THE 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 Grand Baoxin Auto Group Limited , you should at once hand this circular, together with the accompanying form of proxy, to the purchaser or to the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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.

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GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1293)

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

SOMERLEY CAPITAL LIMITED

A letter from the Board is set out on pages 4 to 14 of this circular. A letter from the Independent Board Committee is set out on page 15 of this circular. A letter from the Independent Financial Adviser is set out on pages 16 to 33 of this circular.

A notice convening the extraordinary general meeting of the Company (“ EGM ”) to be held at No. 3998 Hongxin Road, Minhang District, Shanghai, the PRC at 10: 30 a.m. on 15 June 2018 is set out on pages EGM-1 to EGM-2 of this circular.

Whether or not you are able to attend the EGM, please complete and return the enclosed proxy form in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time scheduled for holding the EGM (or any adjourned meeting thereof). Completion and delivery of the proxy form shall not preclude you from attending and voting at the EGM or any adjournment thereof should you so wish.

25 May 2018

			Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
Letter from	the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from	the	Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from	the	Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix I	—	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of the Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			EGM-1

— i —

DEFINITIONS

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

“All Trust Leasing”	All Trust Leasing Company Limited (匯通信誠租賃有限公
	司), a company established under the laws of the PRC and is
	an indirect wholly-owned subsidiary of CGA
“Annual Caps”	the annual maximum finance amount for the transactions
	underlying the Sale and Leaseback Framework Agreement for
	each of the three years ending 31 December 2018, 2019 and
	2020 as set out in this circular
“Articles”	the articles of association of the Company, as amended,
	modified or supplemented from time to time
“associate(s)”	has the meaning ascribed thereto under the Listing Rules
“Board”	the board of directors of the Company
“CGA”	China Grand Automotive Services, Co., Ltd (廣匯汽車服務股
	份公司), a company established under the laws of the PRC,
	the shares of which are listed on the Shanghai Stock Exchange
	(SSE Stock Code: 600297)
“CGA Limited”	China Grand Automotive Services Co., Ltd. (廣匯汽車服務有
	限責任公司), a company established under the laws of the
	PRC and a wholly-owned subsidiary of CGA
“China Grand Auto”	China Grand Automotive Services (Hong Kong) Limited, a
	company incorporated in Hong Kong with limited liability
	and is an indirect wholly-owned subsidiary of CGA
“Company”	Grand Baoxin Auto Group Limited (廣匯寶信汽車集團有限公
	司), an company incorporated in the Cayman Islands with
	limited liability, the Shares of which are listed on the Main
	Board of The Stock Exchange of Hong Kong Limited (stock
	code: 1293)
“connected person(s)”	has the meaning ascribed thereto under the Listing Rules
“connected transaction(s)”	has the meaning ascribed thereto under the Listing Rules
“controlling shareholder”	has the meaning ascribed thereto under the Listing Rules
“Dingxin Leasing”	Shanghai Dingxin Financial Leasing Co., Ltd (上海鼎信融資
	租賃有限公司), a company established under the laws of the
	PRC and is a direct wholly-owned subsidiary of the Company

— 1 —

DEFINITIONS

“Director(s)” the director(s) of the Company “EGM” the extraordinary general meeting of the Company to be convened and held on 15 June 2018 to seek the Independent Shareholders’ approval, amongst other things, on the Sale and Leaseback Framework Agreement

“Group” the Company and its subsidiaries “HK$” Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong “Hong Kong” Hong Kong Special Administrative Region of the PRC “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

“Implementation Agreement(s)”

the specific individual implementation agreement(s) to be entered into by Dingxin Leasing and All Trust Leasing in accordance with the Sale and Leaseback Framework Agreement from time to time during the term of the Sale and Leaseback Framework Agreement

“Independent Board Committee”

a committee under the Board which is established for the purpose of advising the Independent Shareholders on the Sale and Leaseback Framework Agreement, including independent non-executive Directors Mr. DIAO Jianshen, Mr. WANG Keyi and Mr. CHAN Wan Tsun Adrian Alan

“Independent Financial Adviser”

Somerley Capital Limited, a corporation licensed under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Sale and Leaseback Framework Agreement

“Independent Shareholder(s)”

Shareholder(s) other than China Grand Auto and its associates

“Independent Third Party(ies)”

party(ies) not connected with any of the directors, the chief executives or the substantial shareholders of the Company or any of its subsidiaries or their respective associates

— 2 —

DEFINITIONS

“Latest Practicable Date” 23 May 2018, being the latest practicable date for ascertaining certain information before the printing of this circular “Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended from time to time) “PRC” the People’s Republic of China, for the purpose of this circular, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan “Previous CCT” the continuing connected transactions contemplated under the sale and leaseback framework agreement dated 24 January 2017 entered into between Dingxin Leasing and All Trust Leasing, details of which are set out in the announcement of the Company dated 24 January 2017 and the circular of the Company dated 24 February 2017 “RMB” Renminbi, the lawful currency of the PRC “Sale and Leaseback Framework the sale and leaseback framework agreement dated 24 April Agreement” 2018 between All Trust Leasing and Dingxin Leasing “SFO” the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “Share(s)” share(s) in the share capital of the Company, with a nominal value of HK$0.01 each “Shareholder(s)” holder(s) of the Shares “subsidiary” or “subsidiaries” has the meaning ascribed thereto in section 15 of the Companies Ordinance (Chapter 622 of the laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “substantial shareholder(s)” has the meaning ascribed thereto in the Listing Rules “%” percentage ratio

— 3 —

LETTER FROM THE BOARD

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GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1293)

Executive Directors:

Mr. LI Jianping (Chairman) Mr. WANG Xinming (President) Mr. LU Ao Mr. QI Junjie

Non-executive Director: Ms. XU Xing

Independent non-executive Directors:

Mr. DIAO Jianshen Mr. WANG Keyi Mr. CHAN Wan Tsun Adrian Alan

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

I. INTRODUCTION

The main purposes of this circular are:

(a) to provide you with further information relating to the Sale and Leaseback Framework Agreement, which constitutes a discloseable transaction and continuing connected transactions of the Company;
(b) to set out the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as well as the recommendation and opinion of the Independent Board Committee as advised by the Independent Financial Adviser in relation to the Sale and Leaseback Framework Agreement (including the Annual Caps); and
(c) to give you notice of the EGM to consider and, if thought fit, to approve the Sale and Leaseback Framework Agreement and the respective Annual Caps.

— 4 —

LETTER FROM THE BOARD

II. DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

1. Introduction

The Board is pleased to announce that on 24 April 2018 (after trading hours), Dingxin Leasing, a direct wholly-owned subsidiary of the Company, and All Trust Leasing, an indirect wholly-owned subsidiary of CGA, entered into the Sale and Leaseback Framework Agreement.

Pursuant to the Sale and Leaseback Framework Agreement, Dingxin Leasing shall sell to All Trust Leasing vehicles owned by Dingxin Leasing, which shall then be leased back for use by Dingxin Leasing. Upon expiry of the lease term, Dingxin Leasing shall repurchase the leased assets in accordance with the agreed terms.

2. Key Terms of the Sale and Leaseback Framework Agreement

The key terms of the Sale and Leaseback Framework Agreement are as follows:

Date

24 April 2018

Parties

(1) Dingxin Leasing
(2) All Trust Leasing

Sale and leaseback

Dingxin Leasing shall sell to All Trust Leasing vehicles owned by Dingxin Leasing, which shall then be leased back for use by Dingxin Leasing.

Dingxin Leasing is principally engaged in the automobile finance leasing business in the PRC. Dingxin Leasing will enter into automobile finance lease agreements with retail customers, pursuant to which Dingxin Leasing will purchase vehicles from various manufacturers or the retail customers in accordance with the retail customers’ instructions and obtain the legal titles to such vehicles, and Dingxin Leasing will then lease the purchased vehicles to such retail customers.

The vehicles to be sold to All Trust Leasing (and then leased back for use by Dingxin Leasing) under the Sale and Leaseback Framework Agreement comprise those owned by Dingxin Leasing and leased to its retail customers. The list of the leased assets under the Sale and Leaseback Framework Agreement (being the vehicles owned by Dingxin Leasing and leased to its retail customers and which will be set out in each Implementation Agreement), the lease term and the lease rate will be determined at the time when the Implementation Agreements are entered into.

— 5 —

LETTER FROM THE BOARD

Pursuant to the Implementation Agreements, the legal titles of the vehicles subject to such Implementation Agreements will be transferred from Dingxin Leasing to All Trust Leasing; however, All Trust Leasing will not succeed to or assume any rights or obligations of Dingxin Leasing under Dingxin Leasing’s relevant finance lease agreements with its retail customers with respect to the same vehicles.

Upon expiry of the relevant lease term, Dingxin Leasing shall repurchase the leased assets in accordance with the agreed terms and with a consideration of a nominal amount of RMB100.

The Company considers that the Sale and Leaseback Framework Agreement should be classified as a finance lease, and such sale and leaseback transaction is a mean whereby the lessor provides finance to the lessee, with the asset as security. A finance lease should be recognised in the lessee’s statement of financial position as an asset and as an obligation to pay future lease payments, respectively. As such, in the Company’s consolidated statement of financial position, the leased asset shall be recorded as property, plant and equipment and the amount being received from lessor shall be recorded as a payable. This accounting treatment has been agreed with the auditor of the Company.

Sale price and lease payments

The lease payments shall be calculated on the basis of the leasing costs and lease interest rates and made on a monthly basis by Dingxin Leasing to All Trust Leasing. Dingxin Leasing shall settle the lease payments in cash.

