Brilliance China Automotive (BCAUY) 20-F/A 2007 FY Annual report (foreign) (amended)

EXHIBIT 15.1

INDEX TO FINANCIAL STATEMENTS

BMW BRILLIANCE AUTOMOTIVE LTD.

	Page
Report of Independent Registered Public Accounting Firm		F-2
Balance sheets as at December 31, 2007 and 2006		F-3
Income statements for the years ended December 31, 2007, 2006 and 2005		F-5
Cash flow statements for the years ended December 31, 2007, 2006 and 2005		F-6
Notes to the financial statements		F-9

Report of Independent Registered Public Accounting Firm

The Board of Directors of BMW Brilliance Automotive Ltd.:

We have audited the accompanying balance sheet of BMW Brilliance Automotive Ltd. (“the Company”) as of December 31, 2007, and the related income statement and cash flows statement for the year ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BMW Brilliance Automotive Ltd. as of December 31, 2007, and the results of its operations and its cash flows for the year then ended in conformity with the requirements of Accounting Standards for Business Enterprises (hereinafter represents Accounting Standards for Business Enterprises-Basic Standard issued in 2006 and specific accounting standards issued before 2006) and the Accounting Regulations for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China (collectively, PRC GAAP).

As described in note 22 to the financial statements, the Company conducted significant transactions with related parties.

PRC GAAP varies in certain significant respects from generally accepted accounting principles in the United States of America. Information relating to the nature and effect of such differences is presented in note 24 to the financial statements.

KPMG
Hong Kong, China
February 26, 2009

F-2

BMW Brilliance Automotive Ltd.
Balance sheets as at December 31, 2007
and 2006
(In thousands of RMB)

	Note	2007			2006
					(unaudited)
Assets
Current assets
Cash at bank and on hand	5		401,018			993,662
Bills receivable	6		992,153			562,657
Accounts receivable	7, 22		36,516			3,789
Other receivables	8, 22		911,091			895,440
Payments in advance			1,538			7,643
Inventories	9,22		2,830,021			2,549,919
Deferred expenses			1,017			1,016
Other current assets	10		116,567			65,663
Total current assets			5,289,921			5,079,789
Fixed assets
Cost			2,792,491			2,198,764
Less: Accumulated depreciation and amortization			(769,138	)		(474,589	)
Net book value before provision for impairment			2,023,353			1,724,175
Less: Provision for impairment of fixed assets			(8,916	)		(8,916	)
Carrying amount	11		2,014,437			1,715,259
Construction in progress	12		133,734			60,050
Fixed assets pending disposal			1,116			1,358
Total fixed assets			2,149,287			1,776,667
Intangible assets	13		69,540			63,153
Total assets			7,508,748			6,919,609

The notes on pages F-9 to F-32 form part of these financial statements.

F-3

BMW Brilliance Automotive Ltd.
Balance sheets as at December 31, 2007
and 2006 (continued)
(In thousands of RMB)

	Note	2007			2006
					(unaudited)
Liabilities and investors’ equity
Current liabilities
Short-term loans	14		1,100,000			400,000
Accounts payable	22(b)		2,452,845			2,878,900
Receipts in advance			141,046			193,354
Accrued payroll			22,638			13,185
Staff welfare payable			29			30
Taxes (recoverable)/payable	4(c)		(150,552	)		118,206
Other payables	22(b)		230,656			791,861
Other creditors			14			19
Accrued expenses	22(b)		1,079,899			608,034
Provision for warranty	15		28,346			9,976
Current portion of long-term loans	16		290,000			—
Total current liabilities			5,194,921			5,013,565
Long-term liabilities
Long-term loans, excluding current portion	17		870,000			700,000
Total long-term liabilities			870,000			700,000
Total liabilities			6,064,921			5,713,565
Investors’ equity
Paid-in capital	18		1,377,055			1,377,055
Capital reserve	19		273,430			272,447
Accumulated losses			(206,658	)		(443,458	)
Total investors’ equity			1,443,827			1,206,044
Total liabilities and investors’ equity			7,508,748			6,919,609

The notes on pages F-9 to F-32 form part of these financial statements.

F-4

BMW Brilliance Automotive Ltd.
Income statements
for the years ended December 31, 2007,
2006 and 2005
(In thousands of RMB)

		Note	2007			2006			2005
						(unaudited)			(unaudited)
Sales from principal activities		20,22		12,460,502			8,947,350			6,280,304
Less:	Cost of sales from principal activities	22		(9,657,796	)		(7,355,485	)		(6,134,660	)
	Business taxes and surcharges			(1,087,955	)		(737,320	)		(416,299	)
Profit/(loss) from principal activities				1,714,751			854,545			(270,655	)
Add:	Profit from other operations			25,537			12,679			602,179
Less:	Operating expenses			(1,463,153	)		(799,235	)		(532,221	)
	General and administrative expenses			(73,923	)		(59,121	)		(245,161	)
Add:	Net financial income	21		91,289			19,717			163,630
Operating profit/(loss)				294,501			28,585			(282,228	)
Add:	Subsidy income			2,100			1,350			—
	Non-operating income			12,775			11,724			1,243
Less:	Non-operating expenses			(3,189	)		(4,459	)		(385	)
Profit/(loss) before income tax				306,187			37,200			(281,370	)
Less:	Income tax	4(b)		(69,387	)		(19,338	)		—
Net profit/(loss) for the year				236,800			17,862			(281,370	)
Add:	Accumulated losses at the beginning of the year			(443,458	)		(461,320	)		(179,950	)
Accumulated losses carried forward				(206,658	)		(443,458	)		(461,320	)

The notes on pages F-9 to F-32 form part of these financial statements.

