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					                                                   IMPORTANT

 If you are in any doubt about this prospectus, you should consult your stockbroker, bank manager, solicitor, professional
 accountant or other professional adviser.




                                                                                                                               A

        ERA INFORMATION & ENTERTAINMENT LIMITED                                                                                C
                                                                                                                               A


                         (incorporated in the Cayman Islands with limited liability)
                                LISTING ON
                     THE GROWTH ENTERPRISE MARKET OF
                 THE STOCK EXCHANGE OF HONG KONG LIMITED
                                           BY WAY OF PLACING                                                                   C
                                                                                                                               A
                                                                                                                               (
             Number of Placing Shares                        :      80,000,000 Shares, comprising
                                                                    58,000,000 New Shares, and
                                                                    22,000,000 Sale Shares
                                                                    (subject to Over-allotment Option)
             Offer Price                                     :      not more than HK$1.10 per Share
             Nominal value                                   :      HK$0.01 each
             Stock code                                      :      8043

                                               Sponsor and Manager




                                   REXCAPITAL (Hong Kong) Limited
                                                  Lead Underwriter

                          TingKong-RexCapital Securities International Limited
                                                     Underwriters

CEF Capital Limited                                                          Chow Sang Sang Securities           Limited
Get Nice Capital Limited                                                              GC Capital (Asia)          Limited
HT Securities Limited                                                                         KGI Asia           Limited
Kingsway SW Securities Limited                                                Pacific Challenge Capital          Limited
SBI E2-Capital Securities Limited                                           Sun Hung Kai International           Limited
                                         Vickers Ballas Capital Limited

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the       R
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.
A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents delivered to     C
the Registrar of Companies” in Appendix V to this prospectus, has been registered by the Registrar of Companies in Hong Kong
as required under Section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and
Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus
or any other documents referred to above.
The Offer Price is expected to be fixed by agreement between Rexcapital, on behalf of the Underwriters, the Company and the
Vendor at or before 5:00 p.m. on 18th June, 2001 or such later time as may be agreed between the parties, but in any event,
no later than 5:00 p.m. on 19th June, 2001. The Offer Price will be not more than HK$1.10 per Share and is expected to be
not less than HK$0.80 per Share although Rexcapital, on behalf of the Underwriters, the Company and the Vendor may agree
a lower price. If Rexcapital, on behalf of the Underwriters, the Company and the Vendor are unable to reach agreement on the
Offer Price, the Placing will not proceed.

                                                                                                        12th June, 2001
      CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET
        OF THE STOCK EXCHANGE OF HONG KONG LIMITED

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE                                         R

STOCK EXCHANGE OF HONG KONG LIMITED

     GEM has been established as a market designed to accomm odate companies to which a high
investment risk may be attached. In particular, companies may list on GEM with neither a track
record of profitability nor any obligation to forecast future profitability. Furtherm ore, there may
be risks arising out of the emerging nature of companies listed on GEM and the business sectors
or countries in which the companies operate. Prospective investors should be aware of the
potential risks of investing in such companies and should make the decision to invest only after
due and careful consideration. The greater risk profile and other characteristics of GEM mean
that it is a market m ore suited to professional and other sophisticated investors.

     Given the emerging nature of companies listed on GEM, there is a risk that securities traded
on GEM may be m ore susceptible to high market volatility than securities traded on the Main
Board of the Stock Exchange and no assurance is given that there will be a liquid market in the
securities traded on GEM.

     The principal means of information dissemination on GEM is publication on the Internet
website operated by the Stock Exchange. Listed companies are not generally required to issue
paid announcements in gazetted newspapers. Accordingly, prospective investors should note that
they need to have access to the GEM website at www.hkgem.com in order to obtain up-to-date
information on GEM-listed issuers.




                                              — i —
                                             EXPECTED TIMETABLE

                                                                                                                            2001

Determination of the Offer Price on or before . . . . . . . . . . . . . . . 5:00 p.m. on Monday, 18th June

Announcement of the Offer Price and the indication
 of the level of interests in the Placing to be
 published on the GEM website at
 www.hkgem.com and in the Hongkong iMail (in English)
 and the Hong Kong Economic Times (in Chinese) on or before . . . . . . . . . . . Friday, 22nd June

Allotment of New Shares and transfer of Sale Shares
  to placees on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 26th June

Despatch of Share certificates on or before (Note 2) . . . . . . . . . . . . . . . . . . . . . Tuesday 26th June

Dealings in the Shares on GEM to commence on . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 28th June

Notes:


1.       All times refer to Hong Kong local time. Details of the structure of the Placing, including its conditions, are set out in
         the section headed “Structure of the Placing” in this prospectus.


2.       The share certificates for the Placing Shares to be distributed via CCASS are expected to be deposited into CCASS on
         or about Tuesday, 26th June, 2001 for credit to the relevant CCASS participants’ stock accounts of the Underwriters, the
         placees or their agents (as the case may be). No temporary document of title will be issued.


3.       Shares will be traded in board lot of 4,000 Shares.


4.       If there is any change in the above timetable, a separate announcement will be made by the Company.




                                                             — ii —
                                                             CONTENTS


       You should rely only on the information contained in this prospectus to make your investment
  decision.
       Era Information & Entertainment Limited has not authorised anyone to provide you with
  information that is different from what is contained in this prospectus.
        Any information or representation not made nor contained in this prospectus must not be
  relied on by you as having been authorised by Era Information & Entertainment Limited,
  Rexcapital (as sponsor and manager), the Underwriters, any of their respective directors, or any
  other person involved in the Placing.

                                                                                                                                            Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     15

Glossary of technical terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               20

Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      24

Waivers in respect of the GEM Listing Rules and Companies Ordinance . . . . . . . . . . . . .                                                 29

Information about this prospectus and the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               34

Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     37

Parties involved in the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 38

Corporate information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               41

Industry overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           42

General overview of the Group
       History and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                50
       Group and shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   51
       Description of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            52
       The Group’s strength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             61
       Technology and facilities infrastructure                    .....................................                                      65
       Licences and intellectual property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    66

Statement of active business pursuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     68

Relationship with ERA Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    72

Statement of business objectives
       Market potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         75
       Business objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           76
       Implementation plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            79
       Basis and assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              82
       Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          83



                                                                 — iii —
                                                            CONTENTS

                                                                                                                                           Page

Directors, senior management and employees
       Directors       ............................................................                                                          85
       Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     86
       Senior management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           86
       Audit committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         87
       Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       87
       Benefit schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         88
       Share Option Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              88

Substantial, management and significant shareholders
       Substantial shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            89
       Initial Management Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   90
       Significant Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           91
       Undertakings          .........................................................                                                       92

Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      94

Financial information
       Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      96
       Liquidity, financial resources and capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        97
       Trading record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        99
       Property interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
       Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
       Distributable reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
       Adjusted net tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
       No material adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Sponsor’s interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Underwriting
       Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
       Underwriting arrangements and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Structure of the Placing
       Offer Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
       Conditions of the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
       Preference to employees under the Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
       The Placing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
       Over-allotment Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
       Stabilisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110


                                                                 — iv —
                                            CONTENTS

                                                                                                                       Page

Appendix I     —   Accountants’ report          . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Appendix II    —   Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Appendix III   —   Summary of the constitution of the Company
                     and Cayman Islands company law . . . . . . . . . . . . . . . . . . . . . . . . . 136

Appendix IV    —   Statutory and general information . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Appendix V     —   Documents delivered to the Registrar of Companies
                    and documents available for inspection . . . . . . . . . . . . . . . . . . . . . 185




                                                 — v —
                                            SUMMARY


 This summary aims to give you an overview of the information contained in this prospectus. As it
 is a summary, it does not contain all the information that may be important to you. You should read
 the whole prospectus before you decide to invest in the Placing Shares. Capitalised terms used in
 this summary have the same meaning as those defined in “Definitions” or “Glossary of Technical
 Terms” below.

 There are risks associated with investment in companies listed on GEM. Some of the particular
 risks in investing in the Placing Shares are set out in the section headed “Risk factors” in this
 prospectus. You should read that section carefully before you decide to invest in the Placing Shares.


BUSINESS                                                                                                    C
                                                                                                            A

      Since its commencement of business in 1989, the Group has been engaged in the distribution of
foreign home video products and motion pictures in Hong Kong and Macau. The foreign home video
products are mainly sourced from major Hollywood film studios such as Columbia-Tristar, Universal
and DreamWorks. The Group has been granted the exclusive distribution rights of foreign home video
products in Hong Kong and Macau from Columbia-Tristar for over 10 years and has been the exclusive
licensee for Universal on DVDs since 1999. The Group has also been the principal all-rights
distributor (including theatrical, video and TV rights) of Miramax (a Disney company) for over two
years since November 1998. The Group has recently been granted the exclusive licensing rights in
Hong Kong and Macau for new release titles of DreamWorks on DVD and VCD formats and of
Universal on VCD format since 2001. In April 2001, the Company and ERA Taiwan entered into a
memorandum of understanding pursuant to which the Company will be granted the exclusive right of
distribution of all or certain TV programs owned by ERA Taiwan in Asia excluding Taiwan, with
formal distribution agreement currently expected to be concluded within six months from 6th April,
2001. In addition, the Group also entered into a memorandum of understanding on 1st April, 2001 in
connection with the exclusive distribution rights of programs in various formats in Hong Kong owned
by Toei of Japan, with formal distribution agreement currently expected to be finalised by the second
quarter of 2001.

     With the growth of the use of the Internet, the Directors believe that the business opportunities
to provide online entertainment related services will increase. To enhance the growth in business and
revenue sources, the Group plans to extend its distribution network from the traditional means to the
Internet platform. The Directors believe that the Internet platform provides a good e-commerce
opportunity for the Group to serve the end-users directly and to strengthen its market share by carrying
out direct sales as well as rental business of entertainment related products. To achieve this objective,
the Group diversified its business to the Internet industry by launching an Internet portal under the
domain name of www.mov3.com in March 2000, which provides filmed entertainment related services.

Home video products distribution

     The Group is principally engaged in the distribution of foreign home video products, mostly in
the DVD and VCD formats, through its well-established distribution network in Hong Kong and
Macau. The Group has entered into agreements with Columbia-Tristar, Universal and Miramax (a
Disney company) pursuant to which the Group is granted the exclusive distribution or licensing rights
in Hong Kong and Macau for DVDs and/or VCDs of a variety of motion pictures produced by these
studios. Since its commencement of business in 1989 and up to the Latest Practicable Date, the Group
has distributed over 2,000 motion pictures produced by Hollywood film studios. The Group has
recently been granted the exclusive licensing rights in Hong Kong and Macau for new release titles


                                                — 1 —
                                            SUMMARY

of DreamWorks on DVD and VCD formats and of Universal on VCD format since 2001. With effect
from June 2001, the Group had ceased to be the exclusive distributor of home video products for
Warner and will not be engaged in the distribution of home video products for Warner in Hong Kong
and Macau due to the fact that Warner intends to carry out distribution of home video products by their
local offices instead of appointing local distribution agent. As at 31st May, 2001, the inventory of
Warner’s home video products held by the Group amounted to approximately HK$2 million. All the
existing products currently held by the Group will, pursuant to a letter agreement entered into between
Warner and the Group, be consigned to Warner by different stages for resale to its customers for a
period of three months expiring on 31st August, 2001 unless being extended under mutual agreement
(the “Consignment Period”). Any sales of the stocks during the Consignment Period will be treated as
turnover of Warner and the Group will be entitled to receive a lump sum amount from Warner
depending on the quantity of the stocks sold. After the expiration of the Consignment Period, Warner
shall have the right to purchase all or a portion of the stocks remaining unsold from the Group,
otherwise, all unsold products shall be destroyed. The Directors believe that the impact of the
non-renewal of the distribution right of Warner on the Group can be set off and the Group’s turnover
can be improved by securing additional distribution rights in 2001 through (1) the granting of the
exclusive rights in Hong Kong and Macau for new release titles on VCD format for Universal, which
is one of the top five labels of the Group during the Track Record Period; (2) the granting of exclusive
licensing rights in Hong Kong and Macau for new release titles of DreamWorks on DVD and VCD
formats; (3) the entering into of a memorandum of understanding in connection with the exclusive
distribution rights of programs owned by Toei of Japan in various formats in Hong Kong; and (4) the
entering into a memorandum of understanding with ERA Taiwan, the controlling shareholder of the
Group, for the exclusive right of all or certain TV programs owned by ERA Taiwan in Asia, excluding
Taiwan. To further enhance the Group’s market status, the Directors intend to take on additional label
representation as well as develop its distribution network by selling to additional retail chain stores.

Theatrical and pay/free TV rights distributions

      The Group is also engaged in the distribution of motion pictures predominantly produced by
overseas studios. The Group’s customers cover all cinema circuits that exhibit Hollywood pictures and
operators of pay/free TV in Hong Kong. The Group enters into licensing agreements with overseas
studios to secure the exclusive rights for theatrical and pay/free TV distribution of the licensed films
in Hong Kong and Macau. Since 1998, the Group has been the principal distributor of Miramax (a
Disney company) and have a first priority to select all the motion pictures produced and distributed
by Miramax for Hong Kong and Macau. The motion pictures distributed by the Group during the Track
Record Period include the well acclaimed box-office winners “Scream” series, “Scary Movie” and the
awards winner “Life is Beautiful”. The Directors believe that the Group’s experience in theatrical and
pay/free TV rights distributions business will enable the Group to secure more distribution rights of
motion pictures to enhance the development of this business and expect continuing growth of such
distribution income.

Internet business

      As an initial step to carry out direct sales by establishing the platform of e-commerce, the Group
launched an Internet portal under the domain name of www.mov3.com in March 2000 which is focused
on the provision of comprehensive movie related contents. Leveraging on its movie and entertainment
related contents library and ERA Taiwan’s strengths and expertise in Internet technology and its
support given to the Group, the Group aims to develop www.mov3.com into a leading movie and
entertainment focused portal targeting at Chinese-speaking users.


                                               — 2 —
                                           SUMMARY

Content services

      The contents provided on www.mov3.com are available in both traditional and simplified Chinese
characters versions. Currently, the main channels available on www.mov3.com include local and
international movie news in text and video clips, upcoming and current showing movie information,
movie teasers and trailers with Chinese subtitles; major box office information, movie reviews written
by film critics, premiere highlights, coverage on film festivals and awards, local cinema guide,
interactive movie review chat rooms.

     As part of its business strategies, the Group is developing infrastructure portal services such as
free e-mail for members of www.mov3.com. This is aimed to bring together real-time interactive
special interest users’ communities as well as other members of the public to promote movie related
subjects.

E-commerce

     To capitalise on the Group’s exclusive distribution on licensing rights for DVDs and/or VCDs
of certain motion pictures produced by major Hollywood studios, the Group has established an
e-commerce platform in a portal, offering the sale of CDs, VCDs, DVDs and local rental of DVDs
directly to end-users. The Directors believe that the provision of actual products and services through
accessing the Group’s websites may attract viewers and complement the Group’s existing home video
products and motion pictures distribution business.

     Online CD/VCD/DVD store was launched, under the domain name of www.mov3-shop.com, on
24th May, 2001. In addition, it is the intention of the Directors to expand the Group’s e-commerce
operations in Hong Kong, throughout the Southeast Asian region and Greater China.

PRINCIPAL STRENGTHS OF THE GROUP

     The Directors believe that the Group has the following strengths:

     ●    its well-established distribution network in Hong Kong and Macau;

     ●    its well-established relationship with certain leading major Hollywood film makers such as
          Columbia-Tristar, Universal and Miramax;

     ●    its content-rich movie entertainment programs;

     ●    support from ERA Taiwan;

     ●    its ability to attract, retain and motivate qualified technical and management personnel; and

     ●    its commitment to quality products.




                                               — 3 —
                                                       SUMMARY

TRADING RECORD                                                                                                                        C
                                                                                                                                      A

      The following table summarises the Group’s audited combined results for each of the two
financial years ended 31st December, 2000 and is prepared on the assumption that the current structure
of the Group has been in existence throughout the periods under review. This summary should be read
in conjunction with the accountants’ report set out in Appendix I to this prospectus.

                                                                                             Year ended 31st December,
                                                                          Note                    1999            2000
                                                                                              HK$’000         HK$’000

     Turnover                                                              (1)
       Sales of home video products                                                               56,851                  87,816
       Theatrical and television release income                                                   11,169                  14,935
       Income from Internet operations                                                                —                      395
       Total turnover                                                                             68,020                103,146

     Cost of sales                                                                               (49,048)                (73,945)

     Gross profit                                                                                 18,972                  29,201
     Other revenue                                                                                   680                     300
     Portal promotion costs                                                (2)                        —                   (2,269)
     Portal development costs                                              (2)                        —                   (3,213)
     Distribution costs                                                                             (491)                   (600)
     Administrative expenses                                                                     (16,985)                (22,418)
     Other operating expenses                                                                       (746)                     (2)

     Profit from operations                                                                        1,430                      999
     Finance costs                                                                                    (6)                     (61)
     Share of loss of associates                                                                    (501)                    (704)

     Profit before taxation                                                                           923                    234
     Taxation                                                                                        (417)                (1,228)

     Net profit/(loss) attributable to shareholders                                                   506                    (994)

     Earnings/(loss) per share - basic                                     (3)               0.19 cents            (0.38) cents

     Notes:


     (1)      Turnover mainly represents (i) the net invoiced value of goods sold, less sales return and discounts; (ii) the
              theatrical income for distribution of motion pictures; (iii) the television release income for distribution of motion
              pictures; and (iv) income from Internet operations.


     (2)      Portal promotion costs and portal development costs were incurred for the establishment of the following
              websites:


              (i)    filmed entertainment related website under the domain name of www.mov3.com which was launched in
                     March 2000 and has commenced to generate income for the Group since April 2000; and


              (ii)   online sales and rental of CD/VCD/DVD under the website of www.mov3-shop.com which was launched
                     in May 2001.



                                                            — 4 —
                                                   SUMMARY

     (3)   The calculation of the basic earnings/(loss) per Share is based on the Group’s net profit/(loss) attributable to
           shareholders for each of the two years ended 31st December, 2000 and on the assumption that 262,000,000 Shares
           had been in issue throughout the years, comprising 262,000 Shares in issue as at the date of this prospectus and
           261,738,000 Shares which would have been issued pursuant to the Capitalisation Issue as described in Appendix
           IV to this prospectus.


BUSINESS STRATEGIES, FUTURE PLANS AND PROSPECTS

      The Group is committed to establish itself as one of the leading distributors to deliver foreign
filmed entertainment services to audience in Southeast Asia and Greater China in line with the
on-going innovation in exhibition technology through various channels including existing media of
theatrical exhibition, broadcast television, cable television, home video and online delivery of
entertainment products. The Group’s objective is characterised in the following diagram:


    INCOME                                  PROVISION OF                                                                         TARGET
    SOURCE                              PRODUCTS AND SERVICES                                                                  CUSTOMERS

                               Internet Business
                               - Online movie magazine under domain name
                                  of www.mov3.com;                                                                             Movie lovers
Vertical expansion
                               - Online sale and rental store under domain


                                                                                        Innovations in Exhibition Technology
into retail market
 through Internet                 name of www.mov3-shop.com; and
                                                                                                                                Households
                               - Online delivery of entertainment related
                                  products.
Sale of products in            Home Video Products Distribution
  wholesale and                - DVD and VCD products for foreign                                                               Retail chain
distribution market              motion pictures                                                                                  stores

                               Theatrical and Pay/Free TV Rights Distribution
  Sub-license fee              - Pay/Free TV rights distribution for                                                           TV operators
                                 television broadcasting; and
Box office receipts            - Theatrical release in cinemas.                                                                Cinema chains




     The Group has identified four key business strategies in order to achieve the objective mentioned
above:

Establishing itself as a major foreign home video products distributor in Southeast Asia and
Greater China

     The Group aims to satisfy various market demands by offering a wider range of foreign motion
pictures, to expand its existing distribution network to include convenience chain stores, supermarket
chains and department stores, and to obtain more licensed motion pictures from global film producers
and expand to Southeast Asia and Greater China.




                                                       — 5 —
                                             SUMMARY

Establishing itself as a major independent theatrical and pay/free TV rights distributor

      To cope with the demand of pay/free TV rights in the coming years due to more licensed TV
operators in Hong Kong, the Group plans to increase its presence in this area by entering into
additional licensing agreements with overseas studios and by taking on additional product
representation, so as to position itself as a major content provider, and gradually expand into Southeast
Asia and Greater China through possible co-operation with television operators, including satellite
television operators.

Establishing itself as a major online entertainment provider

      The enormous Chinese Internet users market represents one of the fastest growing and
potentially one of the largest user groups of the Internet. In order to exploit this opportunity, the Group
seeks to (i) provide filmed entertainment and music related contents that target at individual Chinese
users; (ii) utilise a widely recognized entertainment media, with exclusive distribution rights on brand
named film products; (iii) utilise strategic alliances, business partnerships with ERA Taiwan on their
experience in providing Internet services in Taiwan over the past two years; and (iv) to create a
platform for e-commerce and online delivery business.

Online CD/VCD/DVD store

      The Directors believe that with the advent of Internet technology, it is an appropriate time to
initiate a vertical extension of the Group’s video distribution business into retail market. There are
four unique characteristics attributed to the Group which will enhance the success of the online store:

     1.    The Group itself is the exclusive video licensee for three major Hollywood film studios.
           The control of product supply for more competitive pricing of the Group’s products and
           quicker access to newly released video products, especially in DVDs, will place the Group
           in an advantageous position when competing with online competitors and, so far as the
           Directors are aware, there are only a few current websites for CD/VCD/DVD sale and none
           for rental of DVDs in Hong Kong.

     2.    There are more than 3,000 motion pictures in either VCD or DVD formats initially available
           in the online store.

     3.    Delivery fulfillment, which is vital to the success of e-commerce, will be substantially
           strengthened by the network of more than four hundred 7-Eleven convenience stores
           opening 24 hours a day and by Hong Kong Post and Federal Express which will provide
           courier services.

     4.    The initial customer base of the store will be supported by more than 40,000 www.mov3.com
           members who are on-target movie lovers.

     The online store has been made initially available in Hong Kong since May 2001 while similar
services will be introduced to Southeast Asia and Greater China following its implementation in Hong
Kong. The Group is currently in discussion with ERA Taiwan and a major home video distributor in
Singapore, for provision of similar services of the Group’s online CD/VCD/DVD store provided in


                                                 — 6 —
                                            SUMMARY

Hong Kong. To operate similar online services of the Group’s online CD/VCD/DVD store in the PRC,
the Group will require necessary government and regulatory approvals. As the Directors do not
envisage that the Group will set up such online services in the PRC at this stage, the Directors consider
it premature to obtain such approval.

Content syndication

      The Group’s website contents have been licensed to Yahoo! Holdings (Hong Kong) Limited for
distribution on its Internet and Wireless Devices. Negotiation is underway with other major Internet
portals for possible content syndication and co-branding with the Group as content provider.

Online delivery of entertainment products

      With the advent of the optical fibre transmission for delivery of motion pictures and the opening
up of the broadcasting market, the Group is prepared to launch the online delivery services as a
medium term plan. The Directors expect that the Group would be able to exploit its advantageous
position of well-established relationship with some of the major Hollywood and overseas studios in
securing the distribution rights of foreign filmed entertainment through online delivery format and
explore the possibilities of the cooperations with strategic partners for the implementation of its
strategy in provision of online delivery services.

Strategic investments

      The Group is constantly looking for information technology or other entertainment related
projects within the Southeast Asia and Greater China for investment. The Group intends to focus on
film and music related entertainment information technology or other entertainment related projects
which can generate synergy effect with the existing lines of business of the Group and supplementary
to its existing business.




                                                — 7 —
                                                             SUMMARY

SUMMARY OF IMPLEMENTATION SCHEDULE

      The implementation of the Group’s future business plans are summarized in the following table:


                                                                         2001                      2002                      2003
 Business Area      Future Plan                               1st Half       2nd Half   1st Half       2nd Half   1st Half       2nd Half

 Traditional Motion Pictures Distribution Business

 Home Video
   Product          Distribution Network Expansion
   Distribution        - Additional retail chain stores

                    Product Base Expansion
                       - Additional label representation

                    Territorial Expansion
                       - Other Southeast Asia markets and
                          Greater China

 Theatrical,
   Pay/Free TV
   Rights           Product Base Expansion
   Distribution        - Additional product representation


 Expansion to Internet Business

 Content            Promotion campaign to attract
   Development         and retain users and members

 Online Store       Online sale of CD/VCD/DVD

                    Online rental of DVD

                    Content Syndication

                    Online delivery of music

                    Launch online sale and delivery of
                      movies and other entertainment
                      programs


Research stage
Preparation stage
Implementation stage
On-going development




                                                              — 8 —
                                             SUMMARY


 WARNING:

 The aforesaid business prospects are based on the existing intentions and plans of the Group. As
 such intentions and plans are based on assumptions of future events which by their nature are
 subject to uncertainty, the Group’s actual course of action may vary from the intentions and plans
 set out above. Although the Directors will endeavour to execute such plans in accordance with the
 aforesaid time frame, there is no assurance that the plans of the Group will materialise, result in
 the conclusion of any agreement or be executed in accordance with the aforesaid time frame, or that
 the objectives of the Group will be fully accomplished or accomplished at all.

REASONS FOR THE PLACING AND USE OF PROCEEDS

     The Directors believe that the listing of the Shares on GEM will enhance the Group’s profile and      A

expand its capital base for its future growth and development. The net proceeds from the Placing to
which the Company is entitled, based on the Offer Price of HK$0.95 per Share (being the mid-point
of the indicative range of the Offer Price between HK$0.80 and HK$1.10 per Share) excluding any
proceeds from the exercise of the Over-allotment Option, are estimated to be approximately HK$44
million. The Directors intend to apply such net proceeds as follows:

                                                    2001        2002        2003       Total
                                              HK$’million HK$’million HK$’million HK$’million

Acquisition of entertainment related
  content including TV distribution rights
  and online distribution rights                        2.0            5.4           7.6           15.0
Expanding the home video and
  theatrical categories                                 8.6            3.1           3.5           15.2
Preparation for and development of the
  launching of online delivery services                  —             4.2           4.4            8.6

                                                       10.6          12.7           15.5           38.8



     The balance of approximately HK$4.7 million (based on the Offer Price of HK$0.95 per Share)
will be applied as general working capital of the Group.

     To the extent that the net proceeds of the Placing are not immediately required for the above
purposes, it is the present intention of the Directors that such proceeds should be placed on short-term
deposit with banks or financial institutions in Hong Kong.

      The above intended use of net proceeds is calculated based on the assumption that the Offer Price
is set at HK$0.95 per Share. In the event that the Offer Price deviates from the assumed HK$0.95 per
Share, the amount of the net proceeds will be different. The Directors envisage that any shortfall
between the estimated net proceeds and the actual proceeds finally received by the Group will be
approximately HK$8 million and any surplus arising thereon will be approximately HK$8 million. The
Directors believe that such deviation will not have any material impact on the business plan as
described in this prospectus.



                                               — 9 —
                                                  SUMMARY

     The Directors are of the view that the net proceeds of the Placing would be sufficient to finance
the implementation plans as described in the paragraph headed “Statement of business objectives -
Implementation plan” in this prospectus. In the event that the implementation plan requires additional
funds for further development as planned, the Company will also use internally generated funds from
operations and/or through other fund raising activities, including bank borrowings and equity
financing.

      On the basis that the Over-allotment Option is exercised in full, the net proceeds of the Placing
will increase by approximately HK$11 million based on the Offer Price of HK$0.95 per Share, and
after deducting commission and expenses attributable to the exercise of the Over-allotment Option in
full. The intended use of additional proceeds from the Over-allotment Option assuming it is exercised
in full will be applied as additional working capital.

     In the event that any of the business objectives of the Group does not materialise or proceed as
planned, the Directors will carefully evaluate the situation and may reallocate the intended funding to
other business plans and/or to new projects of the Group and/or to hold it as short term deposits as
long as the Directors consider it to be in the best interests of the Company and its shareholders taken
as a whole. In such event, the Company will comply with the relevant disclosure requirements under
the GEM Listing Rules.

INITIAL MANAGEMENT SHAREHOLDERS, SIGNIFICANT SHAREHOLDER AND OTHER
EXISTING SHAREHOLDER OF THE COMPANY

                                                                               Attributable
                                                                              percentage of
                                                          Number of            shareholding
                                                         Shares held   (immediately upon
                                                       (immediately      completion of the
                                                               upon        Placing and the
                                                      completion of          Capitalisation
                                                         the Placing        Issue assuming    Moratorium
                                                             and the         that the Over-   period from    Approximate
                                     Date of entry    Capitalisation     allotment Option      the Listing    investment
     Name of shareholder             or acquisition           Issue)      is not exercised)          Date            cost
                                     (Note 1)

     Initial Management
        Shareholders
     Chiu Fu Sheng and his           Founder            180,000,000               56.25%         6 months            N/A
        Associates (Notes 2 and 3)                                                (Note 2)        (Note 3)

     ERA Taiwan (Note 2)             Founder            180,000,000               56.25%         6 months            N/A
                                                                                  (Note 2)        (Note 4)

     5D Technology Holdings Ltd.     Founder            180,000,000                56.25%        6 months        (Note 6)
       (Note 2)                                                                                   (Note 5)

     Leung Chung Chu, Andrew         Founder             36,000,000                11.25%        6 months        (Note 6)
       (Note 7)                                                                                   (Note 5)

     Significant Shareholder
     Cheung Mei Ling (Note 8)        Founder             18,000,000                5.625%        6 months        (Note 6)
                                                                                                  (Note 5)

     Other existing shareholder
     Mei Ah Entertainment (Note 9) 8th January,           6,000,000                1.875%            None        HK$0.35
                                   1996                                                                         per Share
                                                                                                                 (Notes 6
                                                                                                                  and 10)



                                                      — 10 —
                                                  SUMMARY

Notes:

1.       This represents the actual date on which each party became an investor, whether direct or indirect, of the members
         of the Group.

2.       5D Technology Holdings Ltd. is an investment holding company incorporated in the BVI with all its shares held
         by ERA Taiwan. ERA Taiwan is a company incorporated in Taiwan with limited liability with its shares held by
         the following persons:

         Name of shareholders                                                                   Percentage of shareholding

         Mr. Chiu Fu Sheng and his Associates                                                                          56.93%
         Far Eastern International Bank (Note)                                                                           3.7%
         Global Venture Offshore Limited (Note)                                                                         7.49%
         Capital International Global Emerging Markets
           Private Equity Fund L.P. (Note)                                                                               7.5%
         Others (Note)                                                                                                 24.38%

                                                                                                                         100%

         Note: So far as the Directors are aware, the beneficial owners of Far Eastern International Bank, Global Venture
               Offshore Limited, Capital International Global Emerging Markets Private Equity Fund L.P. and the
               remaining shareholders of ERA Taiwan holding the 24.38% of the issued share capital of ERA Taiwan
               stated above are independent third parties not connected with the Directors, the chief executive, the
               Management Shareholders and substantial shareholders of the Company and their respective Associates.

                Far Eastern International Bank is a listed company in Taiwan.

                Capital International Global Emerging Markets Private Equity Fund L.P. is an investment fund registered
                in the United States.

                Global Venture Offshore Limited is indirectly wholly-owned by PCCW Enterprises Limited.

                The 24.38% of the issued share capital of ERA Taiwan stated above represented the shareholdings held by
                the public shareholders in Taiwan.

3.       (a)   Mr. Chiu Fu Sheng, holding approximately 39%, and four independent third parties collectively hold
               approximately 60% (one independent third party holding approximately 60% while the other three
               independent third parties each holds 0.01%) of the issued share capital of Hong-Sheng Investment Ltd.
               (“Hong-Sheng”), a shareholder of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock
               Exchange that they will not dispose of (or enter into any arrangement to dispose of) nor permit the
               registered holder thereof to dispose of (or enter into any agreement to dispose of) any of their direct interest
               in Hong-Sheng from time to time for a period of 12 months from the Listing Date saved that for the period
               of six months commencing on the date falling six months after the Listing Date, they may transfer their
               direct interest in Hong-Sheng among themselves.

         (b)   Mr. Chiu Fu Sheng, holding approximately 99.80%, and four independent third parties each holding 0.03%
               of the issued share capital of Nien-Hsin Investment Ltd. (“Nien-Hsin”), a shareholder of ERA Taiwan, have
               undertaken to the Company, Rexcapital and the Stock Exchange that they will not dispose of (or enter into
               any arrangement to dispose of) nor permit the registered holder thereof to dispose of (or enter into any
               agreement to dispose of) any of their direct interest in Nien-Hsin from time to time for a period of 12
               months from the Listing Date saved that for the period of six months commencing on the date falling six
               months after the Listing Date, they may transfer their direct interest in Nien-Hsin among themselves.

         (c)   Mr. Chiu Fu Sheng, holding approximately 15%, and four independent third parties collectively hold
               approximately 55% (three independent third parties each holding 15% while the remaining independent
               third party holding 10%) of the issued share capital of Yu-Hsin Investment Ltd. (“Yu-Hsin”), a shareholder
               of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock Exchange that they will not
               dispose of (or enter into any arrangement to dispose of) nor permit the registered holder thereof to dispose
               of (or enter into any agreement to dispose of) any of their direct interest in Yu-Hsin from time to time for
               a period of 12 months from the Listing Date saved that for the period of six months commencing on the
               date falling six months after the Listing Date, they may transfer their direct interest in Yu-Hsin among
               themselves.



                                                      — 11 —
                                               SUMMARY

     The above undertakings in respect of shares in Hong-Sheng, Nien-Hsin and Yu-Hsin are valid for a period of 12
     months from the Listing Date and as long as any of Mr. Chiu Fu Sheng and the independent third party
     shareholders of Hong-Sheng, Nien-Hsin and Yu-Hsin remain shareholders of the respective aforesaid companies.


     (d)   Mr. Chiu Fu Sheng, Hong-Sheng, Nien-Hsin and Yu-Hsin (collectively, “Mr. Chiu Fu Sheng and his
           Associates”), collectively, the controlling shareholder of ERA Taiwan, have undertaken to the Company,
           Rexcapital and the Stock Exchange that they will not dispose of (or enter into any arrangement to dispose
           of) nor permit the registered holder thereof to dispose of (or enter into any agreement to dispose of) any
           of their respective direct or indirect interest in ERA Taiwan for a period of 12 months from the Listing Date
           so as to result in Mr. Chiu Fu Sheng and his Associates ceasing to be the controlling shareholder of ERA
           Taiwan.


4.   ERA Taiwan, being the sole beneficial owner of 5D Technology Holdings Ltd., has undertaken to the Company,
     Rexcapital and the Stock Exchange that it will not sell, transfer or otherwise dispose of (or enter into any
     agreement to sell, transfer or otherwise dispose of) any of its interests in 5D Technology Holdings Ltd. for a period
     of 12 months from the Listing Date.


5.   Each of Leung Chung Chu, Andrew, 5D Technology Holdings Ltd., ERA Taiwan, Mr. Chiu Fu Sheng and his
     Associates are considered as the Initial Management Shareholders while Miss Cheung Mei Ling is considered as
     the Significant Shareholder. Each of the Initial Management Shareholders and the Significant Shareholder has
     undertaken with the Company, Rexcapital and the Stock Exchange that for a period of six months from the Listing
     Date (the “Moratorium Period”):


     (a)   he or she or it will not dispose of (or enter into any arrangement to dispose of) nor permit the registered
           holder thereof to dispose of (or enter into any agreement to dispose of) any of their respective direct or
           indirect interest in the Company;


     (b)   he or she or it will place (or procure to be placed) in escrow, with an escrow agent acceptable to the Stock
           Exchange, the Shares owned (or deemed interested) by him or her or it after the completion of the Placing
           and the Capitalisation Issue (the “Relevant Shares”) on terms acceptable to the Stock Exchange;


     (c)   he or she or it will not (or procure that he or she or it will not), save as provided in Rule 13.17 (or, as
           appropriate, Rule 13.19) of the GEM Listing Rules, dispose of (or enter into any agreement or dispose of)
           or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of his or her
           or its direct or indirect interests in the Relevant Shares;


     (d)   in the event that he or she or it pledges or charges any direct or indirect interest in the Relevant Shares under
           Rule 13.17(2) (or, as appropriate, Rule 13.19(2)) of the GEM Listing Rules or pursuant to any right or
           waiver granted by the Stock Exchange pursuant to Rule 13.17(5) (or, as appropriate, Rule 13.19(4)) of the
           GEM Listing Rules, he or she or it must inform (or procure to inform) the Company immediately thereafter,
           disclosing the details as specified in the GEM Listing Rules; and


     (e)   having pledged or charged any of his or her or its interests in the Relevant Shares under sub-paragraph (c)
           above, any of them must inform (or procure to inform) the Company immediately in the event that he or
           she or it becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest
           and of the number of the Relevant Shares affected.


     Each of the Initial Management Shareholders has further undertaken to the Stock Exchange, Rexcapital and the
     Company that (i) he or she or it will not dispose of (or enter into any agreement to dispose of) any of his or its
     direct or indirect interests in the Company if such disposal would result in they, in aggregate, ceasing to have
     control in 35% or more of the voting power at general meeting of the Company; (ii) to place the appropriate
     number of his/its Relevant Shares in escrow with an escrow agent acceptable to the Stock Exchange, during the
     second six-month period after listing of Shares on GEM.


6.   As part of the Reorganisation, these shareholders, being the then shareholders of Era Information & Entertainment
     (BVI) Limited, sold their respective interest in Era Information & Entertainment (BVI) Limited to the Company
     in exchange for the allotment and issue of certain Shares, credited as fully paid, to them. Further details of the
     Reorganisation are set out in the paragraph headed “Reorganisation” in Appendix IV to this prospectus.


7.   Mr. Leung Chung Chu, Andrew is an executive Director and is an Initial Management Shareholder.



                                                  — 12 —
                                                        SUMMARY

         8.    Miss Cheung Mei Ling was one of the shareholders of ERA Home holding 7.5% of the issued share capital of ERA
               Home prior to the Reorganisation. Miss Cheung Mei Ling was a passive investor of ERA Home and did not take
               part in the daily management of ERA Home nor any other member of the Group. Miss Cheung Mei Ling is not
               connected with Mr. Chiu Fu Sheng and Mr. Leung Chung Chu, Andrew.


         9.    Mei Ah Entertainment is incorporated in Hong Kong with all its shares held by Mei Ah Holdings Limited. Mei
               Ah Holdings Limited is a company incorporated in BVI with all its shares held by Mei Ah Entertainment Group
               Limited which is a company incorporated in Bermuda with all its shares listed on the Main Board of the Stock
               Exchange. Mei Ah Entertainment has no representative on the Board.


         10.   Mei Ah Entertainment first became an investor of the Group in January 1996. The shares held by Mei Ah
               Entertainment in Era Information & Entertainment (BVI) Limited were attributable to its investment in ERA Home
               at a cost of HK$2,100,000. The shares held by Mei Ah Entertainment in Era Information & Entertainment (BVI)
               Limited were exchanged for certain Shares pursuant to the Reorganisation, particulars of which are set out in the
               paragraph headed “Reorganisation” in Appendix IV to this prospectus.


PLACING STATISTICS

                                                                                     Based on an                Based on an
                                                                                    Offer Price of             Offer Price of
                                                                                         HK$0.80                    HK$1.10

Market capitalisation (Note 1)             ....................                   HK$256 million             HK$352 million

Adjusted net tangible asset value
 per Share (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                HK$0.16                    HK$0.22

Adjusted net asset value per Share (Note 2) . . . . . . . . . .                            HK$0.19                    HK$0.24

Notes:


1.       The calculation of the market capitalisation is based on the Offer Price and 320,000,000 Shares expected to be in issue
         immediately after completion of the Placing and the Capitalisation Issue but takes no account of any Shares which may
         be issued upon the exercise of the Over-allotment Option or fall to be allotted and issued pursuant to the exercise of
         options granted under the Pre-IPO Share Option Scheme or which may be granted under the Share Option Scheme or
         which may be allotted and issued or repurchased by the Company pursuant to the general mandates for the allotment and
         issue or repurchase of Shares referred to in the paragraph headed “Written resolutions of all the shareholders of the
         Company passed on 5th June, 2001” in the section headed “Further information about the Company” in Appendix IV to
         this prospectus.


2.       The adjusted net tangible asset value per Share and the adjusted net asset value per Share have been arrived at after
         making the adjustments referred to in the paragraph headed “Adjusted net tangible assets” and the relevant notes under
         the section headed “Financial information” in this prospectus and on the basis of a total of 320,000,000 Shares in issue
         and to be issued as mentioned herein. This takes no account of any Shares which may be issued upon the exercise of the
         Over-allotment Option or fall to be allotted and issued pursuant to the exercise of any options granted under the Pre-IPO
         Share Option Scheme or which may be granted under the Share Option Scheme or that may be allotted and issued or
         repurchased by the Company pursuant to the general mandates for the allotment and issue or repurchase of Shares
         referred to in the paragraph headed “Written resolutions of all the shareholders of the Company passed on 5th June, 2001”
         in the section headed “Further information about the Company” in Appendix IV to this prospectus.




                                                            — 13 —
                                             SUMMARY

RISK FACTORS

     The Directors consider that there are certain risks involved in the Group’s business, a summary
of which is set out in the section headed “Risk factors” of this prospectus. These risks can be broadly
categorised into four categories being (i) risks associated with the Group; (ii) risks associated with the
industry; (iii) risks associated with Hong Kong and Macau; and (iv) risks associated with the Shares,
which are summarised as follows:


Risks associated with the Group

     ●     Non-renewal of distribution agreement with Warner

     ●     The Internet activities of ERA Taiwan may compete with the Group’s business

     ●     The Group has a limited operating history in Internet business with unproven business
           model

     ●     The Group has incurred net losses during the year ended 31st December, 2000

     ●     The Group may not be able to successfully implement its business plans and strategies

     ●     Reliance on licensors

     ●     Lack of long term contracts

     ●     The software and hardware systems now used by the Group may not be entirely reliable and
           may be exposed to unexpected interruptions

     ●     Failure by the Group to attract and retain key executives and qualified personnel could
           affect and limit its growth

     ●     The launching of online delivery services by the Group may not be successful

Risks associated with the industry

     ●     The Group operates in a highly competitive market

     ●     The Group’s performance in its distribution business of home video products and motion
           pictures can be adversely affected if piracy activities intensify

Risks associated with Hong Kong

     ●     The Group is exposed to political and economic risks in Hong Kong

Risks associated with the Shares

     ●     An active trading market for the Shares may not develop and their market price may be
           subject to volatility

     ●     Issues to consider in relation to statements made in this prospectus


                                                — 14 —
                                       DEFINITIONS

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

“Articles”                            the articles of association of the Company

“Associate(s)”                        has the meaning ascribed thereto in the GEM Listing Rules

“Board”                               the board of Directors

“Business Day”                        any day (other than a Saturday or Sunday) on which banks in
                                      Hong Kong are generally open for business

“BVI”                                 British Virgin Islands

“Capitalisation Issue”                the allotment and issue of 261,738,000 Shares to be made
                                      upon capitalisation of certain sums standing to the credit of
                                      the share premium account of the Company referred to in the
                                      paragraph headed “Written resolutions of all the shareholders
                                      of the Company passed on 5th June, 2001” in Appendix IV to
                                      this prospectus

“CCASS”                               the Central Clearing and Settlement System established and
                                      operated by Hongkong Clearing

“Columbia Tristar”                    Columbia Tristar Home Entertainment, Inc., a company
                                      incorporated in the US and is engaged in film distribution
                                      business, or its affiliated companies

“Companies Law”                       the Companies Law (Revised) of the Cayman Islands

“Companies Ordinance”                 the Companies Ordinance (Chapter 32 of the Laws of Hong
                                      Kong)

“Company”                             Era Information & Entertainment Limited, a company
                                      incorporated on 26th May, 2000 in the Cayman Islands with
                                      limited liability

“Director(s)”                         the director(s) of the Company

“DreamWorks”                          DreamWorks Home Entertainment Inc., a company
                                      incorporated in the US and is engaged in film distribution
                                      business, or its affiliated companies

“ERA Digital Media”                   Era Digital Media Limited (formerly known as Era Media
                                      Limited), a wholly-owned subsidiary of the Company
                                      principally engaged in the operation of entertainment related
                                      portals




                                            — 15 —
                           DEFINITIONS

“ERA Films”               Era Films (HK) Limited, a wholly-owned subsidiary of the
                          Company principally engaged in film promotion and
                          distribution business

“ERA Home”                Era Home Entertainment Limited, a wholly-owned subsidiary
                          of the Company principally engaged in distribution of video
                          products

“ERA Taiwan”                                      (Era Communications Co., Ltd.), a
                          publicly issued company incorporated in Taiwan with limited
                          liability and through 5D Technology Holdings Ltd. holds
                          56.25% interest in the Company immediately upon
                          completion of the Placing and the Capitalisation Issue (taking
                          no account of any Shares which may be issued upon the
                          exercise of the Over-allotment Option or fall to be allotted
                          and issued pursuant to the exercise of options granted under
                          the Pre-IPO Share Option Scheme or which may be granted
                          under the Share Option Scheme)

“GEM”                     the Growth Enterprise Market of the Stock Exchange

“GEM Listing Committee”   the listing sub-committee of the board of the Stock Exchange
                          with responsibility for GEM

“GEM Listing Rules”       the Rules Governing the Listing of Securities on GEM

“GEM website”             the Internet website of GEM located at www.hkgem.com,
                          operated by the Stock Exchange for the purposes of GEM

“Greater China”           the PRC, Hong Kong and Macau excluding Taiwan for the
                          purpose of this prospectus

“Group”                   the Company and its subsidiaries or, where the context so
                          requires, in respect of the period prior to the Company
                          becoming the holding company of its present subsidiaries, the
                          present subsidiaries of the Company or the business operated
                          by such subsidiaries or (as the case may be) their predecessor

“Hong Kong”               the Hong Kong Special Administrative Region of the PRC

“Hongkong Clearing”       Hong Kong Securities Clearing Company Limited

“IDC”                     International Data Corporation, a company specialised in the
                          provision of information technology industry analysis and
                          market data




                                — 16 —
                             DEFINITIONS

“Initial Management         Management Shareholders of an issuer immediately prior to
  Shareholders”             the date of the issuer’s initial listing document. In the case of
                            the Company, the Initial Management Shareholders are 5D
                            Technology Holdings Ltd., Leung Chung Chu, Andrew, ERA
                            Taiwan and Chiu Fu Sheng and his Associates

“Latest Practicable Date”   5th June, 2001, being the latest practicable date for
                            ascertaining certain information contained herein prior to the
                            publication of this prospectus

“Listing Date”              the date on which the trading of the Shares on GEM
                            commences

“Macau”                     the Macau Special Administrative Region of the PRC

“Management Shareholder”    means any person who is (or group of persons who together
                            are) entitled to exercise or control the exercise of 5% or more
                            of the voting power at general meetings of an issuer and who
                            is (or are) able, as a practical matter, to direct or influence the
                            management of the issuer

“Mei Ah Entertainment”      Mei Ah Entertainment Development Company Limited, a
                            company incorporated in Hong Kong with limited liability

“Miramax”                   Miramax Film Corp., a company incorporated in the US
                            engaged in the film distribution business, or its affiliated
                            companies

“New Shares”                the 58,000,000 new Shares to be issued at the Offer Price
                            under the Placing

“Offer for Sale”            the offer of the Sale Shares by the Vendor under the Placing

“Offer Price”               the offer price per Placing Share (excluding brokerage and
                            Stock Exchange transaction levy), which will be not more
                            than HK$1.10 and is expected to be not less than HK$0.80,
                            such price to be determined at or before 5:00 p.m. on 18th
                            June, 2001 (or such later time as may be agreed between the
                            Company, the Vendor and Rexcapital, on behalf of the
                            Underwriters, but in any event, no later than 5:00 p.m. on
                            19th June, 2001)

“OFTA”                      the Office of the Telecommunications Authority

“Over-allotment Option”     the option granted by the Company to the Underwriters,
                            exercisable by Rexcapital (on behalf of the Underwriters),
                            pursuant to the Underwriting Agreement to require the
                            Company to allot and issue an aggregate of up to 12,000,000
                            new Shares representing 15% of the Shares initially available
                            under the Placing, to cover over-allocation in the Placing



                                  — 17 —
                                 DEFINITIONS

“Placing”                       the conditional placing of the Placing Shares with certain
                                professional, institutional and other investors at the Offer
                                Price, as further described in the section headed “Structure of
                                the Placing” in this prospectus

“Placing Shares”                the New Shares, the Sale Shares and up to 12,000,000
                                additional new Shares which may be allotted and issued
                                pursuant to the Over-allotment Option

“PRC”                           People’s Republic of China and for the purposes of this
                                prospectus, excluding Hong Kong, Macau and Taiwan

“Pre-IPO Share Option Scheme”   the share option scheme conditionally approved and adopted
                                by the Company on 5th June, 2001, the principal terms of
                                which are summarised in the paragraph headed “Pre-IPO
                                Share Option Scheme” in Appendix IV to this prospectus

“Reorganisation”                the reorganisation of the Group in preparation for the listing
                                of the Shares on GEM, the details of which are set out in the
                                paragraph headed “Reorganisation” in Appendix IV to this
                                prospectus

“Rexcapital”                    REXCAPITAL (Hong Kong) Limited, an investment adviser
                                registered under the Securities Ordinance (Chapter 333 of the
                                Laws of Hong Kong), acting as the sponsor and manager of
                                the Placing

“Sale Shares”                   the 22,000,000 Shares being offered for sale by the Vendor
                                under the Placing

“SDI Ordinance”                 the Securities (Disclosure of Interests) Ordinance (Chapter
                                396 of the Laws of Hong Kong) (as amended)

“Share(s)”                      share(s) of HK$0.01 each in the share capital of the Company

“Share Option Scheme”           the Share Option Scheme conditionally adopted by the
                                Company on 5th June, 2001, the principal terms of which are
                                set out in the paragraph headed “Share Option Scheme” in
                                Appendix IV to this prospectus

“Share Option Schemes”          the Share Option Scheme and the Pre-IPO Share Option
                                Scheme

“Stock Exchange”                The Stock Exchange of Hong Kong Limited

“Track Record Period”           the two years ended 31st December, 2000

“Toei”                                   Video         , a film distribution company in Japan,
                                or its affiliated companies. The productions of Toei Group
                                include animation, films and TV programs



                                      — 18 —
                                        DEFINITIONS

“Underwriters”                         TingKong-RexCapital Securities International Limited, CEF
                                       Capital Limited, Chow Sang Sang Securities Limited, Get
                                       Nice Capital Limited, GC Capital (Asia) Limited, HT
                                       Securities Limited, KGI Asia Limited, Kingsway SW
                                       Securities Limited, Pacific Challenge Capital Limited, SBI
                                       E2-Capital Securities Limited, Sun Hung Kai International
                                       Limited and Vickers Ballas Capital Limited

“Underwriting Agreement”               the conditional underwriting and placing agreement relating
                                       to the Placing dated 11th June, 2001 entered into between the
                                       Company, the executive Directors, Chiu Fu Sheng, ERA
                                       Taiwan, 5D Technology Holdings Ltd., Leung Chung Chu,
                                       Andrew, Rexcapital, the Vendor and the Underwriters,
                                       particulars of which are summarised in the section headed
                                       “Underwriting” in this prospectus

“Universal”                            Universal Pictures International BV, a company incorporated
                                       in the Netherlands and is engaged in the film distribution
                                       business, or its affiliated companies

“Vendor”                               Leung Chung Chu, Andrew, the vendor of the Sale Shares

“Warner”                               Warner Home Video, a division of Time Warner Entertainment
                                       Company, a company incorporated in the US and is engaged
                                       in the film distribution business, or its affiliated companies

“US” or “United States”                the United States of America

“HK$” and “cents”                      Hong Kong dollars and cents respectively, the lawful currency
                                       of Hong Kong

“RM”                                   Malaysian Ringgit, the lawful currency of Malaysia


      Unless otherwise specified in this prospectus, Hong Kong dollar amounts have been translated,
for the purpose of illustration only, using the following rate:

     US$1 = HK$7.8

     No representation is made that any amounts in US$ could have been or could be converted at the
above rate or at any other rates or at all.




