Qingling Motors Co. Ltd — Proxy Solicitation & Information Statement 2011

Jan 12, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Qingling Motors Co. Ltd , you should at once hand this circular and the enclosed proxy form to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee.

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

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(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 1122)

CONTINUING CONNECTED TRANSACTIONS PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION PROPOSED CHANGE OF DIRECTOR

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent fi nancial adviser to the Independent Board Committee and Independent Shareholders

Hercules Capital Limited

A letter from the Board is set out on pages 11 to 43 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 44 to 45 of this circular.

A letter from Hercules Capital Limited, the independent fi nancial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 46 to 66 of this circular.

A notice convening an extraordinary general meeting (“EGM”) of Qingling Motors Co. Ltd (the “Company”) to be held at Conference Hall, 1st Floor of Qingling Motors Co. Ltd Offi ce Building, 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the PRC on Wednesday, 2 March 2011 at 10:00 a.m. or any adjournment thereof is set out on pages 71 to 75 of this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed reply slip and proxy form in accordance with the instructions printed thereon. The reply slip should be returned to the legal address of the Company at 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the PRC by hand, by post or by fax (at fax no. (86) 23-68830397) on or before Thursday, 10 February 2011. The proxy form should be returned to the legal address of the Company at 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, PRC (in the case of proxy form of holder of Domestic Shares) or to the Company’s H Share Registrars, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in the case of proxy form of holders of H Shares) as soon as possible and in any event not less than 24 hours before the time appointed for holding of the EGM or 24 hours before the time appointed for taking the poll or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

13 January 2011

CONTENTS

	Pages
Def nitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
I. Continuing Connected Transactions with Engine JV Company . . . . . . . . . . . . . . . . . . . .	13
II. Continuing Connected Transactions with the Qingling Group Companies. . . . . . . . . . . .	16
III. Continuing Connected Transactions with Qingling Moulds . . . . . . . . . . . . . . . . . . . . . . .	27
IV. Continuing Connected Transactions with Isuzu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
V. Continuing Connected Transactions with Sales JV Company. . . . . . . . . . . . . . . . . . . . . .	35
VI. The Revised Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
VII. Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
VIII. Requirements under Listing Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
IX. Independent Shareholders’ Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
X. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
XI. Proposed Amendment to Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
XII. Proposed Change of Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
XIII. The EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
XIV. Voting by Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
XV. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Letter from Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Appendix I — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	67
Appendix II — Biography Details of Mr. Tsukioka. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	70
Notice of Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71

— i —

DEFINITIONS

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

“100P Series Technology Transfer the agreement dated 17 August 1993 entered into between Isuzu Agreement” and the Company relating to the transfer of technology and provision of technical know-how for the production of 100P-N series light vehicles and related parts and components by Isuzu to the Company, details of which are set out in the Announcement

• “140TF/UC Automobile Technology the agreement dated 11 November 1996 entered into between Transfer Agreement” Isuzu and the Company relating to the transfer of technology and provision of technical know-how in relation to 140TF/UC Series light vehicle by Isuzu to the Company, details of which are set out in the Announcement

• “700P3X Series Technology Transfer the agreement dated 23 May 2008 entered into between Isuzu and Agreement” the Company relating to the transfer of technology and provision of technical know-how in relation to the 700P3X Series vehicle by Isuzu to the Company, details of which are set out in the Announcement

• “associate(s)” has the meaning ascribed to it under the Listing Rules “Announcement” the announcement issued by the Company dated 23 December 2010 in relation to, amongst others, the Non-exempt Continuing Connected Transactions

• “Articles of Association” the articles of association of the Company

• “Board” the board of Directors

“CCT Agreements” the New Supply Agreement, the New Consolidated Services Agreement, the New Equipment Lease, the New Factory Lease, the Sales JV Pre-Leasing Agreement, the Sales JV Supply Agreement, the Sales JV Consolidated Services Agreement, the New Machinery Leasing Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Qingling Group Moulds Supply Agreement, the New Warehouse Leasing Agreement, the New Chassis Supply Agreement, the New Qingling Moulds Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement, the 100P Series Technology Transfer Agreement, the 140TF/UC Automobile Technology Transfer Agreement, the F Chassis Technology Transfer Agreement and the 700P3X Series Technology Transfer Agreement

— 1 —

DEFINITIONS

“Chassis Supply Agreement”	the conditional agreement entered into between the Company
	and Qingling Group on 5 August 2008 relating to the supply of
	automobile chassis and related components by the Company to
	Qingling Group for each of the three years commencing on 5
	August 2008 and expiring on 4 August 2011
“Company”	Qingling Motors Company Limited, a sino-foreign joint venture
	joint stock limited company incorporated in the PRC
“Company Supply Agreement”	the conditional agreement dated 23 May 2008 entered into between
	Isuzu and the Company relating to the provision of automobile
	parts and components by the Company to Isuzu for a period of
	three years commencing on 24 June 2008 and expiring on 23 June
	2011
“connected person(s)”	has the meaning ascribed to it under the Listing Rules
“Consolidated Services Agreement”	an agreement entered into between the Company and the Engine
	JV Company on 21 January 2008 pursuant to which the Company
	will provide water and gas supply services, transportation services,
	equipment repair and maintenance services, medical and hygiene
	services and the Three Warranties to the Engine JV Company
“CQAC”	重慶慶鈴車橋有限公司Chongqing Qingling Axle Co. Ltd., a
	sino-foreign joint venture company incorporated in the PRC with
	limited liability owned as to 80%, 10%, and 10% by Qingling
	Group, Isuzu and Isuzu China respectively
“CQAC Agreement”	the conditional agreement dated 23 May 2008 entered into
	between CQAC and the Company relating to the supply of certain
	automobile parts by CQAC to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011
“CQACL”	重慶慶鈴鑄鋁有限公司Chongqing Qingling Aluminium Casting
	Co. Ltd., a sino-foreign joint venture company incorporated in the
	PRC with limited liability owned as to 72.43%, 13%, 10% and
	4.57% by Qingling Group, Isuzu, Isuzu China and an Independent
	Third Party respectively
“CQACL Agreement”	the conditional agreement dated 23 May 2008 entered into between
	CQACL and the Company relating to the supply of certain
	automobile parts by CQACL to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011

— 2 —

DEFINITIONS

“CQCC”	重慶慶鈴鑄造有限公司Chongqing Qingling Casting Company
	Limited, a sino-foreign joint venture company incorporated in the
	PRC with limited liability owned as to 75%, 21.54% and 3.46% by
	Qingling Group, Isuzu and an Independent Third Party respectively
“CQCC Agreement”	the conditional agreement dated 23 May 2008 entered into
	between CQCC and the Company relating to the supply of certain
	automobile parts by CQCC to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011
“CQFC”	重慶慶鈴鍛造有限公司Chongqing Qingling Forging Co. Ltd.,
	a sino-foreign joint venture company incorporated in the PRC with
	limited liability and owned as to 75%, 9.18%, 14.03% and 1.8%
	by Qingling Group, Isuzu, Isuzu China and an Independent Third
	Party respectively
“CQFC Agreement”	the conditional agreement dated 23 May 2008 entered into
	between CQFC and the Company relating to the supply of certain
	automobile parts by CQFC to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011
“CQNHK”	重慶慶鈴日發座椅有限公司Chongqing Qingling NHK Seat Co.
	Ltd., a sino-foreign joint venture company incorporated in the PRC
	with limited liability owned as to 55.80%, 3%, 2%, 30% and 9.2%
	by Qingling Group, Isuzu, Isuzu China and two Independent Third
	Parties respectively
“CQNHK Agreement”	the conditional agreement dated 23 May 2008 entered into between
	CQNHK and the Company relating to the supply of certain
	automobile parts by CQNHK to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011
“CQPC”	重慶慶鈴塑料有限公司Chongqing Qingling Plastic Co. Ltd.,
	a sino-foreign joint venture company incorporated in the PRC
	with limited liability owned as to 75.15%, 9%, 10% and 5.85%
	by Qingling Group, Isuzu, Isuzu China and an Independent Third
	Party respectively
“CQPC Agreement”	the conditional agreement dated 23 May 2008 entered into
	between CQPC and the Company relating to the supply of certain
	automobile parts by CQPC to the Company for a period of three
	years commencing on 20 September 2008 and expiring on 19
	September 2011
“Directors”	the director(s) of the Company

— 3 —

DEFINITIONS

• “Domestic Share(s)” domestic shares of nominal value of RMB1.00 each in the ordinary share capital of the Company

• “EGM” the extraordinary general meeting of the Company to be convened at Conference Hall, 1st Floor of Qingling Motors Co. Ltd Offi ce Building, 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the PRC on Wednesday, 2 March 2011 at 10:00 a.m.

• “Engine JV Company” 慶鈴五十鈴（重慶）發動機有限公司 Qingling Isuzu (Chongqing) Engine Co., Ltd., a sino-foreign equity joint venture established in the PRC which is owned as to 50% by the Company and 50% by Isuzu

• “Equipment Lease” the agreement entered into between the Company and the Engine JV Company on 21 January 2008 for the lease of the Leased Equipment from the Company to the Engine JV Company

• “Existing Continuing Connected transactions under the Supply Agreement, the Consolidated Transactions” Services Agreement, the Equipment Lease, the Factory Lease, the Machinery Leasing Agreement, the CQACL Agreement, the Parts Supply Agreements, the Qingling Group Moulds Supply Agreement, the Warehouse Leasing Agreement, the Chassis Supply Agreement, the Qingling Moulds Supply Agreement, the Isuzu Supply Agreement, the Isuzu Moulds Supply Agreement and the Company Supply Agreement

• “Existing Isuzu Technology the continuing connected transactions under the Technology Transactions” Transfer Agreements “F Chassis Technology Transfer the agreement dated 20 February 2000 entered into between Agreement” Isuzu and the Company relating to the transfer of technology and provision of technical know-how in relation to the components of F Series Chassis by Isuzu to the Company, details of which are set out in the Announcement

• “Factory Lease” the agreement entered into between the Company and the Engine JV Company on 21 January 2008 under which the Company leases the Leased Land and the Factory Premises to the Engine JV Company

• “Factory Premises” the buildings and structures on the Leased Land

• “Group” the Company and its subsidiaries from time to time “H Share(s)” overseas listed foreign shares in the ordinary share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Stock Exchange and traded in Hong Kong dollars

— 4 —

DEFINITIONS

• “Independent Board Committee” an independent committee of the Board established for the purpose of reviewing the Non-exempt Continuing Connected Transactions and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised

• “Independent Financial Adviser” Hercules Capital Limited, a licensed corporation for carrying out Type 6 regulated activity (advising on corporate fi nance) under the SFO, being the independent fi nancial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Non-exempt Continuing Connected Transactions and the revision of the annual cap for the Chassis Supply Agreement

• “Independent Shareholders” Shareholders other than the connected person(s) who is/are interested in the relevant transactions

• “Independent Third Parties” independent third parties which are not connected with the chief executive, directors and substantial shareholder(s) of the Company or any of its subsidiaries and their respective associates, and any of them an “Independent Third Party”

• “Isuzu” Isuzu Motors Limited, a company incorporated in Japan and listed on the Tokyo Stock Exchange and a substantial shareholder of the Company

• “Isuzu China” Isuzu (China) Holding Co., Ltd., a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Isuzu

• “Isuzu Moulds Supply Agreement” the agreement dated 23 May 2008 entered into between Qingling Moulds and Isuzu relating to the supply of moulds and related products by Qingling Moulds to Isuzu for a period of three years commencing on 24 June 2008 and expiring on 23 June 2011

• “Isuzu Supply Agreement” the conditional agreement dated 23 May 2008 entered into between Isuzu and the Company relating to the provision of automobile parts and components by Isuzu to the Company for a period of three years commencing on 24 June 2008 and expiring on 23 June 2011

• “Land” the piece of land known as No. 1, Zhongliang Shan Xiexing Cun, Jiulongpo District, ChongQing City, the PRC

• “Latest Practicable Date” 7 January 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular

• “Leased Equipment” the production equipment (including the 4J/4K Series engine common equipment), testing equipment and pilot equipment, including design plans, user manuals, maintenance handbooks, maintenance records and other ancillary parts of the Company

— 5 —

DEFINITIONS

• “Leased Land”

a portion of the Land

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Machinery Leasing Agreement” the agreement dated 29 February 2008 entered into between CQFC and the Company relating to the leasing of certain machineries for further processing of forging and casting parts by CQFC to the Company for a period of 3 years commencing on 1 March 2008 and expiring on 31 December 2010

• “Mr. Tsukioka” Mr. Ryozo Tsukioka

• “New Chassis Supply Agreement” the conditional agreement entered into between the Company and Qingling Group on 23 December 2010 relating to the supply of automobile chassis and related components by the Company to Qingling Group, details of which are set out in the section headed “THE NEW CHASSIS SUPPLY AGREEMENT”

• “New Company Supply Agreement” the conditional agreement dated 23 December 2010 entered into between Isuzu and the Company relating to the provision of automobile parts and components by the Company to Isuzu, details of which are set out in the section headed “THE NEW COMPANY SUPPLY AGREEMENT”

• “New Consolidated Services an agreement dated 23 December 2010 entered into between the Agreement” Company and the Engine JV Company, details of which are set out in the Announcement

• “New CQAC Agreement” the conditional agreement dated 23 December 2010 entered into between CQAC and the Company relating to the supply of certain automobile parts by CQAC to the Company, details of which are set out in the section headed “THE NEW CQAC AGREEMENT”

• “New CQACL Agreement” the conditional agreement dated 23 December 2010 entered into between CQACL and the Company relating to the supply of certain automobile parts by CQACL to the Company, details of which are set out in the section headed “THE NEW CQACL AGREEMENT”

• “New CQCC Agreement” the conditional agreement dated 23 December 2010 entered into between CQCC and the Company relating to the supply of certain automobile parts by CQCC to the Company, details of which are set out in the section headed “THE NEW CQCC AGREEMENT”

• “New CQFC Agreement” the conditional agreement dated 23 December 2010 entered into between CQFC and the Company relating to the supply of certain automobile parts by CQFC to the Company, details of which are set out in the section headed “THE NEW CQFC AGREEMENT”

— 6 —

DEFINITIONS

• “New CQNHK Agreement” the conditional agreement dated 23 December 2010 entered into between CQNHK and the Company relating to the supply of certain automobile parts by CQNHK to the Company, details of which are set out in the section headed “THE NEW CQNHK AGREEMENT”

• “New CQPC Agreement”

• the conditional agreement dated 23 December 2010 entered into between CQPC and the Company relating to the supply of certain automobile parts by CQPC to the Company, details of which are set out in the section headed “THE NEW CQPC AGREEMENT”

• “New Equipment Lease”

• the agreement dated 23 December 2010 entered into between the Company and the Engine JV Company, details of which are set out in the Announcement

• “New Factory Lease”

• the agreement dated 23 December 2010 entered into between the Company and the Engine JV Company, details of which are set out in the Announcement

• “New Isuzu Moulds Supply Agreement”

• the agreement dated 23 December 2010 entered into between Qingling Moulds and Isuzu relating to the supply of moulds and related products by Qingling Moulds to Isuzu, details of which are set out in the section headed “THE NEW ISUZU MOULDS SUPPLY AGREEMENT”

• “New Isuzu Supply Agreement”

• the conditional agreement dated 23 December 2010 entered into between Isuzu and the Company relating to the provision of automobile parts and components by Isuzu to the Company, details of which are set out in the section headed “THE NEW ISUZU SUPPLY AGREEMENT”

• “New Machinery Leasing Agreement”

• the agreement dated 23 December 2010 entered into between CQFC and the Company relating to the leasing of certain machineries for further processing of forging and casting parts by CQFC to the Company, details of which are set out in the Announcement

• “New Parts Supply Agreements”

• the New Qingling Group Agreement, the New CQCC Agreement, the New CQFC Agreement, the New CQAC Agreement, the New CQNHK Agreement and the New CQPC Agreement

• “New Qingling Group Agreement”

• the conditional agreement dated 23 December 2010 entered into between Qingling Group and the Company relating to the supply of certain automobile parts by Qingling Group to the Company, details of which are set out in the section headed “THE NEW QINGLING GROUP AGREEMENT”

— 7 —

DEFINITIONS

“New Qingling Group Moulds the conditional agreement dated 23 December 2010 entered Supply Agreement” into between Qingling Moulds and the Company relating to the provision of moulds and related products and maintenance and processing services by Qingling Moulds to the company and the provision of raw materials and processing services by the Company to Qingling Moulds, details of which are set out in the Announcement

“New Qingling Moulds Supply the conditional agreement dated 23 December 2010 entered Agreement” into between Qingling Moulds and the Company relating to the provision of moulds and related products and maintenance and processing services by Qingling Moulds to the Company and the provision of raw materials and processing services by the Company to Qingling Moulds, details of which are set out in the Announcement “New Supply Agreement” the agreement dated 23 December 2010 entered into between the Company and the Engine JV Company, details of which are set out in the section headed “THE NEW SUPPLY AGREEMENT”