Leasing costs comprise the sale price and handling fees (if any) agreed to be included in such leasing costs. The sale price shall reflect the fair market value of the leased assets to be sold by Dingxin Leasing to All Trust Leasing by reference to the remaining principal amount of the leased assets under the existing lease agreements between Dingxin Leasing and its retail customers. Principal amount in this case refers to the principal amount under the leasing contracts entered into between Dingxin Leasing and its own customers, which depends on the actual market value of the vehicles associated with the lease as well as the actual financing amount required. Handling fee is determined by reference to the relevant party’s internal procedures which may depend on factors such as the amount under the relevant leasing contract, and handling fees may or may not be applicable for a particular leasing contract. The sale price will be funded by All Trust Leasing’s internal resources and its bank loans. Dingxin Leasing shall bear all costs incurred in connection with the transfer of the leased assets.

Dingxin Leasing shall gather information on the terms and conditions (including interest rates) offered by third parties in the PRC who are independent of the Company and its connected persons in sale and leaseback transactions of a similar scale and nature so that Dingxin Leasing can ensure that the interest rates applicable to transactions between Dingxin Leasing and All Trust Leasing are the same as or more favourable to the Company than those offered by such independent third parties. The parties agree that the lease interest rates shall in any event be at least 110% of, but no more than four times of, the benchmark interest rate for RMB term loans as announced for implementation by the People’s Bank of China.

— 6 —

LETTER FROM THE BOARD

While terms of the sale and lease back transactions, such as lease term and lease rate, will be agreed by the time when the relevant Implementation Agreement is entered into, the monthly repayment amounts (which comprise partly the principal to be repaid and partly the interest to be repaid in that particular period) could be calculated and ascertained in any particular point of time throughout the term of the Sale and Leaseback Framework Agreement.

The annual maximum finance amount, which shall comprise the sum of the principal amount together with the interest that may accrue in respect of the Implementation Agreement(s) then in effect, shall not exceed the Annual Caps.

Implementation Agreements

Dingxin Leasing and All Trust Leasing will enter into specific individual Implementation Agreements from time to time. Each Implementation Agreement will be entered into in the ordinary and usual course of business of the Group and on normal commercial terms or better. The terms of each Implementation Agreement will be in accordance with the terms of the Sale and Leaseback Framework Agreement. Notwithstanding the foregoing, Dingxin Leasing can decide whether or not to enter into any Implementation Agreements with All Trust Leasing after comparing terms then offered by independent third parties, if any, for sale and leaseback arrangements similar to the transactions contemplated under the Sale and Leaseback Framework Agreement. Dingxin Leasing expects that it will not enter into more than ten Implementation Agreements with All Trust Leasing for each of the three years ending 31 December 2018, 2019 and 2020.

Within five days after the signing of each Implementation Agreement, Dingxin Leasing shall pay to All Trust Leasing a deposit in the amount of 10% of the finance amount under the relevant Implementation Agreement, which shall be used to offset default (if any) of payment obligations by Dingxin Leasing under the relevant Implementation Agreement.

During the lease period under each Implementation Agreement, Dingxin Leasing or its designees shall keep the leased assets insured with an insured amount of not less than the total amount of the unpaid lease payments and other payments payable, or the maximum amount that can be insured by an insurance company.

Pledge of receivables

Dingxin Leasing and All Trust Leasing have agreed that Dingxin Leasing shall enter into a pledge of receivables in favour of All Trust Leasing on the date of the relevant Implementation Agreement, pursuant to which, in the event of default of payment by Dingxin Leasing to All Trust Leasing pursuant to the relevant Implementation Agreement, All Trust Leasing shall have the preferential rights to payment on all receivables payable to Dingxin Leasing in respect of the underlying leased assets.

Unless otherwise specified in an Implementation Agreement, in the event Dingxin Leasing fails to repay to All Trust Leasing pursuant to the terms of the respective Implementation Agreement, All Trust Leasing shall have the discretion to exercise its rights in the aforementioned pledge of receivables.

— 7 —

LETTER FROM THE BOARD

Term and termination

The Sale and Leaseback Framework Agreement shall become effective on the date when it is approved by the Independent Shareholders at the EGM and will expire on 31 December 2020. Dingxin Leasing and All Trust Leasing will not enter into any individual Implementation Agreements before the Sale and Leaseback Framework Agreement becomes effective. The term of the individual Implementation Agreements shall not exceed three years and in any event shall not exceed 31 December 2020. In the event that the term of an Implementation Agreement is expected to extend beyond 31 December 2020, the Company will re-comply with the announcement and shareholders’ approval requirements in accordance with Rule 14A.54 of the Listing Rules before such Implementation Agreement is entered into.

If either party to the Sale and Leaseback Framework Agreement commits any material breach, the innocent party may terminate the Sale and Leaseback Framework Agreement by written notice to the party in breach within 15 business days after such material breach is known to the innocent party, provided that the party in breach has not remedied such breach within a reasonable period set out in the notice.

In the event of the termination of the Sale and Leaseback Framework Agreement and the underlying Implementation Agreement(s), Dingxin Leasing is required to make a full repayment of the outstanding principal amount together with the accrued and unpaid lease payment (if any) in respect of the transactions under the Implementation Agreement(s) up to and including the date of termination within seven business days upon such termination.

Previous CCT

On 24 January 2017, Dingxin Leasing and All Trust Leasing entered into a sale and leaseback framework agreement for the Previous CCT, pursuant to which All Trust Leasing shall sell to Dingxin Leasing vehicles owned by All Trust Leasing, which shall then be leased back for use by All Trust Leasing. The annual caps proposed for the Previous CCT are RMB1.5 billion, RMB2.5 billion and RMB3 billion for the three years ending 31 December 2017, 2018 and 2019 respectively. For the year ending 31 December 2017, approximately RMB1 billion has been incurred under the Previous CCT. During the first quarter of 2018, no amount has been incurred under the Previous CCT.

The major terms under the Sale and Leaseback Framework Agreement are largely the same as the sale and leaseback framework agreement for the Previous CCT. However, the Previous CCT constitutes separate transactions to the transactions contemplated under the Sale and Leaseback Framework Agreement, and there will be no net-off effect between the Previous CCT and the transactions contemplated under the Sale and Leaseback Framework Agreement. Further, under no circumstances will any party be allowed or be able to sell and pledge the same leased asset(s) and respective receivable(s) to and back from the same counterparty for the purpose of securing funding. A list containing details that are unique to each vehicle to be sold and leased back (including, but not limited to, engine number) will be provided upon entering into any Implementation Agreement for review and inspection. This ensures that vehicles under each Implementation Agreement are individually identifiable by all parties and the same vehicle does not fall under both the Previous CCT and the Sale and Leaseback Framework Agreement.

— 8 —

LETTER FROM THE BOARD

Internal Control Measures

The Company has adopted a set of effective internal control measures to supervise the continuing connected transactions of the Group. Prior to entering into individual Implementation Agreements under the Sale and Leaseback Framework Agreement, the finance department of Dingxin Leasing will review and assess the specific terms and conditions of the transactions and to compare the lease interest rates with reference to the market conditions and the prices charged or quoted by at least two independent third parties in sale and leaseback transactions of a similar scale and nature. Such independent third parties shall have the operation scale and financial position at least comparable to those of Dingxin Leasing and/or All Trust Leasing and have a track record of at least one year in conducting similar sale and leaseback transactions. Dingxin Leasing will not enter into any individual Implementation Agreements if the lease interest rates paid to All Trust Leasing are not on normal commercial terms. The finance department of the Company will also monitor the sale and leaseback transactions under the Sale and Leaseback Framework Agreement on a regular basis. As part of the reporting processes implemented by the Group, Dingxin Leasing is required to submit a report to the Company’s finance department each month, setting out the transaction amounts and an indication of whether transaction volumes are expected to remain within the Annual Caps. If any monthly report indicates that an Annual Cap is anticipated to be exceeded, the Company’s finance department will collect further information from Dingxin Leasing including estimated transaction values, and the Company’s finance department will calculate and establish revised caps and obtain approval from the Board for such revised annual caps (subject to the requirements under the then applicable Listing Rules).

Given that Dingxin Leasing expects that it will not enter into more than ten Implementation Agreements with All Trust Leasing for each of the three years ending 31 December 2018, 2019 and 2020, the Directors are of the view that such monthly reports from Dingxin Leasing to the Company’s finance department are adequate for the Company to supervise whether transaction volumes are expected to remain within the Annual Caps. In addition, before each and every Implementation Agreement is entered into, the Company’s finance department will review whether transaction volumes will remain within the Annual Caps if such Implementation Agreement is entered into. In the event that the term of an Implementation Agreement is expected to extend beyond 31 December 2020, the Company will re-comply with the announcement and shareholders’ approval requirements in accordance with Rule 14A.54 of the Listing Rules before such Implementation Agreement is entered into.

The independent non-executive Directors shall review the Implementation Agreements to ensure that they have been entered into in accordance with the terms of the Sale and Leaseback Framework Agreement.

— 9 —

LETTER FROM THE BOARD

Proposed annual caps

Set out below is a summary of the proposed Annual Caps in respect of the annual maximum finance amount under the Sale and Leaseback Framework Agreement:

		Total
	_RMB’ _	million
2018		900
2019		1,500
2020		1,800

The annual maximum finance amount set out above refers to the sum of the principal amount and interest that may accrue in respect of the Implementation Agreement(s) then in effect.

The Annual Caps were determined after taking into account, amongst other things, (i) the business plans of the Group (including Dingxin Leasing); and (ii) the relevant expected accumulated principal amount and interest under the Sale and Leaseback Framework Agreement.