F-5

BMW Brilliance Automotive Ltd.
Cash flow statements
for the years ended December 31, 2007,
2006 and 2005
(In thousands of RMB)

	Note to the
	cash flow
	statements	2007			2006			2005
					(unaudited)			(unaudited)
Cash flows from operating activities:
Cash received from sale of goods			14,122,777			10,204,886			7,548,939
Other cash received relating to operating activities			264,080			213,806			126,508
Sub-total of cash inflows			14,386,857			10,418,692			7,675,447
Cash paid for goods and services			(11,401,814	)		(7,971,755	)		(4,593,992	)
Cash paid to and for employees			(316,836	)		(123,374	)		(97,941	)
Cash paid for all types of taxes			(1,889,008	)		(936,237	)		(610,878	)
Other cash paid relating to operating activities			(1,403,211	)		(461,223	)		(1,149,228	)
Sub-total of cash outflows			(15,010,869	)		(9,492,589	)		(6,452,039	)
Net cash (outflow)/inflow from operating activities	i		(624,012	)		926,103			1,223,408
Cash flows from investing activities:	ii
Net cash received from disposal of fixed assets			27,675			35,311			27,541
Other cash received relating to investing activities			5,927			9,233			11,844
Sub-total of cash inflows			33,602			44,544			39,385
Cash paid for acquisition of fixed assets, construction in progress and intangible assets			(1,053,224	)		(604,051	)		(374,845	)
Sub-total of cash outflows			(1,053,224	)		(604,051	)		(374,845	)
Net cash outflow from investing activities			(1,019,622	)		(559,507	)		(335,460	)

The notes on pages F-9 to F-32 form part of these financial statements.

F-6

BMW Brilliance Automotive Ltd.
Cash flow statements
for the years ended December 31, 2007,
2006 and 2005 (continued)
(In thousands of RMB)

	Note to the
	cash flow
	statements	2007			2006			2005
					(unaudited)			(unaudited)
Cash flows from financing activities:
Cash received from borrowings			6,510,000			680,000			550,000
Sub-total of cash inflows			6,510,000			680,000			550,000
Cash repayments of borrowings			(5,350,000	)		(750,000	)		(950,000	)
Cash paid for interest expenses			(109,010	)		(51,495	)		(79,773	)
Sub-total of cash outflows			(5,459,010	)		(801,495	)		(1,029,773	)
Net cash inflow/(outflow) from financing activities			1,050,990			(121,495	)		(479,773	)
Net (decrease)/increase in cash	iii		(592,644	)		245,101			408,175

The notes on pages F-9 to F-32 form part of these financial statements.

F-7

BMW Brilliance Automotive Ltd.
Cash flow statements
for the years ended December 31, 2007,
2006 and 2005 (continued)
(In thousands of RMB)

Notes to the cash flow statements

i Reconciliation of net profit/(loss) to cash flows from operating activities

		2007			2006			2005
					(unaudited)			(unaudited)
Net profit/(loss)			236,800			17,862			(281,370	)
Add:	Provision for/(reversal of) impairment of inventories and fixed assets		13,370			(52,827	)		41,181
	Depreciation and amortization of fixed assets		313,202			182,017			180,088
	Amortization of intangible assets		26,262			22,734			16,848
	(Increase)/decrease in deferred expenses		(1	)		1,230			2,216
	Increase/(decrease) in accrued expenses		471,865			290,928			(530,119	)
	(Gains)/losses on disposal of fixed assets		(1,279	)		1,690			1,857
	Financial expenses		103,083			42,262			67,929
	(Increase)/decrease in gross inventories		(293,472	)		(1,604,350	)		3,299,561
	(Increase)/decrease in gross operating receivables		(522,673	)		122,556			(529,282	)
	(Decrease)/increase in operating payables		(971,169	)		1,902,001			(1,045,501	)
Net cash (outflow)/inflow from operating activities			(624,012	)		926,103			1,223,408

ii Investing activities not requiring the use of cash

	2007		2006		2005
			(unaudited)		(unaudited)
Donation of fixed assets received		983		—		—

iii Net (decrease)/increase in cash

		2007			2006			2005
					(unaudited)			(unaudited)
Cash at the end of the year			401,018			993,662			748,561
Less:	Cash at the beginning of the year		(993,662	)		(748,561	)		(340,386	)
Net (decrease)/increase in cash			(592,644	)		245,101			408,175

The notes on pages F-9 to F-32 form part of these financial statements.

F-8

BMW Brilliance Automotive Ltd.
Notes to the financial statements
(In thousands of RMB)

1	COMPANY STATUS
	BMW Brilliance Automotive Ltd. (the Company) is an equity joint venture established in Shenyang City, Liaoning Province in the People’s Republic of China (PRC) by Shenyang JinBei Automotive Industry Holdings Company Limited and BMW Holding BV (registered in the Netherlands). The Company obtained an approval certificate (Wai Jing Mao Zi Shen Zi [2003] No. 0075) from the Ministry of Commerce on May 20, 2003, and a business licence (Qi He Liao Shen Zong Zi No. 111002579) on May 23, 2003 issued by the Shenyang Administration of Industry and Commerce of the PRC. The registered capital is Euro 150 million (equivalent to RMB 1,377,055).
	According to the joint venture contract and articles of association, the Company’s period of operation is 15 years and its principal activities are the production and sale of BMW passenger cars, engines, parts and components, and accessories; and provision of after-sales services (including spare parts) in connection with its products. The Company commenced operations in September 2003.
2	BASIS OF PREPARATION
	The principal accounting policies adopted in the preparation of the financial statements are in conformity with the Accounting Standards for Business Enterprises-Basic Standard issued in 2006, specific accounting standards issued before 2006 and the Accounting Rules and Regulations for Business Enterprises (PRC GAAP), all issued by the Ministry of Finance of the PRC. The accounting policies comply with the legal and reporting requirements of the relevant government authorities. Accordingly, the basis of measurement and presentation in these financial statements may not be in compliance with the accounting principles and practices generally accepted in countries and jurisdictions other than the PRC and may not be suitable for any purpose other than for statutory reporting.
3	SIGNIFICANT ACCOUNTING POLICIES

