Grand Baoxin Auto Group Limited - Proxy Solicitation & Information Statement 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in BAOXIN AUTO GROUP LIMITED, you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

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BAOXIN AUTO GROUP LIMITED

寶信汽車集團有限公司 (Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1293)

MAJOR TRANSACTION

November 29, 2012

CONTENTS

	Pages
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
THE SALE AND PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
THE BOND INSTRUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
INFORMATION ON THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
INFORMATION ON THE TARGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
REASONS AND BENEFITS OF THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
FINANCIAL EFFECTS OF THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP . . . .	24
IMPLICATIONS UNDER THE LISTING RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	29
APPENDIX II — FINANCIAL INFORMATION OF NCGA HOLDINGS
LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
APPENDIX III — UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	97
APPENDIX IV — STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . . . . .	109

– i –

DEFINITIONS

In this circular, the following expressions have the following meanings, unless the context requires otherwise:

‘‘Acquisition’’

the proposed acquisition of the Sale Shares by the Company pursuant to the Sale and Purchase Agreement;

‘‘Announcement’’
the announcement dated August 30, 2012 issued by the Company in relation to the Acquisition;
‘‘Audited Accounts’’ the audited consolidated accounts of the Target Group for the 12 months period ended on December 31, 2011, including the notes, statements (including cash flow statements) and directors’ report relating to them;
‘‘Auspicious Splendid’’ Auspicious Splendid Global Investments Limited (瑞華環球投資有限公司 ), an investment holding company incorporated under the laws of the British Virgin Islands on February 11, 2011;
‘‘Baoxin Investment’’ Baoxin Investment Management Ltd., an investment holding company incorporated under the laws of the British Virgin Islands on September 6, 2010;
‘‘Board’’ the board of Directors of the Company;
‘‘Bond Instrument’’ the bond instrument to be executed by the Company by way of deed poll at Completion;
‘‘Bondholder’’ a holder of Bonds for the time being;
‘‘Bondholder Majority’’
Bondholders holding or representing in aggregate not less than 50% in principal amount of the Bonds for the time being outstanding;
‘‘Bonds’’
the pay-in-kind bonds component of the Consideration, in the initial aggregate principal amount of US$58,160,184.91 (equivalent to HK$450,741,433.05), to be issued by the Company to the relevant Sellers and MCM at Completion;
‘‘Business Days’’
a day on which banks are open for business in New York and Hong Kong (other than a Saturday, Sunday or a public holiday or a day on which a tropical cyclone warning No. 8 or above or a ‘‘black rainstorm warning signal’’ is hoisted or remains hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.);

– 1 –

DEFINITIONS

‘‘Cash Amount’’
‘‘Company’’
‘‘Completion’’
‘‘Completion Date’’
‘‘Condition(s) Precedent’’
‘‘Consideration’’
‘‘Consideration Shares’’
‘‘Consideration Shares Recipients’’
‘‘Director(s)’’
‘‘Enlarged Group’’
‘‘Family Trust’’
‘‘Group’’
‘‘HK$’’

the initial cash component of the Consideration, in the aggregate amount of US$232,640,739.62 (equivalent to HK$1,802,965,732.05) to be paid by the Company to the relevant Sellers at Completion;

Baoxin Auto Group Limited (寶信汽車集團有限公司), an exempted company incorporated in the Cayman Islands, whose shares are listed on the main board of the Stock Exchange (stock code: 1293);
completion of the sale and purchase of the Sale Shares in accordance with the provisions of the Sale and Purchase Agreement;
the day on which Completion occurs in accordance with the provisions of the Sale and Purchase Agreement;
the conditions precedent to Completion stipulated in the Sale and Purchase Agreement;
the aggregate consideration payable by the Company to the Sellers and MCM pursuant to the Sale and Purchase Agreement, comprising the Cash Amount, the Bonds and the Consideration Shares;
component of the Consideration to be satisfied by the issuance of 28,571,429 Shares by the Company to the Consideration Shares Recipients;
NCGA Investor Group Limited, NCGA Management Participation, Ltd., Pangaea One Acquisition Holdings 9, Ltd. and MCM, being the relevant Sellers and Warrantor entitled to receive the Consideration Shares at Completion and each shall be a ‘‘Consideration Shares Recipient’’;
the director(s) of the Company;
being the Group together with the Target Group;
the family trust set up by Ms. Yang Chu Yu as the settlor pursuant to a trust deed dated May 23, 2011 and a subsequent trust deed dated August 24, 2011 in respect to the shares in Baoxin Investment;
the Company and its subsidiaries;
Hong Kong dollars, the lawful currency of Hong Kong;

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DEFINITIONS

‘‘Hong Kong’’
‘‘Last Trading Day’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘Long Stop Date’’
‘‘Management Accounts Date’’
‘‘Management Options’’
‘‘Material Adverse Change’’

Hong Kong Special Administrative Region of the PRC;

August 28, 2012, being the last trading day for the Shares before the date of the Announcement;

November 27, 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited;

November 30, 2012 (or such later date up to March 31, 2013 as the representatives of the Sellers may specify in writing from time to time);

July 31, 2012;

the options granted to MCM in respect of the right to subscribe for 105,367 new shares in the capital of the Target (representing approximately 5.19% of the total enlarged issued share capital of the Target) at US$55.76 (equivalent to HK$432.14) per share;

any change, effect, event or any combination of them that is materially adverse to the business, results of operations or the business conditions of the Group taken as a whole (resulting in a decline of more than 20% to the total assets or the total revenue of the Group by reference to the amounts stated in the Audited Accounts), provided that none of the following (or its result) shall be a Material Adverse Change:

(a) any change in applicable law or accounting standards (or their interpretations) applicable to any member of the Group;
(b) any loss of customers, business or employees to any member of the Group as a result of, the execution of this Sale and Purchase Agreement or the announcement of the transactions contemplated by the Sale and Purchase Agreement;
(c) any change relating to the automobile dealerships industry generally; or
(d) any action taken (or not taken) by the Target Group at the request or direction of the Company;

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DEFINITIONS

‘‘MCM’’ Mark Cochran McLarty, a director of the Target; ‘‘Other Acquired Members’’ 瑞安寶隆汽車銷售服務有限公司 (Rui ’ an Baolong Automobile Sales & Services Co., Ltd.) and 上海晨隆汽車銷售有限公司 (Shanghai Chenlong Automobile Sales Co., Ltd.), each being a company which will become a subsidiary of the Company by reason of an acquisition which has been agreed on October 8, 2012 and has not been completed as at the Latest Practicable Date; ‘‘Parties’’ parties to the Sale and Purchase Agreement; ‘‘PRC’’ the People’s Republic of China, and for the purposes of this circular, excludes, Hong Kong, Taiwan and Macau Special Administrative Region; ‘‘RMB’’ Renminbi, the lawful currency of the PRC; ‘‘Sale and Purchase Agreement’’ the sale and purchase agreement relating to the sale and purchase of the entire issued share capital of the Target entered into between the Sellers, the Warrantors and the Company dated August 29, 2012; ‘‘Sale Shares’’ the entire issued share capital of the Target at Completion; ‘‘Sellers’’ (a) NCGA Investor LLC; (b) Pangaea One Acquisition Holdings 9, Ltd.; (c) Apollo Strategic Value Master Fund, L.P.; (d) Apollo Value Investment Offshore Fund, Ltd.; (e) Apollo Value Investment Fund, L.P.; (f) NCGA Investor Group Limited; and (g) NCGA Management Participation, Ltd.; ‘‘SFO’’ Securities and Futures Ordnance (Chapter 571 of the Laws of Hong Kong); ‘‘Shareholder(s)’’ shareholders of the Company; ‘‘Shareholder Loans’’ certain shareholders loans owed by the Target to NCGA Investor LLC and NCGA Investor Group Limited, the aggregate outstanding amount of which was US$112,586,118.41 (equivalent to HK$872,542,417.68) as at the Management Accounts Date;

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DEFINITIONS

‘‘Shares’’
the ordinary shares in the capital of the Company with nominal value of HK$0.01 each;
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘Target’’
NCGA Holdings Limited, a company incorporated in Hong Kong with limited liability;
‘‘Target Group’’ the Target and its subsidiaries;
‘‘US$’’
United States dollars, the lawful currency of the United States of America;
‘‘Warrantors’’
(a) NCGA Investor LLC;
(b) Pangaea One Acquisition Holdings 9, Ltd.;
(c) Apollo Strategic Value Master Fund, L.P.;
(d) Apollo Value Investment Offshore Fund, Ltd.;
(e) Apollo Value Investment Fund, L.P.;
(f) NCGA Investor Group Limited;
(g) NCGA Management Participation, Ltd.; and
(h) MCM;
‘‘Yang Trust’’
the trust set up Ms. Yang Chu Yu as settlor pursuant to a trust deed dated July 12, 2011 and a subsequent trust deed dated August 11, 2011 in respect to the shares in Auspicious Splendid; and
‘‘%’’
per cent.

Note: Unless otherwise stated, the figures in this circular in US$ are converted into HK$ and RMB at the rate of US$1 = HK$7.75 and the figures in this circular in RMB are converted into HK$ at the rate of RMB1 = HK$1.25, both being the latest available mid-market exchange rates.

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LETTER FROM THE BOARD

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BAOXIN AUTO GROUP LIMITED 寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1293)

Executive Directors: Mr. YANG Aihua Mr. YANG Hansong Mr. YANG Zehua Ms. HUA Xiuzhen Mr. ZHAO Hongliang

Non-executive Directors: Mr. ZHANG Yang

Registered Office: P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.

Principal place of business in Hong Kong: Units 1803–4, 18/F, Bank of America Tower, 12 Harbour Road, Hong Kong

Independent non-executive Directors: Mr. DIAO Jianshen Mr. WANG Keyi Mr. CHAN Wan Tsun Adrian Alan

November 29, 2012

To the Shareholders

Dear Sir and Madam,

MAJOR TRANSACTION

INTRODUCTION

On August 30, 2012, the Board announced that the Company entered into the Sale and Purchase Agreement with the Sellers and the Warrantors, pursuant to which (i) the Company conditionally agreed to acquire, and the Sellers conditionally agreed to sell, the number and class of Sale Shares, being the entire issued share capital of the Target, and the amount of Shareholders Loans; and (ii) MCM conditionally agreed to cancel the Management Options, for the Consideration. Upon Completion, the Target will become a wholly-owned subsidiary of the Company.

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LETTER FROM THE BOARD

The Acquisition constitutes a major transaction for the Company and is therefore subject to the reporting, announcement and shareholders’ approval requirements as set out in the Listing Rules. A written shareholders’ approval of the Company has already been obtained on August 29, 2012 from a closely allied group of Shareholders who together hold more than 50% in nominal value of the Shares, for the entering into of the Acquisition.

The purpose of this circular is to give you further information in relation to the Acquisition as required under the Listing Rules.

THE SALE AND PURCHASE AGREEMENT

The Sale and Purchase Agreement is legally binding and its terms and conditions are described below:

Date : August 29, 2012 Parties : (1) The Sellers

(2) The Warrantors
(3) The Company

Assets to be : (1) The Sale Shares, being the entire issued share capital of acquired the Target at Completion (2) The amount of Shareholder Loans (3) The cancellation of the Management Options

Upon Completion, the Target will become a wholly-owned subsidiary of the Company. Further details of the Target Group are set out in the paragraph headed ‘‘Information on the Parties’’ below.

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LETTER FROM THE BOARD

Interests of the : The respective interests of the Sellers in the Target are set out Sellers and the below: Warrantors

NCGA Investor LLC Pangaea One Acquisition Holdings 9, Ltd. Apollo Strategic Value Master Fund, L.P. Apollo Value Investment Offshore Fund, Ltd. Value Investment Fund, L.P. NCGA Investor Group Limited NCGA Management Participation, Ltd. Total	Percentage of Shareholding (%) 44.37 2.31 0.83 0.40 0.35 50.23 1.51 100	Amount of Shareholders’ Loan US$57,360,297.78 (equivalent to HK$444,542,307.80) — — — — US$55,225,820.65 (equivalent to HK$428,000,110.04) —
		US$112,586,118.43 (equivalent to HK$872,542,417.83)

MCM was granted the Management Options pursuant to which MCM is entitled to subscribe for 105,367 new shares in the capital of the Target (representing approximately 5.19% of the enlarged total issued share capital of the Target) at US$55.76 (equivalent to HK$432.14) per share.

Consideration

: According to the Sale and Purchase Agreement, the Consideration payable by the Company to the Sellers and MCM on the Completion Date for the purchase of the Sale Shares, the amount of Shareholders Loans and the cancellation of the Management Options consists of:

(i) the Cash Amount;
(ii) the Bonds; and
(iii) the Consideration Shares.

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LETTER FROM THE BOARD

The Consideration payable to each of the respective Sellers and MCM is set out below:

NCGA Investor LLC Pangaea One Acquisition Holdings 9, Ltd. Apollo Strategic Value Master Fund, L.P. Apollo Value Investment Offshore Fund, Ltd. Value Investment Fund, L.P. NCGA Investor Group Limited NCGA Management Participation, Ltd. MCM Total	Cash Amount US$134,805,808.50 (equivalent to HK$1,044,745,015.87) US$152,210.76 (equivalent to HK$1,179,633.39) US$1,455,180.08 (equivalent to HK$11,277,645.62) US$690,517.12 (equivalent to HK$5,351,507.68) US$613,017.50 (equivalent to HK$4,750,885.63) US$91,945,482.21 (equivalent to HK$712,577,487.13) US$2,291,260.79 (equivalent to HK$17,757,271.12) US$687,262.66 (equivalent to HK$5,326,285.62) US$232,640,739.62 (equivalent to HK$1,802,965,732.05)	Bonds — US$3,880,579.64 (equivalent to HK$30,074,492.21) — — — US$50,955,618.31 (equivalent to HK$394,906,041.90) US$335,749.87 (equivalent to HK$2,602,061.49) US$2,988,237.09 (equivalent to HK$23,158,837.45) US$58,160,184.91 (equivalent to HK$450,741,433.05)	Consideration Shares — 1,906,445 Shares — — — 25,032,062 Shares 164,938 Shares 1,467,984 Shares
			28,571,429 Shares

Based on the average of the closing prices of the Shares as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day, the value of each Consideration Share is HK$3.974 and the total value of the Consideration Shares is HK$113,542,858.85. The total Consideration amounts to HK$2,367,250,023.95.

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LETTER FROM THE BOARD

The amount of consideration payable by the Company to each Seller and MCM was determined with reference to its respective shareholding, and the underlying equity interest represented by the Management Options held by MCM, in the Target. The nature of the consideration payable to each Seller and MCM, namely whether the consideration shall be satisfied by either Cash Amount or a combination of Cash Amount, Bonds and/or Consideration Shares, was determined by arm’s length negotiation amongst the Sellers, MCM and the Company.

The Company shall pay the Cash Amount on the Completion Date. The payment of the Cash Amount is expected to be funded by a combination of internal cash resources and external bank borrowings. The Company expects that approximately 50% of the Cash Amount to be funded by internal cash resources which derive from its listing proceeds while the rest of the Cash Amount will be funded by external bank borrowings.

The Consideration was determined based on arm’s length negotiation between the Company and representatives of the Sellers and MCM after taking into account, among others, the net asset value of the Target Group as at the Management Accounts Date. The net asset value of the Target Group as at July 31, 2012 is approximately RMB1.2 billion (equivalent to HK$1.5 billion). The Consideration represents a premium of approximately 48% to the net asset value of the Target Group as at the Management Accounts Date.

The Company also noted that the net profit of the Target Group for the year ended December 31, 2011 decreased as compared with that for 2010 and the Target Group made a loss for the six months ended June 30, 2012. The Company believes that the above-mentioned financial performance of the Target Group was due to the following reasons:

(i) the unfavorable macroeconomic environment of the PRC in the first half of 2012 and as a result the automobile dealership market has been adversely affected;
(ii) in order to reduce inventory and to increase liquidity, the Target Group had to sell its automobiles at lower prices which led to a decrease in gross profit margin; and

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LETTER FROM THE BOARD

(iii) the increase in the Target Group’s labour costs, financial costs and administrative expenses.

The Directors have fully considered the financial performance of the Target Group and the 48% premium represented by the Consideration to the net asset value of the Target Group as at the Management Accounts Date when determining the Consideration. The Directors believe that the Acquisition is fair and reasonable and will be in the long term interest of the Company for the following reasons:

(i) the Target Group has been well established in several major cities in the north, northeastern and northwestern parts of the PRC, including Beijing, Tianjin, Dalian, Xi’an and etc. It has a large and stable customer base for each of those cities. It will be both expensive and time consuming for the Group to enter into these markets by organic expansion. In addition, most of the dealership stores of the Target Group occupy advantageous locations and it will be very difficult for the Company to open new stores in similar areas;
(ii) the Target Group recorded increase in revenue for each of the year ended December 31, 2011 and the six months ended June 30, 2012 compared to the year ended December 31, 2010 and the six months ended June 30, 2011, respectively. The Company believes that the profitability of the Target Group was mainly affected by its increasingly high level of labour costs, financial costs and administrative expenses. By contrast, the Group has proven to be effective in controlling its operating costs over the years and will implement the same efficient management system to the Target Group upon completion of the Acquisition, which will bring down its labour costs, financial costs and administrative expenses and eventually lead to higher profitability of the Target Group;
(iii) most PRC dealerships listed on the Stock Exchange traded at significantly higher premiums to their net asset value as at June 30, 2012. For example, the closing price of the Shares of the Company represents a premium of approximately 170% to the net asset value per Share as at June 30, 2012. The Consideration was considered attractive compared to the comparable companies of the Target Group listed on the Stock Exchange;

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LETTER FROM THE BOARD

(iv) both the Group and the Target Group are principally engaged in the dealership of luxury automobiles with a focus on BMW, Jaguar & Land Rover dealerships, which is expected to result in large managerial, operational and financial synergies when the two businesses are consolidated;
(v) the geographical span and size of the business operation carried out by the Target Group will be an ideal supplement to the Group’s existing geographical coverage, which allows the Company to expand from the eastern part of the PRC to the north, northeastern and northwestern parts of the PRC. It is difficult to seek an alternative acquisition target of similar geographical span and size; and
(vi) the Company plans to consolidate the management team of the Enlarged Group after the Completion to save administrative expenses. Given the large operating scale of the Enlarged Group in different regions, the Company will also enjoy more flexibility to coordinate and aggregate orders and re-allocate automobile and spare parts inventory, which will further lower the costs of the Enlarged Group.
Consideration : As at the Latest Practicable Date, the authorized share capital Shares of the Company is HK$50,000,000 divided into 5,000,000,000 Shares of a par value of HK$0.01 each, among which 2,528,740,000 Shares have been issued and fully paid up. The Consideration Shares represent (i) approximately 1.13% of the existing issued share capital of the Company as at the date of this circular, and (ii) approximately 1.12% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares. The Consideration Shares will be allotted and issued pursuant to the general mandate to allot Shares granted to the Board at the Company’s annual general meeting held on June 12, 2012 and will rank pari passu with the Shares in issue on the date of their issue. The issuance of the Consideration Shares will not result in a change of control of the Company.

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LETTER FROM THE BOARD

The Consideration Shares will be issued on the Completion Date at a price of HK$3.974 per share, being the average of the closing prices of the Shares as quoted on the Stock Exchange for the five consecutive trading days up to and including the Last Trading Day, which represents:

(i) a discount of approximately 0.7% to the closing price of the Shares of HK$4.00 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) same as the average of the closing prices of the Shares of approximately HK$3.974 per Share as quoted on the Stock Exchange for the five consecutive trading days up to and including Last Trading Day;
(iii) a premium of approximately 3.5% to the average of the closing prices of the Shares of approximately HK$3.839 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;
(iv) a premium of approximately 3.7% to the average of the closing prices of the Shares of approximately HK$3.831 per Share as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the Last Trading Day;
(v) a discount of approximately 9.62% to the average of the closing prices of the Shares of approximately HK$4.397 per Share as quoted on the Stock Exchange for the 60 consecutive trading days up to and including the Last Trading Day;
(vi) a discount of approximately 32.6% to the closing price of HK$5.900 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(vii) a premium of approximately 145.0% to the net asset value per Share of HK$1.622 as at June 30, 2012.

An application have been made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

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LETTER FROM THE BOARD

Each of the Consideration Shares Recipients severally undertakes to the Company that, subject to Completion having taken place, it shall not transfer, dispose of or create any encumbrance over its Consideration Shares at any time prior to June 30, 2015, except:

(i) a transfer or disposal of its Consideration Shares to any affiliate of a Consideration Shares Recipient and such affiliate has (prior to such transfer or disposal) executed an undertaking in favour of the Company to be bound by these lock-up restrictions and either to remain an affiliate of a Consideration Shares Recipient through June 30, 2015 or to retransfer the Consideration Shares back to a Consideration Shares Recipient (or any of its affiliates) before that affiliate ceases to be an affiliate of a Consideration Shares Recipient;
(ii) a transfer or disposal of all (but not some only) of its Consideration Shares to any third party, provided that such third party transferee has (prior to such transfer or disposal) executed an undertaking in favour of the Company to be bound by these lock-up restrictions;
(iii) a transfer or disposal of all (but not some only) of its Consideration Shares in connection with a general offer (including by way of a scheme of arrangement or a repurchase offer) in respect of the Shares made pursuant to applicable law (including the Hong Kong Codes on Takeovers and Mergers and Share Repurchases);
(iv) a transfer or disposal of its Consideration Shares pursuant to a court order or under the compulsion of law; or
(v) a transfer or disposal of its Consideration Shares with the prior written consent of the Company.
Conditions : Completion of the Acquisition is conditional upon, among Precedent in others: respect of the Acquisition (i) in so far as the Acquisition (or any part of it) requires to be notified to any competition authority in the PRC such that, without such notification, Completion would be unlawful or otherwise prohibited or restricted under the laws of the PRC, all consents and approvals of any such competition authority in the PRC having been obtained and all applicable mandatory waiting periods in connection with any such filings, submissions or notifications having expired or been terminated;

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LETTER FROM THE BOARD

(ii) all consents under the contracts with the original equipment manufacturers for the change of control of the Target having been obtained, provided that no such consent shall be required unless the absence of such consent will cause a material adverse effect on the Target Group taken as a whole;
(iii) the Stock Exchange having granted the listing of, and permission to deal in, the Consideration Shares (and such listing and permission not subsequently being revoked prior to Completion); and
(iv) there having been no Material Adverse Change since the date of the Sale and Purchase Agreement.

