BOE TECHNOLOGY GROUP CO., LTD - Audit Report / Information 2004

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

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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.

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BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

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	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

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BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

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

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

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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.

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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

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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.

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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;

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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4. SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format – business segments

O 2004 (A RMB’000 597,530 166,409 763,939 (509,105) (66,792 ) (575,897 ) (92,091)	Elim 2004 RMB’000 - (2,215,584)	Con 2004 ( RMB’000 12,441,708 (11,157,840 )	solidated 2003 As restated) RMB’000 11,180,106
	(2,215,584)
	2,208,108 2,208,108		(9,449,140 )
		188,009 188,009 (25,085) (30,196) 364,227 496,955 (61,293)	674,095 674,095 (235,550) (11,047) 76,616 504,114 (30,003 ) 474,111 (78,095 ) 396,016
(30,196) 364,227 (81,961)
		435,662 (81,961 ) 353,701

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4. SEGMENT INFORMATION (CONTINUED)

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

CRT/LCD TFT -LCD DPS Others Elimination 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 (As restated) 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) Investment in equity method associates - - - - 392 - 2,179,707 1,896,347 - - Consolidated total assets 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 - -	Con 2004 ( RMB’000 15,926,659 2,180,099 18,106,758 12,427,401 12,427,401 6,606,998 721,409 22,345 5,308	solidated 2003 As restated) RMB’000 10,336,459 1,896,347 12,232,806
		9,153,342 9,153,342 3,618,900 615,248 13,699 12,905

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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 reve nue 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

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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

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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).

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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%.

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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.

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BOE TECHNOLOGY GROUP CO., LTD.

11. PROPERTY, PLANT AND EQUIPMENT

		Motor vehicles Construction in progress RMB’000 RMB’000 8,372 122,706 (2) (65) 332 50,030 3,453 306,147 (115) - 461 (146,830) - (22,763) (2,735) - - -	Motor vehicles Construction in progress RMB’000 RMB’000 8,372 122,706 (2) (65) 332 50,030 3,453 306,147 (115) - 461 (146,830) - (22,763) (2,735) - - -	Motor vehicles Construction in progress RMB’000 RMB’000 8,372 122,706 (2) (65) 332 50,030 3,453 306,147 (115) - 461 (146,830) - (22,763) (2,735) - - -	Total RMB’000 1,326,218 (1,305) 3,062,684 508,884 (72,243) - (22,763) (614,617) (12,333 ) 4,174,525
				RMB’000 122,706 (65) 50,030 306,147 - (146,830) (22,763) - -
1,416,676		9,766		309,225
1,526,336 (109,660)		19,743 (9,977)		309,225 -	5,113,971 (939,446)
1,416,676	2,438,858	9,766		309,225	4,174,525 4,174,525 447,034 151,061 1,414 6,384,628 (252,161) (15,674) (50,845) - (1) (716,692) (5,078)
	2,438,858 263,831 6,336 413 265,067 (205,356) (14,616) (2,782) 624,672 4,355 (593,648) (4,612)	9,766 309,225 137 40,946 1,545 7,606 371 - 8,033 6,098,711 (531) (285) - (165) (321) (47,652) 545 (1,325,564) - (17,133) (2,397) - - (340)
2,253,196	2,782,518 4,128,499 (1,345,981) 2,782,518	17,148	5,065,349		10,118,211 11,692,685 (1,574,474)
2,469,194 (215,998)		29,643 (12,495)	5,065,349 -
2,253,196		17,148	5,065,349		10,118,211

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).

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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

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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 propert y 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.

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. INTANGIBLE ASSETS

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).

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BOE TECHNOLOGY GROUP CO., LTD.

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).

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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).

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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

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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) 23. BORROWINGS Current	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) 23. BORROWINGS Current	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
	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

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

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BOE TECHNOLOGY GROUP CO., LTD.

23. BORROWINGS (CONTINUED)

Non-current
2004
RMB’000
Syndicate loan – secured
1,410,621
Bank borrowings – secured
979,590
Bank borrowings – unsecured
101,710
Convertible bonds (Note 24)
-
Finance lease liabilities
9,660
Others
1,800
2,503,381
Maturity of non-current borrowings (excluding finance lease liabilities):
2004
RMB’000
Due between 1 and 2 years
1,015,919
Due between 2 and 5 years
1,477,802
2,493,721
Finance lease liabilities – minimum lease payment:
2004
RMB’000
Later than 1 year and not later than 5 years
9,660
Future finance charge
-
Present value of finance lease liabilities
9,660

2003
RMB’000
1,502,162
35,035
155,210
51,637
20,447
1,800
1,766,291
2003
RMB’000
260,624
1,485,220
1,745,844
2003
RMB’000
22,863
(2,416
)
20,477

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BOE TECHNOLOGY GROUP CO., LTD.

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

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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

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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.