(a)	Accounting year
	The accounting year of the Company is from January 1 to December 31.
(b)	Basis of preparation and measurement basis
	The financial statements of the Company have been prepared on an accrual basis. Unless otherwise stated, the measurement basis used is historical cost.

F-9

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c)	Reporting currency
	The Company’s reporting currency is Renminbi.
(d)	Translation of foreign currencies
	Foreign currency transactions during the year are translated into Renminbi at the exchange rates quoted by the Bank of China ruling on the first day of the month in which the transactions take place.
	Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the exchange rates quoted by the Bank of China ruling at the balance sheet date.
	Exchange gains and losses on foreign currency translation, except for the exchange gains and losses directly relating to the construction of fixed assets, are reported in the income statement.
	Exchange gains and losses on foreign exchange forward contracts are not recognized in the financial statements until the contracts are settled (the “contract settlement date”).
(e)	Accounts receivable and bills receivable
	Accounts receivable and bills receivable are stated at cost less provision for doubtful debts losses.
	Accounts receivable and bills receivable are derecognised if the Company’s contractual rights to the cash flows from these assets expire or if the Company transfers these assets to another party without retaining control or substantively all risks and rewards of these receivables.
	The provision for bad debt losses is estimated by management based on individual accounts receivable and bills receivable which show signs of uncollectibility. Provision for other receivables is determined based on their specific nature and management’s estimate of their collectibility.
(f)	Inventories
	Inventories are carried at the lower of cost and net realisable value.
	Cost comprises all costs of purchase, costs of conversion and other costs. Inventories are measured at their actual cost upon acquisition. Cost is determined using the standard cost method with periodical adjustments of cost variance to arrive at actual cost. In addition to the purchase cost of raw materials, work in progress and finished goods include direct labour costs and an appropriate allocation of manufacturing overheads.

F-10

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f)	Inventories (continued)
	Any excess of the cost over the net realisable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs to completion and the estimated expenses and related taxes necessary to make the sale.
(g)	Fixed assets and construction in progress
	Fixed assets are assets held by the Company for use in the production of goods, for use in the supply of services, for rental purposes and for administrative purposes. They are expected to be used for more than one year.
	Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see note 3(j)). Construction in progress is stated in the balance sheet at cost less impairment losses (see note 3(j)).
	All direct and indirect costs that are related to the construction of fixed assets and incurred before the assets are ready for their intended use are capitalised as construction in progress. Those costs include borrowing costs on specific borrowings for the construction of the fixed assets during the construction period.
	Construction in progress is transferred to fixed assets when it is ready for its intended use. No depreciation is provided against construction in progress.
	Fixed assets are depreciated using the straight-line method over their estimated useful lives. The respective estimated useful lives for the Company’s fixed assets are as follows:

	Estimated useful life
Plant and buildings	15 years
Machinery and equipment	Shorter of product lifecycle or 10 years
Office and other equipment	5 years
Motor vehicles	5 years
Leasehold improvements	Shorter of lease period or 5 years

F-11

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Operating lease

i)	Assets held for use in operating leases
	Where the Company leases out assets under operating leases, the assets are included in the balance sheet according to their nature and are depreciated in accordance with the Company’s depreciation policies, as set out in note 3(g). Impairment losses are provided for in accordance with the accounting policy set out in note 3(j).
ii)	Operating lease charges
	Rental payments under operating leases are charged as expenses on a straight-line basis over the lease term.

(i)	Intangible assets
	Intangible assets are stated in the balance sheet at cost less accumulated amortization and impairment losses (see note 3(j)). The cost of the intangible assets is amortized on a straight-line basis over their estimated useful lives. The respective amortization periods for the intangible assets are as follows:

Computer software	5 years
SAP	5 years
Up-front licence fee	Shorter of product lifecycle or 5 years

(j)	Provision for impairment
	The carrying amounts of assets (including fixed assets, construction in progress and intangible assets) are assessed regularly to determine whether their recoverable amounts have declined below their carrying amounts. Assets are tested for impairment whenever events or changes in conditions indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The amount by which the carrying amount is reduced is the impairment loss.
	The recoverable amount is the greater of the net selling price and the present value of the estimated future cash flows arising from the continuous use of the asset and from the disposal of the asset at the end of its useful life.

F-12

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j)	Provision for impairment (continued)
	Provision for impairment is calculated on an item by item basis and recognized as an expense in the income statement.
	If there is an indication that there has been a change in the factors used to determine the provision for impairment and as a result the estimated recoverable amount is greater than the carrying amount of the asset, the impairment loss recognized in prior years is reversed. Reversals of impairment losses are recognized in the income statement. An impairment loss is reversed only to the extent of the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years.
(k)	Income tax
	Income tax is recognized when payable under the tax payable method. Income tax for the year is provided at the applicable tax rate on taxable income.
(l)	Provisions and contingent liabilities
	Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligations and a reliable estimate can be made.
	Where it is not probable that the settlement of the above obligation will cause an outflow of economic benefits, or the amount of the outflow cannot be estimated reliably, the obligation is disclosed as a contingent liability.

i)

Provision for warranty

The Company’s cars are sold with a 24-month warranty. During the warranty period, the Company pays dealers for parts, components and labor covered by the warranty. The costs of the warranty obligation are accrued at the time the sales are recognized, based on the estimated costs of fulfilling the total obligations. The factors used to estimate warranty expenses are re-evaluated periodically in light of actual experience.

