Guangzhou Automobile Group Co., Ltd.

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, licensed dealer in securities, 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)

(1) PROPOSED ADOPTION OF THE SECOND A SHARE OPTION INCENTIVE SCHEME AND THE PROPOSED GRANT UNDER THE SCHEME

(2) NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING AND

(3) NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

A letter from the Board is set out on pages 5 to 16 of this circular.

The EGM, A Shareholders’ Class Meeting and H Shareholders’ Class Meeting of Guangzhou Automobile Group Co., Ltd. (the “ Company ”) will be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. on Monday, 18 December 2017.

The notice of EGM and notice of H Shareholders’ Class Meeting containing the resolutions to be approved at the EGM and H Shareholders’ Class Meeting are set out on pages 43 to 48 of this circular.

Whether or not you are able to attend the said meetings, you are requested to complete the reply slips and forms of proxy enclosed in accordance with the instructions printed thereon and return the same to the Company as soon as possible. The reply slips shall be sent in person, by post or fax to the Company’s H Share Registrar, Tricor Investor Services Limited, at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong (fax number: (852) 2810 8185) on or before Tuesday, 28 November 2017. The forms of proxy shall be returned to the Company’s H Share Registrar, Tricor Investor Services Limited, at least 24 hours before the time of holding of such meetings or at least 24 hours before the designated time of voting. Completion and return of the form of proxy will not preclude you from attending and voting at the meetings should you so wish.

2 November 2017

CONTENT

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
APPENDIX I	– SUMMARY OF PROPOSED PRINCIPAL TERMS OF
	THE SECOND SCHEME. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX II	– SHARE OPTION INCENTIVE SCHEME PERFORMANCE
	APPRAISAL MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING . . . . . . .		43
NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING . . . . . . . . . . .		46

– i –

DEFINITIONS

In this circular (other than those set out in the notices of EGM and H Shareholders’ Class Meeting), the following expressions shall have the meanings set out below unless the context requires otherwise:

“A Share(s)”
domestic listed shares of par value of RMB1.00 each in the ordinary share capital of the Company which are listed on the SSE (Stock Code: 601238)
“A Shareholders’ Class Meeting”
the 2017 first class meeting for holders of A Shares to be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. immediately following the EGM on Monday, 18 December 2017
“Administrative Measures” the Administrative Measures on Share Option Incentives of Listed Companies (Zhong Guo Zheng Jian Hui Ling [No. 126])（《上市公司股權激勵管理辦法》（中國證監會令[第126號]））
“Appraisal Measures” Second Share Option Incentive Scheme Performance Appraisal Measures of Guangzhou Automobile Group Co., Ltd.
“Articles of Association” the Articles of Association of Guangzhou Automobile Group Co., Ltd.
“Board” the board of Directors of the Company
“Class Meetings” the A Shareholders’ Class Meeting and H Shareholders’ Class Meeting
“Company” Guangzhou Automobile Group Co., Ltd., a joint stock limited company incorporated in the PRC, the issued H Shares and A Shares of which are listed on the Stock Exchange and the SSE respectively
“Company Law” the Company Law of the People’s Republic of China “Conditions of Exercise” conditions to be fulfilled for a Participant to Exercise a Share Option according to the Second Scheme
“Conditions of Grant” conditions to be fulfilled for a Participant to be granted a Share Option according to the Second Scheme
“CSRC” China Securities Regulatory Commission

– 1 –

DEFINITIONS

“Date of Grant” the date on which a Share Option is granted to a Participant by the Company, which must be a trading day
“Director(s)” the director(s) of the Company
“EGM” the second extraordinary general meeting of 2017 of the Company to be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. on Monday, 18 December 2017
“Exercise” the behaviour of a Participant acquiring Subject Shares in accordance with the conditions stipulated under the Second Scheme
“Exercise Date” the date on which a Participant is entitled to Exercise, which must be a trading day
“Exercise Price” the price determined under the Second Scheme for a Participant to acquire Shares of the Company
“First Scheme” the A Share option incentive scheme adopted by the Company in 2014, details of which are set out in the announcement of the Company dated 11 July 2014 and the circular of the Company dated 3 September 2014
“H Shares” overseas listed foreign shares of nominal value of RMB1.00 each in the ordinary share capital of the Company which are listed on the Stock Exchange (Stock Code: 2238)
“H Shareholders’ Class Meeting” the 2017 first class meeting for holders of H shares to be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. immediately following the EGM and the A Shareholders’ Class Meeting on Monday, 18 December 2017
“Hong Kong”
Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”
30 October 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

– 2 –

DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Participant(s)” persons to be granted Share Options under the Second Scheme
“PRC” People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region and Taiwan
“Proposal Announcement” the announcement of the Company dated 30 October 2017 in relation to, among other things, the proposal of the Second Scheme
“Remuneration and Assessment the remuneration and assessment committee of the Committee” Board
“RMB” Renminbi, the lawful currency of the PRC “SASAC” the State-owned Assets Supervision and Administration Commission of Guangdong Province
“Second Scheme” the second A Share option incentive scheme of the Company proposed for adoption
“Securities Law” the Securities Law of the People’s Republic of China
“Share(s)” A Share(s) and/or H Share(s)

“Share Option(s)”, “Option(s)” the right to be granted to a Participant to acquire certain number of A Shares according to pre-determined conditions in a particular period of time

“Shareholder(s)” shareholder(s) of the Company
“Shareholders’ Meetings” the EGM and the Class Meetings
“SSE” Shanghai Stock Exchange
“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Subject Share(s)” the A Shares of the Company that a Participant is entitled to acquire under the Second Scheme “Trial Measures” Trial Measures on Implementation of Share Incentive Schemes by State Controlled Listed Companies (Domestic) (Guo Zi Fa Fen Pei [2006] No. 175) （《國有控股上市公司（境內）實施股權激勵試行辦法》（國資發分配[2006]175號））

– 3 –

		DEFINITIONS
“Validity	Period”	the period from the Date of Grant of a Share Option to
		the date on which the Share Option expires
“Vesting	Period”	the period from the Date of Grant to the Exercise Date
		of a Share Option

– 4 –

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: Zeng Qinghong (Chairman) Feng Xingya (General Manager)

Non-executive Directors:

Yan Zhuangli Chen Maoshan Li Pingyi Ding Hongxiang

Independent non-executive Directors: Fu Yuwu Lan Hailin Leung Lincheong Wang Susheng

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

Office address: GAC Center No. 23 Xingguo Road Zhujiang New Town Tianhe District Guangzhou, the PRC

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

2 November 2017

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED ADOPTION OF THE SECOND A SHARE OPTION INCENTIVE SCHEME AND THE PROPOSED GRANT UNDER THE SCHEME (2) NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING AND

(3) NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

I. INTRODUCTION

Reference is made to the announcement of the Company dated 30 October 2017 in relation to the proposed adoption of the second A Share option incentive scheme.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with information regarding the proposed adoption of the Second Scheme and the proposed grant under the scheme as well as the notices of EGM and H Shareholders’ Class Meeting, in order to seek your approval of the special resolutions relating to the aforesaid matters to be proposed at the EGM and the H Shareholders’ Class Meeting.

II. PROPOSED ADOPTION OF THE SECOND SCHEME

The purpose of the Second Scheme is to further refine the corporate governance structure of the Company, facilitate the establishment and improvement of incentive systems of the Company, fully mobilise the enthusiasm, sense of responsibility and sense of mission of the Directors, senior management and other key personnel in core technology, business and management of the Company, and effectively bond the interests of Shareholders, the Company and individual operators, making all parties to attend to and jointly strive for the long-term development of the Company. The Second Scheme is formulated in accordance with relevant requirements under the Company Law, the Securities Law, the Trial Measures, the Notice on Issues concerning Regulating the Implementation of the Equity Incentive System by the State-Owned Listed Companies (Guo Zi Fa Fen Pei [2008] No. 171)（《關於規範國有控股上市公司實施股權激勵制度有關問題的通知》（國資發分配[2008]171號）） and the Administrative Measures, combined with the existing management systems of the Company including the remuneration mechanism and performance appraisal system.

The Company hereby announces that on 30 October 2017, the Board passed a resolution in relation to the proposed adoption of the Second Scheme and the proposed grant thereunder and resolved that it will be proposed at the Shareholders’ Meetings for the Shareholders to consider, and if thought fit, to approve the adoption of the Second Scheme and the proposed grant thereunder by way of special resolutions. The Second Scheme shall become effective upon review and approval by SASAC, consideration and approval at the Shareholders’ Meetings and the Board’s authorisation of the Remuneration and Assessment Committee to formulate the administrative measures of the Second Scheme.

The summary of the principal terms of the Second Scheme is set out in Appendix I to this circular.

III. PROPOSED GRANT

1. Method of share option incentive, source of Subject Shares and number of Share Options proposed to be granted under the Second Scheme

The Second Scheme is a share option incentive scheme. Share Option represents the right to be granted to a Participant by the Company to acquire certain number of Shares of the Company at a pre-determined price and conditions in a particular period of time. The source of the underlying shares shall be the ordinary A Shares to be issued by the Company to the Participants.

There are no voting or dividend rights attaching to the Share Options. The Share Options shall not be transferred or used as guarantee or repayment of debts.