It is the intention of the Company for Dingxin Leasing to replicate the model of All Trust Leasing in managing automobile finance. With this intention, in determining the Annual Caps, the Company considered factors including All Trust Leasing’s performance indicators such as the total number of vehicles sold and the total number of new finance lease contracts entered into, and the existing performance of Dingxin Leasing and its retail finance leasing business including details of finance leasing contracts entered for the first three months of 2018 and the actual financing amount per vehicle sold under such finance lease arrangement.

The Annual Cap for 2018 was mainly estimated by reference to the projected total contract value of the finance leases entered and to be entered by Dingxin Leasing in 2018 and the average financing amount per vehicle under existing finance leases.

The Annual Cap for 2019 comprises of (a) a portion of around RMB300 million representing the estimated outstanding financing amount brought forward pursuant to Implementation Agreement(s) signed in 2018 having a lease term of three years up to 2020; and (b) the remaining balance of around RMB1,200 million representing the total financing amount of newly signed Implementation Agreement(s) in 2019.

The Annual Cap for 2020 comprises of (a) the respective portions of RMB300 million representing the estimated outstanding financing amount brought forward pursuant to the Implementation Agreement(s) signed in 2018 having a lease term of three years up to 2020, and of RMB750 million representing the estimated outstanding financing amount brought forward pursuant to the Implementation Agreement(s) signed in 2018 having a lease term of two years up to 2020; and (b) the remaining balance of RMB750 million representing the total financing amount of newly signed Implementation Agreement(s) in 2019.

— 10 —

LETTER FROM THE BOARD

3. Reasons for and Benefits of Entering into the Sale and Leaseback Framework Agreement

Currently, Dingxin Leasing is mainly engaged in direct automobile finance leasing with retail customers. Dingxin Leasing is planning to vigorously develop its sale and leaseback finance leasing business in the PRC. The Sale and Leaseback Framework Agreement is aimed to provide funding flexibility and financing options to Dingxin Leasing. Although the Previous CCT mirrors the Sale and Leaseback Framework Agreement, as explained in the section headed “Previous CCT”, the Previous CCT is separate from the Sale and Leaseback Framework Agreement, and the transactions contemplated under the Previous CCT will only be entered into provided that the Company considers itself to have the available resources on top of the necessary for its own operations. It is the intention of the Company for Dingxin Leasing to be able to source its funding by way of entering into finance leases as a lessee and at the same time utilise its internal resources to enter into similar arrangements as a lessor, depending on its then financial circumstance and/or business needs. Further, as there is no obligation for Dingxin Leasing to enter into any transactions under the Previous CCT and/or the Sale and Leaseback Framework Agreement, this provides flexibility for the financing management of Dingxin Leasing. Even when such transaction is contemplated, there is in place a set of internal procedures to allow Dingxin Leasing to ascertain that the lease interest rate it agrees to is based on a market rate.

While both CGA and the Group are engaged in the business of automotive sales and services and finance leasing, and the Company intends Dingxin Leasing to replicate the model of All Trust Leasing in managing automobile finance, given that CGA and the Group have different brand portfolios and geographical presence, instead of constituting competition, the businesses of CGA and the Group are delineated and complement each other. CGA’s current brand portfolio consists of high-end brands including FAW Audi, Mercedes-Benz, Shanghai General Motors Cadillac, imported Volkswagen and Volvo, and mid-range brands such as Beijing Hyundai, Changan Ford, Dongfeng Nissan, FAW Toyota, Guangqi Honda, Shanghai General Motors Buick, Shanghai General Motors Chevrolet and Shanghai Volkswagen. The Group currently owns and operates dealerships with brands that CGA does not operate, including Ferrari, Maserati, BMW, Mini, Land Rover, Porsche and Jaguar. Also, CGA’s dealership network is mainly located in central and western regions (including Xinjiang, Gansu, Chongqing, Guangxi, Qinghai and Ningxia), whereas the Group’s dealership network is mainly located in the Yangtze River Delta region, Northeastern China, Eastern China and Northern China, which complements the geographical presence of CGA’s dealership network. The Previous CCT and the Sale and Leaseback Framework Agreement can serve CGA and the Group to develop finance leasing services by their respective sales network as described.

Therefore, the entering into of the Sale and Lease Framework Agreement is a strategic step of the Group to tap into the sale and leaseback finance leasing business in the PRC by obtaining funding flexibility and financing options. By collaborating with All Trust Leasing and entering into the Sale and Leaseback Framework Agreement, the Group will be able to obtain additional financing to develop its own finance leasing business when such financing need is required by business operation.

— 11 —

LETTER FROM THE BOARD

4. Implications under the Listing Rules

As at the Latest Practicable Date, CGA, through its indirect wholly-owned subsidiary China Grand Auto, holds approximately 67.60% of the shares in the Company, and it is therefore a controlling shareholder of the Company. All Trust Leasing is an indirect wholly-owned subsidiary of CGA, and it is therefore a connected person of the Company under the Listing Rules. Accordingly, the transactions contemplated under the Sale and Leaseback Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the Sale and Leaseback Framework Agreement are more than 5%, the Sale and Leaseback Framework Agreement and the transactions contemplated thereunder are subject to the requirements of reporting, announcement and approval by Independent Shareholders of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the Sale and Leaseback Framework Agreement are more than 5% but less than 25%, the Sale and Leaseback Framework Agreement and the transactions contemplated thereunder also constitute a discloseable transaction of the Company, and are subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

5. Approval by Directors and Independent Shareholders

Mr. Li Jianping (chairman of the board of CGA), Mr. Wang Xinming (a director and the president of CGA), Mr. Lu Ao (a vice president and chief financial officer of CGA), Mr. Qi Junjie (the secretary of the party committee of CGA) and Ms. Xu Xing (the secretary of the board and assistant to the president of CGA) all serve at CGA. They have abstained from voting on the Board resolution for considering and approving the Sale and Leaseback Framework Agreement. Save as disclosed above, there are no other Directors who have any material interest in the Sale and Leaseback Framework Agreement and no other Directors need to abstain from voting on the Board resolution for considering and approving the Sale and Leaseback Framework Agreement.

According to the Listing Rules, the Independent Board Committee has been formed. After considering the advice from the Independent Financial Adviser, the Independent Board Committee will advise the Independent Shareholders on the fairness and reasonableness of the Sale and Leaseback Framework Agreement, whether it is in the interests of the Company and the Shareholders as a whole, and how to vote. To the best of the Directors’ knowledge, information and belief after making all due enquiry, no member of the Independent Board Committee has any material rights or interests in the Sale and Leaseback Framework Agreement.

Somerley Capital Limited has been appointed as the Independent Financial Adviser and will advise the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of the Sale and Leaseback Framework Agreement and whether it is in the interests of the Company and the Shareholders as a whole. It will also advise the Independent Shareholders on how to vote and other relevant issues.

— 12 —

LETTER FROM THE BOARD

The Company will convene the EGM to seek the Independent Shareholders’ approval on the Sale and Leaseback Framework Agreement. China Grand Auto and its close associates will abstain from voting at the EGM in respect of the ordinary resolution of the above issue.

6. General Information

The Group

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

Dingxin Leasing

Dingxin Leasing is a company established under the laws of the PRC and is a direct wholly-owned subsidiary of the Company. Dingxin Leasing is principally engaged in the finance leasing business in the PRC.

All Trust Leasing

All Trust Leasing is a company established under the laws of the PRC and is an indirect wholly-owned subsidiary of CGA. All Trust Leasing is principally engaged in the automobile finance leasing business in the PRC.

III. RECOMMENDATION

The Directors (including all independent non-executive Directors) considered that (i) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are on normal commercial terms in the ordinary and usual course of the Group’s business, and (ii) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Therefore, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM. As mentioned above, Somerley Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders.

Your attention is drawn to the letter from the Independent Board Committee and the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders which are set out on page 15 and pages 16 to 33 of this circular, respectively. The Independent Board Committee, having taken into account the advice of Somerley Capital Limited, considers that (i) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are on normal commercial terms and in the ordinary and usual course of the Group’s business, and (ii) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Therefore, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM.

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LETTER FROM THE BOARD

IV. ADDITIONAL INFORMATION

Your attention is drawn to the general information set out in Appendix I of this circular.

By order of the Board Grand Baoxin Auto Group Limited Mr. LI Jianping Chairman

The PRC 25 May 2018

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [61 x 61] intentionally omitted <==

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1293)

25 May 2018

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

We refer to the circular of the Company dated 25 May 2018 (the “ Circular ”) despatched to the Shareholders of which this letter forms part. Unless the context requires otherwise, terms and expressions in this letter shall have the same meanings as those defined in the Circular.

We have been appointed to advise the Independent Shareholders on whether the Sale and Leaseback Framework Agreement is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Somerley Capital Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders on the Sale and Leaseback Framework Agreement.

We wish to draw your attention to the letter from the Board as set out on pages 4 to 14 of the Circular and the letter from the Independent Financial Adviser as set out on pages 16 to 33 of the Circular.

Having considered the advice given by the Independent Financial Adviser, we are of the opinion that (i) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are on normal commercial terms in the ordinary and usual course of the Group’s business, and (ii) the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Therefore, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the EGM.

Yours faithfully,

For and on behalf of the Independent Board Committee DIAO Jianshen WANG Keyi CHAN Wan Tsun Adrian Alan

Independent Non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice dated 25 May 2018 from Somerley Capital Limited prepared for the purpose of inclusion in this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Sale and Leaseback Framework Agreement.

SOMERLEY CAPITAL LIMITED

20th Floor China Building 29 Queen’s Road Central Hong Kong

25 May 2018

To: The Independent Board Committee and the Independent Shareholders

Dear Sirs,

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the Sale and Leaseback Framework Agreement and the transactions contemplated thereunder (the “ Transactions ”). Details of the aforesaid transactions are set out in the letter from the Board contained in the circular of the Company (the “ Circular ”) to its shareholders dated 25 May 2018, of which this letter forms part. Unless otherwise defined, terms used in this letter shall have the same meanings as those defined in the Circular.

