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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934ORþ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended:   December 31, 2007ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toORo
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 1-11412
 BRILLIANCE
CHINA AUTOMOTIVEHOLDINGS LIMITED
  Not Applicable
    
    Bermuda(Translation of Registrants name into English)
    
    (Jurisdiction of Incorporation or Organization)
 Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong
   Securities registered or to be registered pursuant to Section 12(g) of the Act:
  
 Title of Class
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 Number of outstanding shares of each of the issuers classes of capital or common stock as of December 31, 2007:
    o þ
  o þ
  þ o
  o þ o
  o þ
  o þ




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Table of Contents
 PagePart IITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    2ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3.
    
    KEY INFORMATION
    
    
    2ITEM 4.
    
    INFORMATION ON THE COMPANY
    
    
    21ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    53ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    69ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    80ITEM 8.
    
    FINANCIAL INFORMATION
    
    
    85ITEM 9.
    
    THE OFFER AND LISTING
    
    
    87ITEM 10.
    
    ADDITIONAL INFORMATION
    
    
    88ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    104ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    106Part IIITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    106ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    106ITEM 15.
    
    CONTROLS AND PROCEDURES
    
    
    106ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    109ITEM 16B.
    
    CODE OF ETHICS
    
    
    109ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    109ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
    
    
    110ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    110Part IIIITEM 17.
    
    FINANCIAL STATEMENTS
    
    
    111ITEM 18.
    
    FINANCIAL STATEMENTS
    
    
    111ITEM 19.
    
    EXHIBITS
    
    
    111EX-1.1 AMENDED AND RESTATED BYE-LAWS OF BRILLIANCE CHINA AUTOMOTIVEEX-1.2 AMENDMENTS TO BYE-LAWS OF BRILLIANCE CHINA AUTOMOTIVEEX-7.1 STATEMENT EXPLAINING RATIOS CALCULATIONEX-8.1 LIST OF SIGNIFICANT SUBSIDIARIESEX-12.1 SECTION 302 CERTIFICATION OF CEOEX-12.2 SECTION 302 CERTIFICATION OF CFOEX-13.1 SECTION 906 CERTIFICATION OF CEO & CFO
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CONVENTIONS
  FORWARD-LOOKING STATEMENTS
  
    
    unexpected adverse effects on the economy of the Peoples Republic of China, or
China, and Chinas automobile sector in particular;
    
    increased competition from other domestic and international automobile
manufacturers;
    
    increased costs for raw materials and components;
    
    possible further revaluation of the Renminbi against foreign currencies; and
    
    fluctuations in foreign exchange rates.
  1




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




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(Amounts in millions,
    
    As of and for the years ended December 31,Except per share/ADS and operating data)
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007
    
    2007(Rmb)
    
    (US$)Income Statement Data:Total Sales
    
    
    10,109.6
    
    
    
    6,542.0
    
    
    
    5,469.0
    
    
    
    10,484.8
    
    
    
    14,149.1
    
    
    
    1,939.7Cost of sales
    
    
    7,727.1
    
    
    
    5,491.3
    
    
    
    5,012.0
    
    
    
    9,960.6
    
    
    
    13,049.1
    
    
    
    1,788.9Gross Profit
    
    
    2,382.5
    
    
    
    1,050.7
    
    
    
    457.0
    
    
    
    524.2
    
    
    
    1,100.0
    
    
    
    150.8Selling, general and administrative expenses
    
    
    1,410.1
    
    
    
    1,510.4
    
    
    
    1,195.3
    
    
    
    1,384.7
    
    
    
    1,535.7
    
    
    
    210.5Net income (loss)
    
    
    780.8
    
    
    
    1.2
    
    
    
    (671.3
    )
    
    
    (386.1
    )
    
    
    83.7
    
    
    
    11.5Balance Sheet Data:Total assets
    
    
    18,288.2
    
    
    
    17,776.4
    
    
    
    14,692.3
    
    
    
    14,580.4
    
    
    
    16,172.3
    
    
    
    2,217.0Current assets
    
    
    10,286.5
    
    
    
    9,428.3
    
    
    
    7,110.2
    
    
    
    7,768.6
    
    
    
    9,611.8
    
    
    
    1,317.7Current liabilities
    
    
    8,031.0
    
    
    
    8,187.7
    
    
    
    8,059.8
    
    
    
    7,181.5
    
    
    
    8,643.0
    
    
    
    1,184.8Capital stock
    
    
    303.4
    
    
    
    303.4
    
    
    
    303.4
    
    
    
    303.4
    
    
    
    303.5
    
    
    
    41.6Total shareholders equity
    
    
    6,886.3
    
    
    
    6,857.7
    
    
    
    6,139.7
    
    
    
    5,765.9
    
    
    
    5,917.2
    
    
    
    811.2Cash Flow Statement Data:Payment for capital expenditure
    
    
    955.9
    
    
    
    999.1
    
    
    
    558.0
    
    
    
    304.2
    
    
    
    308.4
    
    
    
    42.3Depreciation and amortization
    
    
    677.8
    
    
    
    603.0
    
    
    
    616.6
    
    
    
    811.5
    
    
    
    764.2
    
    
    
    104.8Net cash flows provided by (used in) operating activities
    
    
    753.4
    
    
    
    (712.4
    )
    
    
    883.4
    
    
    
    1,145.6
    
    
    
    1,338.4
    
    
    
    183.5Net cash flows provided by (used in) investing activities
    
    
    (2,491.3
    )
    
    
    (729.2
    )
    
    
    338.4
    
    
    
    514.8
    
    
    
    (566.8
    )
    
    
    (77.7
    )Net cash flows provided by (used in) financing activities
    
    
    2,281.1
    
    
    
    853.9
    
    
    
    (1,622.9
    )
    
    
    (1,035.7
    )
    
    
    (866.2
    )
    
    
    (118.7
    )Per Share/ADS Data:Basic earnings (loss) per share
    
    
    0.21
    
    
    
    0.0003
    
    
    
    (0.1830
    )
    
    
    (0.1053
    )
    
    
    0.0228
    
    
    
    0.003Basic earnings (loss) per ADS
    
    
    21.30
    
    
    
    0.03
    
    
    
    (18.30
    )
    
    
    (10.53
    )
    
    
    2.28
    
    
    
    0.31Diluted earnings (loss) per share
    
    
    0.21
    
    
    
    0.0003
    
    
    
    (0.1830
    )
    
    
    (0.1053
    )
    
    
    0.0227
    
    
    
    0.003Diluted earnings (loss) per ADS
    
    
    21.16
    
    
    
    0.03
    
    
    
    (18.30
    )
    
    
    (10.53
    )
    
    
    2.27
    
    
    
    0.31Cash dividends declared per ADS(1)
    
    
    2.12
    
    
    
    1.07
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aOperating Data:Production volume (units)Minibus  Deluxe model
    
    
    9,291
    
    
    
    7,682
    
    
    
    8,752
    
    
    
    14,277
    
    
    
    15,808Minibus  Mid-priced model
    
    
    65,734
    
    
    
    56,215
    
    
    
    48,131
    
    
    
    53,811
    
    
    
    62,821Subtotal  Minibuses
    
    
    75,025
    
    
    
    63,897
    
    
    
    56,883
    
    
    
    68,088
    
    
    
    78,629Zhonghua Sedans(2)
    
    
    27,054
    
    
    
    11,806
    
    
    
    6,854
    
    
    
    63,560
    
    
    
    128,003Total
    
    
    102,079
    
    
    
    75,703
    
    
    
    63,737
    
    
    
    131,648
    
    
    
    206,632Sales volume (units)Minibus  Deluxe model
    
    
    9,004
    
    
    
    6,626
    
    
    
    9,940
    
    
    
    14,196
    
    
    
    13,898Minibus  Mid-priced model
    
    
    65,614
    
    
    
    54,992
    
    
    
    50,060
    
    
    
    52,049
    
    
    
    59,517Subtotal  Minibuses
    
    
    74,618
    
    
    
    61,618
    
    
    
    60,000
    
    
    
    66,245
    
    
    
    73,415Zhonghua Sedans(2)
    
    
    25,600
    
    
    
    10,982
    
    
    
    9,000
    
    
    
    62,281
    
    
    
    106,770Total
    
    
    100,218
    
    
    
    72,600
    
    
    
    69,000
    
    
    
    128,526
    
    
    
    180,185
 
 (1)
    
    Calculated using the respective U.S. dollar to Renminbi year-end noon
buying rates for the years presented. Brilliance China Automotive
declared cash dividends per ordinary share in H.K. dollars in each of
2004 and 2003.(2)
    
    Includes the Kubao coupe launched in September 2007. 3




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Exchange Rate Information
  Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    High
    
    Low2003
    
    
    8.2767
    
    
    
    8.2771
    
    
    
    8.2800
    
    
    
    8.27652004
    
    
    8.2765
    
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.27642005
    
    
    8.0702
    
    
    
    8.1826
    
    
    
    8.2765
    
    
    
    8.07022006
    
    
    7.8041
    
    
    
    7.9574
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.2946January 2008
    
    
    7.1818
    
    
    
    7.2333
    
    
    
    7.2946
    
    
    
    7.1818February 2008
    
    
    7.1115
    
    
    
    7.1594
    
    
    
    7.1973
    
    
    
    7.1100March 2008
    
    
    7.0120
    
    
    
    7.0541
    
    
    
    7.1110
    
    
    
    7.0105April 2008
    
    
    6.8970
    
    
    
    7.0048
    
    
    
    7.0815
    
    
    
    6.8940May 2008
    
    
    6.9412
    
    
    
    6.9760
    
    
    
    7.0000
    
    
    
    6.9412June 2008 (through June 19, 2008)
    
    
    6.8770
    
    
    
    6.9152
    
    
    
    6.9633
    
    
    
    6.8770
 
 Source:
    
    The noon buying rate in New York for cable transfers
payable in foreign currencies as certified for
customs purposes by the Federal Reserve Bank of New
York.(1)
    
    Determined by averaging the rates on the last business day of each
month during the respective year and on the last business day of each
week during the respective month. 4




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Risk Factors
  Risks Relating to Brilliance China Automotive Minibus and Sedan Businesses
 Brilliance China Automotive has effectuated the delisting of its ADSs from the New York Stock
Exchange and may terminate the registration of its securities with the U.S. Securities and Exchange
Commission in the future, which may adversely affect its ADS price.
  Brilliance China Automotive experienced a net loss in 2005 and 2006 and may not be profitable in
subsequent years.
   5




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




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There are risks involved in Brilliance China Automotives joint venture with BMW to produce BMW
sedans in China.
  Failure by Brilliance China Automotive to continue to form and maintain alliances with foreign
automobile manufacturers could adversely affect its competitiveness.
  7




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The inability of Shenyang Automotive to access Toyotas technical resources to upgrade Shenyang
Automotives products, or Toyotas provision of assistance to any of Shenyang Automotives
competitors could negatively impact Shenyang Automotives sales and competitive position.
  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.
  8




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Any delay or disruption in Shenyang Automotives ability to obtain engines could limit Shenyang
Automotives ability to produce its Zhonghua sedans.
   If Brilliance China Automotive fails to upgrade its existing production facilities or build new
facilities in a timely and cost-efficient manner, its businesses, financial condition and results
of operation may be negatively affected.
  Shenyang Automotives competitors may have access to more advanced technology, greater financial
resources and more substantial support from the Chinese government, which could negatively affect
Shenyang Automotives competitive position.
  9




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Huachen, as Brilliance China Automotives substantial shareholder, may not always act in the best
interest of other shareholders.
  Significant changes in the cost or availability of raw materials or components may have a material
adverse impact on Brilliance China Automotives results of operations.
  10




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Product liabilities and recall claims may adversely affect Brilliance China Automotives results of
operation.
  Brilliance China Automotives business and future growth depend on availability of funding.
  Brilliance China Automotive is required to comply with increasingly stringent environmental, safety
and other standards applicable to its vehicles and manufacturing facilities.
  Brilliance China Automotive is exposed to potential risks and increased costs from the requirements
to evaluate internal control over financial reporting under the Sarbanes-Oxley Act of 2002, and has
identified material weaknesses in its internal control as a result of such evaluation.
  11




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There is no assurance that the research and development carried out by Brilliance China Automotive
will materialize in products that can achieve market acceptance.
   Brilliance China Automotives intellectual property rights may be infringed by third parties and
Brilliance China Automotive may also face infringement claims brought by third parties.
   13




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Brilliance China Automotive has uninsured risks.
  Brilliance China Automotives Zhonghua local brand may not succeed and Brilliance China
Automotive may subsequently suffer losses as PRC consumers give more weight to brand recognition as
they make automobile purchase decisions.
  Risks Relating to the Minibus and Sedan Industries in China
 Chinas automobile demands may become more volatile due to macroeconomic factors.
  14




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
    
    economic and monetary policies implemented by the Chinese government;
    
    volatility in petroleum, diesel and other commodity prices;
    
    inflation and consumer purchasing power;
    
    availability of and governmental policies relating to automobile financing; and
    
    development of transportation infrastructure, for example express ways.
   Increase in fuel prices may adversely affect demand for automobiles.
  
    
    have an adverse impact on Chinas economy, which may thereby result in a slow down
for automobile demand;
    
    increase Brilliance China Automotives production costs due to increase in costs of
petrochemical products; and
    
    discourage customers from purchasing automobiles due to increased running costs.
  Competition is intense in Chinas automobile industry.
  15




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Reduced tariffs and import restrictions on foreign-made motor vehicles and motor vehicle components
as a result of Chinas entry into the WTO may lead to increased competition for Brilliance China
Automotive.
    16




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The automobile industry is heavily regulated in China, and automobile-related regulations may
become even more stringent in the future.
  
    
    crash test requirements and other safety standards in relation to automobile and
automotive parts and components;
    
    emission standards;
    
    maximum fuel consumption;
    
    minimum warranty requirements;
    
    automobile recall requirements;
    
    noise, waste, discharge and other pollution controls relating to manufacturing of
automobiles;
    
    restrictions on road use, including time restriction and segmental restriction; and
    
    market entry requirements and/or minimum production requirements for automobile and
automotive components and parts manufacturers.
   17




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Chinas automobile industry is significantly dependent upon the economy of China.
  Chinas re-adjustment of consumption taxes on vehicles may cause decline of demand for certain
models Brilliance China Automotive currently manufactures.
  Risks Relating to Chinas Economy and Regulatory System
 Chinas economic, political and social conditions, as well as government policies, could affect
Brilliance China Automotives businesses.
  
    
    extent of government involvement;
 18




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
    
    level of development;
    
    growth rate;
    
    control of foreign exchange; and
    
    allocation of resources.
   Exchange rate fluctuations may affect the results of operations of Brilliance China Automotive.
   19




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Significant changes to Chinas income tax regime could have a material adverse effect on Brilliance
China Automotives results of operations.
  Budgetary constraints on Chinas government entities and state enterprises could affect Shenyang
Automotives sales and pricing of products.
  Shenyang Automotives ability to obtain sufficient foreign exchange to satisfy its requirements is
dependent on authorization of the State Administration of Foreign Exchange of China.
  20




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There are inherent uncertainties in Chinas legal system which may affect Brilliance China
Automotive.
   There can be no assurance that there will not be another significant outbreak of a highly
contagious disease in China and natural disasters may disrupt our business and operations.
   
 ITEM 4. INFORMATION ON THE COMPANY
 History and Development of Brilliance China Automotive
  21




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Business Overview
  24




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25




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Principal Products
    26




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DeluxeMinibus
    
    Deluxe
    
    Mid-priced
    
    Zhonghua
    
    Zhonghua
    
    Zhonghua
    
    Zhonghua(Granse
    
    Minibus
    
    Minibus
    
    Sedan
    
    Sedan
    
    Sedan
    
    SedanModel(1))
    
    (Hiase Model)
    
    (Hiase Model)
    
    Zunchi
    
    Junjie
    
    Kubao Coupe
    
    Junjie FRVMaximumnumber ofpassengers
    
    7-8
    
    15
    
    15
    
    5
    
    5
    
    5
    
    5Engine type
    
    Toyota 4-cylinder
    
    Toyota 4-cylinder
    
    MianyangXinchen
    
    Mitsubishi4-cylinder 1.8,
    
    Mitsubishi4-cylinder
    
    Mitsubishi4-cylinder,
    
    Mitsubishi 4-cylinder 1.6-2.7-liter
    
    2.4-liter
    
    and Xinguang
    
    2.0 and 2.4-
    
    1.6-liter, 1.8
    
    1.8-liter
    
    liter gasolinegasoline
    
    gasoline
    
    Brilliance
    
    liter gasoline
    
    and 2.0-liter
    
    gasoline
    
    engineengine and
    
    engine and
    
    4-cylinder
    
    engine and
    
    gasoline
    
    engine andMianyang
    
    Mitsubishi
    
    2.2-liter
    
    Shenyang
    
    engine and
    
    ShenyangXinchen 2.7-
    
    2.4-liter
    
    gasoline
    
    Brilliance
    
    Shenyang
    
    Brillianceliter gasoline
    
    gasoline
    
    engine
    
    Power Train
    
    Brilliance
    
    Power Trainengine
    
    engine
    
    
    
    4-cylinder
    
    Power Train
    
    4-cylinder1.8T gasoline
    
    4-cylinder
    
    1.8T gasolineengine
    
    1.8T gasoline
    
    engineengineHorsepower(bhp)
    
    105
    
    100.6
    
    92.5
    
    122-170
    
    100-173
    
    136-170
    
    100Price Range in Rmb(2)
    
    119,800-239,800
    
    121,800-156,800
    
    64,800-101,800
    
    105,800-209,800
    
    85,800-157,800
    
    123,900-169,500
    
    65,800 -83,800Fuel
Consumption
    
    10
    
    10
    
    9.8
    
    6.5-7.6
    
    6.2-7.6
    
    6.0-6.2
    
    6.2-6.4(Liters/100
km)(3)(4)Maximumspeed(4)
    
    158 km/hr
    
    130 km/hr
    
    130 km/hr
    
    185 -210 km/hr
    
    180 - 210 km/hr
    
    196 - 220 km/hr
    
    167 - 175 km/hrDomestic
componentcontent
    
    85%
    
    90%
    
    100%
    
    94-98%
    
    92-97%
    
    90-99%
    
    90-99%Length
    
    4.79m
    
    4.8m
    
    4.8m
    
    4.88m
    
    4.65m
    
    4.488m
    
    4.21m
 
 (1)
    
    Known as Grace before February 2004.(2)
    
    Actual price depends on specific model.(3)
    
    Based on an average speed of 50-55 kilometers per hour for minibuses and
80 kilometers per hour for sedans. 27




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BMW Brilliance
    
    BMW Brilliance3-Series Sedan
    
    5-Series SedanModels
    
    320i and 325i
    
    523Li, 525Li and 530LiMaximum number of passengers
    
    5
    
    5Engine types
    
    BMW 4 and 6-cylinder
    
    BMW 6-cylinder2.0-liter and 2.5-liter
    
    2.5-liter and 3.0-litergasoline engines
    
    gasoline enginesHorsepower
    
    150 - 218
    
    177-258(bhp)Price range in Rmb(1)
    
    339,800-461,000
    
    472,600-712,600Fuel Consumption
    
    7.9 - 9.0
    
    9.4 - 9.5(Liters/100 km)(2)Maximum speed
    
    215 - 242 km/hr
    
    227 - 250 km/hrLength
    
    4.52 m
    
    4.98 m
 
 (1)
    
    Actual price depends on specific model.(2)
    
    Based on an average speed of 80 kilometers per hour. Deluxe minibus
   Mid-priced minibus
 28




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##### Table of Contents



Zhonghua sedans
  29




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##### Table of Contents



2005
    
    2006
    
    2007Revenue
    
    
    
    
    
    Revenue
    
    
    
    
    
    Revenue(Rmb
    
    
    
    
    
    (Rmb
    
    
    
    
    
    (Rmbmillions)
    
    %
    
    millions)
    
    %
    
    millions)
    
    %Minibus salesDeluxe minibus
    
    
    958
    
    
    
    17.5
    
    
    
    1,460
    
    
    
    13.9
    
    
    
    1,346
    
    
    
    9.5Mid-priced minibus
    
    
    2,989
    
    
    
    54.7
    
    
    
    3,020
    
    
    
    28.8
    
    
    
    3,239
    
    
    
    22.9Zhonghua sedan
    
    
    863
    
    
    
    15.8
    
    
    
    5,190
    
    
    
    49.5
    
    
    
    8,755
    
    
    
    61.9Subtotal
    
    
    4,810
    
    
    
    88.0
    
    
    
    9,670
    
    
    
    92.2
    
    
    
    13,340
    
    
    