The Company may waive conditions (ii) and (iv) listed above in its absolute discretion at any time by written notice to each Seller whereas the Sellers’ representatives may waive condition (ii) listed above at any time by written notice to the Company.

If any conditions remain unsatisfied as at the Long Stop Date and has not been waived on or before the Long Stop Date, the Sale and Purchase Agreement (other than the surviving provisions) may be terminated with immediate effect by the Sellers’ representatives on behalf of the Sellers or the Purchaser by giving written notice of such termination to the other parties, provided, however, that the right to terminate the Sale and Purchase Agreement shall not be available to any party whose failure to perform any of its obligations under the Sale and Purchase Agreement required to be performed prior to or at Completion has been the principal cause of the failure of Completion to occur. As at the Latest Practicable Date, none of the relevant conditions have been waived and the Parties have no intention to waive any conditions as at the Latest Practicable Date.

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LETTER FROM THE BOARD

Repayment of the : At Completion, the Company shall procure (if the Target management fees Group has not done so before the Completion): and the long term facility (i) that the outstanding amounts and all accrued amounts for the management fees payable to McLarty Services, LLC pursuant to the Consulting Service Agreement dated September 19, 2011 between McLarty Services, LLC and McLarty Hong Kong Consulting Limited, a subsidiary of the Target, are paid in full. The aggregate amount outstanding is RMB23,672,118.43 (equivalent to HK$29,590,148.04) as at the Management Accounts Date; and
(ii) that the outstanding principal amount under the loan agreement between Court Square Capital Limited and the Target dated October 5, 2009 in respect of a five years US$41,947,469 interest-bearing term loan repayable on October 5, 2014 and accrued interest thereunder, is repaid in full. The aggregate amount outstanding is US$50,770,356.46 (equivalent to HK$393,470,262.57) as at the Management Accounts Date.

THE BOND INSTRUMENT

The Bond Instrument is in the agreed form and will be executed by the Company by way of deed poll at Completion. Its terms and conditions are described below:

Initial aggregate : US$58,160,184.91 (equivalent to HK$450,741,433.05) principal amount of the Bonds Status : The Bonds constitute direct, unconditional and unsecured obligations of the Company and shall at all times rank pari passu and without any preference among themselves. Transfer : A holder of the Bond may assign, sell, transfer or otherwise dispose of the Bonds held by it to any person at any time, subject to applicable laws.

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LETTER FROM THE BOARD

Interest : The Bonds bear interest at the rate of 5.65% per annum. Interest is payable in arrears every twelve months after the first issue date. Each Bond will cease to bear interest from the due date for redemption unless payment of principal is improperly withheld or refused, in which case it will continue to bear interest at such rate until the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant Bondholder.

All accrued and unpaid interest payable with respect to a Bond shall be added automatically on the interest payment date to the then outstanding principal amount of such Bond and, following such increase in principal amount, such Bond shall bear interest on such increased principal amount from and after the interest payment date.

Redemption

: The Company shall redeem in cash each Bond at 100% of its principal amount, together with all accrued and unpaid interest on the fifth anniversary of the first issue date.

A Bondholder shall have the right at any time and from time to time, by notice in writing to the Company, to require the Company to redeem in cash all or any of the then outstanding Bonds held by it; provided, however, that a Bondholder may exercise such right prior to the maturity date only following the occurrence of a Redemption Event. A ‘‘Redemption Event’’ shall mean any of the following:

(i) a default is made in the payment of the principal or interest in respect of any of the Bonds when and as the same ought to be paid for more than three days (except where failure to pay is caused by administrative or technical error and payment is made within five days of its due date); or
(ii) a default is made by the Company in the performance or observance of any covenant, condition or provision contained in the conditions of the Bonds or the Bond Instrument, and on its part to be performed or observed (other than the covenant to pay the principal and interest in respect of any of the Bonds) which default is incapable of remedy or, if capable of remedy, is not remedied within 14 days after written notice of such default shall have been given to the Company by a Bondholder; or

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LETTER FROM THE BOARD

(iii) any other present or future indebtedness of the Company or any of its subsidiaries for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of an event of default (however described) or any such indebtedness is not paid when due, or, as the case may be, within any applicable grace period or the Company or any of its subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for any moneys borrowed or raised, provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this paragraph have occurred and is continuing equals or exceeds US$50,000,000 (equivalent to HK$387,500,000) (or its equivalent in any other currency); or
(iv) an effective members’ resolution is passed or an order of a court of competent jurisdiction is made that the Company be wound up or dissolved, otherwise (in any such case) than for the purposes of or pursuant to and followed by a consolidation, amalgamation, merger or reorganization, the terms of which shall have previously been approved by the Bondholder Majority; or
(v) an effective members’ resolution is passed or an order of a court of competent jurisdiction is made for the winding up or dissolution of any subsidiary of the Company except (in any such case):
(a) for the purposes of or pursuant to and followed by a consolidation or amalgamation with or merger into the Company or any of its subsidiaries; or
(b) for the purposes of or pursuant to and followed by a consolidation, amalgamation, merger or reorganization (other than as described in subparagraph (a) above) the terms of which shall have previously been approved by the Bondholder Majority; or
(c) by way of a voluntary winding up or dissolution where there are surplus assets in such subsidiary and such surplus assets attributable to the Company and/ or any its subsidiaries are distributed to the Company and/or any such subsidiary; or

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LETTER FROM THE BOARD

(vi) an encumbrancer takes possession of, or a receiver is appointed in respect of, the whole or a material part of the property, assets or undertaking of the Company or any of its subsidiaries and is not discharged within 30 days thereof; or
(vii) a distress, attachment, execution or seizure before judgment is levied or enforced upon or sued out on or against any material part of the property, assets or revenues of the Company or any of its subsidiaries which is material to the Company and its subsidiaries as a whole, and is not discharged within 30 days thereof; or
(viii) the Company or any of its subsidiaries is unable to pay its debts as and when they fall due or the Company or any of its subsidiaries shall initiate proceedings relating to itself under any applicable bankruptcy, reorganization or insolvency law or make an assignment for the benefit of, or enter into any composition with, its creditors; or
(ix) proceedings shall have been initiated against the Company or any of its subsidiaries under any applicable bankruptcy, reorganization or insolvency law and such proceedings shall not have been discharged or stayed within a period of 30 days; or
(x) breach by the Company of any of the covenants or undertakings that the Company shall give notice to each of the Bondholders promptly upon the occurrence of any of the Redemption Events and that it will not modify the rights attaching to the Bonds or amend the Instrument and, if such breach is capable of being remedied, fails to remedy such breach within 21 days of being required in writing to do so by any Bondholder; or
(xi) the Company or any of its subsidiaries cease to carry on business in the ordinary and usual course or there is a material change in the nature of the business carried on by the Company or any of its subsidiaries, except for such change which shall have been previously approved by the Bondholder Majority; or
(xii) the Instrument or the issue of the Bonds is illegal, invalid or unenforceable; or

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LETTER FROM THE BOARD

(xiii) any event occurs which has an analogous effect under the laws of any relevant jurisdiction to any of the events referred to in paragraphs (iv) to (xii) (inclusive) above.
Redemption : A Bondholder shall have the right at any time and from time following a to time, by notice in writing to the Company, following a Change of Change of Control to require the Company to redeem in cash Control all of the then outstanding Bonds held by it, whereupon the Company shall pay to the Bondholder within five Business Days from receipt of such notice at 103% of its principal amount, together with all accrued and unpaid interest. For that purpose, ‘‘Change of Control’’ means: (a) any person who does not own or control more than 30% of the voting rights in the capital of the Company at the first issue date comes to own or control more than 30% of the voting rights in the capital of the Company; or (b) any person who owns or controls more than 30% of the voting rights in the capital of the Company at the first issue date ceases to own or control more than 30% of the voting rights in the capital of the Company.

INFORMATION ON THE PARTIES

The Group

The Group is a leading luxury 4S dealership group in China and is principally engaged in the sale and service of motor vehicles.

The Sellers and Warrantors

The Sellers are the direct shareholders of the Target, and their respective business activities are as follows:

NCGA Investor LLC is a limited liability company incorporated in the State of Delaware, United States of America and is indirectly owned by Citigroup Inc. Other than the holding of the shares of the Target and part of the Shareholder Loans, it does not conduct any business activities. Citigroup Inc., one of the leading global banks, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citigroup Inc. provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Pangaea One Acquisition Holdings 9, Ltd. is a holding company incorporated in the Cayman Islands with limited liability and is controlled by Pangaea One L.P., a private equity fund. Other than the holding of the shares of the Target, it does not conduct any business activities.

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LETTER FROM THE BOARD

Each of Apollo Strategic Value Master Fund, L.P., a Cayman Islands limited partnership, Apollo Value Investment Fund, L.P., a Delaware (US) limited partnership, and Apollo Value Investment Offshore Fund, Ltd., a company incorporated in the Cayman Islands, are investment vehicles managed by affiliates of Apollo Global Management, LLC. Apollo Global Management, LLC and its consolidated subsidiaries had assets under management of approximately US$105 billion (equivalent to approximately HK$814 billion) as of June 30, 2012, in private equity, credit-oriented capital markets and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. Apollo Strategic Value Master Fund, L.P., Apollo Value Investment Fund, L.P. and Apollo Value Investment Offshore Fund, Ltd. seek to capture investment opportunities as they arise across the capital structure through the purchase or sale of bank debt, senior and subordinated bonds, convertible bonds, common stocks, credit and equity indices, credit default swaps, options, preferred stocks and trade claims. The three funds focus on securities of distressed and highly leveraged companies before, during and after a balance sheet restructuring and other undervalued securities or assets with near-term catalysts.

NCGA Investor Group Limited is a holding company incorporated in the Cayman Islands with limited liability and is owned by various investors which are financial sponsors or who are high net worth individuals. Other than the holding of the shares of the Target and part of the Shareholder Loans, it does not conduct any business activities.

NCGA Management Participation, Ltd. is a holding company incorporated in the Cayman Islands with limited liability and is owned by some of the Target’s senior management. Other than the holding of the shares of the Target, it does not conduct any business activities.

The Company confirms that, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, as at the date of this circular, the Sellers, the Warrantors and their respective ultimate beneficial owners are third parties independent of the Company and its connected person(s).

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LETTER FROM THE BOARD

INFORMATION ON THE TARGET

The Target is a holding company of a group which operates luxury automobile dealerships in the PRC. The Target Group currently owns and operates 20 dealerships. The Target Group has sufficient internal financial resources to support the operation of its existing dealerships. Based on the audited accounts of the Target Group, the net asset value of the Target Group was RMB1,461,644,000 (equivalent to HK$1,827,055,000) as at December 31, 2011. The following information is a summary of the consolidated financial statements of the Target Group for the two financial years ended December 31, 2010 and 2011:

	For the	For the
	year ended	year ended
	December 31,	December 31,
	2010	2011
	RMB	RMB
Net profits before tax and extraordinary	302,876,000	75,856,000
items	(equivalent to	(equivalent to
	HK$378,595,000)	HK$94,820,000)
Net profits after tax and extraordinary	217,871,000	42,672,000
items	(equivalent to	(equivalent to
	HK$272,338,750)	HK$53,340,000)

REASONS AND BENEFITS OF THE ACQUISITION

The Directors believe that the Acquisition allows the Company to expand its geographical presence and diversify its brand portfolio in an increasingly competitive PRC dealership market. The Group is principally engaged in the dealership business in the eastern part of the PRC including Shanghai, Jiangsu province, Zhejiang province and Shandong province, while the business activities of the Target Group are mainly carried out in the north, northeastern and northwestern parts of the PRC, including Beijing, Hebei province, Liaoning province, Shaanxi province, Tianjin and Xinjiang Uyghur Autonomous Region.

As at the Latest Practicable Date, the Target Group owns and operates 14 BMW/Mini dealerships, four Jaguar & Land Rover dealerships, one Porsche dealership and one Volvo dealership, which will enhance the Company’s position as a leading dealership for BMW/Mini and Jaguar & Land Rover. The Acquisition will also diversify the Company’s portfolio of luxury and ultra-luxury automobile brands, with the addition of one Porsche dealership and one Volvo dealership.

The Acquisition enhances the Company’s scale and platform, broadens its revenue and customer base, and provides the Company with an attractive platform for strong future growth and development.

The Directors believe that the terms of the Acquisition are fair and reasonable, and in the interests of the Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Company will hold the entire issued share capital of the Target. The Target will become a wholly-owned subsidiary of the Company. The results, assets and liabilities of the Target Group will be consolidated into the consolidated financial statements of the Group.

The following sets out, for illustration purposes only, certain key financial data of the Group and the unaudited pro forma financial information of the Enlarged Group immediately after the Completion of the Acquisition as if the Acquisition was completed on June 30, 2012.

	As at June	30, 2012
		The Enlarged
	The Group	Group
	(Immediately	(Immediately
	Before	After
	Completion)	Completion)
	RMB’000	RMB’000
Total assets	9,113,061	12,364,845
Total liabilities	5,707,706	8,856,309
Net assets	3,405,355	3,508,536

Please refer to Appendix III to this circular for further details about the unaudited pro forma financial information of the Enlarged Group (the ‘‘Unaudited Pro Forma Financial Information’’).

For the purpose of the Unaudited Pro Forma Financial Information, the Company has assessed if there is any impairment loss on the goodwill arising from the Acquisition in accordance with the Hong Kong Accounting Standard No. 36 Impairment of Assets which is consistent with the Company’s accounting policy. The Directors are of the view that, after performing the impairment assessment, there is no impairment indication of the goodwill arising from the Acquisition as set out in the Unaudited Pro Forma Financial Information.

The Directors confirm that the basis used in the preparation of the Unaudited Pro Forma Financial Information is consistent with the accounting policies of the Group, and the accounting policies and the principal assumptions will be consistently adopted in the first set of the financial statements of the Company after the Completion.

Even though the impairment assessment will be carried out in the accounting periods in the future, in view of the date of this circular and the balance sheet date of the first set of the financial statements of the Company after the Completion, any significant changes in the assessment of goodwill impairment is not expected. Accordingly, the Directors considered that no significant goodwill impairment is expected in the first set of financial statements after the Completion.

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LETTER FROM THE BOARD

Since the fair value of the identifiable net assets of the Target Group at the Completion Date may be substantially different from the respective value used in the unaudited pro forma statement of assets and liabilities of the Enlarged Group as set out in Appendix III to this circular, the goodwill recognized at the Completion Date may be different from the amount presented in the Unaudited Pro Forma Financial Information.

It is expected that the Target Group will contribute positively on the results of the Group as a wholly-owned subsidiary in the future after Completion.

The Directors do not expect material variation to the aggregate of the remuneration payable to and benefits in kind receivable by the Directors in consequence of the Acquisition.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Prospectus

After the Completion, the Company will be able to expand its geographical presence to the north, northeastern and northwestern parts of the PRC and will own and operate another twenty dealership stores in total, including 14 BMW/Mini dealerships, four Jaguar & Land Rover dealerships, one Porsche dealership and one Volvo dealership. The horizontal integration of the dealership business of the Target Group and the Group would create benefit for the Group through economies of scale and a larger market share in the luxury and ultra-luxury brand 4S dealership industry.

The Directors believe that the Chinese luxury car market will continue to benefit from the strong trading up trend. Currently, the automobile ownership rate in China, especially the ownership of luxury and ultra-luxury automobiles, is still far below the world average levels. Considering that the average vehicle replacement cycle in China generally is around four to five years, the rapid growth of the Chinese passenger vehicle market in the past few years has laid a solid foundation for a rapid increase in the demand for luxury cars in the coming years. Together with the consumers’ rising spending power and the expansion of product offerings by luxury automobile manufactures, the Directors believe that the luxury and ultra-luxury automobile segment should continue to outperform the overall Chinese passenger vehicle market. At the same time, due to the rising automobile ownership and consumers’ trend of trading-up demands for after-sales services are also resilient and growing steadily fast. The Directors expect that performance of the Target Group and the Group will benefit from the growth in the luxury car market.

Financial Overview, Liquidity, Financial Resources and Gearing

For the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012, the revenue of the Target Group was RMB5,356.6 million, RMB8,045.2 million, RMB8,987.3 million and RMB4,848.1 million, respectively, and the Target Group’s revenue from sale of motor vehicles was RMB4,900.1 million, RMB7,515.4 million, RMB8,295.1 million and RMB4,423.3 million, respectively.

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LETTER FROM THE BOARD

For the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012, the gross profit of the Target Group was RMB548.2 million, RMB764.1 million, RMB805.8 million and RMB388.0 million, respectively and, its gross profit from sale of motor vehicle was RMB320.9 million, RMB505.7 million, RMB471.7 million and RMB165.2 million, respectively. The gross margin of the Target Group in the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012 was 10.2%, 9.5%, 9.0% and 8.0%.

For the three years ended December 31, 2009, 2010 and 2011, the net profit of the Target Group was RMB125.3 million, RMB217.9 million and RMB42.7 million, respectively. The Target Group made a net loss of RMB171.4 million for the six months ended June 30, 2012.

The Target Group’s primary uses of cash are to pay for purchases of new automobiles, spare parts and automobile accessories, to establish new 4S stores and to fund its working capital and normal operating expenses. The Target Group finances its liquidity requirements through a combination of bank loans and other borrowings and cash flows from its operating activities.

As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group had current assets of approximately RMB1,621.3 million, RMB2,319.7 million, RMB3,497.7 million and RMB3,722.7 million respectively.

The Target Group’s current ratio is calculated based on current assets over current liabilities. As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group’s current ratio was approximately 1.92, 1.66, 1.49 and 1.34 respectively.

The Target Group financed its operation primarily from bank loans and other borrowings and cash flows from its operating activities. As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group had cash and cash equivalent of approximately RMB604.9 million, RMB302.1 million, RMB325.3 million and RMB200.4 million respectively.

The Target Group’s gearing ratio is net debt divided by the total equity attributable to the owners of the parent plus net debt. Net debt includes bank loans and other borrowings, trade, bills and other payables and accruals less cash and cash equivalents. As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group’s gearing ratio was approximately 29.0%, 48.3%, 67.0% and 73.7%.

As of December 31, 2009, 2010 and 2011 and June 30, 2012, the net assets of the Target Group were RMB1,209.2 million, RMB1,425.0 million, RMB1,461.6 million and RMB1,290.4 million respectively.

Loans and Borrowings

As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group had bank loans and other borrowings of RMB422.2 million, RMB458.2 million, RMB1,298.9 million and RMB1,716.9 million respectively, of which approximately RMB131.0 million, RMB156.0 million, RMB316.8 million and RMB670.4 million was due within less than one year.

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LETTER FROM THE BOARD

For the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012, the Target Group incurred finance costs of RMB31.4 million, RMB39.5 million, RMB103.7 million and RMB118.9 million respectively.

The increase in both bank loans and other borrowings and finance costs of the Target Group in 2011 and the first half of 2012 were primarily due to the shareholder loan incurred by the Target Group and increased bank borrowings to fund increased automobile purchases resulting from its network expansion and sales growth.

Pledged Assets of the Target Group

As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group had pledged assets of RMB277.8 million, RMB618.7 million, RMB955.1 million and RMB2,026.7 million, respectively.

Credit Policy

The Target Group’s sales are typically settled on a cash basis upon delivery of the automobiles, and there is no significant concentration of credit risk. The carrying amounts of our pledged bank deposits, cash in transit, cash and cash equivalents and trade and other receivables represent the Target Group’s maximum exposure to credit risk in relation to its financial assets. As of December 31, 2009, 2010, 2011 and June 30, 2012, all of the Target Group’s pledged bank deposits and cash and cash equivalents were deposited with creditworthy financial institutions without significant credit risk.

Capital Expenditure and Investment

The Target Group’s capital expenditures during the three years ended December 31, 2011 and the six months ended June 30, 2012 primarily comprised expenditures on property, plant and equipment, land use rights and intangible assets. During these periods of time, the Target Group’s total capital expenditure were RMB134.4 million, RMB168.9 million, RMB365.6 million and RMB215.3 million respectively.

Exchange Risks

The Target Group conducted its business primarily in RMB. For the three years ended December 31, 2009, 2010 and 2011, the Target Group recorded net gain on foreign exchange of RMB3.2 million, RMB1.9 million and RMB7.7 million. For the six months ended June 30, 2012, the Target Group recorded a net loss on foreign exchange of RMB1.5 million. The Target Group did not employ any financial instruments for hedging purposes.

Employees and Remuneration Policies

As at December 31, 2009, 2010 and 2011 and June 30, 2012, the Target Group had a total of approximately 1,100, 1,500, 1,900 and 2,000 employees.

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LETTER FROM THE BOARD

The Target Group offered remuneration packages and welfare benefits, including annual pension, work-related injury benefits, medical and unemployment benefit plans. The Target Group also operated share awards plan and share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Target Group’s operations.

Significant Investments and Material Acquisition and Disposals of Subsidiaries

The Target Group had no material acquisition and disposal of subsidiaries and associated companies during the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012.

Contingent Liabilities

As at December 31, 2009, 2010 and 2011, and June 30, 2012, the Target Group had no any significant contingent liabilities.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios (as set out and calculated under Rule 14.07 of the Listing Rules) in respect of the Acquisition exceeds 25% but are less than 75%, the Acquisition constitutes a major transaction of the Company under Rule 14.06 of the Listing Rules. Therefore, the Acquisition is subject to the applicable notification, announcement, circular and shareholders’ approval requirements under the Listing Rules.

To the best of the knowledge, information and belief of the Directors having made all enquiries, no Shareholders or any of their respective associates have any material interest in the Acquisition. As such, no Shareholder would be required to abstain from voting under the Listing Rules if the Company were to convene a general meeting for the approval of the Acquisition.

Pursuant to Rule 14.44(2) of the Listing Rules, a written Shareholders approval has been obtained from the following closely allied group of Shareholders who together hold more than 50% in nominal value of the Shares giving the right to attend and vote at general meeting to approve the transactions:

(1) Baoxin Investment, holding 1,819,200,000 Shares (approximately 61.41% of the issued share capital of the Company as at the Latest Practicable Date), is wholly owned by the trustee of a discretionary trust of which Mr. Yang Aihua, Mr. Yang Hansong and Mr. Yang Zehua, together with their respective children and further issue are beneficiaries. For so long as there is a protector in office, the trustee shall not have any investment or asset management powers, including powers to interfere in the management of the business of Baoxin Investment and the voting rights attached to its shares. Mr. Yang Aihua is currently the protector of such discretionary trust.

