------ | - |  | ----- | ----- | - |  |  | ----- |  |  |  | ----- | 
|             |  | 2000  |        | 2001 |  | 2002 
|             |  |       |        |      |  |      
|Province/    |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  |       |        |   |  |       |       |   |  |  |       |  |  |  |       | 
|Municipality |  | Units |        | %    |  | Units |       | % |  | Minibuses |        | Sedans
|             |  |       |        |      |  |       |       |   |  |           |        |       
|             |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  | Units |        | % |  | Units |       | %
|             |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  |       |        |   |  |       |       |  
|Shandong     |  |       | 2,341  |      |  |       | 3.9   |   |  |           | 2,055  |        |  |  | 3.3   |  |  |       | 2,063  |   |  |       | 3.2   |   |  |  | 395   |  |  |  | 4.5   | 
|Sichuan      |  |       | 887    |      |  |       | 1.5   |   |  |           | 1,013  |        |  |  | 1.6   |  |  |       | 851    |   |  |       | 1.3   |   |  |  | 437   |  |  |  | 5.0   | 
|Henan        |  |       | 740    |      |  |       | 1.2   |   |  |           | 828    |        |  |  | 1.3   |  |  |       | 733    |   |  |       | 1.1   |   |  |  | 108   |  |  |  | 1.2   | 
|Heilongjiang |  |       | 1,002  |      |  |       | 1.7   |   |  |           | 938    |        |  |  | 1.5   |  |  |       | 1,416  |   |  |       | 2.2   |   |  |  | 146   |  |  |  | 1.7   | 
|Tianjin      |  |       | 757    |      |  |       | 1.3   |   |  |           | 979    |        |  |  | 1.6   |  |  |       | 1,147  |   |  |       | 1.8   |   |  |  | 84    |  |  |  | 0.9   | 
|Others       |  |       | 10,255 |      |  |       | 17.1  |   |  |           | 10,925 |        |  |  | 17.3  |  |  |       | 14,011 |   |  |       | 21.5  |   |  |  | 2,249 |  |  |  | 25.5  | 
|             |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  |       |        |   |  |       |       |   |  |  |       |  |  |  |       | 
|Total        |  |       | 60,018 |      |  |       | 100.0 |   |  |           | 63,009 |        |  |  | 100.0 |  |  |       | 65,138 |   |  |       | 100.0 |   |  |  | 8,816 |  |  |  | 100.0 | 
|             |  |       |        |      |  |       |       |   |  |           |        |        |  |  |       |  |  |       |        |   |  |       |       |   |  |  |       |  |  |  |       | 

Generally, Shenyang Automotives sales are the highest in the second and
fourth quarters of the year. In 2001, however, as a result of Chinas entry
into the WTO, the timing of new product roll-outs and perceived and actual
price reductions, consumer purchasing patterns deviated from those of previous
years. For example, in 2001, Shenyang Automotive experienced its lowest
monthly sales volume for the year in December. In 2002, Shenyang Automotive
recorded its highest levels of sales in the second and third quarters.

In its Tenth Five-Year Plan, the Chinese government reiterated its
intention to give priority to the development of the western provinces of
China, which are economically underdeveloped, but rich in natural resources.
The central and local governments have allocated significant resources to
develop the infrastructure of the western provinces. This, Brilliance China
Automotive believes, will be conducive to the development of the local
automotive markets. In 2002, Shenyang Automotives strategy of actively
targeting sales channels in Chinas western regions, which have historically
shown low sales performance, resulted in an average growth rate in sales of 14%
in those areas, twice as much as other regions. Although Brilliance China
Automotives largest market today remains in the eastern coastal provinces,
Brilliance China Automotive believes that the market in the western provinces
of China will provide substantial upward growth potential in the future.
Brilliance China Automotive will continue to expand its dealership system in
that region to tap into this potential growth.

Approximately 9.5% and 23.4% of consolidated revenues in 2002 were
generated from Shanghai Yuantong Automobile Sales and Service Company Limited,
or Shanghai Yuantong, and Shanghai Shenhua Holdings Co., Ltd. (formerly known
as Shanghai Brilliance Group Co., Ltd. And Shanghai Shenhua Industrial Co.,
Ltd.) or Shanghai Shenhua, respectively. Shanghai Yuantong and Shanghai
Shenhua are affiliates of Brilliance China Automotive that serve as the
principal distributors of Shenyang Automotives products. Shanghai Yuantong
and Shanghai Shenhua currently operate under substantially the same commercial
terms and arrangements with Shenyang Automotive as its other third party
distribution agents. However, up until January 2003, Shanghai Yuantong and
Shanghai Shenhua received an additional 1% commission as compensation for
operating after-sales service centers throughout China.

Shenyang Automotive uses a computerized sales monitoring system to
identify customer demographics with better accuracy, determine which products
and options are most in demand and improve inventory control. As Shenyang
Automotive brings more product options to market, Brilliance China Automotive
believes that this computer system will provide Shenyang Automotive with the
ability to track customer preferences in various regions and adjust its
production and distribution efforts accordingly.

In 2002, Shenyang Automotive spent approximately Rmb 123.6 million
(US$14.9 million) on overall advertising, consisting primarily of television
and print advertising.

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Competition

The Chinese minibus manufacturing industry is highly fragmented and
competitive. In 2002, approximately 58 manufacturers produced an aggregate of
approximately 328,432 minibuses, with approximately 189,597 of such minibuses
produced by five manufacturers, each of which has the capacity to produce in
excess of 20,000 minibuses per year and produced more than 20,000 minibuses in
2002. Significant competitive factors in the industry include price, quality,
reliability and customer service. Brilliance China Automotive believes that
Shenyang Automotive competes favorably in all of these respects, and
particularly in terms of quality, although Shenyang Automotive has experienced
competition in recent years from other manufacturers producing lower priced,
mid-range minibuses.

The Chinese sedan manufacturing industry is also very competitive and
fragmented. The top five brands account for only 61.2% of the overall market
based on unit volume, with the leading brand accounting for only 26.8%. The
market shares of the three leading manufacturers have also been decreasing over
the past several years. New models continue to be introduced on an
increasingly rapid basis as the number of new entrants into the market has also
increased. Unit sales of domestically produced sedans totaled 1.1 million
units in 2002, making sedans the largest segment of the Chinese automotive
market, accounting for 35% of the overall market. It was also the fastest
growing segment, as unit sales of sedans increased by 56% in 2002 compared to
2001. Sedans are also widely expected to continue to be the fastest growing
segment of the Chinese automobile market over the next few years. However,
while vehicle ownership is expected to continue to increase steadily in China
as a result of increasing individual disposable income, there is also expected
to be increasing pricing pressure as tariff rates decline and competition
continues to grow from domestic, foreign and foreign-invested sedan
manufacturers.

Historically, Chinese motor vehicle producers have been exposed to little
competition from non-Chinese enterprises, partly as a result of import
restrictions on foreign-made components and motor vehicles. However, as a
result of Chinas admission to the WTO, which regulates trading and tariffs
among its signatory states, in November 2001, China committed to reducing its
import restrictions on motor vehicles and motor vehicle components. In
addition, China will be required to conform its import tariffs to the uniform
tariffs under the WTO. Effective January 1, 2002, China has reduced its import
tariffs on motor vehicles and automotive components from between 80% to 100%
and between 18% to 40%, respectively, to between 43.8% to 50.7% and between 14%
to 31.4%, respectively. This range was lowered further to between 4.8% and 25%
for automotive components effective January 1, 2003. In addition, tariffs on
vehicles with nine seats or less and engine sizes of three liters or below fell
from 43.9% in 2002 to 38.2% for 2003, while tariffs on vehicles with more than
nine seats and engines of more than three liters decreased from 50.7% in 2002
to 43.0% for 2003. All of these tariffs levels are scheduled to be further
reduced by 2006. Such reductions in tariffs and import restrictions could
potentially increase the competition Brilliance China Automotive will face from
foreign manufacturers.

Listed below are Shenyang Automotives current main competitors in the
Chinese minibus and sedan market. The data listed for each is based on
information published by the Chinese government regarding the Chinese
automotive industry:

Main Minibus Competitors



| |  | Southeast Motors.Taiwan China Motors and Fujian Provincial
Automobile Industry Company established a 50-50 joint venture
company, Southeast Motors in November 1995. Southeast Motors
has launched over thirty different models of light passenger
vehicles under the Delica and Freeca brand names.
Southeast Motors has an annual production capacity of 60,000
light passenger vehicles, and produced 47,516 units in 2002,
which represents a 53.1% increase from
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|  |  | 2001. Its sales volume in 2002 was 47,068 vehicles, which represents a
56.8% increase from 2001. The Delica series includes seven-, eight-
and eleven-seat ordinary, luxury and super luxury models. The Freeca
series includes eight-seat standard, luxury and super luxury models.                                                                                                                                                                                                                                                                                                                                               
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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. Current annual production
capacity is 60,000 vehicles and 75,000 engines. In 2002, Nanjing
Iveco manufactured and sold 14,505 vehicles, which was third to
Brilliance China Automotive and Southeast Motors in Chinas minibus
market.
| 
| |  | Jiangling Motors.Jiangling Motors Corp. of Jiangxi Province, after
two years of cooperation with Ford Motor Company (which owns a
minority interest in Jiangling Motors), began producing the China
Transit, a Ford brand minibus, in December 1997. At present, the
vehicle is available in 15-seat, 12-seat and 9-seat versions. In
2002, Jiangling Motors manufactured and sold a total of 10,667
vehicles and 9,554 vehicles, respectively. Production capacity for
2002 was approximately 10,000 units per shift.                                                                                                                 

Main Sedan Competitors

Brilliance China Automotive considers the following companies to be its
main competitors in the market for sedans priced between Rmb 140,000 and Rmb
200,000, which includes the Zhonghua sedan:



| |  | First Auto Works Group of China.First Auto Works is one of the
largest automotive companies in China. First Auto Works Hongqi
sedan (meaning red flag) was launched in 2001 and is considered one
of the Chinese governments showcase China-made sedans. Its latest
updated model is known as the Hongqi Mingzhi and has a 1.8-liter
engine with four doors. It is priced at approximately Rmb 159,000,
similar to the Zhonghua sedan. This represents a unit price
decrease compared to 2001, which has contributed to the 56% increase
in sales in 2002 to 26,600 units. Approximately 73% of the sales of
the Hongqi in 2002 were to government-related entities and
state-owned enterprises.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Shanghai Volkswagen Automotive. Shanghai Volkswagen Automotive was
one of the original state-designed automobile manufacturers in China.
It is currently 40% held by Volkswagen AG of Germany, 25% held by
Shanghai Automotive Industry Corp., 15% held by Shanghai Union
Investment Co. and 10% held by China Auto Industry Co. It still holds
a dominant share of the Chinese sedan market and competes with the
Zhonghua sedan through the Santana 2000 sedan. The Santana 2000
has a 1.8-liter engine and sells for approximately Rmb 167,000.                                                                                                                                                    
| 
| |  | Beijing Hyundai. Beijing Hyundai was only 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 and Sonata 2.7-liter, and will launch the Elantra
1.6-liter and 1.8-liter models and XG3.0-liter in the second half of
2003. Beijing Hyundai estimates total sales of 50,000 units in 2003.
The 2.0-liter Sonata sells for approximately Rmb 179,000 per unit.                                                                                                                                                                                                                    

Governmental Regulation

The automobile industry in China is controlled at the central government
level by the State Development and Reform Commission (formerly the State
Development and Planning Commission) and the Ministry of Commerce (which
subsumed some of the duties of the former Ministry of Foreign Trade

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and Economic Cooperation). These entities were created as a result of the
governmental restructuring that commenced in March 2003. The State Development
and Reform Commission generally oversees and regulates the automobile industry
in China and any new product or new automobile production facility must obtain
the prior approval of this body before entering the market. Similarly,
approval from the Ministry of Commerce must be obtained prior to any changes to
existing products or the expansion of existing facilities. Both of these
entities must also approve any Sino-foreign joint venture for the production of
automobiles. Under current regulations, a foreign joint venture party may not
hold more than a 50% interest in any automobile or automotive engine producer.
Brilliance China Automotive was granted an exemption from this requirement when
it originally acquired a 51% interest in Shenyang Automotive.

Quality Control

As a result of technical and managerial training from Toyota and technical
assistance from BMW, Shenyang Automotive has adopted a highly regimented
production quality management system for its minibuses and sedans. This
two-fold system concentrates both on the quality of the raw materials and other
production inputs and on the production process itself. In the production
process, the focal point of quality control is the production line worker, who
undergoes extensive training and testing to ensure that he or she performs the
assigned task to the highest quality standards and is qualified and able to
determine on his or her own whether or not the product meets the required
specifications. In addition, Shenyang Automotives specialized quality control
engineers are present at each step of the production process, with 33 separate
quality inspection points.

In addition, Shenyang Automotive has established a quality improvement
unit to supervise and monitor after-sales service centers in major regional
sales bases, such as Guangzhou, Shanghai and Beijing, which also serve as
channels for information feedback on product quality. Designated personnel are
assigned to follow-up on finding remedies for recurring quality issues in a
timely manner.

Shenyang Automotive was granted the internationally recognized ISO-9001-94
quality system certificate in October 1995, making it the first major
automobile manufacturer in China to be awarded such certificate. Shenyang
Automotive has successfully obtained recertification in each subsequent year by
demonstrating a continued commitment to upholding among the highest quality
standards in Chinas automobile industry. To date, 48.3% of Shenyang
Automotives 263 component suppliers achieved QS-9000 quality system
certification and 95.4% are accredited by ISO-9000.

After-Sales Service

Shenyang Automotives standard product warranty for minibuses is 18 months
or 30,000 kilometers (whichever occurs first). The standard product warranty
for sedans covers a period of 24 months or 40,000 kilometers (whichever occurs
first). During the warranty period, Shenyang Automotive pays service stations
for parts and labor covered by the warranty; thereafter, customers must pay for
all parts and labor. In 2002, total accrual of warranty costs for minibuses
and sedans sold during the year were approximately Rmb 27.6 million (US$3.3
million) and Rmb 3.5 million (US$0.4 million), respectively, or an average of
Rmb 424 (US$51) per minibus sold and Rmb 401 (US$48) per sedan sold.

There are 296 and 88 service centers for Shenyang Automotive minibuses and
sedans, respectively, throughout China, with centers clustered in areas that
match distribution patterns of the vehicles. Such centers have been granted
authority by Shenyang Automotive to service its minibuses and sedans, including
the provision of repair services and the sale of spare parts. This extensive
service network has enabled Shenyang Automotive to adopt its current policy of
resolving routine customer

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complaints in all provincial capitals and major cities within 24 hours and
major problems within three days.

To improve customer service, Shenyang Automotive continually reevaluates
its existing distributors based on certain criteria, including financial
soundness, customer service capabilities and customer complaint record.
Shenyang Automotive has also implemented a more advance 4S sales center
system, which features sales, service, spare parts and survey in one location
at the point of sale. As of the end of 2002, Shenyang Automotive had 74 and 30
4S dealership outlets for its minibuses and sedans, respectively.

Environmental Matters

The Chinese government has set vehicle safety, exhaust and performance
standards with which Shenyang Automotive must comply. Brilliance China
Automotive believes that Shenyang Automotives minibuses and sedans currently
meet the standards imposed by the government. Shenyang Automotives facilities
are subject to government pollution regulations enforced by the Shenyang
municipal government. If operations are found to be in violation, Shenyang
Automotive will be given a period of time to remedy the problem. If it should
fail to do so, the government can force a shut-down of Shenyang Automotives
operations until such time as it complies with the regulations. To date,
Shenyang Automotive has never been cited as violating a government pollution
regulation.

On January 1, 2000, Beijing, Tianjin and Yunnan Province put into effect
emission standards that are significantly stricter than the then prevailing
gasoline vehicle emission standards. Since then, these emission standards have
been adopted nationwide. Brilliance China Automotives electronic fuel
injection minibus, introduced in 1999, passed the emission standards tests at
the China National Automobile Testing Center in Tianjin in October 1999. This
engine not only produces cleaner emissions, but also achieved up to an 8%
increase in fuel economy and a 3% increase in horsepower. In early 2001,
Shenyang Automotive began to install multiple electronic fuel injection
engines, which are currently used in all of Shenyang Automotives mid-priced
minibuses. With the installation of this new engine in the mid-price minibus,
currently all of Shenyang Automotives minibuses meet European II emission
standards, which are among the highest international standards. All Zhonghua
sedans also meet these emission standards.

Insurance

Shenyang Automotive currently holds insurance policies that Brilliance
China Automotive believes are customary and standard for companies of
comparable size in comparable industries in China. Shenyang Automotive does
not carry product liability insurance, and Brilliance China Automotive believes
it is customary and standard in the Chinese automobile industry for
manufacturers not to carry product liability insurance.

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Organizational Structure

The following chart sets forth certain significant subsidiaries of
Brilliance China Automotive (excluding intermediate holding companies) as of
December 31, 2002 and also illustrates the shareholding structure of the BMW
joint venture that is currently being established.

(FLOWCHART)

|Brilliance China Automotive
100%
100%
100%
51%
|----------------------------------------------

|100%
50%
50%
51%
Mianyang
Brilliance
Ruian
Ningbo
Brilliance
Ruixing
Xing Yuan
Dong
Shenyang
Automotive
|-------------------------------------------------------------------------------------------------------

|90%
|---

|Dong Xing Automotive
Shenyang Xinguang
Mianyang Xinchen
Ningbo Yuming
Shenyang Xinjinbei Investment and Development Co., Ltd.
|-----------------------------------------------------------------------------------------------------------------------------

|99%
|---

|50%
|---

|SJAI
|----

|50%
|---

|BMW Joint Venture
|-----------------

The following table lists information concerning the subsidiaries and
associated companies of Brilliance China Automotive as of December 31, 2002:

|                                                            |  |                 |  |                  |     |                  |  | 
|----------------------------------------------------------- |  | --------------- |  | ---------------- | --- | ---------------- |  | 
|                                                            |  |                 |  |                  |     | Percentage of   
|                                                            |  |                 |  |                  |     | Interest held by
|                                                            |  | Jurisdiction of |  | Brilliance China
|Name                                                        |  | Incorporation   |  | Automotive (%)  
|                                                            |  |                 |  |                 
|Subsidiaries                                                |  |                 |  |                  |     |                  |  | 
|Shenyang Brilliance JinBei Automobile Co., Ltd.             |  | China           |  |                  | 51  | %               
|Ningbo Yuming Machinery Industrial Co., Ltd.                |  | China           |  |                  | 51  | %               
|Shenyang XingYuanDong Automobile Component Co., Ltd.        |  | China           |  |                  | 100 | %               
|Shenyang Jianhua Motors Engine Co., Ltd.                    |  | China           |  |                  | 100 | %               
|Ningbo Brilliance Ruixing Auto Components Co., Ltd.         |  | China           |  |                  | 100 | %               
|Mianyang Brilliance Ruian Automotive Components Co., Ltd.   |  | China           |  |                  | 100 | %               
|China Brilliance Automotive Components Group Limited        |  | Bermuda         |  |                  | 100 | %               
|Southern State Investment Limited                           |  | BVI             |  |                  | 100 | %               
|Beston Asia Investment Limited                              |  | BVI             |  |                  | 100 | %               
|Pure Shine Limited                                          |  | BVI             |  |                  | 100 | %               
|Key Choices Group Limited                                   |  | BVI             |  |                  | 100 | %               
|Shenyang Brilliance Dongxing Automotive Component Co.,
Ltd. |  | China           |  |                  | 100 | %               

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|                                                                    |  |                 |  |                  |      |                  |  | 
|------------------------------------------------------------------- |  | --------------- |  | ---------------- | ---- | ---------------- |  | 
|                                                                    |  |                 |  |                  |      | Percentage of   
|                                                                    |  |                 |  |                  |      | Interest held by
|                                                                    |  | Jurisdiction of |  | Brilliance China
|Name                                                                |  | Incorporation   |  | Automotive (%)  
|                                                                    |  |                 |  |                 
|Shenyang Xingchen Automotive Seats Co., Ltd.                        |  | China           |  |                  | 90   | %               
|                                                                    |  |                 |  |                  |      |                  |  | 
|Associated companies                                                |  |                 |  |                  |      |                  |  | 
|Mianyang Xinchen Engine Co., Ltd.                                   |  | China           |  |                  | 50   | %               
|Shenyang Xinguang Brilliance Automotive Engine Co., Ltd.            |  | China           |  |                  | 50   | %               
|Shenyang Aerospace Mitsubishi Motors Engine
Manufacturing Co., Ltd. |  | China           |  |                  | 12.8 | %               

Since November 2002, certain directors of Brilliance China Automotive have
ceased to be directors of Compass Pacific, a formerly associated company. As
such, the directors consider that Brilliance China Automotive is not in a
position to exert significant influence over Compass Pacific, and the interest
in Compass Pacific has been reclassified as an investment in securities.

Property, Production Facilities and Equipment

The Shenyang municipal government granted to Shenyang Automotive the right
to use three parcels of land situated in the northern, eastern and western
sectors of Shenyang with a total area of approximately 890,000 square meters,
approximately 50% of which is currently utilized by Shenyang Automotive. These
land use rights are effective for the term of Shenyang Automotive, which
expires in 2021. The western parcel consists of 70,000 square meters, 40,000
square meters of which is occupied by a production facility. While standard
minibuses had been manufactured at this facility since the latter half of the
1970s, production of standard minibuses was discontinued by Shenyang Automotive
at the end of 1999 and this facility has now been converted for use in the
production of mid-priced minibuses. This western facility is capable of
producing 12,000 vehicles per year, using two shifts of workers.

The northern parcel covers 40,000 square meters and is used by Shenyang
Automotive primarily as a technical training facility.

The eastern parcel covers 780,000 square meters, including Shenyang
Automotives primary production facility, and is also intended to be used for
the future expansion of Shenyang Automotives operations. This eastern
facility currently has a production capacity of 70,000 vehicles per year, using
two shifts of workers. This facility is specially designed for the manufacture
and assembly of deluxe minibuses and mid-priced minibuses and consists of four
production plants.

In 2002, Shenyang Automotive substantially completed the construction of
new manufacturing facilities for sedans (including the Zhonghua sedan), which
has a production capacity of 100,000 units. The new manufacturing facilities
are located adjacent to Shenyang Automotives previously existing minibus
production facilities and include new pressing, welding, painting and final
assembly lines. Dies and other key production equipment were purchased from
leading European equipment manufacturers. The total costs for completion of
this expansion project were approximately US$350.0 million, including new
equipment, construction costs and other expenditures, but excluding the design
costs for the sedans. See Item 5Operating and Financial Review and
ProspectsLiquidity and Capital Resources.

It is anticipated that land and buildings for the joint venture with BMW
will also be located on the eastern parcel. However, the arrangements for the
leasing of this land and construction of the necessary facilities have not yet
been finalized.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Overview

Brilliance China Automotive is a holding company whose principal operating
asset is its majority interest in Shenyang Automotive. Its operating segments
are divided primarily into the manufacture of (1) minibuses and automotive
components and (2) sedans. Historically, Brilliance China Automotive has
derived its revenues from Shenyang Automotives sales of minibuses in China.
As a result, Brilliance China Automotives results of operations have been
primarily driven by the sales price, sales volume and cost of production of
Shenyang Automotives minibuses. In May 1998, Brilliance China Automotive
acquired indirect interests in two components suppliers: a 51% equity interest
in Ningbo Yuming Machinery Industrial Co., Ltd., a wholly foreign-owned Chinese
enterprise primarily engaged in the production of automobile window molding,
stripping and other auto components; and a 50% equity interest in Mianyang
Xinchen Engine Co., Ltd., a Sino-foreign equity joint venture manufacturer of
gasoline engines for use in passenger vehicles and light duty trucks. In
October 1998, June 2000 and July 2000, Brilliance China Automotive established
Shenyang XingYuanDong Automotive Component Co., Ltd., Ningbo Brilliance Ruixing
Auto Components Co., Ltd. and Mianyang Brilliance Ruian Automotive Components
Co., Ltd., respectively, as its wholly owned subsidiaries to centralize and
consolidate the sourcing of auto parts and components for Shenyang Automotive.
In 2001, all three companies, in order to maintain their preferential tax
treatment from the Chinese government, began manufacturing automotive
components as well. In December 2000, Brilliance China Automotive acquired a
50% equity interest in Shenyang Xinguang Brilliance Automobile Engine Co.,
Ltd., a Sino-foreign equity joint venture manufacturer of gasoline engines for
use in passenger vehicles. In December 2001, Brilliance China Automotive
acquired a 100% equity interest in Shenyang Brilliance Dongxing Automotive
Component Co., Ltd., a foreign-invested manufacturer of automotive components
in China. As a result, Brilliance China Automotives future financial
performance may diverge from that of Shenyang Automotive.

Shenyang Automotives Zhonghua sedan was launched to the market in China
in August 2002. From August 2002 to December 2002, Shenyang Automotive sold
8,816 Zhonghua sedans in China.

On March 27, 2003, Brilliance China Automotive, through its indirect
subsidiary, SJAI, entered into a joint venture contract with BMW Holding BV to
produce and sell BMW-designed and branded sedans in China. On April 28, 2003,
Brilliance China Automotive increased its effective interest in SJAI from 81%
to 89.1% and thereby increased its effective interest in the joint venture with
BMW Holding BV from 40.5% to 44.55%. Brilliance China Automotive has agreed to
provide a guarantee to BMW Holding BV in relation to the performance by SJAI of
its obligations under the joint venture contract. A reciprocal guarantee will
be provided by BMW AG to SJAI in respect of the obligations of BMW Holding BV
under the joint venture contract. In addition, Brilliance China Automotive
will be indemnified by Shenyang Automobile Industry Asset Management Company
Limited and Shenyang JinBei Automobile Industry Company Limited with respect to
9.9% and 1%, respectively, of its liabilities under this guarantee to BMW
Holding BV. The business license for the joint venture was issued on May 22,
2003 and commercial production of BMW-designed and branded sedans is scheduled
to commence in the fourth quarter of 2003 based on knockdown kits supplied by
BMW.

Production Volumes and Sales

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Shenyang Automotive derives its revenues from the sale of sedans and
deluxe and mid-priced minibuses in China. For the years ended December 31,
2002, 2001 and 2000, revenues from the sale of such products were Rmb 7,319.5
million (US$884.0 million), Rmb 6,218.4 million and Rmb 6,306.4 million,
respectively. Shenyang Automotive commenced commercial sales of its Zhonghua
sedan in August 2002. The principal factor behind the overall increase in the
sales revenue was the launch of the Zhonghua sedan and the competitive
pricing and the offering of more minibus models and features by Shenyang
Automotive.

The mid-priced minibus has proven to be Shenyang Automotives most popular
and competitive product. Sales of sedans, deluxe minibuses and mid-priced
minibuses represented 15.3%, 18.1% and 62.8%, respectively, of Shenyang
Automotives total sales revenue in 2002. Brilliance China Automotive expects
that sedans and the mid-priced minibus will continue to grow as a percentage of
Shenyang Automotives unit sales and total sales revenue in 2003, while sales
of the deluxe minibus are still expected to represent a significant proportion
of total revenue.

Shenyang Automotives current annual minibus production capacity is 70,000
units with the implementation of an additional painting shift and
debottlenecking of the painting process. In 2002, Shenyang Automotive also
completed new production lines for sedans that have an aggregate annual
production capacity of 100,000 units. Brilliance China Automotive believes
that its long-term interests require that Shenyang Automotive continue to
expand its production capacity. Any increase in Shenyang Automotives future
revenue will depend on its ability to continue to expand in a similar manner.
Realization of its production and sales goals is also contingent upon other
factors, including the development of new vehicle models, the ability to
continue to achieve overall cost reductions, ongoing access to high-quality raw
materials and domestic component manufacturers and maintenance of a large
well-trained labor force, an effective distribution network and after-sales
service capabilities.

Costs

The major elements of Shenyang Automotives production costs in recent
years have been the purchase of automotive components, labor and depreciation
and amortization. Shenyang Automotive has significantly lowered its per unit
production costs by improving operating efficiency, increasing production
volume and increasing the domestic component content ratios of its deluxe and
mid-priced models. As a result, average per unit production costs (including
depreciation and amortization) for the deluxe model have been steadily
decreasing over the past several years. The domestic component ratio of the
Zhonghua sedan also increased from 60% in August 2002 to its current level of
65%. In 2002, per unit production costs for minibuses again decreased, but
since pricing pressure caused prices to decrease proportionately to the
decrease in per unit production costs, gross profit (including marginal gross
profit for the Zhonghua sedan) was sustained at approximately the same level
as 2001. Gross margin for minibuses remained stable compared to 2001, while
overall gross margin decreased from 30.7% in 2001 to 26.1% in 2002 owing to the
launch of the Zhonghua sedan, whose start-up gross margin was relatively
lower. In addition, due to increased diversification of Shenyang Automotives
product offerings since 2000, per unit production costs have not been directly
comparable on a year-to-year basis.

Imported components are generally more expensive than domestically
produced components and were subject to import duties that have ranged as high
as 120% since January 1992. However, as a result of Chinas entry into the WTO
in November 2001, import duties on automotive components have decreased to
between 14% and 31.4% effective January 1, 2002, and to between 4.8% and 25%
effective January 1, 2003. In 2002, Shenyang Automotive paid an average tariff
of 23.5% and 22.8% on its minibus and sedan components, respectively. Shenyang
Automotive intends to continue its efforts to increase the domestic component
content of its products, while at the same time emphasizing quality. However,
Brilliance China Automotive expects that future improvements in domestic
component content

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will be at a rate slower than in prior years due to an already high
domestic component content ratio, and the extent and rate of any corresponding
price reductions are expected to be lower than in prior years.

Results of Operations

|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |           | 
|----------------------------------------------- | --------------------------------------------- | ---- | ----------------------- | --------- |  | ---- | ---------- | --------- |  |  | ---------- | --------- | 
|                                                |                                               |      | Year ended December 31,
|                                                |                                               |      |                        
|(Expressed in thousands of Rmb)                 |                                               | 2002 |                         | 2001      |  | 2000
|                                                |                                               |      |                         |           |  |     
|Sales to third parties                          |                                               |      | 4,636,347               |           |  |      | 2,552,780  |           |  |  | 638,513    |          
|Sales to affiliated companies                   |                                               |      | 2,683,108               |           |  |      | 3,665,656  |           |  |  | 5,667,917  |          
|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |          
|                                                | Total sales                                   |      |                         | 7,319,455 |  |      |            | 6,218,436 |  |  |            | 6,306,430 | 
|Cost of sales                                   |                                               |      | (5,411,308              | )         |  |      | (4,307,988 | )         |  |  | (4,436,155 | )        
|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |          
|                                                | Gross profit                                  |      |                         | 1,908,147 |  |      |            | 1,910,448 |  |  |            | 1,870,275 | 
|Selling, general and administrative expenses    |                                               |      | (1,067,154              | )         |  |      | (673,391   | )         |  |  | (663,181   | )        
|Interest expense                                |                                               |      | (171,286                | )         |  |      | (178,028   | )         |  |  | (96,280    | )        
|Interest income                                 |                                               |      | 43,617                  |           |  |      | 110,735    |           |  |  | 116,029    |          
|Equity in earnings of associated companies, net |                                               |      | 138,145                 |           |  |      | 40,043     |           |  |  | 62,264     |          
|Subsidy income                                  |                                               |      |                        |           |  |      |           |           |  |  | 181,600    |          
|Other income (expenses), net                    |                                               |      | 1,009                   |           |  |      | 3,456      |           |  |  | (11,281    | )        
|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |          
|                                                | Income before taxation and minority interests |      |                         | 852,478   |  |      |            | 1,213,263 |  |  |            | 1,459,426 | 
|Income taxes                                    |                                               |      | (146,610                | )         |  |      | (116,250   | )         |  |  | (316,337   | )        
|Minority interests                              |                                               |      | (95,403                 | )         |  |      | (209,936   | )         |  |  | (273,059   | )        
|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |          
|                                                | Net income                                    |      |                         | 610,465   |  |      |            | 887,077   |  |  |            | 870,030   | 
|                                                |                                               |      |                         |           |  |      |            |           |  |  |            |          

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Consolidated net sales of Brilliance China Automotive and its operating
subsidiaries, Shenyang Automotive, Ningbo Yuming, Xing Yuan Dong, Ningbo
Brilliance Ruixing, Mianyang Brilliance Ruian and Dongxing Automotive for the
year ended December 31, 2002 were Rmb 7,319.5 million (US$884.0 million), a
17.7% increase from sales of Rmb 6,218.4 million for the year ended December
31, 2001. The increase in sales was primarily attributable to the launch of
the Zhonghua sedan commencing in August 2002, which generated Rmb 1,117.3
million (US$134.9 million) in sales in 2002. In addition, in 2002, more
minibuses were sold to independent distributors instead of to related party
distributors.

Shenyang Automotive sold a total of 65,138 minibuses in 2002, a 3.4%
increase over the 63,009 minibuses sold in 2001. Shenyang Automotive sold
56,121 of its mid-priced minibuses in 2002, a 5.2% increase over the 53,356
units sold in 2001. Unit sales of the deluxe minibus decreased by 6.6% from
9,653 units in 2001 to 9,017 units in 2002. While unit selling prices were
depressed in the first quarter of 2002 due to an increase in competition in the
minibus industry, prices stabilized beginning in the second quarter of 2002 as
market pressure to lower prices was lessened. Shenyang Automotive also
launched the Zhonghua sedan in August 2002 and sold 8,816 sedans during the
last five months of the year.

Cost of sales, including depreciation and amortization, increased by 25.6%
to Rmb 5,411.3 million (US$653.5 million) in 2002 from Rmb 4,308.0 million in
2001. This increase was primarily due

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to the commencement of sedan production in 2002, offset by the 3 to 5% decrease
in average cost of goods sold for minibuses. The gross margin for the
Zhonghua sedan was marginally positive in 2002 since this product was still
in its start-up period. However, Brilliance China Automotive expects the cost
of sales for sedans to decrease in future years as production becomes more
efficient and components sourcing improves.

Selling, general and administrative expenses rose 58.5% to Rmb 1,067.2
million (US$128.9 million) in 2002 from Rmb 673.4 million in 2001, and as a
percentage of sales increased from 10.8% in 2001 to 14.6% in 2002. The
increase was primarily due to the initial start-up costs of the sedan
production and the increase in research and development expenses and selling
and administrative expenses relating to the launch of the sedans.

Interest expense net of interest income increased from Rmb 67.3 million in
2001 to Rmb 127.7 million (US$15.4 million) in 2002 due to the decrease in
interest income from affiliated companies as a result of the increase in the
proportion of non-interest-bearing loans issued to these affiliated companies
and the decrease in interest rates on bank deposits.

Net equity in earnings of associated companies increased 245.0% from Rmb
40.0 million in 2001 to Rmb 138.1 million (US$16.7 million) in 2002. The
increase was due to the strong performance in 2002 of Brilliance China
Automotives associated companies engaging in engine manufacturing, Mianyang
Xinchen, Shenyang Xinguang and Shenyang Aerospace.