    94.3Other sources of income(1)
    
    
    659
    
    
    
    12.0
    
    
    
    815
    
    
    
    7.8
    
    
    
    809
    
    
    
    5.7Total
    
    
    5,469
    
    
    
    100.0
    
    
    
    10,485
    
    
    
    100.0
    
    
    
    14,149
    
    
    
    100.0
 
 (1)
    
    Including sales of components and scrap metal. 30




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##### Table of Contents



2005
    
    2006
    
    2007Revenue
    
    
    
    
    
    Revenue
    
    
    
    
    
    RevenueProvince/
    
    (Rmb
    
    
    
    
    
    (Rmb
    
    
    
    
    
    (RmbMunicipality
    
    millions)
    
    %
    
    millions)
    
    %
    
    millions)
    
    %Beijing
    
    
    755
    
    
    
    15.7
    
    
    
    1,180
    
    
    
    12.2
    
    
    
    1,814
    
    
    
    13.6Guangdong
    
    
    529
    
    
    
    11.0
    
    
    
    1,057
    
    
    
    10.9
    
    
    
    1,494
    
    
    
    11.2Liaoning
    
    
    567
    
    
    
    11.8
    
    
    
    1,673
    
    
    
    17.3
    
    
    
    1,881
    
    
    
    14.1Shanghai
    
    
    452
    
    
    
    9.4
    
    
    
    803
    
    
    
    8.3
    
    
    
    814
    
    
    
    6.1Jiangsu
    
    
    283
    
    
    
    5.9
    
    
    
    667
    
    
    
    6.9
    
    
    
    747
    
    
    
    5.6Zhejiang
    
    
    188
    
    
    
    3.9
    
    
    
    474
    
    
    
    4.9
    
    
    
    627
    
    
    
    4.7Shandong
    
    
    183
    
    
    
    3.8
    
    
    
    522
    
    
    
    5.4
    
    
    
    774
    
    
    
    5.8Tianjin
    
    
    115
    
    
    
    2.4
    
    
    
    193
    
    
    
    2.0
    
    
    
    334
    
    
    
    2.5Heilongjiang
    
    
    82
    
    
    
    1.7
    
    
    
    184
    
    
    
    1.9
    
    
    
    347
    
    
    
    2.6Hebei
    
    
    87
    
    
    
    1.8
    
    
    
    222
    
    
    
    2.3
    
    
    
    360
    
    
    
    2.7Hubei
    
    
    82
    
    
    
    1.7
    
    
    
    164
    
    
    
    1.7
    
    
    
    214
    
    
    
    1.6Hunan
    
    
    96
    
    
    
    2.0
    
    
    
    203
    
    
    
    2.1
    
    
    
    240
    
    
    
    1.8Shaanxi
    
    
    77
    
    
    
    1.6
    
    
    
    163
    
    
    
    1.7
    
    
    
    240
    
    
    
    1.8Henan
    
    
    106
    
    
    
    2.2
    
    
    
    193
    
    
    
    2.0
    
    
    
    334
    
    
    
    2.5Sichuan
    
    
    115
    
    
    
    2.4
    
    
    
    221
    
    
    
    2.3
    
    
    
    533
    
    
    
    4.0Shanxi
    
    
    72
    
    
    
    1.5
    
    
    
    164
    
    
    
    1.7
    
    
    
    214
    
    
    
    1.6Fujian
    
    
    63
    
    
    
    1.3
    
    
    
    173
    
    
    
    1.8
    
    
    
    173
    
    
    
    1.3Jilin
    
    
    72
    
    
    
    1.5
    
    
    
    116
    
    
    
    1.2
    
    
    
    173
    
    
    
    1.3Chongqing
    
    
    48
    
    
    
    1.0
    
    
    
    172
    
    
    
    1.8
    
    
    
    200
    
    
    
    1.5Xinjiang
    
    
    63
    
    
    
    1.3
    
    
    
    106
    
    
    
    1.1
    
    
    
    173
    
    
    
    1.3Yunnan
    
    
    43
    
    
    
    0.9
    
    
    
    126
    
    
    
    1.3
    
    
    
    213
    
    
    
    1.6Anhui
    
    
    53
    
    
    
    1.1
    
    
    
    135
    
    
    
    1.4
    
    
    
    187
    
    
    
    1.4Guangxi
    
    
    34
    
    
    
    0.7
    
    
    
    77
    
    
    
    0.8
    
    
    
    107
    
    
    
    0.8Jiangxi
    
    
    34
    
    
    
    0.7
    
    
    
    58
    
    
    
    0.6
    
    
    
    67
    
    
    
    0.5Inner Mongolia
    
    
    34
    
    
    
    0.7
    
    
    
    107
    
    
    
    1.1
    
    
    
    133
    
    
    
    1.0Guizhou
    
    
    19
    
    
    
    0.4
    
    
    
    58
    
    
    
    0.6
    
    
    
    93
    
    
    
    0.7Hainan
    
    
    106
    
    
    
    2.2
    
    
    
    26
    
    
    
    0.3
    
    
    
    67
    
    
    
    0.5Other(1)
    
    
    452
    
    
    
    9.4
    
    
    
    433
    
    
    
    4.4
    
    
    
    787
    
    
    
    5.9Total
    
    
    4,810
    
    
    
    100.0
    
    
    
    9,670
    
    
    
    100.0
    
    
    
    13,340
    
    
    
    100.0
 
 (1)
    
    Gansu, Ningxia, Tibet and Qinghai as well as export to other countries. BMW Brilliance
  31




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##### Table of Contents



Production Process
 Minibus Production Process and Equipment
 
    
    Stamping. Shenyang Automotive produces its own semi-finished steel sheets for
stamping on a roll, drop and stack production line. Stamping is carried out at seven
production stations that utilize 31 domestic and imported presses, the largest of
which is calibrated at 3,200 tons and is used to stamp roofs and side panels for the deluxe and mid-priced minibuses. The 175 dies used for stamping and
cutting body components for the Hiase and Granse minibuses were purchased from Toyota.
Substantially all of the stamped metal vehicle components utilized in Shenyang
Automotives minibuses are produced in this stamping workshop.
 32




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##### Table of Contents




    
    Welding. The welding workshop consists of 2 production lines and 15 process
conveying lines, among which the Hiase has 8 lines and the Granse has 7 lines. Each
line is focused on a different section of the minibus. These lines were manufactured
with Toyota technology and utilize a combination of manual welding and automatic
robotic welding, the latter of which is utilized for the more difficult welding
points. Each welding station is equipped with a domestically manufactured testing
machine. The annual production capacity is 120,000 units among which 80,000 units are
dedicated to the Hiase minibuses and 40,000 units to the Granse.
    
    Painting. Shenyang Automotive currently operates a 36,347 square meter painting
workshop that was set up in April 2004 to enhance production capacity. The painting
workshop has three floors, each with its own function. The workshop has an annual
production capacity of 120,000 units, with space reserved for expansion up to an
annual production capacity of 150,000. The new workshop uses a painting method that
combines the use of a conveyor, automated machine and robotic machine. Steps taken to
prepare the vehicle body for painting include de-greasing, rinsing, phosphatization
and electrophoretic coating. Using the 3C1B process, each of three coats of paint is
applied by a sprayer to the minibus body and dried in a heated drying chamber. The
specialized pre-painting preparation of the vehicle allows the frame to withstand
corrosion for 10 to 15 years. Also, the high standard of cleanliness in the painting
workshop and the advanced paint sprayers used allow Shenyang Automotive to reduce
environmental pollution, provide better working conditions for the painting workshop
employees, conserve raw materials and ensure that each minibus receives three
consistent, high-quality coats of paint. Finally, various quality control tests are
conducted, including measurement of the luster and thickness of the paint on each
vehicle. In early 2008, the painting workshop began painting the Junjie FRV and added
a new vehicle acceptance and delivery processing line for the Junjie FRV. Eight
additional robotic paint arms were added and various new inspection points were
introduced as part of the painting process. These modifications have enabled the
Junjie FRV to be painted simultaneously with Hiase minibuses and allowed us to reach
production capacity of 100,000 units of Junjie FRV per year.
    
    Assembly. Shenyang Automotives final assembly workshop is equipped with a
combination single slot, hanging and double slot conveyor. The conveyor is 570 meters
long, has 88 separate workstations and is capable of producing minibuses at the rate
of one every 160 seconds. Shenyang Automotive also developed jointly with the
Shenyang Automation Research Center an automated lifting system that is used in the assembly of the power train, rear chassis
and crank case, as well as a computerized hydraulic machine for carrying out the
transfer from a single rail conveyor onto a hanging line conveyor  the first of its
kind to be developed in China.
    
    Testing. Shenyang Automotive employs an advanced comprehensive vehicle testing
system to ensure that each vehicle conforms to specifications, including wheel
alignment, exhaust emissions, steering, braking and engine performance and testing,
and windshield leakage testing. All of these final testing procedures are also
supported by a comprehensive quality control staff that monitors each step of the
production process. See  Business Overview  Quality Control below.
 33




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##### Table of Contents



Zhonghua Sedan Production Process and Equipment
 
    
    Stamping. At present, 333 pieces for 236 types of large and medium press parts of
the Zhonghua sedans are produced in the stamping (or pressing) workshop. There are
915 imported and domestically produced molds, six large and medium pressing lines,
among which the line producing large (2,300 ton) parts was imported from Schuler of
Germany, which can supply parts for six production lines. There is also a 100-ton
molding press imported from Kawasaki of Japan. The other pressing lines were purchased
from domestic equipment manufacturers.
    
    Welding. The welding workshop is required to assemble and weld 394 separate panels,
30 machined parts, 10 roll-pressed parts and 30 standard parts. This line was
designed, manufactured and installed by Kuka of Germany. The welding line consists of
26 zones and 347 stations. The line for the Kubao coupe includes various lines for
different parts of the automobile and shares the same adjustment line with the Junjie
and Zunchi, with 93 stations. The two lines are capable of spot-welding, carbon
dioxide welding, project welding, T-stud welding, sealing, brazing and hemming. At
present, there are 43 working robots in this workshop, which are used to weld, seal
and inspect at the most important stations on the line. The SKID apparatus that
transports components both on the ground and overhead adds speed and efficiency to the
welding process. The welding workshop used for the Junjie FRV is situated in a new
building and uses new equipment. The welding workshop contains stud welding, spot
welding and carbon dioxide welding operations. The main production line can produce
three models, with each model having its own assembly workstation where the welding is
conducted by robots. There are currently four robots in use at the Junjie FRV welding
workshop and the SKID apparatus is also used. The Junjie FRV welding production line
has an annual production capacity of 100,000 units.
    
    Painting. Zhonghua sedans and the BMW-branded sedans share the same painting line,
with the exception of the Junjie FRV, which uses the same painting line as Hiase
minibuses. The equipment used in the painting line is provided by Durr of Germany, and
the paint supply system was imported from Graco of the United States. Steps involved in the body painting process include
pre-treatment, E-coat, sealing, PVC, primer, top-coat and cavity wax. The painting line
is highly mechanized and automated, with a central control system imported from
Siemens. The painting line may switch paints of different colors within 10 seconds and
15 paints of different colors may be used in the same painting line. All of the paints
and other materials utilized in paint workshop are high quality products sourced both
from within China and abroad.
    
    Assembly and Testing. The performance of the assembly and testing workshop for all
Zhonghua sedans is guided by an information system based on bar code technology. The
layout of the final assembly shop for the Zhonghua sedans (other than the Junjie FRV)
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. The
assembly workshop for the Junjie FRV was reconstructed from a previously existing
painting workshop for Hiase minibuses, with a newly constructed production line. The
equipment for the assembly and testing line is provided by Durr of Germany and Huayuan
Company. Other equipment used in the assembly and testing line for the Junjie FRV
includes equipment produced by Kuka of Germany and Fori Company of the United States.
The Junjie FRV assembly and testing line has an annual production capacity of 100,000
units.
 34




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##### Table of Contents




    
    Instrument Production.The instrument panel workshop, occupying an area of 6,540
square meters, produces Zhonghua instrument panels. The processes include vacuum
shaping, foaming, hydrocutting and welding, and use seven different machines. The
workshop has a high production capacity for the production of parts and assembly of
instrument panels.
 BMW Sedan Production Process
  
    
    Welding. The manufacturing and welding process in the welding workshop is performed
according to the BMW Groups global standard. The dimensional quality is checked with
CMM machines from Wenzel Company of Germany. The sourced welding equipment is from
standard suppliers in Germany. The welding workshop contains stud welding, spot
welding, mig welding and sealing operations. The line operators have been trained by
the BMW Groups specialists and the process is controlled pursuant to BMW Groups
standards. The quality checks and audits are consistent with BMW Groups standards and
specifications.
    
    Painting. All of the equipment used in the painting line is provided by Durr of
Germany, and the paint supply system was imported from Graco of the United States.
Steps involved in the body painting process are highly mechanized and automated, with
a central control system imported from Siemens. All of the paints and other materials
utilized in the paint workshop are high quality products sourced both from within
China and abroad.
    
    Assembly. The assembly workshop consists of two areas, both using conveyor systems
designed by the German supplier AFT with 60 line stations in total, as well as
handling devices for heavy parts from Dalmec Company and filling equipment from Durr
of Germany.
 35




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##### Table of Contents




    
    Testing. The finishing and testing equipment is located in the second area of the
assembly workshop. A wide range of special equipment used in BMW Groups plants
worldwide is used to test 100% of the cars produced.
 Raw Materials and Components
 Raw Materials
  Components
   36




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##### Table of Contents



Other Significant Subsidiaries, Jointly Controlled Entities and Associated Companies
  Mianyang Xinchen
  37




---



##### Table of Contents



Ningbo Yuming
  Xinguang Brilliance
   38




---



##### Table of Contents



Xing Yuan Dong, Ningbo Brilliance Ruixing and Mianyang Brilliance Ruian
    Shenyang Aerospace
  39




---



##### Table of Contents



Brilliance Dongxing and Xingchen Automotive Seats
  Shenyang Automotive Engine Plant
    40




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##### Table of Contents



Shenyang Brilliance Power Train Machinery Co., Ltd.
  Shenyang Chenfa Automobile Component Co., Ltd.
  Sales and Marketing
  2005
    
    2006
    
    2007Units
    
    
    
    
    
    Units
    
    
    
    
    
    UnitsSold
    
    %
    
    Sold
    
    %
    
    Sold
    
    %Shenyang AutomotiveDeluxe minibus
    
    
    9,940
    
    
    
    14.4
    
    
    
    14,196
    
    
    
    11.0
    
    
    
    13,898
    
    
    
    7.8Mid-priced minibus
    
    
    50,060
    
    
    
    72.6
    
    
    
    52,049
    
    
    
    40.5
    
    
    
    59,517
    
    
    
    33.0Zhonghua sedan
    
    
    9,000
    
    
    
    13.0
    
    
    
    62,281
    
    
    
    48.5
    
    
    
    106,770
    
    
    
    59.2Total
    
    
    69,000
    
    
    
    100.0
    
    
    
    128,526
    
    
    
    100.0
    
    
    
    180,185
    
    
    
    100.0BMW BrillianceBMW sedan
    
    
    17,501
    
    
    
    100.0
    
    
    
    23,600
    
    
    
    100.0
    
    
    
    32,100
    
    
    
    100.0
 41




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##### Table of Contents



42




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##### Table of Contents



2005
    
    2006
    
    2007Minibuses
    
    Sedans
    
    Minibuses
    
    Sedans
    
    Minibuses
    
    SedansProvince/Municipality
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %Beijing
    
    
    10,395
    
    
    
    17.3
    
    
    
    453
    
    
    
    5.0
    
    
    
    10,480
    
    
    
    15.8
    
    
    
    5,201
    
    
    
    8.4
    
    
    
    12,131
    
    
    
    16.5
    
    
    
    12,457
    
    
    
    11.7Guangdong
    
    
    7,107
    
    
    
    11.8
    
    
    
    467
    
    
    
    5.2
    
    
    
    7,959
    
    
    
    12.0
    
    
    
    6,114
    
    
    
    9.8
    
    
    
    10,586
    
    
    
    14.4
    
    
    
    9,553
    
    
    
    9.0Liaoning
    
    
    6,461
    
    
    
    10.8
    
    
    
    1,650
    
    
    
    18.3
    
    
    
    7,113
    
    
    
    10.7
    
    
    
    15,089
    
    
    
    24.2
    
    
    
    10,344
    
    
    
    14.1
    
    
    
    15,058
    
    
    
    14.1Shanghai
    
    
    6,347
    
    
    
    10.6
    
    
    
    141
    
    
    
    1.6
    
    
    
    7,509
    
    
    
    11.3
    
    
    
    3,130
    
    
    
    5.0
    
    
    
    6,577
    
    
    
    9.0
    
    
    
    4,519
    
    
    
    4.2Jiangsu
    
    
    3,915
    
    
    
    6.5
    
    
    
    138
    
    
    
    1.5
    
    
    
    4,899
    
    
    
    7.4
    
    
    
    3,934
    
    
    
    6.3
    
    
    
    3,919
    
    
    
    5.3
    
    
    
    6,120
    
    
    
    5.7Zhejiang
    
    
    2,578
    
    
    
    4.3
    
    
    
    88
    
    
    
    1.0
    
    
    
    2,955
    
    
    
    4.5
    
    
    
    3,319
    
    
    
    5.3
    
    
    
    2,798
    
    
    
    3.8
    
    
    
    5,735
    
    
    
    5.4Shandong
    
    
    2,313
    
    
    
    3.9
    
    
    
    296
    
    
    
    3.3
    
    
    
    2,377
    
    
    
    3.6
    
    
    
    4,593
    
    
    
    7.4
    
    
    
    2,448
    
    
    
    3.3
    
    
    
    7,941
    
    
    
    7.4Tianjin
    
    
    1,468
    
    
    
    2.4
    
    
    
    185
    
    
    
    2.1
    
    
    
    1,596
    
    
    
    2.4
    
    
    
    974
    
    
    
    1.6
    
    
    
    1,464
    
    
    
    2.0
    
    
    
    3,034
    
    
    
    2.8Heilongjiang
    
    
    1,079
    
    
    
    1.8
    
    
    
    94
    
    
    
    1.0
    
    
    
    1,337
    
    
    
    2.0
    
    
    
    1,051
    
    
    
    1.7
    
    
    
    1,406
    
    
    
    1.9
    
    
    
    3,377
    
    
    
    3.2Hebei
    
    
    1,187
    
    
    
    2.0
    
    
    
    44
    
    
    
    0.5
    
    
    
    1,621
    
    
    
    2.5
    
    
    
    1,387
    
    
    
    2.2
    
    
    
    1,545
    
    
    
    2.1
    
    
    
    3,422
    
    
    
    3.2Hubei
    
    
    1,136
    
    
    
    1.9
    
    
    
    53
    
    
    
    0.6
    
    
    
    1,333
    
    
    
    2.0
    
    
    
    830
    
    
    
    1.3
    
    
    
    1,071
    
    
    
    1.4
    
    
    
    1,808
    
    
    
    1.7Hunan
    
    
    1,125
    
    
    
    1.9
    
    
    
    275
    
    
    
    3.1
    
    
    
    1,141
    
    
    
    1.7
    
    
    
    1,510
    
    
    
    2.4
    
    
    
    1,098
    
    
    
    1.5
    
    
    
    2,224
    
    
    
    2.1Shaanxi
    
    
    958
    
    
    
    1.6
    
    
    
    126
    
    
    
    1.4
    
    
    
    1,064
    
    
    
    1.6
    
    
    
    1,090
    
    
    
    1.7
    
    
    
    993
    
    
    
    1.3
    
    
    
    1,942
    
    
    
    1.8Henan
    
    
    1,285
    
    
    
    2.1
    
    
    
    207
    
    
    
    2.3
    
    
    
    1,287
    
    
    
    1.9
    
    
    
    1,297
    
    
    
    2.1
    
    
    
    1,052
    
    
    
    1.4
    
    
    
    3,424
    
    
    
    3.2Sichuan
    
    
    1,007
    
    
    
    1.7
    
    
    
    623
    
    
    
    7.0
    
    
    
    1,369
    
    
    
    2.1
    
    
    
    1,631
    
    
    
    2.6
    
    
    
    1,356
    
    
    
    1.9
    
    
    
    5,815
    
    
    
    5.4Shanxi
    
    
    922
    
    
    
    1.5
    
    
    
    143
    
    
    
    1.6
    
    
    
    1,064
    
    
    
    1.6
    
    
    
    1,062
    
    
    
    1.7
    
    
    
    805
    
    
    
    1.1
    
    
    
    2,077
    
    
    
    1.9Fujian
    
    
    824
    
    
    
