Smart-Core Holdings Limited - Capital/Financing Update 2004

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about any aspect of this prospectus or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities of Unity Investments Holdings Limited (the “Company”), you should at once hand this prospectus to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Dealings in the Rights Shares (as defined herein) in their nil paid and fully paid forms may be settled through the Central Clearing and Settlement System (“CCASS”) and you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser for details of those settlement arrangements and how such arrangements may affect your rights and interests.

A copy of this prospectus, together with copies of the provisional allotment letter, the form of application for excess Rights Shares, and the written consent from PricewaterhouseCoopers, has been registered with the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance of Hong Kong. The Registrar of Companies in Hong Kong and the Securities and Futures Commission of Hong Kong take no responsibility as to the contents of any documents referred to above.

Subject to the granting of listing of and permission to deal in the Rights Shares in their nil-paid and fully-paid forms by The Stock Exchange of Hong Kong Limited (“Stock Exchange”) as well as compliance with the stock admission requirements of Hong Kong Securities Clearing Company Limited (“HKSCC”), the Rights Shares in their nil-paid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

The Stock Exchange and HKSCC take no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.

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UNITY INVESTMENTS HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 913)

RIGHTS ISSUE OF 96,000,001 RIGHTS SHARES OF HK$0.10 EACH AT HK$0.14 PER RIGHTS SHARE PAYABLE IN FULL UPON ACCEPTANCE ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY THREE SHARES HELD ON THE RECORD DATE

Financial Adviser to the Company

Underwriter

The Underwriter (as defined herein) may terminate the arrangements set out in the Underwriting Agreement (as defined herein) by notice in writing to the Company at any time prior to 4:00 p.m. on the third business day following the latest date for acceptance if there occurs: (i) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof); or (ii) any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the United States of America) or other nature (whether or not such are of the same nature as any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market; or (iii) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, terrorism, strike or lock-out, and in the reasonable opinion of the Underwriter, such change would have a material and adverse effect on the business, financial or trading position or prospects of the Group (as defined herein) as a whole or the success of the Rights Issue (as defined herein) or make it inadvisable or inexpedient to proceed with the Rights Issue. If, at or prior to 4:00 p.m. on the third business day following the latest date for acceptance: (i) the Company commits any material breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on its business, financial or trading position; or (ii) the Underwriter shall receive notification pursuant to the Underwriting Agreement of, or shall otherwise become aware of, the fact that any of the representations or warranties contained in the Underwriting Agreement was, when given, untrue or inaccurate or would be untrue or inaccurate if repeated as provided in the Underwriting Agreement, and the Underwriter shall, in its reasonable opinion, determine that any such untrue representation or warranty represents or is likely to represent a material adverse change in the business, financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the Rights Issue; or (iii) the Company shall, after certain matters or events referred to in the Underwriting Agreement has occurred or come to the Underwriter’s attention, fail promptly to send out any announcement or circular (after the despatch of the Rights Issue Documents (as defined herein), in such manner (and as appropriate with such contents) as the Underwriter may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company, the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect to treat such matter or event as releasing and discharging the Underwriter from its obligations under this Agreement. Upon termination of the Underwriting Agreement and/or the giving of the termination notice pursuant to the Underwriting Agreement, all obligations of the Underwriter under the Underwriting Agreement shall cease and determine and neither party to the Underwriting Agreement shall have any claim against the other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided that the Company shall remain liable to pay to the Underwriter the fees agreed by the parties pursuant to the Underwriting Agreement.

It should be noted that the Shares (as defined herein) are now being dealt in on an ex-right basis and the Rights Shares in their nil-paid form will be dealt in during the period from Friday, 3 December 2004 to Friday, 10 December 2004, both days inclusive, and that dealings in such Shares and Rights Shares will take place whilst the conditions to which the Rights Issue is subject remain unfulfilled. If the Underwriter terminates the Underwriting Agreement, or the conditions of the Rights Issue are not fulfilled, the Rights Issue will not proceed. Any Shareholder(s) (as defined herein) or other person dealing in such Shares and Rights Shares up to the date on which all conditions to which the Rights Issue is subject are fulfilled will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed. Any shareholder or other person contemplating selling or purchasing Shares or Rights Shares in their nil-paid form during the period from Friday, 3 December 2004 to Friday, 10 December 2004, being the first and the last day of dealings in the nil-paid Rights Shares respectively (both dates inclusive), who is in any doubt about his/her/its position is recommended to consult his/her/its own professional adviser.

The latest time for acceptance and payment for the Rights Shares is 4:00 p.m. on Wednesday, 15 December 2004. The procedure for acceptance or transfer of the Rights Shares is set out on page 11 of this Prospectus.

29 November 2004

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Summary of the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Terms of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Procedure for acceptance or transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Share certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Listings and dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Underwriting arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Conditions of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Warning of the risks of dealings in Shares and nil-paid Rights Shares. . . . . . . .	18
Effects on shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Business review and prospects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Reasons for the Rights Issue and use of proceeds . . . . . . . . . . . . . . . . . . . . . . .	19
Fund raising activities and share transactions of the Company during the
12 months ended on the Latest Practicable Date. . . . . . . . . . . . . . . . . . . . . . .	20
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Appendix I – Financial information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53

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DEFINITIONS

In this prospectus, the following expressions shall have the following meanings unless the context requires otherwise:

“Announcement”	the announcement of the Company dated 2 November
	2004 regarding the Rights Issue
“Board”	the board of Directors
“Business Days”	days on which banks in Hong Kong are open for business
	for more than five hours
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC
“Collier”	Collier Assets Limited, a limited liability company
	incorporated in the British Virgin Islands, which is
	wholly and beneficially owned by Lo Ki Yan, Karen
“Company”	Unity Investments Holdings Limited, a limited liability
	company incorporated in the Cayman Islands and the
	shares of which are listed on the Stock Exchange
“Director(s)”	director(s) of the Company
“Excluded Shareholder(s)”	the Shareholder(s) whose name(s) appear on the register
	of members of the Company on the Record Date and
	whose address is/are in a place(s) outside Hong Kong
	where, the Directors, based on legal opinions provided by
	legal advisers, consider it necessary or expedient to
	exclude any such Shareholder on account either of the
	legal restrictions under the laws of the place of his
	registered address or the requirements of the relevant
	regulatory body or stock exchange in that place
“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China

−1 −

DEFINITIONS

“Irrevocable Undertakings” the irrevocable undertakings given by Collier and Winning Horsee to accept or procure the acceptance of 28,112,666 Rights Shares and 8,196,666 Rights Shares respectively
“Kingston” or the “Underwriter” Kingston Securities Limited, a corporation licensed to carry on business in types 1, 4, 6 and 9 regulated activities (dealing in securities, advising on securities, corporate finance and asset management) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Last Trading Day” 1 November 2004, being the last trading day before the suspension of trading in the Shares on the Stock Exchange pending the release of the Announcement
“Latest Practicable Date” 26 November 2004, being the latest practicable date prior to the printing of this prospectus for ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“PRC” The People’s Republic of China “Qualifying Shareholder(s)” the Shareholder(s), other than Excluded Shareholder(s), whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date
“Record Date” Wednesday, 24 November 2004 “Registrar” the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong

“Rights Issue” the issue of the Rights Shares on the basis of one Rights Share for every three existing Shares held on the Record Date at a price of HK$0.14 per Rights Share as described in this prospectus “Rights Issue Documents” this prospectus, the provisional allotment letter and the form of application for excess Rights Shares

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DEFINITIONS

“Rights Shares”	96,000,001 new Shares
“SFO”	Securities and Futures Ordinance (Chapter 571)
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of
	the Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	HK$0.14 per Rights Share
“Trading Day(s)”	day(s) on which the Stock Exchange is open for trading
“Underwriting Agreement”	the agreement dated 1 November 2004 between the
	Company and Kingston relating to the underwriting and
	certain other arrangements in respect of the Rights Issue
“Winning Horsee”	Winning Horsee Limited, a wholly-owned subsidiary of
	Radford Capital Investment Limited, a limited liability
	company incorporated in the Cayman Islands and the
	shares of which are listed on the Stock Exchange
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

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SUMMARY OF THE RIGHTS ISSUE

The following information is derived from, and should be read in conjunction with, the full text of this prospectus:

Basis of Rights Issue

one Rights Share for every three existing Shares held on the Record Date

Number of existing Shares in issue

288,000,004 Shares

Number of Rights Shares

96,000,001 Rights Shares, representing about 33.3% of the existing issued Shares and about 25.0% of the issued Shares as enlarged by the issue of the Rights Shares

Subscription price

HK$0.14 per Rights Share, payable in full upon acceptance by no later than 4:00 p.m. on Wednesday, 15 December 2004

Basis of entitlement of the nil-paid Rights Shares

nil-paid Rights Shares have been provisionally allotted to Qualifying Shareholders in the proportion of one Rights Share for every three Shares held on the Record Date. No provisional allotment of nil-paid Rights Shares has been made to Excluded Shareholders

Excluded Shareholders no provisional allotment letters and forms of application for excess Rights Shares have been sent to Excluded Shareholders

Excess Rights Shares application Qualifying Shareholders have the right to apply for Rights Shares in excess of their provisional allotments

Amount to be raised by the approximately HK$13.4 million before expenses, and Rights Issue estimated net proceeds of approximately HK$12.2 million

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EXPECTED TIMETABLE

Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 24 November 2004
Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 25 November 2004
First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . Friday, 3 December 2004
Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Tuesday, 7 December 2004
Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . Friday, 10 December 2004
Latest time for acceptance of, and payment
for Rights Shares and application
for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Wednesday, 15 December 2004
Rights Issue becomes unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Monday, 20 December 2004
Announcement of results of acceptances and
excess applications in the Rights Issue
appears in newspapers on or before . . . . . . . . . . . . . . . . . Wednesday, 22 December 2004
Refund cheques in respect of wholly or
partially unsuccessful applications for excess
Rights Shares despatched on or before . . . . . . . . . . . . . . . . Thursday, 23 December 2004
Certificates for fully-paid Rights Shares
despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 23 December 2004
Dealings in fully-paid Rights Shares
on the Stock Exchange commence on . . . . . . . . . . . . . . . . . . Tuesday, 28 December 2004

−5 −

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing to the Company at any time prior to 4:00 p.m. on the third business day following the latest date for acceptance if there occurs:

(i) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof); or
(ii) any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the United States of America) or other nature (whether or not such are of the same nature as any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market; or
(iii) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, terrorism, strike or lock-out,

and in the reasonable opinion of the Underwriter, such change would have a material and adverse effect on the business, financial or trading position or prospects of the Group as a whole or the success of the Rights Issue or make it inadvisable or inexpedient to proceed with the Rights Issue.

If, at or prior to 4:00 p.m. on the third business day following the latest date for acceptance:

(i) the Company commits any material breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on its business, financial or trading position; or
(ii) the Underwriter shall receive notification pursuant to the Underwriting Agreement of, or shall otherwise become aware of, the fact that any of the representations or warranties contained in the Underwriting Agreement was, when given, untrue or inaccurate or would be untrue or inaccurate if repeated as provided in the Underwriting Agreement, and the Underwriter shall, in its reasonable opinion, determine that any such untrue representation or warranty represents or is likely to represent a material adverse change in the business, financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the Rights Issue; or

−6 −

TERMINATION OF THE UNDERWRITING AGREEMENT

(iii) the Company shall, after certain matters or events referred to in the Underwriting Agreement has occurred or come to the Underwriter’s attention, fail promptly to send out any announcement or circular (after the despatch of the Rights Issue Documents), in such manner (and as appropriate with such contents) as the Underwriter may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company,

the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect to treat such matter or event as releasing and discharging the Underwriter from its obligations under this Agreement.