Income before taxation and minority interests decreased by 29.7% from Rmb
1,213.3 million in 2001 to Rmb 852.5 million (US$103.0 million) in 2002.
However, income tax expenses increased from Rmb 116.3 million in 2001 to Rmb
146.6 million (US$17.7 million) in 2002 due to the increase in the corporate
overhead of Brilliance China Automotive, which is at a tax loss position, and
other non-tax-deductible expenses of its subsidiaries in 2002. Net income
decreased 31.2% to Rmb 610.5 million (US$73.7 million) in 2002 from Rmb 887.1
million in 2001. Basic earnings per ADS were Rmb 16.65 (US$2.0) in 2002,
compared to basic earnings per ADS of Rmb 25.10 in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Consolidated net sales of Brilliance China Automotive and its operating
subsidiaries for the year ended December 31, 2001, decreased 1.4% to Rmb
6,218.4 million from Rmb 6,306.4 million for the year ended December 31, 2000.
The decrease in sales was primarily attributable to the price reduction of
Shenyang Automotives minibuses, which was necessitated by increasing price
competition and Chinas entry into the WTO, and the slight decrease in unit
sales of the deluxe minibus, which resulted from an increasing number of
customers switching to the mid-price minibus. In 2001, there was also a shift
in sales to third parties as opposed to affiliated companies, with sales to
third parties increasing 299.8% to Rmb 2,552.8 million in 2001 from Rmb 638.5
million in 2000, and sales to affiliated companies decreasing 35.3% to Rmb
3,665.7 million in 2001 from Rmb 5,667.9 million in 2000.

Shenyang Automotive sold a total of 63,009 minibuses in 2001, a 5.0%
increase over the 60,018 minibuses sold in 2000. Shenyang Automotive sold
53,356 of its mid-priced minibuses in 2001, a 7.0% increase over the 49,873
units sold in 2000. Unit sales of the deluxe minibus decreased 4.8% from
10,145 units in 2000 to 9,653 units in 2001.

Cost of sales, including depreciation and amortization, decreased 2.9% to
Rmb 4,308.0 million in 2001 from Rmb 4,436.2 million in 2000. This decrease
was primarily due to the continued efforts to reduce the cost of domestic
components used in Shenyang Automotives minibuses. As a result, gross profit
increased by 2.1% to Rmb 1,910.4 million in 2001 from Rmb 1,870.3 million in
2000.

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Selling, general and administrative expenses include the additional
pre-operation expenses and depreciation of the buildings relating to the
planned sedan production. Selling, general and administrative expenses rose
1.5% to Rmb 673.4 million in 2001 from Rmb 663.2 million in 2000, and as a
percentage of sales increased from 10.5% in 2000 to 10.8% in 2001. The
increase in selling, general and administrative expenses was due to the
additional pre-operating expenses and depreciation of the buildings related to
the sedan production, offset by the savings in advertising expenses.

Net equity in earnings of associated companies decreased 35.8% to Rmb 40.0
million in 2001 from Rmb 62.3 million in 2000. There was no subsidy income in
2001. In 2000, subsidy income totaled Rmb 181.6 million as a result of a grant
Xing Yuan Dong received from the Administrative Committee of Shenyang New and
High-Tech Industrial and Development Zone.

Income before taxation and minority interests decreased 16.9% to Rmb
1,213.3 million in 2001 from Rmb 1,459.4 million in 2000. Income taxes
decreased to Rmb 116.3 million in 2001 from Rmb 316.3 million in 2000 due to
the reduction in the enterprise income tax rate for Xing Yuan Dong to 7.5% in
2001 from 33% in 2000.

As a result of the performance of Shenyang Automotive, and taking into
account the earnings from Brilliance China Automotives operating subsidiaries
and associated companies, Brilliance China Automotives net income increased
2.0% to Rmb 887.1 million in 2001 from Rmb 870.0 million in 2000. Based on the
adjusted weighted average number of ADSs outstanding, basic earnings per ADS
were Rmb 25.10 in 2001, a 9.1% decrease over the basic earnings of Rmb 27.61
per ADS for 2000.

Contingent Liabilities and Outstanding Guarantees

Brilliance China Automotive and its subsidiaries had endorsed or
discounted bank notes which were not yet honored by the issuers as of December
31, 2002 and 2001 of approximately Rmb 1,414 million (US$170.8 million) and Rmb
1,145 million, respectively. These bank notes were used as a financing tool
primarily by Shenyang Automotive for the purchase of components from affiliated
companies and third parties and for other capital expenditures.

As of December 31, 2002, subsidiaries of Brilliance China Automotive had
provided the following guarantees:



| |  |  | corporate guarantees of approximately Rmb 740 million (US$89.4
million) for revolving bank loans and notes drawn by affiliated
companies of Shanghai Shenhua; and                                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a joint and several proportional guarantee with all the initial
joint venture partners of Shenyang Aerospace on a long-term bank loan
of approximately Rmb 374 million (US$45.2 million) drawn by Shenyang
Aerospace, which will expire in 2008.

As of December 31, 2002, subsidiaries of Brilliance China Automotive had
issued letters of credit amounting to Rmb 44 million (US$5.3 million).

As of December 31, 2002, Shenyang Automotive placed bank security deposits
amounting to approximately Rmb 48 million (US$5.8 million) and issued bank
guarantees of Rmb 50 million (US$6.0 million) at the request of the General
Administration of Customs, pending the completion of an assessment of the
eligibility on the exemption of the VAT and custom duties related to certain
imported fixed assets of this operating subsidiary. Subsequent to year end,
bank guarantees amounting to Rmb 30 million (US$3.6 million) were released.
Management is currently in discussion with the relevant authorities regarding
whether, should these fixed assets be not eligible for such exemption,
additional

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VAT and custom duties will be levied. The directors believe that any
additional liabilities in excess of the security deposits would not be
significant.

See also Item 8  Financial Information  Legal Proceedings  Broadsino
Litigation for details of the writ brought by Broadsino Finance Company
Limited. In addition, see notes 30(a) and 30(c) of Brilliance China
Automotives consolidated financial statements for a discussion of additional
guarantees granted by Brilliance China Automotive and its subsidiaries
subsequent to December 31, 2002.

Liquidity and Capital Resources

The following table set forth our outstanding contractual and commercial
commitments as of December 31, 2002:

|                                                    |  |                               |         |        |  |           |         |       |  |       |        |        |  |  |       |  |  |      |        | 
|--------------------------------------------------- |  | ----------------------------- | ------- | ------ |  | --------- | ------- | ----- |  | ----- | ------ | ------ |  |  | ----- |  |  | ---- | ------ | 
|                                                    |  | Payments Due by Period       
|                                                    |  | (Amounts in thousands of Rmb)
|                                                    |  |                              
|                                                    |  |                               |         |        |  |           |         |       |  |       |        |        |  |  |       |  |  | More
|                                                    |  |                               |         |        |  | Less than |         | 1-3   |  | 4-5   |        | than 5
|                                                    |  | Total                         |         | 1 year |  | years     |         | years |  | years
|                                                    |  |                               |         |        |  |           |         |       |  |      
|Operating Leases (Relating to
Offices and Property) |  |                               | 85,628  |        |  |           | 10,818  |       |  |       | 11,355 |        |  |  | 6,986 |  |  |      | 56,469 | 
|Unconditional Purchase Obligations                  |  |                               | 710,868 |        |  |           | 694,977 |       |  |       | 15,891 |        |  |  |      |  |  |      |       | 
|                                                    |  |                               |         |        |  |           |         |       |  |       |        |        |  |  |       |  |  |      |        | 
|Total Contractual Cash Obligations                  |  |                               | 796,496 |        |  |           | 705,795 |       |  |       | 27,246 |        |  |  | 6,986 |  |  |      | 56,469 | 

Cash Flows

As of December 31, 2002, Brilliance China Automotive had Rmb 1,289.2
million (US$155.7 million) in cash and cash equivalents, Rmb 773.4 million
(US$93.4 million) in short-term bank deposits and Rmb 1,350.0 million (US$163.0
million) in pledged short-term bank deposits, an increase of Rmb 69.0 million,
Rmb 773.4 million and a decrease of Rmb 575.8 million, respectively, from its
positions as of December 31, 2001. This increase in cash and cash equivalents
was mainly due to the net cash inflow from operating activities of Rmb 1,913.0
million (US$231.0 million) and the net cash inflow from financing activities of
Rmb 365.9 million (US$44.2 million), offset by the net cash outflow used in
investing activities of Rmb 2,209.9 million (US$266.9 million).

Cash flow from operating activities increased by 44.2% from Rmb 1,326.8
million for the year ended December 31, 2001 to Rmb 1,913.0 million (US$231.0
million) for the year ended December 31, 2002. This increase in cash flows
from operating activities was primarily due to an increase in positive cash
flow from inter-year changes in:



| |  |  | ordinary-course-of-business notes receivable from affiliated
companies relating to sales of minibuses;
| | - |  | ------------------------------------------------------------------------------------------------------
|
| |  |  | commercial notes payable;                                                                             
|
| |  |  | accounts payable;                                                                                     
|
| |  |  | amounts due from affiliated companies resulting from operating activities;                            
|
| |  |  | customer advances; and                                                                                
|
| |  |  | accrued expenses and other current liabilities.                                                       

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This increase in cash flows from operating activities was partially offset
by a decrease in net income for 2002 compared to 2001, and inter-year changes
in ordinary-course-of-business notes receivable, inventories and other
receivables.

The main drivers for the changes above were:



| |  |  | increased payments in the form of cash and cash equivalents from
Shenyang Automotives customers;                                                                                                                                                                                                                                                                               
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | commencement of sale of the Zhonghua sedans since August 2002.
For initial sedan sales in 2002, cash deposits were received from the
customers prior to the delivery of the vehicles;                                                                                                                                                                                         
|
| |  |  | inventory levels increased from Rmb 627.0 million at the end of
2001 to Rmb 788.4 million (US$95.2 million) at the end of 2002. This
mainly resulted from the commencement of production and sale of
Zhonghua sedans in 2002; and                                                                                                                                             
|
| |  |  | accounts receivable, notes receivable from affiliated companies and
amounts due from affiliated companies decreased to Rmb 1,472.1 million
(US$177.8 million) in 2002 from Rmb 1,543.1 million in 2001. This
decrease was mainly due to the decrease in sales of minibuses to
affiliated companies in 2002, leading to a decrease in notes receivable
from affiliated companies.

Cash used in investing activities increased by 58.0% from Rmb 1,398.8
million for the year ended December 31, 2001 to Rmb 2,209.9 million (US$266.9
million) for the year ended December 31, 2002. This increase in cash flows
used in investing activities was primarily attributable to increases in
short-term bank deposits, advances to affiliated companies and other
receivables arising from short-term investments, partially offset by the
decrease in pledged short-term bank deposits between these two periods and the
proceeds from the disposal of an investment in an associated company in 2002.

In December 2001, Xing Yuan Dong entered into an agreement with two
affiliated companies to establish China Zhengtong Investment Holdings Co.,
Ltd., or Zhengtong. Zhengtongs principal activity is investment holding and
Zhengtong plans to invest in automobile-related products. In December 2002,
Xing Yuan Dong disposed of its entire equity interest in Zhengtong to an
affiliated company at cost, or Rmb 480.0 million (US$58.0 million). Rmb 260.0
million (US$31.4 million) of this amount was received by December 31, 2002.

Cash flow from financing activities increased from Rmb 45.8 million used
in financing activities for the year ended December 31, 2001 to Rmb 365.9
million (US$44.2 million) provided by financing activities for the year ended
December 31, 2002. This significant reversal in cash flow from financing
activities is mainly due to the increase in net receipt from the issuance of
bank notes payable. This increase in usage of bank notes for financing
purposes was due to the lower prevailing interest rates in 2002.

On May 25, 2001 arrangements were made for a private placement to
professional and institutional investors of 318,000,000 ordinary shares of
common stock of US$0.01 each at a price of HK$2.2 per share. Brilliance China
Automotive received net proceeds of Rmb 716.2 million from this placement,
which was completed in June 2001. As of December 31, 2002, Brilliance China
Automotive had utilized all of the proceeds received from this placement in the
construction of a new pressing facility and the new sedan production facilities
and for general working capital purposes.

Debt Changes

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During 2002, Brilliance China Automotive continued to maintain credit
facilities with banks, all of which are located in China, to finance its
working capital needs. As of December 31, 2002, direct bank borrowings and
bank notes payable amounted to Rmb 4,087.4 million (US$493.6 million), an
increase of 10.3% from Rmb 3,705.5 million as of December 31, 2001. The bank
loans and bank notes payable were either secured by property, plant and
equipment or pledged short-term bank deposits, or unsecured, with maturity
periods of less than one year. Brilliance China Automotive believes that it
will continue to have access to sufficient banking facilities to meet its
working capital requirements. Furthermore, Brilliance China Automotive
believes it maintains adequate reserves to manage unforeseen delays in
obtaining new financing, and had cash and cash equivalents of Rmb 1,289.2
million (US$155.7 million) as of December 31, 2002.

Capital Expenditures

Capital expenditures and operating expenses are funded internally in the
form of loans by Brilliance China Automotive to Shenyang Automotive, as well as
loans and notes payable borrowed by Shenyang Automotive from third parties.
Shenyang Automotives capital expenditures were Rmb 798.8 million (US$96.5
million) in 2002, an increase of Rmb 16.2 million (US$2.0 million) from 2001.
Major items of expenditures included the molds, equipment and machinery for the
production of the new versions of minibuses and sedans. In 2003, Shenyang
Automotive is currently investing or planning to invest approximately Rmb 350.0
million (US$42.3 million) on new minibus painting facilities, Rmb 250.0 million
(US$30.2 million) for new molds for the Grace minibus, Rmb 250.0 million
(US$30.2 million) on upgrading the minibus welding and assembling workshops and
Rmb 150.0 million (US$18.1 million) on upgrading the Zhonghua production
facilities and related dies and tools. Of this total amount, Rmb 565.4 million
(US$68.3 million) has already been contractually committed. The new painting
facilities are expected to boost minibus capacity from the current level of
70,000 units to 120,000 units by the end of 2003.

Foreign Currency Requirements

In 2003, Shenyang Automotive will require approximately US$138 million and
Euro 147 million (US$154.4 million) to purchase imported equipment and
components from Toyota of Japan, BMW of Germany and other overseas suppliers
for its minibuses and sedans. This estimate is based upon Shenyang
Automotives 2003 production plans and the level of domestic content expected
for its deluxe and mid-priced minibuses and Zhonghua and BMW sedans in 2003.
Brilliance China Automobile does not receive any foreign exchange through the
sale of its products. However, under Chinese law, Brilliance China Automotive
is able to obtain necessary foreign exchange upon approval from the State
Administration of Foreign Exchange. Brilliance China Automotive believes that
it will be able to obtain adequate amounts of foreign currency to meet its
planned requirements for 2003.

Research and Development, Patents and Licenses, etc.

During 2000, 2001 and 2002, Brilliance China Automotive and Shenyang
Automotive spent Rmb 7.6 million, Rmb 26.9 million and Rmb 304.9 million
(US$36.8 million), respectively, on research and development activities. These
amounts were used for preparing for the commencement of the production of
sedans, the development of improved versions of existing minibus models, the
development of a new engine model in cooperation with a German engine
manufacturer and the development of a new safety system in cooperation with an
airbag manufacturer.

Trend information

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There are four general trends that Brilliance China Automotive expects
will have a significant impact on its results of operations in the near future:



| |  |  | 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 and is expected to continue to
increase. This trend is expected to have a favorable impact on
Brilliance China Automotives sales volume for both minibuses and
sedans, provided that unexpected events such as an economic downturn
in China or political instability do not have an adverse impact on
this trend;                                                                                                                                                                                                                               
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | As a result of Chinas entry into the WTO, domestic
production of automobiles (including minibuses and sedans) is
expected to increase, particularly through Sino-foreign joint
ventures that are being established for this purpose. This could
result in increased domestic competition for Brilliance China
Automotive and greater downward pressure on vehicle prices as more
domestically produced components are utilized by these competitors;                                                                                                                                                                                                                                                       
|
| |  |  | Retail prices in the automotive market are expected to
continue to fall as a result of the localization of production and
sourcing of components as described immediately above, as well as
due to the liberalization of sedan pricing restrictions by the
Chinese government. This expected decline in vehicle prices will
likely have an adverse effect on Brilliance China Automotives gross
income and profitability; and                                                                                                                                                                                                                                                                              
|
| |  |  | The Chinese government is expected to issue a new automotive
policy in 2003. This new policy is expected to be aimed principally
at stimulating automobile consumption in China and encouraging
domestic production within the boundaries of the WTO rules by, for
example, reducing registration tax and introducing more relaxed
rules regarding automobile financing. However, this new policy is
also expected to attempt to combat pollution and congestion caused
by high levels of automobile ownership in crowded urban areas.
Therefore, while the new policy may encourage car purchases overall,
it may discourage them in urban areas through more strict
environmental and traffic regulations.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties and potentially result in materially
different results under different assumptions and conditions.

Brilliance China Automotives consolidated financial statements have been
prepared in accordance with US GAAP. Brilliance China Automotives principal
accounting policies are set forth in note 3 to its consolidated financial
statements. US GAAP requires that Brilliance China Automotive adopt the
accounting policies and make estimates that its directors believe are most
appropriate in the circumstances for the purposes of giving a true and fair
view of its results of operations and financial condition. However, different
policies, estimates and assumptions in critical areas could lead to materially
different results.

Brilliance China Automotive considers certain accounting policies,
including those related to revenue recognition, warranties, inventories,
investment in associated companies, taxation, related party transactions and
impairment of long-lived assets, to be critical accounting policies due to the
estimation processes involved in each.

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Revenue Recognition

Brilliance China Automotive recognizes revenue in accordance with SEC
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 requires that four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred or services have been rendered; (3) the fee is fixed
and determinable; and (4) collectibility is reasonably assured. Determination
of criteria (3) and (4) is based on managements judgments regarding the fixed
nature of the fee charged for services rendered and products delivered, and the
collectibility of those fees. Should changes in conditions cause management to
determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.

Sales represent the invoiced value of goods, net of sales tax, discounts
and returns. Sales are recognized when goods are delivered to customers and
the significant risks and rewards of ownership of the goods have been
transferred to customers. Provisions for allowances and rebates are made at
the time of the sales of goods and are recognized as a reduction of sales.

Warranties

Minibuses are sold with an 18-month or 30,000-kilometer first-to-occur
limited warranty. Sedans are sold with a 24-month or 40,000-kilometer
first-to-occur limited warranty. During the warranty period, Shenyang
Automotive pays service stations for parts and labor covered by the warranty;
thereafter, customers must pay for all parts and labor. The costs of the
warranty obligation are accrued as selling expenses at the time the sales are
recognized, based on the estimated costs of fulfilling the total obligations,
including handling and transportation costs. The assumptions used to estimate
warranty expenses are reevaluated periodically in light of actual experience.
Actual warranty expense may be different from our estimates.

Inventories

Inventories are carried at the lower of cost and net realizable value.
Cost is calculated on a moving-average basis and comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition. Net realizable value is
the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the
sale. Provision for net realizable value from inventories is recognized when
the net realizable value of an inventory item falls below its cost. The
amount of any write-down of inventories are recognized as an expense in the
period the write-down or loss occurs. Estimates may differ from actual
results.

Impairment of long-lived assets

Brilliance China Automotives long-lived assets include fixed assets,
construction-in-progress and intangible assets. In addition to the original
cost of these assets, their recorded value is impacted by a number of policy
elections made by Brilliance China Automotive, including estimated useful
lives, residual values and impairment charges.

Statement of Financial Accounting Standard (SFAS) No. 142 provides that
intangible assets that have indefinite useful lives and goodwill will not be
amortized but rather will be tested at least annually for impairment. SFAS No.
144, Accounting for the Impairment or Disposal of Long-lived Assets requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable from its undiscounted

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future cash flow. Factors Brilliance China Automotive considers important, and
that could trigger an impairment review include the following:



| |  |  | significant underperformance relative to expected historical
or projected future operating results;          
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | significant changes in the manner of the use of the acquired
assets or the strategy for the overall business;
|
| |  |  | significant negative industry or economic trends;                                                            
|
| |  |  | significant drop in market share or gross profit margin in minibus and/or sedan sector(s);                   
|
| |  |  | significant decline in Brilliance China Automotives share
price for a sustained period; and                 
|
| |  |  | Brilliance China Automotives market capitalization relative
to net book value.                              

In making the determinations of impairment charge of long-lived assets,
Brilliance China Automotive utilizes certain assumptions, including, but not
limited to: (i) estimated fair market value of the assets, and (ii) estimated
future cash flows expected to be generated by these assets, which are based on
additional assumptions such as asset utilization, length of service the asset
will be used in Brilliance China Automotives operations and estimated
residual values. The estimations made by management may differ from actual
results.

Investment in associated companies

An associated company is a company in which Brilliance China Automotive
and its subsidiaries have significant influence, but not control or joint
control, and thereby have the ability to participate in the investees
financial and operating policy decisions. Investments in associated companies
are accounted for using the equity method. Goodwill arising on the acquisition
of interests in associated companies is included in the carrying amount of the
investment.

Deferred Taxation

Deferred income tax is provided using the liability method, in which
deferred income taxes are recognized for temporary differences between the tax
and financial statement bases of assets and liabilities. The tax consequences
of those differences expected to occur in subsequent years are recorded as
assets and liabilities on the balance sheet. Estimates may differ from actual
results.

Transactions with affiliated companies

An affiliated company is a company in which one or more of the directors
or substantial shareholders of the Brilliance China Automotive have direct or
indirect beneficial interests in the company or are in a position to exercise
significant influence over the company. Parties are also considered to be
affiliated if they are subject to common control or common significant
influence. The accounting treatment for transactions with these affiliated
companies, including sales and revenue recognition policies, is similar to
that for transactions with third parties.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143 Accounting for
Asset Retirement Obligations which addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS No. 143 requires an entity to
recognize an asset retirement obligation in the period in which it is
incurred, and the entity shall capitalize the asset retirement cost by
increasing the carrying amount of the related asset by the same amount as the
liability and subsequently allocate that retirement cost to expense over the
assets useful life. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Management does not expect that the adoption of

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SFAS No. 143 will have a material effect on Brilliance China Automotives
financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145 Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 requires gains and losses on extinguishments of
debt to be classified as income or loss from continuing operations, rather
than as extraordinary items, as previously required under SFAS No. 4
Reporting Gains and Losses from Extinguishment of Debt, an amendment of APB
Opinion No. 30. Extraordinary treatment will be required for certain
extinguishments, as provided in APB Opinion No. 30 Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
The statement also amended SFAS No. 13 Accounting for Leases for certain
sale-leaseback transactions and sublease accounting. SFAS No. 145 is effective
since January 1, 2003. Management does not expect that the adoption of SFAS
No. 145 will have a material effect on the Brilliance China Automotives
financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146 Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3 Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring), and must be applied beginning on January
1, 2003. SFAS No. 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred rather
than when the exit or disposal plan is approved. Management does not expect
that the adoption of SFAS No. 146 will have a material effect on the
Brilliance China Automotives financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148 Accounting for
Stock-Based Compensation, Transition and Disclosure. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. SFAS No. 148
also requires that disclosures of the pro-forma effect of using the fair value
method of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format. Additionally, SFAS No. 148 requires
disclosure of the pro-forma effect in interim financial statements. SFAS No.
148 is effective for financial statements for fiscal years ended after
December 15, 2002.

In December 2002, FASB Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others was issued. FIN 45 requires that at the
time a company issues a guarantee, the company must recognize an initial
liability for the fair value, or market value, of the obligations it assumes
under that guarantee. This interpretation is applicable on a prospective basis
to guarantees issued or modified after December 31, 2002. Management is
currently evaluating the impact of recognizing such liabilities, if any, on
the Brilliance China Automotives consolidated financial position and results
of operations. FIN 45 also contains disclosure provisions surrounding existing
guarantees, which are effective for financial statements with periods ended
after December 15, 2002.

In January 2003, the FASB issued FIN 46 Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51. FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of
the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. Management does not expect that the adoption of
FIN 46

44



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will have a material effect on the Brilliance China Automotives
financial position or results of operations.

In June 2003, the FASB issued SFAS No. 149 Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133 Accounting for Derivative Instruments
and Hedging Activities. It is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. All provisions of SFAS No. 149 should be applied
prospectively. Management does not expect that the adoption of SFAS No. 149
will have a material effect on the Brilliance China Automotives financial
position or results of operations.

In June 2003, the FASB issued SFAS No. 150 Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or as an asset in some circumstances). It is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS No. 150 and still
existing at the beginning of the interim period of adoption. Restatement is
not permitted. Management does not expect that the adoption of SFAS No. 150
will have a material effect on the Brilliance China Automotives financial
position or results of operations.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

On June 18, 2002, the board of directors of Brilliance China Automotive
convened at the request of Brilliance China Automotives then largest
shareholder, the Chinese Financial Education Development Foundation, to vote on
changes in appointees to various offices of Brilliance China Automotive. At
this meeting, the board voted to remove Mr. Yang Rong as Chairman of the Board,
President and Chief Executive Officer, and appointed Mr. Wu Xiao An as Chairman
of the Board, Mr. Su Qiang as President and Chief Executive Officer, Mr. Hong
Xing as Vice Chairman and Mr. He Tao as Chief Financial Officer. On November
22, 2002, a special general meeting of Brilliance China Automotive was
convened, whereby the shareholders voted to remove Mr. Yang Rong as a director,
with effect from the close of the meeting.

The directors and senior executive officers of Brilliance China Automotive
as of December 31, 2002 are identified below.

|                                    |  |     |  |                                                               |  |                                
|----------------------------------- |  | --- |  | ------------------------------------------------------------- |  | -------------------------------
|                                    |  |     |  |                                                               |  | Date First Elected or Appointed
|Name                                |  | Age |  | Position                                                      |  | Director or Officer            
|                                    |  |     |  |                                                               |  |                                
|Directors                           |  |     |  |                                                               |  |                                
|Wu Xiao An                          |  | 41  |  | Chairman of the Board and
Executive Vice President            |  | 1993                           
|Hong Xing                           |  | 40  |  | Vice Chairman, Executive Vice
President and Company Secretary |  | 1993                           
|Su Qiang                            |  | 37  |  | Director, President and Chief
Executive Officer               |  | 1992                           
|He Tao                              |  | 31  |  | Director, Vice President and
Chief Financial Officer          |  | 1995                           
|Yang Mao Zeng                       |  | 67  |  | Director, Vice President and
Chief Accounting Officer         |  | 1994                           
|Independent Non-Executive Directors |  |    
|Wei Sheng Hong                      |  | 59  |  | Independent Non-Executive Director                            |  | 1999                           
|Huang Anjiang                       |  | 49  |  | Independent Non-Executive Director                            |  | 1999                           
|Yi Min Li                           |  | 41  |  | Independent Non-Executive Director                            |  | 2001                           

Executive Directors

Mr. WU Xiao An, aged 41, has been Chairman of the Board of Brilliance
China Automotive since June 2002, and a Director and an Executive Vice
President since 1993. He is responsible for the overall management and
strategy of Brilliance China Automotive. He was the Vice Chairman and the
Chief Financial Officer of Brilliance China Automotive from 1993 to June 2002.
He is also a director of Shenyang Automotive. Mr. Wu holds a Bachelor of Arts
degree from the Beijing Foreign Languages Institute and a Master of Business
Administration degree from Fordham University in New York. He served from 1988
to 1993 as Deputy Manager of the Bank of China, New York Branch.

Mr. HONG Xing, aged 40, has been the Vice Chairman of Brilliance China
Automotive since June 2002, and a Director and an Executive Vice President
since 1993. Mr. Hong also serves currently as Company Secretary. Mr. Hong is
also a director of Shenyang Automotive. He received a Bachelor of Arts degree
from the Beijing Foreign Languages Institute in 1984. He also received a
Doctor of Jurisprudence degree from the Columbia University School of Law in
New York and is a member of the

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Bar of the State of New York. From 1985 to 1986, Mr. Hong worked as an
attache in the Ministry of Foreign Affairs of China. From 1986 to 1990, Mr.
Hong was an international civil servant at the United Nations headquarters in
New York.

Mr. SU Qiang, aged 37, has been the President and the Chief Executive
Officer of Brilliance China Automotive since June 2002, and a Director since
1992. He also formerly served as an Executive Vice President of Brilliance
China Automotive. He is responsible for the administrative and production
management of Brilliance China Automotive. Mr. Su is also the Chairman of
Shenyang Automotive. He holds a Bachelor of Arts degree from the Peoples
University of China, as well as a graduation certificate from the Graduate
School of the Peoples Bank of China, or PBOC. Mr. Su also served as General
Manager of Shenyang Automotive from 1995 to 1997.

Mr. HE Tao, aged 31, has been the Chief Financial Officer of the Company
since June 2002 and a Director and a Vice President of Brilliance China
Automotive since November 1998. He is responsible for the financial management
of Brilliance China Automotive. He is also a Director of Shenyang Automotive,
which he joined in 1995. Mr. He received a Bachelor of Arts degree from the
University of Finance and Economics in Shanghai. From 1993 to 1995, he worked
as the manager of the accounting department of Brilliance China Machinery Co.,
Ltd. in Luoyang, China.

Mr. YANG Mao Zeng, aged 67, has been a Director, Vice President and the
Chief Accounting Officer of Brilliance China Automotive since 1995. He is
responsible for the administrative and financial management of Brilliance China
Automotive. He graduated from the Soochow University and previously served as
the General Manager of the Bank of China, Grand Cayman Branch, in 1993.

Independent Non-Executive Directors

Mr. WEI Sheng Hong, aged 59, is currently an Executive Vice President of
the China Minsheng Banking Corporation. In 1983, Mr. Wei held the position of
the Vice President of the PBOC of the Xinjiang Autonomous Region and the
Director of the Foreign Exchange Control Bureau of Xinjiang District. He later
became the President of the PBOC of Xinjiang Autonomous Region. In 1989, he
became the Head of the Education Department and later the Head of the
Regulation and Rule Department of the head office of the PBOC.

Mr. HUANG Anjiang, aged 49, is a senior public notary and a lawyer in
China. He was a Director and Deputy General Manager of China Legal Services
(Hong Kong) Ltd. Mr. Huang was the Deputy Director of the Beijing Public
Notary Office and the Public Notary Division of Justice Bureau in Beijing. Mr.
Huang was also the general secretary of the Beijing Public Notary Association
as well as the head of the State Public Notary Office in China. He is
currently a council member of the China Public Notary Association, a member of
China Society of Law and a council member of China Society of Economic Law
(Beijing branch).

Mr. YI Min Li, aged 41, was appointed independent non-executive director
of Brilliance China Automotive in February 2001. Mr. Yi is a Professor in the
School of International Business, Southwest University of Finance and
Economics, Chengdu, Sichuan, China.

The board of directors of Brilliance China Automotive currently consists
of eight members, one-third of whom are required to retire from office at each
annual general meeting in accordance with the terms of its bye-laws. Those
directors that retire from office, however, may be immediately re-elected as
directors by the shareholders.

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There is no family relationship between any director or executive officer
of Brilliance China Automotive and any other director or executive officer.

Compensation

The aggregate amount of compensation, consisting of salary, allowances and
benefits in kind, paid by Brilliance China Automotive to its directors and
executive officers during 2002 was approximately Rmb 30.2 million (US$3.6
million).

Board Practices

Service Agreements

Brilliance China Automotive has entered into service agreements dated
August 21, 2000 with each of its executive directors. Except for the agreement
with Mr. Yang Mao Zeng, all of these agreements have terms of five years
beginning October 1, 2000. None of the service agreements provide for any
benefits or compensation upon termination of employment, other than statutory
compensation.

Audit Committee

Brilliance China Automotive has established an audit committee whose
primary duties consist of reviewing and supervising the financial reporting
process of Brilliance China Automotive. The audit committee currently consists
of three independent non-executive directors.

Meetings

Meetings of the audit committee shall be held at least once per year, and
Brilliance China Automotives external auditors may request a meeting if they
consider that one is necessary. A quorum for a meeting of the audit committee
shall be two members. Brilliance China Automotives secretary shall serve as
secretary of the audit committee and shall circulate to all members of the
board the minutes from any audit committee meeting. Brilliance China
Automotives Chief Financial Officer and a representative of its external
auditors shall normally attend audit committee meetings as well. Other board
members also have the right to attend audit committee meetings. The audit
committee shall meet with our external auditors at least once per year.

Authority and Duties

The audit committee is authorized by the board to investigate any activity
within its scope of duty. It is authorized to seek any information it requires
from any employee and all employees are directed to cooperate with any request
made by the audit committee. The audit committee is authorized by the board to
obtain outside legal or other independent professional advice and to secure the
attendance of outsiders with relevant experience and expertise if it considers
this necessary.

The duties of the audit committee are to:



| |  |  | consider the appointment of the external auditor,
the audit fee and any questions of resignation or dismissal by
or of the external auditor;                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | discuss with the external auditor, before the
audit commences, the nature and scope of the audit, and ensure
coordination where more than one audit firm is involved;
|
| |  |  | review the half-year and annual financial
statements before submission to the board, focusing
particularly on:                                                       



| | - |  | any changes in accounting policies or practices;
| | - |  | ------------------------------------------------

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| | - |  | major judgment areas;                                 
| | - |  | ------------------------------------------------------
|
| | - |  | significant adjustments resulting from the audit;     
|
| | - |  | the going concern assumption;                         
|
| | - |  | compliance with accounting standards; and             
|
| | - |  | compliance with stock exchange and legal requirements;



| |  |  | discuss problems and reservations arising from
the interim and final audits, and any matters the auditors may
wish to discuss (in the absence of management where
necessary);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | review the external auditors management letter
and managements response;                                                                                                   
|
| |  |  | review the statement on internal control systems
prior to endorsement by the board;                                                                                          
|
| |  |  | consider the major findings of internal
investigations and managements response; and                                                                                        
|
| |  |  | consider other topics as defined by the board.                                                                                                                               

The audit committee met in April 2002, September 2002 and April 2003.

Employees

As of December 31, 2002, Brilliance China Automotive had 9 employees
located in Hong Kong, compared with 12 as of December 31, 2001 and 5 as of
December 31, 2000. These employees are primarily responsible for overseeing
the financial management and operations of Shenyang Automotive and the other
subsidiaries of Brilliance China Automotive, and for developing strategic
business plans, preparing financial statements and coordinating investor
relations.

As of December 31, 2002, Shenyang Automotive had a total of 6,639
employees (including part-time employees), compared with 6,906 as of December
31, 2001 and 7,178 as of December 31, 2000. The following chart sets forth the
number of Shenyang Automotives employees by functional area as of December 31,
2002:

|                         |       |                     |       |       | 
|------------------------ | ----- | ------------------- | ----- | ----- | 
|Functional Area          |       | Number of Employees
|                         |       |                    
|Administrative personnel |       |                     | 1,009 |      
|Technical personnel      |       |                     | 900   |      
|Production workers       |       |                     | 4,730 |      
|                         |       |                     |       |      
|                         | Total |                     |       | 6,639 | 

Substantially all of Shenyang Automotives employees are based in
Shenyang, Liaoning Province, China.

In the past ten years, neither Shenyang Automotive nor its predecessor
company has experienced any strikes or other labor disputes that materially
affected Shenyang Automotives business activities. Brilliance China
Automotive considers its labor relations to be good. In addition, Shenyang
Automotive and the other subsidiaries and associated companies of Brilliance
China Automotive consider their labor relations to be good.

