Guangzhou Automobile Group Co., Ltd. — Proxy Solicitation & Information Statement 2012

Jan 13, 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Guangzhou Automobile Group Co., Ltd , you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or transferee(s) or to the bank, stockbroker, or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

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GUANGZHOU AUTOMOBILE GROUP CO., LTD. 廣州汽車集團股份有限公司

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2238)

PROPOSED ADOPTION OF THE H SHARE APPRECIATION RIGHTS SCHEME AND NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

Notice convening the First Extraordinary General Meeting of 2012 of Guangzhou Automobile Group Co., Ltd to be held at Conference Room No.1, 23/F, Chengyue Building, 448 Dong Feng Zhong Road, Guangzhou, the PRC at 10:00 a.m. on Wednesday, 29 February 2012 is set out on pages 31 to 32 of this circular. Whether or not you are able to attend the said meeting, you are requested to complete the accompanying reply slip and form of proxy in accordance with the instructions printed thereon and return the same to the Company.

The reply slip shall be sent by mail, telegraph or fax to the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC; (fax number: (86) 20 8315 1081) (in case of holders of Domestic Shares), or to Tricor Investor Services Limited (the Company’s H Share Registrar) at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, (fax number (852) 2810 8185) (in case of holders of H Shares) on or before Thursday, 9 February 2012.

The form of proxy shall be returned to the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC (in case of holders of Domestic Shares) or Tricor Investor Services Limited (the Company’s H Share Registrar) at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) at least 24 hours before the time of holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM should you so wish.

14 January 2012

CONTENT

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
**LETTER **	FROM THE BOARD
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	PROPOSED ADOPTION OF THE H SHARE APPRECIATION
	RIGHTS SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012 . . . . . . . .	10
4.	VOTING BY WAY OF POLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
5.	RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
APPENDIX – SUMMARY OF MAJOR TERMS OF THE H SHARE
	APPRECIATION RIGHTS SCHEME . . . . . . . . . . . . . . . . . . . .	12
**NOTICE **	OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012 . .	31

– i –

DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

• “Articles of Association” the articles of association of the Company as amended from time to time

• “Board” the board of Directors

• “Company” Guangzhou Automobile Group Co., Ltd, a joint stock company incorporated in the PRC with limited liability, the H Shares of which are listed on the Hong Kong Stock Exchange

• “Director(s)” the directors of the Company “Domestic Share(s)” ordinary share(s) of nominal value of RMB1.00 each in the share capital of the Company, which are subscribed for or credited as fully paid in RMB by PRC citizens and/or PRC incorporated entities

• “EGM” the first extraordinary general meeting of 2012 of the Company to be held at Conference Room No.1, 23/F, Chengyue Building, 448 Dong Feng Zhong Road, Guangzhou, the PRC at 10:00 a.m., Wednesday, 29 February 2012

• “Group” the Company and its subsidiaries

• “H Share(s)” overseas listed foreign share(s) of nominal value of RMB1.00 each in the ordinary share capital of the Company, which are listed on the Main Board of the Hong Kong Stock Exchange

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Incentive Recipients”

• the recipients who will be proposed to receive the Share Appreciation Rights under the Scheme

• “Latest Practicable Date” 12 January 2012, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

“Listing Rules” the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange

– 1 –

DEFINITIONS

• “Notice of EGM” the notice dated 14 January 2012 convening the EGM, as set out in page 31 to 32 of this circular

• “PRC” the People’s Republic of China (for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan)

• “RMB” Renminbi, the current lawful currency of the PRC

• “Scheme” the H Share Appreciation Rights Scheme to be adopted by the Company, details of which are set out in this circular

• “Share Appreciation Rights” the share appreciation rights to be granted under the Scheme, representing the rights conferred on the Incentive Recipients to receive stipulated earnings from the increase in share price of H Shares, subject to specific timeframe and conditions

• “Share(s)” ordinary share(s) in the capital of the Company of nominal value of RMB1.00 each, comprising H Shares and Domestic Shares

• “Shareholder(s)” the shareholder(s) of the Company

– 2 –

LETTER FROM THE BOARD

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GUANGZHOU AUTOMOBILE GROUP CO., LTD. 廣州汽車集團股份有限公司

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2238)

Executive Directors: Zhang Fangyou (Chairman) Zeng Qinghong (Vice Chairman) Yuan Zhongrong Lu Sa

Headquarters and registered office: 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC

Non-executive Directors: Fu Shoujie Liu Huilian Wei Xiaoqin Li Tun Wang Songlin Li Pingyi

Principal place of business in Hong Kong: Room 808, Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong

Independent non-executive Directors: Wu Gaogui Ma Guohua Xiang Bing Law Albert Yu Kwan Li Zhengxi

14 January 2012

To the Shareholders

Dear Sir/Madam

PROPOSED ADOPTION OF THE H SHARE APPRECIATION RIGHTS SCHEME AND NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

1. INTRODUCTION

The purpose of this circular is to provide you with information regarding the proposed adoption of the H Share Appreciation Rights Scheme and to seek your approval of the relevant special resolution to be proposed at the EGM.

– 3 –

LETTER FROM THE BOARD

2. PROPOSED ADOPTION OF THE H SHARE APPRECIATION RIGHTS SCHEME

Reference is made to the announcement of the Company dated 13 January 2012 in relation to the proposed adoption of the Scheme.

In order to establish a long-term incentive mechanism that links the remuneration of the senior management and key personnel with the Company’s business results so as to contribute to the realisation of the Company’s long-term strategic goals and the maximisation of shareholders’ value, the Scheme was considered and approved by the Board and the Remuneration Committee of the Board. In addition, the Scheme has been submitted by the Company to the State-owned Assets Supervision and Administrative Commission, the People’s Government of Guangdong Province for approval.

A summary of the major terms of the Scheme:

Effective Date of the Scheme:

the date on which the below conditions are fulfilled: (i) the Scheme has been approved by relevant regulatory authorities and (ii) the adoption of the Scheme has been approved by the Shareholders at the EGM

Duration:

5 years from the effective date of the Scheme

Incentive Recipients: Directors (excluding independent non-executive Directors and external Directors), senior management and personnel in important areas who are necessary for the realisation of the Company’s strategic goals. The Board shall have the right to make the final determination.

Maximum limit of Share 10% of the entire issued share capital of the Appreciation Rights to be Company as at the effective date of the Scheme granted: Exercise price of Share the higher of (i) the closing price of H Shares as Appreciation Rights: at the date of the grant of the Share Appreciation Rights; (ii) the average closing price of the H Shares of the five trading days immediately preceding the date of grant of the Share Appreciation Rights; or (iii) the nominal value of the H Shares

Official date of grant: to be determined by the Board and notified to the Incentive Recipients

Exercise period: 5 years from the official date of grant of the Share Appreciation Rights

– 4 –

LETTER FROM THE BOARD

A summary of the major terms of the Scheme are set out in Appendix to this circular.