Upon termination of the Underwriting Agreement and/or the giving of the termination notice pursuant to the Underwriting Agreement, all obligations of the Underwriter under the Underwriting Agreement shall cease and determine and neither party to the Underwriting Agreement shall have any claim against the other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided that the Company shall remain liable to pay to the Underwriter the fees agreed by the parties pursuant to the Underwriting Agreement.

−7 −

LETTER FROM THE BOARD

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UNITY INVESTMENTS HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 913)

Registered office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681GT George Town Grand Cayman British West Indies

Executive Directors: Au Shuk Yee, Sue Pang Shuen Wai, Nichols

Non-executive Director: P.O. Box 2681GT Qi Qing George Town Grand Cayman Independent Non-executive Directors: British West Indies Lam Ping Cheung Wong Ying Seung, Asiong Principal office of business Chung Kong Fei, Stephen in Hong Kong: Tsang Wing Ki 30th Floor, China United Center 28 Marble Road North Point Hong Kong 29 November 2004

To the Qualifying Shareholders

Dear Sir or Madam,

RIGHTS ISSUE OF

96,000,001 RIGHTS SHARES OF HK$0.10 EACH AT HK$0.14 PER RIGHTS SHARE PAYABLE IN FULL UPON ACCEPTANCE ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY THREE SHARES HELD ON THE RECORD DATE

INTRODUCTION

It was announced on 2 November 2004 that the Company proposed to raise approximately HK$12.2 million after expenses by issuing 96,000,001 Rights Shares at a price of HK$0.14 per Rights Share.

This prospectus sets out the details of the Rights Issue, including information on dealings in and transfers and acceptances of the Rights Shares, and certain financial and other information in respect of the Group.

−8 −

LETTER FROM THE BOARD

RIGHTS ISSUE

Issue Statistics

Basis of Rights Issue :

one Rights Share for every three existing Shares held by a Qualifying Shareholder on the Record Date

Subscription Price : HK$0.14 per Rights Share

Number of existing Shares in issue : 288,000,004 Shares

Number of Rights Shares : Pursuant to the undertaken to be taken up by Collier and Winning Collier and Winning Horsee undertaken to take up or up 28,112,666 Rights Rights Shares respectively Number of Rights Shares : 96,000,001 Rights Shares

Pursuant to the Irrevocable Undertakings, Collier and Winning Horsee have irrevocably undertaken to take up or procure there are taken up 28,112,666 Rights Shares and 8,196,666 Rights Shares respectively

The Company had no outstanding options or securities convertible into Shares as at the Latest Practicable Date.

Qualifying Shareholders

The Company is sending the Rights Issue Documents to Qualifying Shareholders only.

TERMS OF THE RIGHTS ISSUE

Subscription Price for the Rights Shares

The Subscription Price is HK$0.14 per Rights Share, payable in full by the Qualifying Shareholders upon acceptance of the provisional allotment of the Rights Shares under the Rights Issue or application for excess Rights Shares.

The Subscription Price represents:

a premium of about 72.8% to the closing price of HK$0.081 per Share quoted on the Stock Exchange on the Last Trading Day;
a premium of about 46.2% to the theoretical ex-rights price of about HK$0.09575 per Share based on the closing price of HK$0.081 per Share quoted on the Stock Exchange on the Last Trading Day;
a premium of about 55.2% to the average closing price of about HK$0.0902 per Share quoted on the Stock Exchange for the last ten Trading Days up to and including the Last Trading Day;

−9 −

LETTER FROM THE BOARD

a discount of about 44% to the unaudited net asset value of HK$0.25 per Share as at 30 September 2004, being the latest net asset value per Share as announced by the Company;
a premium of about 70.7% to the closing price of HK$0.082 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
a premium of about 53.5% to the average closing price of about HK$0.0912 per Share quoted on the Stock Exchange for the last ten Trading Days up to and including the Latest Practicable Date.

The Subscription Price was arrived at after arm’s length negotiations between the Company and Kingston with reference to the prevailing market conditions and the net asset value of HK$0.25 per Share as at 30 September 2004 rather than the recent market prices of the Shares, as the Directors consider that the Shares have been trading at prices which do not reflect the net asset value of the Shares. The Directors also consider that setting the Subscription Price with reference to the most recent net asset value per Share as opposed to the recent market prices per Share will avoid a greater dilution of the net asset value per Share. In addition, given the prolonged thin trading volume of Shares in the market, the Directors consider that a discount on the Subscription Price to the net asset value of HK$0.25 as at 30 September 2004 can give an incentive to the Shareholders to participate in the Rights Issue. The proceeds from the Rights Issue can be used to improve the Company’s operating efficiency and future profitability and are intended to be used as to approximately HK$10 million for repaying certain interest-bearing borrowings and as to approximately HK$2.2 million for future possible investments of the Company which will be made in accordance with the principal activities of the Company. The Directors consider the terms of the Rights Issue to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole. As at the date of this prospectus, the Board has not identified any specific investment targets.

Status of the Rights Shares

The Rights Shares, when issued and fully paid, will rank pari passu in all respects with the then existing Shares in issue. Holders of such Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the Rights Shares are fully paid.

Rights of Excluded Shareholders

The Rights Issue Documents have not been and will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong. There are no Shareholders whose registered address are outside Hong Kong in accordance with the register of members of the Company on the Record Date. Therefore, there is no Excluded Shareholders for the purpose of the Rights Issue.

−10 −

LETTER FROM THE BOARD

Fractions of Rights Shares

The Company has not provisionally allotted fractions of Rights Shares. The Company will seek to sell any Rights Shares created from the aggregation of fractions of Rights Shares (if a premium, net of expenses, can be obtained) and will retain the proceeds for its own benefit.

PROCEDURE FOR ACCEPTANCE OR TRANSFER

A provisional allotment letter is enclosed with this prospectus for Qualifying Shareholders which entitles Qualifying Shareholders to subscribe for the number of Rights Shares shown therein. If Qualifying Shareholders wish to exercise their rights to subscribe for all the Rights Shares specified in the enclosed provisional allotment letter, Qualifying Shareholders must lodge the provisional allotment letter in accordance with the instructions printed thereon, together with a remittance for the full amount payable on acceptance, with the branch registrar of the Company in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong by not later than 4:00 p.m. on Wednesday, 15 December 2004. All remittances must be made by cheque or cashier’s order in Hong Kong dollars. Cheques must be drawn on an account with, and cashier’s orders must be issued by, a bank in Hong Kong and made payable to “KINGSTON SECURITIES LIMITED – RIGHTS ISSUE (UNITY)” and crossed “ACCOUNT PAYEE ONLY”.

It should be noted that unless the provisional allotment letter, together with the appropriate remittance, has been lodged with Tengis Limited by 4:00 p.m. on Wednesday, 15 December 2004, whether by the original allottee or any person to whom the rights have been validly transferred, the relevant provisional allotment and all rights thereunder will be deemed to have been declined and will be cancelled.

The provisional allotment letter contains the full information regarding the procedure to be followed if Qualifying Shareholders wish to accept only part of their provisional allotment or if they wish to renounce all or part of their provisional allotment.

If Qualifying Shareholders wish to accept only part of their provisional allotment or transfer a part of their rights to subscribe for the Rights Shares provisionally allotted thereunder, or to transfer their rights to more than one person, the entire provisional allotment letter must be surrendered and lodged for cancellation by not later than 4:00 p.m. on Tuesday, 7 December 2004 to Tengis Limited who will cancel the original provisional allotment letter and issue new provisional allotment letters in the denominations required.

All cheques and cashier’s orders will be presented for payment following receipt and all interest earned on such monies shall be retained for the benefit of the Company. Any provisional allotment letter in respect of which the accompanying cheque is dishonoured on first presentation is liable to be rejected, and in that event the provisional allotment and all rights thereunder will be deemed to have been declined and will be cancelled.

If the Underwriter exercises the right of termination to terminate its obligations under the Underwriting Agreement at any time before 4:00 p.m. on the third business day following the

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LETTER FROM THE BOARD

latest time of acceptance, and/or if the conditions of the Rights Issue (summarised in the section headed “Conditions of the Underwriting Agreement” below) are not fulfilled or waived by 4:00 p.m. on the third business day following the latest time of acceptance, the monies received in respect of acceptances of the Rights Shares will be returned to the Qualifying Shareholders or such other persons to whom the Rights Shares in their nil-paid form shall have been validly transferred or, in the case of joint acceptances, to the first-named person without interest, by means of cheques despatched in the ordinary post at the risk of such Qualifying Shareholders or such other persons on or about Thursday, 23 December 2004.

APPLICATION FOR EXCESS RIGHTS SHARES

Qualifying Shareholders are entitled to apply for any unsold Rights Shares created by adding together fractions of Rights Shares and any Rights Shares provisionally allotted to but not accepted by Qualifying Shareholders. Application may be made by completing the form of application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion and on a fair and reasonable basis but preference will be given to applications for less than one board lot of Shares where it appears to the Directors that such applications have been made to round up odd lots of Shares.

Any unsold Rights Shares created by adding together fractions of Rights Shares and any Rights Shares allotted provisionally but not accepted will be available for application through the form of application for excess Rights Shares by Qualifying Shareholders.

If Qualifying Shareholders wish to apply for any Rights Shares in addition to their provisional allotment under the Rights Issue, they must complete and sign the enclosed form of application for excess Rights Shares as indicated therein and lodge it, together with a separate remittance for the amount payable on application in respect of the excess Rights Shares applied for, with Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong by not later than 4:00 p.m. on Wednesday, 15 December 2004. All remittances must be made by cheque or cashier’s order in Hong Kong dollars. Cheques must be drawn on an account with, and cashier’s order must be issued by, a bank in Hong Kong and made payable to “KINGSTON SECURITIES LIMITED – EXCESS APPLICATION (UNITY)” and crossed “ACCOUNT PAYEE ONLY”. The Company will notify you of any allotment of excess Rights Shares made to you; which allotment will be allocated on a fair and reasonable basis to be decided at the sole discretion of the Directors.

All cheques and cashier’s orders will be presented for payment following receipt and all interest earned on such monies shall be retained for the benefit of the Company. Any form of application for excess Rights Shares in respect of which the accompanying cheque is dishonoured on first presentation is liable to be rejected.

−12 −

LETTER FROM THE BOARD

If the Underwriter exercises the right of termination to terminate its obligations under the Underwriting Agreement at any time before 4:00 p.m. on the third business day following the latest time of acceptance, and/or if the conditions of the Rights Issue (summarised in the section headed “Conditions of the Underwriting Agreement” below) are not fulfilled or waived by 4:00 p.m. on the third business day following the latest time of acceptance, the monies received in respect of applications for excess Rights Shares will be returned to the relevant Qualifying Shareholders without interest, by means of cheques despatched in the ordinary post at the risk of such Qualifying Shareholders on or about Thursday, 23 December 2004.

If no excess Rights Shares are allotted to a Qualifying Shareholder, a refund cheque for the full amount tendered on application without interest is expected to be posted to that Qualifying Shareholder by ordinary post at its own risk on or before Thursday, 23 December 2004. If the number of excess Rights Shares allotted to a Qualifying Shareholder is less than that applied for, cheques for the surplus application monies are expected to be posted to such Qualifying Shareholder without interest by ordinary post at its own risk on or before Thursday, 23 December 2004.