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LETTER FROM THE BOARD

(2) Auspicious Splendid, holding 266,420,000 Shares (approximately 10.54% of the issued share capital of the Company as at the Latest Practicable Date), is wholly owned by Ms. Yang Chu Yu, a daughter of Mr. Yang Aihua as the trustee of a discretionary trust of which Mr. Yang Aihua and Mr. Yang Zehua, together with their respective children and further issue are beneficiaries. For so long as there is a protector in office, the trustee shall not have any investment or asset management powers, including powers to interfere in the management of the business of Auspicious Splendid and the voting rights attached to its shares. Mr. Yang Aihua is currently the protector of such discretionary trust.

Accordingly, no extraordinary general meeting will be convened by the Company to approve the Acquisition.

ADDITIONAL INFORMATION

The Company entered into sale and purchase agreements on October 8, 2012 pursuant to which the Company agreed to acquire the Other Acquired Members, which are, except for the Target, the only companies the Company has acquired or agreed to acquire since January 1, 2012. Given the scale of each of the Other Acquired Members, the Company does not expect the acquisitions of the Other Acquired Member will have a material financial impact on the Group.

Your attention is also drawn to the additional information set out in the Appendices to this circular.

By order of the Board Baoxin Auto Group Limited YANG Aihua Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for (i) the period ended June 30, 2012 is disclosed in the interim report of the Company published on September 28, 2012; (ii) the year ended December 31, 2011 is disclosed in the annual report of the Company published on April 19, 2012, and (iii) the year ended December 31, 2010 and the year ended December 31, 2009 is disclosed in the prospectus of the Company published on December 2, 2011, all of which have been published on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.klbaoxin.com).

B. INDEBTEDNESS STATEMENT

Borrowings

As at the close of business on October 31, 2012, being the latest practicable date for inclusion of information in this paragraph headed ‘‘Borrowings’’ prior to the publication of this circular, the Enlarged Group (being the Company and its subsidiaries (the ‘‘Group’’) together with NCGA Holdings Limited and its subsidiaries (the ‘‘Target Group’’)) and the Other Acquired Members (as defined in the circular dated November 29, 2012 (the ‘‘Circular’’) had outstanding interest-bearing bank and other borrowings of approximately RMB6,220,352,000 as follows:

Current bank borrowings Current other borrowings Non-current bank borrowings Non-current other borrowings Total	As at October 31, 2012 RMB’000 4,870,015 302,373 — 1,047,964
	6,220,352

Non-current other borrowings included the Shareholders Loans currently owed by the Target Group to NCGA Investor LLC and NCGA Investor Group Limited which amounted to an aggregate outstanding amount of US$112,586,118 as at October 31, 2012. The loan balance was translated to RMB709,315,000 at the rate of US$1.00 to RMB6.3002, the spot exchange rate for USD on October 31, 2012. Upon Completion of the Acquisition, the Shareholder Loans will be acquired by the Company and will be eliminated in the financial statements of the Enlarged Group.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The bank borrowings and other borrowings representing:

— secured — guaranteed — unsecured Total	As at October 31, 2012 RMB’000 643,055 50,000 5,527,297
	6,220,352

As at October 31, 2012, the Enlarged Group and the Other Acquired Members had total available bank credit facilities of approximately RMB13,405,344,000 of which approximately RMB7,534,705,000 had been utilised.

Collateral

As at October 31, 2012, certain bank loans and other borrowing of the Enlarged Group and the Other Acquired Members were secured by the pledge of the followings:

Pledged deposits Inventories Property, plant and equipment Land use right Total	As at October 31, 2012 RMB’000 205,587 261,083 50,308 166,981
	683,959

As at October 31, 2012, RMB84.9 million of the bank loans and other borrowings of 瑞安寶隆汽車銷售服務有限公司 (Rui’an Baolong Automobile Sales & Services Co., Ltd.) (‘‘Rui’an Baolong’’), being one of the Other Acquired Members, were guaranteed by companies and individuals who are the related parties of Mr. Zheng Shi Long, being one of the existing shareholders of Rui’an Baolong. Upon completion of the acquisition of Rui’an Baolong by the Group, Rui’an Baolong will be held as to 90% by the Group and 10% by Mr. Zheng Shi Long. Mr. Zheng Shi Long will become a connected person of the Company as a result of the above acquisition and the Company will comply with the applicable Listing Rules in relation to connected transactions for the above guarantee upon completion of the above acquisition. To the best knowledge of the Directors, he is independent to the Sellers and the Warrantors.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contingent liabilities

As at October 31, 2012, Rui’an Baolong, being one of the Other Acquired Members, provided corporate guarantees for securing general banking facilities granted by certain banks to the related parties of the existing shareholders of Rui’an Baolong to the extent of RMB274.2 million. Upon completion of the acquisition of Rui’an Baolong by the Group, the sellers, being the existing shareholders of Rui’an Baolong, will provide counterguarantee in respect of the above corporate guarantees to Rui’an Baolong.

Save for the aforesaid or otherwise disclosed herein and apart from intra-group liabilities, the Enlarged Group and the Other Acquired Members did not have, at the close of business on October 31, 2012, any debt securities issued and outstanding, and authorized or otherwise created but unissued, or term loans or other borrowings or indebtedness in the nature of borrowing such as bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, or mortgages, charges, guarantees, or other material contingent liabilities.

C. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there had been no material adverse change in the financial or trading position of the Group since December 31, 2011, the date to which the latest published audited financial statements of the Group were made up.

D. WORKING CAPITAL STATEMENT

The Directors, after due and careful enquiry, are of the opinion that following the completion of the Acquisition, after taking into account the financial resources available to the Enlarged Group and the Other Acquired Members, including internally generated funds and the available banking facilities, the Enlarged Group and the Other Acquired Members have sufficient working capital for its present requirements for at least the next 12 months from the date of this circular.

E. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group is a leading luxury 4S dealership group in China focused on luxury and ultraluxury brands such as BMW, MINI, Jaguar, Land Rover, Audi, GMC, and Cadillac. As at the Latest Practicable Date, the Group had a total of 48 stores, consisting of 35 luxury brand dealership, two automobile customization centers, one certified collision damage assessment center in Shanghai and 10 mid-to-upper market brand dealership stores.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

automobile segment should continue to outperform the overall Chinese passenger vehicle market. At the same time, due to the rising automobile ownership and consumers’ trend of trading-up demands for after-sales services are also resilient and growing steadily fast. The Directors expect that performance of the Target Group and the Group will benefit from the growth in the luxury car market.

The Acquisition will further enhance the brand portfolio and geographic coverage of the dealership network of the Group. After the Completion, the Company will be able to expand its geographical presence to the north, northeastern and northwestern parts of the PRC and will own and operate another 20 dealership stores in total, including 14 BMW/Mini dealerships, four Jaguar & Land Rover dealerships, one Porsche dealership and one Volvo dealership. The horizontal integration of the dealership business of the Target Group and the Group would create benefit for the Group through economies of scale and a larger market share in the luxury and ultra-luxury brand 4S dealership industry.

The Company intends to further leverage on its leading market positions in the existing brands and open more luxury and ultra-luxury automobile brands with high growth potentials and high profits to cater for the growing demands resulting from the trading-up trend of the consumers.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

The following is a text of a report prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong. Terms defined herein apply to this report only.

22nd Floor 香港中環添美道1號 CITIC Tower 中信大廈22樓 1 Tim Mei Avenue, Central Hong Kong 電話 : +852 2846 9888 傳真 : +852 2868 4432 Tel : +852 2846 9888 Fax : +852 2868 4432 www.ey.com

November 29, 2012

The Directors

Baoxin Auto Group Limited

Dear Sirs,

We set out below our report on the financial information of NCGA Holdings Limited (the ‘‘Target Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) comprising the consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements of the Target Group for each of the three years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012 (the ‘‘Relevant Periods’’), the consolidated statements of financial position of the Target Group and the statements of financial position of the Company as at December 31, 2009, 2010 and 2011 and June 30, 2012 together with the notes thereto (the ‘‘Financial Information’’), and the comparative consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Target Group for the six months ended June 30, 2011 (the ‘‘Comparative Financial Information’’), prepared on the basis of preparation set out in note 2.1 of Section II below, for inclusion in the circular of Baoxin Auto Group Limited (the ‘‘Company’’) dated November 29, 2012 (the ‘‘Circular’’) in connection with the proposed acquisition of the Target Company (the ‘‘Acquisition’’) by the Company.

The Target Company was incorporated in Hong Kong on June 9, 2006 as a company with limited liability.

As at the date of this report, the Target Company has direct and indirect interests in the subsidiaries as set out in note 39 of Section II below. All companies now comprising the Target Group have adopted December 31 as their financial year end date. The financial statements of the companies now comprising the Group were prepared in accordance with the relevant accounting principles applicable to these companies in the countries in which they were incorporated and/or established.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

The consolidated financial statements of the Target Group for each of the years ended December 31, 2009, 2010 and 2011 were audited by KPMG. No audited accounts for the six months ended June 30, 2012 are available. For the purpose of this report, the management of the Target Company has prepared the consolidated financial statements of the Target Group for the six months ended June 30, 2012 comprising the consolidated statement of financial position of the Target Group as at June 30, 2012 and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Target Group for the six months ended June 30, 2012, together with the notes thereto, in accordance with HKFRSs (including all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

The Financial Information has been prepared based on the audited consolidated financial statements of the Target Group for the years ended December 31, 2009, 2010 and 2011 and the unaudited consolidated financial statements for the six months ended June 30, 2012, with no adjustments made thereon. The basis of preparation has been set out in note 2.1 of Section II below.

DIRECTORS’ RESPONSIBILITY

The directors of the Company (the ‘‘Directors’’) are responsible for the preparation of the Financial Information and the Comparative Financial Information that give a true and fair view in accordance with HKFRSs, and for such internal control as the Directors determine is necessary to enable the preparation of the Financial Information and the Comparative Financial Information that are free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

It is our responsibility to form an independent opinion and a review conclusion on the Financial Information and the Comparative Financial Information, respectively, and to report our opinion and review conclusion thereon to you.

For the purpose of this report, we have carried out procedures on the Financial Information in accordance with Auditing Guideline 3.340 Prospectuses and the Reporting Accountant issued by the HKICPA.

We have also performed a review of the Comparative Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an opinion on the Comparative Financial Information.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

OPINION IN RESPECT OF THE FINANCIAL INFORMATION

In our opinion, for the purpose of this report and on the basis of preparation set out in note 2.1 of Section II below, the Financial Information gives a true and fair view of the state of affairs of the Target Company and the Target Group as at December 31, 2009, 2010, 2011 and June 30, 2012 and of the Target Group’s consolidated results and consolidated cash flows for each of the Relevant Periods.

REVIEW CONCLUSION IN RESPECT OF THE COMPARATIVE FINANCIAL INFORMATION

Based on our review which does not constitute an audit, for the purpose of this report, nothing has come to our attention that causes us to believe that the Comparative Financial Information is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Financial Information.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

I. FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED INCOME STATEMENTS

Section II Notes REVENUE 5(a) Cost of sales and services provided 6(b) Gross profit Other income and gains, net 5(b) Selling and distribution costs Administrative expenses Profit/(loss) from operations Finance costs 7 Share of profit of an associate 16(b) Profit/(loss) before tax 6 Tax 8(a) Profit/(loss) for the year/period Attributable to: Owners of the parent	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 5,356,587 8,045,178 8,987,349 (4,808,342) (7,281,112) (8,181,554) 548,245 764,066 805,795 22,177 47,047 76,418 (195,507) (250,421) (256,903) (171,201) (221,622) (451,801) 203,714 339,070 173,509 (31,432) (39,544) (103,745) 2,065 3,350 6,092 174,347 302,876 75,856 (49,008) (85,005) (33,184) 125,339 217,871 42,672 125,339 217,871 42,672	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 4,373,419 4,848,141 (3,962,968) (4,460,155) 410,451 387,986 33,826 43,333 (125,769) (178,697) (187,220) (318,978) 131,288 (66,356) (41,760) (118,900) 5,027 881 94,555 (184,375) (32,860) 13,018 61,695 (171,357) 61,695 (171,357)

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

PROFIT/(LOSS) FOR THE YEAR/ PERIOD Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income/(loss) for the year/period, net of tax Attributable to: Owners of the parent	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 125,339 217,871 42,672 (5,694) (14,542) (18,605) 119,645 203,329 24,067 119,645 203,329 24,067	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 61,695 (171,357) (33,248) 79 28,447 (171,278) 28,447 (171,278)

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Section II Notes NON-CURRENT ASSETS Property, plant and equipment 12 Land use rights 13 Intangible assets 14 Prepayments 15 Investment in an associate 16 Goodwill 17 Deferred tax assets 28 Total non-current assets CURRENT ASSETS Inventories 18 Trade receivables 19 Prepayments, deposits and other receivables 20 Pledged bank deposits 21 Cash in transit 22 Cash and cash equivalents 23 Total current assets CURRENT LIABILITIES Bank loans and other borrowings 24 Trade and bills payables 25 Other payables and accruals 26 Income tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term other borrowings 24 Other non-current liabilities Total non-current liabilities NET ASSETS EQUITY Equity attributable to owners of the parent Share capital 29 Reserves 30 Total equity	December 31, 2009 2010 RMB’000 RMB’000 204,837 273,600 22,287 38,545 — 4,744 — — 11,023 14,373 472,445 458,226 14,426 18,468 725,018 807,956 210,091 378,674 29,122 73,396 503,055 940,585 252,359 618,737 21,776 6,228 604,943 302,088 1,621,346 2,319,708 131,000 156,000 487,673 836,058 187,849 339,780 39,505 68,634 846,027 1,400,472 775,319 919,236 1,500,337 1,727,192 291,150 302,155 — — 291,150 302,155 1,209,187 1,425,037 908,864 908,864 300,323 516,173 1,209,187 1,425,037	2011 RMB’000 580,644 43,264 9,361 173,882 20,445 436,556 33,990 1,298,142 589,150 141,047 1,510,685 915,449 16,110 325,263 3,497,704 316,767 1,685,352 313,090 36,564 2,351,773 1,145,931 2,444,073 982,179 250 982,429 1,461,644 913,623 548,021 1,461,644	June 30, 2012 RMB’000 719,201 42,600 9,560 109,032 21,443 438,229 54,842
			1,394,907
			1,343,961 146,200 880,670 1,103,641 47,867 200,361
			3,722,700
			670,425 1,827,510 275,264 7,297
			2,780,496
			942,204
			2,337,111
			1,046,495 250
			1,046,745
			1,290,366
			913,623 376,743
			1,290,366

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

		Attributable to owners	Attributable to owners	of the parent		Total equity RMB’000 744,678 125,339 (5,694
Share capital Note 29 RMB’000 740,019 — — — 165,135 3,710 — — — 908,864 — — — — — 908,864 — — — 4,759 — 913,623	Share premium* Note 29 RMB’000 135,633 — — — 175,467 — — — — 311,100 — — — — — 311,100 — — — 7,781 — 318,881	Share awards and option reserve* Note 30(i) RMB’000 1,855 — — — — (3,710) — 1,855 — — — — — — 12,521 12,521 — — — — — 12,521	Statutory reserve* Note 30(ii) RMB’000 13,410 — — — — — 10,227 — — 23,637 — — — 12,680 — 36,317 — — — — 4,409 40,726	Capital contribution* Note 30(iii) RMB’000 — — — — — — — — 2,407 2,407 — — — — — 2,407 — — — — — 2,407	Exchange fluctuation reserve* Note 30(iv) RMB’000 (82,299) — (5,694) (5,694) — — — — — (87,993) — (14,542) (14,542) — — (102,535) — (18,605) (18,605) — — (121,140)
						119,645
						340,602 — — 1,855 2,407
						1,209,187
						217,871 (14,542
						203,329
						— 12,521
						1,425,037
						42,672 (18,605
						24,067
						12,540 —
						1,461,644

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

		Attributable to owners	Attributable to owners	of the parent		Total equity RMB’000 1,461,644
Share capital Note 29 RMB’000 913,623 — — — 913,623 908,864 — — — 4,759 913,623	Share premium* Note 29 RMB’000 318,881 — — — 318,881 311,100 — — — 7,781 318,881	Share awards and option reserve* Note 30(i) RMB’000 12,521 — — — 12,521 12,521 — — — — 12,521	Statutory reserve* Note 30(ii) RMB’000 40,726 — — — 40,726 36,317 — — — — 36,317	Capital contribution* Note 30(iii) RMB’000 2,407 — — — 2,407 2,407 — — — — 2,407	Exchange fluctuation reserve* Note 30(iv) RMB’000 (121,140) — 79 79 (121,061) (102,535) — (33,248) (33,248) — (135,783)
						(171,357 79
						(171,278
						1,290,366
						1,425,037
						61,695 (33,248
						28,447
						12,540
						1,466,024

These reserve accounts comprise the consolidated reserves of RMB300,323,000, RMB516,173,000, RMB548,021,000 and RMB376,743,000 in the consolidated statements of financial position as at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, respectively.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENTS

Section II Notes Operating activities Profit/(loss) before tax Adjustments for: — Accrual/(reversal) of impairment of receivables and prepayments 6 — Accrual/(reversal) of impairment of inventories 6 — Depreciation of property, plant and equipment 12 — Amortisation of intangible assets 14 — Amortisation of land use rights 13 — Share of profit of an associate — Net (gain)/loss on disposal of items of property, plant and equipment 5 — Equity-settled share award/option expenses 31 — Cost for cancellation of share-based payment 31 — Finance costs 7 — Interest income 5 — Foreign exchange (gain)/loss 5 (Increase)/decrease in pledged deposits (Increase)/decrease in cash in transit Decrease/(increase) in inventories Decrease/(increase) in trade receivables (Increase)/decrease in prepayments deposits and other receivables Increase/(decrease) in trade and bills payables Increase/(decrease) in other payables and accruals Cash generated from/(used in) operations Income tax paid Net cash generated from/ (used in) operating activities	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 174,347 302,876 75,856 2,260 (1,747) (3,222) 4,302 (4,811) 10,472 28,490 30,691 38,008 — 2,292 1,320 590 756 1,054 (2,065) (3,350) (6,092) (21) 372 (2,050) 1,855 12,521 — 2,407 — — 31,432 39,544 103,745 (2,177) (3,335) (4,159) (3,172) (1,906) (7,654) 238,248 373,903 207,278 (151,021) (366,378) (296,712) (21,776) 15,548 (9,882) 212,830 (162,598) (220,948) 569 (43,161) (63,795) (200,875) (431,935) (599,804) 32,934 348,385 849,294 52,070 144,042 (43,150) 162,979 (122,194) (177,719) (53,106) (59,918) (80,776) 109,873 (182,112) (258,495)	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 94,555 (184,375) — 26,485 1,503 28,648 14,338 27,813 578 1,157 641 664 (5,027) (881) (1,733) 2,020 — — — — 41,760 118,900 (2,579) (3,255) (2,666) 1,480 141,370 18,656 53,654 (188,192) (1,827) (31,757) (285,971) (783,459) (25,523) (5,153) 569,973 649,625 (105,992) 142,158 14,359 (31,304) 360,043 (229,426) (68,298) (37,101) 291,745 (266,527)

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Section II Note Investing activities Proceeds from disposal of items of property, plant and equipment Payment for the purchase of property, plant and equipment, intangible assets and land use rights Acquisition of a subsidiary Interest received Net cash used in investing activities Financing activities Proceeds from new borrowings Proceeds from issue of new shares Repayment of bank loans and other borrowings Interest paid Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of each year/period Effect of foreign exchange rate changes Cash and cash equivalents at the end of each year/period 23	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 56,759 44,997 10,877 (108,893) (160,984) (469,388) — — (348) 2,177 3,335 4,159 (49,957) (112,652) (454,700) 156,022 156,000 946,857 340,602 — 12,540 (222,369) (131,000) (156,000) (26,705) (18,549) (48,422) 247,550 6,451 754,975 307,466 (288,313) 41,780 303,171 604,943 302,088 (5,694) (14,542) (18,605) 604,943 302,088 325,263	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 6,880 45,532 (97,024) (201,192) — 2,579 3,255 (87,565) (152,405) 94,560 542,317 12,540 — (79,560) (188,659) (22,773) (59,707) 4,767 293,951 208,947 (124,981) 302,088 325,263 (33,248) 79 477,787 200,361

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

STATEMENTS OF FINANCIAL POSITION

Section II Notes NON-CURRENT ASSETS Interest in a subsidiary 39 Total non-current assets CURRENT ASSETS Other receivables 20 Cash and cash equivalents 23 Total current assets CURRENT LIABILITIES Short-term other borrowings 24 Other payables and accruals 26 Income tax payable Total current liabilities NET CURRENT ASSETS/(LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term other borrowings 24 Total non-current liabilities NET ASSETS EQUITY Share capital 29 Reserves 30 Total equity	December 31, 2009 2010 RMB’000 RMB’000 1,425,065 1,401,956 1,425,065 1,401,956 — 255 350 339 350 594 250,970 260,999 506 1,509 354 293 251,830 262,801 (251,480) (262,207) 1,173,585 1,139,749 291,150 302,155 291,150 302,155 882,435 837,595 908,864 908,864 (26,429) (71,269) 882,435 837,595	2011 RMB’000 1,436,886 1,436,886 106,056 183,657 289,713 — 4,912 176 5,088 284,625 1,721,511 963,932 963,932 757,579 913,623 (156,044) 757,579	June 30, 2012 RMB’000 1,861,801 1,861,801 326 9 335 122,356 8,408 177 130,941 (130,606) 1,731,195 1,023,423 1,023,423 707,772 913,623 (205,851) 707,772

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF THE TARGET GROUP

NCGA Holdings Limited (the ‘‘Target Company’’) is a limited liability company incorporated in Hong Kong on June 9, 2006. The registered office of the Target Company is located at Level 28, Three Pacific Place, 1 Queen’s Road East, Hong Kong.

The Target Company is an investment holding company. During the years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012 (the ‘‘Relevant Periods’’), the Target Company’s subsidiaries were principally engaged in the sale and service of motor vehicles.