Reasons for the Adoption of the Scheme

The Directors believe that the Scheme can provide medium to long term incentive to the Directors, senior management and managerial and key technical personnel of the Company and promote the continuous development of the business of the Group; and consider that the proposed terms and conditions of the Scheme are fair and reasonable.

Initial Grant of the Scheme

The Board also proposed that 35,850,000 [(Note)] initial Share Appreciation Rights (the “Initial Grant”) to be granted to 105 [(Note)] persons who are preliminarily qualified for the grant, comprising 8 Directors, 10 senior management and 87 managerial and key technical personnel, subject to the Shareholders’ approval of the Scheme and the Initial Grant at the EGM. The Incentive Recipients and their entitlements for the Initial Grant have been proposed by the Remuneration Committee of the Board after cautiously considering each condition of grant stipulated under the Scheme.

Details of the grantees of the Initial Grant are as follows:

• (a) Directors and senior management

			**Approximate **	**percentage **	of number of
			units of Shares Appreciation Rights
			granted as compared to
					the total
					number of
					units of
					Share
		Number of			Appreciation
		units of			Rights
		Share	the total	the total	granted
		Appreciation	number of	number of	under the
		Rights	H Shares	Shares in	Initial
Name	Position	granted	in issue	issue	Grant
Zhang Fangyou	Chairman	740,000	0.033%	0.012%	2.064%
Zeng Qinghong	Vice Chairman, General	580,000	0.026%	0.009%	1.618%
	Manager
Yuan Zhongrong	Director, Deputy	550,000	0.025%	0.009%	1.534%
	General Manager
Fu Shoujie	Director	550,000	0.025%	0.009%	1.534%
Liu Huilian	Director	550,000	0.025%	0.009%	1.534%
Lu Sa	Director, Secretary of	550,000	0.025%	0.009%	1.534%
	the Board
Wei Xiaoqin	Director	550,000	0.025%	0.009%	1.534%
Li Tun	Director	550,000	0.025%	0.009%	1.534%

– 5 –

LETTER FROM THE BOARD

			**Approximate **	**percentage **	of number of
			units of Shares Appreciation Rights
			granted as compared to
					the total
					number of
					units of
					Share
		Number of			Appreciation
		units of			Rights
		Share	the total	the total	granted
		Appreciation	number of	number of	under the
		Rights	H Shares	Shares in	Initial
Name	Position	granted	in issue	issue	Grant
Li Shao	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Huang Xiangdong	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Wang Dan	Chief Financial Officer	500,000	0.023%	0.008%	1.395%
Wu Song	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Jiang Ping	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Yao Yiming	Deputy General	550,000	0.025%	0.009%	1.534%
	Manager
Feng Xingya	Deputy General	550,000	0.025%	0.009%	1.534%
	Manager
Liu Wei	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Ou Yongjian	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Chen Maoshan	Deputy General	500,000	0.023%	0.008%	1.395%
	Manager
Total		9,720,000	0.417%	0.150%	27.113%

– 6 –

LETTER FROM THE BOARD

(b) Managerial and key technical personnel

				Approximate percentage of number of	Approximate percentage of number of	Approximate percentage of number of
				units of Share Appreciation Rights
				granted to the level as compared to
						the total
						number of
		Average	Total			units of
		number of	number of			Share
		units of	units of			Appreciation
		Share	Share			Rights
		Appreciation	Appreciation	the total	the total	granted
		Rights	Rights	number of	number of	under the
Hierarchy level of	Number of	granted	granted	H Shares	Shares in	Initial
personnel	personnel	per person	per level	in issue	issue	Grant
Leaders and middle
management at the
headquarters	13	287,692.3	3,740,000	0.169%	0.061%	10.432%
Members of the operation
team seconded from or
appointed by the
Company at second-level
investment enterprises
(including automobile
research institutes)	65	306,153.8	19,900,000	0.899%	0.324%	55.509%
Chief engineer for
technology research and
development at
automobile research
institute	8	300,000	2,400,000	0.108%	0.039%	6.695%
Model labour above
provincial level	1	90,000	90,000	0.004%	0.001%	0.251%
Total	87		26,130,000	1.181%	0.425%	72.89%

– 7 –

LETTER FROM THE BOARD

A summary of the additional major terms of the Initial Grant:

Conditions Precedent:

The grant of the Share Appreciation Rights is subject to the fulfillment of the following performance-related conditions:

1. None of the following has occurred in relation to the Company:

2. (1) issue of the Company’s audited financial report containing an adverse opinion or a disclaimer of opinion for the last three years by a certified public accountant;

3. (2) the imposition of administrative penalties by the securities regulatory authorities during the last three years due to material breach of laws and regulations;

4. (3) any other circumstance which, in the opinion of the securities regulatory authorities, would render the implementation of the Scheme impossible.

5. The growth rate of net profits, the rate of return on net assets and the proportion of income from principal operations to total income for the year 2010 of the Company is above the average figures of the last three years of the Company, and is not lower than 50 percentile as compared with peer benchmark companies for the same period.

– 8 –

LETTER FROM THE BOARD

1. None of the following has occurred in relation to an Incentive Recipient:

2. (1) public censure or declaration as an unfit person by a stock exchange in the last three years;

3. (2) the imposition of administrative penalties by securities regulatory authorities during the last three years due to material breach of laws or regulations;

4. (3) circumstances under which the Incentive Recipient is prohibited under the Company Law of the PRC from acting as a director and member of the senior management;

5. (4) the Incentive Recipient does not pass the assessment of his performance for the year prior to the implementation of the Initial Grant.

Official date of grant:

as determined by the Board and notified to the Incentive Recipients after the approval of the Scheme and the Initial Grant at the EGM

Note: The Share Appreciation Rights granted to non-executive Director Fu Shoujie and three other managerial and key technical personnel under the Initial Grant are conditional upon (in addition to the performance-related conditions to be fulfilled under the Initial Grant) obtaining the formal approval by the Review Committee of Merger, Acquisition and Reorganisation of China Securities Regulatory Commission in relation to the proposed merger of GAC Changfeng Motor Co. Ltd. by the Company by the time of the EGM. In the event that such condition has not been fulfilled, the Share Appreciation Rights granted to them under the Initial Grant will automatically be cancelled.

General Information

Pursuant to the Scheme, the Incentive Recipients will be granted certain Share Appreciation Rights. Each unit of Share Appreciation Rights is notionally linked to one H Share and represents the rights conferred on the relevant Incentive Recipient to receive in cash stipulated earnings from the increase in market value of the relevant H Share. However, no H Shares will actually be issued to any Incentive Recipient. The Scheme does not involve the grant of options over new Shares or other new securities issuable by the Company (or any of its subsidiaries) and therefore, it does not fall within the ambit of, and is not subject to, the regulations of Chapter 17 of the Listing Rules.