• “New Warehouse Leasing Agreement” the agreement dated 23 December 2010 entered into between Qingling Group and the Company relating to the leasing of warehouses by the Company from Qingling Group for 3 years, commencing from 1 July 2011 to 30 June 2014, details of which are set out in the Announcement

• “Non-exempt Continuing Connected the transactions contemplated under the New Supply Agreement, Transactions” the Sales JV Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement

• “Parts Supply Agreements” the Qingling Group Agreement, the CQCC Agreement, the CQFC Agreement, the CQAC Agreement, the CQNHK Agreement and the CQPC Agreement

• “percentage ratios” the percentage ratios under Rule 14.07 of the Listing Rules, other than the profi ts ratio and equity capital ratio

• “PRC” the People’s Republic of China “Proposed Amendment” the proposed amendment to Article 94 of the Articles of Association, details of which are set out in the section headed “PROPOSED AMENDMENT TO ARTICLES OF ASSOCIATION”

— 8 —

DEFINITIONS

“Qingling Group” 慶鈴汽車（集團）有限公司 Qingling Motors (Group) Company Limited, a state-owned limited liability company established in the PRC “Qingling Group Agreement” the conditional agreement dated 23 May 2008 entered into between Qingling Group and the Company relating to the supply of certain automobile parts by Qingling Group to the Company “Qingling Group Companies” Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC and CQACL and any of them “Qingling Group Company”

• “Qingling Moulds” Chongqing Qingling Moulds Co. Ltd., a sino-foreign joint venture company incorporated in the PRC with limited liability owned as to 50.56% and 49.44 % by the Company and Isuzu respectively

• “Qingling Moulds Supply Agreement” the conditional agreement dated 23 May 2008 entered into between Qingling Moulds and the Company relating to the provision of moulds and related products and maintenance and processing services by Qingling Moulds to the Company and the provision of raw materials and processing services by the Company to Qingling Moulds for a period of three years commencing on 24 June 2008 and expiring on 23 June 2011

“RMB” Renminbi, the lawful currency of the PRC “Sales JV Company” 慶鈴五十鈴（重慶）汽車銷售服務有限公司 Qingling Isuzu (Chongqing) Automobile Sales and Service Co., Ltd, a sino-foreign equity joint venture established in the PRC which is owned as to 50% by the Company and 50% by Isuzu “Sales JV Consolidated Services an agreement dated 23 December 2010 entered into between the Agreement” Company and the Sales JV Company, details of which are set out in the Announcement “Sales JV Leased Land” the piece of land known as A5-1-2, Erlang Science and Technology New City, Jiulongpo District, ChongQing City, the PRC “Sales JV Pre-Leasing Agreement” the pre-leasing agreement entered into between the Company and the Sales JV Company on 23 December 2010 under which the Company leases the Sales JV Leased Land and the Sales JV Premises to the Sales JV Company “Sales JV Premises” the buildings and structures on the Sales JV Leased Land “Sales JV Supply Agreement” the agreement dated 23 December 2010 entered into between the Company and Sales JV Company, details of which are set out in the section headed “THE SALES JV SUPPLY AGREEMENT”

— 9 —

DEFINITIONS

• “SFO” Securities and Futures Ordinance, Cap. 571 of the Laws of Hong Kong

• “Share(s)” the Domestic Shares and the H Shares of the Company “Shareholder(s)” the holder(s) of the shares of the Company

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

“Supply Agreement” the agreement entered into between the Company and the Engine JV Company on 21 January 2008 under which the Company will provide parts of engines and raw materials to the Engine JV Company for the production of engines by the Engine JV Company, and the Engine JV Company will provide engines and their parts to the Company

• “Technology Transfer Agreements”

• the 100P Series Technology Transfer Agreement, the 140TF/ UC Automobile Technology Transfer Agreement, the F Chassis Technology Transfer Agreement and the 700P3X Series Technology Transfer Agreement

• “Three Warranties”

• the provision of warranty services in respect of repair, replacement and refund of the Company’s products

“Warehouse Leasing Agreement” the agreement dated 23 May 2008 entered into between Qingling Group and the Company relating to the leasing of warehouses by the Company from Qingling Group to the Company for a period of 3 years commencing on 1 July 2008 and expiring on 30 June 2011

— 10 —

LETTER FROM THE BOARD

==> picture [326 x 65] intentionally omitted <==

(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 1122)

Executive Directors:

Mr. Wu Yun (Chairman) Mr. Gao Jianmin Mr. Makoto Tanaka Mr. Masanori Katayama Mr. Liu Guangming Mr. Pan Yong Mr. Yue Huaqiang

Independent Non-Executive Directors:

Mr. Song Xiaojiang Mr. Xu Bingjin Mr. Long Tao

Registered Offi ce:

1 Xiexing Cun Zhongliangshan Jiulongpo District Chongqing The People’s Republic of China

Principal Place of Business in Hong Kong: Suite 4901, 49th Floor Offi ce Tower Convention Plaza 1 Harbour Road Wanchai Hong Kong

13 January 2011

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS PROPOSED AMENDMENT TO THE ARTICLES OF ASSOCIATION PROPOSED CHANGE OF DIRECTOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement, the announcement of the Company dated 23 December 2010 in relation to the proposed amendment to the Articles of Association and the announcement of the Company dated 23 December 2010 in relation to the proposed change of Director. Pursuant to the requirements under the Listing Rules, the Company will seek the approval of the Independent Shareholders in relation to, inter alia, the Non-exempt Continuing Connected Transactions and the respective annual caps.

The purpose of this circular is to provide you with details of the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised, proposed amendment to the Articles of Association and proposed change of director. The Independent Board

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LETTER FROM THE BOARD

Committee has formed to advise the Independent Shareholders as to whether the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are fair and reasonable and in the interests of the Shareholders as a whole. Hercules Capital Limited has been appointed as the independent fi nancial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the New Supply Agreement, the Sales JV Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised. A letter from the Independent Board Committee is set out on pages 44 to 45 of this circular and a letter from Hercules Capital Limited is set out on pages 46 to 66 of this circular.

BACKGROUND

The Group has continued to carry on the Existing Continuing Connected Transactions and the Existing Isuzu Technology Transactions, as announced on 28 January 2008, 29 February 2008, 28 May 2008 and 5 August 2008, which include transactions under the following agreements:

• (i) The Consolidated Services Agreement which shall expire on 20 January 2011;

• (ii) The Equipment Lease which shall expire on 20 January 2011;

• (iii) The Factory Lease which shall expire on 20 January 2011;

• (iv) The Supply Agreement which shall expire on 30 March 2011;

• (v) The Machinery Leasing Agreement which shall expire on 31 December 2010;

• (vi) The CQACL Agreement and the Parts Supply Agreements which shall expire on 19 September 2011;

• (vii) The Qingling Group Moulds Supply Agreement which shall expire on 31 December 2011;

• (viii) The Warehouse Leasing Agreement which shall expire on 30 June 2011;

• (ix) The Chassis Supply Agreement which shall expire on 4 August 2011;

• (x) The Qingling Moulds Supply Agreement which shall expire on 23 June 2011;

• (xi) The Isuzu Supply Agreement which shall expire on 23 June 2011;

• (xii) The Isuzu Moulds Supply Agreement which shall expire on 23 June 2011;

• (xiii) The Company Supply Agreement which shall expire on 23 June 2011;

• (xiv) The 140TF/UC Automobile Technology Transfer Agreement;

• (xv) The F Chassis Technology Transfer Agreement;

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LETTER FROM THE BOARD

• (xvi) The 100P Series Technology Transfer Agreement; and

• (xvii) The 700P3X Series Technology Transfer Agreement.

Details of the Existing Continuing Connected Transactions and the Existing Isuzu Technology Transactions are more particularly set out in the announcements dated 28 January 2008, 29 February 2008, 28 May 2008 and 5 August 2008.

It is expected that the Group will from time to time continue to enter into transactions of a nature similar to the Existing Continuing Connected Transactions after the expiry of the agreements to which the Existing Continuing Connected Transactions relate. Accordingly, the Group now seeks to renew the said agreements on substantially the same terms and enter into the agreements numbered (1) to (19) below which constitute continuing connected transactions under the Listing Rules. The Company will also expect to continue the transactions under the existing Technology Transfer Agreements numbered (20) to (23) below.

The Company also has entered into the following agreements with the Sales JV Company:

• (i) Sales JV Pre-Leasing Agreement;

• (ii) Sales JV Supply Agreement; and

• (iii) Sales JV Consolidated Services Agreement.

I. CONTINUING CONNECTED TRANSACTIONS WITH ENGINE JV COMPANY

1. THE NEW CONSOLIDATED SERVICES AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Consolidated Services Agreement will on annual basis be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and are exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

2. THE NEW EQUIPMENT LEASE

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Equipment Lease will on annual basis be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and are exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

3. THE NEW FACTORY LEASE

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Factory Lease will

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LETTER FROM THE BOARD

on annual basis be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and are exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

4. THE NEW SUPPLY AGREEMENT

Date : 23 December 2010 Parties : (i) the Engine JV Company; and (ii) the Company. Term : three years effective from the date upon obtaining all relevant approvals and/or completing all other procedures in accordance with all applicable laws, rules and regulations or 31 March 2011, whichever is later Nature of the transaction : the Company will provide parts of engines and raw materials to the Engine JV Company for the production of engines and their parts by the Engine JV Company, and the Engine JV Company will provide engines and their parts to the Company. Price determination : the actual selling price of the products to be supplied/ purchased and other related terms in any further specifi c agreement shall be the actual costs of the supplying party plus a premium of not exceeding 10%. Such premium shall be fi nalized by both parties on the basis that it is fair and reasonable to both parties.

Pursuant to the New Supply Agreement, the parties shall enter into further specifi c agreement(s) with detailed terms in accordance with the underlying principles under the New Supply Agreement and specifying the type of products to be supplied/purchased, orders making procedure, method of delivery, price, payment methods, quantity, standard of quality, and other terms and conditions in relation to the supply and purchase of specifi c type of products.

Should the Engine JV Company cease to be a connected person of the Company and the Supply Agreement cease to be a continuing connected transaction, the Company is entitled to terminate the New Supply Agreement by notifying the Engine JV Company in writing.

Historical transaction amounts

The following table sets out the historical aggregate transaction amounts between the Company and the Engine JV Company in respect of the purchase and supply of parts of engines and raw materials from

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LETTER FROM THE BOARD

the Company to the Engine JV Company, and the engines and their parts from the Engine JV Company to the Company:

		Actual	amount incurred (in RMB)	amount incurred (in RMB)			Annual caps	(in RMB)
		For			For	For			For
		the period		the period		the period			the period
		from			from	from			from
		1 April	For	1	January	1 April	For	For	1 January
		2008 to	the year ended		2010 to	2008 to	the year ended	the year ending	2011 to
		31 December	31 December	15 December		31 December	31 December	31 December	31 March
		2008	2009		2010	2008	2009	2010	2011
(a)	the value of engines and their parts
	from the Engine JV Company to the
	Company	1,017,780,000	1,230,980,000	1,490,000,000		1,400,000,000	2,600,000,000	3,000,000,000	900,000,000
(b)	the value of engine parts and raw
	materials from the Company to the
	Engine JV Company	733,120,000	899,380,000	830,570,000		1,000,000,000	1,500,000,000	1,200,000,000	400,000,000
Aggregate		1,750,900,000	2,130,360,000	2,320,570,000		2,400,000,000	4,100,000,000	4,200,000,000	1,300,000,000

None of aggregate amounts above exceeded their respective annual caps for the period from 1 April 2008 to 31 December 2008, for the year ended 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the aggregate amount for the year ending 31 December 2010 and the period from 1 January 2011 to 31 March 2011 will not exceed the respective caps for the corresponding periods.

Basis of consideration

As there is no suffi cient comparable transactions, the consideration is determined by the actual costs of the supplying party plus a premium of not exceeding 10%. Such premium shall be fi nalized by both parties on the basis that it is fair and reasonable to both parties.

Proposed annual caps

The proposed annual caps for the New Supply Agreement during the term of such agreement are as follows:

New Supply Agreement (a) the value of engines and their parts from the Engine JV Company to the Company (b) the value of engine parts and raw materials from the Company to the Engine JV Company Aggregate		Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)
	For the period from 1 April 2011 to 31 December 2011 1,800,000,000 1,600,000,000 3,400,000,000	For the year ending 31 December 2012 4,000,000,000 3,000,000,000 7,000,000,000	For the year ending 31 December 2013 4,000,000,000 3,000,000,000 7,000,000,000	For the period from 1 January 2014 to 31 March 2014
				1,000,000,000 800,000,000
				1,800,000,000

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LETTER FROM THE BOARD

Basis of proposed annual caps

The said proposed annual caps for the New Supply Agreement are determined with reference to (i) the expansion of the production capacity of the Group; (ii) the expected growth of the Company from the effective date of the New Supply Agreement to early 2014 in view of the economic growth in the PRC and the growth in demand for engines and their parts; and (iii) the price of engines, parts, raw materials and transportation in the market and their price trends.

Reasons for entering into the New Supply Agreement

To enjoy the economy of scale, the business of the Group requires certain degree of division of labour among its members. With each Group member specializing in a particular area of the business, such as production of engines, marketing or provision of repair and maintenance services, the Directors believe that it would facilitate the operation of the Group, and minimise the costs of the Group in acquiring similar products or services from independent third parties.

The consideration payable by the Company under the New Supply Agreement is determined after arm’s length negotiations between the parties thereto. The Directors (including the independent nonexecutive Directors) are of the view that the New Supply Agreement is on normal commercial terms, and that its terms are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

Further information about the business of Engine JV Company

Engine JV Company is principally engaged in the manufacturing and sale of vehicle-used engines and their parts. Engine JV Company will purchase parts of engines and raw materials from the Company under the New Supply Agreement for the production of engines and their parts. Engine JV Company will sell engines and their parts to the Company or other third party.

II. CONTINUING CONNECTED TRANSACTIONS WITH THE QINGLING GROUP COMPANIES

5. THE NEW MACHINERY LEASING AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Machinery Leasing Agreement will on an annual basis be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

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LETTER FROM THE BOARD

6. THE NEW CQACL AGREEMENT

Date : 23 December 2010 Parties : (i) CQACL; and (ii) the Company Condition precedent : Conditional upon approval by the Independent Shareholders by poll Term : Three years commencing from 20 September 2011 Products provided by : Automobile parts including but not limited to CQACL to the Company aluminium parts and other parts and components Price determination : Currently at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8% determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQACL to Independent Third Parties

7. THE NEW QINGLING GROUP AGREEMENT

Date : 23 December 2010 Parties : (i) Qingling Group; and

• (ii) the Company

Condition precedent : Conditional upon approval by the Independent Shareholders by poll Term : Three years commencing from 20 September 2011 Products provided by : Automobile parts including but not limited to Qingling Group to stamping components, compartments and other parts the Company and components

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LETTER FROM THE BOARD

Price determination

:

Currently at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8% determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by Qingling Group to Independent Third Parties

8. THE NEW CQCC AGREEMENT

23 December 2010

Date : 23 December 2010 Parties : (i) CQCC; and (ii) the Company Condition precedent : Conditional upon approval by the Independent Shareholders by poll Term : Three years commencing from 20 September 2011 Products provided by : Automobile parts including but not limited to casts CQCC to the Company of engine blocks, cylinder heads and main bearing covers and other parts and components Price determination :

Currently at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8% determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQCC to Independent Third Parties

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LETTER FROM THE BOARD

9. THE NEW CQFC AGREEMENT

Date : Parties :

Condition precedent

Term Products provided by CQFC to the Company

Price determination

23 December 2010

(i) CQFC; and

• (ii) the Company Conditional upon approval by the Independent Shareholders by poll

Three years commencing from 20 September 2011

Automobile parts including but not limited to raw casts of engine crankshafts and connecting rods and other parts and components

Currently at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8% determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQFC to Independent Third Parties

10. THE NEW CQAC AGREEMENT

Date : Parties :

23 December 2010

• (i) CQAC; and

• (ii) the Company

Condition precedent Term Products provided by CQAC to the Company

Conditional upon approval by the Independent Shareholders by poll

Three years commencing from 20 September 2011

Automobile parts including but not limited to front and rear motor vehicle axles and other parts and components

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LETTER FROM THE BOARD

Price determination :

Currently at prices not higher than market prices determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQAC to Independent Third Parties

11. THE NEW CQNHK AGREEMENT

Date : 23 December 2010 Parties : (i) CQNHK; and (ii) the Company Condition precedent : Conditional upon approval by the Independent Shareholders by poll Term : Three years commencing from 20 September 2011 Products provided by : Automobile parts including but not limited to motor CQNHK to the Company vehicle seats and other parts and components Price determination : Currently at prices not higher than market prices determined in the following order: (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQNHK to Independent Third Parties

12. THE NEW CQPC AGREEMENT

• Date : 23 December 2010 Parties : (i) CQPC; and

• (ii) the Company

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LETTER FROM THE BOARD

Condition precedent Term Products provided by CQPC to the Company Price determination

Conditional upon approval by the Independent Shareholders by poll

Three years commencing from 20 September 2011

Automobile parts including but not limited to plastic parts and other parts and components

Currently at prices not higher than market prices determined in the following order:

• (i) at prices not higher than market prices; or

• (ii) if no comparable market price, at prices based on actual costs or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favourable than those offered by CQPC to Independent Third Parties

Historical transaction amounts

The following table sets out the historical transaction amounts for the CQACL Agreement and Parts Supply Agreements together with their respective annual caps for the relevant periods or years:

CQACL Agreement Qingling Group Agreement CQCC Agreement CQFC Agreement CQAC Agreement CQNHK Agreement CQPC Agreement	Actual a	mounts incurred (in	RMB) For the period from 1 January 2010 to 15 December 2010 16,390,000 27,110,000 22,400,000 67,170,000 435,210,000 67,880,000 83,690,000		Annual caps	(in RMB)
	For the period from 20 September 2008 to 31 December 2008 4,670,000 22,220,000 6,540,000 16,280,000 108,660,000 14,230,000 20,680,000	For the year ended 31 December 2009 10,350,000 51,840,000 15,220,000 34,390,000 372,800,000 50,410,000 74,570,000		For the year ended 31 December 2008 21,500,000 234,500,000 35,000,000 94,700,000 930,000,000 81,100,000 161,600,000	For the year ended 31 December 2009 35,000,000 250,000,000 50,000,000 120,000,000 900,000,000 100,000,000 150,000,000	For the year ending 31 December 2010 40,000,000 300,000,000 80,000,000 150,000,000 1,100,000,000 120,000,000 180,000,000	For the period from 1 January 2011 to 19 September 2011
							30,000,000 220,000,000 60,000,000 120,000,000 800,000,000 90,000,000 130,000,000

None of aggregate amounts above exceeded their respective annual caps for the years ended 31 December 2008 and 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the aggregate amounts for the year ending 31 December 2010 will not exceed their respective caps for the corresponding period.