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LETTER FROM THE BOARD

The total number of Share Options that may be granted to Participants under the Second Scheme shall not exceed 450,451,400, i.e. not exceeding approximately 7% of the Company’s total issued Shares as at the Latest Practicable Date, approximately 7% of the Company’s total issued Shares and approximately 9% of the Company’s total issued A Shares as at the date of approval of the Second Scheme by the Shareholders (assuming that the non-public issuance of not exceeding 753,390,254 new A Shares by the Company will complete before the date of approval of the Second Scheme by the Shareholders). In the event that the aforesaid non-public issuance of A Shares is not completed before the date of approval of the Second Scheme by the Shareholders, the Company shall adjust the total number of Share Options that may be granted to Participants to not exceeding 10% of the Company’s total issued A Shares as at the date of approval of the Second Scheme by the Shareholders. Please refer to the announcements of the Company respectively dated 31 October 2016 and 19 October 2017 and the circular of the Company dated 25 November 2016 for details regarding the non-public issuance of A Shares.

The number of Participants under the initial grant pursuant to the Second Scheme shall not exceed 2,600, including Directors (excluding independent Directors), senior management and other management personnel and core technical (business) key personnel of the Company having direct impact on the operation results and development of the Company. Participants eligible for the grant of reserved Options shall include core talents of the Company’s new energy and intelligent network business or other management and technical personnel having significant impact on the Company’s operation and development, who should be introduced or promoted. The said personnel shall be considered and approved by the Board and shall be confirmed within 12 months after consideration and approval of the Second Scheme at the Shareholders’ Meetings, and shall not duplicate any Participant under the initial grant pursuant to the Second Scheme.

Among the above Participants, Directors and senior management must be elected by Shareholders’ meetings or appointed by the Board. All Participants must be employed by the Company pursuant to employment contracts during the appraisal period of the Second Scheme and no Participants are retired staff re-employed by the Company. The above Participants do not include substantial Shareholders or controllers of the Company who individually or jointly hold 5% or more of the Shares, or their spouse, parents or children. The details of the proposed grant under the Second Scheme, including the information on Participants, the numbers of A Shares and Exercise Price in relation to the Share Options proposed to be granted to Participants, are set out in Appendix I to this circular.

Based on the terms and conditions of the Second Scheme, the proposed grant and the share options granted under the First Scheme, the total number of Shares issued and to be issued upon exercise of the share options granted to each participant (including both exercised and outstanding options) in any 12-month period would not exceed 1% of the total number of the Company’s A Shares in issue from time to time.

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LETTER FROM THE BOARD

2. Schedule of the Second Scheme

(1) Validity Period

The Second Scheme shall be effective for 6 years.

(2) Vesting Period

Vesting Period represents the period from the Date of Grant to the Exercise Date of the Share Options. The Vesting Period is 24 months pursuant to the relevant requirements of SASAC.

(3) Exercise Date

The Exercise Date must be a trading day and must not fall within any of the following periods:

the period commencing from 30 days prior to the publication of periodic reports of the Company; or in the event of delay in publishing the reports due to special reasons, the period commencing from 30 days prior to the original date of publication and ending on one day immediately preceding the publication date;
the period commencing from 10 days prior to the publication of forecasts of results and preliminary results of the Company;
the period commencing from the date of occurrence of a material event which may have a substantial impact on the trading prices of the Shares and their derivatives or the date on which the relevant decision-making procedures start, and ending on the second trading day following the disclosure in accordance with laws;
other periods as stipulated by the CSRC and the SSE.

If the Conditions of Exercise stipulated under the Second Scheme are fulfilled after expiry of the 24-month period from the Date of Grant, Participants shall Exercise their Share Options in stages within the next 36 months.

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LETTER FROM THE BOARD

(1) The arrangements of each stage of Exercise of the Share Options under the initial grant are as follows:

Exercise				Exercise
arrangements	Duration			Proportion
First Exercise	Commencing on	the	first trading	1/3
period	day after expiry	of	the 24-month
	period from the	date	of the initial
	grant and ending	on the last trading
	day of the 36-month period from the
	Date of Grant
Second Exercise	Commencing on	the	first trading	1/3
period	day after expiry	of	the 36-month
	period from the	date	of the initial
	grant and ending	on the last trading
	day of the 48-month period from the
	Date of Grant
Third Exercise	Commencing on	the	first trading	1/3
period	day after expiry	of	the 48-month
	period from the	date	of the initial
	grant and ending	on the last trading
	day of the 60-month period from the
	Date of Grant

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LETTER FROM THE BOARD

(2) The arrangements of each stage of Exercise of the reserved Share Options to be granted are as follows:

Exercise			Exercise
Arrangements	Duration		Proportion
First Exercise	Commencing on	the first trading	1/3
period	day after expiry	of the 24-month
	period from the	date of grant of
	reserved Share Options and ending
	on the last trading day of the
	36-month period	from the Date of
	Grant
Second Exercise	Commencing on	the first trading	1/3
period	day after expiry	of the 36-month
	period from the	date of grant of
	reserved Share Options and ending
	on the last trading day of the
	48-month period	from the Date of
	Grant
Third Exercise	Commencing on	the first trading	1/3
period	day after expiry	of the 48-month
	period from the	date of grant of
	reserved Share Options and ending
	on the last trading day of the
	60-month period	from the Date of
	Grant

The Participants shall complete the Exercise of Share Options within the Validity Period. If the Conditions of Exercise are not fulfilled, the Share Options for that period shall not be Exercised. If the Conditions of Exercise are fulfilled but not all of the relevant Share Options for that period have been Exercised, such portion of the Share Options shall lapse automatically and shall be cancelled by the Company.

IV. APPRAISAL MEASURES OF THE SECOND SCHEME

According to the Second Scheme, the Exercise of Share Options by Participants shall be conditional upon the Participants having passed the appraisal implemented pursuant to the Appraisal Measures. Details of the Appraisal Measures are set out in Appendix II to this circular.

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LETTER FROM THE BOARD

V. CONDITIONS FOR THE SECOND SCHEME TO BECOME EFFECTIVE

The Second Scheme shall become effective upon review and approval by SASAC, consideration and approval at the Shareholders’ Meetings and the Board’s authorisation of the Remuneration and Assessment Committee to formulate the administrative measures of the Second Scheme. The grant of Share Options shall become valid upon fulfillment of the conditions as stipulated under the Second Scheme.

VI. FAIR VALUE AND DETERMINATION OF SHARE OPTIONS

According to the relevant requirements regarding the recognition of fair value under Enterprise Accounting Standard No. 22 – Financial Instruments: Recognition and Measurement, an appropriate valuation model shall be selected for the calculation of the fair value of Share Options. The Company uses Black-Scholes Model to calculate the fair value of Share Options and has used this Model to make a preliminary calculation of the fair value of the Share Options to be granted (official calculation will be conducted at the time of grant): the value of each Share Option of the Company is approximately RMB6.30, and the aggregate value of 405,406,300 Share Options to be granted under the initial grant of the Second Scheme is RMB2,554,059,700. Relevant factors are set out below:

(1)	Price of Subject Share:	RMB28.28/Share (closing price of A Shares on	the
		date of valuation)
(2)	Exercise Price:	RMB28.4/Share (based on the Exercise Price	for
		this grant determined on the date of valuation)
(3)	Expected life:	4 years (weighted expected effective period)
(4)	Expected volatility:	24.54% (based on the volatility rate of the Shanghai
		Composite Index in the latest four years)
(5)	Risk-free interest rate:	3.75% (based on the four-year yield to maturity of
		the national bond rate)
(6)	Expected dividend:	1.24% (calculated based on the average of	the
		dividend rate of the Company for the latest four
		years preceding the Proposal Announcement)

Note: The calculation results of the value of the Share Options are subject to a number of assumptions of the parameters used herein and the limitation of the model adopted, therefore the estimate value of the Share Options may be subjective and uncertain.

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LETTER FROM THE BOARD

VII. IMPLICATIONS UNDER LISTING RULES

The Second Scheme constitutes a share option scheme under Chapter 17 of the Listing Rules.

The Exercise Price of Share Options to be granted to Participants under the initial grant pursuant to the Second Scheme is RMB28.4 per A Share, being the highest of the following and not less than the nominal value of A Share:

the closing price of the Subject Shares on the last trading day immediately preceding the date of the Proposal Announcement;
the average trading price of the Subject Shares on the last trading day immediately preceding the date of the Proposal Announcement;
the average of the closing prices of the Subject Shares for the last 30 trading days immediately preceding the date of the Proposal Announcement;
one of the average of the trading prices of the Subject Shares for the last 20, 60 or 120 trading days immediately preceding the date of the Proposal Announcement.

Each grant of reserved Share Options shall be considered and approved by the meeting of the Board and the Exercise Price shall be determined by the highest of the following and shall not be less than the nominal value of A Share:

the closing price of the Subject Shares on the last trading day immediately preceding the date of the announcement of the Board resolutions in relation to the relevant grant of reserved Share Options (the “ Board Resolutions Announcement ”);
the average trading price of the Subject Shares on the last trading day immediately preceding the date of the Board Resolutions Announcement;
the average of the closing prices of the Subject Shares for the last 30 trading days immediately preceding the date of the Board Resolutions Announcement;
one of the average of the trading prices of the Subject Shares for the last 20, 60 or 120 trading days immediately preceding the date of the Board Resolutions Announcement.

According to the requirements of note 1 to Rule 17.03(9) of the Listing Rules, the exercise price shall be at least the higher of the following: (i) the closing price of the securities as quoted in the daily quotations sheet of the Stock Exchange on the date of grant; and (ii) the average closing price of the securities as quoted in the daily quotations sheets of the Stock Exchange for the five business days immediately preceding the date of grant.

