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FUN Technologies Inc. Panmure Gordon _ Co

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FUN Technologies Inc. Panmure Gordon _ Co Powered By Docstoc
					THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt about the contents of this document you should
consult your stockbroker, bank manager, solicitor, accountant or other independent adviser
who specialises in advising on the acquisition of shares and other securities and is authorised
under the Financial Services and Markets Act 2000 or other applicable securities laws.
This document is an admission document and has been drawn up in compliance with the rules of
AIM, a market operated by London Stock Exchange plc. This document does not constitute a
prospectus for the purposes of the Prospectus Rules and a copy of it has not been, and will not be,
approved by or filed with the Financial Services Authority.
The whole text of this document should be read. In particular, your attention is drawn to the
risk factors set out in Part II.




                     FUN Technologies Inc.
                       (incorporated under the Canada Business Corporations Act, as amended)




                                 Introduction to AIM
                                          by
                     Panmure Gordon & Co
                     of 61,632,315 Common Shares



Application has been made for the Common Shares to be admitted to trading on AIM. It is
expected that admission will become effective and that dealings in the Common Shares will
commence on AIM on 8 March 2006. AIM is a market designed primarily for emerging or
smaller companies to which a higher investment risk tends to be attached than to larger or
more established companies. AIM securities are not admitted to the official list of the UK
Listing Authority (“UKLA”) (the “Official List”). A prospective investor should be aware of
the risks of investing in such companies and should make the decision to invest only after
careful consideration and, if appropriate, consultation with an independent financial adviser.
Neither London Stock Exchange plc nor the UKLA has itself examined or approved the
contents of this document. The AIM Rules are less demanding than those of the Official List. It
is emphasised that no application is being made for admission of any Common Shares to the
Official List. Application has also been made for the Common Shares to be listed on the
Toronto Stock Exchange. It is expected that listing will become effective and dealings in the
Common Shares will commence on the Toronto Stock Exchange on 8 March 2006.
Panmure Gordon, which is regulated in the United Kingdom by the Financial Services Authority, is
the Company’s Nominated Adviser and Broker for the purposes of the AIM Rules and is acting
exclusively for the Company in connection with the publication of this document. Panmure Gordon
will not be responsible to anyone other than the Company for providing the protections afforded to
clients of Panmure Gordon or for advising any other person on the arrangements described in this
document. Its responsibilities as the Company’s Nominated Adviser and Broker under the AIM
Rules are owed solely to the London Stock Exchange and are not owed to the Company or any
Director. No representation or warranty, express or implied, is made by Panmure Gordon as to the
contents of this document (without limiting the statutory rights of any person to whom this
document is issued).
This document does not constitute an offer to sell, or a solicitation of an offer to buy, Common
Shares in any jurisdiction in which such offer or solicitation is unlawful. In particular, this document is
not for distribution in or into Australia, Japan, the Republic of Ireland, South Africa or the United
States of America. The distribution of this document in other jurisdictions may be restricted by law
and therefore persons into whose possession this document comes should inform themselves about
and observe such restrictions. Any failure to comply with these restrictions may constitute a violation
of the securities laws of any such jurisdiction.
The Common Shares have not been, nor will they be, registered under the US Securities Act of 1933,
as amended (the “US Securities Act”) and may not be offered or sold in the United States or to US
persons. The Common Shares have not been, and will not be, registered under the securities
legislation of any province or territory of Australia, Japan, the Republic of Ireland or South Africa.
Accordingly, the Common Shares may not, subject to certain exceptions, be offered or sold, directly
or indirectly in or into Australia, Japan, the Republic of Ireland or South Africa, to any national,
citizen or resident of Australia, Japan, the Republic of Ireland or South Africa.
This document contains forward-looking statements, including, without limitation, statements
containing the words “believes”, “anticipates”, “expects” and similar expressions. Such
forward-looking statements involve unknown risks, uncertainties and other factors which may cause
the actual results, financial condition, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that might cause such a difference include, but
are not limited to, those discussed in Part II “Risk factors”. Given these uncertainties, prospective
investors are cautioned not to place any undue reliance on such forward-looking statements. The
Company, the Directors and Panmure Gordon disclaim any obligation to update any such
forward-looking statements in this document to reflect future events or developments.
Prospective investors are advised to read, in particular, Part I “Information on the Group” and Part II
“Risk factors” of this document for a more complete discussion of the factors that could affect the
Company’s future performance and the industry in which it operates. In light of these risks,
uncertainties and assumptions, the events described in the forward-looking statements in this
document may not occur.
Other than in accordance with the Company’s obligations under the AIM Rules, the rules of the TSX
or as a matter of law, the Company undertakes no obligation to update or revise publicly any
forward-looking statement, whether as a result of new information, future events or otherwise. All
subsequent written and oral forward-looking statements attributable to the Company, the Directors
or to persons acting on the Company’s behalf are expressly qualified in their entirety by the
cautionary statements referred to above and contained elsewhere in this document.
Information or other statements presented in this document regarding market growth, market size,
development of the market and other industry data consists of estimates based on data and reports
compiled by industry professionals or organisations and analysts and/or the Company’s knowledge
of its sales and markets. The information on the FUN Technologies plc website does not form a part
of this document.
The Company takes responsibility for compiling and extracting, but has not independently verified,
market data provided by third parties or industry or general publications and takes no further
responsibility for such data. The Company confirms that the information contained in this
document, which has been sourced from third parties, has been accurately reproduced and, as far as
the Company is aware and is able to ascertain from information published by the relevant third
parties, no facts have been omitted which would render the reproduced information inaccurate or
misleading. Copies of this document will be available during normal business hours on any day
(except Saturdays, Sundays, bank and public holidays) free of charge to the public at the offices of
Panmure Gordon, 155 Moorgate, London EC2M 6XB for one month from the date of Admission.




                                                    2
                                        CONTENTS

                                                                   Page
Definitions                                                            4

Directors and Advisers                                               6

Expected timetable                                                   7

Part I       Information on the Group                                8
             Overview                                                8
             Industry background                                     8
             Businesses                                              8
             Strategy                                               10
             Customers                                              10
             Product distribution and awareness                     11
             The regulatory regime                                  12
             Competition                                            12
             Technology and security                                12
             Intellectual property                                  13
             Research and development                               13
             Directors, officers and management                      13
             Stock Option Plan                                      15
             Lock-ins                                               15
             Dividend policy                                        15
             Current trading and prospects                          16
             Corporate governance                                   16
             Effects of a Canadian domicile                         18
             Taxation                                               19
             Admission, settlement and dealings                     19
             Scheme of arrangement                                  20
             Information on Liberty                                 21

Part II      Risk factors                                           22

Part III     Financial information on FUN Technologies plc          30

Part IV      Financial information on FUN Technologies Inc.         80

Part V       Comparison between English and Canadian company law    84

Part VI      Additional information                                 90




                                                  3
                                      DEFINITIONS

The following definitions apply throughout this document, unless the context requires otherwise:

“Admission”                     admission of the Common Shares to AIM becoming effective in
                                accordance with Rule 6 of the AIM Rules

“AIM”                           the AIM market of the London Stock Exchange

“AIM Rules”                     the rules published by the London Stock Exchange governing
                                admission to and the operation of AIM

“Articles”                      the articles of incorporation of the Company, as amended from
                                time to time

“By-Laws”                       the by-laws of the Company, as amended from time to time

“Canada”                        Canada, its provinces, territories and all areas subject to its
                                jurisdiction and any political sub-division thereof

“CBCA”                          the Canada Business Corporations Act, as amended

“CDI”                           a CREST Depositary Interest representing an entitlement to
                                Common Shares, general details of which are contained in the
                                CREST International Manual

“CDN$” or “Canadian dollars” Canadian dollars, the lawful currency of Canada

“City Code”                     the City Code on Takeovers and Mergers

“Common Shares”                 common shares of no par value in the capital of FUN

“Companies Act”                 the Companies Act 1985, as amended

“Company”                       FUN Technologies Inc.

“Court”                         the High Court of Justice in England and Wales

“CREST”                         the relevant system (as defined in the Regulations) in respect of
                                which CRESTCo Limited is the Operator (as defined in the
                                Regulations)

“Directors” or “Board”          the board of directors of FUN whose names are set out on page 6

“Don Best”                      the Don Best business acquired under the terms of the Don Best
                                Purchase Agreement

“Don Best Purchase              the agreement dated 6 August 2004 (as amended) relating to the
 Agreement”                     purchase by FUN of the Don Best business

“Fanball” or “FUN Fantasy”      the business operated by FUN Technologies plc’s wholly-owned
                                subsidiary, Fantasy Sports Acquisition, LLC d.b.a Fanball

“Founder Shareholders”          means Andrew Rivkin, Lorne Abony, Defiant Capital
                                Corporation, 6177255 Canada Inc., 1346027 Ontario Inc. and
                                MKU Investments Limited

                                               4
“Founder Shareholder          the agreement dated 21 November 2005 between (1) Liberty,
 Agreement”                   Liberty Freedom and the Company and (2) the Founder
                              Shareholders, further details of which are set out in paragraph 12
                              of Part VI of this document

“FUN”                         FUN Technologies Inc. or, where the context permits, the
                              relevant company or business within the Group

“FUN Skill”                   the Group’s skill gaming division operated by SkillJam

“Group”                       FUN Technologies plc and its subsidiaries of the relevant time
                              and, following the Scheme becoming effective, the Company,
                              FUN Technologies plc and its subsidiaries from time to time

“Liberty”                     Liberty Media Corporation, a Delaware corporation

“Liberty Freedom”             Liberty Freedom, Inc., a Delaware corporation and a
                              wholly-owned subsidiary of Liberty

“London Stock Exchange”       London Stock Exchange plc

“Ordinary Shares”             ordinary shares of 5 pence each in the capital of FUN
                              Technologies plc

“Panmure Gordon”              Panmure Gordon (Broking) Limited

“Preference Shares”           preference shares of no par value in the capital of FUN

“Regulations”                 the Uncertificated Securities Regulations 2001

“Scheme”                      the scheme of arrangement pursuant to section 425 of the
                              Companies Act in relation to FUN Technologies plc, further
                              details of which are set out on page 20 of Part I of this document

“Scheme Circular”             the information circular and notice of meeting of FUN
                              Technologies plc in connection with the Scheme dated
                              23 December 2005

“Shareholder”                 a holder of Common Shares

“Share Purchase and Support   the share purchase and support agreement dated 21 November
 Agreement”                   2005 between (1) Fun Technologies plc; (2) Liberty; (3) Liberty
                              Freedom and (4) FUN

“SkillJam”                    SkillJam Technologies Corporation

“Stock Option Plan”           FUN Technologies plc 2003 Unapproved Employee Share
                              Option Scheme (as amended)

“Takeover Panel”              the UK Panel on Takeovers and Mergers

“TSX”                         TSX Group Inc. trading as the Toronto Stock Exchange




                                             5
                            DIRECTORS AND ADVISERS

Directors                     Andrew Rivkin – Non-executive Chairman
                              Lorne Abony – Chief Executive Officer
                              John Albright – Non-executive Director
                              Mark Carleton – Non-executive Director
                              Neal Dermer – Non-executive Director
                              David Flemming – Non-executive Director
                              Gregory Maffei – Non-executive Director
                              Geoffrey Rotstein – Non-executive Director
                              Harvey Solursh – Non-executive Director
                              Charles Tanabe – Non-executive Director
                              Michael Zeisser – Non-executive Director

Head & Registered Office       100 King Street West
                              Suite 6600
                              1 First Canadian Place
                              Toronto
                              Ontario
                              Canada M4W 3R8

Nominated Adviser and         Panmure Gordon (Broking) Limited
Broker                        Moorgate Hall
                              155 Moorgate
                              London
                              EC2M 6XB

Solicitors to the Company     As to English Law             As to Canadian Law
                              Osborne Clarke                Goodmans LLP
                              One London Wall               2400-250 Yonge Street
                              London                        Toronto
                              EC2Y 5EB                      Ontario
                                                            Canada M5B 2M6
                              Denton Wilde Sapte            Osler, Hoskin & Harcourt LLP
                              One Fleet Place               100 King Street West
                              London                        Suite 6100
                              EC4M 7WS                      Box 50
                                                            Toronto
                                                            Ontario
                                                            Canada M5X 1B8

Auditors                      KPMG LLP
                              Yonge Corporate Centre
                              4100 Yonge Street
                              Suite 200
                              Toronto
                              Ontario
                              Canada M2P 2H3

Transfer Agent                CIBC Mellon Trust Company
                              320 Bay Street
                              Toronto
                              Ontario
                              Canada M5H 4A6


                                            6
                               EXPECTED TIMETABLE

Admission of Common Shares to trading on AIM becomes effective           8 March 2006

Listing of Common Shares on TSX becomes effective                        8 March 2006

Credit of CDIs representing Common Shares to Shareholders’
CREST accounts                                                            8 March 2006
                                                                 (or as soon as possible
                                                                             thereafter)

Despatch of share certificates in respect of Common Shares and
cheques in respect of cash consideration and payment of cash
consideration through CREST                                         by 22 March 2006




                                              7
                                               PART I

                                   Information on the Group

Overview
The Group is one of the market leaders in the provision of online gaming services. FUN provides
online gaming services in two sectors: casual gaming and fantasy sports services. FUN’s casual
gaming business involves operating and licensing a casual games offering which includes free games,
downloadable games, subscription games and pay-for-play person-to-person and tournament-based
interactive skill games. FUN’s fantasy sports services offer editorial content, sports data, games and
leagues to consumers and corporate distributors. The Group was founded in May 2002 and has an
international network of offices with corporate headquarters in Toronto and operations in London,
Fort Lauderdale, Los Angeles, Las Vegas and Minneapolis.
It was announced on 22 November 2005 that FUN Technologies plc and the Company had entered
into the Share Purchase and Support Agreement with Liberty pursuant to which it is proposed that
Liberty will acquire a majority interest in the Company, which will become the new holding company
for the Group. This will be effected by means of a Scheme of Arrangement between FUN
Technologies plc and its shareholders under section 425 of the Companies Act, the provisions of
which were set out in full in the Scheme Circular. Subject, inter alia, to the sanction of the High
Court and satisfaction or waiver of the conditions set out in the Scheme Circular (including
Admission), the Scheme will become effective on 8 March 2006.
The board of directors of FUN Technologies plc believes that Liberty is the right strategic partner
and that its relationship with Liberty may provide benefits to FUN in the development of its business.
In addition, Liberty’s US$50 million investment for Common Shares in connection with the Scheme
will strengthen FUN’s balance sheet significantly.
Industry background
Growth of online games on the Internet
Internet usage has grown rapidly over the last five years, with there being over one billion users at the
end of 2005. The Company believes that gaming has been one of the most successful commercial
applications of the Internet, and has shown strong growth over the last three years in particular.
Revenue in the online gaming market has been forecast to reach almost US$10 billion in 2009.
Fantasy sports
Fantasy sports games have existed in the United Kingdom since the early 1990s and the market for
fantasy sports games is now well-developed in the United States. The market combines competitive
pay-for-play and reward tournament-based game formats with the provision of sports-related
content. In the United States, over 15 million people currently play fantasy sports games and leading
operators have several million users visit their websites each month.
Businesses
The Group’s initial focus was on the development of a technology platform to facilitate the operation
of Internet betting exchanges. In addition to licensing this technology to licensees, FUN
Technologies plc entered into a joint venture with BetandWin.com Interactive AG to form betbull –
The European Betting Exchange plc (“Betbull”) in May 2004. Betbull was set up to operate in the
European retail betting business, initially focussed on Internet person-to-person betting using the
Group’s technology. Betbull is listed on the Vienna Stock Exchange. The Group has discontinued its
exchange betting activities and on 13 December 2005, FUN Technologies plc announced the
disposal of the majority of its equity interest in Betbull for approximately (4.8 million.
FUN Skill
The Group’s FUN Skill division is an Internet-focused, diversified games services provider. The
Group entered the casual gaming business with the acquisition of SkillJam on 30 July 2004. SkillJam
operates an Internet platform where users can play against each other, either in tournaments or
directly against one another. This platform is distributed both through a wide variety of high-traffic
distribution partners and through SkillJam’s own websites.

                                                   8
SkillJam develops, manages and hosts on its proprietary casual gaming platform nearly 100 arcade,
card, memory, puzzle, sport, trivia and word games. Games can range from table games such as Chess
or Checkers to newer arcade style games such as Free Cell, DiamondMine, Bejeweled, Zuma, Lingo,
Bookworm and Dynomite.
Cash-based skill games are games in which participants pay a fee, either on a monthly subscription
basis, a pay-for-play basis or both to compete against each other for a prize and the winner is
determined based on skill rather than on chance.
SkillJam offers a wide range of free games, downloadable games, subscription games, and
pay-for-play cash-based skill games and competitive tournaments via its Internet site
www.skilljam.com and via its relationships with gaming portals. The gaming portals with which
SkillJam has relationships include some of the largest online brands, including MSN’s Zone.com,
America Online, Inc.’s AOL network, Lycos, Inc., RealNetworks, Inc. and Mypoints.com, Inc.
FUN Technologies plc recently acquired the assets of Octopi LLC (“Octopi”), a developer of
single-player and multiplayer mobile and online games. This acquisition has expanded the
distribution capability of SkillJam’s games platform from the Internet to wireless applications such as
mobile phones. Octopi’s game development engine “Octoplex” supports multiple languages, the
top 100 mobile handsets, and other platforms such as PDAs and web browsers. SkillJam also plans to
further expand distribution through kiosks.
SkillJam offers players the opportunity to play for free or to sign up as members and play for cash
prizes. Deposits can be made with SkillJam for sums of US$10 or more. Prize money is automatically
deposited into the tournament winner’s SkillJam account. These funds can be used as entry fees for
other tournaments, saved in the user’s account or withdrawn.
Revenues from casual gaming come from four main sources. First, in respect of each cash or
merchandise tournament, FUN charges an entry fee. Second, FUN charges its users who have made
cash deposits a processing fee, a withdrawal fee and an inactivity fee. Third, FUN charges VIP users a
fixed monthly or annual fee. Last, SkillJam charges its white label customers a software development
fee.
SkillJam has over 9 million registered users and more than one hundred million games have been
played on the SkillJam network of sites.

FUN Fantasy
FUN Fantasy offers sports content, games and leagues to consumers and corporate distributors. Its
website presents visitors with free and premium content covering American football, baseball, golf,
basketball and racing. Fanball.com has automated fantasy league administration, allowing leagues to
run online, and offering visitors continuous access to league information. Those looking to
participate in fantasy sports online can play in a number of games and leagues, and more competitive
users can compete for cash prizes in a variety of pay-for-play fantasy sports contests.
Through its subsidiary, Fantasy Sports Acquisition, LLC, the Group develops and licenses fantasy
league-hosting software, content, real-time sports statistics and interactive games for the Internet
and other convergent media platforms.
FUN Fantasy’s print division produces one of America’s top-selling fantasy sports publications,
“Fantasy Football Weekly”. It is now printed monthly during the summer, and is distributed to over
300 US cities. Fanball also produces two other print publications, called “Just Cheat Sheets” and
“Fantasy Racing”.
The Company believes that FUN Fantasy’s largest area of growth is in its business-to-business
relationships. The Group provides turn-key fantasy sports support for AOL, NASCAR.com and
PGA.com, among others. It also provides a content feed for Yahoo! Recent clients include
BestBuy.com, LLC, 3M Company, Caterpillar, Inc., Ford Motor Company and Jostens, Inc.
FUN Fantasy is supported by its sports information service, Don Best, which provides real-time
information on the Internet, including live odds, major line move alerts, urgent messages, injury
reports and statistical reports.

                                                  9
Don Best’s core business is the publishing of real-time sports information to its subscriber base
through the Internet. Don Best provides its subscribers with the unique ability to monitor the
continuous changes in wagering odds.
Don Best covers a wide range of major sports, such as American football (NFL and NCAA),
basketball (NBA and NCAA), baseball, ice hockey, golf, tennis, soccer and boxing. It publishes
detailed market information on each sport, such as results, player transactions and injuries and local
weather. Don Best does not accept or make wagers.
Don Best’s customers subscribe to the service on a monthly basis, and include licensed gaming
operators.

Strategy
The Group’s strategy is to expand the distribution of its casual gaming and fantasy sports products
and services. The Company believes that increasing distribution is critical to growing its leadership
position due to the “networked” nature of its businesses.
The success of the skill gaming component of the Group’s casual games offering, for example, relies
to a large extent on the liquidity of the tournaments in which customers play. Participants in a skill
game of several people will not be prepared to wait long for the requisite number of people to join the
game; accordingly, the Company seeks to maintain a highly liquid platform, which should be
attractive to participants because of the range of tournaments available, the size of the prizes, and the
speed with which they close. The Company believes, therefore, that achieving and maintaining
leadership in liquidity is critical to creating competitive barriers in skill gaming.
Accordingly, the Company will seek to expand distribution of its casual and fantasy products and
services through entering into agreements with additional high-traffic distribution partners, entering
new geographic markets, upgrading and enhancing its suite of games with complementary products
and through marketing of its products.
The Company will continue to seek out strategic acquisition opportunities. Advantages for the
Group in pursuing selective acquisitions include synergies and economies of scale which acquisitions
may bring to the Group, as well as opportunities to apply the Group’s management experience to the
development of businesses which do not have professional management. Acquisitions could be
effected to expand the distribution of the Group’s software, leverage the Group’s technology into
other products and services or to realise back-end economies of scale.

Customers
The Group’s casual gaming and fantasy sports services are offered to end users through websites
proprietary to the Group and by licensing the Group’s platforms to other website operators. Don
Best’s customers are based throughout the United States and in many foreign countries. Subscribers
include some of the largest sports wagering organizations, government lotteries and leading
bookmakers. The most significant licensees of the SkillJam platform in terms of revenue are
Microsoft Corporation (“MSN”), RealNetworks, Inc. (“RealNetworks”), GSN LLC (“GSN”),
MyPoints.com, Inc. (“MyPoints”) and America Online, Inc. (“AOL”).
MSN’s Zone.com
On 10 September 2002, SkillJam entered into an agreement with MSN whereby SkillJam agreed to
be the backend provider of games for www.zone.com. This arrangement launched on 14 February
2003 provides SkillJam with access to one of the Internet’s top three overall portals. MSN attracts
more than 350 million users worldwide per month. With localized versions available globally in 34
markets and 18 languages, MSN is a world leader in delivering Internet services to consumers and
digital marketing solutions to businesses worldwide.
RealNetworks
SkillJam entered into an agreement with RealNetworks in March 2004. Under the agreement,
SkillJam is the exclusive supplier of skill-based games to RealNetworks. This arrangement provides
SkillJam with access to users from one of the Internet’s premiere gaming networks. RealNetworks is a
leading creator of digital media services and software including the Rhapsody Internet jukebox
service and RealPlayer.

                                                   10
GSN – The Network for Games
SkillJam entered into an agreement dated 1 December 2004 to provide casual games to GSN – The
Network for Games whereby it agreed to build, host and manage a private-label casual-gaming
platform for GSN’s online destination www.GSN.com. Jointly owned by Sony Pictures
Entertainment and Liberty, GSN is the only US television network dedicated to game-related
programming and interactive game playing. It features game shows, reality series, light sports,
documentaries and casino games. As the industry leader in interactivity, GSN features 84 hours per
week of interactive programming, giving viewers a chance to win prizes by playing along with GSN’s
televised games. GSN is distributed in the United States through all major cable systems and satellite
providers, and reaches 56 million homes.

MyPoints
SkillJam entered into a multi-year agreement with MyPoints dated 1 August 2005 pursuant to which
SkillJam agreed to be MyPoints’ exclusive provider of skill games and operates a private-label casual
gaming website for www.mypoints.com. MyPoints is a leading provider of Internet direct marketing
services, which include an integrated suite of incentive-based media products and a True Opt-in
database of more than 10 million members.

AOL
On 26 August 2004, SkillJam entered into an agreement with AOL, under which SkillJam is the
exclusive supplier of skill-based games to AOL, Compuserve and Netscape and has created a new
skill-based games website for each. Fanball is party to an agreement with AOL dated June 2004
pursuant to which Fanball provides AOL with private label fantasy sports solutions. Through these
arrangements with AOL, SkillJam and Fanball’s products and services are accessible to AOL’s over
25 million users.

AOL is a wholly-owned subsidiary of Time Warner Inc. Based in Dulles, Virginia, AOL is a world
leader in interactive services, web brands, Internet technologies and e-commerce services.

Turner
Fanball is party to an agreement with Turner dated 23 January 2002 pursuant to which Fanball
provides Turner with backend fantasy sports solutions, including editorial content and certain games
found at www.nascar.com, the official website of NASCAR. Turner acquired all of NASCAR’s
interactive rights in October 2000 and became the exclusive producer of NASCAR.com in January
2001. Turner also produces PGA.com.

Nokia
Octopi entered into an agreement with Nokia in July 2005 pursuant to which it provides Nokia with
certain game development services. Games developed by Octopi are distributed on Nokia’s mobile
phones. Nokia is a world leader in mobile communications and a leading supplier of mobile and fixed
telecom networks. Octopi is Nokia’s leading Nokia SNAP Mobile game developer.


Product distribution and awareness
The Group intends to continue its distribution strategy of soliciting more distributors for its casual
gaming platform and fantasy sports offerings. In the casual gaming sector, the Company believes that
improving the breadth and depth of SkillJam’s product offerings, improved customer service and
regular cross-selling efforts should increase SkillJam’s user participation, brand loyalty and
recognition. SkillJam currently has a network of affiliate distributors through which it is able to
distribute SkillJam offerings. The Group plans to expand both the Group’s existing distribution
network by entering into relationships that consolidate its presence in the US market, expand the
geographic scope of its business and continue to develop and diversify the platforms on which its
products and services can be distributed. The Company believes that the addition of Octopi to the
Group has significantly strengthened the Group’s development capabilities, improving the quality
and expanding the suite of services the Group is able to provide to its distributors and end users.

                                                 11
The regulatory regime
The Group has, and intends to continue to have, a policy of doing business only in regulated markets.
As such, it will not conduct business with gaming or skill game operators who conduct business in any
jurisdiction where such practices are prohibited or uncertain. The Group is committed to working
with local regulatory authorities to ensure, as far as is possible, that its technology is only used to
provide skill gaming or fantasy sports services in those jurisdictions where it is legally permitted. The
Company believes that the Group has taken reasonable actions to ensure that its business is being
operated in accordance with all material regulatory requirements including, from time to time,
retaining regulatory counsel to advise it with respect to such matters.

Competition
FUN Skill
There are numerous companies that compete directly with certain SkillJam offerings, but the
Company believes that SkillJam has no direct competitor with its breadth of products and revenue
models. The following companies compete in some manner with certain of SkillJam’s offerings:
      AtomShockwave – competes in the areas of skill games, subscription gaming, game software
      sales and adver-gaming
      Electronic Arts, Inc.’s EA.com/Pogo – competes in the areas of game software sales and
      custom billing solutions
      Game Account – competes in the areas of skill games and brand game licensing
      Game Trust – competes in the areas of skill games and brand game licensing
      IGN Entertainment’s GameSpy – competes in the areas of skill games, subscription gaming,
      game integration and adver-gaming
      Lycos, Inc.’s Gamesville – competes in the area of adver-gaming
      Midasplayer – competes in the areas of skill games and brand game licensing
      Worldwinner.com, Inc. – competes in the areas of skill games and brand game licensing
      Yahoo! Inc. – competes in the areas of subscription gaming, game software sales and
      adver-gaming.
The Company believes that SkillJam is highly competitive in the online casual gaming market.
SkillJam offers a broader portfolio of online casual gaming products and services than each of the
companies listed above and provides casual gaming-related services to several of them as SkillJam
private label distributors.

FUN Fantasy
The Group’s principal competitors in the fantasy sports sector are ESPN, FOX, CBS Sportsline and
Stats Inc. While there are numerous companies that compete directly and indirectly with certain Don
Best offerings, the Company believes that Don Best is generally regarded as the industry leader due to
the strength of its product and the pre-eminence of its brand. The Company believes that Don Best’s
direct connections to sports books and long-term relationships would be difficult for competitors to
replicate.

Technology and security
SkillJam operates in a dual environment on the application level, tied together by a “Core Unified
Application Service Infrastructure”. This service level application provides a reliable, best-of-breed
billing, user registration, authentication, affiliate management, accounting integration and payment
processing service. By centralizing these common tasks, new application ideas can be deployed and
tested quickly, without investing time on user, affiliate and payment development.
Network and service monitoring is done at multiple levels. The network is monitored 24 hours a day,
7 days a week with automated notification and paging. Additionally, SkillJam monitors network
connectivity, all services, server health and access times through automated tools. Network status

                                                   12
indicators at the co-location facility immediately notify staff of problems, and automated paging
services notify engineers of issues within five minutes. Multiple levels of security have been
implemented at the network and application levels to prevent abuse of resources and any breaches of
user records.
Fanball employs security methods very similar to SkillJam. Don Best transmits user information and
financial transaction details via industry standard HTTPS protocol. The security certificate is
provided by Verisign and uses a signature algorithm at 1024 bits. Financial and application data is
stored within a SQL Server 2000 database that is accessible only within the internal network. Access
into the database is restricted to management-selected members of the engineering staff and through
back-office applications requiring appropriate permission levels and a password sign-on. Credit card
numbers are further protected by 128-bit encryption using the TEA algorithm.

Intellectual property
The Group relies on a combination of trade secret, copyright, trademark laws, domain name
registrations and other contractual agreements and careful business practices to protect its
intellectual property. The Group has submitted trademark registration applications in the US in
respect of trademarks which are key to its business. The Group has entered into confidentiality and
intellectual property assignment agreements with its employees to ensure the protection and
ownership over its trade secrets and proprietary works and has implemented restricted access policies
and procedures to achieve the same objective. As a routine matter, the Group enters into
non-disclosure agreements with potential distribution partners and into written licensing
agreements with its distribution partners which clearly delineate ownership over proprietary works
and contain confidentiality covenants. Management has, thus far, taken the view not to seek patent
protection for the Group’s technology.

Research and development
In order to minimise expenses, maximise intellectual property ownership and build in-house skills,
the Group has been and will continue to be primarily responsible for developing its proprietary
platforms and related technology. To date, SkillJam has predominantly relied on third party licensors
to build its portfolio of casual games. Development of the SkillJam casual gaming platform, however,
is performed entirely in-house. Fanball will continue to develop its fantasy sports league and
scoreboard technologies with a view to expanding the scope of sports and geographies covered and
possible distribution platforms. Research and development at Don Best consists of keeping up with
new web technology to ensure fast and easy upload of information and expanding possible
distribution platforms. To the extent that complementary third party technologies, products or
services are identified, the Group may consider acquisitions.

