BOE TECHNOLOGY GROUP CO., LTD - Annual Report 2004

==> picture [54 x 55] intentionally omitted <==

==> picture [63 x 55] intentionally omitted <==

BOE TECHNOLOGY GROUP CO., LTD. 2004 ANNUAL REPORT (Overseas Version)

Stock Exchange Listed With: Shenzhen Stock Exchange Short Form of the Stock: BOE - B, Stock Code: 200725

Apr. 25, 2005

Important:

Board of Directors and its members of BOE TECHNOLOGY GROUP CO., LTD. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions or errors which would render any statement misleading. This report was prepared in both Chinese and English. Should there be any difference in interpretation between the Chinese version and English version, the Chinese version shall prevail.

Chairman of the Board and CEO Mr. Wang Dongsheng, President and COO Mr. Liang Xinqing, CFO and Secretary of the Board Mr. Wang Yanjun, and Vice CFO and Secretary of Planning & Financial Dept. Ms. Sun Yun hereby confirm that the Financial Report enclosed the Annual Report is true and complete.

All directors attend the Board meeting.

The 2004 Annual Report of the Company was compiled based on China Enterprise Accounting System.

Chapter Ⅰ Company Profile

Chapter Ⅱ Summary of Financial Highlights and Business Highlights
Chapter Ⅲ Changes in Share Capital and Particulars about Shareholders
Chapter Ⅳ Directors, Supervisors, Senior Executives and Employees
Chapter Ⅴ Administrative Structure
Chapter Ⅵ Shareholders’ General Meeting
Chapter Ⅶ Report of the Board of Directors
Chapter Ⅷ Report of the Supervisory Committee
Chapter Ⅸ Significant Events
Chapter Ⅹ Financial Report
Chapter Ⅺ Documents for Reference

CHAPTER I COMPANY PROFILE

Legal Name of the Company:
In Chinese: 京东方科技集团股份有限公司

In English: BOE TECHNOLOGY GROUP CO., LTD.

Abbr. in Chinese: 京东方
Abbr. in English: BOE
Legal Representative: Wang Dongsheng
Secretary of the Board of Directors: Zhong Huifeng
Contact Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Tel: (86) 10 – 64366264 64318888 sxt.
Fax: (86) 10 – 64366264
E-mail: [email protected] [email protected]
Registered Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Office Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Post Code: 100016

The Company’s Internet Web Site: http://www.boe.com.cn

E-mail: [email protected]
Newspapers Chosen for Disclosing the Information of the Company:
Securities Times, China Securities, Shanghai Securities News and Hong Kong Ta Kung Pao
Internet Web Site for Publishing the Annual Report: http://www.cninfo.com.cn
Place Where the Annual Report is Prepared and Placed: Capital and Stock Warrant Dept. of the Company
Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form for A-share: BOE - A, Stock Code for A-share: 000725
Short Form for B-share: BOE - B, Stock Code for B-share: 200725
Other Related Information: Initial registration date: April 9, 1993
Initial registration address: No.10, Jiuxianqiao Road, Chaoyang District, Beijing
Registrations date after change: June 2,1997; December 25,1997; December 28, 2000; June 18, 2001; December 10, 2001; July 4, 2003 and August 6, 2004
Registration address after change: No.10, Jiuxianqiao Road, Chaoyang District, Beijing
Registered number of enterprise legal person’s business license: 100001501259
Registration number of taxation: GSJZ No.110105101101660
DSJZ No. 110105101101660000

Certified Public Accountants engaged by the Company:

Domestic: Jingdu Certified Public Accountants & Co., Ltd.

Office Address: 5/F, SHG Plaza, No. 22, Jianguomenwai Revenue, Beijing

International: Horwath Hong Kong Certified Public Accountants

Office Address: No. 2001, Central Plaza, 18Harbour Road, Wan Chai Dist. H. K.

CHAPTER II. FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS

Major accounting data as of the year 2004

ajor accounting data as of the year 2004
	(Unit: In RMB’000)
Items	Amount
Profit before tax	496,955
Net profit	353,701
Gross profit of sales	1,283,868
Other operating Income	30,736
Operating profit	188,009
Net cash inflow arising from operating activities：	424,865
Balance in cash and cash equivalents at the year-end	1,535,970

Note: Difference in net assets and net profit as reported based on Accounting System for Enterprise Business (domestic financial report) and IFRS (overseas financial report)

Unit: RMB’000

	Profit after tax barring minority shareholders’ equity	Shareholders’ equity
As reported under AccountingSystem for Enterprise Business	206,013	4,956,439
Adjustment based on IFRS and other:
- Difference in term of amortization ofgoodwill	-1,334	-5,334
- Reckoning rewards and welfares of the employee into administrative expenses	-1,922	--
- Government subsidy	841	-3,014
- Capitalization of R&D expenses	163,786	172,473
- Capitalization of interests	-11,186	18,448
- Difference in negative goodwill when acquire the equity of subsidies	--	-2,171

- Stock on balance of foreign currency discount of joint-operative company	--	19,474
- Losses arisingfrom selling part equityof subsidiary	-2,945	-2,945
- Others	448	1,014
Balance after adjustment under IAS	353,701	5,154,384

Major accounting data and financial indexes over the past three years as ended the report period:

(Unit: RMB’000)

22 Items	2004	2003	2003	2002
		After adjustment	Before Adjustment
Sales income	12,441,708	11,180,106	11,180,106	4,782,587
Net profit	353,701	396,016	411,234	79,000,000
Total assets	18,106,758	12,232,806	12,040,450	6,779,294
Shareholders’ equity (excluding minority interests)	5,154,384	2,553,862	2,569,080	2,176,390
Earnings per share (fully diluted)	0.29	0.60	0.67	0.14
Net assets per share	3.52	3.87	3.90	3.96
Net cash flow per share from operatingactivities	0.29	1.08	1.08	0.35
Return on equity (fully diluted)	6.85%	15.50%	16.00%	3.63%

Note: ① The said diluted data are calculated on the basis of total share capital of 549.554 million shares at the year-end in 2002, on the basis of total share capital of 659.4648 million shares at the year-end in 2003, as well as on the basis of total share capital of 146,379.72 million shares at the year-end in 2004.

② The above data were reported in accordance with the consolidated accounting statements.

Changes and in shareholders’ equity in the report period and its reason

(Unit: RMB’000)

Items	Share capital	Public reserve capital	Surplus public reserve	Statutory public reserve	Retained profits	Discount balance of foreign currency	Total of shareholders’ equity
Amount at the year-beginning	659,464,800	1,084,912,330	412,486,206	59,128,207	409,165,155	-11,098,080	2,554,930,411
Increase in the report period	804,332,400	1,731,007,005	81,636,406	10,204,551	206,012,682	186,112,470	2,401,508,434
Decrease in the report period		514,275,809			93,316,721
Amount at the year-end	1,463,797,200	2,301,643,526	494,122,612	69,332,758	521,861,116	175,014,390	4,956,438,845
Reason of change	Additionally issued B-share and capitalization	Additionally issued B-share, capitalization of share equity and transferred	Withdrew according to the	Withdrew according to the	Net profit and profit distribution		Additionally issue B-share and net profit

		of share equity	into creditor balance of share equity investment	regulations	regulations	of 2004		of 2004

CHAPTER III. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS

I. Changes in share equity
Statement of change in the Company’s shares (ended at Dec. 31, 2004)

Unit: Share

	Before the change		Increase/decrease (+, -) in this time	Increase/decrease (+, -) in this time	Increase/decrease (+, -) in this time	Increase/decrease (+, -) in this time		After the change
		Rationed share	Bonus shares	Shares transferred from public reserves	Additional issuance	Others	Sub- total
I. Unlisted shares: 1. Sponsors’ shares Including： State-owned shares: Domestic legal person’s shares: Foreign legal person’s shares: Others: 2. Raised legal person’s shares: 3. Inner employees’ shares: 4. Preference shares or others: Total listed shares: II. Listed shares: 1. RMB ordinary shares 2. Domestically listed foreign shares (B share) 3. Overseas listed foreign shares: 4. Others: Total listed shares: III. Total shares:	393634800 4290000 10140000 408064800 72000000 179400000 251400000 659464800			316400000 316400000	196817400 2145000 — 198962400 41070000 247900000 288970000 487932400			590452200 6435000 — 596887200 123210000 743700000 866910000 1463797200

Issuance and Listing of shares in last three years ended in report period

According to China Securities Regulatory Commission with ZJGSZ [2000] No. 197 document, the Company issued 10,140,000 shares of inner employees’ share, which were listed for circulating from Jan. 12, 2004.

Approved by State Council Securities Regulatory Commission with ZJFXZ [2004] No. 2 document, the Company additionally increased and issued 316,400,000 B- shares on Jan. 13 – 15, 2004, which were listed for circulating on Apr. 16, 2004.

As examined and approved by the shareholders’ general meeting 2003 (May 28, 2004), based on 975,864,800 shares of total share equity after additional-increase of B- share,

the Company implemented plan of transferring capital reserve into share capital at the rate of 5 shares for every 10 shares to all shareholders dated June 9, 2004. After transferring capital reserve into share capital, the Company’s total shares have increased from 975,864,800 shares to 1,463,797,200 shares.

II. About shareholders

(1) Ended Dec. 31, 2004, the Company had totally 75,658 shareholders, including 4 shareholders of legal person’s share, 40,667 shareholders of A-share and 34,987 shareholders of B-share.

(2) Particulars about the shares held by top ten shareholders by Dec. 31, 2004

No.	Name of shareholder	Increase/dec rease in the report period (share)	Share held at the year-end (share)	Proportion in total shares	Nature of share equity	Shares pledged, frozen or entrusted
1	BEIJING BOE INVESTMENT & DEVELOPMENT CO., LTD.	175235400	525706200	35.91%	State-owned legal person’s shares	No
2	FIELDS PACIFIC LIMITED	Note	90000000	6.15%	B-share	Unknown
3	BEIJING DONGDIAN INDUSTRIAL DEVELOPMENT COMPANY	20022000	60066000	4.10%	State-owned legal person’s shares	No
4	SHANGHAI WANGUO (HONG KONG) SECURITIES	Note	26601148	1.82%	B-share	Unknown
5	BANK OF CHINA GROUP SECURITIES LIMITED	Unknown	23813945	1.63%	B-share	Unknown
6	GUOTAI JUNAN SECURITIES HONG KONG LIMITED	Note	14858149	1.02%	B-share	Unknown
7	TOP RESPECT GROUP LIMITED	Note	13500000	0.92%	B-share	Unknown
8	ZHONGXIN CAPITAL SECURITIES LIMITED	Unknown	9693899	0.66%	B-share	Unknown
9	SUN HUNG KAI INVESTMENT SERVICES LTD-CUSTOMERS A/C	Note	8504463	0.58%	B-share	Unknown
10	KGI ASIA LIMITED	Unknown	6914274	0.47%	B-share	Unknown

Note: ① In the report period, the Company’s controlling shareholder is still Beijing BOE Investment & Development Co., Ltd., Beijing Electronics Holding Co., Ltd. (hereinafter referred to as BEHC) holds 56.25% share equity of Beijing BOE Investment & Development Co., Ltd., so it is the actual controller of the Company. Beijing Dongdian Industrial Development Company is a sole subsidiary. Beijing BOE Investment & Development Co., Ltd. and Beijing Dongdian Industrial Development Company has related relationship. In the report period, due to additional issues of B-share of the Company, the proportion of the shares which Beijing BOE Investment & Development Co., Ltd. and Beijing Dongdian Industrial Development Company hold

declined; due to the Company’s implement of transferring public reserve into the share capital at the rate of 5 shares for every 10 shares, the amount of shares held by Beijing BOE Investment & Development Co., Ltd. and Beijing Dongdian Industrial Development Company has increased.

② FIELD PACIFC LIMITED subscribed B-share additionally issued by the Company, so as to the holding proportion of shares has exceeded over 5% of the total share capital.Please refers to the Report on Change in Shareholders’ Holding of BOE Technology Group Co., Ltd. dated on March 13, 2004 for the further details.

③ Among the top ten shareholders, shares changes on the 2[nd] , 4[th] , 6[th] , 7[th] and 9[th] shareholders were due to subscribe B-share additionally issued by the Company, additionally issued B-share for circulating and the Company’s implement of transferring public reserve into share capital at the rate of 5 shares for every 10 shares; Share changes on the 5[th] , 8[th] and 10[th] shareholders were unknown.

(3) About controlling shareholder and the actual controller

① About the controlling shareholders

Beijing BOE Investment & Development Co., Ltd. holds 35.91% of the Company’s total shares, therefore is the virtual controlling shareholder of the Company; its basic information as follows:

Name of the enterprise: Beijing BOE Investment & Development Co., Ltd.

Legal Representative: Wang Dongsheng

Date of Foundation: Oct.15, 1956

Location: No.10 Jiuxianqiao Road, Chaoyang District, Beijing Registered Capital: RMB 680.982 million

Type of the enterprise: Limited Company

Business Scope: project investment, manufacture and design of electronic products, communications equipment, computer software & hardware, paper products, industrial gasses, mould and matrix, steam; acquisition and sales of mechanical and electrical equipment, metal products, computer software and hardware and supporting equipment, construction material, general merchandise; technical development, technical consultation, technical service and transfer, undertaking exhibitions and sales The actual controller ②

Beijing Electronics Holding Co., Ltd. holds 56.25% share equity of Beijing BOE Investment & Development Co., Ltd., and it is the actual controller of the Company. BEHC belongs to a state-owned holding company directly under Beijing Municipality that is a authorized operation unit by Beijing state-owned assets. The shareholder of the Company, Beijing Dongdian Industrial Development Company (holding 4.1% of shares) and Beijing Kinescope Headquarter (holding 0.3% of shares), are both sole subsidiaries of BEHC, and related enterprises with Beijing BOE Investment & Development Co., Ltd.. Basic information of BEHC is as follows:

Name of the enterprise: Beijing Electronics Holding Co., Ltd.

Legal Representative: Bao Yutong Date of Foundation: April 8, 1997

Location: No.12 Jiuxianqiao Road, Chaoyang District, Beijing Registered Capital: RMB 1307.37 million

Type: Limited Liability Company (owned and funded solely by the state)

Business scope: operation and management of state-owned assets within authorization; Communications equipments, audio & visual products for broadcasting and television; computer and its supporting equipments and the applied products; electronic raw material and components; home electric appliances and electronic products; electronic surveying instruments and meters; mechanical and electric equipments; electronic transportation products and investment in business fields other than electronics and its management; development of real estate, lease and sales of commodity apartments; property management.

③ The property right and controlling relationship between the actual controller and the Company is as follows:

==> picture [471 x 298] intentionally omitted <==

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

State-owned Assets Wang Dongsheng 20% Jiang yukun 10% Liang Xinqing 10% Zhao Caiyong
Supervision & 6.667% Shi Dong 6.667% Chen Yanshun 6.667% Song Ying 6.667% Han Guojian
Administration Commission 6.667% Gong Xiaoqing 3.333% Wang yanjun 3.333% Wang Jiaheng 3.333%
of Beijing People’s Liu Xiaodong 3.333% Ren Jianchang 1.667% Sun Jiping 1.667%
Government Zhang Peng 1.667% Wang Ai’zhen 1.667% Mu Chengyuan 1.667%
Xu Yan1.667% Hua Yulun 1.667% Zhong Huifeng 1.667%
100%
Beijing Electronics Holding Co., Ltd. Beijing Intelligent Kechuang Technology Development Co., Ltd.
56.25% 43.75%
35.91%
Beijing BOE Investment & Development Co., Ltd.
BOE Technology Group Co., Ltd.
----- End of picture text -----

The Company regarded Beijing Intelligent Kechuang Technology Development Co., Ltd. as a platform to implement share equity encouragement for all core technology managers, the aforesaid 20 subscribers was nominal shareholders, proportion of providing funds is not actual equity proportion, the equity of Beijing Intelligent Kechuang Technology Development Co., Ltd. is held in common by all implemented objectives in which is a simulated plan of share equity encouragement mechanism. For the details, please refer to BOE Technology Group Co., Ltd. Report on Changes on Shareholders’ Holdings published on March 2, 2005.

(4) Ended Dec. 31, 2004, particulars about shares held by the top ten shareholders of

circulation share

	Name of shareholders	Shares held at the year-end (share)	Proportion in total shares	Natural of equity
1	FIELDS PACIFC LIMITED	90000000	6.15%	B-share
2	SHANGHAI WANGUO (HONG KONG) SECURITIES	26601148	1.82%	B-share
3	BANK OF CHINA GROUP SECURITIES LIMITED	23813945	1.63%	B-share
4	GUOTAI JUNAN SECUITIES HONG KONG LIMITED	14858149	1.02%	B-share
5	TOP RESPECT GROUP LIMITED	13500000	0.92%	B-share
6	ZHONGXIN CAPITAL SECURITIES CO., LTD.	9693899	0.66%	B-share
7	SUN HUNG KAI INVESTMENT SERVICES LTD-USTOMMER A/C	8504463	0.58%	B-share
8	KGI ASIA LIMITED	6914274	0.47%	B-share
9	MERRILL LYNCH INTERNATIONAL	5996251	0.41%	B-share
10	TOYO SECURITIES ASIA LIMITED-A/C CLIENT.	4731896	0.32%	B-share
Explanation on associated relationship or related relationship among the abovementioned shareholders		The Company is unknown whether there exists associated relationship or consistent action among the top ten circulating shareholders, as well as between the top ten shareholders and the top ten circulating shareholders.

CHAPTER IV. DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES

I. Directors, supervisors and senior executives

1.General Introduction about directors, supervisors and senior executives

Name	Sex	Age	Title	Office term	Shares held	Shares held	Receiving pay from the company?
					Year- begin	Year- end
Wang Dongsheng	Male	47	Chairman of the Board, Chairman of the Executive Committee and CEO	June 2004-June 2007	7800	11700	Yes
Jiang Yukun	Male	51	Vice Chairman of the Board	June 2004-June 2007	4680	7020	No
Liang Xinqing	Male	52	Executive Director, President and COO	June 2004-June 2007	3120	4680	Yes
Cui Bingdou	Male	55	Executive Director, Executive Vice-President	June 2004-June 2007	0	0	Yes
Xuan Jiansheng	Male	61	Executive Director, Senior Vice-President	June 2004-June 2007	0	0	No
Zhao Caiyong	Male	57	Director	June 2004-June 2007	7800	11700	No
Chen Yanshun	Male	39	Director	June 2004-June 2007	0	0	No
Tai Zhonghe	Male	54	Independent Director	June 2004-June 2007	0	0	No
Xie Zhihua	Male	45	Independent Director	June 2004-June 2007	0	0	No
Zhang Baizhe	Male	61	Independent Director	June 2004-June 2007	0	0	No
Li Zhaojie	Male	49	Independent Director	June 2004-June 2007	0	0	No
Xia Zhenzhi	Male	42	Convener of the Supervisory Committee	June 2004-June 2007	3120	750	No
Mu Chengyuan	Male	37	Supervisor	June 2004-June 2007	780	1170	No
Yang An’le	Male	34	Supervisor	June 2004-June 2007	0	0	No
Xu Yan	Female	53	Employee Supervisor	June 2004-June 2007	4680	7020	Yes
Cao Hong	Male	45	Employee Supervisor	June 2004-June 2007	1560	2340	Yes
Wang Yanjun	Male	35	Chief Financial Officer and secretary of the Board	June 2004-June 2007	3120	4680	Yes
Song Ying	Female	47	Vice-President	June 2004-June 2007	7800	11700	Yes
Ren Jianchang	Male	58	Vice-President	June 2004-June 2007	0	0	Yes
Han Guojian	Male	51	Vice-President	June 2004-June 2007	3120	4680	Yes
Liu Xiaodong	Male	40	Vice-President	June 2004-June 2007	0	0	Yes
Wang Jiaheng	Male	36	Vice-President	June 2004-June 2007	0	0	Yes
Feng Weidong	Male	37	Vice-President	June 2001-June 2004	0	0	Yes
Su Zhiwen	Male	36	Chief Auditor	June 2001-June 2004	0	0	Yes

Note: ① Shares held by directors, supervisors and senior executives increasing was

because the Company implemented plan of transferring capital reserve into share capital at the rate of 5 shares for every 10 shares. ② Before Mr. Xia Zhenzhi, convener of the Board of the Company, was elected as the 4[th] Supervisory Committee of the Company, he sold part of inner employee’s share held from the Company due to inner employee’s share listed, after he was elected as the supervisor, the rest of shares held from the Company has been frozen according to relevant regulations. ③ After inner employee’s share of the Company listed for circulating on Jan. 12, 2004, shares held by directors, supervisors and senior executives has been frozen.

Main work experience and pat-time job about directors, supervisors and senior executives

(1) Mr. Wang Dongsheng, 47 years old, master in engineering, took the posts of Chairman and President of the 1[st ] , 2[nd ] and 3[rd] Board of Directors and President of Executive Board of the Company in succession. Now he takes the posts of Chairman, President of Executive Board and CEO of the 4[th] Board of Directors of the Company and concurrently takes the posts of Chairman of the Board of Beijing BOE Photo electronic Technology Co., Ltd., Representative Director and Chairman of BOE-HYDIS, Chairman of Korea Hyundai LCD Inc., Chairman of the Board of Beijing Orient Top Victory Electronics Co., Ltd., Chairman of the Board of BOE Hyundai (Beijing) LCD Inc., Director of Top Victory Technology Co., Ltd., Director of Beijing Matsushita Color CRT Co., Ltd., Director and President of Beijing Electronic Holdings Company Limited, Chairman of the Board of Beijing BOE Investment and Development Co., Ltd., Chairman of the Board of Beijing Qixing Huadian Science (Group) Co., Ltd., Director of Beijing Intelligence & Science Technology Development Co., Ltd. and Vice Chairman of China Electronic Chamber of Commerce.