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LETTER FROM THE BOARD

However, since, among others, the Share Options proposed to be granted involve A Shares only, and the determination of the Exercise Price is in accordance with relevant laws and regulations of the PRC, the Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with note 1 to Rule 17.03(9) of the Listing Rules. For details of the determination of the Exercise Price under the Second Scheme, please refer to the paragraph headed “Exercise Price of Share Options and determination method under the Second Scheme” in Appendix I to this circular.

VIII. THE FIRST SCHEME

The First Scheme was approved and adopted on 19 September 2014 at the 2014 first extraordinary general meeting of the Company. On the same date, a total of 64,348,600 share options were granted to a total of 620 eligible participants, with three separate exercise periods and the initial exercise price of the share options was RMB7.6 per Share.

As disclosed in the announcements of the Company published on the websites of SSE and the Stock Exchange (in the form of Overseas Regulatory Announcement) respectively dated 11 August 2016, 13 October 2016, 5 June 2017 and 23 August 2017, several adjustments were made to the exercise price due to distribution of dividends by the Company: the exercise price during the period from 19 September 2016 to 19 October 2016 was RMB7.24 per Share; the exercise price during the period from 20 October 2016 to 12 June 2017 was RMB7.16 per Share; the exercise price during the period from 13 June 2017 to 13 September 2017 was RMB6.94 per Share. The exercise price since 14 September 2017 has been RMB6.84 per Share.

As disclosed in the announcements of the Company published on the websites of SSE and the Stock Exchange (in the form of Overseas Regulatory Announcement) respectively dated 11 August 2016, 30 August 2016 and 30 August 2017, several adjustments were made to the number of participants and number of share options under the First Scheme due to retirement, resignation and job reallocation.

The first exercise period of the First Scheme commenced on 19 September 2016, the validity period of which was one year. The participants could exercise their share options more than once on a voluntary basis during such period. As disclosed in the announcement of the Company published on the websites of SSE and the Stock Exchange (in the form of Overseas Regulatory Announcement) dated 2 August 2017, 541 participants exercised their share options during the first exercise period under the First Scheme, and all participants have completed their exercises for the first exercise period with a total of 18,674,402 share options exercised. The first exercise period expired on 18 September 2017.

As at the Latest Practicable Date, the number of participants under the First Scheme was adjusted to 520, and the remaining number of share options was adjusted to 34,815,867 (with share options exercised during the first exercise period deducted). As disclosed in the announcement of the Company published on the websites of SSE and the Stock Exchange (in the form of Overseas Regulatory Announcement) dated 12 September 2017, the conditions of exercise for the second exercise period were fulfilled, and the second exercise period commenced on 19 September 2017, the validity period of which is one year; 520

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LETTER FROM THE BOARD

participants may exercise their share options; the total number of exercisable share options is 17,399,629 and the exercise price is RMB6.84 per Share. The participants may exercise their share options more than once on a voluntary basis during such period.

As at the Latest Practicable Date, a total of 10,858,331 share options among the share options granted under the First Scheme had lapsed or been cancelled according to the terms of the First Scheme, and a total of 26,242,866 A Shares had been issued as a result of exercise of the share options granted. As at the Latest Practicable Date, the number of unexercised share options granted under the First Scheme was 27,247,403.

Other than the First Scheme, the Company had not adopted any other share option scheme as at the Latest Practicable Date. As the Board had adopted “one-off” grant of share options to participants under the First Scheme pursuant to the then applicable Administrative Measures promulgated by the CSRC, no further share options may be granted under the First Scheme as at the Latest Practicable Date. Based on the terms of the Second Scheme and the proposed grant: (i) the total number of A Shares which may be issued upon Exercise of all Share Options to be granted under the Second Scheme would not in aggregate exceed 10% of the Company’s total issued A Shares as at the date of approval of the Second Scheme; and (ii) the maximum number of A Shares which may be issued upon exercise of all Options to be granted under the Second Scheme and all outstanding options granted and yet to be exercised under the First Scheme would not exceed 30% of the total number of the Company’s A Shares in issue from time to time.

IX. EGM AND H SHAREHOLDERS’ CLASS MEETING

The notices of EGM and H Shareholders’ Class Meeting are set out on pages 43 to 45 and pages 46 to 48 of this circular respectively for the consideration of, inter alia, the special resolutions relating to the proposed adoption of the Second Scheme and the proposed grant under the scheme.

The EGM and H Shareholders’ Class Meeting will be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. (in the order of the EGM, A Shareholders’ Class Meeting and H Shareholders’ Class Meeting) on Monday, 18 December 2017. The reply slips and forms of proxy for use at the EGM and the H Shareholders’ Class Meeting respectively are enclosed with this circular. The Board confirms that no Shareholder has material interest in the relevant resolutions and therefore, no Shareholder is required to abstain from voting at the above meetings.

The register of members of the Company will be closed from Saturday, 18 November 2017 to Monday, 18 December 2017 (both days inclusive), during which no transfer of Shares will be effected so as to ascertain the H Shareholders’ entitlement to attend and vote at the EGM and H Shareholders’ Class Meeting. In order to be eligible to attend and vote at the EGM and H Shareholders’ Class Meeting, all relevant completed transfer documents accompanied by the relevant share certificates must be lodged with the Company’s H Share Registrar, Tricor Investor Services Limited, at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before 4:30 p.m. on Friday, 17 November 2017.

– 14 –

LETTER FROM THE BOARD

Pursuant to Rule 13.39(4) of 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, all votes at the EGM and the Class Meetings 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.

Whether or not you are able to attend the EGM and H Shareholders’ Class Meeting, you are requested to complete the reply slips and forms of proxy enclosed in accordance with the instructions printed thereon and return the same to the Company as soon as possible. The reply slips shall be sent in person, by post or fax to the Company’s H Share Registrar, Tricor Investor Services Limited, at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong (fax number: (852) 2810 8185) on or before Tuesday, 28 November 2017. The forms of proxy shall be returned to the Company’s H Share Registrar, Tricor Investor Services Limited, at least 24 hours before the time of holding of such meetings or at least 24 hours before the designated time of voting. Completion and return of the form of proxy will not preclude you from attending and voting at the meetings should you so wish.

X. RECOMMENDATION

The Directors (including the independent non-executive Directors) believe that the adoption of the Second Scheme and the proposed grant under the scheme is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend all Shareholders to vote in favour of the relevant resolutions as set out in the notices of EGM and H Shareholders’ Class Meeting.

XI. ADDITIONAL INFORMATION

A copy of the Second Scheme is available for inspection at the Company’s principal place of business in Hong Kong at Room 808, Citicorp Centre, 18 Whitfield Road Causeway Bay, Hong Kong during normal business hours from the date hereof up to and including 18 December 2017, being the date of the Shareholders’ Meetings.

XII. 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 enquires, 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 this circular or any statement contained herein misleading.

– 15 –

LETTER FROM THE BOARD

XIII. GENERAL INFORMATION

Should there be any discrepancies between the Chinese and English versions of this circular, the Chinese version shall prevail.

By order of the Board Guangzhou Automobile Group Co., Ltd. ZENG Qinghong Chairman

– 16 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

The Company hereby announces the principal content of the proposed Second Scheme and the proposed grant thereunder as follows:

I. Purpose of the Second Scheme

The purpose of the Second Scheme is to further refine the corporate governance structure of the Company, facilitate the establishment and improvement of incentive systems of the Company, fully mobilise the enthusiasm, sense of responsibility and sense of mission of the Directors, senior management and other key personnel in core technology, business and management of the Company, and effectively bond the interests of Shareholders, the Company and individual operators, making all parties to attend to and jointly strive for the long-term development of the Company. The Second Scheme is formulated in accordance with relevant requirements under the Company Law, the Securities Law, the Trial Measures, the Notice on Issues concerning Regulating the Implementation of the Equity Incentive System by the State-Owned Listed Companies (Guo Zi Fa Fen Pei [2008] No. 171) （《關於規範國有控股上市公司實施股權激勵制度有關問題的通知》（國資發分配[2008]171號））and the Administrative Measures, combined with the existing management systems of the Company including the remuneration mechanism and performance appraisal system.

II. Method of share option incentive and source of shares

III. Number of Share Options proposed to be granted under the Second Scheme

– 17 –

APPENDIX I SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

The number of Share Options under the initial grant shall not exceed 405,406,300, representing 90% of the total Share Options to be granted under the Second Scheme and not exceeding 6.3% of the Company’s total issued Shares as at the Latest Practicable Date;
The number of reserved Share Options shall not exceed 45,045,100, representing 10% of the total Share Options to be granted under the Second Scheme and not exceeding 0.7% of the Company’s total issued Shares as at the Latest Practicable Date.

Subject to the fulfillment of the Conditions of Exercise, each Share Option entitles the Participant to acquire one A Share of the Company at the Exercise Price during the Validity Period.