    1.3
    
    
    
    98
    
    
    
    1.1
    
    
    
    1,067
    
    
    
    1.6
    
    
    
    1,288
    
    
    
    2.1
    
    
    
    1,136
    
    
    
    1.6
    
    
    
    1,157
    
    
    
    1.1Jilin
    
    
    950
    
    
    
    1.6
    
    
    
    55
    
    
    
    0.6
    
    
    
    971
    
    
    
    1.5
    
    
    
    625
    
    
    
    1.0
    
    
    
    1,050
    
    
    
    1.4
    
    
    
    1,264
    
    
    
    1.2Chongqing
    
    
    476
    
    
    
    0.8
    
    
    
    232
    
    
    
    2.6
    
    
    
    909
    
    
    
    1.4
    
    
    
    1,364
    
    
    
    2.2
    
    
    
    785
    
    
    
    1.1
    
    
    
    1,888
    
    
    
    1.8Xinjiang
    
    
    830
    
    
    
    1.4
    
    
    
    90
    
    
    
    1.0
    
    
    
    693
    
    
    
    1.0
    
    
    
    672
    
    
    
    1.1
    
    
    
    623
    
    
    
    0.9
    
    
    
    1,670
    
    
    
    1.6Yunnan
    
    
    551
    
    
    
    0.9
    
    
    
    90
    
    
    
    1.0
    
    
    
    841
    
    
    
    1.3
    
    
    
    841
    
    
    
    1.4
    
    
    
    1,044
    
    
    
    1.4
    
    
    
    1,797
    
    
    
    1.7Anhui
    
    
    663
    
    
    
    1.1
    
    
    
    101
    
    
    
    1.1
    
    
    
    847
    
    
    
    1.3
    
    
    
    894
    
    
    
    1.4
    
    
    
    711
    
    
    
    1.0
    
    
    
    1,921
    
    
    
    1.8Guangxi
    
    
    478
    
    
    
    0.8
    
    
    
    30
    
    
    
    0.3
    
    
    
    463
    
    
    
    0.7
    
    
    
    564
    
    
    
    0.9
    
    
    
    336
    
    
    
    0.5
    
    
    
    1,099
    
    
    
    1.0Jiangxi
    
    
    396
    
    
    
    0.7
    
    
    
    120
    
    
    
    1.3
    
    
    
    398
    
    
    
    0.6
    
    
    
    428
    
    
    
    0.7
    
    
    
    367
    
    
    
    0.5
    
    
    
    562
    
    
    
    0.5Inner Mongolia
    
    
    414
    
    
    
    0.7
    
    
    
    92
    
    
    
    1.0
    
    
    
    619
    
    
    
    0.9
    
    
    
    794
    
    
    
    1.3
    
    
    
    574
    
    
    
    0.8
    
    
    
    1,334
    
    
    
    1.2Guizhou
    
    
    161
    
    
    
    0.3
    
    
    
    110
    
    
    
    1.2
    
    
    
    276
    
    
    
    0.4
    
    
    
    545
    
    
    
    0.9
    
    
    
    302
    
    
    
    0.4
    
    
    
    1,032
    
    
    
    1.0Hainan
    
    
    1,519
    
    
    
    2.5
    
    
    
    31
    
    
    
    0.3
    
    
    
    123
    
    
    
    0.2
    
    
    
    229
    
    
    
    0.4
    
    
    
    745
    
    
    
    1.0
    
    
    
    162
    
    
    
    0.2Other(1)
    
    
    3,455
    
    
    
    5.8
    
    
    
    2,968
    
    
    
    33.0
    
    
    
    3,934
    
    
    
    6.0
    
    
    
    1,825
    
    
    
    2.9
    
    
    
    6,149
    
    
    
    8.4
    
    
    
    4,378
    
    
    
    4.1Total
    
    
    60,000
    
    
    
    100.0
    
    
    
    9,000
    
    
    
    100.0
    
    
    
    66,245
    
    
    
    100.0
    
    
    
    62,281
    
    
    
    100.0
    
    
    
    73,415
    
    
    
    100.0
    
    
    
    106,770
    
    
    
    100.0
 
 (1)
    
    Gansu, Ningxia, Tibet and Qinghai as well as export to other countries.   43




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Competition
    44




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##### Table of Contents



Minibus
 
    
    Southeast Motors. Southeast Motors is currently 25% owned by Taiwan China Motor
Industry Corporation, 50% owned by Fujian Motor Industry Group Company and 25% owned
by Mitsubishi Motors Corporation. Southeast Motors has launched over thirty different
models of light passenger vehicles (including minibuses) under the Delica and Freeca
brand names and also launched the MPV in 2004. Southeast Motors had an annual
production capacity of 60,000 minibuses. According to Qing Xing Che Yao Wen, a
publication issued by Chinas Light Car Market Analysis Association, Southeast Motors
sales volume in 2007 was 14,406 minibuses, representing a 90.7% increase from 7,555
minibuses in 2006. Delica series includes seven-, eight- and eleven-seat ordinary,
luxury and super luxury models and is currently priced between Rmb 79,800 to Rmb
199,800.
    
    Nanjing Iveco.In 1996, Italys Fiat Auto Company and Yuejin Group established
Nanjing Iveco Automotive Company, Ltd., a 50-50 equity joint venture, for the
manufacture of 33 models of five-ton passenger, goods and off-road vehicles in the
Iveco S series. Models currently in production include the A30, A40 and A49 passenger
vehicles, as well as a separate series of goods vehicles. Nanjing Iveco has an annual
production capacity of 60,000 vehicles. According to Qing Xing Che Yao Wen, in 2007,
Nanjing Iveco sold 24,900 vehicles, representing an 24.1% increase from 20,060
minibuses in 2006. Its minibuses are currently priced between Rmb 99,900 to Rmb 256,000.
    
    Jiangling Motors.Jiangling Motors Co., Ltd. of Jiangxi Province was established in
1993. Its second largest shareholder is currently Ford Motor Company in the United
States. Jiangling Motors produced China Transit, a Ford brand minibus, light trucks
and pick-ups. At present, China Transit is available in 15-seat, 12-seat and 9-seat
versions. According to Qing Xing Che Yao Wen, in 2007, Jiangling Motors sold a total
of 26,576 minibuses, representing a 15.4% increase from 23,029 vehicles in 2006.
Production capacity was approximately 100,000 per year. Its minibuses are currently
priced between Rmb 114,800 to Rmb 193,600.
 45




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Zhonghua Sedan
  
    
    First Auto Works Group of the PRC. First Auto Works is one of the largest
automotive companies in the PRC. First Auto Works Hongqi sedan was launched in 2001
and is considered one of the PRC governments showcase PRC-made sedans. First Auto
Works introduced the Besturn 2.0-liter and 2.3-liter sedans in August 2006, with
selling prices from Rmb 129,800 to Rmb 208,800. According to the monthly report issued
by Chinas Association of National Passenger Vehicle Market Information, First Auto
Works sold 23,279 Besturn sedans in 2007, compared to 5,930 Besturn sedans sold from
August 2006 to December 2006.
    
    Shanghai Volkswagen Automotive. Shanghai Volkswagen Automotive was one of the
original state-designed automobile manufacturers in the PRC. It is currently 50% owned
by Volkswagen AG of Germany and 50% owned by Shanghai Automotive Industry Corp. It
still holds a dominant share of the PRC sedan market and competes with the Zhonghua
sedan through the Santana 3000 sedans. The Santana 3000 has a 1.78-liter engine and
sells for between Rmb 96,800 to Rmb 118,800. According to the monthly report issued by
Chinas Association of National Passenger Vehicle Market Information, in 2007,
Shanghai Volkswagen Automotive sold 101,769 units of Santana 3000 sedans representing
a 23.2% increase from the 82,617 units in 2006.
    
    Beijing Hyundai. Beijing Hyundai was established in 2002 as a 50-50 joint venture
between Beijing Auto Investment and Hyundai Motor Co. of South Korea. It currently
produces and sells the Sonata 2.0-liter, Sonata 2.5-liter and Sonata 2.7-liter, and
the Elantra 1.6-liter and 1.8-liter models. The Sonata 2.0-liter sells for
approximately Rmb 123,800 to Rmb 161,800. The Elantra 1.8-liter sedan sells for
approximately Rmb 112,500 to Rmb 122,500. According to the monthly report issued by
Chinas Association of National Passenger Vehicle Market Information, in 2007, Beijing
Hyundai sold 25,566 units and 120,606 units of the Sonata 2.0-liter and the Elantra, respectively,
representing a decrease of 31.1 % and 28.9%, respectively, from that of 37,095 and
169,716 respectively, in 2006.
  BMW Sedans
  46




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##### Table of Contents




    
    FAW Volkswagen. FAW Volkswagen is 10% owned by Audi AG, 30% by Volkswagen AG and
60% by First Auto Works of China. FAW Volkswagen produces and sells the Audi A4 and A6
sedans and the Volkswagen Jetta and Bora sedans in the PRC. FAW Volkswagens Audi
sedans have a dominant share of the PRCs premium sedan market because of its strong
sales to the PRC government. FAW Volkswagen sold 61,686 and 73,404 units of Audi A6
sedans in 2006 and 2007, respectively. The Audi A4 sedan was formally launched in the
PRC market in 2003 and had a total sales volume of 15,536 and 19,764 in 2006 and 2007,
respectively. A new Audi A6 was launched in June 2005. The Audi A4 sedan currently
sells for between Rmb 274,900 and Rmb 343,400, and the new Audi A6 sedan sells for
between Rmb 347,200 and Rmb 853,300.
    
    Beijing Benz.Beijing Benz Daimler Chrysler Auto Co. Ltd., or Beijing Benz, a 50-50
joint venture between Daimler Chrysler and Beijing Automotive Industry Holding
Company, obtained a license to produce the Mercedes-Benz C-Class and E-Class sedans in
the PRC in August 2005. Beijing Benz launched its domestically produced models of E280
and E200K in December 2005. These E-Class sedans currently are sold for between Rmb
498,000 and Rmb 638,000 in the PRC. The vehicles are produced in a new facility in
Beijing with initial production capacity of 20,000 units per year. The domestically
produced C-Class sedan was launched in March 2008 in the PRC, and currently sells for
between Rmb 378,000 and Rmb 478,000.
    
    Lexus. Lexus sedans are imported from Japan by Toyota Motor (China) Investment Co.,
Ltd. In 2007, the sales volume of Lexus in China was 28,839 units. The new IS and ES
models were introduced into the PRC in August 2006 and sales of these two models in
2007 was 19,837 units. The ES350 currently sells for between Rmb 472,000 and Rmb 552,000 and the IS300 currently sells
for between Rmb 435,000 and Rmb 515,000.
 Governmental Regulation
   47




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48




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Quality Control
    49




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After-Sales Service
     Environmental Matters
  50




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##### Table of Contents



Insurance
  Organizational Structure
  EffectiveInterest held byJurisdiction of
    
    Brilliance ChinaName of Companies
    
    Incorporation
    
    AutomotiveSubsidiariesShenyang Brilliance JinBei Automobile Co., Ltd.
    
    China
    
    
    51.0
    %Ningbo Yuming Machinery Industrial Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang XingYuanDong Automobile Component Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Jianhua Motors Engine Co., Ltd.
    
    China
    
    
    60.8
    %Ningbo Brilliance Ruixing Auto Components Co., Ltd.
    
    China
    
    
    100.0
    %Mianyang Brilliance Ruian Automotive Components Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang
JinBei Automotive Industry Holdings Co., Ltd.
    
    China
    
    
    99.0
    %Shenyang XinJinBei Investment and Development Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Brilliance Dongxing Automotive Component Co., Ltd.
    
    China
    
    
    100.0
    %Shenyang Jindong Development Co., Ltd.
    
    China
    
    
    75.5
    %Shenyang ChenFa Automobile Component Co., Ltd.
    
    China
    
    
    100.0
    %Shanghai Hidea Auto Design Co., Ltd.
    
    China
    
    
    63.3
    %Shenyang Brilliance Power Train Machinery Co., Ltd.
    
    China
    
    
    75.0
    %China Brilliance Automotive Components Group Limited
    
    Bermuda
    
    
    100.0
    %Southern State Investment Limited
    
    BVI
    
    
    100.0
    %Beston Asia Investment Limited
    
    BVI
    
    
    100.0
    %Pure Shine Limited
    
    BVI
    
    
    100.0
    %Key Choices Group Limited
    
    BVI
    
    
    100.0
    %Brilliance China Automotive Finance Ltd.
    
    BVI
    
    
    100.0
    %Brilliance China Finance Limited
    
    BVI
    
    
    100.0
    %Jointly Controlled EntitiesMianyang Xinchen Engine Co., Ltd.
    
    China
    
    
    50.0
    %Shenyang Xinguang Brilliance Automobile Engine Co., Ltd.
    
    China
    
    
    50.0
    %BMW Brilliance Automotive Ltd.
    
    China
    
    
    49.5
    %Associated CompaniesShenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.
    
    China
    
    
    12.8
    %Shenyang JinBei Vehicle Dies Manufacturing Co., Ltd.
    
    China
    
    
    48.0
    %
 51




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Property, Production Facilities and Equipment
      52




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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.
 53




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Overview
     54




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Production Volumes and Sales
   55




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Costs and Expenses
     56




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Results of Operations
 Year ended December 31,2007
    
    2006
    
    2005(Rmb thousands)Sales to third parties
    
    
    10,994,675
    
    
    
    9,067,505
    
    
    
    3,859,151Sales to affiliated companies
    
    
    3,154,474
    
    
    
    1,417,249
    
    
    
    1,609,839Total Sales
    
    
    14,149,149
    
    
    
    10,484,754
    
    
    
    5,468,990Cost of sales
    
    
    (13,049,107
    )
    
    
    (9,960,587
    )
    
    
    (5,011,955
    )Gross profit
    
    
    1,100,042
    
    
    
    524,167
    
    
    
    457,035Selling, general and administrative expenses
    
    
    (1,535,695
    )
    
    
    (1,384,718
    )
    
    
    (1,195,336
    )Interest expense
    
    
    (203,263
    )
    
    
    (177,001
    )
    
    
    (182,354
    )Interest income
    
    
    125,470
    
    
    
    90,738
    
    
    
    60,189Equity in earnings of associated companies and
jointly controlled entities, net
    
    
    192,261
    
    
    
    149,320
    
    
    
    48,995Subsidy income
    
    
    140,081
    
    
    
    50,176
    
    
    
    3,139Other income, net
    
    
    179,706
    
    
    
    106,150
    
    
    
    43,650Impairment loss on intangible assets
    
    
    
    
    
    
    
    
    
    
    (173,000
    )Impairment loss on goodwill(1)
    
    
    
    
    
    
    (73,343
    )
    
    
    (257,720
    )(Loss) before taxation and minority interests
    
    
    (1,398
    )
    
    
    (714,511
    )
    
    
    (1,195,402
    )(Provision) for income taxes
    
    
    (45,208
    )
    
    
    (47,879
    )
    
    
    (101,884
    )Minority interests
    
    
    130,332
    
    
    
    376,282
    
    
    
    625,997Net income (loss)
    
    
    83,726
    
    
    
    (386,108
    )
    
    
    (671,289
    )
 
 (1)
    
    In 2006, an impairment loss on goodwill of Rmb 73.3
million in relation to one of Brilliance China
Automotives jointly controlled entities was
recognized. Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
     57




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Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
      59




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Contingent Liabilities and Outstanding Guarantees
  60




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
    
    Corporate guarantees of approximately Rmb 60 million (US$8.2 million) for revolving
bank loans and notes drawn by affiliated companies of Shanghai Shenhua. The guarantee
arose from the mutual negotiation between Shenyang Automotive and Shanghai Shenhua.
Associated with the corporate guarantee, Shanghai Shenhua also provided a cross
guarantee for the bank facilities of Shenyang Automotive. The guarantee was for
revolving activities of Shanghai Shenhua and will be terminated upon mutual agreements
between Shenyang Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the
repayment of its bank loans or notes when they fall due, Shenyang Automotive is
required to repay the outstanding balance. There is no recourse or collateralization
provision in the guarantee. Default by Shanghai Shenhua and its affiliated companies
is considered remote by management and therefore no provision for the guarantors
obligation under the guarantee was recorded as of December 31, 2007.
    
    Corporate guarantees of bank loans amounting to Rmb 200 million (US$27.4 million),
which is also the maximum potential amount of future payments under the guarantee as
of December 31, 2007, drawn by JinBei. Bank deposits of Rmb 213 million (US$29.2
million) were pledged as a collateral for the corporate guarantees. However, default
by JinBei is considered remote by management and therefore no provision for the
guarantors obligation under the guarantee was recorded as of December 31, 2007.
  Liquidity and Capital Resources
  Payment due by period(Rmb thousands)MoreLess than
    
    
    
    
    
    
    
    
    
    than 5Contractual Obligations
    
    Total
    
    1 year
    
    1-3 years
    
    4-5 years
    
    yearsNotes payable (1)
    
    
    2,828,373
    
    
    
    2,828,373
    
    
    
    
    
    
    
    
    
    
    
    Notes payable to affiliated companies (2)
    
    
    207,774
    
    
    
    207,774
    
    
    
    
    
    
    
    
    
    
    
    Convertible bonds (3)
    
    
    1,752,233
    
    
    
    
    
    
    
    1,752,233
    
    
    
    
    
    
    
    Financing from BMW Brilliance (4)
    
    
    174,373
    
    
    
    40,601
    
    
    
    16,445
    
    
    
    20,481
    
    
    
    96,846Operating lease obligations (relating to
offices and property)
    
    
    66,519
    
    
    
    16,367
    
    
    
    10,464
    
    
    
    8,392
    
    
    
    31,296Unconditional purchase obligations
    
    
    718,733
    
    
    
    718,733
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,748,005
    
    
    
    3,811,848
    
    
    
    1,779,142
    
    
    
    28,873
    
    
    
    128,142
 
 (1)
    
    Approximately Rmb 0.8 billion of the Rmb 2.8 billion notes payable had effective interest
rates of 3% to 4%. The remaining Rmb 2 billion notes payable were interest-free.(2)
    
    Notes payable to affiliated companies are non-interest bearing. 61




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(3)
    
    Included in the amount is a total accreted redemption premium payable on June 7, 2009 of
approximately Rmb 327.4 million (US$ 44.9 million). The accreted redemption premium as of
December 31, 2007 of approximately Rmb 162.3 million (US$ 22.2 million) was calculated based
on the outstanding principal of the convertible bonds using the effective interest method.(4)
    
    Accrued interest of approximately Rmb 68.0 million was calculated on the outstanding
principal using the compound interest method at an effective annual rate of 11.127% on a
quarterly basis. Cash Flows
    
    
    a net profit of Rmb83.7 million (US$11.5 million) in 2007 compared to a net loss of
Rmb 386.1 million in 2006; and
    
    an increase in notes and accounts payable in the amount of Rmb 2,689.1 million
(US$368.6 million) for the year ended December 31, 2007, as compared to an increase of
Rmb 1,487.9 million for the year ended December 31, 2006.
  62




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Debt Changes
    63




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Capital Expenditures
  Foreign Currency Requirements
   Research and Development, Patents and Licenses, etc.
  Trend information
  
    
    Increased Demand for Motor Vehicles. The rate of increase in Chinas gross
domestic product has been one of the highest in the world over the past decade, and
this growth has fueled demand for automobiles. In fact, demand in the Chinese
automobile industry has been growing over the past several years at a faster rate than
the growth in Chinas gross domestic product. This trend is expected to have a
favorable impact on Brilliance China Automotives sales volume for both minibuses and
sedans.
 64




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
    
    Competition. As a result of Chinas accession to the WTO, domestic production of
automobiles (including minibuses and sedans) is expected to continue increasing,
particularly through Sino-foreign joint ventures that are being established for this
purpose. Formation of new Sino-foreign joint ventures and further investments by
foreign auto makers to increase the capacity of existing operations could result in
overcapacity and increased domestic competition for Brilliance China Automotive and
greater downward pressure on vehicle prices as competitors begin to employ a higher
ratio of domestically produced components and as more competitors achieve economies of
scale due to increased volume of production.
    
    Price. Retail prices in the automotive market are expected to continue to fall as
a result of the localization of production and sourcing of components as described
immediately above as well as increased competition. A decrease in average selling
prices may lower margins and cause industry-wide deterioration of profitability. Any
decline in vehicle prices will likely have an adverse effect on Brilliance China
Automotives sales revenue and profits.
 