2.1 BASIS OF PREPARATION

The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information has been prepared under the historical cost convention. The Financial Information is presented in Renminbi (‘‘RMB’’) and all values are rounded to the nearest thousand except when otherwise indicated.

2.2 ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of the Financial Information, the Target Group has adopted, at the beginning of the Relevant Periods, all the new and revised HKFRSs applicable to the Relevant Periods.

2.3 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The following new standards and amendments to standards have been issued but are not effective for the financial year beginning January 1, 2012 and have not been early adopted:

. HKFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until January 1, 2015 but is available for early adoption. When adopted, the standard will affect in particular the Target Group’s accounting for its available-for-sale financial assets, as HKFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss.

There will be no impact on the Target Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss, and the Target Group does not have any such liabilities. The derecognition rules have been transferred from HKAS 39 Financial Instruments: Recognition and Measurement and have not been changed. The Target Group has not yet decided when to adopt HKFRS 9.

. HKFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Target Group is yet to assess HKFRS 10’s full impact and intends to adopt HKFRS 10 no later than the accounting period beginning on or after January 1, 2013.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

. HKFRS 12 Disclosure of Interests in Other Entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Target Group is yet to assess HKFRS 12’s full impact and intends to adopt HKFRS 12 no later than the accounting period beginning on or after January 1, 2013.
. HKFRS 13 Fair Value Measurement aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across HKFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within HKFRSs. The Target Group is yet to assess HKFRS 13’s full impact and intends to adopt HKFRS 13 no later than the accounting period beginning on or after January 1, 2013.
. HKAS 19 (2011) Employee Benefits eliminates the corridor approach and calculates finance costs on a net funding basis. The Target Group is yet to assess the amendments impact.

There are no other HKFRSs or HK(IFRIC) interpretations that are not yet effective that would be expected to have a material impact on the Target Group.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The consolidated financial statements include the financial statements of the Target Company and its subsidiaries (collectively referred to as the ‘‘Target Group’’) for the Relevant Periods. The financial statements of the subsidiaries are prepared for the same reporting period as the Target Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Target Group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated on consolidation in full.

Subsidiaries

A subsidiary is an entity in which the Company, directly or indirectly, controls more than half of its voting power or issued share capital or controls the composition of its board of directors; or over which the Company has a contractual right to exercise a dominant influence with respect to that entity’s financial and operating policies.

The results of subsidiaries are included in the Target Company’s income statement to the extent of dividends received and receivable. The Target Company’s investments in subsidiaries that are not classified as held for sale in accordance with HKFRS 5 are stated at cost less any impairment losses.

Associate

An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Target Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Target Group’s investment in an associate are stated in the consolidated statement of financial position at the Target Group’s share of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The Target Group’s share of the results and reserves of an associate is included in the consolidated income statement, to the extent of dividends received and receivable, and consolidated reserves, respectively. Unrealised gains and losses resulting from transactions between the Target Group and its associate are eliminated to the extent of the Target Group’s investment in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred. The Target Company’s investment in an associate is treated as non-current asset and is stated at cost less any impairment losses.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Target Group, liabilities assumed by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. For each business combination, the Target Group elects whether it measures the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation either at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition costs are expensed as incurred.

When the Target Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with HKAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of HKAS 39, it is measured in accordance with the appropriate HKFRS.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Target Group’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets of the subsidiary acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Target Group performs its annual impairment test of goodwill as at December 31. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Target Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Target Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the consolidated income statement in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises.

Related parties

A party is considered to be related to the Target Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Target Group;
(ii) has significant influence over the Target Group; or
(iii) is a member of the key management personnel of the Target Group or of a parent of the Target Group;

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Target Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Target Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a); and
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

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Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Target Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal estimated useful lives and residual values of property, plant and equipment are as follows:

		Estimated
Category	Estimated useful life	residual value
Buildings	5–20 years	10%
Leasehold improvements	over the shorter of the un-expired terms of the lease	—
	and their estimated useful lives
Plant and machinery	5–10 years	5–10%
Furniture and fixtures	3–5 years	5–10%
Motor vehicles	5–10 years	10%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents buildings, plant and machinery under construction or pending installation, which are stated at cost less any impairment losses, and are not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Intangible assets (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Intangible assets are stated at cost less any impairment losses and are amortised on the straight-line basis over their estimated useful lives. The principal estimated useful life of software is 5–10 years.

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Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Target Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases, including prepaid land and buildings lease payments under finance leases, are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Target Group is the lessor, assets leased by the Target Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Target Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Land use rights

All land in Mainland China is state-owned and no individual land ownership rights exist. The Target Group acquires the rights to use certain land and the consideration paid for such rights are recorded as land use rights, which are amortised over the lease terms of 40 to 50 years using the straight-line method.

Investments and other financial assets

Initial recognition and measurement

Financial assets within the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial investments, or as derivatives designated as hedging loans and receivables, as appropriate. The Target Group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Target Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

The Target Group’s financial assets include cash and bank balances, cash in transit, pledged bank deposits and trade and other receivables.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments as defined by HKAS 39.

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Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in other income and gains or finance costs in the income statement. These net fair value changes do not include any dividends or interest earned on these financial assets, which are recognised in accordance with the policies set out for ‘‘Revenue recognition’’ below.

Financial assets designated upon initial recognition at fair value through profit or loss are designated at the date of initial recognition and only if the criteria under HKAS 39 are satisfied.

The Target Group evaluates its financial assets at fair value through profit or loss (held for trading) to assess whether the intent to sell them in the near term is still appropriate. When, in rare circumstances, the Target Group is unable to trade these financial assets due to inactive markets and management’s intent to sell them in the foreseeable future significantly changes, the Target Group may elect to reclassify these financial assets. The reclassification from financial assets at fair value through profit or loss to loans and receivables, available-for-sale financial assets or held-to-maturity investments depends on the nature of the assets. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation as these instruments cannot be reclassified after initial recognition.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in the income statement. The loss arising from impairment is recognised in the income statement in finance costs for loans and in other expenses for receivables.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity when the Target Group has the positive intention and ability to hold to maturity. Held-tomaturity investments are subsequently measured at amortised cost less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in the income statement. The loss arising from impairment is recognised in the income statement in other expenses.

Available-for-sale financial investments

Available-for-sale financial investments are non-derivative financial assets in listed and unlisted equity investments and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions.

After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in the income statement in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to

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the income statement in other expenses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised in the income statement as other income in accordance with the policies set out for ‘‘Revenue recognition’’ below.

When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses.

The Target Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are still appropriate. When, in rare circumstances, the Target Group is unable to trade these financial assets due to inactive markets and management’s intent to do so significantly changes in the foreseeable future, the Target Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Target Group has the intent and ability to hold these assets for the foreseeable future or to maturity. Reclassification to the held-to-maturity category is permitted only when the Target Group has the ability and intent to hold until the maturity date of the financial asset.

For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

. the rights to receive cash flows from the asset have expired; or
. the Target Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘‘pass-through’’ arrangement and either (a) the Target Group has transferred substantially all the risks and rewards of the asset, or (b) the Target Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Target Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Target Group’s continuing involvement in the asset. In that case, the Target Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Target Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Target Group could be required to repay.

Impairment of financial assets

The Target Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an incurred ‘‘loss event’’) and that loss event has

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an impact on the estimated future cash flows of the financial asset or the Target Group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Target Group firstly assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Target Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Target Group.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to other expenses in the income statement.

Assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

Available-for-sale financial investments

For available-for-sale financial investments, the Target Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is removed from other comprehensive income and recognised in the income statement.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. The determination of what is ‘‘significant’’ or ‘‘prolonged’’ requires judgement. ‘‘Significant’’ is to be evaluated against the original cost of

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the investment and ‘‘prolonged’’ against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement — is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity instruments classified as available for sale are not reversed through the income statement. Increases in their fair value after impairment are recognised directly in other comprehensive income.

Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Target Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.

The Target Group’s financial liabilities include trade and bills payables, other payables and bank loans and other borrowings.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Target Group that are not designated as hedging instruments in hedge relationships as defined by HKAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. The net fair value gain or loss recognised in the income statement does not include any interest charged on these financial liabilities.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the date of initial recognition and only if the criteria of HKAS 39 are satisfied.

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the income statement.

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Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Fair value of financial instruments

The fair value of financial instruments that are traded in active markets is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments where there is no active market, the fair value is determined using appropriate valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; a discounted cash flow analysis; and other option pricing models.

Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is calculated on a specific identification basis as appropriate and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Target Group’s cash management.

For the purpose of the statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits with initial terms of three months or less, which are not restricted as to use.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Target Group operates.

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Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

. when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
. in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

. when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
. in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments or deducted from the carrying amount of the asset and released to the income statement by way of a reduced depreciation charge.

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Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target Group and when the revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Target Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(b) from the rendering of services, on the percentage of completion basis, in the period in which the services are rendered;
(c) rental income, on a time proportion basis over the lease terms;
(d) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset; and
(e) dividend income, when the shareholders’ right to receive payment has been established.

Share-based payment transactions

The Target Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Target Group’s operations. Employees (including directors) of the Target Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (‘‘equity-settled transactions’’).

The cost of equity-settled transactions with employees for grants is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in note 31 to the Financial Information.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Target Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the income statement for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Target Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

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Vendor rebate

Volume-related vendor rebates are recognised as a deduction from the cost of sales on an accrual basis based on the expected entitlement earned up to the reporting date for each relevant supplier contract.

Rebates relating to items purchased but still held at the reporting date are deducted from the carrying value of these items so that the cost of inventories is recorded net of applicable rebates.

Employee benefits

The employees of the Target Group’s subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain percentage of their payroll costs to the central pension scheme. The contributions are charged to the income statement as they become payable in accordance with the rules of the central pension scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Dividends

Final dividends proposed by the Directors are classified as a separate allocation of retained profits within the equity section of the statement of financial position, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Foreign currencies

These financial statements are presented in RMB. Each entity in the Target Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the end of the reporting period. All differences arising on settlement or translation of monetary items are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The gain or loss arising on retranslation of a non-monetary item is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively).

The functional currencies of the Target Company and certain overseas subsidiaries are currencies other than RMB. As at the end of the reporting period, the assets and liabilities of these entities are translated into the presentation currency of the Target Company at the exchange rates ruling at the end of the reporting period, and their income statements are translated into RMB at the weighted average exchange rates for the year/period.

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The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement.

For the purpose of the consolidated statement of cash flows, the cash flows of overseas subsidiaries are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Target Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Target Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the Financial Information:

Deferred tax assets

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying values of deferred tax assets as at December 31, 2009, 2010 and 2011 and June 30, 2012 were RMB14,426,000, RMB18,468,000, RMB33,990,000 and RMB54,842,000, respectively. More details are given in Note 28.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of goodwill

The Target Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Target Group to make an estimate of the expected future cash flows from the cashgenerating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of goodwill at December 31, 2009, 2010 and 2011 and June 30, 2012 were RMB472,445,000, RMB458,226,000, RMB436,556,000 and RMB438,229,000, respectively. Further details are given in Note 17.

Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying values of deferred tax assets relating to tax losses at December 31, 2011 and June 30, 2012 were RMB13,358,000 and RMB32,022,000 respectively. Further details are given in Note 28.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Impairment of non-financial assets (other than goodwill)

The Target Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Indefinite life intangible assets are tested for impairment annually and at other times when such an indicator exists. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

4. SEGMENT INFORMATION

The Target Group’s principal business is the sale and service of motor vehicles. For management purposes, the Target Group operates in one business unit based on its products, and has one reportable segment which is the sale of motor vehicles and the provision of related services.

No operating segments have been aggregated to form the above reportable operating segment.

Information about geographical area

Since over 90% of the Target Group’s revenue was generated from the sale and service of motor vehicles in Mainland China and over 90% of the Target Group’s non-current assets other than deferred tax assets were located in Mainland China, no geographical information is presented in accordance with HKFRS 8 Operating Segments.

Information about major customers

Since none of the Target Group’s sales to a single customer amounted to 10% or more of the Target Group’s revenue during the year, no major customer segment information is presented in accordance with HKFRS 8 Operating Segments.

5. REVENUE, OTHER INCOME AND GAINS, NET

(a) Revenue:

Revenue from the sale of motor vehicles Others	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 4,900,096 7,515,371 8,295,099 456,491 529,807 692,250 5,356,587 8,045,178 8,987,349	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 4,063,199 4,423,275 310,220 424,866 4,373,419 4,848,141	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 4,063,199 4,423,275 310,220 424,866 4,373,419 4,848,141
			4,848,141

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

(b) Other income and gains, net:

Commission income Rental income Interest income Net gain/(loss) on disposal of items of property, plant and equipment Net gain/(loss) on foreign exchange differences Others Total	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 16,481 35,091 57,440 982 1,594 1,020 2,177 3,335 4,159 21 (372) 2,050 3,172 1,906 7,654 (656) 5,493 4,095 22,177 47,047 76,418	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 25,043 40,180 453 752 2,579 3,255 1,733 (2,020 2,666 (1,480 1,352 2,646 33,826 43,333	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 25,043 40,180 453 752 2,579 3,255 1,733 (2,020 2,666 (1,480 1,352 2,646 33,826 43,333
			43,333

6. PROFIT/(LOSS) BEFORE TAX

The Target Group’s profit/(loss) before tax is arrived at after charging/(crediting):

(a) Employee benefit expense (including directors’ remuneration (Note 9)): Wages and salaries Equity-settled share award/option expense Other welfare (b) Cost of sales and services: Cost of sales of motor vehicles Others (c) Other items: Depreciation of items of property, plant and equipment Amortisation of land use rights Amortisation of intangible assets Accrual/(reversal) of impairment of receivables and prepayments Accrual/(reversal) of impairment of inventories Auditor’s remuneration Lease expenses	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 111,380 172,618 271,884 1,855 12,521 — 24,422 36,340 71,913 137,657 221,479 343,797 4,579,197 7,009,648 7,823,402 229,145 271,464 358,152 4,808,342 7,281,112 8,181,554 28,490 30,691 38,008 590 756 1,054 — 2,292 1,320 2,260 (1,747) (3,222) 4,302 (4,811) 10,472 2,930 3,430 3,309 23,544 35,532 68,354	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 114,297 151,126 — — 28,383 42,063 142,680 193,189 3,803,828 4,258,102 159,140 202,053 3,962,968 4,460,155 14,338 27,813 641 664 578 1,157 — 26,485 1,503 28,648 1,655 — 27,613 38,974	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 114,297 151,126 — — 28,383 42,063 142,680 193,189 3,803,828 4,258,102 159,140 202,053 3,962,968 4,460,155 14,338 27,813 641 664 578 1,157 — 26,485 1,503 28,648 1,655 — 27,613 38,974
			193,189
			4,258,102 202,053
			4,460,155
			27,813 664 1,157 26,485 28,648 — 38,974

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

7. FINANCE COSTS

Interest expense on bank borrowings and other borrowings wholly repayable with five years Interest expense charged for discount of bills	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 24,911 25,093 66,345 6,521 14,451 37,400 31,432 39,544 103,745	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 22,363 71,434 19,397 47,466 41,760 118,900	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 22,363 71,434 19,397 47,466 41,760 118,900
			118,900

8. TAX

(a) Tax in the consolidated income statements represents:

Group: Current — Hong Kong Charge for the year/period Current — Mainland China Charge for the year/period Deferred tax (Note 28)	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 355 300 144 54,867 88,747 48,562 (6,214) (4,042) (15,522) 49,008 85,005 33,184	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 403 871 32,895 6,963 (438) (20,852 32,860 (13,018	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 403 871 32,895 6,963 (438) (20,852 32,860 (13,018
			(13,018

The Target Company and the subsidiary incorporated in Hong Kong is subject to income tax at the rate of 16.5% during the Relevant Periods.

According to the Corporate Income Tax Law of the People’s Republic of China, the income tax rate is

25%.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

(b) Reconciliation between tax expense and accounting profit/(loss) at applicable tax rates:

A reconciliation of the tax expense applicable to profit/(loss) before tax using the applicable rates for the regions in which the Target Company and its subsidiaries are domiciled to the tax expense at the effective tax rates is as follows:

Group — 2009

Profit/(loss) before tax Tax at the statutory tax rate Expenses not deductible for tax Tax losses not recognised Tax losses utilised from previous periods Adjustment in respect of current tax of previous periods Profits attributable to an associate Tax charge at the Target Group’s effective rate Group — 2010	Hong Kong RMB’000 % (17,701) (2,921) 16.5% 3,617 (20.4%) — — — — — — (341) 1.9% 355 (2.0%)	Mainland China RMB’000 % 192,048 48,012 25.0% 1,248 0.6% 1,135 0.6% (1,959) (1.0%) 217 0.1% — — 48,653 25.3%	Total RMB’000 % 174,347 45,091 25.9% 4,865 2.8% 1,135 0.7% (1,959) (1.1%) 217 0.1% (341) (0.2%) 49,008 28.1%

Profit/(loss) before tax Tax at the statutory tax rate Expenses not deductible for tax Tax losses not recognised Tax losses utilised from previous periods Adjustment in respect of current tax of previous periods Profits attributable to an associate Tax charge at the Target Group’s effective rate	Hong Kong RMB’000 % (27,485) (4,535) 16.5% 5,388 (19.6%) — — — — — — (553) 2.0% 300 (1.1%)	Mainland China RMB’000 % 330,361 82,590 25.0% 1,865 0.6% 1,241 0.4% (928) (0.3%) (63) — — — 84,705 25.6%	Total RMB’000 % 302,876 78,055 25.8% 7,253 2.4% 1,241 0.4% (928) (0.3%) (63) — (553) (0.2%) 85,005 28.1%

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Group — 2011

Profit/(loss) before tax Tax at the statutory tax rate Expenses not deductible for tax Tax losses not recognised Tax losses utilised from previous periods Adjustment in respect of current tax of previous periods Profits attributable to an associate Tax charge at the Target Group’s effective rate	Hong Kong RMB’000 % (52,671) (8,691) 16.5% 9,840 (18.7%) — — — — — — (1,005) 1.9% 144 (0.3%)	Mainland China RMB’000 % 128,527 32,132 25.0% 483 0.4% 3,756 2.9% (1,776) (1.4%) (1,555) (1.2%) — — 33,040 25.7%	Total RMB’000 % 75,856 23,441 30.9% 10,323 13.6% 3,756 5.0% (1,776) (2.3%) (1,555) (2.0%) (1,005) (1.3%) 33,184 43.7%

Group — Six-month period ended 30 June 2012

Loss before tax Tax at the statutory tax rate Expenses not deductible for tax Tax losses not recognised Adjustment in respect of current tax of previous periods Profits attributable to an associate Tax charge/(credit) at the Target Group’s effective rate	Hong Kong RMB’000 % (44,704) (7,376) 16.5% 8,392 (18.8%) — — — — (145) 0.3% 871 (1.9%)	Mainland China RMB’000 % (139,671) (34,918) 25.0% 2,658 (1.9%) 17,771 (12.7%) 600 (0.4%) — — (13,889) 9.9%	Total RMB’000 % (184,375) (42,294) (0.1%) 11,050 0.0% 17,771 0.0% 600 0.0% (145) (0.0%) (13,018) (0.0%)

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

Group — Six-month period ended 30 June 2011 (unaudited)

Profit/(loss) before tax Tax at the statutory tax rate Expenses not deductible for tax Tax losses not recognised Tax losses utilised from previous periods Adjustment in respect of current tax of previous periods Profits attributable to an associate Tax charge at the Target Group’s effective rate	Hong Kong RMB’000 % (18,422) (3,040) 16.5% 4,272 (23.2%) — — — — — — (829) 4.5% 403 (2.2%)	Mainland China RMB’000 % 112,977 28,244 25.0% 3,032 2.7% 3,168 2.8% (1,210) (1.1%) (777) (0.7%) — — 32,457 28.7%	Total RMB’000 % 94,555 25,204 26.7% 7,304 7.7% 3,168 3.4% (1,210) (1.3% (777) (0.8% (829) (0.9% 32,860 34.8%

9. DIRECTORS’ REMUNERATION

Details of the remuneration of the directors of the Target Company during the Relevant Periods and the sixmonth period ended June 30, 2012, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance is as follows:

Executive directors — Darper, Joseph Thomas (1) — Hagen, Greg Bruce (1) — Hawke, Francis Edward (1) — Kong, Ho Pak (1) — Lee Yau Wai, Ricky (1) — John Arlan Redick (1) — Chui, Ka Kit Patrick (1) — Steven Bruce Fader (2) — Thomas Franklin Mclarty III (2) — Kyffin Donald Simpson (2) — Mark Cochran Mclarty (2) — Anthony Zachary Feell (2)	Directors’ fees RMB’000 — — — — — — — — — — — — —	Year ended December Salaries, allowances and other benefits Equity-settled share award expense RMB’000 RMB’000 — — — — — — — — 3,795 1,483 — — — — — — — — — — — — — — 3,795 1,483	31, 2009 Contributions to defined contribution retirement schemes RMB’000 — — — — — — — — — — — — —	Total RMB’000 — — — — 5,278 — — — — — — —
				5,278

(1) These directors were resigned on October 5, 2009.

(2) These directors were appointed on October 5, 2009.

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

Executive directors — Steven Bruce Fader — Thomas Franklin Mclarty III — Kyffin Donald Simpson — Mark Cochran Mclarty — Anthony Zachary Feell	Directors’ fees RMB’000 — — — — — —	Year ended December Salaries, allowances and other benefits Equity-settled share option expense RMB’000 RMB’000 — — — — — — — 12,521 — — — 12,521	31, 2010 Contributions to defined contribution retirement schemes RMB’000 — — — — — —	Total RMB’000 — — — 12,521 —
				12,521

Executive directors — Steven Bruce Fader — Thomas Franklin Mclarty III — Kyffin Donald Simpson — Mark Cochran Mclarty — Anthony Zachary Feell Executive directors — Steven Bruce Fader — Thomas Franklin Mclarty III — Kyffin Donald Simpson — Mark Cochran Mclarty — Anthony Zachary Feell	Year ended December 31, 2011 Directors’ fees Salaries, allowances and other benefits Contributions to defined contribution retirement schemes Total RMB’000 RMB’000 RMB’000 RMB’000 — — — — — — — — — — — — — — — — — — — — — — — — Six-month period ended June 30, 2012 Directors’ fees Salaries, allowances and other benefits Contributions to defined contribution retirement schemes Total RMB’000 RMB’000 RMB’000 RMB’000 — — — — — — — — — — — — — — — — — — — — — — — —	Total RMB’000 — — — — —
		—
		—

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

	Six-month	period ended	June 30, 2011 (unaudited)	June 30, 2011 (unaudited)
			Contributions
		Salaries,	to defined
		allowances	contribution
		and other	retirement
	Directors’ fees	benefits	schemes		Total
	RMB’000	RMB’000	RMB’000	RMB’000
Executive directors
— Steven Bruce Fader	—	—	—		—
— Thomas Franklin Mclarty III	—	—	—		—
— Kyffin Donald Simpson	—	—	—		—
— Mark Cochran Mclarty	—	—	—		—
— Anthony Zachary Feell	—	—	—		—
	—	—	—		—

There was no arrangement under which a director waived or agreed to waive any remuneration during the Relevant Periods.