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Share Ownership

The following chart sets forth the share ownership of all directors and
executive officers that own any shares in Brilliance China Automotive as of
December 31, 2002.

|                |  |                             |  |                     |            |                             |  |                        |      |   |  | 
|--------------- |  | --------------------------- |  | ------------------- | ---------- | --------------------------- |  | ---------------------- | ---- | - |  | 
|                |  |                             |  |                     |            |                             |  | Percentages of Capital
|Title of Class  |  | Identity of Person or Group |  | No. of Shares Owned |            | Stock Beneficially Owned(1)
|                |  |                             |  |                     |            |                            
|Ordinary shares |  | He Tao                      |  |                     | 35,045,000 |                             |  |                        | 0.96 | %
|Ordinary shares |  | Su Qiang                    |  |                     | 34,500,000 |                             |  |                        | 0.94 | %
|Ordinary shares |  | Wu Xiao An                  |  |                     | 30,000,000 |                             |  |                        | 0.82 | %
|Ordinary shares |  | Hong Xing                   |  |                     | 26,640,000 |                             |  |                        | 0.73 | %
|Ordinary shares |  | Yang Mao Zeng               |  |                     | 2,800,000  |                             |  |                        | 0.08 | %



---

|(1) |  | Percentage ownership is based on 3,666,052,900 shares outstanding as of
December 31, 2002.
|--- |  | ------------------------------------------------------------------------------------------

Upon the listing of Brilliance China Automotives shares on The Stock
Exchange of Hong Kong Limited in September 1999, Brilliance China Automotive
adopted an employee share option scheme. Under the scheme, the board of
directors of Brilliance China Automotive has the right to grant options to
employees of Brilliance China Automotive and its subsidiaries to subscribe for
Brilliance China Automotives shares at a price which shall be higher of: (1) a
price being not less than 80% of the average closing price of the shares on the
relevant securities exchange for the five trading days immediately preceding
the relevant date in respect of such options; or (2) the nominal value of the
shares. If an employee decides to accept the offer of an option he or she must
pay HK$1.00 when the option is granted. The maximum number of shares in
respect of which options may be granted (including shares in respect of which
options, whether exercised or still outstanding, have already been granted)
under the scheme is that number which represents 10% of the issued ordinary
share capital of Brilliance China Automotive, excluding shares issued on
exercise of options previously granted. The period during which an option may
be exercised will be determined by the directors, except that no option may be
exercised more than ten years from the date of grant of the option.

On January 13, 2000, stock options were granted to certain directors and
employees entitling them to subscribe for a total of 304,360,000 shares of
common stock at HK$1.059 per share (after taking into account the effect of the
nineteen for one stock split on April 14, 2000). All the above share options
vested immediately upon the date of grant and are exercisable within a period
of 10 years. The compensation expense associated with these grants was
approximately Rmb 88.3 million and was charged to income during the year ended
December 31, 2000. All of these stock options were exercised by the respective
directors and employees in 2000.

On June 2, 2001, share options were granted to certain directors and
employees of Brilliance China Automotive, entitling them to subscribe for a
total of 31,800,000 shares of Brilliance China Automotives common stock at
HK$1.896 per share. The exercisable period of these options is from June 2,
2001 to June 1, 2011. The compensation expense associated with these grants
was approximately Rmb 15.5 million and was charged to income during the year
ended December 31, 2001. Up to December 31, 2002, none of the above share
options was exercised. No options was granted under Brilliance China
Automotives stock option plan in 2002.

New Share Option Scheme

On June 28, 2002, Brilliance China Automotive adopted a new share option
scheme (the New Scheme) in compliance with the amendments to the listing
rules and regulations of Stock Exchange of Hong Kong that became effective on
September 1, 2001. The New Scheme became effective on July 15,

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2002 and the original share option scheme of Brilliance China Automotive was
terminated. Any new share options granted after July 15, 2002 will be in
accordance with the terms of the New Scheme, but the outstanding share options
granted prior to that date will not be affected. Pursuant to the New Scheme,
Brilliance China Automotives Board of Directors may grant options to the
participants (including Brilliance China Automotives employees, non-executive
directors, suppliers and customers, etc.) to subscribe for Brilliance China
Automotives common stock at a price that shall not be lower than the higher
of:



| | (a) |  | the closing price of the common stock on the relevant stock
exchange as stated in such stock exchanges quotation sheet on the
date of 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 grant;
or
|
| | (c) |  | the nominal value of the common stock.                                                                                                                                                                

The New Scheme allows Brilliance China Automotive to grant options to a
wider category of participants. Under the New Scheme, the board would also
have the discretion to set a minimum period for which an option must be held
before the exercise of the subscription rights attached to that option, as well
as any performance targets it considers appropriate before an option can be
exercised. The purpose of the New Scheme is to provide incentives or rewards
to participants under the scheme for their contribution to Brilliance China
Automotive and its subsidiaries and to enable Brilliance China Automotive and
its subsidiaries to recruit and retain skilled employees.



|                                                                           | 
|-------------------------------------------------------------------------- | 
|As of June 1, 2003, no share option had been granted under the New
Scheme.

Call Option Agreements

On December 18, 2002, Huachen entered into a principal agreement with the
Chinese Financial Education Development Foundation, the then substantial
shareholder, providing for the purchase from the Chinese Financial Education
Development Foundation of a total of 1,446,121,500 shares of common stock,
representing approximately 39.45% of the issued share capital of Brilliance
China Automotive (the Chinese Financial Education Development Foundations
entire shareholding interest in Brilliance China Automotive). Completion of
the principal agreement took place upon signing. In connection with the
signing of the principal agreement and after completion of the sale and
purchase of the common stock pursuant thereto, each of Mr. Wu Xiao An, Mr. Su
Qiang, Mr. Hong Xing and Mr. He Tao entered into a call option agreement with
Huachen. Pursuant to the terms of the call option agreements, Huachen granted
to each of these Directors a call option in respect of a specified number of
shares of common stock, totaling 346,305,630 shares in aggregate and
representing approximately 9.446% of the issued share capital of Brilliance
China Automotive, at an exercise price of HK$0.95 per share. Each call option
is exercisable in whole or in part at any time during the period of 3 years
commencing August 6, 2003.

Under the terms of these call option agreements, the Management Directors
may elect to pay the exercise price in full or to pay 10% of the exercise price
at the time of exercise of the option. If these Directors elect the latter
payment option, the balance of the exercise price will be payable, without
interest, within a 3-year period after the date of completion of the purchase
of the relevant common stock, and the shares will be pledged as security in
favor of Huachen until full payment of the exercise price.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth certain information regarding ownership of
Brilliance China Automotives capital stock as of June 18, 2003 by all persons
who are known to Brilliance China Automotive to own beneficially more than 5%
of Brilliance China Automotives shares or ADSs. The voting rights of
Brilliance China Automotives major shareholders are identical to those of its
other shareholders.

|                |  |                                                       |  |              |               |               |  |  |       |  
|--------------- |  | ----------------------------------------------------- |  | ------------ | ------------- | ------------- |  |  | ----- | -
|                |  |                                                       |  | Number of    |               | Percent of   
|Title of Class  |  | Identity of Person or Group                           |  | Shares Owned |               | Capital Stock
|                |  |                                                       |  |              |               |              
|Ordinary Shares |  | Huachen Automotive Group Holdings Company Limited (1) |  |              | 1,446,121,500 |               |  |  | 39.45 | %
|Ordinary Shares |  | J.P. Morgan Chase & Co. (2)                           |  |              | 463,967,178   |               |  |  | 12.66 | %



---

|(1) |  | Huachen Automotive Group Holdings Company Limited is a wholly owned
subsidiary of the Liaoning Provincial Government.                                                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes ordinary shares beneficially owned through the following
controlled subsidiaries: J.P. Morgan Fleming Asset Management (Asia)
Inc.; J.P. Morgan Fleming Asset Management Holdings Inc.; JF Asset
Management Limited; JPMorgan Chase Bank; JF International Management
Inc.; J.P. Morgan International Finance Limited; J.P. Morgan
International Inc.; J.P. Morgan Whitefriars Inc.; and J.P. Morgan
Overseas Capital Corporation.

On December 19, 2001, Zhuhai Brilliance, a Chinese company under the
control of the Chinese Financial Education Development Foundation, sold
300,000,000 shares in Brilliance China Automotive to Shenzhen Zheng Guo
Investment Co., Ltd., at the market price of HK$1.60 per share, or an aggregate
price of HK$480.0 million. These shares were subsequently sold to the public
market in 2003.

On December 18, 2002, Huachen, a 100% subsidiary of the Liaoning
Provincial Government, entered into a principal agreement with the Chinese
Financial Education Development Foundation, the then substantial shareholder of
Brilliance China Automotive, for the purchase from the Chinese Financial
Education Development Foundation of a total of 1,446,121,500 shares of common
stock, representing approximately 39.45% of the issued share capital of
Brilliance China Automotive (the Chinese Financial Education Development
Foundations entire shareholding interest in Brilliance China Automotive).
Completion of the principal agreement took place upon signing. Accordingly, as
the ultimate beneficial owner through Huachen, the Liaoning Provincial
Government is entitled to cast 39.45% of the votes on all matters to be voted
on by the shareholders of Brilliance China Automotive (to the extent it is not
required to abstain from exercising its voting rights under the applicable laws
and regulations), and will therefore exert substantial influence over the
election of Brilliance China Automotives directors, the outcome of actions
requiring majority shareholder approval and the business in general of
Brilliance China Automotive. However, see Item 8  Financial Information 
Legal Proceedings for a description of the pending litigation relating to this
purchase.

Related Party Transactions

JinBei holds a 49% equity interest in Shenyang Automotive. Shenyang
Automotive began operating as a separate legal entity from JinBei in January
1992. Shenyang Automotive and JinBei are parties to a trademark license
agreement under which JinBei has granted to Shenyang Automotive the license to
use indefinitely the JinBei trademark on its products and marketing
materials.

In 2001, Brilliance China Automotive purchased Rmb 1,425.0 million of its
component parts from various affiliated companies. This figure represented a
decrease of 6.8% from 2000. In 2002, this

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amount increased to Rmb 2,215.6 million (US$267.6 million), representing
an increase of 55.5% over 2001. Brilliance China Automotive believes that its
purchases of such parts have been on terms as favorable to Brilliance China
Automotive as it could have obtained from unrelated third parties on an
arms-length basis.

In December 2001, Brilliance China Automotive entered into an agreement
with Brilliance Holdings Limited for the acquisition of the entire issued share
capital of Key Choices Group Limited at a consideration of approximately Rmb
278.0 million. Key Choices is an investment holding company and its principal
assets are the 100% equity interest in the registered capital of Dongxing
Automotive and a 90% equity interest in the registered capital of Xingchen
Automotive Seats. Dongxing Automotive is a foreign invested enterprise
established in China whose principal products are automotive components for the
use in passenger vehicles. Xingchen Automotive Seats is a Sino-foreign equity
joint established in China in December 2001 that formerly was principally
engaged in the manufacturing of automotive seats. However, Xinchen Automotive
Seats ceased its operations in the second half of 2002.

In December 2001, Xing Yuan Dong entered into an agreement with two
affiliated companies to establish China Zhengtong Investment Holdings Co.,
Ltd., or Zhengtong. Pursuant to the agreement, Xing Yuan Dong contributed cash
amounting to Rmb 480.0 million to acquire a 47.06% equity interest in
Zhengtong. Zhengtongs principal activity is investment holding and Zhengtong
plans to invest in automobile-related products. In December 2002, Xing Yuan
Dong disposed of its entire equity interest in Zhengtong to an affiliated
company at cost, or Rmb 480.0 million.

Significant transactions between Brilliance China Automotive or its
subsidiaries and affiliated companies in the ordinary course of business during
2000, 2001 and 2002 are set forth below:

|                                                                                                                                                           |  |      |           |      |  |            |           |  |  |  |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---------- | --------- |  |  |  | --------- | 
|                                                                                                                                                           |  | 2002 |           | 2001 |  | 2000      
|                                                                                                                                                           |  |      |           |      |  |           
|                                                                                                                                                           |  |      |           |      |  | (Rmb '000) |           |  |  | 
|Sales to JinBei and its affiliated companies                                                                                                               |  |      | 56,438    |      |  |            | 14,923    |  |  |  | 3,527     | 
|Purchases from JinBei and its affiliated companies                                                                                                         |  |      | 712,061   |      |  |            | 317,046   |  |  |  | 25,319    | 
|Sales to Shanghai Shenhua and its affiliated companies                                                                                                     |  |      | 1,664,156 |      |  |            | 907,232   |  |  |  | 4,821,322 | 
|Purchases from Shanghai Shenhua and its affiliated companies                                                                                               |  |      | 375,402   |      |  |            | 164,323   |  |  |  | 153,933   | 
|Sales to Shanghai Yuantong                                                                                                                                 |  |      | 710,100   |      |  |            | 2,622,002 |  |  |  | 83,509    | 
|Advertising expenses reimbursed by Shanghai Yuantong                                                                                                       |  |      |          |      |  |            | 64,070    |  |  |  |          | 
|Sales to other affiliated companies of Brilliance Holdings Limited                                                                                         |  |      | 150,390   |      |  |            | 59,816    |  |  |  | 644,167   | 
|Purchases from other affiliated companies of Brilliance Holdings
Limited                                                                                   |  |      | 99,514    |      |  |            | 274,379   |  |  |  | 406,020   | 
|Purchases from associated companies                                                                                                                        |  |      | 1,014,057 |      |  |            | 635,373   |  |  |  | 715,610   | 
|Purchases from affiliated companies of the joint venture partner
of Ningbo Yuming                                                                          |  |      | 14,580    |      |  |            | 33,524    |  |  |  | 33,237    | 
|Sales to associated companies                                                                                                                              |  |      | 102,024   |      |  |            | 61,683    |  |  |  | 98,546    | 
|Research and development expenses to third parties under
contracts assumed from an affiliated company of Brilliance
Holdings Limited at original costs     |  |      | 116,000   |      |  |            |          |  |  |  |          | 
|Long-term prepayment for fixed assets to a third party under a
contract assumed from an affiliated company of Brilliance
Holdings Limited at original cost |  |      | 18,305    |      |  |            |          |  |  |  |          | 
|Sales to a joint venture partner of Shenyang Aerospace                                                                                                     |  |      |          |      |  |            |          |  |  |  | 1,710     | 
|Sales to affiliated companies of the joint venture partner of
Mianyang Xinchen                                                                             |  |      |          |      |  |            |          |  |  |  | 15,136    | 
|Purchase of an intangible asset from an affiliated company of
Brilliance Holdings Limited                                                                  |  |      |          |      |  |            |          |  |  |  | 681,100   | 
|Acquisition of Key Choices from Brilliance Holdings Limited                                                                                                |  |      |          |      |  |            | 278,213   |  |  |  |          | 
|Acquisition of Xinguang Brilliance from Brilliance Holdings
Limited                                                                                        |  |      |          |      |  |            |          |  |  |  | 388,000   | 
|Sales of fixed assets to an affiliated company of Brilliance
Holdings Limited                                                                              |  |      |          |      |  |            | 5,558     |  |  |  |          | 
|Sales of fixed assets to an associated company                                                                                                             |  |      |          |      |  |            | 18,425    |  |  |  |          | 

53



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|                                                                                                  |  |      |       |      |  |            |        |  |  |  |        | 
|------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---------- | ------ |  |  |  | ------ | 
|                                                                                                  |  | 2002 |       | 2001 |  | 2000      
|                                                                                                  |  |      |       |      |  |           
|                                                                                                  |  |      |       |      |  | (Rmb '000) |        |  |  | 
|Purchase of fixed and other assets from other affiliated
companies of Brilliance Holdings Limited |  |      |      |      |  |            | 41,984 |  |  |  | 24,498 | 
|Purchases of molds from an affiliated company of Shanghai Shenhua                                 |  |      |      |      |  |            | 35,750 |  |  |  |       | 
|Management expenses reimbursed to and consulting fees paid to
Brilliance Holdings Limited         |  |      | 5,182 |      |  |            | 12,405 |  |  |  | 5,796  | 
|Interest income from Brilliance Holdings Limited and affiliated
companies                         |  |      |      |      |  |            | 23,709 |  |  |  | 56,964 | 
|Interest income from associated companies                                                         |  |      |      |      |  |            |       |  |  |  | 2,386  | 
|Interest income from Shanghai Yuantong                                                            |  |      |      |      |  |            | 15,930 |  |  |  |       | 

The above transactions were carried out after negotiations between
Brilliance China Automotive and its subsidiaries and the affiliated companies
in the ordinary course of business and on the basis of estimated market value
as determined by the directors of Brilliance China Automotive.

During the year ended December 31, 2002, JinBei allowed Shenyang
Automotive to use certain components-related technology in the manufacturing of
the Zhonghua sedan.

In 2000, Xing Yuan Dong made loans to Shenyang Xinguang of Rmb 267.3
million, which accrued interest at an annual rate of 5.5%. On August 3, 2000,
all of these loans were repaid by Shenyang Xinguang. In 2001 and 2002, no
similar loans were made by Xing Yuan Dong.

The operating subsidiaries of Brilliance China Automotive have provided
the following outstanding guarantees to affiliated companies:



| |  |  | corporate guarantees of approximately Rmb 740 million
(US$89.4 million) for revolving bank loans and notes drawn by
affiliated companies of Shanghai Shenhua; and                                                                           
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a joint and several proportional guarantee with all the
initial joint venture partners of Shenyang Aerospace on a long-term
bank loan of approximately Rmb 374.0 million (US$45.2 million) drawn
by Shenyang Aerospace that expires in 2008.

Set forth below is information on amounts due from affiliated companies to
Brilliance China Automotive and its subsidiaries arising from trading
activities as of December 31, 2000, 2001 and 2002:

|                                                                                          |  |      |         |      |  |            |         |  |  |  |         | 
|----------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---------- | ------- |  |  |  | ------- | 
|                                                                                          |  | 2002 |         | 2001 |  | 2000      
|                                                                                          |  |      |         |      |  |           
|                                                                                          |  |      |         |      |  | (Rmb '000) |         |  |  | 
|Notes receivable from affiliated companies                                                |  |      |         |      |  |            |         |  |  |  |         | 
|Notes receivable from affiliated companies of JinBei                                      |  |      | 6,613   |      |  |            |        |  |  |  |        | 
|Notes receivable from Shanghai Shenhua                                                    |  |      | 156,240 |      |  |            | 536,859 |  |  |  | 345,196 | 
|Notes receivable from Shanghai Yuantong                                                   |  |      | 3,325   |      |  |            | 144,935 |  |  |  | 75,806  | 
|Notes receivable from other affiliated companies of Brilliance
Holdings Limited           |  |      | 20,807  |      |  |            | 3,075   |  |  |  | 16,427  | 
|Notes receivable from an associated company                                               |  |      | 26,000  |      |  |            | 2,000   |  |  |  |        | 
|Notes receivable from an affiliated company of the joint
venture partner of Ningbo Yuming |  |      |        |      |  |            |        |  |  |  | 12,250  | 
|                                                                                          |  |      |         |      |  |            |         |  |  |  |         | 
|Total(1)                                                                                  |  |      | 212,985 |      |  |            | 686,869 |  |  |  | 449,679 | 
|Amounts due from affiliated companies                                                     |  |      |         |      |  |            |         |  |  |  |         | 
|Due from affiliated companies of Brilliance Holdings Limited(3)                           |  |      | 41,675  |      |  |            | 61,125  |  |  |  | 88,123  | 
|Due from Shanghai Shenhua and its affiliated companies                                    |  |      | 63,608  |      |  |            | 31,874  |  |  |  | 15,828  | 
|Due from Shanghai Yuantong(2)                                                             |  |      | 655,835 |      |  |            | 439,411 |  |  |  | 7,761   | 
|Due from affiliated companies of the joint venture partner of
Ningbo Yuming               |  |      | 280     |      |  |            | 18,281  |  |  |  | 280     | 
|Due from affiliated companies of JinBei                                                   |  |      | 11,015  |      |  |            | 35,071  |  |  |  |        | 

54



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|                                                                                |  |      |         |      |  |            |         |  |  |  |         |  
|------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---------- | ------- |  |  |  | ------- | -
|                                                                                |  | 2002 |         | 2001 |  | 2000      
|                                                                                |  |      |         |      |  |           
|                                                                                |  |      |         |      |  | (Rmb '000) |         |  |  | 
|Due from an associated company                                                  |  |      | 11,376  |      |  |            | 11,175  |  |  |  |        |  
|Due from affiliated companies of the joint venture partner of
Shenyang Xinguang |  |      |        |      |  |            |        |  |  |  | 2,001   |  
|Provision for doubtful receivables                                              |  |      | (9,723  | )    |  |            |        |  |  |  | (12,230 | )
|                                                                                |  |      |         |      |  |            |         |  |  |  |         |  
|Total                                                                           |  |      | 774,066 |      |  |            | 596,937 |  |  |  | 101,763 |  



---

|(1) |  | The notes receivable from affiliated companies are guaranteed by banks in
China and have maturities between one to six months. The fair value of
the notes receivable approximates their carrying value.                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The amount due from Shanghai Yuantong during the year ended December 31,
2001 bears interest at an annual rate of 5.4%. The amount as of December
31, 2002 was non-interest bearing.                                                       
|   
|(3) |  | As of December 31, 2001, included in the amounts due from affiliated
companies of Brilliance Holdings Limited is approximately Rmb 56.0 million
guaranteed by a shareholder of an affiliated company. The amount was
fully settled in 2002.

As of December 31, 2002 and December 31, 2001, Brilliance China Automotive
had advanced approximately Rmb 2,917.3 million (US$352.3 million) and Rmb
1,869.9 million, respectively, to its subsidiaries, of which approximately Rmb
699.3 million (US$84.5 million) and Rmb 1,200.1 million, respectively, bears
interest at 5.0% to 5.1% and 5.5% to 9.0%, respectively, per annum.

Set forth below is information on advances from Brilliance China
Automotive and its subsidiaries to affiliated companies as of December 31,
2000, 2001 and 2002:

|                                                                      |                         |  |           |         |      |  |            |         |  |  |         |         | 
|--------------------------------------------------------------------- | ----------------------- |  | --------- | ------- | ---- |  | ---------- | ------- |  |  | ------- | ------- | 
|                                                                      |                         |  | 2002      |         | 2001 |  | 2000      
|                                                                      |                         |  |           |         |      |  |           
|                                                                      |                         |  |           |         |      |  | (Rmb '000) |         |  |  |        
|Advances to affiliated companies                                      |                         |  |           |         |      |  |            |         |  |  |         |        
|Advances to JinBei and its affiliated companies                       |                         |  | 6,613     |         |      |  | 2,163      |         |  |  | 1,100   |        
|Advances to Brilliance Holdings Limited and its affiliated
companies: |                         |  |           |         |      |  |            |         |  |  |         |        
|(i) Current                                                           |                         |  |           |         |      |  |            |         |  |  |         |        
|                                                                      | Interest bearing(1)     |  |           |        |      |  |            | 40,000  |  |  |         | 200,068 | 
|                                                                      | Non-interest bearing(3) |  |           | 907,191 |      |  |            | 256,223 |  |  |         | 407,639 | 
|(ii) Long-term(2)                                                     |                         |  |           |         |      |  |            |         |  |  |         |        
|                                                                      | Interest bearing(1)     |  |           |        |      |  |            | 39,111  |  |  |         |        | 
|                                                                      | Non-interest bearing    |  |           |        |      |  |            | 5,693   |  |  |         |        | 
|Advances to Zhuhai Brilliance (non-interest bearing) (4)              |                         |  | 360,000   |         |      |  |           |         |  |  |        |        
|Advances to other affiliated companies (non-interest bearing) (5)     |                         |  | 30,892    |         |      |  |           |         |  |  |        |        
|                                                                      |                         |  |           |         |      |  |            |         |  |  |         |        
|Total                                                                 |                         |  | 1,304,696 |         |      |  | 343,190    |         |  |  | 608,807 |        



---

|(1) |  | Interest bearing at annual rates of 5.5% in 2001 and 5.5% to 7.2% in
2000.                                                                      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The long-term portion of advances to an affiliated company of Brilliance
Holdings Limited as of December 31, 2001 were wholly repaid in 2002.   
|   
|(3) |  | Approximately Rmb 810.0 million of the advances to Brilliance Holdings
Limited and its affiliated companies were settled subsequent to year end.
|   
|(4) |  | The balance of Rmb 360.0 million was settled subsequent to year end.                                                                            
|   
|(5) |  | Rmb 30.0 million of the advances to other affiliated companies was
settled subsequent to year end.                                              

Set forth below is information on advances from affiliated companies to
Brilliance China Automotive and its subsidiaries as of December 31, 2000, 2001
and 2002. The advances from affiliated companies are unsecured, non-interest
bearing and have no fixed repayment terms.

|                                                                  |  |      |         |      |  |            |        |  |  |  |        | 
|----------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---------- | ------ |  |  |  | ------ | 
|                                                                  |  | 2002 |         | 2001 |  | 2000      
|                                                                  |  |      |         |      |  |           
|                                                                  |  |      |         |      |  | (Rmb '000) |        |  |  | 
|Advances from affiliated companies                                | 
|Advances from a joint venture partner of Shenyang Aerospace       |  |      | 139,529 |      |  |            |       |  |  |  |       | 
|Advances from affiliated companies of Brilliance Holdings Limited |  |      | 13,951  |      |  |            | 54,276 |  |  |  | 52,311 | 
|Advances from an associated company                               |  |      | 1,264   |      |  |            |       |  |  |  |       | 
|Advances from an affiliated company of Shanghai Shenhua           |  |      | 1,586   |      |  |            |       |  |  |  |       | 
|Advances from affiliated companies of JinBei                      |  |      | 2,092   |      |  |            |       |  |  |  |       | 

55



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##### Table of Contents



|                                                                                 |  |      |         |      |  |            |        |  |  |  |        | 
|-------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---------- | ------ |  |  |  | ------ | 
|                                                                                 |  | 2002 |         | 2001 |  | 2000      
|                                                                                 |  |      |         |      |  |           
|                                                                                 |  |      |         |      |  | (Rmb '000) |        |  |  | 
|Advances from affiliated companies of the joint venture partner
of Ningbo Yuming |  |      | 3,998   |      |  |            |       |  |  |  |       | 
|                                                                                 |  |      |         |      |  |            |        |  |  |  |        | 
|Total                                                                            |  |      | 162,420 |      |  |            | 54,276 |  |  |  | 52,311 | 

The advances from affiliated companies are unsecured, non-interest bearing
and have no fixed repayment terms.

Amounts due to affiliated companies arising from trading activities
consisted of the following:

|                                                                                |  |      |         |      |  |            |         |  |  |  |         | 
|------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---------- | ------- |  |  |  | ------- | 
|                                                                                |  | 2002 |         | 2001 |  | 2000      
|                                                                                |  |      |         |      |  |           
|                                                                                |  |      |         |      |  | (Rmb '000) |         |  |  | 
|Due to JinBei and its affiliated companies                                      |  |      | 196,186 |      |  |            | 107,095 |  |  |  | 14,468  | 
|Due to other affiliated companies of Brilliance Holdings Limited                |  |      | 21,839  |      |  |            | 32,340  |  |  |  | 102,107 | 
|Due to Shanghai Shenhua and its affiliated companies                            |  |      | 101,029 |      |  |            | 173,636 |  |  |  | 71,118  | 
|Due to affiliated companies of the joint venture partner of
Ningbo Yuming       |  |      | 10,225  |      |  |            | 6,287   |  |  |  | 3,584   | 
|Due to affiliated companies of the joint venture partner of
Xinguang Brilliance |  |      | 1,567   |      |  |            | 3,132   |  |  |  |        | 
|Due to associated companies                                                     |  |      | 398,523 |      |  |            | 169,589 |  |  |  | 238,329 | 
|                                                                                |  |      |         |      |  |            |         |  |  |  |         | 
|                                                                                |  |      | 729,369 |      |  |            | 492,079 |  |  |  | 429,606 | 

The amounts due to affiliated companies are unsecured and non-interest
bearing.

As of December 31, 2002 and 2001, included in prepayments and other
current assets were approximately Rmb 263.0 million (US$31.8 million) and Rmb
168.0 million of prepayment for purchases of raw materials made to an
affiliated company of Brilliance Holdings Limited. Subsequent to December 31,
2002, an amount of Rmb 98.0 million (US$11.8 million) was refunded by this
affiliated company.

As of December 31, 2002, included in other receivables was Rmb 220.0
million (US$26.6 million) of outstanding proceeds from the disposal of an
associated company to an affiliated company. Approximately Rmb183.0 million
(US$22.1 million) was received in March 2003.

56



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##### Table of Contents






ITEM 8. FINANCIAL INFORMATION

Legal Proceedings

Broadsino Litigation

On January 21, 2003, a writ dated January 21, 2003, brought by Broadsino,
as plaintiff, was filed with the Supreme Court of Bermuda and an ex parte court
order dated January 22, 2003 granted by the Supreme Court of Bermuda in favor
of Broadsino was served on the registered office of Brilliance China Automotive
in Bermuda. The writ alleged that the interest of the Chinese Financial
Education Development Foundation, a former significant shareholder, in
1,446,121,500 shares of Brilliance China Automotive, representing a 39.45%
ownership interest, was held in trust for Broadsino and was improperly
transferred to Huachen. The Court Order restrained Brilliance China Automotive
from among other things: (a) registering the transfer of these shares by the
Chinese Financial Education Development Foundation to Huachen and/or Huachen to
certain directors of Brilliance China Automotive; or (b) if such transfer has
already been registered, registering any further dealings in such shares, in
each case pending determination by the Supreme Court of Bermuda of the legal
proceedings initiated by Broadsino against Brilliance China Automotive, the
Chinese Financial Education Development Foundation, Huachen and certain
directors of Brilliance China Automotive. Broadsino claims that Brilliance
China Automotive was aware of the trust arrangement and further alleges that
Brilliance China Automotive knowingly participated in a breach of that trust
arrangement by allowing the transfer of such shares from the Chinese Financial
Education Development Foundation to Huachen. Broadsino seeks recovery of these
shares and, in the alternative, damages.

Upon application by Brilliance China Automotive, the Court Order was
discharged by a judgment of the Supreme Court of Bermuda given on February 11,
2003. On February 26, 2003, a statement of claim was filed by Broadsino as a
procedural step in furtherance of the legal proceedings. On March 10, 2003,
Brilliance China Automotive took out a summons at the Supreme Court of Bermuda
to have this writ and statement of claim struck out. The strike-out
proceedings are scheduled to be heard by the Supreme Court of Bermuda on or
about July 22 and 23, 2003. The directors do not believe that this litigation
has had or will have any significant impact on the financial position of
Brilliance China Automotive.

Dividends

All dividends to holders of ADSs are declared and paid in U.S. dollars.
Interim dividends may be paid at the discretion of Brilliance China
Automotives board of directors based on its evaluation of the financial
condition of Brilliance China Automotive, while final dividends are subject to
the approval of the shareholders in a general meeting. Historically,
Brilliance China Automotive has paid a quarterly dividend at the rate of
US$0.02 per share in each quarter, commencing in the first quarter of 1993.
Brilliance China Automotive began to pay dividends on a semi-annual basis at
the rate of US$0.04 per share in the second half of 1996. The amount of these
dividend payments have been adjusted on a pro rata basis to reflect Brilliance
China Automotives 1999 and 2000 bonus share issuances as well as the increase
in earnings per share. The dividend per share and dividend per ADS amounts
paid for 2002 were US$0.00116 per share and US$0.12 per ADS.

Under Section 54 of the Companies Act 1981 of Bermuda (as amended), a
company shall not declare or pay a dividend, or make a distribution out of
contributed surplus, if there are reasonable grounds for believing that

57



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##### 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.

Applicable Chinese laws and regulations require that before a
foreign-invested enterprise distributes profits to investors it must:



| |  |  | satisfy all tax liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | provide for losses in previous
years;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | in the case of a Sino-foreign equity 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, 2002, Shenyang
Automotive and Ningbo Yuming were 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, 2002, Xing Yuan Dong, Ningbo Brilliance Ruixing
and Mianyang Brilliance Ruian made an additional Rmb 60.8 million
(US$7.3 million) to the general contribution to the enterprise
expansion fund and staff welfare fund.

Significant Changes

There have been the following significant changes since December 31, 2002,
the date of the annual financial statements in this annual report:



| | (a) |  | the formation of the joint venture with BMW, the guarantee to be
provided by Brilliance China Automotive to BMW Holding BV relating to
the performance by SJAI of its obligations under the relevant joint
venture contract and Brilliance China Automotives subsequent increase
in its equity interest in SJAI;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | the increase in registered capital of Shenyang Automotive and
corresponding injection of US$139.23 million and US$133.77 million by
Brilliance China Automotive and JinBei, respectively, into Shenyang
Automotive; and                                                                                          
|
| | (c) |  | the guarantee by Xing Yuan Dong of a bank loan to JinBei of up to
the amount of Rmb 370 million with the provision of an indemnity by
JinBei to Xing Yuan Dong of its liabilities under the guarantee.                                                                                                           

58



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##### Table of Contents



See note 30 to Brilliance China Automotives consolidated financial
statements for more information regarding these significant changes.

59



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##### Table of Contents






ITEM 9. THE OFFER AND LISTING

Brilliance China Automotives ordinary shares are listed on The Stock
Exchange of Hong Kong Limited under the stock code 1114, and Brilliance China
Automotives ADSs are listed on the New York Stock Exchange Inc. under the
symbol CBA. The following table sets forth for the periods indicated the
reported high and low sales prices for the ordinary shares and the ADSs on The
Stock Exchange of Hong Kong Limited and the New York Stock Exchange Inc.,
respectively:

|                |  |                                                                      |  |                              |  |         |       |                 |  |                                |  |                                 |  |      
|--------------- |  | -------------------------------------------------------------------- |  | ---------------------------- |  | ------- | ----- | --------------- |  | ------------------------------ |  | ------------------------------- |  | -----
|                |  |                                                                      |  |                              |  |         |       |                 |  |                                |  | The Stock Exchange of Hong Kong
|                |  |                                                                      |  | New York Stock Exchange Inc. |  | Limited
|                |  |                                                                      |  |                              |  |         | (US$) |                 |  |                                |  | (HK$)                          
|                |  |                                                                      |  |                              |  |        
|                |  |                                                                      |  | Ordinary Shares              |  | ADSs    |       | Ordinary Shares
|                |  |                                                                      |  |                              |  |         |       |                
|Calendar Period |  | High                                                                 |  | Low                          |  | High    |       | Low             |  | High                           |  | Low                            
|                |  |                                                                      |  |                              |  |         |       |                 |  |                                |  |                                
|                |  |                                                                      |  |                              |  |         |       | Starting from   |  | Starting from October 22, 1999
|                |  |                                                                      |  |                              |  |         |       | April 17, 2000  |  |                               
|                |  |                                                                      |  |                              |  |         |       |                 |  |                                |  |                                
|1998:           |  | 1st quarter                                                          |  | 8 1/8                        |  | 5 1/8   |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 2nd quarter                                                          |  | 11                           |  | 7 5/16  |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 3rd quarter                                                          |  | 10 3/4                       |  | 5 1/8   |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 4th quarter                                                          |  | 8 15/16                      |  | 5 11/16 |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|1999:           |  | 1st quarter                                                          |  | 8 7/8                        |  | 6 3/16  |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 2nd quarter                                                          |  | 11 1/8                       |  | 7 3/4   |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 3rd quarter                                                          |  | 26 7/8                       |  | 10 9/16 |       | N/A             |  | N/A                            |  | N/A                             |  | N/A  
|                |  | 4th quarter                                                          |  | 25 15/16                     |  | 3 1/16  |       | N/A             |  | N/A                            |  | 32.40                           |  | 26.40
|2000:           |  | 1st quarter                                                          |  | 3 5/16                       |  | 2 5/16  |       | N/A             |  | N/A                            |  | 27.20                           |  | 21.20
|                |  | 2nd quarter                                                          |  |                              |  |         |       |                 |  |                                |  |                                 |  |      
|                |  | (through April 14, 2000 with
respect to NYSE-traded ordinary
shares) |  | 4 3/16                       |  | 2 7/8   |       | 19 15/16        |  | 13 11/16                       |  | 28.20                           |  | 1.13 
|                |  | 3rd quarter                                                          |  | N/A                          |  | N/A     |       | 37 5/8          |  | 17 1/4                         |  | 2.93                            |  | 1.35 
|                |  | 4th quarter                                                          |  | N/A                          |  | N/A     |       | 34 3/4          |  | 25 5/8                         |  | 2.70                            |  | 2.05 
|2001:           |  | 1st quarter                                                          |  | N/A                          |  | N/A     |       | 31.30           |  | 23.50                          |  | 2.70                            |  | 1.80 
|                |  | 2nd quarter                                                          |  | N/A                          |  | N/A     |       | 33.85           |  | 23.29                          |  | 2.65                            |  | 1.81 
|                |  | 3rd quarter                                                          |  | N/A                          |  | N/A     |       | 24.11           |  | 11.66                          |  | 1.87                            |  | 0.84 
|                |  | 4th quarter                                                          |  | N/A                          |  | N/A     |       | 22.70           |  | 14.80                          |  | 1.73                            |  | 1.14 
|2002:           |  | 1st quarter                                                          |  | N/A                          |  | N/A     |       | 21.32           |  | 16.20                          |  | 1.65                            |  | 1.27 
|                |  | 2nd quarter                                                          |  | N/A                          |  | N/A     |       | 18.50           |  | 12.34                          |  | 1.49                            |  | 0.98 
|                |  | 3rd quarter                                                          |  | N/A                          |  | N/A     |       | 15.15           |  | 12.10                          |  | 1.22                            |  | 1.01 
|                |  | 4th quarter                                                          |  | N/A                          |  | N/A     |       | 19.00           |  | 10.65                          |  | 1.49                            |  | 0.80 
|2003:           |  | January                                                              |  | N/A                          |  | N/A     |       | 24.32           |  | 18.11                          |  | 1.95                            |  | 1.42 
|                |  | February                                                             |  | N/A                          |  | N/A     |       | 25.49           |  | 20.35                          |  | 2.03                            |  | 1.57 
|                |  | March                                                                |  | N/A                          |  | N/A     |       | 25.10           |  | 21.84                          |  | 1.94                            |  | 1.72 
|                |  | April                                                                |  | N/A                          |  | N/A     |       | 25.65           |  | 20.48                          |  | 2.03                            |  | 1.56 
|                |  | May                                                                  |  | N/A                          |  | N/A     |       | 25.00           |  | 22.80                          |  | 1.99                            |  | 1.77 
|                |  | June (through June 23)                                               |  | N/A                          |  | N/A     |       | 29.29           |  | 23.25                          |  | 2.28                            |  | 1.79 

Notes:



|(1) |  | On April 14, 2000, Brilliance China Automotive issued bonus shares to all
of its shareholders in the amount of nineteen bonus shares for each share
held. This bonus issuance resulted in a significant decrease in the share
prices after this date as shown in the table above.                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | On April 14, 2000, all ordinary shares of Brilliance China Automotive
traded through the New York Stock Exchange Inc. were converted into
American depositary shares at the ratio of 100 ordinary shares per ADS
(after taking into account the simultaneous bonus share issuance described
in note 1 above).