                                             — 19 —
                         GLOSSARY OF TECHNICAL TERMS

     The glossary contains explanations of certain terms and definitions used in this prospectus in
connection with the Group and its business. The terms and their meanings may not correspond to
standard industry meaning or usage of these terms.

“B2B”                                  business-to-business transactions over the Internet
“B2C”                                  business-to-consumer transactions over the Internet
“CD”                                   compact disc, a 120-mm optical read-only disc used for
                                       digital audio, data or video in different systems and replayed
                                       by laser
“channel”                              website features which provide users with an efficient and
                                       easy way to explore and utilize content on the Internet
                                       through a series of guides and directories
“chat”                                 a form of interactive online communication that enables typed
                                       conversation to occur in real time and allows users to talk (or
                                       type) in real time to other network users from any and all
                                       parts of the world
“community”                            an interacting population of various kinds of individuals in a
                                       common location
“content”                              information contained in a website
“content aggregator”                   a website that aggregates content on a particular subject
“domain name”                          the Internet name of a website which is registered with an
                                       approved domain name registrar, e.g. “www.mov3.com”
“domain suffix”                        a part of a domain name that specifies certain details about the
                                       host such as its location and whether it is part of a
                                       commercial, governmental or educational entity, e.g. “.com”,
                                       “.net” and “.org”
“download”                             to copy files from one computer to another via a network or
                                       using a modem
“DVD”                                  digital versatile disc, a 120-mm CD using the MPEG2 format
                                       to compress the signal on which video programmes can be
                                       decoded by laser for viewing
“e-commerce”                           electronic commerce carried out through or facilitated by the
                                       Internet
“hit rate”                             a statistic used to measure website activity. One hit is counted
                                       each time a user accesses a different file on a website. Each
                                       page viewed on a website may contain many such files, so a
                                       single pageview or visit may account for multiple hits
“HTML”                                 HyperText Markup Language, a coding language used to make
                                       hypertext documents for use on the web. HTML resembles
                                       old-fashioned typesetting code, where a block of text is
                                       surrounded by codes that indicate how it should appear.
                                       HTML allows text to be “linked” to another file on the
                                       Internet



                                             — 20 —
                           GLOSSARY OF TECHNICAL TERMS

“HTTP”                            HyperText Transfer Protocol, the data exchange protocol used
                                  for world wide web. HTTP allows for the transfer of
                                  multimedia and hyperlinked data
“hypertext link”                  a method of instantly linking one website to another
“ICP”                             Internet content providers
“impressions”                     an advertisement’s appearance on an accessed web page.
                                  Advertisers use impressions to measure the number of views
                                  their advertisements receive and publishers often sell
                                  advertisement space according to impressions. Impressions
                                  are tracked in a log maintained by a site server and are often
                                  sold on a cost per thousand (cpm) basis
“Internet” or “Net”               an international network that links together computers and
                                  allows data to be transferred between each computer using the
                                  TCP/IP protocols. These computers are called the servers and
                                  individual users can use a modem to connect to the server
                                  computer and have access to the world network. No one
                                  person or company controls the Internet. Historically, the
                                  Internet was developed by the United States Department of
                                  Defence
“Internet penetration rate”       number of Internet subscribers divided by the subject
                                  population
“ISP”                             Internet services providers
“IT”                              information technology
“LD”                              laser vision disc, an optical disc with the use of high-density
                                  recording and playback-capable laser for the production of
                                  master disc and playback and on which video programmes can
                                  be decoded by laser for viewing
“link”                            a graphic image or hypertext link on a website which
                                  transports a user from one web page to another with a click of
                                  a mouse. Links can be text or graphic. A graphic link usually
                                  has a frame around it while a hypertext link will usually be
                                  underlined and often in a different colour than the rest of the
                                  text on the web page
“Mbps”                            megabits per second, which is a measurement of speed for
                                  digital signal transmission expressed in millions of bits per
                                  second
“MPEG1”                           Motion Pictures Experts Group 1, an encoding standard for
                                  the compression of video and audio signals in VCD
“MPEG2”                           Motion Pictures Experts Group 2, an encoding standard for
                                  the compression of video and audio signals in DVD
“Network Solutions Inc.”          the registry for administering the top level domain names, for
                                  example “.com”, “.net” and “.org”




                                        — 21 —
                      GLOSSARY OF TECHNICAL TERMS

“online”                     being able to connect to the Internet, an online service by
                             virtue of having an account that gives one access
“online community”           a collection of Internet users organised around topics in such
                             a way that the user actively contributes to both the dialogue
                             and content within the community
“online navigation”          connecting to and viewing different websites and other
                             Internet content, typically using a web browser
“pageviews”                  a statistic used to measure website activity. One pageview is
                             recorded each time a single page on a website (which may
                             count for several hits) is loaded on a web browser
“PC”                         personal computer
“PC penetration”             number of PCs divided by the subject population
“portal”                     a Website that serves as a gateway to the Internet. A portal is
                             a collection of links, content, and services designed to guide
                             users to information they are likely to find interesting such as
                             news, weather, entertainment, commerce sites and chat rooms
                             and is the main point of entry to the relevant Website
“QuickTime”                  Multimedia extensions to the Macintosh starting with System
                             7 that add sound and video capabilities. A QuickTime file can
                             contain up to 32 tracks of audio, video, MIDI or other
                             time-based control information. Most major Macintosh
                             DBMSs (database management systems) support QuickTime.
                             Apple also provides a QuickTime for Windows version for
                             Windows-based PCs
“Realplayer”                 A multimedia player and browser plug-in from RealNetworks,
                             Inc., Seattle, WA, (www.real.com) that plays RealAudio and
                             RealVideo transmissions. RealVideo is a streaming video
                             technology for the Internet and intranets from RealNetworks,
                             Inc., Seattle, WA, (www.real.com). A browser equipped with
                             a RealPlayer or RealVideo plug-in enables video broadcasts
                             from RealVideo servers (RealServers) to be viewed on screen.
                             The material can be statically stored in the server and viewed
                             in full, or it can be an on-going broadcast like that of TV.
                             Plug-ins can be downloaded from RealNetworks’ Web site.
                             Server software is available for a variety of platforms.
                             RealAudio is the most popular streaming audio technology for
                             the Internet and intranets from RealNetworks, Inc., Seattle,
                             WA, (www.real.com). A browser equipped with a RealPlayer
                             or RealAudio plug-in enables news, sports and other programs
                             transmitted from RealAudio servers (RealServers) to be heard
                             on the user’s computer. Encoders and plug-ins can be
                             downloaded from RealNetworks’ Web site. Server software is
                             available for a variety of platforms. RealNetworks was
                             formerly Progressive Networks




                                   — 22 —
                      GLOSSARY OF TECHNICAL TERMS

“server”                     a computer that provides services for users of a computer
                             network such as a file server, print server or database server
“traffic”                    the volume of Web users visiting a Website
“TV”                         television
“URL”                        Uniform Resource Locator, the standard addressing system
                             for the world wide web, eg. http://www.mov3.com
“VCD”                        video compact disc, a 120-mm CD using the MPEG1 format
                             to compress the signal on which video programmes can be
                             decoded by laser for viewing
“VCR”                        video cassette recorder
“VHS”                        video cassette, a magnetic storage device on which video
                             programmes are recorded and replayed for viewing
“visit”                      a statistic used to measure website activity. A visit is
                             generally recorded only once each time a user accesses a
                             website, although, if a user is inactive for a period of time
                             while accessing a website (i.e., the user is not recording
                             additional hits and pageviews) an additional visit could be
                             recorded when the user becomes active again
“web” or “world wide web”    a worldwide network of servers that support hypertext
                             connections and other links using HTML and HTTP and which
                             permits the communication of text, graphics, video, sound and
                             other data over the Internet
“web browser”                software which provides a graphical interface through which
                             an Internet user can navigate to various websites and other
                             Internet content, and which integrates various tools which
                             perform Internet-related functions for users, such as
                             transferring files and reading e-mail
“web page”                   a single file stored on a web server that contains formatted
                             text, graphics and hypertext links to other pages on the
                             Internet. A Web page is created using HTML codes and is
                             viewed through a browser
“website”                    a collection of web pages that have been produced by a
                             company or an individual and are linked together by
                             hyperlinks




                                   — 23 —
                                         RISK FACTORS

RISKS ASSOCIATED WITH THE GROUP                                                                            R



Non-renewal of distribution agreement with Warner


      With effect from June 2001, the Group ceased to be an exclusive distributor of home video
products in Hong Kong and Macau for Warner and can no longer distribute Warner’s products due to
the fact that Warner intends to carry out distribution of home video products by their local offices
instead of appointing local distribution agent. Warner was the Group’s largest licensor who supplied
products generating highest contribution to the Group’s turnover which accounted for approximately
52% and 41% of the Group’s turnover respectively for each of the two years ended 31st December,
2000. During each of these financial years, the licensing fees paid to Warner by the Group accounted
for approximately 38% and 31% of the Group’s total licensing fees respectively.

      As at 31st May, 2001, the inventory value of Warner’s home video products held by the Group
amounted to approximately HK$2 million. All the existing products currently held by the Group will,
pursuant to a letter agreement entered into between Warner and the Group, be consigned to Warner by
different stages for sale to its customers for a period of three months expiring on 31st August, 2001
unless extended by mutual agreement (the “Consignment Period”). Any sales of the stocks during the
Consignment Period will be treated as turnover of Warner and the Group will be entitled to receive
a lump sum amount from Warner depending on the quantity of the stocks sold. After the expiration of
the Consignment Period, Warner shall have the right to purchase all or a portion of the stocks
remaining unsold from the Group, otherwise, all unsold products shall be destroyed.

     In the event the Group is not able to secure additional distribution agreement with other
licensors, the Group’s business could be adversely affected.


The Internet activities of ERA Taiwan may compete with the Group’s business

     ERA Taiwan, the holding company of the single largest shareholder of the Company, will
continue to develop and invest in Internet related business in the future. Although the current Internet
business of ERA Taiwan does not compete with the Group directly, there is a risk that the future
projects and businesses of ERA Taiwan may compete with the Group for Internet related businesses.




                                               — 24 —
                                         RISK FACTORS

     It is the intention of ERA Taiwan that the    Group would develop film related business in Asia
other than Taiwan in the future. However, due      to the lack of geographical barrier of Internet, the
Internet business of ERA Taiwan may compete         with that of the Group. The difference of Internet
businesses between ERA Taiwan and the Group        is summarized below:

                               ERA Taiwan                           The Group

     ISP                       Yes                                  No

     ICP                       Portal featuring life style and      Movie Magazine
                               entertainment contents

     E-commerce                Online ticketing                     Online CD/VCD/DVD store

     Geographical              Taiwan                               Initially in Hong Kong and
                                                                    eventually in Asia except Taiwan


The Group has a limited operating history in Internet business with unproven business m odel

     The Group has a limited operating history in Internet business and the development of its Internet
business only began in March 2000 with the launch of www.mov3.com targeting at provision of
movie-related entertainment information. The business model of e-commerce was launched by the
Group in May 2001, which includes online CD/VCD/DVD store and online delivery of movie, music
and other entertainment programs in Hong Kong. The Group’s Internet business may or may not be
successful. In addition, there is no assurance that the Group’s Internet portals and websites will be able
to successfully compete and achieve market acceptance. The Group’s Internet business will also be
adversely affected if it is unable to catch up with the rapid technological changes and unable to
introduce new services responding to such changes.

The Group has incurred net losses during the year ended 31st December, 2000

     For the year ended 31st December, 2000, the Group has incurred net losses of approximately
HK$994,000 mainly due to portal promotion and development costs of approximately HK$5.5 million
incurred in the same period. It is possible that the Group’s net losses may increase in the future and
the Group may not be able to achieve or sustain profitability.

The Group may not be able to successfully implement its business plans and strategies

     The Directors believe that the Group’s business plans and strategies have been formulated after
enquiry and market research with reference to the Group’s market position and competitiveness, the
development trend of the Internet industry and home video markets in Southeast Asia and other
relevant factors. These business plans and strategies are based on a number of assumptions such as
continuous growth in home video markets, the ability to secure relevant distribution rights, continuous
growth in the Internet market, strategic alliances with business partners and wide acceptance of the
Group’s Internet portals. There is no assurance that the business plans and strategies will be
successfully implemented in the future and thus the Group’s prospects may be adversely affected.


                                                — 25 —
                                          RISK FACTORS

Reliance on licensors

      For each of the two years ended 31st December, 2000, the licensing fees paid to the Group’s top
five licensors for the motion pictures accounted for approximately 94% and 97% of the Group’s total
licensing fees paid respectively. In addition, the licensing fee paid to the Group’s largest licensor for
the motion pictures accounted for approximately 38% and 42% of the Group’s total licensing fees for
each of the two years ended 31st December, 2000. The Group has not entered into any long-term
contract with these licensors. In the event that the Group is unable to source these products, the
Group’s business, including its Internet operations, could be adversely affected.

Lack of long term contracts

      The Group sources home video products and motion pictures mainly from four major Hollywood
film studios. The Group has established long term relationship with these companies and has entered
into exclusive distribution agreements with them. However, the exclusive distribution agreements that
the Group and these companies have entered into usually have a relatively short term, which is the
industry norm. Failure to renew the licensing agreement with these film studios may have adverse
impact on the Group’s profitability.

      The major Hollywood film studios may not renew the exclusive distribution agreements upon
expiry of the term. In such event, the business of the Group may be adversely affected if the Group
is not able to procure substitutions for the four major Hollywood film studios.

The software and hardware systems now used by the Group may not be entirely reliable and
may be exposed to unexpected interruptions

      Any system failure or inadequacy of the Group’s online services, or increase in the response time
for the provision of services, as a result of increased traffic or otherwise, could reduce user
satisfaction and thus the Group’s attractiveness to advertisers and users. In addition, as the number of
web pages and traffic increases, there can be no assurance that the Group will be able to manage the
system efficiently.

Failure by the Group to attract and retain key executives and qualified personnel could affect
and limit its growth

     The Group depends, to a significant extent, on the continuous services of its key executive
personnel as set out in the section headed “Directors, senior management and employees” in this
prospectus. The loss of all or any of the key executives, particularly in the area of film sourcing, may
have a material adverse impact on the Group.

      In addition, the Group will need to recruit additional personnel to accommodate its future
business plan. Competition of recruiting people with the necessary experience is intense within the
industry. The Group may not be able to retain existing employees or recruit new employees because
of that competition. If the Group fails to recruit or retain the necessary personnel, or if the Group loses
the services of any of its key executives, the Group’s business could be materially and adversely
affected. Qualifications and experiences of those key executives are set out in the section headed
“Directors, senior management and employees”.


                                                — 26 —
                                        RISK FACTORS

The launching of online delivery services by the Group may not be successful

     The successful launching of online delivery services by the Group depends on a number of
factors including but not limited to the successful lining-up of the network, the smooth transmission
of videos through existing network infrastructure and the receptiveness of subscribers of online
delivery services. Failure to cope with the above-mentioned problems may affect the launching of
online delivery services and/or the profitability of the operation of online delivery services to be
provided by the Group.

RISKS ASSOCIATED WITH THE INDUSTRY                                                                        R


The Group operates in a highly competitive market

      The Group operates in a highly competitive market and faces keen competition from various
competitors. The Internet industry is still at the early stage of its development and thus other new
entrants may better position themselves to compete in this market. In addition, the Group may also
face competition from other international competitors who may have higher technology advancement
and valuable experience. These international competitors may compete with the Group by forming
alliances with local companies. The increase in competition may have adverse effect on the Group’s
financial condition, operations and prospects.

The Group’s performance in its distribution business of home video products and m otion
pictures can be adversely affected if piracy activities intensify

     Unauthorised distributors profit from distributing home video products without obtaining the
relevant authorization from the relevant copyright owners. These unauthorized distributors of pirated
products have posed a major threat to the home video entertainment industry in Hong Kong. In the
event that the piracy activities continue and/or intensify, the Group’s performance in its distribution
business of home video products and motion pictures may be adversely affected.

RISKS ASSOCIATED WITH HONG KONG                                                                           R


The Group is exposed to political and economic risks in Hong Kong

      Hong Kong is a special administrative region of the PRC with its own government and
legislations. Since the resumption of sovereignty over Hong Kong by the PRC on 1st July, 1997, Hong
Kong has enjoyed a high degree of autonomy so far. However, there is no assurance that the present
political and economic environment in Hong Kong will remain unchanged. Future developments in the
political and economic environment in Hong Kong may have adverse effects on the business and
financial conditions of the Group.

RISKS ASSOCIATED WITH THE SHARES

An active trading market for the Shares may not develop and their market price may be
subject to volatility

      An active trading market for the Shares may not develop and the trading price for Shares may
fluctuate significantly in response to a number of events including quarterly variation in the Group’s
operating results, new services launched by the Group, its direct competitors or companies listed on
GEM, companies listed on the Main Board and/or other stock exchanges having comparable business
with that of the Group, general performance of GEM and the analysts’ and investors’ general
perception on the Group’s future prospects. Prior to the Placing, there has been no public market of


                                              — 27 —
                                          RISK FACTORS

any of the Shares. The Offer Price of the Placing Shares will be determined by negotiation between
the Company and Rexcapital, on behalf of the Underwriters. The Offer Price may not be indicative of
the price at which Shares will trade following the completion of the Placing. In addition, there can be
no guarantee that an active trading market for Shares will develop, or, if it does develop, that it will
be sustained following the completion of the Placing, or that the market price of the Shares will not
decline below the Offer Price. Prospective investors should be extremely cautious in considering,
investing or dealing in the Shares. Prospective investors are also recommended to read carefully the
statements in the section headed “Characteristics of GEM” in this prospectus.

Issues to consider in relation to statements made in this prospectus

Certain statistics are derived from unofficial publications

      Certain statistics in this prospectus relating to the Internet industry, such as statistics relating to
current and projected numbers of installed PCs, Internet usage and e-commerce revenues in various
jurisdictions, as well as statistics regarding consumer preferences, are derived from various unofficial
publications, in particular, those published by IDC. Such information has not been independently
verified by the Group and may not be accurate, complete or up-to-date. The Group makes no
representation as to the correctness or accuracy of such statements and, accordingly, such information
should not be unduly relied upon.

Forward-looking statements contained in this prospectus may not materialize

     Included in this prospectus are various forward-looking statements which can be identified by the
use of forward looking terminology such as “may”, “will”, “expect”, “anticipate”, “estimate”,
“continue”, “believe” and other similar words. The Company and the Directors have made
forward-looking statements with respect to the followings, among other things:

     ●     the Group’s objectives and strategies to achieve such objectives;

     ●     the importance and expected growth of the Internet technology;

     ●     the importance and expected growth of e-commerce;

     ●     the pace of change in the Internet market place; and

     ●     the demand for IT infrastructure and Internet services.

      Such forward-looking statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the Group, or industry
results, to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such forward-looking statements are based on numerous
assumptions regarding the Group’s present and future business strategies and the environment in
which the Group will operate in the future. Important factors that could cause the Group’s actual
results, performance or achievements to differ materially from those in the forward-looking statements
include, among others, the loss of key personnel of the Group, changes relating to the Asian and global
Internet industry and changes in general economic and business conditions. Additional factors that
could cause actual results, performance or achievements to differ materially include, but are not
limited to, those discussed above in this section. Furthermore, these forward-looking statements speak
only as of the Latest Practicable Date.


                                                 — 28 —
WAIVERS IN RESPECT OF THE GEM LISTING RULES AND COMPANIES ORDINANCE

GEM LISTING RULES WAIVERS

     For the purpose of the listing of the Shares on GEM, the Company has sought a number of
waivers from the Stock Exchange in relation to certain requirements under the GEM Listing Rules.
Details of such waivers are described below.

WAIVER RELATING TO THE MORATORIUM PERIOD

      Under Rule 13.16 of the GEM Listing Rules, the Company shall procure, inter alia, that every
Initial Management Shareholder (i) places in escrow, with an escrow agent acceptable to the Stock
Exchange, his or its relevant securities (as defined in the GEM Listing Rules) for a period of two years
from the Listing Date, on terms acceptable to the Stock Exchange; and (ii) undertakes to the Company
and the Stock Exchange not, for a period of two years from the Listing Date, save as provided in Rule
13.17 of the GEM Listing Rules, to dispose of (or enter into any agreement to dispose of) or permit
the registered holder to dispose of (or to enter into any agreement to dispose of) any of his or its direct
or indirect interest in the relevant securities.

      Under the GEM Listing Rules, 5D Technology Holdings Ltd., Leung Chung Chu, Andrew, ERA
Taiwan and Chiu Fu Sheng and his Associates (as defined below) are considered to be the Initial
Management Shareholders and would ordinarily be subject to a moratorium period of two years. As
a result of a waiver application made on behalf of the Company, the Stock Exchange has granted a
waiver from strict compliance with Rule 13.16 of the GEM Listing Rules pursuant to the joint press
announcement made by the Stock Exchange and the Hong Kong Securities and Futures Commission
to the effect that the moratorium period applicable to the Initial Management Shareholders has been
reduced from two years to six months in respect of an aggregate of 216,000,000 Shares (representing
67.5% of the enlarged issued share capital of the Company as at the Listing Date (assuming that the
Over-allotment Option is not exercised)) and to accept such Initial Management Shareholders giving
an undertaking to the Company, Rexcapital and the Stock Exchange (i) not to dispose of (or enter into
any arrangement to dispose of) nor permit the registered holder to dispose of (or to enter into any
agreement to dispose of) any of his or its respective direct or indirect interest in the relevant securities
during the six months from the Listing Date and to place his or its relevant securities in escrow with
an escrow agent acceptable to the Stock Exchange during that period; and (ii) that for the period of
six months commencing on the date falling six months after the listing date, he/it will ensure that the
aggregate number of Relevant Securities (as defined in the GEM Listing Rules) held or controlled by
them will represent at least 35% of the voting rights exercisable at general meetings of the Company.

      ERA Taiwan, being the sole beneficial owner of 5D Technology Holdings Ltd., has undertaken
to the Company, Rexcapital and the Stock Exchange that it will not sell, transfer or otherwise dispose
of (or enter into any agreement to sell, transfer or otherwise dispose of) any of its interests in 5D
Technology Holdings Ltd. for a period of 12 months from the Listing Date.

     Mr. Chiu Fu Sheng, Hong-Sheng, Nien-Hsin and Yu-Hsin (collectively, “Mr. Chiu Fu Sheng and
his Associates”), collectively, the controlling shareholder of ERA Taiwan, have undertaken to the
Company, Rexcapital and the Stock Exchange that they will not dispose of (or enter into any
arrangement to dispose of) nor permit the registered holder thereof to dispose of (or enter into any
agreement to dispose of) any of their respective direct or indirect interest in ERA Taiwan for a period
of 12 months from the Listing Date so as to result in Mr. Chiu Fu Sheng and his Associates ceasing
to be the controlling shareholder of ERA Taiwan.


                                                — 29 —
WAIVERS IN RESPECT OF THE GEM LISTING RULES AND COMPANIES ORDINANCE

      Mr. Chiu Fu Sheng, holding approximately 39%, and four independent third parties collectively
hold approximately 60% (one independent third party holding approximately 60% while the other
three independent third parties each holds 0.01%) of the issued share capital of Hong-Sheng
Investment Ltd. (“Hong-Sheng”), a shareholder of ERA Taiwan, have undertaken to the Company,
Rexcapital and the Stock Exchange that they will not dispose of (or enter into any arrangement to
dispose of) nor permit the registered holder thereof to dispose of (or enter into any agreement to
dispose of) any of their direct interest in Hong-Sheng from time to time for a period of 12 months from
the Listing Date saved that for the period of six months commencing on the date falling six months
after the Listing Date, they may transfer their direct interest in Hong-Sheng among themselves.

      Mr. Chiu Fu Sheng, holding approximately 99.80%, and four independent third parties each
holding 0.03% of the issued share capital of Nien-Hsin Investment Ltd. (“Nien-Hsin”), a shareholder
of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock Exchange that they will
not dispose of (or enter into any arrangement to dispose of) nor permit the registered holder thereof
to dispose of (or enter into any agreement to dispose of) any of their direct interest in Nien-Hsin from
time to time for a period of 12 months from the Listing Date saved that for the period of six months
commencing on the date falling six months after the Listing Date, they may transfer their direct
interest in Nien-Hsin among themselves.

      Mr. Chiu Fu Sheng, holding approximately 15%, and four independent third parties collectively
hold approximately 55% (three independent third parties each holding 15% while the remaining
independent third party holding 10%) of the issued share capital of Yu-Hsin Investment Ltd.
(“Yu-Hsin”), a shareholder of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock
Exchange that they will not dispose of (or enter into any arrangement to dispose of) nor permit the
registered holder thereof to dispose of (or enter into any agreement to dispose of) any of their direct
interest in Yu-Hsin from time to time for a period of 12 months from the Listing Date saved that for
the period of six months commencing on the date falling six months after the Listing Date, they may
transfer their direct interest in Yu-Hsin among themselves.

      The above undertakings in respect of shares in Hong-Sheng, Nien-Hsin and Yu-Hsin are valid for
a period of 12 months from the Listing Date and as long as any of Mr. Chiu Fu Sheng and the
independent third party shareholders of Hong-Sheng, Nien-Hsin and Yu-Hsin remain shareholders of
the respective aforesaid companies.

Placing and top-up transaction

      In order to facilitate the Group in raising funds by way of placing and top-up transaction after
six months of listing, the Company has applied for a waiver from strict compliance with Rule 13.16(2)
of the GEM Listing Rules to allow the Initial Management Shareholders to first dispose of any of their
Shares subject to the moratorium period prior to the subsequent top-up by way of a subscription for
new Shares. The Initial Management Shareholders have undertaken to the Company, Rexcapital and
the Stock Exchange that they will apply the whole of the sale proceeds received from such placing to
subscribe for new Shares in order to maintain the Initial Management Shareholders’ interest in the
same number of Shares they had held in the Company prior to such placing and such newly subscribed
Shares will also be subject to the lock-up provision of Rule 13.16(2) of the GEM Listing Rules unless
they are subsequently disposed of pursuant to another placing and top-up transaction. The Initial
Management Shareholders will ensure that the aggregate number of relevant securities (as defined in
GEM Listing Rule) held or controlled by them will represent at least 35% of the voting rights
exercisable at general meeting of the Company after such placing and top-up transactions during the
second six-month period after the Listing Date.


                                               — 30 —
WAIVERS IN RESPECT OF THE GEM LISTING RULES AND COMPANIES ORDINANCE

Stock borrowing arrangement

      In order to facilitate settlement of over-allocations in connection with the Placing and the
distribution of Shares under the Placing, Rexcapital may borrow Shares from Leung Chung Chu,
Andrew up to but not exceeding 15% of the Shares initially being offered under the Placing under a
stock borrowing arrangement pending the exercise of the Over-allotment Option and/or acquisition of
Shares in the secondary market. The granting of the Over-allotment Option together with the
accompanying stock borrowing arrangement are adopted by Rexcapital to facilitate the distribution of
Shares under the Placing. As the Shares held by Leung Chung Chu, Andrew are subject to the
moratorium period as described above, an application has been made to the Stock Exchange for a
waiver from strict compliance with Rule 13.16 of the GEM Listing Rules (as explained above) for the
purpose of implementing the stock borrowing arrangement. A waiver has been granted by the Stock
Exchange on the conditions that:

     (i)    the stock borrowing arrangement with Leung Chung Chu, Andrew will only be effected by
            Rexcapital for the sole purpose of settlement of over-allocation in connection with the
            Placing;

     (ii)   the maximum number of Shares borrowed from Leung Chung Chu, Andrew will be limited
            to the maximum number of Shares which may be issued upon exercise of the Over-allotment
            Option;

     (iii) the same number of Shares will be returned to Leung Chung Chu, Andrew not later than the
           third Business Day following the earlier of (a) the last day on which the Over-allotment
           Option may be exercised and (b) the day on which the Over-allotment Option is exercised
           in full;

     (iv) the returned Shares will be placed in escrow as soon as practicable with an escrow agent
          acceptable to the Stock Exchange; and

     (v)    Leung Chung Chu, Andrew will not receive any benefit or payment pursuant to the stock
            borrowing arrangement.

WAIVER RELATING TO SHARE OPTION SCHEMES

      The Share Option Schemes were conditionally adopted by resolutions in writing passed by all the
shareholders of the Company on 5th June, 2001. Rule 23.03(2) of the GEM Listing Rules requires that
the total number of Shares subject to the Share Option Scheme and any other schemes (including the
Pre-IPO Share Option Scheme) must not, in aggregate exceed 10% of the relevant class of securities
of the Company (or the subsidiary) in issue from time to time (excluding (i) securities issued upon the
exercise of options granted pursuant to the scheme and any other schemes; and (ii) any pro rata
entitlements to further securities issued in respect of those securities mentioned in (iii) during a
specified period of 10 consecutive years (collectively, the “Scheme Limit”). Rexcapital, on behalf of
the Company, has applied for a waiver from strict compliance with Rule 23.03(2) of the GEM Listing
Rules so that the Scheme Limit can be increased to 30% of the issued share capital of the Company
from time to time. Such waiver has been granted by the Stock Exchange subject to the following
conditions:

     (1)    subject to (3) below, the Company may seek approval by shareholders in general meeting
            to grant options under the Share Option Scheme and any other schemes (including the


                                              — 31 —
WAIVERS IN RESPECT OF THE GEM LISTING RULES AND COMPANIES ORDINANCE

           Pre-IPO Share Option Scheme) entitling participants to acquire Shares pursuant to the
           exercise of options representing up to an aggregate of 10% of the issued share capital of
           the Company at time of approval (“Option Scheme General Mandate Limit”), which may be
           renewed by shareholders in general meeting from time to time;

     (2)   subject to (3) below, the Company may seek a separate shareholders’ approval in general
           meeting to grant options beyond the Option Scheme General Mandate Limit to participants
           specified by the Company before such approval is sought;

     (3)   the total number of Shares which may be issued pursuant to the exercise of options under
           the Share Option Scheme and any other schemes (including the Pre-IPO Share Option
           Scheme), must not, in aggregate, exceed 30% of the issued share capital of the Company
           from time to time;

     (4)   if options are granted to a connected person (as such term is defined in the GEM Listing
           Rules), the granting of such option will be subject to all independent non-executive
           Directors’ approval;

     (5)   where options are proposed to be granted to a connected person who is also a substantial
           shareholder (as defined in the GEM Listing Rules) or any of their respective Associates, and
           the proposed grant of options, when aggregated with the options already granted to that
           connected person in the past 12 months period, would entitle him to receive more than 0.1%
           of the total issued Shares for the time being and the value of which is in excess of
           HK$5,000,000, the granting of such option must be subject to the approval of the
           independent shareholders in general meetings. Apart from the connected person involved,
           all other connected persons of the Company must abstain from voting in such general
           meeting (except where any connected person intends to vote against the proposed grant).
           A shareholders’ circular must be prepared by the Company explaining the proposed grant,
           disclosing the number and terms of the options to be granted and containing a
           recommendation from the independent non-executive Directors on whether or not to vote
           in favour of the proposed grant; and

     (6)   additional disclosures will be made in the annual and interim reports of the Company:

           (i)    details of options granted to the following persons: each of the directors of the
                  Company and its subsidiaries and all other participants specified in Rule 23.08 of the
                  GEM Listing Rules; and

           (ii)   a summary of the major terms of each share option scheme approved by the
                  shareholders of the Company.

      As at the Latest Practicable Date, the number of options granted (and remaining exercisable)
under the Pre-IPO Share Option Scheme represents approximately 2.58% of the issued share capital
of the Company immediately upon completion of the Placing and the Capitalisation Issue (excluding
Shares to be issued under the Over-allotment Option or resulting from the exercise of any options
granted under the Pre-IPO Share Option Scheme).


                                                — 32 —
WAIVERS IN RESPECT OF THE GEM LISTING RULES AND COMPANIES ORDINANCE

COMPANIES ORDINANCE WAIVER

      The Company has also sought a waiver from the Hong Kong Securities and Futures Commission
in relation to certain requirements under the Companies Ordinance.

      Under paragraph 10 of Part I of the Third Schedule to the Companies Ordinance, the Company
is required to include in this prospectus the number, description and amount of any Shares which any
person has, or is entitled to be given, an option to subscribe for, together with certain particulars of
each option, namely the period during which it is exercisable, the price to be paid for the Shares
subscribed for under it, the consideration (if any) given or to be given for and the name and address
of the person to whom it was given. As at the date of this prospectus, the Company has conditionally
granted options to 71 persons, all of them being either Directors, consultants, senior management staff
and employees of the Company or its subsidiaries to subscribe for a total of 8,260,000 Shares under
the Pre-IPO Share Option Scheme and on the terms set out in the sub-paragraph headed “Outstanding
options under the Pre-IPO Share Option Scheme” in the paragraph headed “Pre-IPO Share Option
Scheme” in Appendix IV to this prospectus.

     Rexcapital, on behalf of the Company, has applied to the Hong Kong Securities and Futures
Commission for a waiver from strict compliance with the disclosure requirements of paragraph 10(d)
of the Third Schedule to the Companies Ordinance on the ground that full compliance with these
requirements would be unduly burdensome to the Company. The Hong Kong Securities and Futures
Commission has granted such a waiver to the Company pursuant to Section 342A of the Companies
Ordinance on the condition that:

     (a)   full details of all such options granted under the Pre-IPO Share Option Scheme to the
           employees of the Group who have been conditionally granted options entitling them to
           acquire 300,000 Shares or more and all options conditionally granted to the Directors,
           senior management staff and consultants of the Group are disclosed in this prospectus, such
           details to include all the particulars required under paragraph 10 of the Third Schedule to
           the Companies Ordinance; and

     (b)   a list of all the grantees, including the persons referred to in the sub-paragraph above, who
           have been conditionally granted options under the Pre-IPO Share Option Scheme,
           containing all the particulars as required under paragraph 10 of Part I of the Third Schedule
           to the Companies Ordinance, be made available for pubic inspection in accordance with the
           paragraph headed “Documents available for inspection” in Appendix V to this prospectus.




                                               — 33 —
      INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS                                               R


     This prospectus contains particulars given in compliance with the Companies Ordinance, the
Securities (Stock Exchange Listing) Rules 1989 of Hong Kong (as amended) and the GEM Listing
Rules for the purpose of giving information to the public with regard to the Group.

      This prospectus, for which the Directors collectively and individually accept full responsibility,    A
includes particulars given in compliance with the GEM Listing Rules for the purpose of giving
information with regard to the Group. The Directors, having made all reasonable enquiries, confirm
that, to the best of their knowledge and belief:

     (a)   the information contained in this prospectus is accurate and complete in all material
           respects and not misleading;

     (b)   there are no other matters, the omission of which would make any statement in this
           prospectus misleading; and

     (c)   all opinions expressed in this prospectus have been arrived at after due and careful
           consideration and are founded on bases and assumptions that are fair and reasonable.

FULLY UNDERWRITTEN                                                                                          C
                                                                                                            A

     This prospectus is published solely in connection with the Placing. The Placing initially
comprises 58,000,000 New Shares and 22,000,000 Sale Shares, in each case being offered at the Offer
Price (subject to the Over-allotment Option). This prospectus sets out the terms and the conditions of
the Placing.

     The Placing is managed by and the listing of the Shares on GEM is sponsored by Rexcapital. The
Placing is fully underwritten by the Underwriters. Further information in relation to the underwriting
arrangements is set out in the section headed “Underwriting” in this prospectus.

DETERMINATION OF THE OFFER PRICE

     The Placing Shares are being offered at the Offer Price which is expected to be determined by
Rexcapital, on behalf of the Underwriters, the Company and the Vendor at or before 5:00 p.m. on 18th
June, 2001, or such later time as may be agreed between Rexcapital, on behalf of the Underwriters,
the Company and the Vendor but in any event not later than 5:00 p.m. on 19th June, 2001.

     If Rexcapital, on behalf of the Underwriters, the Company and the Vendor are unable to
reach agreement on the Offer Price, the Placing will not proceed.

PLACING SHARES TO BE OFFERED IN CERTAIN JURISDICTIONS ONLY

     Pursuant to the Placing, it is expected that the Underwriters or selling agents nominated by the
Underwriters shall conditionally place the Placing Shares on behalf of the Company at the Offer Price
with investors in Hong Kong and in certain other jurisdictions.

      The Placing is subject to the conditions as stated in the section headed “Structure of the Placing”
in this prospectus.


                                               — 34 —
        INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

      The distribution of this prospectus and the offering or sale of the Placing Shares in certain
jurisdictions is restricted by law. This prospectus may not be used for or in connection with any offer
to, or solicitation by, anyone in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Persons into whose possession this prospectus may come are required by the Company
and the Underwriters to inform themselves about and to observe, such restrictions.

Singapore

     This prospectus has not been and will not be registered as a prospectus with the Registrar of
Companies and Businesses in Singapore. Accordingly, this prospectus and any other document or
material in connection with the offer of the Placing Shares may not be circulated or distributed in
Singapore, nor may any of the Placing Shares be offered or sold, whether directly or indirectly, nor
may any invitation or offer to subscribe for or purchase any Placing Shares be made, whether directly
or indirectly, to the public or any member of the public in Singapore.

Japan

      The Placing has not been and will not be registered under the Securities and Exchange Law of
Japan (the “Securities and Exchange Law”). None of the Placing Shares may be offered, re-offered,
sold or re-sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan, except:
(i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law;
and (ii) in compliance with any other applicable requirements of Japanese law.

Taiwan

     The Placing has not been and will not be registered with the Taiwan Securities and Futures
Commission under the Securities and Exchange Law and Guidelines for the Offering and Issuance of
Securities by Foreign Issuers. Accordingly, none of the Placing Shares may be offered for subscription
or purchase, directly or indirectly, in Taiwan.

Cayman Islands

     No offer of the Placing Shares may be made to the public in the Cayman Islands.

     Each person acquiring the Placing Shares will be required to confirm, or be deemed by its
acquisition of Placing Shares to have confirmed, that it is aware of the restrictions on the offering and
sale of the Placing Shares described in this prospectus.

APPLICATION FOR LISTING ON GEM

      Application has been made to the GEM Listing Committee for the listing of, and permission to               A
                                                                                                                 (
deal in, the Shares in issue and the Shares to be issued as mentioned herein (including the additional
Shares which may be issued pursuant to the exercise of the Over-allotment Option) and any Shares to
be issued pursuant to the exercise of any options granted under the Pre-IPO Share Option Scheme or
which may be granted under the Share Option Scheme. No part of the share or loan capital of the
Company is listed or dealt in on any other stock exchange and no such listing or permission to deal
is being or is proposed to be sought as at the date of this prospectus.


                                                 — 35 —
      INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

HONG KONG BRANCH REGISTER AND STAMP DUTY

     All Shares in issue and to be issued as mentioned in this prospectus will be registered on the
Company’s branch register of members to be maintained by Hong Kong Registrars Limited in Hong
Kong. The Company’s principal register of members is maintained by Bank of Bermuda (Cayman)
Limited in the Cayman Islands. Only Shares registered in the Company’s branch register of members
maintained in Hong Kong may be traded on GEM.

     Dealings in Shares registered on the Company’s branch register of members in Hong Kong will
be subject to Hong Kong stamp duty.

PROFESSIONAL TAX ADVICE RECOMMENDED

      Potential shareholders are recommended to consult their professional advisers if they are in any
doubt as to the taxation implications of the subscribing for, purchasing, holding and dealing in the
Shares. None of the Company, Rexcapital, the Underwriters, any of their respective directors, agents
or advisers or any other party involved in the Placing accepts responsibility for any tax effects on, or
liability of, any person resulting from the subscription for, purchase, holding or dealing in Shares.

SHARES WILL BE ELIGIBLE FOR CCASS

      Subject to the granting of listing of, and permission to deal in, the Shares on GEM and the
compliance with the stock admission requirements of Hongkong Clearing, the Shares will be accepted
as eligible securities by Hongkong Clearing for deposit, clearance and settlement in CCASS with
effect from the date of commencement of dealings in the Shares on GEM or on any other date
Hongkong Clearing chooses. Settlement of transactions between participants of the Stock Exchange
is required to take place in CCASS on the second Business Day after any trading day.

     All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational
Procedures in effect from time to time.

     All necessary arrangements have been made for the Shares to be admitted into CCASS. If you
are unsure about the details of CCASS settlement arrangements and how such arrangements will affect
your rights and interests, you should seek the advice of your stockbrokers or other professional
advisers.

STRUCTURE OF THE PLACING

     Details of the structure of the Placing, including its conditions, are set out under the section
headed “Structure of the Placing” of this prospectus.




                                               — 36 —
                                      DIRECTORS

Name                                   Address                   Nationality   A
                                                                               C

Executive Directors

Leung Chung Chu, Andrew                A5, 16/F., Coral Court    British
(Chairman)                             118 Tin Hau Temple Road
                                       North Point
                                       Hong Kong

Yau Sui Ha, Cecilia                    4D, Fairyland Garden      Chinese
                                       8 Broadcast Drive
                                       Kowloon
                                       Hong Kong

Yau Kar Man                            Flat D, 23/F.             Chinese
                                       Block 1, Tivoli Garden
                                       75 Tsing King Road
                                       Tsing Yi
                                       New Territories
                                       Hong Kong

Non-executive Director

Chiu Fu Sheng                          House 5, Casa Loma        Taiwanese
                                       Silver Cape Road
                                       Clearwater Bay
                                       Kowloon
                                       Hong Kong

Independent non-executive Directors                                            R


Chan Kin Wo                            Flat A, 2/F               Chinese
                                       Yukon Court
                                       2 Conduit Road
                                       Hong Kong

Yow Cecil                              89 Tai Hang Road          Chinese
                                       1/F., Hong Kong




                                       — 37 —
                      PARTIES INVOLVED IN THE PLACING

Sponsor and Manager             REXCAPITAL (Hong Kong) Limited                         A
                                                                                       R
                                Suite 3203, 32nd Floor                                 A
                                                                                       (
                                Nine Queen’s Road
                                Central
                                Hong Kong

Underwriters                    TingKong-RexCapital Securities International Limited   C
                                                                                       A
                                Suite 1701, 17th Floor
                                New World Tower I
                                16-18 Queen’s Road Central
                                Hong Kong

                                CEF Capital Limited
                                Suite 2001
                                20th Floor
                                Cheung Kong Centre
                                2 Queen’s Road Central
                                Hong Kong

                                Chow Sang Sang Securities Limited
                                804 - 806, Man Yee Building
                                68 Des Voeux Road Central
                                Hong Kong

                                Get Nice Capital Limited
                                20/F., Euro Trade Centre
                                13-14 Connaught Road
                                Central
                                Hong Kong

                                GC Capital (Asia) Limited
                                Unit 6501-06, The Center
                                99 Queen’s Road Central
                                Hong Kong

                                HT Securities Limited
                                45th Floor, COSCO Tower
                                183 Queen’s Road Central
                                Hong Kong

                                KGI Asia Limited
                                27/F Asia Pacific Finance Tower
                                Citibank Plaza
                                3 Garden Road
                                Central
                                Hong Kong




                                   — 38 —
                     PARTIES INVOLVED IN THE PLACING

                                    Kingsway SW Securities Limited
                                    5/F. Hutchison House
                                    10 Harcourt Road
                                    Central
                                    Hong Kong

                                    Pacific Challenge Capital Limited
                                    2201-3, 22nd Floor
                                    Worldwide House
                                    19 Des Voeux Road Central
                                    Hong Kong

                                    SBI E2-Capital Securities Limited
                                    20/F., Henley Building
                                    5 Queen’s Road Central
                                    Hong Kong

                                    Sun Hung Kai International Limited
                                    Suites 1101-1106
                                    One Pacific Place
                                    88 Queensway
                                    Hong Kong

                                    Vickers Ballas Capital Limited
                                    19/F, Far East Finance Centre
                                    16 Harcourt Road
                                    Admiralty
                                    Hong Kong

Legal advisers to the Company       as to Hong Kong law:
                                    Sidley Austin Brown & Wood
                                    Level 34
                                    Two Exchange Square
                                    Central
                                    Hong Kong

                                    as to Cayman Islands law:
                                    Conyers Dill & Pearman, Cayman
                                    Zephyr House
                                    Mary Street
                                    George Town
                                    Grand Cayman
                                    Cayman Islands
                                    British West Indies

Legal adviser to the Underwriters   White & Case
                                    9th Floor, Gloucester Tower
                                    The Landmark
                                    11 Pedder Street
                                    Hong Kong



                                       — 39 —
                     PARTIES INVOLVED IN THE PLACING

Auditors and reporting accountants   RSM Nelson Wheeler                    C
                                                                           A
                                     Certified Public Accountants
                                     7th Floor
                                     Allied Kajima Building
                                     138 Gloucester Road
                                     Hong Kong

Property valuer                      American Appraisal Hongkong Limited
                                     Suite 2901
                                     Central Plaza
                                     18 Harbour Road
                                     Wanchai
                                     Hong Kong




                                        — 40 —
                             CORPORATE INFORMATION

Registered office                     P.O. Box 2681GT                     A
                                                                          A
                                      Zephyr House
                                      George Town
                                      Grand Cayman
                                      Cayman Islands
                                      British West Indies

Head office and principal place       Units 1008-1018                     C
                                                                          A
 of business                          10th Floor, Trans Asia Centre       C
                                                                          (
                                      18 Kin Hong Street                  A
                                                                          C
                                      Kwai Chung                          A
                                      New Territiories
                                      Hong Kong

Company homepage/website              http://www.erahk.com

Company secretary                     Ng Wai Lun FCCA, AHKSA

Qualified accountant                  Luk Yuen King FCCA, AHKSA

Compliance officer                    Leung Chung Chu, Andrew

Members of audit committee            Chan Kin Wo (Chairman)
                                      Yow Cecil

Authorised representatives            Leung Chung Chu, Andrew             R
                                                                          R
                                      Ng Wai Lun

Principal bankers                     The Hongkong and Shanghai Banking
                                      Corporation Limited
                                      HSBC Main Building
                                      1 Queen’s Road Central
                                      Hong Kong

Principal share registrar and         Bank of Bermuda (Cayman) Limited
  transfer office in Cayman Islands   36C, Bermuda House
                                      British American Centre
                                      Dr. Roy’s Drive
                                      George Town
                                      Grand Cayman
                                      Cayman Islands
                                      British West Indies

Branch share registrar and            Hong Kong Registrars Limited        R
                                                                          R
  transfer office in Hong Kong        2nd Floor, Vicwood Plaza
                                      199 Des Voeux Road Central
                                      Hong Kong




                                         — 41 —
                                      INDUSTRY OVERVIEW

     The information provided in this section is derived from various private and/or government
publications such as the IDC. This information has not been prepared or independently verified by the
Company.


INDUSTRY OVERVIEW AND BACKGROUND

The home video entertainment industry

     The home video entertainment industry established since the introduction of VCR in the 1970s
and the popularity continued to grow by the proliferation of video rental shops and the introduction
of LD and LD player in the 1980s. The industry continued to grow as the prices of viewing equipments
and videos became more affordable. Recently, more and more motion pictures are produced in the
format of VCD.


     More recently, DVD has been developed as a new video format in the home video entertainment
industry. It has advantages over VCD as having higher memory capacity, finer resolution, better sound
quality, longer recording time and additional features. The Directors believe that if the prices of DVD
and DVD players decrease, this relatively new video format will become more affordable and the
popularity of DVD is expected to increase.

     The following table shows the market penetration or ownership rate of DVD and VCD players
in Hong Kong:

                                                                   1998            1999              2000
                                                                          (in number of household)

     DVD Player                                                   291,000 15%   459,310 23%   638,910 31%
     VCD Player                                                 1,377,400 71% 1,597,600 80% 1,731,240 84%
     Number of Household Base                                   1,940,000     1,997,000     2,061,000


     Source: ACNielsen Home Electrical Appliances Survey 2000


     According to ACNielsen Home Electrical Appliances Survey 2000, 20% out of an approximate
total of 1,416,000 households who did not have DVD player at home in 2000 are likely to acquire DVD
players in 2001. The Directors therefore expect the penetration rate of DVD will considerably increase
in 2001.

     As the ACNeilsen Home Applicances Survey 2000 reflects a steady growth in penetration of
DVD and VCD players during the past few years and with a projected increase of 20% in that 283,200
out of 1,416,000 households are likely to acquire DVD players in 2001 (20% out of an approximate
total of 1,416,000 households), the Directors expect a steady growth in the video product markets and
in particular the DVD market in the coming years.




                                                   — 42 —
                                    INDUSTRY OVERVIEW

The m otion pictures distribution industry

     Motion pictures have been one of the most popular entertainment in the world. Back to the early
20th century, motion pictures were invented and released in theatres. The popularity continued to grow
with the advent of exhibition technology of motion picture industry. Nowadays, motion pictures can
be distributed by various formats including theatrical release, TV broadcasting and home video
products in the formats of VHS, LD, VCD and DVD.

     In Hong Kong, filmed entertainment is also one of the most popular entertainment. There were
63 cinemas with a total of 178 screens in Hong Kong in 2000. A total of 430 motion pictures was
released publicly in Hong Kong in 2000 recording a total gross box office of approximately HK$914
million.

      After certain period of first theatrical release in cinemas, motion pictures will usually be
distributed in Hong Kong by means of home video products and TV broadcasting. The general
information of home video products distribution industry is set out under the paragraph headed “The
Home Video Entertainment Industry” above. For TV distribution of motion pictures, local pay/free TV
operators are generally required to make a lump sum of prepayment upon signing of licensing
agreements with the balance to be paid when the licensors deliver the video master.