(2) Mr. Jiang Yukun, 51 years old, senior economist. He ever took the posts of Managing Deputy Factory Director and Secretary of Committee of Communist Party of China of Beijing Electronic Tube Factory, Director and Vice President of the 1[st] Board of Directors and Vice Chairman of the 2[nd] and 3[rd] Board of Directors of the Company. Now he takes the post of Vice Chairman of the 4[th] Board of Directors of the Company and concurrently takes the posts of Director, President and Secretary of Committee of Communist Party of China in Beijing BOE Investment and Development Co., Ltd., Director of Beijing Star City Property Co., Ltd. and director of Beijing Intelligence & Science Technology Development Co., Ltd..

(3) Mr. Liang Xinqing, 52 years old and senior engineer. He ever took the posts of Director and Vice President of the 1[st] Board of Directors of the Company, Director of the 2[nd] Board of Directors of the Company, Executive Director, President and COO of the 3[rd] Board of Directors of the Company, Chairman of the Board of Beijing Asahi Glass Electronics Co., Ltd., Chairman of the Board of Beijing Nissin Electronics Precision Component Co., Ltd., Deputy General Manager of Beijing Matsushita Color CRT Co., Ltd.. Now he takes the posts of Executive Director, President and COO of the 4[th] Board of Directors of the Company and concurrently takes the posts of Director of Beijing Orient Top Victory Electronics Co., Ltd., Chairman of the Board of Beijing

BOE Software and System Integration Co., Ltd. Chairman of the Board of Beijing Nittan Electronics Co.,Ltd. Chairman of the Board of Beijing Orient Mosler Security and director of Beijing Intelligence & Science Technology Development Co., Ltd..

(4) Mr. Cui Bingdou, aged 55, came from Seoul of Korea, master of engineering, ever took the posts of researcher of Industrial Experiment Institute of Korea Commerce and Industry Department, industrial analyst of Korea Developing Finance Technology department, sales manager of DuPont Far Eastern Co., chief executive of Korea Silicon Wafer Manufactory Co.; he held the positions of GM and senior vice president of Stock business department of Hyundai and GM, chief executive, of business department of LCD CEO of HYDIS in succession. In Jan. 2003 he entered into the Company and took the posts of executive director and executive vice president of the 3[rd] Board of Directors. And he is now in charge of executive director and executive vice president of the 4[th] Board of Directors, executive officer of business department of TFT-LCD and concurrently representative councilor of BOE-Hydis and director and GM of Beijing BOE Photo Electricity Technology Co., Ltd..

(5) Mr. XuanJiansheng, aged 61, master of systems engineering of Boston University and PH.D of Systems of Engineering and Management Science of Polytechnic Institute of New York. He ever took the posts of industrial management office manager of RD department of GE of US, deputy general manager of Taiwan Pepsi-cola, deputy general manager of Taiwan Southeastern Jianye, Taiwan Pan’s Group, general manager of Top Victory (Fujian) Electronics Co., Ltd. and general manager of Beijing Orient Top Victory Electronics Co., Ltd.; executive director and executive vice president of the 3[rd] Board of Directors of the Company, and now is in charge of the executive director and executive vice president of the 4[th] Board of Directors of the Company and chairman of Board and Concurrently CEO of Top Victory Electronics Co., Ltd., CEO and Director of Beijing Orient Top Victory Electronics Co., Ltd..

(6) Mr. Zhao Caiyong, 57 years old, senior accountant, has ever been taken the posts of Chief Accountant in Beijing Electronic Tube Factory, Director and Chief Financial Officer of the 1[st] Board of Directors of the Company, Director of the 2[nd] and 3[rd] Board of Directors of the Company and Deputy Factory Director of Beijing Electronic Tube Factory. Now he takes the posts of Director of the 4[th] Board of Directors of the Company and concurrently takes the posts of Director, Managing Vice President and Chief Financial Office of Beijing BOE Investment and Development Co., Ltd., General Manager of Beijing Dongdian Industrial Development Company, Chairman of the Board of Beijing Asahi Glass Electronics Co., Ltd., Chairman of the Board of Beijing Nissin Electronics Precision Component Co., Ltd. and convener of the Supervisory Committee of Beijing Intelligence & Science Technology Development Co., Ltd..

(7) Mr. Chen Yanshun, 39 years old, master in economics, has ever been taken the posts of lecturer of Chongqing Industry & Commerce University, Secretary of the Board of the 1[st] Board of Directors of the Company, Secretary and Vice President of the 2[nd] Board of Directors and executive director and Senior Vice President of the 3[rd] Board of

Directors. Now he takes the posts of Director of the 4[th ] Board of Directors of the Company and concurrently Top Victory Electronics Co., Ltd., Director of Korea Hyundai LCD Inc., Director of Zhejiang Beijing Orient Vacuum Electronic Co., Ltd., Supervisor of BOE-HYDIS, chairman of the Board of Beijing Intelligence & Science Technology Development Co., Ltd..

(8) Mr. Tai Zhonghe, 54 years old, Taiwanese of China,master ,ever worked in Mitac Computer Co., Ltd. and is one of founders of Acer Group. He successively took the posts of Deputy General Manager of Acer Co., Ltd., General Manager of Acer Science and Technology, Executive Deputy General Manager and General Manager of Marketing Business Group in Acer, General Manager of PC Division in America Branch of Acer, Vice Chairman of the Board of America Branch of Veutron Computer Co., Ltd. and Chairman of the Board of America InterNex Company, Independent Director of the 3[rd] Board of Directors of the Company. Now he takes the posts of Independent Director of the 4[th] Board of Directors of the Company, Copartner and Chairman of the Board of Xuyang Financing Counseling Co., Ltd., Chairman of the Board of Chief Telecom Co., Ltd., and Chairman of the Board and Publisher of Taiwan DigiTimes.

(9) Mr. Xie Zhihua, 45 years old, doctor in economics, professor, instructor of doctorate and China public accountant, ever took the post of independent director of the 3[rd] Board of Directors. He now is Independent Director of the 4[th] Board of Directors of the Company, Vice President of Beijing Technology and Business University, Director of Accounting Society of China, Director of Accounting Professor Association of China, Managing Director of Commercial Accounting Society of China, Vice Chairman of Beijing Accounting Society, Director of Beijing Society of Finance and Politics, Managing Director of Beijing Auditing Society, Committeeman in Senior Title Assessment Committee of Beijing Accounting Serial and Professor Serial, Specially Engaged Researcher in China Problems Research Center of Cardiff University in England, Guest Professor of Kingston College in Canada, Expert Committeeman of Title and Vocation Certificate Examination of China Insurance Regulatory Commission, Research Institute of Finance and Politics of Ministry of Finance and Specially Engaged Professor and Researcher of Scientific Research in over 20 academies and scientific institutes such as Hunan University and etc..

(10) Mr. Zhang Baizhe, aged 61, senior engineer of Tsinghua University, expert in LCD, ever took part in establishment and compliment of electronic department of “75Plan”, “85Plan” and “95Plan” and Beijing LCD Research and Industry Development Plan, and ever took the posts of judger of comment group on photo electronic technology of electron department technology advanced award, expert of supervision group of state secret technology of State Science and Technology Commission, and was engaged expert of the 1[st] domestic expert group by UNDP to participated establishment and guidance work of technology plan related to LCD field; ever took charge of founding the 1[st] state LCD material manufactory so as to realized LCD domestically produced; took charge to accomplished task center of State Technology Commission and Beijing Science Commission---construction of STD-LCD model product line and LCD product

line of Hong Kong TQL Co.; made guidance to finished construction of large area of 掩膜板 product line of Qingyi Nice

Photo Electronic (Shenzhen) Co., Ltd.; independent director of the 3[rd] Board of the Directors. He is now in charge of independent director of the 4[th] Board of the Directors; deputy GM of Beijing Qinghua LCD Material Co., Ltd., executive director of Beijing Jingcheng Qingda Electronic Equipment Co. and consular of Beijing Qinghua LCD Technology Engineering Research Center.

(11) Mr. Li Zhaojie, aged 49, master of Law and Library and Information of University of California of US, doctor of Law of Toronto of Canada, ever took the posts of vice professor of Law Institute of Beijing University, visiting professor Law Institute of University of Duke US, visiting professor of Law Institute of Hong Kong University and Hong Kong City University, lawyer of Wang-And-WangUSA Los Angeles of USA, law consular of Beijing Wang’s Funds, law expert of Olympic Venue Construction & Management Held in Beijing, independent director of the 3[rd] Board of Directors of the Company. He is now in charge of independent director of the 4[th] Board of Directors and professor of Law Institute of Qinghua University.

(12) Mr. Xia Zhenzhi, aged 42, bachelor degree, ever took the posts of secretary of League Party of Beijing Electronic Tube Manufactory, deputy section chief of personnel department and concurrently minister of Party Organization of Beijing Dongfang Electronic Group Co., Ltd., manager of Human Resource department and minister of Party Organization of Beijing BOE Investment and Development Co., Ltd.. He is now in charge of convener of the 4[th] Supervisory Committee and deputy GM and secretary of CPC of Beijing Dongdian Industrial Development Company.

(13) Mr. Mu Chengyuan, aged 37, China economist with bachelor degree, ever took the posts of manager of integration department of Guomao branch of the Company, deputy general manager of Beijing Dongfang Illumination Engineering Co., Ltd. section chief of OMO of Beijing Electronic Tube Manufactory and the supervisor of the 3[rd] Supervisory Committee, now he is charge of the supervisor of the 4[th] Supervisory Committee and secretary of the Board and vice president of Beijing BOE Investment and Development Co., Ltd..

(14) Mr. Yang Anle, 34 years old and college degree. He has ever been worked in Planning and Financial Department of the Company and in Financial Department of Beijing Orient Top Victory Electronics Co., Ltd. and has ever been taken the posts of Deputy Section Chief of Planning and Financial Section in Beijing Electronic Tube Factory and Supervisor of the 2[nd ] and 3[rd] Supervisory Committee of the Company. Now he takes the posts of Supervisor of the 4[th] Supervisory Committee of the Company, Manager of Planning and Financial Department in Beijing BOE Investment and Development Co., Ltd., and Chief Accountant of Beijing Dongdian Industrial Development Company.

(15) Ms. Xu Yan, 53 years old, college degree and economist, she ever took the posts of Secretary of CPC Branch, President of Labor Union and Personnel Deputy Factory Director etc. in Beijing Electronic Tube Factory Branch and Director in Beijing

Electronic Tube Factory Office and Party Committee Office and Supervisor of the 3[rd] Supervisory Committee. Now she takes the posts of Supervisor of the 4[th] Supervisory Committee, Vice-Secretary of Party Committee and Secretary of Committee for Discipline Inspection and concurrently Principal of Labor Union and Secretary of Auditing Supervision Department of the Company.

(16) Mr. Cao Hong, aged 45, professional senior engineer with bachelor degree, ever took the posts of deputy factory manager and factory manager of Beijing BOE Semiconductor Devices Factory and employee’s supervisor of the 3[rd] Supervisory Committee. He is now in charge of employee’s supervisor of the 4[th] Supervisory Committee, president associate and minister of investment dept., chairman of the Board of Beijing BOE Semiconductor Devices Co., Ltd., director of Suzhou and Beijing BOE CHATANI Electronics Co., Ltd. and director of Beijing Asahi Glass Electronics Co., Ltd., director of Beijing Nittan Electronics Co.,Ltd. And Director of BOE Hyundai LCD Inc..

(17) Mr. Wang Yanjun, 35 years old, master and accountant. He ever took Section Chief in Financial Section of Beijing Electronic Tube Factory, Secretary of Financial Department of the Company, Director of Beijing Asahi Glass Electronics Co., Ltd., Director of Beijing Nissin Electronics Precision Component Co., Ltd. and Director of Beijing Orient Top Victory Electronics Co., Ltd.. Now he takes the posts of secretary of the Board of the 4[th] Board of Directors of the Company, Chief Financial Officer of the Company and concurrently Director of Zhejiang Beijing Orient Vacuum Electronic Co., Ltd., Top Victory Technology Co., Ltd., Director of BOE-HYDIS, and director of Beijing Intelligence & Science Technology Development Co., Ltd..

(18) Ms. Song Ying, 47 years old and senior accountant, she has ever been taken the posts of Section Chief of Planning and Financial Section in Beijing Electronic Tube Factory, Manager of Financial Department, Chief Financial Officer of the Company and Director and Managing Vice President of the 2[nd] Board of Directors of the Company, and executive director and senior vice president of the 3[rd] Board of Directors. Now she takes the posts of Secretary of Committee of Communist Party of China and Senior Vice President of the Company and concurrently Vice Chairman of the Board of Zhejiang Beijing Orient Vacuum Electronic Co., Ltd., director of Beijing BOE Software & Systems Integration Co., Ltd. and director of Beijing Intelligence & Science Technology Development Co., Ltd..

(19) Mr. Ren Jianchang, 58 years old, senior engineer, ever worked as technical principal in America Westinghouse Electric Company, Germany SIEMENS Company, AEG Company and CALOR-EMAG Company and etc. in succession. He has ever taken the post of Chief Engineer of Vacuum Switch Tube in ABB Company and was awarded several technical patents in Germany. After jointing into BOE in 1998, he has ever taken the posts of Director and Vice President of the 2[nd] and 3[rd] Board of Directors and General Manager of Beijing Orient Vacuum Electric Co., Ltd.. Now he takes the posts of vice president of the Company and concurrently Chairman of the Board of Beijing Orient Vacuum Electric Co., Ltd..

(20) Mr. Han Guojian, 51 years old, undergraduate and senior engineer, he ever took Technical Section Chief in Division and Chief Technical Officer in Division of the affiliated company of the Company, Deputy General Manager of Beijing Asahi Glass Electronics Co., Ltd. and Chairman of the Board of Beijing BOE YAMATO Photoelectron Co., Ltd. Now he takes the posts of Vice President of the Company and concurrently Representative Director and Vice Chairman of BOE-HYDIS and Director of Beijing Asahi Glass Electronics Co., Ltd..

(21) Mr. Liu Xiaodong, 40 years old, and engineer with bachelor degree. He ever worked in Research Institute of Beijing Information Optics Apparatus. He successively took the posts of Director, Deputy General Manager and Secretary of Committee of CPC of Beijing Matsushita Color CRT Co., Ltd.. Now he takes the posts of Vice President of the Company and Director of BOE CHATANI Electronics Co., Ltd..

(22) Mr. Wang Jiaheng, 35 years old and MBA, ever took the posts of Deputy Manager in International Cooperation and Investment Department, Manager in Enterprise Development Department and General Manger in Electronic Parts Business Headquarters of the Company. Now he takes the posts of Vice President of the Company and concurrently Director of Korea Hyundai LCD Inc., Director and General Manager of BOE Hyundai LCD Inc., Director of Beijing Nissin Electronics Precision Component Co., Ltd..

(23) Mr. Feng Weidong, aged 37, doctor of management science and engineering of Tianjin University, ever was post doctorate of economic management of Qinghua University, and successively took the posts of GM of foreign cooperation department of Datang Communications Technology Industry Group, president associate and senior engineer of Central Research, professor associate of electric and computer engineering department of University of Connecticut of US, central researcher of Engineering and Advanced Technology of Taylor L. Booth, and president associate and concurrently director of enterprise planning department of the Company. He is now in charge of vice president of the Company.

(24) Mr. Su Zhiwen, aged 36, H. K. China nationality, MBA of Hong Kong University of Technology, member of Hong Kong Accounting Firms and senior member of authorized and acknowledged Accounting Firms of UK. He successively took the posts of manager of check and business consultant department of Hong Kong PricewaterhouseCoopers CPAs, CFO of Hong Kong Economic Daily, and chairman of the Board associate of the Company. He is now in charge of Auditing chief of the Company.

Directors and supervisors assuming title in and receiving pay from shareholding companies

	Name	Title
		Beijing BOE Investment & Development Co., Ltd.	Beijing Dongdian Industrial Development Company

Jinag Yukun	Director, President and Secretary of CPC
Zhao Caiyong	Director, Standing Vice-President and CFO	General Manager
Xia Zhenzhi	Vice Secretary of CPC and Changer of LU	Deputy GM and Secretary of CPC
Mu Chengyuan	Secretary of the Board and Vice President
Yang Anle	Manager of Planning and Financial Department	Chief financial Supervisor

II. Annual Salary

The remuneration and award of the Company’s directors, supervisors and senior executives are determined by the Company according to the evaluation of their performance under the company’s salary and personnel system.

The total annual remuneration (including basic wage, various premium, welfare, subsidy, housing allowance and other allowance) of the Company’s present directors, supervisors and senior executives is: RMB 6,700,000

Total remuneration of the top three directors (also senior executives) drawing the highest payment: RMB 3,635,000

Total sum of allowances for independent directors:

Mr. Tai Zhonghe amounted to US$ 10,000 per year; Mr. Xie Zhihua, Mr. Zhang Baizhe and Mr. Li Zhaojie drew RMB 50,000 per year respectively.

In the year of 2004, there were 13 directors, supervisors and senior executives receiving payment from the Company, among whom 1 enjoyed between 100,000 and 200,000 and 12 enjoyed over 200,000.

III. Directors, supervisors and senior executives leaving their posts during the report period:

On May 28, 2004, the 2003 Annual Shareholders’ General Meeting examined and approved the election of the Board of Directors and Supervisory Committee at expiration of office term, elected Mr. Wang Dongsheng, Mr. Jiang Yukun, Mr. Liang Xinqing,Mr.Cui Bingdou, Mr. Xuan Jiansheng, Mr. Zhao Caiyong and Mr. Chen Yanshun director of the 4[th] Board of Directors, elected Mr. Tai Zhonghe, Mr. Xie Zhihua, Mr. Zhang Baizhe and Mr. Li Zhaojie as independent director of the 4[th] Board of Directors and elected Mr. Xia Zhenzhi, Mr. Mu Chengyuan and Mr. Yang An’le as supervisor of the 4[th] Supervisory Committee.

Examined and approved by the Expanding Meeting of Chairman Group (dated May 20, 2004) of Employee Representative Meeting of Labor Union of the Company, elected Ms. Xu Yan and Mr. Cao Hong as employee’s supervisor of the 4[th] Supervisory Committee.

On May 28, 2004, examined and approved by the 1[st] meeting of the 4[th] board of Directors, elected Mr. Wang Dongsheng as chairman of the Board of the 4[th] Board of Directors as well as Mr. Jiang Yukun as vice chairman of the Board. The Board of Directors engaged Mr. Wang Dongsheng as CEO of the Company, and Mr. Liang Xinqing as COO, Mr. Cui Bingdou, Mr. Xuan Jiansheng and Mr. Cheng Yanshun as vice CEO, Mr. Wang Yanjun as CFO and concurrently secretary of the Board, and

engaged Ms. Song Ying, Mr. Ren Jianchang, Mr. Han Guojian, Mr. Liu Xiaodong and Mr. Wang Jiaheng as vice president of the Company.

On May 28, 2004, examined and approved by the 1[st] meeting of the 4[th] Supervisory Committee, elected Mr. Xia Zhenzhi as convener of the 4[th] Supervisory Committee of the Company.

On Aug. 27, 2004, examined and approved by the 2[nd] meeting of the 4[th] Board of Directors, Mr. Chen Yanshun would temporarily not took the post of executive vice president of the Company.

On Sep. 29, 2004, examined and approved by the 3[rd] meeting of the 4[th] board of Directors, engaged Mr. Feng Weidong as vice president of the Company and Mr. Su Zhiwen as Auditing Chief of the Company.

IV. About employees

By the end of the year 2004, the Company had 13037 on-the-job employees, of them, 784 technology research and developing persons, 1714 technician, 438 salespersons, 1085 administrative personnel, 217 financial personnel, 8370 production workers and 429 others.

Educational background of employees: 52 holding a doctoral or post-doctoral degree, 400 holding a master degree, 2066 holding college graduates, 1460 persons received three year college education, 4643 technical secondary school and 4416 others.

CHAPTER V. ADMINISTRATIVE STRUCTURE

1. The Company’s current administrative structure

In the report period, strictly according to the requirements of Company Law, Securities Law, Administration Rules for Listed Companies, Listed Rules of shares in Shenzhen Stock Exchange, Several Regulations on Strengthening Equity Protection of Social Public Shares, the Articles of the Association, and other regulations of CSRC, the Company operated normatively and consummated consistently the relevant rules and regulations. The Company conducted corporate governance in line with working rules of Shareholders’ General Meeting, Board and Supervisory Committee of the Company, in order to ensure the fulfillment of function and responsibilities of Shareholders’ General Meeting, Board and the Supervisory Committee, and protect interests of the Company and shareholders effectively.

In the report period, according to regulations of Circular on Standardizing Capital Current between listed Company and Related Parties and Several Problems on External Guarantee of Listed Companies (ZJF [2003] No. 56 Document, the Company revised Articles of the Association.

根据“诚信、规范、透明、负责”的公司治理观念， The Company timely studied laws and regulations about corporate governance and various formative documents, inspected itself pursuant to the requirements, respected information disclosure rules, fulfilled

strictly information disclosure obligation of listed company, actively improved information disclosure quality of the Company, consistently reinforced investeeship management, and protect the interests of investors in earnest way.

The performance of Independent Director

In the report period, as examined and approved by 2003 Shareholders’ General Meeting of the Company, the Company elected Mr. Tai Zhonghe, Mr. Xie Zhihua, Mr. Zhang Baizhe, and Mr. Li Zhaojie as independent directors of the 4[th] Board of the Company. The four independent directors engaged at present, were the specialists in IT, finance, law and TFT-LCD respectively. During their term, independent directors performed their duties as Independent Director according to the relevant regulations of Guiding Opinions on the Establishment of Independent Director System in Listed Companies, expressed independent opinions on the Changing of CPAs, related transactions, change of posts of directors and senior executives of Company and the other major projects and played an important role in promoting the Company’s strategic decision-making process, and safeguarded the benefits of the mass medium and small shareholders and the interest of the Company in real earnest.