– 9 –

LETTER FROM THE BOARD

The above list of Incentive Recipients and their entitlements for the Initial Grant are proposals only, subject to the Shareholders’ approval of the Scheme and the Initial Grant at the EGM, and further announcement will be made by the Company accordingly. As at the Latest Practicable Date, the proposed grant of the Share Appreciation Rights to the Directors had been approved by the independent non-executive Directors.

The Scheme and the Initial Grant are subject to the Shareholders’ approval at the EGM. In addition, to ensure the smooth implementation of the Scheme and the Initial Grant, Shareholders’ approval will also be sought at the EGM for the grant of authority to the Board to deal with matters relevant to the Scheme.

Any Incentive Recipients who hold or whose associates (as defined under the Listing Rules) hold any Shares of the Company will abstain from voting on the resolution approving the adoption of the Scheme at the EGM.

3. THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

The Notice of EGM is set out on pages 31 to 32 of this circular to consider the special resolution in respect of the Scheme.

The EGM will be held at Conference Room No.1, 23/F, Chengyue Building, 448 Dong Feng Zhong Road, Guangzhou, the PRC at 10:00 a.m. on Wednesday, 29 February 2012. A reply slip and a form of proxy for use at the EGM are enclosed with this circular.

In order to determine the list of Shareholders who are entitled to attend the EGM, the Company’s register of members will be closed from Saturday, 28 January 2012 to Wednesday, 29 February 2012, both days inclusive, during which period no transfer of Shares will be registered. Shareholders whose names appear on the register of members by 4:30 p.m. on Friday, 27 January 2012 are entitled to attend and vote at the meeting. In order to be qualified to attend and vote at the meeting, all transfers of Shares accompanied by relevant share certificates must be lodged with the Company’s H Share Registrar, by 4:30 p.m. on Friday, 27 January 2012.

The Articles of Association require that the Shareholders who intend to attend any general meeting of the Company shall send a written reply to the Company 20 days before the date of the meeting. In the case the written replies received from the Shareholders indicating that those intend to attend the general meeting represent holders of not more than one half of the total number of Shares with voting rights, the Company shall within 5 days inform its Shareholders again in the form of a public notice the proposed matters for consideration at the meeting and the date and venue of the meeting. The general meeting may be convened after such notification has been published. In view of the above requirements in respect of the EGM convened by the Notice of EGM, whether or not you intend to attend the EGM, you are urged to complete and return the reply slip by post, by telegraph or by fax to the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC (fax no. (86) 20 8315 1081) (in the case of holders of Domestic Shares) or to the Company’s H Share

– 10 –

LETTER FROM THE BOARD

Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (fax no. (852) 2810 8185) (in the case of holders of H Shares), on or before Thursday, 9 February 2012.

Whether or not you intend to attend the EGM, you are requested to complete and return the form of proxy to the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the People’s Republic of China (in the case of holders of Domestic Shares) or to the Company’s H Share Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (in the case of holders of H Shares) in accordance with the instructions printed thereon, not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM should you so wish.

4. VOTING BY WAY OF POLL

In accordance with the requirement of Rule 13.39(4) of the Listing Rules, all votes of the Shareholders at the EGM will be taken by poll and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

5. RECOMMENDATION

The Board believes that the adoption of the Scheme is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board recommends all Shareholders to vote in favour of the relevant resolution as set out in the EGM Notice.

By order of the Board Guangzhou Automobile Group Co., Ltd. Zhang Fangyou Chairman

– 11 –

SUMMARY OF MAJOR TERMS OF THE H SHARE APPRECIATION RIGHTS SCHEME

APPENDIX

The following is a summary of the major terms of the Scheme to be submitted to the EGM for approval and implementation. The following is not and will not constitute part of the terms of the Scheme, and hence does not affect any interpretation of the terms of the Scheme.

1. DEFINITIONS

In the Scheme, the following expressions shall have the meanings set out below:

“Scheme” H Share Appreciation Rights Scheme of Guangzhou Automobile Group Co., Ltd, hereinafter referred to as “the Scheme”. “Company” Guangzhou Automobile Group Co., Ltd, hereinafter referred to as “GAC Group”. “Share(s)” ordinary share(s) of the Company with a book value of RMB1.00 each, also referred to as “Ordinary Share”. “Tradable H Share(s)” the issued ordinary share(s) being traded on the Hong Kong Stock Exchange, also referred to as “H Share(s)”. “Share Appreciation Rights” also referred to as “Appreciation Rights”. The rights conferred to the Incentive Recipients by the Company to receive stipulated earnings from the increase in share price, subject to specific timeframe and conditions. The Incentive Recipients are entitled to exercise such rights and are also entitled to abandon such rights, but such rights shall not be used to assign, pledge or repay debt.

“Units of Share Appreciation the basic unit in appreciation on the tradable Rights” shares of the Company to be obtained under the Scheme. “Scheme Effective Date” the date as stipulated in 5.1 of Clause 5 of the Scheme. “Scheme Period” the period as stipulated in 5.2 of Clause 5 of the Scheme. “Board” the board of Directors of the Company. “Supervisory Committee” the supervisory committee of the Company.

– 12 –

SUMMARY OF MAJOR TERMS OF THE H SHARE APPRECIATION RIGHTS SCHEME

APPENDIX

• “Executive Director(s)”

• director(s) holding any executive positions as an employee who has entered into an employment contract with the Company and is entitled to monthly remuneration.

• “Supervisor(s)”

• the member(s) of the Supervisory Committee of the Company.

• “External Supervisor(s)”

• non-employee supervisor(s) who is/are independent to the shareholders of the Company and does/do not hold any management position in the Company; and is/are not close relatives of the related parties and the management of the Company nor has/have any economic interests in the aforesaid persons.

• “Remuneration and Evaluation the special committee established under the Committee” Board, the members of which are directors and shall be appointed by the Board.

• “Formal Employee(s)”

• also referred to as “Employee(s)”, the present employees that have entered into effective labour contracts with the Company for a term of one year or above.

“Grantee(s)”

• person(s) to be granted Share Appreciation Rights under the Scheme.

• “Date of Grant”

• the date when the Share Appreciation Rights are granted to the grantee(s) pursuant to the Scheme.

• “Effective Date of Share Appreciation Rights”

• the date(s) on or after which part or all the granted Share Appreciation Rights become effective and the holder(s) of such Share Appreciation Rights could receive the gains from the rise of share price according to the Restriction Schedule of the Scheme.

• “Exercise Date”

• the date on which Share Appreciation Rights can be exercised at the Exercise Price.

• “Exercise”

• the exercise of Share Appreciation Rights.

“Lapse Date”

the date on which the Share Appreciation Rights as provided in this Scheme shall lapse.

– 13 –

SUMMARY OF MAJOR TERMS OF THE H SHARE APPRECIATION RIGHTS SCHEME

APPENDIX

• “Effective Period”

the period from the Date of Grant to the Lapse Date of Share Appreciation Rights.