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BOE TECHNOLOGY GROUP CO., LTD.

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

Deferred tax assets

At 1 January 2004 Exchange differences Acquisition of business u Income statement charge	Unapproved impairment loss RMB’000 (2,148) - nit - (1,097 ) (3,245)	Accrued for royalty use RMB’000 (4,042) - - - (4,042 )	Over- amortised intangible assets RMB’000 (3,620) - - (2,151 ) (5,771 )		Price protection RMB’000 (828) - - 742 (86 )	Unrealised income RMB’000 (730) - - 730 -	Others RMB’000 (4,358) (25) (57) 4,364 (76 )	Total RMB’000 (15,726) (25) (57) 2,588 (13,220)

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BOE TECHNOLOGY GROUP CO., LTD.

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

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BOE TECHNOLOGY GROUP CO., LTD.

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 The amounts recognised in the income statement are Current service cost Interest cost Expected return on plan assets Current service cost, included in staff costs	2004 RMB’000 - 19,685 19,685 as follows: 2004 RMB’000 54,534 - - - 54,534	2003 RMB’000 (2,501) 14,643 (12,142 ) 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

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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, ? ? ? ? ? ? ? ? ? ? ? ? ( ? ? ? ? ? ) in respect of the restructuring of a newly acquired subsidiary of BOE Land, BOE Land and ? ? ? ? ? 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 ? ? ? ? ? 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.

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BOE TECHNOLOGY GROUP CO., LTD.

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 cove nant 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).

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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
)

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BOE TECHNOLOGY GROUP CO., LTD.

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

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BOE TECHNOLOGY GROUP CO., LTD.

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	-

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BOE TECHNOLOGY GROUP CO., LTD.

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

-
-

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BOE TECHNOLOGY GROUP CO., LTD.

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	-

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BOE TECHNOLOGY GROUP CO., LTD.

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).

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

36. SUBSIDIARIES AND ASSOCIATES (CONTINUED)

(b) Associates

Name	Equity	interest	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.

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BOE TECHNOLOGY GROUP CO., LTD.

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).

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BOE TECHNOLOGY GROUP CO., LTD.

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.

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BOE TECHNOLOGY GROUP CO., LTD.

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

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BOE TECHNOLOGY GROUP CO., LTD.

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 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.

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BOE TECHNOLOGY GROUP CO., LTD.

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 (“T PV”) 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 consideratio n 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 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.

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BOE TECHNOLOGY GROUP CO., LTD.

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	4,956,439
Difference in amortisation of goodwill	(1,334)	(5,334)
Appropriation of staff bonus and
welfare funds	(1,922)	-
Government grant	841	(3,014)
Capitalisation of certain development cost	163,786	172,473
Capitalisation of finance costs	(11,186)	18,448
Difference in negative goodwill
recognition arising from acquisition
of a subsidiary	-	(2,171)
Recognition of loss on deemed disposal of
a subsidiary	(2,945)	16,529
Others	448	1,014
As determined pursuant to IFRS	353,701	5,154,384

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BOE TECHNOLOGY GROUP CO., LTD.

40. APPROVAL OF FINANCIAL STATEMENTS

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

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BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004

Contents	Pages
Auditors’ report	1
Consolidated income statement	2
Consolidated balance sheet	3 & 4
Consolidated statement of changes in shareholders’ equity	5
Consolidated statement of cash flows	6 & 7
Notes to the financial statements	8 to 71

BOE TECHNOLOGY GROUP CO., LTD.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004

AI assistant

BOE TECHNOLOGY GROUP CO., LTD — Audit Report / Information 2004

53782_rns_2005-04-28_d40b4b25-2609-4b1a-883f-8757e69125b0.PDF

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

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004

(Expressed in Renminbi)

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2004

(Expressed in Renminbi)

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

(Expressed in Renminbi)

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

(Expressed in Renminbi)

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

(Expressed in Renminbi)

NOTES TO THE FINANCIAL STATEMENTS

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

ii) Computer software development cost

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(j) Investments

(k) Land use rights

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(l) Inventories

(m) Trade receivables

(n) Loan to employees

(o) Cash and cash equivalents

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(p) Operating leases

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(q) Provisions

(r) Government grants

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(s) Revenue recognition

(t) Share capital

(u) Borrowings

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(v) Deferred taxation

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(w) Foreign currency transactions

ii) Transactions and balances

iii) Group companies

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(x) Borrowing costs

(y) Employee benefits

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(z) Financial instruments

(aa) Impairment of assets

(bb) Contingencies

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(cc) Subsequent events

(dd) Dividends

(ee) Segment reporting

(ff) Business combination

(gg) Comparatives

3. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(hh) Financial instruments and risk management

(a) Financial risk factors

(i) Foreign exchange risk

(ii) Interest rate risk

(iii) Credit risk

BOE TECHNOLOGY GROUP CO., LTD Audit Report / Information 2004