In the report period, particulars about independent directors attending Board meetings were as follows:

Name of Independent Directors	This year times of attending the Board meeting	Times of presence in person (including signing written opinions)	Absence (Times)
Tai Zhonghe	9	9
Xie Zhihua	9	7	2
ZhangBaizhe	9	8	1
Li Zhaojie	9	7	2

The separation between the Company and the controlling shareholder in dealing with personnel, assets, finance, organization and business

The Company’s business activities, personnel, assets, institutions and finance were separated from that of the controlling shareholder. The Company was independent in personnel, finance and organization with complete finance and capability of production and operation.

(1) Business activities: The Company was independent from the controlling shareholder and the actual controller in the aspect of business with its independent purchase and sale system. The purchase of main raw materials and the sale of products were conducted through its own purchase and sale system. The Company made independent decision-making, assumed sole responsibility for its profits or losses, with complete and independent business and capability of independent operation. The related transaction of the Company was carried on according to the standards of market principle, and didn’t harm the legal benefit of the Company and the whole shareholders.

(2) Personnel: The Company was fully independent in its labor, personnel, salary and other matters. The president, vice-presidents, chief financial supervisor, secretary of the

Board and other senior executives of the Company were all full-time personnel and they did not have any dual duty in shareholding company.

(3) Assets: The assets of the Company were independent, complete and the property rights were clear. The Company independently possessed the assets required by its major business activities, such as production system, auxiliary production system, equipment facilities, land using right and intellectual property rights and so on. There was no occupation of the Company’s assets by its controlling shareholder or actual controller.

(4) Organization: The Company has set up organizations and institutions independent from its controlling shareholder and actual controller and possessed independent, sound organizations and legal person’s administrative structure. It has never handled business together with its controlling shareholder or its actual controller in the same office.

(5) Finance: The Company has set up independent financial departments. The financial personnel were all full-time personnel. The Company has also established standard and independent financial and accounting system and the system of financial administration for its subsidiaries. Meanwhile, the Company has kept archives of its financial administration and prepared relevant management staff.

Assessments and Encouragement on the Senior Executives of the Company

The Company implemented engagement system on the senior executives. In the aspect of selecting senior executives, pursuant to the principal of wisdom and concurrently talent, the Company selected all-round key members of good quality and noble moral and high working efficiency. The engagement and disengagement of senior executives of the Board of the Company was based on the working achievements and business capability.

The Company worked out strict achievements assessment measures. Based on the nature of the post, in December of each year, the Company decided the annual achievement objective of the next year of senior executives and signed operating objective responsibility letter with senior executives; nominated by the Board, Salary Assessment Committee was responsible for the assessment and encouragement and punishment on the directors of the Company and senior executives; the assessment was conducted by way of monthly inspection, report senior executives’ work, semi-assessment and annual assessment, which integrated closely the salary and achievements.

In the aspect of encouragement and binding on senior executives, the Company strengthened the achievement management, reinforced encouragement mechanism and set up perfect achievements evaluation and encouragement assessment index system.

CHAPTER VI. SHAREHOLDERS’ GENERAL MEETING

In the report period, particulars about Shareholders’ General Meeting held by the Company were as follows:

I. 2004 1[st] Provisional Shareholders’ General Meeting

The Company published Notification on Holding 2004 1[st] Provisional Shareholders’ General Meeting and Second Public Notice on Holding 2004 1[st] Provisional

Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, Shanghai Securities News and China Securities and Hong Kong Ta Kung Pao respectively on Feb. 25, 2004 and Mar. 25, 2004.

On Mar 30, 2004, 2004 1[st] Provisional Shareholders’ General Meeting was held in Beijing Guomen Road Hotel. Totally 55 shareholders and shareholder’s proxies attended the meeting, representing 513,341,884 shares (valid voting share), which took 53% of the total amount of shares of the Company, including: 3 legal person’s shareholders, representing 394,804,800 shares; 27 shareholders (proxy) of RMB ordinary share (A share), representing 8,255,950 shares and 25 shareholders (proxy) of overseas listed foreign capital share (B share), representing 110,281,134 shares. The meeting accorded with relevant regulations of the Company Law and Articles of the Association. The meeting examined and approved the following proposals by way of registered voting:

(1) Suggestion on TFT-LTD Enterprise (Korean subsidiary) Listing Overseas;

(2) Suggestion on Increasing Usage of Exceeding Raised Proceeds through B-share Additional Issuance;

(3) Proposal on Increasing and Electing Directors.

On Mar. 31, 2004, the Company published Public Notice on Resolutions of 2004 1[st] Provisional Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, China Securities, Shanghai Securities News and Hong Kong Ta Kung Pao.

II. 2003 Shareholders’ General Meeting

The Company published Notification on Holding 2003 Shareholders’ General Meeting and Second Public Notice on Holding 2003 Shareholders’ General Meeting and Changing Holding Place of 2003 Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, Shanghai Securities News and China Securities and Hong Kong Ta Kung Pao respectively on Apr. 27, 2004 and May 22, 2004.

On May 28, 2004, 2003 Shareholders’ General Meeting was held in RoseDale Hotel & Suites. Beijing. Totally 56 shareholders and shareholder’s proxies attended the meeting, representing 473,577,790 shares, which took 49% of the total amount of shares of the Company, including: 3 legal person’s shareholders, representing 394,804,800 shares; 18 shareholders (proxy) of RMB ordinary share (A share), representing 115,100 shares and 35 shareholders (proxy) of overseas listed foreign capital share (B share), representing 78,657,890 shares. The meeting accorded with relevant regulations of the Company Law and Articles of the Association. The meeting examined and approved the following proposals by way of registered voting:

(1) Work Report of the Board 2003;

(2) Work Report of the Supervisory Committee 2003;

(3) Preplan on Profit distribution and Conversion of Capital Reserve into Share Capital 2003;

(4) Proposal on Withdrawing 2003 Encouragement Fund and Determining 2004 encouragement Fund Assessment Index;

(5) Proposal on Investing and Constructing TFT-LCD Production Line Project of the 5[th] Generation;

(6) Proposal on Increasing the Investment to BOE Hyundai (Beijing) LCD Inc. and Building the CSTN Product Line;

(7) Proposal on Loan and External Guarantee Line;

(8) Proposal on Revising Articles of the Association;
(9) Proposal on Expiration and Election of the Board;

(10) Proposal on Expiration and Election of the Supervisory Committee.

On May 29, 2004, the Company published Public Notice on Resolutions of 2003 Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, China Securities, Shanghai Securities News and Hong Kong Ta Kung Pao. III. 2004 2[nd] Provisional Shareholders’ General Meeting

The Company published Notification on Holding 2004 2[nd] Provisional Shareholders’ General Meeting and Second Public Notice on Holding 2004 2[nd] Provisional Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, Shanghai Securities News and China Securities and Hong Kong Ta Kung Pao respectively on Dec. 11, 2004 and Jan. 6, 2005.

On Jan. 11, 2005, 2004 2[nd] Provisional Shareholders’ General Meeting was held in Beijing Guomen Road Hotel. Totally 23 shareholders and shareholder’s proxies attended the meeting, representing 593,000,597 shares (valid voting share), which took 40.51% of the total amount of shares of the Company, including: 2 legal person’s shareholders, representing 585,772,200 shares; 8 shareholders (proxy) of RMB ordinary share (A share), representing 44,040 shares and 13 shareholders (proxy) of overseas listed foreign capital share (B share), representing 7,184,357 shares. The meeting accorded with relevant regulations of the Company Law and Articles of the Association. The meeting examined and approved the following proposals by way of registered voting:

(1)Proposal on Changing CPAs;

(2)Proposal on Revising the Articles of the Association;

On Jan. 12, 2005, the Company published Public Notice on Resolutions of 2004 2[nd] Provisional Shareholders’ General Meeting of BOE Technology Group Co., Ltd. in Securities Times, China Securities, Shanghai Securities News and Hong Kong Ta Kung Pao.

Particulars about election and change of directors and supervisors

On May 28, 2004, 2003 Shareholders’ General Meeting of the Company examined and approved Proposal on Changing and Electing the Board of the Directors and the Supervisory Committee. Mr. Wang Dongsheng, Mr. Jiang Yukun, Mr. Lian Xinqing, Mr. Cui bingdou, Mr. Xuan Jiansheng, Mr. Zhao Caiyong, and Mr. Chen Yanshun were elected as directors of the Company. Mr. Tai Zhonghe, Mr. Xie Zhihua, Mr. Zhang Baizhe and Mr. Li Zhaojie were elected as Independent Directors of the 4[th] Board of the Company. Mr. Xia Zhenzhi, Mr. Mu Chengyuan and Mr. Yang Anle were elected as supervisors of the 4[th] Supervisory Committee.

Examined and approved by the meeting on enlarging the presidium of employee representative of the Company’s labor union (on May 20, 2004), Mr. Cao Hong and Ms. Xu Yan was elected as the employee supervisor of the 4[th] Supervisory Committee.

On May 28, 2004, as examined and approved by 1[st] meeting of the 4[th] Board of the Company, Mr. Wang Dongsheng was elected as Chairman of the Board of the 4[th] Baord of the Company and Mr. Jiang Yukun as Vice Chairman of the 4[th] Board of the Company.

On May 28, 2004, as examined and approved by 1[st] meeting of the 4[th] Supervisory Committee, Mr. Xia Zhenzhi was elected as Convener of the 4[th] Supervisory Committee.

CHAPTER VII. REPORT OF THE BOARD OF DIRECTORS

I. Discussion and analysis and whole operation in the report period

In the report period, the Company firmly carried out working guideline of “changing impossible into possible, and creating strengths of individuals, departments, and the Company”, actively adopted measures, propel investment construction of Beijing TFT-LCD production line of the 5[th] generation with all efforts. TFT-LCD production line of the 5[th] generation accomplished plant construction before December 2004 as schedule and realized trial production. With the fluctuation of TFT-LCD industry cycle, after experiencing the booming term of Feb., 2003 to June., 2004, TFT-LCD entered into downturn since the second half of 2004. In addition, low market price of TFT-LCD brought negative influence with big margin to operating achievements of global TFT-LCD enterprises, which resulted in big decrease of gross profit ratio of TFT-LCD products. In the report period, the Company realized sales income amounting to RMB 12444 million, increasing 11.31% over the same period; realized net profit amounting to 3537 million, decreasing 10.87% over the same period of last year.

II. Main operation in the report period

(I) Scope and operation of core business

The Company, belonging to the industry of electric information, focuses the business in design, R&D, manufacture, sale and service of the display technology products, with seven products group. Its main products kept advance seat in the country or in the world in each field, including: ① TFT-LCD, the Company is the largest manufacturer of TFT-LCD in China, while ranking in the 9[th] place all over the world; ② Monitors/flat TVs, including CRT monitor, TFT-LCD, TFT liquid crystal TV, PDP TV and et.,; ③ Mobile display system, including STN-LCD, OLED and etc.; ④ Specific application display products, including VFD, LED etc., among which, the production and sales volume of VFD ranked the first place in China and ranked the third place in the global list; ⑤ CRT products, , jointly produced with Matsushita. The Company is the second largest producer of CRT; ⑥ Precision electronic components and materials products, majority of which related to display products took the top in the domestic and global list; ⑦ Digital products and display application system relevant to display products etc.. Through implementing strategies including internationalization and cultivating core

competitive edges etc., BOE gradually grew up into a global advanced enterprise in display fields. It possessed 5 R&D centers, 6 manufacture bases in Beijing, Gyeonggi, Korean etc., and over 3000 pieces of patens; marketing and service system covered leading regions in the world.

In 2004, the Company realized sales volume amounting to 3,986.4 thousand pieces in TFT-LCD, 47,587 pieces in STN-LCD business, 23,140 thousands pieces in VFD business, 3,997 thousands pieces in monitors and realized sales volume amounting to 9,986 thousands pieces in CRT incorporated with Panasonic.

Main products taking over 10% in income or profit from main operations of the Company and their areas

① Formation of income from main operations and cost of main operations classified according to product type

(Unit: RMB’000)

Products	Sales	Cost of goods sold	Gross margin ratio (%)	changes of sales from last year (%)	changes of cost from last year (%)	changes in gross margin rate from last year (%)
Monitor	4,459,014	4,232,516	5.08%	41.74%	43.54%	-18.96%
TFT-LCD	5,973,178	5,452,935	8.71%	5.27%	19.54%	-55.57%
small-sized display products	3,461,161	3,104,600	10.30%	72.49%	81.17%	-29.44%
Other businesses	763,939	575,897	24.61%	48.52%	49.10%	-1.17%
Total	12,441,708	11,157,840	11.51%	11.28%	18.08%	-37.19%

② Formation of income from main operations classified according to areas

(Unit: RMB’000)

②Formation of income from	main operations classified a	ccording to areas (Unit: RMB’000)
Areas	Sales	Changes comparing to last year (%)
Mainland China	6133427	27.27
Other countries in Asia	2442940	-14.67
Europe	484249	-64.05
America	2900883	204.47
Other countries	480209	-59.91
Total	12441708	11.28

There were no significant changes in profit formation and core business structure.
Explanation on changes in profitability of main operations (gross profit ratio)

Affected by cyclical fluctuation of the industry, prices of main products of the Company decreased in the second half of 2004, resulted in decrease in gross margin ratio of products.

(II) Operation and achievements of share-holding companies, share profit of which surpassed 10% of net profit of the Company

(Unit: RMB’000)

Name of the Company	Shareholding percentage	Operating scope	Profit shared during the period	Net profit
Top Victory Technology Co., Ltd.	25.37%	Design, manufacture and sales of monitors for computer; main products include CRT monitor, TFT-LCD monitor, TFT-LCD TV	227,950	108337（$）
Beijing·Matsushita Color CRT Co., Ltd.	30%	Production and sales of color CRT for TV and computer; provide relevant service after sales	87,818	292728

(III) Main suppliers and customers

The Company’s sales from the top five customers amount to RMB 5,041,663,263.14, representing 40.52% of total sales.

(IV) Problems and difficulties arising from operations, and resolving plans

Affected by cyclical fluctuation of TFT-LCD industry, since the second half of 2004, TFT-LCD industry entered into downturn cycle. In 1[st] quarter of 2005, the industry still remained unfavorable. Although in 2[nd] quarter of 2005, the prices rose up to some extend, up to now the market still kept low price level. Provided the changes of market environment, the Company proposed guideline of “increasing income by reducing costs, precise management, realizing and organizing maximum of profit” further promoted organization capability and technology creation capability, solidified and exploited resources of customers, sped up localization auxiliary process of accessories parts in the upper stream, decreased costs, and promoted finished products rate of product, increased additional value of products, to enhance profitability. With the resuscitation of TFT-LCD industry, through striving and efforts of all staff, the operating achievements would be promoted step by step.

Till now, trial production of Beijing TFT-LCD production line of 5[th] generation undertook smoothly; yield rate and enhancement of product volume, product authentication of customers went better than expected.

III. Investment and use of the raised proceeds in the report period

Use and achievements of the raised proceeds in the report period

① Use of the raised proceeds in the report period

①Use of the rais	edproceeds in the	reportperiod
Names of investment projects committed	Committed investment amount	Committed investment amount of excessive raised proceedsplan	Total of actual expenditure ended June 30, 2004	Project progress
Refunding bank loan amounting to USD 90 million caused by purchase of TFT-LCD business from HYDIS	USD 90 million (approximately RMB 744.30 million)		USD 90 million	Completed
Investing USD 22.35 million in TFT Colored	USD 22.35 million (approximately RMB		USD 22.35	Completed

Crystal Display Module project	184.83 million)		million
Refunding bank loan amounting to USD 85 million from purchase of partial equity of Top Victory Technology Co., Ltd.		USD 85 million (approximately RMB 702.95 million)	USD85million	Completed
Refunding bank loan amounting to RMB 416.08 million		RMB 416.08million	USD 416.08 million	Completed

② In the report period reason, reason, procedures and disclosure of change of projects with raised proceeds

During 13 to 15 January 2004, the Company additionally issued 316.40 million B-shares at price of HKD 6.32 per share. After relevant issuance expenses, net amount of the proceeds raised through this additional issuance of B-shares was HKD 1,922,072,431 (equivalent to RMB 2,048,160,383). The projects invested with the raised proceeds committed in Memorandum of BOE Technology Group Co., Ltd. on Issuing Domestically Listed Foreign Shares (B-shares) (hereinafter referred to as Memorandum) were (1) Refunding bank loan amounting to USD 90 million (approximately RMB 744.30 million) caused by purchase of TFT-LCD business from HYDIS; (2) Investing USD 22.35 million (approximately RMB 184.83 million) in TFT Colored Crystal Display Module project; meanwhile, the Company also promised in the Memorandum that “If the proceeds raised through this additional issuance of B-shares exceed the capital amount necessary for the said projects invested with the raised proceeds, the excessive proceeds raised will be arranged by the Board of Directors within the authorization of the Articles of Association”.

The 1[st] Emergent General Meeting of the Company for 2004 (held on Mar. 30, 2004) considered and passed Proposal on Increase in Use of the Excessive Proceeds Raised through Additional Issuance of B-shares and used all excessive proceeds raised in “Refunding bank loan amounting to USD 85 million (approximately RMB 702.95 million) from purchase of partial equity of Top Victory Technology Co., Ltd.” and “Refunding bank loan amounting to RMB 416.08 million”. ③ Project progress and earnings

Repaying bank loan amounting to USD 90 million arising from purchase of TFT-LCD business from Korea HYDIS Technology Co., Ltd. (HYDIS): the Company planned to raise proceeds investment USD 90 million, actually did it, accomplished it as schedule. TFT-LCD business has become one of the core businesses and the main point contributing to the profits.

Invest USD 22.35 million into the Thin Film Transistor-Liquid Crystal Module Project: approved by the state administration, registered capital of Beijing BOE Optoelectronic Technology Co., Ltd. undertaking the project the Company was amounting to USD 29.8

million. The Company planned to invest raised proceeds of USD 22.35 million (taking 75% share equity of it) and has invested raised proceeds of USD 22.35 million as per the rate of progress by stages. As approved by the state administration, registered capital of Beijing BOE Optoelectronic Technology Co., Ltd. (“BOE OT”) increased to RMB 500 million, in charge of investing and constructing Beijing TFT-LCD project of 5[th] Generation.

Repaying bank loan amounting to USD 85 million arising from purchase of partial share equity of Top Victory Electronics Co., Ltd.: the Company planned to raise proceeds investment USD 85 million, actually did it, accomplished it as schedule. In the report period, with the sharp increase in business of Top Victory Electronics Co., Ltd., investment income of the Company realized sharp increase.

Repaying bank loan amounting to RMB 416.08 million: the Company planned to use raised proceeds of USD 416.08 million, actually used raised proceeds amounting to RMB 407.84 million and supplemented the differences. In the report period, the raised proceeds paid back bank loan, which consummated the financial structure of the Company and reduced financial expenses of the Company.

(1) Significant investment with the proceeds not raised through shares offering

Unit: RMB’ 000

			Unit: RMB’ 000
Projects	Investment amount in the report period	Accumulative investment amount	Progress of projects
One drop filling (ODF) equipment	259,320	287,020	January 2005
5 Generation TFT-LCD production equipment	173,830	240,110	June 2005
VFD production line improvement	23,890	269,100	June 2005
Total	457,040	796,230

4. Financial position and operating results of the Company

(1) Analysis to financial position and operating results

(Unit: RMB)

			(Unit: RMB)
Financial indexes	Dec. 31, 2004	Dec. 31, 2003	Increase/decrease (%)
Total assets	17,924,029,385	12,257,310,984	46.23%
Long-term liabilities	3,697,249,047	2,446,080,093	50.90%
Current liabilities	8,745,570,305	6,722,666,558	30.13%
	In 2004	In 2003	Increase/decrease (%)
Profit from main operations	1,283,867,847	1,730,965,841	-25.83%

Investment earnings	286,112,046	53,204,161	437.76%
Shareholders’ equity	4,956,438,845	2,554,930,411	94.00%

Increase in total assets was because the Company additionally invested in BOE OT----TET-LCD business project company.

Increase in long-term liabilities was due to additionally loan by mandate for investing TFT-LCD business.

Increase in current liabilities was due to increase of short-term loan for investing TET-LCD business.

Decrease in profit from main operations was resulted from trade cycle of TET-LCD, price decline of the products from main operation, so as to impact on descend of gross ratio level of main operation of the Company.

Increase in investment earnings was due to confirmation of investment income of Top Victory Technology Co., Ltd. accounted according to equity method.

Increase in shareholders’ equity was due to increasing issued B-share and realized net profit in the report period.

(2) Changes in accounting policies and accounting estimates or correction in material accounting errors

Upon correction of the 2003 accounting errors, decreased net profit of 2003 and withdrawal of encouragement funds of 2003 were RMB 15,217,569 and RMB 4,668,871.39, respectively. On Dec. 29, 2003 the Company received RMB 200,000,000.00 from Beijing Economic & Technology Investment and Development Co., Ltd but incorrectly took into accounts in 2004, so the Company adjusted and increased loan from bank of 2003 and long-term receivables respectively amounting to RMB 200,000,000.00.

Significant changes of productive and operating environment and macro-policies and regulations of the Company impact on the Company

Cyclical fluctuation of TET-LCD field impact on production and operation of the Company and measures adopted by the Company, please refer to the aforesaid.