(m)	Revenue recognition
	When it is probable that the economic benefits will flow to the Company and the revenue and costs can be measured reliably, revenue is recognized in the income statement.
	Sale of goods
	Sales revenue is recognized when the significant risks and rewards of the ownership of goods have been transferred to the buyers. No revenue is recognized if there are significant uncertainties regarding the receipt of the consideration and the return of goods, or when the revenue and the costs incurred or to be incurred in respect of the transaction cannot be measured reliably.

F-13

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n)	Borrowing costs
	Borrowing costs incurred on specific borrowings for the construction of fixed assets are capitalised into the cost of the fixed assets during the construction period until the fixed assets are ready for their intended uses.
	Except for the above, other borrowing costs are recognized as financial expenses in the income statement when incurred.
(o)	Repair and maintenance expenses
	Repair and maintenance expenses (including major overhaul expenses) are recognized in the income statement when incurred.
(p)	Retirement benefits
	Pursuant to the relevant laws and regulations in the PRC, the Company has joined a defined contribution retirement plan for the employees arranged by a governmental organisation. The Company makes contributions to the retirement scheme at the applicable rates based on the employees’ salaries. The contributions are charged to the income statement on an accrual basis. After the payment of the contributions under the retirement plan, the Company does not have any other obligations in this respect.
(q)	Related parties
	If the Company has the power, directly or indirectly, to control, jointly control or exercise significant influence over another party, or vice versa, or where the Company and one or more parties are subject to common control from another party, they are considered to be related parties. Related parties may be individuals or enterprises.

F-14

4 TAXATION

(a) The types of tax applicable to the Company’s sales of goods and rendering of services include business tax, value added tax (VAT) and consumption tax. Their tax rates are as follows:

Business tax rate		5	%
VAT rate		17	%
Consumption tax rate	5%, 9% or 12%

(b)	Income tax
	Income tax in the income statement represents:

	2007		2006		2005
			(unaudited)		(unaudited)
Provision for income tax for the year		69,387		19,338		—

Pursuant to Article 8 of the Foreign Enterprise Income Tax (“FEIT”) Law, starting from the year in which a taxable income is made after the offset of deductible losses incurred in prior years, the Company is entitled to a tax holiday of a tax-free period for the first and second years and a 50% reduction in the income tax rate for the third to fifth years. The Company has been granted a tax holiday for exemption of FEIT for years 2005 and 2006, and a 50% reduction of FEIT for years 2007 to 2009.

In 2006, the Company’s FEIT tax returns for the years 2003 to 2005 were examined by the local tax bureau. Notwithstanding the above provisions of the FEIT Law, based on uncertain tax positions arising from the tax bureau’s initial assessment, the Company determined that a liability in the amount of RMB 19,338 was required in respect of the year ended 31 December 2006. This amount was subsequently paid to the tax bureau in April 2007. In March 2008, the local tax bureau issued a final tax inspection report, as a result of which, the RMB 19,338 was returned to the Company in September 2008.

On March 16, 2007, the National People’s Congress passed the new Enterprise Income Tax law (the “new EIT law”) which imposes a single income tax rate of 25% for most domestic enterprises and foreign investment enterprises. The new EIT law was effective as of January 1, 2008. The new EIT law provides a five-year transition period from its effective date for those enterprises which were established before March 16, 2007 and which were entitled to a preferential lower tax rate under the then effective tax laws or regulations. Further, according to the new EIT law, entities that were entitled to a tax holiday shall continue to be entitled to the tax holiday. Therefore, the Company’s applicable tax rates will increase from 7.5% in 2007 to 9%, 10%, 22%, 24% and 25% in 2008, 2009, 2010, 2011 and 2012 onwards respectively.

F-15

4 TAXATION (CONTINUED)

(c) Taxes (recoverable)/payable

	2007			2006
				(unaudited)
VAT recoverable		(310,190	)		(15,841	)
Consumption tax payable		112,933			109,162
Withholding tax payable		2,401			5,063
Business tax payable		353			89
Income tax payable		40,572			19,338
Others		3,379			395
Total		(150,552	)		118,206

5 CASH AT BANK AND ON HAND

	2007		2006
			(unaudited)
Cash on hand		56		62
Demand deposits		400,962		993,600
Total		401,018		993,662

6 BILLS RECEIVABLE

	2007		2006
			(unaudited)
Bank acceptance bills		992,153		562,657

In addition to the above bank acceptance bills as at December 31, 2007, the Company has outstanding bills receivable discounted with banks for which the Company has retained a recourse obligation amounted to RMB 829,747 (2006: RMB 494,388). Management has assessed the recoverable amount of the recourse obligation arising from these discounted bank bills to be insignificant based on the default experience and the credit status of the issuing banks.