IV. Scope and allocation of Participants of the Second Scheme

Among the above Participants, Directors and senior management must be elected by Shareholders’ meetings or appointed by the Board. All Participants must be employed by the Company pursuant to employment contracts during the appraisal period of the Second Scheme and no Participants are retired staff re-employed by the Company. The above Participants do not include substantial Shareholders or controllers of the Company who individually or jointly hold 5% or more of the Shares, or their spouse, parents or children. The allocation of Share Options to be granted to Participants is set out below:

			Percentage of the
		Limit of Share	total number of
		Options to be	Share Options
Names	Positions	granted	under this grant
		(ten thousands)
Zeng Qinghong	Chairman	80	0.18%
Feng Xingya	General manager	76	0.17%
Yan Zhuangli	Director	76	0.17%
Chen Maoshan	Director	72	0.16%

– 18 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

				Percentage of the	Percentage of the
		Limit of	Share	total number of
		Options	to be	Share Options
Names	Positions	granted		under this grant
		(ten thousands)
Wu Song	Standing deputy		72		0.16%
	general manager
Zhang Qingsong	Deputy general		72		0.16%
	manager
Li Shao	Deputy general		72		0.16%
	manager
Wang Dan	Deputy general		72		0.16%
	manager, chief
	financial officer
Qu Yongjian	Deputy general		72		0.16%
	manager
Chen Hanjun	Deputy general		72		0.16%
	manager
Sui Li	Secretary of the		72		0.16%
	Board
Other management, key core technology		39,732.63			88.21%
(business) personnel (not exceeding 2,589
persons)
Reserved (Note 2)		4,504.51			10%
Total		45,045.14			100%

Notes:

The number of Share Options to be granted to each Participant under the Second Scheme does not exceed 1% of the total Share capital of the Company on the date of the Proposal Announcement.
Participants eligible for the grant of reserved Options shall include core talents of the Company’s new energy and intelligent network business or other management and technical personnel having significant impact on the Company’s operation and development, who should be introduced or promoted. The said personnel shall be considered and approved by the Board and shall be confirmed within 12 months after consideration and approval of the Second Scheme at the Shareholders’ Meetings, and shall not duplicate any Participant under the initial grant pursuant to the Second Scheme.

V. Exercise Price of Share Options and determination method under the Second Scheme

The Exercise Price of Share Options to be granted under the initial grant pursuant to the Second Scheme shall be RMB28.4 per Share. The Exercise Price of the reserved Share Options shall be in principle determined according to the requirements of the Second Scheme before each grant.

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APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

During the period between the Proposal Announcement and the completion of Exercise of Share Options by the Participants, in the event of capitalisation issue, bonus issue, sub-division or consolidation of Shares, right issue or declaration of dividends of the Company, the Exercise Price of Share Options shall be adjusted accordingly.

The Exercise Price of Share Options to be granted under the initial grant shall be the highest of the following and shall not be less than the nominal value of A Share:

the closing price of the Subject Shares on the last trading day immediately preceding the date of the Proposal Announcement;
the average trading price of the Subject Shares on the last trading day immediately preceding the date of the Proposal Announcement;
the average of the closing prices of the Subject Shares for the last 30 trading days immediately preceding the date of the Proposal Announcement;
one of the average of the trading prices of the Subject Shares for the last 20, 60 or 120 trading days immediately preceding the date of the Proposal Announcement.

the closing price of the Subject Shares on the last trading day immediately preceding the date of the Board Resolutions Announcement;
the average trading price of the Subject Shares on the last trading day immediately preceding the date of the Board Resolutions Announcement;
the average of the closing prices of the Subject Shares for the last 30 trading days immediately preceding the date of the Board Resolutions Announcement;
one of the average of the trading prices of the Subject Shares for the last 20, 60 or 120 trading days immediately preceding the date of the Board Resolutions Announcement.

VI. Schedule of the Second Scheme

(1) Validity Period

The Second Scheme shall be effective for 6 years.

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SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

(2) Date of Grant

Date of Grant will be determined by the Board upon approval of the Second Scheme by SASAC and consideration and approval of the same at the Shareholders’ Meetings. Within 60 days from the consideration and approval of the Second Scheme at the Shareholders’ Meetings, the Company will grant Share Options to the Participants under the initial grant and complete the announcement and registration procedures in accordance with the relevant requirements. The date of grant of reserved Share Options shall be determined by the Board, and the announcement and registration procedures for the grant shall be completed within 12 months from the date of consideration and approval of the Second Scheme at the Shareholders’ Meetings. The Date of Grant must be a trading day.

(3) Vesting Period

Vesting Period represents the period from the Date of Grant to the Exercise Date of the Share Options, which is 24 months pursuant to the relevant requirements of SASAC.

(4) Exercise Date

The Exercise Date must be a trading day and must not fall within any of the following periods:

the period commencing from 30 days prior to the publication of periodic reports of the Company; or in the event of delay in publishing the reports due to special reasons, the period commencing from 30 days prior to the original date of publication and ending on one day immediately preceding the publication date;
the period commencing from 10 days prior to the publication of forecasts of results and preliminary results of the Company;
the period commencing from the date of occurrence of a material event which may have a substantial impact on the trading prices of the Shares and their derivatives or the date on which the relevant decision-making procedures start, and ending on the second trading day following the disclosure in accordance with laws;
other periods as stipulated by the CSRC and the SSE.

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APPENDIX I SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

(1) The arrangements of each stage of Exercise of the Share Options under the initial grant are as follows:

Exercise			Exercise
Arrangements	Duration		Proportion
First Exercise	Commencing on the first trading	day	1/3
period	after expiry of the 24-month period
	from the date of the initial grant	and
	ending on the last trading day of	the
	36-month period from the Date	of
	Grant
Second Exercise	Commencing on the first trading	day	1/3
period	after expiry of the 36-month period
	from the date of the initial grant	and
	ending on the last trading day of	the
	48-month period from the Date	of
	Grant
Third Exercise	Commencing on the first trading	day	1/3
period	after expiry of the 48-month period
	from the date of the initial grant	and
	ending on the last trading day of	the
	60-month period from the Date	of
	Grant

– 22 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

(2) The arrangements of each stage of Exercise of the reserved Share Options to be granted are as follows:

Exercise		Exercise
arrangements	Duration	Proportion
First Exercise	Commencing on the first trading day	1/3
period	after expiry of the 24-month period
	from the date of grant of reserved
	Share Options and ending on the last
	trading day of the 36-month period
	from the Date of Grant
Second Exercise	Commencing on the first trading day	1/3
period	after expiry of the 36-month period
	from the date of grant of reserved
	Share Options and ending on the last
	trading day of the 48-month period
	from the Date of Grant
Third Exercise	Commencing on the first trading day	1/3
period	after expiry of the 48-month period
	from the date of grant of reserved
	Share Options and ending on the last
	trading day of the 60-month period
	from the Date of Grant

– 23 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

(5) Lock-up period

Lock-up period represents the period during which no Shares issued to Participants upon Exercise shall be sold. Lock-up period under the Second Scheme will be implemented in accordance with the relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and the Articles of Association, and detailed requirements are set out below:

Where the Participant is a Director or senior management of the Company, the number of Shares that may be transferred by the Participant per year during his term of office must not exceed 25% of the total number of Shares of the Company held by him;
Participant who is a Director or senior management of the Company and leaves office prior to the expiry of his term shall comply with the following restrictive requirements during his term of office and within 6 months after the expiry of his term of office:
(1) the number of Shares that may be transferred by the Participant per year must not exceed 25% of the total number of Shares of the Company held by him;
(2) the Participant shall not transfer the Shares of the Company held by him within 6 months after his resignation;
(3) other requirements stipulated by laws, administrative regulations, departmental rules, regulatory documents and operating rules of the SSE in relation to the transfer of shares by a director, supervisor and senior management.
Not less than 20% of the total Share Options granted to a Director or senior management can only be exercised after such Participant has reached a pass grade or above in the performance appraisal for his term of office. If the term of office of a Participant who is a Director or senior management has not ended upon expiry of the Validity Period of the Second Scheme, the Conditions of Exercise shall be determined with reference to his appraisal results of the year during which the Validity Period of the Second Scheme expires, and Exercise shall be conducted within the Validity Period.
Where the Participant is a Director or senior management of the Company, all gains from the sale of Shares of the Company within 6 months of acquisition or from the acquisition of Shares within 6 months of sale by the Participant shall be accounted to the Company and the Board will collect all such gains.

– 24 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

If, during the Validity Period of the Second Scheme, there is any amendment to the relevant requirements regarding the transfer of Shares held by a Director and senior management of the Company under the relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and the Articles of Association, the amended relevant laws, regulations and regulatory documents including the Company Law and the Securities Law and Articles of Association shall apply to the transfer of Shares of the Company held by such Participants.

VII. Conditions of Grant and Conditions of Exercise under the Second Scheme

1. Conditions of Grant of the Share Options

The following conditions must be simultaneously fulfilled by Participants before Share Options are granted:

(1) None of the following circumstances has occurred to the Company:
Issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;
Issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control of financial reporting for the most recent accounting year;
Failure to conduct profit distribution in accordance with laws and regulations, the Articles of Association and public undertakings during the past 36 months after listing;
Prohibition from participation in share incentive schemes by laws and regulations;
Other circumstances as determined by the CSRC.
(2) None of the following circumstances has occurred to a Participant:
Having been declared an inappropriate candidate by the SSE in the past 12 months;
Having been declared an inappropriate candidate by the CSRC or its local bureaus in the past 12 months;
Having been imposed with administrative penalties or prohibited from market entry by the CSRC or its local bureaus in the past 12 months due to material violations of laws and regulations;

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APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

Being prohibited from acting as a Director or a member of senior management of the Company by the Company Law;
Being prohibited from participating in share incentive schemes of listed companies by laws and regulations;
Other circumstances as determined by the CSRC.

