BOE TECHNOLOGY GROUP CO., LTD — Interim / Quarterly Report 2006

Aug 29, 2006

BOE Technology Group Co., Ltd.

Consolidated balance sheet

As at 30 June 2006

(Expressed in Renminbi)		30 June 2006	31 December 2005
	2006	2006	2005	2005
Assets
Non-current assets
Property, plant and equipment	10,833,469		11,330,272
Construction in progress	287,661		285,244
Investment properties	110,127		113,121
Intangible assets	433,314		449,850
Land use right	92,775		103,332
Investment in associates	2,853,436		2,820,463
Other investments	5,500		10,661
Deferred tax assets	-		1,940
Other long-term assets	51,377		70,507
		14,667,659		15,185,390
Current assets
Inventories	1,815,637		1,919,901
Trade receivables and payment in
advance	1,854,758		2,338,795
Convertible bond –current part	-		-
Cash and cash equivalents	1,510,409		2,080,680
		5,180,804		6,339,376
Total assets		19,848,463		21,524,766
Shareholder's equity and liabilities
Shareholder's equity
Share capital	2,195,696		2,195,696
Share premium	1,553,927		1,552,913
Reserves	662,215		680,190
Retained profits	-2,184,685		-461,183
		2,227,153		3,967,616
Minority interests		226,917		233,881
Non-current liabilities
Bank loans	8,032,546		9,569,710
Deferred tax liabilities	-		588
Employee benefits	26,952		17,280
Other long-term liabilities	1,170,610		1,156,478
		9,230,108		10,744,056
Current liabilities
Trade payables and other payables	2,734,034		2,742,275
Tax payable	12,994		23,211
Bank loan	5,376,890		3,762,956
Reserve	40,367		50,771
		8,164,285		6,579,213
Total liabilities		17,394,393		17,323,269
Totalshareholder'sequityand
liabilities		19,848,463		21,524,766

BOE Technology Group Co., Ltd.

Consolidated income statement

January to June 2006

	Ended 30 June
	2006	2005
Turnover	4,286,365	4,321,711
Cost of sales	-5,310,411	-4,596,766
Gross (loss)/profit	-1,024,046	-275,055
Other operating profit	105,422	-8,850
Distribution expenses	-104,039	-136,716
Administrative expenses	-505,803	-413,692
(Loss)/profit from operations	-1,528,466	-834,313
Net financing costs	-371,643	-175,191
Share of profits of associates	140,125	106,015
(Loss)/profit before tax	-1,759,984	-903,489
Income tax	-3,649	-40,430
Total profitAmong which:	-1,763,633	-943,919
Equity belonging to the GroupMinority interests	-1,723,502-40,131	-965,73621,817

BOE Technology Group Co., Ltd.

Consolidated statement of changes in equity

January to June 2006

	Share capital	Sharepremium	Reserve	Retainedprofits	Total equity
January 1 2006	2,195,696	1,552,913	680,190	-461,183	3,967,616
Sharecapitaltransferredfrom
capital reserve	-	-	-	-	-
Share premiumCurrencytranslation	-	-1,014	-	-	1,014
differences	-	-	-17,975	-	-17,975
Profit/loss for the year	-	-	-	-1,763,632	-1,763,632
Profitsattributableto minority interests	-	-		40,130	40,130
Dividend for the year	-	-	-	-	-
Capitalcontributionsfrom minority interestsDistributionsto	-	-	-	-	-
minority interests	-	-	-	-	-
30 June 2006	2,195,696	1,553,927	662,215	-2,184,685	2,227,153

BOE Technology Group Co., Ltd.

Consolidated cash flow statement

January to June 2006

(Expressed in Renminbi)
Cash flows from operating activities
Net profit	-1,723,502
Adjustments for:
Gain/loss of minority shareholders	-40,130
Income tax	3,649
Depreciation expense	916,200
Amortization expense	23,253
Impairment provisions	256,703
Loss from disposal of fix assets	30,266
Financial expense	351,901
Share of profits before tax of associates	-140,125
Change in working capital:
Inventories	-148,897
Trade and other receivables	562,110
Annuity and post employment benefit	7,240
Trade payables	-106,352
Net cash inflow from operating activities	-7,684
Interest income received	19,742
Income tax paid	-13,867
Net cash flow from operating activities	-1,809
Cash flows from investing activities
Net cash outflow due from investment in subsidiaries	-8,000
Acquisitions of property, plant and equipment	-412,266
Acquisitions of intangible assets	8,321
Acquisitions of available-for-sale investments	-
Acquisitions of associate	-
Acquisitions of long-term bond investment	-
Cash inflow due from disposal of subsidiaries	2,787
dividends and bond interest income received	115,151
Withdrawing long-term bond investment	-
Other investing activities	-
Cash inflow from sale of property, plant and equipment	1,919
Net cash flow from investing activities	-292,088
Cash flows from financing activities
Cash inflow from issue of convertible bonds	-
Cash received due from absorbing investment	-
Additional loan	1,455,057
Cash inflow from other financing activities	-
Repaying loan	-1,326,763
Dividend paid to shareholders of the Group	-
Dividend paid to minority shareholders	-
Interest expenditure	-391,656
Cash outflow for other financing activities	-7,940
Net cash flow from financing activities	-271,302
Effect of exchange rate changes	-5,072
Increase/(decrease) in cash and cash equivalents	-570,271
Balance of cash and cash equivalents at the year-begin	2,080,680
Balance of cash and cash equivalents at the period-end	1,510,409

(Expressed in Renminbi)

1 Background of the Company

BOE Technology Group Company Limited (the "Company") was founded on 9 April 1993 in the People's Republic of China (the "PRC") as a joint stock limited company as part of the restructuring of Beijing Electronic Tube Factory ("BETF"). On the same date, the relevant business undertakings of BETF together with the related assets and liabilities were taken over by the Company. The Company and its subsidiaries are collectively referred to as the Group.