For the Parts Supply Agreements, it is expected that the amounts incurred for the period from 1 January 2011 until the expiry of the agreements (i.e. 19 September 2011) will not exceed their respective corresponding annual caps.

For the CQACL Agreement, it is expected that the amount incurred for the period from 1 January 2011 until the expiry of the agreement (i.e. 19 September 2011) will exceed its annual cap for the corresponding period. This is due to the continuous increase in the cost-effectiveness of the products,

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LETTER FROM THE BOARD

the sales and after-sales services of the Company, and that the volume of production and sales of the Company is expected to experience a relatively substantial growth. The Board therefore announces that the annual cap for the CQACL Agreement for the period from 1 January 2011 to 19 September 2011 will be renewed to RMB35,000,000, which is set by the Board with reference to the projected sales volume for the corresponding period. The renewal of the annual cap for the period from 1 January 2011 to 19 September 2011 is only subject to reporting and announcement requirements and is exempt from Independent Shareholders’ approval requirements under the Listing Rules. The Directors, including the independent non-executive Directors, are of the view that the said annual cap as renewed is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Save for the revised annual cap as disclosed above, the other terms and conditions under the CQACL Agreement remain unchanged.

Projected transaction amounts

The Directors project that under the New CQACL Agreement and each of the New Parts Supply Agreements, the value of the automobile parts to be provided by the relevant parties to the Company for the period from 20 September 2011 to 31 December 2011, the two years ending 31 December 2012 and 2013 and the period from 1 January 2014 to the expiry date of the respective agreements will not exceed the amounts set out below:

New CQACL Agreement New Qingling Group Agreement New CQCC Agreement New CQFC Agreement New CQAC Agreement New CQNHK Agreement New CQPC Agreement		Projected transaction amounts Aggregate amounts (in RMB)	Projected transaction amounts Aggregate amounts (in RMB)
	For the period from 20 September 2011 to 31 December 2011 15,000,000 16,000,000 10,000,000 20,000,000 490,000,000 26,000,000 90,000,000	For the year ending 31 December 2012 70,000,000 110,000,000 50,000,000 120,000,000 2,400,000,000 170,000,000 320,000,000	For the year ending 31 December 2013 70,000,000 110,000,000 50,000,000 120,000,000 2,400,000,000 170,000,000 320,000,000	For the period from 1 January 2014 until 19 September 2014
				50,000,000 90,000,000 40,000,000 90,000,000 1,800,000,000 130,000,000 240,000,000

Basis of consideration

The considerations payable by the Company under the New CQACL Agreement and New Parts Supply Agreements are determined after arm’s length negotiations between the parties thereto. The Directors (including the independent non-executive Directors) are of the view that the New CQACL Agreement and New Parts Supply Agreements are on normal commercial terms, and that their terms are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

Proposed annual caps

The table below sets out the proposed annual caps for the transactions under the New CQACL Agreement and each of the New Parts Supply Agreements:

New CQACL Agreement and New Parts Supply Agreements		Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)
	For the period from 20 September 2011 to 31 December 2011 667,000,000	For the year ending 31 December 2012 3,240,000,000	For the year ending 31 December 2013 3,240,000,000	For the period from 1 January 2014 to 19 September 2014
				2,440,000,000

The Company will seek approval from the Independent Shareholders in respect of the transactions under the New CQACL Agreement and the New Parts Supply Agreements and the aforesaid annual caps, which are set by reference to the above projected transaction amounts.

Basis of proposed annual caps

The aforesaid proposed annual caps are ascertained by reference to (i) the historical sales volume for the two years ended 31 December 2010; (ii) the projected sales volume for the four years ending 31 December 2014; (iii) the expected increase in the number of new vehicles of new models or different specifi cations to be launched and made available for sale by the Company; and (iv) the expected expansion of sales network through distributors in the PRC.

With improvement of the market condition in 2011 and the Company’s enhancement in market exploration and development by adopting the following measures, the Company expects that the sales volume for the second half of 2011 and the four years ending 31 December 2014 will increase to a considerable extent and hence increase the Group’s requirement for automobile parts:

• (i) continuous market exploration;

• (ii) continuous adoption of the localization of parts and accessories policy to reduce the costs and enhance the competitiveness of the Group’s products; and

• (iii) product quality enhancement by the Company.

The Company currently anticipates that the total number of vehicles of new models or different specifi cations that may be launched and made available for sale by the Company for the second half of 2011 and the three years ending 31 December 2014 will be in the range of about 10 to 15. However, these fi gures may vary depending on numerous factors, including the change in market demand and the progress of research and development of the new vehicles.

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LETTER FROM THE BOARD

Currently, the Group sells its products through 95 distributors in the PRC. The Group anticipates that the number of distributors through which the Group’s products will be sold will increase substantially in the range of about 120 to 150 in the second half of 2011 and the three years ending 31 December 2014. However, these fi gures may vary depending on numerous factors, including the change in market demand.

Reasons for entering into the New CQACL Agreement and New Parts Supply Agreements

As the Company mainly produces various types of vehicles and components under the brand of Isuzu, the Company has to from time to time, in the course of its business, to purchase: (i) stamping components, cars and other parts and components; (ii) casts of engine blocks, cylinder heads and main bearing covers and other parts and components; (iii) raw casts of engine crankshaft, connecting rods and other parts and components; (iv) front and rear motor vehicle axles and other parts and components; (v) motor vehicle seats and other parts and components; (vi) plastic parts and other parts and components; and (vii) aluminum parts and other parts and components, and since the principle business of Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC and CQACL include the production and retail of products mentioned in the items (i) to (vii) above; Qingling Group produces such products in good quality and is willing to produce such products in accordance with the specifi cations of the Company, hence the Company purchases the said products from Qingling Group (as the case may be).

As the Company mainly manufactures automobiles under the brand of Isuzu, the Company’s specifi cations for all product parts must conform with Isuzu’s standards. Each connected person has already obtained from Isuzu the technical know-how and specifi c equipments, hence they are capable of manufacturing based on the specifi cations of Isuzu’s product parts. In view of the fact that the other suppliers do not possess such technical know-how and specifi c equipments that Isuzu has, the Directors believe that even if the other suppliers may manufacture parts according to the same specifi cations, the quality of these products will not conform with the standards of Isuzu. Therefore, in view of the fact that the Group does not require any other products than those supplied by its connected persons, it is of the view that it would not be necessary to look for other sources.

13. THE NEW QINGLING GROUP MOULDS SUPPLY AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Qingling Group Moulds Supply Agreement on an annual basis will be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and are exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

14. THE NEW WAREHOUSE LEASING AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Warehouse Leasing Agreement will be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and are exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

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LETTER FROM THE BOARD

15. THE NEW CHASSIS SUPPLY AGREEMENT

Date	:	23 December 2010
Parties	:	(i) the Company; and
		(ii) Qingling Group
Term	:	Three years commencing from 5 August 2011
Condition precedent	:	Conditional upon approval by the Independent
		Shareholders by poll
Products supplied by	:	Automobile chassis and related components
the Company to
Qingling Group
Price determination	:	By reference to the market prices of the chassis and
		related components

The New Chassis Supply Agreement is a master agreement which sets out the principles upon which detailed terms in relation to the supply of automobile chassis and related components by the Company to Qingling Group are to be determined.

Pursuant to the New Chassis Supply Agreement, the Company will enter into defi nitive agreements with Qingling Group from time to time to provide for detailed terms of each single transaction in accordance with the principles set out in the New Chassis Supply Agreement. Such detailed terms include but without limitation, prices, payment and settlement terms, quantities, qualities, delivery and inspection of products and other terms and conditions in relation to the provision of the automobile chassis and related components.

The Company and Qingling Group agree that such detailed terms shall be on normal commercial terms or, if there is no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to the Company. Qingling Group also undertakes that the terms offered to the Company shall be no less favourable than terms offered to independent third parties in the market where Qingling Group operates.

Historical transaction amounts

The actual amount paid in respect of the transactions contemplated under the Chassis Supply Agreement and the annual caps for such payments are as follows:

Chassis Supply Agreement	Actual a	mounts received (in	RMB) For the period from 1 January 2010 to 15 December 2010 234,620,000		Annual caps	(in RMB)
	For the period from 5 August 2008 to 31 December 2008 46,200,000	For the year ended 31 December 2009 103,610,000		For the year ended 31 December 2008 320,000,000	For the year ended 31 December 2009 720,000,000	For the year ending 31 December 2010 1,180,000,000	For the period from 1 January 2011 to 4 August 2011
							800,000,000

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LETTER FROM THE BOARD

None of the actual amounts received above exceeded their respective annual caps for the period from 5 August 2008 to 31 December 2008, for the year ended 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the amount for the year ending 31 December 2010 will not exceed the annual cap for the corresponding period.

Basis of consideration

The consideration under the New Chassis Supply Agreement is set by the Board by reference to the market prices of the chassis and related components, and determined after arm’s length negotiations between the parties thereto. The Directors (including the independent non-executive Directors) are of the view that the New Chassis Supply Agreement is on normal commercial terms, and that their terms are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Proposed annual caps

The table below sets out the proposed annual caps for the transactions under the New Chassis Supply Agreement:

New Chassis Supply Agreement		Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)
	For the period from 5 August 2011 to 31 December 2011 900,000,000	For the year ending 31 December 2012 2,800,000,000	For the year ending 31 December 2013 2,800,000,000	For the period from 1 January 2014 to 4 August 2014
				1,900,000,000

The Company will seek approval from the Independent Shareholders in respect of the transactions under the New Chassis Supply Agreement and the aforesaid annual caps.

Basis of proposed annual caps

The aforesaid proposed annual caps for the transactions contemplated under the New Chassis Supply Agreement are set by the Board by reference to the actual amounts received by the Company under the Chassis Supply Agreement and the anticipated market demand in relation to the automobile chassis and related components for the periods/years under the New Chassis Supply Agreement.

Reasons for entering into the New Chassis Supply Agreement

The Company has been selling chassis to manufacturers on a constant basis. In order to increase the market sales volume of the Company, to increase sales and the market share of the Company, the Company will continue to supply chassis to Qingling Group, in order for them to manufacture enhanced vehicles and hence, has entered into the New Chassis Supply Agreement.

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III. CONTINUING CONNECTED TRANSACTIONS WITH QINGLING MOULDS

16. THE NEW QINGLING MOULDS SUPPLY AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual cap for the continuing connected transaction contemplated under the New Qingling Moulds Supply Agreement will, on an annual basis, be more than 0.1% but less than 5%, such continuing connected transaction is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and is exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

IV. CONTINUING CONNECTED TRANSACTIONS WITH ISUZU

17. THE NEW ISUZU SUPPLY AGREEMENT

Date	:	23 December 2010
Parties	:	(i) Isuzu; and
		(ii) the Company
Term	:	Three years commencing from 24 June 2011
Nature of the transaction	:	Supply of automobile parts and components by Isuzu
		to the Company
Condition precedent	:	Conditional upon approval by the Independent
		Shareholders by poll

The New Isuzu Supply Agreement is a master agreement which sets out the principles upon which detailed terms are to be determined between the Company and Isuzu. Pursuant to the New Isuzu Supply Agreement, the Company will enter into defi nitive agreements from time to time to provide for detailed terms of each single transaction in accordance with the principles set out in the New Isuzu Supply Agreement. Such detailed terms include, but without limitation, prices, payment and settlement terms, quantities, qualities, delivery and inspection of products and other terms and conditions in relation to the provision of the automobile parts, components and/or accessories. The Company and Isuzu agree that such detailed terms shall be on normal commercial terms or, if there is no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to the Company. Isuzu also undertakes that the terms offered to the Company shall be no less favourable than terms offered to independent third parties in the market where the Company locates.

In the event that a competitor (including a potential competitor) of Isuzu holds Shares of the same number as or more than that held by Isuzu or there is a change in control in Qingling Group, Isuzu may terminate the New Isuzu Supply Agreement by giving notice to the Company.

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LETTER FROM THE BOARD

Historical transaction amounts

The following table sets out the historical transaction amounts between the Company and Isuzu in respect of the purchase and supply of automobile parts and components and/or accessories under the Isuzu Supply Agreement for the relevant periods or years:

The value of automobile parts and components provided by Isuzu to the Company	Actual A	mounts Incurred (in RMB) For the year ended 31 December 2009 For the period from 1 January 2010 to 15 December 2010 822,930,000 1,738,740,000		Annual Caps (in RMB)	Annual Caps (in RMB)
	For the period from 24 June 2008 to 31 December 2008 704,300,000	For the year ended 31 December 2009 822,930,000	For the year ended 31 December 2008 2,510,032,500	For the year ended 31 December 2009 2,000,000,000	For the year ending 31 December 2010 2,500,000,000	For the period from 1 January 2011 to 23 June 2011
						1,500,000,000

None of aggregate amounts above exceeded their respective annual caps for the period from 24 June 2008 to 31 December 2008, for the year ended 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the aggregate amount for the year ending 31 December 2010 and the period from 1 January 2011 to the expiry date of the agreement will not exceed the respective caps for the corresponding periods.

Basis of consideration

As there are no suffi cient comparable transactions, the consideration in respect of the New Isuzu Supply Agreement is determined by reference to the actual or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 10%.

The consideration payable by the Company under the New Isuzu Supply Agreement was determined after arm’s length negotiations between the parties thereto. The Directors (including the independent nonexecutive Directors) are of the view that the New Isuzu Supply Agreement is on normal commercial terms, and that their terms are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

Proposed annual caps

The Directors estimate or project that under the New Isuzu Supply Agreement, the value of transactions between Isuzu and the Company will not exceed the amounts set out below:

Supply of automobile parts and components by Isuzu to the Company		Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)
	For the period from 24 June 2011 to 31 December 2011 1,390,000,000	For the year ending 31 December 2012 4,400,000,000	For the year ending 31 December 2013 4,400,000,000	For the period from 1 January 2014 to 23 June 2014
				2,200,000,000

Basis of proposed annual caps

The aforesaid annual caps for the New Isuzu Supply Agreement are set by the Board by reference to (i) the historical sales volume; (ii) the projected sales volume for the duration of the relevant agreements, taking into account, inter alia, the overall business environment and specifi c growth strategies; and (iii) the expected increase in the number of new vehicles of new models or different specifi cations to be launched and made available for sale by the Company; and (iv) the expected expansion of sales network through distributors in the PRC.

Reasons for entering into the New Isuzu Supply Agreement

For its business, the Company needs to purchase automobile parts and components from Isuzu from time to time, and requires Isuzu to supply skills and technical know-how in order to fulfi ll product standards and specifi cations required by Isuzu. Hence, the two parties entered into the New Isuzu Supply Agreement.