(3) The performance of the Company fulfills the following conditions:

The Company’s growth rate of net profits (net of non-recurring profits and losses) attributable to the shareholders of the listed company for 2016 as compared to 2015 shall be no less than 50%; the percentage of revenue from principal businesses shall be no less than 96%; and the aforesaid targets shall be no less than the 50th percentile of peer benchmark enterprises of the same industry.

2. Conditions of Exercise of the Share Options

In addition to the fulfillment of the above conditions, the Participants who intend to Exercise the granted Share Options shall simultaneously fulfill the following conditions:

(1) None of the following circumstances has occurred to the Company:

Issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;
Issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control of financial reporting for the most recent accounting year;
Failure to conduct profit distribution in accordance with laws and regulations, the Articles of Association and public undertakings during the past 36 months after listing;
Prohibition from participation in share incentive schemes by laws and regulations;
Other circumstances as determined by the CSRC.

(2) None of the following circumstances has occurred to a Participant:

Having been declared an inappropriate candidate by the SSE in the past 12 months;

– 26 –

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

Having been declared an inappropriate candidate by the CSRC or its local bureaus in the past 12 months;
Having been imposed with administrative penalties or prohibited from market entry by the CSRC or its local bureaus in the past 12 months due to material violations of laws and regulations;
Being prohibited from acting as a Director or a member of senior management of the Company by the Company Law;
Being prohibited from participating in share incentive schemes of listed companies by laws and regulations;
Other circumstances as determined by the CSRC.

(3) Appraisal requirements of the Company’s performance

The performance targets of each Exercise period for Share Options under the initial grant:

Exercise period

Performance targets

First Exercise period

The net profits growth rate of 2018 shall be no less than 12% as compared to 2016; return on net assets shall be no less than 6%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2018 shall be no less than 25%;

Second Exercise period

The net profits growth rate of 2019 shall be no less than 22% as compared to 2016; return on net assets shall be no less than 6.5%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2019 shall be no less than 25%;

– 27 –

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

Third Exercise period
The net profits growth rate of 2020 shall be no less than 41% as compared to 2016; return on net assets shall be no less than 7%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2020 shall be no less than 25%.
The performance targets of each Exercise period for the reserved Share Options to be granted:

Exercise period

Performance targets

First Exercise period The net profits growth rate of 2018 shall be no less than 12% as compared to 2016; return on net assets shall be no less than 6%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2018 shall be no less than 25%;
Second Exercise The net profits growth rate of 2019 shall be no period less than 22% as compared to 2016; return on net assets shall be no less than 6.5%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2019 shall be no less than 25%;
Third Exercise period
The net profits growth rate of 2020 shall be no less than 41% as compared to 2016; return on net assets shall be no less than 7%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2020 shall be no less than 25%.

– 28 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

Notes:

The above-mentioned “return on net assets” represents: the weighted average return on net assets attributable to the shareholders of the listed company (net of non-recurring profits and losses). In the event of refinancing by the Company, the net assets for the year of financing is calculated after deducting the proceeds of financing. “Net profits growth rate” represents the growth rate of the net profits (net of non-recurring profits and losses) attributable to the shareholders of the listed company.
If the Conditions of Exercise are fulfilled, the Participant may Exercise in accordance with the requirements of the Second Scheme. If the performance of the Company does not meet the above conditions, the number of relevant Share Options of all Participants within the relevant Exercise period shall be cancelled by the Company.
A shares and Hong Kong listed companies with similar businesses as the Company and relatively steady operation or representativeness in the industry will be selected as benchmark companies of the same industry according to the industry classification standard stipulated by CSRC. During the process of annual appraisal, if there is any material change to the business structure of a benchmark enterprise sample or the performance of any sample deviates to a large extent, the Board will remove or replace such sample during appraisal.

(4) Appraisal requirements of personal performance

Appraisal of the Participants will be conducted annually according to the existing appraisal system of the Company. Participants will apply to Exercise according to the corresponding Exercise percentage set out below based on the results of their personal performance appraisal.

	Appraisal standard Excellent Good Qualified Basically qualified Not qualified Exercise percentage 100% 70% 0%

VIII. Accounting Treatment of the Second Scheme

(1) Calculation of the fair value of Share Options

According to the relevant requirements regarding the recognition of fair value under Enterprise Accounting Standard No. 22 – Financial Instruments: Recognition and Measurement, an appropriate valuation model shall be selected for the calculation of the fair value of Share Options. The Company uses Black-Scholes Model to calculate the fair value of Share Options and has used this model to make a preliminary calculation of the fair value of the Share Options to be granted (formal calculation will be conducted at the time of grant): the value of each Share Option of the Company is approximately RMB6.30, and the aggregate value of 405,406,300 Share Options to be granted under the initial grant of the Second Scheme is RMB2,554,059,700.

– 29 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

(2) Amortisation method of Share Option expenses

According to the relevant requirements of Enterprise Accounting Standard No. 11 – Share-based Payments, the Company will update the expected amount of Share Options exercisable on each balance sheet date during the Vesting Period based on subsequent information such as the latest available number of Participants who are entitled to Exercise and the completion status of performance targets. Services received during the period will be accounted in relevant costs or fees and capital reserve based on the fair value of the Share Options on the Date of Grant.

(1) Fair value and determination of Share Options

According to the relevant requirements under Enterprise Accounting Standard No. 11 – Share-based Payments and Enterprise Accounting Standard No. 22 – Financial Instruments: Recognition and Measurement, the Company selects Black-Scholes Model (B-S Model) as the pricing model. Based on the calculation by the Company on the Latest Practicable Date, fair value of each Share Option amounted to RMB6.30 (formal calculation will be conducted upon the grant). Detailed reference factors are as follows:

(1) Price of Subject Share: RMB28.28/Share (closing price of A Shares on the date of valuation)
(2) Exercise Price: RMB28.4/Share (based on the Exercise Price for this grant determined on the date of valuation)
(3) Expected life: 4 years (weighted expected effective period)
(4) Expected volatility: 24.54% (based on the volatility rate of the Shanghai Composite Index in the latest four years)
(5) Risk-free interest rate: 3.75% (based on the four-year yield to maturity of the national bond rate)
(6) Expected dividend: 1.24% (calculated based on the average of the dividend rate of the Company for the latest four years preceding the Proposal Announcement)
(2) Expected impact of Share Options on operating result for each period

The Company will determine the fair value of the Share Options on the Date of Grant according to the related valuation tools and ultimately recognise the share based payment expenses for the Second Scheme. Such payment expenses

– 30 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

will be recognised by instalments as per Exercise proportion during the implementation of the Second Scheme. The costs of Share Options incurred under the Second Scheme will be recorded as expenses in recurring profits and losses.

Assuming the grant takes place in December 2017, the amortisation costs of Share Options according to relevant rules from 2017 to 2021 will be as follows:

Share Options	Total
Granted under the Initial	amortisation
Grant	costs	2017	2018	2019	2020	2021
(ten thousand)	(RMB	(RMB	(RMB	(RMB	(RMB	(RMB
	0’000)	0’000)	0’000)	0’000)	0’000)	0’000)
40,540.63	255,405.97	7,685.83	92,229.93	88,682.63	47,297.40	19,510.18

Based on the current situation, the Company estimates that, regardless of the stimulation effects of the Second Scheme on the performance of the Company, amortisation of the costs of the Second Scheme will affect net profits of each year during the Validity Period. In view of the positive effect of the Second Scheme on the development of the Company, including mobilisation of enthusiasm of the management, improvement of operation efficiency and reduction in agency costs, improvement of performance of the Company brought by the Second Scheme will outweigh the increase in costs.

The accounting treatment of the reserved Share Options will be the same as the accounting treatment of the Share Options under the initial grant of the Second Scheme.

IX. Method and Procedures of Adjustment to the Number and Exercise Price of Share Options

In the event of capitalisation issue, bonus issue, sub-division, rights issue or consolidation of Shares of the Company prior to any Exercise, the number of Share Options shall be adjusted accordingly in the following manner:

(1) Capitalisation issue, bonus issue and sub-division of Shares

Q = Q0 × (1 + n)

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of increase per Share resulting from the capitalisation issue, bonus issue and sub-division of Shares (i.e. the number of increased Shares per Share upon capitalisation issue, bonus issue or subdivision of Shares); Q represents the adjusted number of Share Options.

(2) Rights issue

Q = Q0 × P1 × (1 + n)/(P1 + P2 × n)

Where: Q0 represents the number of Share Options before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the ratio of the rights

– 31 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

issue (i.e. the number of Shares to be issued under the rights issue in proportion to the total Share capital of the Company before the rights issue); Q represents the adjusted number of Share Options.

(3) Consolidation of Shares

Q = Q0 × n

Where: Q0 represents the number of Share Options before the adjustment; n represents the ratio of consolidation of Shares (i.e. one Share of the Company shall be consolidated into n Shares); Q represents the adjusted number of Share Options.

(4) New issue of Shares

In the event of any new issue of Shares of the Company, no adjustment shall be made to the number of Share Options.

In the event of any dividend distribution, capitalisation issue, bonus issue, sub-division, rights issue or consolidation of Shares of the Company prior to any Exercise, the Exercise Price shall be adjusted accordingly in the following manner:

(1) Capitalisation issue, bonus issue and sub-division of Shares

P = P0 ÷ (1 + n)

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of increase per Share resulting from the capitalisation issue, bonus issue and sub-division of Shares; P represents the adjusted Exercise Price.

