E 8075Pro-20010524.Pdf

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Important

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

Listing on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited PLACING

Number of Placing Shares : 90,000,000 Shares consisting of 70,000,000 New Shares and 20,000,000 Sale Shares (subject to Over-allocation Option of up to 13,500,000 existing Shares) Placing Price : HK$1.00 per Share Nominal value : HK$0.10 each Stock code : 8075

Global Co-ordinator and Sponsor

Core Pacific – Yamaichi Capital Limited Lead Manager Core Pacific – Yamaichi International (H.K.) Limited Co-Lead Manager Celestial Capital Limited Co-Managers Pacific Challenge Securities Limited CEF Capital Limited Grand Cathay Securities (Hong Kong) Limited SBI E2-Capital Securities Limited Shenyin Wanguo Capital (H.K.) Limited First Shanghai Capital Limited Tai Fook Securities Company Limited YF Securities Company Limited Financial Adviser to the Company

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

A copy of this prospectus, having attached thereto the documents specified in the paragraph headed “Documents delivered to the Registrar of Companies” in Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above. 24th May, 2001 Characteristics of GEM

CHARACTERISTICS OF GEM

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

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

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

ROJAM ENTERTAINMENT HOLDINGS LIMITED i Expected Timetable

2001 (Note 3)

Application lists open and close ...... 11:45 a.m. to 12:00 noon on Tuesday, 29th May

Allotment and transfer (as the case may be) of Placing Shares ...... Tuesday, 29th May

Announcement of the level of indication of interest in the Placing to be published on the GEM website at www.hkgem.com on or before ...... 9:00 a.m. on Wednesday, 30th May

Despatch of share certificates on or before (Note 1) ...... Wednesday, 30th May

Dealings in the Shares on GEM to commence on (Note 2) ...... Thursday, 31st May

Notes:

(1) The share certificates are expected to be deposited into CCASS on or about 30th May, 2001 for credit to the respective CCASS participants, stock accounts designated by the Underwriters.

(2) It will be subject to the Placing becoming unconditional. Please refer to the paragraph headed “Conditions of the Placing” in the section headed “Structure and Conditions of the Placing” in this prospectus.

(3) All time references are to Hong Kong time.

ROJAM ENTERTAINMENT HOLDINGS LIMITED ii Contents

You should rely only on the information contained in this prospectus to make your investment decision.

The Company has not authorised any one to provide you with information that is different from what is contained in this prospectus.

Any information or representation not made in this prospectus must not be relied on by you as having been authorised by the Company, the Sponsor, the Underwriters, any of their respective directors or any other person involved in the Placing.

Page

Summary ...... 1

Definitions ...... 17

Glossary of Technical Terms ...... 24

Risk Factors ...... 27

Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance ...... 34

Information about this Prospectus and the Placing ...... 39

Directors ...... 43

Parties involved in the Placing ...... 44

Corporate Information ...... 47

Industry Overview ...... 48

General Overview of the Group Group Structure ...... 55 History and Development ...... 55 Active Business Pursuits ...... 57 Competitive Strengths ...... 61 Corporate Reorganisation ...... 62 Description of Business ...... 67 Profiles of Producers and International Celebrity ...... 74 Producer and Artiste Audition ...... 78 Strategic Investors ...... 80 Customers and Suppliers ...... 83 Sales and Marketing ...... 86 Technology and Quality Assurance ...... 87 Intellectual Property Rights ...... 87 Competition ...... 87 Competing Interests of the Directors, Initial Management Shareholders and Substantial Shareholders ...... 88 Non-Competition Undertaking ...... 90 Other Undertaking ...... 90 Connected Party Transactions ...... 90 Foreign Exchange ...... 97

ROJAM ENTERTAINMENT HOLDINGS LIMITED iii Contents

Page

Future Plans and Prospects Overall Business Objectives ...... 98 Business Strategies ...... 98 Statement of Business Objectives ...... 100 Bases and Assumptions ...... 104 Use of Proceeds ...... 105

Directors, Senior Management and Staff Executive Directors ...... 106 Independent Non-executive Directors ...... 107 Directors’ Remuneration ...... 107 Senior Management ...... 107 Company Secretary ...... 109 Audit Committee ...... 109 Staff ...... 110 The Group’s Relationship with Staff ...... 110 Remuneration Policy ...... 110 Share Option Scheme ...... 110

Pre-IPO Grant of Options ...... 111

Initial Management Shareholders, Significant Shareholders and Undertakings ...... 116

Share Capital ...... 121

Financial Information Indebtedness ...... 123 Liquidity, Financial Resources and Capital Structure ...... 123 Trading Record ...... 125 Turnover and Revenue ...... 126 Management’s Discussion and Analysis of Financial Condition and Results of Operation ...... 127 Taxation ...... 130 Dividends ...... 131 Property Interests ...... 131 Distributable Reserves ...... 132 Adjusted Net Tangible Assets ...... 132 Rules 17.15 to 17.21 of the GEM Listing Rules ...... 133 No Material Adverse Change ...... 133 Profit Estimate ...... 133 Earnings per Share ...... 133

Underwriting Underwriters ...... 134 Underwriting Arrangements and Expenses ...... 134

ROJAM ENTERTAINMENT HOLDINGS LIMITED iv Contents

Page

Structure and Conditions of the Placing ...... 138

Appendix I – Accountants’ Report ...... 141

Appendix II – Profit Estimate ...... 158

Appendix III – Property Valuation ...... 161

Appendix IV – Summary of the Constitution of the Company and the Cayman Islands Company Law ...... 168

Appendix V – Statutory and General Information ...... 191

Appendix VI – Documents Delivered to the Registrar of Companies and Available for Inspection ...... 218

ROJAM ENTERTAINMENT HOLDINGS LIMITED v Summary

This summary aims to give you an overview of the information contained in this prospectus. As a summary, it does not contain all the information that may be important to you. You should read the whole document before you decide to invest in the Placing Shares. There are risks associated with any investment in companies listed on GEM. Some of the risks in investing in the Placing Shares are set out in the sections headed “Characteristics of GEM” and “Risk Factors” of this prospectus. You should read those sections carefully before deciding to invest in the Placing Shares.

GENERAL OVERVIEW OF THE GROUP

Mr. Tetsuya Komuro has made prominent achievements in music production and has gained outstanding recognition in the music industry in Japan. In the past, Mr. Tetsuya Komuro has been engaged as executive producer by several renowned record companies, including Sony Music Entertainment, Inc. and Avex and has produced music recordings for a number of artistes such as TRF, globe, Namie Amuro, H Jungle with t and Ami Suzuki. According to record companies’ reports, an aggregate of over 168 million copies of records produced by Mr. Tetsuya Komuro have been sold as of December 2000. As a chief executive producer, Mr. Tetsuya Komuro not only contributes his expertise in music production but also supervises marketing plans and strategies. Moreover, Mr. Tetsuya Komuro has also been actively permeating his music into a variety of multi-media contents and products, such as movies, multi-media advertisements, games and performances in several international events. In order to capitalise on the increasing demands for quality audio contents in various areas, Mr. Tetsuya Komuro founded the Group with Mr. Kebo Wu aiming at creating a prime music production house in Asia focusing on Japan, South Korea, Hong Kong, Macau, PRC and Taiwan markets.

The Group has established a strong team of producers led by Mr. Tetsuya Komuro and currently comprises nine experienced producers. This team of producers has already secured producer contracts with two of the leading record companies in Japan. The Group will continue to expand its team of producers whilst further exploring other opportunities to provide music production services to other major record companies and companies in the entertainment industry. The Directors consider that the Group’s team of producers will be able to maintain a steady income stream for the Group. The Group’s team of producers, under the leadership of Mr. Tetsuya Komuro, aims to extend its services to a wider scope of contents with musical elements such as movies, multi-media advertisements and video games.

Taking advantage of its strength in music production, the Group has expanded its business operations into different market segments and developed multiple revenue sources from a diversified business portfolio comprising music production, music publishing, trademark licensing, record distribution, artiste and event management. In addition, the Group operates and maintain a music entertainment portal and plans to develop a music learning centre.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 1 Summary

The following table outlines the existing and prospective principal business activities of the Group:

Business Element Target Customers Business Scope

Music production Record companies and Provision of services of music producers, advertisement and movie arranging, mixing and re-mixing music production houses and advisory services in respect of selection of songs for records production

Music publishing Record companies and The assignment or licensing of music advertisement compositions to production houses music content users

Trademark licensing Entertainment companies Licensing the Group’s trademarks such as discotheques and karaoke boxes

Artiste and event Entertainment companies Organising, promoting and arranging public management and general public performances, public appearances for such as concert organisers artiste(s) and artiste management

Record distribution Record stores Sale of records

Music learning General public with Provision of music production centre interest in music and vocalism courses production or/and vocal training

Music entertainment General public Provision of music and entertainment portal related materials and information on the Internet and the Click Audition system

STRENGTHS

The Directors believe that the Group can become one of the premier integrated music production houses and an experienced and reliable business partner for various entertainment companies in Asia. In particular, the Directors believe that the Group has the following competitive advantages:

• the management has extensive experience in the music and entertainment industry and good knowledge of the regional music market which will enable them to capture the latest music trend and development;

• the team of producers led by Mr. Tetsuya Komuro includes renowned producers, such as, Daisuke Asakura, Koji Kubo (Cozy Kubo) and Takeshi Hayama giving good reputation and publicity for the Group;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 2 Summary

• established close working relationship with companies in the music and entertainment industry enables the Group to efficiently expand its existing business in Japan and Hong Kong into other markets in Asia, such as Taiwan, South Korea and the PRC in the future;

• the Group’s shareholders include a number of reputable companies, such as SOFTBANK, NTT and Dentsu which provide strong shareholders’ support for the Group and assist in creating new business opportunities; and

• as an early mover in deploying the Internet in music production related services and producers and artistes recruitment, the Group can benefit from the convergence of music and the Internet.

THE GROUP’S OVERALL BUSINESS OBJECTIVES

It is the Group’s mission to become a primier music production house and a strong business partner of choice for entertainment companies in Asia. To realise this mission, the Group plans to pursue a range of key strategic initiatives to enable it to expand its presence in the region and to enhance its services and consolidate the foundations required for the Group’s business to continue its success in the future.

The key strategic initiatives that the Group plans to pursue can be summarised as follows:

• Expand its customer base and enhance its core business operations of music production by building up its business alliance with major players in the entertainment industry;

• Strengthen its music production capacity by sourcing new talents;

• Geographical expansion in Asia;

• Increase its current level of recognition and publicity by investing in business development and marketing;

• Exploitation of the Internet media.

CORPORATE SHAREHOLDING

The Group’s corporate reorganisation is detailed in the paragraph headed “Group reorganisation” in Appendix V to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 3 Summary

The following chart shows the shareholders of the Company and their respective approximate percentage shareholdings in the Shares of the Company (immediately after the completion of the Placing without the exercise of the Over-allocation Option) as categorised as “Non-Public” and “Public” members under the GEM Listing Rules:

SOFTBANK * 8.31% Non-Public Initial * Management 53.59% Shareholders (62.25%) Related * Investors under Third Singing 0.35% Mermaid Placement

Supreme * Effort Enterprises 1.85% Limited

Employees * 0.25% Rojam Entertainment Independent Investors under Holdings Limited First Billion 2.72% Moment (Incorporated in the Cayman Islands with limited liability) Placement

Producers * 8.12% Independent Investors under Second Billion 0.14% Moment Placement Independent * Investors under First Singing 6.04% Mermaid Independent Placement Investors under Public Third Billion 0.53% Moment Placement Independent (37.75%) Investors under Second Singing 4.91% Mermaid Placement InvestorsInvestors under the 8.15% Placing Independent Investors under Third Singing 0.40% Mermaid Placement

Strategic Investors 4.64% (Note)

Note: These include all strategic investors except SOFTBANK.

* Shareholders subject to non-disposal undertakings, the details of which is referred on page 9 of this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 4 Summary

The interests of the shareholders of the Company upon completion of the Placing, without taking into account any Shares to be transferred pursuant to the exercise of the Over-allocation Option, any Shares to be issued pursuant to any options under the Pre-IPO Grant of Options and the Share Option Scheme, are set out below:

Initial Management Shareholders 1. Tetsuya Komuro (Notes 1 & 18) 7th April, 2000 467,892,667 42.36% 0.112 52,403,978.7 2. Billion Moment Limited (Notes 2, 16 & 18) 17th April, 2000 75,883,333 6.87% 0.1 7,588,333.3 3. Tomohiko Domen (Note 3) 1st July, 2000 27,022,000 2.45% 0.1 2,702,200.0 4. Arihito Yamada (Note 4) 1st July, 2000 8,913,600 0.81% 0.1 891,360.0 5. Cheng Wing Ki, Aouda (Notes 2 & 5) 1st July, 2000 5,306,000 0.48% 0.1 530,600.0 6. Asami Yoshida (Note 8) 1st July, 2000 1,100,000 0.10% 0.1 110,000.0 7. Keiichi Uezumi (Notes 4 & 9) 1st July, 2000 4,085,400 0.37% 0.1 408,540.0 8. Yuri Shimomura (Note 9) 1st July, 2000 1,333,000 0.12% 0.1 133,300.0 9. Yoshimi Oishi (Note 9) 1st July, 2000 350,000 0.03% 0.1 35,000.0

591,886,000 53.59%

Strategic Investors (Note 17) 1. SOFTBANK 30th August, 2000 91,750,000 8.31% 0.8 73,400,000.0 2. NTT 13th October, 2000 18,750,000 1.70% 0.8 15,000,000.0 3. Dentsu 4th August, 2000 8,984,403 0.81% 0.8 7,187,522.4 4. Media Factory 14th August, 2000 6,250,000 0.57% 0.8 5,000,000.0 5. AEON (JPN) 4th August, 2000 3,125,000 0.28% 0.8 2,500,000.0 6. AEON (HK) 4th August, 2000 3,125,000 0.28% 0.8 2,500,000.0 7. Avex 29th September, 2000 2,700,000 0.24% 0.8 2,160,000.0 8. SOTEC 9th February, 2001 8,390,000 0.76% 0.8 6,712,000.0

143,074,403 12.95%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 5 Summary

Producers 1. Ryuichi Sakai 1st July, 2000 52,500,000 4.75% 0.1 5,250,000 2. Naoto Kine 1st July, 2000 16,580,000 1.50% 0.1 1,658,000 3. Koji Kubo 1st July, 2000 14,000,000 1.27% 0.1 1,400,000 4. Takashi Utsunomiya 1st July, 2000 6,666,000 0.60% 0.1 666,600

89,746,000 8.12%

Employees (Note 6) 1st July, 2000 2,743,000 0.25% 0.1 274,300

Company beneficially owned by ex-Director and his Associate Supreme Effort Enterprises Limited (Note 7) 1st July, 2000 20,483,000 1.85% 0.1 2,048,300

20,483,000 1.85%

Investors under First Singing Mermaid Placement (Note 10) 1st July, 2000 66,833,000 6.04% 0.1 6,683,300 Second Singing Mermaid Placement (Note 11) 9th Februrary, 2001 54,208,000 4.91% 0.8 43,366,400 First Billion Moment Placement (Note 12) 9th Februrary, 2001 30,000,000 2.72% 0.8 24,000,000 Third Singing Mermaid Placement (Note 13) 23rd March, 2001 8,261,000 0.75% 0.8 6,608,800 Second Billion Moment Placement (Note 14) 23rd March, 2001 1,600,000 0.14% 0.8 1,280,000 Third Billion Moment Placement (Note 15) 3rd April, 2001 5,850,000 0.53% 0.8 4,680,000

166,752,000 15.09%

Sub-Total 1,014,684,403 91.85%

Placing Shares (New Shares) 70,000,000 6.34% Placing Shares (Sale Shares)(Note 16) 20,000,000 1.81%

Total 1,104,684,403 100.00%

Notes:

1. Singing Mermaid, the founding member of the Company which was incorporated in the British Virgin Islands and 100% owned by Mr. Tetsuya Komuro, transferred all the Shares held by it to Mr. Tetsuya Komuro on 12th February, 2001.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 6 Summary

2. Billion Moment is held as to 90% and 10% by Mr. Kebo Wu, an executive Director and Ms. Cheng Wing Ki, Aouda respectively. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director. Mr. Kebo Wu is taken to be interested in the 75,883,333 Shares because of his 90% interest in Billion Moment. Mr. Kebo Wu is also an Initial Management Shareholder.

3. Mr. Tomohiko Domen, an executive Director, acquired 27,022,000 Shares from Jade Treasure Investments Limited (a company incorporated in the British Virgin Islands which became a shareholder of the Company on 1st July, 2000) on 23rd March, 2001. Jade Treasure Investments Limited is held as to 70% and 30% by Mr. Tomohiko Domen and his spouse, Mrs. Chiyoko Domen respectively.

4. Mr. Arihito Yamada, Mr. Keiichi Uezumi and Mr. Masahiro Seki, shareholders of Starnet Investment Group Limited (“Starnet”) (a company incorporated in the British Virgin Islands which became a shareholder of the Company on 1st July, 2000) holding 48%, 22% and 30% equity interest in Starnet respectively, acquired the Shares held by Starnet proportionate to their respective percentage of shareholdings in Starnet on 23rd March, 2001.

5. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director.

6. There are 9 employees of the Group each holding between 130,000 Shares to 1,333,000 Shares.

7. Supreme Effort Enterprises Limited, a company incorporated in the British Virgin Islands, is held as to 60% and 40% by Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa respectively. Mr. Hiroshi Ozawa served as a Director for the period between 1st July, 2000 and 20th December, 2000, and Mrs. Naomi Ozawa is his spouse.

Omnicourt Limited, a company indirectly owned by Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa, has been engaged by the Group to set up and maintain the website of the Group since April 2000. Omnicourt Limited is a wholly- owned subsidiary of HAL Communications, Inc. which is 100% owned by Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa. Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa are directors of Omnicourt Limited.

8. Ms. Asami Yoshida is the spouse of Mr. Tetsuya Komuro, an executive Director. Ms. Asami Yoshida was the Group’s exclusive artiste for the period between July 2000 and February 2001. Ms. Asami Yoshida became an artiste of Pony Canyon Inc. and terminated the artiste management agreement with the Group in February 2001 as Pony Canyon Inc. subsequently engaged the Group as its music producer.

9. Mr. Keiichi Uezumi, Ms. Yuri Shimomura and Ms. Yoshimi Oishi are members of the senior management of the Group.

10. Singing Mermaid sold the 66,833,000 Shares to 18 independent investors each holding between 130,000 Shares to 13,333,000 Shares. Among these 18 independent investors, 14 of them, holding in aggregate 60,487,000 Shares, had and/or will continue to have business working relationships with Mr. Tetsuya Komuro, an executive Director, while 4 of them, holding in aggregate 6,346,000 Shares are employees of companies in which Mr. Tetsuya Komuro is directly or indirectly interested.

11. Singing Mermaid sold the 54,208,000 Shares to 14 independent investors each holding between 830,000 Shares to 10,000,000 Shares. All 14 investors holding in aggregate 54,208,000 Shares are investors including Japanese individuals and corporations who are independent of the Directors, chief executive or significant shareholders of the Group and their respective associates.

12. Billion Moment sold the 30,000,000 Shares to one independent investor. This independent investor is a company wholly owned by Mr. Chow Siu Hong and his spouse. Mr. Chow Siu Hong and Mr. Kebo Wu, an executive Director, are business partners. Each of Mr. Chow Siu Hong and Mr. Kebo Wu owns 25% of Guo Ye Enterprises Limited which held 50% of REL for the period between 19th January, 1998 and 18th April, 2000. REL became a wholly- owned subsidiary of the Company after the Corporate Reorganisation as set out on page 62 of this prospectus. Mr. Chow Siu Hong and his spouse have neither been appointed as directors nor served as senior management of the Company or any of its subsidiaries.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 7 Summary

employee of his private company, and two independent third parties holding in aggregate 3,584,000 Shares. In addition, 7 of them, holding in aggregate 3,877,000 Shares, are relatives of Mr. Tetsuya Komuro and their respective shareholdings and relationships are shown as below:

Approximate percentage of shareholding (immediately after the completion of the Placing and assuming that the Date of Name of Relationship with Number of Over-allocation Option Transfer Shareholder Mr. Tetsuya Komuro Shares Consideration is not exercised) (HK$)

23rd March, 2001 Yoshimi Sakuma Mr. Tetsuya Komuro’s 1,000,000 800,000 0.094% mother’s cousin 23rd March, 2001 Yu Sakuma Daughter of 500,000 400,000 0.045% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Tomo Sakuma Daughter of 417,000 333,600 0.038% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Tamaaki Ishida Husband of 292,000 233,600 0.026% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Hiromi Ishida Mr. Tetsuya Komuro’s 834,000 667,200 0.075% mother’s cousin 23rd March, 2001 Nozomi Ishida Daughter of 417,000 333,600 0.038% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Ryonosuke Ishida Son of 417,000 333,600 0.038% Mr. Tetsuya Komuro’s mother’s cousin

14. Billion Moment sold the 1,600,000 Shares to 2 independent investors.

15. Billion Moment sold the 5,850,000 Shares to 3 independent investors, each holding 975,000 Shares, 1,072,500 Shares and 3,802,500 Shares. The 3 independent investors are (i) a wholly owned subsidiary of Great Eagle Holdings Limited (“Great Eagle”), being a company of which the securities are listed on the Stock Exchange, (ii) a company wholly owned by a director of Great Eagle, and (iii) a company wholly owned by a director of BNP Paribas Peregrine Capital Limited, financial adviser to the Company, respectively. Consideration for the said Shares was settled in full by each of the 3 independent investors transferring to Billion Moment certain shares in a company incorporated in the State of Delaware, U.S.A. which is principally engaged in record distribution and is independent of the Directors, chief executive or significant shareholders of the Company and their respective Associates.

16. Billion Moment will offer for sale a total of 20,000,000 existing Shares under the Placing.

17. For details of these strategic investors, please refer to the section headed “Strategic investors” on page 80 of this prospectus.

18. If the Over-allocation Option is fully exercised, 456,822,667 Shares and 73,453,333 Shares will be held by Mr. Tetsuya Komuro and Billion Moment, respectively. These represent approximately 41.35% and 6.65% respectively of the issued share capital of the Company immediately after the completion of the Placing.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 8 Summary

RESTRICTION ON DISPOSAL OF SHARES

Number of Approximate Shares held percentage of or interested in shareholding (immediately after (immediately after the completion the completion Lock up period of the Placing of the Placing commencing from and assuming and assuming the date when that the Over- that the Over- dealings in allocation Option allocation Option Shares commence Nature of shareholders is not exercised) is not exercised) on GEM

INITIAL MANAGEMENT SHAREHOLDERS

Mr. Tetsuya Komuro 467,892,667 42.36% 6-12 months (Note 5) Billion Moment (Note 1) 75,883,333 6.87% 6 months (Notes 5 & 6) Mr. Kebo Wu (Note 1) 75,883,333 6.87% 6 months (Notes 5 & 6) Mr. Tomohiko Domen 27,022,000 2.45% 6 months (Note 5) Mr. Arihito Yamada 8,913,600 0.81% 6 months (Note 5) Ms. Cheng Wing Ki, Aouda (Notes 1 & 2) 5,306,000 0.48% 6 months (Notes 5 & 6) Ms. Asami Yoshida (Note 7) 1,100,000 0.10% 6 months (Note 5) Mr. Keiichi Uezumi 4,085,400 0.37% 6 months (Note 5) Ms. Yoshimi Oishi 350,000 0.03% 6 months (Note 5) Ms. Yuri Shimomura 1,333,000 0.12% 6 months (Note 5)

591,886,000 53.59%

SIGNIFICANT SHAREHOLDER

SOFTBANK (Note 3) 91,750,000 8.31% 12 months (Note 5)

OTHER SHAREHOLDERS SUBJECT TO NON-DISPOSAL UNDERTAKING

Supreme Effort Enterprises Limited (Note 4) 20,483,000 1.85% 6 months (Note 5)

Producers (Note 9) Ryuichi Sakai 52,500,000 4.75% 6 months Naoto Kine 16,580,000 1.50% 6 months Koji Kubo 14,000,000 1.27% 6 months Takashi Utsunomiya 6,666,000 0.60% 6 months

89,746,000 8.12%

Employees (Note 10) 2,743,000 0.25% 6 months Independent Investors under First Singing Mermaid Placement (Note 11) 66,833,000 6.04% 6 months Related investors under Third Singing Mermaid Placement (Note 8) 3,877,000 0.35% 6 months

Total 867,318,000 78.51%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 9 Summary

Notes:

1. Billion Moment is held as to 90% and 10% by Mr. Kebo Wu, an executive Director, and Ms. Cheng Wing Ki, Aouda, respectively. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director. Mr. Kebo Wu is deemed to be interested in the 75,883,333 Shares, since he owns 90% interest in Billion Moment.

2. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director.

3. SOFTBANK is one of the strategic investors of the Company. For details of the strategic investors, please refer to the section headed “Strategic investors” on page 80 of this prospectus.

4. Supreme Effort Enterprises Limited is held as to 60% and 40% by Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa, respectively. Mr. Hiroshi Ozawa served as a Director for the period between 1st July, 2000 and 20th December, 2000, and Mrs. Naomi Ozawa is his spouse.

Each of Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa has undertaken to the Company, the Stock Exchange, CPY and the Underwriters not to dispose of (or enter into any agreement to dispose of) or permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in Supreme Effort Enterprises Limited within the First Relevant Lock-up Period.

5. Each of Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Tomohiko Domen, Mr. Arihito Yamada, Ms. Cheng Wing Ki, Aouda, Ms. Asami Yoshida, Mr. Keiichi Uezumi, Ms. Yoshimi Oishi and Ms. Yuri Shimomura are Initial Management Shareholders and have undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period. Mr. Tetsuya Komuro has also undertaken not to dispose of (or enter into any arrangement to dispose of) any of his direct or indirect interests in the Relevant Securities during the Second Relevant Lock-up Period which will result in the number of the Relevant Securities placed by him in escrow being less than 35% of the issued share capital of the Company, and Mr. Tetsuya Komuro must not, save as stipulated in the GEM Listing Rules, dispose of (or enter into any arrangement to dispose of) nor permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of his direct or indirect interests in the Relevant Securities such that he would cease to control at least 35% of the voting powers at general meetings of the Company.

SOFTBANK, being a significant shareholder, has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period and the Second Relevant Lock-up Period.

Supreme Effort Enterprises Limited has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

6. Each of Mr. Kebo Wu and Ms. Cheng Wing Ki, Aouda has undertaken to the Company, the Stock Exchange, CPY and the Underwriters not to dispose of (or enter into any agreement to dispose of) or permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in Billion Moment within the First Relevant Lock-up Period.

7. Ms. Asami Yoshida is the spouse of Mr. Tetsuya Komuro.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 10 Summary

8. Mr. Tetsuya Komuro sold the 8,261,000 Shares to 11 investors each holding between 292,000 Shares to 1,917,000 Shares on 23rd March, 2001. 7 of them, holding in aggregate 3,877,000 Shares, are relatives of Mr. Tetsuya Komuro and their respective shareholdings and relationships are shown as below:

Each of the 7 relatives of Mr. Tetsuya Komuro has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of his/her direct and indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

9. Each of the producers has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of his direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

10. There are 9 employees of the Group each holding between 130,000 Shares to 1,330,000 Shares. Each of the employees has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

11. There are 18 independent investors each holding between 130,000 Shares to 13,333,000 Shares. Among these 18 independent investors, 14 of them, holding in aggregate 60,487,000 Shares, had and/or will continue to have business working relationships with Mr. Tetsuya Komuro, an executive Director, while 4 of them, holding in aggregate 6,346,000 Shares, are employees of companies in which Mr. Tetsuya Komuro is directly or indirectly interested. Each of these investors has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holders thereof to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 11 Summary

TRADING RECORD

The table below sets out a summary of the audited results of the Group for the two financial years ended 31st March, 2000 and the nine months ended 31st December, 2000 (the “Track Record Period”), which should be read in conjunction with the Accountants’ Report set out in Appendix I to this prospectus. The combined results are prepared on the basis of presentation set out in the Accountants’ Report.

Nine months Year ended ended 31st March, 31st December, 1999 2000 2000 HK$’000 HK$’000 HK$’000

Turnover 4,662 1,506 94,012

(Loss)/profit before taxation (1,302) (916) 17,753

Taxation –––

(Loss)/profit attributable to shareholders (1,302) (916) 17,754

Dividend (Note 1) –––

(Loss)/earnings per Share – Basic (Note 2) (0.1) cent (0.1) cent 1.7 cents

Notes:

1. No dividends have been paid or declared by the Company and the companies now comprising the Group during the Track Record Period.

2. The calculation of the (loss)/earnings per Share for the Track Record Period is for information purpose only and is based on the (loss)/profit attributable to shareholders of the Company for the two years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000, and 1,034,684,403 Shares deemed to be in issue throughout the Track Record Period on the assumption that the reorganisation had been completed on 1st April, 1998.

The SFC has granted a waiver in relation to paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule of the Companies Ordinance and the Stock Exchange has granted a waiver from strict compliance with Rules 7.03(1) and 11.10 of the GEM Listing Rules so that the Group is only required to include in this prospectus the trading record, financial results and information covering the two financial years ended 31st March, 2000 and the nine months ended 31st December, 2000 – see the paragraphs headed “Companies Ordinance Waiver” and “Reporting Accounts Period Waiver” respectively, both under the section headed “Waivers from compliance with the GEM Listing Rules and Companies Ordinance” of this prospectus. The Directors confirm that they have performed sufficient due diligence on the Group to ensure that, save as disclosed herein, up to the date of issue of this prospectus, there has been no material adverse change in the financial position of the Group since 31st December, 2000, and there is no event which would materially affect the information shown in the Accountants’ Report set out in Appendix I to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 12 Summary

PROFIT ESTIMATE FOR THE YEAR ENDED 31ST MARCH, 2001

Estimated combined profit after taxation but before extraordinary items (Note 1) ...... not less than HK$19 million

Estimated earnings per Share (a) pro forma basic (Note 2) ...... 1.72 cents (b) pro forma fully diluted (Note 3) based on the Placing Price of HK$1.00 per Share ...... 1.96 cents

OFFER STATISTICS

Number of Placing Shares (Note 4) ...... 90,000,000

Number of Shares in issue after the Placing (Note 5) ...... 1,104,684,403

HK$

Placing Price ...... 1.00

Market capitalisation (Note 6) ...... 1,104,684,403

Prospective price/earnings multiple (a) pro forma basic (Note 7) ...... 58.14 times (b) pro forma fully diluted (Note 8) ...... 51.02 times

Adjusted net tangible asset value per Share (Note 9) ...... 23.5 cents

Notes:

1. The bases on which the estimated combined profit after taxation but before extraordinary items for the year ended 31st March, 2001 has been prepared are set out in Appendix II to this prospectus.

2. The calculation of the estimated pro forma basic earnings per Share is based on the estimated combined profit after taxation but before extraordinary items of the Group for the year ended 31st March, 2001 assuming that the Company had been listed since 1st April, 2000 and a total 1,104,684,403 Shares had been in issue during the year, but takes no account of (i) any Shares which may fall to be allotted and issued pursuant to the exercise of options which may be granted under the Pre-IPO Grant of Options and the Share Option Scheme; or (ii) any Shares which may be allotted and issued or repurchased by the Company pursuant to the mandates referred to in the paragraph headed “Resolutions of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001” in the section headed “Further information about the Company and subsidiaries” in Appendix V to this prospectus.

3. The calculation of the estimated pro forma fully diluted earnings per Share on a pro forma fully diluted basis is based on the estimated combined profit after taxation but before extraordinary items for the year ended 31st March, 2001 assuming that the Company had been listed since 1st April, 2000 and a total of 1,104,684,403 Shares had been in issue throughout the year and interest income that would have been earned if the estimated net proceeds from the Placing, based on the Placing Price of HK$1.00 per Share were received on 1st April, 2000 and had earned interest at the rate (net of tax) of 5% per annum, but takes no account of (i) any Shares which may be issued upon the exercise of options which may be granted under the Pre-IPO Grant of Options and the Share Option Scheme; or (ii) any Shares which may be alloted and issued or repurchased by the Company pursuant to the mandates referred to in the paragraph head “Resolutions of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001” in the section headed “Further information about the Company and its subsidiaries” in Appendix V to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 13 Summary

4. This represents the number of Shares initially offered under the Placing without taking into account any Shares which may fall to be sold upon the exercise of the Over-allocation Option by which up to 11,070,000 existing Shares and up to 2,430,000 existing Shares are to be sold by Mr. Tetsuya Komuro and Billion Moment, respectively to the Underwriters.

5. This represents the number of Shares expected to be in issue immediately following the completion of the Placing without taking into account any Shares which may fall to be issued upon the exercise of options granted under the Share Option Scheme or Pre-IPO Grant of Option or of any Shares which may fall to be issued or repurchased by the Company pursuant to the mandates referred to in Appendix V to this prospectus.

6. The calculation of market capitalisation of the Shares is based on the Placing Price and 1,104,684,403 Shares in issue immediately after the completion of the Placing but takes no account of (i) any Shares which may be issued upon the exercise of options which may be granted under the Pre-IPO Grant of Options and the Share Option Scheme; or (ii) any Shares which may be allotted and issued or repurchased by the Company pursuant to the mandates referred to the paragraph headed “Resolutions of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001” in the section headed “Further information about the Company and its subsidiaries” in Appendix V to this prospectus.

7. The calculation of the prospective price/earnings multiple on a pro forma basic basis is based on the estimated pro forma basic earnings per Share of 1.72 cents and on the Placing Price of HK$1.00 per Share.

8. The calculation of the prospective price/earnings multiple on a pro forma fully diluted basis is based on the estimated pro forma fully diluted earnings per Share of 1.96 cents and on the Placing Price of HK1.00 per Share.

9. The adjusted net tangible asset value per Share has been arrived at after the adjustments referred to in the paragraph headed “Adjusted net tangible assets” under the section headed “Financial information” of this prospectus and on the basis of a total of 1,104,684,403 Shares in issue and to be issued immediately following the completion of the Placing but takes no account of (i) any Shares which may be allotted and issued upon the exercise of options that may be granted under the Pre-IPO Grant of Options and the Share Option Scheme; or (ii) any Shares which may be alloted and issued or repurchased by the Company pursuant to the mandates referred to the paragraph headed “Resolutions of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001” in the section headed “Further information about the Company and subsidiaries” in Appendix V to this prospectus.

REASONS FOR THE PLACING AND USE OF PROCEEDS

The net proceeds to the Group from the Placing of the New Shares after deduction of underwriting fees and estimated expenses payable by the Company in relation to the Placing, are estimated to be approximately HK$53 million. The Directors currently intend to use the net proceeds of the issue of the New Shares under the Placing as follows:

– approximately HK$10,000,000 for the acquisition of hardware and software for its Tokyo studio to enhance the production of master tapes so as to enable the Group to capitalise on its strength in music production to expand its customer base and enhance its core business operations;

– approximately HK$16,000,000 for the recruitment of producers mainly to strengthen its music production capacity;

– approximately HK$18,000,000 for engaging in sponsorship and artiste promotional activities in different countries in Asia mainly to achieve the Group’s geographic expansion plan and increase brand recognition and publicity;

– approximately HK$2,000,000 for training and development of artistes in different Asian countries to achieve geographic expansion;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 14 Summary

– approximately HK$2,000,000 for establishing an online and offline music learning centre mainly to strengthen the Group’s music production capacity and to exploit the Internet media for the Group’s business; and

– approximately HK$5,000,000 for general working capital purposes.

The proceeds from the sale of the Sale Shares and from the Over-allocation Option, if exercised, will not be received by the Company but will account to Billion Moment, in the case of the Sale Shares and Mr. Tetsuya Komuro and Billion Moment, in the case of the Over-allocation Option.

SUMMARY OF RISK FACTORS

The Directors consider that the operations and results of the Group are subject to certain risks which can be categorised into (i) risks relating to the Group’s business and operations; (ii) risks relating to the industry; (iii) risks relating to the regulatory, economic and political issues; (iv) risks relating to investment in securities traded on GEM; and (v) risks relating to statements made in this prospectus. The risk factors are set out in detail under the section headed “Risk factors” in this prospectus and are summarised as follows:

Risks relating to the Group’s business and operations (page 27)

– Competing interests of an Initial Management Shareholder

– Dependence on its key executives and some principal shareholders

– Track record may not appropriately indicate future revenue

– Reliance on the major customers

– Sustainability of the operating results

– Ability in developing its brandname in Asia

– Ability in utilising or integrating strategic alliances, joint ventures and acquisitions

– Business objectives may not materialise

– Possible failure to continue to recruit quality production personnel

– Reliance on software and hardware systems that are susceptible to failure

– Dependence on third parties’ technological support

– Possible failure to secure registration of the Group’s trademarks

– Sufficiency of internal resources to finance future plans

ROJAM ENTERTAINMENT HOLDINGS LIMITED 15 Summary

Risks relating to the industry (page 30)

– Intense competition

– Fluctuation and volatility of records sales

– Music piracy and illegal music downloading

– Legal framework with respect to the Internet and e-Commerce

– Popularity of the Internet as a medium for music content

Risks relating to the regulatory, economic and political issues (page 31)

– Political risks associated with conducting business in Hong Kong

– Development of Internet related regulations in Asia may affect the Group’s ability to expand its business in the regional market

– Exchange rate risk

– Volatility of the economic climate in Asia

Risks relating to investment in securities traded on GEM (page 32)

– Dilution

– Uncertain volatility of the share price

Risks relating to statements made in this prospectus (page 33)

– Certain statistics are derived from publications which have not been independently verified by the Group, the Underwriters or their respective advisers

– Forward-looking statements contained in this prospectus may not be materialised

ROJAM ENTERTAINMENT HOLDINGS LIMITED 16 Definitions

In this document, unless the context otherwise requires, the following words and expressions have the following meanings:

“AEON” AEON Credit Service Co. Ltd. and AEON Credit Service (Asia) Co. Ltd.