The form of application for excess Rights Shares is for use only by the Qualifying Shareholder to whom it is addressed and is not transferable. All documents, including cheques and cashier’s orders for amounts due, will be sent by ordinary post at the risk of the persons entitled thereto to their registered or nominated addresses.

−13 −

LETTER FROM THE BOARD

SHARE CERTIFICATES

Subject to the fulfilment of the conditions of the Rights Issue, certificates for fully-paid Rights Shares are expected to be posted on or before Thursday, 23 December 2004 to those who have accepted, or where applicable applied for, and paid for the Rights Shares, by ordinary post at their own risk, and refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares are also expected to be posted on or before Thursday, 23 December 2004 by ordinary post to the applicants at their own risk.

Where entitlements to Rights Shares exceed one board lot, it is proposed, so far as is practicable, to issue share certificates in integral multiples of board lot of 2,000 Shares each, with a certificate for the balance.

LISTINGS AND DEALINGS

Application has been made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms.

Provisional allotments of the Rights Shares made to Qualifying Shareholders are transferable and it is expected that dealings in the Rights Shares in their nil-paid form on the Stock Exchange will occur from Friday, 3 December 2004 to Friday, 10 December 2004 (both days inclusive). The latest time for splitting of nil-paid Rights Shares is 4:00 p.m. on Tuesday, 7 December 2004.

It is expected that dealings in the Rights Shares in their fully-paid form on the Stock Exchange will commence on Tuesday, 28 December 2004. The Rights Shares in both their nil-paid and fully-paid forms will be traded in board lots of 2,000 Rights Shares each. No securities of the Company are listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed to be sought for the securities of the Company or the Rights Shares to be listed or dealt in on any other stock exchange.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in their nil-paid and fully-paid forms by the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Rights Shares in their nil-paid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealings in the Rights Shares in their nil-paid and fully-paid forms on the branch register in Hong Kong and the transfer of provisional allotments will be subject to the payment of stamp duty in Hong Kong.

−14 −

LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

Date : 1 November 2004 Parties : the Company and Kingston Number of Rights Shares : 59,690,669 Rights Shares, being the total underwritten number of Rights Shares to which holders of the existing Shares held on the Record Date are entitled to subscribe pursuant to the Rights Issue less an aggregate of 36,309,332 Rights Shares of which Collier and Winning Horsee have undertaken to accept or procure acceptance Commission : 2.5% of the total Subscription Price of the Rights Shares underwritten

The commission payable to Kingston was determined after arm’s length negotiations between the Company and Kingston. The Directors consider that such amount is on normal commercial terms and is comparable with market rates. Kingston is not a connected person (as defined in the Listing Rules) of the Company.

Undertakings from Collier and Winning Horsee

Subject to the Underwriting Agreement becoming unconditional and not being terminated, Collier and Winning Horsee have irrevocably undertaken to the Company and Kingston that the Shares beneficially owned by them as at the date of the Announcement will remain registered in their name or the name of the their respective nominees on the Record Date and that Collier and Winning Horsee will accept or procure the acceptance of the related pro rata allotments of 28,112,666 Rights Shares and 8,196,666 Rights Shares pursuant to the Rights Issue.

CONDITIONS OF THE UNDERWRITING AGREEMENT

The Underwriting Agreement is conditional upon, among other things, the following conditions being fulfilled by 4:00 p.m. on the third business day following the latest date for acceptance or such other date as the Company and Kingston may agree:

(i) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms;
(ii) the registration of the Rights Issue Documents with the Registrar of Companies in Hong Kong; and

−15 −

LETTER FROM THE BOARD

(iii) compliance by Collier and Winning Horsee with all their obligations under the Irrevocable Undertakings in accordance with the terms thereof.

TERMINATION OF THE UNDERWRITING AGREEMENT

(i) an introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof); or
(ii) any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the United States of America) or other nature (whether or not such are of the same nature as any of the foregoing) or of the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market; or
(iii) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, terrorism, strike or lock-out,

−16 −

LETTER FROM THE BOARD

If, at or prior to 4:00 p.m. on the third business day following the latest date for acceptance:

(i) the Company commits any material breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under the Underwriting Agreement which breach or omission will have a material and adverse effect on its business, financial or trading position; or
(ii) the Underwriter shall receive notification pursuant to the Underwriting Agreement of, or shall otherwise become aware of, the fact that any of the representations or warranties contained in the Underwriting Agreement was, when given, untrue or inaccurate or would be untrue or inaccurate if repeated as provided in the Underwriting Agreement, and the Underwriter shall, in its reasonable opinion, determine that any such untrue representation or warranty represents or is likely to represent a material adverse change in the business, financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a materially prejudicial effect on the Rights Issue; or
(iii) the Company shall, after certain matters or events referred to in the Underwriting Agreement has occurred or come to the Underwriter’s attention, fail promptly to send out any announcement or circular (after the despatch of the Rights Issue Documents), in such manner (and as appropriate with such contents) as the Underwriter may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company,

−17 −

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALINGS IN SHARES AND NIL-PAID RIGHTS SHARES

It should be noted that the Shares are now being dealt in on an ex-right basis and the Rights Shares in their nil-paid form will be dealt in during the period from Friday, 3 December 2004 to Friday, 10 December 2004, both days inclusive, and that dealings in such Shares and Rights Shares will take place whilst the conditions to which the Rights Issue is subject remain unfulfilled. If the Underwriter terminates the Underwriting Agreement, or the conditions of the Rights Issue are not fulfilled, the Rights Issue will not proceed. Any Shareholder(s) or other person dealing in such Shares and Rights Shares up to the date on which all conditions to which the Rights Issue is subject are fulfilled will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed. Any shareholder or other person contemplating selling or purchasing Shares or Rights Shares in their nil-paid form during the period from Friday, 3 December 2004 to Friday, 10 December 2004, being the first and the last day of dealings in the nil-paid Rights Shares respectively (both dates inclusive), who is in any doubt about his/her/its position is recommended to consult his/her/its own professional adviser.

EFFECTS ON SHAREHOLDING STRUCTURE

The following is the shareholding structure of the Company immediately before and after completion of the Rights Issue:

Collier Winning Horsee Qi Qing (Note 1) Kingston Public Total	Immediately before completion of the Rights Issue Shares % (approximate) 84,338,000 29.28 24,590,000 8.54 20,000 0.01 – – 179,052,004 62.17 288,000,004 100.00	Immediately after completion of the Rights Issue (assuming all Qualifying Shareholders take up the Rights Shares in full) Shares % (approximate) 112,450,666 29.28 32,786,666 8.54 26,666 0.01 – – 238,736,007 62.17 384,000,005 100.00	Immediately after completion of the Rights Issue (assuming no other Qualifying Shareholder takes up any entitlement under the Rights Issue but the Irrevocable Undertakings are complied with) Shares % (approximate) 112,450,666 29.28 32,786,666 8.54 20,000 0.01 59,690,669 15.54 179,052,004 46.63 384,000,005 100.00	Immediately after completion of the Rights Issue (assuming no other Qualifying Shareholder takes up any entitlement under the Rights Issue but the Irrevocable Undertakings are complied with) Shares % (approximate) 112,450,666 29.28 32,786,666 8.54 20,000 0.01 59,690,669 15.54 179,052,004 46.63 384,000,005 100.00
				100.00

Note: Mr. Qi Qing is a non-executive Director.

−18 −

LETTER FROM THE BOARD

BUSINESS REVIEW AND PROSPECTS

The Company is an investment company listed pursuant to Chapter 21 of the Listing Rules and is principally engaged in investment in listed and unlisted companies in Hong Kong and in PRC.

The Group reported losses of HK$25,433,132 for the year ended 31 December 2003, compared to a net profit of HK$520,547 recorded for the year ended 31 December 2002.

Given the high volatility in the Hong Kong stock market, especially in the first half of the financial year, the Group has adopted relatively conservative investment strategies during the year, resulting in a 62.36% decrease in revenue from HK$41,730,817 to HK$15,708,255 for the financial year ended 31 December 2003. The outbreak of atypical pneumonia and the Iraqi war in the first half of the financial year had led to dramatic falls in the benchmark stock indices. The Heng Seng Index (the “HSI”), at one stage dropped to the low level of 8,331.87. However, the HSI managed to regain most of its earlier losses and closed at 13,575.94, resulting in a gain of approximately 34.9% for the whole year. Without making significant changes in its equity investment portfolio, the Group focused on re-balancing its holdings. During the year, the Group derived most of its revenue from trading securities, which represented 98.84% of the total revenue, compared to 92.7% from the previous financial year. In spite of the shrinkage in revenue, the Group actually had made a gross profit of HK$6,884,119 from share trading. The loss for the year mainly comprised of unrealized losses on the holding of certain equities. The Group issued a statement of profit warning on 14 November 2003 giving the details of the losses.

The Directors consider that long-term growth prospects of the local stock market is still encouraging with the gradual recovery of the domestic economy. The Directors are of the opinion that any short-term turbulence in the capital markets may actually represent opportunities to acquire quality investments.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

As at the date of this prospectus, the Group has total outstanding interest-bearing borrowings in the aggregate amount of approximately HK$22.0 million and is fully invested. The Board is quite satisfied with the existing portfolio and believes that the existing investments still maintain medium to long-term appreciation potential.

The estimated net proceeds of the Rights Issue will amount to approximately HK$12.2 million and will be used as to approximately HK$10 million towards repayment of outstanding interest-bearing borrowing in the aggregate amount of approximately HK$22.3 million and as to approximately HK$2.2 million for future possible investments of the Company.

The Board considers that improving the Company’s gearing ratio is beneficial to the Company and its Shareholders as a whole. Moreover, the Board is optimistic about the long-term prospects of the economy and the stock markets in Hong Kong and the PRC and may consider making further investments in future. As at the Latest Practicable Date, the Board had not identified any specific investment targets.

−19 −

LETTER FROM THE BOARD

In view of the current market conditions and the amount that may be raised by the Rights Issue, the Directors consider that the Rights Issue provides a good opportunity for the Group to strengthen its capital base and to enhance its financial position. Additionally, since the Rights Issue will allow the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company, the Directors consider that it is in the interests of the Company and its Shareholders as a whole to raise capital through the Rights Issue.

The estimated expense of the Rights Issue is about HK$1.2 million, which will be borne by the Company.

FUND RAISING ACTIVITIES AND SHARE TRANSACTIONS OF THE COMPANY DURING THE 12 MONTHS ENDED ON THE LATEST PRACTICABLE DATE

There has not been any rights issue or open offer of Shares in the last 24 months before the Announcement. The following table summarises the capital raising activities of the Group for the 12 months ended on the Latest Practicable Date:

						Percentage of
						number of
						Shares
						issued/total
						number of		Use of
				Amount of	Number of	existing		proceeds	Use of
			Placees/	fund raised	Shares issued	Shares of the		according to	proceeds other
Date of	Date of	Nature of	subscriber/	(net)	from the	Company	Intended use	the intended	than the
announcement	agreement	transaction	allottee	(approximately)	activities	(approximately)	of proceeds	use	intended use
18 December	18 December	Placing of	Independent	HK$5.8	40,000,000	13.895%	General	Investment	Nil
2003	2003	40,000,000	third parties	million	Shares		working
		Shares at a					capital
		price of
		HK$0.148
		per Share
		under
		general
		mandate
4 March	27 February	Placing of	Independent	HK$9.35	48,000,000	16.67%	General	Repayment of	Nil
2004	2004	48,000,000	third parties	million	Shares		working	bank loans
		Shares at a					capital and	and
		price of					repayment of	investment
		HK$0.2 per					borrowing of
		Share under					the Company
		the general
		mandate

GENERAL

Your attention is drawn to the additional information set out in the appendices to this Prospectus.

