13:12     INNOVO<00703> - Results Announcement (2)                            

                                                                              
    3.  QUALIFIED AUDITORS' REPORT                                            
                                                                              
    As explained in note 1, the financial statements have been prepared on a  
    going concern basis on the basis that a controlling shareholder has agreed
    to provide adequate financial support to enable the Group to meet in full 
    its financial obligations as they fall due in the foreseeable future.     
    Although the Company has received a letter of support from the controlling
    shareholder evidencing the commitment in this respect, we are unable to   
    obtain sufficient evidence to satisfy ourselves as to the financial       
    resources of the controlling shareholder and so as to his ability to      
    provide financial support to the Group.  If the financial support from the
    controlling shareholder is not forthcoming and the Group is unable to     
    obtain sufficient other sources of financing, the Group may cease to      
    operate and the going concern basis would then be inappropriate.  In these
    circumstances, adjustments might be required to reduce the value of assets
    to their recoverable amount and to provide for any further liabilities    
    might arise.                                                              
                                                                              
    In forming our opinion, we have considered the adequacy of the disclosure 
    included in the balance sheet of the Group at 31st December, 2004 are     
    amounts of HK$29,323,000 and HK$38,682,000 due from a trade debtor and the
    former director respectively.  The Group has filed claims in June 2004 and
    July 2004 against the trade debtor and the former director respectively in
    the Hong Kong High Court to recover the amounts.  Since the claims are    
    still pending for hearing, the directors consider it is unable to         
    determine the final outcome of the claims at such preliminary stage.      
    Accordingly, no allowance in respect of either of these amounts has been  
    made in the financial statements.  We consider this fundamental           
    uncertainty has been adequately disclosed in the financial statements and 
    our opinion is not qualified on this respect.                             
                                                                              
    As explained in note 1, a subsidiary (Panyu Fantasy Film City Limited)    
    ("PFFCL"), which is under the control of a local court in Mainland China, 
    was de-consolidated in the financial statements of the Group for the year 
    ended 31st December, 2003.  However, this accounting treatment was not in 
    accordance with Statement of Standard Accounting Practice No. 32          
    "Consolidated financial statements and accounting for investments in      
    subsidiaries" issued by the Hong Kong Institute of Certified Public       
    Accountants because as at 31st December, 2003, in our opinion, the Group  
    retained the ability, by virtue of its equity interest in PFFCL, to       
    exercise effective control.  Accordingly, in our opinion, the results,    
    cash flows and changes in equity of PFFCL should have been consolidated   
    throughout the period up to May 2004 and any loss on de-consolidation     
    recognised.  In the absence, however, of the financial statements of PFFCL
    for this period, it is not practicable for us to determine the effect on  
    the financial statements of the failure to properly account for PFFCL.    
                                                                              
    Because of the significance of the limitation in the scope of our work    
    related to the going concern basis, we are unable to form an opinion as to
    whether the financial statements give a true and fair view of the state of
    affairs of the Company and the Group as at 31st December, 2004 or of the  
    loss and cash flows of the Group for the year then ended and as to whether
    the financial statements have been properly prepared in accordance with   
    the disclosure requirements of the Hong Kong Companies Ordinance.