Foreign m otion pictures in Hong Kong

     In 2000, the number of foreign motion pictures released in Hong Kong recorded 280 which is
approximately 1.9 times of the number of locally produced motion pictures. These foreign motion
pictures are usually sourced from US and Japan. Some of the foreign producers penetrate the local
video distribution network by utilizing local video distribution agents.

LICENSING ARRANGEMENTS

      The Group primarily distributes its home video products and motion pictures under all rights
distribution agreement and home video distribution rights agreement.

      Under home video distribution rights agreement, the licensee is usually granted a license to
distribute the video products under specified home video formats, such as VCD and/or DVD.
Licensing fees are payable to the licensors by installments according to the terms of the agreements,
which are usually calculated with reference to the revenue generated from the distribution.

      Under the all rights distribution agreements, the licensee usually has the right to distribute film
titles by ways of theatrical release, pay/free TV exhibition, and to distribute under different video
formats such as VCD and DVD. The terms of licenses are negotiated on a case-by-case basis. Under
normal circumstances, an upfront payment of around 20% of the minimum licensing fees will be
payable at the time of signing of the agreements. The remaining portion will normally be payable upon
the delivery of the film materials by the licensor. Total licensing fee payable is usually calculated by
reference to the total revenue generated from the all rights distribution of the film title after deducting
the theatrical distribution expenses.


                                                — 43 —
                                   INDUSTRY OVERVIEW

PIRACY ACTIVITIES AND REGULATIONS RELATING TO PIRACY LAW IN
HONG KONG

     Piracy activities have adversely affected the film distribution and home video products
distribution industries in Hong Kong for the past few years as the unauthorized distributors could
release the movies in video format through media such as VCD in advance of the official release of
the motion pictures.

     As a result of increased piracy activities, the Government of HKSAR has introduced the
Prevention of Copyright Piracy Ordinance in 1998 to combat the alarming trend of pirated optical
discs in Hong Kong. The Ordinance generally provides for statutory licensing requirements for all
manufacturers of optical discs in Hong Kong.

      The Prevention of Copyright Piracy Ordinance aims to protect legitimate enterprises such as that
of the Group, and to assist in law enforcement by the relevant authorities against the pirates and
counterfeiters. The Commissioner of Customs and Excise combats the activities of unlicensed or
pirated manufacturers of optical discs who profit from distributing the latest motion pictures in video
formats without obtaining the authorization from their owners by the exercise of various powers
vested under the Ordinance, including the power to enter and search the premises and the power to
seize and forfeit the optical discs found at the premises. In accordance with a statement made by the
Hong Kong Customs on 9th March, 2001, the piracy situation in Hong Kong is firmly under control
as a result of vigorous enforcement action taken by the Hong Kong Customs whereby pirated discs
circulation dropped by 98%, from the height of five million pirated discs in circulation a year ago to
fewer than 100,000 currently.


DEVELOPMENT OF THE INTERNET

    The Internet is a global network of inter-connected, separately administered public and private
computer networks that enables different organizations and individuals to communicate, access and
share information, provide entertainment and conduct business remotely. The use of the Internet has
grown rapidly since it was opened for commercial use in the early 1990’s. IDC estimates that the
number of Internet users worldwide will grow from about 399 million at the end of 2000 to about 976
million by the end of 2005. Asian Internet growth is projected to be equally strong, as IDC forecasts
that the number of Asian Internet users will increase from about 110.5 million to about 622 million
during the same period. This increase reflects a compound annual growth rate of about 41.2%.

Online population

      In accordance with IDC’s forecast figures, the number of Internet users in the Asia-Pacific region
(including Japan) will increase from 110.5 million at the end of 2000 to 622 million by the end of
2005, reflecting a compound annual growth rate of 41.2%, while in the more developed US Internet
market, the number of Internet users will increase from about 134.9 million at the end of 2000 to about
219.9 million by the end of 2005, showing a compound annual growth rate of 10.3%.



                                               — 44 —
                                  INDUSTRY OVERVIEW

     IDC has projected high growth in both Internet usage and PC installations, important indicators
for Internet accessibility, in the Hong Kong market in which the Group currently operates. The
following table summarizes key historical and projected data in Hong Kong and the Asia-Pacific
markets.

                                                                                           Projected
                                                                                         Compound
                                                                                             Annual
                                                           December        December Growth Rate
                                                                2000            2005      2000-2005
                                                               (in millions except penetration rates)

     Hong Kong
      Number of Internet users (a)                                1.7             4.8          23.1%
      Number of PCs installed (a)                                 2.1             4.2          14.9%
      Internet penetration rate                                  25%             60%           19.1%

     Asia-Pacific Region
       Number of Internet users (a)                               110             622          41.4%
       Number of PCs installed (a)                               61.2           185.8          24.9%
       Internet penetration rate                                0.8%            4.5%           41.3%


     Notes:


     (a)      Source: IDC, 2001


     According to IDC, the number of Internet users in Hong Kong is expected to increase from 1.7
million at the end of 2000 to 4.8 million by the end of 2005, representing a five-year compound annual
growth rate of 23.1%. Like Singapore, Hong Kong is relatively technologically advanced and is one
of the first cities in the world to have a fully digitized telecommunications network. Hong Kong is
currently developing its broadband Internet access capability to meet expected demand and it is
expected that overall Internet growth will be further enhanced by government’s policies to encourage
the development of Hong Kong as a technology/Internet hub in the Asian region.

THE INTERNET AS A NEW BUSINESS MEDIUM

     The growth in the number of Internet users, the amount of time users spend on the Internet, the
increase in the number of websites and the rate of Internet and PC penetration are fueling the
expansion of business areas in Internet.

     The Directors believe that the Internet will become an increasingly important entertainment
medium, e-commerce enabler and advertising platform as users become more familiar with the
Internet and broadband Internet access develops.




                                              — 45 —
                                   INDUSTRY OVERVIEW

Entertainment content

      The Internet is achieving increasing popularity as an alternative to traditional entertainment
outlets. New software-based authoring tools have lowered the cost of publishing content on the
Internet relative to conventional publishing methods and have enabled new forms of multimedia
content. The cost of accumulating, storing and delivering content to a large audience is lower than that
of conventional media, consisting only of the cost of maintaining and operating computer equipment.
Content is readily accessible by any Internet user and information is often available free of charge.
Through the wide array of content offerings available from different websites, Internet users are able
to view images and video clips, listen to music, play interactive and real-time games with third parties
and communicate with friends.

      As broadband Internet access becomes more available globally and in the Asia-Pacific region, the
Directors believe that the increased performance capabilities of the Internet will enable more
entertainment contents to be efficiently delivered over the Internet and that traditional outlets for
entertainment, such as television, film and radio, will converge with the Internet. In short, broadband
Internet access may transform the products and services of traditional media into new forms of
entertainment and information-gathering which will be delivered over the Internet. The Directors
believe that the widespread application of technologies that will permit entertainment to be delivered
over the Internet offers significant opportunities for companies with access to production facilities and
production experience combined with an Internet focus and understanding.

E-commerce

     E-commerce can be separated into three main categories, business-to-business (B2B), business-
to-consumer (B2C) and consumer-to-consumer (C2C). B2C e-commerce facilitates the transactions
between vendors and customers and minimises the risk of errors. For example, under B2C
e-commerce, purchase order information is input by the customer and sent directly to the computerised
system of the vendor. This reduces the amount of employee involvement in the ordering process and
minimizes the risk arising from human errors. Furthermore, because the data is sent directly to the
vendors’ computerized systems and requires less human involvement, the transaction process is
quicker.

      The Internet is an important tool to disseminate information. Both businesses and consumers
have sought to capitalise on the Internet as a platform for consumer services through the establishment
of websites devoted to the dissemination of information relating to goods and services they have for
offer. The Internet provides merchants with an alternative distribution channel to conduct B2C sales
offering their goods and services to consumers. The Internet enables online merchants to reach a
global audience and operate with minimal infrastructure, reduced overhead and greater economies of
scale. Meanwhile, the Internet provides consumers with more options, increased pricing power and
greater convenience. As a result, the volume of business transacted on the Internet is anticipated to
grow significantly.

      IDC forecasts that world-wide e-commerce revenue will grow significantly from US$330 billion
at the end of 2000 to US$5,000 billion by the end of 2005. IDC predicts that Asian online spending
will increase from US$18.4 billion to US$599.5 billion during the same period.


                                               — 46 —
                                        INDUSTRY OVERVIEW

     The following table shows the split of e-commerce revenue in the Asia-Pacific region in 2000
by two-purpose components:

                                                                             Equivalent to
                                                                 US$ million HK$ million          %

     B2C                                                               5,530         43,134      30
     B2B                                                              12,870        100,386      70

                                                                      18,400        143,520     100

     Source: IDC, 2001


     The following table shows the components of B2C in the Asia-Pacific region excluding Japan in
2000:

                                                                               Equivalent to
                                                                 US$ million    HK$ million       %

     Books                                                               852          6,646     15.4
     Music on CDs, cassettes, etc                                        520          4,056      9.4
     Movies and videos                                                   171          1,334      3.1
     Music download fee, such as MP3                                     116            905      2.1
     Toys and games                                                      238          1,856      4.3
     Magazines, newspapers and other subscriptions                       299          2,332      5.4
     Apparel, such as clothing and shoes                                 205          1,599      3.7
     Tickets for sporting or cultural events                             232          1,810      4.2
     Electronic products (Note)                                          288          2,246      5.2
     Financial and investment products and services                      199          1,552      3.6
     Computer hardware and software                                      713          5,561     12.9
     Flowers                                                             166          1,295      3.0
     Credit card application                                             166          1,295      3.0
     Telecommunications products or services                             254          1,981      4.6
     Others                                                            1,111          8,666     20.1

                                                                       5,530         43,134    100.0

     Source: IDC, 2001


     Note:   TVs, stereos, radios, photographic equipment, etc




                                                     — 47 —
                                    INDUSTRY OVERVIEW

Personal Data (Privacy) Ordinance

     The Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) (“Personal Data
Ordinance”) applies to “data users” in Hong Kong. An Internet advertising company will be a data user
when collecting personal information from users such as the name, birth date or other personal data
of the user.

      In relation to “clicktrails” information, the Privacy Commissioner has indicated that customers’
site to site activity and trails stored on the server’s log is personal data if it is possible to associate
such clicktrails to an individual customer. Contravention of the Personal Data Ordinance occurs when
a company collects such information on its users, analyses the information for a profile of the users’
interests or sells or transmits the profiles to third parties for direct marketing purposes without the
users’ consent. The Privacy Commissioner has stated further that a company should not perform such
analysis if the user has not provided the data for such use.

     It is contemplated that the Group’s future advertisement delivering system will enable direct
marketers to target their advertisements. The system will be designed to integrate information, such
as an user’s online response rate to advertisements, name, address, age or e-mail address, with third
party databases to generate a comprehensive demographic profile of the Internet user. The transfer of
such information, which provides a profile that relates to an individual, would be in contravention of
the Personal Data Ordinance unless the relevant individual expressly consents to such use.

Control of Obscene and Indecent Articles Ordinance

      Under the Control of Obscene and Indecent Articles Ordinance (Chapter 390 of the Laws of Hong
Kong), any person who publishes, possesses for the purpose of publication or imports for the purpose
of the publication any obscene article, whether or not he knows that it is an obscene article, commits
an offence and is liable for a fine of HK$1 million and imprisonment for three years. It is also an
offence to publish any indecent article to a person who is a juvenile, whether it is known that it is an
indecent article or that such person is a juvenile. Such an offence will give rise to a fine of
HK$400,000 and to imprisonment for 12 months. A subsequent conviction will give rise to a fine of
HK$800,000. Failure to comply with the Ordinance by the Group may result in the Group subject to
the fine mentioned above. The Group has implemented various security measures with respect to the
types of contents placed on its portal network. These measures include the implementation of an
automatic password-aging mechanism and a two-factor authentication scheme which regulates system
access privileges for editors and producers who perform periodic content updates to the Group’s portal
network.

Consumer Protection Regulations

     Any services and goods provided by the Group through its websites to its users and consumers
in Hong Kong will also be subject to various consumer protection regulations, including:

     ●     the Control of Exemption Clauses Ordinance (Chapter 71 of the Laws of Hong Kong) which
           restricts a person’s ability to exclude its liability by means of contract terms and otherwise
           in certain circumstances


                                                — 48 —
                                  INDUSTRY OVERVIEW

     ●    the Sale of Goods Ordinance (Chapter 26 of the Laws of Hong Kong) which prescribes,
          among other things, implied conditions and warranties in contracts for the sale of goods
          supplied by a seller in the course of its business

     ●    the Supply of Services (Implied Terms) Ordinance (Chapter 457 of the Laws of Hong Kong)
          which prescribes, among other things, implied terms in contracts for the supply of services

     ●    the Unconscionable Contracts Ordinance (Chapter 458 of the Laws of Hong Kong) which
          empowers the court to give relief in certain consumer contracts which are found
          unconscionable

Electronic Transactions Ordinance

      The Electronic Transactions Ordinance (Chapter 553 of the Laws of Hong Kong) recognises (i)
formation of contracts by electronic means, (ii) digital signatures, (iii) admissibility of electronic
records in court proceedings as well as appoints the Hong Kong Post Office as the digital signature
certification authority.




                                              — 49 —
                        GENERAL OVERVIEW OF THE GROUP

HISTORY AND DEVELOPMENT

     In 1981, Mr. Chiu Fu-Sheng (       ) founded ERA Taiwan which is an integrated entertainment
company in Taiwan engaging in the development, production and distribution of various entertainment
programs and provision of Internet services mainly in Taiwan.

     Recognising the potential growth in the home video entertainment industry in Hong Kong, Mr.
Chiu Fu-Sheng, Mr. Leung Chung Chu, Andrew, Ms. Cheung Mei Ling, amongst others, founded ERA
Home in March 1988, to engage in the home video distribution of motion pictures produced by certain
major Hollywood film studios in Hong Kong and Macau. The Group has entered into distributorship
arrangements with Warner in February 1989 and Columbia-Tristar in December 1990 respectively
whereby the Group has been granted exclusive distribution rights for their home video products in
Hong Kong and Macau.

      In response to the popularity of Hollywood motion pictures in Hong Kong, ERA Films (HK)
Limited was established in June 1995 as an independent theatrical and pay/free TV rights distributor.
It has been the principal distributor of Miramax (a Disney company) to have the first priority to select
all of its motion pictures, for theatrical release, home video products distribution and TV broadcast
for over 2 years since November 1998.

      From early 1999 onwards, ERA Home has been appointed as the exclusive licensee of Universal          C

for its motion pictures on DVDs.

     Also in 1999, in view of the potential growth in the development of Internet and the new market
opportunity to provide information and services through the Internet, ERA Digital Media was
incorporated in December 1999 to develop entertainment content and e-commerce portals for Chinese
users who are interested in filmed and music entertainment products.

    In March 2000, with technical support from ERA Taiwan, the Group launched its
website for the provision of movie and entertainment related information under the domain name of
www.mov3.com, which has attracted over 19,000 registered members in the first month.

      The Group has been granted the exclusive licensing rights in Hong Kong and Macau for new
release titles of DreamWorks on DVD and VCD formats and of Universal on VCD format since 2001.
With effect from June 2001, the Group had ceased to be an exclusive distributor of home video
products for Warner in Hong Kong and Macau and will not be engaged in the distribution of its home
video products due to the fact that Warner intends to carry out distribution of home video products by
their local office instead of appointing local distribution agent.

      In addition, on 6th April, 2001, the Company and ERA Taiwan entered into a memorandum of
understanding pursuant to which the Company will be granted the exclusive right of distribution of
all or certain TV programs owned by ERA Taiwan in Asia excluding Taiwan, with formal distribution
agreement currently estimated to be concluded within six months from 6th April, 2001. The Group had
also entered into a memorandum of understanding on 1st April, 2001 in connection with the exclusive
distribution rights of programs owned by Toei of Japan in various formats in Hong Kong, with formal
distribution agreement currently expected to be finalised in the second quarter of 2001.


                                               — 50 —
                               GENERAL OVERVIEW OF THE GROUP

GROUP AND SHAREHOLDING STRUCTURE

     The Company was incorporated on 26th May, 2000 and in preparation for the listing of the Shares                               C
                                                                                                                                   A
on GEM, became the holding company of the Group upon completion of the Reorganisation as
described in the paragraph headed “Reorganisation” in Appendix IV to this prospectus. The following
diagram illustrates the corporate structure of the Company, its subsidiaries and associated companies
and their respective principal businesses and the shareholding structure of the Company on the Listing
Date (assuming that the Over-allotment Option is not exercised):

                                                                                                                                   A
        Mei Ah                                             5D Technology
                              Leung Chung Chu,
     Entertainment                                          Holdings Ltd.               Cheung Mei Ling                 Public
                                  Andrew
        (Note 2)                                              (Note 1)

              1.875%                     11.25%                     56.25%                           5.625%                  25%



                                                               Company
                                                           (Cayman Islands:
                                                          investment holding)

                                                                     100%

                                                          Era Information &
                                                     Entertainment (BVI) Limited
                                                      (BVI: investment holding)


                              100%                100%               100%                 100%                100%

                           Era
                                         Era Films           Era Home           Era Digital Media       Red River
                     Communications
                                       (HK: promotion     (HK: distribution     (HK: operation of     Agents Limited
                        Limited
                                       and distribution       of video            entertainment      (HK: advertising
                     (HK: investment
                                          of films)          products)           related portals)        agency)
                        holding)

                                                                     22.73%               21.11%
                                                                     (Note 3)             (Note 3)
                                                                                FinanceSec.com
                                                           Winning Scope
                                                                                    Limited
                                                              Sdn. Bhd.
                                                                                (HK: Provision
                                                             (Malaysia:
                                                                                of Internet and
                                                           distribution of
                                                                                  e-commerce
                                                                films)
                                                                                    services)

Notes:

1.       5D Technology Holdings Ltd. is a wholly-owned subsidiary of ERA Taiwan.

2.       Mei Ah Entertainment concentrates on the distribution of Chinese film products and thus has no direct competition with
         the Group.

3.       Save for Winning Scope Sdn. Bhd of which Leung Chung Chu, Andrew, a Director and an Initial Management
         Shareholder, holds approximately 8.26% interest, the other shareholders of Winning Scope Sdn. Bhd. and
         FinanceSec.com Limited, so far as the Directors are aware, are independent third parties not connected with the
         Directors, chief executive, management shareholders and substantial shareholders of the Company and their respective
         Associates.



                                                            — 51 —
                       GENERAL OVERVIEW OF THE GROUP

DESCRIPTION OF BUSINESS                                                                                  C
                                                                                                         A
                                                                                                         2

     The Group has been engaged in the distribution of foreign motion pictures in various formats
since its commencement of business in 1989. In addition, the Group also commenced its operation of
Internet Business in 2000. During each of the two years ended 31st December, 2000, the turnover
generated from home video products distribution, theatrical, pay/free TV rights distribution and
Internet business are set out below:

                                                             Year ended 31st December,
                                                             1999                 2000
                                                       HK$’000       %     HK$’000                  %
     Turnover
       Home Video Products Distribution                  56,851       83.6       87,816          85.1

       Theatrical, Pay/Free TV Rights Distribution       11,169       16.4       14,935          14.5

       Income from Internet Business                          —         —           395           0.4

       Total                                             68,020      100.0      103,146         100.0



Home video products distribution

      The Group commenced business in 1989, and has been engaged in the distribution of foreign
home video products mainly in VCD and DVD formats in Hong Kong and Macau through ERA Home.
The Group has been granted exclusive distribution rights of foreign home video products in Hong
Kong and Macau by Warner and Columbia-Tristar for over 10 years since 1989 and has been the
exclusive licensee in Hong Kong and Macau for Universal on DVD format since 1999. The Group has
also been granted exclusive distribution rights in Hong Kong and Macau by Universal on VCD format
and DreamWorks on DVD and VCD formats for new release titles by these film studios since 2001.
As at the Latest Practicable Date, the Group has released over 2,000 motion pictures on videos formats
produced by overseas studios.

     The home video products distributed by the Group cover various video formats mainly includes
DVDs and VCDs. For each of the two years ended 31st December, 2000, the percentages of turnover
generated from home video products distribution of VCD formats are approximately 59% and 71%
respectively and that for DVD formats are 30% and 29% respectively. Turnover of DVD formats for
the year ended December 31, 2000 increased by approximately 47% when compared to that for the
year ended December 31, 1999. Decrease in the percentage of sale of DVD formats to total turnover
was mainly due to the substantial increase of nearly 85% in sales of VCD formats. The substantial
increase in the sales of VCD formats was mainly due to reissue of film titles in VCD formats with a
very competitive price, such reissue was started in the second half of the year 1999 after the Group
agreed such arrangement with the Hollywood film studios.




                                              — 52 —
                        GENERAL OVERVIEW OF THE GROUP

Acquisition of distribution rights

     Foreign home video products are sourced directly from overseas studios. During the Track
Record Period, the majority of foreign home video products were sourced from Hollywood film
studios. The Group has distributed around 400 and more than 400 motion pictures in various formats
respectively for the two years ended 31st December, 2000. The variety of motion pictures offered by
the Group includes action, drama, thriller, comedy, horror, adventure, animation and others. The
following are examples of Hollywood motion pictures distributed by the Group:

For the year ended 31st December, 1999

     ●    “The Mummy”                                     ●     “Shakespeare In Love”
     ●    “Life is Beautiful”                             ●     “8mm”
     ●    “Stepmom”

For the year ended 31st December, 2000

     ●    “Gladiator”                                      ●    “Erin Brockovich”
     ●    “Hollow Man”                                     ●    “Scream 3”
     ●    “Stuart Little”


For the period from 1st January, 2001 to the Latest Practicable Date

     ●    “Crouching Tiger, Hidden Dragon”                 ●    “Chicken Run”
     ●    “Charlie’s Angels”                               ●    “Meet the Parents”
     ●    “Vertical Limit”


      The Group’s relationships with three of the major Hollywood film studios are well-established
and the Directors believe that such relationships are stable and the Group has been able to
continuously obtain distribution rights in various video formats of not only blockbuster and award
winning films but also films in niche markets with commercial success. The Directors do not
anticipate any significant difficulty in renewing licensing agreements with the three major Hollywood
film studios and in continuing to source marketable home video products.

      The licensing fees are payable by the Group to the Hollywood film studios by installments
according to relevant agreements entered into by the Group and the Hollywood film studios. The
installments are calculated with reference to the expected revenue generated from the distribution of
such motion pictures and the sales in various video formats. For each of the two years ended 31st
December, 2000, the Group spent approximately HK$26.2 million and HK$38.4 million respectively
on licensing fees.

      For the two years ended 31st December, 2000, the gross licensing fees paid to the Group’s five
largest licensors for motion pictures in aggregate accounted for approximately 94% and 97% of the
total gross licensing fees paid by the Group for each of the respective periods. For the two years ended
31st December, 2000, the gross licensing fees paid to the Group’s single largest licensor for motion
pictures accounted for approximately 38% and 42% of the total gross licensing fees paid by the Group
for each of the respective periods.


                                               — 53 —
                        GENERAL OVERVIEW OF THE GROUP

      With effect from June 2001, the Group had ceased to be an exclusive distributor of home video
products in Hong Kong and Macau for Warner due to the fact that Warner intends to carry out
distribution of home video products by their local office instead of appointing local distribution agent.
All the existing products currently held by the Group will, pursuant to a letter agreement entered into
between Warner and the Group, be consigned to Warner by different stages for sale to its customers
for a period of three months expiring on 31st August, 2001 unless extended by mutual agreement (the
“Consignment Period”). Any sales of the stocks during the Consignment Period will be treated as
turnover of Warner and the Group will be entitled to receive a lump sum amount from Warner
depending on the quantity of the stocks sold. After the expiration of the Consignment Period, Warner
shall have the right to purchase all or a portion of the stocks remaining unsold by the Group,
otherwise, all unsold products shall be destroyed. The Directors believe that the impact of the
non-renewal of the distribution right of Warner on the Group can be set off and the Group’s turnover
can be improved by securing additional distribution rights in 2001 through (1) the granting of the
exclusive rights in Hong Kong and Macau for new release titles on VCD format for Universal, which
is the one of the top five labels of the Group during the Track Record Period; (2) the granting of
exclusive licensing rights in Hong Kong and Macau for new release titles of DreamWorks on DVD and
VCD formats; (3) the entering into a memorandum of understanding in connection with the exclusive
distribution rights of programs owned by Toei of Japan in various formats in Hong Kong; and (4) the
entering into a memorandum of understanding with ERA Taiwan, the controlling shareholder of the
Group, for the exclusive right of all or certain TV programs owned by ERA Taiwan in Asia, excluding
Taiwan. To further enhance the Group’s market status, the Directors intend to take on additional label
representation as well as develop its distribution network by selling to additional retail store chains.

     None of the Directors, the substantial, significant or management shareholders of the Company
or any of their respective Associates has any shareholding interest in any of the top five licensors of
the Group.

Distribution and marketing

     ERA Home has a marketing team of four staff for formulating and executing media
advertisement, as well as tie-in promotional activities jointly organised with other video retailers,
hardware manufacturers and trade partners. New video titles and tie-in promotion programs are
announced through major magazines and newspapers. Large-scale marketing campaigns are supported
by substantial above-the-line media advertising such as radio commercial spots and MTR. Many tie-in
promotional campaigns have been done in the past with video retailers, hardware manufacturers and
trade partners such as Toshiba Hong Kong Limited, Sony Corporation of Hong Kong Ltd., Acer
Computer (Far East) Limited, Planet Hollywood Hong Kong Limited and Hong Thai Citizens Travel
Services Ltd. to promote the Group’s home video products.

      The Group has built up a distribution network, which mainly consists of video rental and record
stores, retail chain stores, bookstores and convenience stores. Through its distribution network, the
Group has access to the latest market trends and demands, consumers’ feedback on recent releases, and
information on the popularity of particular motion pictures, producers and actors. Such market
intelligence in turn assists the Group in assessing the marketability of future products and in sourcing
motion pictures.

      ERA Home has currently over 100 customers in Hong Kong and Macau including various video
rental and record stores and retail chain stores namely HMV, Blockbuster, 7-Eleven, Watson’s and
Wellcome, which consisting of about 1,300 outlets. For the two years ended 31st December, 2000, the
turnover generated from the top five customers of the Group represented approximately 50% and 55%


                                               — 54 —
                        GENERAL OVERVIEW OF THE GROUP

of the Group’s total turnover generated from distribution of home video products for each of the
respective periods. For the two years ended 31st December, 2000, the turnover generated from the
single largest customer of the Group represented approximately 14% and 13% of the Group’s total
turnover generated from distribution of home video products for each of the respective periods. In
general, approximately 91% of the sales from home video products distribution for the year ended 31st
December, 2000 was on an open account basis with credit terms ranging from 30 days to 90 days and
the balance of approximately 9% was settled in cash on delivery. The Group’s income is predominantly
received in Hong Kong dollars. The bad debts recorded by the Group is immaterial for the year ended
31st December, 2000. The Group recorded bad debt expenses of approximately HK$492,000 for the
year ended 31st December, 1999, which was mainly due to the liquidation of KPS Retail Stores
Limited (“KPS”). Before its liquidation, KPS was one of the Group’s major customers mainly for LD
and VHS products. The Directors consider that the liquidation of KPS was caused by its over-trading
and financial turmoil of Hong Kong which are beyond their control and they are of the opinion that
the current credit control policy in force by the Group is sound and effective.

      Cash on delivery or letter of credit payment is required for new customers of the Group. After
certain period of trading relationship, and under management approval considering the customers’
creditability, credit terms of not more than 60 days may be offered. Payment history and receivable
accounts’ aging analysis are continuously reviewed by management. Both sales and accounts
departments will follow up the overdue accounts and remind customers for repayment. Further
delivery of goods will not be allowed to customers who have overdue payment for more than one
month. Provision for doubtful debts will be made when the management considers that the debt has
difficulties to recover.

      The Directors believe that the innovation of video formats has enlarged and will continue to
enlarge the potential market for the Group’s distribution business of home video products. The role
and importance of the Group as a key player and a link in the distribution chain between Hollywood
film studios and various exhibition channels are likely to increase with the innovation of video formats
and/or exhibition channels.

     None of the Directors, the substantial, significant or management shareholders of the Company
or any of their respective Associates has any shareholding Interest in any of the top five customers of
the Group.

Competition

      The Group faces competition from local distributors of Hollywood motion pictures. As one of the
leading distributors of foreign home video products and motion pictures, the Group has well-
established relationships with motion picture producers. Moreover, the selection of good, popular and
marketable motion pictures requires experience, judgment and sensitivity to market trends. With the
management’s experience in sourcing marketable, popular and well-received motion pictures and
distribution right, the Directors are confident that the Group will continue to maintain its
competitiveness in the distribution market.

     As the Group has well-established relationships with motion picture producers and Hollywood
studios, the Directors believe that the supply of popular Hollywood home video products are secured
and steady. The Group was the first company to launch and market major DVD titles for Hollywood
studios in Hong Kong in 1997. The Directors believe that Hollywood DVD titles distributed by the
Group provide quality picture with superior sound system and fascinating features including a wide
range of subtitles, production notes, scene selection, etc. Mastering and encoding of DVDs distributed


                                               — 55 —
                        GENERAL OVERVIEW OF THE GROUP

by the Group are done in the US by the Hollywood studios to ensure the quality is guaranteed. The
Group uses well-known replication companies, mainly Sony Music Entertainment (HK) Ltd. for
producing its VCD products. Mei Ah (China) Co., Ltd., which is a company within the same group of
Mei Ah Entertainment, also produces VCD products for the Group.

     The subcontracting costs of home video products of the Group from these replication companies
amounted to approximately HK$11.2 million and approximately HK$19.8 million for each of the two
years ended 31st December, 2000.

      Over the years, the Group has built up a comprehensive library with an extensive selection of
motion pictures. This comprehensive motion picture library, together with the Group’s acquisition of
current popular motion pictures, enables the Group to provide a wide variety of motion pictures to its
customers for selection. The Directors are of the opinion that the Group is in a good position to serve
its customers in different markets with a wide range of motion pictures.

Censorship rules in Hong Kong for video release

      For motion pictures that have been submitted to the Television and Entertainment Licensing
Authority (“TELA”) for the purpose of cinema release, an official notification should be made to
TELA before they can be released in various video formats. For motion pictures which have not been
released at the cinema in Hong Kong, they should be sent to the Obscene Articles Tribunal (the
“Tribunal”) for classification before they can be released in various video formats. The Tribunal will
classify the motion pictures based on their contents into three different categories. Based on the
experience of the Directors, the review process for both TELA and Tribunal usually takes
approximately 14 days.

Copyright Protection

      The Group takes appropriate actions to protect the intellectual property rights for any
infringement of copyright. The Group’s sales team of 5 staff will search around the districts every time
they visit the customers. In addition, the sales team is also responsible for seeking pirated copies of
home video products distributed every two months jointly with Motion Pictures Association,
International Federation of the Phonographic Industry Business Software Alliance. In the event that
pirated products are found, the team would purchase a copy of such pirated copies as evidence and
transfer them to the film studios of relevant home video products for their further actions. All of the
Group’s home video products bear the Group’s registered trademark. In addition, the Group’s sales
staff also make regular visits to retail shops in order to ensure copyright compliance.

Provision for inventories

     The Group has a policy to review the carrying value of the inventories based on the Directors’
best estimation with reference to the net realisable value and market situation. The Group recorded
provision of inventories of approximately HK$750,000 and HK$1,759,000 for each of the two years
ended 31st December, 2000 respectively.

Quality control

     The Group places emphasis on the control of quality of its home video products. The Group has
a quality control team responsible for ensuring that the products supplied by film studios meet the
Group’s specifications and standards. The level of defective products for the two years ended 31st
December, 2000 were insignificant.


                                               — 56 —
                       GENERAL OVERVIEW OF THE GROUP

Theatrical and pay/free TV rights distribution

      Apart from the distribution of foreign home video products, the Group is also engaged in the
business of theatrical and pay/free TV rights distribution of foreign motion pictures in Hong Kong and
Macau through ERA Films. Since 1998, the Group has been acting as the principal distributor in Hong
Kong and Macau for the release of motion pictures produced by Miramax (a Disney company). The
Group is entitled to the distribution rights of all motion pictures produced by Miramax on a first
priority basis. In addition, the Group has also acquired distribution rights of foreign motion pictures
from various independent Hollywood film studios. For the two years ended 31st December, 2000, the
motion pictures produced/distributed by Miramax and distributed by the Group represented
approximately 57% and 73% respectively of the Group’s total theatrical income generated for each of
the respective periods.

      For the two years ended 31st December, 2000, the turnover generated by ERA Films amounted
to HK$11.2 million and HK$14.9 million, representing approximately 16% and 14% for the Group’s
total turnover for each of the respective periods.

Acquisition of distribution rights

     The Group places emphasis on its ability to continuously source distribution rights of foreign
motion pictures with potential and quality at reasonable terms. Up to the Latest Practicable Date, the
following are examples of the wide range of Hollywood motion pictures distributed by the Group:

Sourced from Miramax

     ●    “Scream” series                                 ●    “Life is Beautiful”
     ●    “Dracula 2001”                                  ●    “Scary Movie”
     ●    “Chocolat”


Sourced from other independent film studios

     ●    “I Know What You Did Last Summer”               ●    “The Whole Nine Yards”
     ●    “Hypnosis”                                      ●    “The Fan”
     ●    “House On Haunted Hill”

    The following table summarizes the term of the distribution rights in motion pictures held by the
Group as at 31st December, 2000

                                                                                           Number of
     Distribution rights expiring between                                             m otion pictures

     1st January, 2003 to 31st December, 2003                                                        4
     1st January, 2004 and after                                                                    79

                                                                                                    83




                                              — 57 —
                        GENERAL OVERVIEW OF THE GROUP

Distribution and marketing

     The Group’s customers cover all cinema circuits that exhibit Hollywood pictures and operators
of pay and free TV in Hong Kong. The Group exhibits motion pictures through the cinema circuits,
as well as sub-licenses its motion picture rights to TV customers and provides 35mm prints or video
masters which can be used for exhibition or public broadcasting. For the arrangements with cinema
circuits, the Group agrees with the cinema circuits on the split of the gross box office which the
cinemas will pay to the Group after the showing period. For the operators of pay and free TV, they
are generally required to make a lump sum of prepayment upon signing of agreements, with the
balance to be paid when the Group delivers the relevant materials or the material showing such
programs.

     The income generated from theatrical release and television release represents approximately
90.8% and 9.2% for the year ended 31st December, 1999 and 75.2% and 24.8% for the year ended 31st
December, 2000 for the turnover of theatrical, pay/free TV rights distribution.

     Approximately 83% of the sales from theatrical, pay/free TV rights distribution for the year
ended 31st December, 2000 was on credit terms ranging from 30 days to 90 days and the balance of
approximately 17% was settled in cash on delivery. No bad debts was recorded by the Group in respect
of theatrical and pay/free TV rights distribution for the two years ended 31st December, 2000.

     ERA Films’ sales and marketing team are responsible for scheduling the release of foreign
motion pictures and formulating promotion plans. In addition, they are also responsible for providing
the senior management with market information including box-office receipts of foreign motion
pictures and feedback from the Group’s customers. Prior to the release of a new motion picture, the
Group advertises the release through a number of advertising media such as MTR poster, bus shelter
poster and bus panel. Advertisement will also be placed in newspapers and magazines, as well as on
TV and radio. In addition, materials such as 35mm trailer prints, posters, lobby stills and standees will
be delivered to the cinemas for marketing and promotional purposes.

Censorship rules for motion pictures for cinema release

      Motion pictures are subject to censorship by TELA before they can be released in cinemas. TELA
will classify the motion pictures based on their contents to determine the suitability for viewing by
different age groups. The review process usually takes approximately 14 days.

Internet business

     In addition to the traditional distribution network, the Group plans to extend its network to the
Internet platform. To meet the Group’s objective in developing its Internet business, ERA Digital
Media was incorporated in 1999 with the aim to form, maintain and consolidate a virtual community
of Chinese-speaking movie and music lovers by providing them, via the Internet, with film related
entertainment information, an online CD/VCD/DVD sales and rental store as well as online delivery
of movie and music.




                                               — 58 —
                       GENERAL OVERVIEW OF THE GROUP

www.m ov3.com

     In March 2000, the Group launched an Internet portal under the domain name of www.mov3.com
which focuses on the provision of comprehensive movie related contents. Leveraging on its movie and
entertainment related contents library, as well as ERA Taiwan’s technological support, the Group aims
to develop www.mov3.com into a leading filmed entertainment portal, targeting at Chinese-speaking
movie lovers. The content provided in www.mov3.com are available in both traditional and simplified
Chinese characters versions to enable users to explore and utilise. Currently, the main channels
available on www.mov3.com include the following:

     ●    Local and international movie news in text and video clips

          —    contains up-to-date local and international movie news and interviews presented with
               text, pictures and video clips produced by a crew of editors, reporters and cameramen

     ●    Upcoming and currently showing movie information

          —    contains synopses, information of casts and directors and hyperlinks to official
               websites of upcoming and currently showing movies

     ●    Movie teasers and trailers with Chinese subtitles

          —    contains movie teasers and trailers with Chinese subtitles of both upcoming and
               currently showing movies available in Realplayer and QuickTime formats for online
               viewing and downloads

     ●    Hong Kong, USA and Taiwan box office information

          —    contains latest box office information of the top ten movies in Hong Kong, USA and
               Taiwan respectively

     ●    Movie reviews written by film critics

          —    contains movie reviews written by film critics such as Mak Yiu Kuen, Wilson, Lam
               Kee To, Jason, alias     and Chang Wai Hung, whom the Group have entered into
               short term arrangements for their provision of film commentary on a regular basis

     ●    Column on well-acclaimed local and international actors and directors

          —    contains biographical articles updated periodically by the editorial crew introducing
               individual well-acclaimed local and international actors and directors concentrating
               on their road to success and achievements in the film industry

     ●    Articles on special movie topics

          —    contains articles on various interesting movie topics written by the editorial crew


                                             — 59 —
                       GENERAL OVERVIEW OF THE GROUP

     ●    Premiere highlights on video

          —     contains video shots on movie premieres in Realplayer format for online viewing and
                download

     ●    Coverage on film festivals and awards

          —     contains articles and reports on various local and international film festivals and
                awards such as The Hong Kong Film Awards, the Oscar (Academy Awards) and the
                Cannes Film Festival

     ●    Local cinema guide

          —     contains daily updated information regarding local cinemas including address,
                telephone number and movies showing

     ●    Interactive movie review chat rooms

          —     provision of a chat room where movie lovers can post their movie reviews and ideas
                online for others to share and interact

     ●    A movie club

          —     formation of a movie club inviting movie lovers to join, with member benefits such
                as welcome gift, quizzes and lucky draws, free preview tickets and gatherings with
                famous movie idols, etc. The aim is to gather and consolidate a community of movie
                lovers

     ●    A movie premium shop

          —     an online shop selling hot movie premiums and souvenirs to movie lovers at
                reasonable prices

Online features and community products

      As part of its business strategy, the Group is developing infrastructure portal services such as
free email services for members of www.mov3.com. This is aimed to win the loyalty of members as
well as a mean to promote the movie industry.




                                              — 60 —
                           GENERAL OVERVIEW OF THE GROUP

In-house production

     Most of the contents on www.mov3.com including the up-to-date movie news and information,
movie teasers and trailers with Chinese subtitles, and video shots on movie premieres are produced
by the Group. In contrast to traditional movie magazines, movie related news and information covered
under www.mov3.com is updated daily by the Group’s in-house production team. The following chart
shows the typical production and updating process for the movie related news and information of the
Group:


                                           Prepare
              Interview                                                               Shoot &
Research on                              teasers and       Gather      Obtain film                   Obtain
              with movie     Collect                                                    edit
   movie                                trailers with     box office   review by                  supplement
              producers      photos                                                  premiere
information                                Chinese         figures       critics                  information
              and actors                                                             highlights
                                           subtitles




                                             Edit, design, select
                                               and proofread
                                                information


                                              Post and update
                                               information
                                                on the web


E-commerce

      The Group is leveraging its core strength in the entertainment industry and its favourable
position on content acquisition, together with the support of technology from ERA Taiwan to satisfy
the needs of movie and music lovers. It aims to deliver an easy way to buy or rent movies and music.
Era Digital Media is establishing an e-commerce platform on the portals to offer the sale of CD, VCD,
DVD and local rental of DVD, under the domain name of www.mov3-shop.com; to launch online
delivery of movie, music and other entertainment programs in line with the prevalence of broadband
usage. The movie related aspect of the Group’s e-commerce business has commenced in May 2001.

THE GROUP’S STRENGTH

     The Directors believe that the strengths of the Group are as follows:

Extensive distribution network

      The Group has a well-established and extensive distribution network for the distribution business
of home video products and theatrical and pay/free TV rights in Hong Kong and Macau. The Group
distributes foreign home video products through video rental and record retail chain stores,
bookstores, convenient stores and other outlets. Apart from this, the Group’s distribution network for
theatrical and pay/free TV rights virtually covers all cinema circuits that exhibit Hollywood pictures
and operators of pay/free TV stations in Hong Kong.


                                                — 61 —
                        GENERAL OVERVIEW OF THE GROUP

Established relationship with Hollywood film studios

      The Directors believe that one of the key factors attributable to the success of the Group is the
well-established relationship with four of the leading Hollywood film studios which enable the Group
to source distribution rights continuously in various formats in the last decade. These film studios not
only supply blockbuster attractions but also those films in niche markets. Such relationship is also the
valuable assets of the Group in assisting it to provide quality content to audience through various
existing exhibition formats and channels and pursuit the provision of online delivery services, which
is expected to be an important exhibition channel of motion pictures in the future.

Content-rich m ovie entertainment provider

      During the Track Record Period, the Group has offered various award-winning motion pictures
to its customers. A summary of these motion pictures and their respective a wards is set out below:

“Gladiator”

     ●      The 73rd Annual Academy                  Best   Picture,
            Awards (Oscar)                           Best   Actor in a Leading Role,
                                                     Best   Sound,
                                                     Best   Costume Design,
                                                     Best   Visual Effects


“Crouching Tiger, Hidden Dragon”

     ●      The 73rd Annual Academy                  Best   Foreign Language Film,
            Awards (Oscar)                           Best   Music-Original Score,
                                                     Best   Art Direction-Set Decoration,
                                                     Best   Cinematography


“Erin Brockovich”

     ●      The 73rd Annual Academy                  Best Actress in a Leading Role
            Awards (Oscar)


“The Grinch”

     ●      The 73rd Annual Academy                  Best Make-Up
            Awards (Oscar)


“Life Is Beautiful”

     ●      The 71st Annual Academy                  Best Actor in a Leading Role,
            Awards (Oscar)                           Best Foreign Language Film,
                                                     Best Music-Original Dramatic Score
     ●      The 51st Cannes Film Festival            Grand Jury Prize




                                               — 62 —
                       GENERAL OVERVIEW OF THE GROUP

“Girl, Interrupted”

     ●       The 72nd Annual Academy             Best Actress in a Supporting Role
             Awards (Oscar)


“The Road Home”

     ●       The 50th Berlin Film Festival       Silver Bear


    In addition, a summary of motion pictures and their respective nominations distributed by the
Group during the Track Record Period is set out below:

“Gladiator”

     ●       The 73rd Annual Academy             Best Picture, Best Director, Best Actor in a
             Awards (Oscar)                      Leading Role, Best Actor in a Supporting Role,
                                                 Best Writing-Original, Best Cinematography,
                                                 Best Art Direction-Set Decoration, Best Editing,
                                                 Best Music-Original Score, Best Sound, Best
                                                 Costume Design, Best Visual Effects


“Crouching Tiger, Hidden Dragon”

     ●       The 73rd Annual Academy             Best Picture, Best Director, Best Foreign
             Awards (Oscar)                      Language Film, Best Costume Design, Best
                                                 Editing, Best Music-Original Score, Best Music-
                                                 Song, Best Writing-Adapted, Best Art Direction-
                                                 Set Decoration, Best Cinematography


“Chocolat”

     ●       The 73rd Annual Academy             Best Picture, Best Actress in a Leading Role,
             Awards (Oscar)                      Best Actress in a Supporting Role, Best Music-
                                                 Original Score, Best Writing-Adapted
     ●       The 58th Golden Globe Awards        Best Motion Picture-Musical or Comedy, Best
                                                 Actress-Musical or Comedy, Best Supporting
                                                 Actress, Best Original Score


“Erin Brockovich”

     ●       The 73rd Annual Academy             Best Picture, Best Director, Best Actress in a
             Awards (Oscar)                      Leading Role, Best Actor in a Supporting Role,
                                                 Best Writing-Original




                                             — 63 —
                        GENERAL OVERVIEW OF THE GROUP

“The Grinch”

     ●      The 73rd Annual Academy                  Best Art Direction-Set Decoration, Best Costume
            Awards (Oscar)                           Design, Best Make-Up


“Meet the Parents”

     ●      The 73rd Annual Academy                  Best Music-Song
            Awards (Oscar)


“Hollow Man”

     ●      The 73rd Annual Academy                  Best Visual Effects
            Awards (Oscar)


“The Patriot”

     ●      The 73rd Annual Academy                  Best Music-Original Score, Best Sound, Best
            Awards (Oscar)                           Cinematography


“Music Of The Heart”

     ●      The 72nd Annual Academy                  Best Actress in a Leading Role, Best Music-
            Awards (Oscar)                           Song


“The Yards”

     ●      The 53rd Cannes Film Festival            Official Selection in Competition


      In addition, the Group is entitled to the distribution rights of all motion pictures
produced/distributed by Miramax on a first priority basis. Given the fact that the Group’s strength in
content-rich library of foreign motion pictures and well-established relationship with four of the major
Hollywood film studios, the Directors are of the view that the Group may benefit from the enhanced
competition of the broadcasting market and the Government’s intention to grant further licenses for
interested parties under the new Broadcasting Ordinance.

Relationship with ERA Taiwan

      The controlling shareholder of the Company is 5D Technology Holdings Ltd.. 5D Technology
Holdings Ltd. is a wholly-owned subsidiary of ERA Taiwan which is an integrated entertainment
company in Taiwan. The Directors intend to utilise the expertise of ERA Taiwan including its web
design and consultancy services and to enhance the Group’s distribution business of filmed
entertainment products and its portal operations. In addition, the Directors intend to utilise ERA
Taiwan’s regional presence to assist the Group in its e-commerce operations. The details of
relationship between the Group and ERA Taiwan are set out under the paragraph headed “Relationship
with ERA Taiwan and connected transactions” in the section headed “Relationship with ERA Taiwan”
of this prospectus.


                                               — 64 —
                        GENERAL OVERVIEW OF THE GROUP

Qualified technical and management personnel

     The Directors believe that the Group possesses a qualified technical and management team with
experience in the entertainment industry that is able to capitalise on the growth of its existing business
and to exploit the business opportunities in the Internet market. The Group’s management personnel
includes Mr. Leung Chung Chu, Andrew and Ms. Yau Sui Ha, Cecilia who have been involved in the
foreign home video and film distribution business for over 10 years.

Quality product

      The Group is committed to maintain quality of its products and they are well-accepted. All DVDs
distributed by the Group provide quality sound system and fascinating features including a wide range
of production notes and scene selection, etc. The Group’s products are produced in the US by the
Hollywood studios to ensure that quality is secured and guaranteed.

TECHNOLOGY AND FACILITIES INFRASTRUCTURE

Technology infrastructure

      The Group’s technology infrastructure is built and maintained for reliability, security, and
flexibility and is administered by its technical staff.

Technology strategy

     The principal strategy of the Group on information technology is to build an infrastructure to
enable economic management of the content, traffic, advertisement and user databases of various
portals provided under the www.mov3.com website.

     The Group is using software and hardware components, including various market-leading
components, to construct a flexible structure that will continue to allow a reliable operating platform
whilst at the same time enabling smooth business expansion.

Facilities infrastructure

Servers

     At present, the Group makes its websites available through servers with technical support from
Far East Gateway Limited (“FEG”), a company engaged in global telecommunication business
including the provision of public broadband IP services. The Group also uses hardware from Dell
Computers for its websites. The Group’s servers run on Linux and Windows NT operating systems. For
security and e-commerce transactions, the Group uses SSL software program.

     The Group maintains its central production servers at FEG. The Group’s Internet operations in
Hong Kong depend on the ability of FEG to protect its systems against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins, or other events. FEG provides facilities
management services, including connectivity for the Group’s network servers through multiple
high-speed connections. The facility is protected by multiple uninterruptible power supplies. The
Group performs human and technical monitoring of all production servers.


                                                — 65 —
                       GENERAL OVERVIEW OF THE GROUP

     The Group employs in-house and third party software to monitor access to its servers. Reporting
and tracking systems generate daily traffic, demographic, and advertising reports. The Group uses the
normal industry practices, such as firewalls and passwords, to prevent hacking, viruses and other
disruptions. The Group’s production data is frequently backup and stored off-site at FEG.

Office and warehouse

     The Group’s office and warehouse are located on the 2nd and 10th Floors, Trans Asia Centre, 18
Kin Hong Street, Kwai Chung, New Territories, Hong Kong, with an aggregate of approximately
30,000 square feet of gross space.

Manning

     The Group’s information technology and development team has 7 technical staff. The team
provides administration and maintenance services in order to facilitate the smooth operation and
upgrading of the Group’s system, website layout and content management. The team also undertakes
to enhance the Group’s system architecture and platform and conducts feasibility study on the
application of the state of the art technology to support the existing platform.

LICENCES AND INTELLECTUAL PROPERTY RIGHTS

     The Group currently holds the following licences which are material to the business carried on
by the Group:

     ●    URL licences from Network Solutions Inc. The Group has registered six domain names,
          including “www.mov3.com” and “www.mus6.com”. These domain name registrations have
          been obtained from Network Solutions for nominal consideration for an initial period of
          two years and are renewable on an annual basis thereafter at a nominal renewal fee.

     ●    URL licences from Hong Kong Network Information Centre (“HKNIC”). The Group has
          registered a total of two domain names “www.disc.com.hk” and “www.erahk.com.hk”. These
          domain name registrations have been obtained from HKNIC for nominal consideration of
          HK$700 and currently there is no annual fee required to maintain the registration.

     ●    URL licences from i-DNS.net International. The Group has registered a total of two
          domain names, “           ” and “           ”. Those domain name registrations have been
          obtained from i-DNS.net International for nominal consideration of HK$1,460 for an initial
          period of two years and are renewable on an annual basis thereafter at a nominal renewal
          fee.

     ●    Software licences. The Group purchases non-exclusive licences from Microsoft to operate
          its Web servers and database servers and non-exclusive licences from Microsoft for their
          office programs and to operate its NT servers.




                                             — 66 —
                      GENERAL OVERVIEW OF THE GROUP

     ●    Trademark licence. The Group has entered into an intellectual property rights licence
          agreement with ERA Taiwan under which ERA Taiwan granted to ERA Home an exclusive
          right to use the trademarks, service marks, trade names and other forms of intellectual or
          industrial property acquired by ERA Taiwan in relation to the operation of the Group’s
          existing business and Internet business in the PRC including Hong Kong and Macau. The
          licence commenced on 15th May, 1998 for a period of 10 years and is subject to a renewal
          for a further 10 years.