By Order of the Board Unity Investments Holdings Limited Pang Shuen Wai, Nichols Executive Director

−20 −

FINANCIAL INFORMATION

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

The following table summarises the results, assets and liabilities of the Group for the last three financial years, and was extracted from the published audited financial statements.

The Company’s auditors have not issued any qualified opinion on the Group’s financial statements for the three preceding years.

For the year ended 31 December 2003 2002 2001 HK$ HK$ HK$ 15,525,940 38,667,190 46,446,974	For the year ended 31 December 2003 2002 2001 HK$ HK$ HK$ 15,525,940 38,667,190 46,446,974	For the year ended 31 December 2003 2002 2001 HK$ HK$ HK$ 15,525,940 38,667,190 46,446,974
(25,433,132) –	520,547 –	1,105,058 9,007
(25,433,132) (12.72) cents (12.72) cents	520,547 0.26 cents 0.26 cents	1,114,065

		0.56 cent

		0.55 cent

The Group does not have any extraordinary or exceptional items for each of the three years ended 31 December 2003.

Financial Position Total assets Total liabilities Shareholders’ funds	As 2003 HK$ 112,930,251 (15,152,654) 97,777,597	at 31 December 2002 2001 HK$ HK$ 137,105,247 112,964,317 (12,562,943) (233,082) 124,542,304 112,731,235	at 31 December 2002 2001 HK$ HK$ 137,105,247 112,964,317 (12,562,943) (233,082) 124,542,304 112,731,235
			112,731,235

−21 −

FINANCIAL INFORMATION

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2003

The financial information set out below is copied from pages 18 to 43 of the annual report of the Company for the financial year ended 31 December 2003. All information in this paragraph should be read in conjunction with the audited accounts which are included in the annual report of the Company for the financial year ended 31 December 2003.

Consolidated Profit and Loss Account

For the year ended 31 December 2003

Notes Turnover Proceeds from sales of trading securities 2 Cost of sales Realised gain/(loss) on sale of trading securities Unrealised holding (loss)/gain on trading securities Other revenues 2 Administrative expenses Operating (loss)/profit 3 Finance costs 4 (Loss)/profit for the year Taxation 5 (Loss)/profit attributable to shareholders 6 Basic (loss)/earnings per share 7 Diluted (loss)/earnings per share 7	2003 HK$ 15,525,940 (8,641,821)	2002 HK$ 38,667,190 (42,077,549) (3,410,359) 9,793,500 3,063,627 (8,902,729) 544,039 (23,492) 520,547 – 520,547 0.26 cents 0.26 cents
	6,884,119 (27,038,224) 182,315 (4,654,807) (24,626,597) (806,535) (25,433,132) –	(3,410,359 9,793,500 3,063,627 (8,902,729
		544,039 (23,492
		520,547 –
	(25,433,132) (12.72) cents (12.72) cents

−22 −

FINANCIAL INFORMATION

APPENDIX I

Consolidated Balance Sheet

As at 31 December 2003

Notes Fixed assets 10 Investment securities 12, 14 Current assets Trading securities 13, 14 Deposits, prepayments and other receivables Bank balances and cash Current liabilities Sundry payables and accruals Bank overdraft – secured 14 Net current assets Total assets less current liabilities Financed by: Share capital 15 Reserves 16(a) Shareholders’ funds	2003 HK$ 256,087 81,313,638 30,808,536 193,479 358,511	2002 HK$ 252,269 84,853,388 49,787,500 1,819,456 392,634
	31,360,526 - - - - - - - - - - - - 246,543 14,906,111	51,999,590 - - - - - - - - - - - - 512,321 12,050,622
	15,152,654 - - - - - - - - - - - - 16,207,872 - - - - - - - - - - - - 97,777,597	12,562,943 - - - - - - - - - - - - 39,436,647 - - - - - - - - - - - -
		124,542,304

	20,000,000 77,777,597	20,000,000 104,542,304
	97,777,597	124,542,304

−23 −

FINANCIAL INFORMATION

APPENDIX I

Balance Sheet

As at 31 December 2003

Notes Fixed assets 10 Investments in subsidiaries 11 Investment securities 12, 14 Current assets Trading securities 13, 14 Deposits, prepayments and other receivables Bank balances and cash Current liabilities Sundry payables and accruals Bank overdraft – secured 14 Net current assets Total assets less current liabilities Financed by: Share capital 15 Reserves 16(b) Shareholders’ funds	2003 HK$ 256,087 144,468 81,313,638 30,808,536 193,479 358,511	2002 HK$ 252,269 21,515 84,853,388 49,787,500 1,819,456 392,634
	31,360,526 - - - - - - - - - - - - 246,543 14,906,111	51,999,590 - - - - - - - - - - - - 512,321 12,050,622
	15,152,654 - - - - - - - - - - - - 16,207,872 - - - - - - - - - - - - 97,922,065	12,562,943 - - - - - - - - - - - - 39,436,647 - - - - - - - - - - - -
		124,563,819

	20,000,000 77,922,065	20,000,000 104,563,819
	97,922,065	124,563,819

−24 −

FINANCIAL INFORMATION

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2003

Notes Net cash outflow generated from operations 18(a) Hong Kong profits tax paid Net cash outflow from operating activities Investing activities Purchase of fixed assets Net sale/(purchase) of investment securities Sale of fixed assets Sale of a subsidiary 18(b) Dividends received Interest received Net cash inflow/(outflow) from investing activities Net cash outflow before financing activities Financing activities Dividend paid Interest paid Net cash outflow from financing activities Decrease in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December Analysis of balances of cash and cash equivalents Bank balances and cash Bank overdraft	2003 HK$ (4,316,341) –	2002 HK$ (38,389,418) (36,124) (38,425,542) - - - - - - - - - - - - (306,239) (49,362,866) 245,809 2,200,000 558,200 879,659 (45,785,437) - - - - - - - - - - - - (84,210,979) (1,000,000) (23,492) (1,023,492) - - - - - - - - - - - - (85,234,471) 73,576,483 (11,657,988) 392,634 (12,050,622) (11,657,988)
	(4,316,341) - - - - - - - - - - - - (157,226) 2,208,175 – – 182,130 185 2,233,264 - - - - - - - - - - - - (2,083,077) – (806,535) (806,535) - - - - - - - - - - - - (2,889,612) (11,657,988)	(38,425,542 - - - - - - - - - - - - (306,239 (49,362,866 245,809 2,200,000 558,200 879,659
		(45,785,437 - - - - - - - - - - - -
		(84,210,979 (1,000,000 (23,492
		(1,023,492 - - - - - - - - - - - -
		(85,234,471 73,576,483
	(14,547,600)
	358,511 (14,906,111)	392,634 (12,050,622
	(14,547,600)

−25 −

FINANCIAL INFORMATION

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2003

Notes Total equity as at 1 January (Loss)/profit for the year 16(a) Dividend 16(a) (Deficit)/surplus on revaluation of investment securities 16(a) Issue of bonus shares Bonus issue by capitalizing share premium Total equity as at 31 December	2003 HK$ 124,542,304 (25,433,132) – (1,331,575) – – 97,777,597	2002 HK$ 112,731,235 520,547 (1,000,000) 12,290,522 10,000,000 (10,000,000) 124,542,304

−26 −

FINANCIAL INFORMATION

APPENDIX I

Notes to the Accounts

1. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these accounts are set out below:

(a) Basis of preparation

The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Society of Accountants (“HKSA”). They have been prepared under the historical cost convention as modified by the valuation of investment in securities at fair value.

In the current year, the Group adopted Statement of Standard Accounting Practice (“SSAP”) 12 “Income Taxes” issued by the HKSA which is effective for accounting periods commencing on or after 1 January 2003.

The adoption of the above revised SSAP had no material financial impact on these accounts.

(b) Consolidation

The consolidated accounts include the accounts of the Company and its subsidiaries made up to 31 December. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; or to cast majority of votes at the meetings of the board of directors.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any unamortised goodwill or negative goodwill or goodwill/negative goodwill taken to reserves and which was not previously charged or recognised in the consolidated profit and loss account.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(c) Fixed assets

Fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Fixed assets are depreciated at rates sufficient to write their cost less accumulated impairment losses over their estimated useful lives on a straight-line basis. The principal annual rate used for this purpose is 33[1] ⁄3%.

Improvements are capitalised and depreciated over their expected useful lives to the Group.

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the profit and loss account except where the asset is carried at valuation and the impairment loss does not exceed the revaluation surplus for that same asset, in which case it is treated as a revaluation decrease.

The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.

(d) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.

−27 −

FINANCIAL INFORMATION

APPENDIX I

(e) Investment securities

(i) Investment securities

Investment securities which are held for non-trading purpose are stated at fair value at the balance sheet date. Changes in the fair value of individual securities are credited or debited to the investment revaluation reserve until the security is sold, or is determined to be impaired. Upon disposal, the cumulative gain or loss representing the difference between the net sales proceeds and the carrying amount of the relevant security, together with any surplus/deficit transferred from the investment revaluation reserve, is dealt with in the profit and loss account.

Where there is objective evidence that individual investments are impaired, the cumulative loss recorded in the investment revaluation reserve is taken to the profit and loss account.

(ii) Trading securities

Trading securities are carried at fair value. At each balance sheet date, the net unrealised gains or losses arising from the changes in fair value of trading securities are recognised in the profit and loss account. Profits or losses on disposal of investment securities, representing the difference between the net sales proceeds and the carrying amounts, are recognised in the profit and loss account as they arise.

(f) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks and bank overdraft.

(g) Deferred taxation

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred taxation 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.

(h) Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

(i) Revenue recognition

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

Dividend income is recognised when the right to receive payment is established.

(j) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

−28 −

FINANCIAL INFORMATION

APPENDIX I

(k) Employee benefits

(i) Employee leave entitlements

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.

Employee entitlements to sick leave and maternity leave are not recognised until the time of

leave.

(ii) Profit sharing and bonus plans

The expected cost of profit sharing and bonus payments are recognised as a liability when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for profit sharing and bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.

(iii) Pension obligations

The Group contributes to a defined contribution retirement scheme which is available to all employees. Contributions to the scheme by the Group and employees are calculated as a percentage of employees’ basic salaries. The retirement benefit scheme cost charged to the profit and loss account represents contributions payable by the Group to the fund.

(l) Borrowing costs

All borrowing costs are charged to the profit and loss account in the year in which they are incurred.

(m) Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that outflow is probable, it will then be recognised as a provision.

−29 −

FINANCIAL INFORMATION

APPENDIX I

2. TURNOVER AND REVENUE

The Group is principally engaged in the investment in listed and unlisted companies. Revenues recognised during the year are as follows:

Turnover Proceeds from sale of trading securities Other revenues Interest income Dividend income from investments in securities Other income Total revenues	2003 HK$ 15,525,940 - - - - - - - - - - - 185 182,130 – 182,315 - - - - - - - - - - - 15,708,255	2002 HK$ 38,667,190 - - - - - - - - - - - 879,659 2,173,968 10,000
		3,063,627 - - - - - - - - - -
		41,730,817

All of the Group’s turnover, contribution to operating (loss)/profit, assets and liabilities are attributable to the investments in listed companies and accordingly no analysis of the Group’s turnover, contribution to operating (loss)/profit, assets and liabilities by principal activities is provided.