18. THE NEW ISUZU MOULDS SUPPLY AGREEMENT

Date : 23 December 2010 Parties : (i) Isuzu; and (ii) Qingling Moulds Term : Three years commencing from 24 June 2011 Nature of the transaction : Purchase of moulds and other related products by Isuzu from Qingling Moulds

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LETTER FROM THE BOARD

Price determination : Payment will be made on normal commercial terms, if there are no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to Qingling Moulds. Isuzu also undertake that the terms offered to Qingling Moulds shall be no less favourable than terms offered to independent third parties in the market where Isuzu locates. Condition precedent : Conditional upon approval by the Independent Shareholders by poll

The New Isuzu Moulds Supply Agreement is a master agreement which sets out the principles upon which detailed terms are to be determined between Qingling Moulds and Isuzu. Pursuant to the New Isuzu Moulds Supply Agreement, Qingling Moulds will enter into defi nitive agreements with Isuzu from time to time to provide for detailed terms of each single transaction in accordance with the principles set out in the New Isuzu Moulds Supply Agreement. Such detailed terms include, but without limitation, prices, payment and settlement terms, quantities, qualities, delivery and inspection of products (where applicable) and other terms and conditions in relation to the provision of the automobile parts, components and/or accessories and services. Qingling Moulds and Isuzu agree that such detailed terms shall be on normal commercial terms or, if there is no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to Qingling Moulds. Isuzu also undertakes that the terms offered to Qingling Moulds shall be no less favourable than terms offered to independent third parties in the market where Isuzu locates.

Historical transaction amounts

The actual amounts paid by Isuzu under the Isuzu Moulds Supply Agreement and the annual caps for such payment for the relevant periods or years are as follow:

Purchase of moulds and other related products by Isuzu from Qingling Moulds	Actual A	mounts Received (in RMB) For the year ended 31 December 2009 For the period from 1 January 2010 to 15 December 2010 N/A 17,180,000		Annual Caps (in RMB)	Annual Caps (in RMB)
	For the period from 24 June 2008 to 31 December 2008 N/A	For the year ended 31 December 2009 N/A	For the year ended 31 December 2008 25,000,000	For the year ended 31 December 2009 30,000,000	For the year ending 31 December 2010 30,000,000	For the period from 1 January 2011 to 23 June 2011
						30,000,000

None of aggregate amounts above exceeded their respective annual caps for the period from 24 June 2008 to 31 December 2008, for the year ended 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the aggregate amount for the year ending 31 December 2010 and the period from 1 January 2011 to 23 June 2011 will not exceed the respective caps for the corresponding periods.

Basis of consideration

As there are no suffi cient comparable transactions, the consideration is determined by reference to actual or reasonable costs incurred plus a profi t margin of not more than 10%.

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LETTER FROM THE BOARD

The consideration payable by Company under the New Isuzu Moulds Supply Agreement was determined after arms length negotiations between the parties thereto. The Directors (including the independent non-executive Directors) are of the view that the New Isuzu Moulds Supply Agreement is on normal commercial terms, and that their terms are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Projected transaction amounts

The Directors estimate the aggregate amounts for the transactions contemplated under the New Isuzu Moulds Supply Agreement for the relevant periods to be as follow:

New Isuzu Moulds Supply Agreement	Projected transaction amounts (in RMB)	Projected transaction amounts (in RMB)	Projected transaction amounts (in RMB)
	For the period from 24 June 2011 until 31 December 2011 20,000,000	For the year ending 31 December 2012 30,000,000	For the year ending 31 December 2013 30,000,000	For the period from 1 January 2014 to 23 June 2014
				30,000,000

Reasons for entering into the New Isuzu Moulds Supply Agreement

Qingling Moulds is a company jointly established by the Company and Isuzu, possesses the technology for manufacturing moulds and related products, and the quality of its products fulfi lls the international standards required by Isuzu. In addition, the relevant prices paid by Isuzu to Qingling Moulds is lower than similar products produced in Japan. Hence, through the New Isuzu Moulds Supply Agreement, Isuzu wishes to purchase moulds from Qingling Moulds from time to time based on the development of Isuzu’s new products.

19. THE NEW COMPANY SUPPLY AGREEMENT

Date	:	23 December 2010
Parties	:	(i) Isuzu; and
		(ii) the Company
Term	:	Three years commencing from 24 June 2011
Nature of the transaction	:	Supply of accessory sets and other automobile parts
		and components by the Company to Isuzu
Condition precedent	:	Conditional upon approval by the Independent
		Shareholders by poll

The New Company Supply Agreement is a master agreement which sets out the principles upon which detailed terms are to be determined between the Company and Isuzu. Pursuant to the New Company Supply

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LETTER FROM THE BOARD

Agreement, the Company will enter into defi nitive agreements from time to time to provide for detailed terms of each single transaction in accordance with the principles set out in the New Company Supply Agreement. Such detailed terms include, but without limitation, prices, payment and settlement terms, quantities, qualities, delivery and inspection of products and other terms and conditions in relation to the provision of the automobile parts, components and/or accessories. The Company and Isuzu agree that such detailed terms shall be on normal commercial terms or, if there is no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to the Company. Isuzu also undertakes that the terms offered to the Company shall be no less favourable than terms offered to independent third parties in the market where Isuzu locates.

In the event that a competitor (including a potential competitor) of Isuzu holds Shares of the same number as or more than that held by Isuzu or there is a change in control in Qingling Group, Isuzu may terminate the New Company Supply Agreement by giving notice to the Company.

Historical transaction amounts

The following table sets out the historical transaction amounts between the Company and Isuzu in respect of the purchase and supply of automobile parts and components and/or accessories under the Company Supply Agreement for the relevant periods or years:

The value of accessory sets and other automobile parts and components provided by the Company to Isuzu	Actual A	mounts Received (in RMB) For the year ended 31 December 2009 For the period from 1 January 2010 to 15 December 2010 21,860,000 40,870,000		Annual Caps (in RMB)	Annual Caps (in RMB)
	For the period from 24 June 2008 to 31 December 2008 67,880,000	For the year ended 31 December 2009 21,860,000	For the year ended 31 December 2008 250,446,837	For the year ended 31 December 2009 200,000,000	For the year ending 31 December 2010 300,000,000	For the period from 1 January 2011 to 23 June 2011
						150,000,000

None of aggregate amounts above exceeded their respective annual caps for the period from 24 June 2008 to 31 December 2008, for the year ended 31 December 2009 and for the period from 1 January 2010 to 15 December 2010. It is expected that the aggregate amounts for the year ending 31 December 2010 and the period from 1 January 2011 to the expiry date of the agreement (i.e. 23 June 2011) will not exceed the respective caps for the corresponding periods.

Basis of consideration

As there is no suffi cient comparable transaction, the considerations in respect of the New Company Supply Agreement is determined by reference to the actual or reasonable costs (whichever is lower) incurred plus a profi t margin of not more than 10%.

The consideration payable by the Company under the New Company Supply agreement was determined after arms length negotiations between the parties thereto. The Directors (including the independent non-executive Directors) are of the view that the New Company Supply Agreement is on normal commercial terms and that their terms are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

Projected transaction amounts

The Directors estimate or project that under the New Company Supply Agreement, the value of transactions between Isuzu and the Company will not exceed the amounts set out below:

New Company Supply Agreement	Projected transaction amounts (in RMB)	Projected transaction amounts (in RMB)	Projected transaction amounts (in RMB)
	For the period from 24 June 2011 to 31 December 2011 130,000,000	For the year ending 31 December 2012 250,000,000	For the year ending 31 December 2013 250,000,000	For the period from 1 January 2014 to 23 June 2014
				125,000,000

Reasons for entering into the New Company Supply Agreement

As the parts and components manufactured by the Group fulfi ll the international standards as required by Isuzu and the price of Group’s products are competitive, Isuzu wishes to purchase parts and components from the Group. Furthermore, the Company aims to enter the international market, and hence the parties entered into the New Company Supply Agreement.

Proposed annual caps for the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement

The Directors propose that under the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement, the value of transactions will not exceed the amounts set out below:

New Isuzu Moulds Supply Agreement and New Company Supply Agreement		Proposed annual	caps (in RMB)
	For the period from 24 June 2011 to 31 December 2011 150,000,000	For the year ending 31 December 2012 280,000,000	For the year ending 31 December 2013 280,000,000	For the period from 1 January 2014 to 23 June 2014
				155,000,000

Basis of proposed annual caps

The aforesaid proposed annual caps for the New Isuzu Moulds Supply Agreement and New Company Supply Agreement are set by the Board by reference to (i) the estimated amounts of moulds and related products required by Isuzu from Qingling Moulds for the production of Isuzu’s newly developed products from 2012 to 2014; and (ii) the projected sales volume for the duration of the relevant agreements taking

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LETTER FROM THE BOARD

into consideration, inter alia, the expected increase in sales volume of Isuzu products in overseas market and hence the increase in needs of parts and components.

20. THE 140TF/UC AUTOMOBILE TECHNOLOGY TRANSFER AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the Technology Transfer Agreements will on annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 0.1% but less than 5%, such continuing connected transaction under the 140TF/UC Automobile Technology Transfer Agreement is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and is exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

21. THE F CHASSIS TECHNOLOGY TRANSFER AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the Technology Transfer Agreements will on annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 0.1% but less than 5%, such continuing connected transaction under the F Chassis Technology Transfer Agreement is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and is exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

22. THE 100P SERIES TECHNOLOGY TRANSFER AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the Technology Transfer Agreements will on annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 0.1% but less than 5%, such continuing connected transaction under the 100P Series Technology Transfer Agreement is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and is exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

23. THE 700P3X SERIES TECHNOLOGY TRANSFER AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the Technology Transfer Agreements will on annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 0.1% but less than 5%, such continuing connected transaction under the 700P3X Series Technology Transfer Agreement is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and the annual review requirements set out in Rules 14A.37 to 14A.40 and is exempt from the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

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LETTER FROM THE BOARD

V. CONTINUING CONNECTED TRANSACTIONS WITH SALES JV COMPANY

24. THE SALES JV SUPPLY AGREEMENT

Date : 23 December 2010 Parties : (i) the Sales JV Company; and (ii) the Company Term : three years effective from the date upon obtaining all relevant approvals and/or completing all other procedures in accordance with all applicable laws, rules and regulations Nature of the transaction : the Company will provide automobile and their parts to the Sales JV Company Price determination : the actual selling price of the automobile or their parts to be supplied/purchased and other related terms in any further specifi c agreement shall be determined according to the market price of the automobile or their parts.

Pursuant to the Sales JV Supply Agreement, the parties shall enter into further specifi c agreement(s) with detailed terms in accordance with the underlying principles under the Sales JV Supply Agreement and specifying the type of products to be supplied/purchased, orders making procedure, method of delivery, price, payment methods, quantity, standard of quality, and other terms and conditions in relation to the supply and purchase of specifi c type of products.

Basis of consideration

The consideration is determined according to the market price of the automobile or their parts.

Proposed annual caps

The proposed annual caps for the Sales JV Supply Agreement during the term of such agreement are as follows:

Sales JV Supply Agreement	Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)	Proposed annual caps Aggregate amount (in RMB)
	For the year ending 31 December 2011 820,000,000	For the year ending 31 December 2012 1,240,000,000	For the year ending 31 December 2013
			1,240,000,000

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LETTER FROM THE BOARD

Basis of proposed annual caps

The said proposed caps for the Sales JV Supply Agreement are determined with reference to (i) the expansion of the sales capacity of the Group; (ii) the expected growth of the Company from the effective date of the Sales JV Supply Agreement to the end of 2013 in view of the economic growth in the PRC and the growth in demand for automobile and their parts; and (iii) the price of automobile, parts and transportation in the market and their price trends.

Reasons for entering into the Sales JV Supply Agreement

Under the Sales JV Supply Agreement, the Sales JV Company is principally engaged in the sales of vehicles, assembly and the parts of maintenance and provision of after-sales services. By entering into the Sales JV Supply Agreement between the Company and the Sales JV Company, the Group may benefi t from good sales strategies, management skills and services trading ideas adopted by the Sales JV Company and to expand the market share of its products.

The consideration payable by the Company under the Sales JV Supply Agreement is determined after arm’s length negotiations between the parties thereto. The Directors (including the independent nonexecutive Directors) are of the view that the Sales JV Supply Agreement is on normal commercial terms, and that its terms are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

25. THE SALES JV PRE-LEASING AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual value for the continuing connected transaction contemplated under the Sales JV Pre-Leasing Agreement will on annual basis be less than 0.1%, such continuing connected transaction is exempt from the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, the annual review requirements set out in Rules 14A.37 to 14A.40 and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

26. THE SALES JV CONSOLIDATED SERVICES AGREEMENT

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual value for the continuing connected transaction contemplated under the Sales JV Consolidated Services Agreement will on annual basis be less than 0.1%, such continuing connected transaction is exempt from the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, the annual review requirements set out in Rules 14A.37 to 14A.40 and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Details in relation to the compliance of Listing Rules requirements of such agreement are set out in the Announcement.

VI. THE REVISED CAP

A resolution will be put forward at the EGM to revise the cap for the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 to RMB1,250,000,000. The Company shall comply with the applicable requirements under the Listing Rules in the event that the revised cap is likely to exceed the aggregate amount set out in the table below.

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LETTER FROM THE BOARD

The following table sets out the revised cap for the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011:

Chassis Supply Agreement	Revised cap (in RMB) 1,250,000,000	Approved cap (in RMB)
		800,000,000

Reasons for and basis in determining the revised cap

As the Group’s modifi ed vehicles were continuously being launched into the market, their good technical performance and low-cost competitive advantage won extensive approval from the market and the users, and hence the relevant transactions are expected to increase substantially in the future. Therefore, it is expected that the amount for the period from 1 January 2011 to 4 August 2011 will exceed its caps for the corresponding periods.

The proposed revised cap for the transactions contemplated under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 are set by the Board by reference to the historical transaction amounts received by the Company under the Chassis Supply Agreement and the anticipated market demand in relation to the automobile chassis and related components for the periods/years under the Chassis Supply Agreement.

The Directors (including the independent non-executive Directors) are of the view that the said annual cap as renewed is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Save for the revised annual cap as disclosed above, the other terms and conditions under the Chassis Supply Agreement remain unchanged. The Company will seek approval from the Independent Shareholders in respect of the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

VII. CONTINUING CONNECTED TRANSACTIONS

If the annual value of each of the transactions contemplated under the CCT Agreements and the respective revised caps under the CQACL Agreement and the Chassis Supply Agreement for the period from 1 January 2011 to the expiry of the agreements is likely to exceed the respective proposed caps or the threshold provided under Chapter 14A of the Listing Rules (as the case may be) or there is any material change to the CCT Agreements, the Company will take necessary steps to ensure compliance with all applicable rules under Chapter 14A of the Listing Rules.

VIII. REQUIREMENTS UNDER LISTING RULES

As at the Latest Practicable Date, Isuzu is a substantial shareholder of the Company holding approximately 20% of the entire issued share capital of the Company and is therefore a connected person of the Company. Each of the Engine JV Company and Sales JV Company are owned as to 50% and 50% respectively by the Company and Isuzu and consequently each of the Engine JV Company and the Sales JV Company is a connected person of the Company under the Listing Rules. The entering into of each of the New Consolidated Services Agreement, the New Equipment Lease, the New Factory Lease, the New Supply Agreement, Sales JV Pre-Leasing Agreement, Sales JV Supply Agreement and Sales JV Consolidated Services Agreement therefore constitutes continuing connected transactions of the Company under the Listing Rules.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, Qingling Moulds is owned as to 50.46% and 49.44% respectively by the Company and Isuzu. As Isuzu is a connected person of the Company and is entitled to exercise, or control the exercise of, more than 30% of the voting power at any general meeting of Qingling Moulds, Qingling Moulds, albeit a non-wholly owned subsidiary of the Company, is also a connected person of the Company under Chapter 14A of the Listing Rules. As Qingling Group is a substantial shareholder of the Company holding approximately 50.10% of the entire issued share capital of the Company and CQCC, CQFC, CQAC, CQNHK, CQPC and CQACL are owned as to 75%, 75%, 80%, 55.80%, 75.15% and 72.43% respectively by Qingling Group, they are associates of Qingling Group. Therefore, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC and CQACL are all connected persons of the Company under Chapter 14A of the Listing Rules. The entering into of each of the New Machinery Leasing Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Qingling Group Moulds Supply Agreement, the New Warehouse Leasing Agreement, the New Chassis Supply Agreement, the New Qingling Moulds Supply Agreement, the New Isuzu supply Agreement, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement therefore constitutes continuing connected transactions of the Company under the Listing Rules. The continuing of the Technology Transfer Agreements also constitutes continuing connected transactions of the Company under the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Supply Agreement and the Sales JV Supply Agreement will on an annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions will be subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, annual review requirements set out in Rules 14A.37 to 14A.40 and also Independent Shareholders’ approval under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New CQACL Agreement and the New Parts Supply Agreements will on an annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions are subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, the annual review requirements set out in Rules 14A.37 to 14A.40 and also the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Chassis Supply Agreement and New Isuzu Supply Agreement will, on an annual basis, respectively be more than 5%, such continuing connected transactions are subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, the annual review requirements set out in Rules 14A.37 to 14A.40 and also the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. However, pursuant to Rule 14A.36(1) of the Listing Rules, where a previously announced annual cap is exceeded or likely to be exceeded, the Company must re-comply with the reporting and announcement requirements and/or Independent Shareholders’ approval requirements under Rules 14A.35(3) and 14A.35(4) of the Listing Rules. Since the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised will be more than 5%, such transactions and the relevant annual cap as revised are subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 and also the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement will, on an annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions are subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47, the annual review requirements set out in Rules 14A.37 to 14A.40 and also the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

IX. INDEPENDENT SHAREHOLDERS’ APPROVAL

In view of the above, the Company will seek the approval of the Independent Shareholders in relation to the transactions contemplated under the Non-exempt Continuing Connected Transactions and the annual caps as proposed above and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

As at the Latest Practicable Date, Qingling Group is a substantial shareholder of the Company holding approximately 50.10% of the entire issued share capital of the Company. Qingling Group and its associates will be required to abstain from voting on ordinary resolutions in respect of the New CQACL Agreement, the New Parts Supply Agreements and the New Chassis Supply Agreement and their respective annual caps, and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

Isuzu holds as to 50% of each of the Engine JV Company and the Sales JV Company; Isuzu and Isuzu China (being a wholly-owned subsidiary of Isuzu) hold approximately 21.54% of CQCC, 23.21% of CQFC, 20% of CQAC, 23% of CQACL, 19% of CQPC and 5% of CQNHK. In view of the said interest held by Isuzu and Isuzu China in the Engine JV Company, Sales JV Company and relevant Qingling Group Companies, Isuzu and its associates will abstain from voting on ordinary resolutions in respect of the New Supply Agreement, the Sales JV Supply Agreement, New CQACL Agreement, New Parts Supply Agreements (other than the New Qingling Group Agreement) and their respective annual caps.