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To the best of Brilliance China Automotives knowledge, as of May 31,
2003, Brilliance China Automotive had 1,630,440 ADSs outstanding, of which
1,629,775 ADSs were held by 83 registered holders of record in the United
States (including 1,563,517 ADSs held by 3 nominee holders). One ADS is
equivalent to 100 ordinary shares.

Trading in Brilliance China Automotives shares on The Stock Exchange of
Hong Kong Limited was suspended for one day on May 25, 2001 in connection with
its placement to institutional investors outside of the United States of
318,000,000 new ordinary shares on that day. Trading of Brilliance China
Automotives ADSs was also suspended on the New York Stock Exchange during the
same day.

Trading in Brilliance China Automotives shares in Hong Kong and New York
was suspended on June 21, 2002 to allow Brilliance China Automotive to confirm
and clarify the reports of its change in management on June 18, 2002.

Trading in Brilliance China Automotives shares in Hong Kong and New York
was suspended on October 23, 2002 to allow Brilliance China Automotive to
clarify issues alleged by a former director regarding Brilliance China
Automotive.

Trading in Brilliance China Automotives shares in Hong Kong and New York
was suspended from November 11 to November 13, 2002 to allow Brilliance China
Automotive to clarify certain matters relating to a potential sale of shares of
Brilliance China Automotive held by the Chinese Financial Education Development
Foundation.

Trading in Brilliance China Automotives shares in Hong Kong and New York
was also suspended on January 24, 2003 to allow Brilliance China Automotive to
clarify the impact of the court order obtained by Broadsino Finance Company
Limited against Brilliance China Automotive, the Management Directors, the
Chinese Financial Education Development Foundation and Huachen Automotive Group
Holdings Company Limited restraining the registration of any sale or transfer
of shares of Brilliance China Automotive.

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ITEM 10. ADDITIONAL INFORMATION

Memorandum of Association and Bye-laws

Described below is a summary of certain provisions of Brilliance China
Automotives memorandum of association and bye-laws, as currently in effect.

General

Brilliance China Automotive was incorporated in Bermuda under the
Companies Act as an exempted company with limited liability on June 9, 1992.
Its headquarters are located at Suites 2303-2306, 23rd Floor, Great Eagle
Centre, 23 Harbour Road, Wanchai, Hong Kong and it is registered with the
Registrar of Companies in Hong Kong as an overseas company under Part XI of the
Companies Ordinance.

Brilliance China Automotives memorandum of association also sets out its
objects, including acting as a holding and investment company, and its powers,
including the powers set out in the First Schedule of the Companies Act. As an
exempted company, Brilliance China Automotive will be carrying on business
outside Bermuda, although it maintains a registered office in Bermuda.
Brilliance China Automotives bye-laws were conditionally adopted on September
18, 1999.

Directors



| |  |  | Disclosure of interests in contracts with Brilliance China
Automotive or its subsidiaries
| | - |  | -----------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A director may not vote or be counted in the quorum on any
resolution of the board of directors concerning his own appointment as
the holder of any office or place of profit with Brilliance China
Automotive or any other company in which Brilliance China Automotive is
interested.                                                                                                                                                                                                                                                            
|
| | A director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or arrangement or proposed contract
or arrangement with Brilliance China Automotive must declare the nature
of his interest at the meeting of the board of directors at which the
question of entering into the contract or arrangement is first taken into
consideration, if he knows his interest then exists, or in any other case
at the first meeting of the board of directors after he knows that he is
or has become so interested.
|
| | Save as otherwise provided by the bye-laws, a director may not vote
(nor be counted in the quorum) on any resolution of the board of
directors in respect of any contract, proposal or arrangement in which he
is to his knowledge materially interested, and if he does so his vote may
not be counted, but this prohibition will not apply to any of the
following matters:                                                                                                                                                                      



| |  | - any contract or arrangement for the giving by Brilliance
China Automotive of any security or indemnity to the director in
respect of money lent by him or obligations incurred or undertaken
by him at the request of or for the benefit of Brilliance China
Automotive and any of its subsidiaries;
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | - any contract or arrangement for the giving by Brilliance
China Automotive of any security to a third party in respect of a
debt or obligation of Brilliance China Automotive, or any of its
subsidiaries, for which the director has himself 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 is or is to be interested as a participant in the
underwriting or sub-underwriting of the offer;                                                                                                    
|
| |  | - any contract or arrangement in which the director is
interested in the same manner as other holders of shares or
debentures or securities of Brilliance China Automotive by virtue
only of his interest in shares or debentures or other securities of
Brilliance China Automotive;                                                                                                                                                                                           
|
| |  | - any contract or arrangement concerning any other company in
which the director is interested directly or indirectly whether as
an officer or a member or in which the director is beneficially
interested other than a company in which the director together with
any of his associates owns 5% or more of the issued shares or
voting rights of any class of shares of such company (or of any
third company through which his interest is derived) or of the
voting rights;
|
| |  | - any proposal or arrangement for the benefit of employees of
Brilliance China Automotive or its subsidiaries including the
adoption, modification or operation of a pension fund or
retirement, death or disability benefit scheme which relates both
to directors and employees of Brilliance China Automotive or any of
its subsidiaries and does not give the director any privilege not
generally accorded to the class of persons to whom such scheme or
fund relates; and
|
| |  | - any proposal or arrangement concerning the adoption,
modification or operation of any employees share scheme involving
the issue or grant of options over shares or other securities by
Brilliance China Automotive to, or for the benefit of, the
employees of Brilliance China Automotive or its subsidiaries under
which the director may benefit.                                                                                                                        



| |  |  | Remuneration
| | - |  | ------------



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The directors are entitled to receive remuneration for their
services a sum determined by Brilliance China Automotive in general
meeting, such sum (unless otherwise directed by the resolution by which
it is voted) to be divided amongst the directors in such proportions and
in such manner as the board of directors may agree, or failing agreement,
equally, except that in such event any director holding office for less
than the whole of the relevant period in respect of which the
remuneration is paid shall only rank in such division in proportion to
the time during the period for which he has held office.



| |  |  | Borrowing powers
| | - |  | ----------------



| |                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Subject to the provisions of the Companies Act, the board of
directors may exercise all the powers of Brilliance China Automotive to
raise or borrow or to secure the payment of any sum or sums of money for
the purposes of Brilliance China Automotive and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof. The
board of directors

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| |                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | may raise or secure the payment or repayment of such sum or sums in such
manner and upon such terms and conditions in all respects as it thinks
fit and in particular by the issue of debentures, debenture stock, bonds
or other securities of Brilliance China Automotive, whether outright or
as collateral security for any debt, liability or obligation of
Brilliance China Automotive or of any third party.

Alterations to constitutional documents

The memorandum of association of Brilliance China Automotive may, with the
consent of the Minister of Finance of Bermuda, be altered by Brilliance China
Automotive in general meeting. The bye-laws may be amended by the directors
subject to the approval of Brilliance China Automotive in general meeting. The
bye-laws state that a special resolution is required to alter the memorandum of
association on to approve any amendment of the bye-laws.

Variation of rights of existing shares or classes of shares

If at any time the capital is divided into different classes of shares,
all or any of the special rights (unless otherwise provided for by the terms of
issue of that class) attached to any class may, subject to the provisions of
the Companies Act, be varied or abrogated either with the consent in writing of
the holders of not less than three-fourths in nominal value of the issued
shares of that class or with the sanction of a special resolution passed at a
separate general meeting of the holders of the shares of that class. To every
separate general meeting the provisions of the bye-laws relating to general
meetings will apply, but so that the necessary quorum is not less than two
persons holding or representing by proxy one-third in nominal value of the
issued shares of the class, and that any holder of shares of the class present
in person or by proxy or by a duly authorized corporate representative may
demand a poll.

Special resolutions  majority required

A special resolution of Brilliance China Automotive must be passed by a
majority of not less than three-fourths of the votes cast of such members as,
being entitled so to do, vote in person, or by a duly authorized corporate
representative, or where proxies are allowed, by proxy at a general meeting of
which not less than 21 days notice, specifying the intention to propose the
resolution as a special resolution, has been duly given. However, if it is so
agreed by a majority in number of the members having a right to attend and vote
at such meeting, being a majority together holding not less than 95% in nominal
value of the shares giving that right, a resolution may be proposed and passed
as a special resolution at a meeting of which less than 21 days notice has
been given.

Voting rights and right to demand a poll

Subject to any special rights, privileges or restrictions as to voting
attached to any class or classes of shares, at any general meeting on a show of
hands every member who is present in person or by a duly authorized corporate
representative shall have one vote and on a poll, every member present in
person or by a duly authorized corporate representative or by proxy shall have
one vote for every share of which he is the holder which is fully paid up or
credited as fully paid (but so that no amount paid up or credited as paid up on
a share in advance of calls or installments is treated for the foregoing
purposes as paid up on the share). On a poll, a member entitled to more than
one vote need not use all his votes or cast all the votes in the same way.

At any general meeting a resolution put to the vote of the meeting shall
be decided on a show of hands unless a poll is (before or on the declaration of
the result of the show of hands or on the withdrawal of any other demand for a
poll) demanded:

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| |  |  | 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 and representing, or by proxy
not less than one-tenth of the total voting rights of all the
members having the right to vote at the meeting; or                                                                                                                  
|
| |  |  | by a member or members present in person, or by a duly
authorized corporate representative, or by proxy and holding shares
in Brilliance China Automotive conferring a right to vote at the
meeting being shares on which an aggregate sum has been paid up
equal to not less than one-tenth of the total sum paid up on all
the shares conferring that right.

Requirements for annual general meetings

An annual general meeting must be held once in every year and within not
more than fifteen months after the last preceding annual general meeting.

Notices of annual general meetings

An annual general meeting and any special general meeting at which it is
proposed to pass a special resolution must be called by at least 21 days
notice in writing and any other special general meeting shall be called by at
least 14 days notice in writing (in each case exclusive of the day on which
the notice is served or deemed to be served and of the day for which it is
given). The notice shall specify the place, the day and the hour of meeting
and, in the case of special business, the general nature of that business.

Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members
present in person or by a duly authorized corporate representative or by proxy
and entitled to vote. In respect of a separate class meeting convened to
sanction the modification of class rights, the necessary quorum shall not be
less than two persons holding or representing by proxy or by a duly authorized
corporate representative one-third in nominal value of the issued shares of
that class and that any holder of shares of the class present in person by
proxy or by a duly authorized corporate representative may demand a poll.

Dividends

Brilliance China Automotive in general meeting may declare dividends in
any currency but no dividends may exceed the amount recommended by the board of
directors.

Unless and to the extent that the rights attached to any shares or its
terms of issue otherwise provide, all dividends will be apportioned and paid
pro rata according to the amounts paid or credited as paid up on the shares
during any portion or portions of the period in respect of which the dividend
is paid. No amount paid upon a share in advance of calls will for this purpose
be treated as paid up on the shares. The board of directors may retain any
dividends or other moneys payable on or in respect of a share upon which
Brilliance China Automotive has a lien, and may apply the same in or towards
satisfaction of the

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debts, liabilities or engagements in respect of which the lien exists.
The board of directors may deduct from any dividend or bonus payable to any
member all sums of money, if any, presently payable by him to Brilliance China
Automotive on account of calls, installments or otherwise.

Whenever the board of directors or Brilliance China Automotive in general
meeting has resolved that a dividend be paid or declared, the board of
directors may further resolve either:



| |  |  | that such dividend be satisfied wholly or in part in the form
of an allotment of shares credited as fully paid up, on the basis
that the shares so allotted shall be of the same class or classes as
the class or classes of shares already held by the allottee,
provided that the members will be entitled to elect to receive such
dividend (or part of it) in cash in lieu of such allotment; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | that the members entitled to such dividend will be entitled
to elect to receive an allotment of shares credited as fully paid up
in lieu of the whole or such part of the dividend as the board of
directors may think fit, on the basis that the shares so allotted
shall be of the same class or classes as the class or classes of
shares already held by the allottee.                          

Brilliance China Automotive may also, upon the recommendation of the board
of directors, by a special resolution resolve in respect of any one particular
dividend of Brilliance China Automotive that it may be satisfied wholly in the
form of an allotment of shares credited as fully paid up without offering any
right to members to elect to receive a dividend in cash in lieu of an
allotment.

Whenever the board of directors or Brilliance China Automotive in general
meeting has resolved that a dividend be paid or declared the board of directors
may further resolve that such dividend be satisfied wholly or in part by the
distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared
may be invested or otherwise made use of by the board of directors for the
benefit of Brilliance China Automotive until claimed and Brilliance China
Automotive may not be constituted a trustee. All dividends or bonuses
unclaimed for six years after having been declared may be forfeited by the
board of directors and must revert to Brilliance China Automotive.

Procedures on liquidation

A resolution that Brilliance China Automotive be wound up by the court or
be wound up voluntarily must be a special resolution. If Brilliance China
Automotive is wound up, the surplus assets remaining after payment to all
creditors are to be divided among the members in proportion to the capital paid
up on the shares held by them respectively, and if the surplus assets are
insufficient to repay the whole of the paid up capital, they are to be
distributed so that, as nearly as may be, the losses shall be borne by the
members in proportion to the capital paid up on the shares held by them
respectively, all subject to the rights of any shares issued on special terms
and conditions.

If Brilliance China Automotive is wound up (whether the liquidation is
voluntary or by the court) the liquidator may, with the sanction of a special
resolution, divide among the members in specie or kind the whole or any part of
the assets of Brilliance China Automotive and whether the assets consist of
property of one kind or consists of properties of different kinds and the
liquidator may, for such purposes, set such value as he deems fair upon any one
or more class or classes of property to be divided and may determine how such
division is to be carried out as between the members or different classes of
members and the members within each class. With the like sanction, the
liquidator may vest any part of the assets

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in trustees upon such trusts for the benefit of members as the liquidator but
so that no member shall be compelled to accept any shares or other assets upon
which there is a liability.

Transfer of shares

Subject to the Companies Act, all transfers of shares must be effected by
transfer in writing in the usual or common form or in any other form acceptable
to the board of directors and may be under hand or by means of mechanically
imprinted signatures or such other manner as the board of directors may
approve. An instrument of transfer must be executed by or on behalf of the
transferor and by or on behalf of the transferee and the transferor, providing
that the board may dispense with the execution of the instrument of transfer by
the transferee in any case in which it thinks fit, in its absolute discretion
to do so, shall be deemed to remain the holder of the share until the name of
the transferee is entered in the register of members.

The board of directors may, in its absolute discretion, transfer any share
upon the principal register to any branch register or any share on any branch
register to the principal register or any other branch register.

Unless the board of directors otherwise agrees, no shares on the principal
register shall be transferred to any branch register nor shall shares on any
branch register be transferred to the principal register or another branch
register. All transfers and other documents of title must be lodged for
registration and registered, in the case of shares on a branch register, at the
relevant registration office and, in the case of shares on the principal
register, at the transfer office in Bermuda.

The board of directors may in its absolute discretion and without
assigning any reason, refuse to register any transfer of any shares (not being
fully paid shares) to a person of whom it does not approve, or any share issued
under any share option scheme for employees upon which a restraints on transfer
still applies, and it may refuse to register the transfer of any shares (not
being fully paid shares) on which Brilliance China Automotive has a lien. The
board of directors may also refuse to register a transfer of shares (whether
fully paid or not) in favor of more than four persons jointly. If the board of
directors refuses to register a transfer, it will within two months after the
date on which the transfer was lodged with Brilliance China Automotive send to
the transferor and transferee notice of the refusal.

The board of directors may decline to recognize any instrument of transfer
unless:



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

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The registration of transfers may, on giving notice by advertisement in an
appointed newspaper in Bermuda and in one or more newspapers circulating in
Hong Kong, be suspended at times and for periods as the board of directors may
determine and either generally or in respect of any class of shares. The
register of members must not be closed for more than thirty days in any year.

Recent Amendments to the Bye-Laws

On January 4, 2002, the Companies (Amendment) Ordinance 2001 came into
effect in Hong Kong, which permits companies to offer their shareholders a
summary financial report in place of the complete annual report and accounts.
This new law also permits companies to offer their shareholders the choice to
receive an electronic copy instead of a printed copy of either the summary
financial report or the complete annual report and accounts. On February 17,
2002, The Stock Exchange of Hong Kong Limited also announced amendments to its
Listing Rules that will allow companies to distribute to their shareholders a
summary financial report instead of the longer report. On February 5, 2002,
The Stock Exchange of Hong Kong Limited also announced amendments to its
Listing Rules that will allow companies to distribute corporate communications
to their shareholders via electronic means. The current laws of Bermuda do not
allow a company incorporated in Bermuda to provide to its shareholders a
summary financial report in place of a longer, complete annual report, and
there is no current proposal to change the law in Bermuda to permit companies
incorporated in Bermuda to do so.

As a result of these amendments in Hong Kong, the board of directors of
Brilliance China Automotive amended the Bye-laws of Brilliance China Automotive
to permit Brilliance China Automotive to take advantage of these changes to the
Listing Rules by allowing shareholders to choose (1) to receive a summary
financial report in place of the longer, complete annual report once it is
permissible to do so under Bermuda law; and (2) to receive copies of corporate
communications by electronic means or by relying on the versions of those
documents published on Brilliance China Automotives website instead of printed
copies of such documents.

These amendments were approved by the shareholders of Brilliance China
Automotive by way of a special resolution at the special general meeting held
on June 28, 2002.

Material Contracts

The following contracts, not being contracts in the ordinary course of
business, have been entered into by Brilliance China Automotive and/or its
subsidiaries within the two years preceding the date of this annual report and
are or may be material.



| | (a) |  | Technology Transfer Agreement, dated December 17, 2001,
between Brilliance China Automotive and Toyota Motor Corporation
relating to the technology transfer of the fifth generation of the
Toyota Minibus, the Granvia, for production by Brilliance China
Automotive; (1)
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Acquisition Agreement, dated December 18, 2001, between
Brilliance China Automotive and Brilliance Holdings Limited relating
to the acquisition by Brilliance China Automotive of the entire
issued share capital of Key Choices Group Limited; (1)                        
|
| | (c) |  | Agreement, dated December 30, 2001, between Xing Yuan Dong
and two affiliated companies relating to Xing Yuan Dongs
acquisition of a 47.1% interest in Zhengtong Holdings Co., Ltd.; (1)                                                                                  
|
| | (d) |  | Agreement, dated December 1, 2002, between Xing Yuan Dong and
an affiliated company relating to Xing Yuan Dongs disposal of its
interest in Zhengtong Holdings Co., Ltd.;                                                                                                 

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| | (e) |  | Joint Venture Contract dated March 27, 2003 between SJAI and
BMW Holding BV relating to the proposed joint venture for the
production and sale of BMW-designed and branded sedans in China;                                  
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (f) |  | Agreement dated April 28, 2003 between Shenyang Xinjinbei
Investment and Development Co., Ltd. and Shenyang JinBei Automobile
Industry Company Limited relating to the acquisition of 9% of the
registered capital of SJAI;  
|
| | (g) |  | Capital Increase Agreement dated January 10, 2003 between
Brilliance China Automotive and Shenyang JinBei
Automotive Company Limited relating to the capital increase of
Shenyang Brilliance JinBei Automobile Co., Ltd.; and
|
| | (h) |  | Amended Joint Venture Agreement dated February 26, 2003
between Brilliance China Automotive and Shenyang
JinBei Automotive Company Limited relating to Shenyang Brilliance
JinBei Automobile Co., Ltd.                       



---

|(1) |  | A copy of this agreement was filed with the U.S. Securities and Exchange
Commission as an exhibit to Brilliance China Automotives 2001 Form 20-F.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

Exchange Controls

Brilliance China Automotive has been designated as a non-resident for
exchange control purposes by the Bermuda Monetary Authority, whose permission
was obtained for the issue of the ordinary shares and ADSs of Brilliance China
Automotive to persons not resident in Bermuda for exchange control purposes.

The transfer of shares between persons regarded as residents outside
Bermuda for exchange control purposes and the issue of shares to or by such
persons may be effected without specific consent under the Exchange Control Act
1972 of Bermuda (as amended) and regulations thereunder. Issues and transfers
of shares involving any person regarded as resident in Bermuda for exchange
control purposes require specific prior approval under the Exchange Control
Act.

There are no limitations on the rights of non-Bermuda owners of Brilliance
China Automotives capital stock to hold or vote their shares. Because
Brilliance China Automotive has been designated as a non-resident for Bermuda
exchange control purposes, there are no restrictions on its ability to transfer
funds in and out of Bermuda or to pay dividends to United States residents who
are holders of Brilliance China Automotives ordinary shares, other than in
respect of local Bermuda currency.

In accordance with Bermuda law, share certificates are only issued in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, Brilliance
China Automotive is not bound to investigate or incur any responsibility in
respect of the proper administration of any such estate or trust.

Brilliance China Automotive will take no notice of any trust applicable to
any of its shares whether or not it had notice of such trust.

As an exempted company, Brilliance China Automotive is exempted from
Bermuda laws that restrict the percentage of share capital that may be held by
non-Bermudians, but as an exempted company, Brilliance China Automotive may not
participate in certain business transactions, including:

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

The Bermuda government actively encourages foreign investment in
exempted entities such as Brilliance China Automotive that are based in
Bermuda but do not operate in competition with local business. In addition to
having no restrictions on the degree of foreign ownership, Brilliance China
Automotive is subject neither to taxes on its income or dividends nor to any
foreign exchange controls in Bermuda. In addition, there is no capital gains
tax in Bermuda, and profits can be accumulated by Brilliance China Automotive,
as required, without limitation.

The Chinese government imposes control over its foreign currency reserves
in part through direct regulation of the conversion of Renminbi into foreign
exchange and through restrictions on foreign trade. Effective January 1, 1994,
the dual foreign exchange system in China was abolished in accordance with the
notice of the Peoples Bank of China concerning future reform of the foreign
currency control system issued December 1993. The conversion of Renminbi into
U.S. dollars in China currently must be based on the Peoples Bank of China
rate. The Peoples Bank of China rate is set based on the previous days
Chinese interbank foreign exchange market rate and with reference to current
exchange rates on the world financial markets.

Taxation

Income tax

Brilliance China Automotive is an exempted company incorporated in Bermuda
with limited liability, but conducts its operations primarily through Shenyang
Automotive in China. In Bermuda, there are no taxes on profits, income or
dividends, nor is there any capital gains tax, estate duty or death duty.
Furthermore, Brilliance China Automotive has received from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966,
as amended, an undertaking that, in the event that Bermuda enacts any
legislation imposing tax computed on profits or income, or computed on any
capital asset, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of such tax shall not be applicable to
Brilliance China Automotive or any of its operations, or the shares, debentures
or other obligations of Brilliance China Automotive, until March 28, 2016.
This assurance does not, however, prevent the imposition of any such tax or
duty on such persons as are ordinarily resident in Bermuda and holding such
shares, debentures or obligations of Brilliance China Automotive or on land in
Bermuda leased or let to Brilliance China Automotive.

As an exempted company, Brilliance China Automotive is liable to pay
to the Bermuda government an annual government fee calculated on a
sliding-scale basis by reference to its assessable capital, that is, its
authorized capital plus any share premium as at August 31st of the preceding
year. On

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the basis that Brilliance China Automotives assessable capital exceeds
US$100,000,001, but does not exceed US$500,000,000, Brilliance China Automotive
is required to pay the government fee at an annual rate of US$16,695.

Brilliance China Automotive also provides for Hong Kong profits tax at the
rate of 16% based on estimated assessable profit arising in Hong Kong.

Shenyang Automotive is subject to state and local income taxes in China at
standard rates of 15% and 3%, respectively, based on the taxable income
reported in its statutory financial statements in accordance with the relevant
state and local income tax laws applicable to Sino-foreign equity joint venture
enterprises.

Ningbo Yuming is subject to state and local income taxes in China at
standard rates of 15% and 3%, respectively, based on the taxable income
reported in its statutory financial statements in accordance with the relevant
state and local income tax laws applicable to foreign-invested enterprises.
Under the relevant income tax laws in China, Ningbo Yuming was fully exempted
from enterprise income tax for two years starting from the year ended December
31, 1997, followed by a 50% reduction of enterprise income tax for the
following three years. In addition, Ningbo Yuming is also fully exempted from
local enterprise income tax for the same five-year period. This tax holiday
expired at the end of 2001. As a result, Ningbo Yumings effective income tax
rate was 7.5% in 2000 and 2001 and 18% in 2002.

Xing Yuan Dong is subject to state and local income taxes in China at
standard rates, of 30% and 3%, respectively, based on the taxable income
reported in its statutory financial statements in accordance with the relevant
state and local income tax laws applicable to foreign-invested enterprises.
During 1999, Xing Yuan Dong received official designation by the local tax
authorities as a New and Technologically-Advanced Enterprise. In 2001, Xing
Yuan Dong was further designated by the local authority to be a
foreign-invested enterprise engaged in manufacturing activities. As a result,
the effective combined state and local enterprise income tax rate for Xing Yuan
Dong was 33% in 2000 and 7.5% in 2001 and 2002.

Mianyang Brilliance Ruian is subject to state and local income taxes in
China at standard rates of 30% and 3%, respectively, based on the taxable
income reported in its statutory financial statements in accordance with
enterprise income tax laws. During the year ended December 31, 2001, Mianyang
Brilliance Ruian received official designation by the local tax authority as a
foreign-invested enterprise engaged in manufacturing activities. Under
relevant income tax laws in China, Mianyang Brilliance Ruian is exempted from
state and local enterprise income tax for two years starting from the first
profitable year followed by a 50% reduction of enterprise income tax for the
next three years. As a result, Mianyang Brilliance Ruian was exempted from
income tax for the years ended December 31, 2001 and 2002. For the year ended
December 31, 2000, Mianyang Brilliance Ruian was subject to state and local
income taxes at the standard rates.

Dongxing Automotive is subject to state and local income taxes in China at
standard rates of 15% and 0%, respectively, based on the taxable income
reported in its statutory financial statements in accordance with enterprise
income tax laws applicable to New and Technologically-Advanced Enterprises.
In addition, Dongxing Automotive also received official designation by the
local tax authority as a foreign-invested enterprise engaged in manufacturing
activities. Under relevant income tax laws in China, Dongxing Automotive is
exempted from state enterprise income tax for two years starting from the first
profitable year followed by a 50% reduction of enterprise income tax for the
next three years. In addition, Dongxing Automotive is also fully exempted from
local enterprise income tax for the same five-year period. As a result, the
effective tax rate for Dongxing Automotive was 7.5% for the years ended
December 31, 2001 and 2002.

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Other subsidiaries in China are subject to state and local income taxes
within China at standard rates of 30% and 3%, respectively, based on the
taxable income reported in their statutory financial statements in accordance
with the relevant state and local income tax laws applicable to
foreign-invested enterprises.

Value Added Tax and Consumption Tax

Under the Provisional Regulations on Value Added Tax in the Peoples
Republic of China, which came into effect on January 1, 1994, all subsidiaries
are subject to value added tax, which is the principal indirect tax on the sale
of tangible goods. The general value added tax rate applicable to sales and
purchases of minibuses, sedans and automotive components in China is 17%.
Sales of minibuses and sedans are also subject to consumption tax at the
standard rate of 5% in 2000 and at the standard rates of 3% to 5% in 2001 and
2002.

Customs Duties

See Item 11  Quantitative and Qualitative Disclosures About Market Risk
 Tariff Reductions for a discussion of the import tariffs that generally
apply to Brilliance China Automotive and its subsidiaries.

As of December 31, 2002, Shenyang Automotive placed bank security deposits
amounting to approximately Rmb 48 million (US$5.8 million) and issued bank
guarantees of Rmb 50 million (US$6.0 million) at the request of the General
Administration of Customs, pending the completion of an assessment of the
eligibility on the exemption of the VAT and custom duties related to certain
imported fixed assets of this operating subsidiary. Subsequent to year end,
bank guarantees amounting to Rmb 30 million (US$3.6 million) were released.
Management is currently in discussion with the relevant authorities. Should
these fixed assets be not eligible for such exemption, additional VAT and
custom duties to be determined by the relevant authorities may be levied. The
directors consider any additional liabilities in excess of the security
deposits would not be significant.

Documents on Display

Brilliance China Automotive is subject to the informational requirements
of the U.S. Securities and Exchange Act of 1934, as amended, or the Exchange
Act, and, in accordance with the Exchange Act, Brilliance China Automotive
files annual reports on Form 20-F within six months of its fiscal year end, and
submit other reports and information under cover of Form 6-K with the SEC. You
may read and copy this information at the SECs public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. Recent filings and reports are
also available free of charge though the EDGAR electronic filing system at
www.sec.gov. You can also request copies of the documents, upon payment of a
duplicating fee, by writing to the public reference section of the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference room or accessing documents through EDGAR. As a foreign
private issuer, Brilliance China Automotive is exempt from the rules under the
Exchange Act prescribing the furnishing and content of proxy statements to
shareholders.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Exchange Rates

In the year ended December 31, 2002, approximately 3.0%, 3.0% and 1.4% of
Shenyang Automotives costs of sales were denominated in Japanese Yen, U.S.
dollars and Euros, respectively. Shenyang Automotive pays a Japanese Yen price
for the components and spare parts imported from Toyota through Japanese
Yen-denominated letters of credit issued by the Bank of China and other Chinese
banks. Because the Renminbi is not directly convertible into Japanese Yen,
these letters of credit are funded by Shenyang Automotive in U.S. dollars.
However, because Shenyang Automotives products are sold in China primarily in
Renminbi transactions, its revenues and profits are predominantly in Renminbi,
requiring Shenyang Automotive to convert a portion of its Renminbi earnings
into U.S. dollars. Accordingly, Shenyang Automotive is exposed to
Renminbi/U.S. dollar exchange rate risk, U.S. dollar/Japanese Yen exchange rate
risk and U.S. dollar/Euro exchange rate risk. The value of the Japanese Yen
and the Euro relative to the U.S. dollar have both increased in recent months.
The U.S. dollar/Renminbi exchange rate has remained stable over the past year
and the prospect of a devaluation of the Renminbi has been repeatedly negated
by the Chinese government. While there can be no assurance that such exchange
rates will continue their current trends or that a devaluation in the Renminbi
will not occur, thereby resulting in a higher cost of imported Japanese and
European components, Brilliance China Automotive does not believe that such
occurrences would, in any event, have any material adverse effect on Brilliance
China Automotives earnings. Neither Brilliance China Automotive nor Shenyang
Automotive currently has foreign currency-denominated borrowings from third
parties, but Shenyang Automotive has outstanding letters of credit of Yen 555.5
million and US$0.7 million from local banks, as well as outstanding
shareholders loans from Brilliance China Automotive in the amounts of
approximately HK$540 million and US$18 million.

The parties to the BMW joint venture will be required to contribute in
cash initial registered capital in the aggregate amount of 150.0 million Euros
(US$143.1 million). Brilliance China Automotive will make its contribution in
the form of Renminbi, while BMW will make its contribution in Euros. The
Renminbi contribution will be used primarily to purchase sedan production lines
from Shenyang Automotive, while the Euro contribution will initially be used to
fund the purchase of equipment and semi-knockdown and complete knockdown sedan
kits from BMW.

Since Brilliance China Automotive does not believe that exchange rate
fluctuations have any material effect on the overall financial performance of
Brilliance China Automotive, and the amount of foreign currency that it
requires is not significant, Brilliance China Automotive does not enter into
any hedging transactions with respect to its exposure to foreign currency
movements.

Interest Rates

Funds not required by Brilliance China Automotive in the short term are
kept as temporary demand or time deposits in commercial banks. Brilliance
China Automotive does not hold any market risk-sensitive instruments for
trading purposes. As of December 31, 2002, Brilliance China Automotive had Rmb
150.0 million (US$18.1 million) in fixed rate bank loans outstanding, of which
Rmb 50.0 million (US$6.0 million) bore interest at a fixed monthly rate of
0.48765% and Rmb 100.0 million (US$12.1 million) bore interest at a fixed
monthly rate of 0.44250%. In addition, the average annual rate for discounting
notes receivables with banks in 2002 was approximately 3.3%, which rate is
fixed separately for each transaction. Brilliance China Automotive did not
have any variable rate loans or commitments outstanding as of December 31,
2002.

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For the year ended December 31, 2002, Brilliance China Automotives
interest income was Rmb 43.6 million (US$5.3 million) and its interest expense
was Rmb 171.3 million (US$20.7 million). A 10% change in interest rates would
result in a change in interest income of approximately Rmb 4.4 million (US$0.5
million) and a change in interest expense of approximately Rmb 17.1 million
(US$2.1 million).