    
    Growth, Consolidation and Development. On June 2, 2004, the NDRC issued a new
automotive policy for China to encourage consolidation in the industry and further the
development and sophistication of the automobile industry in areas such as consumer
financing and research and development. The policy acknowledges the success of
Chinas automobile industry and seeks to encourage this pillar industry to foster
further growth, particularly of domestically produced and branded products and
research and development, through consolidation of smaller, less-efficient
manufacturers and increased foreign and domestic investment. By encouraging industry
consolidation and establishing clearer guidelines for foreign investment, the policy
encourages existing players in the industry to grow and provides incentives for targeted
investment from both domestic and foreign sources. On December 26, 2006, the NDRC
issued a circular to assess the current PRC automobile industry and developments since
the 2004 policy. Consistent with the 2004 policy, the NDRC continues to stress the
importance of stable growth and preventing overcapacity in the automobile industry, and
to encourage industry consolidation and reorganization among sectors, in particular the
components sector. The NDRC also encouraged more research and development be focused on
new products, such as environmental friendly models, in order to enhance and upgrade
domestic products. The NDRC also imposed, among other things, a requirement that
annual sales of automobile manufacturers in China must reach certain levels in order
for them to build new manufacturing plants. Given the high capacity utilization rates
already achieved at its production plants, Brilliance China Automotive does not expect
this policy to restrict its capacity expansion plans in the future.
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
    
    Improvements in Chinas Infrastructure. China continues to improve and expand its
roadway system. By making automobile travel a more practical and accessible mode of
transportation for motorists in China, such improvements in Chinas infrastructure
will likely add to demand for automobiles.
    
    Rising Fuel Prices.Chinas fuel prices reached historical heights in June 2008
and may continue to increase. Any further increases in fuel prices will likely have a
negative influence on Brilliance China Automotives sales volume.
 Off-Balance Sheet Arrangements
  Critical Accounting Policies
    Revenue Recognition
  66




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Warranties
  Inventories
  Impairment of long-lived assets
  Deferred Taxation
  67




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Transactions with affiliated companies
  Recent Accounting Pronouncements
     68




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 Directors and Senior Management
  Year FirstElected or AppointedName
    
    Age
    
    Position
    
    Director or OfficerExecutive DirectorsWu Xiao An
    
    46
    
    Chairman of the Board and Executive Vice President
    
    
    1994Qi Yumin
    
    48
    
    President and Chief Executive Officer
    
    
    2006He Guohua
    
    57
    
    Director
    
    
    2005Wang Shiping
    
    51
    
    Director
    
    
    2005Lei Xiaoyang
    
    51
    
    Director and Chief Financial Officer(1)
    
    
    2003Independent Non-Executive DirectorsXu Bingjin
    
    68
    
    Director
    
    
    2003Song Jian
    
    51
    
    Director
    
    
    2004Jiang Bo
    
    48
    
    Director
    
    
    2004OthersHuang Yu
    
    34
    
    Qualified Accountant
    
    
    2007
 
 (1)
    
    Mr. Lei Xiaoyang was redesignated as an executive director effective June 2005 and has been
the Chief Financial Officer since October 2006. 69




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Executive Directors
  
    70




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Independent Non-Executive Directors
    71




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##### Table of Contents



Others
   Compensation
  Board Practices
  Service Agreements
  Audit Committee
  72




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##### Table of Contents



Meetings
  Authority and Duties
   
    
    be primarily responsible for the appointment, re-appointment and removal of the
external auditor, the remuneration and terms of the engagement of the external auditor,
and the resignation or dismissal of the external auditor;
 
    
    review and monitor the external auditors independence and objectivity and the
effectiveness of the audit process in accordance with applicable standards, and to
oversee the work of external auditor (including resolution of disagreements between
management and the external auditor regarding financial reporting). The committee
should establish with the external auditor the nature and scope of the audit and
reporting obligations before the audit commences;
 
    
    develop and implement policy on the engagement of an external auditor to supply
non-audit services. For this purpose, external auditor shall include any entity that
is under common control, ownership or management with the audit firm or any entity that
a reasonable and informed third party having knowledge of all relevant information
would reasonably conclude as part of the audit firm nationally or internationally. The
committee should identify to the board any matters in respect of which it considers
that action or improvement is needed and make recommendations as to the steps to be
taken;
 73




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
    
    monitor the integrity of financial statements of Brilliance China Automotive and
Brilliance China Automotives annual reports and accounts, interim reports and, if
prepared for publication, quarterly reports, and to review significant financial
reporting judgments contained in them. In this regard, in reviewing Brilliance China
Automotives reports and accounts before submission to the board, the committee should
focus particularly on:
 
    
    changes in accounting policies and practices;
    
    accounting policies which require difficult, subjective or complex judgments
(also known as critical accounting policies);
    
    significant adjustments resulting from audits;
    
    going concern assumptions and any qualifications;
    
    compliance with accounting standards; and
    
    compliance with listing rules of stock exchange(s) and other applicable legal
and regulatory requirements and guidance in relation to financial reporting;
 
    
    In regard to the review of financial information:
 
    
    members of the committee must liaise with the board, senior management and the
person appointed as Brilliance China Automotives qualified accountant;
    
    the committee must meet at least once a year with the external auditor; and
    
    the committee should consider any significant or unusual items that are, or may
need to be, reflected in such reports and accounts and must give due consideration
to any matters that have been raised by Brilliance China Automotives qualified
accountant, compliance officer (if any) or auditor;
 
    
    establish procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters, including
procedures for the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters;
    
    review Brilliance China Automotives financial controls, internal control and risk
management systems;
    
    discuss with the management the system of internal control and ensure that
management has discharged its duty to establish and maintain an effective internal
control system;
    
    discuss policies with respect to risk assessment and risk management;
    
    consider the findings of investigations of internal control matters as delegated by
the board, or on the committees own initiative, and review managements response;
 74




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
    
    where an internal audit function exists, to ensure co-ordination between the
internal and external auditors, to ensure that the internal audit function is
adequately resourced and has appropriate standing within Brilliance China Automotive,
and to review and monitor the effectiveness of the internal audit function;
    
    where an internal audit function exists, to meet separately, periodically, with
management, with internal auditors (or other personnel responsible for the internal
audit function) and with external auditors;
    
    review Brilliance China Automotives financial and accounting policies and
practices;
    
    review the external auditors management letter, any material queries raised by the
external auditor to management in respect of the accounting records, financial accounts
or systems of control, and managements response;
    
    review with the external auditor any audit problems or difficulties and managements
response;
    
    ensure that the board provides a timely response to the issues raised in the
external auditors management letter;
    
    report to the board on the matters set out in the code provision of Rule C.3 of
Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the Listing Rules);
    
    give pre-approval of other services and fees of the external auditor;
    
    set clear hiring policies for employees or former employees of the external
auditors;
    
    report regularly to the board of the result of their review of the financial
reporting system and internal control procedures and recommendations (if any) thereon;
and
    
    consider other topics, as determined from time to time by the board.
  Remuneration Committee
  Meetings
  75




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##### Table of Contents



Authority and Duties
   
    
    make recommendations to the board on the policy and structure for all remuneration
of the directors and senior management of Brilliance China Automotive and its
subsidiaries and on the establishment of a formal and transparent procedure for
developing the policy of Brilliance China Automotive and its subsidiaries on such
remuneration;
    
    determine the specific remuneration packages of all executive directors and senior
management, including benefits in kind, pension rights and compensation payments,
including any compensation payable for loss or termination of their office or
appointment, and make recommendations to the board on the remuneration of non-executive
directors;
    
    review and approve performance-based remuneration in accordance with corporate goals
and objectives resolved by the board from time to time;
    
    review and approve the compensation payable to executive directors and senior
management in connection with any loss or termination of their office or appointment in
order to ensure that such compensation is determined in accordance with relevant
contractual terms and that such compensation is otherwise fair and not excessive for
Brilliance China Automotive and its subsidiaries;
    
    review and approve compensation arrangements relating to dismissal or removal of
directors for misconduct to ensure that such arrangements are determined in accordance
with relevant contractual terms and that any compensation payment is otherwise
reasonable and appropriate;
    
    ensure that no director or any of his associates is involved, directly or
indirectly, in deciding such directors remuneration; and
 76




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
    
    in respect of any service agreement to be entered into between Brilliance China
Automotive/its subsidiaries and its respective director or proposed director, the prior
approval of which by the shareholders of Brilliance China Automotive in general meeting
is required pursuant to the Listing Rules, to review and provide recommendations to the
shareholders of Brilliance China Automotive (other than the shareholders who are
directors with a material interest in the relevant service agreements and their
respective associates (as defined in the Listing Rules)) as to whether the terms of the
service agreements are fair and reasonable and whether such service agreements are in
the interests of Brilliance China Automotive and the shareholders as a whole, and to
advise shareholders on how to vote.
 Employees
    Number ofFunctional Area
    
    EmployeesAdministrative Personnel
    
    
    1,576Technical Personnel
    
    
    1,556Production Workers
    
    
    8,549Total
    
    
    11,681
   77




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Share Ownership
  Employee Share Option Schemes
 The 1999 Share Option Scheme
    Number of share options2007
    
    2006At January 1
    
    
    2,800,000
    
    
    
    2,800,000Cancelled/Lapsed during the year
    
    
    
    
    
    
    At December 31,
    
    
    2,800,000
    
    
    
    2,800,000
  78




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New Share Option Scheme
  (a)
    
    the closing price of the common stock on the relevant stock exchange as stated
in such stock exchanges quotation sheet on the date of the grant, which must be a
trading date;(b)
    
    the average closing price of the common stock on the relevant stock exchange as
stated in such stock exchanges quotation sheets for the five trading days immediately
preceding the date of the grant; or(c)
    
    the nominal value of the common stock.
    79




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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 Major Shareholders
  Percent ofNumber of
    
    CapitalTitle of Class
    
    Identity of Person or Group
    
    Shares Owned
    
    StockOrdinary Shares
    
    Huachen Automotive Group Holdings Company
Limited(1)
    
    
    1,446,121,500
    
    
    
    39.41
    %Ordinary Shares
    
    Templeton Asset Management Ltd.
    
    
    407,660,000
    
    
    
    11.11
    %Ordinary Shares
    
    Deutsche Bank Aktiengesellschaft(2)
    
    
    310,569,073
    
    
    
    8.46
    %Ordinary Shares
    
    Citigroup Inc.(3)
    
    
    192,892,827
    
    
    
    5.26
    %
 
 (1)
    
    Huachen Automotive Group Holdings Company Limited, or Huachen,
is a wholly-owned subsidiary of the Liaoning Provincial
Government.(2)
    
    Deutsche Bank Aktiengesellschaft also has 116,462,388 ordinary
shares held in a short position as of December 31, 2007.(3)
    
    Citigroup Inc. also has 35,509,000 ordinary shares held in a
short position as of December 31, 2007. It also holds
34,616,000 ordinary shares as custodian/ approved lending
agent (as defined under the Securities Futures Ordinance of
Hong Kong). The 34,616,000 ordinary shares represent ordinary
shares in Citigroup Inc.s lending pool, or shares that it
holds as agent for a third party to which it is authorized to
lend, and shares that have been lent by Citigroup Inc. but for
which it still has a right to require the return of such
shares.   80




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Related Party Transactions
    2007
    
    2006
    
    2005(Rmb thousands)Sales to JinBei and its affiliated companies
    
    
    452,933
    
    
    
    178,414
    
    
    
    69,432Purchases from JinBei and its affiliated companies
    
    
    1,477,018
    
    
    
    895,457
    
    
    
    383,808Sales to Shanghai Shenhua and its affiliated companies
    
    
    1,394,130
    
    
    
    1,052,689
    
    
    
    1,469,402Purchases from Shanghai Shenhua and its affiliated
companies
    
    
    102,785
    
    
    
    16,668
    
    
    
    85,354Purchases from shareholders of Shenyang Aerospace and
their affiliated companies
    
    
    63,227
    
    
    
    90,505
    
    
    
    1,987Subcontracting charges to BMW Brilliance
    
    
    257,937
    
    
    
    254,479
    
    
    
    112,160Purchases from other affiliated companies of Brilliance
Holdings Limited
    
    
    115,223
    
    
    
    117,336
    
    
    
    66,441Purchases form an affiliated company of the joint
venture partner of Xinguang Brilliance
    
    
    147
    
    
    
    68
    
    
    
    761Purchases from associated companies and jointly
controlled entities
    
    
    1,004,303
    
    
    
    942,878
    
    
    
    524,221Sales to associated companies and jointly controlled
entities
    
    
    188,315
    
    
    
    186,146
    
    
    
    71,005Finance charge to a jointly controlled entity
    
    
    16,100
    
    
    
    16,748
    
    
    
    17,329Operating lease rental on land and buildings charged by: A jointly controlled entity
    
    
    3,430
    
    
    
    908
    
    
    
    2,206 Shanghai Shenhua and its affiliated companies
    
    
    592
    
    
    
    1,148
    
    
    
     JinBei and its affiliated companies
    
    
    
    
    
    
    60
    
    
    
    Mold testing income from a jointly controlled entity
    
    
    1,776
    
    
    
    4,320
    
    
    
    Operating lease rental from a jointly controlled entity
    
    
    14,384
    
    
    
    34,863
    
    
    
    15,078Sales of property, plant and equipment to a jointly
controlled entity
    
    
    
    
    
    
    80,332
    
    
    
    263Service income from a jointly controlled entity
    
    
    18,560
    
    
    
    35,067
    
    
    
    43,671
 81




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82




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
    
    a corporate guarantee of approximately Rmb 60 million (US$8.2 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua.
However, default by Shanghai Shenhua and its affiliated companies is considered remote
by management and therefore no provision for the guarantors obligation under the
guarantee was recorded as of December 31, 2007;
    
    corporate guarantees for bank loans amounting to Rmb 200 million (US$27.4 million)
drawn by JinBei. Bank deposits of Rmb 213 million were pledged as a collateral for the
corporate guarantees. However, default by JinBei is considered remote by management
and therefore no provision for the guarantors obligation under the guarantee was
recorded as of December 31, 2007.
  2007
    
    2006
    
    2005(Rmb thousands)Notes receivable from affiliated companiesNotes receivable from affiliated companies of JinBei
    
    
    3,050
    
    
    
    16,620
    
    
    
    9,446Notes receivable from Shanghai Shenhua
    
    
    143,276
    
    
    
    63,750
    
    
    
    328,482Notes receivable from associated companies and
jointly controlled entities
    
    
    
    
    
    
    1,107
    
    
    
    1,042Notes receivable from a subsidiary of substantial
shareholders
    
    
    113,829
    
    
    
    
    
    
    
    Total(1)
    
    
    260,155
    
    
    
    81,477
    
    
    
    338,970Amounts due from affiliated companiesDue from Shanghai Shenhua and its affiliated companies
    
    
    368,499
    
    
    
    431,310
    
    
    
    276,763Due from affiliated companies of JinBei
    
    
    91,347
    
    
    
    93,446
    
    
    
    62,877Due from affiliated companies of Brilliance Holdings
Limited
    
    
    94,095
    
    
    
    55,040
    
    
    
    54,222Due from jointly controlled entities
    
    
    321
    
    
    
    21,470
    
    
    
    13,380Due from an associated company
    
    
    
    
    
    
    
    
    
    
    1,505Due from a subsidiary of substantial shareholders
    
    
    61,455
    
    
    
    
    
    
    
    Due from BMW BrillianceAccounts receivables
    
    
    98,224
    
    
    
    247,564
    
    
    
    192,185Consideration receivable arising from the
disposal of machinery and equipment (2)
    
    
    
    
    
    
    134,527
    
    
    
    269,003Dividend receivable from a jointly controlled entity
    
    
    76,173
    
    
    
    76,173
    
    
    
    Dividend receivable from an associate
    
    
    21,000
    
    
    
    21,000
    
    
    
    Provision for doubtful debts
    
    
    (29,720
    )
    
    
    (29,720
    )
    
    
    (29,720
    )Total
    
    
    781,394
    
    
    
    1,050,810
    
    
    
    840,215
 
 (1)
    
    The notes receivable from affiliated companies are guaranteed by banks in
China and have maturities of six months or less. The fair value of the
notes receivable approximates their carrying value.(2)
    
    The outstanding balance is unsecured, non-interest bearing and will be
settled by BMW Brilliance when certain conditions specified in the
agreement of sale are fulfilled. 83




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2007
    
    2006
    
    2005(Rmb thousands)Advances to affiliated companiesAdvances to JinBei and its affiliated companies
    
    
    12,062
    
    
    
    23,740
    
    
    
    16,185Advances to associated companies and jointly controlled
entities
    
    
    26,364
    
    
    
    6,553
    
    
    
    7,226Advances to Shanghai Shenhua and its affiliated companies
    
    
    14,044
    
    
    
    14,044
    
    
    
    9,045Advances to affiliated companies of Brilliance Holdings
Limited
    
    
    51,134
    
    
    
    15,273
    
    
    
    15,273Advances to other affiliated companies
    
    
    12
    
    
    
    689
    
    
    
    452Provision for doubtful debts
    
    
    (2,214
    )
    
    
    (2,214
    )
    
    
    (9,250
    )Total
    
    
    101,402
    
    
    
    58,085
    
    
    
    38,931
  2007
    
    2006
    
    2005(Rmb thousands)Advances from affiliated companiesAdvances from Brilliance Holdings Limited and its
affiliated companies
    
    
    12,086
    
    
    
    12,728
    
    
    
    28,558Advances from associated companies and jointly
controlled entities
    
    
    1,282
    
    
    
    1,279
    
    
    
    607Advances from affiliated companies of Shanghai
Shenhua
    
    
    1,430
    
    
    
    820
    
    
    
    236Advances from JinBei and its affiliated companies
    
    
    735
    
    
    
    6,925
    
    
    
    1,088Financing received from BMW Brilliance
    
    
    174,373
    
    
    
    113,343
    
    
    
    74,605Total
    
    
    189,906
    
    
    
    135,095
    
    
    
    105,094
   2007
    
    2006
    
    2005(Rmb thousands)Notes payable to affiliated companiesNotes payable to affiliated companies of JinBei
    
    
    51,167
    
    
    
    7,249
    
    
    
    8,139Notes payable to associated companies and jointly
controlled entities
    
    
    95,921
    
    
    
    30,039
    
    
    
    22,491Notes payable to affiliated companies of
Brilliance Holdings Limited
    
    
    60,686
    
    
    
    
    
    
    
    43,462Total
    
    
    207,774
    
    
    
    37,288
    
    
    
    74,092Amounts due to affiliated companiesDue to affiliated companies of JinBei
    
    
    365,275
    
    
    
    281,721
    
    
    
    142,438Due to affiliated companies of Brilliance Holdings
Limited
    
    
    
    
    
    
    
    
    
    
    22,025Due to affiliated companies of Shanghai Shenhua
    
    
    1,870
    
    
    
    10,719
    
    
    
    4,191Due to associated companies and jointly controlled
entities
    
    
    584,971
    
    
    
    680,943
    
    
    
    465,023Due to other affiliated companies
    
    
    731
    
    
    
    9,910
    
    
    
    130Total
    
    
    952,847
    
    
    
    983,293
    
    
    
    633,807
 84




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##### Table of Contents



ITEM 8. FINANCIAL INFORMATION
 Consolidated Statements and Other Financial Information
  Legal Proceedings
 Yang Rong Employment Proceedings
 sine die sine die
 85




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##### Table of Contents



Dividends
   
    
    Brilliance China Automotive is, or would after payment be, unable to pay its
liabilities as they become due; or
    
    the realizable value of Brilliance China Automotives assets would thereby be less
than the aggregate of its liabilities and its issued share capital and share premium
account. As a Bermuda company, Brilliance China Automotive must abide by these
criteria in formulating its dividend policy.
  
    
    satisfy all tax liabilities;
    
    provide for losses in previous years;
    
    in the case of a Sino-foreign joint venture, also make appropriation, in
proportions determined at the sole discretion of the board of directors of the joint
venture, to a general reserve fund, an enterprise expansion fund and a staff welfare
and employee bonus fund. During the year ended December 31, 2007, Shenyang Automotive
was not required to and therefore did not make any additional contributions into these
funds. Distributions of profits to
investors are required to be in proportion to each partys shareholdings in the joint
venture; and
    
    in the case of a wholly foreign owned enterprise, appropriate 10% of profit after
providing for taxes and losses in previous years to a general reserve fund until the
balance of the fund reaches 50% of its share capital. Any further appropriation
thereafter is optional. The appropriation to an enterprise expansion fund and a staff
welfare fund is at the sole discretion of the board of directors of the wholly foreign
owned enterprise. During the year ended December 31, 2007, Xing Yuan Dong, Ningbo
Yuming and Shenyang Chenfa made an additional Rmb 9.2 million (US$1.3 million) to the
general reserve fund, enterprise expansion fund and staff welfare fund.
 86




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##### Table of Contents



Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
  The New York Stock Exchange,
    
    The Stock Exchange of HongInc.
    