• “Lock-up Period”

• the period from the Date of Grant of the Share Appreciation Rights until the Effective Date, during which no Share Appreciation Rights shall be exercised.

• “Restriction Schedule”

• an arrangement allowing Share Appreciation Rights granted in one batch to be effective by batches in different times or to be effective in one batch in the same time.

“Window Period”

the period during which a Grantee shall be allowed to exercise effective Share Appreciation Rights. Such period shall be subject to the relevant requirements of the Hong Kong Stock Exchange.

“Fair Market Price”

• the fair market price of the Tradable H Share of the Company on a particular Trading Day is referred to as the closing price of H Share of the Company on the Hong Kong Stock Exchange on such day, unless otherwise determined by the Scheme.

“Trading Day”

• the date the Hong Kong Stock Exchange is open for trading marketable securities.

• “Stock Exchange”

the Hong Kong Stock Exchange.

• “Termination of Employment”

• the termination of the relationship between Formal Employee(s) and the Company.

• “Incapability”

the permanent and total disability to work.

• “Retirement” includes Normal Retirement and Early Retirement.

“Normal Retirement”

an employee retiring from his existing working position due to his age reaching or exceeding statutory retirement age and discharged from the employment contract, or the Company agreeing to his early retirement pursuant to the state regulations and standards on long-term incapability.

– 14 –

SUMMARY OF MAJOR TERMS OF THE H SHARE APPRECIATION RIGHTS SCHEME

APPENDIX

• “Early Retirement”

• an employee retiring from his existing working position before reaching the Company’s required retirement age, or an early retirement allowed pursuant to similar requirements of the Company.

• “Transferred Employee”

employee transferred from existing position, while the transfer is beyond the control of the employee and must be complied with unconditionally. Any other transferred employee are not regarded as being transferred, but are regarded as leaving, and shall be dealt with according to 10.6 of Clause 10 of the Scheme.

• “Misconduct”

• any acts considered and proven by the Company that materially and adversely affect the Company’s interests; or purposely disclose confidential information of the Company to its competitors or to the public; or interrupt and damage the Company’s relationship with its major suppliers or customers for personal interests or damaging the interests of the Company; or other conducts which seriously damage the interests of the Company.

• “Material Fault” any criminal offence convicted; acts violating the applicable state or local laws and regulations or causing material losses to the Company.

2. PURPOSE OF THE SHARE APPRECIATION RIGHTS SCHEME

The purpose of the Scheme is to establish a long-term incentive mechanism closely linked to the operating performance and long-term strategies of the GAC Group, so as to optimize the overall remuneration structure and create a competitive advantage in human resources which will contribute to the long-term and sustainable growth of the operating results of the Company. The Company expects to:

• (i) establish a long-term incentive mechanism that links the remuneration of the senior management and key personnel of the Company with the operating results of the Company so as to ensure incentive recipients are acting in line with the strategic objectives of the Company and to contribute to the accomplishment of the Company’s long-term strategic objectives;

• (ii) link closely the interests of the shareholders with those of the senior management of the Company through share incentives with an aim to maximise shareholders’ value;

– 15 –

SUMMARY OF MAJOR TERMS OF THE H SHARE APPRECIATION RIGHTS SCHEME

APPENDIX

• (iii) ensure competitiveness of the remuneration package offered by the Company in the domestic human resources market, so as to attract, retain and motivate the key personnel required for the accomplishment of the strategic objectives of the Company.

3. CORPORATE GOVERNANCE STRUCTURE AND FORMULATION AND MANAGEMENT OF THE SCHEME

The corporate governance structure of the Company shall be regulated and shall comprise the shareholders’ general meeting, the Board, the Supervisory Committee and the management team, which shall perform their respective duties, operate in a coordinative manner and conduct balancing the powers effectively. The Company shall keep optimizing the structure of Board members, raise the ratio of external Directors (including independent Directors) to the total number of Board members, and target to raise such ratio to over 50% as soon as possible.

The Scheme has been prepared by the Board. The Board has authorized the Remuneration and Evaluation Committee to manage the Scheme. According to the Board’s resolution, the Remuneration and Evaluation Committee shall be responsible for studying the remuneration system and incentive schemes of the Company, monitoring and evaluating the effects of implementation of the Scheme, and advising on the improvement of the Scheme. The Remuneration and Evaluation Committee shall make recommendations on the list of the Grantees and their respective number of Share Appreciation Rights to the Board annually for review and approval. When the Board takes a poll for the aforesaid matter, interested persons therein shall abstain from voting. Without prejudice to the provisions of the Scheme, the Board shall exercise its conclusive right in respect of the date, incentive recipients and the respective numbers of Share Appreciation Rights to be granted. The Remuneration and Evaluation Committee has authorized relevant management departments to be responsible for the due implementation of the Scheme.

4. BASIS FOR DETERMINATION OF INCENTIVE RECIPIENTS AND THE SCOPE OF INCENTIVE RECIPIENTS

4.1 Basis for Determination of Incentive Recipients

Depending on their importance to the business development of the Company, incentive recipients of the Scheme mainly include personnel in important areas necessary for the accomplishment of the strategic objectives of the Company. In this respect, the specific number of incentive recipients and that of Share Appreciation Rights to be granted shall be subject to annual adjustment depending on the changes in development of the Company’s business and the performance assessment results of the relevant individuals. The Board shall have the right to make the final decision.

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4.2 Scope of Incentive Recipients

In principle, recipients of Share Appreciation Rights shall include:

• i. the Directors (excluding independent Directors and external Directors), senior management members (excluding 3 executive Directors);

• ii. members of the operation team of investment enterprises seconded from or appointed by the Company (including automobile research institutes);

• iii. leaders and middle management at the headquarters; and

• iv. key technical staff.

The key management members and core technical staff of the Company are determined by the Board based on the characteristics and development needs of the Company.

4.3 Participation of Specified Persons in the Scheme and Restrictions on Grant of Share Appreciation Rights to Specified Persons

• i. According to the Scheme, the grant of Share Appreciation Rights to any Director, chief executives or any of their respective associates (as defined in the Listing Rules) shall be subject to the approval of the independent non-executive Directors of the Company.

• ii. On the Date of Grant of Share Appreciation Rights, any person who holds more than 5% of the Shares carrying voting rights in the Company shall not participate in the Scheme unless approved by the shareholders’ general meeting.

• iii. Where a person in charge of the parent company (being the controlling company) of the Company holds office in the Company, such person is entitled to participate in the Scheme on the condition that he/she may participate in the Share Appreciation Rights Scheme of only one listed company.

• iv. The scope of the incentive recipients shall be conclusively determined by and construed according to the interpretations of the Board.