The parent company of the Group is Beijing Orient Investment and Development Company Limited ("BOID"), which is a state-owned enterprise registered in Beijing, the PRC.

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 Company has its primary listing on the Shenzhen Stock Exchange issuing its first B shares on 10 June 1997, with further offerings of A shares on the Shenzhen Stock Exchange in 12 January 2001 and B shares on 16 January 2004 respectively.

2 Basis of preparation

The current liabilities of the Group is more RMB2,983,480,803 than the current assets as at 30 June 2006. The current liabilities of the Group comprise mainly of bank loan. Up to 29 August 2006, the Group has successfully renewed bank loan of RMB642,000,000. At the same time, on 18 April 2006, the board of directors has approved a private placement of 1,500 million A shares to certain specified persons and this proceeding has been approved by China Securities Regulatory Commission with [2006] No.36 document. All the issuance is in under. In addition, the group will adopt measures including the asset structure improvement and stock asset realization to accelerate fund turnover. Accordingly, the financial statements of the Group should be prepared on a going concern basis.

3 Summary of significant accounting policies

(a) Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRSs") promulgated by the International. A summary of the significant accounting policies adopted in the preparations of the financial statements is set out below.

(b) Basis of preparation

The consolidated financial statements for the year ended 30 June 2006 comprise the Company and its subsidiaries. The financial statements are presented in Renminbi ("RMB"), rounded to the nearest thousand. The measurement basis used in the preparation of the financial statements is historical cost.

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factor that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

(c) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date of that control ceases.

(ii) Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate.

(iii) Jointly controlled entities

Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group's proportionate share of the entities' assets, liabilities, revenue and expenses with items of a similar nature on a line by line basis, from the date that joint control commences until the date that joint control ceases.

(iv) Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group's interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(d) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to RMB at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement, except those eligible for capitalisation as construction in progress.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the transactions.

(ii) Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to RMB at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to RMB at rates approximating to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly as a separate component of equity.

On disposal of a foreign operation, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is included in the calculation of the profit or loss on disposal.

• (e) Property, plant and equipment
• (i) Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition and location for its intended use.

(ii) Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.

(iii) Disposal

Gains or losses arising from the retirement or disposal of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement on the date of retirement or disposal.

(iv) Depreciation

Depreciation is charged to income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, after taking into account its estimated residual value. The estimated useful lives are as follows:

		Estimated residual
		value as a percentage of
	Years	costs
Buildings	20 to 40 years	3%-10%
Plant, machinery and equipment	2 to 15 years	3%-10%
Motor vehicles	2 to 10 years	0%-10%

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(f) Intangible assets

(i) Goodwill

All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, associates and jointly controlled entities. It represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.

Any excess of the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent assets and contingent liabilities over the cost of a business combination or an investment in an associate or a jointly controlled entity is recognised immediately in the income statement.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred.

(iii) Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses .

(iv) Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(v) Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:

Technology rights	8-20 years
Patent	5-10 years
Computer software	3-10 years

(g) Investments

Investment properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less accumulated depreciation and impairment losses.

Depreciation is provided to write off the cost, where appropriate, of each asset over its estimated useful life ranging from 20 to 40 years on a straight-line basis, after taking into account its estimated residual value.

(h) Construction in progress

Construction in progress represents buildings, various plant and equipment under construction and pending installation, and is stated at cost less impairment losses. Cost comprises direct costs of construction, borrowing costs and foreign exchange differences on related borrowed funds to the extent that they are regarded as an adjustment to interest charges and exchange differences on the designated financial instruments during the period of construction.

Capitalisation of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.

No depreciation is provided in respect of construction in progress until it is completed and ready for its intended use.

(i) Trade and other receivables

Trade and other receivables are stated less impairment losses for bad and doubtful debts.

(j) Lease prepayments

Lease prepayments represent land use rights paid to the PRC's governmental authorities. Land use rights are carried at cost less impairment losses and are amortised on a straight-line basis over the respective periods of the rights.

(k) Inventories

Inventories, other than spare parts, tools and ancillary materials, are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is calculated using the weighted average cost formula and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

Spare parts, tools and ancillary materials are stated at cost less provision for obsolescence.

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

(m) Impairment

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or, an impairment loss previously recognised no longer exists or may have decreased:

• property, plant and equipment;
• construction in progress;
• intangible assets;
• lease prepayments;
• investment properties;
• other investments; and
• goodwill.

If any such indication exists, the asset's recoverable amount is estimated.

• Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

(n) Dividends

Dividends are recognised as a liability in the period which they are declared.

(o) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

(p) Employees benefits

Obligations for contributions to defined contribution retirement schemes are recognised as an expense in the income statement as incurred.

The Group's net obligation in respect of lump sum long service amounts payable on cessation of employment in certain circumstances under the relevant statutory requirement is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method, discounted to its present value and reduced by the fair value of any related assets.

(q) Provisions and contingent liabilities

Provisions are recognised for liabilities for uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(r) Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(s) Revenue recognition

(i) Goods sold and services rendered

Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

(ii) Rental income

Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income.

(iii) Government grant

An unconditional government grant is recognised in the income statement as other operating income when the grant becomes receivable. Any other government grant is recognised in the balance sheet initially as deferred income when there is reasonable assurance that it will be received and that the Group will comply with the conditions attaching to it. Grants that compensate the Group for expenses incurred are recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised in the income statement as other operating income on a systematic basis over the useful life of the asset.

(iv) Dividend income

Dividend income from other investments is recognised when the shareholder's right to receive the payment is established.