      Details of the various trademarks, service marks and domain names used by the Group are
referred to in paragraph headed “Intellectual property rights” in Appendix IV to this prospectus.




                                             — 67 —
                  STATEMENT OF ACTIVE BUSINESS PURSUITS

     The following is a summary of the active business pursuits of the Group for the two years ended   R
                                                                                                       1
31st December, 2000 and the remaining period to the Latest Practicable Date:

Period I: Year ended 31st December, 1999

     (a)   Business operations

           ●    Released the theatrical rights of motion pictures licensed by Miramax and others
                including the well-acclaimed “Life is Beautiful” which has won three Oscar Awards
                of Best Foreign Language Film, Best Actor in a Leading Role and Best Music Original
                Dramatic Score

           ●    Identified the Internet business opportunities in respect of content development,
                online CD/VCD/DVD store and online delivery of movie and music

           ●    Conducted research on the use of Internet technology as an efficient means of
                distribution channels in Hong Kong

           ●    Formulating business plan for content development of the Group’s portals and
                e-commerce

           ●    Era Digital Media was incorporated on 1st December, 1999 as the vehicle of launching
                of Internet business

           ●    Commenced development of its Internet portals as a platform for the Group’s
                e-commerce service

           ●    Implemented and hosted a Hong Kong mirror site for Era Taiwan’s Internet portals

           ●    Conducted comprehensive study on Era Taiwan’s Internet portals, technical support
                and expertise for the formulation of the Group’s website, and online delivery of
                movies and music

     (b)   Distribution and marketing

           ●    Further expand the distribution network in Hong Kong by entering into distribution
                arrangements with Blockbuster Hong Kong Limited, Watson’s the Chemist, 7-Eleven
                convenience stores and the Fortress Limited

           ●    Carried out tie-in promotion program with Alitalia, which is an Italian airline
                company, to promote the theatrical release of “Life is Beautiful” in Hong Kong

           ●    Carried out tie-in promotion program with Stereo Limited to promote the home video
                product of “Stepmom”




                                             — 68 —
                 STATEMENT OF ACTIVE BUSINESS PURSUITS

    (c)   Supply and purchases

          ●    Commenced negotiation with suppliers of CD/VCD/DVD in preparation for the
               launching of the online store

          ●    Acquired the distribution rights of the Universal DVD products

    (d)   Deployment of human resources

         As at 31st December, 1999, the Group had 40 employees engaged in various areas of
    operations of the Group.

    (e)   Business strategy

          ●    Leveraged on its advantageous position in filmed entertainment industry and develop
               business opportunities for e-commerce

Period II: Year ended 31st December, 2000

    (a)   Business operations

          ●    Released the theatrical rights of motion pictures including the well-acclaimed
               “Scream 3” and “Scary Movie”

          ●    Launched its website under the domain name of www.mov3.com with the provision of
               movie and entertainment related information

          ●    Enhanced content of the Group’s website and developed the capability of its portals

          ●    Upgraded web design and commenced development of online CD/VCD/DVD store

    (b)   Distribution and marketing

          ●    Planned and implemented marketing and promotional strategy of www.mov3.com
               paving way for the e-commerce opportunities

          ●    Negotiated with convenience chain stores and couriers in preparation for instant
               delivery and logistic arrangements of online CD/VCD/DVD store products

          ●    Announcement of www.mov3.com launch through press conference and extensive
               newspaper coverage with the presence and endorsement of Gigi Leung (           ), as
               well as carrying out various promotion programs for this new website. Such promotion
               programs included giving away gifts and screening preview tickets of “Scream 3” to
               newly joined members of the website, organizing an “Oscar Winners’ Prediction”
               contest, and organizing a “Meet Your Idol-Gigi Leung” campaign.



                                            — 69 —
                 STATEMENT OF ACTIVE BUSINESS PURSUITS

          ●    Carried out tie-in promotion program with Hong Kong Philharmonic Society Ltd. and
               HOPE Worldwide, Ltd. to promote the theatrical release of “Music of the Heart”

          ●    Carried out tie-in promotion program with Hong Thai Citizens Travel Services Ltd.
               and Planet Hollywood to promote the home video products of “Stuart Little”

          ●    Carried out charity program with World Vision Hong Kong to promote the home video
               product of “Not One Less”

          ●    Entered into a content license agreement with Yahoo! Holdings (Hong Kong) Limited
               under which the content of www.mov3.com have been licensed to Yahoo! Holdings
               (Hong Kong) Limited for distribution on the Internet and wireless devices on Yahoo
               property.

    (c)   Supply and purchases

          ●    Continued to negotiate with suppliers to broaden the range of products to be available
               on the online CD/VCD/DVD store

          ●    Entered into negotiation with other foreign film studios for distribution rights of home
               video products

          ●    Entered into negotiation for distribution rights of Japanese film products

    (d)   Deployment of human resources

         As at 31st December, 2000, the Group had employed 71 employees engaged in various areas
    of operations of the Group. The increase in the number of employees of the Group in 2000 is
    mainly due to the development of www.mov3.com (IT and editorial) and the online
    CD/VCD/DVD store (administration and warehouse).

    (e)   Business strategy

          ●    Continued to negotiate with suppliers to secure distribution rights for DVD products

          ●    Commenced research on the areas of technology development and network services in
               preparation for the launching of online delivery of movie and music

Period III: For the period from 1st January, 2001 to the Latest Practicable Date

    (a)   Business operations

          ●    Released the theatrical rights of motion pictures including the award-nominated
               “Chocolat”

          ●    Launched the online CD/VCD/DVD store


                                             — 70 —
             STATEMENT OF ACTIVE BUSINESS PURSUITS

(b)   Distribution and marketing

      ●    Further expand the distribution network in Hong Kong by entering into distribution
           arrangement with Wellcome, one of the largest supermarket chains in Hong Kong

      ●    Carried out tie-in promotion program with Hong Thai Citizens Travel Services Ltd.
           and Sony Music to promote the home video products of “Crouching Tiger, Hidden
           Dragon” which has been nominated for 10 Oscar Awards and has won 4 Oscar Awards
           eventually

      ●    Carried out tie-in promotion program with Sun Energy Travel Services Limited,
           Dickson Cyber, Urban Decay & EQ:IQ to promote the home video product of
           “Charlie’s Angels”

      ●    Carried out tie-in promotion with Ha agen-Dazs and Godiva Chocolatier to promote
           the theatrical release of “Chocolat”

(c)   Supply and purchases

      ●    Acquired the distribution rights of Universal VCD format for its new release titles in
           Hong Kong and Macau since 2001

      ●    Acquired the distribution rights of DVD and VCD formats under the DreamWorks
           label for new release titles since 2001

      ●    Continued to negotiate with licensors to broaden the range of label representation

      ●    Ceased to be an exclusive distributor of home video products for Warner with effect
           from June 2001

(d)   Deployment of human resources

      ●    As at the Latest Practicable Date, the Group has employed 71 employees engaged in
           various areas of operations of the Group




                                         — 71 —
                            RELATIONSHIP WITH ERA TAIWAN

RELATIONSHIP WITH ERA TAIWAN AND CONNECTED TRANSACTIONS

Information on ERA Taiwan

     ERA Taiwan was founded by Mr. Chiu Fu-Sheng in 1981 and is a leading integrated
entertainment company in Taiwan. ERA Taiwan is principally engaged in the development, production
and distribution of feature films and television programs; television broadcasting; cable network
programming and Internet services. Over the years, ERA Taiwan has established itself as a
multi-interactive infotainment media platform. A simplified structure of ERA Taiwan and the Group
immediately following completion of the Placing is set out below:



                                                              ERA Taiwan




                                     100%                                                 100%

                                                                                  5D Technology
                                                                                   Holdings Ltd.

                              Home Video                                                 56.25%
                             and Theatrical                                              (Note)
                                                   Internet
         TV Commercial        Distribution                          E-commerce
                                                   Services                       The Company
            Division            Division                              Division
                                                   Division
                              Video Rental
                               Branches

                                          Taiwan

          - TV Program      - Video Rental    - Internet Service
            Production        Shops             Provider
                                                                    E-Ticketing
          - TV Channels                       - DTH Digital
                                                                      System
            (Cable and                          Satellite
             Satellite)                         Network




     Note: Assuming the Over-allotment Option is not exercised.


     ERA Home was set up in Hong Kong by, among others, Mr. Chiu Fu-Sheng and Mr. Leung Chung
Chu, Andrew in 1988, which was engaged in the distribution of home video products in Hong Kong
and Macau as an initial step for ERA Taiwan to develop the business of filmed entertainment outside
Taiwan. Over the years, ERA Taiwan, through ERA Home, engaged in the development of filmed
entertainment business in Southeast Asian region other than in Taiwan and it intends to remain to
adopt such strategy after the listing of the Shares on GEM.

     On 26th September, 2000, PCCW Enterprises Limited acquired shares representing about 7.49%
in ERA Taiwan from Mr. Chiu Fu-Sheng.



                                                     — 72 —
                           RELATIONSHIP WITH ERA TAIWAN

     Immediately prior to the Reorganisation, ERA Home was a subsidiary of ERA Taiwan in which
ERA Taiwan, through 5D Technology Holdings Ltd., held 75% of its issued share capital. Following
completion of the Placing and Capitalisation Issue (assuming that the Over-allotment Option is not
exercised), ERA Taiwan, through 5D Technology Holdings Ltd., will be interested in 56.25% of the
issued share capital of the Company (assuming the Over-allotment Option is not exercised).

Potential competition with ERA Taiwan and Directors’ competing interest

      Following the listing of the Shares on GEM, the Group will continue its business in mainly three
areas: (i) home video products distribution; (ii) theatrical, pay and free TV rights distribution; and (iii)
Internet business including content development, online CD/VCD/DVD store and online delivery of
movie and music initially in Hong Kong and with possible expansion to Southeast Asia and Greater
China in the coming years. It is the intention of ERA Taiwan that the Group would develop film related
business in Asia but outside Taiwan. However, due to the lack of geographical barrier of Internet, the
Internet businesses of these two companies may compete with each others. The Directors are of the
view that the Group does not compete with ERA Taiwan in respect of distribution businesses of home
video products and theatrical, pay and free TV rights distribution because of the geographical location
differences. However, the Directors are of the view that the Internet projects or businesses of ERA
Taiwan may continue to expand and there is a risk that the future Internet projects or businesses of
ERA Taiwan may compete with the Group especially in the areas of e-commerce.

      In 1995, EEI (HK) Limited (“EEI”) was incorporated and is owned as to 51% by Mr. Chiu
Fu-Sheng and 49% by Ms Kow Fu Hon. Popular singers including Ms. Gigi Leung
(       ) and Mr. Leo Ku (         ) have entered into contracts with EEI, which focuses on music
production and distribution in Taiwan and/or Hong Kong and does not compete directly with the Group
but rather complement the Group’s distribution business and Internet business. Mr. Leung Chung Chu,
Andrew and Mr. Yau Kar Man are also directors of EEI.

Significance of relationship with ERA Taiwan

     Given the proven success of ERA Taiwan in the entertainment industry in Taiwan, the Directors
believe that with support from ERA Taiwan in the areas of management, technological know-how and
business model, the Group possesses competitive advantages in developing filmed entertainment
business and provision of Internet business. Certain members of the Group’s senior management may
serve on the board of both the Group and ERA Taiwan’s related companies. The Directors believe that
such relationship gives the Group access to experience, skills and relationships that it might not
otherwise have.

     With its technology system and business model, ERA Taiwan can support the Group’s
e-commerce of online delivery of movie and music. In development of online delivery of movie and
music, the Group is in an advantageous position to obtain ERA Taiwan’s technology support to provide
such services in the future.

     In addition, the Company and ERA Taiwan had entered into a memorandum of understanding
pursuant to which the Company will be granted the exclusive right of distribution of all or certain TV
programs owned by ERA Taiwan in Asia excluding Taiwan, with formal distribution agreement
currently expected to be concluded within six months from 6th April, 2001. Such transaction may
constitute ongoing connected transactions for the Company after the listing of the Shares and the
Company will apply for waiver from the Stock Exchange and seek shareholders’ approval in
accordance with the GEM Listing Rules if such formal distribution agreement is finalised if necessary.


                                                — 73 —
                         RELATIONSHIP WITH ERA TAIWAN

     EEI, as mentioned above, does not directly compete with the Group but complement with the
development of the Group’s business especially in promotion and marketing campaigns.

Connected transactions                                                                                   A



     Prior to the listing of Shares on GEM, the Group had entered into certain related party
transactions which would constitute connected transaction for the purpose of the GEM Listing Rules
should the Shares of the Company be listed on GEM then. Details of such transactions are summarised
under the paragraph headed “Related-party transactions” in the accountants’ report set out in
Appendix I to this prospectus.

     The Directors currently expect that the Group will continue to enter into the following connected
transactions immediately following the listing of the Shares of GEM:

     Exempt continuing connected transactions

     1.   Trademarks

          Pursuant to an intellectual property rights licence agreement dated 8th March, 2001 made
     between ERA Taiwan and ERA Home, ERA Taiwan grants to ERA Home an exclusive right to
     use the trademarks, service marks, trade names and other forms of intellectual or industrial
     property (collectively, the “Rights”) acquired by ERA Taiwan in relation to the Rights for the
     operation of the Group’s existing business and Internet business in Hong Kong, Macau and the
     PRC.

           The licence commenced on 15th May, 1998 and is for a period of 10 years, renewal for a
     further 10 years. In consideration, ERA Home paid ERA Taiwan a sum of HK$1 each year for
     the licence granted and a sum of HK$154,621 being the registration fees, renewal fees and other
     fees of the Rights incurred by ERA Taiwan for the years 1998, 1999 and 2000. This transaction
     is exempt from reporting, announcement and shareholders’ approval requirements under Rule
     20.25(3) of the GEM Listing Rules.

     2.   Distribution income from ERA Taiwan and Era International (HK) Limited (“EIHKL”)

          ERA Taiwan and EIHKL have authorised ERA Home for distribution of certain home video
     products held by ERA Taiwan and EIHKL within the territories of Hong Kong and Macau. In
     return, ERA Home is entitled to charge distribution fee from ERA Taiwan and EIHKL, both of
     which are connected persons of the Company under the GEM Listing Rules as ERA Taiwan and
     EIHKL are Associates of Mr. Chiu Fu Sheng, a Director. The amounts of distribution fee received
     by ERA Home for each of the two years ended 31st December, 2000 were approximately
     HK$52,000 and HK$65,000 respectively. Based on the financial projections, the Company
     expects that the distribution income generated from ERA Taiwan and EIHKL will be less than
     HK$1,000,000 during the financial year ending 31st December, 2001. Under such circumstances,
     this transaction is exempt from reporting, announcement and shareholders’ approval
     requirements under Rule 20.25(3) of the GEM Listing Rules. The Company will comply with the
     disclosure and approval requirements of the GEM Listing Rules if such transactions become
     non-exempt connected transactions.


                                              — 74 —
                       STATEMENT OF BUSINESS OBJECTIVES

MARKET POTENTIAL

      The Directors believe that the transformation of exhibition technology for filmed entertainment
and the predicted growth in the popularity of the Internet offers great potential for the Group’s
distribution of home video products, theatrical and pay / free TV rights, and the Internet businesses.

1.   The transformation of exhibition technology for filmed entertainment

      The Directors believe that the filmed entertainment industry has benefited from the
transformation of exhibition technology over the years, which provides higher memory capacity, finer
resolution, longer recording time, additional features such as sound effects, more affordable prices and
more convenient delivery channels which allows an efficient distribution of films across the world.
Motion pictures have been distributed through various exhibition channels, including traditional
theatres and TV broadcasting, home video products such as VCR, VCD and DVD and newly developed
concepts of online delivery, to worldwide audience over the years with improved qualities and more
convenient features. The Directors are of the view that the introduction of each new type of exhibition
technology helps to broaden the existing market and promotes continuous growth of the movie
industry.

     The continuous innovation in exhibition technology brings more and more growth opportunities
for participants in the motion pictures distribution industry and the Directors believe that the Group’s
commitment to establish itself as a platform to provide filmed entertainment services is in line with
the development of exhibition technology.

2.   The Government’s intention of liberalising the television market

      Following the 1998 Review of Television Policy, the Chief Executive in Executive Council of
HKSAR made the policy decision, among others, to lift the then moratorium on pay television license
and to open up the television market for competition. To give effect to this policy decision, the
Government issued a Guidance Note inviting interested parties to submit proposals for the provision
of television broadcasting services in Hong Kong. Ten applications were received by the submission
deadline.

     On 4th July, 2000, the Secretary for Information Technology and Broadcasting announced that
the Chief Executive in Executive Council of HKSAR, upon recommendation by the Broadcasting
Authority, had decided to give approval-in-principle to five applications for television broadcasting
licenses, including local and overseas companies, namely Hong Kong Network TV Limited, Elmsdale
Limited, Pacific Digital Media (HK) Corp. Limited, Hong Kong DTV Company Limited and Galaxy
Satellite Broadcasting Limited. These companies will be offered domestic pay television programme
service licences under the new Broadcasting Ordinance which was amended on 7th July, 2000. The
proposed services will provide a maximum of 149 additional television programme channels.

     On 5th December, 2000, the Chief Executive in Executive Council formally granted four
domestic pay television programme service licences to four of the five successful applications
mentioned above except Hong Kong DTV Company Limited which decided not to proceed with its
application.




                                               — 75 —
                       STATEMENT OF BUSINESS OBJECTIVES

      Subsequently, the Hong Kong Network TV Limited has notified the Government of its decision
not to proceed with providing a pay TV service in Hong Kong on 16th March, 2001.

     In addition, given the Group’s content-rich library of foreign motion pictures and well-
established relationship with major Hollywood film studios, the Directors are of the view that the
Group can benefit from the enhanced competition of the broadcasting market and the Government’s
intention to grant further licenses for interested parties under the new Broadcasting Ordinance.

3.      The popularity of foreign filmed entertainment in Hong Kong

     In 2000, the number of foreign motion pictures released in Hong Kong was 280, which is
approximately 1.9 times of the number of locally produced motion pictures. These foreign motion
pictures are usually sourced from the US and Japan. The Directors believe that the Group can benefit
from the popularity of foreign motion pictures in Hong Kong as the Group’s principal strength is in
the distribution of foreign films.

BUSINESS OBJECTIVE                                                                                                                 R
                                                                                                                                   1


      ERA is committed to establish itself as one of the leading distributors to deliver foreign filmed
entertainment services to audiences in Southeast Asia and Greater China in line with the on-going
innovation in exhibition technology through various channels, including the existing media of
theatrical exhibition, broadcast television, cable television, home video and the newly developed
online delivery of entertainment products. The Group’s objective is characterised in the following
diagram:

       INCOME                         PROVISION OF                                                                   TARGET
       SOURCE                     PRODUCTS AND SERVICES                                                            CUSTOMERS

                           Internet Business
                           - Online movie magazine under domain name
                              of www.mov3.com;                                                                     Movie lovers
Vertical expansion
                           - Online sale and rental store under domain
                                                                            Innovations in Exhibition Technology




into retail market
 through Internet             name of www.mov3-shop.com; and
                                                                                                                    Households
                           - Online delivery of entertainment related
                              products.
Sale of products in        Home Video Products Distribution
  wholesale and            - DVD and VCD products for foreign                                                       Retail chain
distribution market          motion pictures                                                                          stores

                           Theatrical and Pay/Free TV Rights Distribution
     Sub-license fee       - Pay/Free TV rights distribution for                                                   TV operators
                             television broadcasting; and
 Box office receipts       - Theatrical release in cinemas.                                                        Cinema chains




                                              — 76 —
                       STATEMENT OF BUSINESS OBJECTIVES

      The Group’s revenue profile comprises steady income streams derived from the existing
distribution business of home video products, and theatrical and pay / free TV rights, as well as
Internet business with high growth opportunities. It is expected that the Group’s existing business will
be movie related entertainment business and will continue to contribute to the Group’s revenue in the
future. The revenue generated from the Internet business will develop over time as its user base
increases and its e-commerce business matures. The Directors also expect that as broadbrand
technology matures and the Group’s customer base increases, the online delivery of movie, music and
other entertainment products will play a significant role in the Group’s revenue model. The Group has
identified four key business objectives in order to achieve the objective mentioned above:

Establishing itself as a major foreign home video products distributor in Southeast Asia and
Greater China

     The Group aims to satisfy various market demands by offering a wider range of motion pictures
and by expanding its existing distribution network, including through convenience store chains,
supermarket chains and department stores, and to obtain more licensed motion pictures from global
film producers and expand to Southeast Asia and Greater China. Home video products distribution will
continue to contribute to the Group’s revenue in the future and will provide the Group with a steady
income flow. The Directors expect that as more distribution rights may be secured in the future and
as more focus shifts from VCDs towards DVDs, the revenue generated from this division is expected
to grow continuously.

Establishing itself as a major independent theatrical and pay/free TV Rights distributor

     To cope with the growing demand of pay and free TV rights in the coming years brought by the
entrance of more licensed TV operators, the Group plans to increase its presence in this area by
entering into additional licensing agreements with overseas studios and by taking on additional
product representation, so as to position itself as a major content provider, and to gradually expand
into Southeast Asia and Greater China through possible cooperation with television operators
including satellite television operators. As the Group has been developing this business for a few years
since 1996, the Directors believe that, with the continuing efforts to secure more distribution rights
for motion pictures, such distribution income and sub-license fees will grow steadily.

Establishing itself as a major online entertainment provider

     Chinese Internet user group represents one of the fastest growing and potentially one of the
largest Internet user groups today. In order to utilise this opportunity, the Group aims to create an
Internet platform which offers premium filmed entertainment and music related content and
e-commerce services catering for individual needs of Chinese users. The Directors believe that with
exclusive distribution rights on brand named film products and strong strategic alliances of business
partnerships with ERA Taiwan, the Group is well positioned to utilise the film and music
entertainment media to achieve the objective of its Internet business.




                                               — 77 —
                       STATEMENT OF BUSINESS OBJECTIVES

Online CD/VCD/DVD store

      The Directors believe that with the advent of Internet technology, it is an appropriate time to
initiate a vertical extension of the Group’s video distribution business into the retail market. There are
four unique characteristics attributed to the Group which may enhance the potential success of the
online CD/VCD/DVD store:

     1.    The Group itself is the exclusive video licensee for 3 major Hollywood film studios. The
           control of product supply for more competitive pricing of the Group’s products and quicker
           access to newly released video products, especially in DVDs, will place the Group in an
           advantageous position when competing with online competitors and, so far as the Directors
           are aware, there are only a few current websites for CD/VCD/DVD sale and none for rental
           of DVD.

     2.    There are more than 3,000 motion pictures in either VCD or DVD formats initially available
           in the online store.

     3.    Delivery fulfillment, which is vital to the success of e-commerce, will be substantially
           strengthened by the network of more than 400 7-Eleven convenience stores opening 24
           hours a day and by Hong Kong Post and Federal Express which will provide courier
           services.

     4.    The initial customer base of the store will be supported by more than 40,000 www.mov3.com
           members who are on-target movie lovers.

      The Directors believe that the revenue generated from the online CD/VCD/DVD store will form
a significant part of the revenue generated from the Group’s Internet business. It will be initially
available in Hong Kong, and has already been launched in May 2001, while similar services will be
introduced to Southeast Asia and Greater China following its successful implementation. The Group
is currently in discussion with ERA Taiwan and a major home video distributor in Singapore for the
provision of similar services of the Group’s online CD/VCD/DVD store. To operate similar online
services of the Group’s online CD/VCD/DVD store in the PRC, the Group will require necessary
governmental and regulatory approvals. As the Directors do not envisage that the Group will set up
such online services in the PRC at this stage, the Directors consider it premature to obtain such
approval.

Content syndication

      The Group’s website contents have been licensed to Yahoo! Holdings (Hong Kong) Limited for
distribution on the Internet and Wireless Devices on Yahoo Properties. Negotiation is underway with
other major Internet portals for possible content syndication and co-branding with the Group as the
content provider. As the Group provides various filmed entertainment information, it will pursue
content syndication to both online and traditional media as an additional revenue stream.

Online delivery of music and entertainment products

      The generation of delivery of music in the form of compressed computer files enables the
distribution of music through Internet. The Directors intend to offer online delivery of music products
when existing security and regulatory problems are reduced to the extent that the provision of such
services is commercially feasible. The Directors believe that such business opportunities will grow
once appropriate regulations are promulgated and the distribution of music through Internet become
more acceptable to music production companies.


                                                — 78 —
                      STATEMENT OF BUSINESS OBJECTIVES

      The Directors expect that the provision of online delivery of entertainment products will become
increasingly important to the Group in the future given the potential transformation from traditional
distribution of home video channels to broadband-based delivery services and the number of
subscribers increases. The penetration into such market in the future not only allows continuous
growth of the motion pictures distribution business but also provides an opportunity for the Group to
become an innovative entertainment distributor with the support of technology infrastructure provided
by its technology partner.

Strategic investments

      The Group is constantly looking for quality information technology or other entertainment
related projects within Southeast Asia and Greater China for investment. The Group intends to focus
on film and music related entertainment or other entertainment related projects which can generate
synergies with the existing lines of business of the Group and which are supplementary to its existing
business.

IMPLEMENTATION PLAN

1.   Period between the Latest Practicable Date and 30th June, 2001

     Home Video Products             Theatrical, pay/free TV
      Distribution                   Rights Distribution                Internet Business

     — Continue to develop           — Commence liaising with           — Continue to run online
       network by distributing         new pay TV players for             store for the sale of
       through more retail             sub-licensing of the               VCDs and DVDs and
       chain stores in Hong            Group’s motion pictures            local rental services of
       Kong and Macau                                                     DVDs
                                     — To finalise the formal
     — Continue to expand              distribution agreement in        — Continue to increase the
       product base by                 connection with the                depth of content of and
       representing additional         exclusive distribution             provide more features to
       labels                          rights of programs owned           www.mov3.com
                                       by Toei of Japan in
                                       various formats in Hong          — Continue syndications
                                       Kong.                              with major websites




                                              — 79 —
                     STATEMENT OF BUSINESS OBJECTIVES

2.   For the six m onths ending 31st December, 2001

     Home Video Products          Theatrical, pay/free TV
      Distribution                rights distribution          Internet business

     — Continue to develop        — Continue to take on        — Widen range of products
       network by distributing      additional product           and services available for
       through more retail          representations and          online stores
       chain stores in Hong         acquire more contents
       Kong and Macau                                          — Continue to increase the
                                  — To finalise the formal       content of and provide
                                    distribution agreement       more features to
                                    with ERA Taiwan in           www.mov3.com
                                    respect of the grant of
                                    exclusive rights for the   — Continue syndications
                                    distribution of all or       with major websites
                                    certain TV programs
                                    owned by ERA Taiwan in     — Commence negotiations
                                    Asia excluding Taiwan.       of licences with music
                                                                 companies for online
                                                                 music delivery services


3.   For the six m onths ending 30th June, 2002

     Home video products          Theatrical, pay/free TV
      distribution                rights distribution          Internet business

     — Enter into other           — Continue to take on        — Commence and secure
       markets in the               additional product           technology and network
       Southeast Asian region       representations and          partner for the
                                    acquire more contents        preparation of online
     — Continue to expand                                        delivery entertainment
       product base and           — To commence negotiation      related services
       consider to acquire          for possible strategic
       distribution rights from     alliance with television   — Continue negotiations of
       other Asian film             operators including          and secure licences from
       studios such as              satellite television         music companies for
       Japanese film studios        operators for the supply     online music delivery
                                    of contents for possible     services
                                    expansion in Southeast
                                    Asia and Greater China.




                                          — 80 —
                     STATEMENT OF BUSINESS OBJECTIVES

4.   For the six m onths ending 31st December, 2002

     Home video products          Theatrical, pay/free TV
      distribution                rights distribution       Internet business

     — Continue to develop        — Continue to expand      — Launching of online
       network by distributing      customer base by          music delivery service
       through more retail          distributing to other
       chain stores in Hong         Asian markets and to    — Commence territorial
       Kong and Macau               more TV channels          expansion for online store
                                                              in other Southeast Asian
     — To selectively identify                                markets and Greater
       and invest in strategic                                China
       film and other
       entertainment related
       projects or content
       partners which can
       generate synergies with
       the existing line of
       businesses of the
       Group


5.   For the six m onths ending 30th June, 2003

     Home video products          Theatrical, pay/free TV
      distribution                rights distribution       Internet business

     — Continue to develop        — Continue to take on     — Commence pre-launching
       network by distributing      additional product        preparation for online
       through more retail          representations and       delivery entertainment
       chain stores locally         acquire more content      related service under
       and in other Southeast                                 favorable market
       Asian markets                                          environment

     — Continue to expand                                   — Continue to secure video
       product base and                                       and music programs for
       consider to acquire                                    preparation of online
       distribution rights from                               delivery services
       other Asian film
       studios such as
       Japanese film studios




                                          — 81 —
                      STATEMENT OF BUSINESS OBJECTIVES

6.   For the six m onths ending 31st December, 2003

     Home video products              Theatrical, pay/free TV
      distribution                    rights distribution                Internet business

     — Continue to develop            — Continue to expand               — Finalise the launching
       network by distributing          customer base by                   preparation for online
       through more retail              distributing to more TV            delivery entertainment
       chain stores in Hong             channels                           related services
       Kong and Macau


BASIS AND ASSUMPTIONS

     The Directors have evaluated that the market potential as stated in the paragraph headed “Market
Potential” above and formulated proposed strategies to focus on the business objectives in reliance on
the past industry trends and future growth and expected demand of similar trends which are based on
the following basis and assumptions:

     1.    The Group is not materially affected by any of the risk factors set out under the section
           headed “Risk Factors”;

     2.    There will be no material changes in the existing political, legal, fiscal, foreign trade or
           economic conditions in Hong Kong or other countries in which the Group intends to carry
           on business;

     3.    There will be continuous development in the global Internet market, especially in relation
           to the world-wide Chinese community;

     4.    There will be a continuous strong demand for entertainment information among the
           world-wide Chinese community;

     5.    The Internet will be widely accepted as a medium for commerce and entertainment;

     6.    The Group will be able to obtain the relevant technology licensed from suppliers;

     7.    The Group will be able to hire and retain key personnel that are in high demand among
           similar industries;

     8.    The broadband technology will develop and expand as anticipated;

     9.    The Group will be able to secure necessary distribution rights for the motion pictures and
           music by way of online delivery;

     10.   The Group is not materially adversely affected by any change in political, legal, fiscal or
           economic conditions in Hong Kong, Macau and other territories of which the Group has
           operations;

     11.   The Group is not materially adversely affected by any change in legislation, rules or
           regulations in the Cayman Islands and Hong Kong, Macau and other territories of which the
           Group has operations; and


                                              — 82 —
                       STATEMENT OF BUSINESS OBJECTIVES

     12.   The business objectives for any of the specified periods have been stated on the basis that
           they may have to be revised or adjusted by the Group from time to time in the light of the
           factors such as changes in market conditions, market response to particular products and
           whether the Group has successfully achieved its stated business objectives in the preceding
           period or periods. It has also been assumed that the Group does not experience any
           significant delays in achieving its stated business objectives in any of the specified periods.

USE OF PROCEEDS                                                                                              C
                                                                                                             A


     The Directors believe that listing on GEM will enhance the Company’s profile and expand its
capital base for its future growth and development. The net proceeds to which the Company is entitled
from the Placing, based on the Offer Price of HK$0.95 per Share (being the mid-point of the indicative
range of the Offer Price of between HK$0.80 and HK$1.10 per Share) excluding any proceeds from
the exercise of the Over-allotment Option, are estimated to be approximately HK$44 million. The
Directors intend to apply such net proceeds as follows:

                                                     2001        2002        2003       Total
                                               HK$’million HK$’million HK$’million HK$’million

     Acquisition of entertainment
       related content including TV
       distribution rights and online
       distribution rights                               2.0            5.4            7.6           15.0
     Expanding the home video and
       theatrical categories                             8.6            3.1            3.5           15.2
     Preparation for and development of
       the launching of online delivery
       services                                           —             4.2            4.4            8.6

                                                        10.6           12.7           15.5           38.8



     The balance of approximately HK$4.7 million (based on the Offer Price of HK$0.95 per Share)
will be applied as general working capital of the Group.

     To the extent that the net proceeds of the Placing are not immediately required for the above
purposes, it is the present intention of the Directors that such net proceeds should be placed on
short-term interest bearing deposits with licenced banks or financial institutions in Hong Kong.

      The above intended use of net proceeds is calculated based on the assumption that the Offer Price
is set at HK$0.95 per Share. In the event that the Offer Price deviates from the assumed HK$0.95 per
Share, the amount of the net proceeds will be different. The Directors intend that any shortfall between
the estimated net proceeds and the actual proceeds finally received by the Group will be approximately
HK$8 million and any surplus arising thereon will be approximately HK$8 million. The Directors
believe that such deviation will not have any material impact on the Business Plan as described in this
prospectus.




                                               — 83 —
                      STATEMENT OF BUSINESS OBJECTIVES

     The Directors are of the view that the net proceeds of the Placing would be sufficient to finance
the implementation plans as described in the paragraph headed “Statement of business objective —
Implementation plan” in this prospectus. In the event that the implementation plan requires additional
funds for further development as planned, the Company will also use internally generated funds from
operations and/or through other fund raising activities, including bank borrowings and equity
financing.

      On the basis that the Over-allotment Option is exercised in full, the net proceeds of the Placing
will increase by approximately HK$11 million based on the Offer Price of HK$0.95 per Share, and
after deducting commission and expenses attributable to the exercise of the Over-allotment Option in
full. The intended use of additional proceeds from the Over-allotment Option, assuming it is exercised
in full, will be applied as additional working capital.

     In the event that any of the business objectives of the Group does not materialize or proceed as
planned, the Directors will carefully evaluate the situation and may reallocate the intended funding to
other business plans and/or to new projects of the Group and/or to hold it as short term deposits as
long as the Directors consider it to be in the best interest of the Company and its shareholders taken
as a whole. The Company will make an announcement accordingly if this occurs.

     In summary, the implementation of the Group’s business plans for the period from the Latest
Practicable Date to the 2nd half of 2003 will be funded as follows:

                                    2001                  2002                  2003             Total
                             1st half 2nd half     1st half 2nd half     1st half 2nd half
                              HK$’m     HK$’m       HK$’m     HK$’m       HK$’m     HK$’m      HK$’m

Acquisition of
  entertainment related
  content including TV
  distribution rights and
  online distribution
  rights                           —         2.0        2.4        3.0        3.4       4.2       15.0
Expansion of the home
  video and theatrical
  categories                      4.5        4.1        2.0        1.1        2.4       1.1       15.2
Preparation for and
  development of
  launching of online
  delivery services                —          —         1.7        2.5        1.9       2.5        8.6

TOTAL                             4.5        6.1        6.1        6.6        7.7       7.8       38.8


Estimated utilisation of
  net proceeds                    4.5        6.1        6.1        6.6        7.7       7.8       38.8




                                              — 84 —
           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS                                                                                               C
                                                                                                        A


Executive Directors

     Mr. LEUNG Chung Chu, Andrew, aged 44, is the Chairman and Compliance Officer of the
Company. Mr. Leung is a co-founder of the Group. He is responsible for the finance, corporate policy
making, strategic planning and overall management of the Group. Mr. Leung graduated with a
bachelor of social sciences degree with honours from the University of Hong Kong. He has over 20
years’ experience in the home video and entertainment related business.

     Ms. YAU Sui Ha, Cecilia, aged 44, is also an executive director and the general manager of ERA
Films. She is responsible for the management and development of the Group’s theatrical, pay and free
TV distribution business. Ms. Yau graduated with a bachelor of science in management degree from
Oklahoma State University. She has more than 10 years’ experience in the films distribution business.
Before joining the Group in November 1995, Ms. Yau was a senior management of a joint-venture
company of three major Hollywood studios in Hong Kong.

     Mr. YAU Kar Man, aged 42, is also an executive director of ERA Digital Media. He is
responsible for the management and development of the Group’s Internet and e-commerce business.
Mr. Yau joined the Group in July 1992 and holds a higher diploma in accountancy from HK
Polytechnic University. He has 10 years’ experience in accounting and audit field.

Non-executive Director

     Mr. CHIU Fu Sheng, aged 53, is a co-founder of the Group. He and his Associates are the
controlling shareholders of ERA Taiwan, which in turn is an indirect substantial shareholder of the
Company. Mr. Chiu has extensive experience in the media entertainment business for more than 30
years. Mr. Chiu is also a director of ERA Taiwan.

Independent non-executive Directors                                                                     R
                                                                                                        (


     Mr. CHAN Kin Wo, aged 46, is a solicitor having been in active practice in Hong Kong since
1988. He is qualified also in England and Wales, Australia and Singapore. He opened his partnership
firm Tsang, Chan & Woo, Solicitors & Notaries in 1992 and has been the partner since then. Mr. Chan
was appointed as an independent non-executive Director in January 2001.

      Mr. YOW, Cecil, aged 48, is experienced in both advertising and entertainment. He possesses
over 20 years of experience in advertising, primarily in the management of advertising agencies. He
was also involved in the business of content production and distribution for both TV and movies. He
has a remarkable career managing major multinational advertising agencies, marketing consultant
firms and production and distribution companies he either co-founded or founded. Mr. Yow was a
co-founder and executive director of a Hong Kong listed company engaged in the production and
distribution of movies and TV programming but has resigned in December 1999. Mr. Yow was
appointed as an independent non-executive Director in January 2001.




                                             — 85 —
           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

CONSULTANTS

      Mr. CHAN Chi-Kwong, aged 40, graduated at the University of Warwick with a degree in
Management Sciences in 1984. He has over 13 years of experience in various fields in the
entertainment industry. His experiences include TV and video distribution, artist management, movie
production and distribution, music production and distribution. He is currently the President of EMI
Hong Kong. Mr. Chan provides general consultancy and advice on the music medium in respect of
sales of CD in the online stores and the planned online delivery of music.

     Mr. CHEN Shu, aged 72, Consultant of the Group, graduated from the faculty of industrial
administration of Jilin University in 1954. Mr. Chen has extensive experience in the audio and video
industry of the PRC. He has been the Chief of Division in the Arts Administrative Bureau, Ministry
of Culture, and the president of China Audio & Video Publishing House, of the PRC. As one of the
pioneers of the audio-video industry of the PRC, Mr. Chen has organized the establishment of the
China Audio & Video Recording Co. and has been the director of it. Mr. Chen provides information,
advice and general consultancy for the PRC video market.

SENIOR MANAGEMENT

      Mr. KEUNG Chi Wai, aged 35, General Manager of ERA Home, joined the Group in 1997. He
is responsible for the sales and marketing as well as business development of the Group’s home video
distribution business. Mr. Keung holds a bachelor of science degree and an MBA from Southwest
Missouri State University. He has more than 9 years’ experience in the field of sales, marketing and
distribution both in Hong Kong and the PRC.

     Mr. NG Wai Lun, aged 38, Assistant General Manager — Corporate Project, joined the Group in         A
                                                                                                         4
March 2000. Mr. Ng is also the Company Secretary of the Company. He is responsible for the Group’s       R
                                                                                                         (
corporate projects and investments, company secretarial matters, as well as fund raising exercise. Mr.
Ng is a fellow of the Association of Chartered Certified Accountants and an associate of the Hong
Kong Society of Accountants. He gained extensive experience of over 14 years in auditing, finance
and corporate projects with an international accounting firm, two Hong Kong listed companies and an
overseas listed company.

     Mr. WONG Wai Shun, Wilson, aged 30, Senior Technology Officer of ERA Digital Media, joined
the Group in 1997. He is responsible for the technical support of the Group’s computer system as well
as the management of the Group’s computer department. Mr. Wong graduated with a bachelor of
science from Ulster University. He has 8 years’ experience in the information technology field as well
as system development.

      Ms. LUK Yuen King, aged 33, Finance Manager, joined the Group in March 2000. She is                C
                                                                                                         A
responsible for the finance and taxation as well as the inventory control of the Group. Ms. Luk          4

received a bachelor degree in accountancy with First Class Honours from City University of Hong
Kong and also holds an MBA from the Hong Kong University of Science and Technology. In addition,
she is a fellow of the Association of Chartered Certified Accountants and an associate of The Hong
Kong Society of Accountants. She has over 9 years’ experience in finance, accounting, auditing and
administration, including over 4 years’ experience in an international accounting firm.


                                              — 86 —
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

AUDIT COMMITTEE

     The Company established an audit committee on 5th June, 2001 with written terms of reference        A
                                                                                                         R
in compliance with the requirements as set out in Rules 5.23, 5.24 and 5.25 of the GEM Listing Rules.
The primary duties of the audit committee are to review the Company’s annual report and accounts,
half-year reports and quarterly reports and to provide advice and comments thereon to the board of
Directors. The audit committee will also be responsible for reviewing and supervising the financial
reporting process and internal control system of the Group. The audit committee comprises two
members, namely Mr. Yow Cecil and Mr. Chan Kin Wo, who are the independent non-executive
Directors.

     The audit committee of the Company will report to the Board on a quarterly basis and present
a report to the Board which addresses the work and findings of the audit committee during the period
on a semi-annual basis.

      The Board intends to make disclosures in the annual report of the Company including: (i) the
composition of the audit committee, (ii) the work of the audit committee and (iii) the number of times
that the audit committee meet.

EMPLOYEES

Workforce

      As at the Latest Practicable Date, the Group had 71 employees (including the Directors) engaged    A

in the following areas:

                                                                               Number of employee

     Directors and general management                                                               3
     Administration and Human Resources                                                             4
     Art Design and Editorial                                                                      12
     Finance and Accounts                                                                           9
     Information Technology                                                                         7
     Marketing and Sales                                                                           23
     Production                                                                                     2
     Warehouse                                                                                     11

     Total                                                                                         71



Relationship with employees

      The Directors consider that it is important to maintain a good working relationship with
employees and to provide them with proper training and competitive compensation and incentives. The
Group has not experienced any disruption of its operations due to labour disputes or any significant
difficulty in recruiting suitable staff for its operations.




                                              — 87 —
           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

BENEFIT SCHEMES

     The Group provides medical benefits and accident insurance to its employees. In addition, the
Group operates a defined contribution retirement scheme for its employees under the Mandatory
Provident Fund Schemes Ordinance.

SHARE OPTION SCHEMES

      As at the Latest Practicable Date, certain full-time employees (including the executive Directors)
of the Group have been granted options to subscribe for an aggregate of 8,260,000 Shares at the Offer
Price under the Pre-IPO Share Option Scheme. Exercise in full of all options granted under the
Pre-IPO Share Option Scheme would result in the issue of 8,260,000 new Shares by the Company,
representing about 2.58% of the number of Shares in issue immediately after completion of the Placing
and the Capitalisation Issue taking no account of any Shares which may be issued under the
Over-allotment Option or upon any exercise of options which may be granted under the Share Option
Scheme or which may be issued or repurchased by the Company pursuant to the mandates referred to
under the paragraph headed “Written resolutions of all the shareholders of the Company passed on 5th
June, 2001” in Appendix IV to this prospectus.

      Pursuant to the written resolution of the shareholders of the Company dated 5th June 2001, the
Company has conditionally adopted the Share Option Schemes, the principal terms of which are set
out in the section headed “Share Option Schemes” and “Pre-IPO Share Option Scheme” in Appendix
IV of this prospectus.

     The Share Option Scheme is conditional on the GEM Listing Committee granting the listing of,
and permission to deal in, the Shares which may be issued pursuant to the exercise of options granted
under the Share Option Scheme.

    As at the Latest Practicable Date, no option has been granted or agreed to be granted by the
Company under the Share Option Scheme.




                                               — 88 —
  SUBSTANTIAL, MANAGEMENT AND SIGNIFICANT SHAREHOLDERS

SUBSTANTIAL SHAREHOLDERS                                                                                                      C
                                                                                                                              A
                                                                                                                              A

     So far as the Directors are aware, immediately following completion of the Placing and the
Capitalisation Issue and taking no account of Shares which may be taken up under the Placing and
assuming the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme
are not exercised, the following shareholders will be interested in 10% or more of the voting power
at any general meeting of the Company:

                                                                                                          Approximate
                                                                                                         percentage of
     Name                                                         Number of Shares                       issued Shares

     Chiu Fu Sheng and his Associates                            180,000,000 (Note)                              56.25%
     ERA Taiwan                                                  180,000,000 (Note)                              56.25%
     5D Technology Holdings Ltd.                                 180,000,000 (Note)                              56.25%
     Leung Chung Chu, Andrew                                      36,000,000                                     11.25%


     Note: 5D Technology Holdings Ltd. is an investment holding company incorporated in the BVI with all its shares held
           by ERA Taiwan. ERA Taiwan is a company incorporated in Taiwan with limited liability with its shares held by
           the following persons:

           Name of shareholders                                                               Percentage of shareholding

           Mr. Chiu Fu Sheng and his Associates                                                                    56.93%
           Far Eastern International Bank (Note)                                                                     3.7%
           Global Venture Offshore Limited (Note)                                                                   7.49%
           Capital International Global Emerging Markets
             Private Equity Fund L.P. (Note)                                                                         7.5%
           Others (Note)                                                                                           24.38%

                                                                                                                     100%



           Note: So far as the Directors are aware, the beneficial owners of Far Eastern International Bank, Global Venture
                  Offshore Limited, Capital International Global Emerging Markets Private Equity Fund L.P. and the
                  remaining shareholders of ERA Taiwan holding the 24.38% of the issued share capital of ERA Taiwan
                  stated above are third parties independent from the Directors, the chief executive, the Management
                  Shareholders and substantial shareholders of the Company and their respective Associates.

                  Far Eastern International Bank is a listed company in Taiwan.

                  Capital International Global Emerging Markets Private Equity Fund L.P. is an investment fund registered
                  in the United States.


                  Global Venture Offshore Limited is indirectly wholly-owned by PCCW Enterprises Limited.

                  The 24.38% of the issued share capital of ERA Taiwan above represented the shareholdings held by the
                  public shareholders in Taiwan.




                                                      — 89 —
   SUBSTANTIAL, MANAGEMENT AND SIGNIFICANT SHAREHOLDERS

INITIAL MANAGEMENT SHAREHOLDERS                                                                                                  R



     So far as the Directors are aware, immediately following completion of the Placing and the
Capitalisation Issue and taking no account of Shares which may be taken up under the Placing, and
assuming the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme
are not exercised, the following shareholders will be interested in 5% or more of the voting power at
any general meeting of the Company and who are able, as a practical matter, to direct or influence the
management of the Company:

                                                                                                             Approximate
                                                                                                            percentage of
     Name                                                            Number of Shares                       issued Shares

     Chiu Fu Sheng and his Associates                             180,000,000     (Note   1)                        56.25%
     ERA Taiwan                                                   180,000,000     (Note   1)                        56.25%
     5D Technology Holdings Ltd.                                  180,000,000     (Note   1)                        56.25%
     Leung Chung Chu, Andrew                                       36,000,000     (Note   2)                        11.25%

     Notes:


     1.       5D Technology Holdings Ltd. is an investment holding company incorporated in the BVI with all its shares held
              by ERA Taiwan. ERA Taiwan is a company incorporated in Taiwan with limited liability with its shares held by
              the following persons:

              Name of shareholders                                                               Percentage of shareholding
              Mr. Chiu Fu Sheng and his Associates                                                                  56.93%
              Far Eastern International Bank (Note)                                                                   3.7%
              Global Venture Offshore Limited (Note)                                                                 7.49%
              Capital International Global Emerging Markets
                Private Equity Fund L.P. (Note)                                                                         7.5%
              Others (Note)                                                                                           24.38%

                                                                                                                        100%


              Note: So far as the Directors are aware, the beneficial owners of Far Eastern International Bank, Global Venture
                     Offshore Limited, Capital International Global Emerging Markets Private Equity Fund L.P. and the
                     remaining shareholders of ERA Taiwan holding the 24.38% of the issued share capital of ERA Taiwan
                     stated above are third parties independent from the Directors, the chief executive, the Management
                     Shareholders and substantial shareholders of the Company and their respective Associates.


                     Far Eastern International Bank is a listed company in Taiwan.

                     Capital International Global Emerging Markets Private Equity Fund L.P. is an investment fund registered
                     in the United States.


                     Global Venture Offshore Limited is indirectly wholly-owned by PCCW Enterprises Limited.

                     The 24.38% of the issued share capital of ERA Taiwan above represented the shareholdings held by the
                     public shareholders in Taiwan.




                                                         — 90 —
   SUBSTANTIAL, MANAGEMENT AND SIGNIFICANT SHAREHOLDERS

     2.    Mr. Leung Chung Chu, Andrew is an executive Director and an Initial Management Shareholder.


     3.    As regards the undertakings given by the Initial Management Shareholders, please refer to the paragraph headed
           “Undertakings” below.


     Under Rule 13.16 of the GEM Listing Rules, a new applicant shall procure that every Initial
     Management Shareholder:

     —     places in escrow, with an escrow agent acceptable to the Stock Exchange, his relevant
           securities for a period of two years from the listing date, on terms acceptable to the Stock
           Exchange; and

     —     undertakes to the new applicant and to the Stock Exchange that, for a period of two years
           from the listing date, he will not, save as provided in rule 13.17 of the GEM listing rules,
           dispose of, or enter into any agreement to dispose of, nor permit the registered holder to
           dispose of, or to enter into any agreement to dispose of, any of his direct or indirect interest
           in the relevant securities.

      The Company has applied to the Stock Exchange for a waiver from strict compliance with Rule
13.16 of the GEM Listing Rules and the Stock Exchange has granted such a waiver on the terms set
out in the section headed “Waivers from compliance with the GEM Listing Rules and the Companies
Ordinance” in this prospectus. The effect of this waiver is that the lock up period applicable to the
Initial Management Shareholders has been reduced from two years to six months in respect of the
Shares held by them but is subject to the conditions as set out in the paragraph headed “Moratorium
period” under the section headed “Waivers from compliance with the GEM listing rules and the
Companies Ordinance”.

SIGNIFICANT SHAREHOLDER

     So far as the Directors are aware, immediately following completion of the Placing and the
Capitalisation Issue and taking no account of Shares which may be taken up under the Placing and
assuming the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme
are not exercised, apart from the Initial Management Shareholders referred to above, the following
shareholder will be interested in 5% or more of the voting power at any general meeting of the
Company:

                                                                                                        Approximate
                                                                                                       percentage of
     Name                                                        Number of Shares                      issued Shares

     Cheung Mei Ling (Note)                                                18,000,000                           5.625%


     Note: Miss Cheung Mei Ling was one of the shareholders of ERA Home holding 7.5% of the issued capital of ERA
           Home prior to the Reorganisation. Miss Cheung Mei Ling was a passive investor of ERA Home and did not take
           part in the daily management of ERA Home nor any other member of the Group. Miss Cheung Mei Ling is not
           connected with Mr. Chiu Fu Sheng and Mr. Leung Chung Chu, Andrew. As regards the undertakings given by
           Miss Cheung Mei Ling, please refer to the paragraph headed “Undertakings” below.