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5. SCHEME PERIOD

5.1 The Effective Date of the Share Appreciation Rights Scheme

The implementation of the Share Appreciation Rights Scheme is conditional on the fulfilment of the following conditions: (i) The Scheme receiving the unanimous approval and reply from the relevant regulatory authority; and (ii) the Share Appreciation Rights Scheme being approved and adopted at a shareholders’ general meeting of the Company by way of a resolution.

The Effective Date of the Share Appreciation Rights Scheme shall be the date on which the above conditions are fulfilled.

Prior to the Effective Date, the Company shall not grant any Share Apreciation Right in any form, nor is anyone entitled to any right or benefit under the Scheme.

5.2 Effective Period of the Share Appreciation Rights Scheme

Unless it is early terminated as provided in Clause 13 of the Scheme, the Share Appreciation Right Scheme shall be valid for a period of five (5) years commencing on the Effective Date. Upon the expiry of the Scheme, the Board shall not grant any Share Appreciation Rights in any form pursuant to the Scheme. However, other provisions under the Scheme shall remain in full force and effect in all aspects. For the avoidance of doubt, to exercise any Share Appreciation Right granted during the Effective Period of the Share Appreciation Rights Scheme, Share Appreciation Rights granted under the Scheme which have become effective shall remain valid, while those granted but not yet effective shall continue to be subject to the Restriction Schedule on exercise and other relevant provisions under the Scheme.

6. GRANT OF SHARE APPRECIATION RIGHTS

6.1 Number of Share Appreciation Rights to be Granted

The total number of Share Appreciation Rights to be granted under the Scheme shall not exceed 10% of the share capital of the Company.

If any grant of Share Appreciation Rights would render:

• i. the number of units of Share Appreciation Rights (number of shares) granted under the Scheme to exceed ten per cent (10%) of the total issued share capital of the Company, the Company shall not offer or grant any Share Appreciation Rights in any form according to the Scheme;

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• ii. the number of Share Appreciation Rights (including exercised and outstanding) granted to a particular person within any 12-month period during the Effective period of the Scheme to exceed one percent (1%) of the total issued share capital of the Company, the Company shall not grant any more Share Appreciation Rights to such person under the Scheme;

Without prejudice to the maximum number as set out in the previous paragraph, the number of Share Appreciation Rights to be granted to any person may be adjusted with reference to the performance appraisal of such person.

6.2 Time Limit on the Grant and Exercise of Share Appreciation Rights

The Board shall not grant Share Appreciation Rights to employees after a price-sensitive event has occurred or a price-sensitive matter may arise as an outcome of a resolution, until such time that the price-sensitive information has been announced or disclosed pursuant to the disclosure requirements of the Listing Rules of the Hong Kong Stock Exchange. No Share Appreciation Rights granted shall be exercised by a holder of such Share Appreciation Rights who has become aware of such price-sensitive information until relevant announcement has been made.

No grant or exercise of Share Appreciation Rights shall be made within one month immediately preceding the earlier of:

• i the date of a Board meeting for the approval of the annual results, half-year results, quarterly results or other interim results; and

• ii the deadline by which the Company is required by the Listing Rules to publish its annual results, half-year results, quarterly results or other interim results.

Such time limit shall end on the actual announcement date. The time limit on the grant and exercise of Share Appreciation Rights shall include the period for which the publication of results is postponed.

6.3 Confirmation of Grant of Share Appreciation Rights

Grant of Share Appreciation Rights shall be notified to the Grantee in written form as decided by the Board. A notice of grant shall specify the time of grant, subject shares of Share Appreciation Rights, quantity of grant, exercise price, conditions to be fulfilled by the Grantee for holding the Share Appreciation Rights, and the principal terms of the Scheme.

If a Grantee fails to accept the grant in accordance with the procedures as set out on the notice of grant within the prescribed time, the offer shall be deemed as unaccepted and shall become void.

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7. PRINCIPAL TERMS AND CONDITIONS

7.1 Determination of the Exercise Price

The Exercise Price of the Share Appreciation Rights shall be determined with reference to the Fair Market Price.

For Share Appreciation Rights granted with the H Shares of the Company as subject, the Exercise Price shall be the highest of the following three prices:

• i. The closing price of the H Shares of the Company as stated in the daily quotations sheet of the Hong Kong Stock Exchange on the Date of Grant;

• ii. The average closing price of the H Shares of the Company as stated in the daily quotations sheet of the Hong Kong Stock Exchange for five consecutive trading days prior to the Date of Grant; or

• iii. The par value of the H Shares of the Company.

7.2 Effective Period of the Share Appreciation Rights

The Share Appreciation Rights granted under the Scheme shall be valid for five (5) years from the Date of Grant. Upon expiry of the Effective Period, the outstanding Share Appreciation Rights will automatically lapse and shall not be exercised retrospectively.

7.3 Effective Period Arrangement

All Grantees of Share Appreciation Rights under the Scheme shall not exercise their rights within two years from the Date of Grant. The Share Appreciation Rights shall become effective in the following manner and in the proportion set out in Clause 7.4:

• i. By the end of the second anniversary (24 months) from the Date of Grant, one third (1/3) of the Share Appreciation Rights being granted to each Grantee under one grant shall become effective;

• ii. By the end of the third anniversary (36 months) from the Date of Grant, another one third (1/3) of the Share Appreciation Rights being granted to each grantee under one grant shall become effective;

• iii. By the end of the fourth anniversary (48 months) from the Date of Grant, the remaining one third (1/3) become effective.

Only the Share Appreciation Rights which have become effective may be exercised. The portion which has not become effective shall not be exercised.

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7.4 Performance-based Effective Conditions of the Share Appreciation Rights

In addition to the Effective Period arrangement described in Clause 7.3, the Board shall have the right to set particular performance indicators and targets according to the specific situation of the Company’s business, and use the same as additional vesting conditions for the Share Appreciation Rights, and adjust the number of Share Appreciation Rights to become effective with reference to the satisfaction of performance-related criteria. Specific performance-related criteria shall be determined and notified to the employees by the Board upon the grant of Share Appreciation Rights. Performance-related criteria may not be freely modified after being determined. In case of special circumstances which require amendments, the consent of the state-owned assets supervision and administration department must be obtained.

7.5 Cancellation of Exercise of Share Appreciation Rights

The Board shall have the right to cancel any exercisable Share Appreciation Rights in any particular year by way of a resolution if any of the following events occurred on the Company:

• i. the annual performance appraisal of the Company fails to meet the criteria set out when the Share Appreciation Rights were granted;

• ii. the registered accountant has issued an adverse opinion or a disclaimer of opinion on the financial statements for that year; or

• iii. the Supervisory Committee or the audit department has raised significant disagreement with the results or the annual financial statements of the Company.

8. EXERCISE OF THE SHARE APPRECIATION RIGHTS

8.1 Timing for Exercise

Under the Scheme, a Grantee or his/her legal beneficiaries may exercise the Share Appreciation Rights on any date which does not fall within the relevant Lock-up Period (or other lock-up period (if applicable)) as stipulated by the Hong Kong Stock Exchange within the Effective Period of the Share Appreciation Rights. Meanwhile, the timing for exercise must also comply with the relevant requirements of the Company.