10. FIVE HIGHEST PAID INDIVIDUALS

The five highest paid individuals included nil director for the six-month period ended June 30, 2012 (2009: one; 2010: one; 2011: nil; the six-month period ended June 30, 2011: nil), details of whose remuneration are set out in Note 9 above. Details of the remuneration of the remaining non-director highest paid employees for each of the Relevant Periods are as follows:

Salaries, bonuses, allowances and benefits in kind Pension scheme contributions	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 4,610 11,704 12,972 — — — 4,610 11,704 12,972	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 6,486 12,511 — 16 6,486 12,527	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 (unaudited) 6,486 12,511 — 16 6,486 12,527
			12,527

The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

HK$1,000,001 to HK$2,000,000 HK$2,000,001 to HK$3,000,000 HK$3,000,001 to HK$4,000,000 HK$4,000,001 to HK$5,000,000 HK$5,000,001 to HK$6,000,000	Year ended December 31, 2009 2010 2011 3 — — 1 1 3 — 2 2 — — — — 1 — 4 4 5	Six-month period ended June 30, 2011 2012 (unaudited) 5 1 — 2 — 1 — 1 — — 5 5	Six-month period ended June 30, 2011 2012 (unaudited) 5 1 — 2 — 1 — 1 — — 5 5
			5

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

11. PROFIT/(LOSS) ATTRIBUTABLE TO OWNERS OF THE PARENT

The consolidated profit/(loss) attributable to owners of the parent for the years ended December 31, 2009, 2010 and 2011 and the six-month period ended June 30, 2012 includes a gain of RMB2,665,000, a loss of RMB51,174,000, RMB55,958,000 and RMB56,356,000, respectively, which have been dealt with in the financial statements of the Target Company (Note 30).

12. PROPERTY, PLANT AND EQUIPMENT

Cost: At January 1, 2009 Additions Transfers Disposals At December 31, 2009 Accumulated depreciation: At January 1, 2009 Depreciation provided during the year Disposals At December 31, 2009 Net book value: At December 31, 2009 Cost: At January 1, 2010 Additions Transfers Disposals At December 31, 2010 Accumulated depreciation: At January 1, 2010 Depreciation provided during the year Disposals At December 31, 2010 Net book value: At December 31, 2010	Buildings RMB’000 113,472 378 1,257 — 115,107 22,743 5,343 — 28,086 87,021 115,107 3,116 24,741 (65) 142,899 28,086 5,014 (4) 33,096 109,803	Leasehold improvements RMB’000 4,782 3,480 2,751 — 11,013 3,146 1,651 — 4,797 6,216 11,013 2,022 6,856 — 19,891 4,797 2,331 — 7,128 12,763	Plant and machinery RMB’000 33,236 3,851 898 (420) 37,565 10,586 3,072 (341) 13,317 24,248 37,565 5,056 — (529) 42,092 13,317 3,478 (424) 16,371 25,721	Furniture and fixtures RMB’000 25,225 6,460 2,969 (757) 33,897 13,796 3,813 (688) 16,921 16,976 33,897 5,602 1,135 (2,713) 37,921 16,921 3,834 (1,476) 19,279 18,642	Motor vehicles RMB’000 34,964 111,418 — (70,146) 76,236 6,890 14,611 (13,556) 7,945 68,291 76,236 95,725 — (52,485) 119,476 7,945 16,034 (8,519) 15,460 104,016	Construction in progress RMB’000 1,177 8,783 (7,875) — 2,085 — — — — 2,085 2,085 33,302 (32,732) — 2,655 — — — — 2,655	Total RMB’000 212,856 134,370 — (71,323
							275,903
							57,161 28,490 (14,585
							71,066
							204,837
							275,903 144,823 — (55,792
							364,934
							71,066 30,691 (10,423
							91,334
							273,600

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

Cost: At January 1, 2011 Additions Transfers Disposals At December 31, 2011 Accumulated depreciation: At January 1, 2011 Depreciation provided during the year Disposals At December 31, 2011 Net book value: At December 31, 2011 Cost: At January 1, 2012 Additions Transfers Reclassification Disposals At June 30, 2012 Accumulated depreciation: At January 1, 2012 Depreciation during the period Reclassification Disposals At June 30, 2012 Net book value: At June 30, 2012	Buildings RMB’000 142,899 — 11,904 (7,211) 147,592 33,096 5,128 (1,269) 36,955 110,637 147,592 4,634 61,867 57,457 (1,265) 270,285 36,955 4,659 5,048 (299) 46,363 223,922	Leasehold improvements RMB’000 19,891 — 160,779 — 180,670 7,128 7,989 — 15,117 165,553 180,670 45,230 — (57,457) (3,223) 165,220 15,117 5,749 (5,048) (1,681) 14,137 151,083	Plant and machinery RMB’000 42,092 16,321 — (469) 57,944 16,371 4,120 (404) 20,087 37,857 57,944 14,108 119 22,096 (5,818) 88,449 20,087 4,896 8,732 (459) 33,256 55,193	Furniture and fixtures RMB’000 37,921 19,648 — (2,913) 54,656 19,279 4,145 (2,499) 20,925 33,731 54,656 13,434 532 (22,096) (1,542) 44,984 20,925 4,271 (8,732) (54) 16,410 28,574	Motor vehicles RMB’000 119,476 41,929 — (3,489) 157,916 15,460 16,626 (1,083) 31,003 126,913 157,916 90,832 — — (47,111) 201,637 31,003 8,238 — (8,914) 30,327 171,310	Construction in progress RMB’000 2,655 275,981 (172,683) — 105,953 — — — — 105,953 105,953 45,684 (62,518) — — 89,119 — — — — — 89,119	Total RMB’000 364,934 353,879 — (14,082
							704,731
							91,334 38,008 (5,255
							124,087
							580,644
							704,731 213,922 — — (58,959
							859,694
							124,087 27,813 — (11,407
							140,493
							719,201

Certain of the Target Group’s buildings with aggregate net book values of approximately RMB20,763,000, Nil, RMB18,841,000 and RMB17,868,000 as at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, respectively, were pledged as security for the Target Group’s bank borrowings (Note 24).

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

13. LAND USE RIGHTS

Cost: At the beginning of each year/period Additions At the end of each year/period Accumulated amortisation: At the beginning of each year/period Charge for the year/period At the end of each year/period Net book value: At the end of each year/period	2009 RMB’000 28,042 — 28,042 5,165 590 5,755 22,287	At December 31, 2010 2011 RMB’000 RMB’000 28,042 45,056 17,014 5,773 45,056 50,829 5,755 6,511 756 1,054 6,511 7,565 38,545 43,264	At June 30, 2012 RMB’000 50,829 —
			50,829
			7,565 664
			8,229
			42,600

The Target Group’s leasehold lands are located in Mainland China and are held on medium term leases (between 10 and 50 years).

Certain of the Target Group’s land use rights with aggregate net book values of approximately RMB4,718,000, Nil, RMB20,774,000 and RMB37,138,000 as at December 31, 2009, 2010 and 2011 and June 30, 2012, respectively, were pledged as security for the Target Group’s bank borrowings (Note 24).

14. INTANGIBLE ASSETS

Software Cost: At the beginning of each year/period Additions At the end of each year/period Accumulated amortisation: At the beginning of each year/period Charge for the year/period At the end of each year/period Net book value: At the end of each year/period	2009 RMB’000 — — — — — — —	At December 31, 2010 2011 RMB’000 RMB’000 — 7,036 7,036 5,937 7,036 12,973 — 2,292 2,292 1,320 2,292 3,612 4,744 9,361	At June 30, 2012 RMB’000 12,973 1,356
			14,329
			3,612 1,157
			4,769
			9,560

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

15. PREPAYMENTS

Prepaid rental expense for land and buildings under operating leases Prepayment for acquiring land use rights Long term deposits Less: impairment	2009 RMB’000 — — — — — —	At December 31, 2010 2011 RMB’000 RMB’000 — 45,473 — 120,223 — 8,186 — 173,882 — — — 173,882	At June 30, 2012 RMB’000 1,568 126,100 7,849
			135,517
			26,485
			109,032

The directors of the Target Company assessed the recoverable amount of the prepayments and 100% provision has been provided for a prepayment for acquiring land use rights. Other than this prepayment, other prepayments are neither past due or impaired.

16. INVESTMENT IN AN ASSOCIATE

2009 RMB’000 Share of net assets 11,023 (a) Particulars of the associate are as follows:	At December 31, 2010 2011 RMB’000 RMB’000 14,373 20,445	At June 30, 2012 RMB’000 21,443

				Percentage of
		Place of		ownership
		incorporation	Registered	interest held
Name		and operation	capital	by the Group	Principal activity
Qingdao	Motors	Hong Kong	HK$1,000	26%	Investment holding
(H.K.)	Limited

(b) The following table illustrates the summarised financial information of the Target Group’s associate extracted from its management accounts:

				Six-month
				period ended
	Year	ended December 31,		June 30,
	2009	2010	2011	2012
	RMB’000	RMB’000	RMB’000	RMB’000
Assets	211,471	239,197	257,129	308,577
Liabilities	169,076	183,919	178,495	226,104
Revenue	42,395	671,347	836,325	393,388
Profit	7,943	12,883	23,431	3,388

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

17. GOODWILL

Group
At January 1, 2009:
Cost (i)
Accumulated impairment
Net carrying amount
Cost at January 1, 2009, net of accumulated impairment
Exchange realignment
At December 31, 2009
At December 31, 2009 and January 1, 2010:
Cost
Accumulated impairment
Net carrying amount
Cost at January 1, 2010, net of accumulated impairment
Exchange realignment
At December 31, 2010
At December 31, 2010 and January 1, 2011:
Cost
Accumulated impairment
Net carrying amount
Cost at January 1, 2011, net of accumulated impairment
Acquisition of a subsidiary (ii)
Exchange realignment
At December 31, 2011
At December 31, 2011 and January 1, 2012:
Cost
Accumulated impairment
Net carrying amount
Cost at January 1, 2012, net of accumulated impairment
Exchange realignment
At June 30, 2012
At June 30, 2012:
Cost
Accumulated impairment
Net carrying amount

RMB’000
630,185
(157,221)
472,964
472,964
(519)
472,445
629,494
(157,049)
472,445
472,445
(14,219)
458,226
610,548
(152,322)
458,226
458,226
600
(22,270)
436,556
581,477
(144,921)
436,556
436,556
1,673
438,229
583,702
(145,473)
438,229

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Notes:

(i) On July 3, 2006, the Target Company acquired all of the shares of Yan Jun Auto Co., Limited (previously named as ‘‘Northern China German Auto Company Limited’’) for US$136 million in cash. The gross amount of the goodwill in the financial statement of the Target Group as at January 1, 2009 represented the excess of the consideration transferred over the identifiable net assets acquired and liabilities assumed regarding above mentioned business combination.
(ii) On October 25, 2011, the Target Group acquired a 100% interest in 北京燕順捷汽車銷售服務有限公司 from third-party individuals. The purchase consideration for the acquisition was in the form of cash of RMB600,000, of which RMB350,000 has been paid at the date of this report. Management assessed that the fair values of the identifiable assets and liabilities are both RMB1,289,000. The goodwill of RMB600,000 was recognised accordingly.

Impairment testing of goodwill

The goodwill comprises the fair value of expected business synergies arising from the acquisition, which is not separately recognised.

Goodwill acquired through business combinations has been allocated to the cash-generating unit of the sales and services of motor vehicles of the Target Group.

The recoverable amount of the cash-generating unit has been determined based on a value in use calculation using cash flow projections based on financial budgets covering a five-year period approved by senior management. No growth has been projected beyond the five years. The pre-tax discount rate applied to the cash flow projections beyond the one-year period is 13.34%.

Key assumptions used in the value in use calculation

The following describes the key assumptions of the cash flow projections.

Sale and service of motor vehicles revenue — the bases used to determine the future earnings from the sale of motor vehicles and the provision of related services are the historical sales and the average growth rate of similar 4S stores of the Target Group over the last two years.

Operating expenses — the bases used to determine the values assigned are the cost of inventories, staff costs, depreciation, amortisation and other operating expenses. The values assigned to the key assumptions reflect past experience and management’s commitment to maintain the Target Group’s operating expenses at an acceptable level.

18. INVENTORIES

Motor vehicles Spare parts and accessories Less: Impairment of inventories Motor vehicles Spare parts and accessories	At December 31, 2009 2010 RMB’000 RMB’000 181,286 332,959 35,814 47,326 217,100 380,285 669 26 6,340 1,585 7,009 1,611 210,091 378,674	2011 RMB’000 525,051 76,182 601,233 7,831 4,252 12,083 589,150	At June 30, 2012 RMB’000 1,308,613 76,079
			1,384,692 33,609 7,122
			40,731
			1,343,961

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

The movements in provision for impairment of inventories are as follows:

At the beginning of each year/period Impairment recognised/(reversed) Written off At the end of each year/period	At December 31, 2009 2010 RMB’000 RMB’000 5,664 7,009 4,302 (4,811) (2,957) (587) 7,009 1,611	2011 RMB’000 1,611 10,472 — 12,083	At June 30, 2012 RMB’000 12,083 28,648 —
			40,731

As at June 30, 2012, the Target Group’s inventories with a carrying amount of RMB868,031,000 were pledged as security for the Group’s bills payable, as further detailed in Note 35 to the Financial Information.

19. TRADE RECEIVABLES

Trade receivables Less: bad debt provision	At December 31, 2009 2010 RMB’000 RMB’000 34,552 77,079 5,430 3,683 29,122 73,396	2011 RMB’000 141,508 461 141,047	At June 30, 2012 RMB’000 146,661 461
			146,200

The Target Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Target Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.

An aged analysis of the trade receivables as at each reporting date (based on the invoice date, net of impairment) is as follows:

Within 1 year Over 1 year	At December 31, 2009 2010 RMB’000 RMB’000 26,419 72,268 2,703 1,128 29,122 73,396	2011 RMB’000 140,504 543 141,047	At June 30, 2012 RMB’000 145,656 544
			146,200

An aged analysis of the trade receivables that are not considered to be impaired is as follows:

Neither past due nor impaired Over one year past due	At December 31, 2009 2010 RMB’000 RMB’000 26,419 72,268 2,703 1,128 29,122 73,396	2011 RMB’000 140,504 543 141,047	At June 30, 2012 RMB’000 145,656 544
			146,200

Receivables that were neither past due nor impaired relate to a large number of diversified customers for whom there was no recent history of default.

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Target Group. Based on past experience, the directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Target Group does not hold any collateral or other credit enhancements over these balances.

The movements in provision for impairment of trade receivables are as follows:

At December 31, 2009 2010 RMB’000 RMB’000 At the beginning of each year/period 3,170 5,430 Impairment losses recognised/(reversed) 2,260 (1,747) At the end of each year/period 5,430 3,683 20. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES	2011 RMB’000 3,683 (3,222) 461	At June 30, 2012 RMB’000 461 —
		461

Group Prepayments to suppliers Rebate receivables VAT recoverable (i) Others Company Due from a subsidiary	At December 31, 2009 2010 RMB’000 RMB’000 237,041 518,425 167,612 326,213 7,385 — 91,017 95,947 503,055 940,585 At December 31, 2009 2010 RMB’000 RMB’000 — 255	2011 RMB’000 1,084,080 306,740 32,370 87,495 1,510,685 2011 RMB’000 106,056	At June 30, 2012 RMB’000 369,384 367,807 113,259 30,220
			880,670
			At June 30, 2012 RMB’000 326

Note:

(i) The Target Group’s sales of motor vehicles are subject to Mainland China Value Added Tax (“VAT”). Input VAT on purchases can be deducted from output VAT payable. The VAT recoverable is the net difference between output and deductible input VAT. The applicable tax rate for domestic sales of the Target Group is 17%.

None of the above assets is past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.

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APPENDIX II

21. PLEDGED BANK DEPOSITS

Deposits pledged with banks as collateral against credit facilities granted by the banks	At December 31, 2009 2010 RMB’000 RMB’000 252,359 618,737	2011 RMB’000 915,449	At June 30, 2012 RMB’000 1,103,641

Pledged bank deposits earn interest at interest rates stipulated by respective financial institutions, which were all pledged as security for the Target Group’s bill payables, as further detailed in Note 35 to the Financial Information.

22. CASH IN TRANSIT

Cash in transit	At December 31, 2009 2010 RMB’000 RMB’000 21,776 6,228	2011 RMB’000 16,110	At June 30, 2012 RMB’000 47,867

Cash in transit represents the sales proceeds settled by credit cards, which have yet to be credited to the Target Group by the banks.

23. CASH AND CASH EQUIVALENTS

Group Cash on hand Cash at banks Cash and cash equivalents Company Cash and bank balances Cash and cash equivalents	At December 31, 2009 2010 RMB’000 RMB’000 948 569 603,995 301,519 604,943 302,088 At December 31, 2009 2010 RMB’000 RMB’000 350 339 350 339	2011 RMB’000 643 324,620 325,263 2011 RMB’000 183,657 183,657	At June 30, 2012 RMB’000 909 199,452
			200,361
			At June 30, 2012 RMB’000 9
			9

The cash and bank balances and time deposits of the Target Group denominated in RMB amounted to RMB564,423,000, RMB296,777,000, RMB149,110,000 and RMB200,055,000 as at December 31, 2009, 2010, 2011 and June 30, 2012. The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. The balances are deposited with creditworthy banks with no recent history of default.

The carrying amounts of the cash and cash equivalents approximate to their fair values.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

24. BANK LOANS AND OTHER BORROWINGS

Group

Effective interest rate (%) Current: Bank loans 4.46 Other borrowings — Non-current: Shareholders loans 7.00	At December 31, 2009 2010 Effective interest rate Effective interest rate RMB’000 (%) RMB’000 (%) 131,000 4.59 156,000 6.10–6.89 — — — 8.50 131,000 156,000 291,150 7.00 302,155 7.00–14.00	At June 30, 2011 2012 Effective interest rate RMB’000 (%) RMB’000 261,730 6.56–8.53 564,585 55,037 8.50 105,840 316,767 670,425 982,179 7.00–14.00 1,046,495	At June 30, 2011 2012 Effective interest rate RMB’000 (%) RMB’000 261,730 6.56–8.53 564,585 55,037 8.50 105,840 316,767 670,425 982,179 7.00–14.00 1,046,495
			670,425
			1,046,495

The current bank loans and other borrowings represent:

— secured (a) — unsecured	At December 31, 2009 2010 RMB’000 RMB’000 131,000 156,000 — — 131,000 156,000	2011 RMB’000 279,837 36,930 316,767	At June 30, 2012 RMB’000 600,425 70,000
			670,425

(a) The bank loans are secured by:

Mortgages over the Target Group’s land use rights situated in Mainland China, which have aggregate carrying values of approximately RMB4,718,000, Nil, RMB20,774,000 and RMB37,138,000 as at December 31, 2009, 2010 and 2011 and June 30, 2012, respectively.
Mortgages over the Target Group’s buildings situated in Mainland China, which have aggregate carrying values of approximately RMB20,763,000, Nil, RMB18,841,000 and RMB17,868,000 as at December 31, 2009, 2010 and 2011 and June 30, 2012, respectively.
Mortgages over the Target Group’s pledged deposits, which have aggregate carrying values of approximately Nil, Nil, RMB126,609,000 and RMB244,730,000 as at December 31, 2009, 2010 and 2011 and June 30, 2012, respectively.
Mortgages over the Target Group’s inventories, which have aggregate carrying value of RMB144,768,000 as at June 30, 2012.

The shareholders loans are unsecured and repayable within 5 years.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Company

Effective interest rate (%) Current: Unsecured loan from a subsidiary 7.00 Non-current: Shareholders loans 7.00	At December 31, 2009 2010 Effective interest rate Effective interest rate RMB’000 (%) RMB’000 (%) 250,970 7.00 260,999 291,150 7.00 302,155 7.00–14.00	At June 30, 2011 2012 Effective interest rate RMB’000 (%) RMB’000 — — 122,356 963,932 7.00–14.00 1,023,423	At June 30, 2011 2012 Effective interest rate RMB’000 (%) RMB’000 — — 122,356 963,932 7.00–14.00 1,023,423
			1,023,423

25. TRADE AND BILLS PAYABLES

Trade payables Bills payable Trade and bills payables	At December 31, 2009 2010 RMB’000 RMB’000 22,120 48,280 465,553 787,778 487,673 836,058	2011 RMB’000 27,980 1,657,372 1,685,352	At June 30, 2012 RMB’000 23,355 1,804,155
			1,827,510

An aged analysis of the trade and bills payables as at each reporting date, based on the invoice date, is as follows:

Within one year	At December 31, 2009 2010 RMB’000 RMB’000 487,673 836,058	2011 RMB’000 1,685,352	At June 30, 2012 RMB’000 1,827,510

Certain bills payable were pledged by bank deposits of the Target Group of RMB252,359,000, RMB618,737,000, RMB788,840,000 and RMB858,911,000 as at December 31, 2009, 2010, 2011 and June 30, 2012, respectively.

Certain bills payable were pledged by inventories of the Target Group with a carrying amount of RMB723,263,000 as at June 30, 2012.