Isuzu holds approximately 49.44% of the issued share capital of Qingling Moulds, therefore, Isuzu and its associates are required to abstain from voting on ordinary resolution in respect of the Qingling Moulds Supply Agreement. Isuzu is a substantial shareholder of the Company holding approximately 20% of the entire issued share capital of the Company, and therefore, Isuzu and its associates will be required to abstain from voting on ordinary resolutions in respect of the New Isuzu Moulds Supply Agreement, the New Isuzu Supply Agreement and the New Company Supply Agreement and their respective annual caps.

The Independent Board Committee has been formed to advise the Independent Shareholders as to whether the transactions under the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are fair and reasonable and in the interests of the Shareholders as a whole.

Hercules Capital Limited has been appointed by the Company as its independent fi nancial adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Nonexempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

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LETTER FROM THE BOARD

X. GENERAL

The Company is principally engaged in the production and sales of Isuzu trucks, multi-purposes vehicles, pick-up trucks, other vehicles and automobile parts and accessories.

Isuzu is principally engaged in the production and sale of commercial vehicles and diesel engines.

Qingling Group is principally engaged in the manufacturing and sales of and the development of new products in relation to motor vehicles and their spare parts and accessories, and the provision of technical advisory services.

CQCC is principally engaged in the manufacturing and sales of automobile parts and components and cast parts.

CQFC is principally engaged in the manufacturing and sales of automobile parts and components and forging parts.

CQAC is principally engaged in the manufacturing and sales of motor vehicle axles and other parts and components.

CQNHK is principally engaged in the manufacturing and sales of motor vehicle seats, interior accessories and other seats.

CQPC is principally engaged in the manufacturing and sales of plastic automobile parts and other plastic parts and components.

CQACL is principally engaged in the manufacturing and sales of aluminum automobile parts and other aluminum parts and components.

Qingling Moulds is principally engaged in the manufacturing and sales of moulds.

Engine JV Company is principally engaged in the manufacturing and sale of vehicle-used engines and their parts.

Sales JV Company is principally engaged in the sales of vehicles, assembly and the parts of maintenance and provision of after-sales service.

No Directors have a material interest in the transactions under the CCT Agreements and the Chassis Supply Agreement.

XI. PROPOSED AMENDMENT TO ARTICLES OF ASSOCIATION

Article 94 of the Articles of Association provides that:

“ There shall be a board of directors comprising 10 members. The board of directors shall have one chairman and one or two deputy chairmen and one or more executive directors. Executive directors shall manage the affairs authorized by the board of directors.” (Note)

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LETTER FROM THE BOARD

Currently, the Board consists of seven executive Directors and three independent non-executive Directors.

Rule 19A.18(1) of the Listing Rules provides that, among others, at least one of the independent nonexecutive directors of a PRC issuer must be ordinarily resident in Hong Kong. Currently, none of the three independent non-executive Directors are ordinarily resident in Hong Kong and this is due to the fact that the Board has in the past been unable to identify a suitable candidate who is ordinary resident in Hong Kong.

In view of the above, in order to provide for the appointment of a suitable candidate as the fourth independent non-executive Director at the next annual general meeting of the Company for the purpose of complying with Rule 19A.18(1) of the Listing Rules, the Board has proposed to amend Article 94 of the Articles of Association by deleting the existing Article 94 in its entirety and substituting therefor the following:

Article 94

“There shall be a board of directors comprising 11 members. The board of directors shall have one chairman and one or two deputy chairmen and one or more executive directors. Executive directors shall manage the affairs authorized by the board of directors.” (Note)

Note: The English version is an unoffi cial translation of its Chinese version. In case of any discrepancy between the two versions, the Chinese version shall prevail.

The Proposed Amendment is subject to approval of the Shareholders by way of a special resolution at the EGM and all necessary approvals, authorisations, or registration (if applicable) having been obtained from or fi led with the relevant governmental or regulatory authorities. Save as disclosed in this circular, all other provisions in the Articles of Association will remain unchanged. The Board confi rms that there is nothing unusual about the Proposed Amendment.

XII. PROPOSED CHANGE OF DIRECTOR

The Board proposes that resolutions be passed to approve (i) the resignation of Mr. Masanori Katayama as an executive Director with effect from the date of the EGM and (ii) the nomination and appointment of Mr. Tsukioka as an executive Director, with effect from the date of the EGM until the date of the Company’s annual general meeting in 2012.

Biography details of Mr. Tsukioka are set out in Appendix II to this circular.

XIII. THE EGM

A notice convening the EGM is set out on pages 71 to 75 of this circular. The EGM will held at Conference Hall, 1st Floor of Qingling Motors Co. Ltd Offi ce Building, 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the PRC on Wednesday, 2 March 2011 at 10:00 a.m. or any adjournment thereof.

A reply slip and a proxy form for use in the EGM are enclosed. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed reply slip and proxy form in accordance with the instructions printed thereon. The reply slip should be returned to the legal address of the Company

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LETTER FROM THE BOARD

at 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the PRC by hand, by post or by fax (at fax no. (86) 23-68830397) on or before Thursday, 10 February 2011. The proxy form should be returned to the legal address of the Company 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, PRC (in the case of proxy form of holder of Domestic Shares) or to the Company’s H Share Registrars, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in the case of proxy form of holders of H Shares) as soon as possible and in any event not later than 24 hours before the time appointed for holding of the EGM or 24 hours before the time appointed for taking the poll or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

Shareholders whose names appear on the register of members of the Company on Monday, 31 January, 2011 are entitled to attend and vote at the EGM. The register of members of the Company will be closed from Monday, 31 January, 2011 to Wednesday, 2 March, 2011, both days inclusive, during such period no transfer of shares of the Company will be registered.

The Shareholders who intend to attend any shareholders’ meeting of the Company shall send a written reply to the Company 20 days before the date of the meeting. In the case the written replies received from the Shareholders indicating that they intend to attend the general meeting represent holders of not more than one half of the total number of shares with voting rights, the Company shall within 5 days inform the Shareholders again in the form of a public notice the proposed matters for consideration at the meeting and the date and venue of the meeting. The general meeting may be convened after such notifi cation has been published.

XIV. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Therefore, all resolution proposed at the EGM shall be voted by poll.

XV. RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the view that the Nonexempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are on normal commercial terms, fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

The Directors also consider that each of the Proposed Amendment and the proposed change of Director is in the best interests of the Company and its Shareholders. The Directors therefore recommend the Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Proposed Amendment and the proposed change of Director.

The Independent Board Committee, having taken into account the advice from Hercules Capital

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LETTER FROM THE BOARD

Limited, the Independent Financial Adviser, considers that the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are on normal commercial terms, fair and reasonable and in the best interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

Your attention is drawn to the letter from the Independent Board Committee set out on pages 44 to 45 of this circular and the letter of advice from Hercules Capital Limited to the Independent Board Committee and Independent Shareholders in connection with the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised and the principal factors and reasons considered by them in arriving such advice set out on pages 46 to 66 of this circular.

Yours faithfully, For and on behalf of Qingling Motors Co. Ltd Wu Nianqing Company Secretary

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LETTER FROM INDEPENDENT BOARD COMMITTEE

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(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 1122)

The Independent Board Committee:

Mr. Song Xiaojiang Mr. Xu Bingjin Mr. Long Tao

13 January 2011

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 13 January 2011 (the “ Circular ”), in which this letter forms part. Unless the context requires otherwise, capitalized terms used in this letter shall have the same meanings as given to them in the section headed “Defi nitions” of the Circular.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders on whether the terms of the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are fair and reasonable so far as the Independent Shareholders are concerned.

Having taken into account the advice from Hercules Capital Limited, the independent fi nancial adviser (the “Independent Financial Adviser”), and in particular the principal factors set out in the letter from the Independent Financial Adviser, we consider that the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the best interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Non-exempt Continuing Connected Transactions and the respective annual caps and the transactions under the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011 and the relevant annual cap as revised.

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LETTER FROM INDEPENDENT BOARD COMMITTEE

The letter from the Independent Financial Adviser containing its recommendations to us and the principal factors and reasons taken into account by the Independent Financial Advisor in arriving at such recommendations is set out on pages 46 to 66 of this Circular.

Yours faithfully, The Independent Board Committee of Qingling Motors Co. Ltd Song Xiaojiang, Xu Bingjin, Long Tao Independent non-executive Directors

— 45 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Hercules Capital Limited

1503 Ruttonjee House 11 Duddell Street Central Hong Kong

13 January 2011

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent fi nancial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of (i) the Non-exempt Continuing Connected Transactions contemplated under the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the Sales JV Supply Agreement; and (ii) the revision of the annual cap for the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011, details of which are set out in the “Letter from the Board” contained in the circular dated 13 January 2011 to the shareholders of the Company (the “Circular”), of which this letter forms part. Terms used in this letter have the same meanings as defi ned elsewhere in the Circular unless the context otherwise requires.

On 23 December 2010, the Company announced that the Board proposed to revise the annual cap for the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011, being the expiry date of the Chassis Supply Agreement, from RMB800.0 million to RMB1,250.0 million (the “Revised Cap”). The Revised Cap is subject to the Independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

In addition, on 23 December 2010, the Company entered into various agreements with Engine JV Company, CQACL, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC, Isuzu and Sales JV Company (collectively, the “Connected Persons”) respectively in relation to (i) the supply of certain engines, automobile parts and components and related products by the respective Connected Persons to the Group; and (ii) the provision of parts of engines and raw materials, automobile chassis, accessory sets, automobile parts and components and automobile by the Company to the respective Connected Persons for a term of three years. Isuzu and Qingling Moulds also entered into the New Isuzu Moulds Supply Agreement, pursuant to which Isuzu agreed to purchase moulds and other related products from Qingling Moulds for a term of three years.

As at the Latest Practicable Date, Qingling Group was a substantial shareholder of the Company holding approximately 50.10% of the entire issued share capital of the Company, and CQCC, CQFC, CQAC, CQNHK, CQPC and CQACL were owned as to 75%, 75%, 80%, 55.80%, 75.15% and 72.43%

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

respectively by Qingling Group and are associates of Qingling Group. Each of Engine JV Company and Sales JV Company was owned as to 50% and 50% by the Company and Isuzu respectively while Qingling Moulds was owned as to 50.56% and 49.44% by the Company and Isuzu respectively, and Isuzu was a substantial shareholder of the Company holding approximately 20% of the entire issued share capital of the Company. Accordingly, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC, CQACL, Engine JV Company, Sales JV Company, Qingling Moulds and Isuzu are all connected persons of the Company under Chapter 14A of the Listing Rules. Therefore, the entering into of the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the Sales JV Supply Agreement constitutes continuing connected transactions of the Company under the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Supply Agreement and the Sales JV Supply Agreement will, on an annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New CQACL Agreement and the New Parts Supply Agreements will, on annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Chassis Supply Agreement and the New Isuzu Supply Agreement will, on an annual basis, respectively be more than 5%, such continuing connected transactions are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

As the applicable percentage ratios as defi ned under Rule 14.07 of the Listing Rules in respect of the annual caps for the continuing connected transactions contemplated under the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement will, on an annual basis, as aggregated in accordance with Rule 14A.25 of the Listing Rules, be more than 5%, such continuing connected transactions are subject to the reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

In accordance with the Listing Rules, Qingling Group and its associates are required to abstain from voting on the proposed resolutions approving the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement and the Revised Cap at the EGM while Isuzu and its associates are required to abstain from voting on the proposed resolutions approving the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements (other than the New Qingling Group Agreement), the Sales JV Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Isuzu Supply Agreement and the New Company Supply Agreement at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Song Xiaojiang, Mr. Xu Bingjin and Mr. Long Tao, has been formed to advise the Independent Shareholders as to whether (i) the Non-exempt Continuing Connected Transactions are conducted in the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

ordinary and usual course of business and the terms of which are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole; and (ii) the Revised Cap is fair and reasonable so far as the Independent Shareholders are concerned. We, Hercules Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in these regards and give our recommendation on how to vote in relation to the Non-exempt Continuing Connected Transactions and the Revised Cap.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the information and representations supplied, and the opinions expressed, by the Directors and management of the Company and have assumed that such information and statements, and representations made to us or referred to in the Circular are true, accurate and complete in all material respects as of the date hereof and will continue as such at the date of the EGM. The Directors have collectively and individually accepted full responsibility for the Circular, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group and having made all reasonable enquiries have confi rmed that, to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular misleading.

We consider that we have reviewed suffi cient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have no reasons to suspect that any material information has been withheld by the Directors or the management of the Company, or is misleading, untrue or inaccurate, and consider that they may be relied upon in formulating our opinion. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the businesses or affairs or future prospects of the Group and the related subjects of, and parties to, the agreements of the Non-exempt Continuing Connected Transactions. Our opinion is necessarily based on the fi nancial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change this opinion and that we do not have any obligation to update, revise or reaffi rm this opinion.

PRINCIPAL FACTORS AND REASONS CONSIDERED

The principal factors and reasons that we have taken into consideration in assessing the Non-exempt Continuing Connected Transactions and the Revised Cap and arriving at our opinion are set out as follows:

1. Background and reasons for the Non-exempt Continuing Connected Transactions

• (a) Background of the Company, Isuzu, Qingling Moulds, Engine JV Company, Sales JV Company and Qingling Group

The Group is principally engaged in the production and sale of Isuzu trucks, multi-purposes vehicles, pick-up trucks, other vehicles and automobile parts and accessories.

Isuzu, a substantial shareholder of the Company holding approximately 20% of the entire issued share capital of the Company, is principally engaged in the production and sale of commercial vehicles and diesel engines.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Qingling Moulds is a sino-foreign equity joint venture established in the PRC which is owned as to 50.56% by the Company and 49.44% by Isuzu. It is principally engaged in the manufacturing and sale of moulds.

Engine JV Company is a sino-foreign equity joint venture established in the PRC which is owned as to 50% by the Company and 50% by Isuzu. It is principally engaged in the manufacturing and sale of vehicle-used engines and their parts.

Sales JV Company is a sino-foreign equity joint venture established in the PRC which is owned as to 50% by the Company and 50% by Isuzu. It is principally engaged in the sale of vehicles, assembly and the parts of maintenance and provision of after-sales services.

Qingling Group, a substantial shareholder of the Company holding approximately 50.10% of the entire issued share capital of the Company, is principally engaged in the manufacturing, sale and development of new products in relation to motor vehicles and their spare parts and accessories, and the provision of technical advisory services.

CQACL, CQCC, CQFC, CQAC, CQNHK and CQPC, associates of Qingling Group, are principally engaged in the manufacturing and sale of (i) aluminium automobile parts and other aluminium parts and components; (ii) automobile parts and components and cast parts; (iii) automobile parts and components and forging parts; (iv) motor vehicle axles and other parts and components; (v) motor vehicle seats, interior accessories and other seats; and (vi) plastic automobile parts and other plastic parts components, respectively.

(b) Background of the Non-exempt Continuing Connected Transactions

The Group has been purchasing various parts of engines, automobile parts and components and related products from Engine JV Company, CQACL, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC and Isuzu, and supplying various parts of engines and raw materials to Engine JV Company, automobile chassis and related components to Qingling Group and various accessory sets and other automobile parts and components to Isuzu under the Supply Agreement, the CQACL Agreement, the Parts Supply Agreements, the Chassis Supply Agreement, the Isuzu Supply Agreement and the Company Supply Agreement. The above-mentioned agreements shall expire in around March, June, August or September 2011. The Directors wish to continue such transactions on an on-going basis after the expiry of the existing agreements. As such, the Company entered into the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements (which comprises the New Qingling Group Agreement, the New CQCC Agreement, the New CQFC Agreement, the New CQAC Agreement, the New CQNHK Agreement and the New CQPC Agreement), the New Chassis Supply Agreement, the New Isuzu Supply Agreement and the New Company Supply Agreement with Engine JV Company, CQACL, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC, Qingling Group and Isuzu respectively on 23 December 2010.