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8.2 Procedure of the Exercise

When the exercise conditions of Share Appreciation Rights are satisfied, the Incentive Recipients may request to exercise on an effective Exercise Date (or during the Window Period), and the Company will confirm the exercise of Share Appreciation Rights according to the following procedures:

• i. A written notice submitted and duly signed by the Grantee or his/her legal personal representative or his/her personal representative stating the number of Share Appreciation Rights to be exercised. The date of the notice shall be the Exercise Date; therefore the date of notice must be a trading day of the Hong Kong Stock Exchange;

• ii. The number of Share Appreciation Rights being requested for exercise must be less than or equal to the number of effective Share Appreciation Rights specified on the certificate of Share Appreciation Rights. If the number of rights being requested for exercise exceeds the number of effective Share Appreciation Rights specified on the certificate of Share Appreciation Rights, the department responsible for management of the Share Appreciation Rights of the Company or a third party administrative agency of Share Appreciation Rights entrusted by the Company is entitled to reduce the number of Share Appreciation Rights being requested for exercise to the number of effective Share Appreciation Rights specified on his/her certificate;

• iii. If the closing price of the subject Shares of the Share Appreciation Rights on the intended Exercise Date is higher than the exercise price of the Share Appreciation Rights, the fair market value at the time of exercise shall be the closing price of that Trading Day. Upon completion of exercise, the Company shall promptly issue a confirmation of exercise to the Grantee within one week thereafter, and subject to compliance with Clause 6.1, shall pay the actual gains from the exercise (after tax) to the exerciser within two (2) weeks.

8.3 Gains of the Exercise of Share Appreciation Rights

Gains on the exercise of Share Appreciation Rights = number of Share Appreciation Rights exercised X (Fair Market Price of the subject Shares on the date of exercise – exercise price) – individual income tax payable;

In respect of the Share Appreciation Rights granted to the senior management members, the cash gained from the exercise of Share Appreciation Rights shall be credited into the accounts opened by the Company for the Incentive Recipients. Not less than 20% of the cash gains in the account may only be withdrawn upon recognition of satisfactory performance at the end of their appointment (or term of office).

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9. TRANSFER OF SHARE APPRECIATION RIGHTS

9.1 Non-negotiable Share Appreciation Rights

The Share Appreciation Rights shall belong to the Grantee and shall not be transferred. The Grantee shall not sell, transfer, pledge, charge, mortgage, set-off debts with, encumber or create any interest in favour of any third party over or in relation to any Share Appreciation Rights or enter into any agreement to do any of the foregoing, and shall not create or hamper any interest of a third party directly or indirectly related to the Share Appreciation Rights. If a Grantee is in violation of the aforesaid provisions, the Share Appreciation Rights being transferred shall become void automatically. The Company is also entitled to forfeit any remaining Share Appreciation Rights held by such Grantee (to the extent of outstanding).

9.2 Transfer under Special Circumstances

Share Appreciation Rights shall only be exercised by the relevant Grantee during his/her lifetime. Share Appreciation Rights may be transferred after the death of the Grantee under the following circumstances:

• i. Share Appreciation Rights may be transferred according to the will of the Grantee or in accordance with the law of inheritance;

• ii. The transfer may be made to a qualified successor in accordance with the relevant requirements of the Share Appreciation Rights Scheme and applicable laws and regulations of the PRC.

10. TREATMENT UNDER SPECIAL CIRCUMSTANCES

10.1 Termination of Employment due to Retirement

If the employment of the Grantee is terminated by the Company due to Retirement (except that the Company determine that the Grantee will be hired by a certain competitor of the Company after the employment with the Company is terminated, in such case, the granted but not yet exercised Share Appreciation Rights will lapse immediately),

• i. in principle, the Share Appreciation Rights that are not yet effective cannot be exercised starting from the date of Retirement. In case it is the first time the Company implement a Share Appreciation Rights Scheme, the rights that have not been exercised may be exercised according to the ratio of the service period of the Incentive Recipients in the Company (after joining the Share Appreciation Rights Scheme) to the effective period of the Scheme of that period. However, those involving performance-related criteria shall be continually executed according to the original requirements.

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• ii. Share Appreciation Rights that have become effective shall be exercised within 6 months after the date of Retirement, the portion that are not exercised beyond 6 months will lapse.

10.2 Termination of Employment of Transferred Employee

Transferred Employees are those personnel that are transferred out of the Company or the subsidiaries by order of the senior management of the Company, and such Transferred Employees must accept such transfer unconditionally. Any other transferred employees are not regarded as being transferred but are regarded as leaving, the requirements of this clause shall not be applicable but the requirement of clause 6 (termination of employment due to voluntary resignation) and clause 7 (termination of employment for other reasons) of this article shall be applicable. Regarding the Share Appreciation Rights received by the Transferred Employees,

• i. in principle, the Share Appreciation Rights that have not become effective may not be exercised from the date of the transfer. In case it is the first time the Company implement a Share Appreciation Rights Scheme, the rights that have not been exercised may be exercised according to the ratio of the service period of the Incentive Recipients in the Company (after joining the Share Appreciation Rights Scheme) to the effective period of the Scheme of that period. However, those involving performance-related criteria shall be continually executed according to the original requirements.

• ii. Share Appreciation Rights that have become effective shall be exercised within 6 months after the date of the transfer, the portion that are not exercised beyond 6 months will lapse.

10.3 The Grantee is Dismissed due to Reasons of the Company

If the Grantee is dismissed by the Company due to reasons of the Company (including layoff, business changes, etc) and the Grantee has not had Material Fault or Misconduct, the Share Appreciation Rights which he holds,

• i. those Share Appreciation Rights that have not become effective shall lapse immediately from the date of layoff.

• ii. those Share Appreciation Rights that have become effective shall be exercised within 6 months after the date of layoff, the portion that are not exercised beyond 6 months will lapse.

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10.4 Termination of Employment due to Death or Incapability

If the Grantee is deceased or suffers from Incapability during his tenure with the Company:

• i. in principle, the Share Appreciation Rights that have not become effective may not be exercised from the date of termination of employment. In case it is the first time the Company implement a Share Appreciation Rights Scheme, the rights that have not been exercised may be exercised according to the ratio of the service period of the Incentive Recipients in the Company (after joining the Share Appreciation Rights Scheme) to the effective period of the Scheme of that period. However, those involving performance-related criteria shall be continually executed according to the original requirements.

• ii. those Share Appreciation Rights that have become effective shall be exercised within 6 months after the date of termination of employment, the portion that are not exercised beyond 6 months will lapse.

In case the Grantee is deceased, his legal personal representative may exercise the Share Appreciation Rights according to the above requirements.