No geographical analysis is presented as none of the Group’s turnover, contribution to operating (loss)/profit, assets and liabilities is attributable to markets outside Hong Kong.

3. OPERATING (LOSS)/PROFIT

Operating (loss)/profit is stated after charging the following:

	2003	2002
	HK$	HK$
Auditors’ remuneration	195,000	150,000
Depreciation	153,408	311,820
Loss on disposal of a subsidiary	–	1,806,190
Staff costs including directors’ remuneration	1,104,200	1,978,764
Operating leases – land and buildings	894,286	479,187
Retirement benefit costs (note 8)	32,700	51,388

4. FINANCE COSTS

				2003	2002
				HK$	HK$
Interest	on	bank	overdraft	806,535	23,492

−30 −

FINANCIAL INFORMATION

APPENDIX I

5. TAXATION

Hong Kong profits tax has not been provided in these accounts as the Group has no estimated assessable profit during the year (2002: Nil).

The taxation on the Group’s (loss)/profit before taxation differs from the theoretical amount that would arise using the taxation rate of the home country of the Company as follows:

(Loss)/profit before taxation Calculated at a taxation rate of 17.5% (2002: 16%) Income not subject to taxation Expenses not deductible for taxation purposes Unrecognised tax losses (note 17) Taxation charge	2003 HK$ (25,433,132) (4,450,798) (31,905) 8,391 4,474,312 –	2002 HK$ 520,547 83,288 (488,580) 311,046 94,246 –

6. (LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The (loss)/profit attributable to shareholders is dealt with in the accounts of the Company to the extent of the loss of HK$25,310,179 (2002: Profit of HK$500,527).

7. (LOSS)/EARNINGS PER SHARE

The calculation of basic and diluted (loss)/earnings per share is based on the Group’s loss attributable to the shareholders of HK$25,433,132 (2002: Profit of HK$520,547).

The basic (loss)/earnings per share is based on the weighted average of 200,000,004 (2002: 200,000,004) ordinary shares in issue during the year. The number of ordinary shares in issue during the year ended 31 December 2002 has been adjusted retrospectively after taking into account the one for one bonus issue.

The diluted loss per share for the year ended 31 December 2003 is the same as the basic loss per share as all potential ordinary shares are anti-dilutive. The diluted earnings per share for the year ended 31 December 2002 is based on 200,146,689 ordinary shares which is the weighted average number of ordinary shares in issue during the year plus the weighted average of 146,685 ordinary shares deemed to be issued at no consideration if all outstanding options had been exercised.

8. RETIREMENT BENEFIT COSTS

The Group contributes to a Mandatory Provident Fund Scheme (the “MPF Scheme”) under the Mandatory Provident Scheme Ordinance (the “MPF Ordinance”) which is available to all qualifying employees. Under the MPF Scheme, the Group’s contributions are at 5% of employees’ relevant income as defined in the MPF Ordinance up to a maximum of HK$1,000 per employee per month. The employees also contribute a corresponding amount to the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund.

The retirement benefit costs charged to the profit and loss account represent contributions payable by the Group to the MPF Scheme.

During the year, the Group’s contribution charged to the profit and loss account, amounted to HK$32,700 (2002: HK$51,388). As at 31 December 2003, there were no contributions payable to the MPF Scheme (2002: Nil).

−31 −

FINANCIAL INFORMATION

APPENDIX I

9. DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

The aggregate amounts of emoluments payable to directors, which are also included in staff costs as disclosed in note 3, of the Company during the year are as follows:

Fees Other emolument Basic salaries, housing allowances, other allowances and benefits in kind Contribution to pension schemes	2003 HK$ 131,000 859,200 27,000 1,017,200	2002 HK$ 69,000 1,702,000 42,000
		1,813,000

Directors’ fees disclosed above include HK$131,000 (2002: HK$69,000) paid to independent nonexecutive directors.

All emoluments of directors fell within the emolument band of HK$Nil to HK$1,000,000 for the year ended 31 December 2003 and 2002.

None of the directors waived emoluments in respect of the year ended 31 December 2003 and 2002.

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include four (2002: five) directors whose emoluments are reflected in the analysis presented in note 9(a) above. The emoluments payable to the remaining one individual for 2003 were as follows:

Basic salaries, housing allowances, other allowances and benefits in kind Contribution to pension scheme	2003 HK$ 114,000 5,700 119,700	2002 HK$ – –
		–

(c) Share options granted to the directors of the Company

Under a share option scheme (the “1999 Scheme”) approved by the shareholders of the Company in 1999, the directors of the Company may, at their discretion, invite employees, including executive directors of the Company, to take up options to subscribe for shares in the Company subject to the terms and conditions stipulated therein.

−32 −

FINANCIAL INFORMATION

APPENDIX I

Particulars of share options held by the directors of the Company under the 1999 Scheme during the year, after adjusting for the 1 for 1 bonus issue of shares effected on 24 May 2002, were as follows:

Options Options Options Options Options held at granted exercised lapsed held at 31 1 January during during during December Exercise Name of director 2003 the year the year the year 2003 price Grant date HK$ Mr. NGAN Man Kit 4,000,000 – – 4,000,000 – 0.33 15 February 2000

The share options granted to Mr. NGAN Man Kit, a former executive director, under the 1999 Scheme lapsed on 15 July 2003 following his resignation as a director of the Company.

Pursuant to a shareholders’ resolution passed on 2 May 2003, the 1999 Scheme was terminated and a new share option scheme (the “New Scheme”) was adopted. Under the New Scheme, the directors of the Company may grant options to those participants who, in the opinion of the Board, have contributed or may contribute to the development and growth of the Group and any entity in which the Group holds any equity interest. No share options were granted under the New Scheme during the year.

10. FIXED ASSETS

Leasehold improvements HK$ 81,530 85,640	Group and Office equipment HK$ 58,248 71,586	Company Furniture and fixtures HK$ 163,681 –	Total HK$ 303,459 157,226
167,170 - - - - - - - - - - - 13,575 55,668	129,834 - - - - - - - - - - - 10,362 43,235	163,681 - - - - - - - - - - - 27,253 54,505	460,685 - - - - - - - - - - - 51,190 153,408
69,243 - - - - - - - - - - - 97,927 67,955	53,597 - - - - - - - - - - 76,237 47,886	81,758 - - - - - - - - - - 81,923 136,428	204,598 - - - - - - - - - -
			256,087

			252,269

−33 −

FINANCIAL INFORMATION

APPENDIX I

11. INVESTMENTS IN SUBSIDIARIES

Investments at cost Unlisted shares Loan to a subsidiary	Company 2003 2002 HK$ HK$ 78 80 144,390 21,435 144,468 21,515	Company 2003 2002 HK$ HK$ 78 80 144,390 21,435 144,468 21,515
		21,515

The loan to a subsidiary is interest-free and has no fixed terms of repayment.

The following are the details of subsidiary held directly by the Company at 31 December 2003:

						Particulars of
				Place of	Principal	issued share
Name				incorporation	activities	capital	Interest held
Moving	Target	Co.,	Ltd.	The British	Investment	10 ordinary	100%
				Virgin Islands	holding in	shares of
					Hong Kong	US$1 each

12. INVESTMENT SECURITIES

Equity securities, at fair value Listed in Hong Kong Market value of listed equity securities	Group 2003 2002 HK$ HK$ 81,313,638 84,853,388 81,313,638 84,853,388	Company 2003 2002 HK$ HK$ 81,313,638 84,853,388 81,313,638 84,853,388	Company 2003 2002 HK$ HK$ 81,313,638 84,853,388 81,313,638 84,853,388

			84,853,388

As at 31 December 2003, the carrying amounts of interests in each of the following companies exceeded 10% of total assets of the Group and the Company respectively.

		Particulars	Investment value	Investment value
	Place of	of issued	Acquisition	At market	Interest	Dividends
Name	incorporation	shares held	cost	value	held	received
			HK$	HK$		HK$
Asia Standard International	Bermuda	Ordinary shares	16,193,885	15,762,450	1.39%	–
Group Limited		of HK$0.1 each
China United International	Hong Kong	Ordinary shares	6,779,708	17,870,892	4.99%	–
Holdings Limited		of HK$0.1 each
Qualipak International	Bermuda	Ordinary shares	20,283,950	11,656,320	2.55%	182,130
Holdings Limited		of HK$0.01 each
Yugang International	Bermuda	Ordinary shares	11,325,636	29,324,352	3.61%	–
Limited		of HK$0.01 each

−34 −

FINANCIAL INFORMATION

APPENDIX I

Particulars of the above major investment securities are as follows:

Asia Standard International Group Limited (“Asia Standard”) is principally engaged in property sales and investment, hotel and management services businesses. The loss attributable to shareholders of Asia Standard for the year ended 31 March 2003 was approximately HK$283,122,000 and the net assets of Asia Standard as at 31 March 2003 were approximately HK$6,660,943,000.

China United International Holdings Limited (“China United”) is principally engaged in property investment, investment holding, investments in marketable securities and the provision of brokerage and financial services. The loss attributable to shareholders of China United for the year ended 31 December 2002 was approximately HK$199,369,000 and the net assets of China United as at 31 December 2002 were approximately HK$345,510,000.

Qualipak International Holdings Limited (“Qualipak”) is principally engaged in the design, development, manufacture and sale of packaging products for designer label items and luxury consumer goods, point-of-sale display units and office stationery. The profit attributable to shareholders of Qualipak for the year ended 31 December 2002 was approximately HK$24,440,000 and the net assets of Qualipak as at 31 December 2002 were approximately HK$316,277,000.

Yugang International Limited (“Yugang”) is principally engaged in packaging business and property investment business. The loss attributable to shareholders of Yugang for the year ended 31 December 2002 was approximately HK$151,420,000 and the net assets of Yugang as at 31 December 2002 were approximately HK$1,718,905,000.

13. TRADING SECURITIES

Equity securities, at fair value Listed in Hong Kong Market value of listed equity securities	Group 2003 2002 HK$ HK$ 30,808,536 49,787,500 30,808,536 49,787,500	Company 2003 2002 HK$ HK$ 30,808,536 49,787,500 30,808,536 49,787,500	Company 2003 2002 HK$ HK$ 30,808,536 49,787,500 30,808,536 49,787,500

			49,787,500

At 31 December 2003, none of the carrying amount of interests in each of the listed equity securities exceeded 10% of total assets of the Group and the Company.

14. BANKING FACILITIES

As at 31 December 2003, the Group’s and the Company’s bank overdraft facilities amounting to HK$15,000,000 (2002: HK$15,000,000) were secured by all the Group’s investment/trading securities.