(2) Rights issue

P = P0 × (P1 + P2 × n)/[P1 × (1 + n)]

Where: P0 represents the Exercise Price before the adjustment; P1 represents the closing price as at the record date; P2 represents the subscription price of the rights issue; n represents the ratio of the rights issue (i.e. the number of Shares to be issued under the rights issue in proportion to the total Share capital of the Company before the rights issue); P represents the adjusted Exercise Price.

(3) Consolidation of Shares

P = P0 ÷ n

Where: P0 represents the Exercise Price before the adjustment; n represents the ratio of consolidation of Shares; P represents the adjusted Exercise Price.

(4) Declaration of dividend

P = P0 – V

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SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

Where: P0 represents the Exercise Price before the adjustment; V represents the dividend rate per Share; P represents the adjusted Exercise Price. After the adjustment, P shall be a positive number.

(5) New issue of shares

In the event of any new issue of Shares of the Company, no adjustment shall be made to the Exercise Price of the Share Option.

The Shareholders’ Meetings will authorise the Board to make adjustments to the Exercise Price and number of Share Options upon occurrence of any of the aforesaid circumstances. The Company shall engage legal adviser to advise on whether such adjustment is in compliance with the requirements under the Administrative Measures, the Articles of Association and the Second Scheme.

X. Procedures of grant of Share Options by the Company and Exercise by the Participants
(1) Upon review and approval of the Second Scheme by SASAC, the Second Scheme will be submitted to the Shareholders’ Meetings for consideration. During the voting process of the Second Scheme at the Shareholders’ Meetings, independent Directors shall collect proxy voting rights regarding the Second Scheme from all Shareholders, and the Company will provide the choice of voting on site and via the Internet.
(2) Upon consideration and approval of the Second Scheme at the Shareholders’ Meetings, the Company will grant Share Options to Participants in a specific period subject to the fulfillment of appraisal requirements of the Second Scheme. Date of Grant must be a trading day and shall comply with relevant requirements.

(3) Procedures of grant of Share Options and Exercise by the Participants

1. Grant procedures of Share Options

 - (1) Upon consideration and approval of the Second Scheme at the Shareholders’ Meetings, the Company will sign the “Stock Options Grant Agreement” with the Participants whereby the obligations of and the relationship between the parties are stipulated. The grant of reserved Share Options is subject to the confirmation, consideration and approval by the Board. The Board will handle specific issues concerning the grant of Share Options under the Second Scheme in accordance with the authorisation by the Shareholders’ Meetings.

 - (2) The Board shall determine the Date of Grant of the Second Scheme and confirm the relevant issues concerning the grant, including whether the Conditions of Grant stipulated under the Second Scheme have been fulfilled by the Company/Participants. The supervisory committee of the Company shall verify if the list of Participants is consistent with the Participants stipulated under the Second Scheme as approved at the Shareholders’ Meetings.

 - (3) The Participant shall complete registration and other procedures pursuant to the relevant requirements of CSRC, SSE and China Securities Depository and Clearing Corporation Limited. Participants eligible for the reserved

– 33 –

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

APPENDIX I

Share Options shall be confirmed within 12 months after the Second Scheme is considered and approved at the Shareholders’ Meetings, and shall not be duplicate with those under the initial grant of the Second Scheme. If Participants cannot be confirmed within 12 months, the reserved Share Options will lapse.

2. Exercise procedures of the Participants

Holders of Share Options shall pay the relevant subscription price to the Company on the Exercise Date and Exercise in accordance with the corresponding manner.

(4) Amendment and termination procedures of the Second Scheme

1. Amendment procedures of the Second Scheme

(1) If the Company intends to amend the Second Scheme prior to its consideration at the Shareholders’ Meetings, such amendment shall be considered and approved by the Board.
(2) If the Company intends to amend the Second Scheme after it is considered and approved at the Shareholders’ Meetings, such amendment shall be considered and determined at general meeting given that such amendment shall not result in the following:
(i) accelerating the Exercise of Share Options;
(ii) reducing the Exercise Price.

2. Termination procedures of the Second Scheme

(1) If the Company intends to terminate the implementation of the Second Scheme prior to its consideration at the Shareholders’ Meetings, such termination shall be considered and approved by the Board.
(2) If the Company intends to terminate the implementation of the Second Scheme after it is considered and approved at the Shareholders’ Meetings, such termination shall be considered and approved at general meeting.

XI. Respective rights and obligations of the Company and Participants

(1) Rights and obligations of the Company

The Company shall have the right to construe and execute the Second Scheme and shall appraise the performance of Participants based on the requirements under the Second Scheme. If a Participant fails to fulfill the Conditions of Exercise required under the Second Scheme, the Company will cancel the Share Options in accordance with the principle under the Second Scheme;
The Company undertakes not to provide loans and financial support in any other forms, including providing guarantee for loans, to Participants under the Second Scheme;

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APPENDIX I SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

The Company shall discharge its obligations in a timely manner in relation to report and information disclosure under the Second Scheme in accordance with the relevant requirements;
The Company shall actively support the Participants who have fulfilled the Conditions of Exercise to Exercise in accordance with the relevant requirements including those of the Second Scheme, SASAC, CSRC, SSE, China Securities Depository and Clearing Corporation Limited. However, the Company disclaims any liability for any loss suffered by a Participant arising from the incapability to Exercise as he desires due to reasons relating to SASAC, CSRC, SSE or Depository and China Securities Depository and Clearing Corporation Limited;
The Company confirms that the eligibility of the Participants under the Second Scheme does not represent the right of such Participants to continue to serve the Company and does not constitute a commitment of employment for a fixed term by the Company. The employment relationship between the Company and the Participants is still governed by the employment contract between the parties.

(2) Rights and obligations of the Participants

A Participant shall comply with the requirements of his position as stipulated by the Company, and shall work diligently and responsibly, strictly observe professional ethics, and make contribution to the development of the Company;
A Participant can decide whether to Exercise Share Options, as well as the number of Share Options to be Exercised within the exercisable limit granted to him on a voluntary basis;
Source of funds shall be self-financed by the Participants;
Share Options granted to the Participants shall not be transferred or used as guarantee or repayment of debts;
Any gains of the Participants generated from the Second Scheme are subject to individual income tax and other taxes according to PRC tax laws;
Other relevant rights and obligations as stipulated by laws and regulations.

XII. Handling of changes in relation to the Company and Participants

(1) Changes in relation to the Company

The Second Scheme shall be terminated immediately upon occurrence of any of the following to the Company:
(1) change of control of the Company;
(2) situations such as the consolidation or demerger of the Company;
(3) issue of the Company’s financial and accounting report for the most recent accounting year in which a certified public accountant gives an adverse opinion or indicates the inability to give an opinion;

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APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

(4) issue of an audit report containing an adverse opinion or indication of inability to give an opinion by a certified public accountant in the internal control of financial reporting for the most recent accounting year;
(5) failure to conduct profit distribution in accordance with laws and regulations, the Articles of Association and public undertakings during the past 36 months after listing;
(6) prohibition from participation in share incentive schemes by laws and regulations;
(7) other circumstances under which the Second Scheme shall be terminated as determined by the CSRC.

In the event of occurrence of any of the above situations, all Share Options granted but not yet Exercised by Participants shall be cancelled by the Company.

Where false statements or misleading statements in or material omissions from the information disclosure documents of the Company result in non-compliance with Condition of Grant or arrangements for Exercise of Share Options, all outstanding Share Options shall be cancelled by the Company. In respect of Share Options already Exercised by Participants, Participants concerned shall return to the Company all interests granted. Participants who bear no responsibility for the aforesaid matters and who incur losses as a result of the return of Share Options granted may seek compensation from the Company in accordance with relevant arrangements under the Second Scheme.

The Board shall recover the gain by the Participants in accordance with the aforesaid requirements and the relevant arrangements under the Second Scheme.

(2) Changes in relation to the Participants

Where the position of a Participant changes within the Company, the Share Options granted to him shall remain unchanged; however, in respect of the Share Options within the Vesting Period, reasonable adjustments may be made by the Company to the relevant personal performance appraisal requirements.
Upon occurrence of any of the following to a Participant, his Share Options prior to the Exercise period and outstanding Share Options within the Exercise period shall be cancelled:
(1) where the Participant is held criminally responsible for his criminal acts;
(2) his service contract is terminated by the Company due to violation of PRC laws, administrative regulations, provisions of the Articles of Association, or serious dereliction of duty, malfeasance, taking bribery, soliciting bribery, corruption, theft, leakage of business and technical secrets, etc., which damage the interest and reputation of the Company and cause loss to the Company;
(3) where the Participant resigns or is dismissed due to personal reasons;

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APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

(4) where the Participant is prohibited from holding Shares or Share Options of the Company by relevant laws and regulations.
Upon occurrence of any of the following to a Participant, his Share Options prior to the Exercise period shall be cancelled, and Share Options within the Exercise period shall remain in force:
(1) where the Participant retires upon reaching the retirement age as stipulated by the PRC or the Company;
(2) where the Participant resigns from his position in the Company due to job reallocation;
(3) where the Company decides not to renew the service contract with the Participant upon its expiry, and the Participant has no record of being investigated by the Party, government or judiciary authorities, subject to action by judiciary authorities or imposed with penalty due to material violation of laws, criminal action and breach of disciplines and rules or prohibited from holding Shares or Share Options of the Company by other relevant laws and regulations;
(4) where the employment relation between the Participant and the Company is terminated due to incapacity or death (including declaration of death) of the Participant which is not arising out of and in the course of his employment, the Participant or his legal heir/legatee shall not be entitled to other rights under the Second Scheme after Exercise in accordance with the requirements under this clause;
(5) where the employment relation between the Participant and the Company is terminated due to incapacity or death (including declaration of death) of the Participant which is arising out of and in the course of his employment, the Participant or his legal heir/legatee shall be entitled to Exercise the Share Options in accordance with the requirements under this clause. Upon canceling the Participants’ Share Options prior to the Exercise period, if subsequently this part of Share Options fulfills the Conditions of Exercise, the Company shall provide reasonable compensation.
Other circumstances not stated above and the handling method thereof shall be determined by the Board.