F-16

7 ACCOUNTS RECEIVABLE

The ageing analysis of the Company’s accounts receivable is as follows:

2007

2006 (unaudited)

Percentage

Percentage

of total

of total

accounts

Bad debt

accounts

Bad debt

RMB

receivable

provision

RMB

receivable

provision

Within 1 year

36,516

100

%

—

3,789

100

%

—

8 OTHER RECEIVABLES

The ageing analysis of the Company’s other receivables is as follows:

	2007							2006 (unaudited)
			Percentage							Percentage
			of total							of total			��
			other			Bad debt				other			Bad debt
	RMB		receivables			provision		RMB		receivables			provision
Within 1 year		428,942		47	%		—		725,100		81	%		—
After 1 year but within 2 years		450,275		49	%		—		170,340		19	%		—
After 2 years but within 3 years		31,874		4	%		—		—		0	%		—
Total		911,091		100	%		—		895,440		100	%		—

9 INVENTORIES

	2007			2006
				(unaudited)
Goods-in-transit		674,755			923,126
Raw materials		259,905			484,835
Work in progress		41,085			147,060
Finished goods		1,867,884			995,136
		2,843,629			2,550,157
Less: Provision for diminution in value of inventories		(13,608	)		(238	)
Total		2,830,021			2,549,919

F-17

9 INVENTORIES (CONTINUED)

Provision for diminution in value of inventories

	2007									2006 (unaudited)
	Raw			Finished						Raw			Finished
	materials			goods			Total			materials			goods			Total
Opening balance as at January 1		—			(238	)		(238	)		(26,425	)		(19,098	)		(45,523	)
Add: Provision made during the year		(2,216	)		(11,392	)		(13,608	)		—			—			—
Less: transfer out due to sales		—			238			238			26,425			18,860			45,285
Closing balance as at December 31		(2,216	)		(11,392	)		(13,608	)		—			(238	)		(238	)

All the above inventories are purchased from others or self-manufactured.

	2007		2006
			(unaudited)
Cost of inventories charged to costs and expenses in the income statement		9,657,796		7,355,485

10 OTHER CURRENT ASSETS

	2007		2006
			(unaudited)
Other monetary funds		116,567		65,663

Other monetary funds as at December 31, 2007 consist of the following bank deposits:

a)	Dealer trust account of RMB 101,567 placed in the Shenyang Xinbei branch of Industrial and Commercial Bank of China; and
b)	Dealer trust account of RMB 15,000 placed in the Shenyang branch of Guangdong Development Bank.

F-18

11 FIXED ASSETS

	Plant			Machinery			Office
	and			and			and other			Motor			Leasehold
	buildings			equipment			equipment			vehicles			improvements			Total
Cost:
As at January 1, 2007(unaudited)		493,831			1,339,339			207,939			84,058			73,597			2,198,764
Additions		117			285,663			37,637			52,173			(4	)		375,586
Transfer from construction in progress		6,341			240,628			481			—			15,498			262,948
Disposals		—			(336	)		(5,698	)		(31,836	)		(6,937	)		(44,807	)
As at December 31, 2007		500,289			1,865,294			240,359			104,395			82,154			2,792,491
Accumulated depreciation:
As at January 1, 2007(unaudited)		(70,081	)		(287,833	)		(67,544	)		(8,058	)		(41,073	)		(474,589	)
Charge for the year		(35,123	)		(201,390	)		(42,714	)		(17,643	)		(16,332	)		(313,202	)
Written back on disposal		—			160			3,881			7,676			6,936			18,653
As at December 31, 2007		(105,204	)		(489,063	)		(106,377	)		(18,025	)		(50,469	)		(769,138	)
Provision for impairment:
As at January 1, 2007(unaudited)/ December 31, 2007		—			(437	)		(8,479	)		—			—			(8,916	)
Carrying amount:
As at December 31, 2007		395,085			1,375,794			125,503			86,370			31,685			2,014,437
As at December 31, 2006 (unaudited)		423,750			1,051,069			131,916			76,000			32,524			1,715,259

As at December 31, 2007, the original cost of fixed assets that have been fully depreciated but are still in use is RMB 404.

As at December 31, 2007, certain fixed assets with carrying amount of RMB 668,162 are pledged as security for long-term bank loans (note 17).

As at December 31, 2007, the carrying amount of the fixed assets leased out under operating leases is set out below:

Plant and buildings:

	2007
Cost		195,405
Accumulated depreciation		(44,723	)
Total		150,682

As at December 31, 2007, the future minimum lease income under non-cancellable operating lease in respect of the leasing out properties and machinery were receivable as follows:

	2007
Within 1 year		26,580
Total		26,580

F-19

12 CONSTRUCTION IN PROGRESS

	RMB
Cost
As at January 1, 2007 (unaudited)		60,050
Additions during the year		336,632
Transfer to fixed assets during the year		(262,948	)
As at December 31, 2007		133,734

The capitalisation rate used to determine the borrowing costs to be capitalised was 5.725%.

13 INTANGIBLE ASSETS

	Computer						Up-front
	software			SAP			licence fee			Total
Cost:
As at January 1, 2007 (unaudited)		16,258			61,112			38,839			116,209
Additions during the year		10,410			905			21,334			32,649
As at December 31, 2007		26,668			62,017			60,173			148,858
Accumulated amortisation:
As at January 1, 2007 (unaudited)		(5,560	)		(30,479	)		(17,017	)		(53,056	)
Charge for the year		(4,071	)		(12,598	)		(9,593	)		(26,262	)
As at December 31, 2007		(9,631	)		(43,077	)		(26,610	)		(79,318	)
Carrying amount:
As at December 31, 2007		17,037			18,940			33,563			69,540
As at December 31, 2006 (unaudited)		10,698			30,633			21,822			63,153

The estimated amortization expense of intangible assets for the next five years is as follows:

2008	30,644
2009	17,700
2010	15,340
2011	4,334
2012	1,522
	69,540

F-20

14 SHORT-TERM LOANS

	2007						2006 (unaudited)
			Interest			Secured/			Interest			Secured/
	Principal		rate (p.a.)			guaranteed	Principal		rate (p.a.)			guaranteed
Bank loans
— RMB		100,000		5.751	%	Nil		—		—			—
— RMB		1,000,000		6.561	%	Nil		400,000		5.508	%	Nil
Total		1,100,000						400,000

15 PROVISION FOR WARRANTY

As at January 1, 2007 (unaudited)	9,976
Add: Charge for the year	28,727
Less: Payments during the year	(10,357	)
As at December 31, 2007	28,346

The Company provides a two-year after-sales repair warranty to the purchasers of the Company’s products. The Company will provide free repair and maintenance services during the warranty period in the event of any non-accidental breakdown or quality problems.