6. Routine work of the Board of Directors

(1) Meetings and resolutions of the Board of Directors in the report period:

In the report period, the holding of the Board of Directors of the Company is as follows: ① On Feb. 24, 2004, the Company held the 19[th] Meeting of the 3[rd] Board of Directors, and examined and approved the followings:

i. Proposal on overseas Listing of TET-LCD Industry (Korea Subsidiary)

ii. Proposal on Change Joint Venture Party of Beijing BOE OT;

iii. Proposal on Increase Use of Exceed Raising Capital from Additionally Issuance of B-shares

iv. Proposal on Additionally Electing Director and Appointed Senior Executives;

v. Proposal on Holding the 1[st] Provisional Shareholders’ General Meeting of 2004. ② On Apr. 23, 2004, the Company held the 20[th] meeting of the 3[rd] Board of Directors and examined and approved the followings:

i. Report on 2003 Operation;

ii. Preplan on 2003 Profit Distribution and Converting share premium into Share Capital;

iii. 2003 Annual Report and its Summary;

iv. Proposal on Withdrawing the Award Funds 2003 and Setting the Indicators for Performance Appraisal 2004 of the Award Funds;;

v. Proposal on Investing and Building the Product Line Project of the 5[th] Generation TFT-LCD;

vi. Proposal on Increasing the Investment to BOE Hyundai (Beijing) LCD Inc. and Building the CSTN Product Line;

vii. Proposal on the Line of Loans and External Guarantees;

viii. Proposal on the Board of Directors Authorizing Chairman of the Board to Exert its Duty;

ix. Proposal on Amendment of Articles of Association;

x. Proposal on Convening the 2003 Annual Shareholders’ General Meeting.

③ On April 28, 2004, the Company held the 22[nd] meeting of the 3[rd] Board of Directors and examined and approved the followings:

i. The 1[st] Quarter Report of 2004;

ii. Proposal on Conducting Asset reorganization to Some of the subsidiaries ; ④ On May 28, 2004, the Company held the 1[st] meeting of the 4[th] Board of Directors and examined and approved the followings:

i. Proposal on Electing Chairman of the Board of the Company;

ii. Proposal on Electing Vice Chairman of the Board of the Company;

iii. Proposal on Composing Commissar of Special Committee of the Board of Directors; iv. Proposal on appointing Senior Executives of the Company;

v. Proposal on appointing Secretary of the Board of the Company.

⑤ On Aug. 27, 2004, the Company held the 2[nd] meeting of the 4[th] Board of Directors and examined and approved the followings:

i. 2004 Semi-Annual Report;

ii. Proposal on Change of Senior Executives of the Company;

⑥ On Sep. 29, 2004, the Company held the 3[rd] meeting of the 4[th] Board of Directors and examined and approved the followings:

i. Proposal on appointing Senior Executives of the Company.

⑦ On Oct. 28, 2004, the Company held the 4[th] meeting of the 4[th] Board of Directors and examined and approved the followings:

i. The 3[rd] Quarter Report of 2004;

ii. Proposal on Additionally Investing in Suzhou BOE CHATANI Electronics Co., Ltd.

to Establish Beijing project of LED to be used by TET-LCD.

⑧ On Nov. 12, 2004, the Company held the Provisional 4[th] Board of Directors and examined and approved the followings:

i. Proposal on Changing external auditor.

⑨ On Dec. 9, 2004, the Company held the 6[th] meeting of the 4[th] Board of Directors and examined and approved the followings:

i. Proposal on Reorganiztion of Business of Monitors and LCD TVs;

ii. Proposal on Amendment of Articles of Association;

iii. Proposal on Convening of the 2[nd] Provisional Shareholders’ General Meeting of 2004.

(2) Implementation on resolution of the Shareholders’ General Meeting

According to the resolution of the 2003 Shareholders’ General Meeting, the Board of Directors of the Company implement plan on 2003 profit distribution: allotting at rate of RMB 0.10 (including tax) per 10 shares for wholly shareholders based on the total share equity amounting to 975,864,800 after additionally issued B-share, at the same time, converting share premium into share capital at the rate of 5 shares per 10 shares . Date of registration was June 8, 2004; date of dividend-out was June 9, 2004. Dividend of B-share shareholders was paid by HKD, at the exchange rate which is the middle price quoted by BOC, at the 1[st] work day (May 31, 2004) after Proposal on 2003 Profit Distribution was examined and approved by 2003 shareholders’ general meeting of the Company.

BOE Technology Group Co., Ltd. Pubic Notice on Implementation of 2003 Distribution of Bonus, Allotment of Dividend and Capitalization of Share Capital has been published on Securities Times, China Securities, Shanghai Securities News and Hong Kong Ta Kung Pao.

The profit distribution preplan and preplan on capitalizing share premium into share capital

As audited by Beijing Jingdu Accounting Co., Ltd., the Company realized net profit amounting to RMB 206,012,681.80 in 2004, with RMB 204,091,016 recognized by its mother company. According to the Articles of Association of the Company, under the rule that “the lower one is taken”, the Company, taking the profit recognized by the mother company, withdrew 10% of the net profit amounting to RMB 20,409,101.54 as statutory reserve, 5% of the net profit amounting to RMB 10,204,550.77 as statutory welfare funds, 25% of the net profit amounting to RMB 51,022,753.84 as discretionary surplus reserve and, employee bonus and welfare funds amounting to RMB 1,921,666.45, The remaining profit after the withdrawal added the accumulative distributable profit amounting to RMB 409,165,555 at the beginning of the year to RMB 521,861,116 at the end of the year.

Based on total share capital of the Company amounting to 1,463,797,200 shares as of Dec. 31, 2004, cash dividend at the rate of RMB 0.20 (including tax) for every 10

shares was distributed to all registered shareholders.

Explanation on “Circular on Standardizing some issues regarding Listed Companies’ Capital Current with Related Parties and External Guarantees”

(1) Please refer to the attachment: CPAs’ special explanation on “Circular on Standardizing issues regarding Listed Companies’ Capital Current with Related Parties and External Guarantees”,

(2) According to opinions issued by independent directors of the Company on capital current between the Company and its controlling shareholder or other related parties of the Company, operation of the Company is in strict conformity with laws and regulations of stock supervision; there is no capital occupation between related parties offending relevant regulation; the special explanation has reflected the true situation of the Company.

(3) Opinion of independent directors on the Company’s external guarantees

Independent directors considered that the operation of the Company was strictly in line with laws and regulations of stock supervision; there is no guarantee for its shareholder, controlling subsidiary of the shareholder, affiliate companies of shareholder or individual debt and;the total external guarantee hasn’t exceed 50% of net assets reflected in the consolidated financial statements in the recent fiscal year.

CHAPTER VIII. REPORT OF THE SUPERVISORY COMMITTEE

I. Meetings of the Supervisory Committee and contents of the resolutions According to Company Law, Articles of Association of the Company, and other relevant regulations, the Supervisory Committee had strictly performed its duties. In the report period, the Supervisory Committee had totally held 6 meetings, and attended meetings of the Board as non-voting delegates. Details were as follows:

On Feb. 24, 2004, the 12[th] meeting of the 3[rd] Supervisory Committee was held. The meeting examined and approved:
1) Proposal on Listing the TFT-LCD Business Overseas;
2) Proposal on Increasing the Use of the Proceeds Raised through the additional issue of B-share.
On Apr. 23, 2004, the 13[th] meeting of the 3[rd] Supervisory Committee was held. The meeting examined and approved:
1) Work Report 2003 of the Supervisory Committee;
2) Report on the Operational Work of 2003 and the Operation Plan of 2004;
3) Preplan of 2003 Profit Distribution and the Transfer of Share Premium into Share Capital;
4) Annual Report 2003 and its Summary;

5) Proposal on Withdrawing the Award Funds 2003 and Setting the Indicators for Performance Appraisal 2004 of the Award Funds;

6) Proposal on Investing and Building the Product Line Project of the 5[th] Generation TFT-LCD;

7) Proposal on Increasing the Investment to BOE Hyundai (Beijing) LCD Inc. and Building the CSTN Product Line;
8) Proposal on the Line of Loans and External Guarantees;
9) Proposal on the Changing Election of the Supervisory Committee.
On Apr. 28, 2004, the 14[th] meeting of the 3[rd] Supervisory Committee was held. The meeting examined and approved:
1) The 1[st] Quarterly Report of 2004;
2) Proposal on Conducting Asset Reorganization to Part of the Subsidiaries.
On May 28, 2004, the 1[st] meeting of the 4[th] Supervisory Committee was held. The meeting examined and approved the Proposal on Choosing a Convener of the Supervisory Committee of the Company.
On Aug. 27, 2004, the 2[nd] meeting of the 4[th] Supervisory Committee was held. The meeting examined and approved the Semi-Annual Report 2004.
On Oct. 28, 2004, the 3[rd] meeting of the 4[th] Supervisory Committee was held. The meeting examined and approved the 3[rd] Quarterly Report of 2004.

II. Independent opinions of the Supervisory Committee

The Company’s operation according to laws

In conformity with relevant regulations, such as the Company Law, Articles of Association and Rules of Procedure of the Supervisory Committee, etc., the Supervisory Committee had dutifully performed its responsibilities. In the report period, members of the Supervisory Committee had attended meetings of the Board as non-voting delegates, and supervised the holding procedures and decision-making procedures of the Shareholders’ General Meeting and the Board of Directors, implementation of the resolutions of the Shareholders’ General Meeting by the Board, as well as the performance of the Company’s resolutions. The Committee believed that all the resolutions of the Company made in the report period was legal, and directors and senior administrative personnel of the Company had no deeds that had been against the Articles of Association of the Company, or had done harm to the interests of the shareholders or the Company.

2. Inspection of the Company’s financial status

The Supervisory Committee believed that the auditing opinions furnished by Beijing Jingdu Certified Public Accountants and Horwath International Certified Public Accountants had been objective, and that the Financial Report had truly reflected the financial status and operation achievements of the Company.

3. The use of raised proceeds

The Company had reissued 316.4 million B-shares from Jan. 13 to 15, 2004. Concerning the use of the raised proceeds through the reissue of B-shares, the

Supervisory Committee believed that the raised proceeds of the Company had been strictly invested in the exact promised projects, and the use of the surplus raised proceeds had also undergone relevant legal procedures.

Purchases and sales of assets made by the Company

In the report period, the transaction prices of the sales of assets by the Company were reasonable and the transactions were in conformity with the legal procedures. No insider dealings had ever happened, nor had there been any cases that had done harm to part of the shareholders or led to the loss of the Company’s assets.

Related transactions

Related transactions, in which the Company had involved, had strictly conformed to the market rules, and stuck to the principle of being fair and impartial. There was no case that had done harm to the interests of minority shareholders. The information of related transactions of great importance had been disclosed in time, financial consultant had been engaged to give consultant opinions, and independent directors had also expressed independent opinions.

CHAPTER IX. SIGNIFICANT EVENTS

I. Lawsuits and arbitrations of the Company in the report period

The wholly-owned subsidiary of the Company, BOE-Hydis Technology Co., Ltd. received the notification of Sharp Corporation, LG Philips LCD and Guardian Industries who announced the certain patent right of theirs has been infringed and counterclaimed the use expense. The Company has disclosed the relevant information in the Annual Report 2003. The investigation of the event is still in process, and the Board of Directors consider that it is difficult to assess the result of potential lawsuit temporarily, so the Company has not appropriated any provision for liabilities caused by the event in the consolidated statement.

Beijing BOE Land Co., Ltd., the controlling subsidiary of the Company, signed the “Framework Agreement on Reorganizing Beijing Zhongjin Shunda Land Co., Ltd.(hereinafter referred to as Zhongjin Land)” with Beijing Zhongye Anshunda Metallurgy General Company (hereinafter referred to as Zhongye Anshunda) on Jan. 14, 2004, which regulated that Beijing BOE Land Co., Ltd. held 60% equity of Zhongjin Land and Zhongye Anshunda held 40% equity of Zhongjin Land. Seeing that Zhongye Anshunda did not finish investment on schedule, the Company has applied the saving on the relevant investment funds to the Court, the lawsuit is still in process.

II. Purchase of assets in the report period.

The Provisional Shareholders’ General Meeting 2003 of the Company (Oct. 8, 2003) examined and approved Proposal on Transferring Share Equity of Beijing Matsushita Lighting Co., Ltd.. According to Beijing Municipal Bureau of Commerce’ s Approval Reply on Transferring Share Equity of Beijing Matsushita Lighting Co., Ltd. to Foreign Enterprises with JSZZ[2004] No. 16 issued by Beijing Municipal Bureau of Commerce on Jan. 9, 2004, the Company transferred 30% share equity of Beijing Matsushita Lighting Co., Ltd. to Japan Matsushita Electric Industrial Co. Ltd. with the transfer

price of RMB 62, 400,000 (based on the evaluation value).

III. Significant related transactions

Commodity on credit, related transaction of proving and accepting labor service Transactions between the Company and related parities were priced according to the market price. For details, please refer to the notes on financial statements “(a) Related Transaction” and “(b) The balance of Related Parties” of “35. Related Transaction”.
No related transaction occurred due to assets and equity transfer.
No related transaction occurred due to the external investment jointly by the Company and related transaction.
Bond, debt and guarantee existed between the Company and related transaction (including subsidiaries not be brought into the consolidated scope)

Transactions between the Company and related parities were priced according to the market price. For details, please refer to notes to financial statement “(a) Related Transaction” and “(b) The balance of Related Parties” of “35. Related Transaction”.

No other significant related transaction
IV. Significant contract and implementation
In the report period, the Company has no custody, contract or lease.
Significant guarantee
(1) The external guarantee

The Company provided a guarantee at 5% for the highest warranty loan of RMB 120 million (namely the amount of the highest warranty loan is RMB 6 million) to Beijing Municipal Administration & Communications Card Co., Ltd. who was borrowing from the Beijing Branch of Communications Bank of China. Ended Dec. 31, 2004, the Company has actually provided the loan guarantee at amount of RMB 4.5 millionto Beijing Municipal Administration & Communications Card Co., Ltd. for its borrowed RMB 90 million loan from the Beijing Branch of Communications Bank of China. The maturity of loan is from Jan. 29, 2006 to Apr. 22, 2006. The said guarantee has no significant influence on the Company.

(2) The internal guarantee

Ended Dec. 31, 2004, the Company provided a guarantee for a loan at RMB 1,693,646,750 of the controlling subsidiary; Zhejiang BOE Display Technology Co., Ltd., the controlling subsidiary of the Company, provided a guarantee for a loan of RMB 9 million of its controlling subsidiary.

In the report period, the Company has no assets that were entrusted others to manage.
Other significant contract

(1) On Sep. 21, 2004, the Company signed the Agreement of Entrusted Loan (including attachment “the Agreement of Equity Pledge”) together with Beijing Municipal State-owned Assets Operation Co., Ltd. and Beijing Commercial Bank Co., Ltd. Shuangyu Sub-branch, Beijing Municipal State-owned Assets Operation Co., Ltd. entrusted Beijing Commercial Bank Co., Ltd. Shuangyu Sub-branch to lend a loan of

RMB 620 million to the Company for purpose of the investment of Beijing BOE Photoelectron Technology Co., Ltd.. The interest rate of the said loan was calculated based on the rate of middle-term and long-term loan (three years to five years (including five years)) of People’s Bank of China, namely annual rate of interest is 5.58% (if the People’s Bank of China adjusted the basis interest rate in the same time in the course of commission loan, then use the new interest rate since the date of adjustment). The Company refunded all principal of the said loan to Beijing Municipal State-owned Assets Operation Co., Ltd. in the fourth year and the fifth year from the date of loan in four separate doses, namely the Company refunded the principal of the said loan amounting to RMB 155 million for every time. All parties regulated synchronously: the Company took its 15% equity of Beijing BOE Photoelectron Technology Co., Ltd. (based on the registered capital of BOE Photoelectron amounting to USD 500 million) to pledge to Beijing Municipal State-owned Assets Operation Co., Ltd. as the guarantee that the Company implemented the responsibility and obligation regulated in the Agreement of Entrusted Loan.

(2) Beijing Economic Technology Investment Development General Company and the Company jointly singed the “Agreement” and the “Supplementary Agreement” on Sep. 14, 2004 and morrow respectively, Beijing Economic Technology Investment Development General Company provided the funds of RMB 450 million to the Company for the purpose of investment of Beijing BOE Photoelectron Technology Co., Ltd., and the Company held the said equity instead of Beijing Economic Technology Investment Development General Company. The both parties regulated synchronously: within six months the said investment funds entered into the account of the Company, after approved by the relevant department, the Company transfers the equity to Beijing Economic Technology Investment Development General Company, but the corresponding rights of the said equity (including but not limiting profit sharing right, earning right and voting right and etc..) will be still held by the Company, Beijing Economic Technology Investment Development General Company will not bear any responsibility of investor due to operating loss of Beijing BOE Photoelectron Technology Co., Ltd., and the Company will take all the responsibilities of investor due from this transfer. Within three years since the Company received the said investment funds, the Company will purchase the equity from Beijing Economic Technology Investment Development General Company at the price of RMB 450 million; after three-year expiration, if the Company will not purchase the said equity on schedule, Beijing Economic Technology Investment Development General Company will dispose the equity based on the market price.

(3) According to the Entrust Contract on Establishing Special Plant signed by the Company, Beijing BOE Photoelectron Technology Co., Ltd. (the controlling subsidiary of the Company) and Beijing Economic Technology Investment Development General Company, as investor, Beijing Economic Technology Investment Development General Company invested RMB 350 million to establish the plants for purpose of perticular use

by Beijing BOE Photoelectron Technology Co., Ltd. and enjoyed the absolute ownership of the plants. Meanwhile, according to the requirements of the Purchase Contract of Plant signed by both parties, Beijing BOE Photoelectron Technology Co., Ltd. should purchase the said special plant in five years since the effectiveness of the contract. On July 9, 2004, according to the Agreement of Contract Release signed by three parties, they unanimously agreed to release the contract involved in establishing and purchasing TFT-LCD plant, Beijing Economic Technology Investment Development General Company has paid RMB 350 million in the prophase, and the Company promised to refund the said investment funds by Oct. 22, 2008. Beijing Electronic Holding Co., Ltd. signed the Warranty Contract with the Company separately on the aforesaid events as the supplementary of the aforesaid release contract. In accordance with the Warranty Contract, Beijing Electronic Holding Co., Ltd. provided the joint warranty guarantee for Beijing Economic Technology Investment Development General Company in order to guarantee the Company to implement the obligation under the Agreement of Contract Release.

Particulars about implementation of the commitment events in the report period
(1) The Company’s commitment events

For details, please refer to the “Note 30. Commitment Events” to International Accounting Statement.

(2) There existed no other commitment of the shareholders holding more than 5% equity of the Company in the report period.
The domestic and overseas Certified Public Accountants engaged by the Company and the relevant remuneration in the report period.

The 2[nd] Provisional Shareholders’ General Meeting held by the Company on Jan. 11, 2005 examined and approved the proposal on changing certified public accountants, and decided to engage Beijing Jingdu Certified Public Accountants and Horwath Certified Public Accountants as auditors of the Company.

In the report period, the remuneration of certified public accountants paid by the Company:

The Company has totally paid RMB 1.6 million to Beijing Jingdu Certified Public Accountants Horwath Certified Public Accountants.

In the report period, the Company, the Board of Directors and its directors, supervisors and senior executives have neither been checked, given administrative punishment or public criticism by CSRC and nor been publicly condemned by Stock Exchange.

8. Other significant events

(1) Change in equity of the controlling shareholder

In order to establish the long-term effective encouragement biding mechanism platform

with competition for and the steady social insurance funds platform of the retirees, the partial core management on behalf of all the core staff of management and technology established Beijing Intelligent Kechuang Technology Development Co., Ltd. Beijing Intelligent Kechuang Technology Development Co., Ltd. acquired 43.75% equity of Beijing BOE Investment & Development Co., Ltd. sold by the China Huarong Assets Management Co.. According to State-owned Assets Supervision and Administration Commission of Beijing People’s Government Reply on BOE Investment Development Co., Ltd. Retirees Settlement Plan (JGZGFZi [2004] No. 21), project payment excluding arrangement for retirees of BOE Investment Development Co., Ltd. born in accordance with share equity proportion of two parties shareholder in the Company; according to Beijing Electronic Holdings Co., Ltd. Case on Social Insurance Fee of Beijing BOE Investment and Development Co., Ltd. (JDKB [2004] No. 162), based on measure and calculation of present relevant policies of Beijing Municipality and National Government, two parties of shareholders should bear various type of social insurance fees totally amounting to RMB 710,240,000.

In order to promote the development of TFT-LCD business of the Company, the Company signed Strategic Cooperation Agreement with Japanese Marubeni Co., Ltd. on March 1, 2005 in Beijing. Furthermore, in order to confirm the mentioned strategic cooperation relationship, Japanese Marubeni Co., Ltd. actively participates the reconstruction and reorganization work of the parent company of the Company, Beijing BOE Investment and Development Co., Ltd.. On March 1, 2005, the actual controller of the Company, Beijing Electronic Holdings Co., Ltd., Beijing Intelligent Kechuang Technology Development Co., Ltd. and Japanese Marubeni Co., Ltd., three parties signed the joint-operative contract. As a strategic investor, Japanese Marubeni Co., Ltd. participates dividend through assigned share equity from Beijing BOE Investment Development Co., Ltd., and became 10% of shareholder of the Beijing BOE Investment and Development Co., Ltd..

Change on share equity had no significant influence on business operation and controlling management system of the Company, the amount of shares and nature of share equity of the Company held by Beijing BOE Investment and Development Co., Ltd. remained, Beijing BOE Investment and Development was still the controlling shareholder of the Company, Beijing Electronic Holdings Co., Ltd. still was the actual controller of the Company.

(2) Changes on proportion of shares held by the Company from Top Victory Technology Co., Ltd.

The Company has accomplished the purchase for 26.36% (totaled 356,033,783 shares) of share equity of Top Victory Technology Co., Ltd. before Dec. 31, 2003, and became the 1[st] large shareholder of Top Victory Technology Co., ltd.. Because Top Victory Technology Co., ltd. implemented plan of purchasing share equity in the report period, total share capital of Top Victory Technology Co., Ltd. increased to 1,403,284,264 shares, so share amount held by the Company from Top Victory Technology Co., Ltd. remained unchanged, however, proportion of holding shares decreased to 25.37% from

26.36%, continuously kept the 1[st] large shareholder position.