                                                     — 91 —
   SUBSTANTIAL, MANAGEMENT AND SIGNIFICANT SHAREHOLDERS

UNDERTAKINGS

      Mr. Chiu Fu Sheng, holding approximately 39%, and four independent third parties collectively
hold approximately 60% (one independent third party holding approximately 60% while the other
three independent third parties each holds 0.01%) of the issued share capital of Hong-Sheng
Investment Ltd. (“Hong-Sheng”), a shareholder of ERA Taiwan, have undertaken to the Company,
Rexcapital and the Stock Exchange that they will not dispose of (or enter into any arrangement to
dispose of) nor permit the registered holder thereof to dispose of (or enter into any agreement to
dispose of) any of their direct interest in Hong-Sheng from time to time for a period of 12 months from
the Listing Date saved that for the period of six months commencing on the date falling six months
after the Listing Date, they may transfer their direct interest in Hong-Sheng among themselves.

      Mr. Chiu Fu Sheng, holding approximately 99.80%, and four independent third parties each
holding 0.03% of the issued share capital of Nien-Hsin Investment Ltd. (“Nien-Hsin”), a shareholder
of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock Exchange that they will
not dispose of (or enter into any arrangement to dispose of) nor permit the registered holder thereof
to dispose of (or enter into any agreement to dispose of) any of their direct interest in Nien-Hsin from
time to time for a period of 12 months from the Listing Date saved that for the period of six months
commencing on the date falling six months after the Listing Date, they may transfer their direct
interest in Nien-Hsin among themselves.

      Mr. Chiu Fu Sheng, holding approximately 15%, and four independent third parties collectively
hold approximately 55% (three independent third parties each holding 15% while the remaining
independent third party holding 10%) of the issued share capital of Yu-Hsin Investment Ltd.
(“Yu-Hsin”), a shareholder of ERA Taiwan, have undertaken to the Company, Rexcapital and the Stock
Exchange that they will not dispose of (or enter into any arrangement to dispose of) nor permit the
registered holder thereof to dispose of (or enter into any agreement to dispose of) any of their direct
interest in Yu-Hsin from time to time for a period of 12 months from the Listing Date saved that for
the period of six months commencing on the date falling six months after the Listing Date, they may
transfer their direct interest in Yu-Hsin among themselves.

      The above undertakings in respect of shares in Hong-Sheng, Nien-Hsin and Yu-Hsin are valid for
a period of 12 months from the Listing Date and as long as any of Mr. Chiu Fu Sheng and the
independent third party shareholders of Hong-Sheng, Nien-Hsin and Yu-Hsin remain shareholders of
the respective aforesaid companies.

     Mr. Chiu Fu Sheng, Hong-Sheng, Nien-Hsin and Yu-Hsin (collectively, “Mr. Chiu Fu Sheng and
his Associates”), collectively, the controlling shareholder of ERA Taiwan, have undertaken to the
Company, Rexcapital and the Stock Exchange that they will not dispose of (or enter into any
arrangement to dispose of) nor permit the registered holder thereof to dispose of (or enter into any
agreement to dispose of) any of their respective direct or indirect interest in ERA Taiwan for a period
of 12 months from the Listing Date so as to result in Mr. Chiu Fu Sheng and his Associates ceasing
to be the controlling shareholder of ERA Taiwan.

      ERA Taiwan, being the sole beneficial owner of 5D Technology Holdings Ltd., has undertaken
to the Company, Rexcapital and the Stock Exchange that it will not sell, transfer or otherwise dispose
of (or enter into any agreement to sell, transfer or otherwise dispose of) any of its interests in 5D
Technology Holdings Ltd. for a period of 12 months from the Listing Date.


                                               — 92 —
     SUBSTANTIAL, MANAGEMENT AND SIGNIFICANT SHAREHOLDERS

     Each of Mr. Leung Chung Chu, Andrew, 5D Technology Holdings Ltd., ERA Taiwan, Mr. Chiu
Fu Sheng and his Associates are considered as the Initial Management Shareholders while Miss
Cheung Mei Ling is considered as the Significant Shareholder. Each of the Initial Management
Shareholders and the Significant Shareholder has undertaken with the Company, Rexcapital and the
Stock Exchange that for a period of six months from the Listing Date (the “Moratorium Period”):

1.    he or she or it will not dispose of (or enter into any arrangement to dispose of) nor permit the
      registered holder thereof to dispose of (or enter into any agreement to dispose of) any of their
      respective direct or indirect interest in the Company;

2.    he or she or it will place (or procure to be placed) in escrow, with an escrow agent acceptable
      to the Stock Exchange, the Shares owned (or deemed interested) by him or her or it after the
      completion of the Placing and the Capitalisation Issue (the “Relevant Shares”) on terms
      acceptable to the Stock Exchange;

3.    he or she or it will not (or procure that he or she or it will not), save as provided in Rule 13.17
      (or, as appropriate, Rule 13.19) of the GEM Listing Rules, dispose of (or enter into any
      agreement or dispose of) or permit the registered holder to dispose of (or enter into any
      agreement to dispose of) any of his or her or its direct or indirect interests in the Relevant Shares;

4.    in the event that he or she or it pledges or charges any direct or indirect interest in the Relevant
      Shares under Rule 13.17(2) (or, as appropriate, Rule 13.19(2)) of the GEM Listing Rules or
      pursuant to any right or waiver granted by the Stock Exchange pursuant to Rule 13.17(5) (or, as
      appropriate, Rule 13.19(4)) of the GEM Listing Rules, he or she or it must inform (or procure
      to inform) the Company immediately thereafter, disclosing the details as specified in the GEM
      Listing Rules; and

5.    having pledged or charged any of his or her or its interests in the          Relevant Shares under
      sub-paragraph (3) above, any of them must inform (or procure to               inform) the Company
      immediately in the event that he or she or it becomes aware that the         pledgee or chargee has
      disposed of or intends to dispose of such interest and of the number         of the Relevant Shares
      affected.

      Each of the Initial Management Shareholders has further undertaken to the Stock Exchange,
Rexcapital and the Company that (i) he or she or it will not dispose of (or enter into any agreement
to dispose of) any of his or its direct or indirect interests in the Company if such disposal would result
in they, in aggregate, ceasing to have control in 35% or more of the voting power at general meeting
of the Company; (ii) to place the appropriate number of his/its Relevant Shares in escrow with an
escrow agent acceptable to the Stock Exchange, during the second six-month period after listing of
Shares on GEM.




                                                 — 93 —
                                                 SHARE CAPITAL

Authorised:                                                                                                                HK$     C
                                                                                                                                   A
                                                                                                                                   1
                                                                                                                                   2
10,000,000,000 Shares                                                                                            100,000,000


Issued and to be issued, fully paid or credited as fully paid:                                                                     C
                                                                                                                                   R

       262,000 Shares in issue                                                                                          2,620
   261,738,000 Shares to be issued under the Capitalisation Issue                                                   2,617,380
    58,000,000 New Shares to be issued under the Placing                                                              580,000

   320,000,000 Shares                                                                                               3,200,000

Notes:


Assumptions


         The above table assumes that the Placing becomes unconditional and the Capitalisation Issue is made.


       It takes no account of any Shares which may be issued pursuant to the exercise of the Over-allotment Option or the
exercise of options granted or to be granted under the Share Option Schemes or of any Shares which may be allotted and issued
or purchased by the Company pursuant to the general mandates for the allotment and issue or repurchase of Shares granted to
the Directors as described below.


Ranking


       The Placing Shares will rank equally with all other Shares now in issue or to be issued as mentioned in this prospectus.
In particular, the Placing Shares will rank in full for all dividends and other distributions hereinafter declared, paid or made
on the Shares after the date of this prospectus other than participation in the Capitalisation Issue.


Share Option Schemes


       The Company has conditionally adopted the Share Option Schemes, the principal terms of which are summarised in the
sections headed “Share Option Scheme” and “Pre-IPO Share Option Scheme” in Appendix IV to this prospectus, under which
options to subscribe for Shares representing up to 30% of the issued share capital of the Company from time to time (excluding
Shares issued pursuant to the exercise of the options granted under the Share Option Schemes) may be granted to full-time
employees (including executive Directors) of the Group.


General mandate to allot and issue Shares


      The Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with a total nominal
value of not more than the sum of:


         1.    20% of the total nominal amount of the share capital of the Company issued and to be issued (following
               completion of the Capitalisation Issue and the Placing (including any Shares that may be issued pursuant to the
               exercise of the Over-allotment Option)); and


         2.    the total nominal amount of the share capital of the Company repurchased by the Company (if any) pursuant to
               the general mandate for the repurchase of Shares granted to the Directors referred to below.


       The Directors may, in addition to Shares which they are authorised to issue under the above mandate, allot, issue and
deal in the Shares under a rights issue, scrip dividend scheme or similar arrangement or Shares to be issued upon the exercise
of options granted under the Share Option Schemes.



                                                          — 94 —
                                                SHARE CAPITAL

      This mandate will expire:


      ●      at the end of the Company’s next annual general meeting; or


      ●      at the end of the period within which the Company is required by any applicable laws or the articles of association
             of the Company to hold its next annual general meeting; or


      ●      when varied or revoked by an ordinary resolution of the shareholders of the Company in general meeting,


whichever occurs first.


      For further details of this general mandate, see the paragraph headed “Written resolutions of all the shareholders of the
Company passed on 5th June, 2001” in Appendix IV to this prospectus.


General mandate to repurchase Shares


      The Directors have been granted a general unconditional mandate to exercise all the powers of the Company to
repurchase Shares with a total nominal value of not more than 10% of the total nominal amount of the share capital of the
Company in issue following the completion of the Capitalisation Issue, the Placing (including any Shares that may be issued
pursuant to the exercise of the Over-allotment Option).


      This mandate only relates to repurchases made on GEM, or on any other stock exchange on which the Shares are listed
(and which is recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose),
and which are repurchased in accordance with the GEM Listing Rules. A summary of the relevant the GEM Listing Rules is
set out in the paragraph headed “Repurchase by the Company of its own securities” in Appendix IV to this prospectus.


      This mandate will expire:


      ●      at the end of the Company’s next annual general meeting; or


      ●      at the end of the period within which the Company is required by any applicable laws or the articles of association
             of the Company to hold its next annual general meeting; or


      ●      when varied or revoked by an ordinary resolution of the shareholders of the Company in general meeting,


whichever occurs first.




                                                         — 95 —
                                FINANCIAL INFORMATION

INDEBTEDNESS                                                                                               C
                                                                                                           2
                                                                                                           A
                                                                                                           3
Borrowings                                                                                                 (



      As at the close of business on 31st March, 2001, being the latest practicable date for the purpose   A

of this indebtedness statement prior to the printing of this prospectus, the Group had total borrowings
of approximately HK$5,493,000 which comprised obligations under finance lease contracts of
approximately HK$493,000 and a loan of HK$5,000,000 from a major corporate shareholder.

Contingent liabilities

     As at 31st March, 2001, 20 employees of the Group have completed the required number of years
of service under the Hong Kong Employment Ordinance to be eligible for long service payments on
termination of their employment. The Group is only liable to make such payments where the
termination meets the required circumstances specified in the Ordinance. If the termination of all these
employees meet the circumstances required by the Ordinance, the Group’s liability at 31st March,
2001 would be approximately HK$1.7 million.

     Save as disclosed above, the Group had no material contingent liabilities as at 31st March, 2001.

Security

     As at 31st March, 2001, the Group had the following facilities and securities:

     1.    Banking facilities of HK$100,000 in respect of payment of advertising charges in favour of
           a newspaper publisher were secured by the Group’s time deposits of HK$100,000.

     2.    Provision of services by a bank in respect of processing of credit card payments for
           customers’ purchases of goods from the Group over the Internet were secured by unlimited
           personal guarantees executed by Mr. Leung Chung Chu, Andrew and Mr. Yau Kar Man,
           directors of the Company, and the Group’s time deposits of HK$750,000.

     3.    Continuing guarantees in the total sum of HK$750,000 in respect of payments of
           advertising charges in favour of certain publishers of newspapers and magazines were
           secured by personal guarantees executed by Mr. Leung Chung Chu, Andrew, a director of
           the Company.

     The relevant bank has agreed to release the above personal guarantees executed by Mr. Leung
Chung Chu, Andrew and Mr. Yau Kar Man upon listing of the Shares on GEM and for replacement of
them by corporate guarantee of the Company and/or other members of the Group upon the listing of
the Shares on GEM. In addition, continuing guarantees of HK$750,000 in respect of payment of
advertising charges will be released or replaced by other securities upon listing of the Shares on GEM.

     Furthermore, the net book value of fixed assets of the Group held under finance leases amounted
to approximately HK$545,000 as at 31st March, 2001.



                                               — 96 —
                               FINANCIAL INFORMATION

Disclaimer

     Save as aforesaid or as otherwise disclosed herein and apart from intra-Group liabilities, no
companies within the Group had outstanding, at the close of business on 31st March, 2001, any loan
capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar
indebtedness, liabilities under acceptances (other than normal trade bills), acceptance credits,
debentures, mortgages, charges, finance leases or hire purchases commitments, guarantees or other
material contingent liabilities.

     Foreign currency amounts have, for the purpose of the indebtedness statement, been translated
into Hong Kong dollars at the applicable rates of exchange prevailing at the close of business on 31st
March, 2001.

     The Directors have confirmed that, save as disclosed above, there had not been any material
change in the indebtedness and contingent liabilities of the Group since 31st March, 2001.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE                                                     A
                                                                                                         (


Borrowings and banking facilities

     The Group generally finances its operations with internally generated cashflow, loans from
shareholders and share capital.

Net current assets

     As at 31st March, 2001, the Group had net current assets of approximately HK$17.7 million. The
current assets comprised bank and cash balances of approximately HK$6.5 million; inventories of
approximately HK$9.2 million; current portion of film rights of approximately HK$9 million, films
production in progress of approximately HK$0.4 million, trade and other receivable of approximately
HK$25.1 million, prepayment and deposits of approximately HK$6.6 million. The current liabilities
comprised trade and other payables of approximately HK$20.7 million, film rights payable of
approximately HK$16.3 million, provision for taxation of approximately HK$1.9 million and
obligations under finance leases of approximately HK$0.2 million.

Directors’ opinion of adequacy of working capital                                                        A



    The Directors are of opinion that, taking into account the internally generated resources of the
Group and the estimated net proceeds from the issue of the Placing Shares under the Placing, the
Group has sufficient working capital for its present requirements.

Capital structure and financial resources

     As at 31st March, 2001, the Group had net assets of approximately HK$ 24.3 million comprising
fixed assets of approximately HK$4.4 million, other non-current assets of approximately HK$2.5
million, net current assets of approximately HK$17.7 million and non-current liabilities of
approximately HK$0.3 million.


                                              — 97 —
                                FINANCIAL INFORMATION

      Prior to the completion of the Placing, the Group’s operations and capital expenditures were
financed principally by its internal resources and equity financing. It is expected that the net proceeds
raised by the Placing will be sufficient to meet the future operating and capital expenditure
requirements.

Capital commitments

     As at 31st March, 2001, the Group had a capital commitment to make capital contribution of
approximately HK$116,000 for investment in an associate, a commitment of unpaid film rights of
approximately HK$23,867,000 due to licensors and a commitment to pay software development costs
of approximately HK$200,000.

Dividends

     No dividend has been paid or declared by the Company or its subsidiaries during the two years
ended 31st December, 2000.

Rules 17.15 to 17.21 of the GEM Listing Rules

      The Group did not advance any money to any entity which exceeded 25% of the Group’s audited
consolidated net assets as at the Latest Practicable Date, did not provide any financial assistance and
guarantees to affiliated companies which exceeded 25% of the Group’s audited consolidated net assets
as at the Latest Practicable Date, did not have any pledge over the Shares by the controlling
shareholder to secure debts, guarantees or support of other obligations of the Group, and did not enter
into any loan agreements importing specific performance obligations on the controlling shareholder.
The Directors are not aware of any circumstances which would give rise to a disclosure requirement
under Rules 17.15 to 17.21 of the GEM Listing Rules.

Foreign exchange risk

      Since most of the income and expenditure of the Group prior to 31st December, 2000 were in            A

Hong Kong dollars, and most of the assets and liabilities as at 31st December, 2000 were denominated
in Hong Kong dollar currency, the Directors do not consider that the Group was significantly exposed
to foreign exchange liabilities and foreign exchange risk.




                                               — 98 —
                                        FINANCIAL INFORMATION

TRADING RECORD

Summary of combined results of the Group

     The following is a summary of the audited combined results of the Group for the two years ended
31st December, 2000, which have been prepared on the basis that the existing Group structure had
been in place throughout the Relevant Periods and which have been extracted from the accountants’
report set out in Appendix I to this prospectus:

                                                                                             Year ended 31st December,                A
                                                                               Note                1999           2000
                                                                                               HK$’000        HK$’000

     Turnover                                                                   (1)
       Sales of home video products                                                                56,851                 87,816
       Theatrical and television release income                                                    11,169                 14,935
       Income from Internet operations                                                                 —                     395
       Total turnover                                                                              68,020               103,146

     Cost of sales                                                                                (49,048)               (73,945)

     Gross profit                                                                                  18,972                 29,201
     Other revenue                                                                                    680                    300
     Portal promotion costs                                                     (2)                    —                  (2,269)
     Portal development costs                                                   (2)                    —                  (3,213)
     Distribution costs                                                                              (491)                  (600)
     Administrative expenses                                                                      (16,985)               (22,418)
     Other operating expenses                                                                        (746)                    (2)

     Profit from operations                                                                          1,430                    999
     Finance costs                                                                                      (6)                   (61)
     Share of loss of associates                                                                      (501)                  (704)

     Profit before taxation                                                                            923                   234
     Taxation                                                                                         (417)               (1,228)

     Net profit/(loss) attributable to shareholders                                                    506                   (994)


     Earnings/(loss) per share - basic                                          (3)           0.19 cents           (0.38) cents


     Notes:


     (1)      Turnover mainly represents (i) the net invoiced value of goods sold, less sales return and discounts; (ii) the
              theatrical income for distribution of motion pictures; (iii) the television release income for distribution of motion
              pictures; and (iv) income from Internet operations.




                                                           — 99 —
                                    FINANCIAL INFORMATION

     (2)   Portal promotion costs and portal development costs were incurred for the establishment of the following
           websites:


           (i)    filmed entertainment related website under the domain name of www.mov3.com which was launched in
                  March 2000 and has commenced to generate income for the Group since April 2000, and


           (ii)   online sales and rental of CD/VCD/DVD under the website of www.mov3-shop.com was launched in May
                  2001.


     (3)   The calculation of the basic earnings/(loss) per Share is based on the Group’s net profit/(loss) attributable to
           shareholders for each of the two years ended 31st December, 2000 and on the assumption that 262,000,000 Shares
           had been in issue throughout the years, comprising 262,000 Shares in issue as at the date of this prospectus and
           261,738,000 Shares which would have been issued pursuant to the Capitalisation Issue as described in Appendix
           IV to the Prospectus.


For the year ended 31st December, 1999

     Turnover of the Group for the year ended 31st December, 1999 amounted to approximately
HK$68 million, 84% of which was generated from the sale and distribution of home videos products,
16% of which was derived from the theatrical and pay/free TV rights distribution. The income
generated from theatrical and TV rights distribution increased by approximately 39% compared to the
previous financial year which is mainly due to certain blockbuster titles released during the year ended
31st December, 1999 including “Life Is Beautiful”, “The Faculty”, “Hypnosis” and “House On
Haunted Hill”. The Group recorded gross profit of approximately HK$19 million representing
approximately 28% of gross profit margin.

      During the year, the Group has offered various reissued movie titles in VCD format with
attractive prices. In addition, exclusive distribution rights of VCD under the Warner label and
distribution rights of DVD under the Universal label have been acquired. As a result, the sales of home
video products increased by approximately 22% when compared with the previous financial year.

     Administrative expenses were approximately HK$17 million for the year. Staff cost was one of
the key items accounting for about 51%.

      As a result of increased copyright piracy activities, the Government of Hong Kong has
introduced the Prevention of Copyright Piracy Ordinance in 1998. Since the piracy situation improved
significantly during the year, the profit attributable to shareholders for the year ended 31st December,
1999 was approximately HK$0.5 million, representing a net profit margin for the year of
approximately 1%.

For the year ended 31st December, 2000

      During the year ended 31st December, 2000, the Group recorded a turnover of approximately
HK$103 million, representing an increase of approximately 52% compared to previous financial year
due to the continuous improvement in overall economy in Hong Kong. Sales of home video products
in the VCD format and DVD format accounted for approximately 85% of the Group’s total turnover
for the same period. As a result of the improved general economic environment, the sales of home
video products have resulted in an increase of more than 70% in VCD and DVD formats. In addition,
the income generated from theatrical and TV rights distribution has grown by approximately 34%
compared to the previous financial year. The gross profit amounted to approximately HK$29 million,
representing a profit margin of approximately 28%.


                                                     — 100 —
                                FINANCIAL INFORMATION

      During the year ended 31st December, 2000, the Group incurred portal promotion and
development costs of approximately HK$5.5 million which were incurred for the establishment of the
website under the domain name of www.mov3.com and the online CD/VCD/DVD store.
www.mov3.com, launched in March 2000, is a filmed entertainment related services website which has
more than 40,000 members who are on-target movie lovers. The online CD/VCD/DVD store has
started to generate revenue since May 2001 with the support of initial customer base from
www.mov3.com.

     Taking into account the initial set-up and promotion costs of Internet business as mentioned
above, the Group recorded a net loss attributable to shareholders of approximately HK$994,000.

Taxation

     Provision for Hong Kong profits tax of the Group have been calculated at the applicable rates
on the estimated assessable profits for the two years ended 31st December, 2000.

     For the two years ended 31st December, 2000, the Group’s effective tax rates were approximately
45% and 525% respectively. The high effective tax rates were due to the fact that only two companies
within the Group had assessable profits while substantial tax losses were incurred for other companies
within the Group during the years concerned. The relatively higher effective rate for the year ended
31st December, 2000 as compared with that for the year ended 31st December, 1999 was mainly
because of (i) a tax loss of approximately HK$1,153,000 brought forward from 1998 to offset the
assessable profit for the year ended 31st December, 1999; and (ii) an increase in the proportion of
losses among the companies within the Group during the year ended 31st December, 2000.

PROPERTY INTERESTS

      Properties leased or licensed by the Group include: (i) Workshop Nos. 3 to 10 and Flat Roof Nos.
3 to 10 on the 2nd Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories; (ii)
Workshop Nos. 5 to 18 on the 10th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New
Territories; and (iii) Car Park Nos. P.6, P.9, Lorry Park Nos. L11 and L13 on 1st Floor Trans Asia
Centre, 18 Kin Hong Street, Kwai Chung, New Territories. Details of these properties are set out in
Appendix II to this prospectus.

Property Valuation

      American Appraisal Hongkong Limited, an independent property valuer, has valued the property
interests of the Group as at 31st March, 2001. The text of a letter, summary of valuation and an extract
of valuation certificate from American Appraisal Hongkong Limited, are set out in Appendix II to this
prospectus.




                                              — 101 —
                               FINANCIAL INFORMATION

DIVIDENDS

     The Directors presently do not intend to recommend any dividends for the year ending 31st
December, 2001. The declaration of, payment and amounts of dividends in future will be subject to
the discretion of the Directors and will be dependent upon the Company’s earnings, financial
condition, cash requirements and availability and other factors as may be deemed relevant at such time
by the Directors.

DISTRIBUTABLE RESERVES                                                                                   A



     As at 31st December, 2000, the Company had no reserve available for distribution to the
shareholders of the Company.

ADJUSTED NET TANGIBLE ASSETS

     The following pro forma statement of adjusted net tangible assets of the Group is based on the      A
audited combined net assets of the Group as at 31st December, 2000 as shown in the accountants’
report set out in Appendix I to this prospectus, adjusted as described below:
                                                                        Based on an      Based on an
                                                                         Offer Price      Offer Price
                                                                         of HK$0.80       of HK$1.10
                                                                            HK$’000          HK$’000


     Audited combined net assets of the Group as at
      31st December, 2000                                                      19,570          19,570

     Less: Film rights                                                         (6,706)         (6,706)

     Adjusted combined net assets                                              12,864          12,864

     Unaudited combined profit after taxation of the Group
      for the three months ended 31st March, 2001                                 682             682

     Allotment of shares of Era Home Entertainment Limited to its
       then shareholders on 20th February, 2001                                 4,000           4,000

     Estimated net proceeds of the issue of the Placing Shares
       (Note 1)                                                                35,192          51,809

     Adjusted net tangible assets                                              52,738          69,355


     Adjusted net tangible asset value per Share (Note 2)                   HK$0.16         HK$0.22


     Adjusted net asset value per Share (Note 3)                            HK$0.19         HK$0.24




                                             — 102 —
                                         FINANCIAL INFORMATION

     Notes:


     1.       The estimated net proceeds of the issue of the Placing Shares under the Placing take no account of any Shares
              which may be issued upon the exercise of the Over-allotment Option.


     2.       The adjusted net tangible asset value per Share is arrived at after the adjustments referred to in this section and
              on the basis of 320,000,000 Shares in issue and to be issued as mentioned herein but takes no account of any
              Shares which may be issued upon the exercise of the Over-allotment Option and options granted under the Pre-IPO
              Share Option Scheme or which may be allotted and issued or purchased by the Company pursuant to the general
              mandates for the allotment and issue or purchase of Shares described in the paragraph headed “Written resolutions
              in writing of all the shareholders of the Company passed on 5th June, 2001” in Appendix IV to this prospectus.


     3.       The adjusted net asset value per Share is arrived at after the adjustments referred to in this section and on the basis
              of 320,000,000 Shares in issue and to be issued as mentioned herein and includes the carrying value of film rights
              of approximately HK$6,706,000 as at 31st December, 2000, but takes no account of Shares which are to be issued
              upon the exercise of the Over-allotment Option and options granted under the Pre-IPO Share Option Schemes or
              which may be allotted and issued or purchased by the Company pursuant to the general mandates for the allotment
              and issue or purchase of Shares described in the paragraph headed “Written resolutions in writing of all the
              shareholders of the Company passed on 5th June, 2001” in Appendix IV to this prospectus.


NO MATERIAL ADVERSE CHANGE                                                                                                              A



     Save as disclosed in this prospectus, the Directors believe that there has been no material adverse
change in the financial or trading position or prospects of the Group since 31st December, 2000 (being
the date to which the latest audited financial statements of the Group were made up).




                                                           — 103 —
                                   SPONSOR’S INTERESTS

      Neither Rexcapital nor its associates expect to have accrued any material benefit as a result of       A

the successful outcome of the Placing, other than the following: (i) by way of underwriting
commissions to be paid to its associate, TingKong-RexCapital Securities International Limited, for
acting as one of the Underwriters to the Placing; (ii) the respective advisory and documentation fees
to be paid to Rexcapital as sponsor of the Placing; (iii) by a sponsor agreement entered into between
Rexcapital and the Company on 11th June, 2001 pursuant to which Rexcapital has been appointed as
sponsor of the Company for the remainder of the financial year of the Company ending 31st December,
2001 and for the period of 24 months commencing from 1st January, 2002 and the Company shall pay
an agreed fee to Rexcapital for its provision of such services; and (iv) certain associates of Rexcapital,
whose ordinary businesses involve the trading and dealing in securities, may involve in the trading of
and dealing in the securities of the Company after the listing.

     No director or employee of Rexcapital or TingKong-RexCapital Securities International Limited
has a directorship in the Company or any other company in the Group.




                                               — 104 —
                                        UNDERWRITING

UNDERWRITERS                                                                                                 C
                                                                                                             A


Underwriters

     TingKong-RexCapital Securities International Limited, CEF Capital Limited, Chow Sang Sang
Securities Limited, Get Nice Capital Limited, GC Capital (Asia) Limited, HT Securities Limited, KGI
Asia Limited, Kingsway SW Securities Limited, Pacific Challenge Capital Limited, SBI E2-Capital
Securities Limited, Sun Hung Kai International Limited and Vickers Ballas Capital Limited.

UNDERWRITING ARRANGEMENTS AND EXPENSES

Underwriting Agreement                                                                                       A



     Pursuant to the Underwriting Agreement, the Company is offering the New Shares for
subscription and the Vendor is offering the Sale Shares for purchase by investors who are professional
and institutional investors and other investors on and subject to the terms and conditions set out in this
prospectus, in each case at the Offer Price.

      Pursuant to the Underwriting Agreement and subject to the GEM Listing Committee granting
listing of and permission to deal in the Shares in issue and the Shares to be issued as mentioned herein
on or before 12th July, 2001 and to certain other conditions set out in the Underwriting Agreement,
the Underwriters have severally agreed to subscribe or purchase or procure placees to subscribe for
or purchase the Placing Shares.

Grounds for termination

      The obligations of the Underwriters to subscribe for or purchase or procure subscribers or
purchasers for the Placing Shares are subject to termination if certain events, including force majeure,
occur at any time prior to 12:00 noon on 26th June, 2001. Rexcapital (for itself (in its capacity as
sponsor and manager of the Placing) and on behalf of Underwriters) has the absolute right to terminate
their obligations under the Underwriting Agreement in its sole and absolute discretion sees fit upon
the occurrence of, but not limited to, any of the following events:

     (i)   in the absolute opinion of Rexcapital (for itself (in its capacity as sponsor and manager of
           the Placing) and on behalf of the Underwriters), the success of the Placing would or might
           be materially and adversely affected by:

           (a)   the introduction of any new law or regulation or any change in existing laws or
                 regulations or change in the interpretation or application thereof or other occurrence
                 of any nature whatsoever which may in the absolute opinion of Rexcapital (for itself
                 (in its capacity as sponsor and manager of the Placing) and on behalf of the
                 Underwriters) materially and adversely affect the business or financial prospects of
                 the Company or any member of the Group; or




                                               — 105 —
                                     UNDERWRITING

       (b)   the occurrence of any event, development or change (whether or not local, national or
             international or forming part of a series of events or changes occurring or continuing
             before, on and/or after the date of the Underwriting Agreement and including an event
             or change in relation to or a development of an existing state of affairs) of a political,
             military, industrial, financial, economic, or other nature, whether or not sui generis
             with any of the foregoing, resulting in a material adverse change in, or which might
             be expected to result in a material adverse change in political, economic or stock
             market conditions; or

       (c)   the imposition of any moratorium, suspension or material restriction on trading in
             securities generally on the Stock Exchange occurring due to exceptional financial
             circumstances or otherwise; or

       (d)   a change or development involving a prospective change in taxation in Hong Kong,
             the Cayman Islands or the implementation of exchange controls which shall or would
             materially and adversely affect the Company or its present or prospective shareholders
             in their capacity as such or any member of the Group; or

(ii)   any change or deterioration in the conditions of local, national or international securities
       markets occurs which, in the absolute opinion of Rexcapital (for itself (in its capacity as
       sponsor and manager of the Placing) and on behalf of the Underwriters), is likely to
       materially and adversely affect the success of, or makes it inexpedient or inadvisable to
       proceed with, the Placing.

(iii) there comes to the notice of any of Rexcapital (in its capacity as sponsor and manager of
      the Placing) and the Underwriters any matter or event showing any of the representations
      and warranties contained in the Underwriting Agreement to be untrue or inaccurate in any
      material respect considered by Rexcapital (for itself (in its capacity as sponsor and manager
      of the Placing) and on behalf of the Underwriters) in its absolute opinion to be material and
      adverse in the context of the Placing; or

(iv) any of the Warrantors (as defined therein) commits any material breach of, or omits to
     observe in any material respect, any of the obligations or undertakings expressed to be
     assumed by them or it under the Underwriting Agreement; or

(v)    there comes to the notice of any of Rexcapital (in its capacity as sponsor and manager of
       the Placing) and the Underwriters any information, matter or event which, in the absolute
       opinion of Rexcapital (for itself (in its capacity as sponsor and manager of the Placing) and
       on behalf of the Underwriters) may lead to a material adverse change in the business or in
       the financial or trading position of any member of the Group.




                                           — 106 —
                                        UNDERWRITING

Undertakings

      Each of Mr. Chiu Fu Sheng, ERA Taiwan, 5D Technology Holdings Ltd. and Mr. Leung Chung
Chu, Andrew has given non-disposal undertakings in favour of the Company and Rexcapital, similar
to those as set out in the section headed “Substantial, management and significant shareholders” of
this prospectus pursuant to the Underwriting Agreement.

      Pursuant to the Underwriting Agreement, the Company has undertaken with Rexcapital and the
Underwriters that it will not and each of Mr. Chiu Fu Sheng, ERA Taiwan, 5D Technology Holdings
Ltd., and Mr. Leung Chung Chu, Andrew and the executive Directors have severally undertaken with
Rexcapital and the Underwriters to procure that the Company will not within the period of six months
commencing from the Listing Date allot, issue, accept, subscribe for, offer, sell, contract to sell, grant
or agree to grant any options or warrants or other rights in or carrying the right to subscribe or
purchase for directly or indirectly conditionally or unconditionally any Shares or other securities
(including securities convertible into or exchangeable for Shares) of the Company or any interest
therein or repurchase any securities of the Company except the grant of options under the Share
Option Scheme and issue of Shares upon the exercise of the Over-allotment Option and options which
have been and/or may be granted under the Share Option Schemes.

Commission and expenses                                                                                      C
                                                                                                             A


      The Underwriters will receive an underwriting and placing commission of 4.5% of the Offer
Price of all the Placing Shares, out of which any sub-underwriting commission will be paid. Rexcapital
will receive a documentation fee relating to the Placing. The underwriting and placing commission,
documentation fee, GEM listing fees, transaction levy, legal and other professional fees and printing
and other expenses relating to the Placing which are estimated to be approximately HK$16 million in
aggregate (based on an Offer Price of HK$0.95 and assuming the Over-allotment Option is not
exercised), will be payable by the Company and the Vendor in the proportion in which the number of
new Shares and the number of Sale Shares bear to the total number of Placing Shares respectively.

Underwriters’ interests in the Company

     Save as provided for under the Underwriting Agreement and disclosed otherwise in this
prospectus, none of the Underwriters has any shareholding interests in the Group nor has any right or
option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any
shares in any member of the Group.




                                               — 107 —
                            STRUCTURE OF THE PLACING

OFFER PRICE                                                                                             A
                                                                                                        1


     The Offer Price will be between HK$0.80 and HK$1.10 per Share. Based on the maximum Offer
Price of HK$1.10 per Share, plus a 1% brokerage and a 0.01% Stock Exchange transaction levy, one
board lot of 4,000 Shares will amount to a total of HK$4,444.44.

      The Offer Price will be determined by the Company, the Vendor and Rexcapital, on behalf of the
Company, on or before 5:00 p.m. on 18th June, 2001 or such later time as may be agreed between the
parties, but in any event, no later than 5:00 p.m. on 19th June 2001.

CONDITIONS OF THE PLACING

     The Placing is conditional on:

     1.   the GEM Listing Committee granting listing of, and permission to deal in, the Shares in
          issue and the Shares to be issued pursuant to the Placing, the Capitalisation Issue, the
          exercise of the Over-allotment Option or options granted or to be granted under the Share
          Option Schemes; and

     2.   the obligations of the Underwriters under the Underwriting Agreement becoming
          unconditional (including, if relevant, as a result of the waiver of any condition(s) by
          Rexcapital on behalf of the Underwriters) and not being terminated in accordance with the
          terms of the Underwriting Agreement or otherwise as set out in the section headed
          “Underwriting” of this prospectus,

in each case, on or before the dates and times specified in the Underwriting Agreement (unless and
to the extent such conditions are validly waived on or before such dates and times) and in any event
not later than 12th July, 2001, being the date which is 30 days after the date of this prospectus.

     If such conditions have not been fulfilled or waived prior to the times and dates specified, the
Placing will lapse and the Stock Exchange will be notified immediately.

PREFERENCE TO EMPLOYEES UNDER THE PLACING

     A maximum of 8,000,000 Shares, being 10% of the total number of the Placing Shares are
available to full-time employees of the Group (excluding the Directors or the chief executive of the
Company or the existing beneficial owners of Shares or an Associate of any of them) under the Placing
on a preferential basis.

THE PLACING

     The Placing initially comprises 58,000,000 New Shares offered by the Company for subscription      A
                                                                                                        1
and 22,000,000 Sale Shares offered by the Vendor for sale, in each case at the Offer Price under the    (
                                                                                                        (
Placing. The Placing Shares initially offered will represent 25% of the issued share capital of the
Company immediately following completion of the Placing and the Capitalisation Issue assuming that
the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme are not
exercised. The Placing is fully underwritten by the Underwriters, subject to the terms and conditions
of the Underwriting Agreement.


                                             — 108 —
                              STRUCTURE OF THE PLACING

      Pursuant to the Placing, the Underwriters or selling agents nominated by the Underwriters on
behalf of the Company shall place the Placing Shares at the Offer Price with selected professional and
institutional investors and other investors anticipated to have a sizeable demand for the Placing Shares
in Hong Kong and other parts of Asia, subject to certain restrictions. Professional investors generally
include brokers, dealers and companies (including fund managers) whose ordinary business involves
dealing in shares and other securities and entities which regularly invest in shares and other securities.
Investors subscribing for and purchasing the Placing Shares are also required to pay a 1% brokerage
and a 0.01% Stock Exchange transaction levy. A total of 8,000,000 Placing Shares, representing 10%
of the total number of Shares initially being offered under the Placing, will be available for full-time
employees of the Group (other than the Directors or the chief executive of the Company or the existing
beneficial owners of Shares or an Associate of any of them) under the Placing on a preferential basis.

OVER-ALLOTMENT OPTION

      In connection with the Placing, the Company has granted to the Underwriters the Over-allotment
Option (exercisable by Rexcapital on behalf of the Underwriters) at any time within 28 days from the
date of this prospectus. Pursuant to the Over-allotment Option, the Company may be required to issue
and allot at the Offer Price up to an aggregate of 12,000,000 additional new Shares, representing 15%
of the Shares initially available under the Placing, to cover over-allocations in the Placing, if any. In
order to facilitate settlement of over-allocations in connection with the Placing pending exercise of the
Over-allotment Option, a stock borrowing arrangement has also been entered into between Rexcapital
and Leung Chung Chu, Andrew.

    Pursuant to this arrangement, Leung Chung Chu, Andrew has agreed, if so requested by
Rexcapital, to lend to Rexcapital up to 12,000,000 Shares on the following terms:

     (i)    the borrowed Shares will only be used to settle over-allocations in the Placing, and

     (ii)   the same number of Shares must be returned to Leung Chung Chu, Andrew, no later than
            the third Business Day following the earlier of (a) the date on which the Over-allotment
            Option is exercised in full and (b) the last day on which the Over-allotment Option may be
            exercised.

     An application has been made to the Stock Exchange for a waiver from strict compliance with
Rule 13.16 of the GEM Listing Rules which restricts the disposal of Shares by Leung Chung Chu,
Andrew for the period of two years from the date of listing of the Shares on GEM, in order to allow
Leung Chung Chu, Andrew to enter into this stock borrowing arrangement. Details of such waiver are
set out in the section headed “Waivers from compliance with the GEM Listing Rules and Companies
Ordinance”. Rexcapital may also cover such over-allocations by, among other means, purchasing
Shares in the secondary market or by a combination of purchases in the secondary market and exercise
of the Over-allotment Option either in part or in full. Any such secondary market purchases will be
made in compliance with all applicable laws, rules and regulations.




                                               — 109 —
                             STRUCTURE OF THE PLACING

     If the Over-allotment Option is exercised in full, the total Placing Shares will represent
approximately 27.7% of the enlarged issued share capital of the Company immediately after
completion of the Placing, the Capitalisation Issue and the exercise of the Over-allotment Option. In
the event that the Over-allotment Option is exercised, an announcement will be made on the GEM
website at www.hkgem.com, and in the Hongkong iMail in English and the Hong Kong Economic
Times in Chinese.

STABILISATION

      In connection with the Placing, Rexcapital may, on behalf of the Underwriters, over-allocate
and/or effect transactions which stabilise or maintain the market price of the Shares at levels other
than those which might otherwise prevail. The number of Shares that may be over-allocated will be
no greater than the number of Shares that may be issued under the Over-allotment Option. Such
stabilisation transactions may be effected in all jurisdictions where it is permissible to do so, in each
case, in compliance with all applicable laws and regulatory requirements. Such transactions, if
commenced, may be discontinued at any time. Should stabilising transactions be effected in
connection with the distribution of Shares, they will be done so at the absolute discretion of
Rexcapital.

     Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of
securities. To stabilise, the underwriters may bid for, or purchase, the newly issued securities in the
secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the
Offer Price. The stabilisation price to cover over- allocations will not exceed the Offer Price.

      Stabilisation is not a practice commonly associated with the distribution of securities in Hong
Kong. In Hong Kong, such stabilisation activities are restricted to cases where underwriters genuinely
purchase shares on the secondary market solely for the purpose of covering over-allocations in an
offering. The relevant provisions of the Securities Ordinance prohibit market manipulation in the form
of pegging or stabilising the price of securities in certain circumstances. Should stabilising
transactions be effected in connection with the distribution of the Placing Shares, they will be done
at the direction, and in the absolute discretion, of Rexcapital.




                                               — 110 —
APPENDIX I                                                          ACCOUNTANTS’ REPORT

     The following is the text of a report, prepared for the purpose of incorporation in this prospectus,
received from the auditors and reporting accountants of the Company, RSM Nelson Wheeler, Certified          C
                                                                                                            A
Public Accountants, Hong Kong:                                                                              A




7th Floor, Allied Kajima Building,
138 Gloucester Road, Hong Kong




                                                                                        12th June, 2001

The Directors
Era Information & Entertainment Limited
REXCAPITAL (Hong Kong) Limited

Dear Sirs,

     We set out below our report on the financial information regarding Era Information &
Entertainment Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the
“Group”) and its associates for the years ended 31st December, 1999 and 2000 (the “Relevant
Periods”) prepared on the basis set out in section 1 below for inclusion in the prospectus of the
Company dated 12th June, 2001 (the “Prospectus”).

     The Company was incorporated in the Cayman Islands on 26th May, 2000 as an exempted
company with limited liability under the Companies Law (2000 Revision) of the Cayman Islands.
Pursuant to a group reorganization (the “Reorganization”), as detailed in the paragraph headed
“Corporate reorganization” in Appendix IV to the Prospectus, which was completed on 5th June, 2001,
the Company became the holding company of the subsidiaries as set out below.

     As at the date of this report, the Company has direct or indirect interests in the following
subsidiaries and associates, all of which are private companies (or, if incorporated outside Hong Kong,
have substantially similar characteristics to private companies incorporated in Hong Kong). Details of
these companies are as follows:

                                                    Issued and
                                                    fully paid     Attributable equity
                            Place and date of       share          interest held by the Principal
     Company                incorporation           capital             Company           activities
                                                                      Direct     Indirect
     Subsidiaries:

     Era Information &     British Virgin Islands   Ordinary           100%            — Investment
       Entertainment (BVI) 12th February, 2001      US$50,000                            holding
       Limited




                                                — 111 —
APPENDIX I                                                          ACCOUNTANTS’ REPORT

                                                    Issued and
                                                    fully paid      Attributable equity
                            Place and date of       share           interest held by the Principal
     Company                incorporation           capital              Company           activities
                                                                       Direct     Indirect

     Era Home               Hong Kong               Ordinary               —        100% Distribution of
       Entertainment        18th March, 1988        HK$24,000,000                        video products
       Limited

     Era Films (HK)        Hong Kong                Ordinary               —        100% Promotion and
       Limited (Formerly   27th June, 1995          HK$2                                 distribution of
       known as Tsuentat                                                                 films
       Investment Limited)

     Era Communications     Hong Kong               Ordinary               —        100% Investment
       Limited              23rd February, 1990     HK$50,000                            holding

     Era Digital Media    Hong Kong                 Ordinary               —        100% Operation of
       Limited (Formerly  1st December, 1999        HK$10,000                            entertainment
       known as Era Media                                                                related portals
       Limited)

     Red River Agents       Hong Kong               Ordinary               —        100% Advertising
       Limited              28th July, 1999         HK$2                                 agent

     Associates:

     Winning Scope Sdn.     Malaysia                Ordinary               —       22.73% Distribution of
      Bhd.                  13th January, 1996      RM4,840,002                           films

     FinanceSec.com         Hong Kong               Ordinary               —       21.11% Provision of
       Limited (Formerly    28th November, 1997     HK$100,000                            Internet and
       known as Profit                                                                    e-commerce
       Chance Enterprises                                                                 services
       Limited)

     No audited financial statements have been prepared for the Company and Era Information &
Entertainment (BVI) Limited since the dates of their incorporation as they are newly incorporated and
have not been involved in any significant business transactions since their respective dates of
incorporation other than the Reorganization. We have, however, reviewed all the relevant transactions
of these companies for the period since their respective dates of incorporation to the date of this
report, and carried out such procedures as we considered necessary for inclusion of financial
information relating to these companies in this report.

     We have examined the audited financial statements of all other companies now comprising the
Group for the Relevant Periods, or from the respective dates of their incorporation where this is a
shorter period, in accordance with the Auditing Guideline “Prospectuses and the Reporting
Accountant” issued by the Hong Kong Society of Accountants.




                                                 — 112 —
APPENDIX I                                                          ACCOUNTANTS’ REPORT

      The financial statements of Winning Scope Sdn. Bhd. for the Relevant Periods were audited by
Skelchy Su Lim & Associates, Public Accountants, Malaysia. Nelson Wheeler have acted as auditors
of all the other companies now comprising the Group for the year ended 31st December, 1999. With
effect from 1st January, 2001, Nelson Wheeler changed the name to RSM Nelson Wheeler. RSM
Nelson Wheeler have acted as auditors of these companies for the year ended 31st December, 2000.

     The auditors’ report on Era Home Entertainment Limited for the year ended 31st December, 1999
was qualified because of the non-preparation of group financial statements in accordance with Section
124(1) of the Hong Kong Companies Ordinance and Statement of Standard Accounting Practice 2.107.
In addition, the auditors’ reports on the financial statements of Era Films (HK) Limited and Era
Communications Limited for the Relevant Periods and of Era Digital Media Limited for the year ended
31st December, 2000 were modified in respect of fundamental uncertainties as to the continuation of
these companies in business as a going concern and the continuation was noted as being dependent
upon financial supports from the then shareholders of these companies. We are satisfied that the
qualification and modification have no significant impact on the combined results of the Group for the
Relevant Periods and of the combined net assets of the Group as at 31st December, 2000.

     The summaries of the combined results of the Group for the Relevant Periods and of the
combined net assets of the Group as at 31st December, 2000 (the “Summaries”) set out in this report
have been prepared based on the audited financial statements or, where appropriate, management
accounts of the companies now comprising the Group, on the basis set out in section 1 below, after
making such adjustments as are appropriate.

     The directors of the respective companies now comprising the Group are responsible for
preparing the financial statements of these companies, which give a true and fair view. In preparing
these financial statements, it is fundamental that appropriate accounting policies are selected and
applied consistently. The directors of the Company are responsible for preparing the Summaries. It is
our responsibility to form an independent opinion, based on our examination, on the Summaries.

      In our opinion, on the basis of presentation set out in section 1 below, the Summaries together
with the notes thereon give, for the purpose of this report, a true and fair view of the combined results
of the Group for the Relevant Periods and of the combined net assets of the Group as at 31st December,
2000.

1.   BASIS OF PRESENTATION

     The summary of the combined results of the Group for the Relevant Periods includes the results
of the companies comprising the Group as if the current group structure has been in existence
throughout the Relevant Periods or since their respective dates of incorporation where this is a shorter
period.

      The summary of the combined net assets of the Group as at 31st December, 2000 has been
prepared to present the assets and liabilities of the Group as at that date, as if the current group
structure has been in existence at 31st December, 2000.

     All significant transactions and balances between companies now comprising the Group have
been eliminated on combination.


                                               — 113 —
APPENDIX I                                                        ACCOUNTANTS’ REPORT

2.   PRINCIPAL ACCOUNTING POLICIES

     The combined results and the combined net assets have been prepared under the historical cost
convention as modified by revaluation of certain investments.

     The principal accounting policies which have been adopted in arriving at the financial
information in this report are set out below. These policies conform with Statements of Standard
Accounting Practice issued by the Hong Kong Society of Accountants and accounting principles
generally accepted in Hong Kong.

     (a)   Subsidiaries

           Subsidiaries are companies in which the Company, directly or indirectly, holds more than
     half of the issued share capital, or controls more than half of the voting power, or controls the
     composition of the board of directors.

     (b)   Associates

           Associates are companies in which the Group, directly or indirectly, controls not less than
     20% and not more than 50% of the equity as long term investments and exercises a significant
     influence in their management.

           The Group’s share of the post-acquisition results and reserves of associates is included in
     the combined income statement and reserves respectively. The Group’s interests in associates are
     stated in the combined balance sheet at the Group’s share of net assets under the equity method
     of accounting less any additional provisions for diminutions in values other than temporary in
     nature deemed necessary by the directors.

     (c)   Investment securities

          Investment securities are stated at cost less any provision for diminution in value, other
     than temporary, if any. The carrying amounts of investment securities are reviewed at each
     balance sheet date to assess whether the fair values have declined below the carrying amount.
     When a decline other than temporary has occurred, the carrying amount of the investment
     securities should be reduced to its fair value. The amount of the reduction is recognized as an
     expense in the income statement.

     (d)   Club membership

          Club membership which is held for non-trading purpose is stated at fair value at the balance
     sheet date. Changes in the fair value of club membership is credited or debited to the investment
     revaluation reserve until the club membership is sold, or is determined to be impaired. Upon
     disposal, the cumulative gain or loss representing the net sales proceeds and the carrying amount
     of the club membership, together with any surplus/deficit transferred from the investment
     revaluation reserve, is dealt with in the income statement.

           Transfer from the investment revaluation reserve to the income statement as a result of
     impairments are written back in the income statement when the circumstances and events leading
     to the impairment cease to exist.


                                             — 114 —
APPENDIX I                                                       ACCOUNTANTS’ REPORT

   (e)   Fixed assets

         Fixed assets are stated at cost less accumulated depreciation.

        Fixed assets are depreciated at rates sufficient to write off their cost over their estimated
   useful lives on a straight-line basis at 25% per annum.

         Major costs incurred in restoring fixed assets to their normal working condition are charged
   to the income statement. Improvements are capitalized and depreciated over their expected useful
   lives to the Group.

        The carrying amounts of fixed assets are reviewed regularly to assess whether their
   recoverable amounts have declined below their carrying amounts. Expected future cash flows
   have not been discounted in determining the recoverable amount.

        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 recognized in the income statement.