On 24 April 2018 (after trading hours), Dingxin Leasing, a direct wholly-owned subsidiary of the Company, and All Trust Leasing, an indirect wholly-owned subsidiary of CGA, entered into the Sale and Leaseback Framework Agreement. Pursuant to the Sale and Leaseback Framework Agreement, Dingxin Leasing shall sell to All Trust Leasing vehicles owned by Dingxin Leasing, which shall then be leased back for use by Dingxin Leasing.

As at the Latest Practicable Date, CGA, through its indirect wholly-owned subsidiary China Grand Auto, holds approximately 67.60% of the shares in the Company, and it is therefore a controlling shareholder of the Company. All Trust Leasing is an indirect wholly-owned subsidiary of CGA, and it is therefore a connected person of the Company under the Listing Rules. Accordingly, the Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the Sale and Leaseback Framework Agreement are more than 5%, the Transactions are subject to the requirements of reporting, announcement and approval by independent shareholders of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As some of the applicable percentage ratios for the Sale and Leaseback Framework Agreement are more than 5% but less than 25%, the Transactions also constitute a discloseable transaction of the Company, and are subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. DIAO Jianshen, Mr. WANG Keyi and Mr. CHAN Wan Tsun Adrian Alan, has been established to make a recommendation to the Independent Shareholders as to whether the terms of the Sale and Leaseback Framework Agreement and the Transactions are on normal commercial terms, in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and its shareholders as a whole. Somerley Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard.

We are not associated or connected with the Company, Dingxin Leasing, All Trust Leasing or their respective core connected persons or associates and, accordingly, are considered eligible to give independent advice on the Transactions. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, Dingxin Leasing, All Trust Leasing or their respective core connected persons or associates.

In formulating our advice and recommendation, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Company (collectively, the “ Management ”), management of CGA, and the respective professional advisers of the Company and CGA, which we have assumed to be true, accurate and complete. We have reviewed information on the Company, including but not limited to, the Sale and Leaseback Framework Agreement, annual reports of the Company for each of the years ended 31 December 2016 (“ FY2016 ”) (the “ 2016 Annual Report ”) and 31 December 2017 (“ FY2017 ”) (the “ 2017 Annual Report ”), and other information contained in the Circular.

In addition, we have relied on the information and facts supplied, and the opinions expressed, by the Group and have assumed in relation to the facts to be true, accurate and complete in all material aspects and in relation to any opinions to be honestly held at the time they were made and will remain, in relation to the facts to be true, accurate and complete in all material aspects and in relation to any opinions to be honestly held, up to the date of the EGM. We have also sought and received confirmation from the Group that no material facts have been omitted from the information supplied by them and that their opinions expressed to us are not misleading in any material respect. We consider that the information we have received is sufficient for us to formulate our opinion and recommendation as set out in this letter and have no reason to believe that any material information has been omitted or withheld, nor to doubt the truth or accuracy of the information provided to us. We have, however, not conducted any independent investigation into the businesses and affairs of the Group, Dingxin Leasing and All Trust Leasing, nor have we carried out any independent verification of the information supplied.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation with regard to the Transactions, we have considered the following principal factors and reasons:

1. Information on the parties to the Sale and Leaseback Framework Agreement

The Group

The Company is incorporated in the Cayman Islands with limited liability, the Shares of which have been listed on the Main Board of the Hong Kong Stock Exchange since 14 December 2011. The Group is a leading luxury 4S (sales, spare parts, service and survey) dealership group in the PRC and is principally engaged in the sale and service of motor vehicles.

The Group’s existing finance leasing services comprises the retail finance leasing services to its retail auto customers, as well as the wholesale finance leasing services to All Trust Leasing. The Group has been operating in the retail finance leasing service business since 2013. In 2017, Dingxin Leasing tapped into the wholesale finance leasing business by entering into the sale and leaseback framework arrangement with All Trust Leasing, details of which were set out in the Company’s circular dated 24 February 2017 (the “ 2017 Sale and Leaseback Framework Agreement ”). Revenue generated from the existing finance leasing services segment increased from approximately RMB4.4 million for FY2016 to approximately RMB62.1 million in FY2017 in which approximately RMB61.0 million was attributable to the wholesale finance leasing business. Despite such growth, revenue from the finance leasing services segment still represented only an insignificant portion of less than 0.19% of the total revenue of the Group for FY2017.

Dingxin Leasing

All Trust Leasing

All Trust Leasing is a company established under the laws of the PRC in 2011 and is an indirect wholly-owned subsidiary of CGA. All Trust Leasing is principally engaged in the automobile finance leasing business in the PRC. As disclosed in CGA’s annual report for year ended 31 December 2017, the total assets and net assets as at 31 December 2017 and net profit for FY2017 for All Trust Leasing amounted to approximately RMB18,142 million, RMB6,148 million and RMB552 million respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. The Sale and Leaseback Framework Agreement

2.1 Background of and reasons for the Sale and Leaseback Framework Agreement

As disclosed in the Circular, Dingxin Leasing is engaged in direct automobile leasing with retail customers and it is planning to vigorously develop its sale and leaseback finance leasing business in the PRC. The entering into of the Sale and Leaseback Framework Agreement is a strategic step of the Group to expand its sale and leaseback finance leasing business in the PRC. By collaborating with All Trust Leasing and entering into the Sale and Leaseback Framework Agreement, the Group will be able to have the flexibility in obtaining additional financing to further develop its own finance leasing business.

The Group has been engaged in the finance leasing services business since 2013. The finance leasing service business remained relatively small and as disclosed in the 2016 Annual Report and the 2017 Annual Report, revenue from the finance leasing services segment represented an insignificant portion of the total revenue of less than 0.03%, 0.017% and 0.19%, for each of the three financial years ended 31 December 2017 respectively. We understand from the Management that the Company has positioned the development of its own finance leasing business through Dingxin Leasing as one of its key strategic goals since 2017. As disclosed in the FY2016 Annual Report, the Management has intended for, among others, Dingxin Leasing to replicate All Trust Leasing’s model in managing automobile finance. The 2017 Sale and Leaseback Framework Agreement was the first step for Dingxin Leasing to tap into the wholesale finance leasing business while at the same time, furthering its retail finance leasing business.

Based on our understanding obtained and as also disclosed in the Circular, while both CGA and the Group are engaged in the business of automotive sales and services and finance leasing, and the Company intends Dingxin Leasing to replicate the model of All Trust Leasing in managing automobile finance, given that CGA and the Group have different brand portfolios and geographical presence, instead of constituting competition, the business of CGA and the Group are delineated and complement each other. CGA’s current brand portfolio consists of high-end brands including FAW Audi, Mercedes-Benz, Shanghai General Motors Cadillac, imported Volkswagen and Volvo, and mid-range brands such as Beijing Hyundai, Changan Ford, Dongfeng Nissan, FAW Toyota, Guangqi Honda, Shanghai General Motors Buick, Shanghai General Motors Chevrolet and Shanghai Volkswagen. The Group currently owns and operates dealerships with brands that CGA does not operate, including Ferrari, Maserati, BMW, Mini, Land Rover, Porsche and Jaguar. Also, CGA’s dealership network is mainly located in central and western regions (including Xinjiang, Gansu, Chongqing, Guangxi, Qinghai and Ningxia), whereas the Group’s dealership network is mainly located in the Yangtze River Delta region, Northeastern China, Eastern China and Northern China, which complements the geographical presence of CGA’s dealership network. As such we concur with the view of the Management that the 2017 Sale and Leaseback Framework Agreement and the Sale and Leaseback Framework Agreement can serve CGA and the Group to develop finance leasing services by their respective sales network as described.

Between January and March 2018, Dingxin Leasing has entered into approximately 1476 financial leases with individual retail clients and approximately 163 financial leases with institutional clients. The contract value of financial leases entered for the same period was approximately RMB97.4

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

million. In view of the promising results achieved so far, and the finance leasing business being, capital intensive in nature, the Management is of the view that it is beneficial for the Company to explore different financing channels to ensure the Group to have the necessary funding for the growth of its operations as well as to optimise its debt structure.

We noted that it is not uncommon for industry players to use automobile sale and leaseback arrangements to secure funding in connection with the operation of retail finance leasing business. We are advised by the Management that All Trust Leasing (as lessee) has also utilised wholesale finance leasing arrangements with other independent third parties including banks and finance companies from time to time, in addition to Dingxin Leasing through the 2017 Sale and Leaseback Framework Agreement. Further details relating the aforesaid arrangements of All Trust Leasing are set out in section headed “2.2 Terms of the Sale and Leaseback Framework Agreement” below in this letter. In addition, we also noted from the public domain that Yixin Group Limited (stock code 2858) (“ Yixin ”), a company listed on the Hong Kong Stock Exchange engaging in the operation of online automobile retail transaction platform in China which includes transaction platform business, and self-operated financing business including the provision to consumers with auto finance solutions through financing leases and operating leases, published an announcement on 14 December 2017 (the “ Yixin Announcement ”) which stated that a wholly-owned subsidiary of Yixin (as the lessee, “ Yixin’s Subsidiary ”) and Cinda Financial Leasing Co., Ltd (信達金融租賃有限公司) (as the lessor, “ CFL ”) entered into a finance lease agreement pursuant to which Yixin’s Subsidiary agreed to sell its automobiles to CFL and CFL agreed to lease back those automobiles to Yixin’s Subsidiary during the lease term (the “ Yixin Transaction* ”). Based on the descriptions mentioned in the Yixin Announcement, the nature and structure of the Yixin Transaction is similar to the Transactions under the Sale and Leaseback Framework Agreement.