3. Integration of CRT and TTE business

The Company signed Letter of Intent on Share Equity Transfer of Beijing Top Victory Electronic Co., Ltd. with Top Victory Technology on Dec. 15, 2004, the Company launched 45.21% share equity held from Beijing BOE Top Victory Electronic Co., Ltd. into Top Victory Technology Co., Ltd. so as to obtain its related shares. On the same day, Koninlijke Philips Electronics N. V. (hereinafter referred to as “Philips”) signed Letter of Intent with Top Victory Technology Co., Ltd. and put its owned CRT and basic type of TTE business into Top Victory Technology Co., Ltd. so as to obtain its share equity (un-exceeding 15% of total share equity after additionally issuance of Top Victory Technology Co., Ltd.) and transferable bond, l which will be locked for 3 years. On Dec. 15, 2004, the Company signed Irrevocable Letter of Acceptance with Philips; Philips offered the prior right for purchase when it solds transferable bond, transferred shares and shares after transfer. If the Company does not exerted the right for prior purchase, Philips will separately allot to the independent 3[rd] party, after allotment, there would be no independent 3[rd] party holding 15% or above of share equity, which has issued by Top Victory Technology. Philips will not sell promised shares, transferable bond and transferring share equity to the key five competitors of Top Victory Technology or to the Company’s main five competitors engaging in manufacturing TFT-LCD Panel.

IX. For details, please refer to Attachment of Accounting Statement “38 After date events of Capital Balance Sheet”

CHAPTER X. FINANCIAL REPORT

I. Accounting statements (refer to the attached statement)

II. Appendix of the accounting statements (refer to the attachment)

CHAPTER XI. DOCUMENTS FOR REFERENCE

1.Accounting statements carrying the personal signatures and seals of legal representative, chief financial supervisor and person in charge of financial departments; 2. Original of Auditors’ Report carrying the seal of Certified Public Accountants as well as personal signatures and seals of certified public accountants;

Originals of all documents and manuscripts of public notices and announcements of the Company disclosed publicly on the newspapers designated by CSRC in the report period.

Board of Directors of BOE TECHNOLOGY GROUP CO., LTD. April 25, 2005

AUDITORS’ REPORT TO THE SHAREHOLDERS OF BOE TECHNOLOGY GROUP CO., LTD. (Incorporated in the People’s Republic of China with limited liability)

We have audited the financial statements on pages 2 to 71 which have been prepared in accordance with International Financial Reporting Standards.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Company’s directors are responsible for the preparation of financial statements, which give a true and fair view. In preparing financial statements, which give a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

BASIS OF OPINION

We conducted our audit in accordance with International Standards on Auditing. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

OPINION

In our opinion the financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2004 and of its profit and cash flows for the year then ended.

HORWATH HONG KONG CPA LIMITED 2001 Central Plaza Certified Public Accountants 18 Harbour Road Wanchai 25 April 2005 Hong Kong Chan Kam Wing, Clement Practising Certificate number P02038

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

Notes Sales 4 Cost of sales 4 Gross profit Other operating income Distribution costs Administrative expenses Other operating expenses Profit from operations 5 Finance costs - net 6 Group profit before taxation Available-for-sale investments – losses Share of results of associates before tax Profit before tax Income tax expenses 8 Group profit before minority interests Minority interests Net profit Earnings per share Basic 9	2004 RMB’000 12,441,708 (11,157,840 ) 1,283,868 30,736 (315,449) (791,896) (19,250 ) 188,009 (25,085 ) 162,924 (30,196) 364,227 496,955 (61,293 ) 435,662 (81,961 ) 353,701 RMB0.288	2003 (As restated) RMB’000 11,180,106 (9,449,140 ) 1,730,966 39,745 (288,021) (788,051) (20,544 ) 674,095 (235,550 ) 438,545 (11,047) 76,616 504,114 (30,003 ) 474,111 (78,095 ) 396,016 RMB0.601

The notes on pages 8 to 71 form part of these financial statements.

Page 42

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

Notes Non-current assets Property, plant and equipment 11 Investment property 12 Intangible assets 13 Land use rights 14 Investments in associates 15 Available-for-sale investments 16 Held-to-maturity investments Deferred tax assets 26 Other non-current assets 17 Current assets Inventories 18 Receivables and prepayments 19 Convertible bonds – current portion Cash and cash equivalents 21 Current liabilities Trade and other payables 22 Current tax liabilities Borrowings 23 Provisions 28 Net current liabilities Total assets less current liabilities	2004 RMB’000 10,118,211 13,893 213,492 133,355 2,180,519 8,020 170 13,220 77,936 12,758,816	2004 RMB’000 10,118,211 13,893 213,492 133,355 2,180,519 8,020 170 13,220 77,936 12,758,816	2003 (As restated) RMB’000 4,174,525 14,780 41,438 108,130 1,926,561 17,836 173 10,759 125,547 6,419,749
	1,127,066 2,342,557 44,031 1,834,288		1,252,508 2,309,090 - 2,251,459
	5,347,942		5,813,057
	3,188,147 7,172 5,506,259 43,994		2,433,656 13,530 4,249,483 25,999
	8,745,572 (3,397,630 ) 9,361,186		6,722,668 (909,611 ) 5,510,138

Page 43

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

		2004	2003
			(As restated)
	Notes	RMB’000	RMB’000
Total assets less current liabilities Non-current liabilities		9,361,186	5,510,138
Borrowings	23	2,503,381	1,766,291
Deferred tax liabilities	26	15	8,383
Post-employment benefit obligations	27	19,685	14,643
Other non-current liabilities	25	1,158,748	641,357
	3,681,829		2,430,674
Minority interests		524,973	525,602
Net assets		5,154,384	2,553,862
Representing:
Capital and reserves
Ordinary shares	31	1,463,797	659,465
Share premium		2,284,812	1,040,984
Other reserves	32	696,414	406,358
Retained earnings		709,361	447,055
Total Shareholders’ Equity		5,154,384	2,553,862

The notes on pages 8 to 71 form part of these financial statements.

Page 44

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

Balance at 31 December 2002 Conversion of share premium to ordinary shares Net profit Currency translation difference Provision of general reserves Balance at 31 December 2003 Balance at 31 December 2003 As previously reported Prior year adjustment arising from fundamental errors(Note 2) As restated Issue of new shares Conversion of share premium to ordinary shares Net profit Currency translation difference Dividend paid Provision of general reserves Balance at 31 December 2004	Ordinary shares (Note 31) 549,554 109,911 - - - 659,465 659,465 - 659,465 316,400 487,932 - - - - 1,463,797	Share premium (Note 31) 1,150,895 (109,911) - - - 1,040,984 1,040,984 - 1,040,984 1,731,760 (487,932) - - - - 2,284,812	Other reserves (Note 32) 280,767 - - (18,544) 144,135 406,358 423,166 (16,808 ) 406,358 - - - 208,419 - 81,637 696,414	Retained earnings 195,174 - 396,016 - (144,135 ) 447,055 445,465 1,590 447,055 - - 353,701 - (9,758) (81,637 ) 709,361	Total 2,176,390 - 396,016 (18,544) - 2,553,862 2,569,080 (15,218 ) 2,553,862 2,048,160 - 353,701 208,419 (9,758) - 5,154,384

The notes on pages 8 to 71 form part of these financial statements.

Page 45

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

Notes Cash flows from operating activities Net profit Adjustment for: Minority interests Tax 8 Depreciation 11,12 Amortisation Impairment charge and write off Net loss on sale of property, plant and equipment Gain on disposal of associates Finance costs 6 Share of result of associates before tax 15 Changes in working capital: Inventories Receivables and prepayments Pension employment benefit obligations Trade and other payables Cash generated from operations Interest received Tax paid Net cash from operating activities	2004 RMB’000 353,701 81,961 13,112 717,579 19,737 114,776 500 (31,421) 25,085 (364,227) (482,135) (289,049) 5,102 232,173 396,894 53,358 (25,387 ) 424,865	2003 (As restated) RMB’000 396,016 78,095 18,889 615,248 23,968 109,756 6,475 - 211,824 (76,616) (384,590) (134,347) 8,215 16,815 889,748 39,651 (20,193 ) 909,206

Page 46

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

Notes Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired Purchase of property, plant and equipment and land use rights Purchase of intangible assets Purchase of available-for-sale investments Refund of investment costs Purchase of associates Purchase of debentures Net cash outflow on change of subsidiary to associate 33 Other investing activities Disposal of subsidiary, net of cash disposed of Proceeds from sale of property, plant and machinery Proceeds from disposal of subsidiary Proceeds from disposal of associates Placement of long term fixed deposits Net cash inflow on consolidation of subsidiary Dividends received Net cash used in investing activities Cash flows from financing activities Proceeds from debentures Proceeds from issue of new shares Proceeds from minority interest Proceeds from borrowings Proceeds from other financial activities Repayments of borrowings Dividends paid to group shareholders Dividends paid to minority interests Interest paid Other long-term loan borrowings Finance lease repayments Payment for other financing activities Net cash from financing activities Effects of exchange rate changes Net decrease in cash and cash equivalents Cash and cash equivalent at beginning of year Cash and cash equivalent at end of year 21	2004 RMB’000 (4,200) (5,422,599) (371,341) - 32,978 (400) (2,235) (105,281) (11,144) 428 49,509 57,769 66,757 (220,749) 45,430 48,577 (5,836,501 ) 71,448 2,072,101 4,020 10,399,068 - (7,902,354) (17,555) (10,477) (287,847) 450,000 (22,907) (39,111 ) 4,716,386 59,624 (635,626) 2,171,596 1,535,970	2003 (As restated) RMB’000 (2,433,235) (643,878) (15,505) (84) - (1,174,623) - - (18,304) 1,389 15,716 - - - - 20,442 (4,248,082 ) - - - 8,811,082 104,413 (5,352,148) (13,434) (3,864) (216,241) - - (34,019 ) 3,295,789 (17,984 ) (61,071) 2,232,667 2,171,596

The notes on pages 8 to 71 form part of these financial statements.

Page 47

BOE TECHNOLOGY GROUP CO., LTD.

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Renminbi)

1. ORGANISATION AND OPERATIONS

BOE Technology Group Co., Ltd. (the Company) was founded in 1993 in Beijing, the People’s Republic of China (PRC). It was reorganized into a joint stock limited company in 1997 and registered in Beijing. The Company and its subsidiaries are collectively referred to as the Group.

The Group manufactures and sells electronic products, invests in enterprises engaged in the manufacture of electronic products and provides property management services to properties it owns. The Group has operations in more than five countries and employs over 13,037 employees (2003: 10,007).

The parent company of the Group is Beijing Orient Investment and Development Co., Ltd., which is a state-owned enterprise registered in Beijing, PRC.

The Company has its primary listing on the Shenzhen Stock Exchange issuing its first B shares in 1997, with further offerings of A Shares on the Shenzhen Stock Exchange in 2000 and B Shares in 2004 respectively.

2. PRIOR YEAR ADJUSTMENTS ARISING FROM FUNDAMENTAL ERRORS

During the financial investigation conducted by the Ministry of Finance of PRC in
July 2004, the following fundamental errors in respect of the financial year 2003 were found and rectified by the Company in this financial year: (a) Overstatement of cost of sales and a corresponding understatement of closing inventory value amounting to approximately RMB3,589,000 by a subsidiary of the Company due to misapplication of costing method;
(b) Overstatement of share of the net assets of an associated company in the amount of approximately RMB18,424,000 as the Company did not properly adopt equity method of accounting for this company in accordance with the prevailing accounting standards;
(c) Overstatement of share of the net assets of another associated company in the amount of approximately RMB5,052,000 as the Company did not apply equity method of accounting for this company based on the audited financial statements of this associate;

Page 48

BOE TECHNOLOGY GROUP CO., LTD.

2. PRIOR YEAR ADJUSTMENTS ARISING FROM FUNDAMENTAL ERRORS (CONTINUED)

(d) Overstatement of property, plant and equipment and intangible assets amounting to approximately RMB47,377,000 and RMB1,667,000 respectively and unrecorded taxes totaling approximately RMB7,574,000 due to omission of transaction for sale of property, plant and equipment and intangible assets at a consideration of approximately RMB82,700,000 to an unconsolidated subsidiary of the Company.

The above fundamental errors resulted in a corresponding reduction of provision for management bonus of approximately RMB4,669,000 in respect of the year ended 31 December 2003 which was calculated on 10% of net profit and included in the administrative expenses for the same year, and a corresponding increase in other receivables as at 31 December 2003.

As a result of the above fundamental errors, net profit for the year ended 31 December 2003 decreased by a total of approximately RMB15,218,000.

In addition, the Company under-recorded a loan transaction, which resulted in an understatement of cash balance and long term payable of RMB200,000,000 as at 31 December 2003, which is now rectified by way of a prior year adjustment.

3. PRINCIPAL ACCOUNTING POLICIES

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The Group also prepares financial statements, which comply with PRC accounting regulations. A reconciliation of the Group’s results and shareholders’ equity under IFRS and PRC accounting regulations is presented in Note 39. The principal accounting policies adopted are as follows:

In the current year, the Group adopted IFRS 3 “Business Combinations” to business combinations for which the agreement date is on or after 31 March 2004. For business combinations, which the agreement date was before 31 March 2004, goodwill arising on these acquisitions is accounted for in accordance with IAS 22, “Business Combinations”. The effect of adopting the accounting policy is set out in Note 3(e) below.

Page 49

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(a) Principles of consolidation

The consolidated financial statements include those of the Company and its subsidiaries and the Group’s interest in associates and joint ventures on the basis as set out in Notes 3(b), (c) and (d) below.

The acquisition method of accounting is used for acquired businesses. Results of subsidiaries and associates acquired or disposed of during the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal. The equity and net income attributable to minority shareholders’ interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively.

All significant intercompany balances and transactions, including intercompany profits and unrealised profits and losses are eliminated on consolidation. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

(b) Subsidiaries

A subsidiary is a company in which the Company has control. Control exists when the Company has the power to govern the financial and operating policies of the subsidiary so as to obtain benefits from its activities. Details of the Company’s subsidiaries as of 31 December 2004 are set out in Note 36 to the financial statements.

(c) Associates

An associate is a company, not being a subsidiary or a joint venture, in which the Company has significant influence. Significant influence exists when the Company has the power to participate in, but not control, the financial and operating decisions of the associate. Investments in associates are accounted for using the equity method of accounting.

(d) Joint ventures

A joint venture is a venture undertaken by two or more parties whose rights and obligations with respect to the venture are specified in a joint venture agreement. No single venture is in a position to control unilaterally the activity of the venture.

The consolidated financial statements include the Group's share of the results of jointly controlled entities for the year, and their assets and liabilities, are accounted for using the proportionate consolidation method.

Page 50

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(e) Goodwill

In accordance with IAS 22, the excess of the cost of an acquisition over the Company’s interest in the fair value of the net identifiable assets acquired as at the date of the exchange transaction is recorded as goodwill and recognised as an asset in the balance sheet. Goodwill is carried at cost less accumulated amortisation and accumulated impairment losses. The amortisation period and the amortisation method are reviewed annually at each financial year end.

IFRS 3 requires goodwill arising from acquisitions to be determined as the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities on the date of acquisition and is measured after initial recognition at cost less accumulated impairment losses. Under IFRS 3, goodwill is not required to be amortised but to be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Page 51

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(f) Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. The initial cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance and overhauls costs, are recognised as an expense in the year in which it is incurred. In situations where it is probable that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalised as an additional cost of the asset. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is included in the income statement.

Depreciation is calculated using the straight line method to write off the cost, after taking into account the estimated residual value, of each asset over its expected useful life. The expected useful lives are as follows:

Buildings	20 to 40 years
Plant and machinery	2 to 15 years
Motor vehicles	2 to 10 years

The useful lives of assets and depreciation method are reviewed periodically.

(g) Construction in progress

Construction in progress represents buildings under construction and machinery under installation and testing and is stated at cost. This includes costs of construction, attributable borrowing costs and other direct costs capitalised during the period of construction, installation or testing up to the date of commissioning.

Construction in progress is not depreciated until such time as the assets are completed and put into operational use.

(h) Investment property

Investment property, principally comprising office buildings, is held for long-term rental yields and is not occupied by the Group. Investment property is treated as a long-term investment and is stated at historical cost less depreciation and impairment. Depreciation is calculated on the straight-line method to write off the cost of each property, to their residual values over their estimated useful lives ranging from 20 to 40 years.

Page 52

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(i) Intangible assets

i) Research and development

Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditures are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit, not exceeding five years.

ii) Computer software development cost

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with identifiable and unique software products controlled by the Group and have probable economic benefits exceeding the cost beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of relevant overheads.

Expenditure that enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives.

iii) Technology rights

Technology rights are confidential techniques or experience that has been applied to productions or operation. Expenditure on acquired technology rights is capitalised and amortised using the straight-line method over their useful lives, but not exceeding 10 years.

iv) Other intangible assets

Expenditure on acquired patents, trademarks and licences is capitalised and amortised using the straight-line method over their useful lives, but not exceeding 10 years. Intangible assets are not revalued.

Page 53

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(j) Investments

The Group classified its investments in debt and equity securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the purpose for which the investments were acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in current assets. For the purpose of these financial statements short term is defined as 3 months. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date, which are classified as current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets.

Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading and available-for-sale investments are subsequently carried at fair value. Held-to-maturity investments are carried at amortised cost using the effective yield method. Unrealised gain and losses arising from changes in the fair value of securities classified as available-for-sale are recognised in equity. Equity securities for which fair values cannot be measured reliably are recognised at cost less impairment. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

(k) Land use rights

Land use rights are the rights granted to the Group to develop, use and/or operate on a parcel of land within a pre-approved period of time. Upfront lump sum usage fees prepaid are recorded as land use rights, which are amortised on the straight-line basis over the pre-approved period, normally 50 years.

Page 54

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(l) Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

(m) Trade receivables

Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers.

(n) Loan to employees

Loans provided to employees for their welfare such as housing are recognised as loans to employees. Long-term loans are initially recognised at fair value and subsequently carried at amortised cost using the effective yield method. The fair value on initial recognition is based on discounted cash flows using a discount rate based on the borrowing rate which the directors expect would be available to the borrower.

(o) Cash and cash equivalents

Cash represents cash in hand and deposits with any banks or other financial institutions, which are repayable on demand.

Cash equivalents represent short term, highly liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less and that are subject to an insignificant risk of change in value.

Page 55

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(p) Operating leases

i) A Group company is the lessee

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the assets or the lease term.

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

ii) A Group company is the lessor

Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.

Page 56

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(q) Provisions

A provision is recognised when, and only when an enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

i) Warranty

The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheet date. This provision is calculated based on historical data of the level of repairs and replacements.

ii) Employee compensated absences entitlement

Employee compensated absences entitlement is provided by BOE-Hydis to their employees. Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the balance sheet date.

(r) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate.

Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as other liabilities and are credited to the income statement on a straight line basis over the expected lives of the related assets.

Other government grants are recognized as income upon receipt.

Page 57

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(s) Revenue recognition

Revenue comprises the invoiced value for the sale of goods and services net of value-added tax, rebates and discounts, and after eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue from rendering of services is based on the stage of completion determined by reference to services performed to date as a percentage of total services to be performed.

Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established.

(t) Share capital

Ordinary shares are classified as equity.

Incremental external costs directly attributable to the issue of new shares, other than in connection with business combination, are shown in equity as a deduction, net of tax, from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition.

(u) Borrowings

Borrowings are recognised initially at the amount of proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.

When convertible bonds are issued by the Group, the fair value of the convertible bonds is determined using a market interest rate for an equivalent non-convertible bond; this amount is carried as liabilities on the amortised cost basis until extinguished on conversion or maturity of the bonds.

Page 58

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(v) Deferred taxation

Deferred taxation is provided under the liability method in respect of significant temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Page 59

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(w) Foreign currency transactions

i) Measurement currency

Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (“the measurement currency”). The consolidated financial statements are presented in Renminbi, which is the measurement currency of the parent.

ii) Transactions and balances

Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.

Translation differences on debt securities and other monetary financial assets measured at fair value are included in foreign exchange gains and losses. Translation differences on non-monetary items such as equities held for trading are reported as part of the fair value gain or loss. Translation differences on available-for-sale equities are included in the revaluation reserve in equity.

iii) Group companies

Income statements and cash flows of foreign entities are translated into the Group’s reporting currency at average exchange rates for the year and their balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in foreign entities and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign entity is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Page 60

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(x) Borrowing costs

Borrowing costs include interest charges and other costs incurred in connection with borrowing of funds, including amortisation of discounts or premiums relating to the borrowing, amortisation of ancillary costs incurred in connection with arranging borrowings and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Borrowing costs are expensed as incurred, except when they are directly attributable to the acquisition, construction or production of the property, plant and equipment, that necessarily takes a substantial period of time to get ready for its intended use in which case they are capitalised as part of the cost of that asset. Capitalisation of borrowing costs commences when expenditure for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalised at the weighted average cost of the related borrowings until the asset is ready for its intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.

(y) Employee benefits

The Group participates in defined contribution employee benefits plans by respective local governments. Under the plans, the Group’s contribution is based on defined percentage of salaries and wages subject to certain salary ceilings. Contributions to the plans are charged to the income statement as incurred.

BOE Hydis Technology Co., Ltd. (“BOE-Hydis”) and Hyundai LCD, Inc. (“Hyundai LCD”), subsidiaries of the Company incorporated in the Republic of Korea, provide post-employment benefits to their employees and directors according to the statutory requirement. The subsidiaries’ employees and directors with more than one year of service are entitled to receive a lump-sum payment upon termination of their employment depending on their length of service and rate of pay at the time of termination, regardless of the reason for termination.

The defined benefit plan costs are assessed using the projected unit credit method: the cost of providing benefits is charged to the income statement so as to spread the regular cost over the service lives of employees. The defined benefit obligation is measured at the present value of the estimated future cash outflows using discount rates determined based on high quality fixed interest corporate bonds or Korean government bonds. Actuarial gains and losses are recognised over the average remaining service lives of employees.

Page 61

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(z) Financial instruments

Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalent, short term investments, notes receivable and payable, trade and other receivables and payables, loans to non-related parties, balances with related parties and borrowings. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as an expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(aa) Impairment of assets

Property, plant and equipment, intangible assets, investments in associates and joint ventures and long term investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the income statement for items of property, plant and equipment, intangible assets, investments in associates and joint ventures and long term investments carried at cost. The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit.

Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or has decreased. The reversal is recorded as income.

(bb) Contingencies

Contingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of economic benefits is probable.

Page 62

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(cc) Subsequent events

Post year end events that provide additional information about the Group’s position at the balance sheet date or those that indicate the going concern assumption is not appropriate (adjusting events) are reflected in the consolidated financial statements. Post year end events that are not adjusting events are disclosed in the notes when material.

(dd) Dividends

Dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders.

(ee) Segment reporting

Business segments provide products or services that are subject to risks and returns that are different from those of other business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments.

(ff) Business combination

Business combinations, which are acquisitions, are accounted for by using the purchase method of accounting. Cost of acquisition is the amount of cash or cash equivalent paid and fair value of the other purchase consideration given by the Company plus any cost directly attributable to the acquisition. All acquired assets and liabilities are initially recognized at fair value. Any excess, at the date of the exchange transaction, of the Company’s interest in the fair values of the identifiable assets and liabilities acquired over the cost of the acquisition, is recognised as negative goodwill and is amortised over the weighted-average useful life of the non-monetary assets acquired or recognised as income when the future losses identified in the acquirer’s plans occur.

(gg) Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

Page 63

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(hh) Financial instruments and risk management

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.

The overall responsibility for the implementation of the Group’s financial risk management policies lies with the Board of Directors.

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to Korean Won (KRW). BOE-Hydis uses forward contracts to buy or sell KRW to hedge their exposure to foreign exchange risk.

(ii) Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group has no significant interest bearing assets. However, the Group has borrowings bearing variable interest rates and does not use interest rate swaps as cash flow hedges of future interest payments.

(iii) Credit risk

The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group’s historical experience in the collection of accounts receivable falls within the recorded allowances.

The carrying amount of receivables and cash represent the Group’s maximum exposure to credit risk. In respect of receivables and cash, the Group has policies in place to ensure that customers and counterparties and banks with whom the Group maintains its cash are of suitable credit standing.

Page 64

BOE TECHNOLOGY GROUP CO., LTD.

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(hh) Financial instruments and risk management (continued)

(a) Financial risk factors (continued)

(iv) Liquidity risk

The Group ensures that it maintains sufficient cash which is available to meet its liquidity requirements.

(b) Accounting for derivative financial instruments

Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair value.

Changes in the fair value of any derivative instruments are recognised immediately in the income statement.

(c) Fair value estimation

The carrying amounts of the following financial assets and financial liabilities approximate to their fair value at the balance sheet date: cash, notes receivables, trade receivables and payables, other receivables and payables, and borrowings.

4. SEGMENT INFORMATION

Since 2003, the Group commenced new business in providing different products and service. And, the Group’s risks and rates of return were affected predominantly by the differences in business segment. Therefore, business segments are adopted as its primary segment reporting format and geographical segments as its secondary reporting format.

For management purposes, the Group is organized on a worldwide basis into three major operating divisions - Cathode Radial Tube (CRT) business, Thin Film Transistor-Liquid Crystal Display (TFT-LCD) business and Digital Product and Service (DPS) business. Other operations include Precision Electronic Components & Materials business and so on. The divisions are the basis on which the Group reports its primary segment information.

Page 65

4. SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format – business segments

CRT/LCD	CRT/LCD	TFT-LCD	TFT-LCD		DPS		Others	Elimination	Elimination	Consolidated	Consolidated
2004	2003	2004	2003	2004	2003	2004	2003	2004	2003	2004	2003
							(As restated)				(As restated)
RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000

Revenue

External sales 4,456,879 Inter-segment sales 2,135 Total 4,459,014 Cost External costs (3,631,189) Inter-segment costs (601,327) Total (4,232,516 ) Results Segment results 142,308 Profit from operations Finance costs - net Available-for-sale investments-losses Share of results of associates before tax Profit before tax Income tax expenses Group profit before minority interests Minority interests Net profit	3,145,925 - 3,145,925 (2,797,211) (151,540 ) (2,948,751 ) 95,830	4,865,946 1,107,232 5,973,178 (4,864,953) (587,982 ) (5,452,935 ) 55,179	5,520,455 153,454 5,673,909 (4,558,085) (3,678 ) (4,561,763 ) 671,294	2,521,353 939,808 3,461,161 (2,152,593) (952,007 ) (3,104,600 ) 82,613	2,006,577 - 2,006,577 (1,707,592) (6,007 ) (1,713,599 ) 83,535	597,530 166,409 763,939 (509,105) (66,792 ) (575,897 ) (92,091) (30,196) 364,227 (81,961)	507,149 7,216 514,365 (386,252) - (386,252 ) (176,564 ) (11,047) 76,616 (78,095)	- (2,215,584) (2,215,584) 2,208,108 2,208,108	- (160,670 ) (160,670 ) 161,225 161,225 -	12,441,708 (11,157,840 ) 188,009 188,009 (25,085) (30,196) 364,227 496,955 (61,293) 435,662 (81,961 ) 353,701	11,180,106 (9,449,140 ) 674,095 674,095 (235,550) (11,047) 76,616 504,114 (30,003 ) 474,111 (78,095 ) 396,016

Page 66

4. SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format – business segments (continued)

CRT/LCD TFT-LCD DPS Others Elimination Consolidated 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 (As restated) (As restated) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Other information Segment assets 1,820,341 1,550,768 12,742,497 5,069,685 1,105,724 1,925,246 361,732 2,024,341 (103,635) (233,581) 15,926,659 10,336,459 Investment in equity method associates - - - - 392 - 2,179,707 1,896,347 - - 2,180,099 1,896,347 Consolidated total assets 18,106,758 12,232,806

Liabilities

Segment liabilities 1,219,443 1,044,285 8,622,617 3,235,061 854,358 1,476,926 1,812,638 3,631,335 (81,655) (234,265) Consolidated total liabilities Other Segment items- Capital expenditure 84,883 71,615 6,366,804 3,229,508 100,845 147,401 54,466 170,376 - - Depreciation 40,728 28,255 513,382 449,322 105,631 90,567 61,668 47,104 - - Amortisation 10,047 9,683 4,255 (5,864) 2,240 4,563 5,803 5,317 - - Impairment charge - - 1,348 572 3,960 - - 12,333 - -	12,427,401 12,427,401 6,606,998 721,409 22,345 5,308	9,153,342
		9,153,342
		3,618,900 615,248 13,699 12,905

Page 67

BOE TECHNOLOGY GROUP CO., LTD.

4. SEGMENT INFORMATION (CONTINUED)

(b) Secondary reporting format – geographical segments

Although the Group’s three major business segments are managed on a worldwide basis, they operate in four main geographical areas.

PRC is the home country of the parent company, which is also the main operating company. The areas of operation cover all the three activities.

Other asian region – sales activities of TFT-LCD and DPS.

European region – sales activities of DPS and CRT.

American region –sales activities of TFT-LCD, DPS and CRT.

PRC Mainland Other asian region European region American region Other countries	Revenue Total assets Capital expenditure 2004 2003 2004 2003 2004 2003 (As restated) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 6,133,427 4,819,366 11,414,121 6,274,763 5,999,110 331,327 2,442,940 2,862,969 6,474,821 5,798,353 607,850 3,287,573 484,249 1,347,144 191,792 116,014 23 - 2,900,883 952,761 26,024 43,676 15 - 480,209 1,197,866 - - - -
	12,441,708 11,180,106 18,106,758 12,232,806 6,606,998 3,618,900

Revenue are based on the country or area in which customers are located. Total assets and capital expenditure are where the assets are located.

(c) Analysis of revenue by category

Sales of goods Others	2004 RMB’000 12,123,374 318,334 12,441,708	2003 RMB’000 11,137,926 42,180 11,180,106

Page 68

BOE TECHNOLOGY GROUP CO., LTD.

5. PROFITS FROM OPERATIONS

Depreciation on property, plant and equipment: (Note 11) Owned assets Owned assets, leased out under operating lease Leased assets under finance lease Impairment of property, plant and equipment (Note 11) Net loss on disposal of property, plant and equipment Net loss on disposal of intangible assets (Note 13) Amortisation of intangible assets: Goodwill (Note 13) Negative goodwill (Note 13) Other intangible assets (Note 13) Impairment charge and write off for intangible assets (Note 13) Amortization of leasehold improvements and long-term advance payment Repairs and maintenance expenditure on property, plant and equipment Research and development expenditure Provision for obsolete and slow-moving inventories Receivables and prepayments: Impairment charge for bad and doubtful debts Reversal of bad and doubtful debts Government grant Investment property: Rental income Operating expense Staff costs (Note 7) Impairment of available-for-sale investments (Note 16) Operating lease expense: Amortisation of land use rights (Note 14) Operating lease expense Warranty cost (Note 28)	2004 RMB’000 716,007 - 685 5,078 500 - 2,585 (9,754) 26,906 230 2,863 137,184 319,227 67,555 1,967 (463) (815) (53,283) 29,500 928,684 15,688 2,609 29,921 40,189	2003 (As restated) RMB’000 604,473 2,949 7,195 12,333 6,475 12,975 2,585 (9,373) 18,521 572 10,269 97,903 246,745 51,973 22,191 (6,454) (11,451) (31,475) 22,270 740,771 9,711 2,991 14,600 25,402

Page 69

BOE TECHNOLOGY GROUP CO., LTD.

6. FINANCE COSTS - NET

Interest expenses: Bank borrowings Convertible bonds (Note 24) Long-term notes payable Finance leases Interest income Net foreign exchange transaction (gain) / loss Net fair value (gain) / loss on forward contracts Net gain on forward contract transactions Others	2004 RMB’000 305,781 10,239 10,961 564 (66,207) (200,643) (295) (46,125) 10,810 25,085	2003 RMB’000 226,996 10,968 12,880 631 (39,651) 11,109 16,282 (6,358) 2,693 235,550

7. STAFF COSTS

Wages and salaries Retirement benefit obligations (Note 27) Social security costs Welfare	2004 RMB’000 721,913 54,534 67,907 84,330 928,684	2003 RMB’000 633,588 37,503 34,260 35,420
		740,771

The average number of employees in 2004 was 13,037 (2003: 10,007).

Page 70

BOE TECHNOLOGY GROUP CO., LTD.

8. INCOME TAX EXPENSES

Current tax Deferred tax (Note 26) Share of tax of associates (Note 15)	2004 RMB’000 23,862 (10,750) 48,181 61,293	2003 RMB’000 26,977 (8,088) 11,114 30,003

The tax of the Group profit before tax differs from the theoretical amount that would arise using the tax rate of the Company is as follows:

Profit before tax Tax calculated at a tax rate of 15% (2003: 15%) Effect of different tax rates Income not subject to tax Expense not deductible for tax purpose Income tax effect of tax exemption Unrecognised deferred tax assets Income tax effect of utilisation of previously unrecognized tax losses of foreign subsidiaries Tax charge	496,955 74,543 458 (22,677) 54,185 (56,242) 12,145 (1,119 ) 61,293	504,114 75,617 81,327 (14,194) 37,915 (166,272) 16,979 (1,369 ) 30,003

The Company is subject to a preferential income tax rate of 15% (2003: 15%) as an enterprise engaged in new and top-notch technology and registered in Beijing New Technology Development Zone. As approved by the relevant governing tax bureau, some of the Company’s subsidiaries are also subject to preferential income tax rates ranging from zero to 15% (2003: zero to 15%). Except for BOE-Hydis, whose income tax rate is 29.7%, and the subsidiaries mentioned in the above, other subsidiaries of the Company are subject to an income tax rate of 33%.

Page 71

BOE TECHNOLOGY GROUP CO., LTD.

9. BASIC EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year.

Net profit attributable to shareholders Weighted average number of ordinary shares in issue (thousands) Basic earnings per share	2004 RMB’000 353,701 1,229,527 RMB 0.288	2003 (As restated) RMB’000 396,016 659,465 RMB 0.601

10. DIVIDEND PER SHARE

At the meeting of the board of directors on 25 April 2005, a final dividend of RMB0.2 per every 10 shares, based on the total number of outstanding shares in issue as at 31 December 2004 of 1,463,797,200 totalling RMB29,275,944 has been proposed in respect of the year ended 31 December 2004.

Page 72

BOE TECHNOLOGY GROUP CO., LTD.

11. PROPERTY, PLANT AND EQUIPMENT

Motor vehicles RMB’000 8,372 (2) 332 3,453 (115) 461 - (2,735) - 9,766	Motor vehicles	Constructi on in progress RMB’000 122,706 (65) 50,030 306,147 - (146,830) (22,763) - - 309,225 309,225 - 309,225	Total RMB’000 1,326,218 (1,305) 3,062,684 508,884 (72,243) - (22,763) (614,617) (12,333 ) 4,174,525 5,113,971 (939,446)
19,743 (9,977)
9,766 9,766 137 1,545 371 8,033 (531) - (321) 545 - (2,397) - 17,148	9,766		4,174,525
		309,225 40,946 7,606 - 6,098,711 (285) (165) (47,652) (1,325,56 4) (17,133) - (340) 5,065,349 5,065,349	4,174,525 447,034 151,061 1,414 6,384,628 (252,161) (15,674) (50,845) - (1) (716,692) (5,078)
			10,118,21
29,643			1 11,692,68 5

Page 73

BOE TECHNOLOGY GROUP	BOE TECHNOLOGY GROUP	BOE TECHNOLOGY GROUP	CO., LTD.	CO., LTD.
Accumulated depreciation Net book amount	(215,998) 2,253,196	(1,345,98 1) 2,782,518	(12,495)	- 5,065,349	(1,574,47 4) 10,118,21 1
			17,148

As of 31 December 2004, buildings with net book amount of approximately RMB1,387,010,000 (2003: RMB1,153,860,000), plant and machinery with net book amount of approximately RMB1,405,548,000 (2003: RMB1,743,808,000), construction in progress with book amount of approximately RMB287,017,000 (2003: RMB18,956,000) are pledged as collateral for the Group’s current and non-current bank borrowings (Note 23).

Page 74

BOE TECHNOLOGY GROUP CO., LTD.

11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The Group is in the process of obtaining formal title certificate for the buildings with a net book amount of approximately RMB78,540,000 (2003: RMB17,260,000).

Bank borrowing cost of approximately RMB9,891,000 (2003: 1,053,000) arising from financing specifically for the construction of property, plant and equipment was capitalised during the year and are included in “other additions” in the table above. A capitalisation rate of 2.97% and 3% (2003: 5.76%) was used representing the borrowing cost of the loan used to finance the projects.

Lease assets, where the Group is a lessee under a finance lease, comprise building and machinery:

Cost Accumulated depreciation Net book amount	2004 RMB’000 11,292 (685) 10,607	2003 RMB’000 19,640 (6,933 ) 12,707

Lease assets, where the Group is a lessor under an operating lease, comprise machinery and motor vehicles:

Cost Accumulated depreciation Net book amount	2004 RMB’000 - - -	2003 RMB’000 46,218 (24,644 ) 21,574

Page 75

BOE TECHNOLOGY GROUP CO., LTD.

12. INVESTMENT PROPERTY

At beginning of year Depreciation charge Disposal At the end of year Cost Accumulated depreciation Net book amount	2004 RMB’000 14,780 (887) - 13,893 21,436 (7,543 ) 13,893	2003 RMB’000 17,430 (631) (2,019 ) 14,780 21,436 (6,656 ) 14,780

Investment property is not measured at fair value as it is not practicable within constraints of timeliness or costs to determine its fair value with sufficient reliability. There is no active market for similar properties in the same location and condition and alternative estimates of fair value are not readily available.

Page 76

13. INTANGIBLE ASSETS

Year ended 31 December 2003: Opening net book amount Additions Acquisition of business unit Impairment charge Disposal Amortisation charge Closing net book amount At 31 December 2003: Cost Accumulated amortisation Net book amount Year ended 31 December 2004: Opening net book amount Additions Transfer Impairment charge Change from a subsidiary to an associate (Note 33) Unconsolidated joint venture Exchange difference Amortisation charge Closing net book amount At 31 December 2004: Cost Accumulated amortisation Net book amount	Goodwill RMB’000 47,625 - - - - (2,585 ) 45,040 51,929 (6,889 ) 45,040 45,040 - - - - - - (2,585 ) 42,455 51,926 (9,471 ) 42,455	Negative goodwill RMB’000 - (2,171) (93,733) - - 9,373 (86,531 ) (95,904) 9,373 (86,531 ) (86,531) - - - 2,171 - (11,753) 9,754 (86,359 ) (110,411) 24,052 (86,359 )	Technology rights RMB’000 48,917 37,559 - - (12,975) (14,934 ) 58,567 94,284 (35,717 ) 58,567 58,567 7,661 1,328 - (2) (3,091) 5,512 (17,638 ) 52,337 106,815 (54,478 ) 52,337	Software RMB’000 - 4,624 16,919 - - (2,310 ) 19,233 21,543 (2,310 ) 19,233 19,233 3,939 - - (2) - 2,735 (3,774 ) 22,131 28,937 (6,806 ) 22,131	Patent RMB’000 369 4,199 2,392 (572) - (1,271 ) 5,117 6,448 (1,331 ) 5,117 5,117 10,355 8,687 (230) (474) - 1,173 (5,486 ) 19,142 26,312 (7,170 ) 19,142	Development cost RMB’000 - - - - - - - - - - - 163,786 - - - - - - 163,786 163,786 - 163,786	Others RMB’000 13 5 - - - (6 ) 12 23 (11 ) 12 12 15 - - (21) - 2 (8 ) - - - -	Total RMB’000 96,924 44,216 (74,422) (572) (12,975) (11,733 ) 41,438 78,323 (36,885 ) 41,438 41,438 185,756 10,015 (230) 1,672 (3,091) (2,331) (19,737 ) 213,492 267,365 (53,873 ) 213,492

As of 31 December 2004, patent with net book amount of approximately RMB1,105,000 (2003: 1,203,000) are pledged as collateral for the Group’s non-current bank borrowings (Note 23).

Page 77

14. LAND USE RIGHTS

Opening net book amount Additions Amortisation charge Disposal Transfer out Closing net book amount Cost Accumulated amortisation Net book amount	2004 RMB’000 108,130 29,162 (2,609) - (1,328) 133,355 141,651 (8,296 ) 133,355	2003 (As restated) RMB’000 100,266 17,803 (2,991) (1,667) (5,281 ) 108,130 114,785 (6,655 ) 108,130

As of 31 December 2004, land use rights, with net book amount of approximately RMB4,123,000 (2003: RMB15,193,000), are pledged as collateral for Group’s current and non-current bank borrowings, respectively (Note 23).

15. INVESTMENTS IN ASSOCIATES

At beginning of year Additions Transfer from available-for-sale investments Disposal or transfer to investments in subsidiaries Share of results before tax Share of tax of associates Share of results after tax Dividend received Other movement At end of year	2004 RMB’000 1,926,561 129,010 - (41,526) 364,227 (48,181) 316,046 (48,426) (101,146 ) 2,180,519	2003 (As restated) RMB’000 741,841 1,111,418 48,638 (20,989) 76,616 (11,114) 65,502 (20,442) 593 1,926,561

Particulars of associates are set out in note 36.

16. AVAILABLE-FOR-SALE INVESTMENTS

At beginning of year Transfer to investment in subsidiaries Transfer to an associate Unconsolidated joint venture Acquisition of subsidiaries Additions Disposals Impairment loss At end of year Non-current	2004 RMB’000 17,836 (7,731) - 14,932 392 - (1,721) (15,688 ) 8,020 8,020	2003 RMB’000 93,200 (25,514) (48,638) - - 8,499 - (9,711 ) 17,836 17,836

Available-for-sale investments, comprising primarily investments in

unconsolidated subsidiaries and other equity investments, are measured at cost less impairment, as it is not practicable to determine their fair value with sufficient reliability.

17. OTHER NON-CURRENT ASSETS

Long-term loans to employees Long-term receivable from sale of investments in associates Long-term cash Club debentures Leasehold improvements Plan assets in retirement benefit obligations (Note 27) Unregistered patents Others	2004 RMB’000 5,721 - 22,153 23,700 22,291 - - 4,071 77,936	2003 RMB’000 6,737 15,656 34,019 20,579 27,473 2,501 8,676 9,906 125,547

The current portion of the above loans and receivables is set out in Note 19. All long term loans are due within 4 to 6 years from the balance sheet date. The carrying value of long-term loans approximates their fair value, which is based on discounted cash flows using an effective interest rate of 4.97%.

Included in long term cash were deposits in total of KRW1,852,500,000 (equivalent to approximately RMB14,814,000) which have been pledged as collaterals for the syndicate loan (Note 23).

18. INVENTORIES

Raw materials (at cost) Work in progress (at cost) Finished goods (at cost) Provision for obsolete and slow-moving inventories	2004 RMB’000 696,676 120,525 437,862 (127,997 ) 1,127,066	2003 (As restated) RMB’000 696,120 294,512 313,911 (52,035 ) 1,252,508

As of 31 December 2004, inventories amounting to approximately RMB614,284,000 owned by BOE-Hydis are pledged as collaterals for the syndicate loan (Note 23).

19. RECEIVABLES AND PREPAYMENTS

Notes receivables Trade receivables Less: Provision for impairment of trade receivables Trade receivables – net Other receivables Less: Provision for impairment of other receivables Other receivables – net Short-term receivable from sale of investment in associate Short-term loans to employees Prepayments Prepaid expense Interest receivable on convertible bonds Forward foreign exchange contracts (Note 20)	2004 RMB’000 200,319 1,866,559 (24,451 ) 1,842,108 252,412 (8,358 ) 244,054 - 5,632 33,146 12,665 4,633 - 2,342,557	2003 (As restated) RMB’000 154,184 1,896,521 (29,449 ) 1,867,072 243,659 (1,441 ) 242,218 3,263 4,105 26,978 11,078 - 192 2,309,090

As of 31 December 2004, trade receivables amounting to approximately RMB406,313,000 (2003: RMB114,279,000) and notes receivable amounting to approximately RMB64,802,000 (2003: 34,215,000) are pledged as collateral for the Group’s current bank borrowings (Note 23).