(v) Interest income

Interest income is recognised as it accrues using the effective interest method.

• (t) Expenses
• (i) Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

(ii) Net financing costs

Net financing costs comprise interest expenses on borrowings calculated using the effective interest rate method, interest receivable on bank deposits, dividend income, foreign exchange gains and losses, and gains and losses on derivative financial instruments that are recognised in the income statement.

Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established which in the case of quoted securities is usually the ex-dividend date.

(u) Income tax

Income tax on the income statement for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

(v) Borrowing costs

Borrowing costs are expensed in the income statement in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(w) Related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals (being members of key management personnel, significant shareholders and/ or their close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the Group.

4 Turnover

Turnover represents the aggregate of the invoiced value of goods sold and services rendered, after allowances for goods returned and deduction of any trade discounts, and excludes value added tax or other sales taxes.

5 Segment reporting

Segment information is presented in respect of the Group's business and geographical segments.

Inter-segment pricing is determined on an arm's length basis.

(i) Business segments

The Group comprises the following main business segments:

• z Thin Film Transistor-Liquid Crystal Display ("TFT-LCD") business;
• z Small-size-Liquid Crystal Display ("SLCD") business
• z Others include Precision Electronic Components and materials and other business lines.
• (ii) Geographical segments

The Group's two major business segments are managed on a worldwide basis, but operate in four main geographical areas.

PRC is the home country of the Group which is also the main operating country. Other Asia region mainly covers the production and sales activity of TFT-LCD and STN-CTSN.

European region and American region mainly covers the sales activity of TFT-LCD.

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Business segments

	Jan.-Jun. 2006		Jan.-Jun. 2005
	Income frommain operations	Cost ofmain operations	Income frommain operations	Cost ofmain operations
	RMB'000	RMB'000	RMB'000	RMB'000
LCDterminalproductsbusiness	-	-	1,922,554	1,839,447
TFT-LCD business	3,639,446	4,793,413	2,050,208	2,541,720
SLCD business	319,835	263,325	321,297	263,029
Other business	542,137	459,557	418,763	333,424
Elimination	(215,053)	(205,884)	(391,111)	(380,854)
Total	4,286,365	5,310,411	4,321,711	4,596,766

Geographical segments

	Jan.-Jun. 2006		Jan.-Jun. 2005
	Income from	Cost of	Income from	Cost of
	main operations	main operations	main operations	main operations
	RMB'000	RMB'000	RMB'000	RMB'000
PRC	978,863	966,542	2,801,526	2,999,367
Other Asian region	3,788,533	4,790,099	1,537,430	1,559,607
European region	330,443	340,123	86,847	82,953
American region	157,838	173,790	484,785	499,016
Other countries	-	-	172,231	206,674
Elimination	(969,312)	(960,143)	(761,108)	(750,851)
Total	4,286,365	5,310,411	4,321,711	4,596,766

6 Other operating income/(expenses)

	January - June 2006RMB'000
Sales of scrap	1,230
Properties lease	3,974
Mould development and transfer	2,112
Sales of LCD	2,986
Government grant	66,538
Income from penalty and reparations	3,966
Income from transfer of Golf Club's membership	23,283
Other	1,333
	105,422

7 Financial expense

	January - June 2006	January - June 2005
	RMB'000	RMB'000
Interests expenses	457,632	262,014
Less: Interests income	(19,742)	(32,010)
Exchange loss	97,305	43,084
Less: exchange income	(165,667)	(100,851)
Other	2,115	2,954
	371,643	175,191

Financial expense is higher, which was due to increase of interest expense on bonds issued by BOE-Hydis in April 2005 and increase of interest expense on syndicated loan borrowed by BOEOT for the development of production lines of the 5th Generation TFT-LCD products.

8 Property, plant and equipment

		machinery	Motor
	Buildings	and equipment	vehicles	Total
	RMB'000	RMB'000	RMB'000	RMB'000
Cost:
At 1 January 2006	2,586,326	11,333,082	27,787	13,947,195
Increase for the period	78,180	232,058	962	311,200
Transfer from construction in progress	-	200,525	-	200,525
Decrease for the period	(6,616)	(11,019)	(2,125)	(19,760)
				-
At 30 June 2006	2,657,890	11,754,646	26,624	14,439,160
				-
Accumulated depreciations and
impairment losses:				-
At 1 January 2006	322,442	2,282,238	12,243	2,616,923
Increase for the period	126,605	864,851	1,584	993,040
Decrease for the period	(354)	(3,086)	(832)	(4,272)
				-
At 30 June 2006	448,693	3,144,003	12,995	3,605,691
				-
Net book value:				-
At 30 June 2006	2,209,197	8,610,643	13,629	10,833,469
At 1 January 2006	2,263,884	9,050,844	15,544	11,330,272

Ended 30 June 2006, buildings and machinery equipments with a net value of fixed assets of RMB 9,623,723,672 were used as mortgage of short-term loan, loan due within one year and long-term loan.

9 Construction in progress

	30 June 2006	31 December 2005
	RMB'000	RMB'000
At 1 January 2006	285,244	5,065,349
Increase for the period	207,767	3,052,018
	493,011	8,117,367
Transfer to fixed assets	(200,525)	(7,682,540)
Transfer to intangible assets	-	(118,787)
Decrease for the period	(4,825)	-
Impairment losses	-	(19,932)
Disposal of a subsidiary	-	(10,981)
Effect of movements in foreign exchange	-	117
At 30 June 2006	287,661	285,244

10 Intangible assets

	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
Cost:
At 1 January 2006	43,394	162,881	289,284	26,432	521,991
Increase for the period		8,080	191	49	8,320
Transfer from construction
in progress					-
Disposals for the period					-
At 30 June 2006	43,394	170,961	289,475	26,481	530,311
					-
Accumulated amortization and
Impairment losses					-
At 1 January 2006	-	19,965	38,605	13,571	72,141
Amortisation for the period		9,054	12,384	3,418	24,856
Impairment losses					-
Releasing as disposals					-
At 30 June 2006	-	29,019	50,989	16,989	96,997
					-
Net book value:					-
At 30 June 2006	43,394	141,942	238,486	9,492	433,314
At 1 January 2006	43,394	142,916	250,679	12,861	449,850

Ended 30 June 2006, patent with net value of intangible assets worth RMB 591,157 was used as loan mortgage.