    Kong Limited(US$)
    
    (HK$)ADSs
    
    Ordinary SharesHigh
    
    Low
    
    High
    
    Low2003
    
    
    
    
    61.30
    
    
    
    18.11
    
    
    
    4.75
    
    
    
    1.422004
    
    
    
    
    62.75
    
    
    
    17.75
    
    
    
    4.85
    
    
    
    1.402005
    
    
    
    
    22.73
    
    
    
    12.56
    
    
    
    1.78
    
    
    
    0.972006:
    
    1st quarter
    
    
    23.66
    
    
    
    14.52
    
    
    
    1.57
    
    
    
    1.122nd quarter
    
    
    19.25
    
    
    
    14.05
    
    
    
    1.55
    
    
    
    1.103rd quarter
    
    
    16.93
    
    
    
    14.40
    
    
    
    1.33
    
    
    
    1.154th quarter
    
    
    18.81
    
    
    
    15.15
    
    
    
    1.46
    
    
    
    1.172007:
    
    1st quarter
    
    
    29.98
    
    
    
    19.87
    
    
    
    2.55
    
    
    
    1.332nd quarter
    
    
    27.00
    
    
    
    21.14
    
    
    
    2.14
    
    
    
    1.643rd quarter
(through July 26 for
the ADSs)
    
    
    28.98
    
    
    
    24.57
    
    
    
    2.32
    
    
    
    1.404th quarter
    
    
    N/A
    
    
    
    N/A
    
    
    
    2.17
    
    
    
    1.532008:
    
    January
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.99
    
    
    
    1.40February
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.64
    
    
    
    1.46March
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.61
    
    
    
    1.16April
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.48
    
    
    
    1.28May
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.52
    
    
    
    1.21June (through June 19)
    
    
    N/A
    
    
    
    N/A
    
    
    
    1.32
    
    
    
    1.15
 87




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ITEM 10. ADDITIONAL INFORMATION
 Memorandum of Association and Bye-laws
  General
   Directors
 Disclosure of interests in contracts with Brilliance China Automotive or its subsidiaries
  88




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##### Table of Contents




    
    any contract or arrangement for the giving by Brilliance China Automotive of any
security or indemnity to the director or his associates in respect of money lent by him
or any of his associates or obligations incurred or undertaken by him or his associates
at the request of or for the benefit of Brilliance China Automotive or any of its
subsidiaries;
    
    any contract or arrangement for the giving by Brilliance China Automotive of any
security or indemnity to a third party in respect of a debt or obligation of Brilliance
China Automotive, or any of its subsidiaries, for which the director or his associates
have assumed responsibility or guaranteed or secured in whole or in part whether solely
or jointly;
    
    any contract or arrangement concerning an offer of the shares, debentures or other
securities of or by Brilliance China Automotive or any other company which Brilliance
China Automotive may promote or be interested in for subscription or purchase where the
director or his associates are interested as a participant in the underwriting or
sub-underwriting of the offer;
    
    any contract or arrangement concerning any other company in which the director or
his associates are interested whether directly or indirectly, as an officer or
executive or shareholder or in which the director or his associates are beneficially
interested in shares of that company, other than a company in which the director
together with any of his associates beneficially own 5% or more of the issued shares of
any class of shares of such company (or of any third company through which his/their
interest is derived) or of the voting rights;
    
    any proposal or arrangement concerning the adoption, modification or operation of
any employees share scheme or any share incentive or share option scheme under which
the director or his associates may benefit;
    
    any proposal or arrangement for the benefit of employees of Brilliance China
Automotive or its subsidiaries including the adoption, modification or operation of a
pension fund or retirement, death or disability benefit scheme which relates both to
directors, their associates and employees of Brilliance China Automotive or any of its
subsidiaries and does not give the director or their associates any privilege or
advantage not generally accorded to the class of persons to whom such scheme or fund
relates; and
 89




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
    
    any contract or arrangement in which the director or his associates are interested
in the same manner as other holders of shares or debentures or securities of Brilliance
China Automotive by virtue only of their interest in shares or debentures or other
securities of Brilliance China Automotive.
 Remuneration
  Borrowing powers
  Alterations to constitutional documents
  Variation of rights of existing shares or classes of shares
  90




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##### Table of Contents



Special resolutions  majority required
  Voting rights and right to demand a poll
   
    
    by the chairman of the meeting;
    
    by at least three members present in person, or by a duly authorized corporate
representative, or by proxy for the time being entitled to vote at the meeting;
    
    by any member or members present in person, or by a duly authorized corporate
representative, or by proxy, and representing not less than one-tenth of the total
voting rights of all the members having the right to attend and vote at the meeting; or
    
    by any member or members present in person, or by a duly authorized corporate
representative, or by proxy having the right to attend and vote at the meeting, and in
respect of whose shares, sums have been paid up in the aggregate equal to not less than
one-tenth of the total sum paid up on all the shares having that right.
 91




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Requirements for annual general meetings
  Notices of annual general meetings
  Quorum for meetings and separate class meetings
  Dividends
    
    
    that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, on the basis that the shares so allotted shall be of
the same class or classes as the class or classes of shares already held by the
allottee, provided that the members will be entitled to elect to receive such dividend
(or part of it) in cash in lieu of such allotment; or
 92




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
    
    that the members entitled to such dividend will be entitled to elect to receive an
allotment of shares credited as fully paid up in lieu of the whole or such part of the
dividend as the board of directors may think fit, on the basis that the shares so
allotted shall be of the same class or classes as the class or classes of shares
already held by the allottee.
    Procedures on liquidation
   Transfer of shares
  93




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##### Table of Contents




    
    the sum, if any, as the board of directors shall determine to be paid to Brilliance
China Automotive has been paid;
    
    the shares are free of any lien in favor of Brilliance China Automotive;
    
    the instrument of transfer is properly stamped, and is in respect of only one class
of shares;
    
    the instrument of transfer is lodged at the relevant registration or transfer office
accompanied by the relevant share certificate(s), and other evidence as the board of
directors may reasonably require to show the right of the transferor to make the
transfer has been presented (particularly if the instrument of transfer is executed by
some other person on his behalf); and
    
    in some circumstances, the permission of the Bermuda Monetary Authority has been
obtained.
 94




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##### Table of Contents



Recent Amendments to the Bye-laws
  
    
    Bye-law 6(A): To reflect the existing authorized share capital of Brilliance China
Automotive
    
    Bye-law 70: To facilitate the process for demanding a poll at general meetings
    
    Bye-law 99: To provide for retirement by rotation of every director at annual
general meetings of Brilliance China Automotive in compliance with code provision A.4.2
of the Code on Corporate Governance Practices issued by The Stock Exchange of Hong Kong
Limited
    
    Bye-law 102 (A) and (B): To specify that any director of Brilliance China
Automotive appointed to fill a casual vacancy shall hold office until the next
following general meeting, instead of the next following annual general meeting
    Material Contracts
  95




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##### Table of Contents



(a)
    
    Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Wu Xiao An;(b)
    
    Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Qi Yumin;(c)
    
    Purchase Agreement, dated May 8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited; and(d)
    
    Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.
 Exchange Controls
      96




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##### Table of Contents




    
    the acquisition or holding of land in Bermuda (except that required for its business
and held by way of lease or tenancy for terms of not more than 50 years) without the
express authorization of the Bermuda legislature;
    
    the taking of mortgages on land in Bermuda to secure an amount in excess of
BD$50,000 without the consent of the Minister of Finance of Bermuda;
    
    the acquisition of securities secured on any land in Bermuda, other than certain
types of Bermuda government securities; or
    
    the carrying on of business of any kind in Bermuda, except in furtherance of the
business of Brilliance China Automotive carried on outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.
   Taxation
 Income tax
  97




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98




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##### Table of Contents



Value Added Tax and Consumption Tax
  Customs Duties
  United States Federal Income Taxation
  
    
    banks, insurance companies and financial institutions;
 
    
    U.S. expatriates;
 
    
    tax-exempt entities;
 
    
    certain insurance companies;
 
    
    broker-dealers;
 
    
    traders in securities that elect to mark to market;
 99




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##### Table of Contents




    
    U.S. holders liable for alternative minimum tax;
 
    
    U.S. holders that own 10% or more of our voting stock;
 
    
    U.S. holders that hold the ADSs or ordinary shares as part of a straddle or a hedging or
conversion transaction; or
 
    
    U.S. holders whose functional currency is not the U.S. dollar.
   
    
    a citizen or resident of the United States for U.S. federal income tax purposes;
    
    a corporation, or other entity treated as a corporation for U.S. federal income tax
purposes, created or organized in or under the laws of the United States or any
political subdivision thereof;
    
    an estate the income of which is subject to U.S. federal income tax without regard
to its source; or
    
    a trust (1) subject to the primary supervision of a U.S. court and the
control of one or more U.S. persons, or (2) that has elected to be treated as a U.S. person under
applicable U.S. Treasury regulations.
  We urge you to consult your tax advisors regarding the U.S. federal, state, local and non-U.S.
tax consequences of the purchase, ownership and disposition of the ADSs or ordinary shares.
 100




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##### Table of Contents



Distributions on the ADSs or Ordinary Shares
    101




---



##### Table of Contents



Sale, Exchange or Other Disposition
  PFIC Rules
   102




---



##### Table of Contents



Backup Withholding and Information Reporting
   103




---



##### Table of Contents



Documents on Display
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Exchange Rates
    104




---



##### Table of Contents



Interest Rates
   Tariff Reductions
   105




---



##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 Material Modifications to the Rights of Security Holders
  Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  106




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Managements Report on Internal Control Over Financial Reporting
     Monitoring Activities.
 Approval over accounting entries
 Follow-up on prepayment to vendors
 107




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##### Table of Contents



Approval and follow-up of large investments
 Safeguarding of notes
 Accounting treatment of sales of raw materials
  Monitoring activities
 Approval over accounting entries
 Follow-up on prepayment to vendors
 Approval and follow-up of large investment
 Safeguarding of notes
 Accounting treatment of sales of raw materials
  Attestation Report of the Registered Public Accounting Firm
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
     1)
    
    Insufficient monitoring activities performed by Audit Committee and Internal Audit
Department;2)
    
    Insufficient approval over accounting entries;3)
    
    Insufficient follow-up on prepayment to vendors;4)
    
    Insufficient approval and follow-up of large investment;5)
    
    Insufficient safeguarding of promissory notes;6)
    
    Ineffective controls over establishing a proper accounting policy for sales of raw
materials.
 Internal ControlIntegrated Framework .
    
 108




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Changes in Internal Control Over Financial Reporting
  
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
    
    The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited, including the Model Code for Securities Transactions by Directors of Listed
Issuers;
    
    Non-Statutory Guidelines on Directors Duties issued by the Hong Kong Companies
Registry in January 2004;
    
    Guide for Independent Non-Executive Directors issued by The Hong Kong Institute of
Directors in 2000;
    
    Guidelines for Directors issued by The Hong Kong Institute of Directors in 2005; and
    
    Code for Securities Transactions by Employees.
 
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  109




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Total Fees2007
    
    2006(Rmb thousands)Audit fees
    
    
    3,800
    
    
    
    2,800Audit-related fees
    
    
    690
    
    
    
    1,900Tax fees
    
    
    
    
    
    
    Other fees
    
    
    
    
    
    
    Total
    
    
    4,490
    
    
    
    4,700
 Audit Fees
  Audit-Related Fees
  Pre-Approval Policies and Procedures
  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  110




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PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
 (a) Financial Statements and Supplemental Data
  (b) Financial Statement Schedules
 Schedule II  Valuation and Qualifying Accounts
  
 ITEM 19. EXHIBITS
  1.1
    
    Amended and Restated Bye-Laws of Brilliance China Automotive dated November 16,
2007.1.2
    
    Amendments to Bye-Laws of Brilliance China Automotive dated June 20, 2008.2.1
    
    Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.*4.1
    
    Form of Service Agreement for Executive Director.*7.1
    
    Statement explaining how certain ratios were calculated in the annual report.8.1
    
    List of significant subsidiaries, jointly controlled entities and associated
companies of Brilliance China Automotive as of December 31, 2007.12.1
    
    Section 302 Certification of the Chief Executive Officer.12.2
    
    Section 302 Certification of the Chief Financial Officer.13.1
    
    Section 906 Certification of the Chief Executive Officer and Chief Financial
Officer.
 
 *
    
    Incorporated by reference from the Registrants annual report on Form 20-F
filed with the SEC on June 26, 2006. 111




---



##### Table of Contents



SIGNATURE
   /s/ WU Xiao AnWU Xiao AnChairman  112




---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED AND SUBSIDIARIES
 PageReport of Independent Registered Public Accounting Firm of Grant
Thornton dated June 27, 2008
    
    
    F-2Consolidated Statements of Income and Comprehensive Income for the years
ended December 31, 2007, 2006 and 2005
    
    
    F-4Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-5Consolidated
Statements of Cash Flows for the years ended December 31, 2007,
2006 and 2005
    
    
    F-7Consolidated
Statements of Changes in Shareholders Equity for the years ended December
31, 2007, 2006 and 2005
    
    
    F-10Notes
to Consolidated Financial Statements for the years ended
December 31, 2007, 2006 and 2005
    
    
    F-11
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Shareholders of
Brilliance China Automotive Holdings Limited
     Accounting for Uncertainty in Income TaxesAn
Interpretation of FASB Statement No. 109 Share-Based Payment.
  /s/ Grant Thornton
  
 F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 To the Shareholders of
Brilliance China Automotive Holdings Limited
    Moores Rowland Mazars  Chartered Accountants
Certified Public Accountants
 
 F-3




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 
 Consolidated Statements of Income and Comprehensive Income
  Year ended December 31,2007
    
    
    
    2006
    
    
    
    2005RMB000
    
    
    
    RMB000
    
    
    
    RMB000(except for share and ADS data)Net sales to third parties
    
    
    10,994,675
    
    
    
    9,067,505
    
    
    
    3,859,151Net sales to affiliated companies
    
    
    3,154,474
    
    
    
    1,417,249
    
    
    
    1,609,839Total sales
    
    
    14,149,149
    
    
    
    10,484,754
    
    
    
    5,468,990Cost of sales (including purchase of goods
and subcontracting charges from affiliated
companies) (2007: RMB3,620,835,000,
2006:RMB2,317,393,000, 2005: RMB1,174,732,000)
    
    
    (13,049,107
    )
    
    
    (9,960,587
    )
    
    
    (5,011,955
    )Gross profit
    
    
    1,100,042
    
    
    
    524,167
    
    
    
    457,035Selling, general and administrative expenses
    
    
    (1,535,695
    )
    
    
    (1,384,718
    )
    
    
    (1,195,336
    )Interest expenses
    
    
    (203,263
    )
    
    
    (177,001
    )
    
    
    (182,354
    )Interest income
    
    
    125,470
    
    
    
    90,738
    
    
    
    60,189Equity in earnings of associated companies
and jointly controlled entities, net
    
    
    192,261
    
    
    
    149,320
    
    
    
    48,995Subsidy income
    
    
    140,081
    
    
    
    50,176
    
    
    
    3,139Other income, net
    
    
    179,706
    
    
    
    106,150
    
    
    
    43,650Impairment loss on intangible assets
    
    
    
    
    
    
    
    
    
    
    (173,000
    )Impairment loss on goodwill
    
    
    
    
    
    
    (73,343
    )
    
    
    (257,720
    )Loss before taxation and minority interests
    
    
    (1,398
    )
    
    
    (714,511
    )
    
    
    (1,195,402
    )Provision for income taxes
    
    
    (45,208
    )
    
    
    (47,879
    )
    
    
    (101,884
    )Minority interests
    
    
    130,332
    
    
    
    376,282
    
    
    
    625,997Net income (loss)
    
    
    83,726
    
    
    
    (386,108
    )
    
    
    (671,289
    )Other comprehensive income (loss)Fair value adjustment for securities
available-for-sale
    
    
    2,393
    
    
    
    1,052
    
    
    
    (27,227
    )Share of a jointly controlled entitys
fair value adjustment for hedging
derivative
    
    
    31,275
    
    
    
    
    
    
    
    Comprehensive income (loss)
    
    
    117,394
    
    
    
    (385,056
    )
    
    
    (698,516
    )Basic earnings (loss) per share
    
    
    RMB0.0228
    
    
    
    RMB(0.1053
    )
    
    
    RMB(0.1830
    )Basic earnings (loss) per ADS
    
    
    RMB2.28
    
    
    
    RMB(10.53
    )
    
    
    RMB(18.30
    )Diluted earnings (loss) per share
    
    
    RMB0.0227
    
    
    
    RMB(0.1053
    )
    
    
    RMB(0.1830
    )Diluted earnings (loss) per ADS
    
    
    RMB2.27
    
    
    
    RMB(10.53
    )
    
    
    RMB(18.30
    )Weighted average number of shares outstanding
    
    
    3,669,022,064
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900Weighted average number of ADSs outstanding
    
    
    36,690,221
    
    
    
    36,683,909
    
    
    
    36,683,909Net income (loss) adjusted for the dilutive
effect of convertible bonds
    
    
    83,726
    
    
    
    (386,108
    )
    
    
    (671,289
    )Weighted average number of shares
outstanding adjusted for dilutive effect of
stock options and convertible bonds
    
    
    3,679,572,569
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900Weighted average number of ADSs outstanding
adjusted for dilutive effect of stock
options and convertible bonds
    
    
    36,795,726
    
    
    
    36,683,909
    
    
    
    36,683,909
  F-4




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 
 Consolidated Balance Sheets
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000AssetsCurrent assetsCash and cash equivalents
    
    
    1,373,416
    
    
    
    1,468,075Short-term bank deposits
    
    
    518,000
    
    
    
    616,787Pledged short-term bank deposits, restricted
    
    
    1,971,665
    
    
    
    1,625,149Deferred expenses  current portion
    
    
    6,283
    
    
    
    6,283Notes receivable
    
    
    416,495
    
    
    
    197,668Notes receivable from affiliated companies
    
    
    260,155
    
    
    
    81,477Accounts receivable, net
    
    
    805,187
    
    
    
    632,158Due from affiliated companies
    
    
    684,221
    
    
    
    953,637Dividend receivable from affiliated companies
    
    
    97,173
    
    
    
    97,173Inventories, net
    
    
    2,469,033
    
    
    
    1,346,843Other receivables
    
    
    491,237
    
    
    
    423,017Prepayments and other current assets
    
    
    273,828
    
    
    
    143,583Income tax recoverable
    
    
    18,482
    
    
    
    815Other taxes recoverable
    
    
    125,179
    
    
    
    117,830Advances to affiliated companies
    
    
    101,402
    
    
    
    58,085Total current assets
    
    
    9,611,756
    
    
    
    7,768,580Property, plant and equipment, net
    
    
    3,569,137
    
    
    
    3,865,210Intangible assets, net
    
    
    266,416
    
    
    
    420,978Interests in associated companies and jointly controlled entities
    
    
    1,615,917
    
    
    
    1,413,135Investment securities
    
    
    26,129
    
    
    
    23,736Goodwill
    
    
    339,710
    
    
    
    339,710Prepayment for a long-term investment
    
    
    600,000
    
    
    
    600,000Deferred expenses, net  non-current portion
    
    
    15,183
    
    
    
    21,466Long-term land lease prepayments, net
    
    
    118,720
    
    
    
    120,099Other long-term assets
    
    
    9,343
    
    
    
    7,450Total assets
    
    
    16,172,311
    
    
    
    14,580,364
 F-5




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Balance Sheets
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Liabilities and shareholders equityCurrent liabilitiesShort-term bank loans
    
    
    370,000
    
    
    
    500,000Notes payable
    
    
    2,828,373
    
    
    
    2,141,947Notes payable to affiliated companies
    
    
    207,774
    
    
    
    37,288Accounts payable
    
    
    3,421,891
    
    
    
    2,299,267Due to affiliated companies
    
    
    952,847
    
    
    
    983,293Customer advances
    
    
    150,354
    
    
    
    425,778Other payables
    
    
    419,710
    
    
    
    403,040Dividends payable
    
    
    3,087
    
    
    
    3,299Accrued expenses and other current liabilities
    
    
    152,150
    
    
    
    159,222Income tax payable
    
    
    9,555
    
    
    
    11,411Other taxes payable
    
    
    71,095
    
    
    
    81,841Advances from affiliated companies
    
    
    56,134
    
    
    
    55,389Total current liabilities
    
    
    8,642,970
    
    
    
    7,101,775Convertible bonds
    
    
    1,489,907
    
    
    