20. FINANCIAL INSTRUMENTS

Forward foreign exchange contracts: - with positive fair values (Note 19) - with negative fair values (Note 22)	2004 RMB’000 - -	2003 RMB’000 192 (16,474 )

During the year ended 31 December 2004, all the forward contracts had

been settled.

21. CASH AND CASH EQUIVALENTS

Cash at bank and in hand Short term bank deposits	2004 RMB’000 1,543,516 290,772 1,834,288	2003 (As restated) RMB’000 1,035,037 1,216,422
		2,251,459

Time deposits amounting to approximately RMB23,990,000, owned by BOE-Hydis are pledged as collateral for bank borrowings (Note 23).

For the purpose of the cash flow statement, the cash and cash equivalents comprise the following:

Cash and bank balances Less: Restricted deposits for Letter of Credit Term deposits with original maturity of more than 3 months which cannot be withdraw on demand Pledged bank deposits	2004 RMB’000 1,834,288 (274,328) - (23,990 ) 1,535,970	2003 (As restated) RMB’000 2,251,459 (6,261) (14,582) (59,020 ) 2,171,596

22. TRADE AND OTHER PAYABLES

Trade payables Notes payable Accrued expenses Advances to suppliers Wages and welfare payables Dividends payable Other payables Other tax liabilities Forward exchange contracts (Note 20)	2004 RMB’000 2,680,947 16,996 138,779 26,353 44,880 7,561 271,076 1,555 - 3,188,147	2003 (As restated) RMB’000 1,803,654 19,550 142,778 25,901 37,064 25,870 340,589 21,776 16,474 2,433,656

23. BORROWINGS

Current

Syndicate loan – secured Bank borrowings – secured Bank borrowings - unsecured Borrowings from joint venture’s other shareholder Discounts on bank acceptance Discounts on commercial notes Convertible bonds (Note 24)	2004 RMB’000 167,453 715,827 4,509,979 - 70,000 43,000 - 5,506,259	2003 RMB’000 - 763,820 3,396,291 4,586 14,000 - 70,786 4,249,483

23. BORROWINGS (CONTINUED)

Non-current

Syndicate loan – secured Bank borrowings – secured Bank borrowings – unsecured Convertible bonds (Note 24) Finance lease liabilities Others	2004 RMB’000 1,410,621 979,590 101,710 - 9,660 1,800 2,503,381	2003 RMB’000 1,502,162 35,035 155,210 51,637 20,447 1,800 1,766,291

Maturity of non-current borrowings (excluding finance lease liabilities):

Due between 1 and 2 years Due between 2 and 5 years Finance lease liabilities – minimum lease payment: Later than 1 year and not later than 5 years Future finance charge Present value of finance lease liabilities	2004 RMB’000 1,015,919 1,477,802 2,493,721 2004 RMB’000 9,660 - 9,660	2003 RMB’000 260,624 1,485,220 1,745,844 2003 RMB’000 22,863 (2,416 ) 20,477

Finance lease liabilities – minimum lease payment:

23. BORROWINGS (CONTINUED)

The collaterals for secured current and non-current bank borrowings include buildings and machinery (Note 11), intangible assets (Note 13), land use rights (Note 14), inventories (Note 18), trade receivables and notes receivable (Note 19), restricted cash (Note 21) and the equity interest of 15% in Beijing BOE Optoelectronics Technology Co., Ltd. owned by the Company.

BOE-Hydis entered into a financial covenant agreement in respect of the syndicate loan obtained from Korean Development Bank, Korean Exchange Bank, Woori Bank and Hyundai Marine and Fire Insurance Company. According to the agreement, BOE-Hydis should maintain certain financial ratios during the term of the syndicate loan and cannot declare dividends (Note 30). The share certificate issued by BOE-Hydis to the Company was kept under Industrial and Commercial Bank of China, Seoul Branch’s custody and the Company’s equity interest in BOE-Hydis shall not be lower than 51% at any event until the loan and related interest is repaid. Any shares or proceeds resulting from dividend appropriation or share exchange, as a result of a merger, consolidation or otherwise will be kept under the custody of Industrial and Commercial Bank of China, Seoul Branch.

Current borrowings bear interest at rates ranging from 0.75% to 8.31% (2003: 5% to 8.5%). Non-current bank borrowings bear interest at rates ranging from 3% to 8.09% (2003: 4.10% to 8.09%).

24. CONVERTIBLE BONDS

As of 31 December 2004, details of convertible bonds were as follows:

No. Coupon rate Issuance date Redemption date Conversion rate (per share) KRW denominated, non-guaranteed: 2nd 7% 02/06/2002 02/06/2004 KRW 5,000 3rd 7% 02/08/2002 02/08/2004 KRW 5,000 5th 7% 12/31/2003 12/31/2004 KRW 5,000 USD denominated, guaranteed: 5th 2% 11/26/2002 11/26/2005 KRW 15,000	Face 2004 KRW'000 RMB'000 - - - - - - - - USD RMB'000 - - -	value 2003 KRW'000 RMB'000 2,568,000 17,831 2,200,000 15,276 4,800,000 33,330 9,568,000 66,437 USD RMB'000 5,800,000 48,006 114,443
		9,568,000
		USD 5,800,000

24. CONVERTIBLE BONDS (CONTINUED)

The convertible bonds were recognised in the balance sheet as follows:

Liability at the beginning of the year Interest expense Interest paid Change from subsidiary company to associate Redemption Net foreign exchange transaction gains Liability at end of year Current (Note 23) Non-current (Note 23)	2004 RMB’000 122,423 10,239 - (132,662) - - - - - -	2003 RMB’000 137,257 10,968 (10,971) - (14,235) (596 ) 122,423 70,786 51,637 122,423

No convertible bonds existed at the year end date as the subsidiary became an associate of the Company due to exercise of conversion right of the bonds by other bond holders.

25. OTHER NON-CURRENT LIABILITIES

Long-term notes payable Long-term payables – construction loan Trust capital loan Government grants Payable for acquiring an associates Other liabilities	2004 RMB’000 299,939 350,000 450,000 46,375 - 12,434 1,158,748	2003 (As restated) RMB’000 307,747 304,413 - 17,975 8,032 3,190
		641,357

25. OTHER NON-CURRENT LIABILITIES (CONTINUED)

Long-term notes payable mainly represent long-term promissory notes issued by BOE-Hydis for the acquisition of the TFT-LCD business from Hyundai Display Technology Inc. and accrued interests. The promissory notes are pledged by certain property, plant and equipment of BOE-Hydis. The principal and its accrued interests are due within 4 to 5 years from the balance sheet date.

During 2003, the Company, its subsidiary Beijing BOE Optoelectronics Technology Co., Ltd (“BOE Optoelectronics”) entered into certain agreements (the “Agreement”) with Beijing Economic Technology Investment Development Co (“Beijing Economic Investment”) whereby Beijing Economic Investment shall provide capital of RMB350,000,000 for the construction of a custom built factory to be solely used by BOE Optoelectronics. BOE Optoelectronics is required to purchase the factory within 5 years from the date of the Agreement. In July 2004, the Company, BOE Optoelectronics and Beijing Economic Investment mutually agreed to cancel the Agreement. The Company undertake to repay RMB350,000,000 to Beijing Economic Investment before 22 October 2008 with the Company’s holding company acting as guarantor.

During 2004, Beijing Technology Economic Development Zone Management Committee (“Beijing Technology Zone Committee”) provided capital of RMB450,000,000 to the Company as its investment in BOE Optoelectronics to encourage the establishment of the production facilities of the 5[th] Generation TFT-LCD products in the zone. The Company would hold Beijing Technology Zone Committee’s interest in BOE Optoelectronics on trust for Beijing Technology Zone Committee. The Company is required the purchase from Beijing Technology Zone Committee its interest in BOE Optoelectronics for RMB450,000,000 within three years from the receipt of the above capital sum. Should the Company fail to make the purchase within the specified period, Beijing Technology Zone Committee has the right to dispose of its interest in BOE Optoelectronics in the market.

26. DEFERRED INCOME TAXES

Deferred income taxes are calculated in full on temporary differences under the liability method using the effective tax rates of the Company and its subsidiaries.

The movement on the deferred income tax account is as follows:

At beginning of year Acquisition of business unit Income statement charge Exchange differences At end of year	2004 RMB’000 (2,376) (57) (10,750) (22 ) (13,205 )	2003 RMB’000 5,770 (10) (8,088) (48 ) (2,376 )

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the period is as follows:

Deferred tax liabilities

	Reserve for research and development RMB’000 At 1 January 2004 Exchange differences Income statement charge At 31 December 2004	Foreign currency exchange gain RMB’000 10,502 - 3 (10,502 ) (13,338 ) - 15	Interest income RMB’000 2,411 20 (2,218 ) 213	Others RMB’000 28 - (28 ) -	Total RMB’000 409 13,350 (17) (590 ) (198 )

Deferred tax assets

Over- Unapproved amortised impairment Accrued for intangible loss royalty use assets RMB’000 RMB’000 RMB’000 At 1 January 2004 (2,148) (4,042)	Price Unrealised protection income Others Total RMB’000 RMB’000 RMB’000 RMB’000 (3,620) (828) (730) (4,358) (15,726)

Exchange differences - Acquisition of business unit - - Income statement charge (1,097 ) (3,245) (4,042 )	-	- - - (5,771	-	- - - (2,151 ) 742 ) (86 )	- (25) (25) - (57) (57) 730 4,364 2,588 - (76 ) (13,220)

26. DEFERRED INCOME TAXES (CONTINUED)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax asset against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet:

Deferred tax assets Deferred tax liabilities	2004 RMB’000 (13,220) 15 (13,205 )	2003 RMB’000 (10,759) 8,383 (2,376 )
	(13,205

27. POST-EMPLOYMENT BENEFIT OBLIGATIONS

At 31 December 2003, the post-employment benefit obligations represented benefit plans maintained by Hyundai LCD and BOE-Hydis. As at 31 December 2004, Hyundai LCD became an associate and its post-employment benefit obligations were not included in the Group’s financial statements. The amounts recognised in the balance sheet are determined as follows:

Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Unrecognised actuarial losses Net liability	2004 RMB’000 88,928 (69,243 ) 19,685 - - 19,685	2003 RMB’000 70,680 (50,878 ) 19,802 3,051 (10,711 ) 12,142

27. POST-EMPLOYMENT BENEFIT OBLIGATIONS (CONTINUED)

Employee benefit obligation assets and liability are offset when there is a legally enforceable right to use the surplus of one plan to settle the obligations under another plan and intends either to settle the obligations on a net basis, or to realise the surplus in one plan and settle its obligations under the other plan simultaneously. The following amount, determined after appropriate offsetting, is shown in the consolidation balance sheet:

Assets in the balance sheet (Note 17) Liabilities in the balance sheet	2004 RMB’000 - 19,685 19,685	2003 RMB’000 (2,501) 14,643 (12,142 )

The amounts recognised in the income statement are as follows:

Current service cost Interest cost Expected return on plan assets Current service cost, included in staff costs	2004 RMB’000 54,534 - - - 54,534	2003 RMB’000 35,277 2,216 (450) 460 37,503

Movement in the net liabilities recognised in the balance sheet are as follows:

At beginning of year Exchange difference Liabilities acquired in business acquisition Total expense – as shown above Contributions paid Change from a subsidiary to an associate At end of year	2004 RMB’000 12,142 2,387 - 54,534 (25,842) (23,536 ) 19,685	2003 RMB’000 6,428 (33) 13,236 37,503 (44,992) - 12,142

28. PROVISIONS

At 1 January 2004 Exchange differences Change from a subsidiary to an associate Additional provisions Utilised during the year At 31 December 2004	Warranty RMB’000 23,916 2,238 (480) 40,189 (26,170 ) 39,693	Compensated absences RMB’000 2,083 832 (3,450) 8,673 (3,837 ) 4,301	Total RMB’000 25,999 3,070 (3,930) 48,862 (30,007 ) 43,994

(a) Warranties

The Group gives warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily. A provision of approximately RMB39,693,000 has been recognised at the year-end for expected warranty claims based on past experience of the level of repairs and returns.

(b) Compensated absences

The Group provides for the expected cost of compensated absences based on the amount that the Group expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date.

29. CONTINGENT LIABILITIES

(a) Guarantee

Related parties Third parties	2004 RMB’000 - 4,500 4,500	2003 RMB’000 - 3,000 3,000

Above balances represent the credit facilities granted by banks to other enterprises which the Group has guaranteed.

(b) Potential litigation

i) BOE-Hydis was given notifications from Sharp Corporation, LG ⋅ Philips LCD and Guardian Industries, alleging infringement of certain patent rights and claiming royalties. The directors are of the opinion that while discovery is still ongoing, it is not possible to assess the outcome of the potential litigation for the time being and no provision for any liability which may result has been made in the consolidated financial statement.
ii) Pursuant to the restructuring agreement signed between BOE Land Co., Ltd. (“BOE Land”) with a third party, 北京中治安顺达冶金总公司(“中治安顺达＂) in respect of the restructuring of a newly acquired subsidiary of BOE Land, BOE Land and 中治安顺达 shall own 60% and 40% of the equity interest of the subsidiary respectively after completion of the restructuring. BOE Land has completed the capital injection but 中治安顺达 was unable to fulfill the asset injection obligation as subject piece of land for injection was under a lien. Accordingly, the Company has applied to court for asset protection against the considerations that has been paid by BOE Land and legal proceedings are still in process.

30. COMMITMENTS

(a) Capital commitments

Capital expenditures contracted for at the end of balance sheet date but not recognised in the financial statements were as follows:

Property, plant and equipment Equity investments	2004 RMB’000 387,368 37,244 424,612	2003 RMB’000 1,099,217 - 1,099,217

(b) Operating lease commitments

A wholly owned subsidiary, BOE-Hydis has entered into a lease agreement with Hynix Semiconductor Inc. in respect of a piece of land for a term from 22 January 2003 to 21 January 2033. The future aggregate minimum lease payments under the non-cancellable operating leases of the land are as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years	2004 RMB’000 14,631 58,524 350,743 423,898	2003 RMB’000 12,704 50,817 317,256 380,777

(c) Licence agreement

BOE-Hydis has entered into a technology transfer agreement with INTERNATIONAL BUSINESS MACHINES CORPORATION (“IBM”), to manufacture flat panel displays. BOE-Hydis is obliged to pay royalties based on a certain percentage of the net sales of the licensed products prior to 1 January 2010. As of 31 December 2004, the licensed products are not manufactured yet.

(d) Financial covenant agreement

BOE-Hydis has entered into a financial covenant agreement in relation to the syndicate loan agreement under which BOE-Hydis should

maintain certain financial ratios and is restricted from entering into material asset acquisitions, either business or equity acquisitions other than normal capital expenditure, prior to the repayment of the loan principal and interest. In addition, BOE-Hydis cannot declare dividends or incur additional liabilities without the approval from the lender (Note 23).

30. COMMITMENTS (CONTINUED)

(e) Commitment in respect of Corporate guarantee obtained

In 2004, the Company entered into an agreement with Beijing Electronics Holding Ltd., Co (“Electronic Holding”) whereby Electronic Holding is to provide corporate guarantee in respect of the Company’s long term payables to Beijing Economic Development to the extent of RMB350,000,000. Total guarantee fees of approximately RMB20,388,500 is payable. As of 31 December 2004, RMB8,000,000 has been paid, resulting in a commitment in the amount of approximately RMB12,388,500.

Up to 25 April 2005, the Company has settled the guarantee fee for the first quarter of 2005 of RMB5,000,000. Accumulative payments of RMB13,000,000 has been made, resulting in commitment outstanding of approximately 7,388,500.

31. ORDINARY SHARES

Domestic non-listed shares of RMB1 each A shares of RMB1 each B shares of RMB1 each	2004 No of shares ‘000 596,887 123,210 743,700 1,463,797	2003 No of shares ‘000 408,065 72,000 179,400 659,465

All shares rank pari passu in all respects.

On 16 January 2004, the Company issued 316,400,000 additional B shares at a premium of RMB5.47 per share and net proceeds received amounted to approximately RMB2,048,160,000. Accordingly, the share premium increased by RMB1,731,760,000.

Pursuant to the 2003 annual general meeting on 28 May 2004, the Company converted share premium of RMB487,932,400 into issued ordinary shares to existing shareholders at the ratio of 5 new ordinary shares to every 10 existing ordinary shares.

32. OTHER RESERVES

Balance at 1 January 2003 Currency translation differences - amount arising in the year General reserves for the year Balance at 31 December 2003 Balance at 31 December 2003 As previously reported Prior year adjustment arising from fundamental errors As restated Currency translation differences - amount arising in the year General reserves for the year Balance at 31 December 2004	Capital reserves RMB’000 4,970 - - 4,970 4,970 - 4,970 - - 4,970	General reserves RMB’000 268,351 - 144,135 412,486 429,294 (16,808 ) 412,486 - 81,637 494,123	Translation reserve RMB’000 7,446 (18,544) - (11,098 ) (11,098) - (11,098) 208,419 - 197,321	Total RMB’000 280,767 (18,544) 144,135 406,358 423,166 (16,808 ) 406,358 208,419 81,637 696,414

In accordance with the relevant PRC regulations, the Group appropriated 10% and 5% of statutory net profit to the statutory surplus reserve and statutory public welfare reserve. The Company also appropriated 25% of statutory net profit to the discretionary surplus reserve which has been approved by the Board of Directors.

33. CHANGE FROM A SUBSIDIARY TO AN ASSOCIATE

On 31 December 2004, the other shareholder of the Company’s ex-subsidiary, Hyundai LCD, Inc (“HyLCD”) exercised their rights and converted their on-hand convertible bonds issued by HyLCD into equity share capital of the company. As a result, the Company’s equity interest in HyLCD decreased from 48.49% to 39.11% and became an associate of the Company following such conversion. Accordingly, assets and liabilities of the subsidiary were not consolidated since that date while the results and cash flows for the year up to 31 December 2004 were consolidated. Details of the assets and liabilities of the subsidiary partially disposed of are as follows:

Net assets disposed of:
Property, plant and equipment
Intangible assets
Held-to-maturity investments
Other non-current assets
Investments in associates
Inventories
Trade and other receivables and prepayments
Cash at bank and in hand
Short-term borrowings
Trade and other payables
Provisions
Taxes payable
Long term borrowings
Other long term liabilities
Analysis of the net cash outflow in respect of disposal of a subsidiary:
Cash at bank and in hand of subsidiary disposed of

RMB’000
252,161
499
2,504
27,223
13,288
775,784
409,429
105,281
(735,462)
(396,224)
(3,930)
(6,213)
(79,111)
(30,887
)
334,342
(105,281
)

100

34. CONSOLIDATION OF A SUBSIDIARY

Owing to the cancellation of share transfer agreement in respect of the shareholding of BOE Land Co., Ltd., the assets and liabilities and financial results of the BOE Land was included in the Group financial statements. Details of the assets and liabilities of the subsidiary at 1 January 2004 are as follows:

Net assets disposed of: Property, plant and equipment Other non-current assets Other investments Inventories Trade and other receivables and prepayments Cash at bank and in hand Trade and other payables Minority interests Analysis of the net cash inflow in respect of consolidation of a subsidiary: Cash at bank and in hand	151,211 5,573 (39,137) 47 28,235 45,429 (174,591) (16,767 ) - 45,429

101

35. RELATED PARTY TRANSACTIONS

(a) Related party transactions

In the opinion of the directors, the terms of the transactions with related parties follow commercial terms and conditions arranged in the ordinary course of business of the Group. The following transactions were carried out with related parties:

	2004	2003
	RMB’000	RMB’000
Purchase of goods and services:
BOE Land Co., Ltd.	-	22,853
Beijing Orient Investment and Development Co., Ltd	455	-
Beijing BOE Digital Technology Co., Ltd.	-	3,167
Beijing Oriental Electronic Materials Co	125	-
TPV Technology Limited	233,074	-
Sales of goods and services:
Beijing Matsushita Color CRT Co., Ltd.	90,095	86,993
Beijing Orient Mosler Security Technology
Systems Co., Ltd.	2,949	2,949
TPV Technology Limited	2,770,917	-
Beijing Electronic Holdings Ltd., Co.	2,247	-
Beijing Orient Investment and Development Co., Ltd	138	-
Rental income:
Beijing Orient Mould Factory	780	-
Beijing Nissin Electronics Precision
Component Co., Ltd.	1,232	203
Beijing Nittan Electronics Co., Ltd.	2,073	1,555
Beijing Orient Mosler Security
Technology System Co., Ltd.	459	133
Beijing Oriental Software Co., Ltd	252	-

102

35. RELATED PARTY TRANSACTIONS (CONTINUED)

(a)
Related party transactions (continued)
2004
RMB’000
Service fee expenses:
Beijing Nissin Electronics Precision
Component Co., Ltd.
2,949
Beijing Nittan Electronics Co., Ltd.
509
Beijing Matsushita Color CRT Co., Ltd.
8,949
Beijing Oriental Software Co., Ltd
109
Beijing Star City Real Estate Development Co., Ltd357
-
Interest income:
Beijing Star City Real Estate Development Co., Ltd.
-
Technology usage expenses:
TPV Technology Limited
30,644
After sales service expenses:
TPV Technology Limited
26,259
Management bonus payable to:
Beijing Intelligence Technology Development Co., Ltd.
40,319
Other service fee expenses:
Beijing Orient Mould Factory Industry
Development Co., Ltd.
200
Beijing Orient Electronic Industry
Development Co., Ltd.
116
Rentals paid:
Beijing Orient Electronic Industry
Development Co., Ltd
1,631
Guarantee granted by:
TPV Technology Limited
108,129
Payments on behalf:
Beijing BOE Investment Development Co., Ltd.
1,636
Receipts on behalf:
Beijing BOE Investment Development Co., Ltd.
904

2003
RMB’000
-
-
-
-

600
-
-
8,284
-
-
-
41,740
-
-

103

104

35. RELATED PARTY TRANSACTIONS (CONTINUED)

(b) Related parties balances

Related party receivables and payables at 31 December 2004 were as follows:

	2004	2003
	RMB’000	RMB’000
Trade receivables due from:
Beijing Orient Mould Factory	4,024	3,956
Beijing Orient Mosler Security Technology
System Co., Ltd.	2,227	2,105
Beijing Matsushita Color CRT Co., Ltd.	15,612	9,971
TPV Technology Limited	461,814	281,430
Hyundai LCD, Inc.	145,344	-
Notes receivable due from:
Beijing Matsushita Color CRT Co., Ltd.	6,499	24,096
Beijing Star City Real Estate Development Co., Ltd.	43,000	-
Other receivables due from:
Beijing BOE Digital Technology Co., Ltd.	573	5
Beijing Orient Investment and Development Co., Ltd.	4,912	3,933
Beijing Star City Real Estate Development Co., Ltd.	30,047	33,400
Beijing Intelligence Development Co., Ltd.	4,859	4,859
TPV Technology Limited	1,386	15,823
Shenzhen Evergreat Industrial Co., Ltd.	374	374
Trade payables due to:
BOE Land Co., Ltd.	-	563
TPV Technology Limited	82,909	45,242
Hyundai LCD, Inc.	141,842	-

105

35. RELATED PARTY TRANSACTIONS (CONTINUED)

(b) Related parties balances (continued)

2004 RMB’000 Other payables due to: Beijing Orient Investment and Development Co., Ltd. 904 Beijing Matsushita Color CRT Co., Ltd. 200 TPV Technology Limited 5,660 Accrued expense: TPV Technology Limited 16,160 Other non-current liabilities due to: Beijing Orient Investment and Development Co., Ltd. 9,661	2003 RMB’000 - - 7,689 11,824 -

(c) Directors’ remuneration

In 2004, total remuneration of the directors was in the amount of RMB3,909,000 (2003: RMB3,700,000).