11 Investment properties

	30 June 2006
	RMB'000
Cost:
At 1 January 2006	132,098
Increase for the period
At 30 June 2006	132,098
Accumulated depreciation:
At 1 January 2006	18,977
Depreciation withdrawn for the period	2,994
At 30 June 2006	21,971
Net book value:
At 30 June 2006	110,127
At 1 January 2006	113,121

12 Interest in associates

	30 June 2006RMB'000	31 December 2005RMB'000
Long-term equity investment
Balance as at the period-begin	2,820,463	2,209,700
Add: incremental investment	8,000	324,283
Amount adjusted as per equity method	139,787	401,766
Less: dividend in cash	(114,814)	(115,286)
Decrease for the period	-
Balance as at the period-end	2,853,436	2,820,463
	-
Less: impairment provisions	-
Balance as at the period-begin	-

Balance as at the period-end	-	-
	-
Book value	-
Book value as at the period-end	2,853,436	2,820,463
Book value as at the period-begin	2,820,463	2,209,700

13 Inventories

30 June 2006	31 December 2005RMB'000
598,561	673,543
204,652	281,143
990,191	940,658
	24,557
1,815,637	1,919,901
	RMB'00022,233

The inventories were stated at cost less net value after impairment provisions, RMB 466, 569,782 were withdrawn as impairment provision for inventories.

Ended 30 June 2006, the inventories with net book value of RMB 429,487,696 were used as mortgage of short-term loan and long-term loan.

14 Trade receivables

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Accounts receivable	1,268,057	1,775,056
Bills receivable	135,650	101,238
Other receivables	317,488	354,948
Payment in advance	100,516	95,975
Allowance receivable	21,206	163
Prepaid expenses	11,841	11,415
	1,854,758	2,338,795

15 Deposits with banks and cash and cash equivalents

Included in deposit with banks and cash and cash equivalents are foreign currency capital:

	30 June 2006	31 December 2005
United States Dollars	USD 41,714	USD 54,102
Hong Kong Dollars	HKD 14,029	HKD 13,720
Korean Won	KRW 8,465,254	KRW 63,992,986
Japanese Yen	Yen 1,252,971	Yen 3,380,464
Taiwan Dollars	TWD60,032	-

16 Trade payables

	RMB'000	RMB'000
Accounts payable	2,117,811	2,166,670
Bills payable	54,103	90,324
Deposit received	45,465	25,273
wages payable	18,352	33,955
Welfare payable	32,860	25,154
Dividends payable	7,749	6,712
Accrued others payments	1,339	1,314
Others payable	340,604	271,809
Accrued expenses	115,751	121,064
	2,734,034	2,742,275

17 Provisions

	30 June 2006	31 December 2005
	RMB'000	RMB'000
After-sales service fees	38,459	44,503
Compensated absence	1,908	6,268
	40,367	50,771

(a) After-sales service fees

The after-sales service fees expected by the Group is mainly warranty providing for products sold. The said projected liabilities are withdrawn based on the actual occurred amount of warranty over the past years and the actual sales and the reasonable estimation.

(b) Compensated absences

BOE-Hydis calculated the expected cost of additional compensated absences based on the unused employee's vacation that has accumulated at the balance sheet dates.

18 Bank and other loans

At 30 June 2006, bank and other loans were repayable as follows

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Current loan within one year	5,376,890	3,762,956
Non-current loan over two years	8,032,546	9,569,710
total	13,409,436	13,332,666

Bank loans and other loans were stated as per currency sort as follows:

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Current portion of bank and other loans
- denominated in RMB	3,003,240	2,704,704
- denominated in USD	1,148,868	483,424
- denominated in Yen	235,541	363,299
- denominated in KRW	937,121	168,529
- discounted commercial notes	52,120	43,000
Sub-total (current portion)	5,376,890	3,762,956

Non-current portion of bank and other loans
- denominated in RMB	2,867,036	3,800,636
- denominated in USD	3,666,184	3,732,448
- denominated in KRW	1,499,326	2,036,626
Sub-total (non-current portion)	8,032,546	9,569,710
total	13,409, 436	13,332,666

19 Employee benefits

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Post employment benefits	26,952	17,280
total	26,952	17,280

As at 30 June 2006, the post employment benefit is that BOE-Hydis withdraws the post employment benefits to its employees and directors with more than one year of service. The employees and directors 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 when they left their position.

20 Other long-term liabilities

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Long-term construction loan	316,023	300,456
Trust capital loan	421,740	410,657
Deferred income	62,237	88,887
Long-term bills payable	314,117	299,939
Others	56,493	56,539
	1,170,610	1,156,478

(a) Long-term construction loan

The Company, BOEOT and Beijing Economic-Technological Investment & Development Corporation ("BETIDC") has signed the Workshop Construction Consignment Agreement (the "Agreement") and the Workshop Purchase Contract (the "Contract") in 2003, according to the Agreement and the Contract, BETIDC would invest a total of RMB350,000,000 (2004: RMB350,000,000) for the construction of the special workshop used by BOEOT and has the ownership of the said workshop, BOEOT is required to acquire from BETIOC the special workshop within five years from the date of the Agreement. In July 2004, the Company, BOEOT and BETIDC signed the Contract Cancel Agreement, and mutually agreed to cancel the aforesaid Agreement. The Company has undertaken to repay the RMB350,000,000 to BETIDC before 22 October 2008, and Beijing Electronics Holding Company Limited ("BEH"), the controlling shareholder of the Company, undertook jointly liability guarantee.