“AEON (HK)” AEON Credit Service (Asia) Co. Ltd, a company incorporated in Hong Kong with limited liability whose shares are listed on the Main Board

“AEON (JPN)” AEON Credit Service Co. Ltd, a company incorporated in Japan with limited liability and listed on the first section of the Tokyo Stock Exchange

“AEON-SPOT™” AEON’s Secure Payment Gateway for Online Transactions, an online payment method created by AEON (HK)

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

“Avex” Avex Inc., a company incorporated in Japan with limited liability, being one of the strategic investors of the Company which profile is set out on page 82 of this prospectus under the paragraph headed “Strategic investors”

“Billion Moment” Billion Moment Limited, a company incorporated in BVI with limited liability whose registered office is situated at TrustNet Chambers, P. O. Box 3444, Road Town, Tortola, British Virgin Islands

“Board” the board of Directors

“BVI” British Virgin Islands

“CASH” Composers and Authors Society of Hong Kong Limited, an organisation aimed at administering and enforcing on a collective basis the rights of composers and authors for their musical and lyrics works subsisting under the copyright law of Hong Kong

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

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

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

ROJAM ENTERTAINMENT HOLDINGS LIMITED 17 Definitions

“Company” Rojam Entertainment Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability on 29th February, 2000 under the Companies Law

“connected persons” has the meaning ascribed thereto in the GEM Listing Rules

“Copyright Ordinance” the Copyright Ordinance (Chapter 528 of the Laws of Hong Kong)

“CPY International” Core Pacific-Yamaichi International (H.K.) Limited, an investment adviser and dealer registered under the Securities Ordinance

“CPY” or “Sponsor” Core Pacific-Yamaichi Capital Limited, an investment or “Global co-ordinator” adviser and dealer registered under the Securities Ordinance

“Dentsu” Dentsu Inc., a company incorporated in Japan with limited liability, being one of the strategic investors of the Company the profile of which is set out on page 81 of this prospectus under the paragraph headed “Strategic investors”

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

“First Relevant Lock-up Period” the period of six months after the date on which dealings in Shares commences on GEM

“First Singing Mermaid Placement” the transfer of 227,915,000 Shares at HK$0.10 each by Singing Mermaid to various investors on 1st July, 2000 in respect of which a total of 66,833,000 Shares were transferred to 18 independent investors

“First Billion Moment Placement” the transfer of 30,000,000 Shares at HK$0.80 each by Billion Moment to an independent third party on 9th February, 2001

“Forward Looking Period” the period commencing on the Latest Practicable Date and ending on 31 March, 2004 (both days inclusive)

“GEM” the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited

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

ROJAM ENTERTAINMENT HOLDINGS LIMITED 18 Definitions

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

“Grantors” Mr. Tetsuya Komuro and Billion Moment

“Greater China Appraisal” Greater China Appraisal Limited, a property valuer for properties in the PRC, Hong Kong, Taiwan and Japan whose registered office is situated at Room 2407, Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong

“Group” the Company and its subsidiaries or, where the context so requires, in respect of the period before the Company became the holding company of its present subsidiaries, the present subsidiaries of the Company

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

“Hongkong Clearing” Hong Kong Securities Clearing Company Limited

“IFPI” International Federation of the Phonographic Industry, an organization which represents the international recording industry for the protection of music copyright and promotion of music

“Initial Management Shareholders” Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Tomohiko Domen, Mr. Arihito Yamada, Ms. Cheng Wing Ki, Aouda, Ms. Asami Yoshida, Mr. Keiichi Uezumi, Ms. Yoshimi Oishi and Ms. Yuri Shimomura

“Iroas” Iroas Corporation, a company established in Japan whose registered office is situated at 2-4-201, Ochiai 5 – chome, Tama – shi, Tokyo 206-0033 Japan and a wholly-owned subsidiary of TK Museum Asia Limited, a company wholly and beneficially owned by Mr. Tetsuya Komuro

“Latest Practicable Date” 21st May, 2001, being the latest practicable date for the purposes of ascertaining certain information contained in this prospectus prior to the printing of this prospectus

“Main Board” the stock market operated by the Stock Exchange prior to the establishment of GEM (excluding the options market) and which stock market continues to be operated in parallel with GEM

“Media Factory” Media Factory, Inc., a company incorporated in Japan with limited liability

“New Shares” 70,000,000 new Shares being offered for subscription under the Placing

ROJAM ENTERTAINMENT HOLDINGS LIMITED 19 Definitions

“NTT” NTT (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of NTT Communications Corporation

“ORICON” Original Confidence magazine’s hits chart

“Over-allocation Option” the option granted by the Grantors to the Underwriters, exercisable by CPY International on behalf of the Underwriters, pursuant to the Underwriting and Placing Agreement to require the Grantors to sell the Over- allocation Shares, at the Placing Price to cover over- allocations under the Placing

“Over-allocation Shares” up to an aggregate of 13,500,000 existing Shares as to up to 11,070,000 Shares to be sold by Mr. Tetsuya Komuro and as to up to 2,430,000 Shares to be sold by Billion Moment

“Placing” the conditional placing by the Underwriters of the Placing Shares (subject to increase upon exercise of the Over- allocation Option) at the Placing Price with professional and institutional and/or other investors on and subject to the terms and conditions described in this prospectus, the Underwriting and Placing Agreement and the placing letters relating thereto

“Placing Price” HK$1.00 per Placing Share (exclusive of brokerage and Stock Exchange transaction levy) at which the Placing Shares are to be subscribed for or sold pursuant to the Placing

“Placing Shares” the New Shares being offered by the Company for subscription and the Sale Shares initially being offered by Billion Moment for purchase at the Placing Price under the Placing respectively, together with, where the context requires, the Over-allocation Shares

“PRC” or “China” the People’s Republic of China which, for the purposes of this prospectus and for geographical reference only (unless otherwise stated), does not include Hong Kong, Macau and Taiwan

“PRC government” the central government of the PRC, including provincial, municipal, county and other regional or local government entities and political sub-divisions thereof

ROJAM ENTERTAINMENT HOLDINGS LIMITED 20 Definitions

“Pre-IPO Grant of Options” the grant of options to the various producers to subscribe for Shares as referred to in the section headed “Pre-IPO Grant of Options” in this prospectus

“REL” Rojam Entertainment Limited, a company incorporated in Hong Kong with limited liability on 5th November, 1997 under the Companies Ordinance, a wholly-owned Subsidiary of the Company

“Related Investors under Third 7 investors under the Third Singing Mermaid Placement Singing Mermaid Placement” who are relatives of Mr. Tetsuya Komuro each holding between 292,000 Shares and 1,000,000 Shares and, (in aggregate holding 3,877,000 Shares), details of which are referred to on page 62 of this prospectus

“Relevant Securities” has the meaning ascribed thereto in Rule 13.15 of the GEM Listing Rules

“Restricted Business” provision of producer services, music publishing, trademark licensing, artiste and event management, record distribution and operation of music learning centre

“RIAJ” Recording Industry Association of Japan, the main trade association of the music record industry in Japan which promotes the welfare of the music record industry and serves as the industry’s spokesman in lobbying for legislation in the interests of music record companies

“Sale Shares” an aggregate of 20,000,000 existing Shares held by Billion Moment immediately before the Placing being offered for sale under the Placing

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

“Second Relevant Lock-up Period” the period of six months commencing from the expiry of the First Relevant Lock-up Period

“Second Billion Moment Placement” the transfer of an aggregate of 1,600,000 Shares at HK$0.80 each by Billion Moment to 2 independent investors on 23rd March, 2001

“Second Singing Mermaid Placement” the transfer of 62,598,000 Shares at HK$0.80 each by Singing Mermaid to 15 investors on 9th February, 2001 in respect of which, a total of 54,208,000 Shares were transferred to 14 independent investors

ROJAM ENTERTAINMENT HOLDINGS LIMITED 21 Definitions

“Securities Ordinance” the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

“SFC” the Securities and Futures Commission of Hong Kong

“Share(s)” Share(s) of HK$0.10 each in the capital of the Company

“Share Option Scheme” the share option scheme conditionally adopted by the Company on 21st May, 2001, the principal terms of which are summarised in the paragraph headed “Share Option Scheme” in Appendix V to this prospectus

“Singing Mermaid” Singing Mermaid Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by Mr. Tetsuya Komuro

“SOFTBANK” SOFTBANK ENTERTAINMENT LIMITED, a company incorporated in the Cayman Islands with limited liability owned by certain funds managed by SOFTBANK INVESTMENT CORPORATION, a Japanese corporation listed on the Nasdaq Japan Market of the Osaka Stock Exchange

“SK Planning” SK Planning KK (also known as Kabushi Kaisha S.K. Kikaku), a company established in Japan. SK Planning is a wholly- owned subsidiary of Touch & Knock On Limited, which in turn is a wholly-owned subsidiary of Richtone Holding Limited. Richtone Holding Limited is a 50% subsidiary of Guo Ye Enterprise Limited, a company in which Mr. Kebo Wu, holds 25% of its issued share capital. The remaining 50% of the issued share capital of Richtone Holding Limited is held by Mr. Tetsuya Komuro

“SOTEC” SOTEC Co., Ltd., a company incorporated in Japan with limited liability whose shares are listed on the Nasdaq Japan Market of the Osaka Stock Exchange

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“TM Network” a musical band comprising Mr. Tetsuya Komuro, Mr. Naoto Kine and Mr. Takashi Utsunomiya

“Third Billion Moment Placement” the transfer of an aggregate of 5,850,000 Shares at HK$0.80 each by Billion Moment to 3 independent investors on 3rd April, 2001

ROJAM ENTERTAINMENT HOLDINGS LIMITED 22 Definitions

“Third Singing Mermaid Placement” the transfer of an aggregate of 8,261,000 Shares at HK$0.80 each by Mr. Tetsuya Komuro to 11 investors on 23rd March, 2001 in respect of which a total of 4,384,000 Shares were transferred to 4 independent investors

“Underwriters” CPY International, Pacific Challenge Securities Limited, Celestial Capital Limited, CEF Capital Limited, Grand Cathay Securities (Hong Kong) Limited, SBI E2-Capital Securities Limited, Shenyin Wanguo Capital (H.K.) Limited, First Shanghai Capital Limited, Tai Fook Securities Company Limited and YF Securities Company Limited

“Underwriting and Placing Agreement” the conditional underwriting and placing agreement relating to the Placing dated 23rd May, 2001 and entered into between, inter alios, the Company, the executive Directors, the Initial Management Shareholders, Billion Moment, CPY, CPY International and the Underwriters, as described under the section headed “Underwriting” on page 134 to 137 of this prospectus

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

“US Securities Act” the United States Securities Act of 1933 (as amended)

“Warrantor(s)” the Company, the executive Directors, the Initial Management Shareholders, Billion Moment (in its capacity as vendor of the Sale Shares) and the Grantors

“WTO” the World Trade Organisation

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

“JPY” or “JP¥” Japanese yen, the lawful currency of Japan

“NTD” New Taiwan dollars, the lawful currency of Taiwan

“RMB” Renminbi, the lawful currency of the PRC

“US$” or “US dollars” United States dollars, the lawful currency of the United States

“sq. ft.” square feet

“sq. m.” square meters

“%” per cent

ROJAM ENTERTAINMENT HOLDINGS LIMITED 23 Glossary of Technical Terms

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

“advance producer royalty” non-refundable advance royalty payable to the producer or the production company, as the case may be, by the record company in respect of the provision of producer services; such advance is typically subject to recoupment

“album” any collection of audio and audio visual recordings comprising not less than 10 songs

“artiste” an individual person or a group comprising more than one person engaged as a singer, musician, actor or actress

“artiste royalty” royalty payable to the featured artiste for performance in the master recordings which, in most cases, is calculated on the basis of the number of the records sold

“arranger” the party who prepares and adjusts the written music composition for presentation in a format other than in the original form. This includes reharmonization, paraphrasing and/or development of a composition so as to fully present the melodic, harmonic and rhythmic structures

“broadband” a type of data transmission in which a single medium can carry several channels at once

“CD” compact disc

“Click Audition” a contest that is regularly run on the Group’s portal, www.rojam.com, and which enables artistes, producers and web visitors to participate in, perform, and make choices in auditions. It provides a channel for the Group to source new musical talents

“composer” the party who writes the melody of a song

“copyright” the entire copyright and all other analogous rights subsisting in any work

“digital” a term used to describe any system based on discontinuous data or as a series of zeros and ones

“DJ” disc jockey

ROJAM ENTERTAINMENT HOLDINGS LIMITED 24 Glossary of Technical Terms

“download” a term used to describe the copying of files from one computer to another via a network or using a modem

“genre” music type

“Internet” the world’s largest international network of interconnected computers that links computers together and allows data to be transferred between computers using prescribed protocols

“JASRAC” Japanese Society for Rights of Authors, Composers and Publishers

“LP” long playing vinyl record

“lyrics writer” the party who writes the lyrics of a song

“master tape” the original studio made recordings recorded in any medium and by any means whether now known or invented in future from which records are manufactured

“MC” music cassette

“mechanical royalty” royalties on record sales or the use of musical composition and/or lyrics paid to the publisher or the owner of the copyright in a song which has been recorded

“merchandising” the use of an artiste’s or a producer’s name, fame and likeness in connection with the exploitation of products and services

“mixer” the party who combines or blends all the tracks made during the recording of a record into the 2-track stereo master and obtains the proper level for each track

“MP3” Moving Pictures Experts Group Audio Layer 3, a standard for storing and compressing audio data in digital format

“producer” the party who is responsible for co-ordinating and bringing the creative product (melody and lyrics of a song) into a tangible form (a recording) and the ultimate production of a master tape

“producer royalty” royalty payable to the producer or the production company, as the case may be, by the record company in respect of the provision of services as a producer

“publisher” the party who carries out publishing activities

ROJAM ENTERTAINMENT HOLDINGS LIMITED 25 Glossary of Technical Terms

“publishing” includes activities such as acquiring ownership of copyright subsisting in a song including the melody and the lyrics; exploiting such copyright including getting the songs recorded and exploiting them commercially; and collecting income arising from such copyright

“performance royalty” royalty for the public performance, broadcasting or authorising transmission (by means of a diffusion service) of songs in which copyright subsists

“record company” the company which finances, markets and distributes records and exploits the copyrights in recorded songs

“records” all types of recording of songs, including records, tapes, and CDs

“remixing” the addition of new recording to, deletion from, enhancement of, modification to or other changes to all or some of the multi-tracks of the existing sound recording to recreate another version of such recording

“ringtones” the tunes that are played on mobile phones when receiving a call

“signing bonus” fees payable to the producer or the production company by the record company as an inducement to enter into a service agreement. Such sum is typically not subject to recoupment and is non-refundable and payable upfront upon signing of the service agreement between the producer or the production company and the record company

“single” any collection of audio or audio-visual recordings of not more than 3 songs

“synchronization” the combining of any audio recordings with visual images

“synchronization fee” any fee accrued in connection with the right to synchronization

“VJ” video jockey

“website” world wide website, a collection of web pages which are linked by a website operator

ROJAM ENTERTAINMENT HOLDINGS LIMITED 26 Risk Factors

Any potential investor in the Placing Shares should, prior to making an investment decision, carefully consider, along with the other matters set out in this prospectus, the following risk factors

RISKS RELATING TO THE GROUP’S BUSINESS AND OPERATIONS

Competing interests of an Initial Management Shareholder

Mr. Tetsuya Komuro, one of the Initial Management Shareholders who will be interested in approximately 42.36% of the issued share capital of the Company immediately after the Placing without taking into account of the exercise of the Over-allocation Option, plays a leading role in the producer team. Mr. Tetsuya Komuro has entered into a service agreement with the Group to provide exclusive producer services to the Group and has irrevocably undertaken to the Company that he and his Associates shall not compete, whether directly or indirectly with the Restricted Business with effect from the date falling on the expiry of six months after the commencement of dealings in the Shares on GEM save for his passive investment in the 24% equity interest in M-Tres Limited, a company principally engaged in event production and management in Japan. However, the undertaking will cease to have effect if the shareholding of Mr. Tetsuya Komuro and/or his Associates falls below 10%. In such event, Mr. Tetsuya Komuro may have interest in other companies which competes with the Group. Accordingly, investors are advised that (i) Mr. Tetsuya Komuro and his Associates may compete, whether directly or indirectly, with the businesses of the Group in the circumstances aforementioned and (ii) Mr. Tetsuya Komuro holds 24% equity interest in M-Tres Limited the Shares on GEM. For details of his competing interests, please refer to the section headed “Competing Interests of Directors, Initial Management Shareholders and Substantial Shareholders” on page 88 of this prospectus.

Dependence on key executives and some principal shareholders

The Group is dependent upon some of its key executives, in particular, Mr. Tetsuya Komuro Mr. Kebo Wu and Mr. Tomohiko Domen for the provision of various services, in particular, music production and establishing business relationships with major record companies. During the track record period, approximately 59% of the melodies and 24% of the lyrics of the songs produced by the Group were written by Mr. Tetsuya Komuro. Furthermore, the Group has entered into various agreements with such shareholders and key executives with respect to these services, which constitute connected transactions for the purposes of the GEM Listing Rules upon listing of the Shares on GEM, as set out in the section headed “Connected Party Transactions” of this prospectus. In the event that these agreements have to be terminated or cannot be renewed upon expiry, the Group’s operations and future planning may be jeopardised.

Track record may not appropriately indicate future revenue

For the nine months ended 31st December, 2000, approximately 78% of the Company’s turnover was derived from the signing bonus received from a record company in consideration of the Group entering into a producer service agreement. However, the revenue derived from signing bonus is not recurrent unless the Group is able to enter into additional producer service agreements or renew an existing producer service agreement. Nevertheless, the amount of signing bonus varies

ROJAM ENTERTAINMENT HOLDINGS LIMITED 27 Risk Factors

amongst agreements and is based on arm’s length negotiations between the Group and the record companies. Should the Group not be able to obtain additional agreements or renew the existing agreements or fail to obtain the comparable amount of signing bonus, the Group will not be able to sustain its revenue in respect of the signing bonus as stated in the Accountants’ Report set out in Appendix I to this prospectus.

For the nine months ended 31st December, 2000, approximately 3% of the Company’s turnover was derived from royalty income received from distribution of musical works produced by the Group. Theoretically, such revenue will increase sharply in the coming years when the producer service agreements are performed and musical works produced by the Group are distributed. However, the amount of royalty income varies amongst musical works performed by different artistes and is susceptible to the then prevailing market conditions. There is no guarantee that the musical works produced by the Group will be marketable or launched under favourable market conditions. Should the Group not be able to produce musical works which are capable of generating satisfactory sales, the revenue to be derived from royalty income may not be as promising as expected.

Reliance on the major customers

As shown in the trading records, a significant amount of revenue of the Group has been generated from the signing bonus relating to producer service contracts with major record companies. In addition, the Company expects to generate revenue from producer royalty, which shall contribute another significant income stream for the Group. If these record companies either cease to renew such contracts or terminate them, the turnover and profitability of the Group may be adversely affected.

The operating results of the Group for the foreseeable future is dependent upon the number of producer service contracts that the Group can secure and the royalties generated from such services, which in turn, will depend on the sales of the musical works produced by the Group.

Sustainability of the operating results

In view of the rapidly changing music trends in Asia, the musical works produced by the Group may, in the future, be out of the then prevailing trend and hence this may adversely affect the Group’s financial performance. Therefore, there can be no assurance that the Group will remain profitable or that revenue will increase in the future.

Ability in developing its brandname in Asia

The Group perceives that brandname recognition is one of the key factors determining the ability of the Group to expand its customer base and increase its market share in its target markets. On the basis that the Group aims to infiltrate into various markets in Asia, the Group may not be able to formulate and implement optimal strategies to promote its brandname in different geographical markets. Furthermore, the Directors believe that the quality of the Group’s products and services is also vital to the promotion and enhancement of the Group’s reputation. However, there is no assurance that the Group can always maintain the quality of its products and services. Failure of the Group to promote and enhance its brandname or spending excess resources for such purpose will adversely affect the Group’s business and results.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 28 Risk Factors

Ability in utilising or integrating strategic alliances, joint ventures and acquisitions

One of the key business strategies of the Group is to utilise strategic alliances, business partnerships and acquisitions, particularly in the areas of providing distribution and marketing network to enhance the penetration and popularity of the Group’s products and expand its geographical reach in its target markets. Although the existing strategic investors of the Group are established corporations and are capable to create synergies with the Group, the Group may still encounter difficulties in capitalising on the perceived synergies of the relationship, integrating new arrangements with the Group’s current products and services or assimilating the operations of acquired businesses.

Business objectives may not materialise

The business objectives and milestones have been formulated by the Group based on various assumptions. These assumptions are inherently subjective and may be varied due to changing factors, both internally and externally. Such changes may result in any or all of the business objectives and milestones of the Group not being achieved within the scheduled time, or at all.

Possible failure to continue to recruit quality production personnel

The success of the Group’s music production operation will be dependent on the Group’s ability to continue to recruit quality music production team members. Failure to recruit additional producers may hinder the growth of the Group’s business, financial condition and results of operation.

Reliance on software and hardware systems that are susceptible to failure

Any system failure or inadequacy due to increased traffic or other factors may adversely affect the availability of the Group’s services, and/or increase the response time of its services. This may lead to lower user satisfaction and reduce advertisers’ interests. The Group’s users depend on Internet service providers, online service providers and other website operators for access to its network, each of which has experienced significant outages in the past, and could, in the future, experience further outages, delays and other difficulties due to system failures unrelated to its system. These types of occurrences could cause users to perceive the Group’s network as not functioning properly or satisfactorily and therefore may cause users to obtain their music through other channels.

Dependence on third parties’ technological support

The Group depends on a number of third-party suppliers for software and hardware components in relation to its Internet operations. Any failure of the Group’s suppliers in meeting increasing demand from the Group may affect the normal operations of the Group. The Group’s inability to maintain its relationship with such suppliers or to develop alternate sources for such software and hardware could delay and increase the operating costs when expanding the Group’s network infrastructure.

Possible failure to secure registration of the Group’s trademarks

As shown in the paragraph headed “Intellectual Property” in Appendix V of this prospectus, the trademark ‘Rojam.com’, currently used by the Group, is the only trademark that has secured registration. All the other trademarks currently used by the Group are subject to pending applications for registration and have not yet been registered with the relevant authorities.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 29 Risk Factors

There is no guarantee that these applications for registration of the Group’s other trademarks will be successful. Accordingly, although the Group is afforded certain rights in relation to its trade names and trademarks under general law, it does not have the statutory protection afforded by registration.

Sufficiency of internal resources to finance future plans

As set out on page 103 of this prospectus, the Group is required to apply internal resources of approximately HK$15 million in each of the six-month periods ending 30th September, 2003 and 31st March, 2004 respectively to finance its future plans. The Accountants’ Report set out in Appendix I to this prospectus shows that the Group had cash and bank balances of about HK$166 million as at 31st December, 2000, which could be used as working capital and to finance its future plans. However, there is no guarantee that at the time that the internal resources are required in each of the two six-month periods ending 30th September, 2003 and 31st March, 2004 respectively under its existing future plans, there will still be sufficient internal resources. Should there be insufficiency of the internal resources of the Group, the Group will not be able to accomplish its future plans; and accordingly the future prospect of the Group will be adversely affected.

RISKS RELATING TO THE INDUSTRY

Intense competition

The Group’s fundamental business is the provision of a wide range of music production services for the entertainment industry. There is no assurance that other companies, with similar or greater access to financial resources and expertise will not attempt to duplicate the Company’s business model and dilute the Group’s access to record companies and pools of investors. Moreover, the Group faces intense competition from existing industry players, record companies, music publishers and media houses.

Fluctuation and volatility of records sales

Although music is an easily accessible form of entertainment, it is highly personalised. Demand is affected by demographic, economic and technological factors. The music business is evolving rapidly. After three uninterrupted decades of expansion, sales for recorded music stopped growing. The diminished interests of the consumers in the new stereo sound recordings and the poor quality control of vinyl pressings contributed to that noticeable decline in demand. There can be no assurance that any downturns in the market will not be severe or that any such downturns would not have any material adverse effect on the operating results of the Group.

In addition, the market trend of the music industry and the fluctuation of artistes’ popularity is unpredictable. There is no assurance that the Group will be able to predict market trends and that certain songs and artistes would be appealing to the public. A major portion of the Group’s music production revenue is generated from the producer contracts with major record companies which relies upon the sales of records in Japan. If the size of the market in Japan cannot be sustained, the Group’s revenue from the music production and distribution segments of the business will be adversely affected.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 30 Risk Factors

Music piracy and illegal music downloading

Piracy has been a major factor underlying the recent slump in the Asian music markets. There is a possibility that countries in Asia may lose the fight against proliferating CD piracy unless they introduce tight measures and legal regimes over soaring CD production, strengthen their enforcement practices and improve their judicial procedures. Moreover, the global music industry has been warned about the flood of illegal downloading of songs in MP3 format available on the Internet. Until reliable digital watermarking technology is developed, the impact of illegal downloading will persist which may adversely affect the Group’s profitability.

Legal framework with respect to the Internet and e-Commerce

The legal framework for the Internet in Asia is developing and may therefore give rise to matters which are not presently foreseeable and which may adversely affect the Group’s business. It is not possible to predict the effects of future developments in the legal systems of such countries, particularly with regard to the Internet, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.

Popularity of the Internet as a medium for music content

The market for music content on the Internet is new and unproven but it is undoubtedly evolving rapidly. There can be no assurance that demand for the Group’s products and services over the Internet could be sustained or generate sufficient revenue to make its business model viable.

RISKS RELATING TO THE REGULATORY, ECONOMIC AND POLITICAL ISSUES

Political risks associated with conducting business in Hong Kong

The Group’s primary business operation is based in Hong Kong. Hong Kong is a special administrative region of the PRC, with independent executive, judicial and legislative branches of government. While Hong Kong presently enjoys a high degree of autonomy from the PRC under the principle of “one country, two systems”, developments in the political and economic environment of the PRC have in the past and, may in the future, adversely affect the political and economic environment in Hong Kong.

Development of Internet related regulations in Asia may affect the Group’s ability to expand its business in the regional market

Due to the increasing popularity and use of the Internet and e-Commerce, it is possible that governments of the countries in Asia may adopt various tax laws and regulations relating to the Internet and e-Commerce transactions. Moreover, the applicability of existing laws and governing issues of the Internet such as property ownership, content, taxation, defamation and personal piracy is uncertain. Taxes, laws and regulations may limit the growth of the Internet, dampen e-Commerce, reduce the number of transactions and increase its cost of conducting business or increase its legal exposure. Any of these factors could have a negative effect on the prospects of the Group’s business.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 31 Risk Factors

Exchange rate risk

It is anticipated that a proportion of the Group’s revenues, expenses and liabilities will be denominated in HK$. The majority of the Group’s transactions for the selling of CDs, receipts by way of signing bonus and royalty payments are denominated in JPY. The Group also expects to generate revenues and expenses and liabilities denominated in NTD, Korean Won, U.S. dollars and RMB. In the future, the Group may also conduct business in other foreign countries and generate revenue and incur expenses and liabilities in other foreign currencies. As a result, the Group is subject to the effects of exchange rate fluctuations with respect to any of these currencies. Potential foreign exchange exposures, are likely to have a material adverse effect on the Group’s business, financial condition and results of operations. The Group does not currently have any agreements or purchase instruments to hedge its exchange rate risks although it is likely to do so in the future. For the nine months ended 31st December, 2000, the Group recorded an exchange loss of approximately HK$5.3 million.

Volatility of economic climate in Asia

Asia will be the primary focus for the Group’s operations in the near future. In the past few years, many countries in Asia have experienced significant economic downturns and related difficulties. As a result of the decline in the value of the region’s currencies, many Asian governments and companies have had difficulties servicing foreign currency-dominated debt and many corporate borrowers defaulted on their payments. As the economic crisis spread across the region, governments raised interest rates to defend their weakening currencies, which adversely impacted domestic growth rates. In addition, liquidity was substantially reduced as foreign investors curtailed investments in the affected region and domestic and foreign banks restricted additional lending activities. The currency fluctuations, as well as higher interest rates and other factors, have materially and adversely affected the economies of many countries in Asia. Economic downturns in Asia could materially and adversely affect the Group’s business, financial condition and results of operation.

RISKS RELATING TO INVESTMENT IN SECURITIES TRADED ON GEM

Dilution

The Group may need to raise additional funds in the future to finance expansion of or new developments relating to its existing operations or new acquisitions. If additional funds are raised through the issuance of new equity or equity-linked securities of the Company other than on a pro rata basis to existing shareholders, the percentage ownership of the shareholders of the Company may be reduced, shareholders may experience subsequent dilution and/or such securities may have rights, preferences and privileges over and above the Shares.

Uncertain volatility of the share price

Prior to the Placing, there has been no public market for the Shares. There can be no assurance that an active trading market for the Shares will develop upon the completion of the Placing. It is possible that the Shares will be subject to changes in price that may not be, either directly or indirectly related to the Company’s financial position.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 32 Risk Factors

Your attention is drawn to the section under the heading “Characteristics of GEM” on page (i) of this prospectus which sets out the inherent risks associated with investing in companies listed on GEM.

RISKS RELATING TO STATEMENTS MADE IN THIS PROSPECTUS

Certain statistics are derived from publications which have not been independently verified by the Group, the Underwriters or their respective advisers

Certain statistics in this prospectus relating to the music industry are derived from reports issued by IFPI and RIAJ. Such information has not been independently verified by the Group, the Underwriters or their respective advisers and may not be accurate, complete or up-to-date. The Group makes no representation as to the correctness or accuracy of such information.

Forward-looking statements contained in this prospectus may not be materialised

Included in this prospectus are various forward-looking statements which can be identified by the use of forward-looking terminology such as “may”, “will, “expect”, “anticipate”, “estimate”, “continue”, “believe” or other similar words. These statements are forward-looking and reflect the current expectations of the Board. These statements are subject to a number of risks and uncertainties, including but not limited to, changes in the economic and political environments in the countries to which the Group offers its services and changes in technology and changes in the music market. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which the Group will operate in the future. In light of the inherent risks and uncertainties, potential investors should keep in mind that there can be no assurance that the forward-looking statements described in this prospectus will materialise.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 33 Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance

For the purpose of the listing of the Shares on the GEM, the Company has sought waivers from the strict compliance of the GEM Listing Rules from the Stock Exchange and the Companies Ordinance from the SFC as described below:

Waiver on Share Option Scheme

The Share Option Scheme was conditionally adopted by a resolution in writing passed by the existing shareholders of the Company at an extraordinary general meeting held on 21st May, 2001. Rule 23.03(2) of the GEM Listing Rules requires that the total number of Shares subject to the Share Option Scheme and any other schemes must not, in aggregate, exceed 10% of the issued share capital of the Company from time to time (the “Scheme Limit”). The Company has applied for a waiver from strict compliance with Rule 23.03(2) of the GEM Listing Rules so that the Scheme Limit can be increased to 30% of the issued share capital of the Company from time to time. Such waiver has been granted by the Stock Exchange subject to the following conditions:

(1) the total number of Shares available for issue under options which may be granted under the Share Option Scheme and any other scheme (which for this purpose including Shares subject to the Pre-IPO Grant of Options), must not in aggregate, exceed 10% of the issued share capital of the Company as at the date of listing of the Shares on GEM unless shareholders’ approval has been obtained pursuant to paragraphs (2) and (3) below;

(2) the Company may seek approval by shareholders in general meeting to refresh the 10% limit. However, the total number of Shares available for issue under options which may be granted under the Share Option Scheme and any other schemes (including for this purpose Shares subject to the Pre-IPO Grant of Options) in these circumstances must not exceed 10% of the issued share capital of the Company from time to time;

(3) the Company may seek separate shareholders’ approval in general meeting to grant options beyond the 10% limit provided that (i) the total number of Shares subject to the Share Option Scheme and any other scheme (including for this purpose Shares subject to the Pre- IPO Grant of Options) does not in aggregate exceed 30% of the total issued share capital of the Company and (ii) the options in excess of the 10% limit are granted only to participants specified by the Company before such approval is sought;

(4) any grant of options to a connected person (as defined in the GEM Listing Rules) must be approved by all independent non-executive Directors;

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

ROJAM ENTERTAINMENT HOLDINGS LIMITED 34 Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance

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

(i) details of options granted to the following persons: each director of the Company and all the other participants; and

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

Waiver on share disposal restrictions

In order to facilitate the settlement of over-allocations in connection with the Placing, CPY International may choose to borrow Shares from shareholders of the Company under stock borrowing arrangements prior to any exercise of the Over-allocation Option by which up to 11,070,000 existing Shares and up to 2,430,000 existing Shares are to be sold by Mr. Tetsuya Komuro and Billion Moment to the Underwriters respectively, or the acquisition of a sufficient number of Shares from other sources. Such stock borrowing arrangements may include arrangements agreed between CPY International or its affiliated entities and Mr. Tetsuya Komuro and Billion Moment, two of the Initial Management Shareholders of the Company. An application has been made to the Stock Exchange for a waiver to be granted to Mr. Tetsuya Komuro and Billion Moment from strict compliance with Rule 13.16 of the GEM Listing Rules which restricts the disposal of shares by initial management shareholders following a new listing, in order to allow it to enter into such stock borrowing arrangements. The Stock Exchange has indicated that the waiver will be granted subject to the following conditions:

(1) such stock borrowing arrangement with Mr. Tetsuya Komuro and Billion Moment will only be effected by the Underwriters for settlement of over-allocations in connection with the Placing;

(2) the maximum number of Shares borrowed from Mr. Tetsuya Komuro and Billion Moment will be limited to the maximum number of 13,500,000 Shares in aggregate, of which up to 11,070,000 Shares shall be sold by Mr. Tetsuya Komuro and up to 2,430,000 Shares shall be sold by Billion Moment, which may be placed upon exercise of the Over-allocation Option; and

(3) up to an aggregate of 13,500,000 Shares will be returned to Mr. Tetsuya Komuro and Billion Moment (subject to the offset arrangement as mentioned below) no later than 3 business days following the earlier of (i) the last day on which the Over-allocation Option may be exercised; and (ii) the day on which the Over-allocation Option is exercised in full.

Such stock borrowing arrangements will be effected in compliance with all applicable laws and regulatory requirements. No payments will be made to Mr. Tetsuya Komuro and Billion Moment by the Underwriters in relation to such stock borrowing arrangements. In the event that CPY International (on behalf of the Underwriters) exercises the Over-allocation Option, such Over-allocation Shares received by CPY International pursuant to such exercise will be used to offset against the Shares owed by CPY International to Mr. Tetsuya Komuro and Billion Moment, if any.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 35 Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance

Reporting Accounts Period Waiver

According to Rules 7.03(1) and 11.10 of the GEM Listing Rules, the Company is required to include its financial results for the two financial years ended 31st March, 2001 in the accountants’ report of the Group. The Accountants’ Report set out in Appendix I to this prospectus provides for the two financial years ended 31st March, 2000 and the nine months ended 31st December, 2000. The Stock Exchange has granted a waiver from strict compliance with Rules 7.03(1) and 11.10 of the GEM Listing Rules. The Directors confirm that they have performed sufficient due diligence on the Group to ensure that, up to the Latest Practicable Date and, save as disclosed herein, there has been no material adverse change in the financial position of the Group since 31st December, 2000 and there is no event which would materially affect the information shown in the Accountants’ Report set out in Appendix I to this prospectus.

Companies Ordinance Waiver

The Company has also sought a waiver from the SFC in relation to certain requirements under the Companies Ordinance.

According to paragraph 27 of Part II of the Third Schedule of the Companies Ordinance (“Paragraph 27”) as amended by the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (L.N. 76 of 2001) (“Exemption Notice”), the Company is required to include in this prospectus a statement as to the gross trading income or sales turnover (as may be appropriate) of the Group during the immediately two preceding years.

According to paragraph 31 of Part II of the Third Schedule of the Companies Ordinance (“Paragraph 31”) as amended by the Exemption Notice, the Company is required to include in this prospectus a report by the auditors and reporting accountants of the Company with respect to the financial results of the Group for each of the two financial years immediately preceding the issue of this prospectus.

The Directors confirm that they have performed sufficient due diligence on the Group to ensure that, up to the date of this prospectus and save as disclosed in this prospectus, there has been no material adverse change in the financial position of the Group since 31st December, 2000 and there is no event which would materially affect the information shown in the Accountants’ Report set out in Appendix I to this prospectus.

The SFC has granted a waiver in relation to Paragraph 27 and Paragraph 31 so that the Group is only required to include in this prospectus its trading record, financial results and information covering the two financial years ended 31st March, 2000 and the 9 months ended 31st December, 2000.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 36 Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance

Moratorium Period Waiver

Under the Rule 13.16 of the GEM Listing Rules, the Company shall procure that every Initial Management Shareholder who, immediately prior to the listing date is entitled to exercise or control the exercise of 5% or more of the voting powers at general meetings of the Company:

1. places in escrow, with an escrow agent acceptable to the Stock Exchange, his/her/its Relevant Securities for a period of two years (the “Moratorium Period”) from the date of the commencement in the dealings of the Shares on GEM, on terms acceptable to the Stock Exchange; and

2. undertakes to the Company, CPY, the Underwriters and the Stock Exchange that, during the Moratorium Period, he/she/it will not, save as provided in Rules 13.17 of the GEM Listing Rules, dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of his/her/its direct or indirect interest in the Relevant Securities.

Under the GEM Listing Rules, Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Tomohiko Domen, Mr. Arihito Yamada, Ms. Cheng Wing Ki, Aouda, Ms. Asami Yoshida, Mr. Keiichi Uezumi, Ms. Yoshimi Oishi and Ms. Yuri Shimomura are considered to be the Initial Management Shareholders and their Relevant Securities would ordinarily be subject to a moratorium period of two years. As a result of an application made on behalf of the Initial Management Shareholders and the Company, the Stock Exchange has granted a waiver to the effect that:

1. Each of the Initial Management Shareholders will not dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in their Relevant Securities within the First Relevant Lock-up Period.

2. Mr. Tetsuya Komuro, being the single controlling shareholder of the Company, will not dispose of (or enter into any arrangement to dispose of) any of his direct or indirect interests in the Relevant Securities during the Second Relevant Lock-up Period to result in the number of the Relevant Securities placed by him in escrow being less than 35% of the issued share capital of the Company, and Mr. Tetsuya Komuro must not, save as stipulated in the GEM Listing Rules, dispose of (or enter into any arrangement to dispose of) nor permit the registered holder to dispose of (or enter into any agreement to dispose of) any of his Relevant Securities such that he would cease to control at least 35% of the voting powers at general meetings of the Company.

Such a waiver is granted in addition to the waiver described in the paragraph headed “Waiver on share disposal restrictions” on page 35.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 37 Waivers from Compliance with the GEM Listing Rules and the Companies Ordinance

CONNECTED PARTY TRANSACTIONS

Members of the Group are parties to certain transactions that will, upon the listing of the Shares on GEM, constitute continuing connected transactions for the purposes of the GEM Listing Rules. These transactions can be broadly categorised as exempt continuing connected transactions and non-exempt continuing connected transactions, the latter of which are subject to waivers to be granted by the Stock Exchange.