16 CURRENT PORTION OF LONG-TERM LOANS

	2007						2006 (unaudited)
			Interest			Secured/			Interest		Secured/
	Principal		rate(p.a.)			guaranteed	Principal		rate(p.a.)		guaranteed
			note 17 i)
Bank loans
— RMB		115,000		7.047	%	note 17 ii)		—		—		—
— RMB		5,000		6.156%/7.047	%	note 17 ii)		—		—		—
— RMB		2,500		5.508%/6.399	%	note 17 ii)		—		—		—
— RMB		87,500		5.751%/6.480	%	note 17 ii)		—		—		—
— RMB		80,000		5.508%/6.156	%	note 17 ii)		—		—		—
Total		290,000						—
					��

F-21

17 LONG-TERM LOANS, EXCLUDING CURRENT PORTION

	2007						2006 (unaudited)
			Maturity &						Maturity &
			interest			Secured/			interest			Secured/
	Principal		rate (p.a.)			guaranteed	Principal		rate (p.a.)			guaranteed
			note i)
Bank loans
—RMB		345,000		7.047	%	note ii)		—		—			—
—RMB		15,000		6.156%/7.047	%	note ii)		—		—			—
—RMB		7,500		5.508%/6.399	%	note ii)		—		—			—
—RMB		262,500		5.751%/6.480	%	note ii)		680,000		5.751	%	note ii)
—RMB		240,000		5.508%/6.156	%	note ii)		20,000		6.156	%	note ii)
Total		870,000						700,000

i) The long-term loans carry an annual interest rate adjustable at 90% of the rate applicable to the eight-year Renminbi term loan as promulgated by the People’s Bank of China. The interest on the loan is payable on a quarterly basis, and principal is repayable in 16 quarterly instalments of RMB 72,500 from March 2008 to December 2011.

ii) The long-term bank loans are secured by fixed assets pledged to the bank (note 11).

18 PAID-IN CAPITAL

Registered capital

	2007					2006 (unaudited)
	Amount		%			Amount		%
	Euro					Euro
Shenyang JinBei Automotive Industry Holdings Company Limited		75,000		50	%		75,000		50	%
BMW Holding BV		75,000		50	%		75,000		50	%
		150,000		100	%		150,000		100	%

Paid-in capital

	2007							2006 (unaudited)
	Amount in		Amount in					Amount in		Amount in
	original		RMB		%			original		RMB		%
	currency		equivalent					currency		equivalent
	Euro							Euro
Shenyang JinBei Automotive Industry Holdings Company Limited		75,000		688,527.5		50	%		75,000		688,527.5		50	%
BMW Holding BV		75,000		688,527.5		50	%		75,000		688,527.5		50	%
		150,000		1,377,055		100	%		150,000		1,377,055		100	%

Capital contributions in foreign currency have been translated into Renminbi at the exchange rates prevailing at the dates of each contribution received as quoted by the People’s Bank of China.

F-22

19 CAPITAL RESERVE

	2007		2006
			(unaudited)
Waiver of liabilities by the foreign investor		272,102		272,102
Donation of fixed assets		1,328		345
		273,430		272,447

20 SALES FROM PRINCIPAL ACTIVITIES

	2007		2006		2005
			(unaudited)		(unaudited)
Sale of cars		12,352,466		8,944,111		6,280,304
Sale of spare parts		108,036		3,239		—
		12,460,502		8,947,350		6,280,304

21 NET FINANCIAL INCOME

	2007			2006			2005
				(unaudited)			(unaudited)
Interest expenses incurred		109,134			51,767			83,353
Less: Borrowing costs capitalised		(124	)		(272	)		(3,580	)
Net interest expenses		109,010			51,495			79,773
Less: Interest income		(5,927	)		(9,233	)		(11,844	)
Net foreign currency exchange gains		(195,672	)		(62,207	)		(232,235	)
Other financial expenses		1,300			228			676
Total		(91,289	)		(19,717	)		(163,630	)

F-23

22 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(a) Relationship between the Company and related parties without controlling relationships

	Relationship with the Company
Shenyang JinBei Automotive Industry Holdings Company Limited	Chinese investor
BMW Holding BV	Foreign investor
Shenyang Brilliance JinBei Automotive Co., Ltd. (“Brilliance JinBei”)	A related party of the Chinese investor
Brilliance China Automotive Holdings Ltd.	Ultimate holding company of the Chinese investor
BMW AG	Ultimate holding company of the foreign investor
BMW (China) Automotive Trading Co., Ltd.	Group company of foreign investor

(b) The amounts of the Company’s related party transactions during the years and its balances with related parties at the years end are summarised as follows:

i) Related party transactions of the Company are summarised as follows:

	Note	2007		2006		2005
				(unaudited)		(unaudited)
Sales of goods			6,002		836		—
Purchase of goods			5,090,842		5,017,684		1,281,632
Purchase of fixed assets and tools			187,044		402,210		122,805
Purchase of other assets			—		—		590
Receiving services	1)		48,734		126,700		163,886
Rendering of services	2)		335,804		295,012		134,821
Interest expenses			424		812		281
Operating lease income			26,744		18,953		26,444
Operating lease expense			14,174		34,851		15,256
Royalty fee	3)		247,049		178,882		251,212
Consultant support fee	4)		101,422		161,256		16,882
Technical support fee	5)		402,786		—		—
Up-front licence fee	5)		21,334		—		—
Dealer development fee	6)		—		—		360,176
Reimbursement of marketing expense			—		—		177,451
Market entrance and product related service	7)		—		—		257,480

1) Pursuant to various service agreements with Brilliance JinBei and BMW AG, the Company received services from Brilliance JinBei and BMW AG with regard to the usage of plant facilities and other public utilities.

2) Pursuant to an agreement entered into between the Company and Brilliance JinBei, the Company rendered painting services for the cars produced by Brilliance JinBei in return for service fee income.

F-24

22 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS(CONTINUED)

i) Related party transactions of the Company are summarised as follows: (continued)

3) A trademark licence agreement is entered into between the Company and BMW AG to pay royalty fees based on a percentage of sales made by the Company.

4) Pursuant to the consultant support agreement with BMW AG, the Company receives technical assistance from BMW AG. The consultant support represents reimbursement of actual costs incurred by BMW AG to assist the Company in enhancing the production capacity and operation of the Company. The consultant support fee is mainly comprised of salary, hotel and travelling costs of expatriates from BMW AG.

5) Pursuant to an agreement between the Company and BMW AG, the Company is required to pay technical support fee based on a percentage of sales made by the Company as well as an up-front licence fee for each BMW model series of licensed car.

6) Pursuant to dealer development related service agreements entered into between the Company and BMW AG, the Company rendered services relating to dealer development and support to BMW AG in return for dealer development fee income.

7) Pursuant to market entrance and product related service agreements entered into between the Company and BMW AG, the Company rendered services relating to brand promotion and technology support to BMW AG in return for market entrance and product related service income.

ii) The balances arising from related party receivables and payables as at December 31, 2007 and 2006 are summarised as follows:

	2007		2006
			(unaudited)
Accounts receivable		2,009		836
Other receivables		880,020		879,130
Accounts payable		1,375,122		1,931,198
Other payables		24,510		461,758
Accrued expenses		550,180		165,022

The payment terms for related party accounts payable range from 15 days to 80 days. The related party receivables and other payables are due upon request.

F-25

23 COMMITMENTS

(a) Capital commitments

As at December 31, 2007, capital commitments of the Company are summarised as follows:

	2007
Contracted for		159,962

(b) Operating lease commitments

As at December 31, 2007, the future minimum lease payments under non-cancellable operating leases in respect of the leasing of properties and machinery were payable as follows:

	2007
Within 1 year		39,561
After 1 year but within 2 years		12,215
After 2 years but within 3 years		11,333
After 3 years		9,297
Total		72,406

(c) Forward exchange contracts

The Company is exposed to foreign currency exchange risk primarily through purchases that are denominated in a currency other than the functional currency of the operations in which they relate. The currency giving rise to this risk is primarily the Euro.

At any point in time the Company hedges 100 % of its estimated foreign currency exposure in respect of committed future purchases and 100% of its estimated foreign currency exposure in respect of highly probable forecasted purchases. The Company uses forward exchange contracts to hedge its foreign currency exchange risk. The Company does not enter into derivative instruments for any purpose other than cash-flow-hedging of its foreign currency exchange risk. The Company does not speculate using derivative instruments.

By using derivative financial instruments to hedge exposures to changes in currency exchange rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company.

F-26

23 COMMITMENTS (CONTINUED)

(c) Forward exchange contracts (continued)

When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. Market risk is the adverse effect on the value of a derivative instrument that results from a change in currency exchange rates. All of the Company’s forward exchange contracts have a maturity of less than one year after the balance sheet date.

As of 31 December 2007, the notional amount of the foreign exchange forward contracts of the foreign currencies to be purchased at maturity was Euro 575 million (2006: Euro 277 million). The Company uses the quoted prices based on observable market quotes to estimate the fair value of the foreign exchange forward contracts. At 31 December 2007, these forward exchange contracts had a net fair value of RMB 69 million (2006: RMB 99 million).

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA

The Company’s accounting policies conform with PRC GAAP, which differ in certain significant respects from generally accepted accounting principles in the United States of America (“U.S. GAAP”). A description of the differences and their effects on net income and investors’ equity are set forth below.

(a) Description of differences between PRC GAAP and U.S. GAAP

i)	Foreign exchange forward contracts
	Under PRC GAAP, changes in the fair value of the foreign exchange forward contracts are not recognized in the financial statements until the contracts are settled (the “contract settlement date”). On the contract settlement date, the difference between the forward rate and the spot rate is recorded as an exchange gain or loss in the income statement in the line item “Net financial income”.
	In 2007, for U.S. GAAP purposes, the Company accounted for foreign exchange forward contracts as hedging activities in accordance with FASB Statement No. 133,Accounting for Derivative Instruments and Certain Hedging Activities, as amended, which requires entities to recognize all foreign exchange forward contracts as either assets or liabilities in the balance sheet at their respective fair values. For foreign exchange forward contracts designated in hedging relationships, changes in the fair value are either offset through earnings against the change in fair value of the hedged item attributable to the risk being hedged or recognized in accumulated other comprehensive income until the hedged item is recognized in earnings.