15. SHARE CAPITAL

At 1 January 2002 Increase in authorised ordinary share capital in 2002 At 31 December 2002 and 2003	Authorised ordinary shares of HK$0.10 each No. of shares HK$ 200,000,000 20,000,000 200,000,000 20,000,000 400,000,000 40,000,000	Authorised ordinary shares of HK$0.10 each No. of shares HK$ 200,000,000 20,000,000 200,000,000 20,000,000 400,000,000 40,000,000
		40,000,000

−35 −

FINANCIAL INFORMATION

APPENDIX I

At 1 January 2002 Issue of bonus shares in 2002 At 31 December 2002 and 2003	Issued and fully paid ordinary shares of HK$0.10 each No. of shares HK$ 100,000,002 10,000,000 100,000,002 10,000,000 200,000,004 20,000,000	Issued and fully paid ordinary shares of HK$0.10 each No. of shares HK$ 100,000,002 10,000,000 100,000,002 10,000,000 200,000,004 20,000,000
		20,000,000

Notes:

(a) By an ordinary resolution passed on 24 May 2002, the authorized ordinary share capital of the Company was increased from HK$20,000,000 to HK$40,000,000 by the creation of 200,000,000 shares of HK$0.10 each.
(b) Also on 24 May 2002, a total of 100,000,002 bonus shares were allocated and issued on the basis of one bonus share for every one share held by the then registered shareholders, credited as fully paid by way of capitalisation from the Company’s share premium account.

16. RESERVES

(a) Group

Share premium HK$ 84,031,922 – – – (10,000,000) 74,031,922	Investment revaluation reserve HK$ 10,800,000 12,290,522 – – – 23,090,522	Retained profits/ (accumulated losses) HK$ 7,899,313 – 520,547 (1,000,000) – 7,419,860	Total HK$ 102,731,235 12,290,522 520,547 (1,000,000 (10,000,000
			104,542,304

74,031,922 – –	23,090,522 (1,331,575) –	7,419,860 – (25,433,132)	104,542,304 (1,331,575 (25,433,132
74,031,922	21,758,947	(18,013,272)	77,777,597

−36 −

FINANCIAL INFORMATION

APPENDIX I

(b) Company

At 1 January 2002 Surplus on revaluation of investment securities Profit for the year 2001 Final dividend paid Issuance of bonus shares At 31 December 2002 At 1 January 2003 Deficit on revaluation of investment securities Loss for the year At 31 December 2003	Share premium HK$ 84,031,922 – – – (10,000,000) 74,031,922	Investment revaluation reserve HK$ 10,800,000 12,290,522 – – – 23,090,522	Retained profits/ (accumulated losses) HK$ 7,940,848 – 500,527 (1,000,000) – 7,441,375	Total HK$ 102,772,770 12,290,522 500,527 (1,000,000) (10,000,000) 104,563,819 104,563,819 (1,331,575) (25,310,179) 77,922,065
	74,031,922 – –	23,090,522 (1,331,575) –	7,441,375 – (25,310,179)	104,563,819 (1,331,575 (25,310,179
	74,031,922	21,758,947	(17,868,804)

The Company had a distributable reserve of HK$74,031,922 as at 31 December 2003 (2002: HK$81,473,297), represented by the total of share premium and retained profits (for 2002 only) of the Company. Under the Companies Law (2000 Revision) of the Cayman Islands, share premium of the Company is distributable to the shareholders, subject to a solvency test.

17. DEFERRED TAXATION

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5% (2002: 16%).

Deferred income tax assets are recognised for tax loss carry forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group and the Company have estimated unrecognised tax losses of HK$28,095,572 (2002: HK$2,919,761) respectively to carry forward against future taxable income. These estimated tax losses have not been accounted for due to uncertainty on future realization.

−37 −

FINANCIAL INFORMATION

APPENDIX I

18. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of operating (loss)/profit to net cash outflow generated from operations

Operating (loss)/profit Depreciation Loss on disposal of a subsidiary Unrealised holding loss/(gain) on trading securities Interest income Dividend income Operating profit/(loss) before working capital changes Increase in trading securities Decrease in deposits, prepayments and other receivables (Decrease)/increase in sundry payables and accruals Net cash outflow generated from operations	2003 HK$ (24,626,597) 153,408 – 27,038,224 (185) (182,130)	2002 HK$ 544,039 311,820 1,806,190 (9,793,500) (879,659) (2,173,968)
	2,382,720 (8,059,260) 1,625,977 (265,778)	(10,185,078) (28,535,340) 15,637 315,363
	(4,316,341)	(38,389,418)

(b) Sale of a subsidiary

Net assets disposed of: Investments/trading securities Loss on disposal of a subsidiary Consideration received Satisfied by: Cash	2003 HK$ – – – –	2002 HK$ 4,006,190 (1,806,190)
		2,200,000

		2,200,000

19. COMMITMENTS UNDER OPERATING LEASES

At 31 December 2003, the Group had future aggregate minimum lease payments under non-cancellable operating leases for land and buildings as follows:

Not later than one year Later than one year and not later than five years	2003 HK$ 620,796 13,864 634,660	2002 HK$ 720,000 600,000
		1,320,000

−38 −

FINANCIAL INFORMATION

APPENDIX I

20. RELATED PARTY TRANSACTIONS

Significant related party transactions, which were carried out in the normal course of the Group’s business, are as follows:

	2003	2002
	HK$	HK$
Management fee and bonus paid/payable to
related companies (note (a))	1,105,139	2,732,439
Brokerage fee paid/payable to a related company (note (b))	–	364,430

Notes:

(a) Pursuant to an investment management agreement dated 6 October 1999 (the “Original Investment Management Agreement”) between the Company and Alpha Asset Investments Limited (“Alpha”), Alpha has agreed to provide the Group with investment management and general administrative services. Under this arrangement, Alpha is entitled to a monthly management fee payable in advance at 2.5% per annum of the net asset value of the Group at the end of preceding month on the basis of actual number of days in the relevant calendar month over a year of 365 days. The aggregate of management fee and the Bonus paid to Alpha for the year amounted to HK$956,593.

Mr. NGAN Man Kit, a former executive director of the Company, has 60% indirect equity interests in Alpha.

The Original Investment Management Agreement was terminated on 27 April 2003.

Pursuant to an investment management agreement dated 5 November 2003 between the Company and CU Investment Management Limited (“CUIM”), CUIM has agreed to provide the Group with investment management services with effect from 5 November 2003. Under this arrangement, CUIM is entitled to a monthly management fee payable in advance at 1% per annum of the net asset value of the Group at the end of preceding month on the basis of actual number of days in the relevant calendar month over a year of 365 days. The aggregate of management fee and the Bonus paid/payable to CUIM for the year amounted to HK$148,546.

Dr. PANG Shuen Wai, Nichols, an executive director of the Company, is a director of CUIM.

(b) Uni-Alpha Securities Limited (“UASL”) provides brokerage services to the Company and is entitled to a brokerage fee at 0.25% of the transaction amounts.

Mr. NGAN Man Kit, a former executive director of the Company, has 60% indirect equity interests in UASL.

21. SUBSEQUENT EVENTS

On 8 January 2004, the Company issued 40,000,000 new ordinary shares of HK$0.10 each at a subscription price of HK$0.148 per share, by way of share placement, raising net proceeds of approximately HK$5,800,000. On 5 March 2004, the Company announced the proposal to issue 48,000,000 new ordinary shares of HK$0.10 each at a subscription price of HK$0.20 per share. The due date for the new share placement will be 15 April 2004.

22. APPROVAL OF ACCOUNTS

The accounts were approved by the board of directors on 26 March 2004.

−39 −

FINANCIAL INFORMATION

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2004

The financial information set out below is copied from pages 2 to 10 of the interim report of the Company for the six months ended 30 June 2004. All information in this paragraph should be read in conjunction with the unaudited accounts which are included in the interim report of the Company for the six months ended 30 June 2004.

Condensed Consolidated Profit and Loss Account

For the six months ended 30 June 2004

Notes Turnover Proceeds from sale of trading securities 2 Cost of sales Realised (loss)/gain on sale of trading securities Unrealised holding gain/(loss) on trading securities Other revenue 2 Administrative expenses Operating loss 3 Finance costs 4 Loss attributable to shareholders 6 Basic loss per share 7	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 61,774 14,343 (72,983) (7,008) (11,209) 7,334 1,748 (9,101) 1,017 182 (1,611) (3,056) (10,055) (4,640) (668) (375) (10,723) (5,014) (4.08) cents (2.51) cents	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 61,774 14,343 (72,983) (7,008) (11,209) 7,334 1,748 (9,101) 1,017 182 (1,611) (3,056) (10,055) (4,640) (668) (375) (10,723) (5,014) (4.08) cents (2.51) cents
	(11,209) 1,748 1,017 (1,611) (10,055) (668)	7,334 (9,101 182 (3,056
		(4,640 (375
	(10,723) (4.08) cents

−40 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Balance Sheet

As at 30 June 2004 and 31 December 2003

Notes Fixed assets Investment securities 8 Current assets Trading securities 9 Deposits, prepayments and other receivables Bank balances and cash Current liabilities Other payables and accruals Bank overdraft – secured 10 Short term borrowings – secured 10 Net current assets Total assets less current liabilities Financed by: Share capital 11 Reserves Shareholders’ funds Non current liabilities Long term borrowings	Unaudited 30 June 2004 HK$’000 226 62,468 45,138 37 633	31 December 2003 HK$’000 256 81,314 30,809 193 359
	45,808 187 12,425 1,255 13,867 31,941	31,361 247 14,906 –
		15,153
		16,208
	94,635	97,778

	28,800 64,335 93,135 1,500	20,000 77,778
		97,778 –
	94,635	97,778

−41 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2004

Net cash outflow from operating activities Net cash inflow from investing activities Net cash inflow/(outflow) from financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents as at beginning of the period Cash and cash equivalents as at end of the period Analysis of balances of cash and cash equivalents: Bank balances and cash Bank overdraft	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 (14,961) (3,082) 1,681 1,856 16,035 (375) 2,755 (1,601) (14,547) (11,658) (11,792) (13,259) 633 15 (12,425) (13,274) (11,792) (13,259)	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 (14,961) (3,082) 1,681 1,856 16,035 (375) 2,755 (1,601) (14,547) (11,658) (11,792) (13,259) 633 15 (12,425) (13,274) (11,792) (13,259)
	633 (12,425)	15 (13,274
	(11,792)

−42 −

FINANCIAL INFORMATION

APPENDIX I

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2004

At 1 January 2004 Deficit on revaluation of investment securities Issuance of shares Share issue expenses Loss for the period At 30 June 2004 (unaudited) At 1 January 2003 Deficit on revaluation of investment securities Loss for the period At 30 June 2003 (unaudited)	Share capital HK$’000 20,000 – 8,800 – – 28,800	Share premium HK$’000 74,032 – 6,720 (317) – 80,435	Investment revaluation reserve/ (deficit) HK$’000 21,759 (9,123) – – – 12,636	(Accumulated losses)/ retained profits HK$’000 (18,013) – – – (10,723) (28,736)	Total HK$’000 97,778 (9,123) 15,520 (317) (10,723) 93,135 124,543 (29,237) (5,014) 90,292
	20,000 – –	74,032 – –	23,091 (29,237) –	7,420 – (5,014)	124,543 (29,237 (5,014
	20,000	74,032	(6,146)	2,406

−43 −

FINANCIAL INFORMATION

APPENDIX I

Notes to the Condensed Accounts

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

These unaudited condensed consolidated interim accounts are prepared in accordance with Statement of Standard Accounting Practice (“SSAP”) 25, “Interim Financial Reporting”, issued by the Hong Kong Institute of Certified Public Accountants.

These condensed accounts should be read in conjunction with the 2003 annual accounts.

The accounting policies and methods of computation used in the preparation of these condensed accounts are consistent with those used in the annual accounts for the year ended 31 December 2003.