Directors, officers and management
As at 31 December 2005, the Group had 139 employees. As at the date of this document, the Group
has 153 employees.
Directors
Andrew Rivkin (Non-Executive Chairman), aged 36
Prior to co-founding FUN Technologies plc, Mr. Rivkin was founder and former President and
Chief Executive Officer of Cryptologic Inc. Cryptologic is one of the largest and most successful
developers of eGaming software. Cryptologic software is used by registered users in 240 nations and
territories worldwide. Cryptologic has processed more than one billion individual transactions and in
excess of US$12 billion in secure electronic deposits, from more than one million registered users.
Lorne Abony (Chief Executive Officer), aged 36
Prior to co-founding FUN Technologies plc, Mr. Abony was a partner at Elucid Technology
Ventures, a private equity and venture capital firm in New York focused on technology and software
companies. Prior to Elucid, Mr. Abony was the co-founder and President of Petopia.com.
Petopia.com is an online pet food and supply destination that raised funds from Silicon Valley
venture capital firms. Petopia.com filed a registration statement for listing its shares on the NASDAQ
but was sold to Petco in 2000 prior to a planned initial public offering. Mr. Abony is a lawyer and

                                                 13
practised corporate and securities law at Aird & Berlis, a Toronto law firm. As corporate counsel, Mr.
Abony’s responsibilities included mergers, acquisitions and divestitures, public securities offerings,
shareholder arrangements, corporate finance and regulatory matters. Mr. Abony is a member of the
Law Society of Upper Canada and the Canadian Bar Association. Mr. Abony has an M.B.A. from
Columbia Business School, an LL.B/J.D. from the International Law Center at the University of
Windsor and a B.A. with distinction from McGill University.
John Albright (Non-executive Director), aged 46
Mr. Albright is the founder of J.L. Albright Venture Partners. Prior to the founding of J.L. Albright
Venture Partners in 1996, Mr. Albright held senior positions within the venture capital and merchant
banking business, where he gained extensive experience assisting entrepreneurs and managers to
grow their businesses and in assisting them accessing the public markets. He has been a director of
FUN Technologies plc since 2004 and currently serves as a director of Descartes Systems Group Inc.,
Q9 Networks Inc. and Nuvo Networks Inc.
Mark Carleton (Non-executive Director), aged 45
Mr. Carleton has been a Senior Vice President of Liberty since December 2003. Prior to joining
Liberty, Mr. Carleton served as a partner with KPMG from 1993 to 2003. Mr. Carleton is a director
of Wildblue Communications, Inc., True Position Inc., QVC, Inc., IDT Entertainment, Inc. and
Volunteers of America – Colorado Branch.
Neal Dermer (Non-executive Director), aged 36
Mr. Dermer has been a Vice President of Liberty since January 2002 and Assistant Treasurer since
December 2000. Mr. Dermer served as Director of Finance & Accounting of Liberty from 1999 to
2001.
David Flemming (Non-executive Director), aged 57
Mr. Flemming has been an Assistant Vice President of Liberty since July 2000.
Gregory Maffei (Non-executive Director), aged 45
Mr. Maffei is the President and Chief Executive Officer of Liberty and has been a director of Liberty
since November 2005. He served as President and Chief Financial Officer of Oracle Corporation
from June 2005 until November 2005. Mr. Maffei served as Chairman and Chief Executive Officer
of 360networks Inc. from January 2000 until June 2005. In addition, he is a director of Electronic
Arts, Inc. and Starbucks Corporation.
Geoffrey Rotstein (Non-executive Director), aged 37
Mr. Rotstein is the Chief Executive Officer of Cyberplex Inc., a publicly traded company on the
Toronto Stock Exchange, where he has served as a director since 1997. He is also currently a director
of Chrysalis Capital II Corporation and PharmEng International Inc. Prior to joining Cyberplex, Mr.
Rotstein spent five years at Coopers and Lybrand in general practice. Mr. Rotstein earned his
Chartered Accountant (CA) designation in 1993, and holds a Masters of Business Administration
(MBA) from York University in Toronto.
Harvey Solursh (Non-executive Director), aged 71
Mr. Solursh is the Chief Financial Officer of QT Inc. Between 1998 and February 2002, he served as
the Chief Financial Officer and a director of CryptoLogic Inc. Since 2005, he has been a director of
FUN Technologies plc.
Charles Tanabe (Non-executive director), aged 54
Mr. Tanabe has served as Secretary of Liberty since April 2001 and as a Senior Vice President and
General Counsel of Liberty since January 1999. He is also a director of On Command Corporation
and QVC, Inc.
Michael Zeisser (Non-executive director), aged 40
Mr. Zeisser has been a Senior Vice President of Liberty since September 2003. Mr. Zeisser served as a
partner in McKinsey & Company from December 1996 until September 2003. He is also a director
of OpenTV Corp., Open Gaming Ltd, Open Play (BVI) Ltd, Betting Corp UK Ltd, 4G Media Ltd,
GSN, LLC and QVC, Inc.

                                                 14
Officers
James Lanthier (Chief Financial Officer and Secretary)
Prior to joining the Group in July 2002, Mr. Lanthier worked closely with Mr. Abony at Petopia.com
in San Francisco in a number of strategic planning and finance roles. Mr. Lanthier has an M.B.A from
the Rotman School of Management, and has a B.A. (Honours) from Queen’s University.
Richard Weil (President)
Prior to joining the Group, Mr. Weil was the Corporate Vice President of International Business
Development for Scientific Games Corporation, having joined as Vice President of Manufacturing in
1994. During his time with the company, he assisted with numerous acquisitions (including
Scientific Games, MDI, Serchi, and IGT On-line Systems). Prior to Scientific Games, Mr. Weil was a
senior management consultant at Monitor Company, a top-ten strategic planning and corporate
development firm. Mr. Weil holds a Bachelor of Engineering Degree from Ryerson University and an
MBA from New York University.
Seung-Yoon Lisa Lee (Senior Vice President, Corporate Development and General Counsel)
Prior to joining the Group in January 2005, Ms. Lee worked as external legal counsel to the Group.
She presently serves as the treasurer and a director of Access Alliance Multicultural Community
Health Centre. She is a co-author of the country chapter for Canada in World Online Business Law.
Ms. Lee has an LL.B. from Osgoode Hall Law School and a B.A. (Honours) from the University of
Toronto.

Stock Option Plan
The Company believes that the success of the Group will depend to a high degree on the future
performance of the management team. The Company also recognises the importance of ensuring
that all employees are well motivated and identify closely with the success of the Group.
Under the terms of the Stock Option Plan, upon the Scheme becoming effective:
(a)   each outstanding option over shares in FUN Technologies plc will automatically convert into
      and represent an option to acquire an equal number of Common Shares and, except as
      described in (b) and (c) below, all other terms and conditions of the options (including exercise
      price and manner of exercise) will remain otherwise unchanged from those of the existing
      options;
(b)   all unvested options will automatically vest on the first business day following 8 March 2006;
      and
(c)   all options will expire on 8 March 2009.
Terms of the Stock Option Plan are set out in paragraph 9 of Part VI of this document.
No further options will be granted under the Stock Option Plan. The Directors intend to review the
implementation of a new stock option plan following Admission.

Lock-ins
Pursuant to the Founder Shareholder Agreement, the Founder Shareholders have entered into
certain undertakings in respect of the non-disposal of Common Shares following Admission
(including options to acquire Common Shares and the Common Shares issued upon exercise of such
options). These undertakings are set out in paragraph 12 of Part VI of this document and relate to the
Common Shares that will, on Admission, be directly or indirectly beneficially owned and controlled
by Andrew Rivkin, Lorne Abony and connected persons (as defined in paragraph 7 of Part VI of this
document).

Dividend policy
The declaration and payment by the Company of any future dividends on the Common Shares and
the amount will depend on the results of the Group’s operations, its financial condition, cash
requirements, future prospects, profits available for distribution and other factors deemed to be
relevant at the time. However, in view of the Company’s early stage of development, the Directors do
not envisage that the Company will pay dividends in the foreseeable future.

                                                 15
Current trading and prospects
On 8 February 2006, FUN Technologies plc announced its unaudited results for the three and 12
months ended 31 December 2005. These are set out in Part III of this document.
Current trading continues in line with expectations. At an operational level, the Company expects
that the Group’s skill and fantasy divisions will pursue European expansion and product and channel
expansion in 2006. Following completion of the transaction with Liberty, the Directors intend to
focus in 2006 on investing in future growth.
Corporate governance
Combined Code
The Company supports high standards of corporate governance. The Company intends to comply
with the Principles of Good Governance and Code of Best Practice set out in the Combined Code so
far as is practical for a company with its characteristics. It is currently expected that the Company will
comply with applicable corporate governance requirements of applicable Canadian corporate and
securities law.
Board composition and operation
The Board is comprised of one executive Director and 10 non-executive Directors.
The Board believes that sound corporate governance practices are in the interests of Shareholders and
contribute to prudent and effective decision-making. As such, the Directors are committed to
thorough and effective corporate governance arrangements. The objective of the Board is to meet
and, where appropriate, exceed all corporate governance guidelines.
Position descriptions
The Board has developed written position descriptions for the Chairman of the Board, the chair of
the Audit Committee, the chair of the Compensation Committee, the chair of the Nominating and
Corporate Governance Committee and the Chief Executive Officer of FUN.
Orientation and continuing education
The Board, through its Nominating and Corporate Governance Committee, intends to develop a
comprehensive orientation program for new Directors to assist new Directors with understanding
the role of the Board and its committees, the contribution that Directors are expected to make to the
Board and the nature and operation of FUN’s business. The Nominating and Corporate Governance
Committee also intends to develop a continuing education program for all Directors to enable
Directors to maintain or enhance their skills and abilities as Directors and ensure that their
knowledge and understanding of FUN’s business remains current.
Ethical business conduct
The Board has adopted a written code of business conduct and ethics (the “Code”) for FUN’s
Directors, officers and employees. The Code constitutes written standards that are designed to deter
wrongdoing and promote: (i) honest and ethical conduct, including the handling of actual or
apparent conflicts of interest between personal and professional relationships; (ii) avoidance of
conflicts of interest, including disclosure to a director or officer of FUN of any material transaction or
relationship that reasonably could be expected to give rise to a conflict of interest; (iii) full, fair,
accurate, timely and understandable disclosure in reports and documents that FUN files with, or
submits to, the Canadian and/or UK securities regulatory authorities and in other public
communications made by FUN; (iv) compliance with applicable governmental laws, rules and
regulations; (v) prompt reporting to a Director or officer (or if appropriate, to the Ontario Securities
Commission) of FUN of violations of the Code; and (vi) accountability and responsibility by all
Directors, officers and employees for adherence to the Code.
The Board has directed the Nominating and Corporate Governance Committee to monitor
compliance with the Code and recommend disclosure with respect thereto. Accordingly, the
Nominating and Corporate Governance Committee is responsible for, amongst other things,
reviewing the Code with a view to complying with all applicable rules and regulations, receiving
regular reports from management with respect to compliance with the Code, and satisfying itself that
management has established a system to disclose the Code (and any amendments thereto) to the
extent required.

                                                   16
Nomination of Directors
As set forth above, the Board has appointed a Nominating and Corporate Governance Committee.
The Charter of the Nominating and Corporate Governance Committee clearly establishes the
committee’s purpose and responsibilities, establishment and composition, authority, duties and
responsibilities.
The Nominating and Corporate Governance Committee is responsible for, amongst other things: (i)
identifying individuals qualified to become Board members, consistent with criteria established by
the Board; (ii) recommending that the Board select the director nominees for the next annual
meeting of Shareholders; (iii) developing and recommending to the Board a set of corporate
governance principles applicable to FUN; and (iv) overseeing the evaluation of the Board and senior
management. In addition, the committee is responsible for developing and recommending a
comprehensive orientation and continuing education program for new Directors, and, subject to
Board approval, for reviewing and updating the Code with a view to complying with applicable law
and ensuring that management has established a system to enforce the Code.
In making recommendations to the Board regarding individuals qualified to become Board
directors, the Committee considers: (i) any selection criteria approved by the Board from time to
time, including the competencies and skills that the Board considers to be necessary for the Board, as
a whole, to possess; (ii) the competencies and skills that the Board considers each existing Director to
possess; and (iii) the competencies and skills each new nominee would bring to the boardroom. In
carrying out its responsibilities, the committee has the authority to retain a firm to assist in identifying
director candidates.
Compensation
As set forth above, the Board has appointed a Compensation Committee.
The Charter of the Compensation Committee clearly establishes the committee’s purpose and
responsibilities, establishment and composition, authority, duties and responsibilities.
The Compensation Committee’s purpose is to assist the Directors in their oversight of executive and
Director compensation, including with respect to: (i) reviewing and recommending compensation
of FUN’s Chief Executive Officer; (ii) reviewing and recommending to the Board non-Chief
Executive Officer compensation, incentive-based plans and equity-based plans; and (iii) reviewing
compensation disclosure in public documents, including the Compensation Committee’s annual
report on executive compensation for inclusion in FUN’s proxy circular, in accordance with
applicable rules and regulations.
With regards to the Chief Executive Officer’s compensation, the Compensation Committee is
responsible for: (i) reviewing and recommending the corporate goals and objectives relevant to the
Chief Executive Officer compensation; (ii) evaluating the Chief Executive Officer’s performance in
light of those corporate goals and objectives; (iii) making recommendations to the Board with
respect to the Chief Executive Officer’s compensation level based on this evaluation; and (iv)
recommending the long-term incentive component of the Chief Executive Officer compensation
with regards to certain factors.
In addition, the Compensation Committee shall make recommendations to the Board with respect
to: (i) compensation of employees that report directly to the Chief Executive Officer; (ii) incentive
compensation plans; and (iii) equity-based plans.
Other Board committees
In addition to the Nominating and Corporate Governance Committee and the Compensation
Committee, FUN has established the Audit Committee.
Assessments
On an annual basis, the Nominating and Corporate Governance Committee examines the size and
composition of the Board and, if appropriate, recommends a program to establish a Board comprised
of members who facilitate effective decision-making. In addition, the Nominating and Corporate
Governance Committee intends to develop and recommend to the Board a process for assessing, on

                                                    17
an annual basis, the performance and effectiveness of the Board, the committees of the Board and the
contributions of the Board, such process to consider: (i) the solicitation and receipt of comments
from Directors, as appropriate; (ii) the Board’s Charter; (iii) the charter of each committee of the
Board; (iv) applicable position descriptions for each individual Director and for the Chairman of the
Board and the chair of each committee; and (v) the competencies and skills each individual Director is
expected to bring to the Board. The Nominating and Corporate Governance Committee is
responsible for overseeing the execution of the assessment process approved by the Board and
management.
Each year, the Board is required to assess its performance and effectiveness in accordance with the
process established by the Nominating and Corporate Governance Committee.
The Directors intend to comply, and procure compliance with, Rule 21 of the AIM Rules relating to
dealings by directors and other applicable employees in the Company’s securities and to this end the
Company has adopted a share dealing code.

Effects of a Canadian domicile
FUN is a Canadian company incorporated under the CBCA. There are a number of differences
between the corporate structure of the Company and that of a public limited company incorporated
in England and Wales under the Companies Act, examples of which are set out below.
(a) Pre-emption rights
As described in paragraphs 5.7 and 11.3 of Part VI of this document, Shareholders, other than
Liberty Freedom, will have no pre-emption rights in respect of issues of further securities by FUN.

(b) Takeover Code
The majority of FUN Technologies plc’s board meetings have been held, and the majority of its
directors are located, in North America, as are the majority of the Group’s operations. In the light of,
inter alia, these factors, FUN Technologies plc’s place of central management is currently
considered by the Takeover Panel Executive for the purposes of the City Code to be outside the
United Kingdom, the Channel Islands and the Isle of Man. Accordingly, it is not currently a company
to which the City Code applies. Due to similar factors to those set out above and the fact that the
Company is incorporated in Canada, the City Code will not apply to the Company. It should be
noted that if there is a change in any of the relevant factors in determining whether or not the
Company is a company to which the City Code applies, then this may change the Takeover Panel
Executive’s assessment of the position.
A take-over bid for the outstanding securities of a corporation in Canada is governed by the
provisions of the securities legislation of the provinces and territories in which the take-over bid is
made. Despite the technical differences that exist from province to province in Canada, two
fundamental principles underlie Canadian take-over bid legislation. First, all holders of the same class
of securities subject to a take-over bid should be treated equally and, second, the target’s
shareholders should be given sufficient time and information to make a fully informed decision about
the take-over bid.
The Ontario Securities Act (the “Ontario Act”) governs take-over bids made to shareholders resident
in Ontario where the target corporation has more than a de minimis number of Ontario shareholders.
Compliance with the Ontario Act will generally satisfy most substantive requirements of other
Canadian jurisdictions. Under the Ontario Act, a “take-over bid” is an offer to acquire outstanding
voting or equity securities of an issuer from any person or company who is in Ontario that, when
aggregated with the offeror’s other securities of the class (and those of persons or companies acting
jointly with the offeror), would constitute 20 per cent. or more of the class of securities for which the
offer is made. The offeror’s holdings are calculated as of the date of the offer to acquire and include
securities that may be converted or exchanged within 60 days into the class of securities that is the
subject of the offer. Once a take-over bid is triggered, unless an exemption is available, the offeror
must comply with provisions concerning minimum time periods for take-over bids, financing
requirements for take-over bids, the requirement to offer identical consideration and the
requirement to prepare and deliver a take-over bid circular.

                                                   18
The take-over bid rules also apply to indirect offers, preventing the structuring of transactions that
might result in the payment of control premiums that otherwise would not be permissible. For
instance, the purchase of control of a private company, the only asset of which is a significant holding
of a public company, generally would be considered to be an indirect take-over bid requiring a formal
offer to be made to all the public company’s shareholders unless an exemption from the take-over bid
requirements is available.
Certain types of take-over bids are exempt from the formal take-over bid provisions of the Ontario
Act, namely:
(a)   an offer made through a recognized stock exchange in accordance with the by-laws,
      regulations or policies of the exchange;
(b)   an offer made through private agreements with not more than five shareholders;
(c)   an offer for not more than 5 per cent. of the securities of the target at prevailing market prices
      other than through a stock exchange;
(d)   an offer for securities of a private issuer; and
(e)   an offer where fewer than 50 offerees are resident in Ontario, and their combined holdings are
      less than 2 per cent. of the securities of the target.

Taxation
Information regarding taxation is set out in paragraph 10 in Part VI of this document. If you are in
any doubt as to your tax position you should consult your own independent financial adviser
immediately.

Admission, settlement and dealings
Application has been made to the London Stock Exchange for all of the Common Shares to be
admitted to trading on AIM and application has been made to the Toronto Stock Exchange for all of
the Common Shares to be listed on the Toronto Stock Exchange. It is expected that Admission and
the listing of the Common Shares on the TSX will become effective and dealings will commence in
the Common Shares on both AIM and the TSX on 8 March 2006.

Certificated settlement
Shareholders in FUN Technologies plc who hold their shares in FUN Technologies plc in
certificated form at 4.30 p.m. (London time) on 7 March 2006 will receive the Common Shares to
which they are entitled in certificated form. As from Admission, existing certificates representing
holdings of shares in FUN Technologies plc will cease to be valid for any purpose and shareholders
should, if so requested by FUN, send such certificates to FUN for cancellation or destroy such
certificates.
Canadian persons whose shares in FUN Technologies plc are registered in the name of an
intermediary (such as a securities broker, financial institution, trustee, custodian or other nominee
who holds securities on behalf of such person or in the name of a clearing agency in which the
intermediary is a participant) should note that their shares in FUN Technologies plc are generally
registered in the name of The Canadian Depository for Securities Limited (“CDS”) or its nominee
and not in the Canadian person’s own name on the register of members of FUN Technologies plc.
Canadian persons should contact the intermediary who holds their shares in FUN Technologies plc
for assistance regarding the registration and delivery of the Common Shares that they will receive in
exchange for their shares in FUN Technologies plc.

Uncertificated settlement
As a matter of English law, non-UK securities cannot be held and transferred directly in the CREST
system. Accordingly, arrangements have been made for the Common Shares to be delivered, held
and settled in CREST by means of the CREST International Settlement Links Service.
Under the CREST International Settlement Links Service, CREST Depository Limited, a subsidiary
of CRESTCo, will issue dematerialised depositary interests representing entitlements to Common

                                                   19
Shares, known as CREST Depositary Interests or CDIs. CDIs are independent securities constituted
under English law, which may be held, transferred and settled solely through the CREST system. The
terms and conditions upon which CDIs are issued and held in CREST are set out in the deed poll
executed by CREST Depository Limited governing CDIs and other related documents in the
CREST International Manual issued by CRESTCo.
Shareholders in FUN Technologies plc who hold their shares in FUN Technologies plc in
uncertificated form at 4.30 p.m. (London time) on 7 March 2006 will have the Common Shares to
which they are entitled transferred to an account of CREST Depositary Limited which will then issue
applicable numbers of CDIs (representing such securities) to the credit of the shareholder’s
appropriate stock account in CREST. Upon receipt of the CDIs, such persons will therefore not be
the registered holders of the Common Shares to which they are entitled as a result of the
implementation of the Scheme. The registered holder of such shares will be a nominee of CREST
Depository Limited. However, ownership of a CDI will represent each person’s entitlement to the
underlying Common Share.
FUN reserves the right to issue Common Shares to all or any shareholder in FUN Technologies plc
who holds shares in FUN Technologies plc in uncertificated form at 4.30 p.m. (London time) on
7 March 2006 in certificated form if, for reasons outside its reasonable control, it is not able to effect
settlement in accordance with this section.

General
The Common Shares will be issued as fully paid and non-assessable common shares of FUN and will
rank pari passu in all respects with the other issued and outstanding Common Shares. Fractions of
Common Shares will not be issued pursuant to the Scheme. All mandates relating to the payment of
dividends on shares in FUN Technologies plc and other instructions given to FUN Technologies plc
by shareholders in FUN Technologies plc in force at 4.30 p.m. (London time) on 7 March 2006
relating to holdings of shares in FUN Technologies plc will, unless and until amended or revoked, be
deemed as from 4.30 p.m. (London time) on 7 March 2006 to be an effective mandate or instruction
to FUN in respect of the corresponding Common Shares.

Scheme of arrangement
It was announced on 22 November 2005 that FUN Technologies plc and the Company had entered
into the Share Purchase and Support Agreement with Liberty pursuant to which it is proposed that
Liberty will acquire a majority interest in FUN. This will be effected by means of a Scheme of
Arrangement between FUN Technologies plc and its shareholders under section 425 of the
Companies Act, the provisions of which were set out in full in the Scheme Circular.
The Scheme was approved at a shareholders’ meeting on 17 February 2006. Subject, inter alia, to
the sanction of the High Court and satisfaction or waiver of the conditions set out in the Scheme
Circular (including Admission), the Scheme will become effective on 8 March 2006. A petition has
been presented to the High Court for the final approval of the Scheme at a court hearing on 7 March
2006.
Pursuant to the Scheme, FUN will acquire all of the issued shares in FUN Technologies plc, on a fully
diluted basis, in exchange for aggregate consideration consisting of approximately £83.7 million in
cash and approximately 32.4 million Common Shares (including Common Shares to be issued upon
the exercise of outstanding options, warrants and other rights to subscribe for shares in FUN
Technologies plc).
Subject to the Scheme becoming effective, Liberty will subscribe, via its wholly-owned subsidiary
Liberty Freedom, for approximately 33.8 million Common Shares for aggregate consideration of
US$50 million plus approximately £83.7 million, payable in cash. The cash consideration of
approximately £83.7 million to be paid by FUN under the Scheme will be funded from the proceeds
of the Liberty subscription for Common Shares.
If the Scheme becomes effective, FUN Technologies plc will become a wholly-owned subsidiary of
FUN, and Liberty will beneficially own approximately 51 per cent. of the Common Shares, on a fully
diluted basis, and will appoint a majority of the members of the 11-member board of directors of

                                                   20
FUN. In addition, Liberty Freedom will be entitled to certain rights of pre-emption on the issue of
further Common Shares or other securities in FUN.

Information on Liberty
Liberty Media Corporation is a holding company incorporated in Delaware which, through its
ownership of interests in subsidiaries and other companies, is primarily engaged in the electronic
retailing, media, communications and entertainment industries in the United States, Europe and
Asia.
Liberty’s most significant consolidated businesses as at 30 September 2005 were QVC, Inc.
(“QVC”) and Starz Entertainment Group LLC (“SEG”). QVC markets and sells a wide variety of
consumer products in the United States and several foreign countries, primarily by means of televised
shopping programs on the QVC networks and via the Internet through its domestic and
international websites. SEG provides premium programming distributed by cable operators,
direct-to-home satellite providers and other distributors throughout the United States.
Liberty’s other consolidated subsidiaries at 30 September 2005 include On Command Corporation
(“On Command”), OpenTV Corp. (“OpenTV”) and TruePosition, Inc. (“TruePosition”). On
Command provides in-room, on-demand video entertainment and information services to hotels,
motels and resorts primarily in the United States. OpenTV provides interactive television solutions,
including operating middleware, web browser software, interactive applications, and consulting and
support services. TruePosition provides equipment and technology that deliver location-based
services to wireless users.
In addition to the foregoing businesses, Liberty maintains significant investments in public
companies, such as News Corporation, IAC/InterActiveCorp, Expedia, Inc., Time Warner Inc.,
Motorola, Inc. and Sprint Corporation.
For the 12 months ended 31 December 2004, Liberty’s revenues amounted to US$7,682 million.
Liberty’s shares of Series A common stock and Series B common stock are traded on the New York
Stock Exchange.




                                                 21
                                              PART II

                                            Risk factors

Prospective investors should be aware that an investment in the Company involves a higher than
normal degree of risk. In addition to the other information contained in this document, the
following risk factors should be considered carefully in evaluating whether to make an investment in
the Company.


Regulatory risks
The Group operates in newly emerging industries which many regulatory regimes have not yet fully
contemplated. Consequently, there is some uncertainty regarding the regulation of the Group’s
activities. This uncertainty presents risk to the Group and its licensees.

Uncertainties in the application of law to newly emerging industries
The Group’s business has global reach and is predominantly Internet-based which raises questions
regarding which countries have jurisdiction over its activities. The applicability of the laws of any
particular jurisdiction to Internet-based activities varies from country to country and, in many cases,
has not yet been determined. The Group and its licensees are subject to applicable laws of the
countries in which they have operating assets or offices. However, there is uncertainty regarding the
manner in which laws of other jurisdictions apply to the Group and its licensees and, in some cases,
whether they apply at all.

As the laws governing Internet activities and, specifically, the Group’s activities evolve, there can be
no assurance that regulators will not choose to enact or interpret legislation in a manner that would
restrict the operations of the Group and its licensees. There is a risk that lobby groups, including
those representing sectors competitive with the Group’s businesses, will influence the development
of regulations governing these new industries in a manner that prioritizes their interests over those of
the Group. Increased compliance costs and any complications in or restrictions on the consumer
experience required by new regulations could make the Group’s services less competitive and could
have a material adverse effect on the Group’s financial results and condition.

Changes to existing regulatory regimes
Changes to existing legislation or to the interpretation of existing legislation by courts or
enforcement agencies could also pose a risk to the Group and its licensees. It may take years to
determine the extent to which existing laws and regulations relating to issues such as intellectual
property ownership and infringement, libel and personal privacy are applicable to the Internet. A
growing branch of the Group’s fantasy sports business is the compilation and provision of sports
information based on facts in the public domain. Claims in the US by sports leagues that reporting
in-progress game scores and other game statistics based on facts in the public domain constituted
misappropriation or copyright infringement were rejected by the United States Court of Appeals for
the Second Circuit in National Basketball Ass’n v. Motorola, Inc. (2d Cir. 1997). Should there be a
change in the law which finds that sports leagues do have property rights in such data, the Group may
be required to acquire licenses from the sports leagues to continue its sports information business at a
cost and may be prohibited from providing any sports information for which it failed to obtain a
license.

Through its subsidiary Corcom, Inc. d.b.a. Don Best, the Group provides real-time sports
information to sports enthusiasts and takes measures to ensure that they do not use this information
unlawfully. There is a risk that some end users may use the information unlawfully despite the
Group’s efforts to prevent such behaviour. To date, the Group has not received any notice from
regulators implying that the Group is responsible at law for aiding such activity. However, changes
may occur to existing legislation or the interpretation of existing legislation by courts or enforcement
agencies which adversely impact the operation and financial condition of the Group’s sports
information business. Such a change might prohibit or require modifications to some or all of the

                                                  22
Group’s sports information business or result in a view by regulators that the Group has violated the
law, raising the possibility of criminal and civil proceedings, including class action lawsuits brought
by or on behalf of public entities or private individuals, credit card processors or advertisers,
potentially resulting in substantial litigation expense, penalties, fines, injunctions or other remedies
or restrictions being imposed on the Group or its licensees while diverting the attention of key
executives. Such a change might require the Group to take further measures to ensure that the sports
information it provides is not used unlawfully which could increase the Group’s compliance costs,
complicate the consumer experience the Group offers and materially adversely affect the Group’s
financial results and condition.
The Group’s casual gaming operations are concentrated in the US where Internet gaming is
regulated at the state-level. The Group offers pay-per-play skill games with prizes (also referred to as
“skill gaming”) as part of its casual gaming offering. Most US states do not prohibit offering games of
skill with prizes for a fee, but do prohibit offering games of chance with prizes for a fee. The legal test
used to make the distinction varies between states. Generally, in the US, games of skill are
distinguished at law from games of chance by the predominant role of skill in determining the
outcome of the game. Should there be any change to the laws in any state in which the Group offers
skill games, the Group may no longer be able to offer skill gaming in these states or may be required to
modify them at a cost to comply with changes in the law. This could reduce the size of the Group’s
skill gaming network, making it less attractive to its distribution partners and its skill gaming
consumers. There are several US states in which the legality of skill gaming has neither been affirmed
nor rejected by any published court decision or opinion. If a court were to find skill gaming to be
illegal in one of these states, the Group could be deemed to have violated the law of such state and
may face penalties, fines, injunctions or other proceedings as a result. These same regulatory risks
exist in jurisdictions other than the US.

Business risks
Dependence on key distribution partners
The success of the Group’s businesses is dependent on key distribution partners, the loss of whom
would have a material adverse effect on the Group’s competitive position in the marketplace,
revenues, and financial position. A substantial portion of the Group’s casual gaming and fantasy
sports revenue is derived from a small number of the Group’s key licensees and distribution partners.
The Group’s agreements with a number of these licensees and distribution partners are short-term
agreements which can be terminated for convenience at any time. The Company believes that such
agreements are consistent with industry standard, and the Group has received no notice of
termination to date and has no reason to believe that any such agreement will be terminated for
convenience. However, there is a risk that the Group’s relationships with these third parties may be
jeopardized by the delivery of work products which are late or which they otherwise deem
unacceptable or unsatisfactory. The Group dedicates significant resources to its production and
research and development groups. Nevertheless, this may prove insufficient if the work products are
new or overly complex. Additionally, the Group’s production group may experience difficulties in
delivering on a timely basis the volume of work products under contract in a given period. The
Group’s agreements with its key customers typically give significant control to the customers over the
approval, development and delivery of the Group’s products and services. Control mechanisms
implemented can increase the development cycle and costs incurred in such arrangements as
compared to those that the Group can achieve independently. It is possible that delays may result and
customers may refuse to approve deliverables in which case the Group would be unable to get its
products and services to market as planned. Any such failure would harm the Group’s businesses and
financial performance.
The Group’s businesses are also dependent on key licensors of content. The Group’s casual gaming
business is a “hits”-driven business, making the Group’s ability to source tier-one games content
critical. The control that licensors of tier-one content have over fee structures and the scope and
manner of content distribution make it difficult to predict the cost and profitability of the Group’s
casual gaming business in the medium to long term. It is possible that such licensors will not renew
their license agreements with the Group. As a result of the importance of this content to the Group’s

                                                    23
casual gaming service, any increase in fee structures or failure to secure a license relationship would
make the service less competitive and weaken its revenue and earnings potential. A significant portion
of the Group’s sports information business is dependent on content sourced from third parties.
Should the Group’s relationships with such third party licensors deteriorate or end altogether, the
Group would no longer provide their content as part of the Group’s sports information service. The
Group’s sports information service could become less competitive as a result and suffer a decrease in
consumer demand and revenues.
Competition
The barriers to entry in most Internet markets are relatively low. As a result, there is a significant risk
of increased competition in such markets. Given that the Group’s businesses are predominantly
Internet-based, there is the risk that competition in the casual gaming, fantasy sports, and sports
information markets will intensify with increased consumer demand.
The Group may face significant competition from companies with greater capital resources, who
provide more effective, more technologically advanced, and qualitatively better products and services
than those provided by the Group or who pursue a more aggressive pricing policy. This includes
existing and potential competitors which include major media companies and traditional video game
publishers. The Group’s competitors may seek to gain market share or enter the Group’s markets by
undercutting the Group’s prices to levels which the Group cannot match without jeopardizing its
financial security. Should the Group’s competitors consolidate or be acquired by larger entities with
greater resources, they could be in a stronger competitive position to take away market share from the
Group.
Presently, the Group’s principal competitors in the casual gaming sector who focus on skill gaming
are MidasPlayer, WorldWinner and GameAccount, and the Group’s principal competitors in the
fantasy sports sector are ESPN, Fox, CBS Sportsline and Stats Inc.
Innovation and intellectual property
The Group’s success is significantly dependent on its innovation and the development of its
intellectual property given that its revenues are principally derived from providing high quality
content and turn-key technological solutions based on proprietary intellectual property.
A large portion of the Group’s revenues for the foreseeable future is likely to be derived from
licensing of technology and content and the sale of associated services. The Group’s ability to develop
new products and enhancements that meet changing customer’s needs and rapidly evolving industry
standards and broad market acceptance of such products and enhancements are critical to the
Group’s future success. The Group may increase its development expenses as it increases resources
employed in research and development to innovate its technology and content and maintain its
competitive edge.
Despite its efforts, there can be no assurance that the Group will be able to keep pace with changing
needs and standards. There can be no assurance that the Group will not experience difficulties that
delay or prevent the successful development, retention and marketing of new products and
enhancements, or that they will be introduced in a timely fashion or will meet consumer expectations
and achieve market acceptance. The Group’s failure to meet changes in consumer and industry
standards will diminish its leadership position, materially reducing its revenues and financial position,
adversely affecting its operating results, and eroding its brand value. As is common in new and rapidly
evolving industries, demand and market acceptance for newly introduced services and products are
subject to a high level of uncertainty. In addition, there is risk that the Group’s expansion into a wider
variety of distribution platforms will have a detrimental impact on its brand value and the acceptance
of its products in the electronic commerce marketplace.
Despite the Group’s precautions, unauthorized parties (such as employees, consultants or business
distribution partners) may have, or could in the future, copy or otherwise reverse engineer portions of
the Group’s intellectual property or otherwise misappropriate and use information which is
proprietary to the Group. Through such unauthorized use, competitors could develop intellectual
property with the same or similar functionality or features. The unauthorized use of the Group’s
trade secrets could result in the loss of their legal protection.