   (f)   Film rights

         Film rights represent license fees prepaid and/or payable by installments under licensing
   agreements for the reproduction and distribution of video products, of films in theatre and
   television, and sub-licensing of film titles, in specified geographical areas and time periods.

        Film rights are stated at cost less amortization. Provision is made against film rights to the
   extent which they are not expected to generate any future revenue for the Group.

        The portion of film rights expected to be recouped within twelve months of the balance
   sheet date is reported as a current asset. The portion of film rights expected to be recouped in
   more than twelve months from the balance sheet date is reported as a non-current asset.

        The attributable license fees of purchased film titles are amortized on a systematic basis
   over the underlying license periods, with reference to projected revenue, according to the
   following:

         —    video products : upon sales of video products;

         —    theatrical release : when films are released in theatre; and

         —    television release : when film materials are delivered.

   (g)   Inventories

         Inventories are stated at the lower of cost and net realizable value. Cost is determined on
   a weighted average basis and includes all costs of purchase and other costs incurred in bringing
   the inventories to their present location and condition.

        Net realizable value is determined based on the estimated selling prices in the ordinary
   course of business less the estimated costs of completion and the estimated costs necessary to
   make the sale.


                                            — 115 —
APPENDIX I                                                       ACCOUNTANTS’ REPORT

   (h)   Revenue recognition

        Revenue from the sales of goods is recognized on the transfer of risks and rewards of
   ownership, which generally coincides with the time when the goods are delivered to customers
   and title has been passed.

         Theatrical income is recognized based on the time when the film is released.

         Revenue from the distribution of film in television is recognized based on the time when
   the film materials are delivered.

        Advertising income is recognized over the period in which the advertisements are
   displayed.

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

         Revenue from the provision of services is recognized when the services are rendered.

   (i)   Pre-operating expenses

        Pre-operating expenses represent company formation costs and are charged to the income
   statement as incurred.

   (j)   Portal development costs

        Costs incurred in the development of new portals and enhancement of existing portals,
   including costs incurred in the development and enhancement of contents, are expensed as
   incurred.

   (k)   Finance leases

         Leases that substantially transfer to the Group all the rewards and risks of ownership of
   assets, other than legal title, are accounted for as finance leases. At the inception of a finance
   lease, the cost of the leased asset is capitalized at the present value of the minimum lease
   payments and recorded together with the obligation, excluding the interest element, to reflect the
   purchase and financing.

        Assets held under capitalized finance leases are included in fixed assets and depreciated
   over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs
   of such leases are charged to the income statement so as to provide a constant periodic rate of
   charge over the lease terms.

        Assets acquired through hire purchase contracts of a financing nature are accounted for as
   finance leases but are depreciated over their estimated useful lives.



                                            — 116 —
APPENDIX I                                                       ACCOUNTANTS’ REPORT

   (l)   Operating leases

         Leases where substantially all the rewards and risks of ownership of assets remain with the
   leasing company are accounted for as operating leases. Rentals applicable to such operating
   leases are charged to the income statement on a straight-line basis over the lease terms.

   (m) Related parties

        Two parties are considered to be related if one party has the ability, directly or indirectly,
   to control the other party or exercise significant influence over the other party in making
   financial and operating decisions. Parties are also considered to be related if they are subject to
   common control or common significant influence. Related parties may be individuals or
   corporate entities.

   (n)   Foreign currency translation                                                                    A



         Transactions in foreign currencies are translated into Hong Kong dollars at the applicable
   rates of exchange ruling on the transaction dates. Monetary assets and liabilities in foreign
   currencies at the balance sheet date are translated at the rates of exchange ruling at that date.
   Profits and losses resulting from this translation policy are dealt with in the income statement.

   (o)   Taxation

        The charge for taxation is based on the results for the year as adjusted for items which are
   non-assessable or disallowable.

         Deferred taxation is provided using the liability method, on all significant timing
   differences in the recognition of revenue and expenses for tax and for financial reporting
   purposes, to the extent that it is probable that the liability will crystallize in the foreseeable
   future. A deferred tax asset is not recognized until its realization is assured beyond reasonable
   doubt.




                                            — 117 —
APPENDIX I                                                      ACCOUNTANTS’ REPORT

3.   RESULTS

     The following is a summary of the combined results of the Group for the Relevant Periods,
prepared on the basis set out in section 1 above, after making such adjustments as are appropriate:

                                                                      Year ended 31st December,
                                                             Note            1999          2000
                                                                         HK$’000       HK$’000

     Turnover                                                 (a)           68,020         103,146
     Cost of sales                                                         (49,048)        (73,945)

     Gross profit                                                           18,972          29,201
     Other revenue                                            (a)              680             300
     Portal promotion costs                                   (b)               —           (2,269)
     Portal development costs                                 (b)               —           (3,213)
     Distribution costs                                                       (491)           (600)
     Administrative expenses                                               (16,985)        (22,418)
     Other operating expenses                                                 (746)             (2)

     Profit from operations                                   (c)            1,430             999
     Finance costs — finance lease charges                                      (6)            (61)
     Share of loss of associates                                              (501)           (704)

     Profit before taxation                                                    923             234
     Taxation                                                 (d)             (417)         (1,228)

     Net profit/(loss) attributable to shareholders                            506            (994)


     Earnings/(loss) per share - basic                        (f)       0.19 cents    (0.38) cents




                                              — 118 —
APPENDIX I                                                                 ACCOUNTANTS’ REPORT

   (a)   Revenue and turnover


         Turnover and revenue recognized during the Relevant Periods are as follows:

                                                                                          Year ended 31st December,
                                                                                             1999              2000
                                                                                          HK$’000          HK$’000

         Turnover
           Sales of goods                                                                   56,851             87,816
           Theatrical income                                                                10,138             11,226
           Television release income                                                         1,031              3,709
           Advertising income                                                                   —                 395


                                                                                            68,020            103,146
         Other revenue
           Bank interest income                                                                  9                 88
           Distribution income                                                                 137                 69
           Dubbing income, net                                                                  68                143
           Sponsorship income                                                                  466                 —
                                                                                               680                300


                                                                                            68,700            103,446



   (b)   Portal promotion costs and portal development costs were incurred for the establishment of the
         following websites:


         (i)    filmed entertainment related website under the domain name of www.mov3.com which was launched in
                March 2000 and has commenced to generate income for the Group since April 2000.


         (ii)   online sales and rental of compact disc/video compact disc/digital versatile disc under the website of
                www.mov3-shop.com which was launched in May 2001.




                                                   — 119 —
APPENDIX I                                                                      ACCOUNTANTS’ REPORT

   (c)   Profit from operations


         Profit from operations is stated after charging/(crediting) the following:

                                                                                                Year ended 31st December,
                                                                                                   1999              2000
                                                                                                HK$’000          HK$’000

         Amortization of film rights                                                              24,754               39,630
         Auditors’ remuneration                                                                      168                  322
         Bad debts written off                                                                       492                    2
         Cost of inventories sold                                                                 11,864               18,655
         Depreciation
            Owned fixed assets                                                                       820                1,211
            Leased fixed assets                                                                       21                  140
         Operating lease rentals
            Land and buildings                                                                     1,255                1,901
            Office equipment                                                                          —                    10
         Pre-operating expenses                                                                       15                   —
         Provision for diminution in value of investment securities                                  254                   —
         Provision for inventories                                                                   750                1,759
         Staff costs including directors’ remuneration                                             9,094               14,422
         Gain on disposal of fixed assets                                                            (40)                (106)



   (d)   Taxation


         The taxation charge comprises:

                                                                                                Year ended 31st December,
                                                                                                   1999              2000
                                                                                                HK$’000          HK$’000

         Hong Kong profits tax                                                                       417                1,228



          Hong Kong profits tax has been provided at the rate of 16% on the estimated assessable profits of the Group
   arising in Hong Kong for the Relevant Periods.


          Certain subsidiaries of the Group had tax losses with tax effect of approximately HK$3 million as at 31st
   December, 2000 for Hong Kong tax purposes which, subject to the agreement by the Inland Revenue Department, may
   be carried forward indefinitely and applied against future profits.


          No provision for profits tax has been provided by the associates as they did not generate any assessable profits
   for the Relevant Periods.


          No deferred taxation was provided as certain subsidiaries of the Group has substantial tax losses in excess of the
   tax allowances over depreciation while the effect of timing differences of other subsidiaries of the Group is not material.


   (e)   Dividends


         No dividends have been paid or declared by the Company and the Group during the Relevant Periods.




                                                      — 120 —
APPENDIX I                                                                    ACCOUNTANTS’ REPORT

   (f)   Earnings/(loss) per share


         The calculation of the basic earnings/(loss) per share is based on the Group’s net profit/(loss) attributable to
   shareholders for the Relevant Periods and on 262,000,000 shares in issue at the date of the prospectus being deemed to
   be in issue throughout the Relevant Periods.


   (g)   Related party transactions


         During the Relevant Periods, the Group had the following material transactions with related parties:

                                                                                              Year ended 31st December,
                                                                                                 1999              2000
                                                                                              HK$’000          HK$’000

         Continuing transactions:

         Distribution income received from
           - Era Communications Co., Limited (“ECCL”) (note i)                                      26                  24
           - Era International (HK) Limited (“EIHK”) (note i)                                       26                  41

         Dubbing income received from an associate, Winning Scope Sdn. Bhd.
           (“WSSB”) (note ii)                                                                      181                 359

         License fee paid to ECCL (note i)                                                          22                  32

         Advertising income received from an associate, FinanceSec.com
           Limited (“FSCL”)                                                                         —                  269

         Discontinuing transactions:

         Film rights paid to ECCL (note i)                                                          99                  —

         Provision for amount due from an investee company, Carnival Home
           Entertainment Limited (“CHEL”) (note ii)                                                254                  —

         Film production cost paid to ECCL (note i)                                                 67                 123



         Notes:


         (i)      Mr. CHIU Fu Sheng, a director of the Company, is a major shareholder of ECCL and EIHK.


         (ii)     Mr. LEUNG Chung Chu, a director of the Company, is a shareholder of WSSB and CHEL.


         The directors are of the opinion that the above transactions were carried out in the normal course of business of
   the Group and at normal commercial terms.


          Pursuant to an intellectual property rights agreement entered into between ECCL and the Group, ECCL granted
   to the Group an exclusive license to use “Era” trademark in Hong Kong and the People’s Republic of China commencing
   on 15th May, 1998 for a period of 10 years and is subject to a renewal for a further 10 years. In consideration: (i) the
   Group paid a sum of approximately HK$155,000 to ECCL being the costs of the intellectual property rights incurred by
   ECCL for the three years ended 31st December, 2000; and (ii) the Group shall pay annual licence fee of HK$1 to ECCL.




                                                    — 121 —
APPENDIX I                                                                   ACCOUNTANTS’ REPORT

         Personal guarantees have been provided by Mr. LEUNG Chung Chu, Andrew, director of the Company, in respect
   of continuing guarantees of HK$750,000 in respect of payment of advertising charges in favour of certain publishers of
   newspapers and magazines. Unlimited personal guarantees have been provided by Mr. LEUNG Chung Chu, Andrew and
   Mr. YAU Kar Man, directors of the Company, to a bank in respect of the provision of e-commerce service to the Group.
   The relevant bank has agreed to release the personal guarantees executed by Mr. LEUNG Chung Chu, Andrew and Mr.
   YAU Kar Man upon listing of the shares of the Company on the Growth Enterprise Market of The Stock Exchange of
   Hong Kong Limited (“GEM”) and for the replacement of them by corporate guarantee of the Company.


         Save as disclosed above, no other material related party transactions have been entered into by the Group.


         The directors have confirmed that only the transactions in respect of distribution income received from ECCL and
   EIHK, dubbing income received from WSSB, license fee paid to ECCL and advertising income received from FSCL
   mentioned above will continue after the listing of the shares of the Company on GEM.


   (h)   Emoluments of directors and five highest paid employees


         Details of the emoluments paid to the directors of the Company during the Relevant Periods are as follows:

                                                                                            Year ended 31st December,
                                                                                               1999              2000
                                                                                            HK$’000          HK$’000

         Fees                                                                                     —                   —
         Basic salaries, allowances and benefits in kind                                       2,008               3,695
         Discretionary bonuses                                                                   273                  84


                                                                                               2,281               3,779



         No directors of the Company waived any emoluments during the Relevant Periods.


         The number of directors of the Company whose emoluments fell within the following bands is as follows:

                                                                                            Year ended 31st December,
                                                                                               1999              2000

         Nil to HK$1,000,000                                                                       3                  2
         HK$1,000,001 to HK$1,500,000                                                              1                  1
         HK$1,500,001 to HK$2,000,000                                                              —                  —
         HK$2,000,001 to HK$2,500,000                                                              —                  1


                                                                                                    4                  4



        The three executive directors received emoluments of approximately HK$1,053,000, HK$654,000 and
   HK$574,000, respectively, for the year ended 31st December, 1999.


        The three executive directors received emoluments of approximately HK$2,165,000, HK$1,054,000 and
   HK$560,000, respectively, for the year ended 31st December, 2000.


         No remuneration was paid to the remaining one non-executive director of the Company during the Relevant
   Periods.




                                                    — 122 —
APPENDIX I                                                                   ACCOUNTANTS’ REPORT

         The five individuals whose emoluments were the highest in the Group are as follows:

                                                                                             Year ended 31st December,
                                                                                                1999              2000

         Directors                                                                                  3                   3
         Non-director employees                                                                     2                   2


                                                                                                    5                   5



         Information relating to the emoluments of the three directors has been disclosed above. Details of the emoluments
   of the remaining two highest paid, non-director employees during the Relevant Periods are as follows:

                                                                                             Year ended 31st December,
                                                                                                1999              2000
                                                                                             HK$’000          HK$’000

         Basic salaries, allowances and benefits in kind                                          877               1,292



         The number of the remaining highest paid, non-director employees whose emoluments fell within the following
   band is as follows:

                                                                                             Year ended 31st December,
                                                                                                1999              2000

         Nil to HK$1,000,000                                                                        2                   2



          During the Relevant Periods, no emoluments were paid by the Group to the directors or any of the five highest
   paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.


   (i)   Retirement benefits


          According to the Mandatory Provident Fund (“MPF”) legislation regulated by the Mandatory Provident Fund
   Schemes Authority in Hong Kong, with effect from 1st December, 2000, the Group is required to participate in MPF
   scheme operated by approved trustees in Hong Kong and to make contributions for its eligible employees. The
   contributions borne by the Group are calculated at 5% of the salaries (monthly contribution is limited to 5% of
   HK$20,000 for each eligible employees) as calculated under the MPF legislation.




                                                    — 123 —
APPENDIX I                                                      ACCOUNTANTS’ REPORT

4.   NET ASSETS

     The following is a summary of the combined net assets of the Group as at 31st December, 2000,
prepared on the basis set out in section 1 above, after making such adjustments as are appropriate:

                                                                  Note                    HK$’000

     NON-CURRENT ASSETS

     Film rights                                                   (a)                       1,041
     Fixed assets                                                  (b)                       4,586
     Interests in associates                                       (c)                         956
     Club membership                                               (e)                         650

                                                                                             7,233

     CURRENT ASSETS

     Inventories                                                   (f)                       8,661
     Current portion of film rights                                (a)                       5,665
     Films production in progress                                                              229
     Trade and other receivables                                   (g)                      18,310
     Prepayment and deposits                                                                 4,646
     Bank and cash balances                                        (h)                       7,476
                                                                                            44,987

     CURRENT LIABILITIES

     Trade and other payables                                      (i)                      16,838
     Film rights payable                                                                    10,691
     Provision for taxation                                        (j)                         873
     Current portion of obligations under finance leases           (k)                         207
                                                                                            28,609

     NET CURRENT ASSETS                                                                     16,378

     TOTAL ASSETS LESS CURRENT LIABILITIES                                                  23,611

     NON-CURRENT LIABILITIES

     Obligations under finance leases                              (k)                         341
     Loans from shareholders                                       (l)                       3,700
                                                                                             4,041

     NET ASSETS                                                                             19,570




                                            — 124 —
APPENDIX I                                                                  ACCOUNTANTS’ REPORT

   (a)   Film rights

                                                                                                               HK$’000

         At 1st January, 2000                                                                                     7,913
         Acquired during the year, at cost                                                                       38,423
         Amortization for the year                                                                              (39,630)


         At 31st December, 2000                                                                                   6,706
         Current portion                                                                                         (5,665)


         Non-current portion                                                                                      1,041



   (b)   Fixed assets

                                                                                       Accumulated
                                                                           Cost        depreciation     Net book value
                                                                        HK$’000            HK$’000            HK$’000

         Leasehold improvements                                            3,638               1,471              2,167
         Computers                                                         2,001                 956              1,045
         Furniture and fixtures                                            2,233               1,365                868
         Motor vehicles                                                      644                 138                506


                                                                           8,516               3,930              4,586



         The aggregate net book value of the Group’s fixed assets held under finance leases as at 31st December, 2000 is
   approximately HK$592,000.


   (c)   Interests in associates

                                                                                                               HK$’000

         Share of net assets of associates                                                                          956



         According to the commitment letter signed on 23rd November, 1999, the Group’s shareholding in FinanceSec.com
   Limited shall be reduced from 21.11% to 20% after completion of 1 year upon the exercise of the share option scheme
   granted to a management shareholder. Up to the date of our report, the share option scheme has not been exercised.


   (d)   Investment securities

                                                                                                               HK$’000

         Unlisted shares, at cost                                                                                    —
         Loan to an investee company                                                                                254


                                                                                                                    254
         Provision for diminution in value                                                                         (254)


                                                                                                                     —




                                                   — 125 —
APPENDIX I                                                                  ACCOUNTANTS’ REPORT

         Details of the investment securities at 31st December, 2000 are as follows:

                                                             Place of          Class of    Percentage        Nature of
         Company                                        incorporation           shares        holding         business

         Carnival Home Entertainment Limited               Hong Kong          Ordinary            15%         Dormant


   (e)   Club membership

                                                                                                              HK$’000

         Club membership, at market value                                                                          650



        Club membership represents the corporate membership for Chung Shan Hot Spring Golf Club in the People’s
   Republic of China.

   (f)   Inventories

         Inventories represent finished goods of video products.

         As at 31st December, 2000 the carrying amount of inventories that are carried at net realizable value amounted
   to approximately HK$1.2 million.

   (g)   Trade and other receivables

                                                                                                              HK$’000

         Trade receivables                                                                                      18,073
         Other receivables                                                                                         237


                                                                                                                18,310



   (h)   Bank and cash balances

          Included in bank and cash balances are time deposits of HK$100,000 and HK$750,000 pledged by the Group to
   banks in respect of payment of advertising charges in favour of a newspaper publisher and provision of e-commerce
   service, respectively.

   (i)   Trade and other payables

                                                                                                              HK$’000

         Trade payables                                                                                         12,768
         Other payables                                                                                          3,405
         Receipts in advance                                                                                       236
         Due to an associate                                                                                         4
         Due to related parties                                                                                    425


                                                                                                                16,838



         The amounts due to an associate and related parties are unsecured, interest free and have no fixed terms of
   repayment.



                                                   — 126 —
APPENDIX I                                                                    ACCOUNTANTS’ REPORT

   (j)   Provision for taxation


         As at 31st December, 2000 provision for taxation represents estimated liabilities of the Group in respect of Hong
   Kong profits tax provided for the current and prior years less provisional tax paid.


         The principal components of deferred taxation assets/(liabilities) of the Group not provided for at 31st December,
   2000 are as follows:

                                                                                                                 HK$’000

         Tax effect of timing differences arising from:

         Taxation losses carried forward                                                                             2,985
         Excess of tax allowances over depreciation                                                                   (408)


                                                                                                                     2,577



   (k)   Obligations under finance leases

                                                                                                                 HK$’000

         Obligations under finance leases                                                                              548
         Current portion                                                                                              (207)


         Non-current portion                                                                                           341


         Non-current portion of obligations under finance leases
           is repayable as follows:

         After one year, but within two years                                                                          187
         After two years, but within five years                                                                        154


                                                                                                                       341



   (l)   Loans from shareholders


         Loans from shareholders represented unsecured loans from 5D Technology Holdings Ltd., Mr. LEUNG Chung
   Chu, Andrew and Mei Ah Entertainment Development Company Limited in the amounts of HK$3,000,000, HK$600,000
   and HK$100,000, respectively. Loans from shareholders were unsecured, interest free and were transferred to their full
   amounts to pay up the share capital of Era Home Entertainment Limited (“Era Home”), a subsidiary of the Company,
   subsequent to 31st December, 2000. Details of the increase in share capital are set out in subsequent events in section
   7 note (a).


   (m)   Reserves


         There were no material movements in reserves during the Relevant Periods.




                                                    — 127 —
APPENDIX I                                                                     ACCOUNTANTS’ REPORT

     (n)   Commitments


           As at 31st December, 2000 the Group had the following commitments:


           (i)    Operating lease commitments

                                                                                                                  HK$’000

                  Annual operating lease commitments payable in the following year
                    under non-cancelable operating leases in respect of land and
                    buildings expiring between two to five years, inclusive                                          2,299



           (ii)   Other commitments

                                                                                                                  HK$’000

                  Unpaid capital contribution for the investment in an associate                                       116
                  Unpaid film rights due to licensors                                                               10,761
                  Software development costs                                                                           150



     (o)   Contingent liabilities


           As at 31st December, 2000, 20 employees of the Group have completed the required number of years of service
     under the Hong Kong Employment Ordinance to be eligible for long service payments on termination of their
     employment. The Group is only liable to make such payments where the termination meets the required circumstances
     specified in the Ordinance. If the termination of all these employees met the circumstances required by the Ordinance,
     the Group’s liability at 31st December, 2000 would be approximately HK$1,681,000. No provision has been made for
     this amount as at 31st December, 2000.


     (p)   Net assets of the Company


           The Company was incorporated in the Cayman Islands on 26th May, 2000. The net assets of the Company as at
     31st December, 2000, prepared on the basis set out in section 1 above, would have been approximately HK$19,570,000,
     representing its investments in subsidiaries.


     (q)   Distributable reserves


          As at 31st December, 2000, the Company had no reserve available for distribution to the shareholders of the
     Company.


5.   DIRECTORS’ REMUNERATION

     Save as disclosed herein, no remuneration has been paid or is payable in respect of the Relevant
Periods by the Company or any of the companies now comprising the Group to the directors of the
Company. Under the arrangements currently in force, the aggregate amount of directors’ fees and other
emoluments payable for the year ending 31st December, 2001 is estimated to be approximately
HK$4.1 million before discretionary bonus and share options which are subject to the approval of the
board of directors.




                                                      — 128 —
APPENDIX I                                                       ACCOUNTANTS’ REPORT

6.   ULTIMATE HOLDING COMPANY

     The directors of the Company consider Era Communications Co., Limited, a company
incorporated in Taiwan, to be the ultimate holding company of the Company.

7.   SUBSEQUENT EVENTS

     The following events have occurred subsequent to 31st December, 2000:

     (a)   On 20th February, 2001 Era Home allotted 4,000,000 ordinary shares of HK$1 each at par
           for cash totaling HK$4,000,000 to its then shareholders of which HK$3,700,000 was fully
           paid up by the loans from shareholders.

     (b)   The companies now comprising the Group underwent a reorganization in preparation for the
           listing of the shares of the Company on GEM. Further details of the reorganization and
           alterations in the share capital of the companies now comprising the Group are set out in
           the paragraphs headed “Corporate reorganization” and “Changes in share capital” in
           Appendix IV of the Prospectus.

     Save as aforesaid, no other significant events have taken place subsequent to 31st December,
2000.

8.   SUBSEQUENT FINANCIAL STATEMENTS

    No audited financial statements have been prepared for the Company or any of the companies
now comprising the Group in respect of any period subsequent to 31st December, 2000.

                                                                              Yours faithfully
                                                                          RSM Nelson Wheeler
                                                                       Certified Public Accountants
                                                                                Hong Kong




                                             — 129 —
APPENDIX II                                                             PROPERTY VALUATION

      The following is the text of a letter, summary of valuation and valuation certificate, prepared for
the purpose of incorporation in this prospectus by American Appraisal Hong Kong Limited, an
independent valuer, in connection with their valuation as at 31st March, 2001 of the property interests
of the Group:

                                                                                                              C
                                                                                                              A




                                                                                          12th June, 2001
The Directors
ERA Information & Entertainment Limited
Units 1008-1018, 10th Floor
Trans Asia Centre
18 Kin Hong Street
Kwai Chung
New Territories
Hong Kong

Dear Sirs,

     In accordance with your instructions to value the property interests of ERA Information &                R
                                                                                                              (
Entertainment Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the
“Group”) in Hong Kong, we confirm that we have carried out inspection for the properties, made
relevant enquiries and obtained such further information as we consider necessary for the purpose of
providing you with our opinion of the value of such property interests as at 31st March, 2001 (the
“valuation date”).

     Our valuation of such property interests is our opinion of open market value which we would
define as intended to mean “the best price at which the sale of an interest in property might reasonably
be expected to have been completed unconditionally for cash consideration on the date of valuation
assuming:

     (i)     a willing seller;

     (ii)    that, prior to the date of valuation, there had been a reasonable period (having regard to the
             nature of the property and the state of the market) for the proper marketing of the interest,
             for the agreement of price and terms and for the completion of the sale;

     (iii) that the state of the market, levels of values and other circumstances were, on any earlier
           assumed date of exchange of contracts, the same as on the date of valuation;

     (iv) that no account is taken of any additional bid by a purchaser with a special interest; and

     (v)     that both parties to the transaction had acted knowledgeably, prudently and without
             compulsion.”


                                                — 130 —
APPENDIX II                                                          PROPERTY VALUATION

     Based on this open market approach, the property interests licensed to or leased by the Group
are considered to have no commercial value either because of their non-assignability in the open
market or there are prohibitions against subletting and/or assignment contained in the respective
licence and/or tenancy agreement or the lack of substantial profit rent.

     Our valuations have been made on the assumption that the owners sell the property interests on
the open market without the benefit of any deferred term contracts, leasebacks, joint ventures,
management agreements or any similar arrangements which could serve to increase the value of such
property interests. In addition, no forced sale situation in any manner is assumed in our valuations.

     No allowance has been made in our valuations for any charges, mortgages or amounts owning
on any of the properties valued nor for any expenses or taxation which may be incurred in effecting
a sale. Unless otherwise stated, it is assumed that all the property interests are free from
encumbrances, restrictions and outgoings of an onerous nature which could affect their rental values.

      We have assumed that all consents, approvals and licences from relevant government authorities
for the buildings and structures erected or to be erected thereon have been granted. Also, we have
assumed that unless otherwise stated, all buildings and structures erected on the site are held by the
owners or permitted to be occupied by the owners.

      It is assumed that all applicable zoning and use regulations and restrictions have been complied
within unless a non-conformity has been stated, defined and considered in the valuation certificate.
Further, it is assumed that the utilization of the land and improvements is within the boundaries of the
property described and that no encroachment or trespass exists unless noted in the valuation
certificate.

Titleship Investigation

     We have not investigated the title of the properties in Hong Kong nor have we scrutinized the
original documents to verify ownership or to verify any amendments which may not appear on the
copies handed to us. We have relied on the information provided to us by the Group.

     All legal documents disclosed in this letter and valuation certificate are for reference only and
no responsibility is assumed for any legal matters concerning the legal title to the property interests
set out in this letter and valuation certificate.

Limiting Conditions

     We have relied to a considerable extent on the information provided by the Group and have
accepted advice given to us by the Group on such matters as statutory notices, easements, tenure,
occupancy, site and floor areas and all other relevant matters. Dimensions and areas included in the
valuation certificate are based on information contained in the documents provided to us and are only
approximations.

     We have no reason to doubt the truth and accuracy of the information as provided to us by the
Group. We were also advised by the Group that no material facts have been omitted from the
information so supplied. We consider we have been provided with sufficient information to reach an
informed view.


                                              — 131 —
APPENDIX II                                                                    PROPERTY VALUATION

     No structural survey has been made and we are therefore unable to report as to whether the
property is or is not free of rot, infestation or any other structural defects. No tests were carried out
on any of the services.

Remarks                                                                                                                   R
                                                                                                                          (


     Unless otherwise stated, all monetary figures stated in this valuation certificate are in Hong Kong
dollars.

      We enclose herewith the summary of valuation and the valuation certificate.

                                                                    Yours faithfully,
                                                                  For and on behalf of
                                                       AMERICAN APPRAISAL HONGKONG LIMITED
                                                                       Leo C. Ho
                                                                    BSc. MTP PCBA ARICS AHKIS RPS
                                                                              Vice President


Note: Mr. Leo C. Ho, who is a Chartered Valuation Surveyor and a Registered Professional Surveyor, has over 12 years of   R
      experience in valuation of properties in Hong Kong and the PRC.




                                                     — 132 —
APPENDIX II                                               PROPERTY VALUATION

                                 SUMMARY OF VALUATION

Group I — Properties leased and occupied by the Group in Hong Kong

                                                                        Open Market Value
                                                                      in existing state as at
     Property                                                             31st March, 2001      R
                                                                                                (
                                                                                       (HK$)    (


1.   Workshop Nos. 3 to 10 and                                        No commercial value
     Flat Roof Nos. 3 to 10
     on the 2nd Floor,
     Trans Asia Centre
     18 Kin Hong Street
     Kwai Chung
     New Territories

2.   Workshop Nos. 5 to 18                                            No commercial value
     on the 10th Floor
     Trans Asia Centre
     18 Kin Hong Street
     Kwai Chung
     New Territories

Group II — Property licensed and occupied by the Group in Hong Kong

3.   Carparking Space Nos. P.6, P.9                                   No commercial value
     L11, L13 on 1st Floor
     Trans Asia Centre
     18 Kin Hong Street
     Kwai Chung
     New Territories




                                       — 133 —
APPENDIX II                                                                    PROPERTY VALUATION

                                        VALUATION CERTIFICATE

Group I — Properties leased and occupied by the Group in Hong Kong

                                                                                                    Open Market Value
                                                                              Particulars of      in existing state as at
     Property              Description and tenure                             occupancy               31st March, 2001      R
                                                                                                                   (HK$)    (
                                                                                                                            (
                                                                                                                            (
1.   Workshop Nos. 3       The property comprises 7 units on the 2nd floor    The property is      No commercial value      (
     to 10 and Flat Roof   of a 17-storey industrial building completed in    currently
     Nos. 3 to 10 on the   or around 1994.                                    occupied by the
     2nd Floor                                                                Group mainly
     Trans Asia Centre     The property has a gross floor area of             for the purposes
     18 Kin Hong Street    approximately 1,506.6 sq.m. (16,217 sq.ft.)        of storage.
     Kwai Chung            including flat roof area of approximately 450.39
     New Territories       sq.m. (4,848 sq. ft.).

                           According to a tenancy agreement dated 13th
                           April, 2000, the property is leased to ERA
                           Home Entertainment Limited for the term of one
                           year nine months and 15 days from 1st April,
                           2000 to 15th January, 2002 at a monthly rent of
                           HK$65,372.00 exclusive of rates and
                           management charges.


2.   Workshop Nos. 5       The property comprises 14 units on the 10th        The property is      No commercial value
     to 18 on the          floor of a 17-storey industrial building           currently
     10th Floor            completed in or around 1994.                       occupied by the
     Trans Asia Centre                                                        Group as its
     18 Kin Hong Street    The property has a gross floor area of             production
     Kwai Chung            approximately 1,811.59 sq.m. (19,500 sq.ft.).      facilities and
     New Territories                                                          ancillary office.
                           According to a tenancy agreement dated 10th
                           January, 2000, Workshop Nos. 8 to 18 are leased
                           to ERA Home Entertainment Limited for the
                           term of two years from 16th January, 2000 to
                           15th January, 2002 at a monthly rent of
                           HK$104,566.00 exclusive of rates and
                           management charges.

                           According to a tenancy agreement dated 12th
                           July, 2000, workshop Nos. 5 to 7 are leased to
                           ERA Home Entertainment Limited for a term
                           commencing from 1st July, 2000 to 15th
                           January, 2002 at a monthly rent of
                           HK$20,484.00 exclusive of rates, government
                           rent and management charges.




                                                     — 134 —
APPENDIX II                                                                     PROPERTY VALUATION

Group II — Property licensed and occupied by the Group in Hong Kong

                                                                                                   Open Market Value
                                                                               Particulars of    in existing state as at
     Property              Description and tenure                              occupancy             31st March, 2001      R
                                                                                                                  (HK$)    (
                                                                                                                           (
                                                                                                                           (
3.   Carparking space      The property comprises four parking spaces on       The property is    No commercial value      (
     Nos. P.6, P.9, L11,   the 1st floor of an industrial building completed   currently used
     L13                   in or around 1994.                                  by the Group as
     on 1st Floor                                                              carparking
     Trans Asia Centre     P.6 and L13 are licensed on a monthly basis         spaces.
     18 Kin Hong Street    commencing on 1st November, 1999 at a licence
     Kwai Chung            fee of HK$3,500 per month and HK$4,500 per
     New Territories       month respectively. L11 is licensed on a
                           monthly basis commencing on 1st February,
                           1998 at a licence fee of HK$4,500 per month.
                           P.9 is licensed on a monthly basis commencing
                           on 8th November, 2000 at a licence fee of
                           HK$3,500 per month.




                                                     — 135 —
                                                                                                            C
APPENDIX III                       SUMMARY OF THE CONSTITUTION OF THE                                       (
                                                                                                            A
                              COMPANY AND CAYMAN ISLANDS COMPANY LAW

     Set out below is a summary of certain provisions of the Memorandum and Articles of Association
of the Company and of certain aspects of Cayman company law.

      The Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 26th May, 2000, under the Companies Law. The Memorandum of Association (the
“Memorandum”) and the Articles comprise its constitution.

1.   MEMORANDUM OF ASSOCIATION

     (a)   The Memorandum states, inter alia, that the liability of members of the Company is limited       R
                                                                                                            (
           to the amount, if any, for the time being unpaid on the Shares respectively held by them and
           that the objects for which the Company is established are unrestricted (including acting as
           an investment company), and that the Company shall have and be capable of exercising any
           and all of the powers at any time or from time to time exercisable by a natural person or
           body corporate, irrespective of any question of corporate benefit, as provided in section
           27(2) of the Companies Law in doing in any part of the world whether as principal, agent,
           contractor or otherwise whatever may be considered by it necessary for the attainment of
           its objects, and in view of the fact that the Company is an exempted company that the
           Company will not trade in the Cayman Islands with any person, firm or corporation except
           in furtherance of the business of the Company carried on outside the Cayman Islands.

     (b)   The Company may by special resolution alter its Memorandum with respect to any objects,
           powers or other matters specified therein.

2.   ARTICLES OF ASSOCIATION

     The Articles were adopted on 5th June, 2001. The following is a summary of certain provisions
of the Articles:

     (a)   Directors

           (i)   Power to allot and issue shares and warrants

                Subject to the provisions of the Companies Law and the Memorandum and Articles
           and to any special rights conferred on the holders of any shares or class of shares, any share
           may be issued with or have attached thereto such rights, or such restrictions, whether with
           regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary
           resolution determine (or, in the absence of any such determination or so far as the same may
           not make specific provision, as the board may determine). Subject to the Companies Law,
           the rules of any Designated Stock Exchange (as defined in the Articles) and the
           Memorandum and Articles, any share may be issued on terms that, at the option of the
           Company or the holder thereof, they are liable to be redeemed.

                 The board may issue warrants conferring the right upon the holders thereof to
           subscribe for any class of shares or securities in the capital of the Company on such terms
           as it may from time to time determine.

                Subject to the provisions of the Companies Law and the Articles and, where
           applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and


                                              — 136 —
APPENDIX III                   SUMMARY OF THE CONSTITUTION OF THE
                          COMPANY AND CAYMAN ISLANDS COMPANY LAW

      without prejudice to any special rights or restrictions for the time being attached to any
      shares or any class of shares, all unissued shares in the Company shall be at the disposal
      of the board, which may offer, allot, grant options over or otherwise dispose of them to such
      persons, at such times, for such consideration and on such terms and conditions as it in its
      absolute discretion thinks fit, but so that no shares shall be issued at a discount.

           Neither the Company nor the board shall be obliged, when making or granting any
      allotment of, offer of, option over or disposal of shares, to make, or make available, any
      such allotment, offer, option or shares to members or others with registered addresses in
      any particular territory or territories being a territory or territories where, in the absence of
      a registration statement or other special formalities, this would or might, in the opinion of
      the board, be unlawful or impracticable. Members affected as a result of the foregoing
      sentence shall not be, or be deemed to be, a separate class of members for any purpose
      whatsoever.

      (ii)   Power to dispose of the assets of the Company or any subsidiary

            There are no specific provisions in the Articles relating to the disposal of the assets
      of the Company or any of its subsidiaries. The Directors may, however, exercise all powers
      and do all acts and things which may be exercised or done or approved by the Company and
      which are not required by the Articles or the Companies Law to be exercised or done by the
      Company in general meeting.

      (iii) Compensation or payments for loss of office

            Pursuant to the Articles, payments to any Director or past Director of any sum by way
      of compensation for loss of office or as consideration for or in connection with his
      retirement from office (not being a payment to which the Director is contractually entitled)
      must be approved by the Company in general meeting.

      (iv) Loans and provision of security for loans to Directors

             There are provisions in the Articles prohibiting the making of loans to Directors.

      (v)    Disclosure of interests in contracts with the Company or any of its subsidiaries.

            A Director may hold any other office or place of profit with the Company (except that         A
      of the auditor of the Company) in conjunction with his office of Director for such period
      and, subject to the Articles, upon such terms as the board may determine, and may be paid
      such extra remuneration therefor (whether by way of salary, commission, participation in
      profits or otherwise) in addition to any remuneration provided for by or pursuant to any
      other Articles. A Director may be or become a director or other officer of, or otherwise
      interested in, any company promoted by the Company or any other company in which the
      Company may be interested, and shall not be liable to account to the Company or the
      members for any remuneration, profits or other benefits received by him as a director,
      officer or member of, or from his interest in, such other company. Subject as otherwise
      provided by the Articles, the board may also cause the voting power conferred by the shares
      in any other company held or owned by the Company to be exercised in such manner in all


                                           — 137 —
APPENDIX III                  SUMMARY OF THE CONSTITUTION OF THE
                         COMPANY AND CAYMAN ISLANDS COMPANY LAW

      respects as it thinks fit, including the exercise thereof in favour of any resolution
      appointing the Directors or any of them to be directors or officers of such other company,
      or voting or providing for the payment of remuneration to the directors or officers of such
      other company.

            Subject to the Companies Law and the Articles, no Director or proposed or intended
      Director shall be disqualified by his office from contracting with the Company, either with
      regard to his tenure of any office or place of profit or as vendor, purchaser or in any other
      manner whatsoever, nor shall any such contract or any other contract or arrangement in
      which any Director is in any way interested be liable to be avoided, nor shall any Director
      so contracting or being so interested be liable to account to the Company or the members
      for any remuneration, profit or other benefits realised by any such contract or arrangement
      by reason of such Director holding that office or the fiduciary relationship thereby
      established. A Director who to his knowledge is in any way, whether directly or indirectly,
      interested in a contract or arrangement or proposed contract or arrangement with the
      Company shall declare the nature of his interest at the meeting of the board at which the
      question of entering into the contract or arrangement is first taken into consideration, if he
      knows his interest then exists, or in any other case, at the first meeting of the board after
      he knows that he is or has become so interested.

           A Director shall not vote (nor be counted in the quorum) on any resolution of the
      board in respect of any contract or arrangement or other proposal in which he is to his
      knowledge materially interested but this prohibition shall not apply to any of the following
      matters, namely:

           (aa) any contract or arrangement for giving of any security or indemnity to the
                Director in respect of money lent or obligations incurred or undertaken by him
                at the request of or for the benefit of the Company or any of its subsidiaries;

           (bb) any contract or arrangement for the giving by the Company of any security or
                indemnity to a third party in respect of a debt or obligation of the Company or
                any of its subsidiaries for which the Director has himself assumed responsibility
                in whole or in part whether alone or jointly under a guarantee or indemnity or
                by the giving of security;

           (cc) any contract or arrangement concerning an offer of shares or debentures or other
                securities of or by the Company or any other company which the Company may
                promote or be interested in for subscription or purchase, where the Director is
                or is to be interested as a participant in the underwriting or sub-underwriting of
                the placing;

           (dd) any contract or arrangement in which the Director is interested in the same
                manner as other holders of shares or debentures or other securities of the
                Company or any of its subsidiaries by virtue only of his interest in shares or
                debentures or other securities of the Company;


                                         — 138 —
APPENDIX III                  SUMMARY OF THE CONSTITUTION OF THE
                         COMPANY AND CAYMAN ISLANDS COMPANY LAW

           (ee) any contract or arrangement concerning any other company in which he is
                interested only, whether directly or indirectly, as an officer or executive or a
                shareholder other than a company in which the Director together with any of his
                associates (as defined by the rules, where applicable, of any Designated Stock
                Exchange (as defined in the Articles)) is beneficially interested in 5% or more
                of the issued shares or of the voting rights of any class of shares of such company
                (or of any third company through which his interest is derived); or

           (ff) any proposal concerning the adoption, modification or operation of a share
                option scheme, a pension fund or retirement, death, or disability benefits scheme
                or other arrangement which relates both to Directors and employees of the
                Company or of any of its subsidiaries and does not provide in respect of any
                Director as such any privilege or advantage not accorded to the employees to
                which such scheme or fund relates.

      (vi) Remuneration                                                                                 C
                                                                                                        A


            The ordinary remuneration of the Directors shall from time to time be determined by
      the Company in general meeting, such sum (unless otherwise directed by the resolution by
      which it is voted) to be divided amongst the Directors in such proportions and in such
      manner as the board may agree or, failing agreement, equally, except that any Director
      holding office for part only of the period in respect of which the remuneration is payable
      shall only rank in such division in proportion to the time during such period for which he
      held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel
      and incidental expenses reasonably expected to be incurred or incurred by them in attending
      any board meetings, committee meetings or general meetings or separate meetings of any
      class of shares or of debentures of the Company or otherwise in connection with the
      discharge of their duties as Directors.

            Any Director who, by request, goes or resides abroad for any purpose of the Company
      or who performs services which in the opinion of the board go beyond the ordinary duties
      of a Director may be paid such extra remuneration (whether by way of salary, commission,
      participation in profits or otherwise) as the board may determine and such extra
      remuneration shall be in addition to or in substitution for any ordinary remuneration as a
      Director. An executive Director appointed to be a managing director, joint managing
      director, deputy managing director or other executive officer shall receive such
      remuneration (whether by way of salary, commission or participation in profits or otherwise
      or by all or any of those modes) and such other benefits (including pension and/or gratuity
      and/or other benefits on retirement) and allowances as the board may from time to time
      decide. Such remuneration may be either in addition to or in lieu of his remuneration as a
      Director. The board may establish or concur or join with other companies (being subsidiary
      companies of the Company or companies with which it is associated in business) in
      establishing and making contributions out of the Company’s monies to any schemes or
      funds for providing pensions, sickness or compassionate allowances, life assurance or other
      benefits for employees (which expression as used in this and the following paragraph shall
      include any Director or ex-Director who may hold or have held any executive office or any
      office of profit with the Company or any of its subsidiaries) and ex-employees of the
      Company and their dependents or any class or classes of such persons.


                                          — 139 —
APPENDIX III                  SUMMARY OF THE CONSTITUTION OF THE
                         COMPANY AND CAYMAN ISLANDS COMPANY LAW

           The board may pay, enter into agreements to pay or make grants of revocable or
      irrevocable, and either subject or not subject to any terms or conditions, pensions or other
      benefits to employees and ex-employees and their dependents, or to any of such persons,
      including pensions or benefits additional to those, if any, to which such employees or
      ex-employees or their dependents are or may become entitled under any such scheme or
      fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the
      board considers desirable, be granted to an employee either before and in anticipation of,
      or upon or at any time after, his actual retirement.

      (vii) Retirement, appointment and removal                                                      A



             At each annual general meeting, one third of the Directors for the time being (or if
      their number is not a multiple of three, then the number nearest to but not greater than one
      third) will retire from office by rotation provided that no Director holding office as
      chairman and/or managing director shall be subject to retirement by rotation, or be taken
      into account in determining the number of Directors to retire. The Directors to retire in
      every year will be those who have been longest in office since their last re-election or
      appointment but as between persons who became or were last re-elected Directors on the
      same day those to retire will (unless they otherwise agree among themselves) be determined
      by lot. There are no provisions relating to retirement of Directors upon reaching any age
      limit.

            The Directors shall have the power from time to time and at any time to appoint any
      person as a Director either to fill a casual vacancy on the board or as an addition to the
      existing board. Any Director so appointed shall hold office only until the next following
      annual general meeting of the Company and shall then be eligible for re-election. Neither      C
                                                                                                     A
      a Director nor an alternate Director is required to hold any shares in the Company by way
      of qualification.

           A Director may be removed by a special resolution of the Company before the
      expiration of his period of office (but without prejudice to any claim which such Director
      may have for damages for any breach of any contract between him and the Company) and
      may by ordinary resolution appoint another in his place. Unless otherwise determined by
      the Company in general meeting, the number of Directors shall not be less than two. There
      is no maximum number of Directors.

           The office or director shall be vacated:

           (aa) if he resigns his office by notice in writing delivered to the Company at the
                registered office of the Company for the time being or tendered at a meeting of
                the Board whereupon the Board resolves to accept such resignation;

           (bb) becomes of unsound mind or dies;

           (cc) if, without special leave, he is absent from meetings of the board (unless an
                alternate director appointed by him attends) for six (6) consecutive months, and
                the board resolves that his office is vacated;


                                         — 140 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

               (dd) if he becomes bankrupt or has a receiving order made against him or suspends
                    payment or compounds with his creditors;

               (ee) if he is prohibited from being a director by law;

               (ff) if he ceases to be a director by virtue of any provision of law or is removed from
                    office pursuant to the Articles.

              The board may from time to time appoint one or more of its body to be managing
         director, joint managing director, or deputy managing director or to hold any other
         employment or executive office with the Company for such period and upon such terms as
         the board may determine and the board may revoke or terminate any of such appointments.
         The board may delegate any of its powers, authorities and discretions to committees
         consisting of such Director or Directors and other persons as the board thinks fit, and it may
         from time to time revoke such delegation or revoke the appointment of and discharge any
         such committees either wholly or in part, and either as to persons or purposes, but every
         committee so formed shall, in the exercise of the powers, authorities and discretions so
         delegated, conform to any regulations that may from time to time be imposed upon it by the
         board.

         (viii) Borrowing powers                                                                          C
                                                                                                          2
                                                                                                          A
              The board may exercise all the powers of the Company to raise or borrow money, to
         mortgage or charge all or any part of the undertaking, property and assets (present and
         future) and uncalled capital of the Company and, subject to the Companies Law, to issue
         debentures, bonds and other securities of the Company, whether outright or as collateral
         security for any debt, liability or obligation of the Company or of any third party.

         (ix) Proceedings of the Board

              The board may meet for the despatch of business, adjourn and otherwise regulate their
         meetings as they think fit. Questions arising at any meeting shall be determined by a
         majority of votes. In the case of an equality of votes, the chairman of the meeting shall have
         an additional or casting vote.

         (x)   Register of Directors and Officers

               The Companies Law and the Articles provide that the Company is required to maintain
         at its registered office a register of directors and officers which is not available for
         inspection by the public. A copy of such register must be filed with the Registrar of
         Companies in the Cayman Islands and any change must be notified to the Registrar within
         30 days of any change in such directors or officers.

   (b)   Alterations to constitutional documents

        The Articles may be rescinded, altered or amended by the Company in general meeting by
   special resolution. The Articles state that a special resolution shall be required to alter the
   provisions of the Memorandum, to amend the Articles or to change the name of the Company.


                                            — 141 —
APPENDIX III                      SUMMARY OF THE CONSTITUTION OF THE
                             COMPANY AND CAYMAN ISLANDS COMPANY LAW

   (c)   Alteration of capital                                                                            A


        The Company may from time to time by ordinary resolution in accordance with the relevant
   provisions of the Companies Law:

         (i)    increase its capital by such sum, to be divided into shares of such amounts as the
                resolution shall prescribe;

         (ii)   consolidate and divide all or any of its capital into shares of larger amount than its
                existing shares.

         (iii) divide its shares into several classes and without prejudice to any special rights
               previously conferred on the holders of existing shares as the directors may determine;

         (iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the
              Memorandum, subject nevertheless to the provisions of the Companies Law, and so
              that the resolution whereby any share is sub-divided may determine that, as between
              the holders of the shares resulting from such sub-division, one or more of the shares
              may have any such preferred or other special rights, over, or may have such deferred
              rights or be subject to any such restrictions as compared with the others as the
              Company has power to attach to unissued or new shares.

         (v)    cancel any shares which, at the date of passing of the resolution, have not been taken,
                or agreed to be taken, by any person, and diminish the amount of its capital by the
                amount of the shares so cancelled.

        The Company may subject to the provisions of the Companies Law reduce its share capital
   or share premium account or any capital redemption reserve or other undistributable reserve in
   any way by special resolution.

   (d)   Variation of rights of existing shares or classes of shares                                      A


         Subject to the Companies Law, all or any of the special rights attached to the shares or any
   class of shares may (unless otherwise provided for by the terms of issue of that class) be varied,
   modified or abrogated either with the consent in writing of the holders of not less than
   three-fourths in nominal value of the issued shares of that class or with the sanction of a special
   resolution passed at a separate general meeting of the holders of the shares of that class. To every
   such separate general meeting the provisions of the Articles relating to general meetings will
   mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting)
   shall be two persons holding or representing by proxy not less than one-third in nominal value
   of the issued shares of that class and at any adjourned meeting two holders present in person or
   by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares
   of the class shall be entitled on a poll to one vote for every such share held by him, and any
   holder of shares of the class present in person or by proxy may demand a poll.

        The special rights conferred upon the holders of any shares or class of shares shall not,
   unless otherwise expressly provided in the rights attaching to the terms of issue of such shares,
   be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.


                                             — 142 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

   (e)   Special resolution-majority required

          Pursuant to the Articles, a special resolution of the Company must be passed by a majority
   of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote
   in person or, in the case of such members as are corporations, by their duly authorised
   representatives or, where proxies are allowed, by proxy at a general meeting of which not less
   than 21 clear days’ notice, specifying the intention to propose the resolution as a special
   resolution, has been duly given. Provided that, except in the case of an annual general meeting,
   if it is so agreed by a majority in number of the members having a right to attend and vote at
   such meeting, being a majority together holding not less than 95% in nominal value of the shares
   giving that right and, in the case of an annual general meeting, if so agreed by all Members
   entitled to attend and vote thereat, a resolution may be proposed and passed as a special
   resolution at a meeting of which less than 21 clear days’ notice has been given.

       A copy of any special resolution must be forwarded to the Registrar of Companies in the
   Cayman Islands within 15 days of being passed.