(b) Trust capital loan

Beijing Economic Technological Investment & Development Corporation ("BETIDC") provided capital of RMB 450,000,000 to the Company in 2004 in order to support the project of the production lines of the 5th Generation TFT-LCD products. The Company would invest in BOEOT with the said capital, and would hold the relevant equity of BOEOT on behalf of BETIDC which the related benefits derived from the equity interests in BOEOT (including but not limited to the entitlement to dividends, the right to share the results of BOEOT and right to exercise the voting right) still belongs to the Company. The Company is required to purchase from BETIDC its interest in BOEOT for RMB450,000,000 within three years from the receipt of the above investment capital sum. If the Company fails to make such purchase within the specified period, Beijing Technology Zone Committee has the right to dispose its interest in BOEOT in the market.

(c) Deferred income

Deferred income represents the difference between the amount of trust capital loan and long-term construction loans and the fair values of these loans. The deferred income will be amortised and is recognised as interest income over the respective loan period.

(d Long-term bills payable

Long-term bills payable mainly includes long-term acceptance bill issued when BOE-Hydis purchased TFT-LCD business from Hyundai LCD Technology Co., Ltd. on 23 January 2003. The relevant bills took the partial properties, machinery and equipments as mortgage and have expired on 22 January 2008.

21 Share capital

		30 June 2006		31 December 2005
	Number of		Number of
	Shares '000	RMB'000	Shares '000	RMB'000
Subject to moratorium
State-owned legal person share	808,895	808,895	808,895	808,895
Raised legal person share	8,814	8,814	8,814	8,814
No subject to moratorium
A-share	262,437	262,437	262,437	262,437
B-share	1,115,550	1,115,550	1,115,550	1,115,550
	2,195,696	2,195,696	2,195,696	2,195,696

22 Reserves

	Capitalreserve	Statutorysurplusreserve	Statutorypublicwelfarefund	Discretionary surplusreserve	Translationreserve	Total
	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
at 1 January 2006Transfer for the yearCurrencytranslationdifferences – amountarising in the yearTransfer-outfortheyear	4,970	140,088	69,334	284,701	181,09717,975	680,190-17,975-
at 30 June 2006	4,970	140,088	69,334	284,701	163,122	662,215

23 Related party transactions

Name of related enterprises relationship with the Company Beijing Electronics Holding Company Limited the actual controller of the Company Beijing Intelligent Kechuang Technology Development Co., Ltd. shareholder of parent company Marubeni Corporation shareholder of parent company Beijing BOE Investment & Dvelopment Co., Ltd. parent company Beijing Dongdian Industrial Development Co. controlled by the same terminal controlling company Star City Land affiliated company of the Company Nissin Electronics affiliated company of the Company Nittan Electronics affiliated company of the Company Mosler affiliated company of the Company

Beijing Matsushita affiliated company of the Company Top Victory Technology affiliated company of the Company Julong photoelectricity affiliated company of the Company

(a) Significant transactions with related parties

		January - June 2006	January - June 2005
controlling relationshipPurchasing ofcommodities	Related transaction with related parties existing the	RMB'000	RMB'000
Guarantee expense paidcontrolling relationshipSalesof	Related transaction with related parties without	2,000	11,125
commodities		474,274	1,033,859
Among which:	Hyundai LCDTop Victory	6,939	57,131
	Technology	442,071	948,094
	Other	25,264	28,634
Service revenue		9,418	6,393
Rental incomePurchasing of		2,082	1,846
commodities		507,914	586,954
Among which:	Hyundai LCDTop Victory	10,573	116,448
	Technology	-	121,887
	Marubeni	496,540	348,619
	Other	801	-
Receiving/paying bountyReceiving labor		-	(4,669)
service		662	22,938
Housing rental expense paid		566	8,500

(b) Significant balances with related parties

		30 June 2006	31 December 2005
		RMB'000	RMB'000
Bills receivables		43,000	43,000
Accounts receivables		114,998	336,145
Among which:	Hyundai LCD	-	42,586
	Top Victory Technology	100,269	278,885
	Beijing Matsushita	10,107	12,217
	Other	4,622	2,457
Other receivables		32,259	36,141
Among which:	Star City Land	30,047	30,047
	Other	2,212	6,094
Trade payables		(76,034)	(104,910)

Among which:	Hyundai LCD	-	(41,823)
	Marubeni	(75,809)	(63,078)
	Other	(225)	(9)
Other payables		(240)	(200)
Accrued expenses		(290)	(180)

24 Commitments

(a) Capital commitments

	30 June 2006	31 December 2005
	RMB'000	RMB'000
Contract signed	150,914	186,035
Contract approved but without signature	11,599	92,775
Total	162,513	278,810

(b) Operating lease commitments

Leases as lessee

BOE-Hydis has entered into a lease agreement in respect of a piece of land for a term of 30 years. Non-cancellable operating lease rentals are payable as follows:

	The Group
	30 June 2006	31 December 2005
	RMB'000	RMB'000
Less than one year	23,282	28,403
Between one year and five years	77,191	61,442
More than five years	342,346	334,851
Total	442,819	424,696

25 Contingent liabilities

(a) Guarantee

(i) External guarantee

Zhejiang BOE provided the highest loan guarantee of RMB 40,000,000 for Zhejiang Huanyu Construction Group Co., Ltd.. Ended 30 June 2006, the actual balance of the said loan guarantee was RMB 35,887,880 with the guarantee term from 23 August 2006 to 18 February 2009.