The non-exempt continuing connected transactions are:

• licence agreements with Shanghai Chikou Entertainment Co., Ltd.

• studio rental arrangements with each of SK Planning and PT. TK Disc Bali

The Stock Exchange has indicated that it will grant waivers in relation to full compliance with the requirements of the GEM Listing Rules in connection with the non-exempt continuing connected transactions as further described in the paragraph headed “Connected Party Transactions” in the “General Overview of the Group” section of this prospectus, and conditionally upon various matters.

Such waivers will include a waiver of the requirement that, in respect of each of the non-exempt continuing connected transactions referred to above, they are to be subject to their respective caps for review and re-approval by independent shareholders of the Company at general meetings in respect of any of the years to 31st March, 2004 if their respective amounts exceed the higher of HK$10 million and 3% of the Company’s then consolidated net tangible assets as set out in Rule 20.30 of the GEM Listing Rules.

Further details of the continuing connected transactions and the waivers are set out in the paragraph headed “Connected Party Transactions” in the section headed “General Overview of the Group” of this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 38 Information about this Prospectus and the Placing

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

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

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

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

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

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

The Placing Shares are offered solely on the basis of the information contained and the representations made in this prospectus. No person in connection with the Placing is authorised to give any information or to make any representations that are not contained in this prospectus; and any information or representations not contained herein must not be relied upon as having been authorised by the Group, CPY, the Underwriters, any of their respective directors, or any other persons involved in the Placing.

FULLY UNDERWRITTEN

This prospectus is published solely in connection with the Placing which is sponsored by CPY. The Placing is managed by CPY International and is fully underwritten by the Underwriters pursuant to the Underwriting and Placing Agreement. Further information relating to the underwriting arrangements is set out in the section headed “Underwriting” in this prospectus.

PLACING SHARES TO BE OFFERED IN CERTAIN JURISDICTIONS ONLY

No action has been taken to permit the offering of the Placing Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purposes of, and does not constitute, an offer or invitation, nor is it calculated to invite or solicit offers to subscribe for or to purchase any Placing Shares in any jurisdiction other than the aforesaid jurisdictions and it is not an offer or invitation to subscribe for or to purchase any Placing Shares to any person to whom it is unlawful to make such an offer or invitation.

Singapore

This prospectus has not been and will not be registered as a prospectus with the Registrar of Companies and Businesses in Singapore. Accordingly, this prospectus and any other document or materials in connection with the offer of the Placing Shares may not be issued, circulated or distributed in Singapore nor may any of the Placing Shares be offered for subscription or purchase,

ROJAM ENTERTAINMENT HOLDINGS LIMITED 39 Information about this Prospectus and the Placing

directly or indirectly, nor may any invitation or offer to subscribe for or purchase of any Placing Shares be made directly or indirectly: (i) to persons in Singapore other than under circumstances in which such offer or sale does not constitute an offer or sale of the Placing Shares to the public in Singapore; or (ii) to any member of the public in Singapore other than (a) to an institutional investor or other person specified in section 106C of the Companies Act (Cap. 50) of Singapore (“Singapore Companies Act”), (b) to a sophisticated investor, and in accordance with the conditions, specified in section 106D of the Singapore Companies Act, or (c) otherwise pursuant to, and in accordance with the conditions of, any other provision of the Singapore Companies Act. The Registrar of Companies and Businesses in Singapore takes no responsibility as to the contents of this prospectus.

Japan

The Placing has not been and will not be registered under the Securities Exchange Law of Japan (Law No. 25 of 1948, as amended) (“SEL”). Accordingly, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the SEL and any other applicable laws, regulations and ministerial guidelines of Japan, the Placing Shares may not be offered in Japan, directly or indirectly, or for the benefit of, any resident of Japan (within the meaning of Article 6, Paragraph 1 Item 5 and Item 6 of the Foreign Exchange and Foreign Trade Law of Japan). If the total number of investors who will be or have already been solicited for subscription and/or purchase of the Placing Shares in Japan reaches 49, no further solicitation should be made in Japan. To the extent the number of investors to be solicited for subscription or purchase of the Placing Shares does not exceed 49, it is exempted from the registration requirements under the SEL mentioned above, details of which are set out in the SEL and the related regulations.

Taiwan

The Placing has not been and will not be registered with the Securities and Futures Commission of Taiwan pursuant to the Taiwan Securities and Exchange Law and the Company has not been and will not be registered in Taiwan. Accordingly, none of the Placing Shares may be offered for subscription and/or purchase, in Taiwan.

STABILISATION

In connection with the Placing, CPY International (on behalf of the Underwriters) may over-allocate up to an aggregate of 13,500,000 additional Shares (such over-allocations may be covered by exercising the Over-allocation Option in full or in part, at any time up to 30 days from the date of this prospectus or by stock borrowing or by purchasing Shares in the secondary market) and/or effect transactions which stabilise or maintain the market price of the Shares at levels other than those which might otherwise prevail but which are not higher than the Placing Price. Any such over- allocation purchase and/or transactions will be made in compliance with all applicable laws and regulatory requirements.

Mr. Tetsuya Komuro and Billion Moment have agreed with CPY International that they will make available to CPY International on a temporary basis by way of stock borrowing arrangements up to in aggregate 13,500,000 Shares to facilitate the settlement of over-allocations in connection with the Placing before the exercise of the Over-allocation Option.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 40 Information about this Prospectus and the Placing

CPY International may also on behalf of the Underwriters effect transactions which stabilise or maintain the market price of the Shares. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case, in compliance with all applicable laws and regulatory requirements. Such transactions, if commenced, may be discontinued at any time. Should stabilising transactions be effected in connection with the distribution of the Shares, they will be done at the absolute discretion of CPY International.

Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilise, the underwriters may bid for or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the initial placing price of the securities. The stabilisation price to cover over-allocations will not exceed the initial placing price.

In Hong Kong, such stabilisation activities on the Stock Exchange are restricted to cases where the underwriters purchase shares in the secondary market genuinely and solely for the purpose of covering over-allocations in the relevant offer. Such transactions, if commenced, may be discontinued at any time. The relevant provisions of the Securities Ordinance prohibit market manipulation in the form of pegging or stabilising the price of securities in certain circumstances.

APPLICATION FOR LISTING ON GEM

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

COMMENCEMENT OF DEALINGS IN THE SHARES

Dealings in the Shares on GEM is expected to commence on 31st May, 2001 and Shares will be traded in board lots of 2,000 each.

SHARES WILL BE ELIGIBLE FOR CCASS

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

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

All necessary arrangements have been made for the Shares to be admitted into CCASS.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 41 Information about this Prospectus and the Placing

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are unsure about the taxation implications of the subscription, purchase, holding or disposal of, or dealing in or the exercise of any rights in relation to the Placing Shares, you should consult a tax expert.

The Company, CPY, the Underwriters, any of their respective directors and any other person or party involved in the Placing do not accept responsibility for any tax effects on, or liabilities of, any person resulting from the subscription for, or purchase, holding or disposal of, or dealing in or the exercise of any rights in relation to, the Placing Shares.

STAMP DUTY

The sale, purchase, transfer of and dealings in Shares registered on the Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty.

STRUCTURE AND CONDITIONS OF THE PLACING

Details of the structure and conditions of the Placing are set out under the section headed “Structure and Conditions of the Placing” of this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 42 Directors

Name Address Nationality

Executive Directors

Tetsuya Komuro 7-22-31-608 Nishi-Shinjuku Japanese Shinjuku-ku, Tokyo, Japan

Kebo Wu 2-12-1-505 Fukazawa, Chinese Setagaya-ku, Tokyo, Japan

Tomohiko Domen Suite 4109, The Atrium, Japanese Pacific Place, 88 Queensway, Hong Kong

Arihito Yamada Suite 3719, Sutton Court, Japanese Gateway Apartments, Harbour City, Kowloon, Hong Kong

Wong Ho Yan, Daniel Flat 03, 7th Floor US Block B, Villa Rocha, 10 Broadwood Road, Hong Kong

Independent non-executive Directors

Seiichi Nakaoda Flat C, 19th Floor, Japanese Block 1, Scenecliff, 33 Conduit Road, Mid-levels, Hong Kong

Yeung Mui Kwan, David Flat F, 27th Floor, Block 1, British Sunshine Grove, 6 Tak Yi Street, Shatin, New Territories, Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 43 Parties involved in the Placing

Global Co-ordinator and Sponsor Core Pacific – Yamaichi Capital Limited 1902-3, Bank of America Tower 12 Harcourt Road Central Hong Kong

Lead Manager Core Pacific – Yamaichi International (H.K.) Limited 30th Floor Two Pacific Place 88 Queensway Hong Kong

Co-Lead Manager Celestial Capital Limited 22nd Floor The Center 99 Queen’s Road Central Hong Kong

Underwriters Core Pacific – Yamaichi International (H.K.) Limited 30th Floor Two Pacific Place 88 Queensway Hong Kong

Pacific Challenge Securities Limited 10th Floor Cosco Tower Grand Millennium Plaza 183 Queen’s Road Central Hong Kong

Celestial Capital Limited 22nd Floor The Center 99 Queen’s Road Central Hong Kong

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

Grand Cathay Securities (Hong Kong) Limited Suite 1120, 11th Floor Two Pacific Place 88 Queensway Admiralty Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 44 Parties involved in the Placing

SBI E2-Capital Securities Limited 20th Floor Henley Building 5 Queen’s Road Central Hong Kong

Shenyin Wanguo Capital (H.K.) Limited 28th Floor Citibank Tower Citibank Plaza 3 Garden Road Hong Kong

First Shanghai Capital Limited 19th Floor Wing On House 71 Des Voeux Road Central Hong Kong

Tai Fook Securities Company Limited 25th Floor New World Tower 1 16-18 Queen’s Road Central Hong Kong

YF Securities Company Limited 11th Floor CMA Building 64-66 Connaught Road Central Hong Kong

Financial adviser to the Company BNP Paribas Peregrine Capital Limited 36th Floor, Asia Pacific Finance Tower 3 Garden Road Central Hong Kong

Legal advisers to the Company As to Hong Kong law: Deacons Alexandra House 3rd to 7th and 18th Floors Central Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 45 Parties involved in the Placing

As to Cayman Islands law: Conyers Dill & Pearman, Cayman Zephyr House Mary Street George Town Grand Cayman Cayman Islands

As to Japanese law: Naito & Shimizu Aoyama East & West 1st Floor 5-46-2, Jingumae Shibuya-ku Tokyo 150-0001 Japan

Anderson Mori AIG Bldg., 1-3 Maranouchi 1-chome Chiyoda-Ku Tokyo 100-0005 Japan

Legal advisers to the Sponsor, As to Hong Kong law: the Lead Manager and Woo, Kwan, Lee & Lo the Underwriters 27th Floor, Jardine House 1 Connaught Place Central Hong Kong

Auditors and reporting accountants PricewaterhouseCoopers Certified Public Accountants 22nd Floor, Prince’s Building Central Hong Kong

Property valuer Greater China Appraisal Limited Room 2407 Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 46 Corporate Information

Registered office: Zephyr House, Mary Street P. O. Box 2681 George Town Grand Cayman Cayman Islands

Head office and principal Suite 1502, 15th Floor place of business: Cheung Kong Center 2 Queen’s Road Central Hong Kong

Company website: http://www.rojam.com

Company secretary: Chan Ying Chun, ACIS, ACS

Qualified accountant: Cheng Kit Sum, ACCA, AHKSA

Compliance officer: Wong Ho Yan, Daniel

Audit committee: Seiichi Nakaoda Yeung Mui Kwan, David

Authorised representatives: Arihito Yamada Wong Ho Yan, Daniel

Principal share registrar and Bank of Butterfield International (Cayman) Limited transfer office: Butterfield House Fort Street P.O. Box 705 George Town Grand Cayman Cayman Islands

Hong Kong branch share Central Registration Hong Kong Limited registrar and transfer office: Rooms 1901-5, 19/F Hopewell Centre 183 Queen’s Road East Hong Kong

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

Credit Suisse First Boston Hong Kong Branch 23rd Floor, Three Exchange Square 8 Connaught Place Central Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 47 Industry Overview

The information presented in this section is derived from various private and/or publicly available documents. This information has not been prepared or independently verified by the Company, CPY, the Underwriters or their respective advisers.

MUSIC INDUSTRY

General

The worldwide music industry is a multi-billion dollar industry. Out of the numerous parties involved in the launch of a music record, the principal players are the producer, composer, lyrics writer and artistes. Record companies and label publishers are responsible for the distribution of the musical works.

According to IFPI, the global music industry generated approximately US$38.5 billion in 1999, with total unit sales of approximately 3.8 billion units. Unit growth remained constant at approximately 3% for CD sales. There was noticeable growth in North America and South East Asia and a slight fall in sales in Europe in 1999. Asia’s music market was worth approximately US$8 billion in 1999, representing approximately 20% of total sales in the world at that time.

On average, the world’s music market has grown by approximately 3.4% per annum in real value since 1991 with extremely strong growth levels in the mid-1990s, when CD sales doubled with no significant substitution effect on other formats. CDs have first outsold cassettes on a global basis in 1994 and, from 1991, levels increased by approximately 140% from approximately 987 million to approximately 2.4 billion. CDs now represent approximately 66% of all albums. The CD is still in its early stages of market penetration in many territories, especially in the less developed Asian and Eastern European countries. CD sales in some of these regions were up by at least 25%, and there is still much scope for further growth as the hardware becomes more widely available in these markets.

CD album sales worldwide were up by approximately 7% in 1999 from the previous year, with strong increases in Europe of approximately 10% and North America of approximately 5%. Latin American CD sales grew by 11% and Asia as a whole saw an increase of approximately 7%. A number of developing markets, especially in South East Asia and Eastern Europe also saw recovery during the same period.

Music sales in Europe as a whole were better in the first half of 2000. Total unit sales grew by approximately 6% which was led by increases in Europe’s two largest markets, Germany (up by approximately 5%), and the UK (up by approximately 6%), both of which saw busy early year release schedules and robust CD album sales.

Japan

Japanese music market contributed to most of the music sales in Asia. In 1999, the total sales revenue in Japan was approximately US$6.4 billion, representing approximately 83% of the Asian market and is the second largest music market in the world, after the U.S. In Japan, domestic repertoire dominated the market with over 70% of the total sales of music albums throughout the last decade. CD is the dominating music storage medium in Japan, representing approximately 96.3% of all music storage mediums in Japan.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 48 Industry Overview

According to RIAJ, Japan’s music market experienced a downturn in the volume of music products in the period from 1998 to 1999. However, it has been anticipated that the digital music distribution market will experience a rising trend from 2001. Initial applications will include music promotion, leading to an increase in CD sales. In addition, online music is expected to become increasingly popular, while CD sales are expected to decline as a result. While the digital audio infrastructure equipment is anticipated to improve from 2002, the digital music distribution market is expected to undergo significant growth, reaching approximately US$727 million in sales, which is approximately 10% of the music market, by the end of 2005.

Hong Kong

The music and media entertainment market flourished in Hong Kong in the 1990’s. The total records sales in Hong Kong was approximately US$98.9 million (approximately HK$771 million) in 1999.

According to IFPI, CD sales accounted for almost 99% of total record sales in Hong Kong in 1999.

Taiwan

Taiwan is the largest music market within the Asian region and the second largest in Asia. In 1999, sales of albums in Taiwan amounted to approximately US$306 million and ranked 16th in the world. Music sales in Taiwan dropped by approximately 25% from approximately US$427 million in 1997 to approximately US$319 million in 1998, but the drop slowed down to approximately 4% in 1999.

South Korea

The South Korean music market was worth approximately US$236 million in terms of sales and is the third largest music market in Asia, representing approximately 3.1% of the Asian music market in 1999. Suffering from economic recession, the South Korean music market shrunk dramatically in 1997 and 1998. However, in 1999 there was indication that the music market was on the path to recovery.

IFPI estimates that the digital music distribution services in South Korea are expected to achieve approximately 10% market share in South Korean music market by 2001 or 2002. The potential growth for the digital audio distribution market in South Korea will be led by the high mobile phone penetration rate of approximately 60% in 2000, as well as that of the Internet. As of 1999, cassette tape remained the dominant music storage medium in South Korea, representing approximately 60% of the market share, whereas CD only represented approximately 40% of South Korea’s total music storage market.

Thailand

The music market in Thailand is approximately a US$126 million industry and the sixth largest music market in Asia in 1999. There was a slowdown in Thailand’s music market between 1996 and 1998, but the market recovered in 1999 with an approximate 10% increase in sales from the previous year. Cassette tape is currently the dominant music storage medium in Thailand, representing approximately 90% of the total music market; whereas, CD only represents approximately 10% of the total music market. The digital music distribution services are anticipated to launch in Thailand in either 2003 or 2004 when the market penetration of the Internet and mobile phones exceeds 10%.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 49 Industry Overview

PRC

Music sales dropped by approximately 63% from approximately US$280 million in 1997 to approximately US$103 million in 1998, but the drop slowed down to approximately 9% with sales of approximately US$94 million in 1999.

As of 1999, cassette tape is the dominant music storage medium in China, representing approximately 90% of the total music market; whereas CD only represents approximately 10% of the total music market.

PROTECTION OF COPYRIGHT OF SONGS

The record industry is dependent on copyright protection. Copyright is the essential building block of music businesses. It gives artistes, composers, lyrics writers and record companies protection from piracy of their works. IFPI has been set up an IFPI Worldwide Enforcement Structure in 1997 to protect the copyright and promote the value of the thriving legitimate music industry.

REGULATIONS

In Hong Kong, copyright in various descriptions of work is governed by the Copyright Ordinance. The Copyright Ordinance contains, inter alia, provisions regarding the rights of performers; devices designed to provide copyright owners with protection of their works, rights management information and with respect to the fraudulent reception of transmission.

The Copyright Ordinance provides that, subject to certain requirements having been fulfilled, copyright is a property right which subsists in three categories of work, namely, (i) original literary, dramatic, musical or artistic works, (ii) sound recordings, films, broadcasts or cable programmes and (iii) the typographical arrangement of published editions.

The Copyright Ordinance provides that copyright in a literary, dramatic, musical or artistic work shall expire at the end of the period of 50 years from the end of the calendar year in which the author dies. The duration of the copyright in a sound recording is 50 years from the end of the calendar year in which it was made or, if released within that period, 50 years from the end of the calendar year in which it is released.

The Copyright Ordinance has given copyright owners the exclusive right to do various acts in respect their copyrighted works including the reproduction of such works; the issuing or making available copies of such works to the public; performing, showing or playing such works in public; broadcasting such works or including them in a cable programme service; and making an adaptation of such works or to do any of the afore-mentioned acts in relation to an adaptation, none of which can be undertaken by any person unless with the appropriate licence from the copyright owner.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 50 Industry Overview

IFPI AND CASH

IFPI

IFPI is the organisation representing the international recording industry. It comprises a membership of 1,400 record producers and distributors in 76 countries. It also has national groups in 46 countries. IFPI’s International Secretariat is based in London, England, and is linked to regional offices in Brussels, Hong Kong, Miami and Moscow. IFPI aims to (i) fight music piracy; (ii) promote fair market access and adequate copyright laws; (iii) help to develop the legal conditions and the technologies for the recording industry to prosper in the digital era; and (iv) promote the value of music in the development of economies, as well as in social and cultural life.

CASH

CASH is aiming at administering and enforcing collectively the rights of composers and authors of musical works subsisting under the copyright laws in Hong Kong. CASH licenses music to users and collects royalties from them in return. Royalties for use of musical works can be classified into the following categories: (i) public performance royalties from live shows, retail shops, cinemas and karaokes etc.; and (ii) broadcasting royalties from television stations, radio stations, cable television and satellite television, etc.

1999 full year – all figures in millions TOTAL MARKET RETAIL VALUE GROWTH TOTAL MARKET UNITS LOCAL % UNIT ASIA SINGLES LPs MCs CDs Minidiscs US$ CURRENCY GROWTH

China 0.02 – 64.4 7.4 – 94 RMB 778.4 –8% Hong Kong 0.2 – 0.1 9.7 – 98.9 HKD 767.1 –6% Japan 128.1 8.2 6.6 264.9 0.2 6,436.6 JPY 733,171.5 –11% Taiwan 1.2 – 6.1 28.6 – 306.8 TWD 9,886.7 –12% South Korea 0.03 0.001 32.3 13.9 – 506.9 SKW 388,506 15% Thailand ––42.9 4.8 – 125.5 THB 4,749.3 –1% Singapore 0.1 – 0.1 4.6 – 46.4 SGD 78.7 –6% Malaysia 0.1 – 6.1 3.3 – 52.8 MYR 200.7 –14% India ––126.2 7.5 – 174.8 INR 7,526.3 2% Indonesia ––56.6 3 – 126.7 IDR 995,254.8 48% Philippines 0.04 0.02 9.1 1.6 – 47.5 PHP 1,855.7 –5% Pakistan ––10 0.5 – 7.9 PKR 405.0 –

Total 129.8 8.2 360.5 349.8 0.2 8,024.8

Asia Markets of Recorded Music in 1999 (Source: “World Sales of recorded music – 1999” by IFPI)

ROJAM ENTERTAINMENT HOLDINGS LIMITED 51 Industry Overview

Music on the Internet – the market opportunity in Asia

Approximately 8% of the industry’s 2003 revenue is expected to be generated online, either through online ordering of music or through direct digital download. Jupiter Research estimates that the number of online music buyers will grow to 33 million or 21% of total online users during the same period.

Asia has only just begun to show significant growth in the Internet, both in terms of the number of Internet users as well as the number of Internet e-Commerce established in countries around the region. The emergence of many companies focusing on Internet and e-Commerce, as well as the accumulation of richer contents on Asian portal sites, are clear indicators of future rapid growth. The following are statistics supporting this view:

• Internet penetration in Asia is predicted to have dramatic growth. The Internet will become an increasingly important facet of Asian life as the primary barriers to the growth of e-Commerce, access and settlement, are overcome. As a result, Asian Internet users are expected to total 64 million by 2004, up from 15 million in 1998, a CAGR of 40%. (Source: www.nua.ie)

• According to Cyber Dialogue, entertainment recently overtook business as the largest content segment on the Internet, and in the US and Japan. Online music distribution is already taking off. The market for online music distribution in target Asian markets is forecast to grow at some 160% per year, the market value rising from some HK$1,453 million in 2000 to an estimated HK$11,136 million by 2004 (Source: IFPI, Jupiter). On this basis, by 2004, music and entertainment related content could account for some 5% of the total value of Asian e-Commerce.

• In addition, the predicted shift from offline to online sales is significant. In 1998, online sales represented approximately 1.1% of the US$13.7 billion total US recorded music sales. The online channel’s share is predicted to grow to 14% of a US$18.4 billion market by 2003. Although the Asian markets will lag behind the US, similar trends are likely to be seen in the coming years.

Music Distribution on the Internet

There are currently various Internet music sales models, in which the free model, pay-per-song model, bundled model and subscription model appear to be the dominant Internet music sales models.

Free Model

The free model is based upon the distribution of free music downloads in order to attract large Internet traffic to the site in return for advertising revenue. Artistes, on the other hand, receive revenue from payments on the downloaded songs.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 52 Industry Overview

Pay-Per-Song Model

The pay-per-song model is such that Internet users may select to download individual songs as desired and be charged on a song-by-song basis. This model mainly serves those Internet users who do not wish to purchase the whole album.

Bundled Model

The bundled model has the same concept as a regular album which is to bundle a group of songs and sell them under the same album for a bundled price. The manufacturing, distribution and retailing costs are lower per song when songs are bundled onto one CD. It is often difficult to sell unpopular songs alone. According to market research on the ten largest markets, five albums are bought for every single. Music consumers tend to prefer purchasing albums over singles due to perceived value in bundled packages.

Subscription Model

The subscription model is similar to the pay-television model in which revenue or subscription fees are collected on a monthly basis. This model reduces sales cycles as volumes would no longer be driven by the quality of current releases and increases the value of back catalogue music.

Key technology developments

The critical mass of Internet usage has attracted massive investment in new technologies, which makes access and use of the Internet easier and more efficient.

Broadband

The high level of investment in broadband networks in the US and Europe and now in Asia means that there will be abundant supply of both broadband and general Internet access services in Asia.

Playback devices

The growth in digital devices will greatly facilitate online digital distribution of entertainment content. In the future, entertainment content is likely to be delivered by multiple devices and formats including Internet television, 3rd generation (3G) mobile phones, PDAs, wireless Walkman, game players, and MP3 players. Adoption of these new devices will not only increase the Internet penetration rate but will also dramatically further the customers’ experience of using Internet services.

MP3 technology

MP3 format is one of the popular early formats for distributing and accessing digitised musical content. Others such as Secure Digital Music Initiative (SDMI) are likely to be important in facilitating the musical download business. Despite the current popularity of the format, MP3 is likely to be an interim technology and there are already moves towards a number of new open standards beyond MP3.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 53 Industry Overview

Streaming

Streaming technology is becoming an increasingly critical feature of interactive websites. Streaming consists of transmitting music or any other sound content so that the computer can start playing such music or sound content as it comes in without taking up space on the hard disk. Streaming is thus very similar to radio or television “broadcasting”. The key difference is that it is available “on demand”: i.e. the transmission starts on demand and contents can be permanently saved and re-played from the hard disc as often as desired.

Online settlement

One major restriction in Asia will be the lack of online settlement capability. Current attempts which have been designed to overcome this problem include the use of ATM cards, utility or ISP bills, or pre-payment cards.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 54 General Overview of the Group

GROUP STRUCTURE

The structure of the Company’s principal subsidiaries immediately upon the listing of the Shares on GEM and their respective places of incorporation and principal activities or current trading status are as shown:

Rojam Entertainment Holdings Limited (Cayman Islands) Investment holding

100% 100% 100% 100%

Rojam Rojam.com RojamTechnology Rojam Management Limited Japan Limited Investment Limited (incorporated in (established in Japan) Limited (incorporated in Hong Kong) (incorporated in Hong Kong) Principal activities: the British Principal activities: • Co-ordination of Virgin Islands) Principal activities: • Business promotion in Japan • General development • Management of • Inactive administration Japan fan club and management • Co-ordination of record sales • Management of Tokyo studio

100% 100% 53.33%

Rojam Rojam Rojam Entertainment InternationalInternational Link Japan Limited Limited Limited (incorporated in (incorporated in (Note) Hong Kong) the BritishVirgin (established in Japan) Islands) Principal activities: • Sales of records and Principal activities: • Intellectual property other audio-visual holding • Inactive products • Music production • Artiste management • Web content • Marketing and production promotion • Music Learning Centre

Note: The remaining 46.67% shares in Rojam Link Japan Limited is held equally by Mr. Tatsuoka Masaki and Mr. Ishizaka Kenichiro (being the subscribers and each owned 50% of Rojam Link Japan Limited immediately before the share transfer to Rojam Entertainment Holdings Limited on 15th September, 2000 for a consideration of JPY 1.6 million as set out under the section headed “Group reorganisation” of Appendix V to this prospectus).

HISTORY AND DEVELOPMENT

Mr. Tetsuya Komuro, one of the two founders of the Group, commenced his career in music production and performance in 1984 and made prominent achievements in music production in the 1990’s. He was accredited the Japan Record Awards for four consecutive years from 1995 to 1998

ROJAM ENTERTAINMENT HOLDINGS LIMITED 55 General Overview of the Group

and has gained outstanding recognition in the music industry. Five of his records have concurrently headed the top-five music sales ranking in the magazine, Original Confidence and recorded a total CD sales volume of over 168 million copies. He has actively participated in the music production for movies and various global events, in particular, the G8 Kyushu-Okinawa Summit Meeting 2000 and the Hong Kong Handover 1st Anniversary Celebration. Based on his overwhelming success in Japan, he has decided to use the Japan market as a base to extend the presence of his music into the international market. In January 1998, he joined efforts with Mr. Kebo Wu, the co-founder of the Group, to establish REL with the mission of creating a premier music production house in Asia.

Capitalising on the reputation of the Group’s management in the music industry, the Group pre- eminently formed an experienced music production team with expertise in different areas of music production and commenced the production of the first single under the “Rojam” label for a record company in Hong Kong in the middle of 1998. In the same period, the Group participated in the production of music video and leveraged its resources in the audio medium to an audio and visual medium. Having successfully launched its first single, the Group continued to actively engage in the overall planning, management, production and supervision of the master tape for one single and one album in 1998 and 1999 respectively. The Group has granted a number of mechanical and synchronization licences to third parties for the manufacturing of karaoke video compact discs and laser discs embodying the Group’s products in an effort to enhance the popularity of its music and to enlarge the Group’s revenue stream.

In addition to music production, the Group has also been involved in other music-related event management and arrangement of artiste performances. In July 1998, the Group introduced and arranged various artistes to perform in the Hong Kong Handover 1st Anniversary Celebration, an event initiated by the Hong Kong Government and organised by Radio Television Hong Kong. In September 1998, the Group arranged and organised a concert in Hong Kong for Puffy, a famous female Japanese group. The Directors believe that the concert aroused considerable publicity in the Group’s target segment and effectively promoted the Group’s image in Hong Kong.

In April 1999, the Group licensed its logo “ ” and trademarks to Shanghai Chikou Entertainment Co., Ltd.

In October 1999, the Group obtained the master recording right of the original soundtrack for a South Korean movie entitled “Christmas in August” and manufactured and distributed such record in Hong Kong. The Directors believe that this was an important milestone for the Group in establishing an extensive distribution channel in the future.

In early 2000, in response to the growing popularity of the use of the Internet, the Group engaged a professional consulting company to conduct a feasibility study on the development of online music and to identify a favourable market environment for the Group’s business. Leveraging on the Group’s management expertise in music production, the Group commenced the development of a music entertainment portal, www.rojam.com, in early 2000 and officially launched the website in April 2000.

With a view to consolidating its position in the music industry, the Group decided to build up its artiste base and started conducting preliminary artiste auditions in Hong Kong, Japan, Taiwan and the PRC in 2000.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 56 General Overview of the Group

In May 2000, the Group engaged five artistes from the Click Audition and has, since then, launched a series of promotional and marketing events in Hong Kong, Taiwan and Japan to promote such artistes. Between July and August 2000, the Group produced and co-published two singles for these artistes under the Group’s trademarks. The Directors believe that the management of the whole record production process represented a breakthrough for the Group to which the Group has offered services in music production, artiste management, publishing and distribution of records.

In July 2000, the Group arranged a well-known Japanese male band, namely, TM Network, to perform in a concert in Yokohama, Japan, which attracted an audience of over 11,000 people. In addition, the Group has obtained distribution rights of various records in Japan enabling the Group to form a closer business relationship with record distributors in Japan. In September 2000, the Group first adopted a hybrid sales model, using an online ordering and physical delivery system to distribute records in Japan. The Directors believe that this was a milestone for the Group in exploiting the Internet as a medium for record distribution. The Group has subsequently distributed a number of records for different artistes in Hong Kong and Japan using both conventional and hybrid sales models. Please refer to pages 71 and 72 for further details of these two sales models.

In September 2000, the Group acquired an inactive company, Rojam Technology Japan Limited, for a consideration of JPY 3.0 million and started to manage and promote its business operations in Japan in an effort to strengthen its presence in the Japanese music market through such company.

Since August 2000, the Group has successfully invited seven reputable strategic investors, namely SOFTBANK, NTT, Dentsu, SOTEC, Media Factory, AEON and Avex, to invest, in aggregate, approximately HK$114 million into the Company. The Directors believe that these strategic alliances would not only support the Group financially but also enrich future development of the Group’s business.

In September 2000, the Group launched a website http://jp.rojam.com/m and co-operated with three mobile operators in Japan, namely, NTT DoCoMo, which is famous for its “i-mode cellular phone”, J-phone group and EZ web (AU Co. & Tsuka) to roll out music download services for the subscribers of the Internet-capable cellular phone in Japan. The subscribers can download three songs of TM Network, namely: “We are Starting Over”, “Ignition, Sequence, Start” and “MESSAGE” as ringtones, free of charge.

In November 2000, the Group entered into a contract with Avex pursuant to which the Group provides producer services to Avex for the period from 1st November, 2000 to 31st October, 2005. In March 2001, the Group entered into a contract with Pony Canyon, Inc. pursuant to which the Group provides producer services to Pony Canyon Inc. for the period from 7th March, 2001 to 6th March, 2004. At the same time, the Group continues to secure music production contracts with other major record companies.

ACTIVE BUSINESS PURSUITS

The following is a statement of active business pursuits of the Group for the two years ended 31st March, 2000 and for the period from 1st April, 2000 to the Latest Practicable Date:

For the year ended 31st March, 1999

Music Production and Music Publishing

• Entered into producer service agreements with Rojam, Inc. (a company wholly-owned by Mr. Tetsuya Komuro), Mr. Naoto Kine and Mr. Tatsushi Hashimoto (DJ Dragon) all in January 1998

ROJAM ENTERTAINMENT HOLDINGS LIMITED 57 General Overview of the Group

• Engaged Mr. Koji Kubo (Cozy Kubo) and Mr. Ryuichi Sakai (Marc Panther) for the provision of music composing and lyrics writing services on a song-by-song basis

• Engaged in the overall planning, management, production and supervision of the master tape recording of two singles and one album

• Entered into a licence agreement with a record company pursuant to which the Group granted such company the exclusive right to manufacture, sell, publicly perform, lend and distribute the records produced by the Group in Hong Kong, Macau, Taiwan and the PRC

• Engaged in the overall planning, management and supervision of the production of two music videos for a record company

• Granted a number of mechanical and synchronization licences to third parties for the purpose of manufacturing karaoke video compact disc and laser disc embodying the music produced by the Group

Artiste Management and Event Management

• Introduced and arranged Mr. Tetsuya Komuro and various artistes to perform in the Hong Kong Handover 1st Anniversary Celebration

• Organised a concert in Hong Kong for Puffy, a Japanese female group

Sales and Marketing

• Granted a reputable telecommunications company in Hong Kong a non-exclusive synchronization licence to use the Group’s music compositions in video compact disc for promotion purposes

For the year ended 31st March, 2000

Music Production and Music Publishing

• Focused on formulating its strategy in respect of music production services and started to look for possible customers for its music production services. The Group commenced preliminary discussions with various potential customers in early 2000, and some of such discussions materialised in the subsequent financial year

• Entered into a non-exclusive licence agreement with a movie production company based in Singapore, under which such company is allowed to use the recordings of certain designated compositions owned by the Group in a soundtrack and to reproduce, release and distribute such soundtrack for sales and rental

• Entered into a non-exclusive licence agreement with a karaoke boxes’ content provider under which such company is allowed to synchronise and reproduce the recordings of certain designated compositions owned by the Group in the format of karaoke discs for sales in Hong Kong and the PRC

• Obtained the master sound recording rights of the original soundtrack for “Christmas in August” and reproduced and distributed the soundtrack in Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 58 General Overview of the Group

• Conducted a feasibility study on the use of Internet technology in artiste audition and audience targeting

• Focused on formulating its strategy in respect of music production services and started preliminary discussions with various potential customers in relation to producer services contracts

Artiste Management

• Conducted the preliminary artiste Click Auditions in Hong Kong, Taiwan, Japan and the PRC

Trademark Licensing

• Granted Shanghai Chikou Entertainment Co. Ltd., a PRC joint venture enterprise in which Mr. Kebo Wu, an executive Director, has a 90% indirect effective interest a non-exclusive licence to use the trademarks of the Group in providing discotheques services in the PRC

For the period from 1st April, 2000 to the Latest Practicable Date

Music Production

• Engaged Mr. Koji Kubo (Cozy Kubo), Mr. Daisuke Asakura, Mr. Takashi Utsunomiya, Mr. Takeshi Hayama, Mr. Tetsuya Katsuragi and Mr. Ryuichi Sakai (Marc Panther) for records production

• Engaged Mr. Jean Michel Jarre as the Group’s chief advisor in respect of music and entertainment and musical event production and management

• Entered into producer service contracts with two major record companies in Japan, namely, Avex and Pony Canyon Inc.; and co-produced seven records for Avex and two records for Pony Canyon Inc.

• Commenced recruitment of producers in Hong Kong

• Entered into a co-publishing agreement with a major Japanese publishing company in respect of the compositions produced by Mr. Tetsuya Komuro for the five artistes selected from the Click Audition

• Manufactured and distributed a total of twelve records of various artistes in Hong Kong and Japan

• Engaged professional consulting company to conduct a feasibility study on the use of the Internet to enhance and further develop the Group’s music production business

• Officially launched the music entertainment portal, www.rojam.com

• Acquired assets in a music studio in Japan including music production equipment and instruments, consideration of which is based on a valuation report prepared by an independent third party who estimated the value of the studio assuming that there are a willing seller and a willing buyer

ROJAM ENTERTAINMENT HOLDINGS LIMITED 59 General Overview of the Group

Artiste Management and Event Management

• Entered into concert promotion agreements to arrange TM Network to perform in two concerts, “TM Network 727” and “TM Network Major Turn-Round”, and to promote such concerts

• Selected and signed five artistes recruited via Click Audition

• Entered into exclusive artiste agreements with two artistes in Japan, namely Mr. Naoto Kine and Mr. Takeshi Utsunomiya

• Engaged Ms. Asami Yoshida in the capacity as an exclusive artiste for the period between 1st July, 2000 and 28th February, 2001. Thereafter, Ms. Asami Yoshida became a recording artiste of Pony Canyon Inc. which engaged the Group in March 2001 to provide music producer services. The Directors believe that it is in the best interest of the Group to transfer the artiste managementship of Ms. Asami Yoshida to Pony Canyon Inc.