Against the backdrop of the 2017 Sale and Leaseback Framework Agreement, we understand from the management that:

(i) it is common for finance leasing entities such as Dingxin Leasing to source its funding by way of entering into finance leases as a lessee and utilise its internal resources at the same time by entering into similar agreements with other entities as a lessor;
(ii) the transactions under the Sales and Leaseback Framework Agreement cannot be done at liberty or done anytime. Such transactions are required to be driven by and are directly correlated to the Company’s actual business operation, that is, the entering into of finance leasing contracts with its retail customers;
(iii) transactions contemplated under the 2017 Sale and Leaseback Framework Agreement will only be entered into provided that the Company considers itself to have available resources on top of those necessary for its own operations. As such, the transactions under the 2017 Sale and Leaseback Framework Agreement and those under the Sale and Leaseback Framework Agreement are simply a mean to provide Dingxin Leasing with funding flexibility and financing options according to its then financial resources and/or business need; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) there is also no obligation for Dingxin Leasing to enter into any transactions under the 2017 Sale and Leaseback Framework Agreement and/or the Sale and Leaseback Framework Agreement and even when such transaction is contemplated, it has in place, a set of internal control procedures to allow Dingxin Leasing to ascertain that the lease interest rate it agrees to is based on a market rate.

Based on all the above, the Directors are of the view, and we concur, that the 2017 Sale and Leaseback Framework Agreement and the Sale and Leaseback Framework Agreement are driven by genuine business and/or financial needs of the Company.

We have discussed with the Management on, among other things, the legality of All Trust Leasing to carry out its finance leasing business as the lessor under the Sale and Leaseback Framework Agreement. We were further advised by the Management that to the best of their knowledge and after making due care enquiry, All Trust Leasing holds the required licenses, permits and approvals issued by relevant PRC authorities to conduct its finance leasing business as the lessor under the Sale and Leaseback Framework Agreement.

In view of the above, we concur with the Directors that the Sale and Leaseback Framework Agreement is a strategic arrangement for the Group to secure additional financing source for accelerating the development of its retail finance leasing business. We note that the Group is not obliged to enter into any Implementation Agreements under the Sale and Leaseback Framework Agreement and the Sale and Leaseback Framework Agreement merely acts as a financing option available to the Group. Dingxin Leasing can decide whether to enter into any Implementation Agreement(s) with All Trust Leasing after comparing terms offered by independent third party(ies), if any, for sale and leaseback arrangements similar to the Transactions and depending on the then financial position and financing requirement of the Group.

Having considered the aforesaid reasons for entering into the Sale and Leaseback Framework Agreement, in particular, that (i) the Sale and Leaseback Framework Agreement merely acts as a financing option available to the Group and the Group is not obliged to enter into any of the Implementation Agreements under the Sale and Leaseback Framework Agreement; (ii) based on the market precedents cited above, the Transaction(s) are not uncommon under automobiles sale and leaseback arrangements for industry players similar to Dingxin Leasing; and (iii) as further discussed in the section headed “2.2 Terms of the Sale and Leaseback Framework Agreement” below, the terms of the Sale and Leaseback Framework Agreement are considered generally in line with the market, we consider that the entering into of the Sale and Leaseback Framework Agreement is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

2.2 Terms of the Sale and Leaseback Framework Agreement

The key terms of the Sale and Leaseback Framework Agreement are as follows:

Sale and leaseback:

Dingxin Leasing shall sell to All Trust Leasing vehicles owned by Dingxin Leasing, which shall then be leased back for use by Dingxin Leasing.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Dingxin Leasing is principally engaged in the automobile finance leasing business in the PRC. Dingxin Leasing will enter automobile finance lease agreements with retail customers, pursuant to which Dingxin Leasing will purchase vehicles from various manufacturers or the retail customers in accordance with the retail customers’ instructions and obtain the legal titles to such vehicles, and Dingxin Leasing will then lease the purchased vehicles to such retail customers.

Upon expiry of the relevant lease term, Dingxin shall repurchase the leased assets in accordance with the agreed terms and with a consideration of a nominal amount of RMB100.

The Company considers that the Sale and Leaseback Framework Agreement should be classified as a finance lease, and such sale and leaseback transaction is a mean whereby the lessor provides finance to the lessee, with the asset as security. A finance lease should be recognised in the lessee’s statement of financial position as an asset and as an obligation to pay future lease payments, respectively. As such, in the Company’s consolidated statement of financial position, the leased asset shall be recorded as property, plant and equipment and the amount being received from lesser shall be recorded as a payable. This accounting treatment has been agreed with the auditor of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sale price and lease payments:

Dingxin Leasing shall gather information on the terms and conditions (including interest rates) offered by third parties in the PRC who are independent of the Company and its connected persons in sale and leaseback transactions of a similar scale and nature so that Dingxin Leasing can ensure that the interest rates applicable to transactions between Dingxin Leasing and All Trust Leasing are the same as or more favourable to the Company than those offered by such independent third parties. The parties agree that the lease interest rates shall in any event be at least 110% (the “ Base Interest Rate ”) of, but no more than four times of, the benchmark interest rate for RMB term loans as announced for implementation by the People’s Bank of China.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Implementation Agreements:

Dingxin Leasing and All Trust Leasing will enter into specific individual Implementation Agreements from time to time. Each Implementation Agreement will be entered in the ordinary and usual course of business of the Group and on normal commercial terms or better. The terms of each Implementation Agreement will be in accordance with the terms of the Sale and Leaseback Framework Agreement. Notwithstanding the foregoing, Dingxin Leasing can decide whether or not to enter into any Implementation Agreements with All Trust Leasing after comparing terms then offered by independent third parties, if any, for sale and leaseback arrangements similar to the transactions contemplated under the Sale and Leaseback Framework Agreement. Dingxin Leasing expects that it will not enter into more than ten Implementation Agreements with All Trust Leasing for each of the three years ending 31 December 2018, 2019 and 2020.

Pledge of receivables:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Term and termination:

The Sale and Leaseback Framework Agreement shall become effective on the date when it is approved by the independent shareholders at the EGM and will expire on 31 December 2020. Dingxin Leasing and All Trust Leasing will not enter into any individual Implementation Agreements before the Sale and Leaseback Framework Agreement becomes effective. The term of the individual Implementation Agreements shall not exceed three years and in any event, shall not exceed 31 December 2020. In the event that the term of an Implementation Agreement is expected to extend beyond 31 December 2020, the Company will re-comply with the announcement and shareholders’ approval requirements in accordance with Rule 14A.54 of the Listing Rules before such Implementation Agreement is entered into.

As aforementioned, Dingxin Leasing’s finance leasing business, in particular, its retail finance leasing segment has remained small and therefore, Dingxin Leasing has not entered into any sale and leaseback arrangement as a lessee for the purposes of refinancing for its retail finance leasing business. However, in addition to the arrangement with Dingxin Leasing in connection with the 2017 Sale and Leaseback Framework Agreement, we are advised by the Company that All Trust Leasing has from time to time entered into similar refinancing arrangements as lessee with independent third parties such as banks and/or other finance companies. We have (i) reviewed the key terms of five comparable refinancing agreements entered by All Trust Leasing between 27 September 2017 up to

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and including the Latest Practicable Date; and (ii) obtained and reviewed the underlying agreements, which, according to All Trust Leasing, is the exhaustive list of recent wholesale refinancing arrangements with independent third parties entered into by All Trust Leasing over the recent eight months that are considered comparable to that of the Implementation Agreements under the Sales and Leaseback Framework Agreement. On the other hand, we have also done researches in the public domain as regards similar automobile sale and leaseback arrangements announced by companies listed on the Hong Kong Stock Exchange in the six months period ended the Latest Practicable Date, and we note that, no other announcements as regards similar transaction could be identified except for the Yixin Transaction. On such basis, given the nature and structure of the Yixin Transaction as discussed in the section headed “2.1 Background of and reasons for the Sale and Leaseback Framework Agreement” above, we considered the Yixin Transaction together with the aforesaid five recent refinancing arrangements of All Trust Leasing (collectively, the “ Comparable Arrangements ”) to be a fair and representative samples to illustrate the market prevailing major features and principal terms of wholesale refinancing arrangements under common market practice. Set out below are the principal terms of each of the Comparable Arrangements:

		Principal	Interest Rate	Interest Rate	Lease			Deposit rate	Rate of
		amount		(% per	term	Repayment		(% to principal	upfront
	(RMB’million)			annum)	(month)		schedule	amount)	handling fee
Comparable Arrangement A		151		6.22	22		Monthly	n/a	n/a
Comparable Arrangement B		350		4.99	24		Monthly	n/a	0.78
Comparable Arrangement C		100		5.70	36		Monthly	n/a	n/a
Comparable Arrangement D		600		4.99	35		Monthly	5	0.58
Comparable Arrangement E		330		6.18	34		Monthly	6	0
Yixin Transaction		500		5.70	33		Monthly	5	1.7
					Average		interest rate	5.63%
Base	Interest Rate under		the Sales and Leaseback Framework Agreement					5.23%

As shown in the table above, we note that the Comparable Arrangements are of lease terms in the range of 22 months to three years. The lease term of the Sale and Leaseback Framework Agreement of up to 31 December 2020 is therefore in line with the those of the Comparable Arrangements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the interest rate of around 5.23% per annum (based on the Base Interest Rate) under the Sales and Purchase Agreement is also less than the average of the interest rates under the Comparable Arrangements of around 5.63% per annum.