(3) Resolution of disputes between the Company and Participants

Any dispute between the Company and the Participants shall be resolved in accordance with provisions of the Second Scheme and Stock Options Grant Agreement. Disputes not clearly covered by the provisions shall be resolved in accordance with PRC laws and on arm’s length negotiation. Where the disputes cannot be settled through negotiations, they shall be referred to the People’s Court with jurisdiction over the Company’s place of domicile.

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SHARE OPTION INCENTIVE SCHEME PERFORMANCE APPRAISAL MEASURES

APPENDIX II

Second Share Option Incentive Scheme Performance Appraisal Measures

In order to ensure smooth implementation of the Second Share Option Incentive Scheme of Guangzhou Automobile Group Co., Ltd. (the “ Company ”), further refine the corporate governance structure of the Company, develop a good and balanced value distribution system, motivate the Directors, senior management, key management, technical and business personnel of the Company to work diligently so as to guarantee the steady improvement of the Company’s performance and the realisation of the Company’s development strategy and business objectives, these measures are hereby formulated according to the relevant requirements of the PRC and the actual circumstances of the Company.

I. PURPOSE OF APPRAISAL

The purpose of the appraisal is to further refine the corporate governance structure of the Company, establish and improve the incentive mechanism of the Company, ensure smooth implementation of the Second Scheme and maximise the benefits of the Second Scheme so as to ensure the realisation of the Company’s development strategy and business objectives.

II. PRINCIPLES OF APPRAISAL

The principles of appraisal must be just, open and fair. Appraisal shall be conducted strictly in compliance with these measures and the performance of the appraised targets so as to link the Second Scheme with the work performance and contribution of the Participants, which in turn help improve the management performance and maximise the interests of the Company and all Shareholders.

III. SCOPE OF APPRAISAL

These measures shall apply to all Participants under the Second Scheme, including Directors (excluding independent Directors), senior management and other management personnel and core technical (business) key personnel of the Company having direct impact on the operation results and development of the Company. Participants eligible for the grant of reserved Options shall include core talents of the Company’s new energy and intelligent network business or other management and technical personnel having significant impact on the Company’s operation and development, who should be introduced or promoted. The said personnel shall be considered and approved by the Board.

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SHARE OPTION INCENTIVE SCHEME PERFORMANCE APPRAISAL MEASURES

APPENDIX II

IV. APPRAISAL INSTITUTION

The Remuneration and Assessment Committee shall be responsible for leading and organising the appraisal of Participant(s) including Directors and members of senior management.

V. TARGETS AND STANDARD OF PERFORMANCE APPRAISAL

The amount of Share Options exercisable by Participants during a year shall be jointly determined by the appraisal results at corporate level and individual level.

(1) Appraisal requirements of the Company’s performance

1. Performance appraisals conditions at the time of grant

The Company’s growth rate of net profits (net of non-recurring profits and losses) attributable to the shareholders of the listed company for 2016 as compared to 2015 shall be no less than 50%; the percentage of revenue from principal businesses shall be no less than 96%; and the aforesaid indicators shall be no less than the 50th percentile of peer benchmark enterprises of the same industry.

2. Performance appraisal requirements upon Exercise

(1) The performance targets of each Exercise period for Share Options under the initial grant:

Exercise period Performance targets

First Exercise period

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SHARE OPTION INCENTIVE SCHEME PERFORMANCE APPRAISAL MEASURES

APPENDIX II

Second Exercise period
- The net profits growth rate of 2019 shall be no less than 22% as compared to 2016; return on net assets shall be no less than 6.5%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2019 shall be no less than 25%;
Third Exercise The net profits growth rate of 2020 shall be no period less than 41% as compared to 2016; return on net assets shall be no less than 7%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2020 shall be no less than 25%.
(2) The performance targets of each Exercise period for the reserved Share Options to be granted:

Exercise period

Performance targets

First Exercise period The net profits growth rate of 2018 shall be no less than 12% as compared to 2016; return on net assets shall be no less than 6%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2018 shall be no less than 25%;
Second Exercise The net profits growth rate of 2019 shall be no period less than 22% as compared to 2016; return on net assets shall be no less than 6.5%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2019 shall be no less than 25%;

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SHARE OPTION INCENTIVE SCHEME PERFORMANCE APPRAISAL MEASURES

APPENDIX II

Third Exercise period

The net profits growth rate of 2020 shall be no less than 41% as compared to 2016; return on net assets shall be no less than 7%; percentage of revenue from principal businesses shall be no less than 96%; the three aforesaid indicators shall be no less than the 75th percentile of peer benchmark enterprises of the same industry; cash dividend percentage of the Company for 2020 shall be no less than 25%.

Notes:

The above-mentioned “return on net assets” represents: the weighted average return on net assets attributable to the shareholders of the listed company (net of non-recurring profits and losses). In the event of refinancing by the Company, the net assets for the year of financing is calculated after deducting the proceeds of financing. “Net profits growth rate” represents the growth rate of the net profits (net of non-recurring profits and losses) attributable to the shareholders of the listed company.
If the Conditions of Exercise are fulfilled, the Participant may Exercise in accordance with the requirements of the Second Scheme. If the performance of the Company does not meet the above conditions, the number of relevant Share Options of all Participants within the relevant Exercise period shall be cancelled by the Company.
A shares and Hong Kong listed companies with similar businesses as the Company and relatively steady operation or representativeness in the industry will be selected as benchmark companies of the same industry according to the industry classification standard stipulated by CSRC. During the process of annual appraisal, if there is any material change to the business structure of a benchmark enterprise sample or the performance of any sample deviates to a large extent, the Board will remove or replace such sample during appraisal.

(2) Appraisal requirements of personal performance

Appraisal of the Participants will be conducted annually according to the existing appraisal system of the Company. According to the results of the appraisal, Participants shall Exercise according to their corresponding Exercise percentage and the details are as follows:

	Appraisal standard Excellent Good Qualified Basically qualified Not qualified Exercise percentage 100% 70% 0%

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APPENDIX II SHARE OPTION INCENTIVE SCHEME PERFORMANCE APPRAISAL MEASURES

VI. DURATION AND FREQUENCY OF APPRAISAL

1. Duration of appraisal

The accounting year preceding the grant of Share Options to the Participants or the Exercise of the Share Options.

2. Frequency of appraisal

Once a year during each year of grant of Share Options to the Participants or the Exercise of the Share Options.

VII. PROCEDURES OF APPRAISAL

After collecting appraisal results of the Participants of the Second Scheme, the Company’s human resources department shall submit them to the office of the Board for summarising, and it shall also be responsible for the specific appraisal work under the guidance of the Remuneration and Assessment Committee. It shall preserve the appraisal results and based on which a performance appraisal report shall be formulated and submitted to the Remuneration and Assessment Committee.

VIII. MANAGEMENT OF APPRAISAL RESULTS

1. Feedback on appraisal results and complaint

The appraisee shall have the right to be informed of his/her appraisal results. The direct supervisor of the employee shall inform the appraisee of his/her appraisal results within 15 working days from completion of the appraisal.

In the event that an appraisee has objection to the appraisal results, he/she can communicate with corresponding appraisal department to resolve it. If it cannot be resolved by communications, the appraisee can lodge a complaint with the Remuneration and Assessment Committee, and the Remuneration and Assessment Committee shall conduct verification within 10 working days and determine the final appraisal results.

2. Filing of appraisal results

After the appraisal, appraisal results shall be kept and filed as confidential information.

IX. MISCELLANEOUS

The Board shall be responsible for the formulation, interpretation and amendment of these measures.
These measures shall be implemented upon approval by the Shareholders’ Meetings of the Company and taking effect of the Second Scheme.

– 42 –

NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING

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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 2017 SECOND EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2017 second extraordinary general meeting (the “ EGM ”) of Guangzhou Automobile Group Co., Ltd. (the “ Company ”) will be held at 2:00 p.m. on Monday, 18 December 2017 at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC to consider and, if thought fit, approve the following resolution(s):

SPECIAL RESOLUTIONS

1 To consider and approve the resolution in relation to the “Second Share Option Incentive Scheme of Guangzhou Automobile Group Co., Ltd (Draft Proposal)” and its summary:
1.01 Basis and scope for confirming the participants of the scheme
1.02 Source, number and allocation of subject shares of the scheme
1.03 Schedule of the scheme
1.04 Exercise price of the share options and the basis of determination of the exercise price
1.05 Conditions of grant and conditions of exercise under the scheme
1.06 Method and procedures of adjustment to the share options
1.07 Accounting treatment of share options under the scheme
1.08 Procedures of grant of share options by the Company and exercise by the participants
1.09 Respective rights and obligations of the Company and participants
1.10 Handling of changes in relation to the Company and participants
1.11 Other important matters.

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NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING

2 To consider and approve the resolution in relation to the “Second Share Option Incentive Scheme Performance Appraisal Measures of Guangzhou Automobile Group Co., Ltd.”.
3 To consider and approve the resolution to authorise the board of directors to deal with the matters relating to the second share option incentive scheme of the Company.