• Entered into exclusive artiste management agreement with Ms. Tam Hoi Ki, Zoie

• Engaged in the overall planning, management and supervision of the production of two music videos for the Group’s artistes

• Entered into an advertising endorsement contract for Ms. Tam Hoi Ki, Zoie, an artiste managed by the Group, to perform in an TV advertisement for the promotion of the products of Glico, a renowned food company in Japan

• Arranged its recording artiste, Ms. Celina Horan to act as the main character in the TV advertisement for AEON MMS promotion programme. In return, AEON (HK) assisted the Group in the promotion of Ms. Celina Horan’s CD such as broadcasting the advertisement in the TV stations including TVB-Jade, TVB-Pearl, ATV-Home and Cable TV

Sales and Marketing

• Entered into a co-operation agreement with Mr. Hidetoshi Nakata, a well-known Japanese soccer player and Sunny Side Up Inc., a company established in Japan as management company of Mr. Hidetoshi Nakata and owner of Mr. Hidetoshi Nakata’s official website at http://nakata.net/, for the promotion of the Group’s entertainment portal and appointment of Mr. Hidetoshi Nakata as the Group’s contracted international celebrity

• Entered into an agreement with Japan Correspondence Education Association in respect of the Group’s music learning centre

• Launched a website http://jp.rojam.com/m and co-operated with three mobile operators in Japan for the offering of free music download to mobile phone subscribers as ringtones

• Appointed a Taiwanese company as the Group’s business representative to solicit business in Taiwan

• Entered into agreements with the Group’s strategic investor, AEON (HK) for the tie-up promotional programs and music downloading for the songs produced by the Group

• Entered into an advertising endorsement contract for an artiste managed by the Group

ROJAM ENTERTAINMENT HOLDINGS LIMITED 60 General Overview of the Group

• Offered free music and music video download on the Group’s website to promote the artistes managed by the Group

• Organised a press conference with the presence of the Group’s strategic investors to promote the Group’s image

• Arranged the Group’s artistes to perform in various television programs, concerts and events to increase their exposure to the public

COMPETITIVE STRENGTHS

The Directors believe that the Group has the strengths to become one of the premier integrated music production houses and a business partner of choice for various entertainment companies in Asia. In particular, the Directors believe the Group has the following competitive advantages as detailed below:

Experienced management team

The Group’s management including Mr. Tetsuya Komuro and Mr. Tomohiko Domen have been actively involved in the music industry for a long period of time. Such experienced management team can assist the Group to develop both as a distinguished music producer resource and a major music distributor for all industries that require quality music. In particular, Mr. Tetsuya Komuro has been a well-known music producer since 1986 and is currently providing the Group with vision and guidance in music production. Mr. Tomohiko Domen has over 20 years of experience in music production and has extensive connections with senior management of companies in the music industry in the United States, Japan and other parts of Asia.

Reputable music production team

The Group has engaged many world renowned music producers in its team, such as Mr. Tetsuya Komuro, Mr. Daisuke Asakura, Mr. Cozy Kubo and Mr. Takeshi Hayama. Mr. Tetsuya Komuro has a long list of music masterpieces which were composed and produced by him, including the soundtrack for the movie “SPEED 2” and the offical album entitled “Allez!Ola!Ole!” for the 1998 World Cup Soccer in France. Mr. Tetsuya Komuro has also produced music for various Japanese artistes such as Namie Amuro, TRF and globe. Mr. Daisuke Asakura is a producer for numerous popular singers in Japan, such as pool bit boys, Yuki Kimura, Takashi Fujii, and T.M. Revolution. Mr. Daisuke Asakura’s music compositions included hits such as “Boarding”, “Wild rush”, “White Breath”, “Hot Limit”, and “NANDA KANDA”. Cozy Kubo has participated in the recording and producing of records of some Japanese pop singers such as Misato Watanabe, Senri Ooe and Kyoko Koizumi. He received the “The Best Song Arranger” award for TRF’s song “Overnight Sensation” in the same year. Over the years, he participated in the music production as a producer, composer, and arranger for numerous artistes including Namie Amuro, Ami Suzuki, tohko, TRF, Naomi Amagata and CASCADE. Mr. Takeshi Hayama is a music arranger for numerous pop groups, such as WANDS, DEEN, and Field of View. He worked on most of Maki Oguro’s albums. Mr. Takeshi Hayama has continuously been involved in producing “the next pop generation”. He is one of the few producers who handle the whole process of music production. Currently, he participates actively in music composing for commercials, television shows and movies. For details of the Group’s other music producers, please refer to the section headed “Profiles of Producers and International Celebrity on pages 74 to 78 of this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 61 General Overview of the Group

Strong business relationships

The Directors believe that the Group possesses an array of established business relationships with popular artistes and global record companies, such as Namie Amuro and Avex through Mr. Tetsuya Komuro. The Directors believe the global record companies provide the Group with extensive music distribution channel; whereas the popular artistes may serve as a powerful marketing tool to promote the Group’s musical masterpieces in the most effective manner.

Strategic alliances providing synergy

The Group has strategic alliances with a number of reputable companies, including but not limited to SOFTBANK, NTT, Dentsu, Avex and SOTEC. The Directors believe its alliance with SOFTBANK may provide the Group with extensive business connections via its portfolio of investments, whereas its alliance with NTT may provide the Group with a distribution network to promote its music. Moreover, the Group may obtain the latest technological know-how from NTT in order to enhance the distribution efficiency and the quality of its services and products. For details, please refer to the section headed “Strategic Investors” on pages 80 to 83 of this prospectus.

Early mover advantage

The Directors believe the Group has an early mover advantage in employing the Internet in the recruitment of talented music producers, in addition to recruiting music producers through traditional auditions. Capitalising on the Group’s reputation as a music production house, the Directors believe that the Group may attract a substantial amount of traffic, in particular music lovers and talented music producers, to its website at www.rojam.com, thus enhancing its chances in spotting talented music producers and generate additional revenue from Internet advertising and e-merchandising of CDs. Moreover, leveraging on the vast number of music producers from both the online and traditional auditions, the Directors believe the Group is uniquely positioned to provide wide-ranging music production services in Asia.

CORPORATE REORGANISATION

The Group originated from a wholly-owned subsidiary of the Company, namely REL, which was founded by Mr. Tetsuya Komuro and Mr. Kebo Wu in January 1998. Mr. Tetsuya Komuro held his equity interests (representing 50% of the issued share capital of REL immediately before completion of the “Group reorganisation” as described in Appendix V to this prospectus) in his own name. Guo Ye Enterprises Limited (in which Mr. Kebo Wu has a 25% equity interest) held the remaining 50% in REL immediately before completion of the “Group reorganisation” as described in Appendix V to this prospectus.

The Company was incorporated in the Cayman Islands on 29th February, 2000 and became the holding company of the Group upon the completion of the group reorganisation, particulars of which are described in the paragraph headed “Group reorganisation” in Appendix V to this prospectus. As at 30th June, 2000, Singing Mermaid held 466,666,744 Shares, which represented approximately 78% of the then existing issued share capital (fully paid up) of the Company, while the remaining 22% was held by Billion Moment.

On 1st July, 2000 Singing Mermaid transferred 227,915,000 Shares all at HK$0.1 per Share to a total of 37 investors including certain Directors, producers and employees of the Group and other investors. Singing Mermaid has confirmed that the consideration of the transfers have been fully paid to Singing Mermaid.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 62 General Overview of the Group

On 10th July, 2000, the Company issued and allotted 299,999,923 Shares at HK$0.13 per Share to Singing Mermaid. As a result, Singing Mermaid held, in aggregate, 538,751,667 Shares as at 10th July, 2000.

In the period from 4th August, 2000 to 13th October, 2000, the Company alloted and issued an aggregate of 134,684,403 Shares all at HK$0.8 per Share (the “First New Issue”). A summary of the First New Issue is set out as follows:

Date of allotment Subscriber Number of Shares

4th August, 2000 AEON (JPN) 3,125,000 4th August, 2000 AEON (HK) 3,125,000 4th August, 2000 Dentsu 8,984,403 14th August, 2000 Media Factory 6,250,000 30th August, 2000 SOFTBANK 91,750,000 29th September, 2000 Avex 2,700,000 13th October, 2000 NTT 18,750,000

134,684,403

On 9th February, 2001, Singing Mermaid transferred an aggregate of 62,598,000 existing Shares at a consideration of HK$0.8 per Share to 15 investors as there were strong demands in the investment community.

On 9th February, 2001, Billion Moment transferred a total of 30,000,000 Shares to Buckhorn Investment Limited, an independent third party at a consideration of HK$0.8 per Share. On 23rd March, 2001, Singing Mermaid, transferred an aggregate of 8,261,000 existing Shares, representing approximately 0.748% of the issued share capital of the Company immediately after the completion of the Placing, at a consideration of HK$0.8 per Share to 11 investors. In addition, Billion Moment transferred an aggregate of 1,600,000 existing Shares, representing approximately 0.145% of the issued share capital of the Company immediately after the completion of the Placing, at a consideration of HK$0.8 per Share to 2 investors.

On 23rd March, 2001, Starnet Investment Group Limited transferred all its equity interest in the Company amounting to 18,570,000 Shares to its ultimate beneficiaries according to their shareholdings in Starnet Investment Group Limited. In this connection, 8,913,600 Shares were transferred to Mr. Arihito Yamada, an executive Director, at a total consideration of HK$4.8. In addition, 5,571,000 Shares were transferred to Mr. Masahiro Seki, an independent third party, at a total consideration of HK$3.0, and 4,085,400 Shares were transferred to Mr. Keiichi Uezumi, a senior management of the Group, at a total consideration of HK$2.2.

On 23rd March, 2001, Jade Treasure Investments Limited transferred all its equity interest in the Company to Mr. Tomohiko Domen amounting to 27,022,000 Shares at a total consideration of HK$1.0. Jade Treasure Investments Limited is owned as to 70% by Mr. Tomohiko Domen, an executive Director, and 30% by Mrs. Chiyoko Domen, the spouse of Mr. Tomohiko Domen. In this transfer, Mrs. Chiyoko Domen sold her indirect equity interest in the Company to Mr. Tomohiko Domen at nominal value.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 63 General Overview of the Group

On 3rd April, 2001, Billion Moment transferred an aggregate of 5,850,000 existing Shares, representing approximately 0.529% of the issued share capital of the Company immediately after the completion of the Placing, at a consideration of HK$0.8 per Share to 3 independent investors.

On 12th February, 2001, Singing Mermaid transferred all its equity interest in the Company to Mr. Tetsuya Komuro at a total consideration of HK$1.00.

591,886,000 53.59%

143,074,403 12.95%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 64 General Overview of the Group

Number of Approximate Shares held percentage of or interested in shareholding (immediately after (immediately after the completion the completion of the Placing of the Placing without the and assuming exercise of the that the Over- Date of becoming Over-allocation allocation Option Consideration Total Name of Shareholder a Shareholder Option) is not exercised) per Share Consideration (HK$) (HK$) Producers 1. Ryuichi Sakai 1st July, 2000 52,500,000 4.75% 0.1 5,250,000 2. Naoto Kine 1st July, 2000 16,580,000 1.50% 0.1 1,658,000 3. Koji Kubo 1st July, 2000 14,000,000 1.27% 0.1 1,400,000 4. Takashi Utsunomiya 1st July, 2000 6,666,000 0.60% 0.1 666,600

89,746,000 8.12%

Employees (Note 6) 1st July, 2000 2,743,000 0.25% 0.1 274,300

Company beneficially owned by ex-Director and his Associate Supreme Effort Enterprises Limited (Note 7) 1st July, 2000 20,483,000 1.85% 0.1 2,048,300

20,483,000 1.85%

166,752,000 15.09%

Sub-Total 1,014,684,403 91.85%

Placing Shares (New Shares) 70,000,000 6.34% Placing Shares (Sale Shares)(Note 16) 20,000,000 1.81%

Total 1,104,684,403 100.00%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 65 General Overview of the Group

Notes:

5. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director.

6. There are 9 employees of the Group each holding between 130,000 Shares to 1,333,000 Shares.

9. Mr. Keiichi Uezumi, Ms. Yuri Shimomura and Ms. Yoshimi Oishi are members of the senior management of the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 66 General Overview of the Group

13. Mr. Tetsuya Komuro sold the 8,261,000 Shares to 11 investors each holding between 292,000 Shares to 1,917,000 Shares. Among these investors four are independent investors comprising an investor, holding 500,000 Shares who had a business working relationship with Mr. Tetsuya Komuro, an investor, holding 300,000 Shares who is an employee of his private company, and two independent third parties holding in aggregate 3,584,000 Shares. In addition, 7 of them, holding in aggregate 3,877,000 Shares, are relatives of Mr. Tetsuya Komuro and their respective shareholdings and relationships are shown as below:

14. Billion Moment sold the 1,600,000 Shares to 2 independent investors.

16. Billion Moment will offer for sale a total of 20,000,000 existing Shares under the Placing.

17. For details of these strategic investors, please refer to the section headed “Strategic investors” on page 80 of this prospectus.

DESCRIPTION OF BUSINESS

The Group is an integrated music production house engaging in a wide range of music related operations including music production, music publishing, record distribution, artiste and event management, trademark licensing, music learning centre and music entertainment portal. With its prime focus on music production, the Group endeavours to strengthen the quality and capacity of

ROJAM ENTERTAINMENT HOLDINGS LIMITED 67 General Overview of the Group

its music production team and secure more music production business and music publishing business with major record companies and entertainment companies. The Directors believe that a significant portion of its revenue will be generated through music production and publishing businesses which will serve as a steady cash flow stream to strengthen the long-term business developments of the Group. Capitalising on its solid foundation and established business relationships in the music industry, the Group has diversified its business lines and has developed a portfolio of music related operations which provide multiple revenue streams to the Group. These operations include record distribution, artiste and event management, trademark licensing, music entertainment portal and music learning centre. Details of each business operation are as follows:

MUSIC PRODUCTION SERVICES

The Group specialises in the provision of a wide range of music production services for the entertainment industry. Having a strong music production team with expertise in different areas of music production, the Group offers services encompassing producer services, master tape recording, mixing services, re-mixing services, arranging services and advisory services in respect of selection of songs for records production. The Group’s contribution to the production of record is accredited by the imprintment of the Group’s trademarks on the record covers. Through such credit, the Group’s reputation is enhanced.

The rate that the Group is able to charge for its services varies between clients depending on various factors, inter alia, the specifications of the project, the expected number of man-hours required and the music production services required.

The Group may refer the artistes selected by the Group through Click Audition to record companies to sign up as recording artistes of such record companies. The Directors believe that such introduction and referral enhances the Group’s bargaining power in the negotiation of royalty payments for the provision of music production services to the record companies.

The music production services offered by the Group can be categorised into the following classes:

Producer services

For the producer services, the Group procures its music production team to strategise, organise and produce master tape recordings and oversee all aspects in the recording process for the production of the master tapes for the production of records. The Group’s producer services include:

• strategising musical products for a record company;

• overall planning, management and supervision of the whole production;

• assigning all persons involved in the production process and supervising their performance;

• budgeting and production cost control;

• advising on technical and studio requirement necessary for musical arrangements;

• sourcing and matching of composers, lyrics writers, artistes, arrangers (if appropriate) and any other persons necessary for the production;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 68 General Overview of the Group

• attending and supervising vocal recording and musical arrangement; and

• attending and supervising post-recording works including mixing and editing.

In consideration for the Group’s provision of producer services (in accordance with the customer’s requirements within a mutually agreed recording schedule), the Group is normally or would normally be remunerated in the following manner:

Signing bonus These are fees payable to the Group by record companies as an inducement to enter into a service agreement that are typically not usually subject to recoupment; such fees are non-refundable and payable upfront upon signing of a service agreement between the Group and the record companies.

Producer royalty These are royalties payable to the Group by its customers such as record companies in respect of the provision of the music production services. Producer royalty is calculated based on a royalty rate against the sales of the music records. Producer royalty rate varies amongst agreements and is negotiated on arm’s length basis with the respective record company.

Advance Producer royalty The advance producer royalty is payable to the Group by record companies in respect of the provision of the music production services to be provided by the Group. Such advance producer royalty would be recoupable from future royalties.

Production fees The Group is reimbursed for all production costs which have been properly incurred in relation to the production of the master tape with a premium of approximately 15% above the actual production cost or in accordance with production budget agreed on a record by record basis. The Group and the record company will agree in advance the budget of such production cost.

Mixing and re-mixing services

Mixing service is the process of reducing the multi-tracks of a recording into a two track stereophonic master tape ready for the duplication process. The re-mixing services comprise re-mixing different versions of the original recordings including all versions of such recordings arranged for promotion and performance and such other versions as may from time to time be required by the clients, post-production services and all other incidental services of re-mixing such recordings. The Group will charge a service fee which varies according to the complexity and/or specifications of the work undertaken.

Arranging services

Arranging services include re-harmonizing, paraphrasing and/or developing different versions of the original musical works with a view to enhance the melodic, harmonic and rhythmic structures. The Group will charge a service fee which varies according to the complexity and/or specifications of the work undertaken.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 69 General Overview of the Group

Advisory services in respect of selection of songs for records production

The Group, capitalising on the expertise and experience of the music production team, provided advice to record companies to engage suitable composers and lyrics writers. The Group has also initially explored a business model of acquiring the copyrights subsisting in musical works of composers and lyrics writers who are not staff members or contractors of the Group, such as Ms Erica Li and granted licences to its customers for the use of those musical works in return for a royalty fee. Please refer to the following section headed “Music Publishing” for such licensing arrangement and details of the royalty fees.

However, the Directors consider that such a business model is no longer in the interest of the Group, as such arrangement necessarily incurs additional administration effort and expenses to the Group and increases the risk exposure of the Group. The Group will suffer losses if the present value of the royalty fee generated from the copyrights of the musical works acquired cannot cover the cost for the acquisition of the copyrights and the administration expenses. Accordingly, the Group has abandoned the above business model and will only provide advisory services to record companies in relation to the selection of musical works for records production.

MUSIC PUBLISHING

The Group grants licences to its customers for use of the musical works owned by or licensed to the Group, such as record companies and movie production houses. The Group intends to grant such licences to other companies such as radio and television broadcasting companies and advertising companies. The Group charges various forms of royalty fees for granting such licences. The royalty fees can be summarised as below:

Mechanical royalty This is the royalty fee payable to the publisher or, copyright owner for the use of his/her compositions and/or lyrics on phonograph records. The Group grants licences to record companies to manufacture and distribute records embodying such compositions and receives, in return, mechanical royalty either in the form of a fixed fee or a specific percentage of record sales, which is mutually agreed between the Group and the record companies.

Synchronisation royalty This is the fee payable to the publisher or copyright owner for the use of his/her compositions and/ or lyrics with visual images recorded on audio-visual devices, in particular, movies, video compact discs or laser discs. The Group grants licences to synchronise the compositions and/or lyrics, in return for a fixed fee or a specific percentage of the sales of such audio-visual devices on which the compositions and/or lyrics are recorded.

As described in the above section headed “Advisory services in respect of selection of songs for records production”, the Group will, in the future, only provide advisory services to record companies in relation to the selection of musical works for records production. The Group will nevertheless continue to co-publish with other publishers such as Sony Music Publishing (Japan) Inc. for the promotion of musical works (and the records embodying such musical works) produced by the Group and receive a share of net royalty income derived from such musical works.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 70 General Overview of the Group

Income flow relating to the Group’s prospective music production and publishing activities are summarized as below:

Music Production and Publishing Income Flow Chart

Target Movie Internet Customers Karaoke Production Television Advertising Content Record Box House Station Agency Provider Store

Mechanical Synchronisation Record Royalty Royalty Sales

MUSIC Mechanical and RECORD PUBLISHER Synchronisation COMPANY Royalty

SigningSigning ProducerProducer ProductionProduction BonusBonus RoyaltyRoyalty FeesFees

PRODUCER

RECORD DISTRIBUTION

In addition to distributing records under its own label, the Group also distributes records containing master sound recordings which have been licensed from third parties in Hong Kong, Taiwan and Japan. In the case of distributing records under its own label, the Group owns the master tape to such records. The royalties paid by the Group to the licensors for distribution of third parties’ records are based on the number of records manufactured and sold. The royalties currently paid to the licensors range from 6.25% to 18% of the record sales.

As the number of the Group’s artistes increases and their popularity grows over time, the Directors believe that the Group can expect considerable revenue from record sales. The Directors believe that as the Group has its own music production team and production facilities, the Group can maintain the quality of its records and better control the overall production costs.

To widen its distribution channels, the Group has employed both conventional and hybrid sales models, using a traditional delivery method but new ordering platform over the Internet, in distributing records. Since its establishment, the Group has formed business relationships with a number of distributors in Hong Kong, Taiwan and Japan.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 71 General Overview of the Group

Record Distribution System y

Conventional Sales System Hybrid Sales System

The Group’s Wholesalers Fax Order Portal

• Internet http://www.rojam.com Record Stores • Mobile Record Stores contracted with http://jp.rojam.com/m/ wholesalers

ROJAM ENTERTAINMENT HOLDINGS LIMITED 72 General Overview of the Group

ARTISTE AND EVENT MANAGEMENT

Artiste Management

The artiste management team is responsible for discovering new artistes and training, promoting and procuring performance opportunities for and development of artistes selected and engaged by the Group. The Directors consider the artistes to be the vocal channels for the works of the music production team. The Group would select potential artistes through its Click Audition system and would enter into recording artiste contracts with such artistes, and in some cases, would also act as their managers. The Group actively participates in, amongst other things, the development and promotion of the artistes, public relations matters, marketing, arrangement of public performances for the artistes and negotiation, on behalf of the artistes, their terms of engagement. By rendering the above services, the Group is able to obtain commission based on a percentage of the remuneration received by the artistes for performing in concerts, commercials and other activities arranged by the Group. In addition to record-related activities, the Group would also procure opportunities for the artistes in other areas of the entertainment industry.

There are two types of arrangements with the artistes:

•“artiste management agreement” – this is an agreement entered into by the Group with an artiste under which the artiste appoints a company of the Group as his/her sole and exclusive manager in all areas of the entertainment industry, including theatre, films, television, radio broadcasting, live performances, recordings and all forms of commercials, merchandising and advertising; and

•“recording artiste agreement” – this is an agreement entered into by a company of the Group with an artiste under which the artiste accepts the exclusive appointment as a contract artiste of such member of the Group and agrees to perform musical works and album recording services in all forms of media including CD, video cassette tapes, laser karaoke discs, CD ROM and any other forms of media which may be invented in the future.

Event Management

The event management team serves as an alternative medium to promote the music production team’s musical works by organising concerts and other similar events as well as highlighting the artistes’ talents. The Directors believe that promotion of artistes will be enhanced through performances in concert or similar events and the Group will usually adopt advance technology to produce visual, lighting and sound effects. Capitalising on the established business connections in the entertainment industry, the Group has arranged and organised a number of concerts for various artistes namely, Puffy and TM Network, in Hong Kong and Japan which in aggregate, attracted an audience of over 55,000 people. In organizing such events, the Group can obtain revenue either in a fixed service amount or a certain percentage of the total revenue or net profit of the event as the case may be.

MUSIC LEARNING CENTRE

The music learning centre serves as a medium for the Group to effectively communicate with music lovers and amateur producer audiences and to promote the awareness of original music creation. The Group plans to launch two types of courses: 1) producer courses; 2) vocalism courses. Producer courses provide a basic guideline in music theory, composing, arranging, mixing, remixing and the editing of music. Vocalism courses feature singing techniques and basic music theory. The

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Group will arrange members of its music production team to prepare the curriculum and materials of the courses and provide guidance to the students. Course materials can be retrieved from the Group’s designated homepage upon the payment of a course fee and students can interact with the tutors via the Internet. The Group intends to select those candidates who excel in the courses to participate in music production or performances and to join the production team of the Group or be introduced to other record companies. The Directors believe that the music learning centre can establish potential business relationships, train and improve the quality of amateur producers and singers and transform them into quality producers and singers of the Group.

TRADEMARK LICENSING SERVICES

The trademark licensing services division provides an alternative means to promote the Group’s image and brand, while at the same time receiving royalties therefrom, currently based on 10% of the gross revenue attributable to the related services of the licensee. Therefore, the Group plans to grant further licences to other entertainment businesses to generate more royalty fees. The Directors believe that the trademarks held by the Group will become even more valuable as its popularity continues to grow over time. Since 1999, the Group has licensed two of its trademarks and the logo “ ” to a discotheque in Shanghai, the PRC. It is the Group’s intention to grant further licences in various target markets, in particular, Taiwan and South Korea. To enhance the publicity of the Group as well as the discotheque in Shanghai, the PRC, it will from time to time, co-operate with such licensees to launch promotional activities, such as concerts. The Directors believe that by licensing the Group’s trademarks to other entertainment businesses, it can enjoy an increasing flow of revenue from such licensees, and at the same time benefit from the synergistic effect of having, its musical works promoted.

MUSIC ENTERTAINMENT PORTAL

The Group currently operates a music entertainment portal under the website – www.rojam.com which features music and music video downloads, news on the Group’s artistes and fan clubs and various forms of entertainment. The portal functions as an alternative marketing channel for the Group which creates a community for music lovers and fans of artistes under the Group’s influences. To capture the increasing use of mobile Internet browsing tools, the Group also developed a web page http://jp.rojam.com/m/ which is tailored for mobile phone users. This portal is further enhanced with the ringtones download service which allows the Group to promote its songs. The Directors expect that the music entertainment portal will generate revenue by hosting advertisements, soliciting sponsorships and selling records. As the portal’s content and publicity grow over time, it is expected that the site network will provide a means of revenue sources.

PROFILES OF PRODUCERS AND INTERNATIONAL CELEBRITY

PRODUCERS

The Group has an established music production team with expertise from different areas in music production. The profile of the team members are summarised as follows:

Koji Kubo (professional name known as Cozy Kubo)

Pursuant to an agreement entered between the Group and Cozy Kubo on 20th April, 2000, Mr. Kubo serves as a non-exclusive producer for the Group in the period from 20th April, 2000 to 19th April, 2005. Cozy Kubo is a producer, composer and arranger in Japan. He started his career as a producer when he participated in the recording and the live concert of TM Network in 1984. In 1985, he worked as the computer lyrics programmer in TM Network’s second album “Childhood’s End”. Since then he has participated in the recording and producing of records of some Japanese

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pop singers such as Misato Watanabe, Senri Ooe and Kyoko Koizumi. In 1989, he got the credit for arranging and producing with Mr. Tetsuya Komuro in Rie Miyazawa, Riho Makise and Arisa Mizuki’s songs who are young actresses in Japan. In March 1992, he released his first solo album “COZY” i n which he made his debut as an artiste. In June 1994, he formed the band “NO GALERS” which released its first album in that year. In May 1995, he produced the musical “Live UFO 95” with Mr. Tetsuya Komuro. He received the “The Best Song Arranger” award for TRF’s song “Overnight Sensation” in the same year. Over the years, he participated in the music production as a producer, composer, and arranger for numerous artistes including Namie Amuro, Ami Suzuki, tohko, TRF, Naomi Amagata and CASCADE.

Daisuke Asakura

Pursuant to an agreement entered into between the Group and Mr. Daisuke Asakura on 1st January, 2001, Mr. Asakura serves as a non-exclusive producer of the Group from 1st Januar y, 2001 to 31st December, 2004. Mr. Daisuke Asakura is a well-known producer in Japan. Mr. Daisuke Asakura started playing synthesiser and studied digital system in music production after he graduated from high school in 1983 and has become an expert in using the computer and synthesiser. He released his first solo album “LANDING TIMEMACHINE” in 1991. He participated in one of TM Network’s famous concert tours “EXPO TOUR” which lasted for eight months between September 1991 and April 1992. After that, he formed the band “access” with Mr. Takami Hiroyuki, and took part as a producer, in which the band released 3 albums and 11 singles, all of which were top hits in the albums and singles charts. In 1996, he formed another group “Iceman” with Mr. Kenichi Ito and Mr. Michihiro Kuroda and has released 6 singles and 6 albums. In addition, he received credit for arranging and producing for a popular male Japanese artiste, Takanori Makes Revolution (T.M. Revolution). Since 1995, Mr. Daisuke Asakura has also produced songs for numerous popular singers in Japan, such as pool bit boys, Yuki Kimura, Takashi Fujii, and T.M. Revolution. Mr. Daisuke Asakura’s music compositions included hits such as “Boarding”, “wild rush”, “White Breath”, “Hot Limit”, and “NANDA KANDA”. Currently, he entrusts with the mission of revolutionizing the traditional music production process by employing the latest technology.

Naoto Kine

Pursuant to an agreement entered into between the Group and Mr. Naoto Kine on 20th April, 2000, Mr. Naoto Kine serves as a non-exclusive producer of the Group from 20th April, 2000 to 19th April, 2005. Mr. Naoto Kine is a composer, producer and novelist in Japan. He was also one of the members of the male trio “TM Network”. After TM Network was disbanded in 1994, he started to release his singles and albums as a solo artiste. He has also composed songs for other artistes including Misato Watanabe, Yuko Sasaki, Akiko Hioki, Ai Maeda and Yaya Ooga. In July 2000, Mr. Naoto Kine, together with Mr. Tetsuya Komuro and Mr. Takeshi Utsunomiya reformed the band “TM Network”. He has, to date, released six albums and the latest compilation album, “The best of Naoto Kine 15 Goodies” was released in May 2000. In December 2000, he performed live with other members of TM Network in a concer t and released the new album “Major Turn-Round”.

Ryuichi Sakai (professional name known as Marc Panther)

Pursuant to an agreement entered into between the Group and Mr. Ryuichi Sakai on 1st January, 2001, Mr. Ryuichi Sakai serves as a non-exclusive producer of the Group from 1st January, 2001 to 31st December, 2001. Mr. Marc Panther was born in Marseille, France and he is the rapper of the Japanese group “globe”. He has been modelling for television commercials since his early age and made his debut in the music industry in 1991. He participated in numerous programs as the host and acted as a DJ and a VJ. Mr. Marc Panther became a member of globe in 1995. He is both the rapper and the lyrics writer for the band. He has been the lyrics writer for numerous albums and singles. He also writes the lyrics for the songs of some popular singers in Japan, such as tohko, Reika

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Miku, Mie Sakaguchi, Namie Amuro, Ami Suzuki, Toshihiko Tahara, Yuko Tsuburaya and Hikaru Nishida. Mr. Marc Panther has received several music awards over the years, including the “Best Album Award” in the 38th Japan Record Award in 1996; the “11th Japan Gold Disc Award”; the “ORICON Award” in the 17th Jam Commercial Music Festival Award; Gold Disc by JASRAC and the “Japan Record Award” in 1998.

Takashi Utsunomiya

Pursuant to an agreement entered into between the among and Mr. Takashi Utsunomiya on 1st January, 2001, Mr. Utsunomiya serves as a non-exclusive producer of the Group from 1st January, 2001 to 31st December, 2004 Mr. Takashi Utsunomiya, is the vocalist of the male trio unit “TM Network”. In 1992, he formed a band “T.UTU with the band” in which 2 albums, 3 singles and 4 videos were released. After TM Network was disbanded in 1994, he formed another rock band “BOYO-BOZO” with Mr. Yasushi Ishii and released an album, 2 singles and a video in 1995. In August 1996, he performed a solo concert tour, “TAKASHI UTSUNOMIYA TOUR 96” in Japan. To date, he has released 4 albums, 6 singles and 5 videos. In addition to being the vocalist of TM Network, he is also a solo artiste and his latest album “White Room” was released in June 2000. During 1998 and 1999, he played the leading role in a popular Broadway musical “RENT ” in Japan. Furthermore, he is also involved in producing books and many other entertainment industries such as hosting radio programmes.

Takeshi Hayama

Pursuant to an agreement entered into between Mr. Takeshi Hayama and the Group on 1st January, 2001, Mr. Hayama serves as a non-exclusive producer of the Group from 1st January, 2001 to 31st December, 2004. Mr. Takeshi Hayama is a well-known guitarist, arranger and producer in Japan. He was a guitarist of the band “Hanashin” from 1977 to 1980. Hanashin won first place in the “Yamaha 8.8 ROCK DAY”, in 1997. In 1978, he released a CD, “BOOGIE Live HANASHIN” and an album, “Dance with HANASHIN” which were produced by Mr. Ginji Ito. Mr. Takeshi Hayama went on to join another band name “Wild Life” in which the Japanese singer, Tetsuro Oda is a member. Mr. Takeshi Hayama is also a music arranger for numerous pop groups, such as WANDS, DEEN, and Field of View. He worked on most of Maki Oguro’s albums. Mr. Takeshi Hayama has continuously been involved in producing “the next pop generation”. He is one of the few producers who handle the whole process of music production. Currently, he participates actively in music composing for commercials, television shows and movies.

Tatsushi Hashimoto (professional name known as DJ Dragon)

DJ Dragon (Tatsushi Hashimoto), an employee and exclusive producer of the Group, is a DJ and a fashion designer in Japan. He started as a full time DJ at the clubs in Tokyo since 1989. In 1992, he formed the band, “THE BIG BAND”, and took part as a vocalist. In 1996, he participated in the production of Mr. Tetsuya Komuro’s concerts. In addition, he demonstrated his creativity in designing souvenirs for the concert tours of pop artistes such as Mr. Tetsuya Komuro and the group “Mr. Children”. He is also the navigator of a NHK program, “MAYONAKA NO OOKOKU” and a VJ for Japanese Music Television Station, “vive INDEX”. Currently, he is the host of a popular radio program of a Japanese radio station, “J-WAVE”.

Tetsuya Katsuragi

Pursuant to an agreement entered into between the Group and Mr. Katsuragi on 1st January, 2001, Mr. Tetsuya Katsuragi serves as a non-exclusive producer for the Group from 1st January, 2001 to 31st December, 2004. Mr. Tetsuya Katsuragi was a member of the group “TV-Wildings”, formerly known as “T.V” and made his first debut in 1986. After TV-Wildings was disbanded, Mr. Tetsuya Katsuragi started to release singles and albums as a solo artiste. He released 7 singles and 5 albums by 1996. He is a well-known session guitarist in the music industry. He took part as a session

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guitarist in the recordings for numerous pop singers, including TM Network’s album “Major Turn- round” and two singles “We Are Starting Over”, “IGNITION SEQUENCE START”; globe’s single “DON’T LOOK BACK”; T.M Revolution’s album “Suite Season”; Fayray’s album “CRAVING”; Ami Suzuki’s album “SA”; Yoshino Kimura’s album “ONE and ONLY” and Misato Watanabe’s album “Hadaka no Kokoro”. He also took part as a stage session guitarist in the concerts of Misato Watanabe, Naoto Kine, TM Network and Takashi Utsunomiya. In addition, Mr. Tetsuya Katsuragi has been a soccer commentator since 1996.

Tetsuya Komuro

Mr. Tetsuya Komuro, the founder and the Chairman of the Company, is one of Japan’s top composers and producers. He made his debut as a member of the male trio TM Network in 1984. Starting from 1985, Mr. Tetsuya Komuro pursued a career as the producer producing master tapes for the soundtrack of an animation film. At the same time, he composed songs for others. Since then, Mr. Tetsuya Komuro has made a name for himself as one of the top producers and composers in Japan.

Between 1987 and 1994, Mr. Tetsuya Komuro concentrated on the role of serving as a producer for several artistes such as TRF, Ryoko Shinohara, H Jungle with t, Tomomi Kahala, Namie Amuro, and globe of which he is a member. On 15th April, 1996, Mr. Tetsuya Komuro made history when the songs he produced for Namie Amuro, Tomomi Kahala, globe, dos and TRF, all ranked top 5 on ORICON. Mr. Tetsuya Komuro was accredited the Japan Record Award for four consecutive years between 1995 and 1998. He had been active internationally, producing for Ring in Taiwan, and Grace Ip in Hong Kong in 1997. As a member of globe, Mr. Tetsuya Komuro released four singles consecutively in 1998; making him the first producer ever in the history of pop music in Japan to have four singles in the top eleven on ORICON at the same time.

Mr. Tetsuya Komuro also went on national tours, performing in numerous concerts including the National Dome Stadium Concert. He held his first overseas concert in Taipei, Beijing, Shanghai, and Hong Kong. He also participated in the soundtrack production for the movie “SPEED 2”, and collaborated with other musicians to produce the official album “Allez!Ola!Ole!” of the 1998 World Cup Soccer in France. In addition, he performed live with Mr. Jean Michel Jarre, a recording artiste and producer in Europe, before an audience of over one million at the Eiffel Tower Square in Paris, France. He participated in the Hong Kong Handover 1st Anniversary Celebration; worked as the general producer for the “Guam Illumination”, which is an event organised by the Guam National Government Tourism Bureau, in which Mr. Tetsuya Komuro was appointed as Goodwill Ambassador.

In January 1999, he established an Indies label “True Kiss Disc” in New York, US and began performing as a member of Kiss Destination. This has brought the number of bands of which he is a member to three – globe, Kiss Destination, and TM Network.

Mr. Tetsuya Komuro had made numerous social contributions to the society including the creation of the “Konet Plan”, which helps elementary school children and junior high school students to enter the world of the Internet; and composition of songs for various anti-narcotic stimulant drug campaigns. In January 2000, Mr. Tetsuya Komuro was appointed by the former Prime Minister of Japan, Mr. Keizo Obuchi, to be the producer of the theme music for the G8 Kyushu-Okinawa Summit meeting held in July 2000. In the same year, by the special invitation from the Executive Director of United Nations International Drug Control Program (UNODCP), Pino Arlacchi, Mr. Tetsuya Komuro was conferred UNODCCP Goodwill Ambassador.

Over the years, Mr. Tetsuya Komuro had won a number of music awards both in Japan and abroad. As of today, an aggregate of over 168 million CDs produced by him have been sold. In addition, he also won the top prize for high quality composition as a music director by releasing “Ten To Chito” in June 1990. In 1998, the song “wanna Be A Dream maker” produced by Mr. Tetsuya Komuro, won the “Japan Record Grand Award of the year”, the fourth successive year for him to win this title.

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INTERNATIONAL CELEBRITY

Hidetoshi Nakata

Pursuant to an agreement entered into between the Group, Mr. Hidetoshi Nakata and Mr. Hidetoshi Nakata’s management company on 20th May, 2001, Mr. Nakata serves as a non-exclusive international celebrity for the Group from 1st April, 2001 to 31st March 2005. His duties to the Group includes participation in the Group’s promotional activities and procure online linkage between the Group’s websites and websites of Mr. Nakata and his Associates. Mr. Hidetoshi Nakata began playing soccer at the age of nine. First selected to represent in the Under-15’s All Japan National team, Mr. Hidetoshi Nakata continued to distinguish himself through high school at the National Athletic Meets and the High School Championships as well as in the national Under-17 and Under-19 teams. When Mr. Hidetoshi Nakata graduated from high school, eleven out of the twelve Japan League teams attempted to recruit him.