Tariff Reductions

The Chinese government imposes restrictions, quotas and tariffs on the
import of foreign-made motor vehicles, as well as motor vehicle components.
However, as a result of Chinas admission to the WTO, which regulates trading
and tariffs among its signatory states, in November 2001, China committed to
reducing its import restrictions on motor vehicles and motor vehicle
components. In addition, China will be required to conform its import tariffs
to the uniform tariffs under the WTO. Effective January 1, 2002, China has
reduced its import tariffs on motor vehicles and automotive components from
between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to
50.7% and between 14% to 31.4%, respectively. This range was lowered further
to between 4.8% and 25% for automotive components effective January 1, 2003.
In addition, tariffs on vehicles with nine seats or less and engine sizes of
three liters or below fell from 43.9% in 2002 to 38.2% for 2003, while tariffs
on vehicles with more than nine seats and engines of more than three liters
decreased from 50.7% in 2002 to 43.0% for 2003. All of these tariffs levels
are scheduled to be further reduced by 2006. Although lower tariffs and
reduced import restrictions may benefit Brilliance China Automotive in terms of
lower cost of imported components, lower tariffs and reduced import
restrictions could also lead to a substantial increase in the number of
minibuses, sport utility vehicles, sedans and other motor vehicles imported
into China, thereby significantly increasing competition in Brilliance China
Automotives current and proposed markets.

Except as described above, Brilliance China Automotives management
believes that at present and in its normal course of business, Brilliance China
Automotive is not subject to any other market-related risks.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

75



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PART II




ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.




ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS

Material Modifications to the Rights of Security Holders

None.

Use of Proceeds

Not applicable.




ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of Brilliance
China Automotive are responsible for establishing and maintaining disclosure
controls and procedures (as defined in the Exchange Act Rules 13a-14(c) and
15d-14(c)). Within 90 days prior to the date of this annual report, the
management of Brilliance China Automotive carried out an evaluation, under the
supervision and with the participation of its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of Brilliance China Automotives
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
on that evaluation, they have concluded that these disclosure controls and
procedures are effective to ensure that material information required to be
included in our periodic SEC reports relating to Brilliance China Automotive,
is made known to them.

There have been no significant changes in internal controls, or in factors
that could significantly affect internal controls, subsequent to the date the
Chief Executive Officer and Chief Financial Officer completed their evaluation.




ITEM 16. [RESERVED]

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PART III




ITEM 17. FINANCIAL STATEMENTS

Brilliance China Automotive has elected to provide the financial
statements and related information specified in Item 18 in lieu of Item 17.




ITEM 18. FINANCIAL STATEMENTS

See pages F-1 to F-38 following Item 19.




ITEM 19. EXHIBITS

(a)  See pages F-1 to F-38 following this item.

(b)  Index of Exhibits

|        |  |                                                                                                                                                                                                                             |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |  |                                                                                                                                                                                                                             |  |  |  | 
|Number  |  | Description                                                                                                                                                                                                                 |  | 
|        |  |                                                                                                                                                                                                                             |  | 
|1.1     |  | Amendment to Bye-Laws of Brilliance China Automotive, dated June 28, 2002.                                                                                                                                                  |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.1     |  | Agreement, dated December 1, 2002, between Xing Yuan
Dong and an affiliated company relating to Xing Yuan
Dongs disposal of its interest in Zhengtong Holdings Co.,
Ltd.                                                   |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.2     |  | Joint Venture Contract dated March 27, 2003 between SJAI
and BMW Holding BV relating to the proposed joint venture
for the production and sale of BMW-designed and branded
sedans in China.                                 |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.3     |  | Agreement dated April 28, 2003 between Shenyang
Xinjinbei Investment and Development Co., Ltd. and
Shenyang JinBei Automobile Industry Company Limited
relating to the acquisition of 9% of the registered
capital of SJAI. |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.4     |  | Capital Increase Agreement dated January 10, 2003
between Brilliance China Automotive and
Shenyang JinBei Automotive Company Limited relating to the
capital increase of Shenyang Brilliance JinBei Automobile
Co., Ltd.    |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.5     |  | Amended Joint Venture Agreement dated February 26,
2003 between Brilliance China Automotive and Shenyang JinBei Automotive Company Limited relating to
Shenyang Brilliance JinBei Automobile Co., Ltd.                      |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|4.6     |  | Share
Option Scheme of Brilliance China Automotive adopted on June 28, 2002.                                                                                                                                                |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|7.1     |  | Statements explaining how certain ratios were calculated
in the annual report.                                                                                                                                              |  | 
|        |  |                                                                                                                                                                                                                             |  |  |  | 
|8.1     |  | List of significant subsidiaries of Brilliance China
Automotive as of December 31, 2002.                                                                                                                                    |  | 

77



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|        |  |                                                                                         |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |  |                                                                                         |  |  |  | 
|Number  |  | Description                                                                             |  | 
|        |  |                                                                                         |  | 
|        |  |                                                                                         |  |  |  | 
|12.1    |  | Section 906 Certification from Chief Executive Officer.                                 |  | 
|        |  |                                                                                         |  |  |  | 
|12.2    |  | Section 906 Certification from Chief Financial Officer.                                 |  | 
|        |  |                                                                                         |  |  |  | 
|12.3    |  | Amendment to Articles of Association of Shenyang
Brilliance JinBei Automobile Co., Ltd. |  | 

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INDEX TO FINANCIAL STATEMENTS

BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED AND SUBSIDIARIES

|                                                                                                                |  |      |      | 
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                |  | Page
|                                                                                                                |  |     
|Report of Independent Public Accountants of PricewaterhouseCoopers, dated April 28, 2003                        |  |      | F-2  | 
|Report of Independent Public Accountants of Arthur Andersen & Co, dated April 25, 2002                          |  |      | F-3  | 
|Consolidated Statements of Income and Comprehensive Income for the years ended
December 31, 2002, 2001 and 2000 |  |      | F-4  | 
|Consolidated Balance Sheets as of December 31, 2002 and 2001                                                    |  |      | F-5  | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000                      |  |      | F-7  | 
|Consolidated Statements of Changes in Shareholders Equity for the years ended
December 31, 2002, 2001 and 2000 |  |      | F-9  | 
|Notes to Consolidated Financial Statements                                                                      |  |      | F-10 | 

F-1



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##### Table of Contents






Report of Independent Public Accountants

To the shareholders of
Brilliance China Automotive Holdings Limited

We have audited the accompanying
consolidated balance sheet of Brilliance
China Automotive Holdings Limited (a
Bermuda corporation) and its subsidiaries
(the Group) as of December 31, 2002,
and the related consolidated statements of
income and comprehensive income, cash flows
and changes in shareholders equity for the
year ended December 31, 2002. These
financial statements are the responsibility
of the Companys management. Our
responsibility is to express an opinion on
these financial statements based on our
audit. The financial statements of the
Group as of December 31, 2001 and for each
of the two years in the period ended
December 31, 2001 were audited by other
independent accountants who have ceased
operations. Those independent accountants
expressed an unqualified opinion on those
statements in their report dated April 25,
2002.

We conducted our audit in accordance with
generally accepted auditing standards in
the United States of America. Those
standards require that we plan and perform
the audit to obtain reasonable assurance
about whether the financial statements are
free of material misstatement. An audit
includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements. An
audit also includes assessing the
accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit
provides a reasonable basis for our
opinion.

In our opinion, the 2002 consolidated
financial statements referred to above
present fairly, in all material respects,
the financial position of Brilliance China
Automotive Holdings Limited and its
subsidiaries as of December 31, 2002, and
the results of their operations and their
cash flows for the year ended December 31,
2002, in conformity with accounting
principles generally accepted in the United
States of America.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong, April 28, 2003

F-2



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##### Table of Contents



Report of Independent Public Accountants

The following report is a copy of a report
previously issued by Arthur Andersen & Co
and has not been reissued by Arthur
Andersen & Co.

To the shareholders of
Brilliance China Automotive Holdings Limited

We have audited the accompanying
consolidated balance sheets of Brilliance
China Automotive Holdings Limited (a
Bermuda corporation) and its subsidiaries
as of December 31, 2001 and 2000, and the
related consolidated statements of income
and comprehensive income, cash flows and
changes in shareholders equity for the
years ended December 31, 2001, 2000 and
1999*, expressed in Chinese Renminbi
(''RMB). These financial statements are
the responsibility of the Companys
management. Our responsibility is to
express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with
generally accepted auditing standards in
the United States of America. Those
standards require that we plan and perform
the audit to obtain reasonable assurance
about whether the financial statements are
free of material misstatement. An audit
includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements. An
audit also includes assessing the
accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit
provides a reasonable basis for our
opinion.

In our opinion, the financial statements
referred to above present fairly, in all
material respects, the financial position
of Brilliance China Automotive Holdings
Limited and its subsidiaries as of December
31, 2001 and 2000, and the results of their
operations and their cash flows for the
years ended December 31, 2001, 2000 and
1999*, in conformity with generally
accepted accounting principles in the
United States of America.

ARTHUR ANDERSEN & CO
Hong Kong

April 25, 2002



|* |  | The 1999 consolidated financial
statements are not required to be
presented in the 2002 annual report.
|- |  | ------------------------------------------------------------------------------------------------------

F-3



---



##### Table of Contents






Consolidated Statements of Income and Comprehensive Income

For the years ended
December 31, 2002, 2001 and 2000

|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |           | 
|------------------------------------------------------------------------------------------- | --------------------------------------------- |  | --------------------------------------- | --------- | ------- |  | ------------- | --------- |  |  | ------------- | --------- | 
|                                                                                            |                                               |  | 2002                                    |           | 2001    |  | 2000         
|                                                                                            |                                               |  |                                         |           |         |  |              
|                                                                                            |                                               |  | RMB'000                                 |           | RMB'000 |  | RMB'000      
|                                                                                            |                                               |  | (except for per share and per ADS data)
|Sales to third parties                                                                      |                                               |  | 4,636,347                               |           |         |  | 2,552,780     |           |  |  | 638,513       |          
|Sales to affiliated companies                                                               |                                               |  | 2,683,108                               |           |         |  | 3,665,656     |           |  |  | 5,667,917     |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|                                                                                            | Total sales                                   |  |                                         | 7,319,455 |         |  |               | 6,218,436 |  |  |               | 6,306,430 | 
|Cost of sales                                                                               |                                               |  | (5,411,308                              | )         |         |  | (4,307,988    | )         |  |  | (4,436,155    | )        
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|                                                                                            | Gross profit                                  |  |                                         | 1,908,147 |         |  |               | 1,910,448 |  |  |               | 1,870,275 | 
|Selling, general and administrative expenses                                                |                                               |  | (1,067,154                              | )         |         |  | (673,391      | )         |  |  | (663,181      | )        
|Interest expense                                                                            |                                               |  | (171,286                                | )         |         |  | (178,028      | )         |  |  | (96,280       | )        
|Interest income                                                                             |                                               |  | 43,617                                  |           |         |  | 110,735       |           |  |  | 116,029       |          
|Equity in earnings of associated companies, net                                             |                                               |  | 138,145                                 |           |         |  | 40,043        |           |  |  | 62,264        |          
|Subsidy income                                                                              |                                               |  |                                        |           |         |  |              |           |  |  | 181,600       |          
|Other income (expenses), net                                                                |                                               |  | 1,009                                   |           |         |  | 3,456         |           |  |  | (11,281       | )        
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|                                                                                            | Income before taxation and minority interests |  |                                         | 852,478   |         |  |               | 1,213,263 |  |  |               | 1,459,426 | 
|Income taxes                                                                                |                                               |  | (146,610                                | )         |         |  | (116,250      | )         |  |  | (316,337      | )        
|Minority interests                                                                          |                                               |  | (95,403                                 | )         |         |  | (209,936      | )         |  |  | (273,059      | )        
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|                                                                                            | Net income                                    |  |                                         | 610,465   |         |  |               | 887,077   |  |  |               | 870,030   | 
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|Basic earnings per share                                                                    |                                               |  | RMB0.1665                               |           |         |  | RMB0.2510     |           |  |  | RMB0.2761     |          
|Basic earnings per ADS                                                                      |                                               |  | RMB16.65                                |           |         |  | RMB25.10      |           |  |  | RMB27.61      |          
|Diluted earnings per share                                                                  |                                               |  | RMB0.1665                               |           |         |  | RMB0.2510     |           |  |  | RMB0.2680     |          
|Diluted earnings per ADS                                                                    |                                               |  | RMB16.65                                |           |         |  | RMB25.10      |           |  |  | RMB26.80      |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|Weighted average number of shares outstanding                                               |                                               |  | 3,666,052,900                           |           |         |  | 3,533,552,900 |           |  |  | 3,151,418,900 |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|Weighted average number of ADSs outstanding                                                 |                                               |  | 36,660,529                              |           |         |  | 35,335,529    |           |  |  | 31,514,189    |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|Weighted average number of shares outstanding adjusted for
dilutive effect of stock options |                                               |  | 3,666,052,900                           |           |         |  | 3,533,552,900 |           |  |  | 3,245,981,803 |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          
|Weighted average number of ADSs outstanding adjusted for
dilutive effect of stock options   |                                               |  | 36,660,529                              |           |         |  | 35,335,529    |           |  |  | 32,459,818    |          
|                                                                                            |                                               |  |                                         |           |         |  |               |           |  |  |               |          

The accompanying notes are an integral part of these consolidated statements of
income.

F-4



---



##### Table of Contents






Consolidated Balance Sheets

As of December 31, 2002 and 2001

|                                            |                                            |                      |           |           |            |         |           |           |            | 
|------------------------------------------- | ------------------------------------------ | -------------------- | --------- | --------- | ---------- | ------- | --------- | --------- | ---------- | 
|                                            |                                            |                      |           | 2002      |            | 2001   
|                                            |                                            |                      |           |           |            |        
|                                            |                                            |                      |           | RMB'000   |            | RMB'000
|Assets                                      |                                            |                      |           |           |            |         |           |          
|Current assets                              |                                            |                      |           |           |            |         |           |          
|                                            | Cash and cash equivalents                  |                      |           | 1,289,150 |            |         |           | 1,220,226 |           
|                                            | Short-term bank deposits                   |                      |           | 773,389   |            |         |           |          |           
|                                            | Pledged short-term bank deposits           |                      |           | 1,350,000 |            |         |           | 1,925,805 |           
|                                            | Notes receivable                           |                      |           | 469,744   |            |         |           | 235,167   |           
|                                            | Notes receivable from affiliated companies |                      |           | 212,985   |            |         |           | 686,869   |           
|                                            | Accounts receivable, net                   |                      |           | 15,275    |            |         |           | 24,107    |           
|                                            | Due from affiliated companies              |                      |           | 774,066   |            |         |           | 596,937   |           
|                                            | Inventories, net                           |                      |           | 788,365   |            |         |           | 626,969   |           
|                                            | Other receivables                          |                      |           | 848,146   |            |         |           | 172,703   |           
|                                            | Prepayments and other current assets       |                      |           | 437,135   |            |         |           | 339,949   |           
|                                            | Advances to affiliated companies           |                      |           | 1,304,696 |            |         |           | 298,386   |           
|                                            |                                            |                      |           |           |            |         |           |           |           
|                                            |                                            | Total current assets |           |           | 8,262,951  |         |           |           | 6,127,118  | 
|Property, plant and equipment               |                                            |                      | 3,555,875 |           |            |         | 3,104,006 |          
|Intangible assets                           |                                            |                      | 624,966   |           |            |         | 681,100   |          
|Investments in associated companies         |                                            |                      | 919,446   |           |            |         | 1,313,586 |          
|Investment securities                       |                                            |                      | 17,305    |           |            |         |          |          
|Goodwill                                    |                                            |                      | 414,464   |           |            |         | 414,464   |          
|Long-term advances to an affiliated company |                                            |                      |          |           |            |         | 44,804    |          
|Long-term prepayment for fixed assets       |                                            |                      | 18,305    |           |            |         |          |          
|Deferred tax assets                         |                                            |                      | 38,041    |           |            |         |          |          
|Other long-term assets                      |                                            |                      | 2,328     |           |            |         | 11,445    |          
|                                            |                                            |                      |           |           |            |         |           |           |           
|                                            |                                            | Total assets         |           |           | 13,853,681 |         |           |           | 11,696,523 | 
|                                            |                                            |                      |           |           |            |         |           |           |           

F-5



---



##### Table of Contents



Consolidated Balance Sheets (Continued)

As of December 31, 2002 and 2001

|                                        |                                                                                                                                                                 |                            |         |            |           |      |         |            |           | 
|--------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ---------- | --------- | ---- | ------- | ---------- | --------- | 
|                                        |                                                                                                                                                                 |                            |         | 2002       |           | 2001
|                                        |                                                                                                                                                                 |                            |         |            |           |     
|                                        |                                                                                                                                                                 | RMB'000                    |         | RMB'000   
|Liabilities
and shareholders equity    |                                                                                                                                                                 |                            |         |            |           |      |         |           
|Current liabilities                     |                                                                                                                                                                 |                            |         |            |           |      |         |           
|                                        | Short-term bank loans                                                                                                                                           |                            |         | 150,000    |           |      |         | 405,500    |          
|                                        | Bank notes payable                                                                                                                                              |                            |         | 3,937,403  |           |      |         | 3,300,000  |          
|                                        | Accounts payable                                                                                                                                                |                            |         | 1,075,592  |           |      |         | 666,216    |          
|                                        | Due to affiliated companies                                                                                                                                     |                            |         | 729,369    |           |      |         | 492,079    |          
|                                        | Customer advances                                                                                                                                               |                            |         | 302,039    |           |      |         | 83,559     |          
|                                        | Other payables                                                                                                                                                  |                            |         | 352,574    |           |      |         | 385,661    |          
|                                        | Dividends payable to joint venture partners                                                                                                                     |                            |         | 21,618     |           |      |         | 46,452     |          
|                                        | Accrued expenses and other current liabilities                                                                                                                  |                            |         | 258,248    |           |      |         | 73,730     |          
|                                        | Taxes payable                                                                                                                                                   |                            |         | 343,483    |           |      |         | 234,268    |          
|                                        | Advances from affiliated companies                                                                                                                              |                            |         | 162,420    |           |      |         | 54,276     |          
|                                        |                                                                                                                                                                 |                            |         |            |           |      |         |           
|                                        |                                                                                                                                                                 | Total current liabilities  |         |            | 7,332,746 |      |         |            | 5,741,741 | 
|Commitments and contingencies (Note 19) |                                                                                                                                                                 |                            |        |            |           |      |        |           
|Minority interests                      |                                                                                                                                                                 |                            | 515,633 |            |           |      | 534,979 |           
|Shareholders
equity                    |                                                                                                                                                                 |                            |         |            |           |      |         |           
|Capital stock                           |                                                                                                                                                                 |                            |         |            |           |      |         |           
|                                        | Common stock (5,000,000,000 shares of US$0.01 each authorized and
3,666,052,900 shares of US$0.01 each issued and outstanding as of
December 31, 2002 and 2001) |                            |         | 303,194    |           |      |         | 303,194    |          
|                                        | Additional paid-in capital                                                                                                                                      |                            |         | 2,147,970  |           |      |         | 2,137,641  |          
|                                        | Other comprehensive income                                                                                                                                      |                            |         | 39,179     |           |      |         | 39,179     |          
|                                        | Dedicated capital                                                                                                                                               |                            |         | 132,179    |           |      |         | 71,356     |          
|                                        | Retained earnings                                                                                                                                               |                            |         | 3,382,780  |           |      |         | 2,868,433  |          
|                                        |                                                                                                                                                                 |                            |         |            |           |      |         |           
|                                        |                                                                                                                                                                 | Total shareholders equity |         |            | 6,005,302 |      |         |            | 5,419,803 | 
|                                        |                                                                                                                                                                 |                            |         |            |           |      |         |           
|                                        | Total liabilities and shareholders equity                                                                                                                      |                            |         | 13,853,681 |           |      |         | 11,696,523 |          
|                                        |                                                                                                                                                                 |                            |         |            |           |      |         |           

The accompanying notes are an integral part of these consolidated balance
sheets.

F-6



---



##### Table of Contents






Consolidated Statements of Cash Flows

For the years ended December 31, 2002, 2001 and 2000

|                                      |                                                                                   |                                                                                                        |                                                |                                           |          |                         |           |         |         |          |           |  |         |          |         | 
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------------------------------------------- | ----------------------------------------- | -------- | ----------------------- | --------- | ------- | ------- | -------- | --------- |  | ------- | -------- | ------- | 
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          | Year ended December 31,
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          |                        
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          | 2002                    |           | 2001    |         | 2000    
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          |                         |           |         |         |         
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          | RMB'000                 |           | RMB'000 |         | RMB'000 
|Cash flows from operating activities: |                                                                                   |                                                                                                        |                                                |                                           |          |                         |           |         |         |          |           | 
|Net income                            |                                                                                   |                                                                                                        | 610,465                                        |                                           |          |                         | 887,077   |         |         |          | 870,030   | 
|                                      | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                                                        |                                                |                                           |          |                         |           |         |         |          |           |  |        
|                                      |                                                                                   | Deferred income tax                                                                                    |                                                |                                           | (38,041  | )                       |           |         |        |          |           |  |        |         
|                                      |                                                                                   | Depreciation of fixed assets                                                                           |                                                |                                           | 213,776  |                         |           |         | 111,922 |          |           |  | 106,683 |         
|                                      |                                                                                   | Amortization of intangible assets                                                                      |                                                |                                           | 56,784   |                         |           |         |        |          |           |  |        |         
|                                      |                                                                                   | Amortization of goodwill of subsidiaries and other assets                                              |                                                |                                           |         |                         |           |         | 6,200   |          |           |  | 7,324   |         
|                                      |                                                                                   | Minority interests in net income of consolidated subsidiaries                                          |                                                |                                           | 95,403   |                         |           |         | 209,936 |          |           |  | 273,059 |         
|                                      |                                                                                   | Provision for doubtful debts and net realizable value provision for
inventory                          |                                                |                                           | 59,682   |                         |           |         | 4,352   |          |           |  | 5,227   |         
|                                      |                                                                                   | Provision for doubtful debts written back                                                              |                                                |                                           | (265     | )                       |           |         | (19,147 | )        |           |  |        |         
|                                      |                                                                                   | Provision for impairment of property, plant and equipment                                              |                                                |                                           | 2,547    |                         |           |         | 30,950  |          |           |  |        |         
|                                      |                                                                                   | Provision for impairment of investment securities                                                      |                                                |                                           | 8,500    |                         |           |         |        |          |           |  |        |         
|                                      |                                                                                   | Loss on disposal of fixed assets                                                                       |                                                |                                           | 5,147    |                         |           |         | 4,539   |          |           |  | 271     |         
|                                      |                                                                                   | Gain on disposal of an associated company                                                              |                                                |                                           | (6,014   | )                       |           |         |        |          |           |  |        |         
|                                      |                                                                                   | Amortization of deferred compensation expenses                                                         |                                                |                                           | 10,329   |                         |           |         | 15,461  |          |           |  | 88,264  |         
|                                      |                                                                                   | Equity in earnings of associated companies, net                                                        |                                                |                                           | (138,145 | )                       |           |         | (40,043 | )        |           |  | (62,264 | )       
|                                      |                                                                                   | (Increase)/decrease in operating assets net of effects
from the purchase of subsidiaries in 2001:      |                                                |                                           |          |                         |           |         |         |          |           |  |         |         
|                                      |                                                                                   |                                                                                                        | Accounts receivable                            |                                           |          | 8,279                   |           |         |         | 8,566    |           |  |         | 25,397   |        
|                                      |                                                                                   |                                                                                                        | Notes receivable                               |                                           |          | (234,577                | )         |         |         | (93,090  | )         |  |         | (85,796  | )      
|                                      |                                                                                   |                                                                                                        | Notes receivable from affiliated companies     |                                           |          | 473,884                 |           |         |         | (237,190 | )         |  |         | (102,211 | )      
|                                      |                                                                                   |                                                                                                        | Due from affiliated companies                  |                                           |          | (163,354                | )         |         |         | (477,136 | )         |  |         | (28,082  | )      
|                                      |                                                                                   |                                                                                                        | Inventories                                    |                                           |          | (202,157                | )         |         |         | 168,639  |           |  |         | (419,088 | )      
|                                      |                                                                                   |                                                                                                        | Other receivables                              |                                           |          | 11,486                  |           |         |         | 826,859  |           |  |         | (816,588 | )      
|                                      |                                                                                   |                                                                                                        | Prepayments and other current assets           |                                           |          | (88,568                 | )         |         |         | (109,967 | )         |  |         | 297      |        
|                                      |                                                                                   | Increase/(decrease) in operating liabilities net of effects
from the purchase of subsidiaries in 2001: |                                                |                                           |          |                         |           |         |         |          |           |  |         |         
|                                      |                                                                                   |                                                                                                        | Accounts payable                               |                                           |          | 409,376                 |           |         |         | 181,361  |           |  |         | 13,182   |        
|                                      |                                                                                   |                                                                                                        | Due to affiliated companies                    |                                           |          | 237,290                 |           |         |         | 133,968  |           |  |         | 84,654   |        
|                                      |                                                                                   |                                                                                                        | Commercial notes payable                       |                                           |          |                        |           |         |         | (350,000 | )         |  |         | 350,000  |        
|                                      |                                                                                   |                                                                                                        | Customer advances                              |                                           |          | 218,480                 |           |         |         | 45,786   |           |  |         | (75,036  | )      
|                                      |                                                                                   |                                                                                                        | Other payables                                 |                                           |          | 68,928                  |           |         |         | 33,251   |           |  |         | 155,727  |        
|                                      |                                                                                   |                                                                                                        | Accrued expenses and other current liabilities |                                           |          | 184,518                 |           |         |         | 8,317    |           |  |         | (29,373  | )      
|                                      |                                                                                   |                                                                                                        | Import tariff and taxes payable                |                                           |          | 109,215                 |           |         |         | (23,855  | )         |  |         | (160,320 | )      
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          |                         |           |         |         |          |           | 
|                                      |                                                                                   |                                                                                                        |                                                | Net cash provided by operating activities |          |                         | 1,912,968 |         |         |          | 1,326,756 |  |         |          | 201,357 | 
|                                      |                                                                                   |                                                                                                        |                                                |                                           |          |                         |           |         |         |          |           | 

F-7



---



##### Table of Contents



Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2002, 2001 and 2000

|                                                     |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |            |            |  
|---------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------------------- | --------- | ----------------------- | ---------- | ------- | --------- | ---------- | ---------- | - | --------- | ---------- | ---------- | -
|                                                     |                                                                        |                                                     |           | Year ended December 31,
|                                                     |                                                                        |                                                     |           |                        
|                                                     |                                                                        |                                                     |           | 2002                    |            | 2001    |           | 2000      
|                                                     |                                                                        |                                                     |           |                         |            |         |           |           
|                                                     |                                                                        |                                                     |           | RMB'000                 |            | RMB'000 |           | RMB'000   
|Cash flows from investing activities:                |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |           
|                                                     | Payment for capital expenditure                                        |                                                     |           | (798,759                | )          |         |           | (782,520   | )          |   |           | (1,016,207 | )         
|                                                     | Proceeds from disposal of fixed assets                                 |                                                     |           | 15,600                  |            |         |           | 25,085     |            |   |           | 179        |           
|                                                     | (Increase)/decrease in short-term bank deposits                        |                                                     |           | (773,389                | )          |         |           | 492,355    |            |   |           | (174,966   | )         
|                                                     | Decrease/(increase) in pledged short-term bank deposits                |                                                     |           | 575,805                 |            |         |           | (1,020,277 | )          |   |           | (371,027   | )         
|                                                     | Increase in advances to affiliated companies                           |                                                     |           | (987,516                | )          |         |           |           |            |   |           | (1,054,528 | )         
|                                                     | Decrease in advances to affiliated companies                           |                                                     |           |                        |            |         |           | 90,566     |            |   |           |           |           
|                                                     | Increase in other assets                                               |                                                     |           | (1,684                  | )          |         |           |           |            |   |           | (1,194     | )         
|                                                     | Net cash acquired from the purchase of a subsidiary                    |                                                     |           |                        |            |         |           | 6,805      |            |   |           |           |           
|                                                     | Increase in other receivables arising from short-term investments      |                                                     |           | (500,000                | )          |         |           |           |            |   |           |           |           
|                                                     | Dividends from an associated company                                   |                                                     |           |                        |            |         |           |           |            |   |           | 42,434     |           
|                                                     | Increase in investments in associated companies                        |                                                     |           |                        |            |         |           | (480,000   | )          |   |           | (16,635    | )         
|                                                     | Increase in advances to associated companies                           |                                                     |           |                        |            |         |           |           |            |   |           | (241,299   | )         
|                                                     | Decrease in advances to associated companies                           |                                                     |           |                        |            |         |           | 269,170    |            |   |           |           |           
|                                                     | Proceeds received from disposal of investment in an associated
company |                                                     |           | 260,000                 |            |         |           |           |            |   |           |           |           
|                                                     |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |            |           
|                                                     |                                                                        | Net cash used in investing activities               |           |                         | (2,209,943 | )       |           |            | (1,398,816 | ) |           |            | (2,833,243 | )
|Cash flows from financing activities:                |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |           
|                                                     | Proceeds from borrowing of short-term bank loans                       |                                                     |           | 1,746,930               |            |         |           | 950,683    |            |   |           | 1,442,867  |           
|                                                     | Repayment of short-term bank loans                                     |                                                     |           | (2,002,430              | )          |         |           | (1,592,412 | )          |   |           | (1,986,498 | )         
|                                                     | Issuance of bank notes payable                                         |                                                     |           | 7,658,304               |            |         |           | 8,080,000  |            |   |           | 5,233,160  |           
|                                                     | Repayment of bank notes payable                                        |                                                     |           | (7,020,901              | )          |         |           | (7,997,318 | )          |   |           | (2,417,145 | )         
|                                                     | Increase in advances from affiliated companies                         |                                                     |           | 108,144                 |            |         |           | 1,965      |            |   |           | 30,656     |           
|                                                     | Proceeds from issuance of common stock                                 |                                                     |           |                        |            |         |           | 716,266    |            |   |           | 345,190    |           
|                                                     | Dividends paid                                                         |                                                     |           | (35,295                 | )          |         |           | (35,306    | )          |   |           | (21,690    | )         
|                                                     | Dividends paid to joint venture partners                               |                                                     |           | (88,853                 | )          |         |           | (169,630   | )          |   |           | (28,692    | )         
|                                                     |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |            |           
|                                                     |                                                                        | Net cash provided by (used in) financing activities |           |                         | 365,899    |         |           |            | (45,752    | ) |           |            | 2,597,848  |  
|Net increase (decrease) in cash and cash equivalents |                                                                        |                                                     | 68,924    |                         |            |         | (117,812  | )          |            |   | (34,038   | )         
|Cash and cash equivalents, beginning of year         |                                                                        |                                                     | 1,220,226 |                         |            |         | 1,338,038 |            |            |   | 1,372,076 |           
|                                                     |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |            |           
|Cash and cash equivalents, end of year               |                                                                        |                                                     | 1,289,150 |                         |            |         | 1,220,226 |            |            |   | 1,338,038 |           
|                                                     |                                                                        |                                                     |           |                         |            |         |           |            |            |   |           |            |           

The accompanying notes are an integral part of these consolidated statements of
cash flows.

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Consolidated Statements of Changes in Shareholders Equity

For the years ended
December 31, 2002, 2001 and 2000

|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  |         |        |  |  |  |         |  |  |  |           |   |  |  |           |  
|------------------------------------------------------ |  | ------------- | ------------- | ------ |  | --------------- | ------- | ------------ |  | --------- | --------- | ------------- |  | --------- | -------- | -------- |  | ------- | ------ |  |  |  | ------- |  |  |  | --------- | - |  |  | --------- | -
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  | Other   |        |  |  |  |         |  |  |  |           |   |  | 
|                                                       |  | Number of     |               |        |  |                 |         | Additional   |  | Deferred  |           | Comprehensive |  | Dedicated |          | Retained |  |         |        | 
|                                                       |  | Shares Issued |               | Amount |  | Paid-in Capital |         | Compensation |  | Income    |           | Capital       |  | Earnings  |          | Total   
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |         
|                                                       |  |               |               |        |  | RMB000         |         | RMB000      |  | RMB000   |           | RMB000       |  | RMB000   |          | RMB000  |  | RMB000
|                                                       |  |               |               |        |  |                 |         |              |  | (Note 29) |           |               | 
|Balance at December 31, 1999                           |  |               | 152,184,645   |        |  |                 | 12,332  |              |  |           | 1,263,322 |               |  |           |         |          |  |         | 39,179 |  |  |  | 5,191   |  |  |  | 1,228,973 |   |  |  | 2,548,997 |  
|Deferred compensation
related to stock options         |  |               |              |        |  |                 |        |              |  |           | 88,264    |               |  |           | (88,264  | )        |  |         |       |  |  |  |        |  |  |  |          |   |  |  |          |  
|Amortization of deferred
compensation expenses         |  |               |              |        |  |                 |        |              |  |           |          |               |  |           | 88,264   |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  | 88,264    |  
|Stock split of 19 shares for 1
share on April 14, 2000 |  |               | 2,891,508,255 |        |  |                 | 239,370 |              |  |           | (239,370  | )             |  |           |         |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  |          |  
|Exercise of employee stock
options                     |  |               | 304,360,000   |        |  |                 | 25,189  |              |  |           | 320,001   |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  | 345,190   |  
|Net income                                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | 870,030   |   |  |  | 870,030   |  
|Dividend declared and paid                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | (16,176   | ) |  |  | (16,176   | )
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  |         |        |  |  |  |         |  |  |  |           |   |  |  |           |  
|Balance at December 31, 2000                           |  |               | 3,348,052,900 |        |  |                 | 276,891 |              |  |           | 1,432,217 |               |  |           |         |          |  |         | 39,179 |  |  |  | 5,191   |  |  |  | 2,082,827 |   |  |  | 3,836,305 |  
|Issuance of shares                                     |  |               | 318,000,000   |        |  |                 | 26,303  |              |  |           | 689,963   |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  | 716,266   |  
|Deferred compensation
related to stock options         |  |               |              |        |  |                 |        |              |  |           | 15,461    |               |  |           | (15,461  | )        |  |         |       |  |  |  |        |  |  |  |          |   |  |  |          |  
|Amortization of deferred
compensation expenses         |  |               |              |        |  |                 |        |              |  |           |          |               |  |           | 15,461   |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  | 15,461    |  
|Net income                                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | 887,077   |   |  |  | 887,077   |  
|Transfer to dedicated capital                          |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  | 66,165  |  |  |  | (66,165   | ) |  |  |          |  
|Dividend declared and paid                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | (35,306   | ) |  |  | (35,306   | )
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  |         |        |  |  |  |         |  |  |  |           |   |  |  |           |  
|Balance at December 31, 2001                           |  |               | 3,666,052,900 |        |  |                 | 303,194 |              |  |           | 2,137,641 |               |  |           |         |          |  |         | 39,179 |  |  |  | 71,356  |  |  |  | 2,868,433 |   |  |  | 5,419,803 |  
|Deferred compensation
related to stock options         |  |               |              |        |  |                 |        |              |  |           | 183,542   |               |  |           | (183,542 | )        |  |         |       |  |  |  |        |  |  |  |          |   |  |  |          |  
|Amortization of deferred
compensation expenses         |  |               |              |        |  |                 |        |              |  |           |          |               |  |           | 10,329   |          |  |         |       |  |  |  |        |  |  |  |          |   |  |  | 10,329    |  
|Net income                                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | 610,465   |   |  |  | 610,465   |  
|Transfer to dedicated capital                          |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  | 60,823  |  |  |  | (60,823   | ) |  |  |          |  
|Dividend declared and paid                             |  |               |              |        |  |                 |        |              |  |           |          |               |  |           |         |          |  |         |       |  |  |  |        |  |  |  | (35,295   | ) |  |  | (35,295   | )
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  |         |        |  |  |  |         |  |  |  |           |   |  |  |           |  
|Balance at December 31, 2002                           |  |               | 3,666,052,900 |        |  |                 | 303,194 |              |  |           | 2,321,183 |               |  |           | (173,213 | )        |  |         | 39,179 |  |  |  | 132,179 |  |  |  | 3,382,780 |   |  |  | 6,005,302 |  
|                                                       |  |               |               |        |  |                 |         |              |  |           |           |               |  |           |          |          |  |         |        |  |  |  |         |  |  |  |           |   |  |  |           |  

The accompanying notes are an integral part of these consolidated statements of
changes in shareholders equity.