The trade and bills payables are non-interest-bearing.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

26. OTHER PAYABLES AND ACCRUALS

Group Advances from customers Payables for purchase of items of property, plant and equipment Taxes payable (other than income tax) Staff payroll and welfare payables Others Company Due to subsidiaries	At December 31, 2009 2010 RMB’000 RMB’000 100,445 238,855 25,477 33,366 20,462 13,108 18,266 28,587 23,199 25,864 187,849 339,780 At December 31, 2009 2010 RMB’000 RMB’000 506 1,509	2011 RMB’000 160,560 49,826 8,046 48,522 46,136 313,090 2011 RMB’000 4,912	At June 30, 2012 RMB’000 139,195 43,304 9,127 27,992 55,646
			275,264
			At June 30, 2012 RMB’000 8,408

27. EMPLOYEE RETIREMENT BENEFITS

As stipulated by the People’s Republic of China (the ‘‘PRC’’) state regulations, the subsidiaries in Mainland China participate in a defined contribution retirement scheme. All employees are entitled to an annual pension equal to a fixed proportion of the average basic salary amount of the geographical area of their last employment at their retirement date. The Mainland China subsidiaries are required to make contributions to the local social security bureau at 10%–22% (2011: 10%–22%; 2010: 10%–22%; 2009: 10%–22%) of the previous year’s average basic salary amount of the geographical area where the employees are under employment with the Mainland China subsidiaries.

The Target Group has no obligation for the payment of pension benefits beyond the annual contributions as set out above.

According to the relevant rules and regulations of the PRC, the Mainland China subsidiaries and their employees are each required to make contributions to an accommodation fund at 7%–10% (2011: 7%–10%; 2010: 7%–10%; 2009: 7%–10%) of the salaries and wages of the employees which is administered by the Public Accumulation Funds Administration Centre. There is no further obligation on the Target Group except for such contributions to the accommodation fund.

As at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, the Target Group had no significant obligation apart from the contributions as stated above.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

28. DEFERRED TAX

Deferred tax assets:

The components of deferred tax assets recognised in the consolidated statements of financial position and the movements during the Relevant Periods are as follows:

At January 1, 2009 Deferred tax recognised/(reversed) in the consolidated income statement during the year (Note 8(a)) At December 31, 2009 Deferred tax recognised/(reversed) in the consolidated income statement during the year (Note 8(a)) At December 31, 2010 Deferred tax recognised/(reversed) in the consolidated income statement during the year (Note 8(a)) At December 31, 2011 Deferred tax recognised/(reversed) in the consolidated income statement during the period (Note 8(a)) At June 30, 2012	Impairment of assets RMB’000 1,857 820 2,677 (1,232) 1,445 4,263 5,708 2,988 8,696	Payroll and accruals RMB’000 6,242 5,419 11,661 5,253 16,914 (2,709) 14,205 (844) 13,361	Losses available for offsetting against future taxable profits RMB’000 — — — — — 13,358 13,358 18,664 32,022	Other RMB’000 113 (25) 88 21 109 610 719 44 763	Total RMB’000 8,212 6,214
					14,426 4,042
					18,468 15,522
					33,990 20,852
					54,842

In accordance with the PRC income tax laws and regulations, tax losses of an entity could be carried forward for five years to offset against its future taxable profits. Deferred tax assets relating to unutilised tax losses are recognised to the extent that it is probable that sufficient taxable profit will be available to allow such deferred tax assets to be utilised. The Group had tax losses arising in Mainland China of RMB3,734,000, RMB7,479,000, RMB64,821,000 and RMB186,454,000 as at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, respectively, that will expire in one to five years for offsetting against its future taxable profits.

Deferred tax assets have not been recognised in respect of these losses of RMB3,734,000, RMB7,479,000, RMB11,389,000 and RMB58,366,000 as at December 31, 2009, 2010 and 2011 and June 30, 2012, as they have arisen in subsidiaries that have been loss-making for some time and it is not considered probable that taxable profits will be available against which the tax losses can be utilised.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Deferred tax liabilities:

Pursuant to the CIT Law, a 10% withholding tax is levied on dividends declared to foreign investors from the PRC effective from January 1, 2008. A lower withholding tax rate may be applied if there is a tax arrangement between the PRC and the jurisdiction of the foreign investors. Under the Arrangement between Mainland China and the Hong Kong Special Administration Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, or the China-HK Tax Arrangement, a qualified Hong Kong tax resident which is the ‘‘beneficial owner’’ and holds 25% or more of the equity interest in a PRC-resident enterprise is entitled to a reduced withholding tax rate of 5%. On February 22, 2008, Caishui (2008) No. 1 was promulgated by the tax authorities to specify that dividends declared and remitted out of the PRC from the retained earnings as at December 31, 2007 are exempted from the withholding tax.

The Target Group’s subsidiaries in Mainland China are directly or indirectly held by the Target Group’s intermediate holding company, Yan Jun Auto Co., Ltd., a Hong Kong tax resident.

The Target Group has not provided for income taxes on accumulated earnings generated by its PRC entities during the Relevant Periods amounting to RMB225,338,000, RMB425,650,000, RMB430,107,000 and RMB358,869,000 as at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, respectively, because it is probable that such accumulated earnings will not be distributed to the holding company outside the PRC in the foreseeable future.

29. SHARE CAPITAL

Authorised

Ordinary shares of US$100.00 each Ordinary shares of US$25.00 each Non-voting shares of US$25.00 each Issued and fully paid 929,329 ordinary shares of US$100.00 each issued and fully paid in and before 2009 967,261 A ordinary shares of US$25.00 each issued and fully paid in 2009 28,982 non-voting shares of US$25.00 each issued and fully paid in 2011	At December 31, 2009 2010 1,044,491 1,044,491 1,251,750 1,251,750 — — 2,296,241 2,296,241 At December 31, 2009 2010 RMB’000 RMB’000 743,728 743,728 165,136 165,136 — — 908,864 908,864	2011 1,044,491 1,251,750 32,800 2,329,041 2011 RMB’000 743,728 165,136 4,759 913,623	June 30, 2012 1,044,491 1,251,750 32,800
			2,329,041
			At June 30, 2012 RMB’000 743,728 165,136 4,759
			913,623

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

A summary of the transactions during the Relevant Periods with reference to the above movements in the Target Company’s issued share capital is as follows:

At January 1, 2009 Share awards exercised (a) Issue of ordinary shares of the Target Company (b) At December 31, 2009 and 2010 Issue of ordinary shares of the Target Company (c) At December 31, 2011 and June 30, 2012	Number of shares in issue 923,899 5,430 967,261 1,896,590 28,982 1,925,572	Issued capital RMB’000 740,019 3,710 165,135 908,864 4,759 913,623	Share premium RMB’000 135,633 — 175,467 311,100 7,781 318,881	Total RMB’000 875,652 3,710 340,602
				1,219,964 12,540
				1,232,504

During the Relevant Periods, the movements in share capital were as follows:

(a) In accordance with the Target Company’s share awards plan, 5,430 ordinary shares with a par value of US$100 each were issued during the year ended December 31, 2009. Details of the share awards plan are disclosed in Note 31(a) to the Financial Information.
(b) NCGA Investor Group Limited entered into a share purchase agreement dated September 16, 2009 with the Target Company, Court Square Capital Limited, to acquire 967,261 A ordinary shares of the Target Group. Pursuant to a resolution of the general meeting held on September 30, 2009, the Target Company’s authorised ordinary share capital was increased to US$135,743,000 by the creation of 1,251,750 A ordinary shares of US$25.00 each to NCGA Investor Group Limited, ranking equally with the existing ordinary shares of the Target Company in all respects. The 967,261 A ordinary shares of the Target Group were issued and fully paid by NCGA Investor Group Limited as at December 31, 2009.
(c) By a resolution on March 8, 2011, the authorised share capital of the Target Company was increased from US$135,743,000 to US$136,563,000 by the creation of further 32,800 non-voting shares of US$25.00 each, among which 28,982 shares were issued and fully paid as at December 31, 2011.

30. RESERVES

Group

(i) Share awards and option reserve

Share awards and option reserve comprise the fair value of the share awards and the estimated number of share options of the Target Company granted to certain directors and employees of the Target Group recognised in accordance with the accounting policy adopted for share-based payments in Note 2.4 to the Financial Information.

(ii) Statutory reserve

Pursuant to the relevant PRC rules and regulations, those Mainland China subsidiaries which are domestic enterprises in Mainland China are required to transfer no less than 10% of their profits after taxation, as determined under PRC accounting regulations, to the statutory reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before the distribution of a dividend to shareholders.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

(iii) Capital contribution

Capital contribution represents the waiver of compensation cost paid, by a shareholder, to certain directors and employees for cancellation of share awards plan on behalf of the Target Company.

(iv) Exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Company

As at January 1, 2009 Profit for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive income for the year Equity-settled share-based transactions Issue of share capital Waiver of liabilities by a shareholder As at December 31, 2009 and January 1, 2010 Loss for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive loss for the year Equity-settled share-based transactions As at December 31, 2010 and January 1, 2011	Share premium amount RMB’000 135,633 — — — — 175,467 — 311,100 — — — — 311,100	Share awards and option reserve RMB’000 1,855 — — — 1,855 (3,710) — — — — — 12,521 12,521	Capital contribution RMB’000 — — — — — — 2,407 2,407 — — — — 2,407	Exchange fluctuation reserve RMB’000 (117,760) — (628) (628) — — — (118,388) — (26,273) (26,273) — (144,661)	Retained profits/ (accumulated losses) RMB’000 (228,899) 7,351 — 7,351 — — — (221,548) (31,088) — (31,088) — (252,636)	Total RMB’000 (209,171 7,351 (628
						6,723
						1,855 171,757 2,407
						(26,429
						(31,088 (26,273
						(57,361
						12,521
						(71,269

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

As at January 1, 2011 Loss for the year Other comprehensive income for the year: Exchange differences on translation of foreign operations Total comprehensive loss for the year Issue of share capital As at December 31, 2011 and January 1, 2012 Loss for the period Other comprehensive income for the period: Exchange differences on translation of foreign operations Total comprehensive loss for the period As at June 30, 2012 As at January 1, 2011 Loss for the period Other comprehensive income for the period: Exchange differences on translation of foreign operations Total comprehensive loss for the period Issue of share capital As at June 30, 2011 (unaudited)	Share premium amount RMB’000 311,100 — — — 7,781 318,881 — — — 318,881 311,100 — — — 7,781 318,881	Share awards and option reserve RMB’000 12,521 — — — — 12,521 — — — 12,521 12,521 — — — — 12,521	Capital contribution RMB’000 2,407 — — — — 2,407 — — — 2,407 2,407 — — — — 2,407	Exchange fluctuation reserve RMB’000 (144,661) — (39,028) (39,028) — (183,689) — 2,734 2,734 (180,955) (144,661) — (22,090) (22,090) — (166,751)	Retained profits/ (accumulated losses) RMB’000 (252,636) (53,528) — (53,528) — (306,164) (52,541) — (52,541) (358,705) (252,636) (14,643) — (14,643) — (267,279)	Total RMB’000 (71,269
						(53,528 (39,028
						(92,556
						7,781
						(156,044
						(52,541 2,734
						(49,807
						(205,851
						(71,269
						(14,643 (22,090
						(36,733
						7,781
						(100,221

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

31. SHARE-BASED PAYMENT

(a) Share awards plan

A share awards plan was adopted on July 3, 2006 whereby the directors of the Target Company are authorised to grant share awards to the directors and the employees of the Target Group at nil consideration. The granted share awards could be vested over four years starting on the grant date and will immediately vest in full upon the occurrence of any of the following triggering events:

. A qualified initial public offer;
. The transfer of the Target Company’s shares which results in a change of the controlling shareholder of the Target Company (other than to an affiliate of the incumbent controlling shareholder);
. The sale, lease or transfer of at least 76% of the assets of the Target Company or Yan Jun Auto Co., Ltd.; or
. New equity of debt financing of either the Target Company or Yan Jun Auto Co., Ltd. in excess of US$86.25 million.

The number of shares under the share awards plan is as follows:

Directors: Outstanding at January 1, 2009 Exercised during the year (1) Cancelled during the year (2) Outstanding at December 31, 2009 Employees: Outstanding January 1, 2009 Exercised during the year (1) Cancelled during the year (2) Outstanding at December 31, 2009	Number of share awards 4,341 (2,172) (2,169) — 6,510 (3,258) (3,252) —

(1) 5,430 of the shares granted under the share awards plan were exercised on July 3, 2009.

(2) According to the agreement with relevant directors of the Target Company and employees of the Target Group, all outstanding shares, as 5,421 shares, were cancelled on September 25, 2009 with a compensation of US$65.00 for each share.

(b) Share option scheme A

A share option scheme was adopted on July 3, 2006 whereby the directors of the Target Company are authorised to grant share options to the directors and employees of the Target Group to subscribe for shares of the Target Company (the ‘‘Scheme A’’). The options will vest and become exercisable in full upon the occurrence of any of the triggering events as mentioned above. In any event, all options shall lapse if not exercised within the option period which means a period starting on the grant of an option and ending at the end of the day before the 7th anniversary of the grant. Each option gives the holder the right to subscribe for one ordinary share in the Target Company and is settled gross in share.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

The following share options were outstanding under the Scheme A in 2009:

Directors: Outstanding at January 1, 2009 Cancelled during the year Outstanding at December 31, 2009 Employees: Outstanding at January 1, 2009 Cancelled during the year Outstanding at December 31, 2009	Weighted average exercise price US$ 165.00 165.00 — 165.00 165.00 —	Number of options 13,896 (13,896
		—
		20,844 (20,844
		—

The fair value of the Scheme A was US$95,535 (US$2.75 each). According to the agreement with relevant directors and employees of the Target Group, all outstanding share options, as 34,740 shares, were cancelled on September 25, 2009 with nil compensation.

(c) Share option scheme B

A share option scheme was adopted on May 24, 2010 whereby a director of the Target Company is authorised to grant share options to the director of the Target Company to subscribe for shares of the Target Company (the ‘‘Scheme B’’). The options are vested on the date of grant and are then exercisable in whole or in part within 10 years from the date of grant. The exercise period is from May 24, 2010 to May 23, 2020. Each option gives the holder the right to subscribe for one A ordinary share in the Target Company and is settled gross in share.

The following share options were outstanding under the Scheme B during the Relevant Periods:

Directors: Outstanding at January 1, 2010 Granted during the year Outstanding at December 31, 2010 and 2011 and June 30, 2012	Weighted average exercise price US$ — 55.76 55.76	Number of options — 105,367
		105,367

The fair value of the share options granted in 2010 was US$1,862,000 (US$17.67 each) of which the Target Group recognised a share option expense of RMB12,521,000 during the year ended December 31, 2010.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

The fair value of equity-settled share options granted in 2010 was estimated as at the date of grant using a binomial model, taking into account:

Dividend	yield (%)	—
Expected	volatility (%)	45%
Risk-free	interest rate (%)	1.3%
Expected	life of options (year)	3
Weighted	average share price (US$ per share)	55.76

At the end of the Relevant Periods, the Target Company had 105,367 share options outstanding under the Scheme B. The exercise in full of the outstanding share options would, under the present capital structure of the Target Company, result in the issue of 105,367 additional ordinary shares of the Target Company and additional share capital of US$2,634,000 and share premium of US$3,241,000 (before issue expenses).

32. FINANCIAL INSTRUMENTS

The carrying amounts of each of the categories of financial instruments as at each reporting date were as follows:

Group

Financial assets

Trade receivables Financial assets included in prepayments, deposits and other receivables Pledged bank deposits Cash in transit Cash and cash equivalents	Loans and receivables At December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 29,122 73,396 141,047 167,612 326,213 306,740 252,359 618,737 915,449 21,776 6,228 16,110 604,943 302,088 325,263 1,075,812 1,326,662 1,704,609	At June 30, 2012 RMB’000 146,200 367,807 1,103,641 47,867 200,361
		1,865,876

Financial liabilities

Trade and bills payables Bank loans and other borrowings Financial liabilities included in other payables and accruals	Financial liabilities At December 31, 2009 2010 RMB’000 RMB’000 487,673 836,058 422,150 458,155 25,477 33,366 935,300 1,327,579	at amortised cost At June 30, 2011 2012 RMB’000 RMB’000 1,685,352 1,827,510 1,298,946 1,716,920 49,826 43,304 3,034,124 3,587,734	at amortised cost At June 30, 2011 2012 RMB’000 RMB’000 1,685,352 1,827,510 1,298,946 1,716,920 49,826 43,304 3,034,124 3,587,734
			3,587,734

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Company

Financial assets

Loans to a subsidiary Financial assets included in prepayments, deposits and other receivables Cash and cash equivalents	Loans and receivables At December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 652,832 652,964 724,288 — 255 106,056 350 339 183,657 653,182 653,558 1,014,001	At June 30, 2012 RMB’000 1,146,488 326 9
		1,146,823

Financial liabilities

Bank loans and other borrowings Financial liabilities included in other payable and accruals	Financial liabilities At December 31, 2009 2010 RMB’000 RMB’000 542,120 563,154 506 1,509 542,626 564,663	at amortised cost At June 30, 2011 2012 RMB’000 RMB’000 963,932 1,145,779 4,912 8,408 968,844 1,154,187	at amortised cost At June 30, 2011 2012 RMB’000 RMB’000 963,932 1,145,779 4,912 8,408 968,844 1,154,187
			1,154,187

33. CONTINGENT LIABILITIES

As at December 31, 2009, 2010 and 2011 and June 30, 2012, neither the Target Group nor the Target Company had any significant contingent liabilities.

34. COMMITMENTS

(a) Capital commitments

Capital commitments of the Target Group in respect of property and equipment outstanding at each reporting date not provided for in the Financial Information were as follows:

Contracted, but not provided for land use rights and buildings Authorised, but not contracted for land use rights and buildings	At December 31, 2009 2010 RMB’000 RMB’000 734 2,218 — — 734 2,218	2011 RMB’000 64,000 465,852 529,852	At June 30, 2012 RMB’000 28,000 539,357
			567,357

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

(b) Operating lease commitments

At each reporting date, the Target Group had total future minimum lease payments under noncancellable operating leases payable as follows:

Within 1 year After 1 year but within 2 years After 2 year but within 3 years After 3 years	At December 31, 2009 2010 RMB’000 RMB’000 19,741 36,007 12,900 15,268 4,028 10,011 33,135 40,665 69,804 101,951	2011 RMB’000 42,986 35,352 27,708 256,969 363,015	At June 30, 2012 RMB’000 107,934 83,228 57,239 133,501
			381,902

The Target Group is the lessee in respect of a number of properties and land held under operating leases. The leases typically run for an initial period of one to thirty years.

35. PLEDGE OF ASSETS

Details of the Target Group’s assets pledged for its bank loans and other borrowings and bills payable are disclosed in Note 12, Note 13, Note 18 and Note 21 to the Financial Information.

36. RELATED PARTY TRANSACTIONS AND BALANCES

(a) Balances with the related parties are as follows:

Shareholders loans Other payables	At December 31, 2009 2010 RMB’000 RMB’000 291,150 302,155 — 8,357	2011 RMB’000 982,179 3,030	At June 30, 2012 RMB’000 1,000,180 1,360

(b) Significant related party transactions during the Relevant Periods are as follows:

Shareholders loans Repayment of unsecured debentures Repayment of interest Interest expense for unsecured debentures Interest expense for shareholders loans Rendering of services	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 — — 701,235 12,339 — — 1,647 — 5,808 14,181 — — 4,755 20,205 56,311 — 6,770 6,857	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 376,611 — — — — — — — 11,014 57,120 3,236 3,470

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Short term employee benefits Equity-settled share award/option expenses Post-employee benefits Total compensation paid to key management personnel	Year ended December 31, 2009 2010 2011 RMB’000 RMB’000 RMB’000 15,767 16,026 14,945 1,855 12,521 — 80 18 60 17,702 28,565 15,005	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 7,473 16,621 — — 30 60 7,503 16,681	Six-month period ended June 30, 2011 2012 RMB’000 RMB’000 7,473 16,621 — — 30 60 7,503 16,681
			16,681

Further details of directors’ emoluments are included in Note 9 to the Financial Information.

37. FAIR VALUE

The carrying amounts of the Target Group’s and the Target Company’s financial instruments approximate to their fair values.

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Group’s principal financial instruments comprise bank loans, other interest-bearing loans, and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Target Group’s operations. The Target Group has various other financial assets and liabilities such as trade receivables, trade and bills payables and other payables, which arise directly from its operations.

The main risks arising from the Target Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below.

Interest rate risk

The Target Group has no significant interest-bearing assets other than pledged bank deposits (Note 21) and cash and cash equivalents (Note 23).

The Target Group’s interest rate risk arises from its bank loans and other borrowings, details of which are set out in Note 24. Borrowings at variable rates expose the Target Group to the risk of changes in market interest rates.

The Target Group has not used any interest rate swaps to hedge its exposure to interest rate risk.

The Target Group dose not expose to significant risk of changes in market interest rates as the Target Group’s debt obligations bear fixed interest rates.

Credit risk

The Target Group has no significant concentrations of credit risk. The carrying amounts of pledged bank deposits, cash in transit, cash and cash equivalents, trade and other receivables included in the Financial Information represent the Target Group’s maximum exposure to credit risk in relation to its financial assets.

As at December 31, 2009, December 31, 2010, December 31, 2011 and June 30, 2012, all pledged bank deposits and cash and cash equivalents were deposited in high quality financial institutions without significant credit risk.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Liquidity risk

The Target Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial instruments and financial assets (e.g., trade receivables) and projected cash flows from operations.