         An ordinary resolution is defined in the Articles to mean a resolution passed by a simple
   majority of the votes of such members of the Company as, being entitled to do so, vote in person
   or, in the case of corporations, by their duly authorised representatives or, where proxies are
   allowed, by proxy at a general meeting held in accordance with the Articles.

   (f)   Voting rights (generally and on a poll) and right to demand a poll                               A


         Subject to any special rights or restrictions as to voting for the time being attached to any
   shares by or in accordance with the Articles, at any general meeting on a show of hands, every
   member who is present in person or by proxy or being a corporation, is present by its duly
   authorised representative shall have one vote and on a poll every member present in person or
   by proxy or, in the case of a member being a corporation, by its duly authorised representative
   shall have one vote for every fully paid share of which he is the holder but so that no amount
   paid up or credited as paid up on a share in advance of calls or installments is treated for the
   foregoing purposes as paid up on the share. Notwithstanding anything contained in the Articles,
   where more than one proxy is appointed by a member which is a clearing house (or its
   nominee(s)), each such proxy shall have one vote on a show of hands. On a poll, a member
   entitled to more than one vote need not use all his votes or cast all the votes he uses in the same
   way.

          At any general meeting a resolution put to the vote of the meeting is to 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 demanded by (i) the chairman of the meeting
   or (ii) at least three members present in person or, in the case of a member being a corporation,
   by its duly authorised representative or by proxy for the time being entitled to vote at the meeting
   or (iii) any member or members present in person or, in the case of a member being a corporation,
   by its duly authorised representative or by proxy and representing not less than one-tenth of the
   total voting rights of all the members having the right to vote at the meeting or (iv) a member
   or members present in person or, in the case of a member being a corporation, by its duly
   authorised representative or by proxy and holding shares in the Company conferring a right to
   vote at the meeting being shares on which an aggregate sum has been paid equal to not less than
   one-tenth of the total sum paid up on all the shares conferring that right.


                                            — 143 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

         If a recognised clearing house (or its nominee(s)) is a member of the Company it may
   authorise such person or persons as it thinks fit to act as its representative(s) at any meeting of
   the Company or at any meeting of any class of members of the Company provided that, if more
   than one person is so authorised, the authorisation shall specify the number and class of shares
   in respect of which each such person is so authorised. A person authorised pursuant to this
   provision shall be entitled to exercise the same powers on behalf of the recognised clearing house
   (or its nominee(s)) as if such person was the registered holder of the shares of the Company held
   by that clearing house (or its nominee(s)) including the right to vote individually on a show of
   hands.

   (g)   Requirements for annual general meetings

        An annual general meeting of the Company must be held in each year, other than the year
   of incorporation (within a period of not more than 15 months after the holding of the last
   preceding annual general meeting or a period of 18 months from the date of incorporation, unless
   a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the
   Articles)) at such time and place as may be determined by the board.

   (h)   Accounts and audit

        The board shall cause true accounts to be kept of the sums of money received and expended
   by the Company, and the matters in respect of which such receipt and expenditure take place, and
   of the property, assets, credits and liabilities of the Company and of all other matters required
   by the Companies Law or necessary to give a true and fair view of the Company’s affairs and
   to explain its transactions.

         The accounting records shall be kept at the registered office or at such other place or places
   as the board decides and shall always be open to inspection by any Director. No member (other
   than a Director) shall have any right to inspect any accounting record or book or document of
   the Company except as conferred by law or authorised by the board or the Company in general
   meeting.

         A copy of every balance sheet and profit and loss account (including every document
   required by law to be annexed thereto) which is to be laid before the Company at its general
   meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report,
   shall not less than 21 days before the date of the meeting be sent to every person entitled to
   receive notices of general meetings of the Company under the provisions the Articles.

         Auditors shall be appointed and the terms and tenure of such appointment and their duties
   at all times regulated in accordance with the provisions of the Articles. The remuneration of the
   auditors shall be fixed by the Company in general meeting or in such manner as the members may
   determine. The financial statements of the Company shall be audited by the auditor in accordance
   with generally accepted auditing standards. The auditor shall make a written report thereon in
   accordance with generally accepted auditing standards and the report of the auditor shall be
   submitted to the members in general meeting. The generally accepted auditing standards referred
   to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the
   financial statements and the report of the auditor should disclose this fact and name such country
   or jurisdiction.


                                            — 144 —
APPENDIX III                      SUMMARY OF THE CONSTITUTION OF THE
                             COMPANY AND CAYMAN ISLANDS COMPANY LAW

   (i)   Notices of meetings and business to be conducted thereat

         An annual general meeting and any extraordinary general meeting at which it is proposed
   to pass a special resolution shall (save as set out in sub-paragraph (e) above) be called by at least
   21 clear days’ notice in writing, and any other extraordinary general meeting shall be called by
   at least 14 clear days’ notice (in each case exclusive of the day on which the notice is served or
   deemed to be served and of the day for which it is given). The notice must specify the time and
   place of the meeting and, in the case of special business, the general nature of that business. In
   addition notice of every general meeting shall be given to all members of the Company other than
   such as, under the provisions of the Articles or the terms of issue of the shares they hold, are not
   entitled to receive such notices from the Company, and also to the auditors for the time being
   of the Company.

        Notwithstanding that a meeting of the Company is called by shorter notice than that
   mentioned above, it shall be deemed to have been duly called if it is so agreed:

         (i)    in the case of a meeting called as an annual general meeting, by all members of the
                Company entitled to attend and vote thereat; and

         (ii)   in the case of any other meeting, by a majority in number of the members having a
                right to attend and vote at the meeting, being a majority together holding not less than
                95% in nominal value of the issued shares giving that right.

        All business shall be deemed special that is transacted at an extraordinary general meeting
   and also all business shall be deemed special that is transacted at an annual general meeting with
   the exception of the following, which shall be deemed ordinary business:

         (aa) the declaration and sanctioning of dividends;

         (bb) the consideration and adoption of the accounts and balance sheet and the reports of the
              directors and the auditors;

         (cc) the election of directors in place of those retiring;

         (dd) the appointment of auditors and other officers;

         (ee) the fixing of the remuneration of the directors and of the auditors; and

         (ff) the granting of any mandate or authority to the directors to offer, allot, grant options
              over or otherwise dispose of the unissued shares of the Company representing not
              more than 20% in nominal value of its existing issued share capital.

   (j)   Transfer of shares                                                                                A


         All transfers of shares may be effected by an instrument of transfer in the usual or common
   form or such other form prescribed by the Designated Stock Exchange (as defined in the Articles)
   or in such other form as the board may approve and which may be under hand or, if the transferor
   or transferee is a clearing house or its nominees(s), by hand or by machine imprinted signature
   or by such other manner of execution as the board may approve from time to time. The instrument


                                              — 145 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

   of transfer shall be executed by or on behalf of the transferor and the transferee provided that
   the board may dispense with the execution of the instrument of transfer by the transferee in any
   case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain
   the holder of the share until the name of the transferee is entered in the register of members in
   respect thereof. The board may also resolve either generally or in any particular case, upon
   request by either the transferor or the transferee, to accept mechanically executed transfers.

         The board in so far as permitted by any applicable law may, in its absolute discretion, at
   any time and from time to time transfer any share upon the principal register to any branch
   register or any share on any branch register to the principal register or any other branch register.

         Unless the board otherwise agrees, no shares on the principal register shall be transferred
   to any branch register nor may shares on any branch register be transferred to the principal
   register or any other branch register. All transfers and other documents of title shall be lodged
   for registration and registered, in the case of shares on a branch register, at the relevant
   registration office and, in the case of shares on the principal register, at the registered office in
   the Cayman Islands or such other place at which the principal register is kept in accordance with
   the Companies Law.

         The board may, in its absolute discretion, and without assigning any reason, refuse to
   register a transfer of any share (not being a fully paid up share) to a person of whom it does not
   approve or any share issued under any share incentive scheme for employees upon which a
   restriction on transfer imposed thereby still subsists, and it may also refuse to register any
   transfer of any share to more than four joint holders or any transfer of any share (not being a fully
   paid up share) on which the Company has a lien.

         The board may decline to recognise any instrument of transfer unless a fee of such
   maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to
   be payable or such lesser sum as the Directors may from time to time require is paid to the
   Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in
   respect of only one class of share and is lodged at the relevant registration office or registered
   office or such other place at which the principal register is kept accompanied by the relevant
   share certificate(s) and such other evidence as the board may reasonably require to show the right
   of the transferor to make the transfer (and if the instrument of transfer is executed by some other
   person on his behalf, the authority of that person so to do).

         The registration of transfers may be suspended and the register closed on giving notice by
   advertisement in a relevant newspaper and, where applicable, any other newspapers in
   accordance with the requirements of any Designated Stock Exchange (as defined in the Articles),
   at such times and for such periods as the board may determine and either generally or in respect
   of any class of shares. The register of members shall not be closed for periods exceeding in the
   whole 30 days in any year.

   (k)   Power for the Company to purchase its own shares

        The Company is empowered by the Companies Law and the Articles to purchase its own
   Shares subject to certain restrictions and the Board may only exercise this power on behalf of
   the Company subject to any applicable requirements imposed from time to time by any
   Designated Stock Exchange.


                                             — 146 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

   (l)   Power for any subsidiary of the Company to own shares in the Company

        There are no provisions in the Articles relating to ownership of shares in the Company by
   a subsidiary.

   (m) Dividends and other methods of distribution                                                        A
                                                                                                          1

        Subject to the Companies Law, the Company in general meeting may declare dividends in
   any currency to be paid to the members but no dividend shall be declared in excess of the amount
   recommended by the board.

         The Articles provide dividends may be declared and paid out of the profits of the Company,
   realised or unrealised, or from any reserve set aside from profits which the directors determine
   is no longer needed. With the sanction of an ordinary resolution dividends may also be declared
   and paid out of share premium account or any other fund or account which can be authorised for
   this purpose in accordance with the Companies Law.

         Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise
   provide, (i) all dividends shall be declared and paid according to the amounts paid up on the
   shares in respect whereof the dividend is paid but no amount paid up on a share in advance of
   calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be
   apportioned and paid pro rata according to the amount paid up on the shares during any portion
   or portions of the period in respect of which the dividend is paid. The Directors may deduct from
   any dividend or other monies payable to any member or in respect of any shares all sums of
   money (if any) presently payable by him to the Company on account of calls or otherwise.

         Whenever the board or the Company in general meeting has resolved that a dividend be paid
   or declared on the share capital of the Company, the board may further resolve either (a) that
   such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully
   paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such
   dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to
   such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up
   in lieu of the whole or such part of the dividend as the board may think fit. The Company may
   also upon the recommendation of the board by an ordinary resolution resolve in respect of any
   one particular dividend of the Company that it may be satisfied wholly in the form of an
   allotment of shares credited as fully paid up without offering any right to shareholders to elect
   to receive such dividend in cash in lieu of such allotment.

        Any dividend, interest or other sum payable in cash to the holder of shares may be paid by
   cheque or warrant sent through the post addressed to the holder at his registered address, or in
   the case of joint holders, addressed to the holder whose name stands first in the register of the
   Company in respect of the shares at his address as appearing in the register or addressed to such
   person and at such addresses as the holder or joint holders may in writing direct. Every such
   cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to
   the order of the holder or, in the case of joint holders, to the order of the holder whose name
   stands first on the register in respect of such shares, and shall be sent at his or their risk and
   payment of the cheque or warrant by the bank on which it is drawn shall constitute a good
   discharge to the Company. Any one of two or more joint holders may give effectual receipts for
   any dividends or other moneys payable or property distributable in respect of the shares held by
   such joint holders.


                                            — 147 —
APPENDIX III                    SUMMARY OF THE CONSTITUTION OF THE
                           COMPANY AND CAYMAN ISLANDS COMPANY LAW

         Whenever the board or the Company in general meeting has resolved that a dividend be paid
   or declared the board may further resolve that such dividend be satisfied wholly or in part by the
   distribution of specific assets of any kind.

         All dividends or bonuses unclaimed for one year after having been declared may be
   invested or otherwise made use of by the board for the benefit of the Company until claimed and
   the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses
   unclaimed for six years after having been declared may be forfeited by the board and shall revert
   to the Company.

        No dividend or other monies payable by the Company on or in respect of any share shall
   bear interest against the Company.

   (n)   Proxies

         Any member of the Company entitled to attend and vote at a meeting of the Company is
   entitled to appoint another person as his proxy to attend and vote instead of him. A member who
   is the holder of two or more shares may appoint more than one proxy to represent him and vote
   on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be
   a member of the Company and shall be entitled to exercise the same powers on behalf of a
   member who is an individual and for whom he acts as proxy as such member could exercise. In
   addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is
   a corporation and for which he acts as proxy as such member could exercise if it were an
   individual member. On a poll or on a show of hands, votes may be given either personally (or,
   in the case of a member being a corporation, by its duly authorised representative) or by proxy.

   (o)   Call on shares and forfeiture of shares

        Subject to the Articles and to the terms of allotment, the board may from time to time make
   such calls upon the members in respect of any monies unpaid on the shares held by them
   respectively (whether on account of the nominal value of the shares or by way of premium). A
   call may be made payable either in one lump sum or by installments. If the sum payable in
   respect of any call or instalment is not paid on or before the day appointed for payment thereof,
   the person or persons from whom the sum is due shall pay interest on the same at such rate not
   exceeding 20% per annum as the board may agree to accept from the day appointed for the
   payment thereof to the time of actual payment, but the board may waive payment of such interest
   wholly or in part. The board may, if it thinks fit, receive from any member willing to advance
   the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid
   or installments payable upon any shares held by him, and upon all or any of the monies so
   advanced the Company may pay interest at such rate (if any) as the board may decide.

        If a member fails to pay any call on the day appointed for payment thereof, the board may
   serve not less than 14 clear days’ notice on him requiring payment of so much of the call as is
   unpaid, together with any interest which may have accrued and which may still accrue up to the
   date of actual payment and stating that, in the event of non-payment at or before the time
   appointed, the shares in respect of which the call was made will be liable to be forfeited.


                                           — 148 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

        If the requirements of any such notice are not complied with, any share in respect of which
   the notice has been given may at any time thereafter, before the payment required by the notice
   has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will
   include all dividends and bonuses declared in respect of the forfeited share and not actually paid
   before the forfeiture.

         A person whose shares have been forfeited shall cease to be a member in respect of the
   forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies
   which, at the date of forfeiture, were payable by him to the Company in respect of the shares,
   together with (if the board shall in its discretion so require) interest thereon from the date of
   forfeiture until the date of actual payment at such rate not exceeding 20% per annum as the board
   determines.

   (p)   Inspection of register of members

        Pursuant to the Articles the register and branch register of members shall be open to
   inspection for at least two hours on every business day by members without charge, or by any
   other person upon a maximum payment of HK$2.50 dollars, at the registered office or such other
   place in the Cayman Islands at which the register is kept in accordance with the Companies Law
   or, upon a maximum payment of HK$1.00 or such lesser sum specified by the board, at the
   Registration Office (as defined in the Articles), unless the register is closed in accordance with
   the Articles.

   (q)   Quorum for meetings and separate class meetings

        No business shall be transacted at any general meeting unless a quorum is present when the
   meeting proceeds to business, but the absence of a quorum shall not preclude the appointment
   of a chairman.

        Save as otherwise provided by the Articles the quorum for a general meeting shall be two
   members present in person (or, in the case of a member being a corporation, by its duly
   authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting
   (other than an adjourned meeting) convened to sanction the modification of class rights the
   necessary quorum shall be two persons holding or representing by proxy not less than one-third
   in nominal value of the issued shares of that class.

         A corporation being a member shall be deemed for the purpose of the Articles to be present
   in person if represented by its duly authorised representative being the person appointed by
   resolution of the directors or other governing body of such corporation to act as its representative
   at the relevant general meeting of the Company or at any relevant general meeting of any class
   of members of the Company.

   (r)   Rights of the minorities in relation to fraud or oppression

         There are no provisions in the Articles relating to rights of minority shareholders in relation
   to fraud or oppression. However, certain remedies are available to shareholders of the Company
   under Cayman law, as summarised in paragraph 4(e) of this Appendix.


                                             — 149 —
APPENDIX III                    SUMMARY OF THE CONSTITUTION OF THE
                           COMPANY AND CAYMAN ISLANDS COMPANY LAW

   (s)   Procedures on liquidation

        A resolution that the Company be wound up by the court or be wound up voluntarily shall
   be a special resolution.

         Subject to any special rights, privileges or restrictions as to the distribution of available
   surplus assets on liquidation for the time being attached to any class or classes of shares (i) if
   the Company shall be wound up and the assets available for distribution amongst the members
   of the Company shall be more than sufficient to repay the whole of the capital paid up at the
   commencement of the winding up, the excess shall be distributed pari passu amongst such
   members in proportion to the amount paid up on the shares held by them respectively and (ii)
   if the Company shall be wound up and the assets available for distribution amongst the members
   as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be
   distributed so that, as nearly as may be, the losses shall be borne by the members in proportion
   to the capital paid up, or which ought to have been paid up, at the commencement of the winding
   up on the shares held by them respectively.

         If the Company shall be wound up (whether the liquidation is voluntary or by the court) the
   liquidator may, with the authority of a special resolution and any other sanction required by the
   Companies Law divide among the members in specie or kind the whole or any part of the assets
   of the Company whether the assets shall consist of property of one kind or shall consist of
   properties of different kinds and the liquidator may, for such purpose, set such value as he deems
   fair upon any one or more class or classes of property to be divided as aforesaid and may
   determine how such division shall be carried out as between the members or different classes of
   members. The liquidator may, with the like authority, vest any part of the assets in trustees upon
   such trusts for the benefit of members as the liquidator, with the like authority, shall think fit,
   but so that no contributory shall be compelled to accept any shares or other property in respect
   of which there is a liability.

   (t)   Untraceable members

         Pursuant to the Articles, the Company may sell any of the shares of a member who is
   untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum
   payable in cash to the holder of such shares have remained uncashed for a period of 12 years;
   (ii) upon the expiry of the 12 year period, the Company has not during that time received any
   indication of the existence of the member; and (iii) the Company has caused an advertisement
   to be published in accordance with the rules of the Designated Stock Exchange (as defined in the
   Articles) giving notice of its intention to sell such shares and a period of three months, or such
   shorter period as may be permitted by the Designated Stock Exchange (as defined in the
   Articles), has elapsed since such advertisement and the Designated Stock Exchange (as defined
   in the Articles) has been notified of such intention. The net proceeds of any such sale shall
   belong to the Company and upon receipt by the Company of such net proceeds, it shall become
   indebted to the former member of the Company for an amount equal to such net proceeds.




                                            — 150 —
APPENDIX III                       SUMMARY OF THE CONSTITUTION OF THE
                              COMPANY AND CAYMAN ISLANDS COMPANY LAW

     (u)   Subscription rights reserve

           The Articles provide that to the extent that it is not prohibited by and is in compliance with
     the Companies Law, if warrants to subscribe for shares have been issued by the Company and
     the Company does any act or engages in any transaction which would result in the subscription
     price of such warrants being reduced below the par value of a share, a subscription rights reserve
     shall be established and applied in paying up the difference between the subscription price and
     the par value of a share on any exercise of the warrants.

3.   CAYMAN ISLANDS COMPANY LAW

      The Company is incorporated in the Cayman Islands subject to the Companies Law (Revised) of           A
                                                                                                            R
the Cayman Islands and, therefore, operates subject to Cayman law. Set out below is a summary of
certain provisions of Cayman company law, although this does not purport to contain all applicable
qualifications and exceptions or to be a complete review of all matters of Cayman company law and
taxation, which may differ from equivalent provisions in jurisdictions with which interested parties
may be more familiar:

     (a)   Operations

          As an exempted company, the Company’s operations must be conducted mainly outside the
     Cayman Islands. The Company is required to file an annual return each year with the Registrar
     of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised
     share capital.

     (b)   Share capital

           The Companies Law provides that where a company issues shares at a premium, whether
     for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those
     shares shall be transferred to an account, to be called the “share premium account”. At the option
     of a company, these provisions may not apply to premiums or shares of that company allotted
     pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any
     other company and issued at a premium. The Companies Law provides that the share premium
     account may be applied by the company subject to the provisions, if any, of its memorandum and
     articles of association in (a) paying distributions or dividends to members; (b) paying up
     unissued shares of the company to be issued to members as fully paid bonus shares; (c) in the
     redemption and repurchase of shares (subject to the provisions of section 37 of the Companies
     Law); (d) writing-off the preliminary expenses of the company; (e) writing-off the expenses of,
     or the commission paid or discount allowed on, any issue of shares or debentures of the company;
     and (f) providing for the premium payable on redemption or purchase of any shares or debentures
     of the company.

          No distribution or dividend may be paid to members out of the share premium account
     unless immediately following the date on which the distribution or dividend is proposed to be
     paid the company will be able to pay its debts as they fall due in the ordinary course business.


                                              — 151 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

         The Companies Law provides that, subject to confirmation by the court, a company limited
   by shares or a company limited by guarantee and having a share capital may, if so authorised by
   its articles of association, by special resolution reduce its share capital in any way. The Articles
   includes certain protections for holders of special classes of shares, requiring their consent to be
   obtained before their rights may be varied. The consent of the specified proportions of the
   holders of the issued shares of that class or the sanction of a resolution passed at a separate
   meeting of the holders of those shares is required.

   (c)   Financial assistance to purchase shares of a company or its holding company

         Subject to all applicable laws, the Company may give financial assistance to Directors and
   employees of the Company, its subsidiaries or any subsidiary of such holding company in order
   that they may buy Shares in the Company or shares in any subsidiary or holding company.
   Further, subject to all applicable laws, the Company may give financial assistance to a trustee
   for the acquisition of Shares in the Company or shares in any such subsidiary or holding
   company to be held for the benefit of employees of the Company, its subsidiaries, any holding
   company of the Company or any subsidiary of any such holding company (including salaried
   Directors).

         There is no statutory restriction in the Cayman Islands on the provision of financial
   assistance by a company to another person for the purchase of, or subscription for, its own or its
   holding company’s shares. Accordingly, a company may provide financial assistance if the
   directors of the company consider, in discharging their duties of care and acting in good faith,
   for a proper purpose and in the interests of the company, that such assistance can properly be
   given. Such assistance should be on an arm’s-length basis.

   (d)   Purchase of shares and warrants by a company and its subsidiaries

         Subject to the provisions of the Companies Law, a company limited by shares or a company
   limited by guarantee and having a share capital may, if so authorised by its articles of
   association, issue shares which are to be redeemed or are liable to be redeemed at the option of
   the company or a shareholder. In addition, such a company may, if authorised to do so by its
   articles of association, purchase its own shares, including any redeemable shares. However, if the
   articles of association do not authorise the manner or purchase, a company cannot purchase any
   of its own shares unless the manner of purchase has first been authorised by an ordinary
   resolution of the company. At no time may a company redeem or purchase its shares unless they
   are fully paid. A company may not redeem or purchase any of its shares if, as a result of the
   redemption or purchase, there would no longer be any member of the company holding shares.
   A payment out of capital by a company for the redemption or purchase of its own shares is not
   lawful unless immediately following the date on which the payment is proposed to be made, the
   company shall be able to pay its debts as they fall due in the ordinary course of business.

         A company is not prohibited from purchasing and may purchase its own warrants subject
   to and in accordance with the terms and conditions of the relevant warrant instrument or
   certificate. There is no requirement under Cayman Islands law that a company’s memorandum
   or articles of association contain a specific provision enabling such purchases and the directors
   of a company may rely upon the general power contained in its memorandum of association to
   buy and sell and deal in personal property of all kinds.


                                            — 152 —
APPENDIX III                    SUMMARY OF THE CONSTITUTION OF THE
                           COMPANY AND CAYMAN ISLANDS COMPANY LAW

         Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in
   certain circumstances, may acquire such shares.

   (e)   Dividends and distributions

         With the exception of section 34 of the Companies Law, there are no statutory provisions
   relating to the payment of dividends. Based upon English case law which is likely to be
   persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section
   34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the
   company’s memorandum and articles of association, the payment of dividends and distributions
   out of the share premium account (see paragraph 2(m) above for further details).

   (f)   Protection of minorities

         The Cayman Islands courts ordinarily would be expected to follow English case law
   precedents which permit a minority shareholder to commence a class action against or derivative
   actions in the name of the company to challenge (a) an act which is ultra vires the company or
   illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are
   themselves in control of the company, and (c) an irregularity in the passing of a resolution which
   requires a qualified (or special) majority.

        In the case of a company (not being a bank) having a share capital divided into shares, the
   court may, on the application of members holding not less than one fifth of the shares of the
   company in issue, appoint an inspector to examine into the affairs of the company and to report
   thereon in such manner as the court shall direct.

         Any shareholder of a company may petition the court which may make a winding up order
   if the court is of the opinion that it is just and equitable that the company should be wound up.

        Generally claims against a company by its shareholders must be based on the general laws
   of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as
   established by the Company’s memorandum and articles of association.

   (g)   Management

        The Companies Law contains no specific restrictions on the power of directors to dispose
   of assets of a company, although it specifically requires that every officer of a company, which
   includes a director, managing director and secretary, in exercising his powers and discharging his
   duties must do so honestly and in good faith with a view to the best interests of the company and
   exercise the care, diligence and skill that a reasonably prudent person would exercise in
   comparable circumstances.

   (h)   Accounting and auditing requirements

         A company shall cause proper records of accounts to be kept with respect to (i) all sums
   of money received and expended by the company and the matters in respect of which the receipt
   and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the
   assets and liabilities of the company.


                                           — 153 —
APPENDIX III                     SUMMARY OF THE CONSTITUTION OF THE
                            COMPANY AND CAYMAN ISLANDS COMPANY LAW

         Proper books of account shall not be deemed to be kept if there are not kept such books as
   are necessary to give a true and fair view of the state of the Company’s affairs and to explain
   its transactions.

   (i)   Exchange control

         There are no exchange control regulations or currency restrictions in the Cayman Islands.

   (j)   Taxation

        Pursuant to section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands,
   the Company has obtained an undertaking from the Governor-in-Council:

         (1)   that no law which is enacted in the Cayman Islands imposing any tax to be levied on
               profits or income or gains or appreciation shall apply to the Company or its
               operations; and

         (2)   that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall   A
               not be payable on the shares, debentures or other obligations of the Company.

         The undertaking for the Company is for a period of twenty years from 25th July, 2000.

         The Cayman Islands currently levy no taxes on individuals or corporations based upon
   profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax
   or estate duty. There are no other taxes likely to be material to the Company levied by the
   Government of the Cayman Islands save certain stamp duties which may be applicable, from time
   to time, on certain instruments executed in or brought within the jurisdiction of the Cayman
   Islands. The Cayman Islands are not party to any double tax treaties.

   (k)   Stamp duty on transfers

       No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
   companies except those which hold interests in land in the Cayman Islands.

   (l)   Loans to directors

       There is no express provision in the Companies Law prohibiting the making of loans by a
   company to any of its directors.

   (m) Inspection of corporate records

        Members of the Company will have no general right under the Companies Law to inspect
   or obtain copies of the register of members or corporate records of the Company. They will,
   however, have such rights as may be set out in the Company’s Articles.

         An exempted company may, subject to the provisions of its articles of association, maintain
   its principal register of members and any branch registers at such locations, whether within or
   without the Cayman Islands, as the directors may, from time to time, think fit. There is no


                                            — 154 —
APPENDIX III                    SUMMARY OF THE CONSTITUTION OF THE
                           COMPANY AND CAYMAN ISLANDS COMPANY LAW

   requirement under the Companies Law for an exempted company to make any returns of
   members to the Registrar of Companies in the Cayman Islands. The names and addresses of the
   members are, accordingly, not a matter of public record and are not available for public
   inspection.

   (n)   Winding up

        A company may be wound up by either an order of the court or by a special resolution of
   its members. The court also has authority to order winding up in a number of specified
   circumstances including where it is, in the opinion of the court, just and equitable that such
   company be wound up.

        A company may be wound up voluntarily when the members so resolve in general meeting
   by special resolution, or, in the case of a limited duration company, when the period fixed for
   the duration of the company by its memorandum expires, or the event occurs on the occurrence
   of which the memorandum provides that the company is to be dissolved. In the case of a
   voluntary winding up, such company is obliged to cease to carry on its business from the time
   of passing the resolution for voluntary winding up or upon the expiry of the period or the
   occurrence of the event referred to above. Upon the appointment of a liquidator, the
   responsibility for the company’s affairs rests entirely in his hands and no future executive action
   may be carried out without his approval.

         A company is placed in liquidation either by an order of the court or by a special resolution
   of its members. A liquidator is appointed whose duties are to collect the assets of the company
   (including the amount (if any) due from the contributories), settle the list of creditors and
   discharge the company’s liability to them, rateably if insufficient assets exist to discharge the
   liabilities in full, and to settle the list of contributories (shareholders) and divide the surplus
   assets (if any) amongst them in accordance with the rights attaching to the shares.

        In the case of a members’ voluntary winding up of a company, the company in general
   meeting must appoint one or more liquidators for the purpose of winding up the affairs of the
   company and distributing its assets.

        As soon as the affairs of the company are fully wound up, the liquidator must make up an
   account of the winding up, showing how the winding up has been conducted and the property of
   the company has been disposed of, and thereupon call a general meeting of the company for the
   purposes of laying before it the account and giving an explanation thereof. This final general
   meeting shall be called by Public Notice or otherwise as the Registrar of Companies may direct.

         For the purpose of conducting the proceedings in winding up a company and assisting the
   Court, there may be appointed one or more than one person to be called an official liquidator or
   official liquidator; and the Court may appoint to such office such person or persons, either
   provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such
   office, the Court shall declare whether any act hereby required or authorised to be done by the
   official liquidator is to be done by all or any one or more of such persons. The Court may also
   determine whether any and what security is to be given by an official liquidator on his
   appointment; if no official liquidator is appointed, or during any vacancy in such office, all the
   property of the company shall be in the custody of the Court.


                                            — 155 —
APPENDIX III                       SUMMARY OF THE CONSTITUTION OF THE
                              COMPANY AND CAYMAN ISLANDS COMPANY LAW

     (o)   Reconstructions

           There are statutory provisions which facilitate reconstructions and amalgamations approved
     by a majority in number representing 75% in value of shareholders or creditors, depending on
     the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned
     by the Courts. Whilst a dissenting shareholder would have the right to express to the Court his
     view that the transaction for which approval is sought would not provide the shareholders with
     a fair value for their shares, the Courts are unlikely to disapprove the transaction on that ground
     alone in the absence of evidence of fraud or bad faith on behalf of management and if the
     transaction were approved and consummated the dissenting shareholder would have no rights
     comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially
     determined value of their shares) ordinarily available, for example, to dissenting shareholders of
     a United States corporation.

     (p)   Take-overs

           Where an offer is made by a company for the shares of another company and, within four
     months of the placing, the holders of not less than 90% of the shares which are the subject of
     the placing accept, the offeror may at any time within two months after the expiration of the said
     four months, by notice require the dissenting shareholders to transfer their shares on the terms
     of the placing. A dissenting shareholder may apply to the Court of the Cayman Island within one
     month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show
     that the Court should exercise its discretion, which it will be unlikely to do unless there is
     evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares
     who have accepted the placing as a means of unfairly forcing out minority shareholders.

     (q)   Indemnification

          Cayman Islands law does not limit the extent to which a company’s articles of association
     may provide for indemnification of officers and directors, except to the extent any such provision
     may be held by the court to be contrary to public policy (e.g. for purporting to provide
     indemnification against the consequences of committing a crime).

4.   GENERAL

      Conyers Dill & Pearman, Cayman, the Company’s special legal counsel on Cayman Islands law,
have sent to the Company a letter of advice summarising certain aspects of Cayman Islands company
law. This letter, together with a copy of the Companies Law, is available for inspection as referred to
in the paragraph headed “Documents available for inspection” in Appendix V. Any person wishing to
have a detailed summary of Cayman Islands company law or advice on the differences between it and
the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal
advice.




                                              — 156 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

FURTHER INFORMATION ABOUT THE COMPANY

1.   Incorporation                                                                                       C
                                                                                                         A
                                                                                                         C
                                                                                                         (
      The Company was incorporated as an exempted company in the Cayman Islands under the                A
                                                                                                         C
Companies Law on 26th May, 2000, with an authorised share capital of HK$1,000,000 divided into           A

10,000,000 shares of HK$0.10 each. The Company has established its principal place of business at
Units 1008-1018, 10th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories,
Hong Kong and is registered as an oversea company in Hong Kong under Part XI of the Companies
Ordinance. Leung Chung Chu, Andrew and Ng Wai Lun have been appointed as the agents of the               S
Company for the acceptance of service of process and notices on behalf of the Company in Hong
Kong. As the Company is incorporated in the Cayman Islands, it is subject to the Companies Law and
is also subject to its constitution which comprises a memorandum of association and Articles. A
summary of certain relevant parts of its constitution and relevant aspects of the Companies Law is set
out in Appendix III to this prospectus.

2.   Changes in share capital                                                                            C
                                                                                                         A


     (a)   The authorised share capital of the Company as at the date of its incorporation was
           HK$1,000,000 divided into 10,000,000 shares of HK$0.10 each, one share of which was
           allotted and issued for cash at par on 26th May, 2000 to Codan Trust Company (Cayman)
           Limited. On the same date, Codan Trust Company (Cayman) Limited transferred the sole
           issued share of HK$0.10 of the Company to Leung Chung Chu, Andrew for cash at par.

     (b)   Pursuant to written resolutions of the sole shareholder of the Company passed on 5th June,
           2001:

           (i)    each of the issued and unissued shares of HK$0.10 each in the share capital of the
                  Company was subdivided into 10 Shares of HK$0.01 each;

           (ii)   the authorised share capital of the Company was increased from HK$1,000,000 to
                  HK$100,000,000 by the creation of an additional 9,900,000,000 Shares; and

           (iii) the Directors were authorised to allot and issue an aggregate of 261,990 Shares,
                 credited as fully paid, to 5D Technology Holdings Ltd., Leung Chung Chu, Andrew,
                 Cheung Mei Ling and Mei Ah Entertainment as the consideration for the acquisition
                 of the entire issued share capital of Era Information & Entertainment (BVI) Limited
                 from 5D Technology Holdings Ltd., Leung Chung Chu, Andrew, Cheung Mei Ling and
                 Mei Ah Entertainment.

     (c)   Pursuant to written resolutions of all shareholders of the Company passed on 5th June,
           2001:

           (i)    the Directors were authorised to allot and issue the 58,000,000 New Shares pursuant
                  to the Placing and up to 12,000,000 Shares pursuant to the exercise of the
                  Over-allotment Option; and


                                              — 157 —
APPENDIX IV                               STATUTORY AND GENERAL INFORMATION

           (ii)   conditional on the share premium account of the Company being credited as a result
                  of the Placing, the Directors were authorised to capitalise the amount of
                  HK$2,617,380 from the amount standing to the credit of the share premium account
                  of the Company at par 261,738,000 Shares for allotment and issue to the persons
                  whose names appear on the register of members of the Company at the close of
                  business on 5th June, 2001, pro-rata to their then existing shareholdings in the
                  Company.

     Save as aforesaid, there has been no alteration in the share capital of the Company since its
incorporation.

3.   Written resolutions of all the shareholders of the Company passed on 5th June, 2001

     Pursuant to written resolutions of all the shareholders of the Company passed on 5th June, 2001:

     (a)   the Company approved and adopted its new Articles;

     (b)   the rules of the Pre-IPO Share Option Scheme were approved and adopted and the Directors
           were authorised, at their absolute discretion, to grant options to subscribe for Shares under
           the Pre-IPO Share Option Scheme and conditional on the same conditions as stated in the
           sub-section headed “Conditions of the Placing” in the section headed “Structure of the
           Placing” of this prospectus and conditional also on the GEM Listing Committee granting
           approval of the listing of, and permission to deal in, any Shares which may fall to be issued
           pursuant to the exercise of any such options, the Directors were authorised, at their
           discretion, to allot, issue and deal with Shares pursuant to the exercise of subscription
           rights under any options which may be granted under the Pre-IPO Share Option Scheme and
           to take all such steps as they consider necessary or desirable to implement the Pre-IPO
           Share Option Scheme;

     (c)   conditional on the same conditions as stated in the sub-section headed “Conditions of the
           Placing” in the section headed “Structure of the Placing” of this prospectus:

           (i)    the Placing, the Capitalisation Issue and the grant of the Over-allotment Option were
                  approved and the Directors were authorised to allot and issue the New Shares, the
                  Shares to be issued pursuant to the Capitalisation Issue and the Shares which may be
                  required to be issued if the Over-allotment Option is exercised; and

           (ii)   the rules of the Share Option Scheme were approved and adopted and the Directors
                  were authorised, at their absolute discretion, to grant options to subscribe for Shares
                  under the Share Option Scheme and to allot, issue and deal with Shares pursuant to
                  the exercise of subscription rights under any options which may be granted under the
                  Share Option Scheme and to take all such steps as they consider necessary or desirable
                  to implement the Share Option Scheme;

     (d)   a general unconditional mandate was given to the Directors to allot, issue and deal with,
           otherwise than by way of rights issue or an issue of Shares upon the exercise of any
           subscription rights attached to any warrants of the Company or pursuant to the exercise of
           the options under the Pre-IPO Share Option Scheme, the Share Option Scheme or any other
           option scheme or similar arrangement or any scrip dividend schemes or similar
           arrangements providing for the allotment and issue of Shares in lieu of the whole or part


                                               — 158 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

           of a dividend on Shares in accordance with the Articles or a specific authority granted by
           the shareholders of the Company in general meeting or the allotment and issue of Shares
           pursuant to the Placing, the Capitalisation Issue, the exercise of the Over-allotment Option,
           Shares with an aggregate nominal value not exceeding (i) 20% of the aggregate nominal
           amount of the share capital of the Company immediately upon completion of the Placing,
           the Capitalisation Issue and the allotment and issue of Shares pursuant to the exercise of
           the Over-alloment Option; and (ii) the nominal amount of the share capital of the Company
           which may be purchased by the Company pursuant to the authority granted to the Directors
           as referred to in paragraph (e) below, until the conclusion of the next annual general
           meeting of the Company, the expiration of the period within which the next annual general
           meeting of the Company is required by the Articles or any applicable laws to be held, or
           the revocation or variation by an ordinary resolution of the shareholders of the Company
           in general meeting, whichever is the earliest; and

     (e)   a general unconditional mandate was given to the Directors authorising them to exercise all
           powers of the Company to repurchase Shares, including the right to determine the manner
           of repurchase on the Stock Exchange or on any other stock exchange on which the securities
           of the Company may be listed and which is recognised by the Securities and Futures
           Commission in Hong Kong and the Stock Exchange for this purpose such number of Shares
           as will represent up to 10% of the aggregate of the total nominal amount of the share capital
           of the Company in issue immediately following completion of the Placing, the
           Capitalisation Issue and the allotment and issue of Shares pursuant to the exercise of the
           Over-allotment Option, until the conclusion of the next annual general meeting of the
           Company, the expiration of the period within which the next annual general meeting of the
           Company is required by the Articles or any applicable laws to be held, or the revocation or
           variation of such mandate by an ordinary resolution of the shareholders of the Company in
           general meeting, whichever is the earliest.

      Immediately following the Placing and the Capitalisation Issue becoming unconditional and the
allotment and issue of Shares as mentioned herein being made, but taking no account of any Shares
which may be issued upon the exercise of the Over-allotment Option and any options granted under
the Pre-IPO Share Option Scheme or which may be granted under the Share Option Scheme, the
authorised share capital of the Company will be HK$100,000,000 divided into 10,000,000,000 Shares
and the issued share capital will be HK$3,200,000 divided into 320,000,000 Shares, all fully paid up
or credited as fully paid up and 9,680,000,000 Shares will remain unissued. Other than pursuant to the
exercise of options granted under the Pre-IPO Share Option Scheme or which may be granted under
the Share Option Scheme or pursuant to the exercise of the Over-allotment Option, there is no present
intention to issue any of the authorised but unissued share capital of the Company and no issue of
Shares which would effectively alter the control of the Company will be made without the prior
approval of members in general meeting.




                                              — 159 —
APPENDIX IV                               STATUTORY AND GENERAL INFORMATION

4.   Reorganisation

     The companies in the Group underwent the Reorganisation to rationalise the Group’s structure
in preparation for the listing on GEM which involved the following:

     (a)   Red River Agents Limited

          On 4th June, 2001, Knapdale Limited and Kirkcowan Limited (both held the shares in Red
     River Agents Limited on trust for ERA Home) transferred all of their shares, being two shares
     of HK$1 each, in Red River Agents Limited to Era Information & Entertainment (BVI) Limited
     and its nominee, Era Communications Limited, in consideration and in exchange for the
     allotment and issue, credited as fully paid, of 1,000 shares of US$0.1 each in Era Information
     & Entertainment (BVI) Limited as to 750 shares to 5D Technology Holdings Ltd., 150 shares to
     Leung Chung Chu, Andrew, 75 shares to Cheung Mei Ling and 25 shares to Mei Ah
     Entertainment, all as directed by Knapdale Limited and Kirkcowan Limited.

     (b)   ERA Digital Media

           On 4th June, 2001, ERA Home and Leung Chung Chu, Andrew (who held the share in ERA
     Digital Media on trust for ERA Home) transferred all of their shares, being 10,000 shares of
     HK$1 each, in ERA Digital Media to Era Information & Entertainment (BVI) Limited and its
     nominee, Era Communications Limited, in consideration and in exchange for the allotment and
     issue, credited as fully paid, of 1,000 shares of US$0.1 each in Era Information & Entertainment
     (BVI) Limited as to 750 shares to 5D Technology Holdings Ltd., 150 shares to Leung Chung Chu,
     Andrew, 75 shares to Cheung Mei Ling and 25 shares to Mei Ah Entertainment, all as directed
     by ERA Home and Leung Chung Chu, Andrew.

     (c)   Era Communications Limited

           (i)    On 4th June, 2001, Chiu Fu Sheng transferred 4,999 shares and 1 share, all of HK$1
                  each, in Era Communications Limited to ERA Home and its nominee, Red River
                  Agents Limited, respectively, for an aggregate consideration of HK$1.

           (ii)   On 4th June, 2001, ERA Home and Red River Agents Limited (which held the share
                  in Era Communications Limited on trust for ERA Home) transferred all of their
                  shares, being 50,000 shares of HK$1 each, in Era Communications Limited to Era
                  Information & Entertainment (BVI) Limited and its nominee, ERA Digital Media, in
                  consideration and in exchange for the allotment and issue, credited as fully paid, of
                  1,000 shares of US$0.1 each in Era Information & Entertainment (BVI) Limited as to
                  750 shares to 5D Technology Holdings Ltd., 150 shares to Leung Chung Chu, Andrew,
                  75 shares to Cheung Mei Ling and 25 shares to Mei Ah Entertainment, all as directed
                  by ERA Home and Red River Agents Limited.

     (d)   ERA Films

           On 4th June, 2001, Leung Chung Chu, Andrew and Knapdale Limited (who held the share
     in ERA Films on trust for Leung Chung Chu, Andrew) transferred all of their shares, being two
     shares of HK$1 each, in ERA Films to Era Information & Entertainment (BVI) Limited and its
     nominee, Era Communications Limited, in consideration and in exchange for the allotment and
     issue, credited as fully paid, of 2,200 shares of US$0.1 each in Era Information & Entertainment
     (BVI) Limited to Leung Chung Chu, Andrew.


                                               — 160 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

     (e)   ERA Home

           On 4th June, 2001, 5D Technology Holdings Ltd., Leung Chung Chu, Andrew, Cheung Mei
     Ling and Mei Ah Entertainment transferred an aggregate of 24,000,000 shares of HK$1 each in
     ERA Home to Era Information & Entertainment (BVI) Limited and its nominee, Era
     Communications Limited, as to 23,999,999 shares to Era Information & Entertainment (BVI)
     Limited and one share to Era Communications Limited in consideration and in exchange for the
     allotment and issue, credited as fully paid, of an aggregate of 21,000 shares of US$0.10 each in
     Era Information & Entertainment (BVI) Limited as to 15,750 shares to 5D Technology Holdings
     Ltd., 3,150 shares to Leung Chung Chu, Andrew, 1,575 shares to Cheung Mei Ling and 525
     shares to Mei Ah Entertainment.

     (f)   Acquisition of Era Information & Entertainment (BVI) Limited

          On 5th June, 2001, 5D Technology Holdings Ltd., Leung Chung Chu, Andrew, Cheung Mei
     Ling and Mei Ah Entertainment transferred an aggregate of 26,200 shares of US$0.1 each in Era
     Information & Entertainment (BVI) Limited, owned as to 18,000 shares by 5D Technology
     Holdings Ltd., 5,800 shares by Leung Chung Chu, Andrew, 1,800 shares by Cheung Mei Ling and
     600 shares by Mei Ah Entertainment, to the Company in consideration and in exchange for the
     allotment and issue, credited as fully paid, of an aggregate of 261,990 Shares as to 180,000
     Shares to 5D Technology Holdings Ltd., 57,990 Shares to Leung Chung Chu, Andrew, 18,000
     Shares to Cheung Mei Ling and 6,000 Shares to Mei Ah Entertainment.

5.   Changes in share capital of subsidiaries                                                              C
                                                                                                           A


     The subsidiaries of the Company are listed in the accountants’ report set out in Appendix I to this
prospectus. The following alterations in the share capital of each of the subsidiaries of the Company
have taken place within the two years preceding the date of this prospectus:

     (a)   Era Information & Entertainment (BVI) Limited

           On 12th February, 2001, Era Information & Entertainment (BVI) Limited, a company with
     limited liability was incorporated in BVI with an authorised share capital of US$50,000 divided
     into 500,000 shares of US$0.1 each.

     (b)   Red River Agents Limited

           (i)    On 28th July, 1999, Red River Agents Limited, a company with limited liability was
                  incorporated in Hong Kong with an authorised share capital of HK$10,000 divided
                  into 10,000 shares of HK$1 each. On the same date, two subscriber shares of HK$1
                  each were issued to the subscribers for cash at par.

           (ii)   On 29th October, 1999, two subscriber shares of HK$1 each in Red River Agents
                  Limited were transferred to each of Knapdale Limited and Kirkcowan Limited, both
                  holding the shares as trustees for ERA Home, respectively for cash at par.



                                              — 161 —
APPENDIX IV                             STATUTORY AND GENERAL INFORMATION

     (c)   ERA Digital Media

          On 1st December, 1999, ERA Digital Media, a company with limited liability, was
     incorporated in Hong Kong with an authorised share capital of HK$10,000 divided into 10,000
     shares of HK$1 each. On the same date, 9,999 shares and 1 share, all of HK$1 each, in ERA
     Digital Media were issued to ERA Home and its nominee, Leung Chung Chu, Andrew,
     respectively, for cash at par.

     (d)   ERA Films

          On 22nd January, 2001, Abagtha Limited and Barfart Enterprises Limited transferred all the
     shares, being two shares of HK$1 each, in ERA Films (formerly known as Tsuentat Investment
     Limited) to Leung Chung Chu, Andrew and his nominee, Knapdale Limited, respectively, for an
     aggregate consideration of HK$1.

     (e)   ERA Home                                                                                       A


          On 20th February, 2001, the authorised share capital of ERA Home was increased from
     HK$20,000,000 to HK$25,000,000 and on the same date, ERA Home allotted and issued
     3,000,000 shares, 600,000 shares, 300,000 shares, 100,000 shares, all of HK$1 each, to 5D
     Technology Holdings Ltd., Leung Chung Chu, Andrew, Cheung Mei Ling and Mei Ah
     Entertainment, respectively for cash at par.

     Save as aforesaid, there has been no alteration in the share capital of any of the subsidiaries of
the Company within the two years immediately preceding the date of this prospectus.

6.   Repurchase by the Company of its own securities

     This paragraph includes the information required by the Stock Exchange to be included in this
prospectus concerning the repurchase by the Company of its own securities.

     (a)   GEM Listing Rules

           The GEM Listing Rules permit companies with a primary listing on GEM to repurchase
     their equity securities on GEM subject to certain restrictions, the most important restriction is
     the shareholders’ approval.

          All proposed repurchases of securities (which must be fully paid up in the case of shares)
     on GEM by a company with a primary listing on GEM must be approved in advance by an
     ordinary resolution of shareholders, either by way of general mandate or by specific approval of
     a particular transaction. On 5th June, 2001, shareholders’ written resolutions were passed
     whereby a general unconditional mandate was given to the Directors authorising repurchase by
     the Company of Shares on GEM, or any other stock exchange recognised by the Securities and
     Futures Commission and the Stock Exchange of up to 10% of the aggregate nominal value of the
     share capital of the Company in issue and to be issued as mentioned herein at any time until the
     next annual general meeting of the Company or the expiration of the period within which the next
     annual general meeting of the Company is required by any applicable laws or the Articles to be
     held or until such mandate is revoked or varied by an ordinary resolution of the shareholders of
     the Company in general meeting, whichever is the earliest (“Buyback Mandate”).


                                              — 162 —
APPENDIX IV                             STATUTORY AND GENERAL INFORMATION

   (b)   Reasons for repurchase                                                                           R


        The Directors believe that it is in the best interests of the Company and its shareholders to
   have general authority from shareholders to enable the Directors to repurchase Shares in the
   market. Such repurchases may, depending on market conditions and funding arrangements at the
   time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will
   only be made when the Directors believe that such repurchases will benefit the Company and its
   shareholders.

   (c)   Funding of repurchases                                                                           R


         (i)    In repurchasing securities, the Company may only apply funds legally available for
                such purpose in accordance with its memorandum of association and Articles and the
                applicable laws of the Cayman Islands.

         (ii)   The Directors do not propose to exercise the Buyback Mandate to such extent as            R
                would, in the circumstances, have a material adverse effect on the working capital
                requirements of the Company or the gearing levels which in the opinion of the
                Directors are from time to time appropriate for the Company. However, there might
                be a material adverse effect on the working capital requirements of the Company or
                the gearing level (as compared with the position disclosed in the accountants’ report,
                the text of which is set out in Appendix I to this prospectus) in the event the Buyback
                Mandate is exercised in full.

   (d)   Exercise of the Buyback Mandate

        Assuming that the Over-alloment Option is not exercised, exercise in full of the Buyback
   Mandate, on the basis of 320,000,000 Shares in issue immediately after the listing of the Shares
   on GEM, could result in up to 32,000,000 Shares being repurchased by the Company during the
   period from the passing of such resolution up to the conclusion of the next annual general
   meeting of the Company or the expiration of the period within which the next annual general
   meeting of the Company is required by the Articles or any applicable laws to be held or the
   revocation or variation of the Buyback Mandate by an ordinary resolution of the shareholders in
   general meeting of the Company, whichever is the earliest.

        In the event the Over-allotment Option is exercised in full, 332,000,000 Shares will be in
   issue immediately after the exercise of the Over-allotment Option. The exercise in full of the
   Buyback Mandate on such basis would result in up to 33,200,000 Shares being repurchased by
   the Company during the period in which the Buyback Mandate remains in force.