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##### Table of Contents






Notes to Consolidated Financial Statements

1.  ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT

Brilliance China Automotive Holdings Limited (the Company) was incorporated
in Bermuda on June 9, 1992 with limited liability. The Companys ADSs and
shares are traded on The New York Stock Exchange Inc. (NYSE) and The Stock
Exchange of Hong Kong Limited (SEHK) respectively.

On December 18, 2002, Huachen Automotive Group Holdings Company Limited
(Huachen) entered into a principal agreement (the Principal Agreement)
with the Chinese Financial Education Development Foundation (the
Foundation), the then substantial shareholder, to purchase from the
Foundation a total of 1,446,121,500 shares of common stock, representing
approximately 39.446% of the issued share capital of the Company and the
Foundations entire shareholding interest in the Company. Completion of the
Principal Agreement took place upon signing.

The Company is an investment holding company. The principal activities of the
Companys subsidiaries are the manufacturing and sales of minibuses, sedans and
automotive components in the Peoples Republic of China (the PRC).

Details of the Companys principal subsidiaries as of December 31, 2002 are as
follows:

|                                                                                                                                                       |  |                   |  |                       |     |                      |  |      |  |                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- |  | --------------------- | --- | -------------------- |  | ---- |  | ---------------------------------------------------------
|                                                                                                                                                       |  |                   |  | Percentage of equity  |     |                     
|                                                                                                                                                       |  | Place of          |  | interest/voting right |     |                     
|                                                                                                                                                       |  | establishment/    |  | attributable to the   |     |                     
|Name                                                                                                                                                   |  | incorporation     |  | Company               |     | Principal activities
|                                                                                                                                                       |  |                   |  |                       |     |                     
|                                                                                                                                                       |  |                   |  | Directly              |     | Indirectly           |  |     
|                                                                                                                                                       |  |                   |  |                       |     |                      |  |     
|Shenyang Brilliance JinBei
Automobile Co., Limited (formerly
Shenyang Jinbei Passenger Vehicle
Manufacturing Company Limited
or Shenyang Automotive) |  | Shenyang, the PRC |  |                       | 51  | %                    |  |     |  | Manufacturing, assembly and
sales of minibuses and
sedans
|                                                                                                                                                      
|Ningbo Yuming Machinery Industrial
Co., Ltd. (Ningbo Yuming)                                                                                         |  | Ningbo, the PRC   |  |                       |    |                      |  | 51%  |  | Manufacturing and sales of
automotive components         
|                                                                                                                                                      
|Shenyang XingYuanDong Automobile
Component Co., Ltd. (Xing Yuan
Dong)                                                                                |  | Shenyang, the PRC |  |                       | 100 | %                    |  |     |  | Manufacturing and trading of
automotive components       
|                                                                                                                                                      
|Ningbo Brilliance Ruixing Auto
Components Co., Ltd. (Ningbo
Ruixing)                                                                                 |  | Ningbo, the PRC   |  |                       | 100 | %                    |  |     |  | Manufacturing and trading of
automotive components       
|                                                                                                                                                      
|Mianyang Brilliance Ruian
Automotive Components Co., Ltd.
(Mianyang Ruian)                                                                           |  | Mianyang, the PRC |  |                       | 100 | %                    |  |     |  | Manufacturing and trading of
automotive components       
|                                                                                                                                                      
|Shenyang Brilliance Dongxing
Automotive Component Co., Ltd.
(Dongxing Automotive)                                                                    |  | Shenyang, the PRC |  |                       |    |                      |  | 100% |  | Manufacturing and trading of
automotive components       
|                                                                                                                                                      
|Shenyang Xingchen Automotive
Seats Co., Ltd. (Xingchen
Automotive Seats)                                                                             |  | Shenyang, the PRC |  |                       |    |                      |  | 90%  |  | Ceased operations                                        

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Notes to Consolidated Financial Statements (Continued)

In June 2000, the Company established
Ningbo Ruixing in the PRC as a wholly-owned
subsidiary of the Company. Ningbo Ruixing
is principally engaged in the manufacturing
and trading of automotive components. In
2000, 100% of Ningbo Ruixings sales were
made to Shenyang Automotive and 100% of
Ningbo Ruixings purchases were from Ningbo
Yuming. In July 2000, the Company
established Mianyang Ruian in the PRC as a
wholly-owned subsidiary of the Company.
Mianyang Ruian is principally engaged in
the manufacturing and trading of automotive
components. In 2000, 100% of sales of
Mianyang Ruian were made to Mianyang
Xinchen Engine Co., Ltd.

In December 2000, the Company entered into
an agreement with Brilliance Holdings
Limited for the acquisition of the entire
issued share capital of China Brilliance
Automotive Components Group Limited
(Automotive Components) at a
consideration of RMB388 million. Automotive
Components is an investment holding company
incorporated in Bermuda. The principal
asset of Automotive Components is a 50%
interest in the registered capital of
Shenyang Xinguang Brilliance Automotive
Engine Co., Ltd, a Sino-foreign equity
joint venture established in the PRC whose
principal products are gasoline engines for
the use in passenger vehicles and light
duty trucks.

In December 2001, the Company entered into
an agreement with Brilliance Holdings
Limited for the acquisition of the entire
issued share capital of Key Choices Group
Limited (Key Choices) at a
consideration of approximately RMB278
million. Key Choices is an investment
holding company and its principal assets
are the 100% equity interest in the
registered capital of Dongxing Automotive
and 90% equity interest in the registered
capital of Xingchen Automotive Seats.
Dongxing Automotive is a foreign-invested
enterprise established in the PRC whose
principal products are automotive
components for the use in passenger
vehicles. Xingchen Automotive Seats is a
Sino-foreign equity joint venture
established in the PRC in December 2001 and
principally engaged in the manufacturing of
automotive seats. The operations of
Xingchen Automotive Seats ceased in 2002.

In December 2001, Xing Yuan Dong entered
into an agreement with two affiliated
companies to establish China Zhengtong
Investment Holdings Co., Ltd.
(Zhengtong). Pursuant to the agreement,
Xing Yuan Dong contributed cash amounting
to RMB480 million to acquire a 47.06%
equity interest in Zhengtong. Zhengtongs
principal activity is investment holding.
In December 2002, Xing Yuan Dong disposed
of its entire equity interest in Zhengtong
to an affiliated company at a consideration
of RMB480 million.

Details of the Groups investment in
associated companies are included in Note
13.

For the years ended December 31, 2002, 2001
and 2000, approximately 10%, 42% and 1% of
the consolidated revenue was generated from
Shanghai Yuantong Automobile Sales and
Service Company Limited (Shanghai
Yuantong), an affiliated company. For the
years ended December 31, 2002, 2001 and
2000, approximately 23%, 15% and 76% of the
consolidated revenue was generated from
Shanghai Shenhua Holdings Co., Ltd.
(formerly Shanghai Brilliance Group Co.,
Ltd.) (Shanghai Shenhua), also an
affiliated company.

2.  BASIS OF PRESENTATION

The financial statements are prepared in
accordance with generally accepted
accounting principles in the United States
of America (U.S. GAAP). The preparation
of financial statements in conformity with
U.S. GAAP requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities,
the disclosure of contingent assets and
liabilities as of the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates. This basis of accounting
differs from that used in the statutory
financial statements of the Companys
subsidiaries, which were prepared in
accordance with the relevant accounting
principles and financial reporting
regulations applicable to foreign
investment enterprises as established by
the Ministry of Finance in the PRC. Certain
accounting principles stipulated under U.S.
GAAP are not applicable in the PRC.

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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

The principal adjustments made to conform
the statutory financial statements to U.S.
GAAP included the following:



| |  | Reclassification of certain items,
designated as prepayments and
construction-in-progress in the
statutory financial statements, as
property, plant and equipment;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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
and goodwill;                                                                                       
| 
| |  | Recognition of research and
development expenditures; and                                                                                                             
| 
| |  | Recognition of stock-based compensation.                                                                                                                              

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)  Basis of consolidation

The consolidated financial statements of
the Group include the financial statements
of the Company and the enterprises that it
controls. This control is normally
evidenced when the Group has the power to
govern the financial and operating policies
of an enterprise so as to benefit from its
activities. The results of subsidiaries
acquired or disposed of during the period
are consolidated from or to their effective
dates of acquisition or disposal. The
equity and net income attributable to
minority shareholders interests are shown
separately in the Groups balance sheet and
income statement respectively.

Intragroup balances and transactions,
including sales to companies within the
Group, and resulting unrealized profits are
eliminated in full. Unrealized losses
resulting from intragroup transactions are
eliminated unless the cost cannot be
recovered. Consolidated financial
statements are prepared using uniform
accounting policies for like transactions
and other events in similar circumstances.

(b)  Sales

Sales represent the invoiced value of
goods, net of consumption tax, discounts
and returns, and are recognized when goods
are delivered to the customers and the
significant risks and rewards of ownership
of the goods have been transferred to
customers. Provisions for sales allowances
and rebates are made at the time of sales
of goods and are recognized as a reduction
of sales.

(c)  Cash, cash equivalents and short-term bank deposits

Cash represents cash on hand and deposits
with financial institutions which are
repayable on demand. Cash equivalents
represent short-term, highly liquid
investments which are readily
convertible into known amounts of cash and
which are subject to an insignificant risk
of changes in value.

Bank deposits with original maturity
between three and twelve months are
classified as short-term deposits.

(d)  Inventories

Inventories are carried at the lower of
cost or net realizable value. Cost is
calculated on the moving-average basis and
comprises all costs of purchase, costs of
conversion and other costs incurred in
bringing the inventories to their present
location and condition. Net realizable
value is the estimated selling price in the
ordinary course of business less the
estimated costs of completion and the
estimated costs of sale. Provision for net
realizable value for inventories is
recognized when the net realizable value of
an inventory item falls below its cost. The
amount of any write-down of inventories to
net realizable value and all losses of
inventories are recognized as an expense in
the period the write-down or loss occurs.

When inventories are sold, the carrying
amount of those inventories is recognized
as an expense in the period in which the
related revenue is recognized.

(e)  Property, plant and equipment

Property, plant and equipment are stated at
cost less accumulated depreciation. The
cost of an asset comprises its purchase
price and any directly attributable costs
of

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Notes to Consolidated Financial Statements (Continued)

bringing the asset to its working condition
and location for its intended use.
Expenditure incurred after the assets have
been put into operation, such as repairs
and maintenance and overhaul costs, is
normally charged to the income statement in
the period in which it is incurred. In
situations where it can be clearly
demonstrated that the expenditure has
resulted in an increase in the future
economic benefits expected to be obtained
from the use of the assets beyond its
originally assessed standard of
performance, the expenditure is capitalized
as an additional cost of the assets.

Depreciation is calculated on a
straight-line basis, at annual rates
estimated to write off the cost less
estimated residual value of 10% of each
asset over its expected useful life. The
annual rates are as follows:

|                                                             |  |  |    |  
|------------------------------------------------------------ |  |  | -- | -
|Buildings                                                    |  |  | 5  | %
|Machinery and equipment (excluding special
tools and moulds) |  |  | 10 | %
|Furniture, fixtures and office equipment                     |  |  | 20 | %
|Motor vehicles                                               |  |  | 20 | %

The costs of special tools and moulds
included in machinery and equipment are
amortized over their estimated productive
periods.

Land use rights are amortized on a
straight-line basis over the term of lease.

When fixed assets are sold or retired,
their cost and accumulated depreciation are
eliminated from the accounts and any gain
or loss resulting from their disposal is
included in the income statement.

Construction-in-progress consists of
factories and office buildings under
construction and machinery pending
installation and includes the costs of
construction, machinery and equipment, and
interest charges arising from borrowings
used to finance these assets during the
period of construction or installation. No
provision for depreciation is made on
construction-in-progress until such time as
the relevant assets are completed and ready
for their intended use.

(f)  Intangible assets

Intangible assets are stated at cost less
accumulated amortization. Cost is the
amount of cash or cash equivalents paid or
the fair value of the other consideration
given to acquire the intangible asset.
Amortization is calculated on a
straight-line basis over the estimated
useful life of 7 years.

(g)  Impairment of long-lived assets

Statement of Financial Accounting Standards
(SFAS) No. 144 Accounting for the
Impairment or Disposal of Long-lived
Assets requires that long-lived assets be
reviewed for impairment whenever events or
changes in circumstances indicate that the
carrying amount of an asset may not be
recoverable from its undiscounted future
cash flow. If such assets are considered to
be impaired, the impairment to be
recognized is measured as the
amount by which the carrying amount of the
assets exceeds the fair value of the
assets.

(h)  Goodwill

Goodwill represents the excess of the
purchase price over the fair value of the
net assets resulting from the Companys
acquisitions of interests in its
subsidiaries. Before the adoption of SFAS
No. 142 Goodwill and other Intangible
Assets by the Group on January 1, 2002,
goodwill is amortized on a straight-line
basis over the expected future economic
life, being the shorter of 40 years or the
remaining life of the respective
subsidiaries. In July 2001, the Financial
Accounting Standards Board (FASB)
issued SFAS No. 142, which addresses
financial accounting and reporting for
goodwill and other intangible assets
subsequent to their acquisition. SFAS No.
142 provides that intangible assets which
have indefinite useful lives and goodwill
will not be amortized but rather will be
tested at least annually for impairment.
Intangible assets with a finite life shall
continue to be amortized over the estimated
useful lives. The Company adopted SFAS No.
142 effective January
1, 2002. Upon adoption, the Company ceased
amortizing goodwill.

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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

(i)  Investments in associated companies

An associated company is a company in which
the Group has significant influence, but
not control or joint control, and thereby
has the ability to participate in the
investees financial and operating policy
decisions. Investments in associated
companies are accounted for using the
equity method. Goodwill arising on the
acquisition of interests in associated
companies is included in the carrying
amount of the investment.

(j)  Investment securities

The Groups investment securities are
stated at cost less any provision for
impairment losses. Declines in fair value
that are determined to be other than
temporary are charged to income. Realized
gains and losses on sales of investment
securities are included in income on a
specific identified cost basis.

(k)  Taxation

Income Tax

The Company was incorporated under the laws
of Bermuda and has received an undertaking
from the Minister of Finance in Bermuda
pursuant to the provisions of the Exempted
Undertakings Tax Protection Act, 1966,
which exempts the Company and its
shareholders, other than shareholders
ordinarily residing in Bermuda, from any
Bermuda taxes computed on profit, income or
any capital asset gain or appreciation, or
any tax in the nature of estate duty or
inheritance tax, at least until year 2016.

The Company also provides for Hong Kong
profits tax at the rate of 16% based on
estimated assessable profit arising in Hong
Kong.

The subsidiaries are subject to state and
local income taxes in the PRC at their
respective tax rates, based on the taxable
income reported in their statutory
financial statements in accordance with the
relevant state and local income tax laws
applicable.

Shenyang Automotive is subject to state and
local income taxes in the PRC at standard
rates of 15% and 3% respectively in
accordance with enterprise income tax laws
applicable to Sino-foreign equity joint
venture enterprises.

Ningbo Yuming is subject to state and local
income taxes in the PRC at standard rates
of 15% and 3% respectively in accordance
with enterprise income tax laws applicable
to foreign-invested enterprises. Pursuant
to the relevant income tax laws in the PRC,
Ningbo Yuming is fully exempted from state
enterprise income tax for two years
starting from the year ended December 31,
1997, followed by a 50% reduction of
enterprise income tax for the next three
years thereafter. In addition, Ningbo
Yuming is also fully exempted from local
enterprise income tax for the five-year
period. As a result, the effective tax rate
for Ningbo Yuming was 18% for the year
ended December 31, 2002 and 7.5% for the
years ended December 31, 2001 and December
31, 2000.

Xing Yuan Dong is subject to state and
local income taxes in the PRC at standard
rates of 30% and 3% respectively in
accordance with enterprise income tax laws.
Xing Yuan Dong received official
designation by the local tax authorities as
a New and Technologically-Advanced
Enterprise in 1999. During 2001, Xing
Yuan Dong was further designated by the
local tax authority as a foreign-invested
enterprise engaged in manufacturing
activities. As a result, the effective
combined state and local enterprise income
tax rate for Xing Yuan Dong was 7.5%, 7.5%
and 33% respectively for the years ended
December 31, 2002, 2001 and 2000.

Mianyang Ruian is subject to state and
local income taxes in the PRC at standard
rates of 30% and 3% respectively in
accordance with enterprise income tax laws.
During 2001, Mianyang Ruian received
official designation by the local tax
authority as a foreign-invested enterprise
engaged in manufacturing activities.
Pursuant to the relevant income tax laws in
the PRC, Mianyang Ruian is exempted from
state and local enterprise income tax for
two years starting from the first
profitable year followed by a 50% reduction
of enterprise income tax for the next three
years. As a result, Mianyang Ruian was
exempted from income tax for the years
ended December 31, 2002 and December 31,
2001. For the year ended December 31, 2000,
Mianyang Ruian was subject to state and
local income taxes at the standard rates.

F-14



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

Dongxing Automotive is subject to state and
local income taxes in the PRC at standard
rates of 15% and 0% respectively in
accordance with enterprise income tax laws
applicable to New and
Technologically-Advanced Enterprises. In
addition, Dongxing Automotive also received
official designation by the local tax
authority as a foreign-invested enterprise
engaged in manufacturing activities.
Pursuant to the relevant income tax laws in
the PRC, Dongxing Automotive is exempted
from state enterprise income tax for two
years starting from the first profitable
year followed by a 50% reduction of state
enterprise income tax for the next three
years. In addition, Dongxing Automotive is
also exempted from local enterprise income
tax for the five-year period. As a result,
the effective tax rate for Dongxing
Automotive was 7.5% for the years ended
December 31, 2002 and 2001.

Other subsidiaries in the PRC are subject
to state and local income taxes in the PRC
at standard rates of 30% and 3%,
respectively, based on the taxable income
reported in their statutory financial
statements in accordance with the relevant
state and local income tax laws applicable
to foreign-invested enterprises.

Value Added Tax (VAT) and Consumption Tax

The general VAT rate applicable to sales
and purchases of minibuses, sedans and
automotive components in the PRC is 17%.

Sales of minibuses and sedans are also
subject to consumption tax at standard
rates of 3% to 5%.

(l)  Deferred taxation

Deferred income taxes are provided using
the liability method in which deferred
income taxes are recognized for temporary
differences between the tax and financial
statement bases of assets and liabilities.
The tax consequences of those differences
expected to occur in subsequent years are
recorded as assets and liabilities on the
balance sheets.

(m)  Foreign currency translation

The functional currency of the Company and
its subsidiaries is RMB. Transactions
denominated in foreign currencies are
translated into RMB at the unified exchange
rates quoted by the Peoples Bank of China
prevailing at the dates of the
transactions. Monetary assets and
liabilities denominated in foreign
currencies are translated into RMB using
the applicable unified exchange rates
prevailing at the balance sheet dates. The
resulting exchange differences are included
in the determination of income.
Non-monetary assets and liabilities
denominated in foreign currencies are
translated into RMB using the applicable
exchange rates prevailing at the time of
transaction.

Foreign currency translation adjustments in
other comprehensive income arose from the
Companys change in functional currency in
previous year.

(n)  Warranty

A provision is recognized when an
enterprise has a present obligation (legal
or constructive) as a result of a past
event and it is probable (i.e. more likely
than not) that an outflow of resources
embodying economic benefits will be
required to settle the obligation, and a
reliable estimate can be made of the amount
of the obligations. Provisions are reviewed
at each balance sheet date and adjusted to
reflect the current best estimate. Where
the effect of the time value of money is
material, the amount of a provision is the
present value of the expenditures expected
to be required to settle the obligation.

Shenyang Automotives minibuses are sold
with an eighteen-month or 30,000 kilometers
first-to-occur limited warranty. The sedans
are sold with a twenty-four-month or 40,000
kilometers first-to-occur limited warranty.
During the warranty period, Shenyang
Automotive pays service stations for parts
and labor covered by the warranty.

The costs of the warranty obligation are
accrued at the time the sales are
recognized, based on the estimated costs of
fulfilling the total obligations, including
handling and transportation costs. The
factors used to estimate warranty expenses
are reevaluated periodically in light of
actual experience.

F-15



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

The reconciliation of the changes in the
warranty obligation for 2002 is as follows:

|                                          |  |         |         |  
|----------------------------------------- |  | ------- | ------- | -
|                                          |  | RMB000
|                                          |  |        
|Balance as of January 1, 2002             |  |         | 8,852   |  
|Accrual for warranties issued during 2002 |  |         | 31,127  |  
|Settlement made during 2002               |  |         | (21,125 | )
|                                          |  |         |         |  
|Balance as of December 31, 2002           |  |         | 18,854  |  
|                                          |  |         |         |  

(o)  Advertising expenses

Advertising expenses are expensed as
incurred. For the years ended December 31,
2002, 2001 and 2000, advertising expenses
of approximately RMB123.6 million, RMB35.7
million (see also Note 23(e)) and RMB126.7
million, respectively, have been charged to
selling, general and administrative
expenses.

(p)  Research and development expenses

Research and development expenses are
expensed as incurred. For the years ended
December 31, 2002, 2001 and 2000, research
and development expenses of approximately
RMB304.9 million, RMB26.9 million and
RMB7.6 million, respectively, have been
charged to selling, general and
administrative expenses.

(q)  Operating leases

Leases where substantially all the rewards
and risks of ownership remain with the
lessor are accounted for as operating
leases. Rental expenses under operating
leases are charged to the income statement
on a straight-line basis over the period of
the relevant leases.

(r)  Stock-based
compensation

The Company accounts for stock-based
employee compensation arrangements in
accordance with the provisions of
Accounting Principles Board (APB)
Opinion No. 25 Accounting for Stock
Issued to Employee, which states that
compensation expense related to employee
stock options is recorded if, on the date
of grant, the fair value of the underlying
stock exceeds the exercise price. The
Company adopted the disclosure-only
requirements of SFAS No. 123 Accounting
for Stock-Based Compensation and the
related amendments under
the provisions of SFAS No. 148 Accounting
for Stock-Based Compensation, Transition
and Disclosure which allow entities to
continue to apply the provisions of APB
Opinion No. 25 and provide pro-forma net
income or loss and pro-forma earnings or
loss per share disclosures for employee
stock options as if the fair-value-based
method of accounting as prescribed in SFAS
No. 123 and SFAS No. 148 was adopted.

Had compensation cost for the Companys
stock options granted been determined based
on the fair value of the stock options at
the
grant date, consistent with the provisions
of SFAS No. 123 and SFAS No. 148, the
Companys net income and earnings per share
for the years ended December 31, 2002, 2001
and 2000 would have been adjusted to the
pro-forma amounts indicated below:

|                                        |  |         |         |         |  |         |         |   |  |  |          |  
|--------------------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | - |  |  | -------- | -
|                                        |  | 2002    |         | 2001    |  | 2000   
|                                        |  |         |         |         |  |        
|                                        |  | RMB000 |         | RMB000 |  | RMB000
|Net income as
reported                  |  |         | 610,465 |         |  |         | 887,077 |   |  |  | 870,030  |  
|Add: Adjustments for
APB Opinion
No. 25 |  |         | 10,329  |         |  |         | 15,461  |   |  |  | 88,264   |  
|Less: Fair value of
stock options       |  |         | (12,565 | )       |  |         | (76,857 | ) |  |  | (105,306 | )
|                                        |  |         |         |         |  |         |         |   |  |  |          |  
|Pro-forma net income                    |  |         | 608,229 |         |  |         | 825,681 |   |  |  | 852,988  |  
|                                        |  |         |         |         |  |         |         |   |  |  |          |  

|                            |             |      |        |      |  |      |        |  |  |  |        | 
|--------------------------- | ----------- | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                            |             | 2002 |        | 2001 |  | 2000
|                            |             |      |        |      |  |     
|                            |             | RMB  |        | RMB  |  | RMB 
|Basic earnings per share:   |             |      |        |      |  |      |        |  |  |  |       
|                            | As reported |      | 0.1665 |      |  |      | 0.2510 |  |  |  | 0.2761 | 
|                            | Pro-forma   |      | 0.1659 |      |  |      | 0.2337 |  |  |  | 0.2707 | 
|Diluted earnings per share: |             |      |        |      |  |      |        |  |  |  |       
|                            | As reported |      | 0.1665 |      |  |      | 0.2510 |  |  |  | 0.2680 | 
|                            | Pro-forma   |      | 0.1659 |      |  |      | 0.2337 |  |  |  | 0.2628 | 

(s)  Earnings per share and earnings per ADS

The calculation of earnings per share is
based on the weighted average number of
shares of common stock outstanding during
the year.

F-16



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

The diluted earnings per share for the year
is calculated based on the weighted average
number of common stock mentioned above and
adjusted for all dilutive potential
ordinary shares outstanding during the
year. The effect of the stock split on
April 14, 2000 has been reflected
retrospectively for the purpose of earnings
per share computation.

A reconciliation of the weighted average
number of common stock used in calculation
of basic and diluted earnings per share is
as follows:

|                                                                                                                                        |  |      |               |      |  |      |               |  |  |  |               | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------- | ---- |  | ---- | ------------- |  |  |  | ------------- | 
|                                                                                                                                        |  | 2002 |               | 2001 |  | 2000
|                                                                                                                                        |  |      |               |      |  |     
|Weighted average number
of common stock used
in calculation of basic
earnings per share                                                 |  |      | 3,666,052,900 |      |  |      | 3,533,552,900 |  |  |  | 3,151,418,900 | 
|Dilutive effect of stock
options                                                                                                        |  |      |              |      |  |      |              |  |  |  | 94,562,903    | 
|Weighted average number
of common stock
adjusted for dilutive
effect of stock options
used in calculation of
diluted earnings per
share |  |      | 3,666,052,900 |      |  |      | 3,533,552,900 |  |  |  | 3,245,981,803 | 

The effect of the assumed conversion of the
potential common stock outstanding for the
years ended December 31, 2002 and 2001 is
anti-dilutive.

On April 14, 2000, the Companys shares
traded on the NYSE were converted to ADSs
at a ratio of 100 shares to each ADS. The
calculation of earnings per ADS is based on
the weighted average number of ADSs
outstanding during the years presented. The
weighted average number of ADS outstanding
is calculated based on the assumptions that
the ADSs had been in existence throughout
all the years presented and that all of the
outstanding ordinary shares were held in
the form of ADSs (at the ratio of 100
shares for each ADS).

A reconciliation of the weighted average
number of ADSs for calculation of basic and
diluted earnings per ADS is as follows:

|                                                                                                                              |  |      |            |      |  |      |            |  |  |  |            | 
|----------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  |  | ---------- | 
|                                                                                                                              |  | 2002 |            | 2001 |  | 2000
|                                                                                                                              |  |      |            |      |  |     
|Weighted average
number of ADSs
used in
calculation of
basic earnings
per ADS                                                 |  |      | 36,660,529 |      |  |      | 35,335,529 |  |  |  | 31,514,189 | 
|Dilutive effect of
stock options                                                                                              |  |      |           |      |  |      |           |  |  |  | 945,629    | 
|Weighted average
number of ADSs
adjusted for
dilutive effect of
stock options
used in
calculation of
diluted earnings
per ADS |  |      | 36,660,529 |      |  |      | 35,335,529 |  |  |  | 32,459,818 | 

(t)  Segmental information

Segmental information is presented in
accordance with SFAS No. 131 Disclosures
about Segments of an Enterprise and Related
Information which establishes standards
for reporting information about operating
segments on a basis consistent with the
Companys internal organization structure
as well as information about geographic
areas and major customers. Disclosure of
segmental information in accordance with
SFAS No. 131 is made in Note 28.

(u)  Comprehensive income

SFAS No. 130 Reporting Comprehensive
Income requires the components of
comprehensive income to be disclosed in the
financial statements. Comprehensive income
consists of net income and other gains and
losses affecting shareholders equity that,
under generally accepted accounting
principles, are excluded from net income.

F-17



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

There was no other comprehensive income or
loss for the years ended December 31, 2002,
2001 and 2000 other than net income for the
three years.

(v)  Other recent accounting pronouncements

In June 2001, the FASB issued SFAS No. 143
Accounting for Asset Retirement
Obligations which addresses accounting
and reporting for obligations associated
with the retirement of tangible long-lived
assets and the associated asset retirement
costs. SFAS No. 143 is effective for fiscal
years beginning after June 15, 2002.
Management does not expect that the
adoption of SFAS No. 143 will have a
material effect on the Groups financial
position or results of operations.

In April 2002, the FASB issued SFAS No. 145
Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. SFAS No. 145
requires gains and losses on
extinguishments of debt to be classified as
income or loss from continuing operations,
rather than as extraordinary items, as
previously required under SFAS No. 4
Reporting Gains and Losses from
Extinguishment of Debt, an amendment of APB
Opinion No. 30. Extraordinary treatment
will be required for certain
extinguishments, as provided in APB Opinion
No. 30 Reporting the Results of
Operations  Reporting the Effects of
Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. The
statement also amended SFAS No.
13 Accounting for Leases for certain
sale-leaseback transactions and sublease
accounting. SFAS No. 145 is effective since
January 1, 2003. Management does not expect
that the adoption of SFAS No. 145 will have
a material effect on the Groups financial
position or results of operations.

In June 2002, the FASB issued SFAS No. 146
Accounting for Costs Associated with Exit
or Disposal Activities. SFAS No. 146
addresses financial accounting and
reporting for costs associated with exit or
disposal activities and nullifies EITF
Issue No. 94-3 Liability Recognition for
Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including
Certain Costs Incurred in a
Restructuring), and must be applied
beginning on January 1, 2003. SFAS No. 146 requires that
a liability for a cost associated with an
exit or disposal activity be recognized
when the liability is incurred rather than
when the exit or disposal plan is approved.
Management does not expect that the
adoption of SFAS No. 146 will have a
material effect on the Groups financial
position or results of operations.

In December 2002, the FASB issued SFAS No.
148 Accounting for Stock-Based
Compensation, Transition and Disclosure.
SFAS No. 148 provides alternative methods
of transition for a voluntary change to the
fair value based method of accounting for
stock-based employee compensation. SFAS No.
148 also requires that disclosures of the
pro-forma effect of using the fair value
method of accounting for stock-based
employee compensation be displayed more
prominently and in a tabular format.
Additionally,
SFAS No. 148 requires disclosure of the
pro-forma effect in interim financial
statements. SFAS No. 148 is effective for
financial statements for fiscal years ended
after December 15, 2002. Please refer to
Note 3(r) for relevant disclosures.

In December 2002, FASB Interpretation No.
(FIN) 45, Guarantors Accounting and
Disclosure Requirements for Guarantees,
Including Indirect Guarantees of
Indebtedness of Others was issued. FIN 45
requires that at the time a company issues
a guarantee, the company must recognize an
initial liability for the fair value, or
market value, of the obligations it assumes
under that guarantee. This interpretation
is applicable on a prospective basis to
guarantees issued or modified after
December 31, 2002. Management is currently
evaluating the impact of recognizing such
liabilities, if any, on the Groups
consolidated financial position and results
of operations. FIN 45 also contains
disclosure provisions surrounding existing
guarantees, which are effective for
financial statements with periods ended
after December 15, 2002. Please refer to
Note 3(n) and Note 19 for details.

In January 2003, the FASB issued FIN 46
Consolidation of Variable Interest
Entities, an Interpretation of ARB No.
51. FIN 46 requires certain variable
interest entities to be consolidated by the
primary beneficiary of the entity if the

F-18



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

equity investors in the entity do not have
the characteristics of a controlling
financial interest or do not have
sufficient equity at risk for the entity to
finance its activities without additional
subordinated financial support from other
parties. FIN 46 is effective for all new
variable interest entities created or
acquired after January 31, 2003. For
variable interest entities created or
acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for
the first interim or annual period
beginning after June 15, 2003. Management
does not expect that the adoption of FIN 46
will have a material effect on the Groups
financial position or results of
operations.

4.  SUBSIDY INCOME

Xing Yuan Dong was granted a subsidy of
approximately RMB181,600,000 by the
Administrative Committee of Shenyang New
and High-Tech Industrial Development Zone
for the year ended December 31, 2000.
During 2000, approximately RMB88 million
was received by the Company and the
remaining balance was received in 2001.

5.  INCOME TAXES

For the years ended December 31, 2002, 2001
and 2000, certain of the Companys
subsidiaries were subject to income taxes
in the PRC at the applicable statutory tax
rates on taxable income as reported in the
statutory financial statements adjusted for
the reduced tax rates and exemptions
described in Note 3(k).

The amount of income taxes charged to the
consolidated income statement represents:

|                  |  |         |         |         |  |         |         |  |  |  |         | 
|----------------- |  | ------- | ------- | ------- |  | ------- | ------- |  |  |  | ------- | 
|                  |  | 2002    |         | 2001    |  | 2000   
|                  |  |         |         |         |  |        
|                  |  | RMB000 |         | RMB000 |  | RMB000
|Current taxation  |  |         | 184,651 |         |  |         | 116,250 |  |  |  | 316,337 | 
|Deferred taxation |  |         | (38,041 | )       |  |         |        |  |  |  |        | 
|                  |  |         |         |         |  |         |         |  |  |  |         | 
|                  |  |         | 146,610 |         |  |         | 116,250 |  |  |  | 316,337 | 
|                  |  |         |         |         |  |         |         |  |  |  |         | 

The reconciliation of the Groups effective
income tax rate (based on income before
taxes and minority interests) to its
statutory income tax rate for years ended
December 31, 2002, 2001 and 2000 is as
follows:

|                                                                                          |  |      |       |      |  |      |       |    |  |  |       |   
|----------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | -- |  |  | ----- | --
|                                                                                          |  | 2002 |       | 2001 |  | 2000
|                                                                                          |  |      |       |      |  |     
|Average statutory tax
rate (including state
and local income
taxes)                       |  |      | 18.58 | %    |  |      | 18.93 | %  |  |  | 26.26 | % 
|Effect of statutory tax
holiday                                                           |  |      | (9.30 | %)   |  |      | (7.72 | %) |  |  | (1.67 | %)
|Effect of permanent
difference relating
to non-deductible
expenses (non-
taxable subsidy) |  |      | 5.91  | %    |  |      |      |    |  |  | (3.10 | %)
|Others, not
individually
significant                                                      |  |      | 2.01  | %    |  |      | (1.63 | %) |  |  | 0.19  | % 
|                                                                                          |  |      |       |      |  |      |       |    |  |  |       |   
|Effective tax rate                                                                        |  |      | 17.20 | %    |  |      | 9.58  | %  |  |  | 21.68 | % 
|                                                                                          |  |      |       |      |  |      |       |    |  |  |       |   

The average statutory tax rates for the
relevant periods represented the weighted
average tax rates of the Companys
subsidiaries calculated on the basis of the
relative amount of net income and the
applicable statutory tax rate of each
subsidiary.

As of December 31, 2002, deferred tax asset
mainly arose from pre-operating expenses
and accrued expenses which were not fully
deductible in 2002 but will be available
for deduction in future years. The tax
effects for amounts available for future
deduction arising from pre-operating
expenses and accrued expenses were
approximately RMB16.8 million and RMB15.3
million, respectively. As of December 31,
2001 and 2000, there were no material
deferred tax assets or liabilities.

F-19



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

6.  PLEDGED SHORT-TERM BANK DEPOSITS

As of December 31, 2002 and 2001,
approximately RMB1,350.0 million and
RMB1,925.8 million respectively of the
short-term bank deposits were pledged as
security for banking facilities.