                                                   24
There are additional limitations to the effectiveness of the Group’s protective measures. Effective
copyright and other legal protection may be unavailable or limited in certain foreign countries, and
failure by the Group to register its intellectual property rights in certain countries may make
enforcement of its rights more difficult. Furthermore, legal proceedings to enforce the Group’s
intellectual property rights could be burdensome and expensive and could involve a high degree of
uncertainty. If the Group cannot successfully enforce its intellectual property rights, this could have a
material adverse effect on its business, revenues, operating results and financial condition. See also
“Risk factors – Third party patent litigation”.
Infrastructure
The Group’s businesses face certain risks given that they are technology-based and principally
conducted on the Internet.
The Group’s ability to handle electronic commerce transactions and user information over the
Internet securely depends on bank processing, credit card systems and other technologies and
network systems. These systems and operations are vulnerable to damage or interruption from
human error, natural disasters, telecommunication failures, break-ins, sabotage, computer viruses,
intentional acts of vandalism and similar events. Any system failure, including network, software or
hardware failure or system intrusion may cause a delay or interruption that could result in reduced
use, reduced revenue and harm to the Group’s reputation, brand and relations with customers, which
could adversely affect the Group’s business, revenues, operating results and financial condition.
The Group and its licensees depend principally on the Internet to distribute the Group’s products
and services. Similarly, the Group’s end users principally depend on Internet service providers and
online service providers to access them. Increased Internet usage has caused interruptions and delays
in processing and transmitting data over the Internet. The Group takes measures to prevent or
minimize the impact of such interruptions and delays on its businesses, but there can be no guarantee
that the Group’s network systems will not be affected or will continue to be able to support the
demands placed on it by the continued growth of the Internet, the overall growth in demand of
casual gaming, fantasy sports and sports information services. The Group and its licensees have
experienced service outages in the past and could experience service outages, delays and other
difficulties due to system failures, stability and interruption. A loss of customers may result from
delays or interruption in service, including those relating to high volumes of traffic or technological
problems. As a result of these interruptions or delays, the Group may not be able to meet a level of
service that it has contracted for, and the Group may be in breach of its contractual commitments,
which could end or materially erode the goodwill developed in its customer relationships and, in
turn, could materially adversely affect the Group’s business, revenues, operating results and financial
condition.
A significant barrier to electronic commerce and communication is the secure transmission of
confidential information over public networks. The Group’s technology uses encryption and
authentication technology to provide the security and authentication necessary to effect secure
transmission of confidential information. Advances in computer capabilities, new discoveries in the
field of cryptography, employee mischief, stealing of source code, system intrusion or other events or
developments could result in a compromise or breach of the algorithms the Group uses to protect
user transaction data. If any such compromise of the Group’s security were to occur, it could damage
consumer confidence and give rise to possible civil litigation based on novel claims pertaining to
privacy rights. Such events could materially adversely affect the Group’s brand, revenues, operating
results and financial condition.
The Group’s ability to cost-effectively serve an increasing number of users is dependent on the ability
of its technology to “scale” in an efficient manner. While the Group has conducted internal testing on
its technology to ensure scalability, its testing may not have been rigorous enough, or may not have
uncovered hidden scalability faults. Any failure of the Group’s technology to scale efficiently could
result in a delay or interruption of service.
Foreign operations
The Group’s ability to expand its business in certain countries will require modification of its
products (e.g. domestic language support) and additional local infrastructure investments (e.g.

                                                   25
payment processing and marketing initiatives). However, there can be no assurance that the Group
will be able to sustain or increase revenue derived from international operations or that the Group will
be able to penetrate linguistic, cultural or other barriers to new foreign markets. The failure to
successfully expand into foreign markets could erode the Group’s competitiveness in the
marketplace, and its inability to sustain or increase revenue from international operations could have
a material adverse effect on the Group’s business, revenues, operating results and financial condition.
In addition to regulatory uncertainty regarding the emerging Internet-based casual gaming and
fantasy sports industries in certain countries (See “Regulatory risks” above), there are certain
difficulties and risks inherent in doing business internationally, including the burden of complying
with multiple and conflicting regulatory requirements, foreign exchange controls, potential
restrictions or tariffs on gaming activities that may be imposed, potentially adverse tax consequences
and tax risks and political and economic instability. Changes in the political, regulatory and taxation
structures of jurisdictions in which the Group operates and in which users are located could have a
material adverse effect on the Group’s business, revenues, operating results and financial condition.
Foreign exchange fluctuations
It is currently anticipated that the Company will report its results in US and/or Canadian dollars. In
addition, the Group earns revenue in a number of different currencies. Accordingly, fluctuations in
the exchange rates of world currencies could have a positive or negative effect on the Group’s
reported results. Given the Group’s constantly changing currency exposures and the substantial
volatility of currency exchange rates, the Group cannot predict the effect of exchange rate
fluctuations upon future operating results.
Hiring and retaining key personnel
Qualified and talented technical, creative, marketing and management personnel are essential to the
development and management of the Group’s businesses. The market for such personnel is
extremely competitive. The loss of or the inability to attract qualified and talented personnel could
have a material adverse effect on the Group’s business, revenues, operating results and financial
condition. There can be no assurance that the Group will be successful in hiring or retaining qualified
personnel. The Group’s failure to attract and retain the necessary management, technical and sales
and marketing personnel could have a material adverse effect on the development and success of its
business revenues, operating results and financial condition.
Limited operating history
Given its short operating history, the Group does not have a long proven track record of performance
from which future performance can be extrapolated. As stated earlier, there can be no assurance that
the market will accept the Group’s products and services or that the Group will even be profitable.
Without meaningful historic financial information, the Group’s revenue is difficult to forecast and is
subject to significant fluctuation from reporting period to reporting period. Due to these factors,
comparisons of the Group’s operating results in such periods may not be a good indicator of future
performance.
Acquisitions of SkillJam, Don Best, Fanball and Octopi: undiscovered liabilities
The acquisitions of SkillJam, Don Best, Fanball and the assets of Octopi (the “Acquired Businesses”)
were completed by the Group with the expectation that their successful completions would result in
long-term strategic benefits and synergies. These anticipated benefits and synergies will depend in
part on whether the operations of the Group and each of the Acquired Businesses can be integrated in
an efficient and effective manner. It is premature to ascertain whether the anticipated financial
benefits will be realized. While early integration of the Acquired Business has not placed adverse
pressures on the Group’s management and resources, future integration and restructuring decisions
pertaining to the Acquired Businesses may significantly divert and strain management’s resources
away from other business concerns and incur unforeseen costs. This could materially adversely
impact the Group’s business, revenues, operating results and financial condition.
Although the Group has conducted investigations of, and engaged legal counsel to review, the
corporate legal, financial and business records of each of the Acquired Businesses, there may be
liabilities that the Group may not have uncovered in its due diligence investigations and that the

                                                  26
Group has not yet discovered in its operation of the Acquired Businesses. Liabilities could include
third party intellectual property infringement claims, regulatory non-compliance and claims from
existing or former clients of either of the Acquired Businesses. To the extent that the relevant statute
of limitations has not yet expired in respect of such liabilities, they could have, individually or in the
aggregate, a material adverse affect on the Group’s business, revenues, operating results and financial
condition.

Third party patent litigation
While the Company believes that the Group’s technology and other intellectual property do not
infringe upon the proprietary rights of third parties, there can be no assurance that the Group will not
receive communications from third parties asserting that the Group’s technology and other
intellectual property infringe, or may infringe, their proprietary rights. Any such claims, with or
without merit, could be time-consuming, result in costly litigation and diversion of technical and
management personnel, cause product delays or require the Group to develop non-infringing
technology or enter into royalty or licensing agreements or re-brand products or cease conducting
certain businesses due to a court-imposed injunction. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Group or at all. In the event of a successful
claim of product infringement against the Group and failure or inability of the Group to develop
non-infringing technology or license the infringed or similar technology, the Group’s business,
revenues, operating results and financial condition could be materially adversely affected.
On 30 July 2004, SkillJam purchased certain assets previously owned by eUniverse, Inc.
(“eUniverse”) and GameUniverse, Inc. (“GameUniverse”) in an operational division known as the
SkillJam Division and assumed certain liabilities relating to the business of the SkillJam Division. The
Group did not purchase or assume eUniverse’s liability in connection with Arcade Planet, Inc.’s
(“Arcade”) lawsuit against eUniverse and Worldwinner.com, Inc. (“Worldwinner”) which alleges
that eUniverse and Worldwinner infringe Claim 34 of US Patent 5,816,918 (the “918 Patent”)
owned by Arcade and titled Prize Redemption Systems for Games for eUniverse’s operation of
“skill-based games for player participation and use on the Internet at its SkillJam.com website.”
Following the closing of the acquisition of SkillJam, the Group has utilized the purchased assets to
operate a cash-prize, skill-based gaming business including operation of the SkillJam.com website
named in the lawsuit. To the best of the Company’s knowledge, Arcade has not to date filed any
lawsuits against any member of the Group. However, there is a possibility that Arcade could name
FUN Technologies plc or SkillJam in the existing lawsuit or file a patent infringement claim against
FUN Technologies plc or SkillJam similar to that filed against eUniverse. On 15 April 2003,
Worldwinner filed a request for re-examination of the 918 Patent with the US Patent and Trademark
Office (the “PTO”) on the basis of certain articles and patents that were alleged to predate the 918
Patent. On 3 June 2003, the PTO found a “substantial new question of patentability” had been
raised as to Claims 34-35 and 39-44 of the 918 Patent and initiated are-examination proceeding as to
those claims. On 8 September 2004, the PTO issued a non-final office action in the re-examination of
the 918 Patent. The patentee filed a Notice of Appeal on 29 August 2005 to appeal the rejection to
the United States Board of Patent Appeals and Interferences. Because the re-examination of the
918 Patent is ongoing, and because the claims that are the subject of that re-examination may be
amended, upheld or rejected as part of that proceeding, it is difficult to predict the likelihood of
future litigation and the merits of any potential infringement claim by Arcade against FUN
Technologies plc or SkillJam.
The litigation process is inherently uncertain and the Group might not prevail in connection with any
such claim. Patent litigation is particularly complex and can extend for a protracted time, which can
substantially increase the cost of any such litigation. If Arcade were to file such a claim, the Group
would incur substantial legal fees and expenses. Any such litigation would likely also divert the efforts
and attention of certain key management and technical personnel. As a result, the Group’s defense of
any such litigation, regardless of its eventual outcome, would likely be costly and time consuming.
Furthermore, without regard to the merits of any such claim, if judgments by a court of law on such
claim or any other claim received in the future were to be upheld, or if the Group were otherwise to
agree to the settlement of such claims, the consequences to the Group could be severe and could

                                                   27
require the Group, among other things, to: (a) cease altogether its skill gaming business operations
that incorporate the challenged intellectual property; (b) obtain a royalty-bearing license to sell or
use the relevant technology, which license may not be available on reasonable terms or available at all;
(c) pay significant monetary damages; and/or (d) redesign its operations that use the disputed
technology. Any of these results would have a material adverse effect on the business, operations and
financial results of the Group.
Pursuant to the acquisition agreement, eUniverse agreed to indemnify the purchasers from any losses
asserted against, relating to, imposed upon or incurred by FUN Technologies plc, SkillJam or the
purchasers by reason of, resulting from, based upon or arising out of any losses resulting from the 918
Patent. No indemnity is payable after 31 July 2010 or generally to the extent that the indemnification
obligation would exceed an aggregate of US$1 million.

Future acquisitions
As part of the Group’s growth strategy, it will continue to acquire or make strategic investments in
businesses that offer products, services and technologies complementary to its current lines of
business. Any of these strategic transactions could be material to the Group’s financial condition and
operating results. Any such transaction will be accompanied by the risks commonly associated with
acquisitions and strategic investments, including:
      the need to implement controls, procedures and policies appropriate for a public company in
      the target;
      cultural challenges and the associated difficulty in assimilating the operations and personnel of
      the target;
      the potential disruption of the Group’s ongoing business;
      the distraction of management from the Group’s business;
      management’s inability to maximize the financial and strategic positions of the Group and the
      target, and the maintenance of uniform standards, controls, procedures and policies; and
      impairment of relationships with employees and clients resulting from the introduction of new
      management personnel and the associated risk of losing such employees and clients.
The Group may not be able to identify or consummate suitable acquisition or strategic investment
targets successfully. The failure to successfully evaluate, negotiate, complete and integrate such a
transaction could have a material adverse effect on the Group’s business, revenues, operating results
and financial condition, particularly in the case of a larger acquisition.
Consideration paid for future strategic transactions could involve the issuance of the Company’s
equity securities, potentially diluting Shareholders and earnings per Common Share. They could
involve the incurrence of debt, contingent liabilities, amortization expenses or one-time write-offs of
goodwill. Shareholders may not have the opportunity to review, vote on or evaluate future
acquisitions or interests.

Challenges in managing rapid growth
Given the rapid expansion of the Group’s business by way of acquisition and the anticipated organic
growth levels of its business, management will need to devote significant resources to integration and
scaling its commercial, technological and administrative infrastructure. Coupled with increased
complexity of the business, this may place a significant strain on management and operational
resources and increase demands on its internal systems, procedures and controls. The Group’s future
operating results will depend on management’s adeptness at developing and managing the Group’s
growth, meaning hiring and retaining appropriate personnel, making strategic investments,
accurately forecasting revenues and controlling expenses. A decline in the revenue growth rate
without a corresponding and timely slowdown in expense growth or any inability to manage or build
future growth efficiently or effectively could have a material adverse effect on the Group’s business,
revenues, operating results and financial condition.

                                                  28
Tax residency of FUN Technologies plc
Upon the Scheme becoming effective, FUN Technologies plc will become a subsidiary of the
Company. FUN Technologies plc is a resident of the United Kingdom for United Kingdom
corporation tax purposes by virtue of its incorporation under the laws of the United Kingdom. For
Canadian income tax purposes, the residency of a corporation that is not incorporated in Canada,
such as FUN Technologies plc, involves a determination based on all relevant facts and circumstances
as to where its central management and control is situated. FUN Technologies plc has represented in
the Share Purchase and Support Agreement that it is a resident for tax purposes in both the United
Kingdom and Canada under the applicable laws of the United Kingdom and Canada. FUN
Technologies plc’s representation that it is a resident in Canada for Canadian income tax purposes is
based on FUN Technologies plc’s determination that FUN Technologies plc’s central management
and control is situated in Canada. Since FUN Technologies plc is resident in both the United
Kingdom and Canada under the applicable laws of the United Kingdom and Canada, subject to any
relief that may be granted to the Company as a result of the procedure described below, FUN
Technologies plc is subject to tax on its worldwide income in both the United Kingdom and Canada.
There is a procedure available under the Canada – United Kingdom Income Tax Convention (1978)
(the “Treaty”), whereby FUN Technologies plc could apply to the taxation authorities of both
Canada and the United Kingdom to determine, by mutual agreement between the countries, in
which of the two countries FUN Technologies plc would be deemed to be a resident, so as to
minimize or eliminate the adverse consequences of double taxation that might otherwise arise. Such
an application, if made by FUN Technologies plc, could take several years to be resolved and it is not
certain what precise outcome would follow. In the interim, FUN Technologies plc will be subject to
comprehensive tax in both Canada and the United Kingdom, and it is not clear that the incidence of
double taxation could be minimized or completely eliminated by recourse to the domestic tax laws of
Canada and the United Kingdom. The tax implications of the foregoing could have a material
adverse effect on the Company’s business, financial condition and results of operations.

Ownership structure
Upon completion of the Scheme, Liberty will indirectly beneficially own approximately 51 per cent.
of the Common Shares, on a fully diluted basis. As a result of such ownership, Liberty will be able to
exercise control over all matters requiring ordinary shareholder approval, including the election of
directors. Pursuant to the terms of the Share Purchase and Support Agreement, Liberty has agreed
initially to appoint 6 of the 11 directors of FUN. Such concentration of ownership will have the effect
of delaying or preventing a change in control of FUN. As a result of its indirect voting interests, its
ability to elect or appoint at least a majority of the board of FUN and its pre-emptive rights in respect
of issues of new securities by FUN, Liberty will be able to exercise significant influence or control over
transactions submitted to the Board and certain transactions submitted to Shareholders. The
interests of Liberty may conflict with those of the other Shareholders.




                                                   29
                                            PART III

                   Financial information on the FUN Technologies plc

The financial information set out in this Part III has, in respect of information for the years ended
31 December 2003 and 31 December 2004, been extracted without material adjustment from the
published audited consolidated accounts of FUN Technologies plc and, in respect of the year ended
31 December 2005, has been extracted without material adjustment from the statement of
unaudited results for the year ended 31 December 2005. This information does not constitute
statutory accounts within the meaning of section 240 of the Companies Act. Audited statutory
accounts have been delivered to the Registrar of Companies for the periods ended 31 December
2003 and 31 December 2004. Audited statutory accounts for the year ended 31 December 2005 will
be delivered to the Registrar of Companies once approved by Shareholders at the annual general
meeting of FUN Technologies plc in 2006. Unqualified audit reports under section 235 of the
Companies Act, which did not contain any statement under section 237(2) or section 237(3) of the
Companies Act for the financial years ended 31 December 2003 and 31 December 2004 have been
given by KPMG Audit Plc, Chartered Accountants and Registered Auditors of 8 Salisbury Square,
London EC4Y 8BB, United Kingdom.




                                                30
A:    Financial information on FUN Technologies plc (then CES Software plc) for the year
      ended 31 December 2003

The following information has been directly extracted from the audited financial statements of FUN
Technologies plc (then CES Software plc) for the 12 months ended 31 December 2003. Such
information has been extracted without adjustment and accordingly there are a number of page
references and references made to parts of the reports originally included with such statements that
will not agree with this document.



INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CES SOFTWARE PLC
For the year ended 31 December 2003

We have audited the financial statements on pages 11 to 29. We have also audited the information in
the Report of the Board on Directors’ Remuneration that is described therein as having been audited.

This report is made solely to the company’s members, as a body, in accordance with Section 235 of
the Companies Act 1985. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditors’ report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.


Respective responsibilities of directors and auditors
The directors are responsible for preparing the annual report and accounts. As described on page 4
this includes responsibility for preparing the financial statements in accordance with applicable
United Kingdom law and Accounting Standards. Our responsibilities, as independent auditors, are
established in the United Kingdom by statute, the Auditing Practices Board and by our profession’s
ethical guidance.

We report to you our opinion as to whether the financial statements give a true and fair view and are
properly prepared in accordance with the Companies Act 1985. We also report to you if, in our
opinion, the directors’ report is not consistent with the financial statements, if the company has not
kept proper accounting records, if we have not received all the information and explanations we
require for our audit, or if information specified by law regarding directors’ remuneration and
transactions with the group is not disclosed.

We read the other information accompanying the financial statements and consider whether it is
consistent with those statements. We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the financial statements.


Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the group’s circumstances, consistently applied
and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that
the financial statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.

                                                 31
Opinion
In our opinion:
     the financial statements give a true and fair view of the state of affairs of the company and the
     group as at 31 December 2003 and of the loss for the year then ended; and
     the financial statements and the part of the directors’ remuneration report to be audited have
     been properly prepared in accordance with the Companies Act 1985.

KPMG Audit Plc                                                         Chartered Accountants and
                                                                       Registered Auditor
29 June 2004                                                           London




                                                32
Consolidated profit and loss account
for the year ended 31 December 2003

                                                                           12 months      Period from
                                                                               ended    9 May 2002 to
                                                                         31 December     31 December
                                                                                2003             2002
                                                                Notes          £’000            £’000
Administrative expenses                                                         (742)           (428)
Operating loss                                                                  (742)           (428)
Share of operating loss in joint venture                                          (2)             —
Loss on ordinary activities before interest
and other income                                                                (744)           (428)
Interest receivable and similar income                              5              4               1
Loss on ordinary activities before taxation                  2 and 3            (740)           (427)
Tax on loss on ordinary activities                                  6              —                —
Loss on ordinary activities after taxation and loss for
the financial period                                                             (740)           (427)
Appropriations (non equity)                                         7            (35)            (20)
Retained loss for the period                                                    (775)           (447)
Loss per share
Basic and diluted                                                   8         (0.07p)         (0.04p)

The results disclosed in the consolidated profit and loss accounts are on a historical cost basis.
All of the above results are from continuing operations.




                                                 33
Consolidated balance sheet
at 31 December 2003

                                                                          31 December   31 December
                                                                                 2003          2002
                                                                  Notes         £’000         £’000
Fixed assets
Intangible assets                                                    9            51            85
Tangible assets                                                     10            19            10
Investment in joint ventures:                                       11
Share of gross assets                                                             20            1
Share of gross liabilities                                                       (21)           —
                                                                                  (1)            1
                                                                                  69            96
Current assets
Debtors                                                             12           280            15
Cash at bank and in hand                                                       3,437           375
                                                                               3,717           390
Creditors
Amounts falling due within one year                                 13          (273)          (40)
Net current assets                                                             3,444           350
Total assets less current liabilities and net assets                           3,513           446

Capital and reserves
Called up share capital                                             14           978            —
Share premium account                                               15         3,345            —
Shares to be issued                                                 15            —            876
Other reserve                                                       15          (298)           —
Capital redemption reserve                                          15           664            —
Profit and loss account                                              15        (1,176)         (430)
Shareholders’ funds – equity                                                   3,513           446

These financial statements were approved by the Board of Directors on 29 June 2004 and were
signed on its behalf by:


A Rivkin                                               L Abony
Director                                               Director




                                                34
Company balance sheet
at 31 December 2003

                                                                               31 December
                                                                                      2003
                                                                       Notes         £’000
Fixed assets
Investments                                                              11         1,325
Current assets
Debtors                                                                  12           301
Cash at bank and in hand                                                            3,349
                                                                                    3,650
Creditors
Amounts falling due within one year                                      13          (137)
Net current assets                                                                  3,513
Total assets less current liabilities and net assets                                4,838

Capital and reserves
Called up share capital                                                  14           978
Share premium account                                                    15         3,345
Capital redemption reserve                                               15           664
Profit and loss account                                                   15          (149)
Shareholders’ funds – equity                                                        4,838

These financial statements were approved by the Board of Directors on 29 June 2004 and were
signed on its behalf by:


A Rivkin                                               L Abony
Director                                               Director




                                                35
Consolidated cash flow statement
for the year ended 31 December 2003
                                                                    12 months      Period from
                                                                        ended   9 May 2002 to
                                                                  31 December     31 December
                                                                         2003             2002
                                                          Notes         £’000            £’000
Net cash outflow from operating activities                   17          (732)           (249)
Returns on investments and servicing of finance              18             4               1
Capital expenditure and financial investment                 18           (17)            (13)
Acquisitions and disposals                                  18            —             (103)
Cash outflow before management of liquid
resources and financing                                                  (745)           (364)
Management of liquid resources                              18           350            (350)
Financing                                                   18         3,813             742
Increase in cash in the period                                         3,418               28



Reconciliation of net cash flow to movement in net funds
                                                                    12 months      Period from
                                                                        ended   9 May 2002 to
                                                                  31 December     31 December
                                                                         2003             2002
                                                          Notes         £’000            £’000
Increase in cash in the period                                         3,418               28
Cash (inflow)/outflow from (decrease)/increase
in liquid resources                                                     (350)            350
Translation differences and other non cash movements                      (6)             (3)
Movement in net funds in the period                                    3,062             375
Net funds at the start of the period                        19           375               —
Net funds at the end of the period                          19         3,437             375




                                             36
Statement of total consolidated recognised gains and losses
for the year ended 31 December 2003
                                                                12 months      Period from
                                                                    ended   9 May 2002 to
                                                              31 December     31 December
                                                                     2003             2002
                                                                    £’000            £’000
Loss for the financial period:
  Group                                                             (738)           (427)
  Joint venture                                                       (2)             —
                                                                    (740)           (427)
Foreign exchange differences                                          (6)             (3)
Total consolidated recognised gains and losses                      (746)           (430)



Reconciliation of movements in shareholders’ funds
                                                                12 months      Period from
                                                                    ended   9 May 2002 to
                                                              31 December     31 December
                                                                     2003             2002
                                                                    £’000            £’000
Loss for the financial period                                        (740)           (427)
Appropriations                                                       (35)            (20)
Retained loss for the financial period                               (775)           (447)
Reversal of financing charge on preference shares                      35              20
New ordinary share capital issued in lieu of compensation
and other services                                                    —              134
New share capital subscribed net of issue costs                    3,813             742
Foreign exchange differences                                          (6)             (3)
Net increase in shareholders’ funds                                3,067             446
Opening shareholders’ funds                                          446              —
Closing shareholders’ funds                                        3,513             446




                                               37
Notes to the Financial Statements
for the year ended 31 December 2003

1.    Accounting policies
The following accounting policies have been applied consistently in dealing with items which are
considered material in relation to the consolidated financial statements.

1.1 Basis of preparation
The financial statements have been prepared in accordance with applicable accounting standards and
under the historical cost accounting rules.

The company was incorporated on 24 June 2003. On 24 October 2003 it acquired the entire share
capital of Columbia Exchange Systems Limited in a share for share exchange as part of a group
reorganisation. The acquisition by the company of Columbia Exchange Systems Limited was
accounted for in accordance with the principles of merger accounting set out in Financial Reporting
Standards 6 “Mergers and Acquisitions”. Accordingly, the financial information is presented as if the
combination had existed throughout the period ended 31 December 2002.

In the company’s balance sheet, the investment in Columbia Exchange Systems Limited is stated at
the nominal value of the shares issued in consideration for that company. As permitted by sections
131 and 133 of the Companies Act 1985, no premium has been recorded on the shares issued in
consideration. On consolidation, the difference between the nominal value of shares issued and
received is credited directly to the other reserve.

Under section 230(4) of the Companies Act 1985, the company is exempt from the requirement to
present its own profit and loss account. The loss for the period ended 31 December 2003 dealt with
in the individual financial statements of CES Software plc was £149,169.

1.2 Going concern
The group has had limited commercial activity to date. The group remains in a development stage
and, accordingly, continues to generate losses.

The directors are of the opinion, however, that taking account of the net proceeds of the placing
completed in December 2003, the group will have sufficient financial resources to enable it to
continue to trade and to meet its liabilities as they fall due for the foreseeable future and for at least the
next 12 months from the date of approval of these financial statements.

1.3 Valuation of investments
Investments held as fixed assets are stated at cost less any provision for impairment.

1.4 Joint ventures
An entity is treated as a joint venture where the group holds a long term interest and shares control
under a contractual agreement.

In the group accounts, interests in joint ventures are accounted for using the gross equity method of
accounting. The consolidated profit and loss account indicates the group’s share of the joint
venture’s turnover and includes the group’s share of the operating results, interest, pre-tax results
and attributable taxation of such undertakings based on audited financial statements. In the
consolidated balance sheet, the group’s share of the identifiable gross assets (including any
unamortised premium paid on acquisition) and its share of the gross liabilities attributable to its joint
ventures are shown separately.

1.5 Goodwill
Goodwill arising on acquisition is capitalised on the balance sheet and amortised through the profit
and loss account in equal annual instalments over its estimated useful economic life of three years.

                                                     38
1.6 Tangible fixed assets and depreciation
Depreciation is provided to write off the cost of tangible fixed assets over their estimated useful
economic lives as follows:
Computer equipment                               30 per cent. straight line
Computer software                                100 per cent. straight line (one year life)
A half year’s depreciation charge is made in the year of acquisition.
1.7 Leases
Rentals under operating leases are charged on a straight line basis over the lease term.
1.8 Research and development expenditure
Expenditure related to the research, design and development of software products are charged to
profit as incurred. Software development costs are capitalised, beginning when a product’s feasibility
has been established, which generally occurs upon completion of a working model, and ending when
a product is available for general release to customers. To date, no software development costs have
been capitalised.

1.9 Deferred taxation
Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet
date to pay more tax, or a right to pay less tax at a future date, at rates expected to apply when they
crystallise, based on current tax rates and law. Timing differences arise from the inclusion of items of
income and expenditure in taxation computations in periods different from those in which they are
included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as
more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
1.10 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
exchange rates ruling at the balance sheet date and any exchange gains or losses arising are taken to
the profit and loss account.
The assets and liabilities of overseas subsidiaries are translated at the period end closing exchange
rates. The results of such undertakings are consolidated at the average exchange rate during the
period. Gains and losses arising are taken to reserves.
1.11 Financial instruments
The group’s financial instruments comprise cash and various items such as trade debtors and creditors
that arise directly from its operations. The group’s policy towards financial instruments is to manage
interest rate, liquidity and foreign exchange risk without exposing the group to undue risk or
speculation.
1.12 Cash and liquid resources
Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on
demand.
Liquid resources comprise current asset investments held as readily disposable stores of value as
defined by Financial Reporting Standard 1 (Revised 1996) “Cash flow statements”. Liquid resources
held in the preceding period comprise short term bank deposits and are included within the caption
“cash at bank and in hand” in the balance sheet.
Cash totalling £3,349,000 was, at 31 December 2003, held on the company’s behalf in accounts
with qualifying financial institutions and managed by Osborne Clarke. Because these balances were
accessible by the company on demand and without penalty, they are included as “cash” in both the
balance sheet and cash flow statement.




                                                   39
2.    Segmental information
                                                                                         Period from
                                                                          12 months           9 May
                                                                              ended          2002 to
                                                                        31 December     31 December
                                                                               2003             2002
                                                                              £’000            £’000
Analysis by geographic market:
Pre-tax loss by origin
United Kingdom                                                                 (184)           (152)
Canada                                                                         (554)           (275)
Group                                                                          (738)           (427)
Joint venture                                                                    (2)             —
                                                                               (740)           (427)
Net assets by location
United Kingdom                                                                3,503             85
Canada                                                                           10            361
                                                                              3,513            446


3.    Loss on ordinary activities before taxation
                                                                                         Period from
                                                                          12 months           9 May
                                                                              ended          2002 to
                                                                        31 December     31 December
                                                                               2003             2002
                                                                              £’000            £’000
Loss on ordinary activities before taxation is stated after
charging:
Auditors’ remuneration:
Group – audit (company: £20,000)                                                 33               6
Depreciation and other amounts written off tangible fixed assets:
Owned                                                                             8              3
Amortisation of intangibles                                                      34             18
Research and development costs                                                  242            137
Hire of land and buildings – operating leases                                    18             10

The group also incurred fees of £22,841 (2002: £nil) for work by the auditors in respect of the
placing and listing on AIM. These fees have been charged to the share premium account.
Details of directors’ remuneration for the period are provided in the directors’ remuneration report
on pages 8 to 9.

4.   Staff numbers and costs
There were no employees of the group during the periods ended 31 December 2003 and
31 December 2002 other than directors, all staff being engaged on consultancy contracts.