(ii) Internal guarantee

The Company provided the loan guarantee for the loan amounting to RMB 135,000,000 of Zhejiang, the loan amounting to RMB 4,000,000 of Vacuum Electric. As the same time, the company provided the loan guarantee amounting to RMB 574,385,481 for the loan amounting to RMB 6,006,632,000 of BOEOT (Meanwhile, BOEOT took fixed assets with total net value of RMB 7,195,508,996 as mortgage.)

Ended 30 June 2006, Zhejiang BOE provided loan guarantee of RMB 9,500,000 for Shaoxing BOE.

Ended 30 June 2006, Suzhou BOE CHATANI provided guarantee for loan of RMB 41,700,000 and trade financing quantum of RMB 3,557,930 to its controlling subsidiary, Beijing CHATANI.

(b) Potential litigation

BOE-Hydis was given notifications from Sharp Corporation, LG Philips LCD and Honeywell International Incorporation and Honeywell Intellectual Properties Incorporation, 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 liabilities which may result has been made.

26 Principal subsidiaries, associates and jointly controlled entities

The particulars of the Group's principal subsidiaries at 31 December 2005 are as follows:

Name of company	Place anddate ofIncorporation/establishment	Registered/issued capital	Direct	Attributableequity interestIndirect	Principal activities
Consolidatedsubsidiaries
Zhejiang BOE DisplayTechnology Co., Ltd.(1)	PRC8 July 1993	RMB129,194,000	69%	-	Research, development, manufacture andsale of monitors and related parts
Beijing BOE VacuumElectronics Co., Ltd.	PRC14 September 1998	RMB35,000,000	55%	-	Manufacture and sale of vacuumelectronic products
BOE Semi-conductorCo., Ltd.	PRC29 May 1992	RMB15,000,000	63%	-	Manufacture and sale of semi-conductorproducts
Beijing Software andSystem IntegratedCo., Ltd.	PRC6 May 1999	RMB20,000,000	100%	-	Research and development of networkand telecommunications
Beijing Orient HengTong Property Centre	PRC22 August 1997	RMB9,931,700	100%	-	Leasing of commercial facilities
Suzhou BOE ChaguElectronics Co., Ltd.	PRC26 March 2002	USD8,552,000	75%	-	Development, manufacture and sale ofback-light products and related services
BOE Hyundai LCD(Beijing) DisplayTechnology Co., Ltd.	PRC20 May 2002	USD5,000,000	75%	-	Development, manufacture and sale ofrelated parts of LCD products
BOE-Hydis TechnologyCo., Ltd. (2)	Korea28 November 2002	KRW91,197,000,000	100%	-	Development, manufacture and sale ofTFT-LCD products and related services
Beijing BOEOptoelectronicsTechnology Co., Ltd.	PRC9 June 2003	USD500,000,000	75%	25%	Development, manufacture and sale ofTFT-LCD products and related services
BOE Land Co., Ltd.	PRC28 April 1994	RMB55,420,000	70%	-	Leasing of commercial facilities
Beijing BOE ChataniElectronics Co., Ltd	PRC22 March 2005	RMB37,244,000	1%	75%	Development, manufacture and sale offlat screen display products
Beijing FangyiIntegrated CircuitsCo., Limited	PRC19 May 2005	USD5,000,000	75%	25%	Development, manufacture and sale ofIntegrated Circuits products

BOE (Hebei) MobileDisplay TechnologyCo., Ltd. (3)	PRC7 April 2006	USD20,000,000	75%	25%	Production of flat screen display productsused in mobile display system, sales ofself-production product and relatedservices
BOE-Hydis JapanHolding Company	Japan1 October 2001	YEN10,000,000	-	100%	Sales distributor of BOE-Hydis inJapan
BOE-Hydis AmericaInc.	United States1 September 2002	USD302,500	-	100%	Sales distributor of BOE-Hydis inUnited States
Shenzhen BOEIntelligent DisplayTechnology Co., Ltd	PRC23 December 1998	RMB20,000,000	-	41%	Development, manufacture and sale ofLED products
Shaoxing BOE UenoElectronics ApparatusCompany Limited	PRC19 November 1999	RMB27,000,000	-	41%	Manufacture and sale of electronicsproducts
FineICs Co., Ltd(4)	Korea7 December 2004	KRW910,000,000	-	55%	Design, development and sales for the ICproducts
BOE TFT-LCD EuropeGmbh (4)	Germany6 July 2005	EURO500,000	-	100%	Sales distributor of BOE-Hydis inGermany
Unconsolidatedsubsidiaries
BOE TechnologyIncorporation	USA31 October 2000	USD200,000	100%	-	Research, development, manufacture andsale of high technology electronicinfrastructure products
Beijing BOE DigitalTechnology Co., Ltd.	PRC5 March 2001	USD10,000,000	75%	-	Research, development, manufacture andsale of digital cameras and other digitalvisual wireless transfer platform
BOE OptoelectronicsHolding CompanyLtd	British Virgin Island7 January 2003	USD100,000	100%	-	Design, manufacture and trading ofelectronics information technologyproducts and investing activities
BOE OptoelectronicsTechnology Co., Ltd	Bermuda15 March 2004	HKD100,000	-	100%	Investment holding
BOE OptoelectronicsInvestment Co., Ltd	Malta29 April 2004	USD10,000	-	100%	Investment holding
Associates
Beijing Star City RealEstate DevelopmentCo., Ltd.	PRC11 October1995	RMB66,400,000	40%	-	Properties development
Beijing NissinElectronics PrecisionComponent Co., Ltd	PRC1 April 1996	USD7,100,000	40%	-	Manufacture and sales of electronicstubes and related spare parts
Beijing NittanElectronic Co., Ltd	PRC24 June 1996	USD2,000,000	40%	-	Manufacture and sales of terminals,connectors and stampers
Beijing Orient MoslerSecurity TechnologySystem Co., Ltd.	PRC7 September 1998	USD1,300,000	35%	-	Manufacture and sales of security andprotection system and products
Beijing MatsushitaColor CRT Co., Ltd.	PRC8 September 1987	RMB1,240,754,049	30%	-	Manufacture and sales of color picturetubes and color display tubes