Furthermore, Qingling Moulds has been supplying moulds and other related products to Isuzu under the Isuzu Moulds Supply Agreement, which shall expire in June 2011, and Qingling Moulds wishes to continue to supply moulds and other related products to Isuzu after the expiry of the Isuzu Moulds Supply Agreement. Therefore, Isuzu and Qingling Moulds entered into the New Isuzu Moulds Supply Agreement on 23 December 2010 to set out the principles upon which detailed terms of the transactions to be determined between Qingling Moulds and Isuzu.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On 14 July 2008, the Company and Isuzu established Sales JV Company for the purpose of sale of vehicles, assembly and parts of maintenance and provision of after-sales services for the vehicles and related products under the brand of Isuzu. The Company expects that it shall from time to time provide automobile and parts to Sales JV Company. Accordingly, the Company and Sales JV Company entered into the Sales JV Supply Agreement on 23 December 2010 to set out the principles upon which detailed terms of the transactions to be determined between the Company and Sales JV Company.

• (c) Reasons for entering into the New Supply Agreement and the Sales JV Supply Agreement

The Directors consider that division of labour among its group members can increase the operational effi ciency of the Group and minimize the costs of the Group through economy of scale. Therefore, Engine JV Company has been established for carrying out the business of manufacturing of engines and their parts while the Company focuses on the production and sale of vehicles. By entering into the New Supply Agreement, Engine JV Company can purchase parts of engines and raw materials from the Company for production of engines and their parts while the Company in turn can secure the supply of engines and their parts from Engine JV Company.

Meanwhile, Sales JV Company has also been established for carrying out the sale of vehicles, assembly and parts of maintenance and provision of after-sales services. By entering into the Sales JV Supply Agreement, the Group shall provide automobile and their parts to Sales JV Company for further distribution to the retail market. The Directors believe that the good sales strategies, management skills and services, trading ideas adopted by Sales JV Company as well as the wellestablished sales channels of Sales JV Company can further enhance the sales volume and market share of the Group.

On the above basis, we concur with the view of the Directors that it is reasonable to enter into the New Supply Agreement and the Sales JV Supply Agreement and the transactions contemplated thereunder are normal commercial transactions to be conducted in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole.

• (d) Reasons for entering into the New CQACL Agreement, the New Parts Supply Agreements, the New Isuzu Supply Agreement, the New Chassis Supply Agreement, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement

The vehicles manufactured by the Group are principally under the brand name of “Isuzu” and the automobile parts and components used therein must meet the “Isuzu” standard. The Company has been purchasing various automobile parts and components specifi ed under the New CQACL Agreement, the New Parts Supply Agreements and the New Isuzu Supply Agreement, including (i) aluminum parts, other parts and components; (ii) stamping components, cars and other parts and components; (iii) casts of engine blocks, cylinder heads and main bearing covers and other parts and components; (iv) raw casts of engine crankshafts, connecting rods and other parts and components; (v) front and rear motor vehicle axles and other parts and components; (vi) motor vehicle seats and other parts and components; and (vii) plastic parts and other parts and components, from the respective Connected Persons, which are specialized in the production and sale of the relevant parts and products specifi ed under the New CQACL Agreement, the New Parts Supply Agreements and the New Isuzu Supply Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, the Company has been selling chassis, accessory sets and other automobile parts and components specifi ed under the New Chassis Supply Agreement and the New Company Supply Agreement to Qingling Group and Isuzu while Qingling Moulds has been supplying moulds and related products specifi ed in the New Isuzu Moulds Supply Agreement to Isuzu.

Having considered that:

• (i) the Group needs to purchase various automobile parts and components specifi ed under the New CQACL Agreement, the New Parts Supply Agreements and the New Isuzu Supply Agreement for its daily operation of manufacturing various types of trucks and vehicles from time to time;

• (ii) CQACL, Qingling Group, CQCC, CQFC, CQAC, CQNHK, CQPC and Isuzu are specialized in the production and sale of the products specifi ed under the New CQACL Agreement, the New Parts Supply Agreements and the New Isuzu Supply Agreement;

• (iii) a majority of the vehicles manufactured by the Group are under the brand name of “Isuzu” and the automobile parts and components used by the Company must meet the “Isuzu” standard;

• (iv) each of the Connected Persons and Qingling Moulds has obtained the technology knowhow and specifi c equipment from Isuzu, and demonstrated with track records of being a reliable supplier and capable of manufacturing high quality products in accordance with the specifi cations of the Company and Isuzu;

• (v) other suppliers do not possess the technology know-how and specifi c equipment of Isuzu and thus their products will not meet the requirements of Isuzu even though they may be capable of manufacturing parts with the same specifi cations;

• (vi) the Company is specialized in the production and sale of chassis, accessory sets and other related automobile parts and components. The supply of chassis to Qingling Group and accessory sets and other automobile parts and components to Isuzu can expand the chassis and accessory sets production businesses of the Company and increase the turnover, sales volume and market share of the Company’s chassis and accessory sets production businesses;

• (vii) Qingling Moulds is specialized in the production and sale of moulds and related products and the supply of moulds to Isuzu can expand the business of Qingling Moulds and increase its turnover, sales volume and market share in the moulds production market;

• (viii) the Company possess necessary technology know-how for manufacturing the products and the quality of such products meets the international standards required by Qingling Group and Isuzu; and

• (ix) the products to be supplied by the Company to Isuzu are tailor-made for these companies and such products cannot be sold to other customers,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we concur with the view of the Directors that it is reasonable for the Company to continue to source the products from the respective Connected Persons and to supply the products to Qingling Group and Isuzu. We also consider that it is reasonable for Qingling Moulds to continue to supply moulds and related products to Isuzu, and the above-mentioned Non-exempt Continuing Connected Transactions are normal commercial transactions to be conducted in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole.

2. Principal Terms of the Non-exempt Continuing Connected Transactions

(a) The New CQACL Agreement and the New Parts Supply Agreements

Pursuant to the New CQACL Agreement and the New Parts Supply Agreements, the Company will purchase the following products from the respective Connected Persons for a term of three years, commencing from 20 September 2011:

• (i) automobile parts including but not limited to aluminum parts and other parts and components from CQACL;

• (ii) automobile parts including but not limited to stamping components, compartments and other parts and components from Qingling Group;

• (iii) automobile parts including but not limited to casts of engine blocks, cylinder heads and main bearing covers and other parts and components from CQCC;

• (iv) automobile parts including but not limited to raw casts of engine crankshafts and connecting rods and other parts and components from CQFC;

• (v) automobile parts including but not limited to front and rear motor vehicle axles and other parts and components from CQAC;

• (vi) automobile parts including but not limited to motor vehicle seats and other parts and components from CQNHK; and

• (vii) automobile parts including but not limited to plastic parts and other parts and components from CQPC.

The New CQACL Agreement and the New Parts Supply Agreements are master agreements which set out the principles upon which detailed terms of the transactions thereunder are to be determined between the Company and the respective Connected Persons. The parties to the said agreements shall enter into defi nitive agreements from time to time for detailed terms of each single transaction based on the underlying principles set out in the New CQACL Agreement and the New Parts Supply Agreements. The price of the products will be determined in the following order: (i) at prices not higher than market prices; or (ii) if no comparable market price, at prices based on actual costs or reasonable costs, whichever is lower, incurred plus a profi t margin of not more than 8%, and in any event, at prices no less favorable than those offered by the respective Connected Persons to Independent Third Parties. The price determination is formulated after arm’s length negotiations between the parties.

As advised by the management of the Company, all products under the New CQACL Agreement and the New Parts Supply Agreements are tailor-made by the respective Connected Persons for the Company in accordance with its specifi cations. Therefore, those products are not generally available for purchases by the Company from other suppliers. Accordingly, the prices of the products are currently determined based on actual costs or reasonable costs, whichever is lower, incurred plus a profi t margin of not more than 8%.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed the 2009 statistics published by China Association of Automobile Manufacturers and noted that the average profi t margin of automobile parts manufacturers in the PRC for the year of 2009 was approximately 7.9%, which is similar to the maximum rate of 8% to be charged by the respective Connected Persons under the New CQACL Agreement and the New Parts Supply Agreements. On this basis, and having considered that the profi t margin of 8% under the New CQACL Agreement and the New Parts Supply Agreements represents only the maximum rate that can be charged by the respective Connected Persons and the actual rate to be charged to the Company will be dependent on the prevailing market rate and in any event not less favorable than those offered to any other Independent Third Party, we consider that the terms of the New CQACL Agreement and the New Parts Supply Agreements are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

(b) The New Chassis Supply Agreement

Pursuant to the New Chassis Supply Agreement, the Company agreed to supply automobile chassis and related components to Qingling Group for a term of three years, commencing from 5 August 2011.

The New Chassis Supply Agreement is a master agreement which sets out the principles upon which detailed terms in relation to the supply of automobile chassis and related components are to be determined between the Company and Qingling Group. Under the New Chassis Supply Agreement, the parties shall enter into defi nitive agreements from time to time for detailed terms of each single transaction in accordance with the principles set out in the New Chassis Supply Agreement. Such detailed terms include, but not limited to, prices, payment and settlement terms, quantities, qualities, delivery and inspection of products and other terms and conditions in relation to the provision of the automobile chassis and related components. The Company and Qingling Group agreed that such detailed terms shall be on normal commercial terms or, if there are no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to the Company. Qingling Group has also undertaken that the terms offered to the Company shall be no less favorable than those offered to any Independent Third Party in the market where Qingling Group locates.

As advised by the management of the Company, the selling prices of the automobile chassis and related components for Qingling Group are determined by reference to the market prices of the related products. We have reviewed samples of invoices issued by the Company to Qingling Group and the Independent Third Parties in relation to the sale of automobile chassis and noted that the terms offered by the Company to Qingling Group were similar and not less favorable than those offered to the Independent Third Parties. Given that (i) the terms of the transactions contemplated under the Chassis Supply Agreement offered by the Company to Qingling Group were similar and not less favorable than those offered to the Independent Third Parties; (ii) both the Company and Qingling Group have agreed that the terms of the New Chassis Supply Agreement, including selling price of the products to be supplied, would be on normal commercial terms or, if there is no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms fair and reasonable to the Company; and (iii) Qingling Group has undertaken that the terms offered to the Company would be no less favourable than terms offered to Independent Third Parties in the market where Qingling Group operates, we consider that the terms of the New Chassis Supply Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (c) The New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement

Pursuant to the New Supply Agreement, the Company agreed to provide parts of engines and raw materials to Engine JV Company for the production of engines and their parts by Engine JV Company, and Engine JV Company agreed to provide the engines and their parts to the Company for a term of three years with effect from the date upon obtaining all relevant approvals and/or completing all other procedures in accordance with all applicable laws, rules and regulations or 31 March 2011, whichever is later. Pursuant to the New Isuzu Supply Agreement, Isuzu agreed to supply automobile parts and components to the Company for a term of three years, commencing from 24 June 2011. Meanwhile, the Company agreed to supply accessory sets and other automobile parts and components to Isuzu in accordance with the New Company Supply Agreement for a term of 3 years, commencing from 24 June 2011. Qingling Moulds shall also supply moulds and other related products to Isuzu under the New Isuzu Moulds Supply Agreement for a term of three years, commencing from 24 June 2011.

The New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement are master agreements which set out the principles upon which detailed terms of the transactions thereunder are to be determined between the parties to the agreements. The parties to the said agreements shall enter into defi nitive agreements for detailed terms of each single transaction in accordance with the underlying principles set out in the New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement. Such detailed terms include, but without limitation, the type of products to be supplied/purchased, orders making procedure, method of delivery, prices, payment and settlement terms, quantities, standard of qualities, delivery and inspection of products and other terms and conditions in relation to the supply and purchase of specifi c type of products. All parties to the agreements agreed that such detailed terms and the pricing shall be on normal commercial terms and shall be fair and reasonable to the parties thereto. If no suffi cient comparable transactions to judge whether they are on normal commercial terms, the terms should be fair and reasonable to the Company and Qingling Moulds. Isuzu has also undertaken that the terms offered to the Company and Qingling Moulds would be no less favorable than those offered to any other Independent Third Party in the market where the Company and Isuzu (where appropriate) locate.

In the event that Engine JV Company ceases to be a connected person of the Company and the New Supply Agreement ceases to be a continuing connected transaction under the Listing Rules, the Company is entitled to terminate the New Supply Agreement by giving written notice to Engine JV Company. Moreover, in the event that a competitor (including a potential competitor) of Isuzu holds Shares of the same number as or more than that held by Isuzu or there is a change in control in Qingling Group, Isuzu may terminate the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement by giving notice to the Company.

We have discussed with the management of the Company regarding the basis of price determination for transactions with insuffi cient comparable transactions and were advised that the price had been and would continue to be determined by reference to (i) the actual costs incurred plus a profi t margin of not more than 10% for the transactions contemplated under the New Supply Agreement; and (ii) the actual or reasonable costs, whichever is lower, incurred plus a profi t margin of not more 10% for the transactions contemplated under the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the management of the Company, the Company and Qingling Moulds have not supplied the products specifi ed under the New Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement to any Independent Third Party because such products are tailor-made for Engine JV Company and Isuzu (as the case may be), and not for sale to other third parties. In addition, there are no Independent Third Parties who supply to the Company the products under the New Supply Agreement and the New Isuzu Supply Agreement because such products are of specifi c specifi cations which are not available from other suppliers. As such, we are unable to compare the terms of these transactions with those of the independent suppliers or

customers.

According to the 2009 statistics published by China Association of Automobile Manufacturers, the average profi t margin of automobile parts manufacturers in China for the year of 2009 was approximately 7.9%, which is approximately 21% lower than the Company’s proposed maximum rate of 10%. Given that (i) the products under the New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement are tailor-made and it is a generally acceptable market practice for vendors to charge a higher premium for tailor-made products; (ii) the profi t margin of 10% under the New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement represents only the maximum rate that can be charged and the actual rate to be charged will be dependent on the prevailing market rate, and the Company, Engine JV Company, Qingling Moulds and Isuzu all agreed that the actual selling price of the products to be supplied or purchased shall be on normal commercial terms and the terms offered to the Company and Qingling Moulds shall be no less favorable than those offered to any other Independent Third Party; (iii) the New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement shall last for 3 years and the market rate of profi t margin may fl uctuate during the term of the contracts; (iv) both the Company and Engine JV Company are mutually bounded by the same terms on price determination for sale and purchase transactions under the New Supply Agreement; and (v) both the Company and Isuzu are mutually bounded by the same terms on price determination for sale and purchase transactions under the New Isuzu Supply Agreement and the New Company Supply Agreement, we consider that it is fair and reasonable to set the ceiling of the profi t margin at 10%, although it is higher than the current market rate, so as to allow fl exibility in price negotiation in response to market change. We also consider that the terms of the New Supply Agreement, the New Isuzu Supply Agreement, the New Company Supply Agreement and the New Isuzu Moulds Supply Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

(d) The Sales JV Supply Agreement

Pursuant to the Sales JV Supply Agreement, the Company agreed to supply automobile and their parts to Sales JV Company for a term of three years effective from the date upon obtaining all relevant approvals and/or completing all other procedures in accordance with all applicable law, rules and regulations.

— 55 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Sales JV Supply Agreement is a master agreement which sets out the principles upon which detailed terms in relation to the supply of automobile and their parts are to be determined between the Company and Sales JV Company. Under the Sales JV Supply Agreement, the parties shall enter into specifi c agreements with detailed terms of each single transaction in accordance with the principles set out in the Sales JV Supply Agreement. Such detailed terms include, but not limited to, type of products to be supplied, orders making procedure, method of delivery, price, payment methods, quantity, standard of quality and other terms and conditions in relation to the provision of specifi c type of products. The selling price of the automobile and/or their parts to be supplied and other related terms shall be determined according to the market price of the automobile and/or their parts.

We were advised by the management of the Company that up to the Latest Practicable Date, the Company has not sold any automobile and/or their parts to Sales JV Company yet and thus we are unable to compare the terms of the proposed transactions contemplated under the Sales JV Supply Agreement with those of the independent customers. However, the management of the Company confi rmed that the selling price of the products to be supplied would be on normal commercial terms and the terms of the Sales JV Supply Agreement would be no less favorable than those for any other Independent Third Party. We have reviewed the calculation basis of the annual caps for the Sales JV Supply Agreement and noted that the projected selling prices of automobile for Sales JV Company were the same as the prevailing market prices offered by the Company to the Independent Third Parties. Having considered that the selling price of the products to be supplied shall be on normal commercial terms and the terms of the Sales JV Supply Agreement shall be no less favorable than those for any other Independent Third Party, we consider that the terms of the Sales JV Supply Agreement are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned.