F-27

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (CONTINUED)

(a) Description of differences between PRC GAAP and U.S. GAAP (continued)

i)	Foreign exchange forward contracts (continued)
	The Company only enters into foreign exchange forward contracts that it intends to designate as a hedge of a forecasted transaction (cash flow hedge). For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring ineffectiveness. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether foreign exchange forward contracts that are used in hedging transactions are highly effective in offsetting cash flows of hedged items. For foreign exchange forward contracts that are designated and qualify as a cash-flow hedge, the effective portion of the gain or loss on the foreign exchange forward contract is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on foreign exchange forward contracts representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
	In 2006, under U.S. GAAP, the Company did not apply hedge accounting and therefore the changes in fair value of the foreign exchange forward contracts were recorded in the income statement.

ii)	Provision for impairment
	Under PRC GAAP, if there is an indication that there has been a change in the factors used to determine the provision for impairment of fixed assets and as a result the estimated recoverable amount is greater than the carrying amount of the fixed assets, the impairment loss recognized in prior years is reversed. Reversals of impairment losses are recognized in the income statement. An impairment loss is reversed only to the extent of the fixed asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years.
	Under U.S. GAAP, reversals of impairment losses are not permitted.

F-28

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (CONTINUED)

(a) Description of differences between PRC GAAP and U.S. GAAP (continued)

iii)	Deferred income taxes
	Under PRC GAAP, income tax expense is recognized under the tax payable method and no deferred tax is recognized for temporary differences between the financial statement carrying amounts of all assets and liabilities and their respective tax bases.
	Under U.S. GAAP, income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more-likely-than-not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

iv)	Interest
	Under PRC GAAP, interest received is classified in the statement of cash flows as a component of investing activities and interest paid is classified in the statement of cash flows as a component of financing activities.
	Under U.S. GAAP, interest received and paid are classified in the statement of cash flows as components of operating activities.

F-29

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (CONTINUED)

(b) A summary of the significant adjustments to net income for the years ended December 31, 2007 and 2006 and to the investors’ equity as of December 31, 2007 and 2006 which would be required if U.S. GAAP had been applied, instead of PRC GAAP, in the financial statements are set forth below:

	Note	2007			2006
					(unaudited)
Net income in accordance with PRC GAAP			236,800			17,862
U.S. GAAP adjustments — increase/(decrease) due to:
Foreign exchange forward contracts	24(a) i)		(99,763	)		104,434
Provision for impairment	24(a) ii)		904			(7,467	)
Deferred income taxes	24(a) iii)		93,820			36,824
Deferred income tax effect on U.S. GAAP adjustments			8,236			(6,351	)
Net adjustments			3,197			127,440
Net income in accordance with U.S. GAAP			239,997			145,302

	Note	2007			2006
					(unaudited)
Investors’ equity in accordance with PRC GAAP			1,443,827			1,206,044
U.S. GAAP adjustments — increase/(decrease) due to:
Foreign exchange forward contracts	24(a) i)		69,430			99,763
Reversal of provision for impairment	24(a) ii)		(6,563	)		(7,467	)
Deferred income taxes	24(a) iii)		144,358			48,551
Net adjustment			207,225			140,847
Investors’ equity in accordance with U.S. GAAP			1,651,052			1,346,891

F-30

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (CONTINUED)

(c) The changes in investors’ equity in accordance with U.S. GAAP for the years ended December 31, 2007 and 2006 are as follows:

					Accumulated
					other					Total		Total
	Contributed		Additional		comprehensive		Retained			shareholders'		comprehensive
	Capital		paid-in capital		income		earnings			equity		income
Balance as of January 1, 2006 (unaudited)		1,377,055		272,102		—		(447,913	)		1,201,244		—
Net income (unaudited)		—		—		—		145,302			145,302		145,302
Total comprehensive Income (unaudited)													145,302
Others (unaudited)		—		345		—		—			345
Balance as of December 31, 2006 (unaudited)		1,377,055		272,447		—		(302,611	)		1,346,891		—
Net income		—		—		—		239,997			239,997		239,997
Foreign exchange forward contracts, net of deferred tax expense of RMB 6,249		—		—		63,181		—			63,181		63,181
Others		—		983		—		—			983		—
Total comprehensive Income													303,178
Balance as of December 31, 2007		1,377,055		273,430		63,181		(62,614	)		1,651,052

(d) Following are summarized balance sheet information determined under U.S. GAAP as of December 31, 2007 and 2006:

	2007		2006
			(unaudited)
Current assets		5,447,788		5,212,564
Non-current assets		2,268,185		1,847,892
Total assets		7,715,973		7,060,456
Current liabilities		5,194,921		5,013,565
Non-current liabilities		870,000		700,000
Total liabilities		6,064,921		5,713,565
Investors’ equity		1,651,052		1,346,891
Total liabilities and investors’ equity		7,715,973		7,060,456

F-31

24 SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES OF AMERICA (CONTINUED)

(e) The condensed statements of cash flows under U.S. GAAP for the years ended December 31, 2007 and 2006 were as follows:

	2007			2006
				(unaudited)
Net cash (used in)/provided by operating activities		(727,095	)		883,841
Net cash used in investing activities		(1,025,549	)		(568,740	)
Net cash provided by/(used in) financing activities		1,160,000			(70,000	)
Net (decrease)/increase in cash		(592,644	)		245,101
Cash at beginning of year		993,662			748,561
Cash at end of year		401,018			993,662

As described in Note 24 (a) iv), under U.S. GAAP, interest received and interest paid are classified as components of operating activities.

F-32