TPV TechnologyLimited	Bermuda12 January1998	USD19,153,769	22.16%	-	Manufacture and sale of color computermonitors and LCD products
Shenzhen JulongPhotoelectricity Co.,Ltd (5)	PRC1 November 1993	RMB20,000,000	-	-	Development and manufacture ofmechanical integrated products, satellitecommunication equipment, computersoftware and automatic instruments
Jointly controlledentities
Beijing Asahi GlassElectronics Co., Ltd.	PRC16 November 1993	RMB61,576,840	50%	-	Manufacture and sales of electronicproducts

(1) In accordance with the resolutions of the 20th meeting of the 4th Board of Directors, the Company has completed the increase of its equity interests in ZJBOE by RMB 50 million in March 2006, and Shaoxing Tianyuan Certified Public Accountants issued the capital verification report. After the capital injection, the equity interest held by BOE at ZJBOE has increased to 69.3%.

(2) In accordance with the resolutions of the 19th meeting of the 4th Board of Directors, the Company has completed the increase of its equity interests in BOE-Hydis by USD 5 million (converting into RMB 40.21 million) on 24 March 2006.

(3) In accordance with the resolutions of the 23rd meeting of the 4th Board of Directors, the Company and BOE-Hydis jointly invested to set up BOE (Hebei) Mobile Display Technology Co., Ltd. (BOEHB), and took the business license of BOEHB, thus, the Company would bring it into the consolidated scope.

(4) FineICs Co., Ltd and BOE TFT-LCD EUROPE GMBH were established by BOE-Hydis as its controlling subsidiary in 2004 and 2005 respectively, thus, the Company would bring them into the consolidated scope in the current period.

(5) In accordance with the resolutions of the 22nd meeting of the 4th Board of Directors, the Company invested RMB 8 million in Shenzhen Julong Photoelectricity Co., Ltd. in April 2006, accounting for 40% of equity interests. Shenzhen Hengdafeng Certified Public Accountants issued the capital verification report.

27 Other significant events

(a) BOE Land Co., Ltd. ("BOE Land") signed a Framework Agreement on Restructuring of Beijing Zhongjin Shun Da Land Corporation ("ZJ Land") with Beijing Zhong Ye An Shun Da Metallurgy Corporation ("ZYASD") on 14 January 2004. Pursuant to the regulations in the said agreement, BOE Land and ZYASD would respectively hold 60% and 40% equity of ZJ Land after restructuring. BOE Land has completed the relevant reorganization procedure such as the capital injection in line with the said agreement, while ZYASD failed to make the capital injection according to plan. The Company has applied for preservation to the Court with the investment payment related with the project.

On 20 December 2005, Beijing Municipal Higher People's Court made the ultimate judgment with (2005) GMZZ No. 1020 document, which relieved the said Framework agreement and the relevant supplemental agreement, and asked for ZYASD must repay the investment payment related with the said project to the Company.

In January 2006, ZYASD did not refund the said investment payment, the Court entered into execution phase, conducted the price assessment for land and properties under the name of ZYASD, and held the auction on sealing up object on 4 August 2006. As at this reporting date, the execution after auction was under progress.

(b) The Company examined and passes the proposal on integrating Beijing Fangyi Integrated Circuits Co., Limited ("Beijing Fangyi") in the 24th meeting of the 4th Board of Directors on 31 May 2006, which the Company and BOE Hydis Technology Co., Ltd. ("BOE Hydis", a subsidiary of the Company) respectively transfer its equity interest in Beijing Fangyi to Teralane Semiconductor Inc. ("TLS"), as the consideration, TLS paid cash of USD 3 million and 5,000,000 shares of TLS (converting into USD 1.5 million) to the Company, and paid 5,000,000 shares of TLS (converting into USD 1.5 million) to BOE Hydis. Meanwhile, TLS undertook to purchase or introduce the third party for purchasing 5,000,000 shares of TLS held by BOE Hydis before 15 December 2006. As at the reporting date, the corresponding equity transfer procedure was under progress.

(c) Hyundai LCD Inc., an subsidiary associated company of the Company, went bankrupt because of operating losses, and was taken over by the Bank in March 2006, after this, the Company transferred its 31.28% equity interest of 39.11% in Hyundai LCD. Inc to the Bank, thus, the Company only reserved 7.83% of the relevant equity. On 25 July 2006, Hyundai LCD Inc. applied for the legal management to the Court according to the regulations of Korean laws, the Bank exited. Ended the financial reporting date, the reorganization work was still under progress.

28 Post balance sheet events

1. On 17 July 2006, the application on private placement of A shares to specified persons examined and passed in the 21st meeting of the 4th Board of Directors of the Company has been approved by China Securities Regulatory Committee with ZJFXZ [2006] No. 36 document.