Mr. Hidetoshi Nakata’s reputation continued to soar through his first year as a professional player with Bellmare Hiratsuka. He was selected for the national team, at the age of 19, the youngest to play in the Olympic games in Atlanta. With Mr. Hidetoshi Nakata’s participation, Japan was able to win a ticket to the Olympics, for the first time in 28 years. He was also instrumental in Japan’s historic victory over Brazil in Atlanta. Since his debut match for Japan’s senior squad in May 1997 against South Korea, Mr. Hidetoshi Nakata has started to perform the key role in the national team. He spearheaded the way for the ascent through the Asian qualifying round for a successful passage to the World Cup in France, Japan’s first-ever entry into the tournament. On 24th July, 1998, Mr. Hidetoshi Nakata joined AC Perugia in the Italian Serie A. He was then transferred to AS Roma on 13th January 2000, where he continues to play in one of the world’s most prestigious professional leagues.

The official homepage of Mr. Hidetoshi Nakata, “nakata.net” was established in May 1998. It is one of the popular websites in Japan. The average daily page views is 600,000 and the highest daily hit rate was over 27 million a day. As at September 2000, an aggregate of over 500,000 mails have been received by the “Hotline Message”. The website was voted as the “Top New Homepage of the Year 1998” and “Best Site” by Yahoo!JAPAN web.

PRODUCER AND ARTISTE AUDITION

The Group introduced the “Click Audition” system in an attempt to source and incubate young music talents and future music icons. The Click Audition aims to recruit potential artistes as well as music producers by inviting music fans in Asia to participate in the selection of their favourite candidates.

The Click Audition is a contest that is held on the Group’s website continuously and is open to public participation. It is established to provide a platform for those with music talents to exhibit their skills. The system allows potential artistes and producers from around Asia to make their debut and introduce themselves to the mass market through the Internet. Web visitors can choose their favourite talents from a list of candidates and place their votes. The candidate with the highest votes may be selected by the Group to receive professional training for a singing or music-producing career.

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The following flow chart shows the Click Audition system:

Artiste and Producer Audition System

ON-LINE OFF-LINE

Registration

Candidates who wish to be an artiste/aproducer

WEB Personal biographies, musical creations will be posted on the web www.rojam.com

VOTE

Selection

ARTISTES PRODUCERS contracts with contracts with

ROJAM ROJAM’s Music Joint Ventures of Production Team ROJAM Record Companies or Talent Management Office Programme Sponsors

Artiste Audition

The artiste audition provides the Group with a channel to source potential future stars. The audition is based on votes. Contestants may enter through both online and off line registrations, where they will be rated and voted by the general public. A regularly updated database of the profiles of potential artistes from Japan, Hong Kong, Taiwan, South Korea and the PRC will be collected, on average, every three to six months. The management will then consider inviting the most talented candidates with the highest number of votes in the audition to join the Group for a professional music career. The selected candidates may be given the opportunity to sign contracts with leading record companies or management companies and have a debut album produced by the Group’s music production team.

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Producer Audition

The producer audition provides the Group with a channel to source talented music producers. The audition may take place either online or offline. The candidates may upload their music compositions onto the Group’s website or send the compositions directly to the Group’s head office. The compositions are made available to the Internet community for comments. Similar to the artiste audition, the general public may vote for their favourite producer candidates. The management may consider inviting those being talented and with the highest number of votes to join the Group for a professional music producing career. The Directors believe the producer audition will provide the Group with a great opportunity to source new producer talents efficiently.

STRATEGIC INVESTORS

It is part of the Group’s business development strategy to establish and maintain strategic partnerships with reputable companies with superior industry influence in the Group’s established and developing business areas. As a step in implementing such strategy, the Group has formed strategic relationships with seven reputable companies, namely, SOFTBANK, NTT, Dentsu, SOTEC, Media Factory, Avex and AEON. The Directors believe that the relationships with these strategic partners will provide synergies to the Group and also introduce potential clients and/or opportunities to the Group.

SOFTBANK

SOFTBANK currently holds 91,750,000 Shares which will represent approximately 8.086% of the issued share capital of the Company immediately after completion of the Placing.

SOFTBANK CORP., the holding company of the SOFTBANK Group in which SOFTBANK INVESTMENT CORPORATION is one of the members, has emerged as one of the world’s leading Internet market forces. Through its ownership positions in more than 400 Internet companies and its unique Internet management concept, SOFTBANK CORP., creates market synergies for its group of companies on a global scale. SOFTBANK CORP., together with its subsidiaries engage in a wide range of businesses worldwide and have formed joint ventures with many reputable market leaders such as Microsoft Corporation, Cisco Systems and Yahoo!.

The strategic alliance with SOFTBANK will provide synergies to the Group on a number of different levels. The Directors expect that this alliance will lead to an increase in opportunities for the Group to offer various services, in particular, business transaction platform, broadband infrastructure services and its related business to a portfolio of companies in which SOFTBANK has invested. In addition, SOFTBANK has extensive business connections worldwide and is able to introduce reputable and established partners to the Group in developing new business lines and regional markets.

NTT

NTT currently holds 18,750,000 Shares which will represent approximately 1.652% of the issued share capital of the Company immediately after completion of the Placing.

NTT was founded in March 1997 as a subsidiary of NTT Communications Corporation, one of the world’s largest telecommunications companies. It focuses on providing high-quality and reliable global network and telecommunication services in Hong Kong, Japan, US, Europe and other Asian countries at a low cost. It not only establishes global network at clients’ premises through support system integration but also provides full operational support to clients’ facilities.

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The Directors believe that this strategic alliance can help the Group to promote its music in Japan through the mobile phone system owned by NTT DoCoMo, a member of the NTT Group. Moreover, taking advantage on the expertise of NTT in network and telecommunications, the Group is able to acquire the latest technology which can enhance the distribution efficiency as well as the quality of its services and products.

Dentsu

Dentsu currently holds 8,984,403 Shares which will represent approximately 0.792% of the issued share capital of the Company immediately after completion of the Placing.

Dentsu is one of the world’s largest advertising companies in terms of both gross income and billings, holding this position for more than 20 consecutive years. It has, since 1901 when it was founded, led the Japanese communications industry for almost 100 years. Beginning as a news telegraphic service and advertising firm, Dentsu’s activities have expanded beyond traditional mass media services to involve nearly every aspect of creative communications. At present, Dentsu simply offers a breadth of services unrivaled by any competitor, anywhere brought together in total communications services, a full support structure and philosophy ensuring a never-ending pursuit of excellence in global communications.

Having in-depth knowledge and solid foundation in mass media services in Asia, Dentsu is able to bring value to the Group through the provision of market knowledge of different countries and identify business opportunities and partners, where appropriate to the Group.

SOTEC

SOTEC currently holds 8,390,000 Shares which will represent approximately 0.76% of the issued share capital of the Company immediately after completion of the Placing.

SOTEC was established in 1984 in Yokohama, Japan and is a company with its shares listed on the Nasdaq Japan Market. SOTEC aims to develop personal computers which could satisfy the needs of and bring excitement to its customers. The principal businesses of SOTEC are the development, design, manufacture and sale of personal computers, import and export of computers, development and sale of computer peripheral equipment and e-commerce. SOTEC will continue to form global tie-ups with businesses specialising in other promising communication and computer-related areas.

Having the mission of emerging as one of the leading integrated music production houses in Asia, the Directors believe that the strategic alliance with SOTEC enables the Group to extend its presence in a different industry by providing the background tunes or theme music for computers. The Directors expect that the alliance with SOTEC will allow the Group to focus on its core operation of producing quality music, while minimising a significant amount of uncertainty risks such as the large expenses involved in marketing and music distribution. This alliance can also provide an additional promotional channel for the Group to increase the awareness of its music through personal computers. Furthermore, the Group can jointly incubate potential artistes scouted by the Group through its Click Audition system with SOTEC. The Directors believe that this alliance represents an integration of the music production business and personal computer business between the Group and SOTEC whereby allowing both parties to promote their infiltration and influence in music and personal computer markets.

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Media Factory

Media Factory currently holds 6,250,000 Shares which will represent approximately 0.551% of the issued share capital of the Company immediately after completion of the Placing.

Established in December 1986, Media Factory is engaged in extensive business operations, including (i) planning, production and sales of POKEMON CARD GAME and related items of POKEMON; (ii) engaging in a variety of publishing operations, namely, game software, motion picture items, animated cartoons, artistic works and books; (iii) planning, production of master tapes, sales of records and CDs, and management of artistes; and (iv) copyright management and intellectual property consultancy.

Taking advantage of Media Factory’s distribution networks and wide breath of contents relating to entertainment, the Group can further enrich the contents of its portal, develop its publication business and reticulate a more extensive distribution network.

Avex

Avex currently holds 2,700,000 Shares which will represent approximately 0.238% of the issued share capital of the Company immediately after completion of the Placing. Mr. Tetsuya Komuro is interested in about 0.86% of the issued share capital of Avex as at the Latest Practicable Date.

Avex and its subsidiaries are engaged in the diversified general entertainment businesses in music and video software, and worked to establish a business structure that consistently posts high profitability. The principal business areas of Avex include planning, production and marketing of music and video software (CDs and video); management of song copyrights; production of promotional and other videos; planning, production and staging of concerts and events; artiste management; and production and marketing of music overseas, including production and sales of its original and proprietary titles. At present, the Avex Group is executing its plan developed to enable more aggressive participation in home entertainment business activity adapted for the information communications age. Avex has started digital music distribution over the Internet by establishing a new wholly-owned subsidiary, to handle the music download activity and manage the website.

As Avex is one of the major record companies in Asia, most of the artistes under its fold are well recognised in the market. By assuming the producer role of the records of those artistes, the Group can further promote its publicity and reputation in the target markets. Furthermore, the Group can jointly incubate potential artistes scouted by the Group through its audition system. The Directors believe that this alliance represents an integration of the music production business and record business between the Group and Avex allowing the two parties to exercise a strong influence over the music market together.

AEON

AEON (JPN) and AEON (HK) currently collectively hold 6,250,000 Shares which will represent approximately 0.55% of the issued share capital of the Company immediately after completion of the Placing.

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AEON (HK)’s history in Hong Kong began in November 1987, when AEON (JPN) set up its branch office in the territory. AEON (HK) is a member of the AEON Group and a subsidiary of AEON (JPN). AEON (HK)’s shares are listed on the Main Board and its core business is credit card operation, which accounted for 92% of its total turnover for the year ended 20th February, 2000. Besides the issuance of credit cards, AEON (HK) also provides a range of other consumer credit finance services, including the provision of vehicle financing, the provision of hire purchase financing for household merchandise and other consumer products, and the provision of personal loan financing.

For the tie-up sponsorship program, the Group has successfully launched a series of tie-up promotional co-marketing events to promote the Group’s products in the year 2000 such as the tie-up with AEON (HK)’s promotional program for the records of the Group’s artistes. The Group consistently makes use of this free but effective channel, not only to build the brandname awareness among the public, but also to cut down on the advertising and promotion expenditures.

The Group exploits the Internet media to promote its products and brandname. The Group’s music entertainment portal and the website for the mobile Internet system were respectively launched in April and September 2000 and have became two of the effective channels to market the Group’s music and one of the sources for scouting potential producers and artistes for the Group.

This strategic alliance can provide the Group synergies in respect of marketing and distribution on the basis that AEON (HK) and the Group are focusing on the same mass market audience falling into the demographic group of 20 to 45 years old in Asia. In 2000, the Group has co-operated with AEON (HK) to promote and distribute the Group’s records through AEON (HK)’s multi-media stations and television commercials. In addition, the Group plans to develop an online channel for sales of merchandise and music with the support of AEON-SPOTTM.

CUSTOMERS AND SUPPLIERS

Customers

The Group’s major customers are record companies, record and merchandise dealers, and its trademark licensee. For the years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000, the five largest customers of the Group, in aggregate, amounted to approximately HK$4,636,000, HK$1,375,000 and HK$84,500,000 respectively, accounting for approximately 99.4%, 91.3% and 89.9% of the Group's total turnover respectively.

The Group’s largest customer for the years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$3,342,000, HK$820,000 and HK$76,737,000 respectively, accounting for approximately 71.7%, 54.5% and 81.6% of the Group’s total turnover respectively.

The Group’s largest customer for the year ended 31st March, 2000 and being the fifth largest customer of the Group for the nine months ended 31st December, 2000 was indirectly beneficially owned as to 90% by Mr. Kebo Wu, an executive Director. Turnover from such customer for the year ended 31st March, 2000 and the nine months ended 31st December, 2000 amounted to

ROJAM ENTERTAINMENT HOLDINGS LIMITED 83 General Overview of the Group

approximately HK$820,000 and HK$1,199,000 respectively, accounting for approximately 54.5% and 1.3% of the Group's total turnover respectively. Details of the transactions are set out in the section headed “Connected Party Transactions” in this prospectus. Mr. Tetsuya Komuro, an executive Director and the controlling shareholder of the Company, has an interest of approximately 24% in the second largest customer of the Group for the nine months ended 31st December, 2000. Turnover from such customer for the nine months ended 31st December, 2000 amounted to approximately HK$2,905,000, accounting for approximately 3.1% of the Group’s total turnover. A company indirectly owned as to 50% by Mr. Tetsuya Komuro and 12.5% by Mr. Kebo Wu, and being the largest supplier of the Group for the nine months ended 31st December, 2000, has an interest of not more than 1% in the largest customer of the Group for the nine months ended 31st December, 2000.

Both of the Group’s largest customer for (i) the year ended 31st March, 2000 and being the fifth largest customer of the Group for the nine months ended 31st December, 2000; and (ii) the nine months ended 31st December, 2000 have entered into contracts with the Group, the terms of which will expire on 31st March, 2004 and 31st October, 2005 respectively. As the operation of the Group continues to grow in scale and the revenue base expands, the percentage of total turnover attributable to these customers should decrease.

Save as aforesaid, none of the Directors, their respective Associates and shareholders who own more than 5% of the issued share capital of the Company has any interest in any of the top five customers of the Group for the two years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000.

During the two years ended 31st March, 2000 and the nine months ended 31st December, 2000, the Group’s sales were primarily made on the basis of cash on delivery and credit terms of around 30 days. The management of the Group reviews the credit terms granted to its customers from time to time. The Group normally grants credit terms to customers with good payment records and close business relationships. The credit terms and credit limits granted to the customers are approved by two executive Directors who are responsible for the Group’s operations in Japan and Hong Kong respectively.

The Group closely monitors the amounts due from its customers and will adjust the credit terms granted to its customers, as appropriate. The management of the Group reviews the debt position on a regular basis. Provision will be made on a specific basis when any doubtful debts have been identified. During the two years ended 31st March, 2000 and the nine months ended 31st December, 2000, the Group has neither experienced any bad debt nor has been required to make any provision for such.

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The following table shows the currency breakdown of the Group’s turnover for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000:

Nine months ended Year ended 31st March 31st December Currency 1999 2000 2000

JPY ––98% HKD 100% 100% 2% 100% 100% 100%

During the two years ended 31st March, 2000 and the nine months ended 31st December, 2000, the Group’s sales were mainly settled by cheques and telegraphic transfers.

Suppliers

The Group’s major suppliers are studio owners, merchandise production companies and CD jacket and video production companies. For the years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000, the five largest suppliers of the Group, in aggregate, amounted to approximately HK$2,605,000, HK$54,000 and HK$8,998,000 respectively, accounting for approximately 70.1%, 42.5% and 66.1% of the Group's total cost of music production and distribution respectively.

The Group’s largest supplier for the two years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$2,220,000, HK$24,000 and HK$3,970,000 respectively, accounting for approximately 59.7%, 18.9%, 29.2% of the Group's total cost of music production and distribution respectively.

Both the largest and the fourth largest suppliers of the Group for the nine months ended 31st December, 2000 were indirectly beneficially owned as to 50% by Mr. Tetsuya Komuro, an executive Director and the controlling shareholder of the Company, and 12.5% by Mr. Kebo Wu, an executive Director. The cost of music production and distribution attributed to such suppliers for the nine months ended 31st December, 2000 amounted to approximately HK$3,970,000 and HK$774,000 respectively, accounting for approximately 29.2% and 5.7% of the Group's total cost of music production and distribution respectively. Mr. Tomohiko Domen, an executive Director, is a director of both such suppliers. The largest supplier of the Group for the year ended 31st March, 1999 and being the fifth largest supplier of the Group for the nine months ended 31st December, 2000 was wholly owned by Mr. Tetsuya Komuro. The cost of music production and distribution attributed to such supplier for the year ended 31st March, 1999 and the nine months ended 31st December, 2000 amounted to approximately HK$2,220,000 and HK$291,000 respectively, accounting for approximately 59.7% and 2.1% of the Group's total cost of music production and distribution respectively. Details of the transactions are set out in the section headed “Connected Party Transactions” on pages 90 to 97 of this prospectus and the section headed “Related Party Transactions” in the Accountants’ Report set out in Appendix I to this prospectus. Mr. Tetsuya Komuro also has an indirect interest of approximately 24% in the third largest supplier of the Group for the nine months ended 31st December, 2000. The cost of music production and distribution attributed to such supplier for the nine months ended 31st December, 2000 amounted to approximately HK$1,490,000, accounting for approximately 10.9% of the Group’s total cost of music production and distribution.

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Save as aforesaid, none of the Directors, their respective Associates and shareholders who own more than 5% of the issued share capital of the Company has any interest in any of the five suppliers of the Group for the two years ended 31st March, 1999 and 2000 and the nine months ended 31st December, 2000.

As disclosed in the section headed “Non-exempt continuing connected transactions” in this prospectus, the Directors expect that the Group will continue to engage the services of the suppliers mentioned in the preceding paragraph on the same basis as set out therein and in the ordinary course and on terms no less favourable than from independent third parties. Notwithstanding that the major suppliers of the Group are connected persons and that the Group could procure similar services from other studio and related services providers, the Directors are of the view that such connected persons are the most appropriate suppliers because of their quality services and experience in co- operating with the Group’s producers, and hence, it is in the interests of the Group to continue to procure services from these connected parties so long as the terms for the services are fair and reasonable and in the interests of the shareholders of the Company.

For the two years ended 31st March, 2000 and the nine months ended 31st December, 2000, the payment for the procurement were primarily made on credit basis ranging from cash on delivery to 120 days and mainly settled in JPY and HK$ by cheques and telegraphic transfers. To date, the Group has not experienced any major difficulties in obtaining adequate supplies to meet its needs.

The following table shows the currency breakdown of the Group’s payment for the procurement for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000:

Nine months ended Year ended 31st March, 31st December, Currency 1999 2000 2000

JPY ––55% HK$ 100% 100% 45% 100% 100% 100%

SALES AND MARKETING

The Group is engaged in business operations with different target markets. Accordingly the Group has segregated its target markets into two segments and adopted different marketing strategies to capture different market segments.

For the music production business, the Group aims to capture the major record companies, movie production houses, advertising companies and those who seek music content to furnish their products. Taking into account of the nature of this business mentioned above, the Group employs a direct sales method to establish business relationship with target customers and promote the Group’s music production services. Using the direct sales method, the Group will consistently send its personnel to visit its existing and prospective clients to discuss about their requirements and then develop tailor-made musical works to address their needs.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 86 General Overview of the Group

For record distribution and Internet related businesses, the Group focuses on the mass market audience falling into the demography of 15 to 35 years old in Asia. In view of the mass market focus, the Group focuses on promoting its products as well as its artistes persistently through the public media channels including television commercials, radio, magazines and public events. The Group will from time to time tie up with its strategic investors, retail chain stores, magazine publishers and event management companies to co-organise a series of marketing functions for the purpose of enhancing the publicity and arousing the interests of the targeted audience to the Group’s products.

TECHNOLOGY AND QUALITY ASSURANCE

The Group consistently study and select appropriate technological new equipment to improve production efficiency and quality of its musical works. The Directors believe that one of the key factors for spearheading in the music industry and winning confidence of the customers is to provide high quality music. Therefore, the Group places emphasis on adopting measures, technology and equipment to enhance the quality of music and production efficiency and to create new musical elements to meet the ever-changing market trends.

To assure its customers of the quality of its music production services, in particular, master-tape recording, arranging, mixing and re-mixing, the Group has a studio with a total gross floor area of about 1,344 sq.m. (about 14,460 sq.ft.) in Tokyo, Japan and invested approximately JPY460 million in acquiring various music production equipment. Currently, the Group has four experienced musical engineers specialising in exploiting the latest technology and providing technical support in music production.

INTELLECTUAL PROPERTY RIGHTS

The Group has applied for registration of certain trademarks, service marks and domain names in a number of countries, and some of the trademarks and the domain name have been registered, details of which are set out in the paragraph headed “Intellectual Property” in Appendix V to this prospectus.

COMPETITION

Due to its inherent volatile and evolving nature, competition within the music and entertainment industry is tough and, to a certain extent, unforeseeable. In respect of music production, the core business of the Group, the major competition comes from individual producers of major record companies. However, the Director believe that the Group has competitive advantages attributable to its scale of resources and experience of the team of producers. In respect of other business lines of the Group, such as music publishing, record distribution and artiste and event management, the Group faces intense competition from existing industry players, record companies, music publishers, media houses and other new entrants into the music and entertainment industry.

Although the competition encountered by the Group’s businesses is intense, the Directors consider that the Company has commanded a relatively strong position in the music and entertainment industry through its competitive strengths as set out in the section headed “Competitive Advantages” in this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 87 General Overview of the Group

COMPETING INTERESTS OF THE DIRECTORS, INITIAL MANAGEMENT SHAREHOLDERS AND SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the business of the Group and the music related activities of Mr. Tetsuya Komuro, an executive Director and the controlling shareholder of the Company, in his personal capacity are delineated as follows:

The Group Provision of producer services, music publishing, trademark licensing, artiste and event management, record distribution and operation of music learning centre

Tetsuya Komuro Music composing and lyrics writing, artiste performance, rental of studio in Hawaii, USA and Bali, Indonesia

Set out below are the reasons for which the Directors consider not to include the musical related activities engaged by Mr. Tetsuya Komuro in his personal capacity into the business scope of the Group:

1. For music composing and lyrics writing:

(i) such activities are highly dependent on individual talent. Transforming them into a corporate operation shall not bring any additional merit to the capability or quality of the activities. Therefore, there are no economies of scale for the inclusion of such activities into the Group’s business; and

(ii) the Directors believe even if the Group opts to manipulate business models to include such activities into its operations, there are no commercially viable ways to do so. The Directors anticipated that there are two methods of manipulation: (a) pay the composers and lyrics writers one-off fees for their assignment of their musical works and lyrics (and any future royalty incomes derived from the musical works and lyrics) to the Group; and (b) hire the composers and writers as employees and require them to transfer any royalty incomes derived from the musical works and lyrics to the Group. However, such business models are not in the interest of the Group, as (a) there are risks attached to the sales of the records embodying such musical works and lyrics, and the Group may suffer losses if the present value of the related royalty income to be generated is not able to match the cost of assignment or employment; and (b) it is not in the Group’s interest to employ a team of composers and lyrics writers whether now, or in the future, to provide the related services as the composers and lyrics writers can be engaged on a song by song basis which enables to Group to cut down on the related expenses and other overheads;

The Directors believe that it is a common industry norm for a popular and renowned music composer and/or lyrics writer to be paid a one-off fee in addition to the royalties derived from the musical works and lyrics. The composer’s fee varies amongst musical works and composers subject to negotiation. The royalties include Mechanical Royalties and Synchronisation Royalties, the rates of which are fixed by the JASRAC in the case of Japan, the Group’s major market and similar organisations in other jurisditions (“Equivalents”) and JASRAC or Equivalents will collect the royalties from the record companies and other music users such as TV stations, radio stations and Karaoke box operators and reimburse to the relevant composers or the lyrics writers.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 88 General Overview of the Group

In the past, when the Group engaged Mr. Tetsuya Komuro to provide music composing and/or lyrics writing services, Mr. Tetsuya Komuro had waived the one-off fee and was only entitled to the fixed royalties to be collected from JASRAC or equivalents. Mr. Tetsuya Komuro has agreed to continue to provide composing and lyrics writing services to the Group on such terms in the future.

During the track record period of the Company, approximately 59% of the musical works and approximately 24% of the lyrics of the musical works produced by the Group were written by Mr. Tetsuya Komuro; while the remaining ones were written by independent third parties.

2. For artiste performance, the Directors consider that it is not the core business which the Group intends to develop and, hence, it is not in the Group’s interests to enforce an exclusive right to engage artistes for performance whether now, or in the future, as the artistes can be engaged to perform on a event by event basis which enables to Group to cut down on the expenses and other overheads.

3. For rental of music studio situated in Hawaii, USA and the music studio in Bali, Indonesia for music production, the Directors consider that it is not the core business which the Group intends to develop and it is more economical to rent such studio as and when needed.

As at the Latest Practicable Date, Mr. Tetsuya Komuro, an executive Director and the controlling shareholder of the Company, is interested in approximately 24% of M-Tres Ltd. which is the management company of Mr. Takashi Utsunomiya, a producer of the Group. Under the management of M-Tres Ltd., Mr. Takashi Utsunomiya (together with M-Tres Ltd.) and REL have entered into an exclusive recording artiste agreement in July 2000 whereby REL became the record company for Mr. Tskashi Utsunomiya. The principal business of M-Tres Ltd. is event production and management business. Mr. Tetsuya Komuro has confirmed that he has not taken any management role in M-Tres Ltd. and he is solely a passive investor. He has also confirmed that he has verbally undertaken to the other shareholders of M-Tres Ltd. that he will not dispose of his interests in M-Tres Ltd. and there may be adverse impact on the business of M-Tres Ltd. if he does so. Given the scope and nature of business of M-Tres Ltd. and the passive nature of Mr. Tetsuya Komuro’s involvement in it and further that event production and management is not the core business of the Group, the Directors consider that Mr. Tetsuya Komuro’s retention of his interest in M-Tres Ltd. will not have any significant adverse impact on the business of the Group.

Disclaimers

Save as disclosed in this prospectus, none of the Directors, Initial Management Shareholders, the substantial shareholder of the Company and their respective Associates has any business or interest that competes or may compete with the business of the Group and none of the above persons has any conflicts of interest with the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 89 General Overview of the Group

NON-COMPETITION UNDERTAKING

Mr. Tetsuya Komuro has unconditionally and irrevocably undertaken to the Company that (i) he will not, and will procure that none of his Associates will, directly or indirectly, carry on or engage or be engaged in any business which shall compete, or may compete, with the provision of producer services, music publishing, trademark licensing, artiste and event management, record distribution, and music learning centre, (the “Restricted Business”) whether directly or indirectly with effect from six months after the commencement date of dealings in the Shares on GEM; and (ii) he will not, and will procure that none of his Associates will, directly or indirectly, own more than 5% of equity interest or share interest in any company whose business includes the Restricted Business, save for the 24% equity interest in M-Tres Ltd. as described above. The above undertaking will cease to have effect on the earliest of the date on which (i) Mr. Tetsuya Komuro and/or his Associates cease to be shareholder(s) who is/are together entitled to exercise or control the exercise of 10% or more of the voting power at general meetings of the Company; (ii) the Shares cease to be listed and traded on the GEM; or (iii) the principal business of the Group ceases to be the Restrictive Business.

OTHER UNDERTAKING

Mr. Tetsuya Komuro has unconditionally and irrevocably undertaken to the Company that he will procure the names of Rojam Pictures, Inc. and Rojam, Inc., being companies wholly and beneficially owned by Mr. Tetsuya Komuro and outside the Group to be changed so as not to contain the word or any reference to “Rojam” or any similar form that could possibly infringe the intellectual property rights of the Group before the expiration of 3 months after the commencement of dealings in the Shares on GEM.

CONNECTED PARTY TRANSACTIONS

Discontinued connected transactions

Members of the Group have entered into agreements with certain connected persons constituting connected transactions for the Group for the purpose of the GEM Listing Rules. However, such transactions shall cease within six months falling the date of the commencement of dealings in the Shares on GEM. The summary of such transactions are set out as follows:

(1) CD production agreement

REL has, in the past, engaged Iroas for the production of compact discs for two music records under the Group’s label, namely, “Ignition, Sequence, Start” and “We Are Starting Over” by TM Network on an order by order basis. Iroas is a wholly-owned subsidiary of TK Museum Asia Limited, a company wholly and beneficially owned by Mr. Tetsuya Komuro. The fees payable to Iroas are computed as the actual production cost to Iroas of producing the CDs and an additional 10% of the actual production cost charged as administration fee.

As confirmed by the Directors and Mr. Tetsuya Komuro being the ultimate beneficial owner of Iroas, the Group will not engage lroas and Iroas will not be engaged by the Group to provide any CD production services, although the Group has in the past engaged Iroas in respect of such services and the amount paid by the Group to Iroas for the nine months ended 31st December, 2000 was HK$17,122.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 90 General Overview of the Group

Accordingly, the Directors have confirmed that such connected transactions will not continue after dealings in the Shares on the GEM commence.

(2) Artiste agreement

REL has entered into an exclusive artiste agreement dated 1st July, 2000 with (1) Iroas, being artiste management company for Mr. Naoto Kine and (2) Mr. Naoto Kine (artiste) pursuant to which Mr. Naoto Kine will perform and Iroas will procure Mr. Naoto Kine to perform such activities as to enable the reproduction and distribution of records, and to fulfill the product requirements of three original albums. The term of the artiste agreement commenced on 1st July, 2000 and will continue until the end of the sixth month from the date of release of the third original album by Mr. Naoto Kine. The royalty fees payable to Iroas are based on a royalty rate ranging from 3% to 8% of the net sales of the albums.

The amount payable to Iroas for the nine months ended 31st December, 2000 amounted to HK$147,048.

Mr. Tetsuya Komuro undertakes that he will procure Iroas to terminate its engagement with Naoto Kine as artiste manager of Naoto Kine before the trading in the Shares on GEM commences. The Group will enter into agreement with Mr. Naoto Kine and/or his new management in relation to his performing artiste’s engagement.

Accordingly, the Directors have confirmed that such connected transactions will not continue after dealings in the Shares on the GEM commence.

Continuing connected transactions

Members of the Group are parties to certain transactions that will, upon the listing of the Shares on GEM, constitute continuing connected transactions for the purposes of the GEM Listing Rules, which can be broadly categorised as exempt continuing connected transactions and non-exempt continuing connected transactions, which are subject to waivers to be granted by the Stock Exchange.

Exempt continuing connected transactions

The Directors (including the independent non-executive Directors) have confirmed that, save as disclosed herein, each of the transactions described below has been entered into in the ordinary course of business of the Group, and is fair and reasonable to the Company and its shareholders taken as a whole.

(1) Artiste performance services by Mr. Tetsuya Komuro

REL has engaged the services of Mr. Tetsuya Komuro in his capacity as a member of TM Network to perform in two concerts, TM Network 727 and TM Network Tour Major Turn- Round on an order by order basis. REL is not required to pay Mr. Tetsuya Komuro any service fees under such an arrangement.

The Directors expect that the Group will continue to engage the services of Mr. Tetsuya Komuro in his capacity as a member of TM Network on the same basis.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 91 General Overview of the Group

The Group and Mr. Tetsuya Komuro have agreed that the Group will not be required to pay any fees to Mr. Tetsuya Komuro in future in relation to the artiste performance services rendered by Mr. Tetsuya Komuro to the Group.

(2) Adoption of musical works and lyrics

REL has, in the past, adopted musical works and lyrics composed and written by Mr. Tetsuya Komuro in the production of master tapes on a song by song basis. REL is not required to pay Mr. Tetsuya Komuro any fees for his composing services provided so far.

The Directors expect that the Group will continue to adopt Mr. Tetsuya Komuro’s musical works and lyrics in conducting its music production services on the basis that it will not be required to pay any composing service fee to Mr. Tetsuya Komuro. However, Mr. Tetsuya Komuro will retain his entitlements to the royalties derived from his musical works and lyrics.

(3) Video production agreement

REL has, in the past, engaged Rojam Pictures, Inc., a company wholly and beneficially owned by Mr. Tetsuya Komuro to provide video production services on an order by order basis. The fees payable to Rojam Pictures. Inc. are computed as the actual production cost to Rojam Pictures, Inc. of producing the videos and an additional 15% of the actual production cost charged as administration fee.

The amount paid to Rojam Pictures, Inc. for the year ended 31st March, 1999 was HK$2,220,000 and for the nine months ended 31st December, 2000 was HK$1,410,000. No payment has been made to Rojam Pictures, Inc. for the year ended 31st March, 2000 since the Group did not engage Rojam Pictures, Inc. to provide such services for that year.

The reasons for the Group to engage Rojam Pictures, Inc. to provide video production services in the past were principally as follows:

(i) the Group does not have such an operation and did not include such operation into the Group as the capital investment is so huge that it is not in the best interest of the Group to acquire such business from Mr. Tetsuya Komuro. Instead, the Directors believe that it is more economical to engage such production services on a project by project basis;

(ii) the executive Directors consider that the production quality of Rojam Pictures, Inc. demonstrates a better quality than other production houses;

(iii) the crew has ample experience in working with the producers of the Group, in this event Mr. Tetsuya Komuro, and hence this engagement is considered the most efficient;

(iv) most of the video recordings in relation to Mr. Tetsuya Komuro were kept by Rojam Pictures, Inc. Therefore when the Group produces videos in connection with Mr. Tetsuya Komuro, it is more convenient and effective to engage Rojam Pictures, Inc; and

(v) the engagement of Rojam Pictures, Inc. is on terms no less favourable to the Group than terms available from independent third parties.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 92 General Overview of the Group

Notwithstanding the above, Mr. Tetsuya Komuro, being the ultimate beneficial owner of Rojam Pictures Inc., has undertaken that, he will procure to have the business of Rojam Pictures Inc. disposed of to an independent third party (if not possible, to terminate its business) within six months after dealings in the Shares on the GEM commence.

Accordingly, there will be no connected transaction relating to such aspect six months after the dealings in the Shares on the GEM commence. The Directors expect that the amount payable by the Group to Rojam Pictures Inc. will not exceed HK$1,000,000 within six months after dealings of the Shares on the GEM commence.

(4) Maintenance of website

Rojam International Limited has commissioned Omnicourt Limited to set up and maintain the contents of the Group’s website at www.rojam.com since April 2000. Omnicourt Limited is a company wholly owned by HAL Communications Inc. which is in turn owned as to 82% by Mr. Hiroshi Ozawa and 18% by Mrs. Naomi Ozawa. Mr. Hiroshi Ozawa was a director of the Company, Rojam Management Limited, REL, Rojam International Limited and Rojam.com Limited for the period between 1st July, 2000 and 20th December, 2000. The fees payable to Omnicourt Limited include a one-off set-up fee of around HK$405,000 and a monthly maintenance fee of around HK$39,000.

The amount paid to Omnicourt Limited for the period between April 2000 and 31st December, 2000 amounted to around HK$759,000. The Directors expect that the aggregate consideration payable to Omnicourt Limited under this arrangement will not exceed HK$1,000,000 per year for each of the three years ending 31st March, 2004 and such amount has accordingly been set as the annual cap for each of the said financial years.

Should the annual total value or consideration (as appropriate) of any of these transactions numbered (1) to (4) above, exceed the higher of HK$1,000,000 or 0.03% of the net tangible assets of the Company, the Company will endeavour to comply with the reporting requirement set out in Rule 20.34 of the GEM Listing Rules, the announcement requirement set out in Rule 20.35 of the GEM Listing Rules and the shareholders’ approval requirement set out in Rule 20.36 of the GEM Listing Rules.

Non-exempt continuing connected transactions

(1) Licence agreement

(a) Pursuant to a licence agreement dated 5th July, 2000 (as amended by a supplementary agreement dated 17th May, 2001) entered into by REL and Shanghai Chikou Entertainment Co., Ltd. (“SCE”), which is a 90% owned subsidiary of Chikou Co., Ltd., a company wholly and beneficially owned by Mr. Kebo Wu, an executive Director and which the remaining 10% is owned by Shanghai Huanyu I/E Co., a company incorporated in the PRC and is independent of the Group, REL agreed to grant a non-exclusive sub- licence to SCE to use the trademark of Rojam International Limited, “Rojam.com” in a discotheque in the premises situate at 4th Floor, HK Plaza, 283 Huai Hai Zhong Road, Shanghai, 20021, PRC (the “Services”). The Directors consider that discotheque is not the kind of business which the Group has competitive advantages in; and therefore do not consider to include SCE in the Group. The term of the licence agreement is for an

ROJAM ENTERTAINMENT HOLDINGS LIMITED 93 General Overview of the Group

initial four year period from 1st April, 2000 to 31st March, 2004, and thereafter renewable at the option of REL for consecutive three year periods until 31st March, 2010 provided that the GEM Listing Rules requirements are complied with.

The licence fee payable to REL is in the form of royalty computed as 5% of gross revenue attributable to SCE in the provision of the Services.

(b) Pursuant to a licence agreement dated 5th July, 2000 (as amended by a supplementary agreement dated 17th May, 2001) entered into by REL and SCE, REL agreed to grant a non-exclusive sub-licence to SCE to use the logo “ ” of Rojam International Limited, in providing the Services. The term of the licence agreement is for an initial four year period from 1st April, 2000 to 31st March, 2004 and thereafter renewable at the option of REL for consecutive three year periods until 31st March, 2010 provided that the GEM Listing Rules requirements are complied with.

The aggregate licence fee payable to REL for the trademark and the logo “ ” is in the form of royalty computed as 5% of gross revenue attributable to SCE in the provision of the Services.

The amount paid to REL under the above two licence agreements for the year ended 31st March, 2000 was HK$820,000 and for the nine months ended 31st December, 2000 was HK$1,199,000. The Directors expect that the aggregate consideration payable to REL under these licence agreements will not exceed HK$2,000,000 per year for each of the three years ending 31st March, 2004 and such amount has accordingly been set as the annual cap for each of the said financial years.

(2) Studio Rental

(a) Pursuant to an agreement dated 19th May, 2001 made between SK Planning and REL, REL has since 1st April, 2000 rented from SK Planning the music studio situate at 377 Keahole St. D-03, Honolulu, Hawaii 96825, USA for use by the Group to be confirmed on an order by order basis. The term of the agreement is from 1st April, 2000 to 31st March, 2004. SK Planning is a wholly-owned subsidiary of Touch & Knock On Limited, which in turn is a wholly-owned subsidiary of Richtone Holding Limited. Richtone Holding Limited is a 50% owned subsidiary of Guo Ye Enterprises Limited, a company in which Mr. Kebo Wu, an executive Director, holds 25% of its issued share capital. The remaining 50% of the issued share capital of Richtone Holding Limited is held by Mr. Tetsuya Komuro. The fees payable for the use of the said studio are computed as studio charges and an additional 15% of the studio charges as administration fee.