We also note that the lease interest rate under the Sale and Leaseback Framework Agreement is a range set between the aforesaid Base Interest Rate and 4 times the benchmark interest rate for RMB term loans as announced for implementation by the People’s Bank of China (“PBOC”) (the “ Interest Range ”). The indication of four times the benchmark interest rate for RMB term loans as announced for implementation by PBOC is as such, only the ceiling of the Interest Range and the actual lease interest rate under potential Implementation Agreements to be entered (if any), would depend on the then market conditions and market interest rate. In ascertaining the fair and reasonableness of the above, we noted that Dingxin Leasing have a set of internal control procedures in place to ensure that quotes from independent third parties (minimum of two) are obtained prior to entering into any Implementation Agreements with All Trust Leasing. Under the internal control procedures, prior to entering into individual Implementation Agreement(s), the finance department of Dingxin Leasing will review and assess the specific terms and conditions of transactions and to compare, among other things, the lease interest rate offered with reference to the market conditions and the prices charged or quoted by at least two independent third parties which have the operation scale and financial position at least comparable to that of Dingxin Leasing itself and/or All Trust Leasing. We consider the requirement to obtain at least two independent quotes and the selection basis for independent institutions are reasonable for Dingxin Leasing to assess the then prevailing market terms for sale and leaseback transactions of a similar scale and nature offered by independent third parties with similar operation scale and financial strength as Dingxin Leasing and/or All Trust Leasing, and we consider it effective to allow Dingxin Leasing to agree the actual lease interest rate in the Implementation Agreement(s) based on such market rate.

We note from the table above that the deposit rates paid by the Comparable Arrangements are, lower than the Deposit Rate. Nevertheless, we consider the Deposit Rate is still fair and reasonable because (i) under the terms and conditions set out under the Sale and Leaseback Framework Agreement, the deposit paid will only be used to offset default (if any) of payment obligations by Dingxin Leasing under the Transactions and therefore, the deposit paid should not be merely seen as an additional benefit to All Trust Leasing; and (ii) the deposit rate under the Transactions is reciprocal to, and the same as, the deposit rate under the 2017 Sale and Leaseback Framework Agreement. Separately, we have also noted that, save for that no corporate guarantee by CGA Limited in favour of All Trust Leasing is required under the Sale and Leaseback Framework Agreement, other terms under the Sale and Leaseback Framework Agreement are largely reciprocal to and the same as those of the 2017 Sale and Leaseback Framework Agreement.

We have also considered other terms of the Sale and Leaseback Framework Agreement such as the sale price being the remaining principal amount of the leased assets under the existing lease agreements between Dingxin Leasing and its customers, the repurchase option upon the expiry of the lease term, the responsibility for insurance and maintenance expenses, the settlement arrangement and terms in the event of termination. We note that such other terms under the Sale and Leaseback Framework Agreement are customary for sale and leaseback arrangements of this type.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the 2017 Sale and Leaseback Framework Agreement, we have also discussed with the Management and further understood that under no circumstances will any party be allowed or be able to sell and pledge the same leased asset(s) and respective receivable(s) to and back from the same counterparty for the purpose of securing funding. In any event, a list containing details that are unique to each vehicle to be sold and leased back (including, but not limited to, engine number) will be provided upon entering into any Implementation Agreement for review and inspection. This ensures that vehicles under each Implementation Agreement are individually identifiable by all parties and the same vehicle will not be the subject under both the 2017 Sales and Leaseback Framework Agreement and the Sale and Leaseback Framework Agreement.

In view of (i) the entering into of the Sale and Leaseback Framework Agreement will not make the Group becoming obliged to enter into any transactions with All Trust Leasing, but will open up an additional funding channel for the Group to obtain funding to facilitate Dingxin Leasing’s growing financial leasing business; (ii) the terms of the Sale and Leaseback Framework Agreement are generally in line with the market; (iii) the benefits to be brought about pursuant to the Sale and Leaseback Framework Agreement as discussed in the sub-section headed “2.1 Background of and reasons for the Sale and Leaseback Framework Agreement” above; and (iv) terms under the Sale and Leaseback Framework Agreement shall be no less favourable to the Group than those offered by the independent third parties, we concur with the view of the Directors that the terms of the Sale and Leaseback Framework Agreement is fair and reasonable so far as the Company and its shareholders are concerned.

2.3 Annual Caps for the Transactions

Set out below are details of the annual cap of the Transactions (the “ Annual Cap(s) ”) for each of the three financial years ending 31 December 2020:

		Total
	RMB	’million
2018		900
2019		1,500
2020		1,800

As disclosed in letter from the Board in the Circular, the Annual Caps were determined after considering, amongst other things, (i) the business plans of the Group, including Dingxin Leasing; and (ii) the relevant expected accumulated principal amount and interest under the Sale and Leaseback Framework Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have discussed and understand from the Management that the Annual Cap for 2018 of RMB900 million was mainly estimated by reference to the projected total contract value of the finance leases entered and to be entered into by Dingxin Leasing in 2018 and the average financing amount per vehicle under existing finance leases. In assessing the fairness and reasonableness of the Annual Cap for 2018, we have carried out the following independent work and considered the following factors:

(1) we understand from the Management that the finance lease contracts under the retail finance leasing business have been mainly originated from and corresponded to the Group’s total number of new vehicles sold, and therefore there is a correlation between number of new vehicles sold and the number of finance lease contracts entered in the same period. In this regard, we note that the total number of finance lease contracts for 2018 projected by Dingxin Leasing represents around 14.5% of the total number of new vehicles sold by the Group in FY2017;
(2) based on the information available in the annual reports of CGA (together with its subsidiaries, the “ CGA Group ”) for the financial years ended 31 December 2015, 2016 and 2017, we noted that the total number of vehicles under new finance lease contracts entered into by All Trust Leasing for each of the three financial years ended 31 December 2015, 2016 and 2017 represented approximately 17.9%, 20.1% and 23.9% of the total number of new vehicles sold by CGA Group in the corresponding year respectively. We noted that the total number of finance lease contracts for 2018 forecasted by Dingxin Leasing represents a lower percentage when compared to those of CGA Group for each of the past three years and therefore, is considered prudent; and
(3) we have obtained and reviewed the finance leasing contract details entered into by Dingxin Leasing for the first three months of 2018 and noted that the aforesaid average financing amount per finance lease contract corresponds to the actual historical average financing amount per vehicle under the finance lease contracts entered into by Dingxin Leasing over the first three months of 2018. As such, we consider such estimates for calculating the Annual Cap reasonable.

We also understand from the Management that in determining the Annual Caps for 2019 and 2020:

(1) the Annual Cap for 2019 comprises of (a) a portion of around RMB300 million representing the estimated outstanding financing amount brought forward pursuant to Implementation Agreement(s) signed in 2018 having a lease term of three years up to 2020; and (b) the remaining balance of around RMB1,200 million representing the total financing amount of newly signed Implementation Agreement(s) in 2019; and similarly
(2) the Annual Cap for 2020 comprises (a) the respective portions of RMB300 million representing the estimated outstanding financing amount brought forward pursuant to the Implementation Agreement(s) signed in 2018 having a lease term of three years up to 2020,

— 29 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and of RMB750 million representing the estimated outstanding financing amount brought forward pursuant to the Implementation Agreement(s) signed in 2018 having a lease term of two years up to 2020; and (b) the remaining balance of RMB750 million representing the total financing amount of newly signed Implementation Agreement(s) in 2019.

As illustrated in section headed “2.2 Terms of the Sale and Leaseback Framework Agreement” above, it is common for sale and leaseback arrangements similar to the Transactions to have terms of roughly two to three years. As such, we consider the incorporation of outstanding financing amounts brought forward from prior years to be prudent, fair and reasonable in the estimation of Annual Cap for 2019 and 2020.

Considering the above, we noted that the expected financing amounts for new Implementation Agreement(s) to be entered into in 2019 and 2020 are estimated to be RMB1,200 million and RMB750 million respectively. In this regard, we noted that:

(1) the financing amount of newly signed Implementation Agreement(s) in 2019 of RMB1,200 million represents a growth rate of around 33.3% as compared to the Annual Cap for 2017. In assessing such growth rate, we have made reference to the recent growth in the finance leasing business of All Trust Leasing and we note that, based on information available in the annual reports of CGA for the financial years ended 31 December 2016 and 2017, the growth rates of the total number of vehicles under new finance lease contracts of All Trust Leasing for each of the recent two years ended 31 December 2016 and 2017 were around 46.6% and 27.0% respectively, with an average of around 36.8%. The growth rate of around 33.3% represented by the financing amounts of newly signed Implementation Agreement(s) in 2019 of RMB1,200 million forecasted by Dingxin Leasing is therefore, not excessive; and
(2) as provided in the terms of the Sale and Leaseback Framework Agreement, the term of individual Implementation Agreements shall not exceed three years and in any event, shall not exceed 31 December 2020. Given such constraint, it is considered justifiable for Dingxin Leasing to forecast a relatively lower total financing amount pursuant to Implementation Agreement(s) to be entered in 2020.

Based on the discussion above, we consider the Annual Caps of 2019 to 2020 are fair and reasonable as far as the Company and Independent Shareholders are concerned.