The maturity profile of the Target Group’s financial liabilities as at the end of each of the Relevant Periods, based on the contractual undiscounted payments, was as follows:

Group

Trade and bills payables Short-term borrowings Financial liabilities included in other payables and accruals Long-term other borrowings Trade and bills payables Bank loans and other borrowings Financial liabilities included in other payables and accruals Long-term other borrowings Trade and bills payables Bank loans and other borrowings Financial liabilities included in other payables and accruals Long-term other borrowings	Less than 1 year RMB’000 487,673 134,550 25,477 — 647,700 Less than 1 year RMB’000 836,058 159,077 33,366 — 1,028,501 Less than 1 year RMB’000 1,685,352 325,351 49,826 — 2,060,529	As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — — — — — 536,133 — 536,133 As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — — — — — 514,295 — 514,295 As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — — — — — 1,687,757 — 1,687,757	2009 Over 5 years RMB’000 — — — — — 2010 Over 5 years RMB’000 — — — — — 2011 Over 5 years RMB’000 — — — — —	Total RMB’000 487,673 134,550 25,477 536,133
				1,183,833
				Total RMB’000 836,058 159,077 33,366 514,295
				1,542,796
				Total RMB’000 1,685,352 325,351 49,826 1,687,757
				3,748,286

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

Trade and bills payables Bank loans and other borrowings Financial liabilities included in other payables and accruals Long-term other borrowings	Less than 1 year RMB’000 1,827,510 683,649 43,304 — 2,554,463	As at June 30, 2012 1 to 2 years 2 to 5 years Over 5 years RMB’000 RMB’000 RMB’000 — — — — — — — — — — 1,691,180 — — 1,691,180 —	Total RMB’000 1,827,510 683,649 43,304 1,691,180
			4,245,643

The maturity profile of the Target Company’s financial liabilities as at the end of each of the Relevant Periods, based on the contractual undiscounted payments, was as follows:

Company

Short-term borrowings Financial liabilities included in other payables and accruals Long-term other borrowings Short-term borrowings Financial liabilities included in other payables and accruals Long-term other borrowings Financial liabilities included in other payables and accruals Long-term other borrowings	Less than 1 year RMB’000 268,538 506 — 269,044 Less than 1 year RMB’000 279,269 1,509 — 280,778 Less than 1 year RMB’000 4,912 — 4,912	As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — — — 536,133 — 536,133 As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — — — 514,295 — 514,295 As at December 31, 1 to 2 years 2 to 5 years RMB’000 RMB’000 — — — 1,500,081 — 1,500,081	2009 Over 5 years RMB’000 — — — — 2010 Over 5 years RMB’000 — — — — 2011 Over 5 years RMB’000 — — —	Total RMB’000 268,538 506 536,133
				805,177
				Total RMB’000 279,269 1,509 514,295
				795,073
				Total RMB’000 4,912 1,500,081
				1,504,993

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

Short-term borrowings Financial liabilities included in other payables and accruals Long-term other borrowings	Less than 1 year RMB’000 122,356 8,408 — 130,764	As at June 30, 2012 1 to 2 years 2 to 5 years Over 5 years RMB’000 RMB’000 RMB’000 — — — — — — — 1,508,688 — — 1,508,688 —	Total RMB’000 122,356 8,408 1,508,688
			1,639,452

Capital management

The primary objectives of the Target Group’s capital management are to safeguard the Target Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.

The Target Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Target Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31, 2009, December 31, 2010, December 31, 2012 and the six-month period ended June 30, 2012.

The Target Group monitors capital using a gearing ratio, which is net debt divided by the total equity attributable to owners of the parent plus net debt. Net debt includes bank loans and other borrowings, trade, bills and other payables, accruals, less cash and cash equivalents. The gearing ratios as at the end of each of the Relevant Periods were as follows:

Bank loans and other borrowings Trade and bills payables Other payables and accruals Less: Cash and cash equivalents Net debt Equity attributable to owners of the parent Gearing ratio	2009 RMB’000 422,150 487,673 187,849 (604,943) 492,729 1,209,187 29.0%	At December 31, 2010 2011 RMB’000 RMB’000 458,155 1,298,946 836,058 1,685,352 339,780 313,090 (302,088) (325,263) 1,331,905 2,972,125 1,425,037 1,461,644 48.3% 67.0%	At June 30, 2012 RMB’000 1,716,920 1,827,510 275,264 (200,361
			3,619,333
			1,290,366
			73.7%

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

39. INTEREST IN A SUBSIDIARY

Company

Unlisted shares, at cost Impairment (1) Loans to a subsidiary (2)	2009 RMB’000 929,282 (157,049) 772,233 652,832 1,425,065	At December 31, 2010 2011 RMB’000 RMB’000 901,314 857,519 (152,322) (144,921) 748,992 712,598 652,964 724,288 1,401,956 1,436,886	At June 30, 2012 RMB’000 860,786 (145,473) 715,313 1,146,488 1,861,801

(1) An impairment of US$23,000,000 was recognised for entire unlisted investments with a carrying amount of US$136,095,000 (before deducting the impairment loss) (2011: US$136,095,000; 2010: US$136,095,000; 2009: US$136,095,000) because the directors determined the decrease in the recoverable amount of the investments due to a decreased demand for automobiles in 2008. There was no change in the impairment account during the Relevant Periods.
(2) The loans to a subsidiary as at December 31, 2009 and 2010 included: (1) a loan of US$53,900,000, which is unsecured, interest-free and with no fixed repayment terms; and (2) a loan of US$41,022,253, which is unsecured, with an annual interest rate of 7% and no fixed repayment term.

The loans to a subsidiary as at December 31, 2011 represented a loan of US$53,900,000, which is unsecured, interest-free and with no fixed repayment term.

The loans to a subsidiary as at June 30, 2012 included: (1) a loan of US$53,900,000, which is unsecured, interest-free and with no fixed repayment term; and (2) a loan of US$22,605,000 which is unsecured, with an annual interest rate of 6.56% and a one-year repayment term.

The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the Target Group.

	Place and date of		Proportion of	Proportion of
	incorporation/		ownership	interest
	registration and		Held by the
	place of	Authorised/registered/	Target	Held	by a
Company name	operations	paid-in/issued capital	Company	subsidiary		Principal activities
			%		%
Yan Jun Auto Co., Limited	Hong Kong,	Registered and paid-in	100%		—	Investment holding
	the PRC	capital of
	1993	HK$59,900,000
燕駿（中國）投資有限公司	The PRC/	Registered and paid-in	—		100%	Investment holding
	Mainland China	capital of				and consulting
	2011	US$30,000,000				service
北京燕寶汽車服務有限公司	The PRC/	Registered and paid-in	—		100%	Rendering of car
	Mainland China	capital of				repair and
	1995	RMB89,350,000				maintenance
						services

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

	Place and date of		Proportion of	Proportion of	Proportion of
	incorporation/		ownership		interest
	registration and		Held by the
	place of	Authorised/registered/	Target		Held	by a
Company name	operations	paid-in/issued capital	Company		subsidiary		Principal activities
				%		%
北京東寶金龍經貿發展	The PRC/	Registered and paid-in		—		100%	Sale of cars
有限公司	Mainland China	capital of
	2002	RMB80,600,000
陝西金花汽車貿易有限責任	The PRC/	Registered and paid-in		—		100%	Sale of cars
公司	Mainland China	capital of
	2001	RMB52,000,000
大連燕寶汽車有限公司	The PRC/	Registered and paid-in		—		100%	Rendering of car
	Mainland China	capital of					repair and
	1995	US$7,920,000					maintenance
							services
北京燕德寶汽車銷售有限	The PRC/	Registered and paid-in		—		100%	Sale of cars
公司	Mainland China	capital of
	2002	RMB44,250,000
北京燕豪汽車銷售服務有限	The PRC/	Registered and paid-in		—		100%	Sale of cars
公司	Mainland China	capital of
	2010	RMB44,130,000
北京燕英捷汽車銷售服務	The PRC/	Registered and paid-in		—		100%	Sale of cars
有限公司	Mainland China	capital of
	2010	US$5,000,000
天津燕英捷汽車銷售服務	The PRC/	Registered and paid-in		—		100%	Sale of cars
有限公司	Mainland China	capital of
	2010	US$5,000,000
大連燕德寶汽車銷售有限	The PRC/	Registered and paid-in		—		100%	Sale of cars
公司	Mainland China	capital of
	2002	RMB36,000,000
烏魯木齊燕寶汽車銷售有限	The PRC/	Registered and paid-in		—		100%	Rendering of car
公司	Mainland China	capital of					repair and
	2005	RMB35,600,000					maintenance
							services
西安金花寶馬汽車服務有限	The PRC/	Registered and paid-in		—		100%	Rendering of car
公司	Mainland China	capital of					repair and
	2001	RMB26,000,000					maintenance
							services
北京燕盛豪汽車銷售服務	The PRC/	Registered and paid-in		—		100%	Rendering of car
有限公司	Mainland China	capital of					repair and
	2011	RMB25,000,000					maintenance
							services
北京晨德寶汽車銷售有限	The PRC/	Registered and paid-in		—		100%	Sale of cars
公司	Mainland China	capital of
	2003	RMB16,500,000

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APPENDIX II

FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

	Place and date of		Proportion of	Proportion of
	incorporation/		ownership	interest
	registration and		Held by the
	place of	Authorised/registered/	Target	Held	by a
Company name	operations	paid-in/issued capital	Company	subsidiary		Principal activities
			%		%
營口燕德寶汽車銷售服務	The PRC/	Registered and paid-in	—		100%	Sale of cars
有限公司	Mainland China	capital of
	2010	RMB10,000,000
北京燕寶汽車租賃有限公司	The PRC/	Registered and paid-in	—		100%	Leasing of cars
	Mainland China	capital of
	1995	US$1,000,000
營口燕寶汽車有限公司	The PRC/	Registered and paid-in	—		100%	Rendering of car
	Mainland China	capital of				repair and
	2008	RMB3,000,000				maintenance
						services
大連晨德寶汽車銷售有限	The PRC/	Registered and paid-in	—		100%	Sale of cars
公司	Mainland China	capital of
	2006	RMB2,000,000
唐山燕時達汽車銷售服務	The PRC/	Registered and paid-in	—		100%	Sale of cars
有限公司	Mainland China	capital of
	2011	RMB10,000,000
克拉瑪依燕寶汽車銷售服務	The PRC/	Registered and paid-in	—		100%	Sale of cars
有限公司	Mainland China	capital of
	2011	RMB10,000,000
北京燕駿廣告有限公司	The PRC/	Registered and paid-in	—		100%	Advertising services
	Mainland China	capital of
	2011	RMB100,000
北京晨德寶舊機動車經紀	The PRC/	Registered and paid-in	—		100%	Sale of cars
有限公司	Mainland China	capital of
	2005	RMB100,000
Gin Wi Enterprises Group	Hong Kong,	Registered and paid-in	—		100%	Investment holding
(HK) Limited	the PRC	capital of
	1999	HK$10,000
Mclarty Consulting Hong	Hong Kong,	Registered and paid-in	—		100%	Consulting services
Kong Limited	the PRC	capital of
	2010	HK$10,000

The above table lists the subsidiaries of the Target Company which, in the opinion of the Directors, principally affected the results for the Relevant Periods or formed a substantial portion of the net assets of the Target Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

Note: The financial statements, if applicable, of the subsidiaries registered in the PRC prepared in accordance with PRC GAAP and those of the subsidiaries incorporated in Hong Kong, the PRC prepared in accordance with HKFRSs for the years ended December 31, 2009, 2010 and 2011 were audited by KPMG.

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FINANCIAL INFORMATION OF NCGA HOLDINGS LIMITED

APPENDIX II

40. EVENT AFTER THE REPORTING PERIOD

There is no material subsequent event undertaken by the Target Company or by the Target Group after June 30, 2012.

41. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Company or the Target Group have been prepared in respect of any period subsequent to June 30, 2012.

Yours faithfully Ernst & Young Certified Public Accountants Hong Kong

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP
(i) Basis of preparation of the unaudited pro forma financial information of the Enlarged Group

The information set out below is for illustrative purpose only and does not form part of the accountants’ report prepared by the reporting accountants of Baoxin Auto Group Limited (the ‘‘Company’’), Ernst & Young, Certified Public Accountants, Hong Kong, as set out in Appendix II to this circular.

To provide additional financial information, the unaudited pro forma consolidated statement of financial position (the ‘‘Unaudited Pro Forma Financial Information’’) of the Enlarged Group (being the Company and its subsidiaries (the ‘‘Group’’) together with NCGA Holdings Limited (the ‘‘Target Company’’) and its subsidiaries (collectively referred to as the ‘‘Target Group’’)) as at June 30, 2012 has been prepared based on:

(a) the historical unaudited consolidated statement of financial position of the Group as at June 30, 2012 which has been extracted from the interim report for the six-month period ended June 30, 2012 of the Company;
(b) the consolidated statement of financial position of the Target Group as at June 30, 2012 which has been extracted from Appendix II to this circular; and
(c) after taking into account of the unaudited pro forma adjustments as described in the notes thereto to demonstrate how the proposed acquisition might have affected the historical financial information in respect of the Group as if the proposed acquisition had been completed on June 30, 2012.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information contained in this circular and the Accountants’ Report on the Target Group as set out in Appendix II to this circular.

The Unaudited Pro Forma Financial Information of the Enlarged Group is for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at June 30, 2012 or at any future date.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(ii) Unaudited Pro Forma Financial Information of the Enlarged Group

NON-CURRENT ASSETS Property, plant and equipment Land use rights Intangible assets Prepayments Goodwill — Recorded by the Target Group in relation to the acquisition in 2006 — Arising from the Acquisition Interest in a subsidiary Interest in a jointly-controlled entity Investment in an associate Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Trade receivables Prepayments, deposits and other receivables Due from related parties Pledged bank deposits Cash in transit Cash and cash equivalents Total current assets CURRENT LIABILITIES Short-term bank loans and other borrowings Trade and bills payables Other payables and accruals Due to related parties Income tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	The Group as at June 30, 2012 RMB’000 1,198,889 172,652 2,567 23,622 — — — 21,536 — 10,882 1,430,148 2,413,977 194,595 2,158,011 37,835 384,860 39,692 2,453,943 7,682,913 3,786,415 923,302 276,605 550,142 139,823 5,676,287 2,006,626 3,436,774	The Target Group as at June 30, 2012 RMB’000 719,201 42,600 9,560 109,032 438,229 — — — 21,443 54,842 1,394,907 1,343,961 146,200 880,670 — 1,103,641 47,867 200,361 3,722,700 670,425 1,827,510 275,264 — 7,297 2,780,496 942,204 2,337,111	Unaudited RMB’000 (1) — (342,380) (342,380) — (342,380) (342,380)	Pro Forma Adjustments RMB’000 RMB’000 (2) (3) (438,229) 3(c) 386,215 3(d) 1,942,467 (1,942,467) 1,942,467 (1,994,481) (1,471,429) (1,471,429) — — — (1,471,429) — 471,038 (1,994,481)	Unaudited Pro Forma Enlarged Group as at June 30, 2012 RMB’000 1,918,090 215,252 12,127 132,654 — 386,215 — 21,536 21,443 65,724
					2,773,041
					3,757,938 340,795 3,038,681 37,835 1,488,501 87,559 840,495
					9,591,804
					4,456,840 2,750,812 551,869 550,142 147,120
					8,456,783
					1,135,021
					3,908,062

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APPENDIX III

NON-CURRENT LIABILITIES Long-term bank loans and other borrowings Bonds Deferred tax liabilities Other non-current liabilities Total non-current liabilities NET ASSETS EQUITY Equity attributable to owners of the parent Share capital Reserves Non-controlling interests Total equity	The Group as at June 30, 2012 RMB’000 20,000 — 11,419 — 31,419 3,405,355 20,604 3,342,411 3,363,015 42,340 3,405,355	The Target Group as at June 30, 2012 RMB’000 1,046,495 — — 250 1,046,745 1,290,366 913,623 376,743 1,290,366 — 1,290,366	Unaudited RMB’000 (1) (342,380) (342,380) — — —	Pro Forma Adjustments RMB’000 RMB’000 (2) (3) (704,115) 3(a) 367,857 367,857 (704,115) 103,181 (1,290,366) 233 (913,623) 102,948 (376,743) 103,181 (1,290,366) 103,181 (1,290,366)	Unaudited Pro Forma Enlarged Group as at June 30, 2012 RMB’000 20,000 367,857 11,419 250
					399,526
					3,508,536
					20,837 3,445,359
					3,466,196 42,340
					3,508,536

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(iii) Notes to the Unaudited Pro Forma Financial Information of the Enlarged Group

The pro forma adjustment represents the repayments, which are required to be made before or at the Completion (as defined in the circular dated November 29, 2012 (the ‘‘Circular’’)) pursuant to the Sale and Purchase Agreement (the ‘‘Agreement’’ as defined in the Circular), of
(1) Procure (if the Target Group has not done so before Completion) that the outstanding amounts and all accrued amounts for the deferred management fees payable to McLarty Services, LLC pursuant to the Consulting Service Agreement dated September 19, 2011 between McLarty Services, LLC and McLarty Hong Kong Consulting Limited, a subsidiary of the Target Company, (the ‘‘Deferred Management Fees’’), are paid in full at Completion. The aggregate amount outstanding as at June 30, 2012 was RMB23,072,000; and
(2) Procure (if the Target Group has not done so before Completion) that the outstanding principal amount under the loan agreement between Court Square Capital Limited and the Target Company dated October 5, 2009 in respect of a five years US$41,947,469 interest-bearing term loan repayable on October 5, 2014 (the ‘‘Long-term Facility’’) and accrued interest under the Long-term Facility, is repaid in full at Completion.

The aggregate amount outstanding as at June 30, 2012 was US$50,484,834, which was translated to RMB319,308,000 as the rate of US$1.00 to RMB6.3249 (the spot exchange rate for USD on June 29, 2012 (being the last business day before June 30, 2012)).

To the best knowledge of the directors of the Company (the ‘‘Directors’’), both McLarty Services, LLC and Court Square Capital Limited are independent from the Company.

The pro forma adjustment represents the aggregate consideration payable, to the Sellers (as defined in the Circular) and MCM, (the ‘‘Consideration’’ as defined in the Circular) pursuant to the Agreement, comprising (1) the cash amount of US$232,640,739.62; (2) the bond instrument with a principal amount of US$58,160,184.91 to be issued pursuant to the Agreement (the ‘‘Bonds’’ as defined in the Circular); and (3) 28,571,429 Consideration Shares (the ‘‘Consideration Shares’’ as defined in the Circular) to be issued pursuant to the Agreement.

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APPENDIX III

For the purpose to illustrate the Unaudited Pro Forma Financial Information of the Enlarged Group, the components of the Consideration are accounted for as follows:

(1) The rate of US$1.00 to RMB6.3249 (the spot exchange rate for USD on June 29, 2012 (being the last business day before June 30, 2012)) was used to translate the cash amount and the principal amount of the bond instrument from USD to RMB, which are RMB1,471,429,000 and RMB367,857,000, respectively.
(2) As the date of the Acquisition (as defined in the Circular) completed, the fair value of the Bonds should be recognised as investment cost. For the purpose of this Unaudited Pro Forma Financial Information, the Directors of the Company had assumed that the face value of the Bonds approximated to the fair value of the Bonds on the date of issue. The fair value of the Bonds will be reassessed on the completion date of the Acquisition.
(3) The fair value of each of the Consideration Shares is assumed to be the published closing price of the ordinary shares of the Company quoted on the Stock Exchange on June 29, 2012 (being the last trading day before June 30, 2012) of HK$4.430 each. On this basis, a pro forma adjustment amounting to RMB233,000 represents the par value of 28,571,429 Consideration Shares with a par value of HK$0.01 each and an exchange rate of RMB0.8152 to HK$1.00 (the spot exchange rate for HK$ on June 29, 2012 (being the last business day before June 30, 2012)), and the pro forma adjustment amounting to RMB102,948,000 represents the share premium arising from the issue of the 28,571,429 Consideration Shares at the assumed fair value of HK$4.430 each and an exchange rate of RMB0.8152 to HK$1.00 (the spot exchange rate for HK$ on June 29, 2012 (being the last business day before June 30, 2012)).

The actual share premium amount to be recorded in the financial statements of the Group on the completion date of the Acquisition should be based on the published closing price of the share of the Company on the date of completion of the Acquisition, which may be materially different from the estimated share premium as shown in the unaudited pro forma financial information of the Enlarged Group.

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APPENDIX III

The pro forma adjustments reflect the allocation of the cost of the proposed acquisition to the identifiable assets and liabilities of the Target Group, which represent:
(a) elimination of the shareholders loans

Upon completion of the Acquisition, the Company will acquire the shareholders loans currently owed by the Target Group to NCGA Investor LLC and NCGA Investor Group Limited which amounted to an aggregate outstanding amount of US$111,323,720.21 as at June 30, 2012. The loan balance was translated to RMB704,115,000 as the rate of US$1.00 to RMB6.3249 (the spot exchange rate for USD on June 29, 2012 (being the last business day before June 30, 2012)). The adjusted amount recognised on the completion date of the Acquisition should be US$112,586,118.41 since the interest for July 2012 has been incurred. The balance of the shareholders loans as at June 30, 2012 has been eliminated with the investment cost recognised by the Company for the purpose to illustrate the Unaudited Pro Forma Financial Information of the Enlarged Group.

(b) fair value adjustment of the identifiable assets and liabilities of the Target Group

Upon completion of the Acquisition, the identifiable assets and liabilities of the Target Group will be accounted for in the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group at fair value under the purchase method of accounting in accordance with Hong Kong Financial Reporting Standard 3 ‘‘Business Combinations’’.

For the purpose of this Unaudited Pro Forma Financial Information, the Directors of the Company had assumed that the carrying values of the identifiable assets and liabilities of the Target Group approximated to their fair values, which will be reassessed on the completion date of the Acquisition together with the fair value assessment of the intangible assets and deferred tax impact in relation to such fair value adjustments.

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APPENDIX III

(c) goodwill previously recorded by the Target Group

On July 3, 2006, the Target Company acquired all of the shares of Yan Jun Auto Co., Limited (previously named as ‘‘Northern China German Auto Company Limited’’) for US$136 million in cash. The gross amount of the goodwill in the financial statement of the Target Group as at June 30, 2012, was arising from the above mentioned acquisition on July 3, 2006 (the ‘‘Target Group’s Goodwill’’). As the Target Group’s goodwill does not constitute a part of the Target Group’s identifiable net assets, to be recognized in the Acquisition and is therefore not included in the unaudited pro forma financial information of the Enlarged Group as at June 30, 2012.

(d) recognition of goodwill in relation to the Acquisition

Goodwill of the Enlarged Group represents the excess of the cost of the Acquisition over the estimated fair value of the identifiable net assets of the Target Group. For the purpose of this Unaudited Pro Forma Financial Information, the Directors of the Company had assumed that: (1) the consideration of the Acquisition was RMB1,942,467,000 as set out in Note 2 above, which pursuant to the Agreement; (2) the shareholders loans were eliminated as set out in Note 3 (a) above, and (3) the estimated fair value of the identifiable net assets of the Target Group as at June 30, 2012 is determined based on the Target Group’s net asset carrying values attributable to the equity holders of the Target Company as set out in Note 3(b) above.