7.  ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of:

|                                   |  |         |         |         |  |  |         |  
|---------------------------------- |  | ------- | ------- | ------- |  |  | ------- | -
|                                   |  | 2002    |         | 2001   
|                                   |  |         |         |        
|                                   |  | RMB000 |         | RMB000
|Accounts receivable                |  |         | 67,024  |         |  |  | 77,166  |  
|Less: Allowance for doubtful debts |  |         | (51,749 | )       |  |  | (53,059 | )
|                                   |  |         |         |         |  |  |         |  
|                                   |  |         | 15,275  |         |  |  | 24,107  |  
|                                   |  |         |         |         |  |  |         |  

8.  NOTES RECEIVABLE

Notes receivable are primarily notes
received from customers for the settlement
of trade receivable balances. As of
December 31, 2002 and 2001, all notes
receivable were guaranteed by established
banks in the PRC and have maturities of
between one to six months. The fair value
of the notes receivable approximated their
carrying value.

9.  OTHER RECEIVABLES

As of December 31, 2002, included in other
receivables was an amount of RMB500 million
deposited with an investment company during
the year. This arrangement was terminated
during the year and the deposit was fully
refunded subsequent to year end at the
original amount.

During 2002, Xing Yuan Dong disposed of its
entire equity interest in Zhengtong to an
affiliated company at original investment
cost of RMB480 million (the
Consideration). As of December 31,
2002, other receivables included
outstanding Consideration of RMB220
million, of which approximately RMB183
million was received in March 2003.

As of December 31, 2001, other receivables
were primarily advances to third parties
and subsidy receivables from the
Administrative Committee of Shenyang New
and High-Tech Industrial Development Zone.
The advances to third parties
of approximately RMB23.4 million were
guaranteed by Shenyang JinBei Automotive
Company Limited (formerly known as Shenyang
Brilliance Automotive Company Limited)
(JinBei), a joint venture partner of
Shenyang Automotive and carried interest at
6.138% per annum and had no fixed repayment
dates.

10.  INVENTORIES

Inventories consist of:

|                                     |  |         |         |         |  |  |         |  
|------------------------------------ |  | ------- | ------- | ------- |  |  | ------- | -
|                                     |  | 2002    |         | 2001   
|                                     |  |         |         |        
|                                     |  | RMB000 |         | RMB000
|Raw materials                        |  |         | 399,182 |         |  |  | 319,173 |  
|Work-in-progress                     |  |         | 126,202 |         |  |  | 46,783  |  
|Finished goods                       |  |         | 309,563 |         |  |  | 273,417 |  
|Less: Net realizable value provision |  |         | (46,582 | )       |  |  | (12,404 | )
|                                     |  |         |         |         |  |  |         |  
|                                     |  |         | 788,365 |         |  |  | 626,969 |  
|                                     |  |         |         |         |  |  |         |  

11.  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of:

|                                         |  |         |           |         |  |  |           |  
|---------------------------------------- |  | ------- | --------- | ------- |  |  | --------- | -
|                                         |  | 2002    |           | 2001   
|                                         |  |         |           |        
|                                         |  | RMB000 |           | RMB000
|Buildings                                |  |         | 794,371   |         |  |  | 624,783   |  
|Machinery and equipment                  |  |         | 2,965,625 |         |  |  | 2,247,392 |  
|Motor vehicles                           |  |         | 75,765    |         |  |  | 67,900    |  
|Furniture, fixtures and office
equipment |  |         | 145,357   |         |  |  | 96,071    |  
|Construction-in-progress                 |  |         | 453,028   |         |  |  | 738,931   |  
|                                         |  |         |           |         |  |  |           |  
|                                         |  |         | 4,434,146 |         |  |  | 3,775,077 |  
|Less: Provision for impairment
losses    |  |         | (31,922   | )       |  |  | (30,950   | )
|                                         |  |         |           |         |  |  |           |  
|                                         |  |         | 4,402,224 |         |  |  | 3,744,127 |  
|Less: Accumulated depreciation           |  |         | (846,349  | )       |  |  | (640,121  | )
|                                         |  |         |           |         |  |  |           |  
|Net book value                           |  |         | 3,555,875 |         |  |  | 3,104,006 |  
|                                         |  |         |           |         |  |  |           |  

F-20



---



##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

During 2001, certain obsolete moulds were
written down to their estimated residual
value and the related impairment losses
were charged to selling, general and
administrative expenses during the year.

During the years ended December 31, 2002,
2001, and 2000, capitalized interest
expense amounted to approximately RMB0.8
million, RMB49.2 million and RMB79.1
million respectively.

12.  INTANGIBLE ASSETS

|                          |  |         |         |         |  |  |         | 
|------------------------- |  | ------- | ------- | ------- |  |  | ------- | 
|                          |  | 2002    |         | 2001   
|                          |  |         |         |        
|                          |  | RMB000 |         | RMB000
|Cost                      |  |         |         |         |  |  |         | 
|Beginning of year         |  |         | 681,100 |         |  |  | 681,100 | 
|Additions                 |  |         | 650     |         |  |  |        | 
|                          |  |         |         |         |  |  |         | 
|End of year               |  |         | 681,750 |         |  |  | 681,100 | 
|                          |  |         |         |         |  |  |         | 
|Accumulated amortization  |  |         |         |         |  |  |         | 
|Beginning of year         |  |         |        |         |  |  |        | 
|Amortization for the year |  |         | (56,784 | )       |  |  |        | 
|                          |  |         |         |         |  |  |         | 
|End of year               |  |         | (56,784 | )       |  |  |        | 
|                          |  |         |         |         |  |  |         | 
|Net book value            |  |         |         |         |  |  |         | 
|End of year               |  |         | 624,966 |         |  |  | 681,100 | 
|                          |  |         |         |         |  |  |         | 
|Beginning of year         |  |         | 681,100 |         |  |  | 681,100 | 
|                          |  |         |         |         |  |  |         | 

Intangible asset amounting to RMB681.1
million represents rights, titles and
interest in certain design and engineering
agreements and technical assistance
agreement relating to a sedan project
acquired from an affiliated company of
Brilliance Holdings Limited in 2000. No
amortization was charged in 2001 as the
intangible asset was not available for its
intended use by December 31, 2001.
Amortization commenced when the intangible
asset was available for its intended use in
2002.

For each of the 5 years ending December 31,
2007, the estimated amortization expense of
the intangible assets as of December 31,
2002 is approximately RMB97.3 million.

F-21



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

13.  INVESTMENTS IN ASSOCIATED COMPANIES

Investments in associated companies as of December 31, 2002 consist of:

|                                                                                           |  |                   |  |                       |       |                      |  |                                                                                  
|------------------------------------------------------------------------------------------ |  | ----------------- |  | --------------------- | ----- | -------------------- |  | ---------------------------------------------------------------------------------
|                                                                                           |  | Place of          |  | Percentage of equity 
|                                                                                           |  | establishment/    |  | interest/voting right
|Name of company                                                                            |  | incorporation     |  | held indirectly       |       | Principal activities
|                                                                                           |  |                   |  |                       |       |                     
|Mianyang Xinchen Engine Co., Ltd.
(Mianyang Xinchen)                                     |  | Mianyang, the PRC |  |                       | 50    | %                    |  | Manufacturing and sales
of automotive engines
for minibuses and light
duty trucks
|                                                                                          
|Shenyang Aerospace Mitsubishi
Motors Engine Manufacturing Co.,
Ltd. (Shenyang Aerospace) |  | Shenyang, the PRC |  |                       | 12.77 | %                    |  | Manufacturing and sales
of automotive engines
for sedans and
minibuses           
|                                                                                          
|Shenyang Xinguang Brilliance
Automotive Engine Co., Ltd.
(Xinguang Brilliance)           |  | Shenyang, the PRC |  |                       | 50    | %                    |  | Manufacturing and sales
of automotive engines
for minibuses and light
duty trucks

F-22



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

The carrying values of investments in
associated companies are:

|                                                                          |  |         |         |         |  |  |           | 
|------------------------------------------------------------------------- |  | ------- | ------- | ------- |  |  | --------- | 
|                                                                          |  | 2002    |         | 2001   
|                                                                          |  |         |         |        
|                                                                          |  | RMB000 |         | RMB000
|Investment in Mianyang Xinchen                                            |  |         | 287,829 |         |  |  | 248,846   | 
|Investment in Compass Pacific
Holdings Limited (Compass
Pacific)        |  |         |        |         |  |  | 29,793    | 
|Investment in Shenyang Aerospace                                          |  |         | 187,697 |         |  |  | 153,769   | 
|Investment in China Zhengtong
Investment Holdings Co., Ltd.
(Zhengtong) |  |         |        |         |  |  | 480,000   | 
|Investment in Xinguang Brilliance                                         |  |         | 443,920 |         |  |  | 401,178   | 
|                                                                          |  |         |         |         |  |  |           | 
|                                                                          |  |         | 919,446 |         |  |  | 1,313,586 | 
|                                                                          |  |         |         |         |  |  |           | 

In December 2001, Xing Yuan Dong (a
100%-owned subsidiary) entered into an
agreement with two affiliated companies to
establish Zhengtong. Pursuant to the
agreement, Xing Yuan Dong contributed cash
amounting to RMB480 million to acquire a
47.06% equity interest in Zhengtong.
Zhengtongs principal activity is
investment holding. The Group disposed of
its entire equity interest in Zhengtong to
an affiliated company in December 2002 at a
consideration of RMB480 million.

Since November 2002, certain directors of
the Company ceased to be the directors of
Compass Pacific, a formerly associated
company. As such, the directors consider
that the Company could not exert
significant influence over Compass Pacific,
and the investment in Compass Pacific was
reclassified as investment securities,
which was stated at the net book value at
the time of reclassification less provision
for impairment losses.

The acquisition of associated companies
have been accounted for using the purchase
method of accounting. The tangible assets
were valued in the acquisitions at their
estimated fair values. The excess of the
purchase price over the fair values of the
net assets acquired has been accounted for
as goodwill. The carrying values of
goodwill of the associated companies, which
are included in the carrying amount of
investments in associated companies, are:

|                    |  |         |         |         |  |  |         | 
|------------------- |  | ------- | ------- | ------- |  |  | ------- | 
|                    |  | 2002    |         | 2001   
|                    |  |         |         |        
|                    |  | RMB000 |         | RMB000
|Mianyang Xinchen    |  |         | 91,410  |         |  |  | 91,410  | 
|Compass Pacific     |  |         |        |         |  |  | 10,285  | 
|Shenyang Aerospace  |  |         | 31,983  |         |  |  | 31,983  | 
|Xinguang Brilliance |  |         | 299,694 |         |  |  | 299,694 | 
|                    |  |         |         |         |  |  |         | 
|                    |  |         | 423,087 |         |  |  | 433,372 | 
|                    |  |         |         |         |  |  |         | 

Before the adoption of SFAS No. 142 as of
January 1, 2002, equity method goodwill was
amortized on a straight-line basis over the
expected future economic life. Since
January 1, 2002, goodwill ceased to be amortized.
Pro-forma disclosures for goodwill are
presented in Note 14.

The equity shares in the income (loss) of
the associated companies in 2002 and 2001
are:

|                    |  |         |         |         |  |  |        |  
|------------------- |  | ------- | ------- | ------- |  |  | ------ | -
|                    |  | 2002    |         | 2001   
|                    |  |         |         |        
|                    |  | RMB000 |         | RMB000
|Mianyang Xinchen    |  |         | 66,955  |         |  |  | 34,031 |  
|Compass Pacific     |  |         | (3,989  | )       |  |  | (3,375 | )
|Shenyang Aerospace  |  |         | 33,937  |         |  |  | (3,791 | )
|Xinguang Brilliance |  |         | 47,256  |         |  |  | 13,178 |  
|Zhengtong           |  |         | (6,014  | )       |  |  |       |  
|                    |  |         |         |         |  |  |        |  
|                    |  |         | 138,145 |         |  |  | 40,043 |  
|                    |  |         |         |         |  |  |        |  

F-23



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

Combined financial information of the
associated companies is summarized as
follows:

|                            |  |         |           |         |  |  |           | 
|--------------------------- |  | ------- | --------- | ------- |  |  | --------- | 
|                            |  | 2002    |           | 2001   
|                            |  |         |           |        
|                            |  | RMB000 |           | RMB000
|Revenue                     |  |         | 2,087,319 |         |  |  | 1,732,108 | 
|Profit before taxation, net |  |         | 409,745   |         |  |  | 81,322    | 
|Net income                  |  |         | 391,773   |         |  |  | 70,678    | 
|Current assets              |  |         | 1,449,819 |         |  |  | 2,288,293 | 
|Non-current assets          |  |         | 1,242,550 |         |  |  | 1,344,050 | 
|                            |  |         |           |         |  |  |           | 
|Total assets                |  |         | 2,692,369 |         |  |  | 3,632,343 | 
|                            |  |         |           |         |  |  |           | 
|Current liabilities         |  |         | 858,212   |         |  |  | 572,000   | 
|Long-term liabilities       |  |         | 585,402   |         |  |  | 824,336   | 
|                            |  |         |           |         |  |  |           | 
|Total liabilities           |  |         | 1,443,614 |         |  |  | 1,396,336 | 
|                            |  |         |           |         |  |  |           | 
|Total owners equity        |  |         | 1,248,755 |         |  |  | 2,236,007 | 
|                            |  |         |           |         |  |  |           | 

14.  GOODWILL

|                                           |  |         |         |         |  |  |         |  
|------------------------------------------ |  | ------- | ------- | ------- |  |  | ------- | -
|                                           |  | 2002    |         | 2001   
|                                           |  |         |         |        
|                                           |  | RMB000 |         | RMB000
|Cost, beginning of year                    |  |         | 439,583 |         |  |  | 248,316 |  
|Additions from acquisition of a
subsidiary |  |         |        |         |  |  | 191,267 |  
|Less: Accumulated amortization             |  |         | (25,119 | )       |  |  | (25,119 | )
|                                           |  |         |         |         |  |  |         |  
|                                           |  |         | 414,464 |         |  |  | 414,464 |  
|                                           |  |         |         |         |  |  |         |  

Before the adoption of SFAS No. 142 as of
January 1, 2002, goodwill was amortized on
a straight-line basis over the expected
future economic life. Since January 1,
2002, goodwill ceased to be amortized.

Pro-forma disclosure of net income and
earnings per share in all periods presented
excluding amortization of goodwill arising
from acquisition of subsidiaries and
associated companies in accordance with
SFAS No. 142 is as follows:

|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|----------------------------------- |  | ---------- | ------- | --------- |  | --------- | ------- | --------- |  |  | ------- | 
|                                    |  | 2002       |         | 2001      |  | 2000     
|                                    |  |            |         |           |  |          
|                                    |  | RMB000    |         | RMB000   |  | RMB000  
|Reported net income                 |  |            | 610,465 |           |  |           | 887,077 |           |  |  | 870,030 | 
|Goodwill amortization               |  |            |        |           |  |           | 6,200   |           |  |  | 6,355   | 
|Equity method goodwill
amortization |  |            |        |           |  |           | 11,313  |           |  |  | 3,398   | 
|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|Adjusted net income                 |  |            | 610,465 |           |  |           | 904,590 |           |  |  | 879,783 | 
|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|Reported basic earnings per
share   |  | RMB0.1665  |         | RMB0.2510 |  | RMB0.2761
|Goodwill amortization               |  |            |        |           |  | RMB0.0018 |         | RMB0.0020
|Equity method goodwill
amortization |  |            |        |           |  | RMB0.0032 |         | RMB0.0011
|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|Adjusted basic earnings per
share   |  | RMB.0.1665 |         | RMB0.2560 |  | RMB0.2792
|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|Reported diluted earnings per
share |  | RMB0.1665  |         | RMB0.2510 |  | RMB0.2680
|Goodwill amortization               |  |            |        |           |  | RMB0.0018 |         | RMB0.0020
|Equity method goodwill
amortization |  |            |        |           |  | RMB0.0032 |         | RMB0.0010
|                                    |  |            |         |           |  |           |         |           |  |  |         | 
|Adjusted diluted earnings per
share |  | RMB0.1665  |         | RMB0.2560 |  | RMB0.2710
|                                    |  |            |         |           |  |           |         |           |  |  |         | 

15.  BANK NOTES PAYABLE

As of December 31, 2002 and 2001, certain
bank notes payable were bank notes secured
by bank deposits of approximately
RMB1,350.0 million and RMB1,925.8 million,
respectively.

16.  TAXES PAYABLE

Taxes payable consist of:

|                         |  |         |         |         |  |  |         |  
|------------------------ |  | ------- | ------- | ------- |  |  | ------- | -
|                         |  | 2002    |         | 2001   
|                         |  |         |         |        
|                         |  | RMB000 |         | RMB000
|VAT payable (prepayment) |  |         | 54,314  |         |  |  | (7,119  | )
|Income taxes payable     |  |         | 133,920 |         |  |  | 70,833  |  
|Others                   |  |         | 155,249 |         |  |  | 170,554 |  
|                         |  |         |         |         |  |  |         |  
|                         |  |         | 343,483 |         |  |  | 234,268 |  
|                         |  |         |         |         |  |  |         |  

F-24



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

17.  INTEREST EXPENSE AND INTEREST INCOME

|                 |  |         |          |         |  |         |          |   |  |  |         |  
|---------------- |  | ------- | -------- | ------- |  | ------- | -------- | - |  |  | ------- | -
|                 |  | 2002    |          | 2001    |  | 2000   
|                 |  |         |          |         |  |        
|                 |  | RMB000 |          | RMB000 |  | RMB000
|Interest expense |  |         | (171,286 | )       |  |         | (178,028 | ) |  |  | (96,280 | )
|Interest income  |  |         | 43,617   |         |  |         | 110,735  |   |  |  | 116,029 |  
|                 |  |         |          |         |  |         |          |   |  |  |         |  
|                 |  |         | (127,669 | )       |  |         | (67,293  | ) |  |  | 19,749  |  
|                 |  |         |          |         |  |         |          |   |  |  |         |  

18.  SHORT-TERM BANK LOANS

Short-term bank loans were drawn for
working capital purposes and to finance
construction-in-progress, and are
denominated in Renminbi and U.S. Dollars.
The loans are repayable within one year and
bear interests at the prevailing lending
rates in the PRC, which ranged from 5.31%
to 5.841% per annum during the year ended
December 31, 2002, 5.58% to 8.53% per annum
during the year ended December 31, 2001 and
from 5.56% to 8.52% per annum during the
year ended December 31, 2000. The weighted
average borrowing rate as at December 31,
2002, 2001 and 2000 was 5.487%, 6.002% and
6.329%, respectively.

As of December 31, 2002 and 2001, the
Groups secured short-term bank loans were:

|                                                     |  |              |         |         |  |  |         | 
|---------------------------------------------------- |  | ------------ | ------- | ------- |  |  | ------- | 
|                                                     |  | December 31,
|                                                     |  |             
|                                                     |  | 2002         |         | 2001   
|                                                     |  |              |         |        
|                                                     |  | RMB000      |         | RMB000
|Secured by:                                          |  |              |         |         |  |  |         | 
|Property, plant and equipment of
Shenyang Automotive |  |              | 150,000 |         |  |  |        | 
|Guaranteed by:                                       |  |              |         |         |  |  |         | 
|The Company                                          |  |              |        |         |  |  | 200,000 | 

19.  COMMITMENTS AND CONTINGENCIES

(a)  Commitments

As of December 31, 2002, the Group had
approximately RMB1,021.9 million in
outstanding commitments of which certain
items are denominated in Deutsch Marks,
U.S. Dollars and Euros. The amount included
contracted but not provided for capital
commitment for construction projects,
investment and acquisition, purchase of
equipment, and others amounting to
approximately RMB710.9 million, future
aggregate minimum lease payments under
noncancellable operating leases regarding
leased properties amounting to
approximately RMB85.6 million, and
authorized but not contracted for capital
commitment amounting to approximately
RMB225.4 million.

The future aggregate minimum lease payments
under noncancellable operating leases
regarding leased properties are detailed as
follows:

|                    |  |         |        | 
|------------------- |  | ------- | ------ | 
|                    |  | 2002   
|                    |  |        
|                    |  | RMB000
|Within one year     |  |         | 10,818 | 
|One to two years    |  |         | 6,071  | 
|Two to three years  |  |         | 5,284  | 
|Three to four years |  |         | 3,493  | 
|Four to five years  |  |         | 3,493  | 
|Over five years     |  |         | 56,469 | 
|                    |  |         |        | 
|                    |  |         | 85,628 | 
|                    |  |         |        | 

(b) Contingent liabilities



|(i) |  | The Group had endorsed or discounted
bank notes which were not yet honored by
the issuers as of December 31, 2002 and
2001 of approximately RMB1,414 million and
RMB1,145 million, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-25



---



##### Table of Contents



Notes to Consolidated Financial Statements (Continued)



|(ii) |  | As of December 31, 2002, subsidiaries
of the Group had provided the following
guarantees:
|---- |  | -----------------------------------------------------------------------------------------



| | (1) |  | Corporate guarantees of
approximately RMB740 million (2001:
RMB1,114 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
banking 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, 2002, the guarantee
provided for the bank loans and
notes drawn by affiliated companies
of Shanghai Shenhua was
approximately RMB740 million, which
is also the maximum potential
amount of future payments under the
guarantee as of December 31, 2002.
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, 2002.
|
| | (2) |  | A joint and several proportional
guarantee with all the initial joint
venture partners of Shenyang Aerospace
on a long-term bank loan of
approximately RMB374 million (2001:
RMB540 million) drawn by Shenyang
Aerospace which will expire in 2008:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |     |  | The guarantee was provided by the
joint venture partners 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 joint venture
partners are jointly and severally
liable to repay the outstanding
balance. There is no recourse or
collateralization provision in the
guarantee. As of December 31, 2002,
the guarantee provided for the
outstanding bank loan of Shenyang
Aerospace was RMB374 million, which
is also the maximum potential
amount of future payments under the
guarantee as of December 31, 2002.
However, default by Shenyang
Aerospace is considered remote by
management and therefore no
liability for the guarantors
obligation under the guarantee
existed as of December 31, 2002.                                                                                                                                                                                                                                                                                                             



|(iii) |  | As of December 31, 2002, subsidiaries
of the Group had issued letters of credit
amounting to RMB44 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(iv)  |  | As of December 31, 2002, Shenyang
Automotive placed bank security deposits
amounting to approximately RMB48 million
and issued bank guarantees of RMB50 million
at the request of the General
Administration of Customs, pending the
completion of an assessment of the
eligibility on the exemption of the VAT and
custom duties related to certain imported
fixed assets of this operating subsidiary.
Subsequent to year end, bank guarantees
amounting to RMB30 million were released.
Management is currently in discussion
with the relevant authorities. Should
these fixed assets be not eligible for
such exemption, additional VAT and
custom duties to be determined by the
relevant authorities may be levied. The
directors consider any additional
liabilities in excess of the security
deposits would not be significant.
|     
|(v)   |  | On January 21, 2003, a writ dated
January 21, 2003 (the Writ) brought by
Broadsino Finance Company Limited
(Broadsino) as Plaintiff was filed with
the Supreme Court of Bermuda and an ex
parte Court Order dated January 22, 2003
(the Court Order) granted by the
Supreme Court of Bermuda in favor of
Broadsino was served on the registered
office of the Company in Bermuda. The Writ
alleged that the interest of the
Foundation, a former significant
shareholder, in certain 1,446,121,500
shares of the                                                                                                                                                                                                                                                                                                                   

F-26



---



##### Table of Contents



Notes to Consolidated Financial Statements (Continued)



| |  | Company (the Sale Shares) was held
in trust for Broadsino. The Court Order
restrained the Company from among other
things: (a) registering the transfer of
the Sale Shares by the Foundation to
Huachen and/ or Huachen to certain
directors of the Company; or (b) if
such transfer has already been
registered, registering any further
dealings in such Sale Shares, in each
case pending determination by the
Bermuda court of the legal proceedings
initiated by Broadsino against the
Company, the Foundation, Huachen and
certain directors of the Company.
Broadsino claims that the Company was
aware of the trust arrangement and
further alleges that the Company
knowingly participated in a breach of
that trust arrangement by allowing the
transfer of the Sale Shares from the
Foundation to Huachen. Broadsino seeks
recovery of the Sale Shares and in the
alternative damages.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Upon application by the Company, the
Court Order was discharged by a
judgement of the Supreme Court of
Bermuda given on February 11, 2003. On
February 26, 2003, a Statement of Claim
(the Statement of Claim) was filed
by Broadsino as a procedural step in
furtherance of the legal proceedings.
On March 10, 2003, the Company has
taken out summons (the Strikeout
Summons) at the Bermuda court to have
the Writ and the Statement of Claim
struck out. The directors do not
believe this litigation to have any
significant impact on the financial
position of the Company.                                                                                                                                                                                                                                                                                                            

F-27



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

20.  CAPITAL STOCK

|                             |  |           |           |        |  |            |  |           |           |        |  |            |  |           |           |  |  |            |  |  |  |  |  | 
|---------------------------- |  | --------- | --------- | ------ |  | ---------- |  | --------- | --------- | ------ |  | ---------- |  | --------- | --------- |  |  | ---------- |  |  |  |  |  | 
|                             |  | 2002      |           | 2001   |  | 2000      
|                             |  |           |           |        |  |           
|                             |  | Number of |           |        |  |            |  | Number of |           |        |  |            |  | Number of |           |  |  |           
|                             |  | shares    |           | Amount |  | shares     |  | Amount    |           | shares |  | Amount    
|                             |  |           |           |        |  |            |  |           |           |        |  |           
|                             |  | 000      |           | 000   |  | 000       |  | 000      |           | 000   |  | 000      
|Authorized:                  |  |           |           |        |  |            |  |           |           |        |  |            |  |           |           |  |  |            |  |  |  |  |  | 
|Common stock of US$0.01 each |  |           | 5,000,000 |        |  | US$50,000  |  |           | 5,000,000 |        |  | US$50,000  |  |           | 5,000,000 |  |  | US$50,000 
|Issued and fully paid:       |  |           |           |        |  |            |  |           |           |        |  |            |  |           |           |  |  |            |  |  |  |  |  | 
|Common stock of US$0.01 each |  |           | 3,666,053 |        |  | RMB303,194 |  |           | 3,666,053 |        |  | RMB303,194 |  |           | 3,348,053 |  |  | RMB276,891

F-28



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

During 2000, certain directors and
employees exercised their stock options
(see Note 21 for details) and as a result
304,360,000 shares of common stock of
US$0.01 each were issued at a price of
HK$1.059 per share. These new shares ranked
pari passu with existing shares.

On May 25, 2001, arrangements were made for
a private placement to professional and
institutional investors of 318,000,000
common stock of US$0.01 each at a price of
HK$2.20 per share by Zhuhai Brilliance, a
then shareholder, and Mr. Yang Rong,
ex-Chairman of the Company. The price of
HK$2.20 per share represented a discount of
approximately 12% to the closing market
price of the Companys shares of HK$2.50
per share as quoted on SEHK on May 24,
2001. On the same date, the Company entered
into a subscription agreement with Zhuhai
Brilliance and Mr. Yang Rong for the
subscription of 318,000,000 new shares of
common stock of US$0.01 each at a price of
HK$2.20 per share (the Subscription).
The Subscription was completed in June
2001. The subscription price was equivalent
to the placing price mentioned above. All
the shares issued during 2001 ranked pari
passu with the then existing shares in all
respects.

21.  STOCK OPTIONS

Upon the listing on the Companys shares on
the SEHK, the Company adopted an employee
share option scheme (the Scheme).
Pursuant to the Scheme, the Companys Board
of Directors may grant options to employees
of the Group to subscribe for the Companys
common stock at a price which shall be the
higher of:



|(a) |  | a price being not less than 80% of the
average closing price of the common stock
on the relevant Stock Exchange as stated in
such Stock Exchanges quotation sheets for
the five trading days immediately preceding
the relevant date in respect of such
options; or
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | the nominal value of the common stock.                                                                                                                                                                                                                              

The maximum number of shares on which
options may be granted may not exceed 10%
of the issued share capital of the Company
excluding any shares issued on the exercise
of the option from time to time.

On January 13, 2000, stock options were
granted to certain directors and employees
entitling them to subscribe for a total of
304,360,000 shares of common stock at
HK$1.059 per share (after taking into
account the effect of the nineteen for one
stock split on April 14, 2000). All the
above share options vested immediately upon
the date of grant and are exercisable
within a period of 10 years. The
compensation expense associated with these
grants was approximately RMB88.3 million
and was charged to income during the year
ended December 31, 2000. All of the above
stock options were exercised by the
respective directors and employees in 2000.

On June 2, 2001, share options were granted
to certain directors and employees of the
Company, entitling them to subscribe for a
total of 31,800,000 shares of the Companys
common stock at HK$1.896 per share. The
exercisable period of these options is from
June 2, 2001 to June 1, 2011. The
compensation expense associated with these
grants was approximately RMB15.5 million
and was charged to income during the year
ended December 31, 2001. Up to December 31,
2002, none of the above share options was
exercised. No option was granted under the
Scheme in 2002.

|                        |  |           |         |          |  |          |  | 
|----------------------- |  | --------- | ------- | -------- |  | -------- |  | 
|                        |  | Number of |         |          |  |         
|                        |  | stock     |         | Exercise
|                        |  | options   |         | price   
|                        |  |           |         |         
|                        |  | ('000)    |         |          |  |         
|As of January 1, 2001   |  |           |        |          |  |          |  | 
|Granted                 |  |           | 31,800  |          |  | HK$1.896
|Exercised               |  |           |        |          |  |          |  | 
|Cancelled/lapsed        |  |           |        |          |  |          |  | 
|                        |  |           |         |          |  |          |  | 
|As of December 31, 2001 |  |           | 31,800  |          |  |          |  | 
|Granted                 |  |           |        |          |  |          |  | 
|Exercised               |  |           |        |          |  |          |  | 
|Cancelled/lapsed        |  |           | (13,972 | )        |  |          |  | 
|                        |  |           |         |          |  |          |  | 
|As of December 31, 2002 |  |           | 17,828  |          |  |          |  | 
|                        |  |           |         |          |  |          |  | 

F-29



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

As a result of this transaction, the
additional paid-in capital for the year
ended December 31, 2001 was increased by
approximately RMB15.5 million.

On June 28, 2002, the Company adopted a new
share option scheme (the New Scheme) in
compliance with the amendments to the
listing rules and regulations of SEHK which
came into effect on September 1, 2001. The
New Scheme has come into effect on July 15,
2002 and the original share option scheme
adopted by the Company on September 18,
1999 (as described above) was terminated.
Any new share option granted after July 15,
2002 will be in accordance with the terms
of the New Scheme, but the outstanding
share option granted in 2001 will not be
affected. Pursuant to the New Scheme, the
Companys Board of Directors may grant
options to the participants (including the
Groups employees, non-executive directors,
suppliers and customers, etc.) to subscribe
for the Companys common stock at a price
which shall not be lower than the higher
of:



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

As of December 31, 2002, no share option
was granted under the New Scheme.

On December 18, 2002, Huachen entered into
the Principal Agreement with the
Foundation, the then substantial
shareholder, to purchase from the
Foundation a total of 1,446,121,500 shares
of common stock, representing approximately
39.446% of the issued share capital of the
Company and the Foundations entire
shareholding interest in the Company.
Completion of the Principal Agreement took
place upon signing.

On December 18, 2002, each of Mr. Wu Xiao
An, Mr. Su Qiang, Mr. Hong Xing and Mr. He
Tao (the Management Directors) entered
into a call option agreement (Call Option
Agreements) with Huachen, immediately
after the Principal Agreement was entered
into and after completion of the sale and
purchase of the common stock pursuant
thereto. Pursuant to the terms of the Call
Option Agreements, Huachen granted to each
of the Management Directors a call option
in respect of a specified number of shares
of common stock, totaling 346,305,630
shares in aggregate and representing
approximately 9.446% of the issued share
capital of the Company, at an exercise
price of HK$0.95 per share. Each call
option is exercisable in whole or in part
at any time during the period of 3 years
commencing from the date falling 6 months
after February 6, 2003, the closing date of the general
offer made to the remaining shareholders by
Huachen and the Management Directors dated
December 18, 2002.

Under the terms of the Call Option
Agreements, the Management Directors may
elect to pay the exercise price in full or
to pay 10% of the exercise price at the
time of exercise of the option. If the
Management Directors elect the latter
payment option, the balance of the exercise
price will be payable, without interest,
within a 3-year period after the date of
completion of the purchase of the relevant
common stock, and the shares will be
pledged as security in favor of Huachen
until full payment of the exercise price.

As a result of the Call Option Agreements
entered into between Huachen and the
Management Directors, compensation expense
associated with these call options is being
recognized by the Company on a
straight-line basis from December 18, 2002
to August 6, 2003, the date that the call
options become fully vested. Accordingly,
compensation expense of approximately
RMB10.3 million was charged to the income
statement for the year ended December 31,
2002, and compensation expense of
approximately RMB173.2 million will be
charged to the income statement in 2003.

F-30



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

Pro-forma disclosures, had the Company
determined compensation expense based on
the fair value of the stock options in
accordance with SFAS No. 123 and No. 148,
are presented in Note 3(r).

The fair value of each option grant is
estimated using the minimum value method of
the Black-Scholes option pricing model. The
weighted average assumptions used for
grants made in 2002, 2001 and 2000 are as
follows:

|                                                                                       |                                |  |        |     |      |  |          |     |  |          |          |   | 
|-------------------------------------------------------------------------------------- | ------------------------------ |  | ------ | --- | ---- |  | -------- | --- |  | -------- | -------- | - | 
|                                                                                       |                                |  | 2002   |     | 2001 |  | 2000    
|                                                                                       |                                |  |        |     |      |  |         
|Risk-free interest rate                                                                |                                |  | 4.96   | %   |      |  | 5.71     | %   |  |          | 5.68     | %
|Expected option life (days of
share option outstanding)
 Exercised on August 12,
2000 |                                |  | N/A    |     |      |  | N/A      |     |  | 211 days
|                                                                                       |  Exercised on August 18,
2000 |  |        | N/A |      |  |          | N/A |  |          | 217 days
|                                                                                       |  Exercised on August 29,
2000 |  |        | N/A |      |  |          | N/A |  |          | 228 days
|                                                                                       |  Issued on June 2, 2001       |  |        | N/A |      |  | 10 years |     |  |          | N/A      |  
|                                                                                       |  Issued on December 18,
2002  |  | 1 year |     |      |  | N/A      |     |  |          | N/A      |  
|Expected dividend yield                                                                |                                |  | 4.11   | %   |      |  | 3.98     | %   |  |          | 6.97     | %
|Volatility                                                                             |                                |  | 48.01  | %   |      |  | 75.88    | %   |  |          | 84.79    | %

22.  DISTRIBUTION OF PROFIT

As stipulated by the relevant laws and
regulations for foreign-invested
enterprises in the PRC, the Companys
subsidiaries are required to maintain
discretionary dedicated capital, which
includes a general reserve fund, an
enterprise expansion fund and a staff
welfare and incentive bonus fund. The
dedicated capital is to be appropriated
from statutory net income as stipulated by
statute or by the Board of Directors and
recorded as a component of shareholders
equity. Under U.S. GAAP, the appropriation
for the staff welfare and incentive bonus
fund is charged to income and any
unutilized balance is included in current
liabilities. Shenyang Automotives
appropriations to dedicated capital, which
consisted solely of appropriations to the
staff welfare and incentive bonus fund,
amounted to nil, nil and RMB17.6 million
for the years ended December 31, 2002, 2001
and 2000, respectively, and were charged to
income in each respective year. As of
December 31, 2002, 2001 and 2000,
unutilized appropriations to the staff
welfare and incentive bonus fund amounted
to RMB16.4 million, RMB14.7 million and
RMB15.4 million, respectively. For the
years ended December 31, 2002 and 2001, the
subsidiaries of the Company appropriated
approximately RMB60.8 million and RMB66.2
million, respectively, to the general
reserve fund. No such appropriation was
made by the subsidiaries for the year ended
December 31, 2000. No appropriation to the
enterprise expansion fund was made by the
subsidiaries for the years ended December
31, 2002, 2001 and 2000.