    1,486,568Deferred income
    
    
    81,555
    
    
    
    109,502Advances from affiliated companies
    
    
    133,772
    
    
    
    79,706Total liabilities
    
    
    10,348,204
    
    
    
    8,777,551Minority interests
    
    
    (93,116
    )
    
    
    36,900Shareholders equityCapital stockCommon stock (8,000,000,000 and 5,000,000,000
shares of US$0.01 each authorized as of
December 31, 2007 and 2006, respectively, and
3,669,765,900 and 3,668,390,900 shares of
US$0.01 each issued and outstanding as of
December 31, 2007 and 2006, respectively)
    
    
    303,488
    
    
    
    303,388Additional paid-in capital
    
    
    2,327,697
    
    
    
    2,325,690Accumulated other comprehensive income
    
    
    75,140
    
    
    
    41,472Dedicated capital
    
    
    193,356
    
    
    
    184,193Capital reserve
    
    
    120,000
    
    
    
    120,000Share option reserve
    
    
    43,090
    
    
    
    11,281Retained earnings
    
    
    2,854,452
    
    
    
    2,779,889Total shareholders equity
    
    
    5,917,223
    
    
    
    5,765,913Total liabilities and shareholders equity
    
    
    16,172,311
    
    
    
    14,580,364
  F-6




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 
 Consolidated Statements of Cash Flows
  Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Cash flows from operating activities:Net income (loss)
    
    
    83,726
    
    
    
    (386,108
    )
    
    
    (671,289
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Deferred income tax
    
    
    
    
    
    
    
    
    
    
    114,005Depreciation of property, plant and equipment
    
    
    593,263
    
    
    
    601,045
    
    
    
    399,744Amortization of long-term land lease prepayments
    
    
    3,439
    
    
    
    4,058
    
    
    
    3,886Amortization of intangible assets
    
    
    161,219
    
    
    
    181,444
    
    
    
    204,009Amortization of deferred expenses
    
    
    6,283
    
    
    
    24,962
    
    
    
    8,920Minority interests in net loss of consolidated
subsidiaries
    
    
    (130,332
    )
    
    
    (376,282
    )
    
    
    (625,998
    )Provision for doubtful debts and write off of bad
debts
    
    
    5,269
    
    
    
    28,196
    
    
    
    48,244Provision for impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    173,000Provision for impairment of property, plant and
equipment
    
    
    836
    
    
    
    29,160
    
    
    
    48,299Provision for impairment of investment in a
jointly controlled entity
    
    
    
    
    
    
    73,343
    
    
    
    179,030Provision for impairment of goodwill in a
subsidiary
    
    
    
    
    
    
    
    
    
    
    78,690Provision for inventories, net
    
    
    (130,185
    )
    
    
    21,264
    
    
    
    65,827Gain on disposal of property, plant and equipment
    
    
    (2,428
    )
    
    
    (3,055
    )
    
    
    (341
    )Gain on disposal of land lease prepayment
    
    
    (1,399
    )
    
    
    
    
    
    
    Write off of property, plant and equipment
    
    
    4,198
    
    
    
    8,251
    
    
    
    Gain on disposal of a jointly controlled entity
    
    
    
    
    
    
    
    
    
    
    (2,098
    )Government grant recognized
    
    
    (140,081
    )
    
    
    (1,850
    )
    
    
    (941
    )Unrealized exchange gain
    
    
    (100,043
    )
    
    
    (69,259
    )
    
    
    (40,829
    )Equity in earnings of associated companies and
jointly controlled entities, net
    
    
    (192,261
    )
    
    
    (149,320
    )
    
    
    (48,995
    )Amortisation of finance costs of convertible bonds
    
    
    103,170
    
    
    
    68,419
    
    
    
    12,419Write off of other non-current assets
    
    
    
    
    
    
    1,798
    
    
    
    Share option costs
    
    
    32,243
    
    
    
    11,281
    
    
    
    Gain on disposal of an associate
    
    
    
    
    
    
    (384
    )
    
    
    Loss on disposal of an associate
    
    
    
    
    
    
    709
    
    
    
    Gain on buy back of convertible bonds due 2008
    
    
    
    
    
    
    (10,733
    )
    
    
    
 F-7




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Cash Flows
 Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000(Increase) decrease in operating assets:Accounts receivable
    
    
    (173,094
    )
    
    
    (521,656
    )
    
    
    (69,974
    )Notes receivable
    
    
    (218,827
    )
    
    
    179,837
    
    
    
    243,394Notes receivable from affiliated companies
    
    
    (178,678
    )
    
    
    257,493
    
    
    
    306,173Due from affiliated companies
    
    
    886,193
    
    
    
    (191,724
    )
    
    
    (79,804
    )Inventories
    
    
    (991,935
    )
    
    
    (321,608
    )
    
    
    464,059Other receivables
    
    
    (73,424
    )
    
    
    75,113
    
    
    
    7,278Prepayments and other current assets
    
    
    (130,245
    )
    
    
    (85,876
    )
    
    
    69,374Increase (decrease) in operating liabilities:Notes and accounts payable
    
    
    2,689,050
    
    
    
    1,487,870
    
    
    
    (333,250
    )Due to affiliated companies
    
    
    (622,386
    )
    
    
    363,459
    
    
    
    171,871Notes payable to affiliated companies
    
    
    170,486
    
    
    
    (36,804
    )
    
    
    (47,070
    )Customer advances
    
    
    (275,424
    )
    
    
    106,800
    
    
    
    53,486Other payables
    
    
    4,442
    
    
    
    25,566
    
    
    
    43,423Accrued expenses and other current liabilities
    
    
    (7,072
    )
    
    
    (106,686
    )
    
    
    (8,277
    )Import tariff and taxes payable
    
    
    (37,618
    )
    
    
    (143,155
    )
    
    
    117,152Net cash provided by operating activities
    
    
    1,338,385
    
    
    
    1,145,568
    
    
    
    883,417Cash flows from investing activities:Capital expenditures
    
    
    (308,425
    )
    
    
    (304,152
    )
    
    
    (558,028
    )Proceeds from disposal of property, plant and
equipment
    
    
    6,921
    
    
    
    3,314
    
    
    
    9,487Proceeds from disposal of land lease prepayment
    
    
    6,618
    
    
    
    
    
    
    
    Decrease (Increase) in short-term bank deposits
    
    
    98,787
    
    
    
    437,045
    
    
    
    (45,230
    )Decrease(Increase) in pledged short-term bank
deposits, restricted
    
    
    (346,516
    )
    
    
    307,500
    
    
    
    844,542(Increase) in advances to affiliated companies
    
    
    (43,317
    )
    
    
    (12,944
    )
    
    
    (8,729
    )(Increase) Decrease in other non-current assets
    
    
    (1,893
    )
    
    
    1,719
    
    
    
    12,866Decrease in interests in associated companies and
jointly controlled entities
    
    
    
    
    
    
    
    
    
    
    11,517Dividends received from associated companies and
jointly controlled entities
    
    
    21,000
    
    
    
    81,000
    
    
    
    72,000Proceeds received from disposal of investment in
associated companies
    
    
    
    
    
    
    1,350
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (566,825
    )
    
    
    514,832
    
    
    
    338,425
 F-8




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Consolidated Statements of Cash Flows
 Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Cash flows from financing activities:Proceeds from short-term bank loans
    
    
    430,000
    
    
    
    650,000
    
    
    
    501,202Repayment of short-term bank loans
    
    
    (560,000
    )
    
    
    (646,500
    )
    
    
    (4,702
    )Issuance of notes payable
    
    
    2,420,000
    
    
    
    4,530,000
    
    
    
    7,934,900Repayment of notes payable
    
    
    (3,300,000
    )
    
    
    (5,532,500
    )
    
    
    (10,106,000
    )Increase (decrease) in advances from affiliated
companies
    
    
    29,974
    
    
    
    102,480
    
    
    
    (9,434
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (19,450
    )Proceeds from issuance of convertible bonds due
2011
    
    
    
    
    
    
    1,460,779
    
    
    
    Payment of direct expenses incurred in connection
with the issuance of convertible bonds due 2011
    
    
    
    
    
    
    (31,414
    )
    
    
    Buy back and redemption of convertible bonds due
2008
    
    
    
    
    
    
    (1,598,320
    )
    
    
    Issue of share capital by exercise of share options
    
    
    1,673
    
    
    
    
    
    
    
    Receipts of government grants
    
    
    112,134
    
    
    
    29,750
    
    
    
    80,543Net cash used in financing activities
    
    
    (866,219
    )
    
    
    (1,035,725
    )
    
    
    (1,622,941
    )Net (decrease) increase in cash and cash
equivalents
    
    
    (94,659
    )
    
    
    624,675
    
    
    
    (401,099
    )Cash and cash equivalents, beginning of year
    
    
    1,468,075
    
    
    
    843,400
    
    
    
    1,244,499Cash and cash equivalents, end of year
    
    
    1,373,416
    
    
    
    1,468,075
    
    
    
    843,400
  F-9




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 
 Consolidated Statements of Changes in Shareholders Equity
  Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    Share
    
    
    
    
    
    
    otherNumber of
    
    
    
    
    
    
    paid-in
    
    
    Dedicated
    
    
    option
    
    
    Capital
    
    
    comprehensive
    
    
    Retainedshares issued
    
    
    Amount
    
    
    capital
    
    
    capital
    
    
    reserve
    
    
    reserve
    
    
    income
    
    
    earnings
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Balance as of December 31,
2004
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    158,352
    
    
    
    
    
    
    
    120,000
    
    
    
    67,647
    
    
    
    3,882,577
    
    
    
    6,857,654Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (671,289
    )
    
    
    (671,289
    )Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,279
    )
    
    
    Net unrealized loss on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,227
    )
    
    
    
    
    
    
    (27,227
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,450
    )
    
    
    (19,450
    )Balance as of December 31,
2005
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    167,631
    
    
    
    
    
    
    
    120,000
    
    
    
    40,420
    
    
    
    3,182,559
    
    
    
    6,139,688Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386,108
    )
    
    
    (386,108
    )Share option costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,281Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,562
    )
    
    
    Net unrealized gain on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,052
    
    
    
    
    
    
    
    1,052Balance as of December 31,
2006
    
    
    3,668,390,900
    
    
    
    303,388
    
    
    
    2,325,690
    
    
    
    184,193
    
    
    
    11,281
    
    
    
    120,000
    
    
    
    41,472
    
    
    
    2,779,889
    
    
    
    5,765,913Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,726
    
    
    
    83,726Transfer to dedicated capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,163
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,163
    )
    
    
    Issue of share capital
    
    
    1,375,000
    
    
    
    100
    
    
    
    1,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,702Premium arising from
exercise of employee share
option
    
    
    
    
    
    
    
    
    
    
    405
    
    
    
    
    
    
    
    (434
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Share option costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,243Net unrealized gain on
marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,393
    
    
    
    
    
    
    
    2,393Share of a jointly
controlled entitys fair
value adjustment for hedging
derivative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,275
    
    
    
    
    
    
    
    31,275Balance as of December 31,
2007
    
    
    3,669,765,900
    
    
    
    303,488
    
    
    
    2,327,697
    
    
    
    193,356
    
    
    
    43,090
    
    
    
    120,000
    
    
    
    75,140
    
    
    
    2,854,452
    
    
    
    5,917,223
  F-10




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 
 Notes to Consolidated Financial Statements
  1.
    
    ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT
    Percentage of effectivePlace of
    
    equity interest/votingestablishment/
    
    right attributable toName
    
    incorporation
    
    the Company
    
    Principal activitiesDirectly
    
    IndirectlyShenyang Brilliance JinBei
Automobile Co., Ltd. (Shenyang
Automotive)
    
    Shenyang, the PRC
    
    
    51
    %
    
    
    
    
    
    Manufacture,
assembly and sale
of minibuses and
sedansNingbo Yuming Machinery
Industrial Co., Ltd. (Ningbo
Yuming)
    
    Ningbo, the PRC
    
    
    
    
    
    
    100
    %
    
    Manufacture and
sale of automotive
componentsShenyang XingYuanDong
Automobile Component Co., Ltd.
(Xing Yuan Dong)
    
    Shenyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsNingbo Brilliance Ruixing Auto
Components Co., Ltd. (Ningbo
Ruixing)
    
    Ningbo, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsMianyang Brilliance Ruian
Automotive Components Co., Ltd.
(Mianyang Ruian)
    
    Mianyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Manufacture and
trading of
automotive
componentsShenyang Brilliance Dongxing
Automotive Component Co., Ltd.
(Dongxing Automotive)
    
    Shenyang, the PRC
    
    
    
    
    
    
    100
    %
    
    Manufacture and
trading of
automotive
components and
remodeling
minibuses and
sedansShenyang Jindong Development
Co., Ltd.
    
    Shenyang, the PRC
    
    
    
    
    
    
    75.5
    %
    
    Trading of
automotive
componentsBrilliance China Finance Limited
    
    British Virgin
Islands
    
    
    100
    %
    
    
    
    
    
    FinancingShenyang ChenFa Automobile
Component Co., Ltd.
    
    Shenyang, the PRC
    
    
    100
    %
    
    
    
    
    
    Development,
manufacture and
sale of engines
components
 F-11




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 1.
    
    ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT (CONTINUED)
 Percentage of effectivePlace of
    
    equity interest/votingestablishment/
    
    right attributable toName
    
    incorporation
    
    the Company
    
    Principal activitiesDirectly
    
    IndirectlyBrilliance China Automotive Finance Limited
    
    British Virgin Islands
    
    
    100
    %
    
    
    
    
    
    InactiveShenyang XinJinBei
Investment and
Development Co.,
Ltd. (SXID)
    
    Shenyang, the PRC
    
    
    
    
    
    
    100
    %
    
    Investment holdingShenyang JinBei
Automotive Industry
Holdings Co., Ltd.
(SJAI)
    
    Shenyang, the PRC
    
    
    
    
    
    
    99
    %
    
    Investment holdingShanghai Hidea Auto
Design Co., Ltd
    
    Shenyang, the PRC
    
    
    
    
    
    
    63.25
    %
    
    Design of automotiveShenyang Brilliance
Power Train
Machinery Co., Ltd
    
    Shenyang, the PRC
    
    
    49
    %
    
    
    26.01
    %
    
    Manufacture and
sale of power train
   2.
    
    BASIS OF PRESENTATION
   
    
    Reclassification of certain items, designated as construction-in-progress in the statutory
financial statements, as property, plant and equipment;
    
    Reclassification of certain items, designated as long-term land lease prepayments, from
property, plant and equipment in the statutory financial statements;
    
    Reclassification of certain items, designated as reserves appropriated from net income in
the statutory financial statements, as charges to income;
    
    Recognition of deferred income taxes;
    
    Recognition of provision for impairment loss of long-lived assets;
 F-12




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 2.
    
    BASIS OF PRESENTATION (CONTINUED)
 
    
    Write-off of certain research and development expenditures which are recgonised as intangible
assets in the statutory financial statements; and
    
    Recognition of stock-based compensation.
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a)
    
    Basis of consolidation
     F-13




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (a)
    
    Basis of consolidation (Continued)
  (b)
    
    Sales
   (c)
    
    Account receivables
  (d)
    
    Cash, cash equivalents and short-term bank deposits
   (e)
    
    Inventories
   F-14




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 (f)
    
    Property, plant and equipment and long-term land lease prepayments
   F-15




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (f)
    
    Property, plant and equipment and long-term land lease prepayments (Continued)
 Buildings
    
    
    5
    %Machinery and equipment (excluding special tools and moulds)
    
    
    10
    %Furniture, fixtures and office equipment
    
    
    20
    %Motor vehicles
    
    
    20
    %
     (g)
    
    Intangible assets
  (h)
    
    Impairment of long-lived assets
  (i)
    
    Goodwill
   F-16




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (i)
    
    Goodwill (Continued)
  (j)
    
    Investments in associated companies and jointly controlled entities
  (k)
    
    Investment securities
   F-17




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (l)
    
    Taxation
 Income Tax
        F-18




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (l)
    
    Taxation (Continued)
 Income Tax (Continued)
     Value Added Tax (VAT) and Consumption Tax
   (m)
    
    Deferred taxation
   F-19




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (n)
    
    Foreign currency translation
   (o)
    
    Warranty
    2007
    
    
    2006RMB000
    
    
    RMB000Balance as of January 1,
    
    
    27,348
    
    
    
    22,460Accrual for warranties issued during the year
    
    
    73,832
    
    
    
    42,102Settlement made during the year
    
    
    (72,690
    )
    
    
    (37,214
    )Balance as of December 31,
    
    
    28,490
    
    
    
    27,348
 (p)
    
    Advertising expenses
  F-20




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (q)
    
    Research and development expenses
  (r)
    
    Operating leases
   (s)
    
    Stock-based compensation
     F-21




---



##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (t)
    
    Earnings (Loss) per share and earnings (loss) per ADS
    Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Net income (loss) during the year
    
    
    83,726
    
    
    
    (386,108
    )
    
    
    (671,289
    )
  Year ended December 31,2007
    
    
    2006
    
    
    2005Weighted average number of
shares of common stock used in
calculation of basic earnings
(loss) per share
    
    
    3,669,022,065
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900Dilutive effect of stock options
    
    
    10,550,504
    
    
    
    
    
    
    
    Weighted average number of
shares of common stock adjusted
for dilutive effect of stock
options and convertible bonds
used in calculation of diluted
(loss) earnings per share
    
    
    3,679,572,569
    
    
    
    3,668,390,900
    
    
    
    3,668,390,900
    F-22




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (t)
    
    Earnings (Loss) per share and earnings (loss) per ADS (Continued)
     Year ended December 31,2007
    
    
    2006
    
    
    2005Weighted average number of ADSs
used in calculation of basic
earnings (loss) per ADS
    
    
    36,690,221
    
    
    
    36,683,909
    
    
    
    36,683,909Dilutive effect of stock options
    
    
    105,505
    
    
    
    
    
    
    
    Weighted average number of ADSs
adjusted for dilutive effect of
stock options and convertible
bonds used in calculation of
diluted earnings (loss) per ADS
    
    
    36,795,726
    
    
    
    36,683,909
    
    
    
    36,683,909
 (u)
    
    Segmental information
  (v)
    
    Comprehensive income
   F-23




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (w)
    
    Convertible bonds
  (x)
    
    Guarantees
  (y)
    
    Allowance for doubtful accounts
  (z)
    
    Fair value of financial instruments
  (aa)
    
    Use of estimates
  (ab)
    
    Other new accounting pronouncements
  F-24




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 (ab)
    
    Other new accounting pronouncements (Continued)
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of SFAS No. 115
   4.
    
    SUBSIDY INCOME
  5.
    
    INCOME TAXES
  F-25




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 5.
    
    INCOME TAXES (CONTINUED)
  Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Current taxation
    
    
    (45,208
    )
    
    
    (47,879
    )
    
    
    12,121Deferred taxation
    
    
    
    
    
    
    
    
    
    
    (114,005
    )(45,208
    )
    
    
    (47,879
    )
    
    
    (101,884
    )
  Year ended December 31,2007
    
    
    2006
    
    
    2005%
    
    
    %
    
    
    %Average statutory tax rate
(including state and local income
tax)
    
    
    (5,650.24
    )
    
    
    5.17
    
    
    
    10.25Effect of statutory tax holiday
    
    
    4,048.63
    
    
    
    5.87
    
    
    
    3.07Effect of non-deductible expenses
    
    
    (2,111.20
    )
    
    
    (7.02
    )
    
    
    (2.62
    )Effect of valuation allowances
    
    
    1,378.32
    
    
    
    (8.77
    )
    
    
    (22.93
    )Others, not individually significant
    
    
    (909.32
    )
    
    
    (1.95
    )
    
    
    3.71Effective tax rate
    
    
    (3,243.81
    )
    
    
    (6.70
    )
    
    
    (8.52
    )
   As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Deferred tax asset:Research and development costs
    
    
    88,814
    
    
    
    62,008Provisions and accruals
    
    
    37,065
    
    
    
    56,893Provision for impairment of property, plant and equipment
    
    
    3,023
    
    
    
    7,541Amortization and provision for impairment of intangible assets
    
    
    118,378
    
    
    
    116,737Tax losses carry forward
    
    
    127,248
    
    
    
    144,671374,528
    
    
    
    387,850Valuation allowance (Note)
    
    
    (374,528
    )
    
    
    (387,850
    )Net deferred tax assets
    
    
    
    
    
    
    
 F-26




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 5.
    