(b) Pursuant to an agreement dated 19th May, 2001 made between PT, TK Disc Bali and REL, REL has since 1st April, 2000 rented from PT. TK Disc Bali, a company beneficially owned by Mr. Tetsuya Komuro, the music studio situate at Jalan Raya Seminyak, Gang Plawa No.566, Kuta-Bali 80361, Indonesia to be confirmed on an order by order basis. The term of the agreement is from 1st April, 2000 to 31st March, 2004. The fees payable for the use of the said studio are computed as studio charges and an additional 15% of the studio charges as administration fee.

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The Group will continue to engage in such transactions mainly for the following commercial reasons:

(i) the Group needs such services but has not included such studios into the Group as the capital investments are so high that it is not in the best interests of the Group to acquire such business from Mr. Tetsuya Komuro. Instead, the Directors believe that it is more economical to rent such studio as and when needed;

(ii) the executive Directors consider that the production quality of such studios demonstrates a better quality than other studios in the same region;

(iii) the engineers have ample experience to work with the producers of the Group, and hence the engagement is currently the most efficient one;

(iv) a lot of the audio records of the Group’s producers have been kept in such studios. Therefore, it is more convenient and effective to rent such studios; and

(v) the charges in relation to the rental of such studios will be reimbursed by the record companies to the Group if the Group uses them to produce songs for companies other than the Group. In addition, the charges of such studios are no less favourable than terms offered from independent third parties.

The Directors expect that the Group will continue to rent the above studios from SK Planning and PT. TK Disc Bali on the same basis and in the ordinary course of business and on terms no less favourable than from independent third parties.

The aggregate amount paid for the rental of the studios as described above for the nine months ended 31st December, 2000 was HK$655,000. The Directors expect that the aggregate consideration payable for the use of the studios above under these arrangements will not exceed HK$3,500,000 per year for each of the three years ending 31st March, 2004 and such amount has accordingly been set as the annual cap for each of the said financial years.

Each of the non-exempt connected transactions set out above constitutes a non-exempt continuing connected transaction under Rule 20.26 of the GEM Listing Rules, and such transactions are normally subject to the reporting, announcement and/or shareholder’s approval requirements set out in Rules 20.34 to 20.36 of the GEM Listing Rules. These provisions require that certain details of such transactions be included in the Company’s next published annual report and accounts, announced by the Company on the GEM website and/or approved by its shareholders following the issue of a circular to the shareholders of the Company in respect thereof.

In the opinion of the Directors (including the independent non-executive Directors), these non- exempt continuing connected transactions (together the “non-exempt connected transactions”) are entered into:

(a) in the ordinary and usual course of business of the Group;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 95 General Overview of the Group

(b) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties; and

(c) in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

CPY has concurred with such view after having reviewed the documents and information provided by the Group and relying on confirmations and representations made by the Directors.

As the non-exempt connected transactions are of a recurring nature and expected to continue in the future and fall within the definition of “Transactions” in the ordinary and usual course of business of the Group as defined in Rule 20.09(12) of the GEM Listing Rules, the obligations to comply with disclosure requirements in full and to seek approval of the shareholders of the Company in general meeting from time to time would be impracticable and unduly burdensome.

Accordingly, CPY, on behalf of the Company, has applied to the Stock Exchange for a waiver from strict compliance of the requirements relating to connected transactions under Chapter 20 of the GEM Listing Rules in respect of each of the non-exempt connected transactions, and the Stock Exchange has indicated that such waiver will be granted, subject to the following conditions:

(i) (a) the non-exempt connected transactions will be entered into in the ordinary and usual course of business of the Group as defined under Rule 20.09(12) of the GEM Listing Rules;

(b) the non-exempt connected transactions will be entered into either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties;

(c) the non-exempt connected transactions will be entered into in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole;

(d) the value of each of the non-exempt connected transactions in any one financial year shall not exceed the caps set out in the above paragraphs;

(ii) details of the non-exempt connected transactions shall be disclosed in the Company’s next published annual report and accounts as set out in Rule 20.34 of the GEM Listing Rules;

(iii) the independent non-executive Directors shall review annually the non-exempt connected transactions and confirm in the Company’s annual report whether the transactions have been conducted in the manner prescribed in paragraphs (i)(a) to (d) above;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 96 General Overview of the Group

(iv) the auditors of the Company shall review annually the non-exempt connected transactions and provide the board of Directors with a letter, a copy of which will be provided to the Stock Exchange, stating that the non-exempt connected transactions:

(a) have been approved by the Directors;

(b) are in accordance with the pricing policies of the Group if the transactions involve provision of goods or services by the Group;

(d) have not exceeded the caps referred to in paragraph (i)(d) above;

(v) in the event of any amendments to the terms of the non-exempt connected transactions (unless as provided for under the terms of the relevant agreements, documents or arrangements), the Company will comply with the provisions of Chapter 20 of the GEM Listing Rules or will apply for waiver from strict compliance with the relevant requirements;

(vi) the Company shall comply with all disclosure and/or shareholders’ approval requirements of the GEM Listing Rules after 31st March, 2004 unless a further waiver has been granted by the Stock Exchange;

(vii) the Company shall promptly notify the Stock Exchange if it knows or has reason to believe that the independent non-executive Directors and/or the auditors will not be able to confirm the matters set out in GEM Listing Rules 20.27 and/or 20.28, respectively; and

(viii) in compliance with GEM Listing Rules 20.26 to 20.28, where the cap in any year is greater than the higher of HK$10,000,000 or 3% of the net tangible assets of the Group, the transaction(s) and the cap(s) are subject to review and re-approval by independent shareholders at the annual general meeting following the initial approval and at each subsequent annual general meeting so long as the transaction(s) continue(s). The independent non-executive directors will be required to opine in the annual report whether or not the Group should continue with the agreement(s) for the transaction(s).

FOREIGN EXCHANGE

Foreign exchange risk

The income and expenditure of the Group are mainly in both HK$ and JPY, and the assets of liabilities of the Group as at 31st March, 2001 were denominated in both HK$ and JPY. As at 31st March, 2001, the Group maintained a balanced portfolio of Hong-Kong-dollar-denominated assets and liabilities and Japanese-yen-denominated assets and liabilities, taking into account the Group’s operational and capital requirements. Hence, the Directors do not consider that the Group is significantly exposed to any foreign currency exchange risks.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 97 Future Plans and Prospects

The information contained in this section has been included in compliance with Rule 14.19 of the GEM Listing Rules. As the Company is in the business of music industry, where the pace of change is rapid, there is no assurance that any of the Directors’ views on the market potential of the Group will remain unchanged or be capable of being realised. The Group may adjust its strategies and business objectives according to changes in market conditions. Thus, certain general or specific business objectives or milestones set out below may not be realised.

OVERALL BUSINESS OBJECTIVES

The Group aims to continue to pursue its mission of being one of the premier integrated music production houses and a business partner of choice for various entertainment companies in Asia. To realise this mission and take advantage of the growing opportunities that the Directors envisage, the Group will endeavour to pursue a range of key strategic initiatives to enable it to expand its presence in the region, strengthen its music production capacity, enhance its service offering and consolidate the foundations required for the Group’s business to succeed in the future.

The key strategic initiatives the Group plans to pursue can be summarised as below:

• Expand its customer base and enhance its core business operations of music production by building up its business alliance with major players in the entertainment industry;

• Strengthen its music production capacity by sourcing new talents;

• Geographical expansion in Asia;

• Increase its current level of recognition and publicity by investing in business development and marketing;

• Exploitation of the Internet media.

BUSINESS STRATEGIES

With the vision of being one of the leading integrated music production houses in Asia, the Directors have formulated a set of comprehensive strategies so as to realise the Group’s business objectives.

Expand its customer base and enhance its core business operation of music production by building up its business alliances with major players in the entertainment industry

The Group will continue to form strategic alliances with major players in the entertainment industry, as the means to strengthen its music production business by leveraging their broad distribution channels. The Group positions itself as the core production engine in driving the music industry in which its musical works continue to attract a positive demand from the market. The alliances with record companies allows the Group to focus on its core operation of producing quality music, while minimising a significant amount, such as the large expenses involved in marketing, artiste development and music titles distribution.

Strengthen its music production capacity by sourcing new talents

The Directors believe the most effective method to increase the Group’s music production capacity is by sourcing a large team of producers. Hence, the Group will continue to source and strengthen

ROJAM ENTERTAINMENT HOLDINGS LIMITED 98 Future Plans and Prospects

its production team by means of a variety of channels, in particular, the online and off line auditions, the music entertainment portal and the music learning centre. Moreover, in an effort to enhance the quality of music produced, the Group will capitalise on its established music management status to attract and incubate talented producers for producer services, mixing and re-mixing services, and arranging services.

Geographical expansion in Asia

The Group plans to undergo a major expansion in Asia to broaden its client base and minimise the economic risks impact on its business operations in a particular country. The Group plans to infiltrate into all major markets in the region, including Japan, Hong Kong, Taiwan, South Korea and the PRC. In order to minimise any uncertainty in entering into new markets in Asia, the Group plans to ally with strategic business partners in each country who have the ability and capability to complement the Group’s businesses. The strategic partners would possess adequate music market knowledge, established connections and distribution powers in these respective markets.

Increase its current level of recognition and publicity by investing in business development and marketing

The Group will undertake a number of activities with the objective to increase market awareness, enhance the Group’s position in the music industry, support the Group’s regional expansions and better position the Group to capture greater market opportunities. With a view to achieving the Group’s objectives in synergetic business development and effective marketing, the Directors plan to collaborate with discotheques in major cities in Asia to promote the Group’s image and brandname as a quality music production house. The Directors believe that the collaboration with discotheques will provide the Group with an effective means to promote its music and directly engage with music lovers or other patrons who are not as interested in music as they once were. In addition, the Group will rely more on multi-media for marketing and promotion, such as the Internet industry, the movie industry, magazine publication industry and the television and radio broadcasting industry.

Exploitation of the Internet media

In light of the growing popularity of the Internet, the Group will continue to leverage its resources and expertise in music production to build a variety of channels over the Internet through which the Group would recruit talented producers, promote the awareness of its music and carry out distribution and sales functions. The Directors believe that the extensive usage of the Internet has created a new media and presented an opportunity for the music industry. In particular, the Group plans on implementing two major online businesses to promote the music production industry. The online operations include a music entertainment portal which features music uploads and downloads and a music learning centre, which promotes and sources potential music producers and artistes.

In addition, the Group has stepped up its plans to co-operate with mobile content providers from Japan and eventually penetrate the download music market in Asia. In September 2000, the Group syndicated music content for three mobile operators in Japan, namely NTT DoCoMo, J-phone group and EZ Web (AU Co. & Tsuka). The three songs of TM Network: “We are Starting Over”, “Ignition, Sequence, Start”, and “MESSAGE” can be downloaded free of charge as ringtones; allowing the Group to promote the songs and to familiarize itself with the digital distribution system. The Directors are of the view that this was an important move for the Group to establish its music download business through mobile Internet browsing tools in the future.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 99 Future Plans and Prospects

’

s audition

’

Produce not less than 14 records for contractedfor label record companies Recruit not less Release not less than 3 producers than 6 records under the Group

Enter into not less than 1 producer service contract

Introduce not less than 1 artiste selected from the Group system to contracted record companies

–

– –

–

Six months ending 31st March, 2004 31st March,

’

Produce not less than 13 records for contractedfor label record companies

Release not less than 6 records under the Group

Enter into not less than 1 producer service contract

Enter into not less than 3 contracts with software companies, computer and games companies, etc. for the etc. provision of music provision content production services

Six months ending

–

’

s audition

’

Produce not less than 13 records for contractedfor label record companies Recruit not less Release not less than 3 producers than 5 records Enter into not less under the Group than 1 producer service contract

Introduce not less than 1 artiste selected from the Group system to contracted record companies

Six months ending 31st March, 200331st March, 2003 September, 30th

–

– – –

–

’

Produce not less Enter into not less than 12 records than 1 producer for contractedfor label service contract record companies

Enter into not less Release not less than 3 contracts than 5 records with software under the Group companies, computer and games companies, etc. for the etc. provision of music provision content production services

Six months ending

– –

’

s audition

’

Enter into not less than 1 producer service contract

Introduce not less than 1 artiste Produce not less selected from the than 17 records Group contractedfor label system to record companies contracted record Recruit not less companies Release not less than 1 producer than 5 records under the Group

31st March, 200231st March, 2002 September, 30th

–

– –

’

Enter into not less than 1 producer service contract

Enter into not less than 3 contracts with software companies, computer and games companies, etc. for the etc. Produce not less provision of music provision than 4 records for content contracted record label production companies services Release not less than 2 records under the Group

Period I Period Latest PracticableII Period III Period IV Period V Period VI Period Date to Six months ending 30th September, 2001

–

The following is a summary of the specific business objectives formulated by the Group for the following periods: the following is a summary by the Group for formulated The following objectives business of the specific

STATEMENT OF BUSINESS OBJECTIVES STATEMENT

Expand its customer base and enhance its core business operations of music production by building production by up its business alliance with major players in with major players the entertainment industry

Strengthen music production capacity through the sourcing of new talents

ROJAM ENTERTAINMENT HOLDINGS LIMITED 100 Future Plans and Prospects

’

Engage in not less than 1 music production or related project

co-brand label

Release not less than 4 records under the Group

Engage in not less than 1 music production or related project

markets

Engage in not less than 1 music production or related project

Taiwan

–

South Korea

–

PRC

–

Other Asian

–

Six months ending 31st March, 2004 31st March,

’

Explore other music related business opportunities

co-brand label

Release not less than 3 records under the Group

Engage in not less than 1 music production or related project

markets

Engage in not less than 1 music production or related project

Six months ending

Taiwan

–

South Korea

–

PRC

–

Other Asian

–

’

Engage in not less than 1 music production or related project

co-brand label

Release not less than 3 records under the Group

Engage in not less than 1 music production or related project

markets

Explore music related business opportunities

Six months ending 31st March, 200331st March, 2003 September, 30th

Taiwan

–

South Korea

–

PRC

–

Other Asian

–

’

s local

’

Participate in artiste auditions organised by the Group representative

Release not less than 2 records under the Group co-brand label

Engage in not less than 1 music production or related project

Six months ending

Taiwan

–

South Korea

–

PRC

–

’

Enter into a producer service contract with a Taiwan based Taiwan record company

Enter into a trademark licensing agreement with an entertainment company

label

Release not less than 2 records under the Group

Explore music related business opportunities

31st March, 200231st March, 2002 September, 30th

Taiwan

–

South Korea

–

PRC

–

s local

’

Participate in artiste auditions organised by the Group representative

Explore business opportunities in licensing the Group trademark rights to entertainment companies, for companies, example, discotheques

Co-operate with its strategic partner to establish music establish production and record distribution operations

Period I Period Latest PracticableII Period III Period IV Period V Period VI Period Date to Six months ending 30th September, 2001

Taiwan

–

South Korea

–

Geographical expansion in Asia expansion in

ROJAM ENTERTAINMENT HOLDINGS LIMITED 101 Future Plans and Prospects

s music,

s music

’

Sponsor or participate in television programs, Conduct audition activities and producersfor events in Asia to in events promote the Group artistes, producers Release not less and businesses than 1 major feature product to feature be sold via the Group entertainment portal

centre

Continue to expand the student base of the music learning centre

– Audition

–

Merchandise sales Merchandise

–

Music learning

–

Six months ending 31st March, 2004 31st March,

s music,

s music

’

Sponsor or participate in television programs, Conduct audition activities and artistesfor events in Asia to events in promote the Group artistes, producers Release not less and businesses than 1 major feature product to feature be sold via the Group entertainment portal

Six months ending

– Audition

–

Merchandise sales Merchandise

–

s music,

s music

’

Sponsor or participate in television programs, Conduct audition activities and producersfor events in Asia to events in promote the Group artistes, producers Release not less and businesses than 1 major feature product to feature be sold via the Group entertainment portal

centre

Expand the operation of the music learning centre on both conventional and conventional Internet platforms targeting 1 Asian targeting 1 market other than Japan and the market explored (if any) in Period I in Period (if any)

Six months ending 31st March, 200331st March, 2003 September, 30th

– Audition

–

Merchandise sales Merchandise

–

Music learning

–

s music,

s music

’

Six months ending

– Audition

–

Merchandise sales Merchandise

–

s music

’

Sponsor television programs in Japan and South Korea Conduct audition for producersfor

Release not less than 1 major feature product to feature be sold via the Group entertainment portal

centre

Launch music learning centre on both conventional and Internet platforms targeting 1 Asian targeting 1 market other than Japan

31st March, 200231st March, 2002 September, 30th

– Audition

–

Merchandise sales Merchandise

–

Music learning

–

’

s music

’

Sponsor television programs in Japan and Taiwan with a Taiwan and view to promoting Conduct audition the Group artistesfor contracted artistes and producers Release not less Self-organise or than 1 major participate in not product to feature less than 1 be sold via the concert to Group promote the entertainment Group portal

centre

Conduct market research and plan the operation of a music learning centre on both conventional and conventional Internet platforms in languages other than Japanese

Period I Period Latest PracticableII Period III Period IV Period V Period VI Period Date to Six months ending 30th September, 2001

– Audition

–

Merchandise sales Merchandise

– –

Music learning

–

Increase its current Exploitation of the level of recognition Internet media and publicity by and publicity investing in business investing development and development marketing

ROJAM ENTERTAINMENT HOLDINGS LIMITED 102 Future Plans and Prospects

––

2.0 0.5 0.5

16.0 4.5 4.5

(in HK$million)

–

2.5 2.5 5.0 10.0 5.0 5.0

6.0 10.0

0.5 1.5

0.5 1.0 0.5 2.0 0.5 0.5

ollows:

–

2001 2002 2002 2003 2003 2004

Date to ending ending ending ending ending

Period IPeriod II Period III Period IV Period TotalVVI (Note) Period Period (Note)

30th September,March, 31st 30th September,March, 31st 30th September,March, 31st

Latest Practicable Six months Six months Six months Six months Six months

usic learning centre

net media for

s geographical expansion plan

’

s business

’

: internal these periods by plans for resources. will be finanaced The business

for its Tokyo studio to enhance Tokyo its for the production of master tapes so as to enab the Group to capitalise on its strength in music production to strength in music expand its customer base and enhance its core business operationsenhance its core business

to strengthen its music production capacity

and artiste promotional activities in different countries in Asia primarily in different countries in to achieve the Group to achieve and increase its brand recognition and publicity 4.5 4.5 4.5 4.5 18.0 4.5 4.5

Asian countries to achieve geographic expansion

mainly to strengthen the music production capacity mainly to strengthen the music and to exploit the Inter the Group

Detailed breakdown of the use of proceeds is set out as f Detailed breakdown

Acquisition of hardware and software

Recruitment of producers

Engaging in sponsorship

Training and development of artistes and development Training in different

Establishing an online and offline m

General working capital purposes 0.5 0.5 1.0 3.0 5.0

Total 5.0 14.5 20.5 13.0 53.0 15.0 15.0

Note

Use of Proceeds

ROJAM ENTERTAINMENT HOLDINGS LIMITED 103 Future Plans and Prospects

BASES AND ASSUMPTIONS

The Directors have made the following assumptions in the preparation of the statement of specific business objectives for the period ending 31st March, 2004. Although the Directors believe such assumptions are reasonable, these assumptions may prove to be incorrect, in which case the Directors may modify or revise their business objectives accordingly.

Market assumptions

The market for music and related businesses, in particular for music produced or distributed by the Group, will continue to grow, both globally and in Asia.

There will be a sustained demand for music from record companies in Asia, in particular, from the Group.

Human resources

The Group will be able to attract and retain additional talented producers and artistes, and source compositions and lyrics from talented composers and lyrics writers.

Business issues

The Group will be able to identify suitable business partners and conclude agreements with them to form the working relationships proposed to effect the Group’s regional expansion.

The Group will be able to source and conclude strategic investments and acquisitions for the purposes of expanding its record business.

The Group will be able to maintain its existing good relationships with its major customers and record companies.

Legal environment

There will be no material adverse changes in the existing political, legal, fiscal or economic conditions in Japan, Hong Kong, Taiwan, South Korea or the PRC, or any countries in which the Group operates, or intends to operate.

Funding

The Group’s business plan assumes that the Group will have sufficient financial resources available to meet its proposed capital commitments. In the event that more business opportunities arise than those currently anticipated, and if markets permit additional fund-raising on favourable terms or the Group achieves substantial additional income from disposals, the Group may seek to accelerate and/or expand its stated business objectives.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 104 Future Plans and Prospects

USE OF PROCEEDS

The Directors believe that the Group will be able to expand its existing business operations and capture the growing business opportunities arising from the extensive usage of the Internet and technology advancement. The capital from the net proceeds of the Placing will provide funding for the plans of the Group set out in this section.

The net proceeds to the Group from the Placing of the New Shares, after deduction of underwriting fees and estimated expenses payable by the Company in relation to the Placing, are estimated to be approximately HK$53 million. The Directors presently intend to apply such net proceeds as follows:

– approximately HK$16,000,000 for the recruitment of producers mainly to strengthen its music production capacity;

– approximately HK$2,000,000 for training and development of artistes in different Asian countries to achieve geographic expansion;

– approximately HK$5,000,000 for general working capital purposes.

To the extent that the net proceeds of the issue of the New Shares under the Placing are not immediately applied for the above purposes, it is the present intention of the Directors that such net proceeds will be placed on short term deposits with licensed banks in Hong Kong.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 105 Directors, Senior Management and Staff

EXECUTIVE DIRECTORS

Mr. Tetsuya Komuro, aged 42, is the Chairman of the Board and the Chief Executive Producer of the Group’s music production team. Mr. Komuro founded the Group with Mr. Kebo Wu in January 1998 and is responsible for formulating the overall business strategies and development of the Group. He is also the mentor of the Group’s production team providing vision and guidance in music production. Mr. Komuro is an international renowned music composer, arranger and producer and a member of several pop groups namely globe, Kiss Destination and TM Network. Mr. Komuro has produced for a number of well-known artistes in Japan, such as Namie Amuro, Ami Suzuki and TRF and has made his name in the international arena on a number of occasions. In 1997, Mr. Komuro held a series of concerts in Beijing, Shanghai and Hong Kong as part of the celebrations for the 25th Anniversary of the Normalisation of China-Japan Relations. In April 1998, Mr. Komuro co- produced the official album for the 1998 World Cup Soccer in France. In early 2000, he was appointed by the former Prime Minister of Japan, Mr. Keizo Obuchi, to be the producer of the theme music for the G8 Kyushu-Okinawa Summit Meeting 2000.

Mr. Kebo Wu, aged 37, founded the Group with Mr. Tetsuya Komuro in January 1998 and is the Vice-Chairman of the Board. With extensive business experience and strong connections with various corporate entities in Japan, Hong Kong and the PRC, he is responsible for the overall strategic planning of the Group. Since graduating from Soka University, Japan with a Bachelor Degree in Business Administration, Mr. Wu has held key positions in a number of companies in Japan and the PRC.

Mr. Tomohiko Domen, aged 46, joined the Group in April 2000 is the Vice-Chairman of the Board. He is responsible for the Group’s overall music production and entertainment operations and business development. Mr. Domen joined Yamaha Co. Ltd in Tokyo, Japan in 1977 after he graduated from Sophia University, Japan with a Bachelor of Arts degree. He has over 20 years’ experience in music production and has extensive connections in the music industry in the United States, Japan and other parts of Asia. Since joining the Group in April 2000, Mr. Domen has successfully expanded the Group’s music production operations and other ancillary businesses.

Mr. Arihito Yamada, aged 38, is the Chief Executive Officer and Chief Financial Officer of the Group. He is responsible for the overall management of the Group in the areas of finance, legal, administration and corporate development. Mr. Yamada was educated in Japan and has a Bachelor of Economics degree from Keio University, Japan and a Master of Laws degree from Tsukuba University, Japan. He is a member of the Institute of Certified Public Accountants in Japan and has over 15 years’ experience in accounting and tax planning in PricewaterhouseCoopers including 3 years in Los Angeles office, specializing in the area of mergers and acquisitions, finance and tax planning of the entertainment industry. Prior to joining the Group in July 2000, Mr. Yamada was a partner of PricewaterhouseCoopers Tokyo office and the Chief Executive Officer of PricewaterhouseCoopers Entertainment Ltd.

Mr. Wong Ho Yan, Daniel, aged 32, is responsible for the Group’s overall public relations and marketing, the music production and entertainment operations and business development of the Group in the Greater China region. He graduated from University of Southern California, US, with a Bachelor of Science Degree in Business Administration, and has over 6 years’ experience in sales and marketing and business development, in particular, in the PRC and Hong Kong. Mr. Wong joined the Group in May 2000, and has made substantial contribution to the establishment of the

ROJAM ENTERTAINMENT HOLDINGS LIMITED 106 Directors, Senior Management and Staff

Group’s entertainment business, setting-up of the Group’s headquarters in Hong Kong and development of the Group’s various businesses in the Greater China region.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Seiichi Nakaoda, aged 35, was appointed as an independent non-executive Director in February 2001. He is a member of The Japanese Institute of Certified Public Accountants and has over 12 years’ experience in finance and accounting practice. Mr. Nakaoda is a managing director of an accounting consultancy firm in Hong Kong.

Mr. Yeung Mui Kwan, David, aged 45, was appointed as an independent non-executive Director in April 2001. He is a fellow member of both the Association of Chartered Certified Accountants and the Hong Kong Society of Accountants and has over 20 years’ experience in finance and accounting practice. Mr. Yeung is now practising in his own accounting consultancy firm.

DIRECTORS’ REMUNERATION

For each of the two years ended 31st March, 2000, the Group did not pay any remuneration to the executive Directors. It is anticipated that there will not be a substantial increase in the amount of executive Directors’ fees and remuneration upon listing of the Shares on GEM. Under present arrangement, the aggregate remuneration of the executive Directors (excluding discretionary bonuses) for the year ended 31st March, 2001 is estimated to be approximately HK$8.8 million.

The breakdown of the aggregate remuneration of the executive Directors for the year ended 31st March, 2001 is as follows:

Period Amount in HK$

Nine months ended 31st December, 2000 6,804,000 Month ended 31st January, 2001 667,330 Month ended 28th February, 2001 667,330 Month ended 31st March, 2001 667,330 Year ended 31st March, 2001 8,805,990

SENIOR MANAGEMENT

Ms. Hung Shi Wei, Halina, aged 29, Deputy Chief Financial Officer, has joined the Group since November 2000. She is responsible for assisting the Board/Chief Financial Officer in the areas of finance and corporate development. Ms. Hung graduated from Monash University, Australia with a Bachelor of Economics Degree and a Bachelor of Laws Degree. She holds a Graduate Diploma in Applied Finance and Investments, and has over 5 years of experience in finance, legal compliance and corporate development. Ms. Hung is a barrister and solicitor admitted to practise in Victoria, Australia, and is an Associate of the Securities Institute of Australia.

Ms. Etsuko Hoshiyama, aged 39, General Manager of Administration, has joined the Group since March 2000. She holds a Bachelor Degree of Law in Japan and a Master Degree of Laws in Taxation from University of Denver, USA. She is an associate member of the American Institution of Certified Public Accountants and the Hong Kong Society of Accountants. Before joining the Group, Ms.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 107 Directors, Senior Management and Staff

Hoshiyama was a tax manager of PricewaterhouseCoopers in Hong Kong. She has over 10 years of experiences in tax, business consulting, and business development.

Ms. Cheng Kit Sum, aged 29, Financial Controller, has joined the Group since May 2000. She is responsible for managing the Group’s finance and accounting processes, maintaining finance control and performing statutory financial reporting. Ms. Cheng holds a Bachelor of Arts Degree in Accountancy from the Hong Kong Polytechnic University. She is an associate member of the Hong Kong Society of Accountants and the Association of Chartered Certified Accountants. Prior to joining the Group, Ms. Cheng worked for PricewaterhouseCoopers in Hong Kong and has over 6 years’ experience in auditing and accounting.

Ms. Chu Wai Kit, aged 33, General Manager of Entertainment Division, has joined the Group since June 2000. She is responsible for overseeing the operations of the entertainment division of the Group, all aspects of the engagement and promotion activities, and providing guidance to certain artistes on their personal and career developments. Ms. Chu has over 10 years’ experience in entertainment and public relations industries. Her occupational background and career development are remarkable: Production Manager of Brainnew Advertising and Production Ltd., Marketing Director of Vertex Productions Co., Ltd., Marketing Manager of Asia Vigour Productions Ltd., and Operation Manager of Pico Hong Kong Ltd. She has had successfully applied her skills and knowledge in hosting and coordination of various media functions, exhibitions, road shows and both indoor and outdoor events.

Ms. Yoshimi Oishi, aged 36, General Manager of Administration Division in Japan, has joined the Group since September 2000. She is responsible for overseeing the daily operations of the Group in Japan. Before joining the Group, Ms. Oishi was an accounting manager of TK State America Museum Inc. Prior to that she was employed by BMW Japan as the marketing executive.

Ms. Yuri Shimomura, aged 36, General Manager of Rojam Technology Japan Ltd., joined the Group in September 2000. She is responsible for overseeing the music production and distribution of the Group’s products in Japan. She obtained a Bachelor of Psychology Degree from Nippon University. In 1996, Ms. Shimomura joined Tetsuya Komuro Rise K.K. and had been the manager of Koji Kubo, one of the famous Japanese producers. After it was merged into TK State America Museum Inc., she has been the Production Manager for Mr. Tetsuya Komuro. Before that, she was the Vice-President of the management company of concert halls activities. Ms. Shimomura has over 5 years of experience in the area of music production and artiste management.

Mr. Keiichi Uezumi, aged 31, General Manager of Business Planning, has joined the Group since July 2000. He was qualified as a Japanese Certified Public Accountant (CPA) in 1996, and passed the US CPA Examination in 2000. He holds a Bachelor Degree of Economics from Seikei University. Mr. Uezumi has over 8 years, of experience in accounting and tax planning, in PricewaterhouseCoopers including 5 years in Tokyo office and 3 years in Los Angeles office. He is a specialist in finance and international tax planning in the entertainment industry and Internet business. Prior to joining the Group, Mr. Uezumi was a manager of PricewaterhouseCoopers’ Tokyo office.

Mr. Kazuto Sasaki, aged 38, Senior Business Affairs Manager, has joined the Group since October 2000. He is responsible for overseeing the music production, distribution and licensing businesses of the Group. Mr. Sasaki was educated in Japan and has a Bachelor of Commerce degree from Okayama Shoka University, Japan. Immediately after his graduation in 1992, Mr. Sasaki joined the

ROJAM ENTERTAINMENT HOLDINGS LIMITED 108 Directors, Senior Management and Staff

legal affairs department of Pony Canyon, Inc. in Tokyo, Japan, a member of the Fujisankei Communication Group, which is a major media company in Japan. He has over 8 years of experience in the music industry in the areas of music production, distribution, licensing, publishing, and artiste management.

Mr. Hiroyuki Yui, aged 40, General Manager of Promotion Division of the Group in Japan, has joined the Group since August 2000. He is responsible for the marketing operations of the Group in Japan. Mr. Yui has extensive experiences in the entertainment industry in the area of editing, writing articles magazines, production, promotion and planning of various products, events and projects.

Mr. Shen De Min, aged 40, is the Group’s General Manager of China Marketing. He joined the Group in March 2001 and is responsible for overseeing the sales and marketing operations, and business development of the Group in the PRC. Mr. Shen was educated in Shanghai, the PRC and has a Bachelor of Mathematics degree from East China Normal University. Prior to joining the Group, Mr. Shen was the Department Manager of Kanematsu (Hong Kong) Limited, the holding company of which, Kanematsu Corporation, is one of the top nine general trading firms in Japan. He has over 12 years of experience in sales and marketing and business development, in particular, in the PRC and Japan.

COMPANY SECRETARY

Ms. Chan Ying Chun, aged 34, is the company secretary of the Group overseeing the company secretarial and legal matters of the Group. She has been with the Group since August 2000. Ms. Chan is an Associate member of both The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries. She obtained her Bachelor of Laws degree from the University of London in 1998. Ms. Chan has over 10 years’ company secretarial and legal experience in multinational and listed companies.

AUDIT COMMITTEE

The Company has established an audit committee with written terms of reference in compliance with Rules 5.23 and 5.24 of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control procedures of the Group.

The audit committee has two members namely Mr. Seiichi Nakaoda and Mr. Yeung Mui Kwan, David, the two independent non-executive Directors.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 109 Directors, Senior Management and Staff

STAFF

As at the Latest Practicable Date, the Group had a workforce of 47 in the following operations:

Job category HK Japan Total

Management 3 2 5 Business planning 1 1 2 Music Production 3 10 13 Sales and Marketing 5 5 10 Administration and accounting 13 4 17

Total 25 22 47

THE GROUP’S RELATIONSHIP WITH STAFF

The Group has not, in the past, experienced any significant disruption of its operations due to any major labour disputes. The Directors consider that the Group has a reasonably good relationship with its staff.

REMUNERATION POLICY

The Company’s policies concerning remuneration of the executive Directors are:

– the amount of remuneration is determined on the basis of the relevant Director’s experience, responsibility, workload and time devoted to the Group;

– non-cash benefits are provided to the Directors under their remuneration packages; and

– the executive Directors may be granted, at the discretion of the board of Directors, share options of the Company, as part of their remuneration packages.

SHARE OPTION SCHEME

The Company has conditionally adopted the Share Option Scheme whereby full-time employees and executive Directors of the Group may be granted options which entitle them to subscribe for the Shares. A summary of the principal terms of the Share Option Scheme is set out in the section headed “Share Option Scheme” in Appendix V to this prospectus. The Directors believe that the Share Option Scheme will assist the Group in its recruitment and retention of high calibre executives and employees.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 110 Pre-IPO Grant of Options

PRE-IPO GRANT OF OPTIONS

As at the Latest Practicable Date, the Company has granted share options to a number of parties as an inducement to engage them for the provision of producer services pursuant to terms of certain producer service agreements (“Agreements”). Details of the Pre-IPO Grant of Options are set out as follows:

Approximate percentage Total number of Shares of the issued share to be issued under capital before and Term of Exercise Type of Grantee Address the granted options (after) the Placing exercise price service (HK$)

Mr. Tetsuya 7-22-31-608 41,387,376 4.00% (3.74)% Note 0.1 Producer Komuro Nishi-Shinjuku Shinjuku-ku, Tokyo Japan

Mr. Naoto 5-2-4-201, Ochiai, 5,173,422 0.50% (0.47)% Note 0.8 Producer Kine Tama-shi, Tokyo, Japan

Mr. Koji 2-28-3-1102, Shiba, 5,173,422 0.50% (0.47)% Note 0.8 Producer Kubo Minato-ku, Tokyo, Japan

Total 51,734,220 5.00% (4.68)%

Note:

All such options may be exercised in accordance with the following schedule but shall lapse where the grantee ceases to be a producer by reason of the termination of his services under the relevant Agreement:

Total percentage of Shares Period since date on which comprised in the options which Shares are listed on GEM become exercisable

Year 1 Zero Year 2 Up to 30% Year 3 Up to 60% Year 4 and thereafter Up to 100%

A brief summary of other principal terms of the Pre-IPO Grant of Options is as follows:

1. Conditions of grant and application for listing

Each of the above Pre-IPO Grant of Options is conditional on (a) the GEM Listing Committee granting listing of and permission to deal in the Shares to be issued upon exercise of the options granted thereunder and (b) the shareholders of the Company approving the grant of options under the Pre-IPO Grant of Options and the subsequent exercise thereof and duly convene the extraordinary general meeting of the Company. Application has been made to the GEM Listing Committee in relation to the condition set out in sub-paragraph (a) above.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 111 Pre-IPO Grant of Options

2. Options personal to grantee

An option is personal to the grantee and shall not be assignable or transferrable by the grantee.

3. Period of exercise

An option may be exercised by a grantee at any time before the date falling on the expiry of 10 years from the date when dealings in shares commence on GEM (“Expiry Date”), provided that:

(a) in the event of the termination of an Agreement for any reason other than by reason of breach of any terms of such Agreement by the grantee, the grantee may exercise the option up to his entitlement at the date of such termination (to the extent not already exercised) within the period of six months following the date of such termination;

(b) in the event the grantee dies before exercising the option in full and none of the events which would be a ground for termination of his services under paragraph 5(e) below arises, the personal representative(s) of the grantee shall be entitled within a period of six months from the date of death to exercise the option up to the entitlement of the grantee as at the date of death (to the extent not already exercised);

(c) if a general offer by way of takeover is made to all the holders of Shares (or all such holders other than the offeror, any person controlled by the offeror and any person acting in association or concert with the offeror) with the terms of the offer having been approved by the holders of not less than nine-tenths in value of the Shares comprised in the offer within four months from the date of the offer and the offeror thereafter gives a notice to acquire the remaining Shares, the grantee (or, where appropriate, his legal personal representatives) shall be entitled to exercise the option in full (to the extent not already exercised) even though the period within which such option is exercisable has not come into effect during the occurrence of the general offer within 21 days after the date of such notice by the offeror;

(d) if a compromise or arrangement between the Company and its members or creditors is proposed for the purposes of or in connection with a plan for the reconstruction of the Company or its amalgamation with any other company or companies, the Company shall give notice to the grantee on the same date as it despatches the notice to each member or creditor of the Company summoning the meeting to consider such a compromise or arrangement, and thereupon the grantee (or his personal representative(s)) may until the expiry of the period commencing with such date and ending with the earlier of the date two months thereafter and the date on which such compromise or arrangement is sanctioned by the court, provided that the relevant options are not subject to a term or condition precedent to them being exercisable which has not been fulfilled, exercise any of his option whether in full or in part, but the exercise of an option as aforesaid shall be conditional upon such compromise or arrangement being sanctioned by the court and becoming effective. Upon such compromise or arrangement becoming effective, the option shall lapse except insofar as previously exercised hereunder. The Company may require the grantee (or his

ROJAM ENTERTAINMENT HOLDINGS LIMITED 112 Pre-IPO Grant of Options

personal representative(s)) to transfer or otherwise deal with the Shares issued as a result of the exercise of the option in these circumstances so as to place the grantee in the same position as nearly as would have been the case had such Shares been subject to such compromise or arrangement;

(e) in the event a notice is given by the Company to its shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall forthwith give notice thereof to the grantee and the grantee (or his legal personal representatives) may by notice in writing to the Company (such notice to be received by the Company not later than four business days prior to the proposed shareholders’ meeting) exercise the option (to the extent not already exercised) either to its full extent or to the extent specified in such notice and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed shareholders’ meeting, allot and issue such number of Shares to the grantee which falls to be issued on such exercise.