106

36. SUBSIDIARIES AND ASSOCIATES

Except for BOE Technology Incorporation, which was incorporated in the United States of America with limited liability, Hyundai LCD and BOE-Hydis, which were incorporated in the Republic of Korea with limited liability all of, the following principal subsidiaries and associates were all incorporated in the PRC.

(a) Subsidiaries

Name	Equity	interest	Principal Activities	Notes
	2004	2003
Beijing BOE Digital	75%	75%	Research, development, manufacture	(1)
Technology Co., Ltd.			and sale of digital cameras and other
			digital visual wireless transfer
			platforms
Beijing Software and System	100%	100%	Research and development of network
Integrated Co., Ltd.			and telecommunications
Beijing Orient Top Victory	45.21%	45.21%	Manufacture and sale of color computer	(2)
Electronics Co., Ltd			and monitors
Zhejiang BOE Display	60%	60%	Research, development, manufacture
Technology Co., Ltd.			and sale of monitors and related parts
Beijing BOE Vacuum	55%	55%	Manufacture and sale of vacuum
Electronics Co., Ltd.			electronic products
BOE Technology	100%	100%	Research, development, manufacture	(1)
Incorporation			and sale of high technology electronic
			information products
Beijing Orient Heng Tong	100%	100%	Leasing of commercial facilities
Property Centre
Beijing BOE Mobile	-	51%	Research, development and manufacture
Technology Co., Ltd.			of mobile technology products
Beijing BOE	100%	100%	Development, manufacture and sale of
Optoelectronics Technology			TFT-LCD products and related services
Co., Ltd.

107

36. SUBSIDIARIES AND ASSOCIATES (CONTINUED)

(a) Subsidiaries (continued)

Name	Equity	interest	Principal Activities
	2004	2003
BOE Hyundai LCD (Beijing)	75%	75%	Development, manufacture and sale of
Display Technology Co., Ltd.			related parts of LCD products
Suzhou BOE Chagu Electronics	75%	75%	Development, manufacture and sale of
Co., Ltd.			back-light products and related services
BOE-Hydis Technology Co.,	100%	100%	Development, manufacture and sale of
Ltd.			TFT-LCD products and related services
BOE Semi-conductor Co., Ltd.	63%	63%	Manufacture and sale of semi-conductor
			products
BOE Land Co., Ltd. (Note 34)	70%	70%	Development of manufacture buildings
			facilities and leasing of commercial
			facilities

108

36. SUBSIDIARIES AND ASSOCIATES (CONTINUED)

(a) Subsidiaries (continued)

Name	Equity	interest	Principal Activities		Notes
	2004	2003
BOE Optoelectronics Holding	100%	100%	Design, manufacture and	trading of	(3)
Co., Ltd			electronics information	technology
			products and investing activities
BOE Optoelectronics	100%	100%	Investment holding		(3)
Technology Co., Ltd
BOE Optoelectronics Investment	100%	100%	Investment holding		(3)
Co., Ltd

(1) As the assets and results in the year were not material to the Group, they were not consolidated in the financial statements.
(2) According to the capital injection agreement, 8.7% of the voting rights in this company held by Multi-Lines Investment Co., Ltd. have been consigned to the Company. This company is consolidated in the financial statements.
(3) As at the date of the report, the three foreign subsidiaries set up by the Company for strategic purposes, namely BOE Optoelectronics Holding Co., Ltd, BOE Optoelectronics Technology Co., Ltd and BOE Optoelectronics Investment Co., Ltd have not yet commenced production or operation. Administration expenses incurred by these subsidiaries during the year were not significant and had been borne by the Company. Accordingly, their financial statements have not been consolidated.

109

36. SUBSIDIARIES AND ASSOCIATES (CONTINUED)

(b) Associates

Name	Equity	interest	Principal Activities	Principal Activities
	2004	2003
Beijing Matsushita Color CRT	30%	30%	Manufacture and sales	of color picture tubes and
Co., Ltd.			color display tubes
Shenzhen Evergreat Industrial	40%	40%	Development and manufacture of mechanical
Co., Ltd.			integrated products,	satellite communication
			equipment, computer	software and automatic
			instruments
Beijing Nittan Electronics Co.,	40%	40%	Manufacture and sales of terminals, connectors and
Ltd.			stampers
Beijing Nissin Electronics	40%	40%	Manufacture and sales of electronics tubes and
Precision Component Co., Ltd.			related spare parts
Beijing Huaxu Jinka Co., Ltd.	-	21%	Manufacture and sales	of IC card, magnetic card,
			laser card and related read-write equipment
Beijing Orient Mosler Security	35%	35%	Manufacture and sales	of security and protection
Technology System Co., Ltd.			system and products
Beijing Oriental Software Co.,	-	30%	Design, develop, manufacture of software,
Ltd.			hardware and computer	components; network
			Integration
TPV Technology Limited	25.37%	26.36%	Manufacture and sales of color computer monitors
			and LCD products
Hyundai LCD, Inc. (Note 33)	39.11%	48.5%	Manufacture and sale	of Liquid Crystal Display
			(“LCD”) devices used	in handset and electrical
			goods
Beijing Star City Real Estate	40%	-	Property development
Development Co., Ltd.

110

37. INTEREST IN JOINT VENTURES

The Group has a 50% interest in a joint venture, Beijing Asahi Glass Electronics Co., Ltd., which manufactures electronics products. The following amounts represent the Group’s 50% share of the assets and liabilities, sales and results of the joint venture which were included in the consolidated balance sheet and income statement:

Property, plant and equipment Intangible assets Current assets Current liabilities Net assets Sales Profit before tax Income taxes Profit after tax	2004 RMB’000 46,464 4,909 82,477 133,850 (22,333 ) 111,517 98,438 26,546 (3,795 ) 22,751	2003 RMB’000 21,413 2,690 37,128 61,231 (10,981 ) 50,250 46,504 10,263 (1,636 ) 8,627

Beijing BOE YAMATO Photoelectron Co., Ltd., in which the Company has a 51% equity interest, went into voluntary liquidation on 1 August 2004. The assets, liabilities and results of this company are not material to the Group and therefore have not been consolidated."

There are no contingencies and commitments relating to the Group’s interest in above joint ventures. The average number of employees in these joint ventures in 2004 was 402 (2003: 532).

111

38. POST BALANCE SHEET EVENTS

(1) Capital increase in Suzhou BOE Chatani Electronics Co., Ltd (“Suzhou BOE Chatani”) and establishment of Beijing BOE Chatani Electronics Co., Ltd

In March 2005, the Company and Chatani Properties Inc completed the additional capital injection of US$4,498,000 into Suzhou BOE Chatani, the controlling subsidiary of the Company, in proportion to their respective original investment., as a result of which the registered capital of Suzhou BOE Chatani has increased to US$8,552,000.

On 22 March 2005, the Company and Suzhou BOE Chatani established in Beijing Economic Technology Development Area Beijing BOE Chatani Electronics Co., Ltd with a registered capital of RMB37,244,248, 1% of which is owned by the Company and the remaining 99% by Suzhou BOE Chatani. As of 18 March 2005, the paid-up capital from the two parties has amounted to RMB8,372,400.

(2) Establishment of Beijing Fangyi Integrated Circuits Co Limited

In order to reduce the manufacturing costs of TFT-LCD and ensure of the stable supply of drive IC, the principal component of TFT-LCD, the Board of Directors has passed a resolution on 24 February 2005 to approve the establishment of Beijing Fangyi Integrated Circuits Co Limited (“Beijing Fangyi”) by the Company and its wholly-owned subsidiary BOE Hydis Technology Co., Ltd. Currently the establishment is under process.

(3) Redemption of Convertible bonds

As of 25 April 2005, the Company has already completed the redemption of its convertible bonds issued by Hyundai LCD Inc. in the amount of US$724,000 (equivalent to approximately RMB5,992,000), with the outstanding US$2,170,000 (equivalent to RMB17,960,000) convertible bonds which was postponed to be redeemed in May of 2005.

112

38. POST BALANCE SHEET EVENTS (CONTINUED)

(4) Syndicate loan facilities obtained by Beijing BOE Optoelectronics Technology Co., Ltd

On 31 March 2005, Beijing BOE Optoelectronics Technology Co., Ltd (“BOE Optoelectronics”) , a subsidiary of the Company signed the Syndicate Loan Facility Agreement with the Beijing City Construction Development Division of China Construction Bank Co Ltd as the sole and lead manager of the banking consortium, for facilities with limit of US$740 million (including the equivalent balance of RMB denominated loans). The facilities include fixed assets loans with a term of 5 years and working capital loans with a term of 3 years from the respective dates of cash drawdown. Interest rates for United States Dollars denominated loans and Renminbi denominated loans shall be 1.8% over 3 months LIBOR rate and the applicable basis rates announced by the People’s Bank of China from time to time respectively. In respect of the consortium loan facilities, BOE Optoelectronics has entered into a Custody Agreement, a Machinery Pledge Agreement and a Real Estate Pledge Agreement with each lending bank under the banking consortium whereby BOE Optoelectronics has agreed to pledge the existing and future interests in all land and buildings and machinery and these assets are having appraised values of RMB1.479 billion and RMB4.12 billion respectively. BOE Optoelectronics also pledges all insurance contracts related to these assets to the consortium.

Both the Company and Beijing Electronics Holdings Ltd., Co signed a corporate guarantee agreement with each lending bank under the banking consortium whereby both the companies agreed to provide joint and several non-cancellable corporate guarantees to the extent of 50% of the net asset values of the Company on consolidated basis, less the amount of corporate guarantees already granted to other third parties and recognized by the banking consortium. The Company has committed to reduce the amount of corporate guarantees to other third parties to a level no more than RMB900 million within 6 months from the date of signing of the guarantee agreement. At the same time, the Company, Beijing Electronics Holdings Ltd., Co and BOE Optoelectronics have jointly signed an agreement to the effect that BOE Optoelectronics, the Company and Beijing Electronics Holdings Ltd., Co are the primary, secondary and third-ranked guarantor. As of 25 April 2005, BOE Optoelectronics has drawn down the total facility limit of US$740 million.

In addition, BOE Optoelectronics and Beijing Electronics Holdings Ltd., Co signed an agreement whereby BOE Optoelectronics is

113

liable to pay a guarantee fee of 0.1% per annum on the amount of facilities utilised by BOE Optoelectronics in each year.

114

38. POST BALANCE SHEET EVENTS (CONTINUED)

(5) Issuance of corporate debentures

On 12 April 2005, BOE Hydis Technology Co., Ltd. a wholly owned subsidiary has completed the initial public offerings of interest bearing, unsecured and bearer corporate bonds (the “Bonds”) with the purpose of fueling the working capital in Korea. The total amount of the issued Bonds is KRW6 billion with the following main terms: the par value of each bond is KRW10,000; the interest rate is 6.5% per annum, the issuance period is from 12 April 2005 to 12 April 2007. The principal amount of the Bonds will be repaid at the Maturity Date, and the interests of the Bonds will be paid every three months starting from the issuance date at one fourth of the annual interest.

As of 25 April 2005, proceeds of KRW5.922 billion (equivalent to RMB473.56 million) have been raised from the issuance of the Bonds.

(6) Leasing of properties

By a board resolution dated 24 February 2005, the Company entered into a finance lease agreement with Beijing Dongdian Industrial Development Co (“Beijing Dongdian”) for the leasing of a youth hostel for a period of 20 years. The ownership of the property will rest with the Company after the full satisfaction of the lease. The Company is required to pay off the entire rental under the lease of approximately RMB11,292,000, representing the net present value of the total rental value of the property for the next 20 years of approximately RMB16,916,000, calculated at annual rental of RMB246.38 per sq. m using a discount rate of 6.76%. As at 25 April 2005, the Company has paid approximately RMB8,131,000 with a balance of approximately RMB3,161,000 to be paid.

(7) Strategic Alliance with Marubeni Corporation of Japan (“Marubeni”)

On 1 March 2005, the Company signed a Strategic Alliance Agreement (the “Agreement”) with Marubeni. According to the Agreement, Marubeni will:

i) as required, provide the Company with TFT-LCD

115

production-related materials sourcing and components procurement information services and provide the TFT-LCD fab of the Company with stable and competitive materials and components supply;

ii) by such means as active investment, assist in the introducing of overseas TFT-LCD materials and components manufacturers to invest in Beijing and form the localization services in ;
iii) assist in the marketing and sale of the Company’s products into global markets; and
iv) study on the co-operation model with the Company in the 2[nd] TFT-LCD production facility project, including such model of direct investment by Marubeni.

38. POST BALANCE SHEET EVENTS (CONTINUED)

(8) Monitor and Flat Screen TV business restructuring

On 15 December 2004, the Company signed a Heads of Agreement with TPV Technology Limited (“TPV”) under which the Company intends to transfer to TPV all its 45.21% shareholding in Beijing Orient Top Victory Electronics Co, Ltd. (“Beijing Top Victory”) , as a consideration TPV will issue to the Company a number of shares. On the same day, Koninklijke Philips Electronics N.V. (“Philips”) signed a Letter of Intent with TPV for the contribution of the monitor and flat screen TV businesses and assets owned by Philips to TPV , as a consideration TPV will issue to Philips Consideration Shares and Convertible Bonds.

On 15 December 2004, the Company and Philips signed to each other an Irrevocable Letter of Undertaking, an attachment to which is the Outline of Proposed Shareholders Agreement (“Outline”). Under the Outline, the Company shows its support to the above-mentioned transaction between TPV and Philips, and Philips acknowledges that the Company is and intends to remain the largest shareholder in TPV and Philips acknowledges its support for the Company’s objective. The Consideration Shares of Philips shall be limited to 15% of TPV’s enlarged share capital post the TPV and OTPV transactions. The Philips Consideration Shares and Convertible Bonds shall be subject to a 3 years lock-up period. If Philips is to sell all or part of its TPV Shares, Convertible Bonds or Converted Shares, Philips will grant the Company a right of first refusal in relation to such shares and/or bonds. If the Company does not exercise its right of first refusal, Philips can sell such shares and/or bonds to a third party, provided that this third party can not be any person of TPV’s five key competitors and the Company’s five key competitors who manufacture TFT LCD panels and provided that

116

such third party (other than a financial institution in a block trade) in a transaction whereby receives from Philips more than 15% of the issued shares of TPV immediately after the completion of such sale. If at any time Philips’ shareholding in TPV is in excess of 15%, Philips agrees that it will not exercise any voting rights attaching to such excess shares. The Company and Philips confirm that they shall take all such actions as may be necessary or appropriate to enter into and execute a Shareholders Agreement in the form in accordance with the Outline.

117

39. IMPACT OF IFRS ADJUSTMENTS ON PROFIT AFTER TAXATION AND MINORITY INTERESTS AND SHAREHOLDERS’ FUNDS

The statutory accounts of the Group are prepared in accordance with PRC accounting regulations applicable to joint stock limited companies. These accounting principles differ in certain significant respects from IFRS. The effects of these differences on the profit after taxation and minority interests for the year ended 31 December 2004 and shareholders’ funds at that date are summarised as follows:

Profit after
taxation and
minority
Shareholders'
interests
funds
RMB’000
RMB’000
As determined pursuant to PRC
accounting regulations
206,013
Difference in amortisation of goodwill
(1,334)
Appropriation of staff bonus and
welfare funds
(1,922)
Government grant
841
Capitalisation of certain development cost
163,786
Capitalisation of finance costs
(11,186)
Difference in negative goodwill
recognition arising from acquisition
of a subsidiary
-
Recognition of loss on deemed disposal of
a subsidiary
(2,945)
Others
448
As determined pursuant to IFRS
353,701

4,956,439
(5,334)
-
(3,014)
172,473
18,448
(2,171)
16,529
1,014
5,154,384

40. APPROVAL OF FINANCIAL STATEMENTS

The Board of Directors authorised these financial statements for issuance on 25 April 2005.

118

119

Items	At beginning of year	Increase	Decrease	At end of year
一、Provision for doubtful debts	30,890,673.00	17,092,602.00	15,173,266.00	32,810,009.00
Including：account receivables	29,449,312.00	10,083,895.00	15,081,209.00	24,451,998.00
other receivables	1,441,361.00	7,008,707.00	92,057.00	8,358,011.00
二、Provision for short term investments	0.00	0.00	0.00	0.00
三、Provision for inventories	52,035,081.00	139,783,533.00	63,821,762.00	127,996,852.00
Including：Finishedgoods	36,488,863.00	130,345,805.00	50,475,220.00	116,359,448.00
Raw materials	15,546,218.00	9,437,728.00	13,346,542.00	11,637,404.00
四、Provision for longterm investments	14,160,247.00	21,074,300.00	5,386,659.00	29,847,888.00
Including：long-term equityinvestments	14,160,247.00	21,074,300.00	5,386,659.00	29,847,888.00
long-term securities investments	0.00	0.00	0.00	0.00
五、Impairment of fixed assets	18,160,960.00	5,050,387.00	2,007,647.00	21,203,700.00
Including：buildings	0.00	139,005.00	0.00	139,005.00
plant and machinary	18,160,960.00	4,911,382.00	2,007,647.00	21,064,695.00
六、Provision for intangible assets	572,205.00	341,361.00	0.00	913,566.00
Including：Patent	572,205.00	341,361.00	0.00	913,566.00
trademark	0.00	0.00	0.00	0.00
七、Impairment of construction inprocess	0.00	376,001.00	0.00	376,001.00
八、Provision for consignment loans	0.00	0.00	0.00	0.00
九、Total	115,819,166.00	183,718,184.00	86,389,334.00	213,148,016.00

121

AI assistant

BOE TECHNOLOGY GROUP CO., LTD — Annual Report 2004

53782_rns_2005-04-28_2387a2c3-2b86-4714-85c8-c7004b22579d.PDF

BOE TECHNOLOGY GROUP CO., LTD. 2004 ANNUAL REPORT (Overseas Version)

Important:

Contents

CHAPTER I COMPANY PROFILE

CHAPTER II. FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS

CHAPTER III. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS

circulation share

CHAPTER IV. DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES

IV. About employees

CHAPTER V. ADMINISTRATIVE STRUCTURE

1. The Company’s current administrative structure

CHAPTER VI. SHAREHOLDERS’ GENERAL MEETING

CHAPTER VII. REPORT OF THE BOARD OF DIRECTORS

(III) Main suppliers and customers

(1) Significant investment with the proceeds not raised through shares offering

4. Financial position and operating results of the Company

6. Routine work of the Board of Directors

CHAPTER VIII. REPORT OF THE SUPERVISORY COMMITTEE

II. Independent opinions of the Supervisory Committee

2. Inspection of the Company’s financial status

3. The use of raised proceeds

CHAPTER IX. SIGNIFICANT EVENTS

III. Significant related transactions

(2) The internal guarantee

8. Other significant events

26.36%, continuously kept the 1[st] large shareholder position.

3. Integration of CRT and TTE business

CHAPTER X. FINANCIAL REPORT

CHAPTER XI. DOCUMENTS FOR REFERENCE

AUDITORS’ REPORT TO THE SHAREHOLDERS OF BOE TECHNOLOGY GROUP CO., LTD. (Incorporated in the People’s Republic of China with limited liability)

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

BASIS OF OPINION

OPINION

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Renminbi)

1. ORGANISATION AND OPERATIONS

2. PRIOR YEAR ADJUSTMENTS ARISING FROM FUNDAMENTAL ERRORS

2. PRIOR YEAR ADJUSTMENTS ARISING FROM FUNDAMENTAL ERRORS (CONTINUED)

3. PRINCIPAL ACCOUNTING POLICIES

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(a) Principles of consolidation

(b) Subsidiaries

(c) Associates

(d) Joint ventures

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(e) Goodwill

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(f) Property, plant and equipment and depreciation

(g) Construction in progress

(h) Investment property

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(i) Intangible assets

i) Research and development

ii) Computer software development cost

iii) Technology rights

iv) Other intangible assets

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(j) Investments

BOE TECHNOLOGY GROUP CO., LTD Annual Report 2004