   (e)   General                                                                                          R


         (i)    None of the Directors or, to the best of their knowledge, having made all reasonable      R
                enquiries, any of their Associates, has any present intention if the Buyback Mandate
                is exercised to sell any Shares to the Company or any of its subsidiaries.

         (ii)   The Directors have undertaken to the Stock Exchange that, so far as the same may be       R
                applicable, they will exercise the Buyback Mandate in accordance with the GEM
                Listing Rules and the applicable laws of the Cayman Islands.


                                             — 163 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

           (iii) If as a result of a repurchase of Shares, a shareholder’s proportionate interest in the     R
                 voting rights of the Company increases, such increase will be treated as an acquisition
                 for the purposes of the Hong Kong Code on Takeovers and Mergers (“Takeovers
                 Code”) issued by the Securities and Futures Commission. As a result, a shareholder,
                 or group of shareholders acting in concert, depending on the level of increase of the
                 shareholder’s interest, could obtain or consolidate control of the Company and
                 become obliged to make a mandatory offer in accordance with Rule 26 of the
                 Takeovers Code. Save as aforesaid, the Directors are not aware of any consequences
                 under the Takeovers Code as a result of a repurchase of securities made immediately
                 after the listing of the Shares.

           (iv) No connected person (as defined in the GEM Listing Rules) has notified the Company           R
                that he has a present intention to sell Shares to the Company, or has undertaken not
                to do so, if the Buyback Mandate is exercised.

FURTHER INFORMATION ABOUT THE BUSINESS

7.   Summary of material contracts                                                                           C
                                                                                                             A
                                                                                                             A
                                                                                                             (
     The following contracts (not being contracts in the ordinary course of business) have been
entered into by members of the Group within the two years preceding the date of this prospectus and
are or may be material:

     (a)   an intellectual property rights licence agreement dated 8th March, 2001 made between ERA
           Taiwan and ERA Home under which ERA Taiwan has granted to ERA Home an exclusive
           right to use the trademarks, service marks, trade names and other forms of intellectual or
           industrial property acquired by ERA Taiwan in relation to the trademarks and service marks
           referred to in the paragraph headed “Intellectual property rights” of this Appendix in Hong
           Kong, Macau and the PRC for the services stated therein. The agreement is for a term of
           10 years commencing from 15th May, 1998 and is subject to a renewal for a further 10
           years. In consideration, ERA Home is required to pay to ERA Taiwan a sum of HK$1 each
           year for the licence granted and a sum of HK$154,621 being the registration fees, renewal
           fees and other fees of the trademarks and service marks referred to in the paragraph headed
           “Intellectual property rights” of this Appendix incurred by ERA Taiwan for the years 1998,
           1999 and 2000;

     (b)   four sets of bought and sold notes and five related instruments of transfer all dated 4th June,
           2001 by which Era Information & Entertainment (BVI) Limited and its nominee, Era
           Communications Limited, acquired:

           (i)    18,000,000 shares of HK$1 each in the share capital of ERA Home from 5D
                  Technology Holdings Limited in consideration of the allotment and issue, credited as
                  fully paid, of 15,750 shares of US$0.1 each in Era Information & Entertainment (BVI)
                  Limited;

           (ii)   3,600,000 shares of HK$1 each in the share capital of ERA Home from Leung Chung
                  Chu, Andrew in consideration of the allotment and issue, credited as fully paid, of
                  3,150 shares of US$0.1 each in Era Information & Entertainment (BVI) Limited;


                                               — 164 —
APPENDIX IV                            STATUTORY AND GENERAL INFORMATION

         (iii) 1,800,000 shares of HK$1 each in the share capital of ERA Home from Cheung Mei
               Ling in consideration of the allotment and issue, credited as fully paid, of 1,575 shares
               of US$0.1 each in Era Information & Entertainment (BVI) Limited; and

         (iv) 600,000 shares of HK$1 each in the share capital of ERA Home from Mei Ah
              Entertainment in consideration of the allotment and issue, credited as fully paid, of
              525 shares of US$0.1 each in Era Information & Entertainment (BVI) Limited;

   (c)   an agreement dated 5th June, 2001 entered into between (i) 5D Technology Holdings Ltd.,
         Leung Chung Chu, Andrew, Cheung Mei Ling and Mei Ah Entertainment as vendors, (ii)
         Chiu Fu Sheng as covenantor, and (iii) the Company as purchaser relating to the sale and
         purchase of the entire issued share capital of Era Information & Entertainment (BVI)
         Limited by the vendors to the Company in consideration and in exchange for the allotment
         and issue, credited as fully paid, of an aggregate of 261,990 Shares as to 180,000 Shares
         to 5D Technology Holdings Ltd., 57,990 Shares to Leung Chung Chu, Andrew, 18,000
         Shares to Cheung Mei Ling and 6,000 Shares to Mei Ah Entertainment;

   (d)   a deed of indemnity dated 5th June, 2001 given by 5D Technology Holdings Ltd., Leung
         Chung Chu, Andrew, Cheung Mei Ling and Chiu Fu Sheng in favour of the Company and
         its subsidiaries being the deed of indemnity containing indemnities in respect of Hong Kong
         estate duty and tax indemnity referred to in the paragraph headed “Estate duty and tax
         indemnity” in this Appendix;

   (e)   the Underwriting Agreement; and

   (f)   a sponsor agreement dated 11th June, 2001 entered into between the Company and
         Rexcapital whereby the Company appointed Rexcapital to act as its sponsor for the purpose
         of the GEM Listing Rules for a period covering the remainder of the financial year during
         which the listing of the Shares on GEM occurs and the two financial years thereafter.




                                             — 165 —
APPENDIX IV                                    STATUTORY AND GENERAL INFORMATION

8.   Intellectual property rights                                                                                             A



     Pursuant to the intellectual property rights licence agreement referred to in the paragraph headed
“Summary of material contracts” in this Appendix dated 8th March, 2001, ERA Home, a
wholly-owned subsidiary of the Company, is granted from ERA Taiwan an exclusive right to use the
trademarks and service marks shown below:

     The mark        Registration no.        Class     Date of registration             Place of registration


                        05226 of 2000              9   15th May, 1998                   Hong Kong


                        00735 of 2000            35    15th May, 1998                   Hong Kong


                        00736 of 2000            38    15th May, 1998                   Hong Kong


                        02254 of 2000            41    15th May, 1998                   Hong Kong


                                1353823            9   14th January, 2000               PRC


                                1349963          35    28th December, 1999              PRC


                                1342414          38    7th December, 1999               PRC


                                1344939          41    14th December, 1999              PRC



     Class 9


     data-processing devices; computer programs for data communication; loudspeakers; video game machines for use with
     televisions; videorecorders; videotapes; films for motion picture; compact discs, records, tapes, modulators; computer
     peripheral devices; monitors, compact disc read only memories and interface cards; signal receivers; transmission
     devices; transmitter for telecommunication; radio antenna masts; carrier equipments for message transmission; radio
     antenna towers; wireless telephones; photographic and cinematographic apparatus and instruments; printed circuit
     boards; computers; cables or cable lines; optical fibers; wave amplifiers; wave enhancers; antenna frame; antenna;
     modem; signal converters; analogue to digital converters.


     Class 35


     advertising; business investigation; business management consultation; export and import agencies; business
     merchandising display services; agency services for quotations, tenders, sales and distribution of products.


     Class 38


     television and/or radio broadcasting; news agency services; transmission of information, data, news by telephones,
     computer, fax, television for commercial and domestic use.




                                                       — 166 —
APPENDIX IV                                     STATUTORY AND GENERAL INFORMATION

     Class 41


     arranging and conducting lectures, seminars, conferences for entertainment purpose; conducting sports contests and live
     entertainments; night club services; providing cinemas facilities; providing facilities for signing with pre-recorded
     background music and with lyric shown on a screen for entertainment purpose; amusement park services; providing
     bowling houses and gymnasium facilities; production of motion picture, phonograph records, cassette tapes and video
     tapes; production of radio and/or television programmes, arranging and conducting concerts, operas and dramas; rental
     of video tapes, motion pictures.


     As at the Latest Practicable Date, members of the Group held a number of domain names
including the following domain names:

     Domain name                                     Registrant                                 Expiry date


     erahk.com                                       Era Home                                   10th March, 2003
     erahk.com.hk                                    Era Home                                   No expiry date
     mov3.com                                        Era Digital Media                          1st December, 2001
     mus6.com                                        Era Digital Media                          17th January, 2002
     shop4disc.com                                   Era Digital Media                          25th February, 2002
     disc.com.hk                                     Era Digital Media                          No expiry date
     mov3-shop.com                                   Era Digital Media                          12th June, 2002
     mus6-shop.com                                   Era Digital Media                          12th June, 2002
                                                     Era Digital Media                          1st February, 2002
                                                     Era Digital Media                          1st February, 2002


FURTHER INFORMATION ABOUT DIRECTORS, MANAGEMENT AND STAFF

9.   Disclosure of interests

     (a)   Save as disclosed herein and in the paragraphs headed “Reorganisation” and “Summary of                              C
                                                                                                                               A
           material contracts” in this Appendix, none of the Directors or the experts named in the
           paragraph headed “Consents of experts” in this Appendix has any direct or indirect interest
           in the promotion of the Company or in any assets acquired or disposed of by or leased to
           any member of the Group or is proposed to be acquired or disposed of by or leased to any
           member of the Group within the two years immediately preceding the date of this
           prospectus.

     (b)   Save as disclosed in the paragraphs headed “Particulars of service contracts” and                                   C
                                                                                                                               A
           “Summary of material contracts” in this Appendix, none of the Directors is materially
           interested in any contract or arrangement subsisting at the date of this prospectus which is
           significant in relation to the business of the Group.




                                                      — 167 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

10.   Particulars of service contracts                                                                    C
                                                                                                          A


      Each of Leung Chung Chu, Andrew, Yau Sui Ha, Cecilia and Yau Kar Man, all being executive
Directors, has entered into a service contract with the Company for a term of three years commencing
on 1st June, 2001 with monthly remuneration at the rate of HK$160,000, HK$84,000 and HK$45,000
respectively. Under the service contracts, the remuneration payable to each of them may, subject to
the discretion of the Directors, be increased after each completed year of service and they will each
be entitled to a discretionary bonus of such amount as the Directors may determine provided that the
total amount of bonus payable to all the Directors for any year shall not exceed 20% of the
combined/consolidated profit after taxation but before extraordinary items of the Group in respect of
each financial year of the Company. Each service contract can be terminated by either party after the
expiry of the initial term on three months’ written notice or in certain other circumstances by the
Company, including but not limited to, serious breaches of the Directors’ obligations under the service
contract or serious misconduct.

11.   Directors’ remuneration                                                                             C
                                                                                                          A
                                                                                                          4

     The annual remuneration of the executive Directors during the Track Record Period were as
follows:

                                                                         Year ended 31st December,
                                                                                1999          2000
                                                                            HK$’000       HK$’000

      Leung Chung Chu, Andrew                                                      654           2,165
      Yau Sui Ha, Cecilia                                                        1,053           1,054
      Yau Kar Man                                                                  574             560

                                                                                 2,281           3,779



     Under the current arrangements, the Directors will be entitled to receive remuneration which, for
the year ending 31st December, 2001, is expected to be approximately HK$4.1 million. The
discretionary bonuses, if any, which may be paid to the Directors in respect of the year ending 31st
December, 2001 will be discretionary in nature.

     The independent non-executive Directors have been appointed for a term expiring on 31st May,
2003 and will each receive an annual fee of HK$100,000. Save for directors’ fees each year, none of
the non-executive Director and the independent non-executive Directors is expected to receive any
other remuneration for holding their office as a non-executive Director or an independent
non-executive Director.




                                              — 168 —
APPENDIX IV                                     STATUTORY AND GENERAL INFORMATION

12.   Interests of Directors in the share capital of the Company and associated corporations                                    C
                                                                                                                                A


     Immediately following completion of the Placing and the Capitalisation Issue, the Directors will
have the following interests in the shares of the Company or its associated corporations (within the
meaning of the SDI Ordinance) which will have to be notified to the Company and the Stock Exchange
pursuant to section 28 of the SDI Ordinance (including interests which they are taken or deemed to
have under section 31 of, or Part 1 of the Schedule to, the SDI Ordinance) or which will be required,
pursuant to section 29 of the SDI Ordinance, to be entered in the register referred to therein or which
will be required, pursuant to Rules 5.40 to 5.59 of the GEM Listing Rules, to be notified to the
Company and the Stock Exchange, once the Shares are listed on GEM:

                                                                          Number of Shares
                                                    Corporate         Personal    Family     Other                     Total
      Director                                       interests        interests interests interests                interests

      Leung Chung Chu,                                       —      36,000,000             —            —       36,000,000
        Andrew

      Chiu Fu Sheng                               180,000,000                 —            —            —      180,000,000
                                                        (note)


      Note: 5D Technology Holdings Ltd. is an investment holding company incorporated in BVI with all its shares held by
            ERA Taiwan. ERA Taiwan is a company incorporated in Taiwan with limited liability with its shares held by the
            following persons:

            Name of shareholders                                                                Percentage of shareholding

            Chiu Fu Sheng and his Associates                                                                         56.93%
            Far Eastern International Bank (Note)                                                                      3.7%
            Global Venture Offshore Limited (Note)                                                                    7.49%
            Capital International Global Emerging Markets
              Private Equity Fund L.P. (Note)                                                                          7.5%
            Others (Note)                                                                                            24.38%

                                                                                                                       100%



            (Note) So far as the Directors are aware, the beneficial owners of Far Eastern International Bank, Global Venture
                   Offshore Limited, Capital International Global Emerging Markets Private Equity Fund L.P. and the
                   shareholders of ERA Taiwan holding the 24.38% of the issued share capital of ERA Taiwan stated above
                   are third parties independent from the Directors, the chief executive, the Management Shareholders and
                   substantial shareholders of the Company and their respective Associates.


                    Far Eastern International Bank is a listed company in Taiwan.

                    Capital International Global Emerging Markets Private Equity Fund L.P. is an investment fund registered
                    in the United States.

                    Global Venture Offshore Limited is indirectly wholly-owned by PCCW Enterprises Limited.


                    The 24.38% of the issued share capital of ERA Taiwan above represented the shareholdings held by the
                    public shareholders in Taiwan.




                                                       — 169 —
APPENDIX IV                                        STATUTORY AND GENERAL INFORMATION

     Leung Chung Chu, Andrew is personally interested in 400,000 shares of RM1 each in,
representing approximately 8.26% of the issued share capital of, Winning Scope Sdn. Bhd., a company
of which the Company is indirectly interested in 22.73% of its issued share capital.

     Pursuant to the Pre-IPO Share Option Scheme, certain Directors have been granted options to
subscribe for Shares, details of which are set out as follows:

                                                                                                              Approximate
                                                                    Total number of Shares                    percentage of
      Name of Directors                                               subject to the options                   shareholding
                                                                                    (Note 1)                        (Note 2)

      Leung Chung Chu, Andrew                                                          1,200,000                      0.375%
      Yau Sui Ha, Cecilia                                                                600,000                     0.1875%
      Yau Kar Man                                                                        400,000                      0.125%
      Chan Kin Wo                                                                        400,000                      0.125%
      Yow Cecil                                                                          400,000                      0.125%


      Notes:


      1.       The options were granted on 5th June, 2001 and are exercisable at the Offer Price in accordance with the terms
               of the Pre-IPO Share Option Scheme.


      2.       The calculation is made on the basis that the Placing and the Capitalisation Issue become unconditional and
               without taking into account the Shares which may fall to be issued upon the exercise of the Over-allotment Option
               or any options granted under the Pre-IPO Share Option Scheme.


13.   Personal guarantee

     Personal guarantees have been provided by Leung Chung Chu, Andrew and Yau Kar Man, both
being executive Directors, in respect of certain banking facilities and continuing guarantees in respect
of payment of advertising charges in favour of certain newspapers and magazines. The relevant bank
has agreed to release such personal guarantees upon listing of the Shares on GEM and to replace such
guarantees by corporate guarantees from the Company and/or other members of the Group. In
addition, continuing guarantees in respect of payment of advertising charges will be released or
replaced by other security upon listing of the Shares on GEM.




                                                          — 170 —
APPENDIX IV                                     STATUTORY AND GENERAL INFORMATION

14.   Substantial shareholders                                                                                                 C
                                                                                                                               A


      So far as the Directors are aware, immediately following completion of the Placing and the
Capitalisation Issue, the holders of 10% or more of the Shares then in issue (taking no account of
Shares which may be taken up under the exercise of the Over-allotment Option or the options granted
or to be granted under the Pre-IPO Option Scheme) will be:

                                                                                                           Approximate
                                                                                                          percentage of
      Name                                                         Number of Shares                       issued Shares

      Chiu Fu Sheng and his Associates                             180,000,000 (note)                             56.25%
      ERA Taiwan                                                   180,000,000 (note)                             56.25%
      5D Technology Holdings Ltd.                                  180,000,000 (note)                             56.25%
      Leung Chung Chu, Andrew                                       36,000,000                                    11.25%


      Note: 5D Technology Holdings Ltd. is an investment holding company incorporated in the BVI with all its shares held
            by ERA Taiwan. ERA Taiwan is a company incorporated in Taiwan with limited liability with its shares held by
            the following persons:

            Name of shareholders                                                               Percentage of shareholding

            Mr. Chiu Fu Sheng and his Associates                                                                    56.93%
            Far Eastern International Bank (Note)                                                                     3.7%
            Global Venture Offshore Limited (Note)                                                                   7.49%
            Capital International Global Emerging Markets
              Private Equity Fund L.P. (Note)                                                                         7.5%
            Others (Note)                                                                                           24.38%


                                                                                                                      100%



            Note: So far as the Directors are aware, the beneficial owners of Far Eastern International Bank, Global Venture
                   Offshore Limited, Capital International Global Emerging Markets Private Equity Fund L.P. and the
                   remaining shareholders of ERA Taiwan holding the 24.8% of the issued share capital of ERA Taiwan stated
                   above are third parties independent from the Directors, the chief executive, the Management Shareholders
                   and substantial shareholders of the Company and their respective Associates.


                   Far Eastern International Bank is a listed company in Taiwan.

                   Capital International Global Emerging Markets Private Equity Fund L.P. is an investment fund registered
                   in the United States.

                   Global Venture Offshore Limited is indirectly wholly-owned by PCCW Enterprises Limited.


                   The 24.38% of the issued share capital of ERA Taiwan above represented the shareholdings held by the
                   public shareholders in Taiwan.




                                                      — 171 —
APPENDIX IV                               STATUTORY AND GENERAL INFORMATION

15.   Agency fees or commissions received

     The Underwriters will receive a commission of 4.5% of the Offer Price in respect of the Placing
Shares, out of which they will pay any sub-underwriting commissions and selling concessions. Such
commissions, selling concessions, documentation fees and expenses, together with the Stock
Exchange listing fees, legal and other professional fees, and printing and other expenses relating to
the Placing which are estimated to amount in aggregate to approximately HK$16 million, will be
payable by the Company and Leung Chung Chiu, Andrew in the proportion in which the number of
New Shares and the number of Sale Shares bear to the total number of Placing Shares respectively.

16.   Related party transactions

     The Group has entered into the related party transactions within the two years immediately
preceding the date of this prospectus as mentioned the paragraph headed “Connected transactions” in
the section headed “Relationship with ERA Taiwan” of this propsectus, the paragraph headed
“Reorganisation” in this Appendix and in section 3 note (g) “Related party transactions” of the
accountants’ report set out in Appendix I to this prospectus.

17.   Disclaimers

      Save as disclosed in this prospectus:

      (a)   none of the Directors or chief executive of the Company or their respective Associates has
            any interest in the shares or debentures of the Company or any associated corporation
            (within the meaning of the SDI Ordinance) which will have to be notified to the Company
            and the Stock Exchange pursuant to section 28 of the SDI Ordinance (or any interest which
            he will be taken or deemed to have under section 31 of, or Part 1 of the Schedule to, the
            SDI Ordinance) or which will be required, pursuant to section 29 of the SDI Ordinance, to
            be entered in the register referred to therein or which will be required, pursuant to Rules
            5.40 to 5.59 of the GEM Listing Rules, to be notified to the Company and the Stock
            Exchange once the Shares are listed on GEM;

      (b)   there are no existing or proposed service contracts (excluding contracts expiring or
            determinable by the employer within one year without payment of compensation (other than
            statutory compensation)) between the Directors and any member of the Group;

      (c)   none of the Directors or the experts named in the paragraph headed “Consents of experts”
            in this Appendix has any direct or indirect interest in the promotion of, or in any assets
            which have been, within the two years immediately preceding the date of this prospectus,
            acquired or disposed of by or leased to, any member of the Group, or are proposed to be
            acquired or disposed of by or leased to any member of the Group;

      (d)   none of the Directors is materially interested in any contract or arrangement subsisting at
            the date of this prospectus which is significant in relation to the business of the Group taken
            as a whole;

      (e)   taking no account of Shares which may be taken up under the Placing or upon the exercise          C
                                                                                                              A
            of the Over-allotment Option or the options granted or which may be granted under the
            Pre-IPO Share Options and the Share Option Scheme, none of the Directors knows of any


                                                — 172 —
APPENDIX IV                               STATUTORY AND GENERAL INFORMATION

            person (not being a Director or chief executive of the Company) who will immediately
            following completion of the Placing and the Capitalisation Issue be interested, directly or
            indirectly, 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 member of the Group; and

      (f)   none of the experts named in the paragraph headed “Consents of experts” in this Appendix
            has any shareholding in any company in the Group or the right (whether legally enforceable
            or not) or option to subscribe for or to nominate persons to subscribe for securities in any
            member of the Group.

18.   Share Option Scheme                                                                                   C
                                                                                                            A


      (a)   Summary of terms

           The following is a summary of the principal terms of the Share Option Scheme adopted
      pursuant to written resolutions of all the shareholders of the Company passed on 5th June, 2001:

            (i)    Who may join

                The Directors may at their discretion grant options to Directors and employees of the
            Group to subscribe for Shares.

            (ii)   Price of Shares

                   Options may be granted without any initial payment at a subscription price determined
            by the Directors (subject to adjustments as provided therein) equal to the higher of (i) the
            nominal value of the Shares; (ii) the closing price per Share as stated in the Stock
            Exchange’s daily quotations sheet on the date of grant, which must be a Business Day; and
            (iii) the average closing price per Share as stated in the Stock Exchange’s daily quotations
            sheets for the five Business Days immediately preceding the date of grant.

            (iii) Maximum number of Shares

                  The maximum number of Shares subject to the Share Option Scheme and any other
            schemes (including the Pre-IPO Share Option Scheme) must not, in aggregate, exceed 30%
            of Shares of the Company in issue from time to time during a period of 10 years from the
            date on which the Share Option Scheme becomes unconditional (excluding (i) Shares issued
            after that date upon the exercise of any options granted under the Pre-IPO Share Option
            Scheme, the Share Option Scheme and any other such schemes; and (ii) any pro rata
            entitlements to further Shares issued in respect of those Shares mentioned in (i)). Subject
            to this:

                   (aa) the total number of Shares available for issue under options which may be
                        granted under the Share Option Scheme must not in aggregate exceed 10% of the
                        issued share capital of the Company as at the date of listing of Shares on GEM
                        unless an approval by shareholders at general meeting has been obtained
                        pursuant to paragraphs (bb) or (cc) below;


                                               — 173 —
APPENDIX IV                        STATUTORY AND GENERAL INFORMATION

           (bb) the Company may seek approval by shareholders at general meeting to refresh
                the 10% limit. However, the total number of Shares available for issue under
                options which may be granted under the Share Option Scheme in these
                circumstances must not exceed 30% of the issued share capital of the Company
                at the date of approval of the refreshing of the limit;

           (cc) the Company may seek separate shareholders’ approval at general meeting to
                grant options beyond the 10% limit, provided that (i) the total number of Shares
                subject to the Share Option Scheme does not in aggregate exceed 30% of the
                total issued share capital of the Company and (ii) the options in excess of the
                10% limit are granted only to participants specified by the Company before such
                approval is sought;

           (dd) any grant of options to a connected person (as defined in the GEM Listing Rules)
                must be approved by all independent non-executive Directors; and

           (ee) where options are proposed to be granted to a connected person who is also a
                substantial shareholder (as defined in the GEM Listing Rules) of the Company
                or any of its Associates, and the proposed grant of options, when aggregated the
                options already granted to such connected person in the past 12 months period,
                would entitle that person to receive more than 0.1% of the total issued shares of
                the Company for the time being and the value of which is in excess of HK$5
                million, then the proposed grant must be subject to the approval by shareholders
                at general meeting. Apart from the connected person involved, all other
                connected persons of the Company must abstain from voting in such general
                meeting (except where any connected person intends to vote against the
                proposed grant). A shareholder’s circular must be prepared by the Company
                explaining the proposed grant, disclosing the number and terms of the options to
                be granted and containing a recommendation from the independent non-
                executive Directors on whether or not to vote in favour of the proposed grant.

            Upon completion of the Placing and the Capitalisation Issue and taking no account of
      Shares which may be issued pursuant to (i) the Over-allotment Option and (ii) options
      granted under the Pre-IPO Share Option Scheme as described in the paragraph headed
      “Pre-IPO Share Option Scheme” below, the total number of Shares subject to the Share
      Option Scheme and any other scheme (including the Pre-IPO Share Option Scheme), will
      be the number of Shares, representing 30% of the issued share capital of the Company at
      that time.

           No option may be granted to any person which if exercised in full will result in such
      person’s maximum entitlement exceeding 25% of the aggregate Shares for the time being
      issued or issuable under the Share Option Scheme and any other share option scheme (if
      any) (including the Pre-IPO Share Option Scheme).

      (iv) Time of exercise of option

           Any grant of options must not be made after a price sensitive development has
      occurred or a price sensitive matter has been the subject of a decision, until such price
      sensitive information has been announced pursuant to the requirements of the GEM Listing
      Rules. An option may be exercised in accordance with the terms of the Share Option


                                        — 174 —
APPENDIX IV                          STATUTORY AND GENERAL INFORMATION

      Scheme at any time during the period commencing immediately after the date on which the
      option is deemed to be granted and accepted and expiring on a date to be determined and
      notified by the board of Directors to the grantee, such offer shall in any event and not later
      than 10 years from the date on which the Share Option Scheme option under the Share
      Option Scheme is deemed to be granted and accepted.

      (v)   Rights are personal to grantee

           An option may not be transferred or assigned and is personal to the holder of the
      option, save as provided under the rules of the Share Option Scheme.

      (vi) Rights on dismissal

            If the grantee of an option leaves the service of the Group by reason of his termination
      of his employment on the grounds of serious misconduct, bankruptcy, insolvency,
      arrangement or composition with his creditors on conviction of any criminal offence
      involving his integrity or honesty, or if has been convicted of any criminal offence
      involving his or her integrity or honesty, his option will lapse automatically on the date of
      cessation or termination (to the extent not already exercised). The date of such cessation
      shall be the last day on which the grantee was at work with the Group whether salary is paid
      in lieu of notice or not.

      (vii) Rights on cessation of employment or death

           If the grantee of an option ceases to be an employee of the Group for any reason other
      than death or those set out in paragraph (vi) above, the grantee (or his or her legal personal
      representatives) may exercise the option in full (to the extent not already exercised) within
      a period of six months following the date of such cessation, which date shall be the last
      actual working day on which the grantee was at work with the Company or the relevant
      subsidiary on which salary is paid whether in lieu of notice or not or the date on which his
      contractual notice period expires, whichever is later, or such longer period as the board of
      Directors may determine.

           In the event the grantee dies before exercising the option in full and none of the events
      which would be a ground for termination of his or her employment under paragraph (vi)
      above arises, the legal personal representative(s) of the grantee shall be entitled within a
      period of six months from the date of death to exercise the option in full (to the extent not
      already exercised) up to the entitlement of such grantee as at the date of death.

      (viii) Effects of alterations to share capital

            In the event of any reduction, sub-division or consolidation of the share capital of the
      Company or capitalisation of profits or reserves, rights issue or distribution of capital assets
      by the Company, the number or nominal amount of Shares comprised in each option, the
      option price and/or the method of exercise of the option may be adjusted in such manner
      as the Directors (having received a statement in writing from the auditors of the Company
      that in their opinion the adjustments proposed are fair and reasonable) may deem
      appropriate, provided always that an option holder shall have the same proportion of the
      equity capital of the Company as that to which he was entitled before such adjustments.


                                           — 175 —
APPENDIX IV                         STATUTORY AND GENERAL INFORMATION

      (ix) Rights on a general offer by way of takeover

            In the event of a general offer by way of takeover being made to all the holders of
      Shares (or all such holders other than the offeror and/or any person controlled by the offeror
      and/or any person acting in association or concert with the offeror) and such offer becomes
      or is declared unconditional during the option period of the relevant option, the grantee (or
      his or her legal personal representatives) shall be entitled to exercise the option in full (to
      the extent not already exercised even though the option period has come into effect during
      the occurrence of the general offer) at any time within one month after the date on which
      the offer becomes or is declared unconditional.

      (x)   Rights on a general offer by way of scheme of arrangement

            If a general offer by way of scheme of arrangement is made to all the holders of Shares
      and such offer having been approved by the necessary number of holders of Shares at the
      requisite meetings, the grantee (or his or her legal personal representatives) may thereafter
      (but before such time as shall be notified by the Company) exercise the option (to the extent
      not already exercised) to its full extent or to the extent specified in such notice.

      (xi) Rights on winding up                                                                         A


           If notice is duly given of a general meeting at which a resolution will be proposed for
      the voluntary winding-up of the Company, every option shall be exercisable in whole or in
      part at any time thereafter until the resolution is duly passed or defeated or the meeting
      concluded or adjourned sine die, whichever shall first occur and the Company shall
      forthwith give notice thereof to the grantee and the grantee (or his or her legal personal
      representatives) may by notice in writing to the Company (such notice to be received by the
      Company not later than four Business Days prior to the proposed shareholders’ meeting)
      exercise the option (to the extent not already exercised) either to its full extent or to the
      extent specified in such notice whereupon the Company shall as soon as possible and in any
      event no later than the day immediately prior to the date of the proposed shareholders’
      meeting, allot and issue such number of Shares to the grantee which falls to be issued on
      such exercise. If such resolution is duly passed, all options shall, to the extent that they
      have not been exercised, thereupon cease and terminate.

      (xii) Rights on a compromise or arrangement

           In the event of a compromise or arrangement between the Company and its members
      or creditors being proposed in connection with a scheme for the reconstruction or
      amalgamation of the Company, the Company shall give notice thereof to all grantees on the
      same day as it gives notice of the meeting to its members or creditors to consider such a
      scheme or arrangement and any grantee (or his or her legal personal representatives) may
      by notice in writing to the Company accompanied by a remittance of the full amount of the
      exercise price payable on exercise of an option and in respect of which the notice is given
      (such notice to be received by the Company not later than two Business Days prior to the
      proposed meeting) exercise the option (to the extent not already exercised) either to its full
      extent or to the extent specified in such notice and the Company shall as soon as possible
      and in any event no later than the day immediately prior to the date of the proposed
      meeting, allot and issue such number of Shares to the grantee which falls to be issued on
      such exercise credited as fully paid and register the grantee as holder thereof.


                                          — 176 —
APPENDIX IV                           STATUTORY AND GENERAL INFORMATION

      (xiii) Ranking of Shares

            The Shares to be allotted upon the exercise of an option will be subject to all the
      provisions of the articles of association of the Company for the time being in force and will
      rank pari passu in all respects with the fully paid Shares in issue on the date on which the
      name of the grantee is registered on the register of members of the Company and
      accordingly will entitle the holders to participate in all dividends and other distributions
      paid or made after that date other than any dividends and other distributions declared or
      recommended or resolved to be paid or made if the record date therefor was on or before
      that date provided always that when the date or exercise of the option falls on a date upon
      which the register of members of the Company is closed then the exercise of the option
      shall become effective on the first Business Day in Hong Kong on which the register of
      members of the Company is re-opened.

      (xiv) Period of Share Option Scheme

           The Share Option Scheme will remain in force for a period of 10 years from the date
      of adoption of such scheme.

      (xv) Alteration

            Any alteration of the provisions of the Share Option Scheme to the advantage of the
      grantees or the prospective grantees shall not take effect except with the prior sanction of
      an ordinary resolution of the Company in general meeting, with the grantees and their
      Associates abstaining from voting and that any material alteration to its terms and
      conditions of (including matters contained in Rule 23.03 of the GEM Listing Rules) shall
      first be approved by the Stock Exchange. No such alteration shall adversely affect any
      option granted or agreed to be granted prior to the date of alteration.

      (xvi) Cancellation of options

           Any cancellation of options granted but not exercised must be approved by
      shareholders of the Company (and also by shareholders of any holding company whose
      securities are listed on the Main Board or on GEM) in general meeting, with participants
      and their associates abstaining from voting. Any vote taken at the general meeting to
      approve such cancellation shall be taken by poll.

      (xvii) Termination of the Share Option Scheme

           The Company in general meeting may at any time terminate the Share Option Scheme
      and in such event no further options shall be granted or offered but in all other respects the
      provisions of the Share Option Scheme shall remain in full force and effect. Upon such
      termination, details of the options granted (including options exercised or outstanding)
      under the Share Option Scheme are required under the GEM Listing Rules to be disclosed
      in the circular to shareholders seeking approval of the first new scheme establishing
      thereafter.

      (xviii) General

            Unless the context otherwise requires, “Shares” in this paragraph 18 include
      references to shares in the ordinary equity share capital of the Company of such nominal
      amount as shall result form a subdivision, consolidation, re-classification of reduction of
      the share capital of the Company from time to time.


                                         — 177 —
APPENDIX IV                                STATUTORY AND GENERAL INFORMATION

      (b)   Present status of the Share Option Scheme

            (i)    The Share Option Scheme is conditional on, among other conditions, the GEM Listing
                   Committee granting the listing of and permission to deal in the Shares in issue at the
                   date of adoption of the Scheme and the Shares which may fall to be issued pursuant
                   to the exercise of options granted under the Share Option Scheme.

            (ii)   As at the date of this prospectus, no option has been granted or agreed be granted
                   under the Share Option Scheme.

            (iii) Application has been made to the GEM Listing Committee of the Stock Exchange for
                  the listing of and permission to deal in the Shares which may fall to be issued pursuant
                  to the exercise of the options granted under the Share Option Scheme.

19.   Pre-IPO Share Option Scheme                                                                            C
                                                                                                             A
                                                                                                             (

      (a)   Summary of terms of the Pre-IPO Share Option Scheme

           The purpose of the Pre-IPO Share Option Scheme is to recognise the contribution of certain
      Directors, employees, consultants and advisers of the Group to the growth of the Group and/or
      the listing of Shares on GEM. The principal terms of the Pre-IPO Share Option Scheme,
      conditionally approved by written resolution of all the shareholders of the Company passed on
      5th June, 2001, are substantially the same as the terms of the Share Option Scheme except that:

            (i)    the subscription price per Share is the Offer Price;

            (ii)   the total number of Shares subject to the Pre-IPO Share Option Scheme is 8,260,000
                   Shares equivalent to approximately 2.58% of the enlarged issued share capital of the
                   Company as of the Listing Date (assuming that the Over-allotment Option is not
                   exercised); and

            (iii) save for the options which have been granted under the Pre-IPO Share Option Scheme
                  (see paragraph (b) below), no further options will be offered or granted under the
                  Pre-IPO Share Option Scheme, as the right to do so will terminate upon the listing of
                  the Shares on GEM.

           Each of the grantees to whom options have been conditionally granted under the Pre-IPO
      Share Option Scheme will be entitled to exercise (i) 50% of the options so granted to him/her
      (rounded down to the nearest whole number) at any time after the expiry of 12 months from the
      date of the grant of the options, and (ii) the remaining 50% of the options granted to him/her
      (rounded down to the nearest whole number) at any time after 24 months from the date of the
      grant of the options, and in each case, not later than 10 years from the date of the grant of the
      options.

           Application has been made to the GEM Listing Committee for the listing of, and permission
      to deal in, the Shares which may be issued pursuant to the exercise of the options granted under
      the Pre-IPO Share Option Scheme.


                                                — 178 —
APPENDIX IV                          STATUTORY AND GENERAL INFORMATION

   (b)   Outstanding options under the Pre-IPO Share Option Scheme

        As at the date of this prospectus, 71 options to subscribe for an aggregate of 8,260,000
   Shares at an exercise price equal to the Offer Price have been granted by the Company under the
   Pre-IPO Share Option Scheme. Each of the grantees to whom options have been conditionally
   granted under the Pre-IPO Share Option Scheme will be entitled to exercise (i) 50% of the
   options so granted to him/her (rounded down to the nearest whole number) at any time after the
   expiry of 12 months from the date of the grant of the options, and (ii) the remaining 50% of the
   options granted to him/her (rounded down to the nearest whole number) at any time after 24
   months from the date of the grant of the options, and in each case, not later than 10 years from
   the date of the grant of the options. Particulars of the outstanding options which have been
   granted under the Pre-IPO Share Option Scheme to the Directors, consultants, senior
   management staff and employees of the Group entitling to acquire 300,000 Shares or more are
   set out below:

                                                                                    Approximate
                                                                                   percentage of
                                                                                shareholding (on
                                                                Number of            the basis of
                                                                underlying    320,000,000 Shares
   Name of grantee                Address                          Shares               in issue)


   Executive Directors

   Leung Chung Chu, Andrew        A5, 16/F., Coral Court         1,200,000                 0.375%
                                  118 Tin Hau Temple Road
                                  North Point
                                  Hong Kong

   Yau Sui Ha, Cecilia            4D, Fairyland Garden             600,000                0.1875%
                                  8 Broadcast Drive
                                  Kowloon
                                  Hong Kong

   Yau Kar Man                    Flat D, 23/F.                    400,000                 0.125%
                                  Block 1, Tivoli Garden
                                  75 Tsing King Road
                                  Tsing Yi
                                  New Territories
                                  Hong Kong

   Independent non-executive Directors

   Chan Kin Wo                    Flat A, 2/F., Yukon Court        400,000                 0.125%
                                  2 Conduit Road
                                  Hong Kong

   Yow Cecil                      89 Tai Hang Road, 1/F.           400,000                 0.125%
                                  Hong Kong




                                            — 179 —
APPENDIX IV                                       STATUTORY AND GENERAL INFORMATION

                                                                                                          Approximate
                                                                                                         percentage of
                                                                                                      shareholding (on
                                                                                  Number of                the basis of
                                                                                  underlying        320,000,000 Shares
     Name of grantee                          Address                                Shares                   in issue)


     Consultants

     Chan Chi Kwong                           Room 18C, Block 17                      400,000                      0.125%
       (Note 1)                               South Horizons
                                              Ap Lei Chau
                                              Hong Kong

     Chan Yiu Bong, Boniface                  65A, 20/F.                              300,000                   0.09375%
       (Note 2)                               Broadway Street
                                              Mei Foo Sun Chuen
                                              Kowloon

     Senior management staff

     Keung Chi Wai                            Flat E, 8/F., Block 5                   400,000                      0.125%
                                              Villa Esplanada
                                              8 Nga Ying Chau Street
                                              Tsing Yi
                                              New Territories

     Ng Wai Lun                               Block C, 2/F.,                          300,000                   0.09375%
                                              242 Prince Edward Road
                                              Kowloon
                                              Hong Kong

     Wong Wai Shun, Wilson                    Room 412, Block D                       120,000                     0.0375%
                                              Ming Wah Building
                                              Shaukeiwan
                                              Hong Kong

     Luk Yuen King                            Flat A, 12/F.                           120,000                     0.0375%
                                              Block 11, Sceneway Garden
                                              Lam Tin
                                              Kowloon
                                              Hong Kong
     Notes:

     1.       Mr. Chan Chi Kwong has been acting as a consultant for the Group to provide general consultancy and advice on
              the music medium in respect of sales of CD through the online stores and the planned online delivery of music.

     2.       Mr. Chan Yiu Bong, Boniface has been acting as the US representative for the Group to involve in negotiation of
              licensing agreements with US film studios as and when necessary. In addition, Mr. Chan is also responsible for
              maintaining relationship between the Group and these US film studios.


     In addition to the options granted to the persons above, a total of 60 employees of the Group have
been granted options under the Pre-IPO Share Option Scheme.


                                                        — 180 —
APPENDIX IV                               STATUTORY AND GENERAL INFORMATION

     Rexcapital, on behalf of the Company, has applied to the Hong Kong Securities and Futures
Commission for a waiver from strict compliance with the disclosure requirements of paragraph 10(d)
of the Third Schedule to the Companies Ordinance on the ground that full compliance with these
requirements would be unduly burdensome to the Company. The Hong Kong Securities and Futures
Commission has granted such a waiver to the Company pursuant to Section 342A of the Companies
Ordinance on the condition that:

      (a)   full details of all such options granted under the Pre-IPO Share Option Scheme to the
            employees of the Group who have been conditionally granted options entitling them to
            acquire 300,000 Shares or more and all options conditionally granted to the Directors,
            senior management staff and consultants of the Group are disclosed in this prospectus, such
            details to include all the particulars required under paragraph 10 of the Third Schedule to
            the Companies Ordinance; and

      (b)   a list of all the grantees, including the persons referred to in the sub-paragraph above, who
            have been conditionally granted options under the Pre-IPO Share Option Scheme,
            containing all the particulars as required under paragraph 10 of Part I of the Third Schedule
            to the Companies Ordinance, be made available for pubic inspection in accordance with the
            paragraph headed “Documents available for inspection” in Appendix V to this prospectus.

     Save as disclosed above, no options have been granted or agreed to be granted by the Company
under the Pre-IPO Share Option Scheme.

OTHER INFORMATION

20.   Estate duty and tax indemnity

      5D Technology Holdings Ltd., Leung Chung Chu, Andrew, Cheung Mei Ling and Chiu Fu Sheng
have given joint and several indemnities in connection with, taxation and, Hong Kong estate duty
which might be payable by any member of the Group by reason of any transfer of property (within the
meaning of Section 35 of the Estate Duty Ordinance of Hong Kong) to any member of the Group on
or before the date on which the Placing becomes unconditional and other taxation which may be
payable by any member of the Group on or before the date on which the Placing becomes
unconditional save in certain circumstances including where provision has been made for such
taxation in the audited accounts of any member of the Group for the period ended 31st December,
2000.

     The Directors have been advised that no material liability for estate duty is likely to fall on any
member of the Group in the Cayman Islands, or Hong Kong, being jurisdiction in which one or more
of the companies comprising the Group are incorporated.

21.   Litigation                                                                                            A



     On 17th May, 2001, a claim (the “Claim”) at the Small Claim Tribunal was brought against ERA
Home, a wholly subsidiary of the Company. The Claim relates to the outstanding advertising fees
payable by ERA Home to the plaintiff and is for an amount of HK$40,000 plus costs. Based on the
advice of the legal adviser to ERA Home, the Directors estimate that the maximum liability of the
Group under the Claim will not exceed HK$50,000.


                                               — 181 —
APPENDIX IV                              STATUTORY AND GENERAL INFORMATION

     Save as disclosed above, no member of the Group is engaged in any litigation or arbitration of
material importance and no litigation, arbitration or claim of material importance is known to the
Directors to be pending or threatened against any member of the Group.

22.   Sponsor

      Rexcapital has made an application on behalf of the Company to the GEM Listing Committee for
the listing of and permission to deal in the Shares in issue and to be issued as mentioned herein, and
any Shares falling to be issued pursuant to the exercise of options granted and to be granted under the
Share Option Schemes.

23.   Preliminary expenses                                                                                 C


     The estimated preliminary expenses of the Company are approximately US$2,000 and are                  C
                                                                                                           A
payable by the Company.

24.   Prom oter

      The promoter of the Company is Leung Chung Chu, Andrew. In relation to the benefit given to          C
                                                                                                           A
the promoter of the Company in connection with the Placing or related transaction, please refer to the
section headed “Further information about the Company” in this Appendix.

      Save as disclosed in this prospectus, within the two years preceding the date of this prospectus,
no amount or benefit has been paid or given to the promoter in connection with the Placing or the
related transactions described in this prospectus.

25.   Qualifications of experts

     The following are the qualifications of the experts who have given their opinions or advice which
are contained in this prospectus:

      Name of expert                                  Qualifications

      American Appraisal Hongkong Limited             Professional surveyors and valuers
      RSM Nelson Wheeler                              Certified public accountants
      Conyers Dill & Pearman, Cayman                  Cayman Islands attorneys-at-law


26.   Consents of experts

      American Appraisal Hongkong Limited, RSM Nelson Wheeler and Conyers Dill & Pearman,                  C
                                                                                                           (
Cayman have given and have not withdrawn their respective written consents to the issue of this            A
prospectus with copies of their reports, valuation, opinions or letters (as the case may be) and the
references to their names included herein in the form and context in which they are respectively
included.

27.   Binding effect                                                                                       C
                                                                                                           (
                                                                                                           A
      This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering
all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A
and 44B of the Companies Ordinance so far as applicable.


                                              — 182 —
APPENDIX IV                                STATUTORY AND GENERAL INFORMATION

28.   Tax

      (a)   Hong Kong

           Dealings in Shares registered on the Company’s Hong Kong branch register of members
      will be subject to Hong Kong stamp duty. The sale, purchase and transfer of Shares registered
      on the Company’s Hong Kong branch register of members are subject to Hong Kong stamp duty.

           Profits from dealings in the Shares arising in or derived from Hong Kong may also be
      subject to Hong Kong profits tax.

           The Shares are Hong Kong property for the purposes of the Estate Duty Ordinance (Chapter
      111 of the Laws of Hong Kong) and, accordingly, Hong Kong estate duty may be payable in
      respect thereof on the death of an owner of Shares.

      (b)   Cayman Islands

          Under the present Cayman Islands law, transfers and other dispositions of Shares are
      exempt from Cayman Islands stamp duty.

      (c)   Professional tax advice recommended

           Intending holders of Shares are recommended to consult their professional advisers if they
      are in any doubt as to the taxation implications of subscribing for, purchasing, holding or
      disposing of or dealing in Shares. It is emphasised that none of the Company, the Directors or
      other parties involved in the Placing can accept responsibility for any tax effect on, or liabilities
      of, holders of Shares resulting from their subscription for, purchase, holding or disposal of or
      dealing in Shares.

29.   Miscellaneous

      (a)   Save as disclosed in this prospectus:

            (i)    within the two years preceding the date of this prospectus, no share or loan capital of    C
                                                                                                              A
                   the Company or any of its subsidiaries has been issued or agreed to be issued fully or
                   partly paid either for cash or for a consideration other than cash;

            (ii)   within the two years preceding the date of this prospectus, no commissions, discounts,
                   brokerages or other special terms have been granted in connection with the issue or
                   sale of any share or loan capital of the Company or any of its subsidiaries;

            (iii) no share or loan capital of the Company or any of its subsidiaries is under option or
                  is agreed conditionally or unconditionally to be put under option;

            (iv) there has been no material adverse change in the financial position or prospects of the
                 Group since 31st December, 2000 (being the date to which the latest audited combined
                 financial statements of the Group were made up); and

            (v)    there has not been any interruption in the business of the Group which has had a
                   material adverse effect on the financial position of the Group in the 24 months
                   preceding the date of this prospectus.


                                                — 183 —
APPENDIX IV                             STATUTORY AND GENERAL INFORMATION

      (b)   The Company has no founder shares, management shares or deferred shares.                   C
                                                                                                       A


      (c)   Subject to the provisions of the Companies Law, the register of members of the Company
            will be maintained in the Cayman Islands by Bank of Bermuda (Cayman) Limited and a
            branch register of members of the Company will be maintained in Hong Kong by Hong
            Kong Registrars Limited. Unless the Directors otherwise agree, all transfers and other
            documents of title of Shares must be lodged for registration with and registered by, the
            Company’s share registrar in Hong Kong and may not be lodged in the Cayman Islands.

      (d)   All necessary arrangements have been made to enable the Shares to be admitted into
            CCASS.

30.   Particulars of the Vendor

      Particulars of the Vendor are as follows:                                                        C
                                                                                                       A
                                                                                                       1
      Name                        Description                       Address

      Leung Chung Chu,            One of the Initial Management     A5, 16/F., Coral Court
        Andrew                    Shareholders and an executive     118 Tin Hau Temple Road
                                  Director                          North Point
                                                                    Hong Kong




                                                — 184 —
APPENDIX V                    DOCUMENTS DELIVERED TO THE REGISTRAR OF
                      COMPANIES AND DOCUMENTS AVAILABLE FOR INSPECTION

A.   DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES                                                    C
                                                                                                          (

     The documents attached to the copy of this prospectus delivered to the Registrar of Companies
in Hong Kong for registration were the written consents referred to in the paragraph headed “Consents     S
                                                                                                          (
of experts” in Appendix IV to this prospectus, a statement of the adjustments made by RSM Nelson
Wheeler in arriving at the figures set out in the accountants’ report as set out in Appendix I to this
prospectus and giving their reasons therefor, a statement as to the name, description and address of
the Vendor and copies of the material contracts referred to in the paragraph headed “Summary of
material contracts” in Appendix IV to this prospectus.

B.   DOCUMENTS AVAILABLE FOR INSPECTION                                                                   C
                                                                                                          (
                                                                                                          A
     Copies of the following documents will be available for inspection at the offices of Sidley Austin
Brown & Wood at Level 34, Two Exchange Square, Central, Hong Kong during normal business hours
up to and including 25th June, 2001:

     (a)   the memorandum of association of the Company and Articles;

     (b)   the accountants’ report prepared by RSM Nelson Wheeler, the text of which is set out in
           Appendix I and the related statement of adjustments;

     (c)   such audited financial statements as have been prepared for each of the companies
           comprising the Group for the years ended 31st December, 1999 and 2000 or from their
           respective dates of incorporation where this is a shorter period;

     (d)   the letter, summary of valuation and valuation certificate prepared by American Appraisal
           Hongkong Limited, the text of which is set out in Appendix II to this prospectus;

     (e)   the rules of the Share Option Scheme;

     (f)   the rules of the Pre-IPO Share Option Scheme;

     (g)   a list of all options granted by the Company under the Pre-IPO Share Option Scheme
           referred to in the section headed “Outstanding options under the Pre-IPO Share Option
           Scheme” in Appendix IV to this prospectus;

     (h)   the letter of advice prepared by Conyers Dill & Pearman, Cayman summarising certain
           aspects of the Cayman Islands company law;

     (i)   the Companies Law;

     (j)   the service contracts referred to in the paragraph headed “Particulars of service contracts”
           in Appendix IV to this prospectus;

     (k)   the material contracts referred to in the paragraph headed “Summary of material contracts”
           in Appendix IV to this prospectus; and

     (l)   the written consents referred to in the paragraph headed “Consents of experts” in Appendix
           IV to this prospectus.


                                              — 185 —

				
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