5.    Interest receivable and similar income
                                                                                         Period from
                                                                          12 months           9 May
                                                                              ended          2002 to
                                                                        31 December     31 December
                                                                               2003             2002
                                                                              £’000            £’000
Bank interest                                                                     4               1

                                                40
6.    Taxation
                                                                                           Period from
                                                                            12 months           9 May
                                                                                ended          2002 to
                                                                          31 December     31 December
                                                                                 2003             2002
                                                                                £’000            £’000
UK corporation tax at 30% (2002: 30%)                                               —               —
Overseas tax                                                                        —               —
                                                                                    —               —

The current tax charge for both periods is lower than the standard rate of corporation tax in the UK of
30 per cent. The differences are explained below.
                                                                                           Period from
                                                                            12 months           9 May
                                                                                ended          2002 to
                                                                          31 December     31 December
                                                                                 2003             2002
                                                                                £’000            £’000
Current tax reconciliation
Loss on ordinary activities before tax                                           (740)           (427)
Current tax charge/(credit) at 30%                                               (222)           (128)
Effects of:
Expenses not deductible for tax purposes and other adjustments                     12               53
Non-utilisation of tax losses                                                     210               75
Current tax charge                                                                  —               —

The group has a potential deferred tax asset of £289,000 (company: £44,000) at 31 December 2003
(2002: £75,000) in respect of unutilised tax losses. The deferred tax asset has not been recognised
due to the uncertainty surrounding the timing of anticipated future taxable profits.

7.    Dividends and other appropriations
                                                                                           Period from
                                                                            12 months           9 May
                                                                                ended          2002 to
                                                                          31 December     31 December
                                                                                 2003             2002
                                                                                £’000            £’000
Appropriation in respect of financing charge                                        35               20

The company did not have sufficient distributable reserves available to pay preference shareholders
so, in accordance with Financial Reporting Standard 4, “Capital Instruments”, the amounts
attributable to preference shareholders have been shown as an appropriation in the profit and loss
account, but have then been added back to the profit and loss reserve.
As described in note 14, the preference shares were converted into ordinary shares during the period.

8.    Loss per share
Loss per ordinary share has been calculated using the weighted average number of shares in issue
during the relevant financial periods. The weighted average number of equity shares in issue is
11,140,186 (2002: 10,217,308) and the loss, being loss after tax and preference dividends, is
£775,000 (2002: £447,000).
Diluted loss per share has not been presented as including all potential ordinary shares in the
calculation would be anti-dilutive.

                                                  41
9.    Intangible fixed assets
                                                                                             Goodwill
                                                                                               £’000
Group
Cost
At 1 January 2003 and at 31 December 2003                                                        103

Amortisation
At 1 January 2003                                                                                  18
Provided for the year                                                                              34
At 31 December 2003                                                                                52

Net book value
At 31 December 2003                                                                                51
At 31 December 2002                                                                                85

In May 2002, Columbia Exchange Systems Limited acquired 100 per cent. of the shares in Betmart
Limited, a company registered in Ireland, for consideration of £102,500 paid in cash.
There was no difference between the book value and the fair value of assets and liabilities of Betmart
Limited on acquisition, both of which were £nil and £nil respectively.

10.   Tangible fixed assets
                                                            Computer        Computer
                                                            equipment        software           Total
                                                                 £’000          £’000           £’000
Group
Cost
At 1 January 2003                                                  11               2              13
Additions                                                          15               2              17
At 31 December 2003                                                26               4              30

Depreciation
At 1 January 2003                                                   2               1               3
Provided for the year                                               6               2               8
At 31 December 2003                                                 8               3              11

Net book value
At 31 December 2003                                                18               1              19
At 31 December 2002                                                 9               1              10




                                                 42
11.    Fixed asset investments
                                                                                                        Joint
                                                                                                     Ventures
                                                                                                       £’000
Group
Cost
At 31 December 2003 and 1 January 2003                                                                       1

Share of retained losses
At 1 January 2003                                                                                           —
Loss for the year                                                                                           (2)
At 31 December 2003                                                                                         (2)

Net book value
At 31 December 2003                                                                                         (1)
At 31 December 2002                                                                                          1


                                                                                                   Subsidiary
                                                                                                 Undertakings
                                                                                                        £’000
Company – cost and net book value
Additions and at 31 December 2003                                                                      1,325


Subsidiary undertakings and joint ventures
The principal undertakings in which the company’s interest at the period end is 20 per cent. or more
are as follows:
                                                            Proportion of
                                                            voting rights and
                                     Country of             ordinary share
                                     incorporation          capital held        Nature of business
Columbia Exchange                    England                100%                Technology development
Systems Limited
Columbia Exchange                    Canada                 100%                Technology development
Systems Limited*
Betmart Limited*                     Republic of Ireland    100%                Non-trading
Betmart Limited*                     England                50%                 Joint venture (see note)
Betmart Bookmakers                   England                100%                Non-trading
Limited*
*Undertakings held indirectly by the company.

The group owns 50 per cent. of the issued share capital of Betmart Limited (England). This company
is operated as a joint venture with 4Gi, and operates an internet sports betting exchange.

12.    Debtors
                                                                      Group             Group        Company
                                                                       2003              2002            2003
                                                                      £’000             £’000           £’000
Amounts due from group undertakings                                      —                 —                61
Other debtors                                                           264                —               240
Prepayments and accrued income                                           16                15               —
                                                                        280                15              301

                                                       43
13.   Creditors – Amounts falling due within one year
                                                                     Group        Group      Company
                                                                      2003         2002          2003
                                                                     £’000        £’000         £’000
Trade creditors                                                        169           39            39
Amounts owed to joint ventures                                           1            1            —
Accruals                                                               103           —             98
                                                                       273           40           137


14.   Share capital
                                                                                          2003
                                                                                Number           £’000
Authorised share capital
Ordinary shares of 5p each                                                   50,425,000          2,521
                                                                             50,425,000          2,521

                                                                                Number           £’000
Allotted, called up and fully paid
Ordinary shares of 5p each                                                   19,554,000           978
                                                                             19,554,000           978

On incorporation, the company issued one ordinary subscriber share of £1 at par. The original share
of £1 in the company was subsequently sub-divided into ten ordinary shares of 10p each on
24 October 2003. The company issued 5,352,490 ordinary shares of 10p each and 1,255,000
convertible redeemable preference shares of 62.93p each at par as consideration for the acquisition of
Columbia Exchange Systems Limited.
The holders of the convertible redeemable preference shares were entitled to dividends, if and when
declared, so as to provide a cumulative compounding return of 5 per cent. per annum.
The preference shares were convertible, at the option of the holder or the company, into ordinary
shares on a one-for-one basis, in a number of circumstances.
The holders of the preference shares were entitled to that number of votes equal to the number of
ordinary shares into which the preference shares were convertible.
On admission of the company to AIM, each preference share was converted into one ordinary share
of 10p. Each holder of the preference shares also received one deferred share in the company.
Fourteen deferred shares were issued with an aggregate nominal value of £664,271.50. The deferred
shares were subsequently bought back by the company for consideration of 14 pence on 4 December
2003 and cancelled.
Pursuant to a resolution passed on 17 September 2003, each ordinary share of 10p each was
sub-divided into two ordinary shares of 5p each on admission of the ordinary shares to trading on
AIM.
The company issued 6,339,000 new ordinary shares of 5p each for gross proceeds of £4,310,520,
including share premium of £3,993,570, on 4 December 2003, following admission of the ordinary
shares to trading on AIM. The issue costs of £648,948 have been set against the share premium
arising on these shares.
On 27 November 2003, the company granted options to directors and officers over 1,621,842
ordinary shares under the Employee Share Option Scheme. The options were granted with an
exercise price of 68p per share. The options vest in three instalments, annually on the anniversary of
admission to AIM. The options were outstanding as at 31 December 2003. The company also
granted options over 10,000 shares to a third party during the period. These were also outstanding at
31 December 2003.

                                                 44
The company also issued 190,170 warrants to third parties on 4 December 2003. The warrants
entitle the holders to subscribe for shares in the company at 68p per share for a period of 18 months
from the date of issue.

15.   Share premium and reserves
                                                                   Shares              Capital
                                           Share        Share        to be    Other redemption Profit and
                                          capital    premium       issued    reserve    reserve loss account
                                           £’000        £’000      £’000      £’000      £’000         £’000
Group
At 1 January 2003                             —             —       876         —           —         (430)
New share capital issued by
Columbia Exchange Systems
Limited                                       —             —       151         —           —            —
Share for share exchange re
acquisition of Columbia Exchange
Systems Limited                          1,325              —     (1,027)    (298)         —            —
On ordinary shares issued (IPO)            317           3,994        —        —           —            —
Less: issue costs                           —             (649)       —        —           —            —
Conversion of preference shares           (664)             —         —        —          664           —
Retained loss for the year                  —               —         —        —           —          (775)
Appropriations added back                   —               —         —        —           —            35
Foreign currency differences                —               —         —        —           —            (6)
At 31 December 2003                         978          3,345        —      (298)        664      (1,176)
Company
At 1 January 2003                             —             —         —         —           —            —
Share for share exchange re
acquisition of Columbia Exchange
Systems Limited                          1,325              —         —         —          —            —
On ordinary shares issued (IPO)            317           3,994        —         —          —            —
Less: issue costs                           —             (649)       —         —          —            —
Conversion of preference shares           (664)             —         —         —         664           —
Retained loss for the year                  —               —         —         —          —          (149)
At 31 December 2003                         978          3,345        —         —         664         (149)

Shares to be issued represent the share premium and capital redemption reserve account of Columbia
Exchange Systems Limited capital and immediately prior to the share for share exchange. The other
movements on the other reserve in the group represents the difference in the nominal value of the
shares issued in exchange for the entire issued share capital of Columbia Exchange Systems Limited
(England) as described in note 14.
The company has established a capital redemption reserve to record the difference between the
nominal value of the 10p ordinary shares issued and the preference shares converted as described in
note 14.




                                                    45
16.     Commitments
                                                       31 December 2003        31 December 2002
                                                     Land and                Land and
                                                      buildings      Other    buildings      Other
Group                                                    £’000       £’000       £’000       £’000
Annual commitments under non-cancellable
operating leases are as follows:
Operating leases which expire:
Within one year                                            18          —           19            —
In the second to fifth years inclusive                      —           —           —             —
Over five years                                             —           —           —             —
                                                           18          —           19            —

17.     Reconciliation of operating loss to operating cash flows
                                                                          12 months      Period from
                                                                              ended         9 May to
                                                                        31 December     31 December
                                                                               2003             2002
                                                                              £’000            £’000
Operating loss                                                                (742)           (428)
Amortisation of intangibles                                                     34              18
Depreciation                                                                     8               3
Charge for share based compensation                                             —              126
Charge for share based payments for services                                    —                8
Increase in debtors                                                           (265)            (15)
Increase in creditors                                                          233              39
Net cash outflow from operating activities                                     (732)           (249)

18.     Analysis of cash flows
                                                                          12 months      Period from
                                                                              ended         9 May to
                                                                        31 December     31 December
                                                                               2003             2002
                                                                              £’000            £’000
Returns on investments and servicing of finance
Interest received                                                                4                1
Net cash inflow for returns on investment and servicing of finance                 4                1

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                17               13
Net cash outflow for capital expenditure and financial investment                 17               13

Acquisitions and disposals
Purchase of subsidiary undertaking                                              —              103
Net cash outflow for acquisitions and disposals                                  —              103

Management of liquid resources
Cash movements on short term bank deposits                                     350            (350)

Financing
Issue of ordinary share capital (net of expenses)                            3,662              —
Issue of preference share capital                                              151             742
Net cash inflow from financing                                                 3,813             742

                                                    46
19.     Analysis of net funds
                                                    At                                              At
                                             1 January            Cash        Non-cash     31 December
                                                  2003             flow       movements            2003
                                                 £’000           £’000           £’000           £’000
Cash                                               25           3,418                (6)         3,437
Short term bank deposits                          350            (350)               —              —
Total                                             375           3,068                (6)         3,437

Included within cash at bank and in hand in the balance sheet at 31 December 2003 were term
deposits of £nil (31 December 2002: £350,000), which represent “liquid resources” for cash flow
reporting purposes (note 1).

20. Pension scheme
The group makes no pension contributions on behalf of its staff and directors.

21. Related party transactions
As at 31 December 2003, £225,000 had been advanced by the company to L Abony to be held by
him on behalf of the company and to be used to meet certain group operating expenses. Ultimately
this was not required and subsequent to the year end the funds in their entirety have been repaid to
the company. Accordingly, £225,000 is shown in the company and group balance sheets at
31 December 2003 within other debtors.
Simon Fielder was appointed director of the company on 27 November 2003. Mr Fielder is a partner
in Osborne Clarke, the group’s solicitors, who advised the group throughout the period, including
on the placing and admission to AIM. Total fees for legal services in the period payable to Osborne
Clarke amount to £160,000 (of which £61,000 are included within share issue costs charged to the
share premium account). The balance due to Osborne Clarke at 31 December 2003 was £nil.

22. Financial instruments
The group’s financial instruments comprise trade debtors, trade creditors, cash and equity shares.
The group has not entered into any derivative or other hedging instruments. The group’s policy is to
finance its operation and expansion through the issue of equity share capital.
Financial assets comprise cash at bank and in hand. Financial assets and financial liabilities exclude
short term debtors and creditors. The fair value of the financial assets and financial liabilities are not
materially different from their carrying values.

Interest rate risk
Cash balances attract a floating rate of interest of LIBOR less 1.5 per cent. The company does not
have any borrowings.
Liquidity risk
All financial liabilities fall due in one year or less. The company has no material undrawn committed
borrowing facilities.

Foreign currency risk
The monetary assets and liabilities of the group that are not denominated in the functional currency
of the operating unit concerned are shown below.




                                                  47
Functional currency of group operations
2003
                                                                          Net foreign currency
                                                                        monetary assets/(liabilities)
                                                                                          Canadian
                                                                          Sterling             dollar
                                                                            £’000              £’000
Sterling                                                                        —                 —
Canadian dollar                                                                 10                —

At 31 December 2002, the group’s only functional currency risk comprised a net Canadian dollar
asset of £361,000.

23. Post balance sheet events
Since the balance sheet date of 31 December 2003 the group has entered into a joint venture
shareholders agreement with BETandWIN Interactive Entertainment AG (“betandwin”) and the
senior management of Ebex to formalise the arrangements between them in respect of the set up and
management and operation of the Ebex joint venture. As part of the arrangements relating to the
joint venture, the Group has also entered into software licensing and hosting agreements with Ebex
to provide its exchange betting technology to the joint venture. These agreements replace the
framework joint venture agreement with betandwin referred to in the company’s AIM admission
document.




                                               48
B: Financial information on FUN Technologies plc for the year ended 31 December 2004
The following information has been directly extracted from the audited financial statements of FUN
Technologies plc for the 12 months ended 31 December 2004. Such information has been extracted
without adjustment and accordingly there are a number of page references and references made to
parts of the reports originally included with such statements that will not agree with this document.

INDEPENDENT AUDITORS’ REPORT
To the Members of FUN Technologies plc
We have audited the consolidated financial statements on pages 21 to 25.
This report is made solely to the Company’s members, as a body, in accordance with Section 235 of
the Companies Act 1985. Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in an auditors’ report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

Respective responsibilities of directors and auditors
The directors are responsible for preparing the directors’ report and, as described on page 15, the
financial statements in accordance with applicable United Kingdom law and Accounting Standards.
Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the
Auditing Practices Board and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are
properly prepared in accordance with the Companies Act 1985. We also report to you if, in our
opinion, the directors’ report is not consistent with the financial statements, if the Company has not
kept proper accounting records, if we have not received all the information and explanations we
require for our audit, or if information specified by law regarding directors’ remuneration and
transactions with the Group is not disclosed.
We read the other information accompanying the financial statements and consider whether it is
consistent with those statements. We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the financial statements.

Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an assessment of the significant
estimates and judgments made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Group’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that
the financial statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.

Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the Company
and the Group as at 31 December, 2004 and of the loss for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.

KPMG Audit Plc                                                           Chartered Accountants and
                                                                         Registered Auditor
                                                                         London
30 March 2005

                                                  49
Consolidated profit and loss account
(Expressed in U.K Pounds)
Year ended 31 December 2004
                                                                  2004                     2003
                                           Notes         £’000            £’000    £’000          £’000
Group turnover continuing                     2                             26                      —
               acquisition                    2                            999                      —
                                                                         1,025
Cost of goods sold                                                        (411)                     —
Gross profit                                                                 614                     —
Research and development                                                   (950)                  (242)
Administrative expenses                                                  (2,912)                  (500)
Group operating loss continuing                         (3,008)                    (742)
                     acquisition                          (240)                      —
                                                                         (3,248)                  (742)
Share of operating loss in associate
undertaking                                                               (468)                     —
Share of operating loss in joint
venture                                                                      —                       (2)
Loss of ordinary activities before
interest and other income                                                (3,716)                  (744)
Gain on disposal of part of investment
in associate undertaking                     11                          1,395                      —
Interest receivable and similar income        5                            200                      4
Loss on ordinary activities before
taxation                                    2, 3                         (2,121)                  (740)
Tax provision                                  6                             (5)                    —
Loss on ordinary activities after
taxation                                                                 (2,126)                  (740)
Appropriations (non equity)                   7                              —                     (35)
Loss for the year                                                        (2,126)                  (775)
Basic and diluted loss per share              8                           (8.6p)                  (7.0p)

The results disclosed in the consolidated profit and loss accounts are on a historical cost basis.
All of the above results are from continuing operations.




                                                   50
Consolidated balance sheet
(Expressed in U.K Pounds)
As at 31 December 2004
                                                               2004                      2003
                                        Notes          £’000           £’000    £’000            £’000
Fixed assets
Intangible assets                          9                           4,470                       51
Tangible assets                           10                             387                       19
                                                                       4,857                       70
Investment in associate undertakings      11          2,313                        —
Investment in joint ventures:             11
Share of gross assets                                    —                         20
Share of gross liabilities                               —                        (21)
Total investments                                                      2,313                        (1)
                                                                       7,170                       69
Current assets
Debtors                                   12          1,458                       280
Cash at bank and in hand                             21,634                     3,437
                                                     23,092                     3,717
Creditors: amounts falling due within
one year                                  13         (1,312)                    (273)
Net current assets                                                    21,780                    3,444
Total assets less current liabilities                                 28,950                    3,513
Creditors:
Amounts falling due more than one
year                                      14                            (517)                       —
Net assets                                                            28,433                    3,513

Capital and reserves
Called up share capital                   15                           2,067                       978
Share premium account                     16                          28,886                     3,345
Shares to be issued                       16                               6                        —
Capital redemption reserve                16                             664                       664
Other reserve                             16                            (293)                     (298)
Profit and loss account                    16                          (2,897)                   (1,176)
Shareholders’ funds – equity                                          28,433                    3,513

These financial statements were approved by the Board of Directors on March 30, 2005 and were
signed on its behalf by:


A Rivkin                                             L Abony
Director                                             Director




                                                51
Company balance sheet
(Expressed in U.K. Pounds)
As at 31 December 2004
                                                                            2004        2003
                                                               Notes       £’000       £’000
Fixed assets
Tangible assets                                                  10           3          —
Investments                                                      11       6,453       1,325
                                                                          6,456       1,325
Current assets
Debtors                                                          12      25,090         301
Cash at bank and in hand                                                    294       3,349
                                                                         25,384       3,650
Creditors
Amounts falling due within one year                              13        (214)       (137)
Net current assets                                                       25,170       3,513
Total assets less current liabilities                                    31,626       4,838
Creditors
Amounts falling due more than one year                           14        (517)         —
Net assets                                                               31,109       4,838

Capital and reserves
Called up share capital                                          15       2,067         978
Share premium account                                            16      28,886       3,345
Shares to be issued                                              16           6          —
Capital redemption reserve                                       16         664         664
Profit and loss account                                           16        (514)       (149)
Shareholder’s funds – equity                                             31,109       4,838

These financial statements were approved by the Board of Directors on March 30, 2005 and were
signed on its behalf by:


A Rivkin                                         L Abony
Director                                         Director




                                            52
Consolidated statement of cash flows
(Expressed in U.K Pounds)
Year ended 31 December 2004
                                                                     2004     2003
                                                           Notes    £’000    £’000
Net cash outflow from operating activities                    18    (2,764)   (732)
Returns on investments and servicing of finance               19      200         4
Capital expenditure and financial investment                  19     (387)      (17)
Acquisitions and disposals                                   19    (5,893)      —
Cash outflow before management of liquid resources
and financing                                                       (8,844)   (745)
Management of liquid resources                               19     3,400     350
Financing                                                    19    26,636    3,813
Increase in cash in the period                                     21,192    3,418




Reconciliation of net cash flow to movements in net funds
(Expressed in U.K Pounds)
Year ended 31 December 2004
                                                                     2004     2003
                                                           Notes    £’000    £’000
Increase in cash in the period                                     21,192    3,418
Cash (inflow)/outflow from (decrease)/increase
in liquid resources                                                (3,400)   (350)
Translation differences and other non-cash
movements                                                            405        (6)
Movement in net funds in the period                                18,197    3,062
Net funds at the start of the period                         20     3,437      375
Net funds at the end of the period                                 21,634    3,437




                                            53
Consolidated statement of total recognised gains and losses
(Expressed in U.K Pounds)
Year ended 31 December 2004
                                                                                  2004        2003
                                                                                 £’000       £’000
Loss for the financial period:
  Group                                                                         (1,658)      (738)
  Joint venture                                                                     —          (2)
  Associates                                                                      (468)        —
                                                                                (2,126)      (740)
Foreign exchange differences                                                       405         (6)
Total consolidated recognised gains and losses                                  (1,721)      (746)


Reconciliation of movements in shareholders’ funds
(Expressed in U.K Pounds)
Year ended 31 December 2004
                                                               Group                 Company
                                                        2004            2003      2004        2003
                                                       £’000           £’000     £’000       £’000
Loss for the financial period                          (2,126)          (740)     (365)       (149)
Appropriations                                            —             (35)       —          (35)
Retained loss for the financial period                 (2,126)          (775)     (365)       (184)
Reversal of financing charge on preference
shares                                                    —              35         —          35
New share capital issued against options and
warrants                                                205               —       205          —
New share capital subscribed, net of issue
costs                                                 26,431           3,813    26,431      3,663
Share conversion and in exchange                          —               —         —       1,324
Pre-acquisition reserve in joint venture
acquired                                                  5               —         —          —
Foreign exchange differences                            405               (6)       —          —
Net increase in shareholders’ funds                   24,920           3,067    26,271      4,838
Opening shareholders’ funds                            3,513             446     4,838         —
Closing shareholders’ funds                           28,433           3,513    31,109      4,838




                                                 54
Notes to Financial Statements
Expressed in U.K. Pounds
Year ended December 31, 2004
1.    Summary of significant accounting policies
The following accounting policies have been applied consistently in dealing with items which are
considered material in relation to the consolidated financial statements.
(a) Basis of preparation
These financial statements have been prepared in accordance with applicable UK accounting
standards and under the historical cost accounting rules.
The consolidated financial statements include the accounts of the Company and its subsidiary
undertakings made up to 31 December 2004. Other than set out below the acquisition method of
accounting has been adopted. Under this method the results of subsidiary undertakings acquired or
disposed of in the year are included in the consolidated profit and loss account from the date of
acquisition or up to the date of disposal.
The Company was incorporated on 24 June 2003. On 24 October 2003 it acquired the entire share
capital of Columbia Exchange Systems Limited in a share for share exchange as part of a group
reorganisation. The acquisition by the Company of Columbia Exchange Systems Limited was
accounted for in accordance with the principles of merger accounting set out in Financial Reporting
Standards 6 “Mergers and Acquisitions”.
In the Company’s balance sheet, the investment in Columbia Exchange Systems Limited is stated at
the nominal value of the shares issued in consideration for that company. As permitted by sections
131 and 133 of the Companies Act 1985, no premium has been recorded on the shares issued in
consideration. On consolidation, the difference between the nominal value of shares issued and
received is credited directly to the other reserve.
Under section 230(4) of the Companies Act 1985, the Company is exempt from the requirement to
present its own profit and loss account. The loss for the year ended December 31, 2004 dealt with in
the individual financial statements of FUN Technologies plc (formerly CES Software plc) was
£365,422 (2003: £149,169).
(b) Going concern
The Group had commercial activity during the year; although it continued to generate losses.
These consolidated financial statements have been prepared on a going concern basis. The directors
are of the opinion, that taking account of the net proceeds of the various funds raised during the year
under review and subsequently the Group will have sufficient financial resources to enable it to
continue to trade and to meet its liabilities as they fall due for the foreseeable future and for at least the
next 12 months from the date of approval of these financial statements.
(c) Revenue recognition
The Group specializes in the development and management of intemet-based person-to-person
exchange betting technology as well as the development and operating of online skill gaming
businesses.
For the exchange betting division, it derives revenue from licensing this technology to subsidiaries
and other eGaming operators. Its licensing fee typically takes the form of a percentage share in the
gross commission generated by the use of the technology. Commissions are earned by licensees when
betting transactions are settled, at or shortly after the conclusion of a betting event. Since the
Company’s commercial arrangements with licensees typically take the form of an ongoing
percentage of commission revenue, the Company recognizes its commissions at the same time of the
transaction completion.
In the case of skill gaming business, revenues are the difference between game and other fees
collected and prizes and other promotions paid; except for fixed prize tournaments which recognize
entry fees as revenue and the related costs of prizes and associated expenses taken to cost of sales. In

                                                     55
either case, tournament fees are recognized as revenues at the conclusion of game play. Game
download fees are recognised as revenues when games are downloaded and subscription fees are
recognized as revenues over the subscribed period.
(d) Valuation of investments
Investments held as fixed assets are stated at cost less any provision for impairment.
(e) Goodwill
Purchased goodwill (representing the excess of the fair value of the consideration given over the fair
value of the separable net assets acquired) arising on consolidation, in respect of acquisitions is
capitalised. Positive goodwill is amortized to nil by equal instalments over its estimated useful life.
In the company’s financial statements, investments in subsidiary undertakings, associates and joint
ventures are stated at cost.
(f) Tangible fixed assets and depreciation
Depreciation is provided to write off the cost less residual value of tangible fixed assets on a
straight-line basis over their estimated useful economic lives per annum as follows:
Computer equipment & telecommunication systems              –   30%
Computer software                                           –   100% (one year life)
Leasehold improvements                                      –   20%
Furniture and fixtures                                       –   20%
A half year’s depreciation charge is made in the year of acquisition.
(g) Leases
Rentals under operating leases are charged on a straight-line basis over the lease term.
(h) Research and development expenditure
Software development costs are capitalised, beginning when a product’s feasibility has been
established, which generally occurs upon completion of a working model, and ending when a
product is available for general release to customers. Unless these criteria are met, expenditure
relating to the research, design and development of software products are charged to the profit and
loss account as incurred. To date, no software development costs have been capitalised.
(i) Deferred taxation
Except as prohibited by FRS 19, deferred tax is provided in full on timing differences which result in
an obligation at the balance sheet date to pay more tax, or a right to pay less tax at a future date, at
rates expected to apply when they crystallise, based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in financial statements. Deferred tax assets are
recognised to the extent that it is regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are not discounted.
(j) Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
exchange rates ruling at the balance sheet date and any exchange gains or losses arising are taken to
the consolidated profit and loss accounts.
The assets and liabilities of overseas subsidiaries are translated at the period end closing exchange
rates. The results of such undertakings are consolidated at the average exchange rate during the
period. Gains and losses arising are taken to reserves.
(k) Financial instruments
The Group’s financial instruments comprise cash and various items such as trade debtors and
creditors that arise directly from its operations. The Group’s policy towards financial instruments is to
manage interest rate, liquidity and foreign exchange risk without exposing the Group to undue risk
or speculation.

                                                  56
(l) Cash and liquid resources
Cash, for the purpose of the consolidated cash flow statements, comprises cash in hand and deposits
repayable on demand.
Liquid resources comprise current asset investments held as readily disposable stores of value as
defined by Financial Reporting Standard I (Revised 1996) “Cash flow statements”.
Liquid resources held in the preceding period comprise short-term bank deposits and are included
within the caption “cash at bank and in hand” in the consolidated balance sheets.
Cash totalling £106,605 (2003: £3,349,000) was, at 31 December 2004, held on the Company’s
behalf in accounts with qualifying financial institutions and managed by Osborne Clarke. Because
these balances were accessible by the Company on demand and without penalty, they are included as
“cash” in both the consolidated balance sheet and consolidated cash flow statements.

(m) Joint ventures and associates
An associate is an undertaking in which the group has a long term interest, usually from 20% to 50% of
the equity voting rights, and over which it exercises significant influence. A joint venture is an
undertaking in which the group has a long term interest and over which it exercises joint control. The
group’s share of the profits less losses of associates and of joint ventures is included in the
consolidated profit and loss account and its interest in their net assets is included in investments in the
consolidated balance sheet.




                                                   57
2.   Segmental information
The Group analyses its business by two segments: Exchange betting (internet-based
person-to-person wagering) and Skill gaming (on-line tournaments and non-chance skill gaming)
                                       2004                                 2003
                         Exchange       Skill                  Exchange       Skill
                           betting   gaming           Total      betting   gaming       Total
                            £’000      £’000          £’000       £’000      £’000      £’000
Turnover by origin
United Kingdom
 continuing                    26         —             26           —          —         —
 acquisition                   —          —             —            —          —         —
                               26         —             26           —          —         —
Canada
  continuing                   —          —              —           —          —         —
  acquisition                  —          —              —           —          —         —
                               —          —              —           —          —         —
USA
 continuing                    —         —              —            —          —         —
 acquisition                   —        999            999           —          —         —
                               —        999            999           —          —         —
                               26       999          1,025           —          —         —
Pre-tax loss by origin
United Kingdom
  continuing                (207)         —           (207)       (184)         —       (184)
  acquisition                 —           —             —           —           —         —
                            (207)         —           (207)       (184)         —       (184)
Canada
  continuing              (1,674)         —          (1,674)      (554)         —       (554)
  acquisition                 —           —              —          —           —         —
                          (1,674)         —          (1,674)      (554)         —       (554)
USA
 continuing                    —         —              —            —          —         —
 acquisition                   —       (240)          (240)          —          —         —
                               —       (240)          (240)          —          —         —
Group                     (1,881)      (240)         (2,121)      (738)         —       (738)
  Joint venture               —          —               —          (2)         —         (2)
                           1,881       (240)         (2,121)      (740)         —        740




                                                58
Revenue by geographic destination is not material different revenue by geographic origin.
                                           2004                                     2003
                          Exchange          Skill                   Exchange          Skill
                            betting      gaming           Total       betting      gaming          Total
                             £’000         £’000          £’000        £’000         £’000         £’000
Net assets by origin:
United Kingdom
 continuing                 6,982             —           6,982         3,503           —         3,503
 acquisition                   —              —              —             —            —            —
                            6,982             —           6,982         3,503           —         3,503
Canada
  continuing               21,116             —          21,166            10           —            10
  acquisition                  —              —              —             —            —            —
                           21,116             —          21,116            10           —            10
USA
 continuing                     —            —              —              —            —            —
 acquisition                    —           335            335             —            —            —
                                —           335            335             —            —            —
                           28,098           335          28,433         3,513           —         3,513

Analysis of operating loss between continuing operating and acquisitions:
                                                          2004           2004         2004          2003
                                                    Continuing     Acquisition       Total    Continuing
                                                         £’000          £’000        £’000         £’000
Sales                                                       26           999        1,025            —
Cost of sales                                               —            411          411            —
Gross profit                                                  26          588           614           —
Research and development                                   (700)        (250)         (950)        (242)
Administration                                           (2,334)        (578)       (2,912)        (500)
Group operating loss                                     (3,008)        (240)       (3,248)        (742)

3.    Loss on ordinary activities before taxation
                                                                                 Year ended December 31,
                                                                                       2004        2003
                                                                                      £’000       £’000
Loss on ordinary activities before taxation is stated after charging:
Auditors’ remuneration:
Group audit (Company – £25,000)                                                         63           33
Depreciation and other amounts written off tangible fixed assets:
Owned                                                                                  45             8
Amortisation of intangibles                                                           747            34
Research and development costs                                                        950           242
Hire of land and buildings – operating leases                                          57            18

The Group also incurred fees of £68,157 (2003: £22,841) for work by the auditors in respect of the
placing and listing on the Toronto Stock Exchange (2003: £AIM listing). These fees have been
charged to the share premium account.
Details of director’s remuneration for the year are provided in the directors’ remuneration report on
page 18.