2. Zhejiang BOE signed the Agreement on Equity Transfer of Shenzhen BOE Intelligent Display Technology Co., Ltd. and Disposal of Creditor's Rights owned by Zhejiang BOE Display Technology Co., Ltd. with Shenzhen Ri Shun Sheng Trade Co., Ltd. on 31 July 2006, according to the said agreement, Zhejiang BOE transferred its 59.8% equity interest in Shenzhen BOE and creditor's rights worth RMB 7.5893 million to Shenzhen Ri Shun Sheng Trade Co., Ltd. with the transfer payment amounting to RMB 10 million, meanwhile, Shenzhen Ri Shun Sheng Trade Co., Ltd. agreed to pay RMB 2 million, RMB 3 million and RMB 5 million respectively on 31 July 2006, 8 August 2006 and 31 August 2006. As at financial reporting date, Zhejiang BOE has received the transfer payment of equity and creditor's rights amounting to RMB 5 million from Shenzhen Ri Shun Sheng Trade Co., Ltd. at the appointed time of the contract.

3. In order to promote products market development of the Group and perfect establishment of the global marketing system taking customers as core, the Group planed to newly set up marketing network. At present, the said matter is under transaction in succession.

4. Ended 30 June 2006, the balance of syndicated loan of BOE-Hydis was KRW 87.324 billion and USD 50.23 million (converting into RMB 1128.7 million), among which, BOE-Hydis should repay KRW 12.474 billion and USD 7.17 million (converting into RMB 166.01 million) on 24 July 2006. Whereas, BOE-Hydis did not take a favorable turn in respect of operation, resulting into funds lack, thus, BOE-Hydis unable to refund on the date promised by the Loan Agreement. As negotiated between BOE-Hydis and syndication, the syndication agreed to defer to 24 August 2006 for repaying. At present, BOE-Hydis was adopting the actively measures to improve cash flow status. The assets of BOE-Hydis were pledged for the aforesaid loan, while BOE did not provide any guarantee, thus, the Company considered that no influence happened on the Company due to the said matter.

5. TPV has carried out a share option scheme and share capital of TPV adds up to 1,929,147,954 on 15 August 2006. The group process the number of stock didn't change during the report period and rate of shareholder is 22.00%. The group is still the biggest shareholder up to now.

Differences between financial statements

prepared in accordance with International Financial Reporting Standards ("IFRSs") and PRC Accounting Rules and Regulations ("PRC GAAP")

	Net profitRMB'000	Net assetsRMB'000
Net (Loss)/profit of the Company inconsolidated statement under PRCGAAP	(1,264,346)	1,608,063
Adjustments:	-	-
1.Recognitionandamortisationof
positive goodwill	54,488	117,566
2.Recognitionandamortisationof
negative goodwill	(7,426)	88,936
3. Government grant	-	(3,242)
4. Capitalised general borrowing costs
and depreciation withdrawn	(2,256)	30,929
5.CapitalisedR&Dcostsand
depreciation withdrawn	(5,137)	195,314
6. Disposal of subsidiary	-	141,620
7.Appropriationofstaffbonusand
welfare fund	(3,410)	-
8. Amortisation of loans arrangement fee	(5,343)	10,349
9. Dilution gain on interest in associate	-	(73,750)
10. Convertible debentures	-	111,357
11. Unconfirmed investment loss	(490,072)	-
12. Others	-	11
Net (Loss)/profit of the Company in	(1,723,502)	2,227,153
consolidated statement under
IFRSs
	=========	========

• 1. Under IFRSs, positive goodwill should be recorded at an amount equal to the cost less the accumulative impairment loss after initial confirmation. Under PRC GAAP, positive goodwill should be amortised in the income statement based on the relevant amortisation period.
• 1. Under IFRSs, negative goodwill should be amortised in the income statement based on the relevant amortisation period over the previous years. Along with the Group adopts new IFRSs, negative goodwill is recognised as other income one-off when incurred. The Group has retroactively adjusted the amounts over the past years in accordance with the relevant requirements of new IFRSs. Under PRC GAAP, negative goodwill is amortised in the income statement based on the relevant amortisation period.
• 1. Under IFRSs, government grant is recognised as other income in the income statement. Under the PRC GAAP, government grant is booked as capital reserve.
• 1. Under IFRSs, general borrowing costs can be capitalised. Under the PRC GAAP, general borrowing costs are charged to the income statement when incurred.
• 1. Under IFRSs, R&D costs can be capitalised when accorded with the certain conditions. Under PRC GAAP, R&D costs are charged to the income statement when incurred.
• 1. Under PRC GAAP, in the non-monetary transactions, the book value of assets received is recognised at an amount equal to the carrying value of the assets surrendered. Under IFRSs, the book value of assets surrendered is recognised with the fair value, balance of

value is recorded into gain/loss. The amount represents the difference treatment on disposal of subsidiary post balance sheet under PRC GAAP and IFRSs.

• 1. Under IFRSs, appropriation of staff bonus and welfare fund is recorded into the current expense. Under PRC GAAP, appropriation of staff bonus and welfare fund is recognised as profit distribution.
• 1. Under IFRSs, the loans arrangement fee is amortised in the income statement based on the loan period. Under PRC GAAP, the loans arrangement fee was charged to the income statement when incurred.
• 1. Under IFRSs, the change in equity enjoyed by original investor in the investee unit happened owing to new shares issued by the said investee, gain/loss from the relevant equity diluted is recognised in the income statement when incurred. Under PRC GAAP, gain/loss from the relevant equity diluted is recognised in shareholders' equity when incurred.
• 1. The amount represents the GAAP differences on the equity accounting of TPV which has issued convertible debentures in 2005. Under IFRS, the equity portion of the convertible debentures is recognised in shareholders' equity. Under PRC GAAP, the equity portion is recognised in liability.
• 1. Under IFRSs, when subsidiary company went bankruptcy and went on operating, parent company continually accounted as per equity method and brings it into consolidated statement. Under PRC GAAP, for insolvent subsidiary company, parent company accounted long-term investment as per equity method till zero, and listed the excess loss of subsidiary company in the income statement and balance sheet as unconfirmed investment loss.