10.5 Termination of Employment due to Misconduct, Material Fault and Breach of Relevant Laws and Regulations of the State and the Articles of Association

The occurrence of any one of the above conditions will lead to the immediate and automatic lapse of the not-yet-effective and/or effective but not-yet-exercised Share Appreciation Rights that have been granted to the Grantee. The Board is entitled to determine the specific handling requirements.

10.6 Termination of Employment due to Voluntary Resignation

If the Grantee resigns voluntarily, the Share Appreciation Rights granted to the Grantee but not-yet-effective and/or effective but not-yet-exercised shall automatically lapse immediately. The Board is entitled to determine the specific handling requirements.

10.7 Termination of Employment for other Reasons

If a Grantee terminates employment with the Company for any reason other than those referred to above, unless the Board otherwise determine, the Share Appreciation Rights granted to such person not-yet-effective at that time shall lapse on the date of termination. The termination date shall be the last day on which such person was at work with the Company or the relevant entity whether salary is paid or not. Share Appreciation Rights that have become effective may be exercised, but must be exercised within 6 months since the date of termination of employment of the Grantee with the Company. Share Appreciation Rights that are not exercised beyond such period will automatically lapse immediately.

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10.8 Liquidation or Bankruptcy of Grantee

On the date the Grantee becomes bankrupt or insolvent, or reaches a disposition plan or settlement with the creditors, the not-yet-effective and/or effective but not-yet-exercised Share Appreciation Rights that have been granted to the Grantee shall automatically lapse immediately.

10.9 Change of Control of the Company

“Change of Control” means the occurrence of any one of the following conditions:

• i. In respect of limited company registered and settled in the PRC, change of the Company’s registered largest shareholder;

• ii. when the term of office of the Board has not expired, the general meeting approved the change of half or more than half of the members of the Board by voting.

If Change of Control occurs, all the granted but not-yet-exercised Share Appreciation Rights may not be exercised in an accelerated manner.

10.10 General Provisions

All the effective arrangements contained in this provision are subject to the Effective Period of the Share Appreciation Rights Scheme. If the above dates fall beyond the Effective Period of the Share Appreciation Rights Scheme, then they shall be subject to the Effective Period of the Share Appreciation Rights Scheme.

11. ADJUSTMENT TO THE SHARE APPRECIATION RIGHTS

11.1 Prerequisite and principles of the adjustment to the Share Appreciation Rights

In the event of any change in the Company’s shareholding structure (limited to a capitalisation of profits or reserves, rights issue, subdivision or consolidation of Shares or reduction of capital) whilst any Share Appreciation Rights remain exercisable, the Board has the right to make corresponding adjustment to the exercise price of the Share Appreciation Rights (if not exercised) granted under this Scheme and/or the number of Share Appreciation Rights, provided that any decision made by the Board is subject to approval at a general meeting of the Company. Any adjustment shall give a Grantee the same gains to which he is entitled from the share appreciation as before. However, no adjustment is necessary if the change in the Company’s shareholding structure arises from an issue of equity as a consideration in a transaction.

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An independent financial adviser to or the auditors for the time being of the Company shall issue a written opinion to the Board in respect of such adjustments (if any), confirming such adjustments are fair and reasonable. All costs in connection with the independent financial adviser or the auditors shall be borne by the Company.

11.2 Adjustment Method of the Number of the Share Appreciation Rights

If matters such as conversion of capital reserve, distribution of bonus Shares, stock split, placing or consolidation of Shares occurs in the Company before the exercise of Share Appreciation Rights, corresponding adjustment to the number of Share Appreciation Rights shall be made. The adjustment methods are as follows:

• i. Conversion of capital reserve into shares, distribution of bonus shares and stock split

= Q Q0*(1+n)

In which: Q0 is the number of Share Appreciation Rights granted before the adjustment; n is the ratio of conversion of capital reserve into shares, distribution of bonus shares and stock split per Share (i.e. the increased number of shares after conversion, distribution of bonus shares or stock split per Share); Q is the number of Share Appreciation Rights after adjustment.

• ii. Consolidation of Shares

= Q Q0*n

In which: Q0 is the number of Share Appreciation Rights before adjustment; n is the ratio of consolidation of Shares (i.e. One Share of the Company shall be consolidated into n shares); Q is the number of Share Appreciation Rights after adjustment.

• iii. Placing

= Q Q0*(1+n)

In which: Q0 is the number of Share Appreciation Rights before adjustment; n is the basis of the placing (i.e. the number of issued Shares under the placing in proportion to the total share capital of the Company before placing); Q is the number of Share Appreciation Rights after adjustment.

11.3 Method of adjusting the Exercise Price of Share Appreciation Rights

If matters such as dividend distribution, conversion of capital reserve into shares, distribution of bonus shares, stock split, placing or consolidation of Shares of the Company before the exercise of Share Appreciation Rights, corresponding adjustment to the price of grant shall be made. The adjustment methods are as follows:

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• i. Conversion of capital reserve into shares, distribution of bonus shares and stock split

P = P0/(1+n)

In which: P0 is the exercise price before adjustment; n is the ratio of conversion of capital reserve into share, distribution of bonus shares and stock split per Share; P is the exercise price after adjustment.

• ii. Consolidation of Shares

P = P0/n

In which: P0 is the exercise price before adjustment; n is the ratio of consolidation of Shares; P is the exercise price after adjustment.

• iii. Dividend distribution

P = P0-V

In which: P0 is the exercise price before adjustment; V is the dividend distribution amount per Share; P is the exercise price after adjustment.

• iv. Placing

P = P0(P1+P2n)/[P1*(1+n)]

In which: P0 is the exercise price before adjustment; P1 is the closing price on the equity registration date; P2 is the price of placing; n is the ratio of placing of Shares (i.e. the number of issued Shares under the placing in proportion to the total share capital of the Company before placing); P is the exercise price after adjustment.

12. TAXATION

The beneficiaries of Share Appreciation Rights shall pay their taxation in connection with the Scheme according to the relevant provisions in the PRC, Hong Kong and the taxation jurisdiction where the Grantee of Share Appreciation Rights is located. (According to the relevant laws and regulations, the Company may withhold and pay such tax on behalf of the Grantee.)

• i. All beneficiaries who are taxpayers in the PRC must acknowledge unconditionally and give up any right of claim against the Company for making personal income tax payment on their behalf by virtue of performing the duty of withholding and collecting individual income tax in accordance with the provisions of the individual income tax law of the PRC. The legal heir of a Grantee of Share

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Appreciation Rights shall pay estate duty and other tax (if applicable) under the relevant PRC laws and regulations, and give up the right of action against the Company;

• ii. Persons exercising Share Appreciation Rights and beneficiaries of Share Appreciation Rights who are taxpayers in Hong Kong or other jurisdictions outside the PRC must pay taxation as required. The Company shall not be liable for any failure of such taxpayers to fulfill their tax obligations under the Scheme and the regulations of local tax departments.