    INCOME TAXES (CONTINUED)
 
 Note:
    
    At December 31, 2007, valuation allowances of approximately RMB127.2 million (2006: RMB144.7
million) and RMB247.3 million (2006: RMB243.2 million) were made for deferred tax assets recognized
in respect of the unused tax losses and deductible temporary differences because it is more likely
than not that the tax benefit will not be realized in the foreseeable future. The temporary
differences do not expire under current legislation but the unrecognized tax losses of RMB238.1
million (2006: RMB354.2 million), RMB610.2 million (2006: RMB610.2 million) will expire in 2009 and
2010 respectively.
 6.
    
    PLEDGED SHORT-TERM BANK DEPOSITS, RESTRICTED
  7.
    
    ACCOUNTS RECEIVABLE, NET
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Accounts receivable
    
    
    868,075
    
    
    
    694,981Less: Allowance for doubtful debts
    
    
    (62,888
    )
    
    
    (62,823
    )805,187
    
    
    
    632,158
  2007
    
    
    2006RMB000
    
    
    RMB000Balance as of January 1,
    
    
    62,823
    
    
    
    48,367Additional provision
    
    
    83
    
    
    
    14,456Write-back of provision
    
    
    (18
    )
    
    
    Balance as of December 31,
    
    
    62,888
    
    
    
    62,823
  Percentage of total sales for the year2007
    
    2006
    
    2005Customer A
    
    
    23
    %
    
    
    7
    %
    
    NilCustomer B
    
    
    7
    %
    
    
    8
    %
    
    
    26
    %
 F-27




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Percentage of accounts receivableDecember 31,2007
    
    2006
    
    2005Major customers receivable balances
    
    
    42
    %
    
    
    42
    %
    
    
    30
    %
 8.
    
    NOTES RECEIVABLE
  9.
    
    OTHER RECEIVABLES
  10.
    
    INVENTORIES, NET
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Inventories consist of:Raw materials
    
    
    806,580
    
    
    
    598,970Work-in-progress
    
    
    226,476
    
    
    
    174,328Finished goods
    
    
    1,435,977
    
    
    
    573,5452,469,033
    
    
    
    1,346,843
  F-28




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 11.
    
    PROPERTY, PLANT AND EQUIPMENT, NET
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Buildings
    
    
    1,262,157
    
    
    
    1,238,713Machineries and equipment
    
    
    4,578,375
    
    
    
    4,439,080Motor vehicles
    
    
    122,355
    
    
    
    116,133Furniture, fixtures and office equipment
    
    
    435,372
    
    
    
    423,321Construction-in-progress
    
    
    257,017
    
    
    
    233,1046,655,276
    
    
    
    6,450,351Less: Accumulated provision for impairment losses
    
    
    (94,907
    )
    
    
    (125,028
    )6,560,369
    
    
    
    6,325,323Less: Accumulated depreciation
    
    
    (2,991,232
    )
    
    
    (2,460,113
    )Net book value
    
    
    3,569,137
    
    
    
    3,865,210
 (a)
    
    During the years ended December 31, 2007, 2006 and 2005, capitalized interest expense
amounted to approximately RMB5.5 million, RMB6.8 million and RMB23.9 million, respectively.(b)
    
    In December 2003, Shenyang Automotive disposed of certain machineries and equipment at their
net book value to the Groups jointly controlled entity, BMW Brilliance Automotive Ltd (BMW
Brilliance), at a consideration mutually agreed by both parties. The agreement of sale
includes an option for BMW Brilliance to require Shenyang Automotive to purchase back such
machineries and equipment at the purchase price less depreciation over a specified period upon
the occurrence of certain events, including the passing of a valid resolution pursuant to the
joint venture contract by the board of directors of BMW Brilliance. Up to December 31, 2007,
BMW Brilliance has not required Shenyang Automotive to purchase back such machineries and
equipments. These machineries and equipment are maintained and operated by BMW Brilliance for
the manufacturing of its products. BMW Brilliance will provide certain services to Shenyang
Automotive upon the payment of a service fee which is determined based on the number of
Zhonghua sedans produced by Shenyang Automotive using these machineries and equipment at a
predetermined formulated unit charge. The service fees of approximately RMB257,937, RMB254,479
and RMB112,160,000 were incurred for 2007, 2006 and 2005, respectively.(c)
    
    In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option
for BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the
purchase price less depreciation upon the occurrence of certain events, including the passing
of a valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. For financial reporting purposes, as of December 31, 2007 and 2006, the net book
value of the buildings, amounting to approximately RMB126,140,000 and RMB134,348,000,
respectively, were retained as assets on the balance sheet of the Group and the portion of
consideration received from BMW Brilliance up to December 31, 2007, amounting to approximately
RMB174,373,000 (2006: RMB113,343,000), was treated as financing and will be partially offset
against the lease rental payable in future years.
 F-29




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 These respective buildings have been pledged by BMW Brilliance to a bank for long-term bank
loans granted to BMW Brilliance.(d)
    
    As a result of the retirement from use and/or the change in use  from production to rental
  of certain property, plant and equipment of the Groups minibus and automotive components
segment, the Group assessed the recoverability of the carrying value of these long-lived
assets, which resulted
in impairment losses of approximately RMB0.8 million, RMB29.1 million and RMB48.3 million for
the years ended December 31, 2007, 2006 and 2005 respectively. These losses reflect the
amounts by which the carrying values of these assets exceeded their estimated fair values
determined by their estimated discounted future cash flows. The impairment loss was recorded
as a component of Selling, general and administrative expenses in the Consolidated
Statement of Income and Comprehensive Income for the years.
 F-30




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 12.
    
    INTANGIBLE ASSETS, NET
 2007
    
    
    2006RMB000
    
    
    RMB000CostBalance as of January 1
    
    
    1,539,333
    
    
    
    1,521,722Additions
    
    
    6,657
    
    
    
    17,611Balance as of December 31
    
    
    1,545,990
    
    
    
    1,539,333Accumulated amortizationBalance as of January 1
    
    
    (895,355
    )
    
    
    (713,911
    )Amortization for the year
    
    
    (161,219
    )
    
    
    (181,444
    )Balance as of December 31
    
    
    (1,056,574
    )
    
    
    (895,355
    )Accumulated impairmentBalance as of January 1 and December 31
    
    
    (223,000
    )
    
    
    (223,000
    )Net book valueBalance as of December 31
    
    
    266,416
    
    
    
    420,978Balance as of January 1
    
    
    420,978
    
    
    
    584,811
  (a)
    
    Sedan design rights, which include rights, titles and interests in certain design and
engineering agreements and a technical assistance agreement related to Zhonghua sedans; and(b)
    
    Components and parts technology rights, which include rights, titles and interests in the
design of the components and spare parts for Zhonghua sedans contributed by JinBei, a joint
venture partner, as capital into Shenyang Brilliance JinBei Automobile Co. Ltd., a subsidiary
of the Company in 2003.
   F-31




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 13.
    
    INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES
  Percentage of effectiveequity interest heldPlace of
    
    indirectly by theName of company
    
    establishment
    
    Company
    
    Principal activitiesAssociated companies:Shenyang Aerospace
Mitsubishi Motors Engine
Manufacturing Co., Ltd.
(Shenyang Aerospace)
(Note 1)
    
    Shenyang, the PRC
    
    
    12.77
    %
    
    Manufacture and
sale of automotive
enginesShenyang JinBei Vehicle
Dies Manufacturing Co.,
Ltd. (Shenyang JinBei
Vehicle)
    
    Shenyang, the PRC
    
    
    48
    %
    
    Manufacture and
sale of automotive
componentsJointly controlled entities:Mianyang Xinchen Engine
Co., Ltd. (Mianyang
Xinchen) (Note 2)
    
    Mianyang, the PRC
    
    
    50
    %
    
    Manufacture and
sale of automotive
engines for
minibuses and light
duty trucksShenyang Xinguang
Brilliance Automobile
Engine Co., Ltd. (Xinguang
Brilliance)
    
    Shenyang, the PRC
    
    
    50
    %
    
    Manufacture and
sale of automotive
engines for
minibuses and light
duty trucksBMW Brilliance Automotive
Ltd. (BMW Brilliance)
    
    Shenyang, the PRC
    
    
    49.5
    %
    
    Manufacture and
sale of BMW sedans
 
 Notse:(1)
    
    The Group has effective equity interest of 12.77% in Shenyang Aerospace through 21% equity
interest jointly held by Xin Yuan Dong and Shenyang Automotive. On 29th September, 2005, the
Group entered into an agreement with a shareholder of Shenyang Aerospace to dispose of 2% of
the Groups interest in Shenyang Aerospace for a cash consideration of RMB50 million. The
disposal is yet to be completed as at the date of these financial statements upon the approval
of respective local government.(2)
    
    On 7th August, 2006, the Group entered into an agreement with an independent third party to
dispose of 3.5% of the Groups interest in Mianyang Xinchen for a cash consideration of
approximately RMB16.4 million. The disposal is yet to be completed as at the date of these
financial statements upon the approval of the respective local government. F-32




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 13.
    
    INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES (CONTINUED)
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Interests in associated companies:Shenyang Aerospace
    
    
    374,919
    
    
    
    357,893Shenyang JinBei Vehicle
    
    
    13,840
    
    
    
    14,087388,759
    
    
    
    371,980Interests in jointly controlled entities:Mianyang Xinchen
    
    
    309,984
    
    
    
    304,462Xinguang Brilliance
    
    
    35,187
    
    
    
    28,523BMW Brilliance
    
    
    881,987
    
    
    
    708,1701,227,158
    
    
    
    1,041,1551,615,917
    
    
    
    1,413,135
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Shenyang Aerospace
    
    
    31,983
    
    
    
    31,983Mianyang Xinchen
    
    
    91,410
    
    
    
    91,410123,393
    
    
    
    123,393
  F-33




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 13.
    
    INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES (CONTINUED)
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Associated companies:Shenyang Aerospace
    
    
    37,863
    
    
    
    50,183Shenyeng JinBei Vehicle
    
    
    (246
    )
    
    
    (265
    )37,617
    
    
    
    49,918Jointly controlled entities:Mianyang Xinchen
    
    
    5,885
    
    
    
    (414
    )Xinguang Brilliance
    
    
    6,532
    
    
    
    (6,876
    )BMW Brilliance
    
    
    142,227
    
    
    
    106,692154,644
    
    
    
    99,402192,261
    
    
    
    149,320
  Year ended December 31,2007
    
    
    2006RMB000
    
    
    RMB000Revenue
    
    
    2,225,332
    
    
    
    2,113,735Profit before taxation, net
    
    
    206,390
    
    
    
    209,438Net income
    
    
    180,563
    
    
    
    187,388
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Current assets
    
    
    838,123
    
    
    
    889,889Non-current assets
    
    
    1,796,883
    
    
    
    1,906,025Total assets
    
    
    2,635,006
    
    
    
    2,795,914Current liabilities
    
    
    (433,145
    )
    
    
    (634,616
    )Long-term liabilities
    
    
    (540,000
    )
    
    
    (580,000
    )Total liabilities
    
    
    (973,145
    )
    
    
    (1,214,616
    )Total shareholders equity
    
    
    1,661,861
    
    
    
    1,581,298
 F-34




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 13.
    
    INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES (CONTINUED)
  Year ended December 31,2007
    
    
    2006RMB000
    
    
    RMB000Revenue
    
    
    13,343,555
    
    
    
    8,953,086Profit before taxation, net
    
    
    315,823
    
    
    
    159,091Net income
    
    
    296,356
    
    
    
    197,063
 As of December 31,2007
    
    
    2006RMB'000
    
    
    RMB'000Current assets
    
    
    6,366,424
    
    
    
    6,051,057Non-current assets
    
    
    2,812,837
    
    
    
    2,101,276Total assets
    
    
    9,179,261
    
    
    
    8,152,333Current liabilities
    
    
    (6,049,432
    )
    
    
    (5,530,655
    )Long-term liabilities
    
    
    (871,478
    )
    
    
    (700,979
    )Total liabilities
    
    
    (6,920,910
    )
    
    
    (6,231,634
    )Total shareholders equity
    
    
    2,258,351
    
    
    
    1,920,699
 14.
    
    INVESTMENT SECURITIES
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Available-for-sale securities at cost
    
    
    17,305
    
    
    
    17,305Gross unrealized gain
    
    
    4,686
    
    
    
    2,29321,991
    
    
    
    19,598Unlisted securities at cost
    
    
    4,138
    
    
    
    4,13826,129
    
    
    
    23,736
  F-35




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 14.
    
    INVESTMENT SECURITIES (CONTINUED)
  15.
    
    GOODWILL
   16.
    
    PREPAYMENT FOR A LONG-TERM INVESTMENT
    F-36




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 17.
    
    DEFERRED EXPENSES, NET
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Direct expenses incurred in connection with the
issuance of convertible bonds due 2011 (Note 18)
    
    
    31,414
    
    
    
    31,414Amortization
    
    
    (9,948
    )
    
    
    (3,665
    )21,466
    
    
    
    27,749Non-current portion
    
    
    15,183
    
    
    
    21,466Current portion
    
    
    6,283
    
    
    
    6,28321,466
    
    
    
    27,749
 18.
    
    CONVERTIBLE BONDS
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Convertible bonds issued at par
    
    
    1,460,779
    
    
    
    1,460,779Accreted redemption premium
    
    
    162,327
    
    
    
    59,157Exchange gain
    
    
    (133,199
    )
    
    
    (33,368
    )1,489,907
    
    
    
    1,486,568
   Conversion price reset
 (1)
    
    If the average of the closing price (the Average Market Price) of the
shares of the Company for the period of 20 consecutive trading days immediately prior
to the reset dates (being March 10, 2007 and March 10, 2008) is less than the
conversion price on the applicable reset date, the conversion price shall be adjusted
on the applicable reset date so that the Average Market Price of the shares of the
Company will become the adjusted conversion price with effect from the applicable
reset date provided that, among other things, any such adjustment to the conversion
price in no event shall be less than 68% (for the March 10, 2007 reset date) and 75%
(for the March 10, 2008 reset date) of the conversion price prevailing on the
applicable reset date and that the conversion price shall not be reduced below the
then par value of the shares unless under applicable law then in effect the
convertible bonds due 2011 could not be converted at such reduced conversion price
into legally issued, fully-paid and non-assessable shares. Since the average market
price was HK$1.53 prior to the 10th March 2008 reset date, the conversion price was
adjusted from HK$1.93 to HK$1.53.
 F-37




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 Due to the adjustment to the conversion price, the total number of conversion shares
will increase from 733,674,599 shares at a conversion price of HK$1.93 to 925,484,964
shares at conversion price of HK$1.53.An ordinary resolution was proposed in an EGM held on 21st April 2008 to grant the
directors a specific mandate to issue, allot and deal with the additional conversion
shares.
 18.
    
    CONVERTIBLE BONDS (CONTINUED)
 Redemption
  (i)
    
    on or at any time after June 7, 2008 and prior to June 7, 2009, if the closing price of the
shares of the Company on the SEHK for each of the last 30 consecutive trading days has been at
least 145% of the applicable early redemption amount divided by the conversion ratio
(principal amount of the convertible bonds divided by the conversion price);(ii)
    
    on or at any time after June 7, 2009 and prior to May 8, 2011, if the closing price of the
shares of the Company on the SEHK for each of the last 30 consecutive trading days has been at
least 130% of the applicable early redemption amount divided by the conversion ratio; or(iii)
    
    at any time, if more than 90% in principal amount of the convertible bonds has been
converted, redeemed or purchased and cancelled.
    19.
    
    NOTES PAYABLE
  F-38




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 20.
    
    TAXES PAYABLE
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Income tax payable
    
    
    9,554
    
    
    
    11,411VAT payable
    
    
    12,674
    
    
    
    10,651Consumption tax payable
    
    
    44,967
    
    
    
    54,727Others
    
    
    13,454
    
    
    
    16,463Other taxes payable
    
    
    71,095
    
    
    
    81,84180,649
    
    
    
    93,252
 21.
    
    COMMITMENTS AND CONTINGENCIES
 (a)
    
    Commitments
   OperatingleaseRMB000Within one year
    
    
    16,367One to two years
    
    
    6,201Two to three years
    
    
    4,263Three to four years
    
    
    4,263Four to five years
    
    
    4,129Over five years
    
    
    31,296Total minimum lease payments
    
    
    66,519
 F-39




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 21.
    
    COMMITMENTS AND CONTINGENCIES (CONTINUED)
 (b)
    
    Operating lease income
    As of December 31,2007RMB000Buildings
    
    
    97,358Accumulated depreciation
    
    
    (19,542
    )Net investment in operating leases
    
    
    77,816
  As of December 31,2007RMB000Within one year
    
    
    19,884One to two years
    
    
    14,174Two to three years
    
    
    14,174Three to four years
    
    
    14,174Four to five years
    
    
    14,174Over five years
    
    
    76,778Total
    
    
    153,358
  F-40




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 21.
    
    COMMITMENTS AND CONTINGENCIES (CONTINUED)
 (c)
    
    Contingent liabilities(i)
    
    As of December 31, 2007, the Group had provided the following guarantees:
 (1)
    
    Corporate guarantees of approximately RMB60 million (2006: RMB120 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua:The guarantee arose from the mutual negotiation between Shenyang Automotive and Shanghai
Shenhua. Associated with the corporate guarantee, Shanghai Shenhua also provided a cross
guarantee for the bank facilities of Shenyang Automotive. The guarantee was for revolving
activities of Shanghai Shenhua and will be terminated upon mutual agreements between
Shenyang Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the repayment
of its bank loans or notes when they fall due, Shenyang Automotive is required to repay
the outstanding balance. There is no recourse or collateralization provision in the
guarantee. As of December 31, 2007, the guarantee provided for the bank loans and notes
drawn by affiliated companies of Shanghai Shenhua was approximately RMB60 million (2006:
RMB120 million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2007. 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, 2007.(2)
    
    Corporate guarantees of bank loans amounting to RMB200 million (2006: RMB295
million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2007, drawn by JinBei. Bank deposits of RMB213 million
(2006: RMB312 million) were pledged as collateral for the corporate guarantees. However,
default by JinBei is considered remote by management and therefore no liability for the
guarantors obligation under the guarantee existed as of December 31, 2007.
 (ii)
    
    On or about 25th October, 2002, the Company was served with a claim lodged by Mr. Yang Rong
(Mr. Yang) in the Labour Tribunal in Hong Kong against the Company for alleged wrongful
repudiation and/or breach of his employment contract. The claim was for approximately US$4.3
million (equivalent to approximately RMB31.5 million) with respect to loss of salary. In
addition, Mr. Yang claimed unspecified damages in respect of bonuses and share options. The
claim was dismissed by the Labour Tribunal in Hong Kong on 28th January, 2003. Mr. Yang
subsequently applied for a review of this decision. At the review hearing on 4th July, 2003,
the Labour Tribunal ordered the case to be transferred to the High Court in Hong Kong. The
claim has therefore been transferred to the High Court and registered as High Court Action
No.2701 of 2003 (the Action).On 16th September, 2003, a Statements of Claim was served on the Company. On 4th November,
2003, the Company filed a Defence and Counterclaim with the High Court. Mr. Yang filed a Reply
to Defence and Defence to Counterclaim on 26th April, 2004. On 21st July, 2004. Mr. Yang
obtained leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim.
The Company filed and served a Reply to defence to Counterclaim on 4th September, 2004.
Pleadings closed on 18th September, 2004. The parties filed and served Lists of Documents on
26th October, 2004 and witness statements were exchanged on 28th February, 2005.
 F-41




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 21.
    
    COMMITMENTS AND CONTINGENCIES (CONTINUED)
 (c)
    
    Contingent liabilities (Continued)The parties applied by consent to adjourn sine die a checklist hearing fixed for 20th April  ,
2005, as the respective parties anticipated that that they would be filing supplemental
evidence and amending their pleadings. The Court approved the application and made an Order on
19th April, 2005 that the checklist hearing be vacated and adjourned sine die with liberty to
restore.Pursuant to a request made by Mr. Yang on 2nd June, 2005 for further and better particulars of
the Defence and Counterclaim, the Company filed and served its Answer to Mr. Yangs request on
4th July, 2005.On August 17, 2006, in compliance with its continuing discovery obligations, the Company filed
and served a Supplemental List of Documents. Subsequently, on September 5, 2006, Mr. Yang also
filed and served a Supplemental List of Documents.There has been no material progress in the litigation.The directors of the Company do not believe the Action will have any significant impact on the
financial position of the Company and of the Group. The directors of the Company intend to
continue vigorously defending the action.
 22.
    