Goodwill of the Enlarged Group is calculated as below:

The consideration of the Acquisition Less: shareholders loans acquired Identifiable net assets acquired and liabilities assumed (note 1) Goodwill arising from the Acquisition (note 2)	As at June 30, 2012 RMB’000 1,942,467 (704,115) (852,137) 386,215

note 1: For illustrative purposes, the Directors had assumed that the carrying values of the identifiable assets and liabilities of the Target Group approximated to their fair values, the identifiable net assets acquired and liabilities assumed can be reached by: RMB1,290,366,000, as the net assets of the Target Group as at June 30, 2012, minus RMB438,229,000, as the goodwill recognised in the consolidated financial statements of the Target Group as at June 30, 2012.

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APPENDIX III

note 2: The goodwill is recognized for the following reasons:
(i) most of the Target Group’s dealerships occupy advantageous locations in major cities and have experienced operation teams and skilled staff; and
(ii) the Target Group enjoys a leadership position in the luxury and ultra-luxury brands automobiles dealership market in northeast and northwest parts of the PRC;

For the purpose of this Unaudited Pro Forma Financial Information, the Company has assessed if there is any impairment loss on the goodwill arising from the Acquisition in accordance with the Hong Kong Accounting Standard No. 36 Impairment of Assets which is consistent with the Company’s accounting policy. The Directors are of the view that, after performing the impairment assessment, there is no impairment indication of the goodwill arising from the Acquisition as set out in the Unaudited Pro Forma Financial Information.

Even though the impairment assessment will be carried out in the accounting periods in the future, in view of the date of the Circular and the balance sheet date of the first set of the financial statements of the Company after the Completion, any significant changes in the assessment of goodwill impairment is not expected. Accordingly, the Directors considered that no significant goodwill impairment is expected in the first set of financial statements after the Completion.

Since the fair value of the identifiable net assets of the Target Group at the date of the completion of the Acquisition may be substantially different from the respective value used in the unaudited pro forma statement of assets and liabilities of the Enlarged Group, the goodwill recognised at the completion date of the Acquisition may be different from the amount presented above.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pursuant to Rule 4.29 of the Listing Rules, no other adjustment has been made to the Unaudited Pro Forma Financial Information to reflect any other transactions of the Group and the Target Group entered into subsequent to December 31, 2011. In particular, the Unaudited Pro Forma Financial Information has not taken into account (1) the proposed acquisition of 90% of the total equity interest in 瑞安寶隆汽車銷售服務有限公司 (Rui’an Baolong Automobile Sales & Services Co., Ltd.) by 寧波寶信汽車銷售服務有限公司 (Ningbo Baoxin Automobile Sales & Services Co., Ltd.) for a consideration of RMB150 million as disclosed in the Company’s announcement dated October 8, 2012; and (2) the proposed acquisition of the entire issued equity interest in 上海晨隆汽車銷售有限公司 (Shanghai Chenlong Automobile Sales Co., Ltd.) by 上海鵬捷投資管理有限公司 (Shanghai Pengjie Investment Management Co., Ltd.) for an aggregate consideration of RMB29 million pursuant to an equity transfer agreement dated October 8, 2012.

The acquisition of the Other Acquired Members has not been completed as at Latest Practical Date (as defined in the Circular). Nevertheless, for the benefit of the shareholders, the Directors voluntarily disclose the combined unaudited net assets as at June 30, 2012 and the combined losses for the six months ended June 30, 2012 of the Other Acquired Members, were approximately RMB32,494,000 and RMB5,926,000, respectively.

The Directors are of the view that, based on the preliminary assessment of the identifiable net assets of the Other Acquired Members and the purchase consideration, goodwill would be arising from the acquisition of the Other Acquired Members, and there is no impairment indication of the goodwill arising from the acquisition of the Other Acquired Members as at the Latest Practicable Date.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

November 29, 2012

The Directors

Baoxin Auto Group Limited

Dear Sirs,

We report on the unaudited pro forma financial information set out on pages 97 to 105 under the heading of ‘‘Unaudited Pro Forma Financial Information of the Enlarged Group’’ (the ‘‘Unaudited Pro Forma Financial Information’’) in Appendix III of the circular dated November 29, 2012 (the ‘‘Circular’’) of Baoxin Auto Group Limited (the ‘‘Company’’), in connection with the proposed acquisition of NCGA Holdings Limited (the ‘‘Target Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) (the ‘‘Transaction’’) by the Company. The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Transaction might have affected the relevant financial information of the Company and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on page 97 of the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND THE REPORTING ACCOUNTANTS

It is the responsibility solely of the Directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

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APPENDIX III

It is our responsibility to form an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION

We conducted our engagement in accordance with the Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unaudited consolidated statement of assets and liabilities as at June 30, 2012 of the Group as set out in the ‘‘Pro Forma Financial Information’’ section of this Circular with the unaudited interim condensed financial statements of the Group for the six months ended June 30, 2012 as set out in the 2012 interim report of the Company, comparing the unaudited consolidated statement of assets and liabilities as at June 30, 2012 of the Target Group with the accountants’ report as set out in Appendix II of this Circular, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the Directors of the Company.

Our work did not constitute an audit or a review made in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the Directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at June 30, 2012 or any future date.

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OPINION

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants

Hong Kong

– 108 –

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or the chief executive of the company had any interests or short position in the Shares, underlying Shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have taken under such provisions of the SFO); or (b) were required pursuant to section 352 of the SFO to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

			Approximate
			percentage of
		Number of	shareholding
Name of Director	Nature of interest	Shares	interest
Mr. Yang Aihua	Beneficial owner(1)	1,819,200,000	71.95%
Mr. Yang Hansong	Beneficial owner(2)	1,552,780,000	61.41%
Mr. Yang Zehua	Beneficial owner(3)	1,819,200,000	71.95%

Notes:

(1) Mr. Yang Aihua is one of the beneficiaries of the Family Trust and the Yang Trust and is deemed to be interested in the shares held by Baoxin Investment and Auspicious Splendid.
(2) Mr. Yang Hansong is one of the beneficiaries of the Family Trust and is deemed to be interested in the shares held by Baoxin Investment.
(3) Mr. Yang Zehua is one of the beneficiaries of the Family Trust and the Yang Trust and is deemed to be interested in the shares held by Baoxin Investment and Auspicious Splendid.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

SUBSTANTIAL SHAREHOLDERS

Mr. Yang Aihua, an executive Director and the Chairman of the Company, is also a director of Baoxin Investment and Auspicious Splendid. Mr. Zhang Yang, the non-executive Director, is also a director of TH Capital. All of Baoxin Investment, Auspicious Splendid and TH Capital are substantial shareholders of the Company as at the Latest Practicable Date.

Save as disclosed above, none of the Directors was a director or employee of a company which had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as at the Latest Practicable Date.

DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have since December 31, 2011 (being the date to which the latest published audited accounts of the Company were made up) been acquired or disposed of by or leased to any members of the Enlarged Group or any Other Acquired Members, or was proposed to be acquired or disposed of by or leased to any members of the Group.

DIRECTORS’ INTERESTS IN CONTRACT OF SIGNIFICANCE

None of the Directors is materially interested, directly or indirectly, in any contracts or arrangements entered into by any members of the Enlarged Group or any Other Acquired Members subsisting at the date of this circular and which is significant in relation to the business of the Group.

MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Enlarged Group or any Other Acquired Members within the two years immediately preceding issue of this circular:

(a) a supplemental investment agreement dated December 2, 2010 entered into between Huakong (Tianjin) Industry Investment Fund (Limited Partnership) (‘‘Huakong Industry’’), Huakong (Tianjin) Innovation Fund (Limited Partnership) (‘‘Huakong Innovation’’), Shanghai Baoxin, Shanghai Kailong Investment Management Co., Ltd. (‘‘Kailong PRC’’), Shanghai Shangchen Investment Management Co., Ltd. (‘‘Shangchen PRC’’), Shanghai Hengjun Investment Management Co., Ltd. (‘‘Hengjun PRC’’), Shanghai Chiheng Investment Management Co., Ltd. (‘‘Chiheng PRC’’), Shanghai Bentai Investment Management Co., Ltd. (‘‘Bentai PRC’’), Mr. Yang Aihua, Mr. Yang Hansong and Mr. Yang Zehua in relation to the investment agreement dated August 4, 2010 and the subscription of equity interests in Shanghai Baoxin by Huakong Industry and Huakong Innovation;

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APPENDIX IV

(b) an equity transfer agreement dated December 21, 2010 entered into between Shanghai Baoxin Automobile Sales & Services Co., Ltd. (‘‘Shanghai Baoxin’’) and Mr. Liu Yan pursuant to which Shanghai Baoxin agreed to sell to Mr. Liu Yan RMB1,000,000 equity interests in Shenyang Xinbaohang Automobile Sale & Services Co., Ltd. (‘‘Shenyang Xinbaohang’’);
(c) an equity transfer agreement dated February 22, 2011 entered into between Shanghai Baoxin and Kailong Investments Management Limited (‘‘Kailong HK’’) pursuant to which Shanghai Baoxin agreed to sell to Kailong HK the entire equity interests in Suzhou Baoxin for a consideration of RMB14,280,000;
(d) an equity transfer agreement dated March 11, 2011 entered into between Mr. Yang Hansong and Suzhou Baoxin pursuant to which Mr. Yang Hansong agreed to sell to Suzhou Baoxin Automobile Sales & Services Co., Ltd. (‘‘Suzhou Baoxin’’) RMB2,000,000 equity interests in Suzhou Xinbaohang Automobile Sales & Services Co., Ltd. (‘‘Suzhou Xinbaohang’’) for a consideration of RMB2,000,000;
(e) an equity transfer agreement dated March 11, 2011 entered into between Mr. Yang Aihua and Suzhou Baoxin pursuant to which Mr. Yang Aihua agreed to sell to Suzhou Baoxin RMB8,000,000 equity interests in Suzhou Xinbaohang for a consideration of RMB8,000,000;
(f) an equity transfer agreement dated May 29, 2011 entered into between Shanghai Hanchuan and Suzhou Xinbaohang pursuant to which Shanghai Hanchuan Industrial Co., Ltd. (‘‘Shanghai Hanchuan’’) agreed to sell to Suzhou Xinbaohang the entire equity interests in Jiaxing Tianhua Automobile Sales & Services Co., Ltd. (‘‘Jiaxing Tianhua’’) for a consideration of RMB10,000,000;
(g) an equity transfer agreement dated June 10, 2011 entered into between Shanghai Hanchuan and Suzhou Xinbaohang pursuant to which Shanghai Hanchuan agreed to sell to Suzhou Xinbaohang the entire equity interests in Ningbo Tianhua Automobile Sales & Services Co., Ltd. (‘‘Ningbo Tianhua’’) for a consideration of RMB15,000,000;
(h) an equity transfer agreement dated June 10, 2011 entered into between Shanghai Hanchuan and Suzhou Xinbaohang pursuant to which Shanghai Hanchuan agreed to sell to Suzhou Xinbaohang the entire equity interests in Wuxi Tianhua Automobile Sales & Services Co., Ltd. (‘‘Wuxi Tianhua’’) for a consideration of RMB15,000,000;
(i) an equity transfer agreement dated June 28, 2011 entered into between Huakong Industry and Suzhou Baoxin pursuant to which Huakong Industry agreed to sell to Suzhou Baoxin 3.244% equity interests in Shanghai Baoxin for a consideration of RMB6,963,246;

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(j) an equity transfer agreement dated June 28, 2011 entered into between Huakong Innovation and Suzhou Baoxin pursuant to which Huakong Innovation agreed to sell to Suzhou Baoxin 4.866% equity interests in Shanghai Baoxin for a consideration of RMB10,444,869;
(k) an equity transfer agreement dated June 28, 2011 entered into between Kailong PRC and Suzhou Baoxin pursuant to which Kailong PRC agreed to sell to Suzhou Baoxin 69.88% equity interests in Shanghai Baoxin for a consideration of RMB150,000,000;
(l) an equity transfer agreement dated June 28, 2011 entered into between Chiheng PRC and Suzhou Baoxin pursuant to which Chiheng PRC agreed to sell to Suzhou Baoxin 0.84% equity interests in Shanghai Baoxin for a consideration of RMB1,800,000;
(m) an equity transfer agreement dated June 28, 2011 entered into between Shangchen PRC and Suzhou Baoxin pursuant to which Shangchen PRC agreed to sell to Suzhou Baoxin 12.11% equity interests in Shanghai Baoxin for a consideration of RMB26,000,000;
(n) an equity transfer agreement dated June 28, 2011 entered into between Hengjun PRC and Suzhou Baoxin pursuant to which Hengjun PRC agreed to sell to Suzhou Baoxin 2.56% equity interests in Shanghai Baoxin for a consideration of RMB5,500,000;
(o) an equity transfer agreement dated June 28, 2011 entered into between Bentai PRC and Suzhou Baoxin pursuant to which Bentai PRC agreed to sell to Suzhou Baoxin 3.5% equity interests in Shanghai Baoxin for a consideration of RMB7,500,000;
(p) an equity transfer agreement dated June 28, 2011 entered into between Huakong Industry, Huakong Innovation, Shanghai Baoxin, Suzhou Baoxin, the Company, Mr. Yang Aihua, Mr. Yang Hansong and Mr. Yang Zehua pursuant to which Huakong Industry and Huakong Innovation agreed, subject to certain conditions set out therein, to sell to Suzhou Baoxin 3% equity interests in Shanghai Baoxin for a consideration of RMB550 million;
(q) an equity transfer agreement dated August 15, 2011 entered into between Shanghai Kailong Automobile Sales Co., Ltd. (‘‘Shanghai Kailong Qixiao’’) and Shanghai Kailong Automobile Trading Co., Ltd. (‘‘Shanghai Kailong Qimao’’) pursuant to which Shanghai Kailong Qixiao agreed to sell to Shanghai Kailong Qimao the entire equity interests in Shanghai Minhang Kailong Automobiles Sales Co., Ltd. (‘‘Minhang Automobiles’’) for a consideration of RMB10,000,000;
(r) an asset transfer agreement dated August 15, 2011 entered into between Shanghai Kailong Qixiao and Minhang Automobiles pursuant to which Shanghai Kailong Qixiao agreed to sell to Minhang Automobiles all the operational assets of Shanghai Kailong Qixiao for a consideration of RMB41,040,271;
(s) the deed of non-competition dated November 23, 2011 entered into between Mr. Yang Aihua, Baoxin Investment and Auspicious Splendid (the ‘‘Controlling Shareholders’’);

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(t) the deed of indemnity dated November 23, 2011 entered into between the Controlling Shareholders and the Company pursuant to which the Controlling Shareholders would indemnify the Group against, among others, (a) any depletion in or diminution in the value of the assets of the Company as a direct or indirect consequence of, and in respect of any amount which the Group may hereafter become liable to pay, resulting from any taxation under sections 35 and 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) (‘‘Estate Duty Ordinance’’); or (b) taxation falling on the Group resulting from, or relating to or in consequence of, any income, profits or gains earned, accrued or received (or deemed to be so earned, accrued or received) on or before December 14, 2011; or (c) all property losses and property claims arising from, or in connection with, directly or indirectly, the properties owned or occupied by the Group with defective title;
(u) the underwriting agreement dated December 1, 2011 relating to the offer of the 37,932,000 Shares being initially offered for subscription, subject to reallocation by the public in Hong Kong and entered into by Morgan Stanley Asia Limited, J.P. Morgan Securities (Asia Pacific) Limited, CMB International Securities Limited, CMB International Capital Limited, the Controlling Shareholders, Baoxin Investment and the Company;
(v) the Sale and Purchase Agreement;
(w) the equity transfer agreement dated October 8, 2012 entered into between Mr. Zheng Shi Long and Mr. Yan Zhi Hui as sellers and Ningbo Baoxin Automobile Sales & Services Co., Ltd. as buyer in relation to the buyer’s acquisition of 90% of the total equity interest in Rui’an Baolong Automobile Sales & Services Co., Ltd. for a consideration of RMB150,000,000; and
(x) the equity transfer agreement dated October 8, 2012 entered into between Mr. Zheng Shi Long and Mr. Lu Jian Ping as sellers and Shanghai Pengjie Investment Management Co., Ltd. as buyer in relation to the buyer’s acquisition of the entire equity interest in Shanghai Chenlong Automobile Sales Co., Ltd. for a consideration of RMB29,000,000.

LITIGATION

As far as the Directors are aware, neither any members of the Enlarged Group nor any Other Acquired Members was engaged in any litigation or arbitration or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any members of the Enlarged Group or any Other Acquired Members as at the Latest Practicable Date.

DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Company for an initial term of three years commencing on December 14, 2011 unless terminated by not less than three months’ notice in writing served by either the executive Director or the Company.

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

During the two financial years ended December 31, 2010 and December 31, 2011, the aggregate of the compensation and benefits in kind payable to the Directors were approximately RMB2.9 million (equivalent to HK$3.6 million) and RMB4.3 million (equivalent to HK$5.4 million) respectively. Save as disclosed in this circular, no other emoluments have been paid or are payable, in respect of the two financial years end December 31, 2010 and December 31, 2011 respectively by the Company to the Directors.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors and their respective associates (as defined under the Listong Rules) was considered to have any interest in any business apart from the Group’s business which competes, or is likely to compete, either directly or indirectly, with the business of the Group pursuant to Rule 8.10 of Listing Rules.

EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given its opinion or advice on the information contained in this circular:

Name Qualification Ernst & Young Certified Public Accountants

Ernst & Young has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter/report and/or references to its name in the form and context in which they are included.

EXPERTS’ INTEREST

As at the Latest Practicable Date, Ernst & Young:

(a) was not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group or any Other Acquired Members since December 31, 2011, being the date to which the latest published audited accounts of the Company were made up; and
(b) did not have any shareholding interest in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

MISCELLANEOUS

(a) the joint secretaries of the Company are Mr. Chen Changdong and Ms. Pau Lai Mei respectively. Mr. Chen is an accountant recognised by the Ministry of Finance of the PRC. Ms. Pau, is a Chartered Secretary and a fellow member of both The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries;

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STATUTORY AND GENERAL INFORMATION

APPENDIX IV

(b) the registered office of the Company is at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. The principal place of business and head office of the Company in the PRC is at 1715 Wuzhong Road, Minhang District, Shanghai, PRC and the Company’s principal place of business in Hong Kong is at Units 1803–4, 18/F, Bank of America Tower, 12 Harbour Road, Hong Kong;
(c) the principal share registrar and transfer office of the Company is Maples Fund Services (Cayman) Limited P.O. Box 1093, Boundary Hall, Cricket Square, Grand Cayman, KY1-1102, Cayman Islands;
(d) the Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong; and
(e) the English text of this circular shall prevail over the Chinese text in the event of any inconsistency between the English and the Chinese text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company in Hong Kong at Units 1803–4, 18/F, Bank of America Tower, 12 Harbour Road, Hong Kong during normal business hours from the date of this circular up to and including December 13, 2012:

(a) memorandum of association and articles of association of the Company;
(b) the service contracts as referred to in the section headed ‘‘Directors’ Service Contracts’’ in this appendix;
(c) the material contracts as referred to in the section headed ‘‘Material Contracts’’ in this appendix;
(d) the Company’s prospectus containing financial information for two financial years ended December 31, 2009 and 2010, the annual report of the Company for the financial year ended December 31, 2011 and the Company’s interim report for six months ended June 30, 2012;
(e) the accountants’ report on the audited financial information on the Target Group as set out in Appendix II to this circular;
(f) the report issued by Ernst & Young relating to the unaudited pro forma financial information on the Enlarged Group as set out in Appendix III to this circular; and
(g) the written consent as referred to in the section headed ‘‘Expert’s Qualification and Consent’’ in this appendix.

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AI assistant

Grand Baoxin Auto Group Limited — Proxy Solicitation & Information Statement 2012

49831_rns_2012-11-28_7bcaaab3-3b3a-4448-b81a-4042a05adc00.pdf

BAOXIN AUTO GROUP LIMITED

MAJOR TRANSACTION

DEFINITIONS

BAOXIN AUTO GROUP LIMITED 寶 信 汽 車 集 團 有 限 公 司

MAJOR TRANSACTION

INTRODUCTION

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

LETTER FROM THE BOARD

THE BOND INSTRUMENT

LETTER FROM THE BOARD

Redemption

LETTER FROM THE BOARD

INFORMATION ON THE PARTIES

The Group

The Sellers and Warrantors

INFORMATION ON THE TARGET

REASONS AND BENEFITS OF THE ACQUISITION

FINANCIAL EFFECTS OF THE ACQUISITION

LETTER FROM THE BOARD

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Prospectus

Financial Overview, Liquidity, Financial Resources and Gearing

LETTER FROM THE BOARD

Loans and Borrowings

LETTER FROM THE BOARD

Pledged Assets of the Target Group

Credit Policy

Capital Expenditure and Investment

Exchange Risks

Employees and Remuneration Policies

Significant Investments and Material Acquisition and Disposals of Subsidiaries

Contingent Liabilities

IMPLICATIONS UNDER THE LISTING RULES

ADDITIONAL INFORMATION

A. FINANCIAL INFORMATION OF THE GROUP

B. INDEBTEDNESS STATEMENT

Borrowings

Collateral

Contingent liabilities

C. MATERIAL ADVERSE CHANGE

D. WORKING CAPITAL STATEMENT

E. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Directors

Dear Sirs,

DIRECTORS’ RESPONSIBILITY

REPORTING ACCOUNTANTS’ RESPONSIBILITY

OPINION IN RESPECT OF THE FINANCIAL INFORMATION

REVIEW CONCLUSION IN RESPECT OF THE COMPARATIVE FINANCIAL INFORMATION

I. FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED INCOME STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENTS

STATEMENTS OF FINANCIAL POSITION

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION OF THE TARGET GROUP

2.1 BASIS OF PREPARATION

2.2 ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

2.3 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Subsidiaries

Associate

Business combinations and goodwill

Impairment of non-financial assets

APPENDIX II

Related parties

Property, plant and equipment and depreciation

Intangible assets (other than goodwill)

Leases

Land use rights

Investments and other financial assets

Initial recognition and measurement

Subsequent measurement

Grand Baoxin Auto Group Limited Proxy Solicitation & Information Statement 2012

BAOXIN AUTO GROUP LIMITED 寶信汽車集團有限公司