                                                    59
4.    Staff numbers and costs
                                                                             Year ended December 31,
                                                                                   2004        2003
Average number of persons employed:
Administration                                                                      13            —
Research and development                                                            59            —
                                                                                    72            —

                                                                             Year ended December 31,
                                                                                   2004        2003
                                                                                   £000        £000
The aggregate payroll costs of these persons were as follows:
Wages and salaries                                                                 985            —
Social security costs                                                               82            —
Other pension costs                                                                  2            —
                                                                                 1,069            —

In the year ended on 31 December 2003, there were no employees as all staff were engaged on
consultancy contracts.

The Group has no retirement benefit scheme for employees except for a subsidiary in the USA that
provides a defined contribution retirement scheme. Contribution made to the scheme are charged to
the profit and loss account for the year.


5.    Interest receivable and similar income
                                                                             Year ended December 31,
                                                                                   2004        2003
                                                                                  £’000       £’000
Bank interest                                                                      200             4



6.    Taxation
                                                                             Year ended December 31,
                                                                                   2004        2003
                                                                                  £’000       £’000
UK corporation tax at 30% (2003 – 30%)                                                3           —
Overseas tax                                                                          2           —
                                                                                      5           —

The current tax charge for both years is lower than the standard rate of corporation tax in the UK of
30%. The differences are explained below.
                                                                             Year ended December 31,
                                                                                   2004        2003
                                                                                  £’000       £’000
Loss on ordinary activities before taxation                                     (2,121)        (740)
Current tax charge/(credit) at 30%                                                (623)        (222)
Effects of:
Expenses not deductible for tax purposes and other adjustments                     278           12
Non-utilisation of tax losses                                                      350          210
Current tax charge                                                                    5           —

                                                 60
The Group has a potential deferred tax asset of £629,000 (Company £92,300) at 31 December
2004 (2003: £289,000; Company £44,000) in respect of unutilised tax losses. The deferred tax asset
has not been recognised due to the uncertainty surrounding the timing of anticipated future taxable
profits.


7.    Dividends and other appropriations
                                                                             Year ended December 31,
                                                                                   2004        2003
                                                                                  £’000       £’000
Appropriation in respect of financing charge                                          —            35

In prior years, the Company did not have sufficient distributable reserves available to pay preference
shareholders so, in accordance with Financial Reporting Standard 4, “Capital Instruments”, the
amounts attributable to preference shareholders have been shown as an appropriation in the
consolidated profit and loss accounts, but have then been added back to the consolidated profit and
loss reserve.

The preference shares were converted into ordinary shares in the prior financial year.


8.    Loss per share
Loss per ordinary share has been calculated using the weighted average number of shares in issue
during the relevant financial periods. The weighted average number of equity shares in issue is
24,753,986 (2003: 11,140,186) and the loss, being loss after tax and preference dividends, is
£2,080,979 (2003: £775,000).

Diluted loss per share has not been presented as including all potential ordinary shares in the
calculation would be anti-dilutive.


9.    Intangible fixed assets
                                                                                            Goodwill
Group                                                                                         £’000
Cost:
At 1 January 2004                                                                               103
Additions                                                                                     5,166
At 31 December 2004                                                                           5,269

Amortisation:
At 1 January 2004                                                                                52
Provided for the year                                                                           747
At 31 December 2004                                                                             799

Net book value:
At 31 December 2004                                                                           4,470
At 1 January 2004                                                                                 51

On 30 July 2004, the Company acquired the net operating assets of the SkillJam Division of
eUniverse Inc, satisfied by a cash consideration of £4,507,137 (including total acquisition expense of
£275,077), deferred earn out payment estimated to be £621,000 and assumed net liabilities of
£37,515 giving rise to a goodwill of £5,165,652 as set out in note 24. Goodwill is being amortised
over the directors’ estimate of its economic useful life, considered to be 3 years.

                                                 61
10.   Tangible fixed assets
                             Computer                            Office
                             equipment                      equipment
                                    and      Leasehold   furniture and
                               software   improvements          fittings   Total
                                  £’000          £’000           £’000    £’000
Group
Cost:
At 1 January 2004                  30              —                —       30
Additions                         345              3                39     387
In companies acquired              26              —                —       26
At 31 December 2004               401               3               39     443

Depreciation:
At 1 January 2004                   11             —                —       11
Provided for the year               42             —                3       45
At 31 December 2004                 53             —                 3      56

Net book value:
At 31 December 2004               348               3               36     387
At 1 January 2004                   19             —                —       19

                                                            Computer
                                                            equipment     Total
                                                                 £’000    £’000
Company
Cost:
At 1 January 2004                                                   —       —
Additions                                                           3       3
At 31 December 2004                                                  3       3
Depreciation:
At 1 January 2004                                                   —       —
Provided for the year                                               —       —
At 31 December 2004                                                 —       —
Net book value:
At 31 December 2004                                                  3       3
At 1 January 2004                                                   —       —




                                  62
11.    Fixed asset investments
                                                                                         Joint
                                                                     Associate        venture       Total
                                                                        £’000           £’000       £’000
Group
Cost:
At 1 January 2004                                                         —                 1          1
Additions                                                              1,386               —       1,386
Disposal                                                                  —                (1)        (1)
At 31 December 2004                                                    1,386               —       1,386
Share of retained losses and dilution gain:
At 1 January 2004                                                         —                (2)        (2)
Dilution gain                                                          1,395               —       1,395
Loss for the year                                                       (468)              —        (468)
Disposal                                                                  —                (2)        (2)
At 31 December 2004                                                       927              —         927

Net book value:
At 31 December 2004                                                    2,313               —       2,313
At 1 January 2004                                                           —              (1)         (1)

                                                                                   Subsidiary
                                                                                 undertakings       Total
                                                                                        £’000       £’000
Company
Cost:
At 1 January 2004                                                                     1,325        1,325
Additions                                                                             5,128        5,128
At 31 December 2004                                                                   6,453        6,453
Net book value:
At 31 December 2004                                                                   6,453        6,453
At 1 January 2004                                                                     1,325        1,325

Subsidiary undertaking, joint ventures and associates
The principal undertakings in which the Company’s interest at the period end is 20% or more are as
follows:
                                                                    Proportion of
                                                                voting rights and
                                                   Country of      ordinary share                Nature of
                                               incoroporation         capital held                business
Columbia Exchange Systems Limited                  England                 100%               Technology
                                                                                             development
Columbia Exchange Systems                           Canada                 100%               Technology
Limited*                                                                                     development
SkillJam Technologies Corp                            USA                  100%              Skill gaming
SkillJam EU Limited*                                   UK                  100%              Skill gaming
Betmart Limited*                                Republic of                100%              Non-trading
                                                   Ireland
Betmart Limited                                   England                  100%         Betting exchange
Betmart Bookmakers Limited*                       England                  100%              Non-trading
betbull – The European Betting                    England                 24.6%         Betting exchange
Exchange plc*
*Undertakings held indirectly by the company

                                                   63
In July 2004, the Group acquired the remaining 50% share capital of Betmart Limited from its joint
venture partner, 4Gl Limited, at a nominal cost and is therefore now a fully owned subsidiary of the
group.
On 30 July 2004, the Group acquired the net operating assets of the SkillJam Division of eUniverse
Inc., establishing a new 100% owned subsidiary, SkillJam Technologies Inc.
On 7 October 2004 the Group acquired a 40% holding in betbull – The European Betting Exchange
plc for a consideration of £1,385,717. The listing of betbull – The European Betting Exchange plc
on the Austrian Stock Exchange, in November 2004, resulted in the dilution of the group’s share in
the equity capital of the undertaking from 40.0% to 24.6%. This dilution, however, resulted in the a
gain of £1,395,445 to the Group and is calculated by comparing the fair value of other Group’s share
of the consideration given by the new investors to the amount by which the existing carrying value of
the Group’s interest in the associate undertaking is reduced.

12.   Debtors
                                                       Group        Group     Company       Company
                                                        2004         2003         2004          2003
                                                       £’000        £’000        £’000         £’000
Trade debtors                                            440           —             —            —
Provision for doubtful debts in trade debtors            (68)          —             —            —
                                                         372           —            —            —
Amounts due from subsidiaries                             —            —        24,467           61
Amounts due from associated undertakings                  15           —            —            —
Other debtors                                             39          264           40          240
Prepayments and accrued income                           498           16           49           —
Prepayments made in connection with an
acquisition                                              534           —           534            —
                                                      1,458           280       25,090          301

Prepayments were made in the year for the announced acquisition of the entire issued share capital of
Corcom, Inc. (a Nevada corporation) and certain assets associated with Corcomn Inc’s business,
Don Best Sports. This acquisition has since been completed. See Note 25 on post balance sheet
events.

13.   Creditors: amounts falling due within one year
                                                       Group        Group     Company       Company
                                                        2004         2003         2004          2003
                                                       £’000        £’000        £’000         £’000
Trade creditors                                          422          169           30            39
Customers’ deposits                                      518           —            —             —
Amounts owed to joint ventures                            —             1           —             —
Deferred revenue                                          39           —            —             —
Deferred consideration                                   104           —           104            —
Accruals                                                 224          103           80            98
Tax provision                                              5           —            —             —
                                                      1,312           273          214          137


14.   Creditors: amounts falling due after more than one year
                                                                                 Group and Company
                                                                                   2004        2003
                                                                                  £’000       £’000
Deferred consideration                                                             517            —

                                                 64
The deferred consideration represents managements’ estimate of the deferred consideration arising
from the acquisition of SkillJam (see note 24) and is due:
                                                                                   Group and Company
                                                                                     2004        2003
                                                                                    £’000       £’000
Less than one year                                                                   104            —
Between two and five years                                                            517            —
                                                                                     621            —

15.   Called up share capital
                                                                                     2004         2003
                                                                                    £’000        £’000
Authorised
50,425,000 Ordinary shares with a par value of 5p each
(2003: 50,425,000)                                                                 2,521        2,521
Allotted, called up and fully paid
41,352,370 Ordinary shares of 5p each (2003: 19,554,000)                           2,067          978

On 29 July 2004, the Company issued for cash 80,000 ordinary shares and 4,320,000 special
warrants, both at £1.05 per unit, to finance the acquisition of assets and business of SkillJam Division
of eUniverse, Inc. The special warrants were exercised and 4,320,000 ordinary shares issued to the
holders without any further payments on completion of such exercise.
On 5 October 2004, the Company issued for cash 977,700 ordinary shares at £1.40 each for listing
on the Toronto Stock Exchange (TSX). This was followed by an issue of 14,000,000 ordinary shares
at £1.40 per share and 2,230,500 special warrants priced at $3.22 (equivalent to £1.40) each unit on
22 October 2004. The special warrants were exercised and 2,230,500 ordinary shares issued to the
holders without any further payment on completion of such exercise.
At year end, a third party subscribed for 190,170 ordinary shares at 68p each as prescribed under the
grant of 190,170 warrants issued on 4 December 2003. The exercise was completed and funds
totalling £129,316 has been received.
In 2003, the Company granted options over 1,621,842 ordinary shares to directors and officers
under the Employee Share Option Scheme. The options were granted with an exercise price of 68p
per share. The options vest in three instalments, annually on the anniversary of admission to AIM.
During the year, options for 701,842 units of these shares were withdrawn and 306,667 units vested.
During the year, options for 95,500 ordinary shares were granted at 73p each to employees of the
Company and further options for 301,418 ordinary shares granted at 99p to management staff of a
subsidiary company under the Company’s Employee Share Option Scheme. These options vest in
equal instalments over the four years. Options outstanding as at 31 December 2004 under the
Employee Share Option Scheme totalled 1,010,251 ordinary shares.
The Company also granted options over 10,000 ordinary shares to a third party in 2003. These were
also outstanding at 31 December 2004.




                                                  65
16.   Share premium and reserves
                                                                                       Capital           Profit
                                    Share       Share    Shares to        Other     redemption         and loss
                                   capital   premium     be issued      reserves        reserve        account
                                    £’000       £’000       £’000         £’000          £’000           £’000
Group
Balance at 1 January 2004            978      3,345             —        (298)            664          (1,176)
New share capital issued for
acquisition of SkillJam              220      4,400             —              —            —              —
Shares issued for listing on TSX     748     20,220             —              —            —              —
Sale of special warrants             112      3,011             —              —            —              —
Less issue costs                      —      (2,280)            —              —            —              —
Exercised by warrant holders           9        120             —              —            —              —
Exercise of options granted           —          70             6              —            —              —
Retained loss for the year            —          —              —              —            —          (2,126)
Reserve arising from
acquisition of joint venture
undertakings                           —          —             —              5            —              —
Foreign currency
differences                            —          —             —              —            —            405
Balance, 31 December
2004                               2,067     28,886              6       (293)            664          (2,897)

                                                                                       Capital           Profit
                                    Share       Share    Shares to        Other     redemption         and loss
                                   capital   premium     be issued       reserve        reserve        account
                                    £’000       £’000       £’000         £’000          £’000           £’000
Company
Balance January 1, 2004              978      3,345             —                         664           (149)
New share capital issued for
acquisition of SkillJam              220      4,400             —              —            —             —
Shares issued for listing on TSX     748     20,220             —              —            —             —
Sale of special warrants             112      3,011             —              —            —             —
Less issue costs                      —      (2,280)            —              —            —             —
Exercised by warrant holders           9        120             —              —            —             —
Exercise of options granted           —          70             6              —            —             —
Retained loss for the year            —          —              —              —            —           (365)
Balance, December 31
2004                               2,067     28,886              6             —          664           (514)

Shares to be issued represent the options to acquire ordinary shares granted to and exercised by the
grantee.

17.   Commitments
(a)   Annual commitments under non-cancellable operating leases, are as follows:
                                                                2004                            2003
                                                   Land and                        Land and
                                                    buildings          Other        buildings           Other
                                                       £’000           £’000           £’000            £’000
Group
Operating leases which expire:
 Within one year                                          95             —                18               —
 In the second to fifth years inclusive                    18             —                —                —
 Over five years                                           —              —                —                —
Contracted                                              113              —                18               —

                                                66
18.    Reconciliation of operating loss to operating cash flows
                                                                                  Years ended December 31,
                                                                                         2004        2003
                                                                                        £’000       £’000
Operating loss                                                                       (3,248)          (742)
Amortisation of intangibles                                                             747             34
Deprecation                                                                              45              8
Increase in debtors                                                                    (768)          (265)
Increase in creditors                                                                   460            233
Net cash outflow from operating activities                                            (2,764)          (732)

19.    Analysis of cash flows
                                                                 Years ended December 31,
                                                              2004                      2003
                                                        £’000        £’000        £’000               £’000
Returns on investment and servicing of
finance:
Interest received                                        200                                4
Net cash inflow for returns on investment
and servicing of finance                                                  200                             4

Capital expenditure and financial investment:
Purchase of tangible fixed assets                        (387)                            (17)
Net cash outflow for capital expenditure
and financial investment                                                  (387)                         (17)

Acquisitions and disposals:
Purchase of subsidiary undertaking                     (4,507)                              —
Purchase of associate undertaking                      (1,386)                              —

Net cash outflow for acquisitions and
disposals                                                           (5,893)                             —

Management of liquid resources:
Cash movements on short-term bank deposits              3,400                           350
                                                                     3,400                             350

Financing:
Issue of ordinary share capital (net of
expenses)                                              26,636                         3,662
Issue of preference share capital                          —                            151
Net cash inflow from financing                                        26,636                           3,813

20.    Analysis of net funds
                                          1 January               Cash           Non-cash       31 December
                                               2004               flows           movement              2004
                                              £’000              £’000              £’000             £’000
Cash                                           3,437            17,792                405           21,634

21. Pension scheme
The Group makes no pension contributions on behalf of its staff and directors other than
contributions to a defined contribution retirement scheme by a subsidiary.

                                                67
22. Related party transactions
Simon Fielder was appointed director of the Company on 27 November 2003. Mr. Fielder is a
partner in Osborne Clarke, the Group’s solicitors, who advised the Group throughout the period,
including on the placing and admission to TSX. Total fees for legal services in the period payable to
Osbome Clarke amount to £88,399 (2003:£160,000); of which £23,451 (2003: £61,000) are
included within share issue costs charged to the share premium account. The balance due to Osborne
Clarke at 31 December 2004 was £6,261 (2003: nil).
As at 31 December 2004, £88,082 was outstanding on funds (originally totalling £226,202) which
had been advanced to L Abony during the year to make computer hardware purchases on behalf of
the Group. Subsequent to the year end the outstanding amount was used to purchase computer
hardware for a subsidiary undertaking. Accordingly £88,082 is shown in the Group balance sheet at
31 December 2004 within prepayments
The Group has a contractual agreement with betbull-The European Betting Exchange plc, an
associate undertaking, that in exchange for a fixed percentage of the associate undertaking’s net
commission, the Group shall provide the support services for the associate’s exchange betting
business. For the year a minimal income has been earned. At year end an amount of £14,704 was
owed by betbull-The European Betting Exchange plc to the group.

23. Financial instruments
The Group’s financial instruments comprise trade debtors, trade creditors, cash and equity shares.
The Group has not entered into derivative or other hedging instruments. The Group’s policy is to
finance its operation and expansion through the issue of equity share capital.
Financial assets comprise cash at bank and in hand. Financial assets and financial liabilities exclude
analysis for short term debtors and creditors, except in relation to foreign exchange risk. The fair
value of the financial assets and financial liabilities are not materially different from their carrying
values.
(a) Interest rate risk
Cash balances attract a floating rate of interest of LIBOR less 1.5%. The Company does not have any
borrowings.

(b) Liquidity risk
All financial liabilities fall due in one year or less other than the £517,000 contingent earn-out
payment. The Company has no committed borrowing facilities.
(c) Foreign currency risk
The monetary assets and liabilities of the Group that are not denominated in the functional currency
of the operating unit concerned are shown below.
                                                                    Pounds     Canadian            US
                                                                    sterling      dollar        dollar
                                                                      £’000       £’000         £’000
Functional currency of group operations:
Pounds sterling                                                          —            —           —
Canadian dollar                                                          6            —       18,365
US dollar                                                                —            —           —

At 31 December 2004, the Group’s only functional currency risk comprised a net US dollar asset of
£18,365,461.




                                                 68
24. Acquisition accounting
On 30 July 2004 the Company acquired the net operating assets of the SkillJam, a division of
eUniverse Inc. The resulting goodwill of £5,165,652 was capitalized and is being written off in 3
years.
                                                                      Book     Fair value        Fair
                                                                     value    adjustments       value
                                                                     £’000          £’000       £’000
Tangible fixed assets                                                    26            —           26
Debtors                                                                410            —          410
Total assets                                                           436            —          436
Creditors                                                             (410)          (64)       (474)
Total liabilities                                                     (410)          (64)       (474)
Net liabilities                                                         26           (64)        (38)
Goodwill                                                                                       5,166
Purchase consideration and cost of acquisition                                                 5,128

Representing:
                                                                                                £’000
Cash consideration                                                                             4,507
Deferred consideration                                                                           621
Total purchase consideration                                                                   5,128
Pursuant to the SkiliJam Acquisition Agreement, the aggregate consideration for the acquisition
included an earn-out payment to be made by the Company to eUniverse based on a declining
percentage of net revenue from the European operations of SkillJam for the 5-year period ending on
31 December 2009.
The estimated contractual contingent earn out amounts were as follows:
Amount estimated to be payable within one year                                              £104,000
Amount estimated to be payable after one year                                               £517,000

SkillJam Technologies Inc. had no operations in Europe at the year end.
SkillJam Division made an estimated pretax loss of US$247,000 for the period between the
beginning of its financial year to the date of acquisition. In its previous financial year, the loss was
US$781,000.

25. Post balance sheet events
Subsequent to the balance sheet date, the Company announced the conditional placing of 4,800,000
new shares at 178p per share in the United Kingdom and certain provinces of Canada. This placing,
having received shareholders’ approval and the fulfillment of conditions, has since been completed.
On 1 February 2005, the Company announced the completion of its acquisition of Don Best Sports,
based in Las Vegas, Nevada, USA. As part of this acquisition the Company acquired all of the issued
and outstanding shares of Corcom Inc,, a corporation organized under the laws of Nevada. The
consideration for the acquisition of Don Best was the payment to the sellers of US$40 million in cash,
the issuance of one million ordinary shares, and the issuance of a maximum of one million ordinary
shares pursuant to an earn-out clause. In August 2004, the vendors of the Don Best business entered
into an agreement (the “Purchase Agreement”) to sell Don Best to Celeus Capital Corporation
(“Celeus”), part of JJR Capital Partners (“JJR”), a Toronto-based private equity firm. JJR later
approached FUN with the opportunity to acquire Don Best. JJR agreed to assign its rights in the
Purchase Agreement to FUN in consideration of the issue of 2,000,000 ordinary shares to JJR and
240,000 ordinary shares to a company controlled by a relative of a director. In addition, FUN
reimbursed Celeus for US $1 million of expenses incurred by it in connection with its entering into
the Purchase Agreement.

                                                 69
To better reflect the Company’s overall corporate philosophy, and its goal of facilitating fun,
efficient, high-quality gaming and betting experiences for its customers, the Company has changed
its corporate name to FUN Technologies plc on 1 February 2005.

26. Reconciliation of loss for the period to Canadian GAAP
The following table reconciles the loss for the period as reported in the consolidated profit and loss
account to the consolidated loss that would have been reported had the financial statements been
prepared under Canadian GAAP:
                                                                              Year ended December 31,
                                                                                    2004        2003
                                                                                   £’000       £’000
Retained loss for the period                                                     (2,126)        (775)
Less: Stock based compensation (i)                                                 (192)         (27)
Add: amortization of goodwill under UK GAAP (ii)                                    747           35
Less: Amortisation of intangibles under Canadian
GAAP (ii)                                                                          (530)           —
Retained loss for the period under
Canadian GAAP                                                                    (2,101)        (767)
Basic and diluted loss per share                                                  (8.5p)        (6.9p)

(i) Stock-based compensation
Under Canadian GAAP the Company is required to expense, over the vesting period, the fair value of
employee awards. For the year ended December 31, 2004, stock-based compensation amounting to
£242,000 (2003-£27,000), would have been included within general and administrative expenses in
the consolidated statements of operations.
The Company estimated the fair value of options granted in the year on the date of grant using the
Black-Scholes option-pricing model, assuming a risk-free interest rate of 4.75%, a dividend yield of
0%, an expected volatility of 67% and a weighted average expected life of the options of 10 years. The
weighted average grant date fair value per share for options issued during the year was £0.74 (2003-
£0.53).
(ii) Goodwill
Under Canadian GAAP goodwill arising on purchase combination is not amortized. In addition, if
certain criteria are met, acquired identifiable intangible assets are to be separately valued and
amortized over their respective useful lives.
In connection with the Company’s purchase of SkillJam (notes 9 and 24) the Company recorded
goodwill for UK GAAP purposes of £5,165,652, no amounts were assigned to acquired intangible
assets. Accordingly amortization expense of £747,000 relating to goodwill recognized under UK
GAAP is not recorded under Canadian GAAP.
The Company engaged an external valuator to assist in their identification and determination of
acquired identifiable intangible assets in accordance with Canadian GAAP. The Company identified
the following intangible assets:
                                                                                                £’000
Customers contracts                                                                            3,125
End user database                                                                                149
Technology Platform                                                                              517
Trademarks, domain names and logos                                                                27
Total                                                                                          3,818

The Company has determined the useful life of these assets to be 3 years, resulting in amortization
expense under Canadian GAAP for the year ended December 31, 2004 of £530,278.


                                                 70
C:    Financial information on FUN Technologies plc for the year ended 31 December 2005
Set out below is the text of the statement of unaudited results for the year ended 31 December 2005:
“FUN Technologies plc
February 8, 2006
FUN Technologies announces preliminary unaudited year-end results
LONDON, England – FUN Technologies plc (“FUN” or “the Company”), one of the world’s
leading online casual gaming providers, announced today its preliminary unaudited results for the
three and twelve months ended 31 December 2005.

2005 Q4 Highlights
    Consolidated revenue in the quarter of £5.6 million
      Pro forma EBITDA in the quarter of £1.7 million. FUN recorded a GAAP loss in the quarter
      after taxation of approximately £0.5 million
      The Company entered into a share purchase and support agreement with Liberty Media
      Corporation (“Liberty”) where it is proposed that Liberty will indirectly acquire a majority
      interest in FUN pursuant to a Scheme of Arrangement under section 425 of the UK
      Companies Act 1985
      Subsequent to the quarter end, FUN continued its expansion into new distribution channels
      through the acquisition of the business of Octopi LLC (“Octopi”), a leading mobile game
      developer
Lorne Abony, CEO of FUN, commented, “I am pleased to report another strong quarter, capping
off a very successful year for the Company. We have exceeded our goals of rapid organic growth,
strategic acquisitions and significant new distribution partnerships. Most importantly, we are
confident that this year’s accomplishments have laid the foundation for creating additional value in
2006 and beyond. We look forward to the future with great excitement.”
The preliminary financial results contained herein have not been audited or reviewed by the
independent external auditors of the Company, KPMG Audit plc and, as such, remain subject
to such adjustments as may be required by such auditors in connection with their audit of
FUN’s results for the year ended 31 December 2005. Such preliminary unaudited financial results
are being released at this time to provide shareholders of FUN, who will be voting on the Scheme
referred to above at the Court Meeting scheduled for 17 February 2006 and making elections in the
Mix and Match Facility with the most current financial results available.

Forward-looking statements
This news release may contain forward-looking statements that are based on current projections and
are not guarantees of future performance, and involve certain risks and uncertainties that are difficult
to predict. The future results of the Company may differ materially from those expressed in the
forward-looking statements contained in this news release, due to, among other factors, the risks and
uncertainties inherent in the business of the Company, the risk factors discussed in the Company’s
2004 Annual Information Form, and in other documents published or filed by, or on behalf of, the
Company from time to time with the Canadian securities regulators. The Company does not
undertake any obligation to update or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this news release or to reflect the occurrence of
unanticipated events.




                                                  71
CHAIRMAN’S STATEMENT
I am pleased to report a year of significant growth and achievements for the Company.

Revenue growth
FUN’s revenue for the full year of 2005 was £13.7 million, up £12.7 million from 2004’s revenue.
£9.4 million of revenue was attributable to acquisitions made in 2005. All of the Company’s business
units grew organically over the course of the year.

Operational focus and profitability
In 2005, the Company sharpened its focus on casual games and achieved positive pro forma
EBITDA, recording positive pro forma EBITDA of £1.8 million for the year ended December 31,
2005. EBITDA growth was driven by the Company’s fantasy division. On the year, the Company
posted a GAAP loss of £7.0 million. While the strong positive pro forma EBITDA generation
underscores the health of the Company’s operating divisions, in 2006 we intend to focus on investing
in future growth.

Agreement with Liberty Media Corporation
On 22 November 2005, the Company announced that it had entered into a share purchase and
support agreement with Liberty Media Corporation, pursuant to which Liberty would indirectly
acquire a majority interest in FUN Technologies plc by way of a Scheme of Arrangement under
section 425 of the UK Companies Act 1985. Pursuant to the Scheme, a newly incorporated
Canadian subsidiary of Liberty (“New FUN”) will acquire all of the issued and outstanding ordinary
shares in FUN, on a fully diluted basis, in exchange for aggregate consideration consisting of
approximately £83.7 million in cash and approximately 32.4 million common shares of New FUN
(including common shares that would be issuable upon exercise of outstanding options, warrants
and other rights to subscribe for ordinary shares of FUN). The cash consideration to be paid by New
FUN under the Scheme will be funded by Liberty by way of a subscription for common shares of New
FUN for the aggregate consideration of US$50 million plus approximately £83.7 million, payable in
cash. If the Scheme becomes effective, FUN will become a wholly-owned subsidiary of New FUN,
Liberty will beneficially own approximately 51 per cent. of the New FUN shares, on a fully-diluted
basis, and the current FUN shareholders and holders of options, warrants and other rights to
subscribe for ordinary shares of FUN, collectively, will own or have the right to acquire the remaining
49 per cent. of the New FUN shares, on a fully-diluted basis.
Liberty is a U.S. holding company owning interests in a broad range of electronic retailing, media,
communications and entertainment businesses. Its businesses include widely recognised brands and
companies, including GSN, QVC, Encore, Starz, IAC/InterActiveCorp, Expedia and News
Corporation.
This is a significant achievement both for FUN stakeholders and for the future prospects of FUN’s
businesses. We believe that the completion of this transaction will significantly enhance shareholder
value in both the short and long term. We further believe Liberty is the right strategic partner to
enable FUN’s businesses to realize their full potential, through access to Liberty’s world-class media
and entertainment properties and affiliates.

Strategic acquisitions
In 2005, FUN grew its fantasy division through the acquisitions of the business of Fanball Interactive
and Don Best Sports. We see great growth potential for fantasy sports, particularly with the
intersection of interactive technologies. We believe that by combining a market leader in fantasy
solutions with a leader in sports gaming statistics, FUN can realize significant synergies and
opportunities.
In January 2006, FUN acquired the business of Octopi, a leading mobile games developer. Octopi’s
expertise will enable FUN to accelerate its growth through the mobile distribution channel.

                                                  72
Outlook
At an operational level, our skill and fantasy divisions will turn their sights towards European
expansion and product and channel expansion. At a corporate level, we look forward to the
completion of the proposed transaction with Liberty, which, pending shareholder approval and
sanction of the High Court, is expected to close on 8 March 2006. However, there can be no
assurances that the proposed transaction will be completed. We continue to explore acquisition and
consolidation opportunities in the casual games space and related businesses. We look forward to an
exciting 2006 for FUN.


Andrew Rivkin
Non Executive Chairman




                                                73
Supplementary financial information
In addition to disclosing preliminary results in accordance with UK generally accepted accounting
principles (GAAP), FUN also provides supplementary non-GAAP measures as a method of
evaluating the Company’s operating performance.
Management uses pro forma EBITDA as a measure of enterprise-wide performance. EBITDA is
defined as earnings before interest income, taxes, depreciation and amortization. Pro forma EBITDA
also excludes income from associate companies and joint ventures, and other charges, including
those related to discontinued operations and costs related to the proposed transaction with Liberty
Media Corporation. Management believes pro forma EBITDA is a useful measure that facilitates
period-to-period operating comparisons and allows the Company to compare its operating results
with its competitors. Pro forma EBITDA does not have any standardized meaning prescribed by
GAAP and is not necessarily comparable to similar measures presented by other companies. Pro
forma EBITDA is not a measure of performance under UK GAAP and should not be considered in
isolation or as a substitute for net earnings (loss) prepared in accordance with UK GAAP. The
Company has provided a reconciliation of pro forma EBITDA to UK GAAP net earnings (loss)
below.
In £’000s
(Unaudited)

Pro Forma EBITDA Summary
                                                                                 2005         2004
Three months ended December 31                                                 1,726        (2,027)
                                                                                 2005         2004
Twelve months ended December 31                                                1,794        (2,440)

Pro Forma EBITDA Calculation
                                                     Three months ended        Twelve months ended
                                                       December 31,               December 31,
                                                      2005          2004         2005          2004
(Loss) for the period                                  (521)        (814)      (7,040)      (2,126)
Discontinued operations                                 221          155          588          907
Gain from sale                                       (2,157)      (1,395)      (2,157)      (1,395)
Tax provision                                         1,195            5        2,000            5
Interest receivable and similar income                  (13)        (131)        (161)        (200)
Share of operating (loss)/income in associate
undertaking                                             17          (468)        608          (468)
Depreciation of tangible assets                        180            23         388            45
Amortization of intangible assets                    1,993           598       6,757           792
Transaction costs                                      811            —          811            —
Pro Forma EBITDA                                     1,726        (2,027)      1,794        (2,440)




                                                74
Notice to reader of the Preliminary Unaudited Annual Consolidated Financial Statements
The preliminary unaudited consolidated financial statements of FUN Technologies plc (the
“Company”) and the accompanying unaudited consolidated balance sheets as at December 31,
2005, the preliminary unaudited annual consolidated profit and loss account and preliminary
unaudited consolidated statements of cash flows for the three and twelve-month periods then ended,
are the responsibility of the Company’s management. These consolidated financial statements have
not been audited or reviewed on behalf of the shareholders by the independent external auditors of
the Company, KPMG Audit plc.
The preliminary unaudited consolidated financial statements have been prepared by management
and include the selection of appropriate accounting principles, judgments and estimates necessary to
prepare these financial statements in accordance with accounting principles generally accepted in the
United Kingdom.