By order of the Board Guangzhou Automobile Group Co., Ltd. ZENG Qinghong Chairman

Guangzhou, PRC, 2 November 2017

Notes:

Details of the resolutions are set out in the circular of the Company dated 2 November 2017.
Any shareholder of the Company (the “ 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. A proxy need not to be a Shareholder.
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 Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 24 hours before the time for holding the meeting or 24 hours before the time appointed for taking the poll (i.e. 2:00 p.m. on Sunday, 17 December 2017).
Shareholders or their proxies shall present proofs of identities when attending the meeting.
The register of members of the Company will be closed from Saturday, 18 November 2017 to Monday, 18 December 2017 (both days inclusive), during which no transfer of Shares will be effected so as to ascertain the Shareholders’ entitlement to attend and vote at the forthcoming EGM. In order to be eligible to attend and vote at the forthcoming EGM, all completed transfer documents accompanied by the relevant share certificates must be lodged with the Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before 4:30 p.m. on Friday, 17 November 2017.
Shareholders who are entitled to attend the said meeting are requested to deliver the reply slip for attendance not later than 20 days before the date of the meeting, i.e. no later than Tuesday, 28 November 2017 by hand, by post or by fax to the Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, fax no.: (852) 2810 8185.
Shareholders or their proxies attending the EGM are responsible for their own transportation and accommodation expenses.
Pursuant to Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (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, all votes 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.

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NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING

The notice of the EGM is despatched to the holders of H Shares of the Company only. The notice of the EGM to the holders of A Shares and the relevant reply slip and proxy form are separately published on the websites of the Company (http://www.gagc.com.cn) and the Shanghai Stock Exchange (http:// www.sse.com.cn).
The contact person of the EGM is Mr. Liu Yong and his contact number is (86)-20-83150281.

As at the date of this notice, the executive directors of the Company are ZENG Qinghong and FENG Xingya, the non-executive directors of the Company are YAN Zhuangli, CHEN Maoshan, LI Pingyi and DING Hongxiang and the independent non-executive directors of the Company are FU Yuwu, LAN Hailin, LEUNG Lincheong and WANG Susheng.

– 45 –

NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

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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 2017 FIRST CLASS MEETING FOR HOLDERS OF H SHARES

NOTICE IS HEREBY GIVEN that the 2017 first class meeting for holders of H Shares (“ H Shareholders’ Class Meeting ”) of Guangzhou Automobile Group Co., Ltd. (the “ Company ”) will be held at Conference Room 707 of GAC Center, Xingguo Road No. 23, Zhujiang New Town, Tianhe District, Guangzhou, Guangdong Province, the PRC at 2:00 p.m. on Monday, 18 December 2017 (to be convened in the order of the 2017 second extraordinary general meeting, 2017 first class meeting for holders of A shares and 2017 first H Shareholders’ Class Meeting) to consider and, if thought fit, approve the following resolution(s):

SPECIAL RESOLUTIONS

1 To consider and approve the resolution in relation to the “Second Share Option Incentive Scheme of Guangzhou Automobile Group Co., Ltd (Draft Proposal)” and its summary:
1.01 Basis and scope for confirming the participants of the scheme
1.02 Source, number and allocation of subject shares of the scheme
1.03 Schedule of the scheme
1.04 Exercise price of the share options and the basis of determination of the exercise price
1.05 Conditions of grant and conditions of exercise under the scheme
1.06 Method and procedures of adjustment to the share options
1.07 Accounting treatment of share options under the scheme
1.08 Procedures of grant of share options by the Company and exercise by the participants
1.09 Respective rights and obligations of the Company and participants
1.10 Handling of changes in relation to the Company and participants

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NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

1.11 Other important matters.
2 To consider and approve the resolution in relation to the “Second Share Option Incentive Scheme Performance Appraisal Measures of Guangzhou Automobile Group Co., Ltd.”.
3 To consider and approve the resolution to authorise the board of directors to deal with the matters relating to the second share option incentive scheme of the Company.

By order of the Board Guangzhou Automobile Group Co., Ltd. ZENG Qinghong Chairman

Guangzhou, PRC, 2 November 2017

Notes:

Details of the resolutions are set out in the circular of the Company dated 2 November 2017.
Any H shareholder of the Company (the “ H Shareholder ”) entitled to attend and vote at the H Shareholders’ Class Meeting is entitled to appoint one or more than one proxy to attend and vote on his behalf. A proxy need not to be a Shareholder.
In order to be valid, the H Shareholder’s 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 Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 24 hours before the time for holding the meeting or 24 hours before the time appointed for taking the poll (i.e. 2:00 p.m. on Sunday, 17 December 2017).
H Shareholders or their proxies shall present proofs of identities when attending the meeting.
The register of members of the Company will be closed from Saturday, 18 November 2017 to Monday, 18 December 2017 (both days inclusive), during which no transfer of Shares will be effected so as to ascertain the Shareholders’ entitlement to attend and vote at the forthcoming H Shareholders’ Class Meeting. In order to be eligible to attend and vote at the forthcoming H Shareholders’ Class Meeting, all completed transfer documents accompanied by the relevant share certificates must be lodged with the Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong on or before 4:30 p.m. on Friday, 17 November 2017.
H Shareholders who are entitled to attend the said meeting are requested to deliver the reply slip for attendance not later than 20 days before the date of the meeting, i.e. no later than Tuesday, 28 November 2017 by hand, by post or by fax to the Company’s H Share Registrar, Tricor Investor Services Limited at 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, fax no.: (852) 2810 8185.
H Shareholders or their proxies attending the H Shareholders’ Class Meeting are responsible for their own transportation and accommodation expenses.
Pursuant to Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (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, all votes at the H Shareholders’ Class 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.

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NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

The notice of the H Shareholders’ Class Meeting is despatched to the H Shareholders of the Company only.
The contact person of the H Shareholders’ Class Meeting is Mr. Liu Yong and his contact number is (86)-20-83150281.

– 48 –

AI assistant

Guangzhou Automobile Group Co., Ltd. — Proxy Solicitation & Information Statement 2017

50469_rns_2017-11-01_56a6f5df-3e27-4fd6-8537-8bbb0e1a3088.pdf

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

(1) PROPOSED ADOPTION OF THE SECOND A SHARE OPTION INCENTIVE SCHEME AND THE PROPOSED GRANT UNDER THE SCHEME

(2) NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING AND

(3) NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

CONTENT

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

(1) PROPOSED ADOPTION OF THE SECOND A SHARE OPTION INCENTIVE SCHEME AND THE PROPOSED GRANT UNDER THE SCHEME (2) NOTICE OF 2017 SECOND EXTRAORDINARY GENERAL MEETING AND

(3) NOTICE OF 2017 FIRST H SHAREHOLDERS’ CLASS MEETING

I. INTRODUCTION

II. PROPOSED ADOPTION OF THE SECOND SCHEME

III. PROPOSED GRANT

1. Method of share option incentive, source of Subject Shares and number of Share Options proposed to be granted under the Second Scheme

LETTER FROM THE BOARD

2. Schedule of the Second Scheme

(2) Vesting Period

(3) Exercise Date

LETTER FROM THE BOARD

LETTER FROM THE BOARD

IV. APPRAISAL MEASURES OF THE SECOND SCHEME

V. CONDITIONS FOR THE SECOND SCHEME TO BECOME EFFECTIVE

VI. FAIR VALUE AND DETERMINATION OF SHARE OPTIONS

VII. IMPLICATIONS UNDER LISTING RULES

LETTER FROM THE BOARD

VIII. THE FIRST SCHEME

IX. EGM AND H SHAREHOLDERS’ CLASS MEETING

X. RECOMMENDATION

XI. ADDITIONAL INFORMATION

XII. RESPONSIBILITY STATEMENT

XIII. GENERAL INFORMATION

I. Purpose of the Second Scheme

II. Method of share option incentive and source of shares

III. Number of Share Options proposed to be granted under the Second Scheme

APPENDIX I SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

IV. Scope and allocation of Participants of the Second Scheme

APPENDIX I

V. Exercise Price of Share Options and determination method under the Second Scheme

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

VI. Schedule of the Second Scheme

(1) Validity Period

APPENDIX I

(2) Date of Grant

(3) Vesting Period

(4) Exercise Date

APPENDIX I

APPENDIX I

(5) Lock-up period

VII. Conditions of Grant and Conditions of Exercise under the Second Scheme

1. Conditions of Grant of the Share Options

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

(3) The performance of the Company fulfills the following conditions:

2. Conditions of Exercise of the Share Options

(1) None of the following circumstances has occurred to the Company:

(2) None of the following circumstances has occurred to a Participant:

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

(3) Appraisal requirements of the Company’s performance

Exercise period

Performance targets

APPENDIX I

SUMMARY OF PROPOSED PRINCIPAL TERMS OF THE SECOND SCHEME

Exercise period

Performance targets

APPENDIX I

(4) Appraisal requirements of personal performance

VIII. Accounting Treatment of the Second Scheme

(1) Calculation of the fair value of Share Options

APPENDIX I

(2) Amortisation method of Share Option expenses

(1) Fair value and determination of Share Options

APPENDIX I

IX. Method and Procedures of Adjustment to the Number and Exercise Price of Share Options

(1) Capitalisation issue, bonus issue and sub-division of Shares

Guangzhou Automobile Group Co., Ltd. Proxy Solicitation & Information Statement 2017