3. Internal control procedures

As disclosed in the letter from the Board of the Circular, the Company has adopted a set of effective internal control measures to supervise the continuing connected transactions of the Group. Prior to entering into individual Implementation Agreements under the Sale and Leaseback Framework Agreement, the finance department of Dingxin Leasing will review and assess the specific terms and conditions of the transactions and to compare the lease interest rates with reference to the market conditions and the prices charged or quoted by at least two independent third parties in sale and leaseback transactions of a similar scale and nature. Such independent third parties shall have the operation scale and financial position at least comparable to those of Dingxin Leasing and/or All Trust

— 30 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Leasing and have a track record of at least one year in conducting similar sale and leaseback transactions. Dingxin Leasing will not enter into any individual Implementation Agreements if the lease interest rates paid to All Trust Leasing are not on normal commercial terms. The finance department of the Company will also monitor the sale and leaseback transactions under the Sale and Leaseback Framework Agreement on a regular basis. As part of the reporting processes implemented by the Group, Dingxin Leasing is required to submit a report to the Company’s finance department each month, setting out the transaction amounts and an indication of whether transaction volumes are expected to remain within the Annual Caps. If any monthly report indicates that an Annual Cap is anticipated to be exceeded, the Company’s finance department will collect further information from Dingxin Leasing including estimated transaction values, and the Company’s finance department will calculate and establish revised caps and obtain approval from the Board for such revised annual caps (subject to the requirements under the then applicable Listing Rules). Given that Dingxin Leasing expects that it will not enter more than ten Implementation Agreements with All Trust Leasing for each of the three years ending 31 December 2018, 2019 and 2020, the Directors are of the view that such monthly reports from Dingxin Leasing to the Company’s finance department are adequate for the Company to supervise whether transaction volumes are expected to remain within the Annual Caps. In addition, before each Implementation Agreement is entered into, the Company’s finance department will review whether transaction volumes will remain within the Annual Caps if such Implementation Agreement is entered into. In the event that the term of an Implementation Agreement is expected to extend beyond 31 December 2020, the Company will re-comply with the announcement and shareholders’ approval requirements in accordance with Rule 14A.54 of the Listing Rules before such Implementation Agreement is entered into. The independent non-executive Directors shall review the Implementation Agreements to ensure that they have been entered into in accordance with also the terms of the Sale and Leaseback Framework Agreement.

We consider the requirement to obtain of at least two independent quotes and the selection basis of independent institutions are reasonable for Dingxin Leasing to assess the then prevailing market terms of sale and leaseback transactions of a similar scale and nature offered by independent third parties with similar operation scale and financial strength as Dingxin Leasing and/or All Trust Leasing. As such, we concur with the view of the Directors that the internal control procedures and policies relating to the Transactions have demonstrated the Group’s practices of so as getting access to market information and having regular assessment on the terms of the Transactions to make sure that terms of the Transactions will be no less favourable (so far as the Group is concerned) than those prevailing in the market for similar sale and leaseback transactions.

Furthermore, we are of the view that the internal procedures, including but not limited to, the submissions of reports by Dingxin Leasing to the Group and the regular calculation of forecasts of the projected transaction values for the remainder of the relevant year by the finance department of the Company following receipt of the monthly report, all on a monthly basis, can facilitate a regular communication and reporting to the Company which shall enable the Company to effectively monitor the utilisation of the Annual Caps on timely manner.

— 31 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Listing Rules Requirements

Pursuant to Rule 14A.55 of the Listing Rules, the independent non-executive directors will confirm in the annual report of the Company that the Group’s continuing connected transactions have been entered into (1) in the ordinary and usual course of business of the Company; (2) on normal commercial terms or on terms no less favourable to the Group than terms available from independent third parties; (3) in accordance with the relevant agreement; and (4) on terms that are fair and reasonable and in the interests of the Shareholders as a whole.

The auditors of the Company will also perform a review of the Group’s continuing connected transactions and will confirm in the annual report of the Company that such continuing connected transactions were conducted in the manner stated in Rule 14A.56 of the Listing Rules.

For each financial year of the Company during the terms of the Sale and Leaseback Framework Agreement relating to the Transactions, the subject transactions will be subject to review by the independent non-executive Directors and the Company’s auditors as required by the provisions of the Rules 14A.55 and 14A.56 of the Listing Rules respectively. The independent non-executive Directors must confirm in the annual report of the Company for the year 2018-2020 such transactions have been entered into:

(1) in the ordinary and usual course of business of the Company;
(2) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than terms available to or from (as appropriate) independent third parties; and
(3) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders.

Furthermore, the Listing Rules require that the Company’s auditors must provide a letter to the Board (with a copy provided to the Hong Kong Stock Exchange at least ten business days prior to the bulk printing of the annual report of the Company), confirming that the Transactions:

(1) have received the approval of the Board;
(2) are in accordance with the pricing policies of the Company if the transactions involve provision of goods or services by the Company have been entered into in accordance with the relevant agreement governing the transactions; and
(3) have not exceeded the cap disclosed in its previous announcement.

Given the above, we believe there will be sufficient procedures and arrangements in place to ensure that the Transactions will be conducted on terms that are fair and reasonable and on normal commercial terms as far as the Independent Shareholders are concerned.

— 32 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATION

Having considered the principal factors and reasons set out above, we are of the view that that the terms of the Sale and Leaseback Framework Agreement (including the Annual Caps) are on normal commercial terms and in the ordinary and usual course of business of the Group, and are fair and reasonable so far as the Independent Shareholders are concerned. We also consider that the entering into of the Sale and Leaseback Framework Agreement is in the interests of the Company and the Shareholders. Accordingly, we advise the Independent Shareholders, and the Independent Board Committee to recommend the Independent Shareholders as a whole, to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Sale and Leaseback Framework Agreement, and the adoption of the Annual Caps.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED

Lyan Tam Director

Ms. Lyan Tam is a licensed person registered with the Securities and Futures Commission and as a responsible officer of Somerley to carry out Type 6 (advising on corporate finance) regulated activities under the SFO and has over 12 years of experience in corporate finance industry.

— 33 —

GENERAL INFORMATION

APPENDIX I

1. 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.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules, to be notified to the Company and the Hong Kong Stock Exchange, were as follows:

Number of Shares/underlying Shares held in the Company

			Number of
			underlying
			Shares interested
			under physically
			settled	% of the issued
			equity	share capital of
	Nature of		derivatives	the Company
Name of Director	interest	Date of grant	(share options)	(Note)
Mr. LI Jianping	Beneficial owner	28 March 2018	4,000,000(L)	0.14%
Mr. WANG Xinming	Beneficial owner	28 March 2018	4,000,000(L)	0.14%
Mr. LU Ao	Beneficial owner	28 March 2018	2,000,000(L)	0.07%
Mr. QI Junjie	Beneficial owner	28 March 2018	2,000,000(L)	0.07%
Ms. XU Xing	Beneficial owner	28 March 2018	2,000,000(L)	0.07%

— (L) long position

Note: As at the Latest Practicable Date, the issued share capital of the Company consisted of 2,837,311,429 Shares.

Save as disclosed above, so far as was known to the Board, none of the Directors and chief executives of the Company had any interest or short positions in any shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to the Company and the Hong Kong Stock Exchange pursuant to

— I-1 —

APPENDIX I

GENERAL INFORMATION

Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules, to be notified to the Company and the Hong Kong Stock Exchange.

As at the Latest Practicable Date, so far as was known to the Board, none of the Directors was a director or employee of a company which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DISCLOSURE OF SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, save as disclosed below, so far as was known to the Board, no persons (not being a Director or chief executive of the Company) had an interest or short position in the shares or underlying shares and debentures 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, or, who was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at the general meeting of any other member of the Company:

			Approximate
			percentage
		Number of	(%) in the
		Shares Held or	Company’s
	Capacity/	Deemed to be	total share
Name of shareholders	Nature of Interest	Held	capital
China Grand Automotive Services	Beneficial interest	1,917,983,571(L)	67.60%
(Hong Kong) Limited (廣匯汽車服		1,917,983,571(S)	67.60%
務(香港)有限公司)(1)(3)
China Grand Automotive Services	Interest in controlled	1,917,983,571(L)	67.60%
Co., Ltd. (廣匯汽車服務有限責任公	corporation	1,917,983,571(S)	67.60%
司)(1)(3)
Shanghai Huiyong Automotive	Interest in controlled	1,917,983,571(L)	67.60%
Distribution Co., Ltd. (上海匯湧汽	corporation	1,917,983,571(S)	67.60%
車銷售有限公司)(1)(3)
China Grand Automotive Services	Interest in controlled	1,917,983,571(L)	67.60%
Co., Ltd. (廣匯汽車服務股份公司)	corporation	1,917,983,571(S)	67.60%
(1)(3)

— I-2 —

APPENDIX I

GENERAL INFORMATION

			Approximate
			percentage
		Number of	(%) in the
		Shares Held or	Company’s
	Capacity/	Deemed to be	total share
Name of shareholders	Nature of Interest	Held	capital
Xinjiang Guanghui Industry	Interest in controlled	1,917,983,571(L)	67.60%
Investment Group Co., Ltd. (新疆	corporation	1,917,983,571(S)	67.60%
廣匯實業投資(集團)有限責任公司)
(1)(3)
Mr. Sun Guangxin(1)(3)	Interest in controlled	1,917,983,571(L)	67.60%
	corporation	1,917,983,571(S)	67.60%
Baoxin Investment Management	Beneficial interest	252,754,130(L)	8.91%
Ltd.(2)
Mr. Yang Aihua(2)	Interest in controlled	252,754,130(L)	8.91%
	corporation
China Merchants Bank Co., Ltd.	Person having a	1,917,983,571(L)	67.60%
(Shanghai Songjiang Branch) (招商	security interest
銀行有限公司上海松江支行)(3)	in shares

(L) — long position; (S) — short position

Notes:

(1) China Grand Automotive Services (Hong Kong) Limited (廣匯汽車服務(香港)有限公司) is wholly owned by Shanghai Huiyong Automotive Distribution Co., Ltd. (上海匯湧汽車銷售有限公司) (which is in turn owned as to approximately 44.23% by CGA Limited and approximately 55.77% by CGA). CGA Limited is wholly owned by CGA which is owned as to approximately 37.26% by Xinjiang Guanghui Industry Investment Group Co., Ltd. (新疆廣匯實業投資(集團)有限責任公司). Mr. Sun Guangxin holds approximately 63.60% of the shares in Xinjiang Guanghui Industry Investment Group Co., Ltd. (新疆廣匯實業投資(集團)有限責任公司). Each of CGA Limited, Shanghai Huiyong Automotive Distribution Co., Ltd. (上海匯湧汽車銷售有限公司), CGA, Xinjiang Guanghui Industry Investment Group Co., Ltd. (新疆廣匯實業投資(集團)有限責任公司) and Mr. Sun Guangxin are deemed to be interested in the shares held by China Grand Automotive Services (Hong Kong) Limited (廣匯汽車服務(香港)有限公司).
(2) Baoxin Investment Management Ltd. is wholly owned by Mr. Yang Aihua. Mr. Yang Aihua is deemed to be interested in the Shares held by Baoxin Investment Management Ltd.
(3) On 1 September 2016, China Grand Auto executed a share charge over the 1,917,983,571 Shares held by it (in favour of China Merchants Bank Co., Ltd. (Shanghai Songjiang Branch) China Merchants Bank Co., Ltd. (Shanghai Songjiang Branch) (招商銀行有限公司上海松江支行) as the security agent under a syndicated loan facility granted to CGA.