                                                75
Consolidated Balance Sheet
(Expressed in £’000s)
As at December 31, 2005
(Unaudited)
                                                                        2005           2004
                                                                    Unaudited        Audited
Fixed Assets
Intangible assets                                                     40,975          4,470
Tangible assets                                                        1,185            387
                                                                      42,160          4,857
Investment in associate undertaking                                       —           2,313
Other investments                                                        766             —
Total investments                                                        766          2,313
Current Assets
Debtors                                                                2,517          1,458
Cash at hand and in bank                                               5,804         21,634
                                                                       8,321         23,092
Creditors
Amounts falling due within one year                                    (6,688)       (1,312)
Net current assets                                                     1,633         21,780
Total assets less current liabilities                                 44,559         28,950
Creditors
Amounts falling due after more than one year                           (5,731)          517
Net Assets                                                            38,828         28,433
Capital and reserves
Called up share capital                                                4,490          2,067
Share premium account                                                 43,709         28,886
Shares to be issued                                                       —               6
Capital redemption reserve                                               664            664
Other reserve                                                            310            293
Profit and loss account                                               (10,343)        (2,897)
Shareholders’ funds – equity                                          38,828         28,433

See accompanying notes to the unaudited preliminary consolidated financial statements. These
unaudited preliminary financial statements should be read in conjunction with the 2004 Annual
Consolidated Financial Statements.




                                               76
Consolidated Profit and Loss Account – Unaudited
(Expressed in £’000s except for per share amounts)
                                                   Three months ended     Twelve months ended
                                                     December 31,            December 31,
                                                    2005          2004      2005          2004
Turnover
Continuing                                         1,314          541     4,243        1,025
Acquisition                                        4,243           —      9,430           —
                                                   5,557          541    13,673        1,025
Discontinued operations                               —            —         —            —
Group turnover                                     5,557          541    13,673        1,025
Cost of goods sold                                 (1,421)       (196)    (3,308)        (411)
Gross profit                                        4,136          345    10,365          614
Research and Development                             (740)       (374)    (1,660)        (950)
Administrative expenses                            (4,875)     (1,838)   (15,455)      (2,912)
                                                   (1,479)     (1,867)    (6,750)      (3,248)
Group operating profit/(loss)
Continuing                                         (2,091)     (1,722)    (6,133)      (2,341)
Acquisition                                           833          —         (29)          —
                                                   (1,258)     (1,722)    (6,162)      (2,341)
Discontinued operations                              (221)       (155)      (588)        (907)
Total group operating loss                         (1,479)     (1,867)    (6,750)      (3,248)
Share of operating loss in associate
undertaking – discontinued                           (17)        (468)     (608)         (468)
Loss on ordinary activities before interest
and other income                                   (1,496)     (2,335)    (7,358)      (3,716)
Gain on disposal of part of investment in
associate undertaking                              2,157        1,395     2,157        1,395
Interest receivable and similar income                13          131       161          200
Profit/(loss) on ordinary activities before
taxation                                             674         (809)    (5,040)      (2,121)
Tax provision                                      (1,195)         (5)    (2,000)           5
Loss for the period                                 (521)        (814)    (7,040)      (2,126)

Basic and diluted loss per share (in pence)          (1.0)       (3.3)     (14.1)        (8.6)

See accompanying notes to the unaudited preliminary consolidated financial statements. These
unaudited preliminary financial statements should be read in conjunction with the 2004 Annual
Consolidated Financial Statements.




                                              77
Consolidated Statement of Cash Flows
(Expressed in £’000s)
(Unaudited)
                                                   Three months ended     Twelve months ended
                                                     December 31,            December 31,
                                                    2005          2004      2005          2004
Net cash inflow/(outflow) from operating
activities                                          (424)      (1,912)     2,552       (2,764)
Returns on investments and servicing                  13          130        161          200
Capital expenditure and financial investment         (279)        (240)    (1,186)        (387)
Acquisitions and disposals                         3,227         (973)   (26,451)      (5,893)
Cash inflow/(outflow) before management
of liquid resources and financing                   2,537      (2,995)    (24,924)     (8,844)
Management of liquid resources                       357       1,175      19,915       3,400
Financings                                           581      22,536       8,823      26,636
Increase/(decrease) in cash in the period          3,475      20,716      3,814       21,192



Reconciliation of Net Cash Flow to Movement in Net Funds
(Expressed in £’000s)
(Unaudited)
                                                   Three months ended     Twelve months ended
                                                     December 31,            December 31,
                                                    2005          2004      2005          2004
Increase/(decrease) in cash in the period          3,475      20,716      3,814       21,192
Cash (inflow)/outflow from
(decrease)/increase in liquid resources             (357)      (1,175)   (19,915)      (3,400)
Translation differences and other non-cash
movements                                            (31)         404       271          405
Movement in net funds in the period                3,087      19,945     (15,830)     18,197
Net funds at the start of the period               2,717        1,689    21,634        3,437
Net funds at the end of the period                 5,804      21,634      5,804       21,634

See accompanying notes to the unaudited preliminary consolidated financial statements. These
unaudited preliminary financial statements should be read in conjunction with the 2004 Annual
Consolidated Financial Statements.




                                              78
Notes to the Preliminary Unaudited Consolidated Financial Statements
For the twelve months ended December 31, 2005

(Unaudited)
(Expressed in £’000s except for per share amounts)
1.    The preliminary unaudited consolidated results have been approved by the Company’s Board
      of Directors and prepared under the historical cost convention and in accordance with
      applicable accounting standards using accounting policies that have been applied consistently.
2.    Loss per share
                                                      Three months ended       Twelve months ended
                                                        December 31,              December 31,
                                                       2005          2004        2005          2004
      Loss for the period                              (521)        (814)      (7,040)       (2,126)
      Weighted average number of shares
      outstanding                                    50,013       24,754       50,013       24,754
      Basic loss per share (in pence)                   (1.0)        (3.3)       (14.1)        (8.6)

The financial information set out above does not constitute the Company’s statutory accounts for the
52 weeks ended December 31, 2005. The information relating to the 52 weeks ended December 31,
2004 has been extracted from the 2004 Annual Report and Accounts, which received an unqualified
auditors’ report and have been delivered to the Registrar of Companies.




                                                79
                                                   PART IV

                    Financial information on FUN Technologies Inc.

A:   Auditors’ consent




                             KPMG LLP
                             Chartered Accountants                                                 Telephone   (416) 228-7000
                             Yonge Corporate Centre                                                Fax         (416) 228-7123
                             4100 Yonge Street Suite 200                                           Internet    www.kpmg.ca
                             Toronto ON M2P 2H3
                             Canada




                                   AUDITORS’ CONSENT

The Board of Directors of FUN Technologies Inc. (formerly Liberty FT Acquisition Inc.)
We have read the AIM admission document of FUN Technologies Inc. (“FUN”) dated March 3,
2006. We have complied with Canadian generally accepted standards for an auditors’ involvement
with offering documents.
We consent to the use in the above-mentioned information circular of our report to the shareholder
of FUN Technologies Inc. (formerly Liberty FT Acquisition Inc.) on the balance sheet of FUN
Technologies Inc. as at December 31, 2005. Our report is dated March 3, 2006.




/s/ KPMG LLP
Chartered Accountants

Toronto, Canada

March 3, 2006




                              KPMG LLP, a Canadian limited liability partnership is the Canadian
                              member firm of KPMG International, a Swiss cooperative.




                                                          80
B:    Financial information on FUN Technologies Inc. as at 31 December 2005

Auditors’ Report to the shareholder
We have audited the balance sheet of FUN Technologies Inc. (formerly Liberty FT Acquisition Inc.)
as at December 31, 2005. This financial statement is the responsibility of the Company’s
management. Our responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable assurance whether the
balance sheet is free of material misstatement. An audit of a balance sheet includes examining, on a
test basis, evidence supporting the amounts and disclosures in that balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall balance sheet presentation.
In our opinion, this balance sheet presents fairly, in all material respects, the financial position of the
Company as at December 31, 2005 in accordance with Canadian generally accepted accounting
principles.



/s/ KPMG LLP
Chartered Accountants

Toronto, Canada

March 3, 2006




                                                   81
FUN TECHNOLOGIES INC. (FORMERLY LIBERTY FT ACQUISITION INC.)
Balance Sheet
(Expressed in Canadian dollars)
December 31, 2005
Assets
Current assets:
  Cash                                                         $1

Shareholder’s Equity
Capital stock:
  Authorized:
     Unlimited common shares
  Issued:
     1 common share
                                                               $1

See accompanying notes to balance sheet.




On behalf of the Board:



(signed) Mark Carleton

Mark Carleton
Director




                                           82
FUN TECHNOLOGIES INC. (formerly Liberty FT Acquisition Inc.)
Notes to Balance Sheet
(Expressed in Canadian dollars, unless otherwise indicated)
December 31, 2005
1.    Basis of presentation:
This financial statement has been prepared in accordance with Canadian GAAP.
This financial statement is stated in Canadian dollars.
FUN Technologies Inc. (formerly Liberty FT Acquisition Inc.) (“FUN” or the “Company”) was
incorporated in Canada on November 18, 2005 to facilitate the transaction as described in note 3. As
the transaction has not been consummated at the balance sheet date, the Company had incurred
neither a profit nor a loss and no dividends have been declared or paid since the date of incorporation.
Statements of operations and cash flows have not been presented as the Company has no active
operations.
There are no differences between accounting principles generally accepted in Canada (“Canadian
GAAP”) and International Reporting Standards (“IFRS”) as adopted by the EU, that impact on
these financial statements. Accordingly, although the Company has considered The Committee of
European Securities Regulators (“CESR”) technical advice on equivalence of certain third country
GAAP (including Canadian GAAP) issued in June 2005, there is no additional disclosures or
information in respect of these financial statements that would be required to satisfy the
recommendations set out in the CESR advice, if that advice were to be applied.

2.   Capital stock:
Authorized:
   Unlimited common shares of Canadian $1 each
Issued and fully paid:
   1 common share

3.    Business acquisition:
As of November 21, 2005, Fun Technologies plc (“FUN Technologies”) entered into a share
purchase agreement with Liberty Media Corporation (“Liberty”) and others pursuant to which
Liberty, through its wholly owned subsidiary FUN Technologies Inc. (formerly Liberty FT
Acquisition Inc.), will acquire a majority indirect interest in FUN Technologies. The transaction has
been structured as a Scheme of Arrangement under section 425 of the UK Companies Act 1985 (the
“Scheme”). Liberty will subscribe, via its wholly-owned subsidiary Liberty Freedom, Inc., for
approximately 33.8 million FUN shares for aggregate consideration of approximately CDN$58.6
million (US$50 million) plus approximately CDN$172.2 million (£83.7 million), payable in cash.
Pursuant to the Scheme, FUN will acquire all of the issued and outstanding ordinary shares in FUN
Technologies (“Ordinary Shares”) in exchange for aggregate consideration consisting of
approximately CDN$172.2 million (£83.7 million) in cash and approximately 27.9 million common
shares of FUN (not including approximately 4,573,517 common shares that would be issuable upon
exercise of outstanding options to acquire FUN Technologies’ Ordinary Shares, which will become
options to acquire common shares as a result of the Scheme). The cash consideration of
approximately CDN$172.2 million (£83.7 million) to be paid by FUN under the Scheme will be
funded from the proceeds of the Liberty subscription for FUN shares. On February 17, 2006, the
Scheme received approval from shareholders of FUN Technologies. The Scheme remains
conditional upon receipt of, among other things, the sanction of the High Court of Justice in
England and Wales. This transaction, upon completion, will be accounted for as a purchase
transaction, with the Company identified as the acquirer and FUN Technologies as the acquiree.




                                                  83
                                                 PART V

                Comparison between English and Canadian company law

The Company is a corporation governed by the CBCA. Whilst the rights and privileges of
shareholders of an English company are substantially comparable to those of shareholders of the
Company, there are certain distinctions arising from differences between English and Canadian
company law.
The following is a comparison of certain significant differences between English and Canadian
company law as at the date of this document and the respective constitutions of FUN Technologies
plc and the Company. The summary is not intended to be complete or to address all differences and is
qualified in its entirety by reference to English law, the CBCA, the Articles and By-Laws of the
Company. A summary of the Company Articles and By-Laws is set out in Part VI of this document.
This comparison does not address applicable securities law, or the rules and regulations of the TSX
and AIM, which will be applicable to the Company following Admission.
                                  English law                             Canadian law
Shareholder votes required for    For the passing of extraordinary or   For certain fundamental changes, the
transactions – special majority   special resolutions, the approval of  approval of not less than two-thirds of
requirements                      75% of members’ votes cast at a       the votes cast by shareholders is
                                  general meeting is required.          required (a “special resolution”).
                                  Extraordinary or special resolutions  Fundamental changes include
                                  are required, amongst other things,   amendments to a corporation’s articles
                                  for the following:                    of incorporation to, amongst other
                                        change of the company’s         things:
                                        name;                                 change its name;
                                        variation of the articles and         vary any restrictions on the
                                        memorandum of association;            business that the corporation
                                                                              may carry on;
                                        disapplication of shareholders’
                                                                              change the maximum number of
                                        preemption rights;
                                                                              shares that the corporation is
                                        re-registration of a public           authorised to issue or vary its
                                        company as a private company;         stated capital or effect a stock
                                        and                                   split or consolidation;
                                        certain liquidations and              create a new class of shares or
                                        dissolutions.                         vary the rights, privileges,
                                                                              restrictions or conditions of any
                                                                              shares;
                                                                              vary restrictions on the issue,
                                                                              transfer or ownership of shares;
                                                                              and
                                                                              constrain (or vary the constraint
                                                                              regarding) the issue or transfer
                                                                              of shares to persons who are not
                                                                              resident Canadians.
                                                                        In addition, the approval of not less
                                                                        than two-thirds of the votes cast by
                                                                        shareholders is required to approve
                                                                        the corporation’s amalgamation
                                                                        (other than a “vertical short-form” or
                                                                        “horizontal short-form”
                                                                        amalgamation) or the corporation’s
                                                                        proposal to sell, lease or exchange all
                                                                        or substantially all of its property other
                                                                        than in the ordinary course.
Shareholder votes required for    For an ordinary resolution to be      For the transaction of ordinary
transactions – simple majority    passed, the approval of more than     business, the approval of more than
requirements                      50% of members’ votes cast at a       50% of the votes cast by shareholders
                                  general meeting is required.          is required. Ordinary business
                                  Ordinary resolutions are required,    includes, among other things:
                                  amongst other things, for the
                                  following:

                                                     84
                                 English law                              Canadian law
                                       appointment or removal of a              electing or removing directors;
                                       director;
                                                                                appointing or removing
                                       appointing or removing                   auditors; and
                                       auditors;
                                                                                approving, amending or
                                       the sub-division or                      repealing by-laws.
                                       consolidation of share capital
                                       or increase in authorised share
                                       capital; and

                                       authorising directors to allot
                                       securities.

                                 While removal of a director can be
                                 effected by a simple majority, special
                                 notice must be given of the intention
                                 to do so.

Powers of directors to allot     The powers of directors to allot      Generally, directors may authorise the
shares                           shares are restricted by the          issue of securities of a corporation
                                 authorised share capital, the         without shareholder approval.
                                 authority granted by shareholders to
                                 the directors to allot shares and the
                                 shareholders’ rights of pre emption
                                 on the allotment of equity securities
                                 for cash consideration.

Shareholders’ statutory          The Companies Act provides that          If a corporation’s articles so provide,
preemption rights                prior to an allotment of equity          subject to certain exceptions, no
                                 securities for cash those securities     shares of a class shall be issued unless
                                 must first be offered to existing         the shares have first been offered to
                                 shareholders proportionate to their      the shareholders holding shares of that
                                 existing holding. These rights may       class in proportion to their holdings,
                                 be excluded or varied by a special       at such price and terms as those shares
                                 resolution passed at a general           are to be offered to others.
                                 meeting. There are no
                                 statutory preemption rights where        The Company does not currently
                                 securities are issued for non-cash or    intend to include such preemptive
                                 partly non-cash consideration.           rights in its articles.

Notice of shareholder meetings   Not less than 21 clear days’ notice is   A corporation must give not less than
                                 required for an annual general           21 days’ and not more than 60 days’
                                 meeting or an extraordinary general      notice before a shareholders’ meeting.
                                 meeting at which special resolutions
                                 are to be proposed or at which it is
                                 proposed to remove a director.

                                 Other extraordinary general
                                 meetings require not less than 14
                                 clear days’ notice be given.

Location of shareholder          There is no requirement as to the        Shareholder meetings shall be held at
meetings                         location of shareholder meetings for     the place within Canada provided in
                                 English companies.                       the by-laws or, in the absence of such
                                                                          provision, at the place within Canada
                                                                          that the directors determine.

                                                                          Notwithstanding the paragraph above,
                                                                          shareholder meetings may be held at a
                                                                          place outside Canada if the place is
                                                                          specified in the articles or all of the
                                                                          shareholders entitled to vote at the
                                                                          meeting agree that the meeting is to
                                                                          be held at that place.



                                                     85
                        English law                              Canadian law
                                                                 The Company’s By-Laws will provide
                                                                 that shareholders meetings shall be
                                                                 held at such place within Canada as
                                                                 the directors shall determine or such
                                                                 place outside Canada as may be
                                                                 specified in the Articles. The
                                                                 Company does not currently intend to
                                                                 specify a place for shareholder
                                                                 meetings in its Articles.
Quorum for general      The FUN Technologies plc Articles        The Company’s By-Laws will provide
shareholder meetings    provide for a quorum of 2                that a quorum is present irrespective
                        shareholders in person or by proxy.      of the number of persons actually
                        There is no requirement for the          present at the meeting if holders of at
                        holder of a minimum percentage of        least a majority of the shares entitled
                        the voting share capital to be present   to vote at the meeting are present or
                        at the meeting.                          represented by proxy.
Shareholder proposals   English law provides that the holders Both registered and beneficial
                        of 10% of the shares in issue can     shareholders who are entitled to vote
                        requisition a shareholders meeting.   at an annual meeting may submit to
                                                              the corporation notice of a matter that
                        Shareholders who hold not less than
                                                              the shareholder proposes be discussed
                        5% of the shares in issue or not less
                                                              at the meeting (or discuss such matter
                        than 100 shareholders holding
                                                              at the meeting) provided that such
                        shares on which an average of £100
                                                              shareholder has owned, for at least 6
                        has been paid up can propose a
                                                              months, 1% or more of the total
                        resolution at the company’s annual
                                                              number of outstanding voting shares
                        general meeting and require the
                                                              of the corporation, or shares that have
                        company to circulate notice of it and
                                                              a market value of at least CDN$2,000.
                        an accompanying 1,000 word
                                                              Shareholders are permitted to pool
                        statement to shareholders.
                                                              their shares to meet this minimum
                                                              threshold.
                                                                 Holders of not less than 5% of the
                                                                 corporation’s issued shares that carry
                                                                 the right to vote at a meeting may
                                                                 requisition the directors to call a
                                                                 meeting of shareholders for the
                                                                 purposes stated in the requisition.
Class rights            The rights attaching to a class of       Even where the shares of a class or
                        shares may be varied if 75% of the       series do not otherwise carry the right
                        holders of the relevant class consent    to vote, separate class or series voting
                        or an extraordinary resolution passed    is required on a proposal to amend a
                        at a separate general meeting of the     corporation’s articles of incorporation
                        holders of the class sanctions the       to, amongst other things, vary the
                        variation.                               rights or restrictions attaching to the
                                                                 class or another class which impacts on
                        The quorum for a class meeting is
                                                                 the first class.
                        two persons holding or representing
                        by proxy at least one-third of the      In addition, a class vote is required if
                        issued shares of the class in question. the corporation proposes to sell, lease
                                                                or exchange all or substantially all of
                                                                the property of the corporation if such
                                                                class is affected by the sale in a manner
                                                                different from the shares of another
                                                                class.
                                                                 Moreover, shares that would not
                                                                 otherwise have voting rights are
                                                                 granted voting rights with respect to,
                                                                 amongst other things, the approval of
                                                                 certain amalgamations or the sale,
                                                                 lease or exchange of all or substantially
                                                                 all of the property of the corporation.



                                            86
                                  English law                               Canadian law
Registered office                  Both English law and the FUN              A corporation’s registered office shall
                                  Technologies plc Articles permit the      be in the province in Canada specified
                                  Company’s registered office to be at       in its articles and may be relocated
                                  any place in England and Wales and        within the province by a directors’
                                  to be freely alterable within those       resolution.
                                  countries by resolution of the
                                  directors. The Companies Act
                                  prohibits the alteration of the chosen
                                  country of the registered office.
Director residency                There are no residency requirements Under the CBCA, at least 25% of a
requirements                      for directors of an English company. corporation’s directors must be
                                                                       resident Canadians. If a corporation
                                                                       has less than 4 directors, at least one
                                                                       must be a resident Canadian.
Quorum for directors meetings The FUN Technologies plc Articles             Pursuant to the Company’s By-Laws,
                              provide 2 directors constitute a              a quorum consists of a majority of
                              quorum. This includes alternate               directors in office at the time of the
                              directors where their appointers are          meeting. Generally, one quarter of the
                              not present at the meeting.                   directors present (or at least 1 if there
                                                                            are less than 4 directors appointed)
                                                                            must be resident Canadians.
Obligations to notify interests   Subject to certain limited exceptions,    No similar provision is included in the
in shares                         any person interested in 3% or more       CBCA. However, under Canadian
                                  of a public company’s issued share        securities laws, a shareholder who
                                  capital is required to notify that        acquires beneficial ownership of, or
                                  interest and any whole percentage         exercises control or direction over,
                                  change in that interest to the            10% of a public company’s securities
                                  company. An interest in shares is         must issue a press release and file a
                                  widely defined and includes a              report disclosing this interest.
                                  beneficial interest as well as the
                                  registered holding. Persons who
                                  co-operate together to acquire
                                  interests in a public company’s share
                                  capital may also be required to
                                  aggregate their interests for the
                                  purposes of this disclosure
                                  obligation.
Company investigations into       A public company may, by notice in No similar provision is included in the
share ownership                   writing, require a person who is, or is CBCA.
                                  reasonably believed to be or has at
                                  any time in the preceding 3 years
                                  been interested in its shares to
                                  confirm whether or not they do hold
                                  or have held such an interest
                                  together with other specified details
                                  as to the interest.
                                  The FUN Technologies plc Articles
                                  provide that a shareholder who is in
                                  default of such a notice (by failing to
                                  reply or providing false information)
                                  will be subject to sanctions by the
                                  board of directors including
                                  prohibition on voting, withholding
                                  of dividends and refusal to register
                                  transfers of shares.




                                                      87
                              English law                               Canadian law
Compulsory acquisition on a   An offeror who acquires 90% or            Subject to compliance with the
takeover                      more of the shares of a public            relevant provisions of the CBCA, if an
                              company to which the offer relates        offeror offers to purchase all of the
                              may, subject to compliance with the       shares of a corporation under a
                              relevant provisions of the Companies      take-over bid which, within 120 days
                              Act, become entitled to acquire the       of the date of the bid, is accepted by
                              remaining outstanding shares. In          holders of not less than 90% of the
                              such circumstances a shareholder          shares (other than those held by or on
                              may also require the offeror to           behalf of the offeror or an affiliate or
                              acquire his or her shares under the       associate thereof), of any class of
                              terms of the offer.                       shares to which the bid relates then
                                                                        the offeror is entitled to acquire the
                                                                        shares held by the dissenting offerors
                                                                        and the shares held by the dissenting
                                                                        offerors shall be transferred to the
                                                                        offeror in accordance with the relevant
                                                                        provisions of the CBCA.
                                                                        In such a case, and subject to
                                                                        compliance with the relevant
                                                                        provisions of the CBCA,
                                                                        non-tendering shareholders have the
                                                                        option of either tendering their shares
                                                                        to the offeror on the same terms as
                                                                        shares were tendered to the bid or
                                                                        demanding payment of the fair value
                                                                        of their shares.
Unfair prejudice action       A shareholder may apply to the court      A “complainant” (which includes a
                              by petition for an order on the           security holder, director, officer and
                              ground that the company’s affairs are     any other person who, in the
                              being or have been conducted in a         discretion of a court, is a proper
                              manner which is unfairly prejudicial      person to make an application) may
                              to the interests of its shareholders,     seek relief from the courts on the basis
                              including at least himself or herself     that the corporation or its affiliates
                              or that any actual or proposed act or     have engaged in conduct that is
                              omission of the company is or would       oppressive or unfairly prejudicial to or
                              be so prejudicial.                        that unfairly disregards the interests of
                                                                        any security holder, creditor, director
                                                                        or officer.
Dissenters’ rights            Subject to certain conditions,            Subject to certain conditions,
                              shareholders may make an                  shareholders may dissent if, amongst
                              application to the court for relief, in   other things, the corporation resolves
                              certain limited circumstances,            to:
                              including:
                                                                              amend its articles to vary any
                                    where shareholders of not less            provisions restricting or
                                    than 5% of the company’s                  constraining the issue, transfer
                                    issued share capital object to            or ownership of shares of such
                                    an application by a public                shareholder’s class;
                                    company to be re-registered as
                                                                              amend its articles to vary any
                                    a private company;
                                                                              restriction on the business that
                                    where shareholders of not less            the corporation may carry on;
                                    than 15% of the class in
                                                                              amalgamate otherwise than
                                    question object to a proposed
                                                                              under a vertical or horizontal
                                    variation of the rights
                                                                              short-form amalgamation;
                                    attaching to such class of
                                    shares; and                               be continued into another
                                                                              jurisdiction;
                                    in a takeover situation where
                                    the offeror has acquired 90% of           sell, lease or exchange all or
                                    the issued share capital of a             substantially all of its property;
                                    company and a shareholder                 or
                                    objects to his or her shares
                                                                              carry out a “going-private” or
                                    being compulsorily acquired
                                                                              “squeeze-out” transaction.
                                    by the offeror.

                                                   88
                     English law                            Canadian law
                                                            In addition, holders of any class or
                                                            series of shares entitled to vote on a
                                                            proposal to amend a corporation’s
                                                            articles of incorporation for which
                                                            class voting would be required, as set
                                                            out under “Class rights” above, may
                                                            dissent if the corporation’s articles are
                                                            amended as proposed.
                                                            Dissenting shareholders who comply
                                                            with the requirements set out in the
                                                            CBCA are entitled to be paid by the
                                                            corporation the fair value of the shares
                                                            in respect of which the shareholder
                                                            dissents.
Derivative actions   A minority of shareholders can bring  A “complainant” (which includes a
                     an action in their own name seeking   security holder, director, officer of the
                     a remedy on behalf of a company in    Company and its affiliates and any
                     respect of a wrong done to it.        other person who, in the discretion of
                     Proceedings are generally brought     a court, is a proper person to make an
                     by the company in its own name and    application) may apply to the court for
                     as such derivative actions are        leave to bring an action in the name
                     exceptional.                          and on behalf of a corporation or any
                                                           of its subsidiaries, or intervene in an
                     Derivative actions are generally only
                                                           action to which such entity is a party,
                     permitted in circumstances where a
                                                           for the purpose of prosecuting,
                     serious wrong to the company has
                                                           defending or discontinuing the action
                     occurred which cannot be ratified by
                                                           on behalf of such entity.
                     an ordinary resolution and where the
                     majority of shareholders will not     Amongst other things, the court must
                     sanction an action in the company’s be satisfied that it appears to be in the
                     name.                                 interests of the corporation or its
                                                           subsidiary that the action be brought,
                                                           prosecuted, defended or discontinued.




                                        89
                                               PART VI

                                      Additional information

The Company and the Directors whose names are set out on page 6 of this document, accept responsibility
for the information contained in this document. To the best of the knowledge of the Company and the
Directors (who have taken all such reasonable care to ensure that such is the case), the information
contained in this document is in accordance with the facts and does not omit anything likely to affect the
import of such information.

1.    The Company
1.1   The Company was incorporated in Canada on 18 November 2005 as 4309669 Canada Inc.
      under the CBCA.
1.2   On 14 December 2005, the Company changed its name to Liberty FT Acquisition Inc.
1.3   On 1 March 2006, the Company changed its name to FUN Technologies Inc.
1.4   The Company is a company resident in Canada and the liability of its shareholders is limited.
1.5   The Company and its activities and operations are principally regulated by the CBCA and the
      regulations made thereunder, the Company’s Articles and the Company’s By-Laws.
1.6   The head office of the Company is at 100 King Street West, Suite 6600, 1 First Canadian
      Place, Toronto, Ontario MSX 1B8, Canada (to be 175 Bloor Street East, South Tower,
      Suite 803, Toronto, Ontario M4W 3R8, Canada, telephone no. 001 416 540 0806, on
      Admission).

2.    Share Capital
2.1   The authorised and issued share capital of the Company, of which the issued share is fully paid
      up and non-assessable, as at the date of this document is as follows:
                                                                                                  Issued
      Authorised                                                                                 Number
      Unlimited            Common Shares                                                               1
      Unlimited            Preference Shares                                                          Nil
2.2   On Admission, the authorised and issued share capital of the Company, of which all of the
      issued shares will be fully paid up and non-assessable, will be as follows:
                                                                                                  Issued
      Authorised                                                                                 Number
      Unlimited            Common Shares                                                     61,632,315
      Unlimited            Preference Shares                                                         Nil
2.3   On Admission, options will be outstanding pursuant to the Stock Option Plan to subscribe for
      up to 4,573,514 Common Shares.
2.4   Save as mentioned in this paragraph 2:
      (a)   other than the pre-emptive rights granted to Liberty pursuant to the Share Purchase and
            Support Agreement, no unissued share or loan capital of the Company is under option or
            is agreed conditionally or unconditionally to be put under option;
      (b)   there are no shares in the capital of the Company currently in issue with a fixed date on
            which entitlement to a dividend arises and there are no arrangements in force whereby
            future dividends are to be waived or agreed to be waived;
      (c)   there are no outstanding convertible securities issued by the Company; and
      (d)   no share capital or loan capital of the Company is in issue and no such issue is proposed.
2.5   None of the Common Shares have been sold or made available to the public in conjunction
      with the application for Admission.

                                                   90
2.6   The Common Shares bear the ISIN number CA36075N1033, and are in registered form. The
      Common Shares will not be enabled for dealings through CREST. However, the Company
      intends that holders who are CREST members should be able to elect to have CDIs (which
      represent their entitlement to Common Shares) credited to their CREST accounts which will
      be enabled for dealings through CREST. Further details of the CDIs are set out in Part 1 of this
      document. It is expected that definitive share certificates will be posted to those Shareholders
      who have requested the issue of Common Shares in certificated form within 14 days of
      Admission.

3.    Subsidiary undertakings
3.1   On Admission, the Company will be the holding company of the Group.
3.2   On Admission, the Company will have the following subsidiaries:
                                                            Proportion of
      Name                                                     ownership       Country of incorporation
                                                             interest held
      FUN Technologies plc                                       100%             England and Wales
      Columbia Exchange Systems Limited                 100% (Indirect)           England and Wales
      SkillJam Technologies Corporation                 100% (Indirect)      United States (Delaware)
      Columbia Exchange Systems Ltd.                    100% (Indirect)             Canada (Ontario)
      Betmart Limited                                   100% (Indirect)           England and Wales
      Corcom, Inc.                                      100% (Indirect)       United States (Nevada)
      Fantasy Sports Acquisition, LLC                   100% (Indirect)      United States (Delaware)
      Skilljam EU Limited                               100% (Indirect)           England and Wales
      Fanball UK Limited                                100% (Indirect)           England and Wales
      FUN Technologies Corporation                      100% (Indirect)      United States (Delaware)
      Octopi, Inc.                                      100% (Indirect)      United States (Delaware)

4.   Description of the Company’s share capital
4.1 Common Shares
The Company’s Articles attach the following rights, privileges, restrictions and conditions to the
Common Shares:
(a) Voting rights
Each holder of Common Shares shall be entitled to receive notice of and to attend all meetings of
shareholders of the Company and to vote thereat, except meetings at which only holders of a
specified class of shares or specified series of shares (other than Common Shares) are entitled to vote.
At all meetings of which notice must be given to the holders of Common Shares, each holder thereof
shall be entitled to one vote in respect of each Common Share held by such holder.
(b) Dividends
The holders of Common Shares shall be entitled, subject to the rights, privileges, restrictions and
conditions attaching to any other class of shares of the Company ranking in priority to the Common
Shares, to receive any dividend as, if and when declared by the Directors.
(c) Liquidation, dissolution or winding-up
The holders of Common Shares shall be entitled, subject to the rights, privileges, restrictions and
conditions attaching to any other class of shares of the Company ranking in priority to the Common
Shares, to receive the remaining property of the Company on a liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, or on any other return of capital or
distribution of assets of the Company among its shareholders for the purpose of winding up its affairs.