F-31



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

Dividends declared by the Companys
subsidiaries are based on the distributable
profits as reported in the statutory
financial statements and amounted to
RMB1,567.1 million, RMB250.2 million and
RMB905.2 million for the years ended
December 31, 2002, 2001 and 2000,
respectively. Distributions received from
the Companys subsidiaries are denominated
in U.S. Dollars and are translated at the
prevailing unified exchange rate in the
PRC. Total accumulated distributable
profits of the Companys subsidiaries
amounted to RMB325.8 million, RMB1,313.6
million and RMB880.2 million as of December
31, 2002, 2001 and 2000, respectively. The
distributable profits of subsidiaries are
different from the amounts reported under
US GAAP. The Companys share of
undistributed earnings retained in the
associated companies amounted to RMB271.2
million as of December 31, 2002.

Dividends declared by the Company during
the years consist of:

|                                                                                 |  |         |        |         |  |  |        | 
|-------------------------------------------------------------------------------- |  | ------- | ------ | ------- |  |  | ------ | 
|                                                                                 |  | 2002    |        | 2001   
|                                                                                 |  |         |        |        
|                                                                                 |  | RMB'000 |        | RMB'000
|2001 and 2000 final dividends
of HK$0.005 and HK$0.005
per share, respectively   |  |         | 19,605 |         |  |  | 19,762 | 
|2002 and 2001 interim
dividends of HK$0.004 and
HK$0.004 per share,
respectively |  |         | 15,690 |         |  |  | 15,544 | 
|                                                                                 |  |         |        |         |  |  |        | 
|                                                                                 |  |         | 35,295 |         |  |  | 35,306 | 
|                                                                                 |  |         |        |         |  |  |        | 

On April 28, 2003, the Company proposed a
final dividend of HK$0.01 per share
totaling approximately RMB39,210,000.

23.  RELATED PARTY TRANSACTIONS

An affiliated company is a company in which one or more of the directors or
substantial shareholders of the Company have direct or indirect beneficial
interests in the company or are in a position to exercise significant influence
over the company. Parties are also considered to be affiliated if they are
subject to common control or common significant influence.

Save as disclosed elsewhere in the
financial statements, particulars of
significant transactions with affiliated
companies (these affiliated companies and
the Company have certain directors in
common and/or other relationships as
specified) are summarized below:



|(a) |  | Amounts due from affiliated companies
arising from trading activities:
|--- |  | ----------------------------------------------------------------------

|                                                                            |  |         |         |         |  |  |         | 
|--------------------------------------------------------------------------- |  | ------- | ------- | ------- |  |  | ------- | 
|                                                                            |  | 2002    |         | 2001   
|                                                                            |  |         |         |        
|                                                                            |  | RMB'000 |         | RMB'000
|Due from Shanghai Yuantong (i)                                              |  |         | 655,835 |         |  |  | 439,411 | 
|Due from Shanghai Shenhua and its
affiliated companies                      |  |         | 63,608  |         |  |  | 31,874  | 
|Due from other affiliated companies
of Brilliance Holdings Limited (ii)     |  |         | 41,675  |         |  |  | 61,125  | 
|Due from affiliated companies of
JinBei                                     |  |         | 11,015  |         |  |  | 35,071  | 
|Due from affiliated companies of the
joint venture partner in Ningbo
Yuming |  |         | 280     |         |  |  | 18,281  | 
|Due from an associated company                                              |  |         | 11,376  |         |  |  | 11,175  | 
|                                                                            |  |         |         |         |  |  |         | 
|                                                                            |  |         | 783,789 |         |  |  | 596,937 | 
|Provision for doubtful debts                                                |  |         | (9,723  | )       |  |  |        | 
|                                                                            |  |         |         |         |  |  |         | 
|                                                                            |  |         | 774,066 |         |  |  | 596,937 | 
|                                                                            |  |         |         |         |  |  |         | 



---

|(i)  |  | The amount as of December 31, 2002 was
non-interest bearing. The amount due from
Shanghai Yuantong during the year ended
December 31, 2001 carried interest at a
rate of 5.4% per annum.                                                              
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | As of December 31, 2001, included in
the amounts due from affiliated companies
of Brilliance Holdings Limited was an
amount of approximately RMB56 million
guaranteed by a shareholder of an
affiliated company. The amount was fully
settled in 2002.

Save as disclosed above, the amounts due
from affiliated companies are unsecured,
non-interest bearing and have no fixed
repayment terms.

F-32



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)



|(b) |  | Notes receivable from affiliated
companies arising from trading activities
consisted of the following:
|--- |  | ------------------------------------------------------------------------------------------------------

|                                                                                |  |         |         |         |  |  |         | 
|------------------------------------------------------------------------------- |  | ------- | ------- | ------- |  |  | ------- | 
|                                                                                |  | 2002    |         | 2001   
|                                                                                |  |         |         |        
|                                                                                |  | RMB'000 |         | RMB'000
|Notes receivable from affiliated
companies of JinBei                            |  |         | 6,613   |         |  |  |        | 
|Notes receivable from Shanghai
Shenhua                                          |  |         | 156,240 |         |  |  | 536,859 | 
|Notes receivable from Shanghai
Yuantong                                         |  |         | 3,325   |         |  |  | 144,935 | 
|Notes receivable from other
affiliated companies of Brilliance
Holdings Limited |  |         | 20,807  |         |  |  | 3,075   | 
|Notes receivable from an associated
company                                     |  |         | 26,000  |         |  |  | 2,000   | 
|                                                                                |  |         |         |         |  |  |         | 
|                                                                                |  |         | 212,985 |         |  |  | 686,869 | 
|                                                                                |  |         |         |         |  |  |         | 

All the notes receivable from affiliated
companies are guaranteed by banks in the
PRC and have maturities of between one to
six months. The fair value of the notes
receivable approximates their carrying
value.



|(c) |  | As of December 31, 2002, included in
prepayments and other current assets were
approximately RMB263 million (2001: RMB168
million) prepayments for purchases of raw
materials made to an affiliated company of
Brilliance Holdings Limited. Subsequent to
December 31, 2002, an amount of RMB98
million was refunded by this affiliated
company.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | As of December 31, 2002, included in
other receivables was RMB220 million
(2001: nil) of outstanding proceeds
from the disposal of an associated
company to an affiliated company (Note
13). Approximately RMB183 million was
received in March 2003.                                                                                           
|   
|(d) |  | Amounts due to affiliated
companies arising from trading activities
consisted of the following:                                                                                                                                                                                                                                                 

|                                                                                |  |         |         |         |  |  |         | 
|------------------------------------------------------------------------------- |  | ------- | ------- | ------- |  |  | ------- | 
|                                                                                |  | 2002    |         | 2001   
|                                                                                |  |         |         |        
|                                                                                |  | RMB'000 |         | RMB'000
|Due to associated companies                                                     |  |         | 398,523 |         |  |  | 169,589 | 
|Due to Shanghai Shenhua and its
affiliated companies                            |  |         | 101,029 |         |  |  | 173,636 | 
|Due to JinBei and its affiliated
companies                                      |  |         | 196,186 |         |  |  | 107,095 | 
|Due to other affiliated companies of
Brilliance Holdings Limited                |  |         | 21,839  |         |  |  | 32,340  | 
|Due to affiliated companies of the
joint venture partner of Ningbo
Yuming       |  |         | 10,225  |         |  |  | 6,287   | 
|Due to affiliated companies of the
joint venture partner of Xinguang
Brilliance |  |         | 1,567   |         |  |  | 3,132   | 
|                                                                                |  |         |         |         |  |  |         | 
|                                                                                |  |         | 729,369 |         |  |  | 492,079 | 
|                                                                                |  |         |         |         |  |  |         | 

F-33



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)



|(e) |  | Save as disclosed elsewhere in the
financial statements, significant
transactions with affiliated companies
consisted of:
|--- |  | -------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                           |  |         |           |         |  |         |           |  |  |  |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | --------- | ------- |  | ------- | --------- |  |  |  | --------- | 
|                                                                                                                                                           |  | 2002    |           | 2001    |  | 2000   
|                                                                                                                                                           |  |         |           |         |  |        
|                                                                                                                                                           |  | RMB'000 |           | RMB'000 |  | RMB'000
|Sales to JinBei, the joint venture partner
of Shenyang Automotive, and its affiliated companies                                                            |  |         | 56,438    |         |  |         | 14,923    |  |  |  | 3,527     | 
|Purchases from JinBei and its affiliated
companies                                                                                                         |  |         | 712,061   |         |  |         | 317,046   |  |  |  | 25,319    | 
|Sales to Shanghai Shenhua and its
affiliated companies                                                                                                     |  |         | 1,664,156 |         |  |         | 907,232   |  |  |  | 4,821,322 | 
|Purchases from Shanghai Shenhua and
its affiliated companies                                                                                               |  |         | 375,402   |         |  |         | 164,323   |  |  |  | 153,933   | 
|Sales to other affiliated companies of
Brilliance Holdings Limited                                                                                         |  |         | 150,390   |         |  |         | 59,816    |  |  |  | 644,167   | 
|Purchases from other affiliated
companies of Brilliance Holdings
Limited                                                                                   |  |         | 99,514    |         |  |         | 274,379   |  |  |  | 406,020   | 
|Sales to Shanghai Yuantong                                                                                                                                 |  |         | 710,100   |         |  |         | 2,622,002 |  |  |  | 83,509    | 
|Sales to associated companies                                                                                                                              |  |         | 102,024   |         |  |         | 61,683    |  |  |  | 98,546    | 
|Purchases from associated companies                                                                                                                        |  |         | 1,014,057 |         |  |         | 635,373   |  |  |  | 715,610   | 
|Purchases from affiliated companies of
the joint venture partner of Ningbo
Yuming                                                                          |  |         | 14,580    |         |  |         | 33,524    |  |  |  | 33,237    | 
|Research and development expenses to
third parties under contracts
assumed from an affiliated company
of Brilliance Holdings Limited at
original costs     |  |         | 116,000   |         |  |         |          |  |  |  |          | 
|Long-term prepayment for fixed assets to
a third party under a contract
assumed from an affiliated company
of Brilliance Holdings Limited at
original cost |  |         | 18,305    |         |  |         |          |  |  |  |          | 
|Sales to a joint venture partner of
Shenyang Aerospace                                                                                                     |  |         |          |         |  |         |          |  |  |  | 1,710     | 
|Sales to affiliated companies of the joint
venture partner of Mianyang Xinchen                                                                             |  |         |          |         |  |         |          |  |  |  | 15,136    | 
|Purchase of an intangible asset from an
affiliated company of Brilliance
Holdings Limited (see Notes 12 and
26)                                            |  |         |          |         |  |         |          |  |  |  | 681,100   | 
|Acquisition of Key Choices from
Brilliance Holdings Limited                                                                                                |  |         |          |         |  |         | 278,213   |  |  |  |          | 
|Acquisition of Xinguang Brilliance from
Brilliance Holdings Limited                                                                                        |  |         |          |         |  |         |          |  |  |  | 388,000   | 
|Sales of fixed assets to an affiliated
company of Brilliance Holdings
Limited                                                                              |  |         |          |         |  |         | 5,558     |  |  |  |          | 
|Sales of fixed assets to an associated
company                                                                                                             |  |         |          |         |  |         | 18,425    |  |  |  |          | 
|Purchase of fixed assets and other assets
from other affiliated companies of
Brilliance Holdings Limited                                                   |  |         |          |         |  |         | 41,984    |  |  |  | 24,498    | 
|Purchases of moulds from an affiliated
company of Shanghai Shenhua                                                                                         |  |         |          |         |  |         | 35,750    |  |  |  |          | 
|Advertising expenses reimbursed by
Shanghai Yuantong                                                                                                       |  |         |          |         |  |         | 64,070    |  |  |  |          | 
|Management expenses reimbursed to
and consultancy fees paid to
Brilliance Holdings Limited                                                                 |  |         | 5,182     |         |  |         | 12,405    |  |  |  | 5,796     | 
|Interest income from Shanghai
Yuantong                                                                                                                     |  |         |          |         |  |         | 15,930    |  |  |  |          | 
|Interest income from Brilliance Holdings
Limited and its affiliated companies                                                                              |  |         |          |         |  |         | 23,709    |  |  |  | 56,964    | 
|Interest income from associated
companies                                                                                                                  |  |         |          |         |  |         |          |  |  |  | 2,386     | 

The above transactions were carried out
after negotiations between the Group and
the affiliated companies in the ordinary
course of business and on the basis of estimated
market value as determined by the
directors.

During the year ended December 31, 2002,
JinBei allowed Shenyang Automotive to use
the technology of components in the
manufacturing of Zhonghua sedan (see also
Note 30(b)).

Other significant transactions with
affiliated companies consisted of:

i.  Trademark license

Pursuant to a trademark license agreement,
JinBei granted Shenyang Automotive the
right to use the JinBei trademark on its
products and marketing materials
indefinitely.

ii.  Guarantees provided to affiliated companies

Please refer to Note 19 (b) (ii) for
details of the guarantees provided to
affiliated companies.

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Notes to Consolidated Financial Statements (Continued)



|(f) |  | The advances to affiliated companies consisted of:
|--- |  | --------------------------------------------------

|                                                                                       |  |         |           |         |  |  |         | 
|-------------------------------------------------------------------------------------- |  | ------- | --------- | ------- |  |  | ------- | 
|                                                                                       |  | 2002    |           | 2001   
|                                                                                       |  |         |           |        
|                                                                                       |  | RMB'000 |           | RMB'000
|Advances to Brilliance Holdings
Limited and its affiliated
companies:                  |  |         |           |         |  |  |         | 
|Interest bearing at 5.5% per
annum                                                     |  |         |          |         |  |  | 40,000  | 
|Non-interest bearing (ii)                                                              |  |         | 907,191   |         |  |  | 256,223 | 
|Advance to Zhuhai Brilliance:                                                          |  |         |           |         |  |  |         | 
|Non-interest bearing (iii)                                                             |  |         | 360,000   |         |  |  |        | 
|Advances to affiliated companies
of JinBei:                                            |  |         |           |         |  |  |         | 
|Non-interest bearing                                                                   |  |         | 6,613     |         |  |  | 2,163   | 
|Advances to other affiliated
companies:                                                |  |         |           |         |  |  |         | 
|Non-interest bearing (iv)                                                              |  |         | 30,892    |         |  |  |        | 
|                                                                                       |  |         |           |         |  |  |         | 
|                                                                                       |  |         | 1,304,696 |         |  |  | 298,386 | 
|Long-term portion of advances to
an affiliated company of
Brilliance Holdings Limited: |  |         |           |         |  |  |         | 
|Interest bearing at 5.5% (i)                                                           |  |         |          |         |  |  | 39,111  | 
|Non-interest bearing (i)                                                               |  |         |          |         |  |  | 5,693   | 
|                                                                                       |  |         |           |         |  |  |         | 
|                                                                                       |  |         |          |         |  |  | 44,804  | 
|                                                                                       |  |         |           |         |  |  |         | 



---

|(i)   |  | The long-term portion of advances to an
affiliated company of Brilliance Holdings
Limited as of December 31, 2001 were wholly
repaid in 2002.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | Approximately RMB810 million of the
advances to Brilliance Holdings Limited and
its affiliated companies were settled
subsequent to year end.
|     
|(iii) |  | The balance of RMB360 million was settled subsequent to year end.                                                                            
|     
|(iv)  |  | RMB30 million of the advances to other
affiliated companies was settled subsequent
to year end.                                              

Save as disclosed above, the advances to
affiliated companies are unsecured,
non-interest bearing and have no fixed
repayment terms.



|(g) |  | The advances from affiliated companies consisted of:
|--- |  | ----------------------------------------------------

|                                                                                 |  |         |         |         |  |  |        | 
|-------------------------------------------------------------------------------- |  | ------- | ------- | ------- |  |  | ------ | 
|                                                                                 |  | 2002    |         | 2001   
|                                                                                 |  |         |         |        
|                                                                                 |  | RMB'000 |         | RMB'000
|Advances from a joint venture
partner of Shenyang Aerospace                      |  |         | 139,529 |         |  |  |       | 
|Advances from affiliated companies
of Brilliance Holdings Limited                |  |         | 13,951  |         |  |  | 54,276 | 
|Advances from an associated
company                                              |  |         | 1,264   |         |  |  |       | 
|Advances from an affiliated
company of Shanghai Shenhua                          |  |         | 1,586   |         |  |  |       | 
|Advances from affiliated companies
of JinBei                                     |  |         | 2,092   |         |  |  |       | 
|Advances from affiliated companies
of the joint venture partner of
Ningbo Yuming |  |         | 3,998   |         |  |  |       | 
|                                                                                 |  |         |         |         |  |  |        | 
|                                                                                 |  |         | 162,420 |         |  |  | 54,276 | 
|                                                                                 |  |         |         |         |  |  |        | 

The advances from affiliated companies are
unsecured, non-interest bearing and have no
fixed repayment terms.



|(h) |  | As of December 31, 2002 and 2001, the
Company had advanced approximately
RMB2,917.3 million and RMB1,869.9 million
respectively to its subsidiaries, of which
approximately RMB699.3 million and
RMB1,200.1 million bear interest at 5.0%
and 5.5% per annum respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-35



---



##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

24.  RETIREMENT PLAN AND EMPLOYEES BENEFIT

As stipulated by the regulations of the PRC
government, the Companys subsidiaries in
the PRC have defined contribution
retirement plans for their employees. The
PRC government is responsible for the
pension liability to these retired
employees. The Companys subsidiaries are
required to make specified contributions to
the state-sponsored retirement plan at
23.5% to 25% for 2002, 20% to 23.5% for
2001 and 20% to 23.5% for 2000. Commencing
from January 1, 1992, Shenyang Automotive
agreed to pay a Chinese insurance company
to assume the responsibility for making
pension payments to all employees retiring
after January 1, 1992.

The retirement plan contributions for the
years ended December 31, 2002, 2001 and
2000 were approximately RMB26.9 million,
RMB21.2 million and RMB17.6 million,
respectively.

In addition to the pension contributions,
pursuant to the relevant laws and
regulations of the PRC, the Companys
subsidiaries are required to provide
benefits such as housing funds, medical
insurance and unemployment insurance for
their PRC employees. These provisions,
which were approximately RMB21.2 million,
RMB10.4 million and RMB32.3 million for the
years ended December 31, 2002, 2001 and
2000, respectively, were calculated at a
certain percentage (approximately 11% to
18.9% in 2002, 9.8% to 10.9% in 2001 and
29.27% in 2000) of the employees actual
salaries.

The Groups Hong Kong employees are covered by the mandatory provident fund
which is managed by an independent trustee. The Group and its Hong Kong
employees each makes monthly contribution to the scheme at 5% of the employees
cash income with maximum contribution by each of the Group and the employees
limited to HK$1,000 per month. The retirement benefits scheme cost charged to
the income statement represents contributions payable by the Company to the
fund. During the years ended December 31, 2002 and 2001, contributions
amounting to approximately HK$146,000 and HK$160,000, respectively, were made.

25.  EXECUTIVE BONUS PLAN

Certain officers of the Company are
participants in the Executive Bonus Plan
(the Plan). The Plan provides that up
to 5% of the Companys net income be set
aside each year for distribution among plan
participants based upon performance as
determined by the Companys Board of
Directors. The allocation of bonuses among
participants is determined at the
discretion of the President of the Company.
For the year ended December 31, 2001, no
bonus was allocated. For the years ended
December 31, 2002 and 2000, the Company
accrued RMB21.6 million and RMB34.1
million, respectively, under the Plan.

26.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

|                                     |                      |  |                         |         |         |  |         |         |  |  |         |        | 
|------------------------------------ | -------------------- |  | ----------------------- | ------- | ------- |  | ------- | ------- |  |  | ------- | ------ | 
|                                     |                      |  | Year ended December 31,
|                                     |                      |  |                        
|                                     |                      |  | 2002                    |         | 2001    |  | 2000   
|                                     |                      |  |                         |         |         |  |        
|                                     |                      |  | RMB'000                 |         | RMB'000 |  | RMB'000
|Cash paid for:                       |                      |  |                         |         |         |  |         |         |  |  |         |       
|Interest (net of amount
capitalized: |                      |  |                         |         |         |  |         |         |  |  |         |       
|                                     | 2002: RMB800,000;    |  |                         |         |         |  |         |         |  |  |         |        | 
|                                     | 2001: RMB49,164,000; |  |                         |         |         |  |         |         |  |  |         |        | 
|                                     | 2000: RMB79,118,000) |  |                         | 202,968 |         |  |         | 178,028 |  |  |         | 96,280 | 
|Income taxes                         |                      |  | 112,579                 |         |         |  | 183,845 |         |  |  | 369,373 |       
|                                     |                      |  |                         |         |         |  |         |         |  |  |         |       

During the years ended December 31, 2001
and 2000, major non-cash transactions
include:



|(i) |  | During the year ended December 31,
2001, purchase consideration amounting to
approximately RMB278 million for the
acquisition of an indirect equity interest
in a subsidiary was offset against certain
receivable balances from affiliated
companies. During the year ended December
31, 2000, purchase considerations amounting
to approximately RMB681.1 million and
RMB388 million for the acquisitions of
certain intangible assets and an indirect
equity interest in an associated company,
respectively, were offset against certain
receivable balances from affiliated
companies and a portion of the proceeds
from issuance of shares on exercise of
share options which the Company directed to
be paid to Brilliance Holdings Limited.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-36



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)



|(ii)  |  | During the year ended December 31,
2001, amounts due from and due to
affiliated companies of approximately RMB87
million were offset after agreement among
the parties. During the year ended December
31, 2000, dividends payable of RMB609.7
million to the joint venture partner of
Shenyang Automotive were offset against
certain receivable balances from affiliated
companies.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(iii) |  | During the year ended December 31,
2001, the Company acquired a 100% equity
interest in Key Choices. In conjunction
with the acquisition, assets and
liabilities were assumed as follows:                                                                                                                                                                                            

|                                  |             |  |         |         |   |  |         |   | 
|--------------------------------- | ----------- |  | ------- | ------- | - |  | ------- | - | 
|                                  |             |  |         |         |   |  | RMB'000
|                                  |             |  |         |         |   |  |        
|Cash paid for the acquisition     |             |  |         |         |   |  | 278,213 |  
|Fair value of net assets acquired |             |  |         |         |   |  |         |  
|Assets                            |             |  | 111,165 |         |   |  |         |  
|                                  | Liabilities |  |         | (24,219 | ) |  |         |   | 
|                                  |             |  |         |         |   |  |         |  
|                                  |             |  |         |         |   |  | (86,946 | )
|                                  |             |  |         |         |   |  |         |  
|Goodwill arising from
acquisition |             |  |         |         |   |  | 191,267 |  
|                                  |             |  |         |         |   |  |         |  

27.  OTHER SUPPLEMENTAL INFORMATION

The following items are charged to the
consolidated statements of income:

|                                                          |  |                         |         |         |  |         |        |  |  |  |         | 
|--------------------------------------------------------- |  | ----------------------- | ------- | ------- |  | ------- | ------ |  |  |  | ------- | 
|                                                          |  | Year ended December 31,
|                                                          |  |                        
|                                                          |  | 2002                    |         | 2001    |  | 2000   
|                                                          |  |                         |         |         |  |        
|                                                          |  | RMB'000                 |         | RMB'000 |  | RMB'000
|Import tariffs                                            |  |                         | 68,168  |         |  |         | 66,394 |  |  |  | 164,726 | 
|Research and development costs                            |  |                         | 304,936 |         |  |         | 26,825 |  |  |  | 7,623   | 
|Foreign exchange losses                                   |  |                         | 2,786   |         |  |         | 11,608 |  |  |  | 5,413   | 
|Net realizable value provision for
inventory              |  |                         | 40,761  |         |  |         | 3,000  |  |  |  | 5,000   | 
|Provision for impairment of property,
plant and equipment |  |                         | 2,547   |         |  |         | 30,950 |  |  |  |        | 
|Provision for impairment of
investment securities         |  |                         | 8,500   |         |  |         |       |  |  |  |        | 
|Provision for doubtful debts                              |  |                         | 18,921  |         |  |         | 1,352  |  |  |  | 227     | 
|                                                          |  |                         |         |         |  |         |        |  |  |  |         | 

28.  SEGMENT INFORMATION

SFAS No. 131 establishes standards for
reporting information about operating
segments in financial statements. Operating
segments are defined as components of an
enterprise about which separate financial
information is available that is evaluated
regularly by the chief operating decision
maker, or decision making group, in
deciding how to allocate resources and in
assessing performance.

Before 2002, the Companys operating
segment consists solely of manufacturing
and sales of minibuses and automotive
components through its subsidiaries within
the PRC. No separate financial information
and segment information was disclosed.

In 2002, the Company began its operation in
manufacturing and selling of Zhonghua
sedans, which is managed separately because
it represents a strategic business unit
that serves a different market in the
automobile industry. Therefore, the
Companys reportable operating segments
consist of i) manufacture and sales of
minibuses and automotive components, and
ii) manufacture and sales of Zhonghua
sedans.

The accounting policies of each operating
segment are the same as those described in
the summary of significant accounting
policies. The Company evaluates performance
based on stand-alone operating segment net
income and generally accounts for
intersegment sales and transfers as if the
sales or transfers were to third parties,
that is, at current market prices. The
Groups activities are conducted
predominantly in the PRC. Accordingly, no
geographical segmentation analysis is
provided.

F-37



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##### Table of Contents



Notes to Consolidated Financial Statements (Continued)

|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|--------------------------------------------------------- |  | ------------ | --------- | ------------ |  | ------- | --------- | - |  |  | ---------- | -
|                                                          |  | Manufacture  |           |              |  |         |           |   |  | 
|                                                          |  | and sales of |           |              |  |         |           |   |  | 
|                                                          |  | minibuses    |           | Manufacture  |  |         |           |  
|                                                          |  | and          |           | and sales of |  |         |           |  
|                                                          |  | automotive   |           | Zhonghua     |  |         |           |  
|                                                          |  | components   |           | sedans       |  | Total  
|                                                          |  |              |           |              |  |        
|                                                          |  | RMB'000      |           | RMB'000      |  | RMB'000
|Total revenue from reportable
segments                    |  |              | 6,283,700 |              |  |         | 1,117,283 |   |  |  | 7,400,983  |  
|Elimination of intersegment
revenues                      |  |              | (81,528   | )            |  |         |          |   |  |  | (81,528    | )
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Revenues from external customers                          |  |              | 6,202,172 |              |  |         | 1,117,283 |   |  |  | 7,319,455  |  
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Segment income (loss) before
taxes and minority interests |  |              | 1,295,322 |              |  |         | (316,276  | ) |  |  | 979,046    |  
|Unallocated amounts  corporate
expenses                  |  |              |           |              |  |         |           |   |  |  | (126,568   | )
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Income before taxes and minority
interests                |  |              |           |              |  |         |           |   |  |  | 852,478    |  
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Segment assets as of December 31,
2002                    |  |              | 9,340,061 |              |  |         | 4,022,489 |   |  |  | 13,362,550 |  
|Unallocated amounts  corporate
assets                    |  |              |           |              |  |         |           |   |  |  | 491,131    |  
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Total assets as of December 31,
2002                      |  |              |           |              |  |         |           |   |  |  | 13,853,681 |  
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  
|Other disclosures:                                        |  |              |           |              |  |         |           |   |  |  |            |  
|Depreciation of fixed assets                              |  |              | 95,823    |              |  |         | 117,953   |   |  |  | 213,776    |  
|Amortization of intangible
assets                         |  |              |          |              |  |         | 56,784    |   |  |  | 56,784     |  
|Interest income                                           |  |              | 42,983    |              |  |         | 634       |   |  |  | 43,617     |  
|Interest expense                                          |  |              | 171,158   |              |  |         | 128       |   |  |  | 171,286    |  
|Capital expenditure                                       |  |              | 451,781   |              |  |         | 244,942   |   |  |  | 696,723    |  
|Equity in earnings of associated
companies                |  |              | 104,208   |              |  |         | 33,937    |   |  |  | 138,145    |  
|Equity method goodwill
(Note 13)                          |  |              | 391,104   |              |  |         | 31,983    |   |  |  | 423,087    |  
|Goodwill (Note 14)                                        |  |              | 414,464   |              |  |         |          |   |  |  | 414,464    |  
|                                                          |  |              |           |              |  |         |           |   |  |  |            |  

29.  OTHER COMPREHENSIVE INCOME

SFAS No. 130 requires the components of
comprehensive income to be disclosed in the
financial statements. Comprehensive income
consists of net income and other gains and
losses affecting shareholders equity that,
under generally accepted accounting
principles, are excluded from net income.
For the Company, comprehensive income only
represents its net income for 2002, 2001
and 2000.

|                             |  |             |        |               |  |  |        | 
|---------------------------- |  | ----------- | ------ | ------------- |  |  | ------ | 
|                             |  | Foreign     |        | Accumulated  
|                             |  | Currency    |        | Other        
|                             |  | Translation |        | Comprehensive
|                             |  | Adjustments |        | Income       
|                             |  |             |        |              
|                             |  | RMB'000     |        | RMB'000      
|Balance at December 31, 2000 |  |             | 39,179 |               |  |  | 39,179 | 
|Current year change          |  |             |       |               |  |  |       | 
|                             |  |             |        |               |  |  |        | 
|Balance at December 31, 2001 |  |             | 39,179 |               |  |  | 39,179 | 
|Current year change          |  |             |       |               |  |  |       | 
|                             |  |             |        |               |  |  |        | 
|Balance at December 31, 2002 |  |             | 39,179 |               |  |  | 39,179 | 
|                             |  |             |        |               |  |  |        | 

30.  EVENTS AFTER BALANCE SHEET DATE



|(a) |  | On March 14, 2003, the Company received
the formal approval from the PRC government
for the feasibility study for the
establishment of a joint venture (the
JV) between BMW Holding BV (BMW), a
wholly-owned subsidiary of BMW AG, and
Shenyang JinBei Automotive Industry
Holdings Company Limited (SJAI), an
indirect 81%-owned subsidiary of the
Company in the PRC. On March 27, 2003, SJAI
entered into a joint venture contract (the
JV
Contract) with BMW in relation to the
establishment of the JV in the PRC. The
registered capital and total investment
cost of the JV is Euro150 million and
Euro450 million, respectively
(equivalent to approximately RMB1,367
million and RMB4,100 million,
respectively, based on the exchange
rate of Euro/RMB of approximately
9.11). The JV is to be 50%-owned by
each of SJAI and BMW and is for a term
of 15 years from the date of issuance
of business license. The business scope
of the JV is to produce
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-38



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Notes to Consolidated Financial Statements (Continued)



|    |  | and sell BMW passenger cars, engines,
parts and components and to provide
after-sales services (including repair
and maintenance and spare parts)
relating to its products. Profits of
the JV will be shared as to 50% by each
of SJAI and BMW, in proportion to their
respective proportionate contributions
to the registered capital of the JV.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Prior to the establishment of the JV,
the Company will provide a guarantee to
BMW guaranteeing the performance by
SJAI of its obligations under the JV
Contract. A reciprocal guarantee will
be provided by BMW AG to SJAI in
respect of the obligations of BMW under
the JV Contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | On April 28, 2003, the Company, through
its indirectly 90%-owned subsidiary,
entered into an agreement with the 10%
shareholder of SJAI to acquire an
additional 9% interest in SJAI. Upon
completion, SJAI will be 89.1%
indirectly-owned by the Company.
Accordingly, the Companys effective
interests in the JV with BMW will
increase from 40.50% to 44.55%. The
above transactions are subject to the
approval by the Companys shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(b) |  | Pursuant to the Special General Meeting
held on February 26, 2003, the shareholders
of the Company have approved that the
registered capital and total investment of
Shenyang Automotive will be increased by
US$273 million (equivalent to approximately
RMB2,260 million based on the exchange rate
of US$/RMB of approximately 8.28) (the
Increased Amount). The increase in
capital will be contributed by the Company
and JinBei in proportion to their current
equity interests in Shenyang Automotive
(51: 49). The Company will inject US$139.23
million (equivalent to approximately
RMB1,153 million) by capitalizing its share
of distributable profit of a subsidiary and
dividend receivable from a subsidiary up to
the amount of US$139.23 million (equivalent
to approximately RMB1,153 million),
representing 51% of the Increased Amount.
JinBei will inject US$133.77 million
(equivalent to approximately RMB1,107
million), representing 49% of the Increased
Amount, by transferring to Shenyang
Automotive the technology of components
(the Component Technology) currently
used by Shenyang Automotive mainly in the manufacturing
of Zhonghua sedans at RMB820 million
and certain training facilities (the
Training Facilities). The
respective values of the Component
Technology and the Training Facilities
were supported by professional
valuations before injecting into
Shenyang Automotive. As the aggregate
value of the Component Technology and
the Training Facilities as valued by
the professional valuer is less than
US$133.77 million (equivalent to
approximately RMB1,107 million), JinBei
will contribute the balance of its
portion of contribution to the
Increased Amount by cash. The above
capital increase has been approved by
the Ministry of Foreign Trade and Economic Co-operation
on December 5, 2002. The contributions
will be made by the Company and JinBei
within six months from the date of the
issuance of the approval by the
relevant authorities in the PRC and the
new business license.
|   
|(c) |  | Pursuant to the Special General Meeting
held on February 26, 2003, the shareholders
of the Company have approved that Xing Yuan
Dong, a wholly-owned subsidiary of the
Company, will provide a guarantee (the
Guarantee) in respect of a loan up to
the amount of RMB370 million by the banks
to JinBei (the Loan). In consideration
of the provision of the Guarantee, JinBei
will provide an indemnity (the
Indemnity) to Xing Yuan Dong of its
liabilities under the Guarantee. The Loan
will be repaid (i) as to RMB100 million on
or before December 31, 2003; (ii) as to
RMB200 million on or before December 31,
2004; and (iii) as to the remaining RMB70
million on or before December 31, 2005. The
Guarantee and the Indemnity will continue
during the term of the Loan until the Loan
together with interest therein is repaid in
full. A relevant guarantee agreement was
entered into in April 2003 with the
guarantee amount of RMB300 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

31.  APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by
the board of directors on April 28, 2003.

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##### Table of Contents



SIGNATURE

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

|                    |  |                            
|------------------- |  | ---------------------------
|                    |  | BRILLIANCE CHINA AUTOMOTIVE
|                    |  | HOLDINGS LIMITED           
|                    |  |                            
|                    |  | /s/ Wu Xiao An             
|                    |  |                            
|                    |  | WU Xiao An                 
|                    |  | Chairman                   
|                    |  |                            
|Date: June 24, 2003 |  |                            





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##### Table of Contents



CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, SU Qiang, Chief Executive Officer of Brilliance China Automotive
Holdings Limited, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of Brilliance China
Automotive Holdings Limited;                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (and persons performing the
equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        





---



##### Table of Contents





|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or any other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       
|-----------------------
|/s/ Su Qiang           
|                       
|SU Qiang               
|Chief Executive Officer
|June 24, 2003          





---



##### Table of Contents



CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002



|   |  | I, HE Tao, Chief Financial Officer of Brilliance China Automotive Holdings
Limited, certify that:                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|1. |  | I have reviewed this annual report on Form 20-F of Brilliance China
Automotive Holdings Limited;                                                                                                                                                                                                                        
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (and persons performing the
equivalent function):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        





---



##### Table of Contents





|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls
or any other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       
|-----------------------
|/s/ He Tao             
|                       
|HE Tao                 
|Chief Financial Officer
|June 24, 2003