— 56 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Annual Caps for the Non-exempt Continuing Connected Transactions

(a) The annual caps for the Non-exempt Continuing Connected Transactions

The proposed annual caps in respect of the Non-exempt Continuing Connected Transactions (the “Annual Caps”) are set out below:

Table 1: Proposed Annual Caps of the Non-exempt Continuing Connected Transactions

New Supply Agreement Note 1 — to be supplied by Engine JV Company — to be supplied by the Company New CQACL Agreement and New Parts Supply Agreements Note 2 New Chassis Supply Agreement Note 3 New Isuzu Supply Agreement Note 4 New Isuzu Moulds Supply Agreement and New Company Supply Agreement Note 4 Sales JV Supply Agreement	For the period from the commencement date to 31 December 2011 1,800 1,600 667 900 1,390 150	Proposed Annual Caps (RMB’ million) For the year ending 31 December 2012 For the year ending 31 December 2013 For the period from 1 January 2014 to the expiry date of the agreement Compound annual growth rate Note 5 4,000 4,000 1,000 19.3% 3,000 3,000 800 15.2% 3,240 3,240 2,440 12.9% 2,800 2,800 1,900 13.3% 4,400 4,400 2,200 20.2% 280 280 155 4.3% Proposed Annual Caps (RMB’ million) For the year ending 31 December 2011 For the year ending 31 December 2012 For the year ending 31 December 2013 Compound annual growth rate 820 1,240 1,240 23.0%	Compound annual growth rate Note 5
			23.0%

Notes:

1. The agreement will commence on 1 April 2011 and expire on 31 March 2014.

2. These agreements will commence on 20 September 2011 and expire on 19 September 2014.

3. The agreement will commence on 5 August 2011 and expire on 4 August 2014.

4. These agreements will commence on 24 June 2011 and expire on 23 June 2014.

5. Calculated based on annualized fi gures for 2011 and 2014.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Determination Basis of the Annual Caps

The Annual Caps of the New Supply Agreement are determined by reference to (i) the expansion of the production capacity of the Group; (ii) the expected growth of the Company from the effective date of the New Supply Agreement to early 2014 in view of the economic growth in the PRC and the growth in demand for engines and their parts; and (iii) the price of engines, parts, raw materials and transportation costs in the market and their price trends.

The Annual Caps of the New CQACL Agreement and the New Parts Supply Agreements are determined by reference to (i) the historical sales volume for the two years ended 31 December 2010; (ii) the projected sales volume for the four years ending 31 December 2014; (iii) the expected increase in the number of new vehicles of new models or different specifi cations to be launched and made available for sale by the Company; and (iv) the expected expansion of sales network through distributors in the PRC.

The Annual Caps of the New Chassis Supply Agreement are set by the Board by reference to the actual amounts received by the Company under the Chassis Supply Agreement and the anticipated market demand in relation to the automobile chassis and related components for the periods/years under the New Chassis Supply Agreement.

The Annual Caps of the New Isuzu Supply Agreement are set by the Board by reference to (i) the historical sales volume; (ii) the projected sales volume for the duration of the relevant agreements, taking into account, inter alia, the overall business environment and specifi c growth strategies; (iii) the expected increase in the number of new vehicles of new models or different specifi cations to be launched and made available for sale by the Company; and (iv) the expected expansion of sales network through distributors in the PRC.

The Annual Caps of the New Isuzu Moulds Supply Agreement are determined based on the estimated amounts of moulds and related products required by Isuzu from Qingling Moulds for the production of Isuzu’s newly developed products from 2012 to 2014.

The Annual Caps of the New Company Supply Agreement are set by the Board by reference to the projected sales volume for the duration of the relevant agreements taking into consideration, inter alia, the expected increase in sales volume of Isuzu products in overseas market and hence the increase in needs of parts and components.

The Annual Caps of the Sales JV Supply Agreement are determined with reference to (i) the expansion of the sales capacity of the Group; (ii) the expected growth of the Company from the effective date of the Sales JV Supply Agreement to the end of 2013 in view of the economic growth in the PRC and the growth in demand for automobile and their parts; and (iii) the price of automobile, parts and transportation in the market and their price trends.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Assessment on the Basis of the Annual Caps

To assess whether the basis of the Annual Caps are fair and reasonable, we have considered the following factors:

• (i) The historical transaction amounts

The following table sets out the historical transaction amounts under the Non-exempt Continuing Connected Transactions for the past three years:

Table 2: Historical transaction amounts of the Non-exempt Continuing Connected Transactions

Supply Agreement Note 1 — supplied by Engine JV Company — supplied by the Company CQACL Agreement Note 2 Qingling Group Agreement Note 2 CQCC Agreement Note 2 CQFC Agreement Note 2 CQAC Agreement Note 2 CQNHK Agreement Note 2 CQPC Agreement Note 2 Chassis Supply Agreement Note 3 Isuzu Supply Agreement Note 4 Isuzu Moulds Supply Agreement Note 4 Company Supply Agreement Note 4	Transaction amounts (RMB’ million) For the period from the commencement date to 31 December 2008 For the year ended 31 December 2009 For the period from 1 January 2010 to 15 December 2010 Compound annual growth rate Note 5 1,017.8 1,231.0 1,490.0 7.4% 733.1 899.4 830.6 -5.5% 4.7 10.4 16.4 1.8% 22.2 51.8 27.1 -40.0% 6.5 15.2 22.4 0.5% 16.3 34.4 67.2 10.4% 108.7 372.8 435.2 8.7% 14.2 50.4 67.9 18.7% 20.7 74.6 83.7 9.3% 46.2 103.6 234.6 22.4% 704.3 822.9 1,738.7 16.2% — — 17.2 N/A 67.9 21.9 40.9 -42.6%	Transaction amounts (RMB’ million) For the period from the commencement date to 31 December 2008 For the year ended 31 December 2009 For the period from 1 January 2010 to 15 December 2010 Compound annual growth rate Note 5 1,017.8 1,231.0 1,490.0 7.4% 733.1 899.4 830.6 -5.5% 4.7 10.4 16.4 1.8% 22.2 51.8 27.1 -40.0% 6.5 15.2 22.4 0.5% 16.3 34.4 67.2 10.4% 108.7 372.8 435.2 8.7% 14.2 50.4 67.9 18.7% 20.7 74.6 83.7 9.3% 46.2 103.6 234.6 22.4% 704.3 822.9 1,738.7 16.2% — — 17.2 N/A 67.9 21.9 40.9 -42.6%
		7.4% -5.5% 1.8% -40.0% 0.5% 10.4% 8.7% 18.7% 9.3% 22.4% 16.2% N/A -42.6%

Notes:

1. The agreement commenced from 1 April 2008.

2. These agreements commenced from 20 September 2008.

3. The agreement commenced from 5 August 2008.

4. These agreements commenced from 24 June 2008.

5. Calculated based on annualized fi gures for 2008 and 2010.

— 59 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

From Table 2 above, we noted that, save for the transactions under the Supply Agreement in respect of the supply of parts of engines and raw materials by the Company and transactions under the Qingling Group Agreement and the Company Supply Agreement, the transaction amounts of the Non-exempt Continuing Connected Transactions increased with a compound annual growth rate ranging from approximately 0.5% to 22.4% during the past few years. We were advised by the management of the Company that the rise in transaction amounts were mainly attributable to the increases in the Company’s production volume and prices of automobile parts.

We also understand from the management of the Company that Engine JV Company had reduced its orders from the Company in 2009 and 2010 in order to clean up the stocks of parts of engines. As a result, the transaction amount in respect of the supply of parts of engines and raw materials by the Company under the Supply Agreement decreased in 2009 and 2010. The management of the Company expected that Engine JV Company would increase its purchases of parts of engines and raw materials from the Company during the years of 2011 to 2014 to refi ll its stocks.

Furthermore, Qingling Group has changed its business focus from production of automobile parts to modifi ed vehicles during the period under review. Therefore, certain types of automobile parts originally supplied by Qingling Group were sourced from other parties by the Company and the transaction amounts under the Qingling Group Agreement dropped accordingly. Meanwhile, Isuzu’s sales of vehicles were negatively impacted by the global fi nancial crisis in 2009 and the demand of accessory sets and related parts and components from Isuzu reduced accordingly. Following the easing of the global fi nancial crisis in 2010, the purchase amount of accessory sets and related parts and components from Isuzu increased gradually in 2010.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (ii) The projected transaction amounts for the New CQACL Agreement, the New Parts Supply Agreements, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement

The transaction amounts estimated by the Directors in respect of the transactions contemplated under the New CQACL Agreement, the New Parts Supply Agreements, the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement are set out below:

Table 3: Proposed Transaction Amounts

New CQACL Agreement Note 1 New Qingling Group Agreement Note 1 New CQCC Agreement Note 1 New CQFC Agreement Note 1 New CQAC Agreement Note 1 New CQNHK Agreement Note 1 New CQPC Agreement Note 1 Total New Isuzu Moulds Supply Agreement Note 2 New Company Supply Agreement Note 2 Total	For the period from the commencement date to 31 December 2011 15 16 10 20 490 26 90 667 20 130 150	Proposed Transaction Amounts (RMB’ million) For the year ending 31 December 2012 For the year ending 31 December 2013 For the period from 1 January 2014 to the expiry date of the agreement 70 70 50 110 110 90 50 50 40 120 120 90 2,400 2,400 1,800 170 170 130 320 320 240 3,240 3,240 2,440 30 30 30 250 250 125 280 280 155	Compound annual growth rate Note 3
			9.4% 30.3% 16.3% 20.9% 13.0% 25.3% 1.6% 12.9% 18.1% 1.8% 4.3%

Notes:

1. These agreements will commence on 20 September 2011 and expire on 19 September 2014.

2. These agreements will commence on 24 June 2011 and expire on 23 June 2014.

3. Calculated based on annualized fi gures for 2011 and 2014.

— 61 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) Outlook of automobile market in the PRC

Based on the statistics released by the National Bureau of Statistics of China, the gross domestic product (“GDP”) of the PRC for the nine months ended 30 September 2010 was approximately RMB26,866.0 billion, representing an increase of approximately 10.6% over the last corresponding period. For the six months ended 30 June 2010, the per capita disposable income of urban population was approximately RMB9,757, representing a growth of approximately 10.2% over the same period of the previous year. The OECD Economic Outlook No. 88 issued by the Organization for Economic Cooperation and Development in November 2010 revealed that the vigorous economic growth in the PRC had slowed down during the fi rst half of 2010 as the impact of the stimulus plan faded, but it has picked up since then and such renewed buoyancy is projected to be continued with an expected growth rate of 9.7% in the real GDP of the PRC in 2011 and 2012 as a result of the growth in domestic demand. The rapid growth in GDP is refl ected in the rising standard of living in the PRC and in the increasing demand among the Chinese population for consumer and durable goods, including automobiles.

According to the China Association of Automobile Manufacturers, the auto production in the PRC for the ten months ended 31 October 2010 was approximately 14.62 million units, representing an increase of approximately 34.5% as compared to the previous corresponding period. The auto sales volume in the PRC reached 14.67 million units for the ten months ended 31 October 2010, representing a growth of approximately 34.8% as compared to the last corresponding period. It is expected that the number of auto sold in the PRC would reach 18 million units in 2010. A report published in China Securities News forecasted that the auto industry in the PRC would maintain a two-digit growth in 2011 in view of the tremendous market demand in the PRC and the stimulus policies on new energy vehicles. It is also forecasted that the total number of auto sold in the PRC would reach 20 million units in 2011 despite the existence of certain unfavorable factors such as the cancellation of purchase tax breaks on small displacement cars and the likely infl ation in 2011.

Given the continuous economic growth in the PRC, the management of the Company expects and we concur with its view that, in the absence of any unforeseeable adverse factors that may have a substantial negative impact on the economy of the PRC, the demand of automobiles as well as automobile components in the PRC will continue to increase and the market outlook of the automobile industry in the PRC shall remain positive in the foreseeable future.

(iv) Expected expansion of the Group’s production capacity

We understand from the management of the Company that the production capacity of the Group in 2010 was approximately 70,000 vehicles per year. After completion of the existing projects of capacity expansion for assembly, components and parts production and engines, vehicles and chassis development in around June 2011 and the introduction of more advanced manufacturing technologies, the Group’s integrated production capacity of vehicles is expected to increase to approximately 200,000 vehicles. The management of the Company has planned to increase the production volume of vehicles so as to meet the increasing market demand and thus the Group’s demand for engines, automobile parts and other related parts and components from the respective Connected Persons are also expected to increase in line with the increase in auto production.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Meanwhile, Engine JV Company, Qingling Group and Isuzu shall also increase their production capacity in the coming years to cope with the increasing demand of vehicle engines, chassis and accessory sets and related parts and components. Therefore, it is expected that the demand of various products supplied by the Company shall also increase accordingly.

(v) Expected increase in price of engines, parts and raw materials

In the course of our discussion with the management of the Company, we understand that there has been a substantial and continuous increase in price of raw materials and parts as well as transportation and labor costs in the past year. The management of the Company expects that both the raw material costs and the manufacturing costs of products provided by the Company will further increase in the coming years.

The following chart shows the annual change on consumer price index of the PRC during the period from January 2009 to November 2010.

==> picture [294 x 193] intentionally omitted <==

----- Start of picture text -----

Annual Change on Consumer Price Index of PRC
6%
5%
4%
3%
2%
1%
0%
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov-
09 09 09 09 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 10 10 10 10
-1%
-2%
-3%
----- End of picture text -----

Source: National Bureau of Statistics of China

As shown in the above chart, the consumer price index of the PRC has been on a rising trend since July 2009. In November 2010, the consumer price index went up by 5.1% year-onyear, up from 4.4% in October 2010, although the PRC Government has adopted tightened credit policies and fi scal measures to combat infl ation. In view of the above, we concur with the view of the management of the Company that the raw material costs and the manufacturing costs of the Company might continue to increase in the foreseeable future.

(vi) Projected sales volume

For the six months ended 30 June 2010, the Group recorded a turnover of approximately RMB3.01 billion, representing a growth of approximately 58.3% over the last corresponding period. The number of vehicles sold by the Group increased by approximately 60.6% to 30,109 vehicles for the six months ended 30 June 2010.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the 2010 interim report, the Group has launched three groups of high quality but medium-priced products, namely light-duty vehicles, medium-duty vehicles and pickups, in the high-end and mid-end markets aiming at increasing the Group’s market share. The Company anticipates that new models or different specifi cations of vehicles will be launched and made available for sale in the second half of 2011 and the total number of new models or specifi cations to be launched in the three years ending 31 December 2014 will be in the range of 10 to 15. The management of the Company expects that the launching of vehicles with new models and specifi cations can help further boosting the sales volume of the Group.

During the six months ended 30 June 2010, the Company has engaged 20 new distributors for medium-duty vehicles and has expanded the network of new distributors for light-duty vehicles and sales branches in local municipalities by engaging 48 new distributors and sales branches. Currently, the Group sells its products through 95 distributors and 200 sales branches in the PRC. To further strengthen the Group’s capability in marketing and after-sales services, the Group plans to further increase its number of distributors by approximately 120 to 150 in the three years ending 31 December 2014. The Group shall also continue to adopt the policy of localization of parts and accessories to reduce costs and enhance the competitiveness of the Group’s products.

For the year ended 31 December 2009, the Group’s export sales dropped signifi cantly and accounted for only approximately 0.5% of the Group’s total turnover. The management of the Group explained that the decrease in export sales for the year ended 31 December 2009 was mainly attributable to the global fi nancial tsunami and anticipated that the export sales of the Group would pick up again in the ensuing years following the recovery of the global economy in 2010. Meanwhile, the Group will continue to strive for expanding its export sales by launching more high value-added products and leveraging on its price competitiveness of its existing products. The Group will also improve its after-sales services for the overseas markets and explore new opportunities for sale of automobile engines.

Having considered the development plan of the Group and the general market outlook of the auto industry in the PRC, we are of the view that the Group’s expected compound annual growth rates, in the range of approximately 4.3% to 23.0%, in transaction amounts of the Non-exempt Continuing Connected Transactions for the three years ending 31 December 2014, which are mainly resulted from the increase in production and sales volume of the Group, are fair and reasonable. We also consider that the Annual Caps proposed by the Directors are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

4. Revised Caps

The Board proposed to revise the annual cap for the Chassis Supply Agreement for the period from 1 January 2011 to 4 August 2011, being the expiry date of the Chassis Supply Agreement, from RMB800.0 million to RMB1,250.0 million. The Revised Cap is set by the Board by reference to the projected sales volume for the corresponding period.