4.2 Preference Shares
The Preference Shares will be issuable from time to time in one or more series. Subject to the
Company’s Articles, the Board will, prior to issue, fix the number of shares of each series and
determine the designation, rights, privileges, restrictions and conditions attaching to the shares

                                                  91
of each series, including, without limitation, the right to receive dividends (which may be cumulative,
non-cumulative or partially cumulative, and variable or fixed), the currency of the payment of
dividends (if any), the rights of redemption, as well as the rights of retraction (if any) and the prices
and other terms and conditions of any rights of retraction. Except as otherwise provided by law or in
accordance with any voting rights which may from time to time be attached to any series of
Preference Shares, the holders of the Preference Shares are not entitled to receive notice of, to attend
or to vote at any meeting of the holders of Common Shares. The Preference Shares will rank ahead of,
and shall be entitled to priority over, the Common Shares with respect to the payment of dividends,
or any distribution of assets or return of capital in the event of the liquidation, dissolution or
winding-up of the Company. The Preference Shares of each series will rank on a parity with the
Preference Shares of every other series with respect to priority in the payment of dividends, the return
of capital and in the distribution of assets in the event of the liquidation, dissolution or winding-up of
the Company.
If the rights, privileges, restrictions and conditions attaching to the series so provide, the Preference
Shares of any series may be convertible into or exchangeable for Common Shares. The provisions
attaching to the Preference Shares as a class may be amended or repealed at any time with such
approval as may then be required by law to be given by the holders of the Preference Shares as a class.

5.    Articles of incorporation and corporate regulation
The Company and its corporate activities and operations are principally regulated by the CBCA and
the regulations made thereunder, the Company’s Articles and the Company’s By-Laws. Under the
CBCA, the Company has the capacity and, subject to the provisions of the CBCA, the rights, powers
and privileges of a natural person. The Company’s Articles contain no restriction on the business the
Company may carry on or the powers it may exercise.
A summary of the Company’s Articles, the Company’s By-Laws (in each case as will be in place on
Admission) and certain applicable provisions of the CBCA is set out below. This summary is not
intended to be complete or to address all differences and is qualified in its entirety by reference to the
CBCA and the regulations made thereunder, the Company’s Articles and the Company’s By-Laws.
The Company’s Articles will be filed on the System for Electronic Document Analysis and Retrieval
at www.sedar.com following Admission.
Upon the Scheme becoming effective and the Common Shares being listed on the TSX, the
Company will be a reporting issuer or equivalent in the provinces of British Columbia, Alberta,
Saskatchewan, Ontario, Quebec and New Brunswick and, where applicable, will be subject to
applicable Canadian securities regulation and to the rules and regulations of the TSX. The summary
below is not intended to be a summary of applicable Canadian securities law or stock exchange rules
and regulations.

5.1 Voting rights and resolutions of shareholders
Each holder of Common Shares is entitled to receive notice of and to attend all meetings of
shareholders of the Company and to vote thereat, except meetings at which only holders of a
specified class of shares or specified series of shares (other than Common Shares) are entitled to vote.
At all meetings of which notice must be given to the holders of the Common Shares, each holder of
Common Shares will be entitled to one vote in respect of each Common Share held by such holder.
Pursuant to the Company’s Articles, the Board may determine the rights and conditions attaching to
the shares of each series of Preference Shares, including the voting rights (if any) attaching thereto.
Even where the shares of a class or series do not otherwise carry the right to vote, separate class or
series voting is required to amend the Company’s Articles, inter alia, to add, remove or change
prejudicially the rights and conditions attached to such class or increase the rights and privileges of
any class of shares having rights or privileges equal or superior to such class.
A proxy appointee need not be a shareholder and a proxy appointing such person is required to be
executed by the shareholder or by his or her attorney authorised in writing and in conformity with the
requirements of the CBCA and the Company’s By-Laws. The Board may by resolution fix a time not

                                                   92
exceeding two business days preceding any meeting or adjourned meeting for which time proxies to
be used at such meeting must be deposited with the Company or its agent.

Resolutions required in connection with the transaction of ordinary business must be approved by
more than 50 per cent. of the votes cast by shareholders represented at the meeting either in person or
by proxy. Ordinary business includes, inter alia, the ratification or repeal of the Company’s By-laws.

Certain fundamental changes, such as a change in the Company’s name, an amalgamation (other
than an amalgamation involving certain members of the Group) and the sale, lease or exchange of all
or substantially all of the Company’s property outside of the ordinary course, must be approved by a
special resolution of the Company’s shareholders. A special resolution must be passed by not less than
two thirds (662⁄3 per cent.) of the votes cast by the Company’s shareholders represented at the
meeting either in person or by proxy. Holders representing a majority of the shares entitled to vote at
a meeting of shareholders present in person or by proxy constitute a quorum.

5.2 Dividends
The Board may, from time to time, declare and the Company may pay dividends by delivery of money
or property or by issuing fully paid shares in the Company, provided however that the directors shall
not declare or pay dividends if there are reasonable grounds for believing that the Company is, or
after the payment would be, unable to pay its liabilities as they become due, or if the realisable value of
the Company’s assets would thereby be less than the aggregate of its liabilities and stated capital of all
classes.

Holders of Common Shares are entitled to receive dividends, as and when declared, by the Company
subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of
the Company ranking in priority to the Common Shares in regard to dividends, such as the
Preference Shares.

Pursuant to the Company’s Articles, the Board may determine the rights and conditions attaching to
the shares of each series of Preference Shares, including the rights (if any) to receive dividends (which
may be cumulative, non-cumulative or partially cumulative and variable or fixed). Preference Shares
are entitled to receive dividends in priority to the Common Shares (and any other shares of any class
ranking junior to the Preference Shares), provided, however, that each series of Preference Shares
shall rank pari passu with the Preference Shares of every other series for the payment of dividends.

5.3 Distribution of assets on liquidation and dissolution
The holders of Common Shares will be entitled to receive the remaining property of the Company on
a liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or on
any other return of capital or distribution of assets of the Company among its shareholders for the
purpose of winding up its affairs, subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares of the Company ranking in priority to the Common Shares (such
as the Preference Shares).

5.4 Changes in share capital
The Company cannot create a new class of shares except by the filing of an amendment to the
Company’s Articles authorised by a special resolution of the shareholders creating such new class.
The Board may, however, issue Preference Shares at any time and from time to time in one or more
series having the designation, rights, privileges, restrictions and conditions attaching to the shares of
each series as may be determined by the Board.

Articles of amendment must also be filed (after authority granted by a special resolution of the
Company’s shareholders) in order to, among other things, change the maximum number of shares
that the Company is authorised to issue; vary the rights, privileges, restrictions or conditions of any
shares; vary its stated capital; effect a stock split or consolidation; vary restrictions on the issue,
transfer or ownership of shares; or constrain (or vary the constraint regarding) the issue or transfer of
shares to persons who are not resident Canadians.

                                                    93
Holders of a class of shares are entitled to vote as a separate class upon any proposal to amend the
Company’s Articles to alter the characteristics attached to the class of shares held by them, and
holders of a series of a class of shares are entitled to vote separately as a series if the series held by them
is affected by an amendment in a manner different from another series of the same class. Such right
applies whether or not the shares of a class or series otherwise carry the right to vote.

5.5 Dissenting shareholders
Subject to the provisions of the CBCA relating to a reorganisation by court order, if the Company
resolves to amend its Articles to add, remove or change any restrictions upon the business or
businesses it may carry on, amend its articles to add, remove or change any provisions restricting or
constraining the issue, transfer or ownership of shares of a class, amalgamate with another
corporation, be continued under the laws of another jurisdiction, sell, lease or exchange all or
substantially all of its property or carry out a “going private” or “squeeze-out” transaction, a holder
of shares of any class or series entitled to vote on the resolution may dissent.
If such shareholder elects to dissent in accordance with the provisions of the CBCA, such shareholder
is entitled as of right to be paid the fair value of the shares held by him or her. Notwithstanding the
authorisation of the shareholders by special resolution to take any such steps, the directors may
determine not to proceed, in which case such action will not be taken by the Company and the
dissenting shareholder is not entitled to proceed further. The Company is prohibited from making
any payment if there are reasonable grounds for believing that the Company is, or after the payment,
would be unable to pay its liabilities as they become due, or the realisable value of the Company’s
assets would thereby be less than the aggregate of its liabilities.
The CBCA provides similar dissenting rights to shareholders of a class of shares entitled to vote
separately as a class upon a proposal to amend the Company’s Articles in the event that such proposal
is approved.

5.6 Variation of class rights and class meetings
Subject to the provisions of the CBCA, when a class or series of shares becomes entitled to a class or
series vote in respect of one of the matters described above under “Changes in share capital”, the
shareholders entitled to receive notice of or to vote at such meeting are determined by the provisions
of the CBCA and otherwise in accordance with the Company’s Articles.

5.7 No pre-emption rights or restrictions on the ability of directors to issue shares
Existing shareholders have no rights of pre-emption or first refusal under the Company’s Articles, the
Company’s By-Laws or the CBCA in respect of future issuances of shares by the Company (although
following Admission, Liberty will have certain pre-emptive rights, as more particularly described in
paragraph 11.3 of Part VI of this document).
Under the Company’s Articles and the Company’s By-Laws, the directors generally have authority,
without the need for the approval of the shareholders, to issue further shares. The directors have the
power to issue shares of the Company to such persons and for such consideration as the directors
determine. A share shall not be issued until the consideration for the share is fully paid in money or
property or past services that are not less in value than the fair equivalent of the money that the
Company would have received if the share had been issued for money.

5.8 Directors and directors’ interests
Directors serve for a period of one year until the next annual meeting of shareholders where they may
be re-elected or until their successors are elected or appointed. A quorum of the directors can fill a
vacancy occurring among the directors between annual meetings. The Board currently consists of 11
directors. The Company’s Articles provide that the Board may appoint one or more additional
directors, who shall hold office for a term expiring not later than the close of the next annual meeting
of shareholders, provided the total number of directors so appointed may not exceed one third of the
number of directors elected at the previous annual meeting of shareholders. Directors can be
removed from office during their term by ordinary resolution of the shareholders at a special meeting.

                                                      94
The Board manages, or supervises the management of, the business and affairs of the Company.

Resolutions to be passed in connection with the transaction of ordinary business must be approved by
more than 50 per cent. of the votes cast on the matter by directors present and voting at the meeting.
Certain extraordinary corporate actions, including the creation and membership of committees of
the Board, the declaration and payment of dividends, the issuance of Preference Shares and Common
Shares, the liquidation, dissolution or winding up of the Company, the sale, lease or exchange of all
or substantially all of the Company’s property outside of the ordinary course, the approval of
mergers, amalgamations or plans of arrangement involving the Company, the approval or
recommendation of any amendments to the Company’s Articles and certain acquisitions and
dispositions in excess of specified thresholds, must be passed by a majority of the directors then in
office.

For the purposes of directors’ meetings, a quorum will consist of a majority of the number of
directors in office, or in the event that there are less than 4 directors, 1 director. Written resolutions
must be signed by all of the directors who are entitled to vote on the matter.

The CBCA provides that a director or officer who has an interest in a contract or transaction or
proposed contract or transaction that is material to the Company or is a director or officer of, or has a
material interest in, a person who has a material interest in such a contract or transaction or proposed
contract or transaction, is required to disclose in writing to the Company or request to have entered
in the minutes of the meeting of directors the nature and extent of his or her interest.

A director having an interest in a material contract or transaction or proposed material contract or
transaction with the Company must disclose the interest and abstain from voting on any resolution to
approve the contract or transaction unless the contract or transaction relates primarily to his or her
remuneration by the Company or an affiliate, is for indemnity or insurance or is with an affiliate of the
Company. A director is liable to account to a company for profits that accrue to the director if such
director fails to disclose a disclosable interest.

The Company may purchase and maintain insurance for the benefit of any director or officer against
any liability incurred in his or her capacity as a director or officer. Subject to the CBCA, the Company
shall indemnify a director or officer of the Company, a former director or officer of the Company or
another individual who acts or acted at the Company’s request as a director or officer, or an individual
acting in a similar capacity, of another entity against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably incurred by such individual in
respect of any civil, criminal or administrative, investigative or other proceeding in which the
individual is involved because of that association with the Company or other entity. In accordance
with the CBCA and the Company’s By-Laws, the Company may not indemnify an individual unless
the individual: (i) acted honestly and in good faith with a view to the best interests of the Company or
other entity for which the individual acted as a director or officer or in a similar capacity at the
Company’s request, as the case may be; and (ii) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or
her conduct was lawful.

The Directors may fix the remuneration of the directors, officers and employees. Directors may be
reimbursed for all expenses of such director incurred in the service of, and on behalf of the Company.

5.9 Disclosure of interests in shares
There are no requirements under the CBCA, the Company’s Articles or the Company’s By-Laws for
the directors or shareholders who hold 3 per cent. or more of the Company’s share capital to notify
the Company of their interests in the Company’s share capital or changes in such interests. Neither
the CBCA, the Company’s Articles or the Company’s By-Laws contain any power authorising the
Company to require a person to disclose their interests in the Company’s share capital. However,
under Canadian securities legislation, a person who acquires beneficial ownership of, or the power to
exercise control or direction over, 10 per cent. of a public company’s securities must file a press release
and publicly file a report disclosing this interest.

                                                   95
5.10 Meetings of the shareholders
The Company is required to hold an annual meeting of its shareholders not later than 15 months
after the preceding annual meeting but no later than 6 months after the end of the Company’s
preceding financial year.

At the annual meeting, the directors of the Company must place the annual financial statements that
the Company is required to file under applicable Canadian securities legislation in relation to the
most recently completed financial year and any auditors report made on those financial statements
before the meeting. Ordinary business to be conducted at the annual meeting includes consideration
of any reports of the directors or auditors, setting the number of directors, the election of directors,
the appointment of auditors and the setting of their remuneration. Any other business is considered
special business.

The shareholders elect directors to their usual term of office and, by following the provisions in the
CBCA, can remove them before the expiry of their term.

For all shareholder meetings of the Company, the directors are required to solicit proxies and to
prepare and deliver an information circular setting out the business to be determined at the meeting
in accordance with the requirements of the CBCA and applicable Canadian securities legislation
describing any matter to be voted upon in sufficient detail to permit shareholders to form a reasoned
judgment concerning the matter.

Notice of any meetings of shareholders must be given to the shareholders not less than 21 and not
more than 60 days before the date of the meeting and must be accompanied by an information
circular containing full details of all matters to be considered at the meeting. However, public
companies are also subject to the requirements of National Instrument 54-101 Communication with
Beneficial Owners of Securities of a Reporting Issuer, which provides for minimum notice periods
greater than the minimum 21 day period provided by the CBCA.

5.11 Borrowing powers
Without limit to the powers of the board as provided in the CBCA, the board may from time to time
on behalf of the Company: borrow money upon the credit of the Company; issue, reissue, sell or
pledge debt obligations of the Company; to the extent permitted by the CBCA, give, directly or
indirectly, financial assistance to any person by means of a loan, a guarantee to secure the performance
of an obligation or otherwise; and mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Company, owned or subsequently acquired, to secure any
obligation of the Company.

5.12 Financial statements
In general, a company that is a “distributing corporation” (as the Company will be) is required to
send annual audited financial statements to its shareholders prepared in accordance with generally
accepted accounting principles as set out in the Handbook of the Canadian Institute of Chartered
Accountants.


6.    Directors
6.1   The directors of the Company are Andrew Rivkin, Lorne Abony, John Albright, Mark
      Carleton, Neal Dermer, David Flemming, Gregory Maffei, Geoffrey Rotstein, Harvey Solursh,
      Charles Tanabe and Michael Zeisser.

6.2   The business address of the Directors on Admission will be 175 Bloor Street East, South
      Tower, Suite 803, Toronto, Ontario M4W 3R8, Canada.

6.3   Details of any directorship that is or was in the last 5 years held by each of the Directors (save for
      those companies of which such Director is or was a director of its direct or indirect holding
      company), and any partnership of which each of the Directors is or was in the last 5 years a
      member in addition to their directorships of the Company are set out below:

                                                    96
      Name                 Current directorships and partnerships Previous directorships and partnerships
      Andrew Rivkin        FUN Technologies plc                   CryptoLogic Inc.
                           betbull — The European Betting
                           Exchange Plc
      Lorne Abony          FUN Technologies plc                   CryptoLogic Inc.
                           betbull – The European Betting         Elucid Technology Ventures
                           Exchange plc
      John Albright        FUN Technologies plc                   Bio Scrypt Inc.
                           Descartes Systems Group Inc.           Triple G Systems
                           Q9 Networks Inc.                       Basis 100 Inc.
                           Nuvo Networks Inc.                     Indian Motorcycle Company
      Mark Carleton        Wildblue Communications, Inc.    KPMG
                           True Position Inc.
                           QVC, Inc.
                           IDT Entertainment, Inc.
                           Volunteers of America – Colorado
                           Branch
      Neal Dermer          —                                      —
      David Flemming       —                                      —
      Gregory Maffei       Liberty                                Expedia, Inc.
                           Electronic Arts, Inc.
                           Starbucks Corporation
                           360networks Inc.
      Geoffrey Rotstein FUN Technologies plc                      Exclamation, Inc.
                        Cyberplex Inc.
                        PharmEng International Inc.
                        Chrysalis Capital II Corporation
      Harvey Solursh       FUN Technologies plc                   CryptoLogic Inc.
      Charles Tanabe       On Command Corporation
                           QVC, Inc.                              Ascent Media Group
      Michael Zeisser      Open TV Corp.                          McKinsey & Company
                           Open Gaming Ltd
                           Open Play (BVI) Ltd
                           Betting Corp. UK Ltd
                           4G Media Ltd.
                           GSN, LLC
                           QVC, Inc.
6.4   At the date of this document, save as disclosed in paragraphs 6.5 and 6.6 below, none of the
      Directors:
      (a)    has any unspent convictions in relation to indictable offences;
      (b)    has been declared bankrupt or has entered into an individual voluntary arrangement;
      (c)    was a director of any company at the time of or within the 12 months preceding any
             receivership, compulsory liquidation, creditors’ voluntary liquidation, administration,
             company voluntary arrangement or any composition or arrangement with its creditors
             generally or any class of its creditors with which such company was concerned;
      (d)    was a partner in a partnership at the time of or within the 12 months preceding a
             compulsory liquidation, administration or partnership voluntary arrangement of such
             partnership;
      (e)    has had his assets the subject of any receivership or was a partner in a partnership at the
             time of or within the 12 months preceding any assets thereof being the subject of a
             receivership; or

                                                   97
      (f)     has been the subject of any public criticisms by any statutory or regulatory authority
              (including any recognised professional body) nor has ever been disqualified by a court
              from acting as a director of a company or from acting in the management or conduct of
              the affairs of any company.
6.5   John Albright resigned as a director of Indian Motorcycle Company on 1 January 2003, prior
      to it ceasing operations and appointing an assignee to manage its assets in September 2003.
6.6   Gregory Maffei was Chairman, President and Chief Executive Officer of 360networks Inc.
      when that company filed for bankruptcy in June 2001. He led the company through its
      reorganisation which was approved by the Canadian courts in September 2002 and the US
      courts in October 2002.

7.    Directors’ and other interests
7.1   The interests of the Directors including the interests of their respective connected persons (as
      defined in note 7 below), the existence of which is known to, or could with reasonable diligence
      be ascertained by that director whether or not held through another party in the issued share
      capital of the Company (all of which, save where stated otherwise in the notes below, are
      beneficial interests) as at the date of this document and as they are expected to be immediately
      following Admission are/will be as follows:
                                                                       Percentage of                 Percentage of
                                                          Number of issued Common       Number of issued Common
                                                    Common Shares Shares (as at the Common Shares    Shares (at the
                                                   (as at the date of    date of this  (at the date         date of
      Director                                       this document)      document)     Admission)1     Admission)
      Andrew Rivkin2                                                Nil                    Nil           210,103                         0.3
      Lorne Abony3                                                  Nil                    Nil         3,613,775                         5.9
      Geoffrey Rotstein4                                            Nil                    Nil             2,726                         0.0
      John Albright5                                                Nil                    Nil           809,770                         1.3
      Harvey Solursh6                                               Nil                    Nil             1,635                         0.0
      Mark Carleton                                                 Nil                    Nil                Nil                        Nil
      Charles Tanabe                                                Nil                    Nil                Nil                        Nil
      Michael Zeisser                                               Nil                    Nil                Nil                        Nil
      David Flemming                                                Nil                    Nil                Nil                        Nil
      Gregory Maffei                                                Nil                    Nil                Nil                        Nil
      Neal Dermer                                                   Nil                    Nil                Nil                        Nil
      1.    Assumes that each holder of Ordinary Shares (other than Andrew Rivkin, Lorne Abony and their connected persons) receive
            the ‘basic allocation’ on the Scheme becoming effective being, 163.69p in cash and 0.5453 of a Common Share for each
            existing share in FUN Technologies plc. In respect of Andrew Rivkin, Lorne Abony and their connected persons (being
            Defiant Capital Corporation, 6177255 Canada Inc., 1346027 Ontario Inc. and MKU Investments Limited) it is assumed
            that they receive all Common Shares for their existing shares in FUN Technologies plc on the Scheme becoming effective.
      2.    On Admission, Andrew Rivkin will hold options to subscribe for a further 1,200,000 Common Shares under the Stock
            Option Plan.
      3.    Lorne Abony will be beneficially interested in 3,613,775 Common Shares registered in the name of CDS Co. On
            Admission, he will also hold options to subscribe for a further 950,000 Common Shares under the Stock Option Plan.
      4.    On Admission, Geoffrey Rotstein will hold options to subscribe for 30,000 Common Shares under the Stock Option Plan.
      5.    John Albright will be beneficially interested in 807,044 Common Shares held by J L Albright Venture III Fund. On
            Admission, he will also hold options to subscribe for a further 30,000 Common Shares under the Stock Option Plan.
      6.    Harvey Solursh will be beneficially interested in 1,635 Common Shares held by his wife. On Admission, he will also hold
            options to subscribe for a further 30,000 Common Shares under the Stock Option Plan.
      7.    A person is connected with someone if they are:
            (a) the spouse, child under the age of 18 or step-child under the age of 18 of such person; or
            (b) a body corporate with which such person is associated (being where they are persons connected with them are together
                  interested in at least one-fifth of the equity share capital or are entitled to control the exercise of more than one-fifth of
                  the voting rights of such body corporate); or
            (c) a person acting in their capacity as a trustee of any trust, the beneficiaries of which include (or could include subject to
                  the powers of the trustees) such person or any of the people in (a) or (b) above (save for the trustee of an employee
                  share scheme or pension scheme); or
            (d) a person acting in their capacity as the partner of such person;
            and “connected person” shall be construed accordingly.

                                                                   98
7.2   Details of the total number of options under the Stock Option Plan which will be outstanding
      as at Admission and held by the Directors are as follows:
                                          Number of
                                           Common               Exercise price
                                        Shares under            per Common
      Name                                    Option                Share (£)                                   Exercise period
      Andrew Rivkin                        200,000                        0.68       9 March 2006 to 7 March 2009
                                         1,000,000                        1.79       9 March 2006 to 7 March 2009
      Lorne Abony                          200,000                        0.68       9 March 2006 to 7 March 2009
                                           250,000                        1.79       9 March 2006 to 7 March 2009
                                           250,000                        1.84       9 March 2006 to 7 March 2009
                                           250,000                        1.92       9 March 2006 to 7 March 2009
      Geoff Rotstein                        30,000                        1.84       9 March 2006 to 7 March 2009
      John Albright                         30,000                        1.84       9 March 2006 to 7 March 2009
      Harvey Solursh                        30,000                        2.48       9 March 2006 to 7 March 2009
      Mark Carleton                             —                         NIL                                  —
      Charles Tanabe                            —                         NIL                                  —
      Michael Zeisser                           —                         NIL                                  —
      David Flemming                            —                         NIL                                  —
      Gregory Maffei                            —                         NIL                                  —
      Neal Dermer                               —                         NIL                                  —
      Pursuant to the terms of the Stock Option Plan, all of the options listed above will become fully
      vested on the first business day following the Scheme becoming effective.
7.3   Save as disclosed above, none of the Directors nor any member of his immediate family or any
      person connected with him holds or is beneficially or non-beneficially interested, directly or
      indirectly, in any shares or options to subscribe for, or securities convertible into, shares of the
      Company or any of its subsidiary undertakings.
7.4   In addition to the interests of the Directors set out in paragraph 7.1 above, the following
      persons are at the date of this document, or are expected at Admission to be directly or
      indirectly interested in 3 per cent. or more of the issued share capital of the Company:
                                                                  Percentage of                  Percentage of
                                                     Number of issued Common        Number of issued Common
                                               Common Shares      Shares (at the Common Shares   Shares (at the
                                                 (at the date of    date of this (at the date of        date of
      Name                                      this document)      document)       Admission)     Admission)
      Liberty Freedom                                          1                  100       33,764,973                     54.8
      Stampee Technologies Inc.1                              Nil                  Nil       2,508,380                      4.1
      1   Assumes that each holder of Ordinary Shares (including Stampee Technologies Inc.) receives the “basic allocation” on the
          Scheme becoming effective being 163.69p in cash and 0.5453 of a Common Share for every existing share in FUN
          Technologies plc.

7.5   Save as disclosed above, there are no persons, so far as the Company is aware, who are or will be
      immediately following Admission interested, directly or indirectly, in 3 per cent. or more of the
      Company’s issued share capital, nor, so far as the Company is aware, other than Liberty
      Freedom and its affiliates, are there any persons who at the date of this document or
      immediately following Admission, directly or indirectly, jointly or severally, exercise or could
      exercise control over the Company. No persons disclosed above have different voting rights to
      those of any other shareholder in the Company.
7.6   Save as disclosed in this document, there are no arrangements known to the Company, the
      operation of which may at a subsequent date result in a change in control of the Company.
7.7   Save as disclosed in this document, no Director has, or has had, any interest in any transaction
      effected by any company in the Group which is or was unusual in its nature or conditions or
      significant to the business of the Group, and (in any such case) was effected since the
      Company’s incorporation.

                                                             99
7.8   Save as disclosed in this document, there have been no related party transactions of the kind set
      out in the Standards adopted according to the Regulation (EC) No 1606/2002 that the
      Company has entered into since incorporation.

7.9   No Director nor any member of his/her Family has a Related Financial Product (as such terms
      are defined in the AIM Rules) referenced to Common Shares.


8.    Directors’ appointments, remuneration and service agreements
8.1   The period during which each Director has served in office is as follows:
                                                                           Date of
      Name                                                       first appointment
      Andrew Rivkin                                             2 March 2006
      Lorne Abony                                               2 March 2006
      John Albright                                             2 March 2006
      Mark Carleton                                         22 November 2005
      Neal Dermer                                               2 March 2006
      David Flemming                                            2 March 2006
      Gregory Maffei                                            2 March 2006
      Geoffrey Rotstein                                         2 March 2006
      Harvey Solursh                                            2 March 2006
      Charles Tanabe                                        22 November 2005
      Michael Zeisser                                       22 November 2005

8.2   Lorne Abony has a service agreement with FUN Technologies plc under which he is paid a base
      salary of CDN$400,000 per annum, reviewable annually in respect of his role as Chief
      Executive Officer. The agreement is for a term of one year ending on 1 June 2006 and is
      automatically renewable for further one year periods unless either he or FUN Technologies plc
      provides written notice of non-renewal not less than 180 days prior to the expiry of the then
      current term. Pursuant to the terms of the agreement, his employment may be terminated by
      FUN Technologies plc at any time without cause upon 12 months’ notice or payment in lieu of
      notice. In the event that Mr. Abony’s employment is terminated: (i) by FUN Technologies plc
      for any reason other than cause, disability or death; (ii) by Mr. Abony for “good reason” (as
      such term is defined in the service agreement); or (iii) by Mr. Abony for any reason during the 6
      month period following a “change in control” of FUN Technologies plc (other than as a result
      of the Scheme becoming effective), any options held by Mr. Abony will accelerate and vest
      upon such termination.

8.3   FUN Technologies plc has entered into a management services agreement (the “Management
      Agreement”) with Andrew Rivkin, the Chairman and a Director of FUN and Defiant Capital
      Corporation (“DCC”), a management corporation wholly-owned by Mr. Rivkin. Pursuant to
      the terms of the Management Agreement, FUN Technologies plc has retained DCC to
      provide FUN Technologies plc with certain management services, including the personal
      services of the Group’s non-executive Chairman. In consideration for these services, FUN
      Technologies plc has agreed, with effect from 1 June 2005, to pay an annual retainer fee of
      CDN$10,000, subject to adjustment annually by the Board, to reimburse DCC for certain of
      its out-of-pocket expenses incurred in the performance of its services and to provide Mr. Rivkin
      with those employment benefits provided by FUN Technologies plc to senior executives from
      time to time. The agreement is for a term ending on 1 January 2007 and is automatically
      renewable for a further one year period unless either DCC or FUN Technologies plc provides
      written notice of non-renewal not less than 180 days prior to the expiry of the then current
      term. In the event that the Management Agreement is terminated: (i) by FUN Technologies
      plc for any reason other than cause, disability or death of Mr. Rivkin; (ii) by DCC for “good
      reason” (as such term is defined in the Management Agreement); or (iii) by DCC for any
      reason during the 6 month period following a “change in control” of FUN Technologies plc
      (other than as a result of the Scheme becoming effective), any options held by Mr. Rivkin will

                                                 100
      accelerate and vest upon such termination. Pursuant to a prior agreement between FUN
      Technologies plc and DCC (which agreement has been superseded by the Management
      Agreement), DCC was entitled to annual compensation in the amount of £250,000. Pursuant
      to such agreement, DCC received a proportionate amount of such compensation for the
      period 1 January 2005 to 1 June 2005. In addition, in June 2005, apart from the arrangements
      described above, Mr. Rivkin was awarded a bonus in the amount of £265,000 in connection
      with services performed in connection with the acquisition of Fanball.
8.4   All non-executive directors of FUN Technologies plc are at the date of this document entitled
      to receive an annual retainer fee of CDN$10,000 plus CDN$1,000 for each meeting of the
      Board or a committee thereof attended by such director. The Chairman of each committee of
      the Board is entitled to receive an additional retainer of CDN$2,500.
8.5   Remuneration of the Board will be determined by the Board following the Scheme becoming
      effective. It is currently anticipated that the remuneration of the Board will be set at the same
      level as for the board of FUN Technologies plc as described in paragraph 8.5 above.
8.6   Save as disclosed in this document, on Admission there will be no service agreements or
      agreements for the provision of services existing or proposed between the Directors and any
      member of the Group.
8.7   In the financial period ended 31 December 2005 (being the last completed financial year of
      FUN Technologies plc), the aggregate remuneration paid including pension contributions
      and benefits in kind granted to the directors of FUN Technologies plc was £374,948.
8.8   On the basis of the arrangements in force at the date of this document it is estimated that the
      aggregate remuneration payable including pension contributions and benefits in kind granted
      to the Directors for the year ending 31 December 2006 (being the current financial year of the
      Company) will be £310,000.

9.     Stock Option Plan
Following the Scheme becoming effective, the Board will determine whether to adopt a new stock
option plan. As at the date of this document, there are no outstanding options to acquire Common
Shares. The Stock Option Plan has been amended to provide that, as of the time the Scheme becomes
effective, each existing option under the Stock Option Plan to subscribe for Ordinary Shares will
automatically convert and be rolled over into an option to subscribe for Common Shares. It is not
intended for further grants of options to be made under the Stock Option Plan. The Stock Option
Plan (as amended) at the time of this document has the following terms:

(a) Eligibility
All employees and full-time directors of the Group, who are not within two years of their contractual
retirement date, are eligible to participate at the discretion of the compensation committee of the
Board (“the Compensation Committee”). In addition, consultants who are engaged by any
Company in the Group and who are required to devote substantially the whole of their working time
to the Group are entitled to participate.