2. TURNOVER AND REVENUES

The Group is principally engaged in the investment in listed and unlisted securities. Revenues recognised during the Period are as follows:

Turnover Proceeds from sale of trading securities Other revenue Dividend income from investments in securities Total revenues	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 61,774 14,343 1,017 182 62,791 14,525	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 61,774 14,343 1,017 182 62,791 14,525
		14,525

An analysis of the Group’s turnover and contribution to operating loss for the Period by geographical segment is as follows:

Hong Kong United States of America	Unaudited Turnover Six months ended 30 June 2004 2003 HK$’000 HK$’000 61,774 14,343 – – 61,774 14,343	Unaudited Operating loss Six months ended 30 June 2004 2003 HK$’000 HK$’000 (10,029) (4,640) (26) – (10,055) (4,640)	Unaudited Operating loss Six months ended 30 June 2004 2003 HK$’000 HK$’000 (10,029) (4,640) (26) – (10,055) (4,640)
			(4,640)

−44 −

FINANCIAL INFORMATION

APPENDIX I

3. OPERATING LOSS

Operating loss is stated after charging the following:

	Unaudited	Unaudited
	Six months ended
		30 June
	2004	2003
	HK$’000	HK$’000
Depreciation	86	80
Staff cost, including directors’ remuneration	353	614
Operating leases – land and buildings	360	360

4. FINANCE COSTS

Interest on bank overdraft Interest on loan from a financial institution	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 486 375 182 – 668 375	Unaudited Six months ended 30 June 2004 2003 HK$’000 HK$’000 486 375 182 – 668 375
		375

5. TAXATION

Hong Kong profits tax has not been provided in these accounts as the Group has no estimated assessable profit during the Period (2003: Nil).

6. LOSS ATTRIBUTABLE TO SHAREHOLDERS

The loss attributable to shareholders is dealt with in the accounts of the Company to the extent of HK$10,706,233 (2003: HK$5,014,472).

7. LOSS PER SHARE

The calculation of basic loss per share is based on the Group’s loss attributable to the shareholders of HK$10,722,789 (2003: HK$5,014,472).

The basic loss per share is based on the weighted average number of 262,725,279 (2003: 200,000,024) ordinary shares in issue during the Period.

Diluted loss per share has not been presented for the Period as there were no dilutive potential ordinary shares. The diluted loss per share for the six months ended 30 June 2003 is the same as the basic loss per share as all potential ordinary shares are anti-dilutive.

−45 −

FINANCIAL INFORMATION

APPENDIX I

8. INVESTMENT SECURITIES

Equity securities, at fair value Listed in Hong Kong Market value of listed equity securities TRADING SECURITIES Equity securities, at fair value Listed in Hong Kong Quoted outside Hong Kong Unlisted redeemable convertible notes, at fair value Market value of listed equity securities	Unaudited 30 June 2004 HK$’000 62,468 62,468 Unaudited 30 June 2004 HK$’000 19,795 9,343 16,000 45,138 45,138	31 December 2003 HK$’000 81,314

		81,314

		31 December 2003 HK$’000 30,809 – –
		30,809

		30,809

9. TRADING SECURITIES

Subsequent to 30 June 2004, all redeemable convertible notes have been redeemed.

10. PLEDGE OF ASSETS

As at 30 June 2004, the Group’s and the Company’s bank overdraft facilities amounting to HK$15,000,000 (31 December 2003: HK$15,000,000) and margin financing facilities (31 December 2003: Nil) obtained from a financial institution amounting to approximately HK$1,255,000 were secured by all the Group’s investment and trading securities.

11. SHARE CAPITAL

Ordinary shares of HK$0.10 each Number of shares Issued and fully paid At 1 January 2004 (Audited) 200,000,004 Issue of shares 88,000,000 As 30 June 2004 288,000,004	Amount HK$’000 20,000 8,800
	28,800

On 8 January 2004 and 31 March 2004, the Company issued 40,000,000 and 48,000,000 new ordinary shares of HK$0.10 each at a subscription price of HK$0.148 and HK$0.2 respectively, by way of share placement, raising net proceeds of approximately HK$5,800,000 and HK$9,400,000.

−46 −

FINANCIAL INFORMATION

APPENDIX I

12. Commitments under operating leases

As at 30 June 2004, the Group had future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings as follow:

Not later than one year Later than one year and not later than five years	Unaudited 30 June 2004 HK$’000 741 963 1,704	31 December 2003 HK$’000 621 14
		635

13. ACQUISITION

On 21 June 2004, the Group acquired 100% of the share capital of Anchor Talent Limited which is engaged in investment holding and was incorporated in the British Virgin Islands. The consideration of HK$9,000,000 was settled in cash. The fair value of the net identifiable assets at the date of acquisition was HK$9,368,993. The resulting negative goodwill of HK$368,993 is recognised in the profit and loss account immediately. The acquired business contributed operating loss of HK$25,556 to the Group for the period from 21 June 2004 to 30 June 2004.

The assets and liabilities arising from the acquisition are as follows respectively:

Trading securities Fair value of net assets Negative goodwill Total purchases consideration	HK$’000 9,369
	9,369 (369
	9,000

14. RELATED PARTY TRANSACTIONS

Significant related party transactions, which were carried out in the normal course of the Group’s business are summarised as follows:

	Unaudited	Unaudited
	Six months ended
		30 June
	2004	2003
	HK$’000	HK$’000
Management fee and bonus paid/payable to
a related company (note (a))	617	957

(a) Pursuant to an investment management agreement dated 6 October 1999 (the “Original Investment Management Agreement”) between the Company and Alpha Asset Investments Limited (“Alpha”), Alpha has agreed to provide the Group with investment management and general administrative services. Under this arrangement, Alpha is entitled to a monthly management fee payable in advance at 2.5% per annum of the net asset value of the Group at the end of preceding month on the basis of actual number of days in the relevant calendar month over a year of 365 days.

Mr. NGAN Man Kit, a former executive director of the Company, has 60% indirect equity interests in Alpha.

−47 −

FINANCIAL INFORMATION

APPENDIX I

The Original investment Management Agreement was terminated on 27 April, 2003.

Dr. PANG Shuen Wai Nichols, an executive director of the Company, is a director of CUIM.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the present available financial resources, the borrowings and debts and the estimated net proceeds from the Rights Issue, the Group has sufficient working capital for its present requirements in the absence of unforeseen circumstances.

5. INDEBTEDNESS

Borrowings and debts

As at the close of business on 31 October 2004, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this prospectus, the Group had outstanding borrowings and debts of approximately HK$22,029,124, comprising the following:

(i) short-term loans of HK$17,595,686, which were denominated in Hong Kong dollars; and
(ii) margin financing account of HK$4,433,439.

All borrowings and debts were secured by the Group’s investment and trading securities.

Contingent liabilities

As at 31 October 2004, the Group had no contingent liabilities.

Disclaimer

Save as aforesaid and apart from intra-group liabilities, neither the Group nor any of the companies comprising the Group had, at the close of business on 31 October 2004, any loan capital issued and outstanding and authorised or otherwise created but unissued, or agreed to be issued, bank overdrafts, term loans, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills and payables) or acceptance credits, debenture, mortgages, charges, obligations under hire purchases contracts or other finance leases, guarantees or other material contingent liabilities.

−48 −

FINANCIAL INFORMATION

APPENDIX I

The Directors have confirmed that there has been no material change in the indebtedness and contingent liabilities of the Group since 31 December 2003, being the date to which the latest published audited accounts of the Company were made up to.

6. MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2003, the date to which the latest audited financial statements of the Company were made up, save as publicly disclosed.

7. STATEMENT OF UNAUDITED PRO FORMA CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Unaudited Pro Forma Consolidated Net Tangible Assets

The unaudited pro forma financial information prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the Rights Issue on the net tangible assets of the Group as if the Rights Issue had taken place on 30 June 2004.

The pro forma financial information has been prepared for illustrative purposes only, and because of its nature, it may not give a true picture of the financial position of the Group following the Rights Issue.

The following statement of unaudited pro forma consolidated net tangible assets of the Group is based on the unaudited consolidated net tangible assets of the Group as at 30 June 2004, as shown in the unaudited consolidated financial statements of the Group, and adjusted to reflect the effect of the Rights Issue as follows:

	Unaudited		Unaudited
	consolidated	Estimated net	pro forma
	net tangible	proceeds from	consolidated
	assets of the	the Rights	net tangible
	Group as at	Issue	assets of the
	30 June 2004	(Note)	Group
	HK$’000	HK$’000	HK$’000
Based on the Subscription
Price of HK$0.14 per
Rights Share	94,635	12,240	106,875

−49 −

FINANCIAL INFORMATION

APPENDIX I

		Unaudited
	Unaudited	pro forma
	consolidated net	adjusted
	tangible assets	consolidated net
	per share of the	tangible assets
	Group as at	per share of the
	30 June 2004	Group
	HK$	HK$
Based on the Subscription Price of
HK$0.14 per Rights Share	0.32860	0.27832

Note: The estimated net proceeds from the Rights Issue are estimated based on the Subscription Price of HK$0.14 per Rights Share, after deduction of the expenses directly attributable to the Rights Issue.

−50 −

FINANCIAL INFORMATION

APPENDIX I

8. LETTER ON THE UNAUDITED PRO FORMA CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the text of a letter in connection with the Rights Issue received from auditors of the Group, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong Telephone (852) 2289 8888 Facsimile (852) 2810 9888

29 November 2004

The Directors

Unity Invesments Holdings Limited 30/F China United Center

28 Marble Road North Potnt Hong Kong

Dear Sirs,

Unity Investments Holdings Limited

We report on the unaudited pro forma financial information of Unity Investments Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out on pages 49 to 50 under the heading of unaudited pro forma consolidated net tangible assets of the Group in Appendix I of the Company’s prospectus dated 29 November 2004 in connection with the proposed rights issue (the “Rights Issue”) of the Company on the Main Board of the Stock Exchange of Hong Kong Limited. The unaudited pro forma financial information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Rights Issue might have affected the relevant financial information of the Group as at 30 June 2004.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 and paragraph 13 of Appendix 1b of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (“the Listing Rules”).

−51 −

FINANCIAL INFORMATION

APPENDIX I

It is our responsibility to form an opinion, as required by the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owned to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work with reference to the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.

Our work does not constitute an audit or review in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared, on the bases set out on page 49 for illustrative purpose only and, because of its nature, it may not be indicative of the financial position of the Group at any future date.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant 4.29 of the Listing Rules.

Yours faithfully,

PricewaterhouseCoopers

Certified Public Accountants Hong Kong

−52 −

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This prospectus includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

The movements, in the authorised and issued share capital of the Company since 31 December 2003 (being the end of the latest audited financial year of the Company) up to the Latest Practicable Date are summarised as follows:

Authorised: 400,000,000 Shares of HK$0.1 each	HK$ 40,000,000

Issued and fully paid or credited as fully paid: 200,000,000 As at 1 January 2003 88,000,000 Issue of shares from 8 January 2004 to 31 March 2004	20,000,000 8,800,000
288,000,000 As at the Latest Practicable Date	28,800,000

All the Shares in issue and to be issued rank and will rank pari passu in all respects with each other including rights to dividends, voting and return of capital. There is no arrangement under which future dividends are waived or agreed to be waived. The Rights Shares, when fully paid, will rank pari passu in all respects with the other issued Shares including as to the right to receive all dividends and distributions which may be declared, made or paid after the Rights Shares are fully paid.