4. Rights attaching to the Shares upon exercise of an option

All Shares to be allotted and issued upon the exercise of an option will be subject to the provisions of the articles of association of the Company for the time being in force and will rank pari passu with the fully paid Shares in issue as from the date of exercise of the option.

5. Lapse of an option

An option shall lapse automatically (to the extent not already exercised) on the earliest of:

(a) 31st December, 2001, if the dealings in the Shares have not yet commenced on GEM on or before that date;

(b) the Expiry Date;

(d) subject to the scheme or arrangement or scheme for reconstruction or amalgamation becoming effective, the expiry of the period referred to in paragraph 3 (d) above;

(e) the date on which the grantee ceases to be a producer by reason of the termination of his services under the relevant Agreement on the grounds that he has been guilty of serious misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay debts or has become insolvent or has made any arrangement or composition with his creditors generally, or has been convicted of any criminal offence involving his integrity or honestly;

(f) the date of the commencement of the winding-up of the Company; and

(g) the date on which the grantee commits a breach of any terms of his relevant Agreement.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 113 Pre-IPO Grant of Options

6. Minimum public float

The grant and/or exercise of any options granted and other transactions contemplated under the relevant Agreements and the terms of the Pre-IPO Grant of Options shall be subject to a pre-condition that at least the “minimum prescribed percentage” of the Shares in issue from time to time must comply with the requirements set out in Rule 11.23 of the GEM Listing Rules (as may be amended from time to time).

7. Administration

The grant and exercise of all options granted under the Pre-IPO Grant of Options shall be subject to the administration of a designated committee of the Board whose decision is final and binding on all parties to the grant.

8. Effects of reorganisation of capital structure

In the event of any alteration in the capital structure of the Company while an option may become or remains exercisable, arising from a capitalisation of profits or reserves, rights issue or other general offer of securities made by the Company to holders of Shares, consolidation, subdivision or reduction or similar reorganisation of the share capital of the Company, such corresponding alterations (if any) shall be made in the number of Shares subject to the option so far as unexercised; and/or (b) the subscription price in relation to the option; and/ or (c) the method of exercise of the option, as the auditors of the Company shall certify in writing to the board of Directors to be in their opinion fair and reasonable (except in the case of a capitalisation issue where no such certification shall be required), provided that (i) any such alterations shall be made on the basis that the proportion of the issued share capital of the Company to which the grantee is entitled after such alteration shall remain as nearly as possible the same as (but shall not be greater than) that to which he was entitled before such alteration, and (ii) no such alterations shall be made the effect of which would be to enable a Share to be issued at less than its nominal value. For the avoidance of doubt only, the issue of securities as consideration in a transaction shall not be regarded as a circumstance requiring any such alterations.

The Directors consider that the Pre-IPO Grant of Options is fair and reasonable as:

1. It is clear that the Group will require the services of the producers whom the Group propose to grant Pre-IPO Options as: (i) the existing work load in relation to the two producer service agreements with Avex and Pony Canyon Inc. requires a team of producers to execute; and (ii) the Directors expect that the joining of the producers may be able to bring further producer service contracts to the Company; and (iii) the producers will be able to provide training to the younger generation of producers who may join the Group;

2. The Directors believe that hiring a producer with satisfactory experience and recognition may require a considerable amount of signing bonus and/or advance royalties and/or monthly salary. In the case of the Group, the Pre-IPO Grant of Options shall replace such monetary incentives. The Directors believe that Pre-IPO Grant of Options is in the best interests of the Group, as by compensating the grantees by way of the grant

ROJAM ENTERTAINMENT HOLDINGS LIMITED 114 Pre-IPO Grant of Options

of options, the Group shall be able to reduce its capital expenditure (being the signing bonus) and operating expenses (being the salary) but without immediately incurring a dilution effect to per share’s earnings; and

3. Messrs. Tetsuya Komuro, Koji Kubo and Naoto Kine have already been engaged by the Group to provide producer services and made contributions to the Group. For Mr. Tetsuya Komuro, he will produce exclusively for the Group. The said options are proposed to be granted to the producers not only in recognition of their past performance and contribution to the Group, but also for the continutity of such services provision and contribution to the Group’s future performance and success. Although the producers (except Mr. Tetsuya Komuro) will not enter into agreements to provide exclusive service to the Group, they have agreed to give priority to the Group’s assignment and committed to certain minimum product requirements If the producers under-perform and breach the contract, the option will immediately lapse as per the terms of grant. The producers are entitled to exercise the said options if and only if they have fulfilled their product commitment and contributed to the Group. In order that the producers would be able to exercise the options in full, they must have produced for and contributed to the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 115 Initial Management Shareholders, Significant Shareholders and Undertakings

INITIAL MANAGEMENT SHAREHOLDERS

So far as the Directors are aware, the following shareholders of the Company will be entitled to exercise or control the exercise of 5% or more of the voting powers at the general meetings of the Company immediately following completion of the Placing without taking into account the exercise of the Over-allocation Option and Shares which may be taken up pursuant to the Placing, or are able, as a practical matter, to direct or influence the management of the Company, and are accordingly regarded as Initial Management Shareholder s under the GEM Listing Rules:

Approximate Lock up period Number of percentage of commencing from Shares held shareholding the date when (immediately after (immediately after dealings in the completion of the completion of Shares commence Nature of shareholders the Placing) the Placing) on GEM

Initial Management Shareholders

Mr. Tetsuya Komuro 467,892,667 42.36% 6-12 months (Note 5) Billion Moment (Notes 1 & 6) 75,883,333 6.87% 6 months (Note 5) Mr. Kebo Wu (Notes 1 & 6) 75,883,333 6.87% 6 months (Note 5) Mr. Arihito Yamada (Note 2) 8,913,600 0.81% 6 months (Note 5) Mr. Tomohiko Domen (Note 3) 27,022,000 2.45% 6 months (Note 5) Ms. Cheng Wing Ki, Aouda (Note 4) 5,306,000 0.48% 6 months (Note 5) Ms. Asami Yoshida (Note 7) 1,100,000 0.10% 6 months (Note 5) Mr. Keiichi Uezumi (Note 8) 4,085,400 0.37% 6 months Ms. Yoshimi Oishi (Note 8) 350,000 0.03% 6 months Ms. Yuri Shimomura (Note 8) 1,333,000 0.12% 6 months

Notes:

1. Billion Moment is held as to 90% and 10% by Mr. Kebo Wu and Ms. Cheng Wing Ki, Aouda, respectively. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director. Mr. Kebo Wu is taken to be interested in the 75,883,333 Shares because of his 90% interest in Billion Moment.

2. Mr. Arihito Yamada is an executive Director.

3. Mr. Tomohiko Domen is an executive Director.

4. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director.

5. Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Tomohiko Domen, Mr. Arihito Yamada, Ms. Cheng Wing Ki, Aouda and Ms. Asami Yoshida are Initial Management Shareholders and have undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in their Relevant Securities within the First Relevant Lock-up Period. Mr. Tetsuya Komuro has also undertaken not to dispose of (or enter into any arrangement to dispose of) any of his direct or indirect interests in the Relevant Securities during the Second Relevant Lock-up Period to result in the number of the Relevant Securities placed by him in escrow being less than 35% of the issued share capital of the Company, and Mr. Tetsuya Komuro must not, save as stipulated in the GEM Listing Rules, dispose of (or enter into any arrangement to dispose of) nor permit the registered holder to dispose of (or enter into any agreement to dispose of ) any of his Relevant Securities such that he would cease to control at least 35% of the voting powers at general meetings of the Company.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 116 Initial Management Shareholders, Significant Shareholders and Undertakings

6. Each of Mr. Kebo Wu and Ms. Cheng Wing Ki, Aouda has undertaken to the Company, the Stock Exchange, CPY and the Underwriters not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interests in Billion Moment within the First Relevant Lock-up Period.

7. Ms. Asami Yoshida is the spouse of Mr. Tetsuya Komuro, an executive Director.

8. Mr. Keiichi Uezumi, Ms. Yuri Shimomura and Ms. Yoshimi Oishi are senior management of the Group holding, in aggregate, 5,768,400 Shares, representing approximately 0.52% of the issued share capital of the Company immediately after the completion of the Placing and are Initial Management Shareholders. Each of them has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of his/her direct and indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

SIGNIFICANT SHAREHOLDER

So far as the Directors are aware, the following shareholder of the Company will be entitled to exercise or control the exercise of 5% or more of the voting powers at general meetings of the Company, immediately following the completion of the Placing and without taking into account the Shares which may be taken up under the Placing, apart from the Initial Management Shareholders referred to above: Approximate percentage or Number or attributable attributable percentage Name number of Shares of shareholding

SOFTBANK (Note) 91,750,000 8.31%

Note: SOFTBANK is one of the strategic investors of the Company. For detail of the strategic investors, please refer to the section headed “Strategic Investors” in this prospectus.

SOFTBANK has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in its Shares within the First Relevant Lock-up Period and the Second Relevant Lock-up Period.

OTHER SHAREHOLDERS SUBJECT TO NON-DISPOSAL UNDERTAKING

Supreme Effor t Enterprises Limited (Note 1) 20,483,000 1.85%

Investors under First Singing Mermaid Placement (Note 5) 66,833,000 6.04%

Related investors under Third Singing Mermaid Placement (Note 2) 3,877,000 0.35%

Producers (Note 3) Ryuichi Sakai 52,500,000 4.75% Naoto Kine 16,580,000 1.50% Koji Kubo 14,000,000 1.27% Takashi Utsunomiya 6,666,000 0.60%

89,746,000 8.12%

Employees (Note 4) 2,743,000 0.25%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 117 Initial Management Shareholders, Significant Shareholders and Undertakings

Notes:

1. Supreme Effort Enterprises Limited is held as to 60% and 40% by Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa respectively. Mr. Hiroshi Ozawa served as a Director for the per iod between 1st July, 2000 and 20th December, 2000 and Mrs. Naomi Ozawa is his spouse.

Each of Mr. Hiroshi Ozawa and Mrs. Naomi Ozawa has undertaken to the Company, the Stock Exchange, CPY and the Underwriters not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of their direct or indirect interest in Supreme Effor t Enterprises Limited within the First Relevant Lock-up Period.

Supreme Effort Enterprises Limited has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in its Shares within the First Relevant Lock-up Period.

2. Mr. Tetsuya Komuro sold the 8,261,000 Shares to 11 investors each holding between 292,000 Shares to 1,917,000 Shares on 23rd March, 2001. 7 of them, holding in aggregate 3,877,000 Shares, are relatives of Mr. Tetsuya Komuro and their respective shareholdings and relationships are shown as below:

Percentage shareholding (immediately after Date of Name of Relationship with Number of the completion of Transfer Shareholder Mr. Tetsuya Komuro Shares Consideration the Placing) (HK$)

23rd March, 2001 Yoshimi Sakuma Mr. Tetsuya Komuro’s 1,000,000 800,000 0.094% mother’s cousin 23rd March, 2001 Yu Sakuma Daughter of 500,000 400,000 0.045% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Tomo Sakuma Daughter of 417,000 333,600 0.038% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Tamaaki Ishida Husband of 292,000 233,600 0.026% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Hiromi Ishida Mr. Tetsuya Komuro’s 834,000 667,200 0.075% mother’s cousin 23rd March, 2001 Nozomi Ishida Daughter of 417,000 333,600 0.038% Mr. Tetsuya Komuro’s mother’s cousin 23rd March, 2001 Ryonosuke Ishida Son of Mr. Tetsuy a Komuro’s 417,000 333,600 0.038% mother’s cousin

Each of the 7 relatives of Mr. Tetsuya Komuro has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of his/her direct and indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

3. Each of the producers has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of his/her direct and indirect interests in the Relevant Securities within the Fir st Relevant Lock-up Period.

4. There are 9 employees of the Group each holding between 130,000 Shares to 1,330,000 Shares. Each of the employees has undertaken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of its direct and indirect interest in the Relevant Securities within the First Relevant Lock-up Period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 118 Initial Management Shareholders, Significant Shareholders and Undertakings

5. There are 18 independent investors each holding between 130,000 Shares to 13,333,000 Shares. Among these 18 independent investors, 14 of them, holding in aggregate 60,487,000 Shares, had and/or will continue to have business working relationships with Mr. Tetsuya Komuro, an executive Director, while 4 of them, holding in aggregate 6,346,000 Shares, are employees of companies in which Mr. Tetsuya Komuro is directly or indirectly interested. Each of these investors has under taken to the Company, CPY, the Underwriters and the Stock Exchange not to dispose of (or enter into any agreement to dispose of) or permit the registered holder to dispose of (or enter into any agreement to dispose of) any of its direct or indirect interests in the Relevant Securities within the First Relevant Lock-up Period.

UNDERTAKINGS

Each of the Initial Management Shareholders referred to above has undertaken to the Company, the Stock Exchange, CPY and the Underwriters pursuant to the GEM Listing Rules and a waiver granted by the Stock Exchange as described under the section headed “Waivers from compliance with GEM Listing Rules and Companies Ordinance” in this prospectus that:

1. it/he will place with an escrow agent acceptable to the Stock Exchange and CPY its/his Relevant Securities during the First Relevant Lock-up Period on terms acceptable to the Stock Exchange and CPY;

2. it/he shall not, and shall procure that none of it/his Associates and the companies controlled by or nominees or trustees holding in trust for it/him shall, within the First Relevant Lock-up Period, sell, transfer or otherwise dispose of create any rights (or enter into any agreement to do any of the above) in respect of any of the Relevant Securities (apart from a pledge or charge to an authorised institution under the Banking Ordinance (Chapter 155, Laws of Hong Kong) (as amended from time to time) as security for a bona fide commercial loan), or sell, transfer or otherwise dispose of (or enter into an agreement to do any of the above) any interest in any shares in any company controlled by it/him directly, or through another company indirectly, the beneficial owner of any of the Relevant Securities (apar t from a pledge or charge to an authorised institution under the Banking Ordinance as security for a bona fide commercial loan);

3. within the First Relevant Lock-up Period it/he shall (a) when it/he pledges or charges any interest in the Relevant Securities, immediately inform the Company and CPY in writing of such pledge or charge together with the number of such securities so pledged or charged, the purpose for which the pledge or charge is made and such other relevant details; and (b) when it/he receives indications, either verbal or written, from any pledgee or chargee that the Relevant Securities in the Company pledged or charged by it/he will be or has been disposed of, immediately inform the Company and CPY in writing of such indications or disposal. Upon receiving such information in writing, the Company will, as soon as practicable, notify GEM and make a public disclosure by way of a press announcement; and

4. it or he or she will not dispose of (or enter into any arrangement to dispose of) any of its/his respective interest in Shares arising pursuant to the exercise of any options (including the options granted under the Pre-IPO Grant of Options) held immediately prior to the date of listing of the Shares on GEM during the First Relevant Lock-up Period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 119 Initial Management Shareholders, Significant Shareholders and Undertakings

Mr. Tetsuya Komuro has fur ther undertaken to the Company, the Stock Exchange, CPY and the Underwriters that he will not, and will procure that none of his Associates and companies controlled by him or his nominees or trustees holding interest for him shall, dispose of (or enter into any agreement to dispose of) any of his direct or indirect interests in the Relevant Securities during the Second Relevant Lock-up Period if such disposal would result in him ceasing to have control over 35% of the voting powers at general meetings of the Company; and (ii) to place the appropriate number of his Relevant Securities (if applicable) in escrow with an escrow agent acceptable to the Stock Exchange during the Second Relevant Lock-up Period to the extent as described above and will comply with the requirements under Rule 13.20 of the GEM Listing Rules.

The Company has undertaken and covenanted with each of CPY and the Underwriters not to, and each of the Initial Management Shareholders and the executive Directors has under taken and covenanted with each of CPY and the Underwriters to procure that the Company and the members of the Group not to issue, accept subscriptions for, offer, sell, contract to sell or, grant or agree to grant any option or other rights in or to subscribe for or otherwise dispose of Shares or debentures (other than debentures granted as security collateral for borrowings in the ordinary course of business) or other securities (including securities convertible or exchangeable for Shares) of the Company or any member of the Group (other than for the formation of any new joint venture vehicles or new wholly-owned subsidiaries) or any interests therein during the First Relevant Lock- up Period, other than the issue of Shares pursuant to the Placing, the exercise of the Over- allocation Option, the granting and the exercise of options under the Share Option Scheme, consolidation, sub-division or capital reduction of Shares and will comply with the requirements under Rule 13.16 of the GEM Listing Rules.

Under Rule 17.29 of the GEM Listing Rules, no further Shares or securities convertible into equity securities of the Company (whether or not of a class already listed) may be issued or form the subject to any agreement to issue within the first 6 months of the date on which the Shares first commence dealing on GEM, save in respect of any capitalisation issue or any consolidation, sub- division or capital reduction of shares.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 120 Share Capital

HK$

Authorised share capital:

5,000,000,000 Shares 500,000,000

Issued Shares:

Shares in issue (including the Sales Shares and the 1,034,684,403 Over-allocation Shares) 103,468,440

Shares to be issued:

70,000,000 Shares to be issued under the Placing 7,000,000

Total shares issued and to be issued:

1,104,684,403 Shares 110,468,440

Notes:

Assumptions

1. This table assumes that the Placing becomes unconditional and the issue and sale of Shares were made pursuant thereto.

2. It takes no account of any Shares which may be allotted and issued pursuant to the exercise of options granted under the Pre-IPO Grant of Option and/or the Share Option Scheme or of any Shares which may be allotted and issued or repurchased by the Company under the general mandates for the allotment and issue or purchase of Shares granted to Directors as referred to below or otherwise.

Ranking

The Placing Shares will rank equally with all Shares now in issue or to be issued, and will qualify for all dividends or other distributions declared, made or paid on the Shares after the date of this prospectus.

Share Option Scheme

The Company has conditionally adopted the Share Option Scheme. A summary of the main terms of the Share Option Scheme is set out in the section headed “ Share Option Scheme” in Appendix V to this prospectus.

Under the Share Option Scheme, full-time employees or executive Directors of the Group may be granted options which entitle them to subscribe for Shares representing up to a maximum of, when aggregated with any securities subject to any other share option scheme(s) of the Company, 30% of the issued share capital of the Company from time to time (excluding (i) any Shares issued pursuant to the Share Option Scheme and any other share option schemes of the Company; and (ii) any pro rata entitlements to further Shares issued in respect of those Shares mentioned in (i)).

Pre-IPO Grant of Options

As at the Latest Practicable Date, the Company has granted share options to a few producers as an inducement to engage them for the provision of producer services pursuant to terms of certain producer service agreements. Details of the Pre- IPO Grant of Options are set out in the section headed “Pre-IPO Grant of Options” in this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 121 Share Capital

General mandate to allot and issue Shares

Upon the Placing becoming unconditional, the Directors are granted a general unconditional mandate to allot and issue and deal with additional new Shares, (otherwise than by way of rights issue, scrip dividend or subscription arrangement the Share Option Scheme or the Pre-IPO Grant of Option or an allotment and issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Articles of Association) with an aggregate nominal amount of not more than the sum of:

1. 20% of the aggregate nominal amount of the Shares in issue immediately following completion of the Placing; and

2. the aggregate nominal amount of the Shares repurchased by the Company (if any) pursuant to the general mandate to repurchase Shares as referred to below.

This mandate is granted in addition to the authority of the Directors to allot and issue Shares under a rights issue, script dividend scheme or similar arrangement and the Share Option Scheme.

This mandate will expire:

• all the end of the Company’s next annual general meeting; or

• at the end of the period within which the Company is required by law or the Articles of Association to hold its next annual general meeting; or

• when varied or revoked by an ordinary resolution of the Company’s shareholders in general meeting;

whichever is the earliest.

For further details of this mandate, please see the paragraph headed “Changes in share capital” in the section headed “Further Information about the Company and Subsidiaries” in Appendix V to this prospectus.

General mandate to repurchase Shares

Upon the Placing becoming unconditional, the Directors are granted a general unconditional mandate to exercise all the powers of the Company to repurchase Shares (including to determine the manner of repurchase) with a total nominal value of not more than 10% of the total nominal amount of the Shares in issue and to be issued immediately following completion of the Placing.

This mandate only relates to repurchase made on GEM, or on any other stock exchange on which the Shares are listed (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are in accordance with the GEM Listing Rules. A summary of the relevant GEM Listing Rules is set out in the section headed “Repurchase by the Company of its own securities” in the section headed “Further Information about the Company and Subsidiaries” in Appendix V to this prospectus.

This mandate will expire:

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

• at the end of the period within which the Company is required by law or the Articles of Association to hold its next annual general meeting; or

• when varied or revoked by an ordinary resolution of the Company’s shareholders in general meeting;

whichever is the earliest.

For further details of this mandate, please see the paragraph headed “Changes in share capital” in the section headed “Further information about the Company and Subsidiaries” in Appendix V to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 122 Financial Information

INDEBTEDNESS

Debt securities

As at the close of business on 31st March, 2001, being the latest practicable date for the indebtedness statement prior to the printing of this prospectus, the Group had no debt securities.

Borrowings

As at 31st March, 2001, the Group had no borrowings.

As at 31st March, 2001, the Group had outstanding hire purchase or finance lease obligations amounting to approximately HK$0.1 million.

Mortgages and charges

As at 31st March, 2001, approximately HK$3.1 million of the Group’s cash and bank balances were placed in a term deposit account with a bank in Hong Kong to secure a corporate card facility granted by the bank.

Save as aforesaid, as at 31st March, 2001, the Group had no mortgages or charges.

Capital commitments and other commitments

As at 31st March, 2001, the Group had no material capital commitments or other commitments.

Contingent liabilities

As at 31st March, 2001, the Group had no material contingent liabilities.

Disclaimer

Save as aforesaid and apart from intra-group liabilities, the Group did not have, at the close of business on 31st March, 2001, any outstanding loan capital issued or agreed to be issued, bank overdrafts, loans, debts, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptable credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

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

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Net current assets

As at 28th February, 2001, the Group had net current assets of approximately HK$163.8 million. The current assets of approximately HK$177.2 million comprised cash and bank balances of

ROJAM ENTERTAINMENT HOLDINGS LIMITED 123 Financial Information

approximately HK$131.8 million, receivables from related parties of approximately HK$0.6 million, trade receivables of approximately HK$12.4 million, other receivables of approximately HK$2.6 million, deposits paid of approximately HK$2.9 million, prepayments of approximately HK$26.2 million, and inventory of approximately HK$0.7 million. The current liabilities of approximately HK$13.4 million comprised trade payables of approximately HK$4.7 million, payables to related parties of approximately HK$1.4 million, obligations under finance lease and hire purchase of approximately HK$0.1 million, and accruals and other payables of approximately HK$7.2 million.

Directors’ opinion of the net asset position

Taking into account the estimated net proceeds of the Placing of the New Shares, the Directors believe that the Group has sufficient net current assets to meet its present operating and capital expenditure requirements.

Working capital

The Group has been financing its operations through equity fundings. Hence, the Group did not have any debt securities or loan capital which would require cash outlay for settlement.

Taking into account the estimated net proceeds of the Placing of the New Shares, the Directors are of the opinion that the Group has sufficient working capital to meet its present requirements.

Foreign exchange risk

The income and expenditure of the Group are mainly in both HK$ and JPY and the assets of liabilities of the Group were denominated in both HK$ and JPY. The Group has maintained a balanced portfolio of Hong-Kong-dollar-denominated assets and liabilities and Japanese-yen- denominated assets and liabilities, taking into account the Group’s operational and capital requirements. Hence, the Directors do not consider that the Group is significantly exposed to any foreign currency exchange risk.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 124 Financial Information

TRADING RECORD

The table below sets out a summary of the audited results of the Group for the two financial years ended 31st March, 2000 and the nine months ended 31st December, 2000 which should be read in conjunction with the Accountants’ Report set out in Appendix I to this prospectus. The combined results are prepared on the basis of presentation set out in the Accountants’ Report.

Nine months ended 31 Year ended 31 March, December, 1999 2000 2000 HK$’000 HK$’000 HK$’000

Turnover 4,662 1,506 94,012 Other revenues 441 23 2,893

Total revenue 5,103 1,529 96,905

Less: overseas withholding taxation – (164) (7,914)

5,103 1,365 88,991 Cost of music production and record sales (3,718) (127) (13,608) Selling and distribution expenses (848) (431) (13,141) Other operating expenses (1,839) (1,723) (44,489)

(Loss)/profit before taxation (1,302) (916) 17,753 Taxation –––

(Loss)/profit after taxation (1,302) (916) 17,753

Minority interests ––1

Net (Loss)/profit for the year/period (1,302) (916) 17,754

Dividend (Note 1) –––

(Loss)/earnings per Share – Basic (Note 2) (0.1) cent (0.1) cent 1.7 cents

Notes:

1. No dividends have been paid or declared by the Company and the companies now comprising the Group during the Track Record Period.

2. The calculation of the (loss)/earnings per Share for the Track Record Period is for information purpose only and is based on the (loss)/profit attributable to shareholders of the Group for each of the two years ended 31st March, 1999 and 2000 and the nine-month period ended 31st December, 2000 and 1,034,684,403 Shares deemed to be in issue throughout the Track Record Period on the assumption that the reorganisation had been completed on 1st April, 1998.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 125 Financial Information

The SFC has granted a waiver in relation to paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule of the Companies Ordinance and the Stock Exchange has granted a waiver from strict compliance with Rules 7.03 (1) and 11.10 of the GEM Listing Rules so that the Group is only required to include in this prospectus the trading record, financial results and information covering the two financial years ended 31st March, 2000 and the nine months ended 31st December, 2000 – see the paragraphs headed “Companies Ordinance Waiver” and “Reporting Accounts Period Waiver” respectively, both under the section headed “Waivers from compliance with the GEM Listing Rules and Companies Ordinance” of this prospectus. The Directors confirm that they have performed sufficient due diligence on the Group to ensure that, save as disclosed herein, up to the date of issue of this prospectus, there has been no material adverse change in the financial position of the Group since 31st December, 2000, and there is no event which would materially affect the information shown in the Accountants’ Report set out in Appendix I to this prospectus.

TURNOVER AND REVENUE

The Group is principally engaged in music production, music publishing, recording distribution, artiste management, event management, trademark licensing, merchandise sales and banner advertising. The amounts of each significant category of revenue recognised during the Track Record Period are as follows: Nine months ended Year ended 31st March, 31st December, 1999 2000 2000 HK$’000 HK$’000 HK$’000 Tur nover

Music production income – Production of music video 3,000 –– – Royalty income ––3,046 – Signing bonus (Note) ––73,000

Music publishing fee – Royalty income 348 535 7

Record distribution income – 151 11,324

Artiste management fees ––278

Event management income 1,314 – 83

Trademark licensing income – 820 1,199

Merchandise sales ––3,048

Banner advertising income ––2,027

4,662 1,506 94,012 Other revenues Interest income 441 23 2,893

Total revenue 5,103 1,529 96,905

Note: The signing bonus is received from a record company in consideration for the Group entering into a production agreement with this record company.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 126 Financial Information

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following is a discussion of the combined results of operations of the Group for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 based on the presentation in the Accountants’ Report as set out in Appendix I to this prospectus.

Overview

The Group is an integrated music production house servicing the entertainment industry in Asia. The Group offers a wide range of products and services including music production, music publishing, record distribution, trademark licensing, event and artiste management, merchandise sales and music entertainment portal.

Turnover

The Group’s turnover is derived from its core businesses comprising music production, music publishing and record distribution, and supplementary businesses which include trademark licensing, event and artiste management, merchandise sales and banner advertising sales. The Group’s total turnover decreased from approximately HK$4.7 million for the year ended 31st March, 1999 to approximately HK$1.5 million for the year ended 31st March, 2000 due to the differences in the number of music production and related projects undertaken by the Group, and the nature and size of such projects. For the nine months ended 31st December, 2000, as the number of music production and related projects undertaken by the Group increased, the total turnover rose significantly and amounted to approximately HK$94.0 million.

Turnover from the Group’s core businesses for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$3.3 million, HK$0.7 million and HK$87.4 million respectively, representing approximately 71.8%, 45.6% and 92.9% of the total turnover respectively.

Music production contributed to the largest portion of turnover for the year ended 31st March, 1999 and the nine months ended 31st December, 2000, which accounted for approximately 64.4% and 80.9% of total turnover respectively. During the year ended 31st March, 2000, no revenue of the Group was derived from music production services as the Group focused on formulating its strategy in respect of music production services and started to look for possible potential customers for its music production services. The Group’s turnover from music production for the year ended 31st March, 1999 comprised revenue from the production of a music video. The turnover from music production for the nine months ended 31st December, 2000 comprised payments received by way of a signing bonus and producer royalties. It is common practice in the music and entertainment industry for record companies to pay signing bonuses or other advance payments to famous and well-known production companies or producers in order to induce them to join the record companies or commit to produce a certain minimum number of musical works within a specified period of time. In the nine months ended 31st December, 2000, a non-refundable signing bonus of approximately HK$73 million was paid to the Group pursuant to a producer service agreement dated 1st November, 2000 made between the Group and Avex. Such signing bonus was paid to the Group upfront upon signing as an inducement for the Group to enter into the said producer service agreement. In consideration of the signing bonus and other payments under the said producer

ROJAM ENTERTAINMENT HOLDINGS LIMITED 127 Financial Information

service agreement, the Group has committed to produce a certain minimum number of musical works for Avex during the agreement term between 1st November, 2000 and 31st October, 2005. In the event that the Group fails to meet the minimum product requirement before the end of the term of the contract, the duration of the contract will be extended until the requirement is met. Unless the Group refuses such extension or fails to fulfil the minimum product requirement within the extended period, there will not be any penalty should it fail to fulfil the minimal product requirement within the initial contract term.

Turnover from music publishing increased from approximately HK$0.3 million for the year ended 31st March, 1999 to approximately HK$0.5 million for the year ended 31st March, 2000. For the nine months ended 31st December, 2000, the turnover from music publishing amounted to approximately HK$0.007 million. The increase in turnover from music publishing for the year ended 31st March, 2000 was mainly attributable to the increase in the number of licences granted during the year ended 31st March, 2000 to users of the musical works owned by or licensed to the Group. No new licences were granted in the nine months ended 31st December, 2000, and the music publishing income of approximately HK$0.007 million for the nine months ended 31st December, 2000 was attributable to the licences granted in the preceding periods.

The Group commenced its record distribution business in January 2000. Turnover from record distribution increased from approximately HK$0.2 million for the year ended 31st March, 2000 to approximately HK$11.3 million for the nine months ended 31st December, 2000. Such significant increase in turnover was the result of the increase in the number of titles released by the Group from one for the year ended 31st March, 2000 to eleven for the nine months ended 31st December, 2000, as well as the increase in the aggregate quantity of records sold from 2,073 units for the year ended 31st March, 2000 to 88,065 units for the nine months ended 31st December, 2000.

Turnover from the Group’s supplementary businesses for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$1.3 million, HK$0.8 million and HK$6.6 million respectively, representing approximately 28.2%, 54.4% and 7.0% of total turnover respectively. The increase in turnover from supplementary businesses for the nine months ended 31st December, 2000 was mainly attributable to the businesses of merchandise sales and banner advertising, both of which commenced operation in the nine months ended 31st December, 2000.

Turnover from trademark licensing relates to royalties received by the Group for licensing the Group’s trademark rights on a non-exclusive basis to Shanghai Chikou Entertainment Company Limited for use in discotheques. Turnover from trademark licensing for the year ended 31st March, 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$0.8 million and HK$1.2 million respectively, representing approximately 54.4% and 1.3% of the total turnover respectively. The increase in trademark licensing income was mainly due to the increase in gross revenue of the discotheques.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 128 Financial Information

Turnover from event management for the year ended 31st March, 1999 amounted to approximately HK$1.3 million, comprising income from arranging Mr. Tetsuya Komuro and various artistes to perform in the Hong Kong Handover 1st Anniversary Celebration and organising a concert in Hong Kong for a popular Japanese group. The Group had not been active in event management in the year ended 31st March, 2000 and the nine months ended 31st December, 2000, and generated no income and an income of approximately HK$0.1 million for the respective financial year or period.

In May 2000, the Group selected and entered into artiste contracts with five artistes from the Group’s Click Audition. Turnover from artiste management for the nine months ended 31st December, 2000 amounted to approximately HK$0.3 million and comprised income from arranging the Group’s contracted artistes to perform in various television programs and concerts.

The Group started selling merchandise relating to the Group’s artistes through both online and offline channels, in the nine months ended 31st December, 2000. Turnover from merchandise sales for the nine months ended 31st December, 2000 amounted to approximately HK$3.0 million, representing approximately 3.2% of the total turnover.

In the nine months ended 31st December, 2000, the Group also started generating turnover from banner advertisement sales on its music entertainment portal, which, for the nine months ended 31st December, 2000, amounted to approximately HK$2.0 million, representing approximately 2.2% of the total turnover.

Other revenue

Interest income generated by the Group decreased from approximately HK$0.4 million for the year ended 31st March, 1999 to approximately HK$0.02 million for the year ended 31st March, 2000. For the nine months ended 31st December, 2000, interest income generated by the Group amounted to approximately HK$2.9 million. Such interest income was earned on the Group’s bank balances from time to time which amounted to approximately HK$1.6 million, HK$0.1 million and HK$166.1 million as at 31st March, 1999, 31st March, 2000 and 31st December, 2000 respectively.

Cost of music production and distribution

The cost of music production and distribution comprised mainly the production costs for music videos, master tapes and music records. As the various music production and related projects undertaken by the Group over the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 were either ad-hoc projects or performed on an order-by-order basis, the cost bases and hence profitability thereof varied. The total cost of music production and distribution amounted to approximately HK$3.7 million, HK$0.1 million and HK$13.6 million, representing approximately 79.8%, 8.4% and 14.5% of total turnover, respectively for the years ended 31st March, 1999 and 2000, and the nine months ended 31st December, 2000. For the year ended 31st March, 1999, approximately HK$2.8 million, representing approximately 75.3% of the total cost of music production and distribution for the same period, was attributable to a music production project undertaken by the Group for the production of a music video. As mentioned in a previous paragraph, the Group’s total turnover for the nine months ended 31st December, 2000 comprised a non-refundable signing bonus of approximately HK$73 million, in relation to which the Group did not incur any direct costs. The total cost of music production and distribution of approximately HK$13.6 million for the nine months ended 31st December, 2000 related mainly to the Group’s record distribution business, and represented approximately 64.8% of the Group’s turnover excluding the signing bonus for the same period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 129 Financial Information

Selling and distribution expenses

For each of the two years ended 31st March, 2000, the advertising and promotion expenses incurred by the Group in marketing activities were insignificant. The decrease in selling and distribution expenses for the year ended 31st March, 2000 was attributed mainly to a reduction in travelling expenses. For the nine months ended 31st December, 2000, during which period the Group launched a number of marketing campaigns to promote its artistes and music, advertising and promotion expenses amounted to approximately HK$10.4 million, while delivery and travelling expenses also increased in line with the level of selling activities.

Other operating expenses

Other operating expenses, comprising employees’ salaries and benefits, rental expenses, travelling expenses, depreciation, directors’ emoluments, professional fees, exchange losses and other miscellaneous expenses, for the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 amounted to approximately HK$1.8 million, HK$1.7 million and HK$44.5 million respectively. The Group had a fairly similar scale of operation during the two years ended 31st March, 2000. Hence, the difference in other operating expenses between the two financial years was insignificant. Other operating expenses escalated for the nine months ended 31st December, 2000 as the Group expanded its overall scale of operation, resulting in substantial increases in staff- related costs, rental expenses, depreciation and professional fees.

In the nine months ended 31st December, 2000, as the Group expanded its overall scale of operation, the Group increased the number of staff from 4 to 34, and move to more sizeable office to cater for such expansion. Other operating expenses thus escalated for the nine months ended 31st December, 2000 as a result of substantial increase in staff-related costs, rental expenses, depreciation and professional fees.

TAXATION

A subsidiary of the Group engaged in music production is subject to withholding tax in Japan in respect of the music production income. The tax, calculated at 10% of the production income, has been deducted, during the nine months ended 31st December, 2000 when the income was derived, from the income by the payer in accordance with the production agreement between that subsidiary and the payer.

Certain subsidiary of the Group received royalty from trademark licensing to a PRC party during the year ended 31st March, 2000 and the nine months ended 31st December, 2000. PRC withholding tax at the prevailing rate of 20% has been deducted by the PRC party from the royalty payments to that subsidiary.

Certain subsidiaries engaged in sale of records, artiste management, provision of administration services and business development services in Japan and Hong Kong sustained taxation losses in the Track Record Period and as such have no liabilities to Japan or Hong Kong profits tax during the Track Record Period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 130 Financial Information

Liquidity and capital resources

The Group currently funds its operations through equity funds and cash from operations.

As at 28th February, 2001 the Group had current assets of approximately HK$177.2 million, comprising cash and bank balances of approximately HK$131.8 million, receivables from related parties of approximately HK$0.6 million, trade receivables, prepayment and other receivables of approximately HK$44.1 million and inventories of approximately HK$0.7 million. As at the same date, the Group also had non-current assets of approximately HK$53.4 million, comprising studio equipment of approximately HK$22.6 million, leasehold improvements of approximately HK$24.0 million, furniture and fixtures and office equipment of approximately HK$5.4 million, computer equipment of approximately HK$1.1 million and motor vehicles of approximately HK$0.3 million.

As at 28th February, 2001, the Group had current liabilities of approximately HK$13.4 million, comprising trade payables of approximately HK$4.7 million, amounts due to related parties of approximately HK$1.4 million, obligations under finance lease and hire purchase of approximately HK$0.1 million, and accruals and other payables of approximately HK$7.2 million. As at the same date, the Group had minority interests in subsidiaries of approximately HK$0.1 million.

DIVIDENDS

On 28th March, 2001, the Company declared an interim dividend of about HK$10,347,000 for the financial year ended 31st March, 2001 to its then shareholders registered as such on 31st December, 2000. Such interim dividend was financed by internal resources of the Group. The Directors do not presently intend to recommend any final dividend in respect of the year ended 31st March, 2001. On the basis of the interim dividend and had the Company been a publicly listed company for the whole of the year ended 31st March, 2001, the Company would have declared a dividend of about 1 cent per Share representing a proforma annual dividend yield of about 1% of the Offer Price.

The declaration, payment and amount of dividends in the future will be subject to the discretion of the Directors and will be dependent upon the Group’s future operations and earnings, financial condition, cash requirements and availability, and other factors as may be deemed relevant at such time by the Directors.