13. MODIFICATION AND TERMINATION OF THE SCHEME

13.1 Modification of the Scheme

With respect to the Grantees who have accepted Share Appreciation Rights under the Scheme, in case of modification or suspension of the Scheme, no changes or impairment may be made or caused to the rights and obligations previously attached to such Grantees without their prior consent (except for Clause 7.5 above). Subject to the foregoing conditions, the Board can make modifications to the Scheme as they deemed necessary in the following manner:

• i. Make adjustments to Share Appreciation Rights granted to conform to new requirements due to any change in applicable laws and policies or the introduction of new implementation scheme;

• ii. Select and decide on Grantees of Share Appreciation Rights in a regular or irregular manner;

• iii. If the time is ripe for implementing other equity incentive plans, to decide whether and to what extent equity incentives be granted to participants of the Scheme according to the new scheme, and how to convert between the Share Appreciation Rights granted under this Scheme and the equity incentives granted under the new scheme.

The adoption of the following modifications shall be void and null without the approval from more than 50% of the shareholders of ordinary Shares in issue and holders of shares of other types or class conferring the same voting rights as the ordinary Shares. (Separate voting shall be conducted for each class of shareholders.) Such modifications include:

• i. Transfer of Share Appreciation Rights;

• ii. Restrictions on the scope of grant of Share Appreciation Right;

• iii. Restrictions on the number of Share Appreciation Rights to be granted;

• iv. Restrictions on the exercise of Share Appreciation Rights;

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• v. Rights of holders of Share Appreciation Rights on winding-up of the Company;

• vi. Adjustment to the exercise price of Share Appreciation Rights;

• vii. Exercise period of Share Appreciation Rights (or any specific period) or the term of the Share Appreciation Rights Scheme;

• viii. Any terms substantially favourable to the Grantee.

If relevant laws, regulations, agreements or the Hong Kong Stock Exchange require that approval must be obtained from the Shareholders’ General Meeting and/or the Hong Kong Stock Exchange before making certain modifications to the Scheme, the Board shall obtain such approval on making such modifications.

13.2 Termination of the Scheme

The Scheme will automatically terminate upon expiry of the Effective Period. The Board has the right to decide an early termination of the Scheme. In the event the Board decides to terminate the Scheme before its expiry, the Company shall cease to grant any Share Appreciation Rights pursuant to the Scheme. Unless otherwise stated, the Share Appreciation Rights granted prior to the termination of the Scheme shall remain valid and continue to be exercisable pursuant to the provisions thereof.

The Scheme was originally drafted in Chinese and the English translation of the Scheme is for your reference only. In case of any inconsistencies between the Chinese and the English version, the Chinese version shall prevail.

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NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

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GUANGZHOU AUTOMOBILE GROUP CO., LTD. 廣州汽車集團股份有限公司

(a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2238)

NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

NOTICE IS HEREBY GIVEN that the first extraordinary general meeting of 2012 of Guangzhou Automobile Group Co., Ltd. (the “Company”) will be held at Conference Room No.1, 23/F, Chengyue Building, 448 Dong Feng Zhong Road, Guangzhou, the PRC at 10:00 a.m. on Wednesday, 29 February 2012 to consider and, if thought fit, approve (with or without modifications) the following special resolution:

SPECIAL RESOLUTION

1. Resolution in respect of the adoption and implementation of the H Share Appreciation Rights Scheme of the Company:

2. (a) THAT the H Share Appreciation Rights Scheme of the Company, a summary of the terms of which is set out in the circular (the “Circular”) dated 14 January 2012 which has been delivered to the Shareholders of the Company, be and is hereby adopted and approved;

3. (b) THAT the initial grant of 35,850,000 H Share Appreciation Rights pursuant to the H Share Appreciation Rights Scheme, the details of allocation of which is set out in the Circular, be and is hereby approved;

4. (c) THAT the Board be and is hereby authorised to handle all matters relating to the H Share Appreciation Rights Scheme, including to adjust the price or number of Share Appreciation Rights, amend the H Share Appreciation Rights Scheme, determine and formulate any matters relating to the H Share Appreciation Rights Scheme, and do all such acts, matters and things that are necessary, expedient or desirable in respect of the H Share Appreciation Rights Scheme in accordance with the terms of the Share Appreciation Rights Scheme and that all such actions of the Board be and are hereby approved, ratified and confirmed.

By order of the Board Guangzhou Automobile Group Co., Ltd. Lu Sa

Company Secretary

Guangzhou, the PRC, 14 January 2012

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NOTICE OF THE FIRST EXTRAORDINARY GENERAL MEETING OF 2012

Note:

1. Any shareholder entitled to attend and vote at the said meeting is entitled to appoint one or more than one proxy to attend and vote on his behalf according to the Articles of Association of the Company. A proxy need not be a member of the Company.

2. In order to be valid, the proxy form and, if such proxy form is signed by a person under a power of attorney or other authority on behalf of the appointer, a notarially certified copy of that power of attorney or authority shall be deposited at the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC (in case of holders of Domestic Shares) or at the Company’s H Share Registrar, Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) not less than 24 hours before the time for holding the meeting.

3. Shareholders or their proxies shall present proofs of identities when attending the meeting.

4. In order to determine the list of shareholders entitled to attend the EGM, the register of members of the Company will be closed from Saturday, 28 January 2012 to Wednesday, 29 February 2012 (both dates inclusive), during which period no transfer of shares will be registered.

5. Shareholders whose names appear on the register of members of the Company at 4:30 p.m. on Friday, 27 January 2012 will be entitled to attend and vote at the meeting. In order to attend and vote at the meeting, all transfer documents together with the relevant share certificates must be lodged with the Company’s H Share Registrar before 4:30 p.m. on Friday, 27 January 2012 to register the transfer of Shares.

6. Shareholders who intend to attend the meeting shall complete and return the reply slip of the meeting by mail, telegraph or fax to the headquarters of the Company at 23/F, Chengyue Building, 448-458 Dong Feng Zhong Road, Yuexiu District, Guangzhou, the PRC; (fax number: (86) 20 8315 1081) (in case of holders of Domestic Shares), or to Tricor Investor Services Limited (the Company’s H Share Registrar) at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, (fax number is (852) 2810 8185) (in case of holders of H Shares) on or before Thursday, 9 February 2012.

7. The EGM is not expected to take more than half a day, Shareholders shall be responsible for their own travel and accommodation expenses.

8. Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the meeting will be taken by poll and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

9. As at the date of this notice, the executive directors of the Company are ZHANG Fangyou, ZENG Qinghong, YUAN Zhongrong and LU Sa, the non-executive directors of the Company are FU Shoujie, LIU Huilian, WEI Xiaoqin, LI Tun, WANG Songlin and LI Pingyi and the independent non-executive directors of the Company are WU Gaogui, MA Guohua, XIANG Bing, LAW Albert Yu Kwan and LI Zhengxi.

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