We understand from the management of the Company that the modifi ed vehicles manufactured by Qingling Group has been launched to the market with great acceptance by, and continuous increase in demand from, the users given the good technical performance and low-cost competitive advantage of the modifi ed vehicles, in particular the refrigerated trucks and insulation vehicles. Meanwhile, Qingling Group launched a new model of modifi ed vehicles in June 2010 and predicted that the production volume of such new model would increase signifi cantly in 2011. Therefore, it is expected that Qingling Group will

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

increase its order of automobile chassis and related components from the Company in 2011 to cope with the increasing market demand of its modifi ed vehicles. We were also advised by the management of the Company that the estimated sales volume of automobile chassis and related components to Qingling Group has been arrived at after considering the 2011 purchase plan provided by Qingling Group. Based on the above factors, we consider that the Revised Cap proposed by the Directors is appropriate for the Company to maintain its continuous supply of automobile chassis and related components to Qingling Group in 2011 and is fair and reasonable so far as the Independent Shareholders are concerned.

5. Annual review of the Non-exempt Continuing Connected Transactions

The Company will comply with Rule 14A.37 to Rule 14A.41 of the Listing Rules during the term of the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the Sales JV Supply Agreement, in particular:

• (a) the Annual Caps for the Non-exempt Continuing Connected Transactions shall not be exceeded;

• (b) each year the independent non-executive Directors will review the Non-exempt Continuing Connected Transactions and confi rm in the annual report of the Company that such transactions have been entered into:

• (i) in the ordinary and usual course of business of the Company;

• (ii) either on normal commercial terms or, if there are no suffi cient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than terms available to or from (as appropriate) the Independent Third Parties; and

• (iii) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• (c) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report), confi rming that the Non-exempt Continuing Connected Transactions:

• (i) have received the approval of the Board;

• (ii) have been entered into in accordance with the pricing policy of the Group;

• (iii) have been entered into in accordance with the terms of the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the Sales JV Supply Agreement; and

• (iv) have not exceeded the Annual Caps as disclosed;

• (d) the Board must state in the annual report of the Company whether its auditors have confi rmed the matters as referred to in paragraph (c) above; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (e) upon any variation or renewal of the New Supply Agreement, the New CQACL Agreement, the New Parts Supply Agreements, the New Chassis Supply Agreement, the New Isuzu Supply Agreement, the New Isuzu Moulds Supply Agreement, the New Company Supply Agreement and the Sales JV Supply Agreement, the Company will comply in full with all applicable reporting, disclosure and independent shareholders’ approval requirements of Chapter 14A of the Listing Rules.

Given the above, we are of the view that the interests of the Company and the Shareholders under the Non-exempt Continuing Connected Transactions will be properly safeguarded.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we consider that (i) the Nonexempt Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Non-exempt Continuing Connected Transactions (and the proposed Annual Caps thereunder) and the Revised Cap are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Board Committee to advise the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the resolution(s) to approve the Non-exempt Continuing Connected Transactions and the Revised Cap at the upcoming EGM.

Yours faithfully,
For and on behalf of
Hercules Capital Limited
Louis Koo Amilia Tsang
Managing Director Director

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the Shares

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

(b) Persons or corporations who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to each Director or chief executive of the Company, as at the Latest Practicable Date, the following persons or corporations have an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who/which is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group and the amount of each of such person’s/corporate’s interest in such securities, together with particulars of any options in respect of such capital:

Long positions in the Shares:

					% of share
Name of			Nature of		capital of the	% of entire
Shareholders	Class of Shares	No. of Shares	Interest	Capacity	relevant class	share capital
Qinging Group	Domestic Shares	1,243,616,403	Benef cial Interest	Benef cial owner	100%	50.10%
Isuzu	H Shares	496,453,654	Benef cial Interest	Benef cial owner	40.08%	20%

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, nor the chief executive of the Company was aware of any other person or corporation who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who/which is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, or any options in respect of such capital.

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GENERAL INFORMATION

APPENDIX I

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into any service contract with any member of the Group which does not expire or is not determinable by the relevant member of the Group within one year without compensation (other than statutory compensation).

4. COMPETING INTEREST

As at the Latest Practicable Date, so far as the Directors are aware of, none of the Directors nor their respective associates had any interests which competed or may compete with the Company’s business.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are of the view that there was no material adverse change in the fi nancial and trading position of the Group since 31 December 2009, being the date to which the latest published audited consolidated fi nancial statements of the Group were made up.

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

As at the Latest Practicable Date, none of the Directors has any direct or indirect interest in any asset which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2009, being the date to which the latest published audited consolidated fi nancial statements of the Group were made up.

As at the Latest Practicable Date, none of the Directors is materially interested in any contract or arrangement which is signifi cant in relation to the business of the Company.

7. EXPERT AND CONSENT

The following is the qualifi cation of the expert who has given opinion or advice which is contained in this circular:

Name Qualifi cation

Hercules Capital Limited A licensed corporation under the SFO to carry out type 6 regulated activity (advising on corporate fi nance)

As at the Latest Practicable Date, Hercules Capital Limited was not interested benefi cially or nonbenefi cially in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Share or share in any member of the Group.

As at the Latest Practicable Date, Hercules Capital Limited does not have any direct or indirect interest in any asset which had been, since 31 December 2009, being the date to which the latest published audited fi nancial statements of the Company were made up, acquired or disposed of by or leased to, or are proposed to be acquired or disposed of by or leased to any member of the Group.

Hercules Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter dated 13 January 2011 and reference to its name in the form and context in which they respectively appear.

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GENERAL INFORMATION

APPENDIX I

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offi ces of Messrs. Woo Kwan Lee & Lo at 26th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours up to and including the date of the EGM:

• (a) the New Supply Agreement

• (b) the New CQACL Agreement

• (c) the New Qingling Group Agreement

• (d) the New CQCC Agreement

• (e) the New CQFC Agreement

• (f) the New CQAC Agreement

• (g) the New CQNHK Agreement

• (h) the New CQPC Agreement

• (i) the New Chassis Supply Agreement

• (j) the New Isuzu Supply Agreement

• (k) the New Isuzu Moulds Supply Agreement

• (l) the New Company Supply Agreement

• (m) the Sales JV Supply Agreement

9. GENERAL

Save as otherwise stated in this circular, the English text of this circular shall prevail over the Chinese text in the event of inconsistency.

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BIOGRAPHY DETAILS OF MR. TSUKIOKA

APPENDIX II

Mr. Ryozo Tsukioka , aged 62, graduated from Waseda University in Japan. In April of 1972, Mr. Tsukioka joined Isuzu and from November 1998 until November 2002, he held the positions in Isuzu as team member of the production planning department (產品企劃室主任部員), team member of the merchandise planning department (商品企劃室主任部員), head of the 1st, 3rd and 5th divisions of the commercial vehicles merchandise planning department (商用車商品企劃室第一部、第三部、第五 部主管), offi cer of the commercial vehicles merchandise planning department (商用車商品企劃室室 長) and offi cer of the vehicles development offi ce (車輛開發室室長). From June 2003 until February 2004, Mr. Tsukioka held the post as executive director (執行擔當) of Isuzu’s technology development planning department (技術開發企劃部) and design centre (設計中心). From April 2005 until March 2006, he served as the Area Operations Executive of the North America (北美地區現地統括). From April 2006 until the present, Mr. Tsukioka has been the Executive Vice President and Director (取締役副社 長) of Isuzu. Save as disclosed herein, Mr. Tsukioka has not held any other directorships in listed public companies in the last three years.

Pursuant to his letter of appointment, Mr. Tsukioka’s appointment shall commence from the date of the forthcoming extraordinary general meeting until the date of Company’s annual general meeting in 2012. However, his appointment is subject to normal retirement and re-election by Shareholders pursuant to the articles of association of the Company. Under an authorization to be given by the Shareholders at the EGM, the Company will enter into a service contract with Mr. Tsukioka and his remuneration will be determined by the Board in accordance with the terms and conditions of the said service contract having regard to his duties and responsibilities with the Company, the Company’s performance and profi tability and the prevailing market conditions. It is expected that he will not receive any annual salary.

Mr. Tsukioka does not hold any other offi ce with the Company and other members of the Group. Other than his relationship with Isuzu, a substantial shareholder of the Company, as disclosed above, Mr. Tsukioka did not have any relationship with any other directors, senior management, substantial shareholders or controlling shareholders of the Company (as defi ned in the Listing Rules). As at the Latest Practicable Date, Mr. Tsukioka did not have any interest in the shares or underlying shares of the Company within the meaning of Part XV of the SFO.

Save as disclosed above, there are no other matters concerning Mr. Tsukioka that need to be brought to the attention of the Shareholders and there is no information relating to Mr. Tsukioka that is required to be disclosed pursuant to any requirements of Rule 13.51(2) of the Listing Rules.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [326 x 65] intentionally omitted <==

(a Sino-foreign joint venture joint stock limited company incorporated in the People’s Republic of China) (Stock Code: 1122)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Qingling Motors Co. Ltd (the “ Company ”) will be held at Conference Hall, 1st Floor of Qingling Motors Co. Ltd Offi ce Building, 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the People’s Republic of China (“ PRC ”) on Wednesday, 2 March 2011 at 10:00 a.m. for the purpose of considering and, if thought fi t, passing (with or without modifi cations), the following ordinary resolutions and special resolution of the Company:

ORDINARY RESOLUTIONS

1. “THAT :

• (a) the conditional agreement dated 23 December 2010 entered into between the Company and Qingling Isuzu (Chongqing) Engine Co., Ltd. (the “Engine JV Company”) in respect of the supply of parts of engines and raw materials to and purchase of engines and their parts from the Engine JV Company (the “New Supply Agreement”, a copy of which marked “A” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

• (b) the relevant annual caps for the period from 1 April 2011 to 31 December 2011, each of the two years ending 31 December 2013 and the period from 1 January 2014 to 31 March 2014 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

and the directors of the Company (the “Directors”) be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the New Supply Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the conditional agreement dated 23 December 2010 entered into between the Company and Qingling Isuzu (Chongqing) Automobile Sales and Service Co., Ltd. (the “Sales JV Company”) in respect of the supply of automobile and their parts by the Company to the Sales JV Company (the “Sales JV Supply Agreement”, a copy of which marked “B” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual caps for each of the three years ending 31 December 2013 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the Sales JV Supply Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the conditional agreements dated 23 December 2010 entered into: (i) between Chongqing Qingling Aluminium Casting Co., Ltd. (“CQACL”) and the Company (the “New CQACL Agreement”); (ii) between Qingling Motors (Group) Co. Ltd. (“Qingling Group”) and the Company (the “New Qingling Group Agreement”); (iii) between Chongqing Qingling Casting Company Ltd. (“CQCC”) and the Company (the “New CQCC Agreement”); (iv) between Chongqing Qingling Forging Co. Ltd. (“CQFC”) and the Company (the “New CQFC Agreement”); (v) between Chongqing Qingling Axle Co. Ltd. (“CQAC”) and the Company (the “New CQAC Agreement”); (vi) between Chongqing Qingling NHK Seat Co. Ltd. (“CQNHK”) and the Company (the “New CQNHK Agreement”); and (vii) between Chongqing Qingling Plastic Co. Ltd. (“CQPC”) and the Company (the “New CQPC Agreement”) (copies of which marked “C” have been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual caps for the period from 20 September 2011 to 31 December 2011, each of the two years ending 31 December 2013 and the period from 1 January 2014 to 19 September 2014 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the New CQACL Agreement, New Qingling Group Agreement, New CQCC Agreement, New CQFC Agreement, New CQAC Agreement, New CQNHK Agreement and New CQPC Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the transactions contemplated under the Chassis Supply Agreement dated 5 August 2008 between the Company and Qingling Motors (Group) Co. Ltd. (a copy of which marked “D” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) for the period from 1 January 2011 to 4 August 2011 be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual cap for the period from 1 January 2011 to 4 August 2011 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the Chassis Supply Agreement and the annual caps and the transactions thereby contemplated.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

1. “THAT :

2. (a) the conditional agreement dated 23 December 2010 entered into between the Company and Qingling Motors (Group) Company Limited (“Qingling Group”) in respect of the supply of certain automobile chassis and related components by the Company to Qingling Group (the “New Chassis Supply Agreement”, a copy of which marked “E” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual caps for the period from 5 August 2011 to 31 December 2011, each of the two years ending 31 December 2013 and the period from 1 January 2014 to 4 August 2014 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the New Chassis Supply Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the conditional agreement dated 23 December 2010 entered into between Isuzu Motors Limited (“Isuzu”) and the Company in respect of the supply of certain automobile parts and components by Isuzu to the Company (the “New Isuzu Supply Agreement”, a copy of which marked “F” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual caps for the period from 24 June 2011 to 31 December 2011, each of the two years ending 31 December 2013 and the period from 1 January 2014 to 23 June 2014 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the New Isuzu Supply Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the conditional agreement dated 23 December 2010 entered into between Isuzu and Chongqing Qingling Moulds Co. Ltd. (“Qingling Moulds”) in respect of the supply of moulds and related products by Qingling Moulds to Isuzu (the “New Isuzu Moulds Supply Agreement”) and the conditional agreement dated 23 December 2010 entered into between Isuzu and the Company in respect of the supply of automobile parts and components by the Company to Isuzu (the “New Company Supply Agreement”) (copies of which marked “G” have been produced to the meeting and signed by the Chairman of the meeting for the purpose of identifi cation) and the transactions contemplated thereunder be and are hereby approved, confi rmed and ratifi ed; and

3. (b) the relevant annual caps for the period from 24 June 2011 to 31 December 2011, each of the two years ending 31 December 2013 and the period from 1 January 2014 to 23 June 2014 (as set out in the circular of the Company dated 13 January 2011) be and are hereby approved;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

and the Directors be and are hereby authorised on behalf of the Company to sign, seal, execute, all such other documents and agreements and to do all such acts and things as they may in their discretion consider necessary or desirable or expedient to implement and/or to give effect to the New Isuzu Moulds Supply Agreement and the New Company Supply Agreement and the annual caps and the transactions thereby contemplated.”

1. “THAT :

2. (a) the resignation of Mr. Masanori Katayama as an executive Director with effect from 2 March 2011, being the date of the extraordinary general meeting, be and is hereby approved; and

3. (b) the nomination and appointment of Mr. Ryozo Tsukioka as an executive Director with effect from 2 March 2011, being the date of the extraordinary general meeting, until the date of the Company’s annual general meeting in 2012, be and is hereby approved.”

SPECIAL RESOLUTION

1. “ THAT the existing Article 94 of the Articles of Association be deleted in its entirety and substituted therefor the following new Article 94:

Article 94 There shall be a board of directors comprising 11 members. The board of directors shall have one chairman and one or two deputy chairmen and one or more executive directors. Executive directors shall manage the affairs authorized by the board of directors.”

By Order of the Board Qingling Motors Co. Ltd Wu Nianqing Company Secretary

Chongqing, PRC, 13 January 2011

Legal Address:

1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the People’s Republic of China

Principal Place of Business in Hong Kong:

Suite 4901, 49th Floor,

Offi ce Tower, Convention Plaza,

• 1 Harbour Road, Wanchai, Hong Kong

Notes:

• (1) Any shareholder entitled to attend and vote at the meeting mentioned above is entitled to appoint one or more proxies to attend and vote at the meeting on his/her behalf in accordance with the Articles of Association. A proxy need not be a shareholder of the Company.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

• (2) In order to be valid, the proxy form and, if such proxy form is signed by a person under a power of attorney or other authority on behalf of the appointer, a notarially certifi ed copy of the power of attorney or authority shall be deposited at the legal address of the Company (in the case of proxy form of holder of Domestic Shares) or the Company’s H Share Registrars, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in the case of proxy form of holders of H Share) not less than 24 hours before the time appointed for holding of the meeting or 24 hours before the time appointed for taking the poll or any adjournment thereof.

• (3) The register of members of the Company will be closed from Monday, 31 January 2011 to Wednesday, 2 March 2011 (both days inclusive), during which period no transfer of shares will be registered. In order to determine the identity of the shareholders who are entitled to attend and vote at the meeting, all duly completed transfer forms accompanied by the relevant share certifi cates must be lodged with the Company’s H Share Registrars, Hong Kong Registrars Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on Friday, 28 January 2011.

• (4) Shareholders whose names appear on the register of members of the Company on Monday, 31 January 2011 are entitled to attend and vote at the meeting.

• (5) Shareholders or their proxies shall produce their identity documents when attending the meeting.

• (6) Shareholders who intend to attend the meeting shall complete and return the reply slip for attending the meeting at the legal address of the Company at 1 Xiexing Cun, Zhongliangshan, Jiulongpo District, Chongqing, the People’s Republic of China by hand, by post, or by fax (at fax no.: (86) 23-68830397) on or before Thursday, 10 February 2011.

• (7) The extraordinary general meeting is not expected to take more than half a day. Shareholders or their proxies attending the extraordinary general meeting shall be responsible for their own travel and accommodation expenses.

• (8) The resolutions as set out above will be determined by way of poll.

• (9) As at the date hereof, the board of directors of the Company comprises 10 Directors, of which Mr. WU Yun, Mr. GAO Jianmin, Mr. Makoto TANAKA, Mr. Masanori KATAYAMA, Mr. LIU Guangming, Mr. PAN Yong, Mr. YUE Huaqiang are executive directors of the Company and Mr. LONG Tao, Mr. SONG Xiaojiang, and Mr. XU Bingjin are independent non-executive directors of the Company.

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