(b) Exercise price
The price at which the participants in the Stock Option Plan may acquire Ordinary Shares shall not be
less than the closing price of the Ordinary Shares on the TSX on the day prior to the date of grant.

(c) Exercise, lapse and exchange of options
Options may normally be exercised at any time prior to the tenth anniversary of their date of grant
provided they have vested, and any performance targets specified at the date of grant have been achieved.
Options may be satisfied by the issue of Ordinary Shares or the transfer of existing Ordinary Shares. The
Compensation Committee may specify vesting periods at the time of grant of options.
On the Scheme becoming effective, the outstanding options to acquire Ordinary Shares will be
converted and rolled over into options to acquire Common Shares on equivalent terms and
conditions save that:

                                                 101
(i)    all unvested options will automatically vest on the first business day following the Scheme
       becoming effective; and

(ii)   all such rollover options will expire on the third anniversary of the date the Scheme becomes
       effective.

Options normally lapse on a holder ceasing to hold any office or employment within the Group by
virtue of which he is eligible to participate in the Stock Option Plan, provided that a holder will be
treated as continuing to hold an office with the Company for so long as he remains engaged as a
non-executive director of the Company. However, exercise of vested options is permitted for a
limited period following cessation of employment for specified reasons such as redundancy,
retirement or ill-health, and at the discretion of the Compensation Committee. In addition to the
special provisions which apply in respect of the rollover of options if the Scheme becomes effective in
the event of any other amalgamation, takeover or winding up of the Company, options may be
exercised within certain time limits. There are also provisions for the exchange of options in specified
circumstances. Options immediately become void in the event of the participant’s bankruptcy.

(d) Adjustments
The number of shares comprised in an option and/or exercise price may be adjusted if any
capitalisation issue, offer by way of rights or any sub-division, reduction or consolidation of the
Company’s share capital occurs.

(e) Amendments
The Compensation Committee may at any time amend the Stock Option Plan provided that the
prior approval of the Company in general meeting is obtained for amendments which would make
the terms of options relating to eligibility, limits on participation and the variation of options more
generous to participants. However, such prior approval will not be required in relation to an
amendment which is made to comply with the provisions of an existing or proposed legislation or to
obtain or maintain favourable taxation, exchange control or regulatory treatment of any participating
company or any participant.

10. Taxation
10.1 Tax considerations in Canada
Canadian federal income taxation
The following is a summary of the principal consequences under the Income Tax Act (Canada) (the
“Canadian Tax Act”) generally applicable to a Shareholder who holds Common Shares as capital
property and deals at arm’s length with, and is not affiliated with, the Company.

This summary is based upon the current provisions of the Canadian Tax Act, and the Canada –
United Kingdom Income Tax Convention (1978) (the “Treaty”). This summary also takes into
account all specific proposals to amend the Canadian Tax Act publicly announced by or on behalf of
the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and the current
published administrative and assessing policies and practices of the Canada Revenue Agency (the
“CRA”). No assurances can be given that the Tax Proposals will be enacted as proposed, if at all.

The Canadian Tax Act contains provisions relating to securities held by certain financial institutions
(the “mark-to-market rules”). This summary does not take into account these mark-to-market rules.
Shareholders that are “financial institutions” for purposes of these rules should consult their own tax
advisers. This summary does not apply to a Shareholder, an interest in which is a tax shelter
investment. This summary is not exhaustive of all possible Canadian federal income tax
considerations and, except for the Tax Proposals, does not take into account or anticipate any
changes in law, whether by legislative, governmental or judicial decision or action, or any changes in
the administrative and assessing policies and practices of CRA. This summary does not take into
account tax legislation of any province, territory or foreign jurisdiction. Provisions of provincial
income tax legislation vary from province to province in Canada and may differ from federal income
tax legislation.

                                                 102
This summary is of a general nature only and is not intended to be, nor should it be construed
to be, legal or tax advice to any particular Shareholder. Accordingly, Shareholders should
consult their own tax advisers for advice with respect to the income tax consequences to them
of acquiring, holding and disposing of Common Shares having regard to their own particular
circumstances.

10.2 Residents of Canada
The following is a summary of the principal consequences under the Canadian Tax Act generally
applicable to a Shareholder of holding and disposing of Common Shares who, at all relevant times, is,
or is deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable
income tax treaty or convention (a “Canadian Holder”).

(a) Disposition of Common Shares
A Canadian Holder will realise a capital gain (or a capital loss) on a disposition or deemed disposition
of Common Shares equal to the amount, if any, by which the proceeds of disposition, net of any
reasonable costs of disposition, exceed (or are less than) the Canadian Holder’s aggregate adjusted
cost base of such Common Shares. See “Taxation of capital gains and capital losses” below.

(b) Dividends on Common Shares
Dividends received or deemed to be received on Common Shares held by a Canadian Holder will be
included in the recipient’s income for the purposes of the Canadian Tax Act. Such dividends received
by an individual (including most trusts) will be subject to the gross-up and dividend tax credit rules in
the Canadian Tax Act normally applicable to dividends received from taxable Canadian corporations.
Such dividends will qualify for the enhanced gross-up and dividend tax credit mechanism as
described in an announcement made by the Minister of Finance (Canada) on 23 November 2005. A
Canadian Holder that is a corporation will include such dividends in computing its income and
generally will be entitled to deduct the amount of such dividends in computing its taxable income. A
Canadian Holder that is a “private corporation” or “subject corporation” (as such terms are defined
in the Canadian Tax Act) may be liable under Part IV of the Canadian Tax Act to pay a refundable tax
of 331⁄3 per cent. of dividends received or deemed to be received on the Common Shares to the extent
such dividends are deductible in computing the Canadian Holder’s taxable income.

(c) Taxation of capital gains and capital losses
A Canadian Holder will be required to include in income one-half of the amount of any capital gain (a
“taxable capital gain”) and will generally be entitled to deduct one-half of the amount of any capital
loss (an “allowable capital loss”) against taxable capital gains realised by such holder. Allowable
capital losses in excess of taxable capital gains realised in a particular year may be carried back and
deducted in any of the 3 preceding years or carried forward and deducted in any following year
against taxable capital gains realised in such year, to the extent and under the circumstances described
in the Canadian Tax Act. In general, a capital loss otherwise arising on the disposition of a Common
Share by a corporation may be reduced by dividends previously received, or deemed to have been
received, thereon. Similar rules may also apply in circumstances where a corporation is a member of a
partnership or a beneficiary of a trust that owns Common Shares. Canadian Holders to whom these
rules may be relevant should consult their own tax advisers.

A “Canadian-controlled private corporation” as defined in the Canadian Tax Act may be liable to
pay, in addition to tax otherwise payable under the Canadian Tax Act, a refundable tax of 62⁄3 per cent.
of its “aggregate investment income”. For this purpose, investment income will include capital gains.

Capital gains realised by individuals and certain trusts may give rise to alternative minimum tax.

(d) Eligibility for investment
Provided they are listed on a prescribed stock exchange (which includes the TSX), the Common
Shares will be qualified investments under the Canadian Tax Act for trusts governed by registered
retirement savings plans, registered retirement income funds, deferred profit sharing plans and
registered education savings plans.

                                                  103
10.3 Non-Residents of Canada
The following is a summary of the principal consequences under the Canadian Tax Act generally
applicable to a Shareholder (other than a Canadian Holder) of holding and disposing of Common
Shares who, at all relevant times, is neither a resident, nor deemed to be a resident, of Canada for
purposes of the Canadian Tax Act and any applicable tax treaty or convention, and who does not use
or hold, and is not deemed to use or hold, the Common Shares in carrying on a business in Canada (a
“Non-Resident Holder”). Non-Resident Holders should consult their own tax advisers for advice
with respect to any foreign tax consequences applicable to them from holding and disposing of
Common Shares. Non-Resident Holders that are resident or ordinarily resident in the United
Kingdom should also refer to the discussion below under the heading “Tax considerations in the
United Kingdom”.

(a) Disposition of Common Shares
Provided the Common Shares are not taxable Canadian property, nor deemed to be taxable
Canadian property, to a Non-Resident Holder, the holder will not be subject to tax under the
Canadian Tax Act on any capital gain realized on the disposition or deemed disposition of such
Common Shares.

Generally, Common Shares will not be taxable Canadian property to a Non-Resident Holder at a
particular time of disposition provided that the Common Shares are listed on a prescribed stock
exchange (which currently includes the TSX) at that time and at no time during the 60 month period
immediately preceding the date of disposition of the Common Shares did the Non-Resident Holder,
persons with whom the Non-Resident Holder did not deal at arm’s length, or such holder together
with such persons, own 25 per cent. or more of the issued shares of any class or series of the Company.

If Common Shares constitute or are deemed to constitute taxable Canadian property to a particular
Non-Resident Holder, on the disposition or deemed disposition thereof, such holder will realise a
capital gain (or capital loss), generally computed in the manner described above under “Residents of
Canada – Taxation of capital gains and capital losses”. Any such capital gain may be exempt from tax
under the Canadian Tax Act under the terms of an income tax treaty or convention between Canada
and the country in which the Non-Resident Holder resides. In the case of a Non-Resident Holder
resident in the United Kingdom for purposes of the Treaty, whose Common Shares constitute
taxable Canadian property, such Non-Resident Holder will generally not be subject to Canadian
income tax unless the Non-Resident Holder is a resident of Canada at any time during the fiscal year
in which the Common Shares are disposed of or has been resident in Canada at any time during the 6
years immediately preceding the disposition of the Common Shares. Non-Resident Holders whose
Common Shares are taxable Canadian property should consult their own tax advisers for advice
having regard to their particular circumstances.

(b) Dividends on Common Shares
Dividends on Common Shares paid or credited or deemed to be paid or credited to a Non-Resident
Holder will be subject to non-resident withholding tax under the Canadian Tax Act at the rate of
25 per cent., subject to reduction under the provisions of an applicable income tax treaty or
convention and the Company will be required to deduct such amount from any such dividends and
remit the amount to the appropriate Canadian tax authority on behalf of the Non-Resident Holder.
Pursuant to the Treaty, the rate of withholding tax applicable to dividends paid or credited or deemed
to be paid or credited to a Non-Resident Holder who is resident in the United Kingdom for purposes
of the Treaty will generally be reduced to 15 per cent. of the gross amount of the dividend, or 5 per
cent. where the beneficial owner is a company which controls, directly or indirectly, at least 10 per
cent. of the voting power in the Company.

10.4 Tax considerations in the United Kingdom
The following comments are intended as a general guide for the benefit of an investor (holding their
Common Shares through CDIs) as to their tax position under current United Kingdom tax law and
HM Revenue & Customs practice as at the date of this document. They are intended only for

                                                 104
investors who are resident or ordinarily resident in the United Kingdom for tax purposes and who
hold their Common Shares as investments rather than trading stock and who are the beneficial
owners thereof. Any investor who is in any doubt as to their tax position, or who is subject to tax in a
jurisdiction other than the United Kingdom, is strongly recommended to consult their professional
advisers without delay.

(a) Dividends on Common Shares
An investor resident in the United Kingdom for tax purposes will be taxable in full on the gross
amount of any dividend received, including the amount of any withholding tax (see below for relief
available on withholding tax). The tax credit available to non corporate shareholders for dividends
received from United Kingdom companies will not be available to United Kingdom shareholders in
the Company. Corporate shareholders will not benefit from the general exemption from taxation
which is available on dividends received from other United Kingdom companies.
Any Canadian withholding tax suffered on dividends on Common Shares is generally available as a
tax credit against the United Kingdom income tax or corporation tax payable on the dividend. The
amount of such credit cannot exceed the tax liability in the United Kingdom on such dividend.
The Company is not currently required to withhold at source any amount in respect of UK tax from
any dividend paid by the Company.
(b) Capital gains
A disposal of Common Shares by an investor who is either resident or, ordinarily resident for tax
purposes in the United Kingdom, may, depending on the investor’s circumstances and subject to any
available exemptions or reliefs, give rise to a capital gain or allowable loss.
The individual holder of the Common Shares would be entitled to an annual exemption on gains of
up to £8,500 (under current legislation).
For individual holders of Common Shares, taper relief may be available to reduce the amount of the
gain that is liable to tax on chargeable gains, depending on the time for which such Common Shares
have been owned.
A United Kingdom resident corporate holder of the Common Shares would generally be assessable
on a gain on the disposal of the Common Shares at its corporate tax rate. Indexation allowance is
available and under certain circumstances substantial shareholdings exemption is available, which
would exempt in full the gain made.

(c) Stamp duty
It is intended that trading of the Common Shares (which are registered in Canada) on AIM will be
effected on a paperless basis through CREST in the form of UK depositary interests in foreign
securities. It is expected that these depositary interests will qualify for an exemption from the stamp
duty reserve tax on transfer.

11. Share Purchase and Support Agreement
The following paragraphs summarise the material terms of the Share Purchase and Support
Agreement, which will apply following Admission. A copy of the Share Purchase and Support
Agreement is available on the System for Electronic Document Analysis and Retrieval at
www.sedar.com.

11.1 Representations and warranties
In the Share Purchase and Support Agreement, FUN Technologies plc and Liberty made a number
of customary representations and warranties to each other regarding aspects of their respective
businesses, financial condition and other relevant facts.
The representations and warranties provided by FUN Technologies plc in favour of Liberty, Liberty
Freedom and the Company include those relating to: (a) organisation; (b) corporate power,
authorisation and validity of agreement; (c) capitalisation, authorisation and listing; (d) subsidiaries;

                                                  105
(e) no conflicts and notices; (f) reports, financial statements and US law matters; (g) absence of
certain changes; (h) litigation; (i) restrictions on business activities, certain contracts and excluded
jurisdictions; (j) tax matters; (k) contracts and commitments; (l) licenses and compliance with
regulatory matters; (m) employee benefit plans; (n) employee matters; (o) patents, trademarks and
similar rights; (p) minute books; (q) brokers’ and finders’ fees and independent valuation; (r) private
placement; (s) directors’ and officers’ insurance; and (t) English law and UK regulatory matters.
The representations and warranties provided by Liberty in favour of FUN Technologies plc include
those relating to: (a) organisation; (b) corporate power, authorisation and validity of agreement; (c)
no conflicts and notices; (d) brokers’ and finders’ fees; (e) the Company’s status; (f) Common Shares;
(g) Liberty reports and financial statements; and (h) private placement.
The representations and warranties provided by FUN Technologies plc in the Share Purchase and
Support Agreement are qualified in certain instances by exceptions set out in the Disclosure
Schedules delivered.
11.2 Strategic transactions
For so long as Liberty beneficially owns at least 80 per cent. of the shares beneficially owned by it
following the Scheme becoming effective and has at least two nominees serving on the board of FUN
Technologies plc or the Company (as applicable), Liberty agrees to promote, and to use
commercially reasonable efforts to cause its controlled affiliates to promote, the Group’s business.
Any such promotional arrangement will be on arm’s length terms and conditions.
11.3 Pre-emptive rights
For so long as Liberty beneficially owns at least 80 per cent. of the shares beneficially owned by it
following the Scheme becoming effective, subject to the exceptions listed below, Liberty will have
the right to purchase its pro rata share of any securities proposed to be issued by the Company on the
same terms and conditions as such securities are proposed to be issued.
This right will not apply to the issuance of up to an aggregate of 500,000 shares to employees,
officers, directors or consultants pursuant to equity-based arranged that are approved by the
applicable board of directors; shares issued upon the exercise of outstanding options or warrants;
shares issued in connection with stock splits, stock dividends or similar events; and shares issued to
shareholders pursuant to pre-emptive rights under the Companies Act (provided that Liberty shall
have the right to elect to exercise pre-emptive rights under the Share Purchase and Support
Agreement or participate in pre-emptive rights under such Act).
11.4 Indemnification
FUN Technologies plc has agreed to indemnify Liberty for breaches of representations, warranties
and covenants in the Share Purchase and Support Agreement, subject to a US$50 million cap with
respect to breaches of representations and warranties. FUN Technologies plc has also agreed to
indemnify Liberty (not subject to cap) in certain circumstances in connection with FUN
Technologies plc or the Company becoming obligated to pay any material tax liabilities.
11.5 Directors’ and officers’ insurance
Subject to the Scheme becoming effective, for the period from the Scheme becoming effective, until
the earlier of: (a) 6 years from the Scheme becoming effective; and (b) Liberty ceasing to beneficially
own at least 51 per cent. of the outstanding Common Shares, Liberty will: (i) cause the Company to
maintain a “tail” directors’ and officers’ liability insurance policy that maintains existing coverage for
current and former directors and officers with respect to acts or omissions occurring prior to closing;
(ii) maintain an ongoing directors’ and officers’ liability insurance policy for directors and officers of
the Company with respect to acts or omissions occurring after closing for its then-directors and
officers; and (iii) cause the Company to continue to indemnify current and former directors and
officers in accordance with organisation documents and indemnity agreements, provided that
Liberty’s obligation to cause the Company to maintain an ongoing directors’ and officers’ liability
insurance policy as described in clause (b)(ii) will be subject to the aggregate annual cost of the
premium for such policy not exceeding 120 per cent. of the annual premium under FUN
Technologies plc’s existing directors’ and officers’ liability insurance policy for the year ended
31 December 2004, and the approval of the Company’s directors not appointed by Liberty.

                                                  106
11.6 Governing law
The Share Purchase and Support Agreement is governed by Delaware law.

12. Material contracts
The following contracts (not being contracts entered into in the ordinary course of business) have
been entered into by the Company or members of the Group within the two years immediately
preceding the date of this document which are, or may be, material or which contain any provision
under which the Company or any member of the Group has any obligation or entitlement which is
material to the Group as at the date of this document:
(a)   an agency agreement dated 16 June 2004 amongst FUN Technologies plc and CIBC World
      Markets and Canaccord Capital (Europe) Limited (collectively, the “Agents”), pursuant to
      which the Agents effected a placing of special warrants and Ordinary Shares in FUN
      Technologies plc. Under the terms of the agency agreement, FUN Technologies plc
      completed the placing of 4,320,000 special warrants and 80,000 Ordinary Shares in 2 separate
      closings which took place on 30 June 2004 and 22 July 2004. Each special warrant was
      subsequently exercised into an Ordinary Share. Under the terms of the agency agreement,
      FUN Technologies plc paid the agents a cash commission of 6 per cent. of the gross proceeds of
      the placing. The agency agreement contains certain warranties and indemnities given by FUN
      Technologies plc to the Agents. In addition, FUN Technologies plc issued 330,000
      compensation options to the Agents. Each compensation option was exercisable into one
      broker warrant at no cost which was in turn exercisable into one Ordinary Share at a price of
      CDN$2.62;
(b)   an asset purchase agreement dated 30 June 2004 amongst SkillJam, eUniverse, Inc.,
      GameUniverse, Inc. and FUN Technologies plc, pursuant to which FUN Technologies plc
      acquired the business and assets of the skill gaming division of eUniverse, Inc., operating as
      SkillJam. Initial consideration of US$8 million was paid in cash under the terms of the
      agreement. In addition, SkillJam assumed certain liabilities including post-closing liabilities
      arising from assumed contracts and liabilities to the end-users of SkillJam’s games equal to the
      amount of user deposits arising as of the closing of the acquisition. Additional deferred
      consideration is payable on the 45th day after the end of each fiscal quarter commencing
      31 March 2005 based on a percentage (on a declining scale) of the net revenue from the
      European operations of SkillJam up to and including the quarter ending 31 December 2009;
(c)   an agency agreement dated 28 September 2004 amongst FUN Technologies plc and the
      Agents, pursuant to which the Agents effected a placing of 977,700 Ordinary Shares at
      CDN$3.22 per share. Under the terms of the agency agreement, FUN Technologies plc paid
      the Agents a cash commission of 7 per cent. of the gross proceeds of the placing. The agency
      agreement contains certain warranties and indemnities given by FUN Technologies plc to the
      Agents;
(d)   an agency agreement dated 29 September 2004 amongst FUN Technologies plc and the
      Agents pursuant to which the Agents effected a placing of 2,230,500 special warrants at
      CDN$3.22 per special warrant. Under the terms of the agency agreement, FUN Technologies
      plc paid the Agents a cash commission of 6 per cent. of the gross proceeds of the placing. The
      agency agreement contains certain warranties and indemnities given by FUN Technologies plc
      to the Agents. In addition, FUN Technologies plc issued 167,288 compensation options to
      the Agents. Each compensation option was exercisable into one broker warrant at no cost
      which was in turn exercisable into one Ordinary Share at a price of CDN$3.22;
(e)   an agency agreement dated 22 October 2004 amongst FUN Technologies plc and the Agents,
      and a placing agreement dated 22 October 2004 amongst FUN Technologies plc and the
      Agents, pursuant to which the Agents effected a placing of 14 million share in FUN
      Technologies plc at £1.40 (CDN$ 3.18) per share. Under the terms of the agency agreement,
      FUN Technologies plc paid the Agents a cash commission of 5.75 per cent. of the gross
      proceeds of the placing. The agency agreement contains certain warranties and indemnities
      given by FUN Technologies plc to the Agents;

                                                107
(f)   an assignment and assumption agreement dated 4 January 2005 amongst JJR Capital Partners,
      Celeus Capital Corporation, Don Best Sports, LLC, FUN Technologies plc and Layda’s
      Yummies Inc., pursuant to which FUN Technologies plc was assigned the benefit of a purchase
      agreement dated 6 August 2004 (as amended) between Don Best Sports, LLC, Corcom, Inc.,
      DC Sports, Inc., BC Sports, Inc., DAB Properties, Inc., Dana Corbo and Betty Corbo, in
      consideration for the issuance of 2,240,000 Ordinary Shares. In addition, under the
      assignment and assumption agreement, FUN Technologies plc agreed to reimburse the
      assignors for US$1 million of costs and expenses incurred by them in connection with the entry
      into the Don Best Purchase Agreement (referred to in (g) below);
(g)   the Don Best Purchase Agreement, pursuant to which FUN Technologies plc acquired the
      Don Best sports information business for initial consideration of 1 million Ordinary Shares and
      US$40 million which was paid in cash on the closing of the transaction on 31 January 2005. In
      addition, the sellers under the agreement were entitled to deferred consideration in the form of
      the issue of 1 Ordinary Share for each US$1.00 that the earnings before interest, taxes,
      depreciation and amortisation (“EBITDA”) for the 12 month period commencing on the first
      day of the first full month immediately after closing exceeded US$6 million subject to a
      maximum of 1 million Ordinary Shares being issuable, all of which shares were allotted on 15
      December 2005;
(h)   a placing agreement dated 14 January 2005 amongst FUN Technologies plc, Lazard & Co.,
      Limited (acting through its division, Panmure Gordon), CIBC World Markets and Harris
      Partners Limited (collectively, the “Placing Agents”) pursuant to which the Placing Agents
      effected a placing of 4.8 million Ordinary Shares at £1.78 per share. Under the terms of the
      placing agreement, FUN Technologies plc paid the Placing Agents a cash commission of 5 per
      cent. of the gross proceeds of the placing. The placing agreement contains certain warranties
      and indemnities given by FUN Technologies plc to the Placing Agents;
(i)   an asset purchase agreement dated 13 June 2005 amongst FUN Technologies plc, Fantasy
      Sports Acquisition, LLC, Fanball Interactive, LLC, Robert Pythian, Rudy Menendez and Paul
      Charchian pursuant to which FUN Technologies plc acquired all of the assets of Fanball
      Interactive, LLC in consideration for US$12 million in cash, plus an earn-out based on
      EBITDA targets for the Fanball business in 2005 and 2006. Under the terms of the earn-out,
      the sellers are entitled to 6.61 times the 2005 EBITDA, less the initial payment of US$12
      million, plus 6.61 times the EBITDA realized on earnings in excess of US$2.6 million in 2006.
      The overall consideration will not exceed US$22 million;
(j)   the Share Purchase and Support Agreement, summarised in paragraph 11 of this Part VI;
(k)   share purchase agreements dated 30 November 2005 entered into by Columbia Exchange
      Systems Limited, pursuant to which Columbia Exchange Systems Limited sold an aggregate of
      686,700 ordinary shares of 5 pence each in the capital of Betbull to Coatue Offshore Ltd.,
      Coatue Qualified Partners L.P., Blue Ridge Offshore Master Limited Partnership and Blue
      Ridge Limited Partnership for an aggregate consideration of (4,806,900 in cash; and
(l)   a shareholder agreement dated 21 November 2005 between (1) Liberty, Liberty Freedom, the
      Company and (2) the Founder Shareholders pursuant to which the Founder Shareholders have
      agreed, amongst other things, to:
      (a)   elect to receive, pursuant to the mix and match facility under the Scheme, Common
            Shares for all the shares in FUN Technologies plc they directly or indirectly beneficially
            own or control (subject to availability depending on the elections made by other
            shareholders); and
      (b)   retain beneficial ownership (directly or indirectly) and control over specified numbers of
            Common Shares and options to acquire Common Shares, for a period of 3 years
            following the Scheme becoming effective, as set out below.
      Prior to the date the Scheme becomes effective, none of the Ordinary Shares (or options to
      acquire Ordinary Shares) that are directly or indirectly beneficially owned or controlled by the
      Founder Shareholders may be transferred to any person. Following the date the Scheme

                                                108
      becomes effective, the Founder Shareholders are required to maintain direct or indirect
      beneficial ownership and control over the following number of Common Shares (including
      options to acquire Common Shares and the Common Shares issued upon exercise of such
      options):
      (a)   until the first anniversary of the Scheme becoming effective, each of the Founder
            Shareholders is required to retain an amount of Common Shares equal to the number of
            Common Shares in respect of which he holds share options, which in the case of
            Mr. Abony will comprise 950,000 Common Shares and in the case of Mr Rivkin will
            comprise 1.2 million Common Shares together with 80 per cent., in the case of
            Mr. Abony and 100 per cent. in the case of Mr. Rivkin, of the Common Shares received
            by or on behalf of them or those of the other Founder Shareholders connected with
            them, in the Scheme;
      (b)   from the first anniversary until the second anniversary of the Scheme becoming effective,
            each of the Founder Shareholders is required to retain an amount equal to 50 per cent. of
            the number of Common Shares he or it was required to retain during the period
            beginning on the date the Scheme becomes effective and ending on the first anniversary
            of that date; and
      (c)   from the second anniversary until the third anniversary of the Scheme becoming
            effective, each of the Founder Shareholders is required to retain an amount equal to
            50 per cent. of the number of Common Shares he or it was required to retain during the
            period beginning on the first anniversary of the date the Scheme becomes effective and
            ending on the second anniversary of that date.
      The shares in FUN Technologies plc that are directly or indirectly beneficially owned or
      controlled by the Founder Shareholders comprise in aggregate 3.64 million shares and
      represent approximately 7.1 per cent. of the shares in FUN Technologies plc in issue, as of the
      date of this document, of which Mr. Abony is beneficially interested in 3.44 million shares and
      Mr Rivkin is beneficially interested in 200,000 shares.
      In addition, the Founder Shareholders have granted Liberty a right of first refusal with respect
      to the Common Shares and options to acquire Common Shares (including the Common
      Shares to be issued upon the exercise of such options) they will directly or indirectly beneficially
      own and control following the date the Scheme becomes effective until the date upon which
      Liberty ceases to beneficially own at least 5 per cent. of the outstanding number of shares in the
      Company.
      Andrew Rivkin and Lorne Abony have each entered into certain restrictive covenants not to
      compete with the business of the Group until the first anniversary of the date they cease to be an
      officer, director, employee of, or a consultant to, the Group (or if earlier, the date of
      termination of the Share Purchase and Support Agreement or the date upon which Liberty
      cease to beneficially own at least 80 per cent. of the number of shares in the Company
      beneficially owned by it immediately following completion of the Scheme) (the “Restricted
      Period”).
      They have also entered into certain restrictive covenants not to solicit certain officers and
      employees, customers and suppliers of the Group during the Restricted Period and for a period
      of 2 years thereafter; and
(m) an engagement letter dated 3 March 2006 between Panmure Gordon and the Company
    pursuant to which Panmure Gordon has been appointed to act as nominated adviser and
    corporate broker to the Company. Under the terms of the letter, Panmure Gordon is entitled
    to a fee of £60,000 per annum. The engagement is automatically renewable annually but may
    be terminated by the Company or Panmure Gordon on 7 days’ written notice.

13. Working capital
In the opinion of the Directors, having made due and careful enquiry, the working capital available to
the Group is sufficient for its present requirements, that is for at least the next 12 months from the
date of Admission.

                                                  109
14. Litigation
Save as disclosed in the section entitled “Risk factors” in Part II of this document, no member of the
Group is or has been involved in any governmental, legal or arbitration proceedings which may have
or have had during the last 12 months preceding the date of this document, a significant effect on the
financial position or profitability of the Company and/or the Group nor, so far as the Company is
aware, are any such proceedings pending or threatened.

15. Consents
15.1 Panmure Gordon is acting as nominated adviser and broker to the Company and is regulated
     by the Financial Services Authority. Panmure Gordon has given and has not withdrawn its
     written consent to the issue of this document with the inclusion of its name and the references
     to it in the form and context in which it appears.
15.2 KPMG Audit Plc, Chartered Accountants and Registered Auditors, of 8 Salisbury Square,
     London EC4Y 8BB, United Kingdom and KPMG LLP, of Yonge Corporate Centre, 4100
     Yonge Street, Suite 200, Toronto, Ontario, M2P 2H3, Canada, have given and have not
     withdrawn their written consent to the issue of this document with the inclusion of their name
     and reports in Parts III and IV of this document and the references to such reports and their
     name, in the form and context in which they appear.

16. General
16.1 Save for the purposes of implementing the Scheme, the Company has not traded since
     incorporation.
16.2 Save as disclosed in Part III of this document and save as described in the paragraph headed
     “Current trading and prospects” in Part I of this document, there has been no significant
     change in the financial or trading position of FUN Technologies plc or its subsidiaries since
     31 December 2004, being the end of the last financial period for which audited consolidated
     accounts have been published.
16.3 There has been no significant change in the financial or trading position of the Company since
     31 December 2005, being the end of the last financial period for which audited accounts have
     been published.
16.4 Save as disclosed in this document, no person (excluding professional advisers otherwise
     disclosed in this document and trade suppliers) has received, directly or indirectly, since the
     date of incorporation of the Company or entered into contractual arrangements to receive,
     directly or indirectly, from the Company on or after Admission:
      (a)   fees totalling £10,000 or more;
      (b)   securities where these have a value of £10,000 or more calculated by reference to the
            expected price of the Common Shares on Admission; or
      (c)   any other benefit with a value of £10,000 or more at the date of Admission.
      There have been no public takeover bids by third parties in respect of the Common Shares
      which have occurred during the last financial year or the current financial year of the Company.
16.5 Save as disclosed in this document, the Company is are unaware of any exceptional factors
     which have influenced the Group activities.
16.6 Save as disclosed in this document, the Company is unaware of any environmental issues that
     may affect the Group’s utilisation of its tangible fixed assets.
16.7 Save as disclosed in this document, there have been no significant recent trends in production,
     sales and inventory, and costs and selling prices since 31 December 2005 and the Company is
     unaware of any trends, uncertainties, demands, commitments or events that are reasonably
     likely to have a material effect on the Group’s prospects for the current financial year.
16.8 Save as disclosed in this document, there are no investments in progress and there are no future
     investments on which the Company has already made firm commitments which are significant
     to the Group.

                                                110
16.9 Save as described in this document, the Company believes that the Group is not dependent on
     patents or licences, industrial, commercial or financial contracts or new manufacturing
     processes which are material to the Group’s business or profitability.
16.10 The current accounting reference period of the Company will end on 31 December 2006.

17. Availability of this document
Copies of this document are available free of charge from the Company’s registered office and at the
offices of Panmure Gordon, Moorgate Hall, 155 Moorgate, London EC2M 6XB, during normal
business hours on any weekday (Saturdays, Sundays and public holidays excepted) and will remain
available for at least one month after Admission.
Dated 3 March 2006




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