    CAPITAL STOCK
 As of December 31,2007
    
    
    2006
    
    
    2005Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number ofshares
    
    
    Amount
    
    
    shares
    
    
    Amount
    
    
    shares
    
    
    Amount000
    
    
    000
    
    
    000
    
    
    000
    
    
    000
    
    
    000Authorized:Common stock
of US$0.01 each
(Note1)
    
    8,000,000
    
    
    
    US$80,000
    
    
    
    5,000,000
    
    
    US$50,000
    
    
    
    5,000,000
    
    
    US$50,000Issued and fully paid:Common stock
of US$0.01 each (Note
2)
    
    
    3,669,766
    
    
    RMB303,488
    
    
    
    3,668,391
    
    
    RMB303,388
    
    
    
    3,668,391
    
    
    RMB303,388
 
 Note 1:
    
    At a special general meeting held on February 12, 2007, shareholders of the Company
approved the increase of the authorized share capital of the Company from US$50,000,000 to
US$80,000,000 by the creation of an additional 3,000,000,000 shares of par value of US$0.01 each.Note 2:
    
    1,125,000 and 250,000 ordinary shares were issued on 16th July,2007 and 24th July, 2007,
respectively, as a result of an exercise of share option on 16th July, 2007, at an
aggregate consideration of RMB1,702,000 (or HK$1,815,000) of which RMB1,602,000 was credited to the
share premium account. F-42




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 23.
    
    STOCK OPTIONS
 Original share option scheme approved in 1999
  (a)
    
    a price being not less than 80%, of the average closing price of the common stock on the
relevant stock exchange as stated in such stock exchanges quotation sheets for the five
trading days immediately preceding the relevant date in respect of such options; and(b)
    
    the nominal value of the common stock.
   New share option scheme approved in 2002
  (a)
    
    the closing price of the common stocks on the relevant stock exchange as stated in such stock
exchanges quotation sheet on the date of the offer of grant, which must be a trading date;(b)
    
    the average closing price of the common stocks on the relevant stock exchange as stated in
such stock exchanges quotation sheets for the five trading days immediately preceding the
date of the offer of grant; and(c)
    
    the nominal value of the common stock.
 F-43




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 23.
    
    STOCK OPTIONS (CONTINUED)
  Exercise prices (theweighted averageNo. of share
    
    
    exercise price in
    
    
    Aggregateoptions
    
    
    parenthesis)
    
    
    intrinsic valueOutstanding as of January 1, 2005
    
    
    14,490,000
    
    
    HK$1.896Cancelled/lapsed
    
    
    (11,690,000
    )
    
    HK$1.896Outstanding as of December 31,2005
and January 1, 2006
    
    
    2,800,000
    
    
    HK$1.896Granted
    
    
    35,750,000
    
    
    HK$1.320Outstanding
as of December 31, 2006 and January 1, 2007
    
    
    38,550,000
    
    
    HK$1.896, HK$1.320(HK$1.362
    )Granted
    
    
    59,500,000
    
    
    HK$1.746Exercised
    
    
    (1,375,000
    )
    
    HK$1.320Outstanding as of December 31, 2007
    
    
    
    
    
    HK$1.320, HK$1.746and HK$1.89696,675,000
    
    
    (HK$1.599
    )
    
    HK$14,437,000Exercisable as of December 31, 2007
    
    
    
    
    
    HK$1.320 and96,675,000
    
    
    HK$1.746 (HK$1.599
    )
    
    HK$14,437,000
  WeightedNo. of share
    
    
    average
    
    
    Weightedoptions
    
    
    remaining
    
    
    averageRange of Exercise Prices
    
    outstanding
    
    
    contractual life
    
    
    exercise priceHK$1.320-HK$1.896
    
    
    96,675,000
    
    
    9.45 years
    
    
    HK$1.599
   F-44




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
   2007
    
    
    2006Fair value at measurement date
    
    HK$0.5549
    
    
    HK$0.3139Expected volatility
    
    
    48.44
    %
    
    
    42.64
    %Option life
    
    2 - 3 years
    
    
    1 - 2 yearsExpected dividends
    
    Nil
    
    
    NilRisk-free interest rate
    
    
    2.58%-2.79
    %
    
    
    3.48%-3.509
    %
  24.
    
    DISTRIBUTION OF PROFIT
    25.
    
    RELATED PARTY TRANSACTIONS
 (a)
    
    Name and relationship
 Name
    
    RelationshipJinBei
    
    A shareholder of Shenyang AutomotiveShanghai Shenhua
    
    Common directorship of certain directors of
the CompanyBrilliance Holdings Limited (BHL)
    
    Common directorship of certain directors of
the Company
 F-45




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
   (b)
    
    Amounts due from affiliated companies arising from trading activities consisted of the
following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Due from related parties: Shanghai Shenhua and its affiliated companies
    
    
    368,499
    
    
    
    431,310 Affiliated companies of JinBei
    
    
    91,347
    
    
    
    93,446 An affiliated company of BHL
    
    
    94,095
    
    
    
    55,040 A subsidiary of the substantial shareholder of the Company
    
    
    61,455
    
    
    
     BMW Brilliance Accounts receivables
    
    
    98,224
    
    
    
    247,564 Consideration receivable arising from the disposal
of machinery and equipment (note (i))
    
    
    
    
    
    
    134,527 Other jointly controlled entities
    
    
    321
    
    
    
    21,470Less: Provision for doubtful debts
    
    
    (29,720
    )
    
    
    (29,720
    )684,221
    
    
    
    953,637
 (i)
    
    The outstanding balance is unsecured, non-interest bearing and will be settled by BMW
Brilliance when certain conditions specified in the agreement of sale are fulfilled (See also
Note 11(c)).(ii)
    
    Except for (i) above, the amounts due from affiliated companies are unsecured, non-interest
bearing and have no fixed repayment terms. F-46




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 25.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 (c)
    
    Notes receivable from affiliated companies arising from trading activities consisted of the
following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Notes receivable from related parties: Affiliated companies of JinBei
    
    
    3,050
    
    
    
    16,620 Shanghai Shenhua
    
    
    143,276
    
    
    
    63,750 Associated companies and jointly controlled entities
    
    
    
    
    
    
    1,107 A subsidiary of the substantial shareholders of the Company
    
    
    113,829
    
    
    
    260,155
    
    
    
    81,477
  (d)
    
    Dividends receivable from affiliated companies consisted of:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Dividend receivable from a jointly controlled entity
    
    
    76,173
    
    
    
    76,173Dividend receivable from an associate
    
    
    21,000
    
    
    
    21,00097,173
    
    
    
    97,173
 (e)
    
    Amounts due to affiliated companies arising from trading activities consisted of the following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Due to related parties: Associated companies and jointly controlled entities
    
    
    584,971
    
    
    
    680,943Affiliated companies of Shanghai Shenhua
    
    
    1,870
    
    
    
    10,719Affiliated companies of JinBei
    
    
    365,275
    
    
    
    281,721 Other affiliated companies
    
    
    731
    
    
    
    9,910952,847
    
    
    
    983,293
  F-47




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 25.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 (f)
    
    Notes payable to affiliated companies arising from trading activities consisted of the
following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Notes payable to related parties: Affiliated companies of BHL
    
    
    60,686
    
    
    
     An affiliated companies of JinBei
    
    
    51,167
    
    
    
    7,249 Associated companies and jointly controlled entities
    
    
    95,921
    
    
    
    30,039207,774
    
    
    
    37,288
 F-48




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 25.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 (g)
    
    Save as disclosed elsewhere in the financial statements, significant transactions with
affiliated companies consisted of the following:
 Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Sales of goods: JinBei and its affiliated companies
    
    
    452,933
    
    
    
    178,414
    
    
    
    69,432 Shanghai Shenhua and its affiliated companies
    
    
    1,394,130
    
    
    
    1,052,689
    
    
    
    1,469,402 A subsidiary of the substantial shareholders of the
Company
    
    
    1,119,096
    
    
    
    
    
    
    
     Associated companies and jointly controlled entities
    
    
    188,315
    
    
    
    186,146
    
    
    
    71,0053,154,474
    
    
    
    1,417,249
    
    
    
    1,609,839Purchase of goods:Affiliated companies of JinBei
    
    
    1,477,018
    
    
    
    895,457
    
    
    
    383,808Affiliated companies of Shanghai Shenhua
    
    
    102,785
    
    
    
    16,668
    
    
    
    85,354Affiliated companies of BHL
    
    
    115,223
    
    
    
    117,336
    
    
    
    66,441 Associated companies and jointly controlled entities
    
    
    1,004,303
    
    
    
    942,878
    
    
    
    524,221 Affiliated companies of the joint venture partner of
Xinguang Brilliance
    
    
    147
    
    
    
    68
    
    
    
    761 Shareholders of Shenyang Aerospace
    
    
    63,227
    
    
    
    90,505
    
    
    
    1,987Subcontracting charges to a jointly controlled entity
    
    
    257,937
    
    
    
    254,479
    
    
    
    112,1603,020,640
    
    
    
    2,317,391
    
    
    
    1,174,732Purchase of intangible asset from an affiliated company
of the joint venture partner of Ningbo YumingFinance charge to a jointly controlled entity
    
    
    16,100
    
    
    
    16,748
    
    
    
    17,329Operating lease rental on land and buildings charged by: A jointly controlled entity
    
    
    3,430
    
    
    
    908
    
    
    
    2,206 Shanghai Shenhua and its affiliated companies
    
    
    592
    
    
    
    1,148
    
    
    
     Affiliated companies of JinBei
    
    
    
    
    
    
    60
    
    
    
    Mould testing income from a jointly controlled entity
    
    
    1,776
    
    
    
    4,320
    
    
    
    Operating lease rental from a jointly controlled entity
    
    
    14,384
    
    
    
    34,863
    
    
    
    15,078Proceeds from sale of property, plant and equipment a
jointly controlled entity
    
    
    
    
    
    
    80,332
    
    
    
    263Service income from a jointly controlled entity
    
    
    18,560
    
    
    
    35,067
    
    
    
    43,671
  F-49




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 25.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 i.
    
    Trademark license
  ii.
    
    Guarantees provided to affiliated companies
  (g)
    
    Advances to affiliated companies consisted of the following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Advances to related parties: Associated companies and jointly controlled entities
    
    
    26,364
    
    
    
    6,553Affiliated companies of BHL
    
    
    51,134
    
    
    
    15,273 Shanghai Shenhua and its affiliated companies
    
    
    14,044
    
    
    
    14,044JinBei and its affiliated companies
    
    
    12,062
    
    
    
    23,740 Other affiliated companies
    
    
    12
    
    
    
    689103,616
    
    
    
    60,299Less: provision for doubtful debts
    
    
    (2,214
    )
    
    
    (2,214
    )101,402
    
    
    
    58,085
  (h)
    
    Advances from affiliated companies consisted of the following:
 As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Advances from related parties: Associated companies and jointly controlled entities
    
    
    1,282
    
    
    
    1,279BHL and its affiliated companies
    
    
    12,086
    
    
    
    12,728 Affiliated companies of Shanghai Shenhua
    
    
    1,430
    
    
    
    820JinBei and its affiliated companies
    
    
    735
    
    
    
    6,925 Current portion of financing received from BMW
Brilliance (Note 11(d))
    
    
    40,601
    
    
    
    33,36756,134
    
    
    
    55,389
 F-50




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 25.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
  As of December 31,2007
    
    
    2006RMB000
    
    
    RMB000Within 1 year
    
    
    40,601
    
    
    
    33,637More than 1 year but less than 2 years
    
    
    7,772
    
    
    
    13,204More than 2 years but less than 5 years
    
    
    29,154
    
    
    
    26,124More than 5 years
    
    
    96,846
    
    
    
    40,378174,373
    
    
    
    113,343Less: non-current portion
    
    
    (133,772
    )
    
    
    (79,706
    )Current portion
    
    
    40,601
    
    
    
    33,637
  26.
    
    RETIREMENT PLAN AND EMPLOYEES BENEFIT
   27.
    
    EXECUTIVE BONUS PLAN
  F-51




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 28.
    
    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Cash paid for:Interest (net of amount capitalized: 2007: RMB5,533,000; 2006: RMB6,766,000; 2005: RMB23,875,000)
    
    
    106,924
    
    
    
    92,744
    
    
    
    111,303Income taxes
    
    
    65,858
    
    
    
    39,240
    
    
    
    33,975
   29.
    
    OTHER SUPPLEMENTAL INFORMATION
  Year ended December 31,2007
    
    
    2006
    
    
    2005RMB000
    
    
    RMB000
    
    
    RMB000Import tariffs
    
    
    29,680
    
    
    
    31,616
    
    
    
    15,224Research and development costs
    
    
    402,826
    
    
    
    214,021
    
    
    
    235,177Foreign exchange gains, net
    
    
    80,040
    
    
    
    32,955
    
    
    
    21,487Provision for impairments of property, plant and
equipment
    
    
    
    
    
    
    29,160
    
    
    
    48,299Provision for doubtful debts and write off of bad debts
    
    
    5,566
    
    
    
    28,272
    
    
    
    55,703
 30.
    
    SEGMENT INFORMATION
    F-52




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
  Business segments  2007
 Manufactureand sale of
    
    
    Manufactureminibuses and
    
    
    and sale of
    
    
    Manufactureautomotive
    
    
    Zhonghua
    
    
    and sale ofcomponents
    
    
    sedans
    
    
    BMW sedans
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Total revenues from reportable segments
    
    
    5,729,289
    
    
    
    8,754,847
    
    
    
    
    
    
    
    14,484,136Elimination of intersegment revenues
    
    
    (334,987
    )
    
    
    
    
    
    
    
    
    
    
    (334,987
    )Revenues from external customers
    
    
    5,394,302
    
    
    
    8,754,847
    
    
    
    
    
    
    
    14,149,149Segment (loss) income before taxation and
minority interests
    
    
    194,986
    
    
    
    (286,223
    )
    
    
    142,227
    
    
    
    50,990Unallocated amounts corporate income net of corporate expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,405interest income less interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,793
    )Loss before taxation and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,398
    )Segment assets as of December 31, 2007
    
    
    7,115,643
    
    
    
    8,038,601
    
    
    
    881,987
    
    
    
    16,036,231Unallocated amounts  corporate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,081Total assets as of December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,172,312Other disclosures:Depreciation of fixed assets
    
    
    207,216
    
    
    
    386,047
    
    
    
    
    
    
    
    593,263Amortization of long-term land lease
prepayments
    
    
    2,254
    
    
    
    1,185
    
    
    
    
    
    
    
    3,439Amortization on intangible assets
    
    
    9,548
    
    
    
    151,671
    
    
    
    
    
    
    
    161,219Impairment of equity method goodwill (Note
13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditure
    
    
    41,810
    
    
    
    278,843
    
    
    
    
    
    
    
    320,653Equity in earnings of associated companies
and jointly controlled entities
    
    
    12,171
    
    
    
    37,863
    
    
    
    142,227
    
    
    
    192,261Equity method goodwill (Note 13)
    
    
    91,410
    
    
    
    31,983
    
    
    
    
    
    
    
    123,393Goodwill (Note 15)
    
    
    339,710
    
    
    
    
    
    
    
    
    
    
    
    339,710
 F-53




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 Business segments  2006
 Manufacture andsale of
    
    
    Manufacture andminibuses and
    
    
    sale of
    
    
    Manufacture andautomotive
    
    
    Zhonghua
    
    
    sale of BMWcomponents
    
    
    sedans
    
    
    sedans
    
    
    TotalRMB000
    
    
    RMB000
    
    
    RMB000
    
    
    RMB000Total revenues from reportable segments
    
    
    5,533,953
    
    
    
    5,190,129
    
    
    
    
    
    
    
    10,724,082Elimination of intersegment revenues
    
    
    (239,328
    )
    
    
    
    
    
    
    
    
    
    
    (239,328
    )Revenues from external customers
    
    
    5,294,625
    
    
    
    5,190,129
    
    
    
    
    
    
    
    10,484,754Segment (loss) income before taxation and
minority interests
    
    
    145,602
    
    
    
    (830,404
    )
    
    
    106,692
    
    
    
    (578,110
    )Unallocated amounts corporate expenses net of corporate income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,138
    )interest income less interest expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,263
    )Income before taxation and minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (714,511
    )Segment assets as of December 31, 2006
    
    
    6,237,217
    
    
    
    5,274,223
    
    
    
    708,170
    
    
    
    12,219,610Unallocated amounts  corporate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,360,754Total assets as of December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,580,364Other disclosures:Depreciation of fixed assets
    
    
    223,233
    
    
    
    377,812
    
    
    
    
    
    
    
    601,045Amortization of long-term land lease
prepayments
    
    
    2,485
    
    
    
    1,573
    
    
    
    
    
    
    
    4,058Amortization on intangible assets
    
    
    2,603
    
    
    
    178,841
    
    
    
    
    
    
    
    181,444Impairment of equity method goodwill (Note
13)
    
    
    73,343
    
    
    
    
    
    
    
    
    
    
    
    73,343Impairment of goodwill in a subsidiary (Note
15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital expenditure
    
    
    106,130
    
    
    
    144,935
    
    
    
    
    
    
    
    251,065Equity in earnings of associated companies
and jointly controlled entities
    
    
    (7,556
    )
    
    
    50,184
    
    
    
    106,692
    
    
    
    149,320Equity method goodwill (Note 13)
    
    
    91,410
    
    
    
    31,983
    
    
    
    
    
    
    
    123,393Goodwill (Note 15)
    
    
    339,710
    
    
    
    
    
    
    
    
    
    
    
    339,710
 F-54




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##### Table of Contents



Brilliance China Automotive Holdings Limited
 Notes to Consolidated Financial Statements
 31.
    
    ACCUMULATED OTHER COMPREHENSIVE INCOME
  Unrealized gain(loss) on
    
    
    Foreign
    
    
    Accumulativemarketable
    
    
    currency
    
    
    otheravailable-for-
    
    
    translation
    
    
    comprehensivesale securities
    
    
    adjustments
    
    
    incomeRMB000
    
    
    RMB000
    
    
    RMB000Balance as of January 1, 2006
    
    
    1,241
    
    
    
    39,179
    
    
    
    40,420Current year change
    
    
    1,052
    
    
    
    
    
    
    
    1,052Balance as of December 31, 2006
    
    
    2,293
    
    
    
    39,179
    
    
    
    41,472Current year change
    
    
    2,393
    
    
    
    
    
    
    
    2,393Balance as of December 31, 2007
    
    
    4,686
    
    
    
    39,179
    
    
    
    43,865
 32.
    
    COMPARATIVE FIGURES
  33.
    
    APPROVAL OF FINANCIAL STATEMENTS
  F-55




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##### Table of Contents



Balance at
    
    Charged /beginning of the
    
    (credited) to
    
    Deductions
    
    Balance at endDescription
    
    year
    
    expenses
    
    Note (a)
    
    of the yearRMB000
    
    RMB000
    
    RMB000
    
    RMB000Year ended December
31, 2007Allowance for doubtful
debt of: Accounts receivables
    
    
    62,823
    
    
    
    65
    
    
    
    
    
    
    
    62,888 Other receivables
    
    
    82,725
    
    
    
    5,204
    
    
    
    (292
    )
    
    
    87,637 Due from affiliated companies
    
    
    29,720
    
    
    
    
    
    
    
    
    
    
    
    29,720 Advances to affiliated
companies
    
    
    2,214
    
    
    
    
    
    
    
    
    
    
    
    2,214Allowance for inventories
    
    
    200,276
    
    
    
    (130,185
    )
    
    
    
    
    
    
    70,091Year ended December
31, 2006Allowance for doubtful
debt Accounts receivables
    
    
    48,367
    
    
    
    14,456
    
    
    
    
    
    
    
    62,823 Other receivables
    
    
    78,003
    
    
    
    13,740
    
    
    
    (9,018
    )
    
    
    82,725 Due from affiliated
companies
    
    
    29,720
    
    
    
    
    
    
    
    
    
    
    
    29,720 Advances to affiliated
companies
    
    
    9,250
    
    
    
    
    
    
    
    (7,036
    )
    
    
    2,214Allowance for inventories
    
    
    179,012
    
    
    
    21,264
    
    
    
    
    
    
    
    200,276Year ended December
31, 2005Allowance for doubtful
debt Accounts receivables
    
    
    47,719
    
    
    
    648
    
    
    
    
    
    
    
    48,367 Other receivables
    
    
    42,682
    
    
    
    35,321
    
    
    
    
    
    
    
    78,003 Due from affiliated
companies
    
    
    24,720
    
    
    
    5,000
    
    
    
    
    
    
    
    29,720 Advances to affiliated
companies
    
    
    1,975
    
    
    
    7,275
    
    
    
    
    
    
    
    9,250Allowance for inventories
    
    
    113,185
    
    
    
    65,827
    
    
    
    
    
    
    
    179,012
 
 Note (a) Bad debts write-offs F-56