— I-3 —

GENERAL INFORMATION

APPENDIX I

4. PARTICULARS OF DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Company for a term of three years with effect from the date of the respective contract, subject to retirement by rotation and re-election in accordance with the Articles.

Save as disclosed above, none of the Directors has entered or intends to enter into a service contract with any member of the Group (other than contracts expiring or determinable by the relevant employer within one year without the payment of compensation (other than statutory compensation)).

5. COMPETING INTERESTS

As at the Latest Practicable Date, other than certain directorships and/or other senior management positions held by some of the Directors in CGA and/or CGA Limited as disclosed below, so far as the Board was aware, none of the Directors or their respective close associates had any interest in a business which competes or is likely to compete directly or indirectly with the business of the Group:

(a) Mr. LI Jianping is the chairman of the board of directors of CGA and an executive director of CGA Limited;
(b) Mr. WANG Xinming is a director and a president of CGA;
(c) Mr. LU Ao is the vice president and the chief financial officer of CGA;
(d) Mr. QI Junjie is the secretary of the party committee of CGA; and
(e) Ms. XU Xing is the secretary of the board and assistant to the president of CGA.

6. DIRECTORS’ INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors had any interests, either directly or indirectly, in any assets which had been, since 31 December 2017 (being the date to which the latest published audited financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which was significant in relation to the business of the Group taken as a whole.

— I-4 —

GENERAL INFORMATION

APPENDIX I

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company since 31 December 2017 (being the date to which the latest published audited financial statements of the Group were made up).

8. EXPERT

The following is the qualification of the Independent Financial Adviser who has given its opinion or advice contained in this circular:

Name Qualifications Somerley Capital Limited A corporation licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities

As at the Latest Practicable Date, Somerley Capital Limited had no shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Somerley Capital Limited had no direct or indirect interest in any assets which had been, since 31 December 2017 (being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of by, or leased to, any member of the Group, or were proposed to be acquired or disposed of by, or leased to, any member of the Group.

Somerley Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name included herein in the form and context in which it appears.

9. MISCELLANEOUS

In the event of any inconsistency, the English language version of this circular shall prevail over the Chinese language version.

10. ROUNDING

Certain amounts and percentages figures included in this circular have been subject to rounding adjustments, or have been rounded to one or two decimal places. Any discrepancies between totals and sums of amounts listed in any table are due to rounding.

— I-5 —

GENERAL INFORMATION

APPENDIX I

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the office of the Company at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong from 28 May 2018 up to and including 14 June 2018:

(a) the Articles;
(b) the Sale and Leaseback Framework Agreement;
(c) the letter from the Independent Board Committee to the Independent Shareholders dated 25 May 2018, the full text of which is set out on page 15 of this circular;
(d) the letter from Somerley Capital Limited to the Independent Board Committee and the Independent Shareholders dated 25 May 2018, the full text of which is set out on pages 16 to 33 of this circular;
(e) the written consent of Somerley Capital Limited referred to in the paragraph headed “8. Expert” in this Appendix; and
(f) this circular.

— I-6 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

==> picture [61 x 61] intentionally omitted <==

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1293)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING AND CLOSURE OF REGISTER OF MEMBERS

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “ EGM ”) of Grand Baoxin Auto Group Limited (the “ Company ”) will be held at No. 3998 Hongxin Road, Minhang District, Shanghai, the PRC at 10: 30 a.m. on 15 June 2018. In this notice, unless the context otherwise requires, terms used herein shall have the same meanings as defined in the Company’s circular (the “ Circular ”) dated 25 May 2018.

RESOLUTION TO BE CONSIDERED AND APPROVED AT THE EGM

By way of ordinary resolution:

(1) “ THAT
(a) the Sale and Leaseback Framework Agreement and the transactions contemplated thereunder be and hereby approved and confirmed AND the fixing of the respective Annual Caps as disclosed in the Circular be and is hereby approved and confirmed; and
(b) the Directors acting together or by committee, or any Director acting individually, be and is/are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) on behalf of the Company as he or they may, in his/their absolute discretion, consider necessary, desirable or expedient for the purposes of, or in connection with, the performance and implementation of the Sale and Leaseback Framework Agreement and any other documents relating thereto or contemplated thereby (in each case amended if necessary) and to make or agree such alterations, amendments and additions thereto as the Director(s) may, in his/their absolute discretion, consider necessary, desirable or expedient in the interests of the Company.”

— EGM-1 —

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Details of the above resolution proposed at the EGM are contained in the Circular, which is available on the website of Hong Kong Exchanges and Clearing Limited (www.hkex.com.hk) and the website of the Company (http://www.klbaoxin.com).

By order of the Board Grand Baoxin Auto Group Limited Mr. Li Jianping Chairman

The PRC 25 May 2018

As at the date of this notice, the executive Directors are Mr. LI Jianping, Mr. WANG Xinming, Mr. LU Ao and Mr. Qi Junjie; the non-executive Director is Ms. XU Xing; and the independent non-executive Directors are Mr. DIAO Jianshen, Mr. WANG Keyi and Mr. CHAN Wan Tsun Adrian Alan.

Notes:

All resolutions at the meeting will be taken by poll pursuant to the Listing Rules except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. The results of the poll will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company in accordance with the Listing Rules.
Any Shareholder entitled to attend and vote at the above meeting is entitled to appoint one or more proxies (who must be individual(s)) to attend and vote instead of him/her/it. A proxy need not be a Shareholder. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
Where there are joint registered holders of any Share, any one of such persons may vote at the above meeting, either personally or by proxy, in respect of such Share as if he/she/it were solely entitled thereto; but if more than one of such joint holders are present at the above meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders that stand on the register of members in respect of the relevant joint holding.
In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, must be completed and lodged at the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude a Shareholder from attending and voting in person at the meeting or any adjournment thereof, and in such event, the relevant form of proxy shall be deemed revoked.
For determining the entitlement to attend and vote at the above meeting, the register of members of the Company will be closed from 12 June 2018 to 15 June 2018, both days inclusive, during such period no transfer of Shares will be registered. In order to qualify for attending and voting at the EGM, all duly stamped share transfer documents accompanied by the relevant share certificates must be lodged with the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4: 30 p.m. on 11 June 2018.
The translation into Chinese language of this notice is for reference only. In case of any inconsistency, the English version shall prevail.

— EGM-2 —

AI assistant

Grand Baoxin Auto Group Limited — Proxy Solicitation & Information Statement 2018

49831_rns_2018-05-25_dc13aaad-3fdd-4c65-a9d5-227296612f11.pdf

THE CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

SOMERLEY CAPITAL LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

I. INTRODUCTION

II. DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

1. Introduction

2. Key Terms of the Sale and Leaseback Framework Agreement

Date

Parties

Sale and leaseback

LETTER FROM THE BOARD

Sale price and lease payments

LETTER FROM THE BOARD

Implementation Agreements

Pledge of receivables

LETTER FROM THE BOARD

Term and termination

Previous CCT

LETTER FROM THE BOARD

Internal Control Measures

LETTER FROM THE BOARD

Proposed annual caps

LETTER FROM THE BOARD

3. Reasons for and Benefits of Entering into the Sale and Leaseback Framework Agreement

LETTER FROM THE BOARD

4. Implications under the Listing Rules

5. Approval by Directors and Independent Shareholders

LETTER FROM THE BOARD

6. General Information

The Group

Dingxin Leasing

All Trust Leasing

III. RECOMMENDATION

LETTER FROM THE BOARD

IV. ADDITIONAL INFORMATION

GRAND BAOXIN AUTO GROUP LIMITED 廣匯寶信汽車集團有限公司

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS — SALE AND LEASEBACK FRAMEWORK AGREEMENT

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

SOMERLEY CAPITAL LIMITED

DISCLOSEABLE TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

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PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information on the parties to the Sale and Leaseback Framework Agreement

The Group

Dingxin Leasing

All Trust Leasing

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. The Sale and Leaseback Framework Agreement

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2.2 Terms of the Sale and Leaseback Framework Agreement

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2.3 Annual Caps for the Transactions

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3. Internal control procedures

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4. Listing Rules Requirements

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OPINION AND RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Number of Shares/underlying Shares held in the Company

Grand Baoxin Auto Group Limited Proxy Solicitation & Information Statement 2018