As at the Latest Practicable Date, the Company had no share options or other convertible securities outstanding.

No share or loan capital of the Company or any member of the Group has been put under option or agreed conditionally or unconditionally to be put under option and no warrant or conversion right affecting the Shares has been issued or granted or agreed conditionally, or unconditionally to be issued or granted.

No share or loan capital of the Company has been issued or is proposed to be issued for cash or otherwise and no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any such capital.

−53 −

GENERAL INFORMATION

APPENDIX II

The Shares are listed on the Stock Exchange. No part of the share or loan capital of the Company is listed or dealt in, nor is listing or permission to deal in the share or loan capital of the Company being, or proposed to be, sought on any other stock exchange.

3. DIRECTORS’ INTERESTS IN EQUITY OR DEBT SECURITIES

As at the Latest Practicable Date, the Directors and the chief executive of the Company and their respective associates had the following interests and short positions in the shares, underlying shares and debentures of the Company and its associated corporation (within the meaning of Part XV of the SFO) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors and chief executive of the Company was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered into in the register referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange:

			Approximate
	Nature	Number	percentage of
Name of director	of interest	of Shares	interest
Mr. QI Qing	Personal	20,000	0.01

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company and their respective associates had any interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporation (within the meaning of Part XV of the SFO) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors and chief executive of the Company was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered into in the register referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

−54 −

GENERAL INFORMATION

APPENDIX II

4. SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES AND UNDERLYING SHARES

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons (the “Substantial Shareholders”) (other than the Directors or the chief executive of the Company) who had an interest or short position in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group, or had any options in respect of such shares are set out below:

				Approximate
				percentage of
	Capacity/Nature	Number of Shares		issued shares in
Name of shareholder	of interest	Long position	Short position	the Company
LO Ki Yan, Karen	Beneficial owner	112,450,666	–	29.28
(Note 1)
Radford Capital	Investment manager	32,786,666	–	8.54
Investment Limited
The Underwriter	Beneficial	59,690,669	−	15.54
(Note 2)	Interests
Chu Yuet Wah (Note 2)	Interests of	59,690,669	−	15.54
	controlled
	corporation
Ma Siu Fong (Note 2)	Interests of	59,690,669	−	15.54
	controlled
	corporation

Notes:

LO Ki Yan, Karen beneficially owns and controls the relevant shares through her wholly-owned company, Collier.
The Underwriter is deemed to be interested in these shares by virtue of the Underwriting Agreement. The entire issued share capital of the Underwriter is beneficially owned as to 51% by Chu Yuet Wah and as to 49% by Ma Siu Fong.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company are not aware of any other persons who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were,

−55 −

GENERAL INFORMATION

APPENDIX II

directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or had any options in respect of such shares.

5. DIRECTORS’ SERVICE CONTRACTS

None of the Directors has any existing nor proposed service contract with any member of the Group, save for contracts which will expire or are terminable by the employer within one year without payment or compensation, other than statutory compensation.

6. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and there were no litigation or claims of material importance known to the Directors to be pending or threatened by or against the Company or any member of the Group.

7. MATERIAL CONTRACTS

Save for disclosed below, neither the Company nor any other members of the Group has entered into any material contracts (not being contracts entered into in the ordinary course of business carried on by the Group) within the two years preceding the date of this prospectus:

(a) On 18 December 2003, the Company entered into a placing agreement with CU Corporate Finance Limited as financial adviser and Chung Nam Securities Limited as placing agent for a placing of 40,000,000 Shares at a price of HK$0.148 per Share to the independent third parties;
(b) On 27 February 2004, the Company entered into a placing agreement with CU Corporate Finance Limited as financial adviser and Chung Nam Securities Limited as placing agent for a placing of 48,000,000 Shares at a price of HK$0.2 per Share to the independent third parties; and
(c) the Underwriting Agreement.

8. EXPERT AND CONSENT

As at the Latest Practicable Date, PricewaterhouseCoopers, a firm of Certified Public Accountants did not have any beneficial interest in the share capital of any member of the Group or had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group and have any interest, either directly or indirectly, in any assets which have been, since 31 December 2003, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

−56 −

GENERAL INFORMATION

APPENDIX II

PricewaterhouseCoopers has given and has not withdrawn its written consent to the issue of this prospectus with the inclusion therein of its letter, and the references to its name, in the form and context in which it respectively appears.

9. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Company Secretary and Qualified	Poon Suk Ching, CPA
Accountant	1801, 18th Floor, Golden Centre
	188 Des Voeux Road
	Central
	Hong Kong
Authorised Representatives	Au Shuk Yee, Sue
	30th Floor, China United Centre
	28 Marble Road
	North Point
	Hong Kong
	Pang Shuen Wai, Nichols
	30th Floor, China United Centre
	28 Marble Road
	North Point
	Hong Kong
Registered Office	Century Yard
	Cricket Square
	Hutchins Drive
	P.O. Box 2681GT
	George Town
	Grand Cayman
	British West Indies
Principal Place of Business	30th Floor, China United Centre
in Hong Kong	28 Marble Road
	North Point
	Hong Kong
Investment Manager	CU Investment Management Limited
	Office B
	31st Floor, China United Centre
	28 Marble Road
	North Point
	Hong Kong

−57 −

GENERAL INFORMATION

APPENDIX II

Financial Adviser to the Company	Kingston Corporate Finance Limited
	Suite 2801, 28th Floor
	One International Finance Centre
	1 Harbour View Street
	Central
	Hong Kong
Underwriter	Kingston Securities Limited
	Suite 2801, 28th Floor
	One International Finance Centre
	1 Harbour View Street
	Central
	Hong Kong
Auditors	PricewaterhouseCoopers
	Certified Public Accountants
	22nd Floor, Prince’s Building
	Central
	Hong Kong
Principal Bankers	Standard Chartered Bank
	32nd Floor
	4-4A Des Voeux Road
	Central
	Hong Kong
	Liu Chong Hing Bank
	2nd Floor, New World Tower
	Queen’s Road Central
	Hong Kong
Custodian	Standard Chartered Bank
	15th Floor, Standard Chartered Tower
	388 Kwun Tong Road
	Kwun Tong
	Kowloon
	Hong Kong
Share Registrars and Transfer Office	Tengis Limited
	Ground Floor, Bank of East Asia
	Harbour View Centre
	56 Gloucester Road
	Wanchai
	Hong Kong

−58 −

GENERAL INFORMATION

APPENDIX II

Legal Advisers to the Company As to Hong Kong Law: Richards Butler 20th Floor, Alexandra House 16-20 Chater House Hong Kong As to Cayman Islands Law: Conyers Dill & Pearman, Cayman Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

10. BINDING EFFECT

The Rights Issue Documents and all acceptances of any offer contained in or application made pursuant to such documents, are governed by and shall be construed in accordance with the laws of Hong Kong. When an acceptance or application is made pursuant to any of the above documents, the relevant document(s) shall have the effect of rendering all persons concerned bound by the provisions (other than the penal provisions) of Sections 44A and 44B of the Companies Ordinance, so far as applicable.

11. PROCEDURES FOR DEMANDING A POLL

Under Article 100 of the Articles of Association of the Company, at any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by:

(a) the Chairman of the meeting; or
(b) at least five members present in person or by proxy and entitled to vote; or
(c) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or
(d) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

12. EXPENSES

The expenses in connection with the Rights Issue, including financial advisory fees, underwriting commission, printing, registration, translation, legal and accountancy charges are estimated to amount to approximately HK$1.2 million and are payable by the Company.

−59 −

GENERAL INFORMATION

APPENDIX II

13. MISCELLANEOUS

(a) None of the Directors has, or has had any direct or indirect interest in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to the Company or any member of the Group since 31 December 2003, being the date to which the latest published audited accounts of the Company were made up.
(b) Save for the Underwriting Agreement, there is no contract or arrangement entered into by any member of the Group, subsisting at the date of this Prospectus in which any of the Directors is materially interested, directly or indirectly, and which is significant in relation to the business of the Group taken as a whole.
(c) The English text of the Rights Issue Documents shall prevail over the Chinese text in the case of any inconsistency.

14. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

A copy of each of the Rights Issue Documents and the written consent from PricewaterhouseCoopers, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance.

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the office of the Company at 30th Floor, China United Centre, 28 Marble Road, North Point, Hong Kong up to and including 14 December 2004:

(a) the memorandum of association and articles of association of the Company;
(b) the Underwriting Agreement;
(c) the audited financial statements of the Company for each of the two years ended 31 December 2003;
(d) the unaudited financial statement of the Company for the period of six months ended 30 June 2004;
(e) the material contracts referred to in the section headed “Material Contracts” of this appendix; and
(f) the letter from PricewaterhouseCoopers referred to in paragraph 8 of Appendix 1.

−60 −

AI assistant

Smart-Core Holdings Limited — Capital/Financing Update 2004

50415_rns_2004-11-29_320095f4-9cc6-4ea9-b07d-58a52d8926b2.pdf

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

UNITY INVESTMENTS HOLDINGS LIMITED

Financial Adviser to the Company

Underwriter

CONTENTS

DEFINITIONS

EXPECTED TIMETABLE

UNITY INVESTMENTS HOLDINGS LIMITED

RIGHTS ISSUE OF

INTRODUCTION

RIGHTS ISSUE

Issue Statistics

Qualifying Shareholders

TERMS OF THE RIGHTS ISSUE

Subscription Price for the Rights Shares

Status of the Rights Shares

Rights of Excluded Shareholders

Fractions of Rights Shares

PROCEDURE FOR ACCEPTANCE OR TRANSFER

LETTER FROM THE BOARD

APPLICATION FOR EXCESS RIGHTS SHARES

LETTER FROM THE BOARD

SHARE CERTIFICATES

LISTINGS AND DEALINGS

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

Undertakings from Collier and Winning Horsee

CONDITIONS OF THE UNDERWRITING AGREEMENT

TERMINATION OF THE UNDERWRITING AGREEMENT

WARNING OF THE RISKS OF DEALINGS IN SHARES AND NIL-PAID RIGHTS SHARES

EFFECTS ON SHAREHOLDING STRUCTURE

BUSINESS REVIEW AND PROSPECTS

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES AND SHARE TRANSACTIONS OF THE COMPANY DURING THE 12 MONTHS ENDED ON THE LATEST PRACTICABLE DATE

GENERAL

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2003

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Accounts

1. PRINCIPAL ACCOUNTING POLICIES

(a) Basis of preparation

(b) Consolidation

(c) Fixed assets

(d) Operating leases

(e) Investment securities

(i) Investment securities

(ii) Trading securities

(f) Cash and cash equivalents

(g) Deferred taxation

(h) Translation of foreign currencies

(i) Revenue recognition

(j) Provisions

(k) Employee benefits

(ii) Profit sharing and bonus plans

(iii) Pension obligations

(l) Borrowing costs

(m) Contingent liabilities

2. TURNOVER AND REVENUE

3. OPERATING (LOSS)/PROFIT

4. FINANCE COSTS

5. TAXATION

6. (LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS

7. (LOSS)/EARNINGS PER SHARE

8. RETIREMENT BENEFIT COSTS

9. DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

(b) Five highest paid individuals

(c) Share options granted to the directors of the Company

APPENDIX I

10. FIXED ASSETS

11. INVESTMENTS IN SUBSIDIARIES

12. INVESTMENT SECURITIES

Smart-Core Holdings Limited Capital/Financing Update 2004