PROPERTY INTERESTS

The properties leased by the Group include (i) Flat 521, DB Plaza (Block C), 5th Floor, Discovery Bay, Lantau Island, Hong Kong; (ii) Unit 516, Block M, 5th Floor, Nos. 43-45 Hong Yue Street, Kornhill, Hong Kong; (iii) Flat D, Tower 1, 3rd Floor, The Floridian, No. 18 Sai Wan Terrace, Hong Kong; (iv) Unit 1601, Ruttonjee House, 16th Floor, Ruttonjee Centre, No. 11 Duddell Street, Hong Kong; (v) Suite 1502, 15th Floor, Cheung Kong Center, No. 2 Queen’s Road Central, Hong Kong; (vi) Warehouse No. 501, Fifth District, Nos. 4-19, 1-Chome, Katsushima, Shinagawa-Ku, Tokyo, Japan; and (vii) Car Parking Space Nos. 48-53 on Roof Top of Commercial Complex, Nos. 4-19, 1-Chome, Katsushima, Shinagawa-Ku, Tokyo, Japan. Properties (i) to (iii) are currently used as staff quarters, (iv) as offices, (v) and (vi) as offices and studio and (vii) for the purpose of car parking. Particulars of the Group’s property interests are set out in the section headed “Property Valuation” in Appendix III to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 131 Financial Information

Property valuation

The property interests of the Group were valued by Greater China Appraisal, an independent property valuer, at no commercial value as at 31st March, 2001. The text of the letter and valuation certificate of Greater China Appraisal are available for inspection as set out in the paragraph headed “Documents available for inspection” under the section headed “Documents delivered to the Registrar of Companies and available for inspection” in Appendix VI to this prospectus.

DISTRIBUTABLE RESERVES

As at 31st December, 2000, the reserves available for distribution to the shareholders of the Company amounted to approximately HK$105.1 million, represented by share premium and retained earnings of the Company. Under the Companies Laws, share premium of the Company is distributable to the members, subject to solvency tests.

ADJUSTED NET TANGIBLE ASSETS

The following pro forma statement of adjusted net tangible assets of the Group is based on the audited combined net assets of the Group as at 31st December, 2000 as shown in the Accountants’ Report set out in Appendix I to this prospectus, and adjusted as follows:

HK$’000

Audited combined net tangible assets of the Group 222,425

Combined loss of the Group after taxation for the two months ended 28th February, 2001 as per the unaudited management accounts (5,360)

Less: dividends (10,347) Estimated net proceeds of the Placing of the New Shares 53,000

Adjusted net tangible assets 259,718

Adjusted net tangible asset value per Share (HK cents) (Note) 23.5

Note: The adjusted net tangible asset value per Share is arrived at after the adjustments referred to in this section and on the basis of a total of 1,104,684,403 Shares expected to be in issue immediately following completion of the Placing, but takes no account of any Shares which may be allotted and issued upon the exercise of options that are granted or may be granted under the Pre-IPO Grant of Options and Share Option Scheme or which may be allotted and issued or repurchased by the Company pursuant to the general mandates for the allotment and issue or repurchase of Shares described in the paragraph headed “Resolution of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001” in Appendix V to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 132 Financial Information

RULES 17.15 TO 17.21 OF THE GEM LISTING RULES

The Directors have confirmed that save as disclosed in this prospectus, as at the Latest Practicable Date, the Group was not aware of any circumstances which would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the GEM Listing Rules.

NO MATERIAL ADVERSE CHANGE

The Directors confirm that there has not been any material adverse change in the financial or trading position of the Group since 31st December, 2000, the date to which the latest audited combined financial statements of the Group were made up.

PROFIT ESTIMATE

The Directors estimate that, on the bases set out in Appendix II to this prospectus, the combined profit after taxation and minority interests but before extraordinary items of the Group for the year ended 31st March, 2001 will not be less than HK$19 million. The Directors are not aware of any extraordinary items which have arisen in the year ended 31st March, 2001.

The texts of the letters from the auditors and reporting accountants, PricewaterhouseCoopers, and from CPY in respect of the profit estimate are set out in Appendix II to this prospectus.

EARNINGS PER SHARE

On the basis of the above profit estimate and assuming 1,104,684,403 Shares had been in issue during the year ended 31st March, 2001 and that the Over-allocation Option is not exercised, the pro forma estimated earnings per Share on a fully diluted basis is 1.96 cents, based on the Placing Price of HK$1.00. This assumes that the Company had been listed and a total of 1,104,684,403 Shares had been issued on 1st April, 2000 and that interest income had been earned on the proceeds of the Placing at an interest rate during 2000 of approximately 5% per annum (net of tax).

ROJAM ENTERTAINMENT HOLDINGS LIMITED 133 Underwriting

UNDERWRITERS

CEF Capital Limited Celestial Capital Limited CPY International Grand Cathay Securities (Hong Kong) Limited SBI E2-Capital Securities Limited Shenyin Wanguo Capital (H.K.) Limited First Shanghai Capital Limited Pacific Challenge Securities Limited Tai Fook Securities Company Limited YF Securities Company Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Underwriting and Placing Agreement

Pursuant to the Underwriting and Placing Agreement, the Company is offering the Placing Shares for subscription or purchase by investors who are professional and institutional investors and other investors anticipated to have a sizeable demand for the Placing Shares, at the Placing Price.

Pursuant to the Underwriting and Placing Agreement and subject to the GEM Listing Committee of the Stock Exchange granting listing of and permission to deal in the Shares in issue and the Shares to be issued as mentioned herein on or before 23rd June, 2001 and to certain other conditions set out in the Underwriting and Placing Agreement, the Underwriters have severally agreed to subscribe for or purchase, or procure placees to subscribe for or purchase, the Placing Shares (as the case may be).

Grounds for termination

The obligations of the Underwriters to subscribe or purchase or procure subscribers or purchasers are subject to termination if certain events, including force majeure, occur at any time prior to 8:45 a.m. on the date of despatch of share certificates. CPY (for itself (in its capacity as Sponsor and Global co-ordinator of the Placing) and on behalf of the Underwriters) has the absolute right to terminate their obligations under the Underwriting and Placing Agreement after such consultation with the Company, as CPY in its sole and reasonable opinion sees fit, upon the occurrence of, but not limited to, any of the following events:

(i) in the reasonable opinion of CPY (for itself (in its capacity as Sponsor and Global co- ordinator of the Placing) and on behalf of the Underwriters), the success of the Placing would or might be materially and adversely affected by:

(a) the introduction of any new law or regulation or any change in existing laws or regulations or change in the interpretation or application thereof or other occurrence of any nature whatsoever which may in the reasonable opinion of CPY (for itself (in its capacity as Sponsor and Global co-ordinator of the Placing) and on behalf of the Underwriters) materially and adversely affect the business or financial prospects of any member of the Group; or

ROJAM ENTERTAINMENT HOLDINGS LIMITED 134 Underwriting

(b) the occurrence of any event, development or change (whether or not local, national or international) or forming part of a series of events or changes occuring or continuing before on and/or after the date of the Underwriting and Placing Agreement of a political, military, industrial, financial or economic nature resulting in a material adverse change in, or which might be expected to result in a material adverse change in political, economic or stock market conditions; or

(c) the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange occurring due to exceptionally adverse financial circumstances; or

(d) a change or development involving a prospective change in taxation in Hong Kong, Japan, the Cayman Islands, the BVI (or any other jurisdiction in which the Group operates) or the implementation of exchange controls which will or may materially and adversely affect any member of the Group; or

(ii) any change or deterioration in the conditions of local, national or international securities markets occurs which, in the reasonable opinion of CPY (for itself (in its capacity as Sponsor and Global co-ordinator of the Placing) and on behalf of the Underwriters), will or may materially and adversely affect the success of, or makes it inexpedient or inadvisable to proceed with, the Placing; or

(iii) there comes to the notice of any of CPY (in its capacity as Sponsor and Global co-ordinator of the Placing) and the Underwriters any matter or event showing any of the representations and warranties contained in the Underwriting and Placing Agreement to be untrue or inaccurate in any material respect considered by CPY (for itself (in its capacity as Sponsor and Global co-ordinator of the Placing) and on behalf of the Underwriters) in its reasonable opinion to be material and adverse in the context of the Placing; or

(iv) any of the Warrantors commits any material breach of, or omits to observe in any material respect, any of the obligations or undertakings expressed to be assumed by them or it under the Underwriting and Placing Agreement; or

(v) there comes to the notice of any of CPY (in its capacity as Sponsor and Global co-ordinator of the Placing) and the Underwriters any information, matter or event which, in the reasonable opinion of CPY (for itself (in its capacity as Sponsor and Global co-ordinator of the Placing) and on behalf of the Underwriters) may lead to a material adverse change in the business or in the financial or trading position of any member of the Group.

Undertakings

The Initial Management Shareholders and certain other shareholders of the Company have given non-disposal undertakings, details of which are described in the sections headed “Summary” and “Initial Management and Significant Shareholders” of this prospectus.

Pursuant to the Underwriting and Placing Agreement, the Company has undertaken and covenanted with each of CPY and the Underwriters and each of the Initial Management Shareholders and the executive Directors has undertaken and covenanted with each of CPY (in its capacity as Sponsor

ROJAM ENTERTAINMENT HOLDINGS LIMITED 135 Underwriting

and Global co-ordinator of the Placing) and the Underwriters to procure that, save as pursuant to and in compliance with the GEM Listing Rules, the Placing or pursuant to the exercise of the Over- allocation Option or pursuant to the exercise of any options which may be granted under either or both the Pre-IPO Grant of Options and the Share Option Scheme, the Company will not within the period of six months from the day on which dealings in the Shares commence on GEM, issue, accept subscriptions for, offer, sell, contract to sell, grant or agree to grant any option or other rights in or to subscribe for or otherwise dispose of any Shares or debentures (other than debentures granted as security collateral for borrowings in the ordinary course of business) or other securities (including securities convertible into or exchangeable for Shares) of the Company or any member of the Group (other than for the formation of any new joint venture vehicles or new wholly-owned subsidiaries) or any interests therein.

Commission and expenses

The Underwriters will receive an underwriting commission of 3.5% of the aggregate of the Placing Price in respect of the Placing Shares out of which any sub-underwriting commission will be paid. CPY will receive a documentation fee relating to the Placing. The underwriting and placing commission, advisory fees, documentation fee, GEM listing fees, transaction levy, legal and other professional fees and printing and other expenses relating to the Placing which are estimated to amount, in aggregate, to approximately HK$21 million. If the Over-allocation Option is not exercised, the Group will bear 77.8%, while Billion Moment will bear 22.2% of such commission, fees and expenses. If the Over-allocation Option is exercised in full, the Group will bear 67.6% while Mr. Tetsuya Komuro and Billion Moment will bear 10.7% and 21.7% of such commission, fees and expenses, respectively.

If the Over-allocation Option is exercised in part, such commission, fees and expenses will be borne by the Group, Billion Moment and Mr. Tetsuya Komuro in proportion to their respective numbers of Shares subscribed for or purchased, as appropriate, under the Placing.

Sponsor’s interests in the Company

A sponsor’s agreement will be entered into between CPY and the Company (“Sponsor’s Agreement”) whereby the Company will appoint and CPY will agree to act as its sponsor for the purpose of the GEM Listing Rules pursuant to which CPY will receive a fee. Such appointment will be from the date the Shares are listed on GEM to until 31st March, 2004 or until such sponsor’s agreement is terminated upon the terms and conditions set out therein.

Save as provided for under the Underwriting and Placing Agreement, neither CPY nor its associates have or may, as a result of the Placing, have any interest in any class of securities of the Company or any other company in the Group (including options or rights to subscribe for such securities).

No director or employee of CPY who is involved in providing advice to the Company has or may, as a result of the Placing, have any interest in any class of securities of the Company or any other company in the Group (including options or rights to subscribe for such securities but, for the avoidance of doubt, excluding interests in securities that may be subscribed for or purchased by any such director or employee pursuant to the Placing).

No director or employee of CPY has a directorship in the Company or any other company in the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 136 Underwriting

Neither CPY nor its associates has accrued or will accrue any material benefit as a result of the successful outcome of the Placing, including by way of example, the repayment of material outstanding indebtedness or success fees other than the following: (i) by way of underwriting and placing commission to be paid to CPY International for acting as one of the Underwriters pursuant to the Underwriting and Placing Agreement; (ii) the advisory and documentation fees to be paid to CPY as sponsor of the Placing; (iii) by way of the Sponsor’s Agreement; and (iv) certain associates of CPY, whose ordinary businesses involve the trading of and dealing in securities, may be involved in the trading of and dealing in the securities in the Company.

Underwriters’ interests in the Company

Save as provided for under the Underwriting and Placing Agreement and disclosed otherwise in this prospectus, none of the Underwriters has any shareholding interests in the Group nor has any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any shares in any member of the Group.

Over-allocation Option

Mr. Tetsuya Komuro and Billion Moment have granted CPY International the Over-allocation Option, exercisable by CPY International on behalf of the Underwriters within 30 days of the date of this prospectus, to require Mr. Tetsuya Komuro and Billion Moment to sell up to an aggregate of 13,500,000 additional Shares, at the Placing Price solely to cover over-allocations in the Placing, if any.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 137 Structure and Conditions of the Placing

CONDITIONS OF THE PLACING

The Placing will be conditional upon inter-alia:

(a) Listing

the GEM Listing Committee granting listing of and permission to deal in all the Shares in issue and to be issued pursuant to the Placing and the exercise of options that may be granted under the Share Option Scheme; and

(b) Underwriting and Placing Agreement

the obligations of the Underwriters under the Underwriting and Placing Agreement becoming unconditional which requires, amongst other things, the Underwriting and Placing Agreement not being terminated in accordance with its terms or otherwise.

If these conditions are not fulfilled (or, where applicable, waived by CPY (on behalf of the Underwriters)) on or before 23rd June, 2001, the Placing will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the Placing will be caused to be published by the Company in the GEM website on the next day following such lapse.

The Placing will involve selective marketing of Shares to institutional and professional investors and other investors anticipated to have a sizeable demand for such Shares. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities.

The Placing is fully underwritten by the Underwriters, each being subject to the conditions set out in the sub-section headed “Underwriting Arrangements and Expenses” in the section headed “Underwriting” of this prospectus.

THE PLACING

The Placing Shares will represent approximately 8.15% of the issued share capital of the Company immediately after completion of the Placing, assuming that the Company’s Over-allocation Option is not exercised.

The Placing Shares will be conditionally placed on behalf of the Company by the Underwriters or through selling agents appointed by them at the Placing Price. Shares will be placed in the Placing with certain professional and institutional investors and other investors anticipated to have a sizeable demand for the Shares in Hong Kong, Europe and other jurisdictions outside the US (other than the PRC) in offshore transactions. Investors subscribing for or purchasing the Placing Shares are also required to pay 1% brokerage and a 0.01% Stock Exchange transaction levy.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 138 Structure and Conditions of the Placing

Allocation of Placing Shares to investors pursuant to the Placing is based on a number of factors including the level and timing of demand and whether or not it is expected that the relevant investor is likely to buy further Shares, or hold or sell its Shares, after the listing of the Shares on the Stock Exchange. Such allocation is generally intended to result in a distribution of the Placing Shares on a basis which would lead to the establishment of a broad shareholder base to the benefit of the Company and its shareholders as a whole.

OVER-ALLOCATION OPTION

Pursuant to the Underwriting and Placing Agreement, Mr. Tetsuya Komuro and Billion Moment (together the “Grantors”) have granted to the Underwriters the Over-allocation Option which is exercisable by CPY International on behalf of the Underwriters, at any time and from time to time within 30 days from the date of this prospectus. If the Over-allocation Option is exercised, the Grantors are required to sell up to an aggregate of 13,500,000 Shares (“Grantors’ Shares”), of which, 11,070,000 Shares shall be sold by Mr. Tetsuya Komuro and 2,430,000 Shares shall be sold by Billion Moment. If the Over-allocation Option is exercised in part, the Over-allocation Shares will be sold by Mr. Tetsuya Komuro and Billion Moment on a pro-rata basis. The Grantors’ Shares shall represent 15% of the total Placing Shares under the Placing, at the Placing Price solely to cover over-allocation in the Placing, if any. In order to facilicate the settlement of over-allocations in connection with the Placing in an efficient manner, CPY International, the lead manager of the Placing, may choose to borrow Shares from the Grantors, under the stock borrowing agreement prior to any exercise of the Over-allocation Option, or the acquisition of a sufficient number of shares from other sources. The Grantors will not receive any payment or benefit in respect of such stock borrowing arrangement unless the Over-allocation Option is exercised in which case the Grantors will receive payment for their respectively sold Over-allocation Shares. Pursuant to such stock borrowing arrangement, any Over-allocation Shares borrowed but not sold pursuant to the Over-allocation Option must be returned to the Grantors and deposited with the escrow agent no later than three business days following the last date for exercising the Over-allocation Option, if and only if the Over-allocation Option is not exercised in full. Any stock borrowing arrangement to be entered into will be conducted in accordance with all applicable laws and regulatory requirements. Please refer to the section headed “Waivers from Compliance with the GEM Listing Rules and Companies Ordinace” of this prospectus. In the event that the Over-allocation Option is exercised, an announcement will be made by the Company setting out the relevant details.

STABILISATION

In connection with the Placing, CPY International (on behalf of the Underwriters) may over-allocate up to 13,500,000 Shares and/or effect transactions which stabilise or maintain the market price of the Shares at levels other than those which might otherwise prevail in the open market, but which are not higher than the Placing Price. Such transactions may be effected in any jurisdiction where it is lawful to do so, in each case in compliance with all applicable laws and regulatory requirements. Such transactions, if commenced, may be discontinued at any time.

Stabilisation is a practice not commonly associated with the distribution of securities in Hong Kong. In Hong Kong, such stabilisation activities on the Stock Exchange are restricted to cases where underwriters purchase shares in the secondary market genuinely and solely for the purpose of covering over-allocations in the offering. Relevant provisions of the Securities Ordinance (Chapter 333 of the Laws of Hong Kong) prohibit market manipulation in the form of pegging or stabilising the price of securities in certain circumstances. In Hong Kong, the stabilisation price will not exceed the Placing Price.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 139 Structure and Conditions of the Placing

COMMENCEMENT OF DEALINGS IN THE SHARES ON THE STOCK EXCHANGE

Dealings in the Shares on the Stock Exchange is expected to commence on 31st May, 2001.

Shares will be traded on the Stock Exchange in board lots of 2,000 Shares each.

SHARES WILL BE ELIGIBLE FOR CCASS

If the Stock Exchange grants the listing of and permission to deal in the Shares on GEM and the Company complies with the stock admission requirements of Hongkong Clearing, the Shares will be accepted as eligible securities by Hongkong Clearing for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Shares on GEM or on any other date Hongkong Clearing chooses. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after any trading day. Investors should seek the advice of their stockbroker or other professional adviser for details of those settlement arrangement and how such arrangement will affect their rights and interests.

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

All necessary arrangements have been made for the Shares to be admitted into CCASS.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 140 APPENDIX I Accountants’ Report

The following is the text of a report, prepared for the purpose of inclusion in this prospectus received from the auditors and reporting accountants of the Company, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong.

PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong

24th May, 2001

The Directors Rojam Entertainment Holdings Limited Core Pacific-Yamaichi Capital Limited

Dear Sirs,

We set out below our report on the financial information regarding Rojam Entertainment Holdings Limited (“the Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000 (the “Relevant Periods”) for inclusion in the prospectus of the Company dated 24th May, 2001 (the “Prospectus”).

The Company was incorporated in the Cayman Islands on 29th February, 2000 as an exempted company with limited liability under the Companies Law (Revised) of the Cayman Islands. Pursuant to a group reorganisation (the “Reorganisation”), as detailed in Appendix V to the Prospectus, which was completed on 19th September, 2000, the Company became the holding company of the subsidiaries as set out below in connection with the listing of the Company on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited.

As at the date of this report, the Company has direct interests in the following subsidiaries, all of which are private companies or, if incorporated outside Hong Kong, have substantially the same characteristics as a Hong Kong private company. Details of these companies are as follows:

Attributable Country/place Issued and equity and date of fully paid up interest Principal Name incorporation share capital % activities

Rojam Entertainment Hong Kong HK$100,000 100 Sale of records Limited (“REL”) 5th November, 1997 100,000 ordinary and other audio- (formerly known as shares of HK$1 visual products, Wiltshire International each artiste management Limited) and provision of marketing and promotion activities

ROJAM ENTERTAINMENT HOLDINGS LIMITED 141 APPENDIX I Accountants’ Report

Attributable Country/place Issued and equity and date of fully paid up interest Principal Name incorporation share capital % activities

Rojam International British Virgin US$1 100 Intellectual property Limited Islands 1 registered share holding, music and (formerly known as 6th January, 2000 of US$1 each web content Yao Choy International production Limited)

Rojam Management Hong Kong HK$10,000 100 Provision of general Limited 8th March, 2000 10,000 ordinary administration (formerly known as shares of HK$1 and management Clear Sky Investment each services to group Limited) companies

Rojam Technology Japan ¥3,000,000 100 Administration of Japan Limited 10th July, 2000 60 units of online record sales, shares of sales and promotion ¥50,000 each coordination, management of fan clubs and Tokyo studio

Rojam Link Japan Limited Japan ¥3,000,000 53.3 Inactive 10th July, 2000 60 units of shares of ¥50,000 each

Rojam.com Limited Hong Kong HK$1,000 100 Provision of (formerly known as 8th February, 2000 1,000 ordinary business development komuro. com Limited) shares of HK$1 services each

Rojam Investment Limited British Virgin Islands US$1 100 Inactive (formerly known as 15th November, 2000 1 registered share of Brainy Enterprises Limited) US$1 each

All companies comprising the Group have adopted 31st March, as their financial year end date.

We have acted as auditors of REL for the Relevant Periods. No audited accounts have been prepared for other companies comprising the Group. We have, however, reviewed all relevant transactions of these companies since their incorporation to the date of this report.

For the purpose of this report, we have examined the audited accounts or, where appropriate, the management accounts, of all companies now comprising the Group for the Relevant Periods and

ROJAM ENTERTAINMENT HOLDINGS LIMITED 142 APPENDIX I Accountants’ Report

have carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the Hong Kong Society of Accountants.

The financial information as set out in sections 1 to 6 below (“Financial Information”) has been prepared based on the audited accounts or, where appropriate, management accounts of all companies now comprising the Group, on the basis set out in section 1 below, after making such adjustments as are appropriate. The directors of the respective group companies are responsible for preparing accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.

The directors of the Company are also responsible for the Financial Information. It is our responsibility to form an independent opinion on the combined results of the Group for the Relevant Periods and the combined net tangible assets of the Group and the net tangible assets of the Company as at 31st December, 2000.

In our opinion, the Financial Information, for the purpose of this report and prepared on the basis set out in section 1 below, gives a true and fair view of the combined results of the Group for the Relevant Periods and of the combined net tangible assets of the Group and the net tangible assets of the Company as at 31st December, 2000.

1. BASIS OF PRESENTATION

The combined results of the Group for the Relevant Periods, as detailed in Section 3 below, include the results of the companies now comprising the Group, except for the results of Rojam Investment Limited which was acquired by the Group subsequent to the end of the Relevant Periods on 6th February, 2001, as if the current group structure had been in existence throughout the Relevant Periods or since their respective dates of incorporation to 31st December, 2000.

The combined net tangible assets of the Group as at 31st December, 2000 as detailed in Section 4 below has been prepared to present the net tangible assets of the Group as at that date.

All significant intra-group transactions and balances have been eliminated on combination.

Minority interests represent the interests of outside shareholders in the operating results and net assets of the subsidiaries.

2. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies which have been adopted in arriving at the Financial Information in this report are set out below. These policies conform with Statements of Standard Accounting Practice issued by the Hong Kong Society of Accountants and accounting principles generally accepted in Hong Kong. The Financial Information in this report is prepared under the historical cost convention.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 143 APPENDIX I Accountants’ Report

(a) Subsidiaries

Subsidiaries are companies in which the Company, directly or indirectly, controls more than half of the voting power or issued share capital or controls the composition of the Board of directors.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision, if necessary, for any diminution in value other than temporary in nature.

(b) Revenue recognition

(i) Revenue from record distribution and merchandise sales are recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.

(ii) Signing bonus, which represents fee receivable by the Group as an inducement for entering into an agreement, is non-refundable and non-recoupable and is recognised when the the agreement is signed.

(iii) Royalty income and trademark licensing income are recognised on an accrual basis.

(iv) Revenue from the production of music video is recognised when the productions are completed.

(v) Revenue from event management is recognised when the events are completed.

(vi) Revenue from artiste management is recognised when the services are rendered.

(vii) Advertising revenues from banner advertisements are recognised over the period in which the advertisements are displayed, provided that no significant obligations remain and collection of the receivable is reasonably assured.

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

Fixed assets are stated at cost less accumulated depreciation.

Fixed assets are depreciated at rates sufficient to write off their costs over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Computer equipment 30% Studio equipment 10% – 20% Leasehold improvements 20% – 25% Office equipment, furniture and fixtures 20% Motor vehicles 30%

ROJAM ENTERTAINMENT HOLDINGS LIMITED 144 APPENDIX I Accountants’ Report

Depreciation is not charged until the assets are put into use by the Group.

Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the Group.

The carrying amounts of fixed assets are reviewed regularly to assess whether their recoverable amounts have declined below their carrying amounts. Expected future cash flows have not been discounted in determining the recoverable amount.

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

(d) Inventories

Inventories represent finished goods of audio-visual products and merchandise and are stated at the lower of cost and net realisable value. Cost is calculated on the first-in, first-out basis. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(e) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(f) Deferred taxation

Deferred taxation is accounted for at the current taxation rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that a liability or an asset is expected to be payable or recoverable in the foreseeable future.

(g) Translation of foreign currencies

Transactions in foreign currency are translated into Hong Kong dollars at exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are incorporated into the accounts by translating foreign currencies into Hong Kong dollars at the rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The accounts of subsidiaries expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Exchange differences are dealt with as a movement in reserves.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 145 APPENDIX I Accountants’ Report

(h) Related companies

Related companies are those companies in which the Company’s directors or shareholders have significant direct or indirect interests.

(i) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on a straight line basis over the lease periods.

3. COMBINED RESULTS

The following is a summary of the combined results of the Group for the Relevant Periods, prepared on the basis set out in section 1 above, after making such adjustments as are appropriate:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 Note HK$’000 HK$’000 HK$’000

Tur nover (a) 4,662 1,506 94,012 Other revenues (a) 441 23 2,893

Total revenue (a) 5,103 1,529 96,905 Less: overseas withholding taxation (c) – (164) (7,914)

5,103 1,365 88,991

Cost of music production and record sales (3,718) (127) (13,608) Selling and distribution expenses (848) (431) (13,141) Other operating expenses (1,839) (1,723) (44,489)

(Loss)/profit before taxation (b) (1,302) (916) 17,753 Taxation (c) –––

(Loss)/profit after taxation (1,302) (916) 17,753

Minority interests ––1

Net (loss)/profit for the year/period (1,302) (916) 17,754

ROJAM ENTERTAINMENT HOLDINGS LIMITED 146 APPENDIX I Accountants’ Report

(a) Turnover and revenue

The Group is principally engaged in music production, music publishing, record distribution, artiste management, event management, trademark licensing, merchandise sales and banner advertising. The amounts of each significant category of revenue recognised during the Relevant Periods are as follows:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Tur nover

Music production income – Production of music video 3,000 –– – Royalty income ––3,046 – Signing bonus (Note) ––73,000

Music publishing fee – Royalty income 348 535 7

Record distribution income – 151 11,324

Artiste management fees ––278

Event management income 1,314 – 83

Trademark licensing income – 820 1,199

Merchandise sales ––3,048

Banner advertising income ––2,027

4,662 1,506 94,012

Other revenues Interest income 441 23 2,893

Total revenue 5,103 1,529 96,905

Note: The signing bonus is received from a record company in consideration for the Group entering into a production agreement with this record company.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 147 APPENDIX I Accountants’ Report

(b) (Loss)/Profit before taxation

(Loss)/Profit before taxation is stated after charging the following:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Staff costs 521 272 7,263 Exchange losses 926 315 5,273 Auditors’ remuneration 30 111 400 Operating leases rental on land and buildings 135 238 6,378 Depreciation of owned fixed assets 24 27 1,453 Provision for inventories ––595 Cost of inventories sold – 51 13,608

No provisions for Hong Kong profits tax and Japanese corporate income tax have been made as the companies comprising the Group have no assessable profits during the Relevant Periods.

Overseas withholding taxation represents Japan and the People’s Republic of China (“PRC”) withholding taxes on the income subject to withholding taxes and calculated at the rates applicable thereto.

A subsidiary of the Group engaged in music production is subject to withholding tax in Japan in respect of the music production income. The tax, calculated at 10% of the production income, has been deducted, during the nine months ended 31st December, 2000 when the income was derived from the income by the payer in accordance with the production agreement between that subsidiary and the payer.

Certain subsidiaries engaged in sale of records, artiste management, provision of administration services and business development services in Japan and Hong Kong sustained taxation losses in the Relevant Periods and as such have no liabilities to Japan or Hong Kong profits tax during the Relevant Periods.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 148 APPENDIX I Accountants’ Report

(d) Dividend

No dividend has been paid or declared by the Company and the companies now comprising the Group during the Relevant Periods.

(e) Earnings per share

No earnings per share figure is presented as this would be hypothetical due to the preparation of the results for the Relevant Periods on a combined basis, as disclosed in section 1.

(f) Emoluments of directors and employees of the Company

(i) The Company was not incorporated until 29th February, 2000 and no emoluments were paid and payable to the directors for the two years ended 31st March, 1999 and 2000. Emoluments paid and payable to five executive directors for the nine months ended 31st December, 2000 are as follows:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Fees ––– Basic salaries, allowances and benefit in kind ––6,237 Compensation for loss of office ––567 Bonuses –––

––6,804

The emoluments paid and payable to the five executive directors of the Company fell within the following bands:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Nil to HK$1,000,000 ––1 HK$1,000,001 to HK$2,000,000 ––4

––5

ROJAM ENTERTAINMENT HOLDINGS LIMITED 149 APPENDIX I Accountants’ Report

Each of the five executive directors of the Company who had received emoluments for the nine months ended 31st December, 2000 received emoluments of approximately HK$1,923,000, HK$1,497,000, HK$1,387,000, HK$1,220,000 and HK$777,000 respectively.

(ii) The five individuals whose emoluments were the highest in the Group for the nine months ended 31st December, 2000 include 5 directors whose emoluments are reflected in the analysis presented above. The emolument payable to all employees for each of the two years ended 31st March, 2000 and 1999 during the Relevant Periods are as follows:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Basic salaries and allowances 521 272 – Discretionary bonuses –––

521 272 –

The number of employees whose emoluments fell within the following bands is as follows:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Nil to HK$1,000,000 2 4 –

(iii) Save as disclosed in (i) above, no emoluments have been paid by the Group to the directors and the highest paid employees mentioned above as an inducement to join or upon joining the Group or as compensation for loss of office.

(g) Retirement benefit costs

From 1st December, 2000, the subsidiaries operating in Hong Kong are required to participate in defined contribution retirement scheme of the Group set up in accordance with the Hong Kong Mandatory Provident Fund Ordinance. Prior to that date, the subsidiaries operating in Hong Kong did not have a provident fund scheme for its directors and employees. Under the scheme, the employees are required to contribute 5% of their monthly salaries up to maximum of HK$1,000 and they can choose to make additional contributions. The employer’s monthly contributions are calculated at 5% of the employee’s monthly salaries up to a maximum of HK$1,000 (the “mandatory

ROJAM ENTERTAINMENT HOLDINGS LIMITED 150 APPENDIX I Accountants’ Report

contributions”). The employees are entitled to 100% of the employer’s mandatory contributions upon their retirement at the age of 65 years old, death or total incapacity. The subsidiaries operating in Japan are required to participate in defined contribution retirement schemes organised by relevant local government authorities since incorporation. They are required to make contributions to the retirement schemes at a rate of 8.675% of the basic salary of their employees up to a maximum of Yen 605,000 (approximately HK$41,000) per employee.

Retirement benefit costs for the Relevant Periods were as follows:

Nine months Year ended ended 31st 31st March December 1999 2000 2000 HK$’000 HK$’000 HK$’000

Contributions paid and payable to defined contribution retirement schemes in respect of: Hong Kong ––14 Japan ––58

––72

At 31st December, 2000, the Group has HK$72,000 outstanding contribution payable to the retirement schemes participated by the Group and there was no forfeited contribution available to offset future pension obligation of the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 151 APPENDIX I Accountants’ Report

(h) Related party transactions

Apart from the Reorganisation, the Group has carried out the following material transactions with related parties during the Relevant Periods: Nine months Year ended ended 31st 31st March December 1999 2000 2000 Note HK$’000 HK$’000 HK$’000

Purchase of fixed assets from SK Kikaku Ltd. * (i) ––35,339

Revenues received and receivables from related parties: – trademark licence fees from Shanghai Chikou Entertainment Co. Ltd. (ii) – 820 1,199

Operating expenses paid and payable to related parties:

– music production service fee paid to Rojam Pictures, Inc. (iii) 2,220 – 1,410

– music production service fee paid to Iroas Corporation Ltd. * (iii) ––17

– studio charges paid to Shu Corporation Ltd. and SK Planning: (iv) – Tokyo studio * ––635 – Hawaii studio ––556

– studio charges paid to PT. TK Disc Bali (iv) ––99

– music production service fee paid to Shu Corporation Ltd. and SK Planning * (iv) ––4,661

– reimbursement of expenses to Shu Corporation Ltd. (v) ––2,994

– website set up fee to Omnicourt Limited * (vi) ––405

– website maintenance fee to Omnicourt Limited (vi) ––354

– art direction fee paid to HAL Communications, Inc. * (vi) ––790

– producer and performance fee to: – Rojam, Inc. (note vii) (note vii) (note vii) – Mr Tetsuya Komuro ––(note viii)

– artiste management fee paid to Iroas Corporation Limited * (ix) ––147

– assignment of receivable from Shanghai Chikou Entertainment Co. Ltd. * (x) ––21,251

ROJAM ENTERTAINMENT HOLDINGS LIMITED 152 APPENDIX I Accountants’ Report

(i) Pursuant to a sale and purchase agreement dated 28th December, 2000, the Group purchased certain music equipment and instruments and music studio fixtures from SK Kikaku Ltd, a company beneficially owned by Mr. Tetsuya Komuro and Mr. Kebo Wu, directors and shareholders of the Company, to the extent of 50% and 12.5% respectively.

(ii) Shanghai Chikou Entertainment Co., Ltd. (“SCE”) is a 90% owned company of Mr. Kebo Wu. The trademark licence fees are charged for the uses of various trademarks by SCE in accordance with the terms of agreements.

(iii) Rojam Pictures, Inc. and Iroas Corporation Limited are companies wholly and beneficially owned by Mr. Tetsuya Komuro.

(iv) SK Planning and Shu Corporation Ltd. are benefically owned by Mr. Tetsuya Komuro and Kebo Wu to the extent of 50% and 12.5% respectively. PT. TK Disc Bali is wholly and beneficially owned by Mr. Tetsuya Komuro.

(v) The reimbursement of expenses to the respective related parties is at cost.

(vi) HAL Communications, Inc. (“Hal”) and Omnicourt Limited are 100% owned companies of Mr. Hiroshi Ozawa, a director of the Company during the Relevant Periods, and his spouse. Hal and Omnicourt Limited became unrelated parties of the Group since the resignation of Mr. Hiroshi Ozawa as director of the Company on 20th December, 2000.

(vii) Pursuant to a service agreement dated 2nd January, 2001 between the Group and Rojam, Inc., a company wholly-owned by Mr. Tetsuya Komuro, Rojam, Inc. has, since 20th January, 1998 procured and caused Mr. Tetsuya Komoro to provide producer services of music records to REL. In consideration, REL may at its entire discretion give Rojam, Inc. a bonus payment. No bonus has been paid or is payable during the Relevant Periods.

(viii) Pursuant to a service agreement dated 21st May, 2001 between Mr. Tetsuya Komuro and the Company, Mr. Tetsuya Komuro is remunerated, in the capacity of a chief executive producer and performance artiste, with the grant of share options entitling him to subscribe for 41,387,376 ordinary shares in the Company of HK$0.1 each at an exercise price of HK$0.1, subject to terms and conditions attached thereto.

(ix) The artiste management fee is charged at 3% to 8% of the net sales of products that involve the artiste’s performance under the agreement.

(x) Pursuant to an agreement between REL, Singing Mermaid Limited (“SML”, a shareholder of the Company at the time of such agreement), and SCE dated 29th December, 2000, receivables of HK$21,251,000 due from SCE to REL was assigned to SML as settlement of debts due by the Group to SML for the same amount.

In the opinion of the directors of the Company, the above related party transactions were carried out in the normal course of business and at terms mutually agreed

ROJAM ENTERTAINMENT HOLDINGS LIMITED 153 APPENDIX I Accountants’ Report

between the Group and the respective related parties. Except for the reimbursement of expenses and the producer fee as set out in notes (v), (vii) and (viii) above, the Group charged and/or paid the above related parties at market prices or, where no market price was available, at cost plus a percentage mark-up in the range of 5% to 15%.

The directors also confirm that the above transactions except those marked with an asterisk will continue after the listing of the shares of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (“GEM”) and that such transactions will be conducted based on the terms of the relevant agreements governing these transactions; all transactions marked with an asterisk will not continue after the listing of the shares of the Company on GEM.

4. COMBINED NET TANGIBLE ASSETS

The following is a summary of the combined net tangible assets of the Group as at 31st December, 2000 prepared on the basis set out in section 1 above, after making such adjustments as are appropriate, and the net tangible assets of the Company as at 31st December, 2000:

Group Company Note HK$’000 HK$’000

Fixed assets (a) 54,689 –

Investments in subsidiaries (b) – 446

Current assets Inventories (c) 457 – Trade receivables, prepayments and other receivables 25,158 9,690 Amounts due from related companies (d) 932 – Amounts due from subsidiaries (e) – 112,730 Cash and bank balances (f) 166,117 90,109

192,664 212,529

Current liabilities Trade payables 7,621 – Amounts due to related companies (d) 316 – Accruals and other payables 14,724 2,254 Bank overdrafts, unsecured 2,166 2,166

24,827 4,420

Net current assets 167,837 208,109 ------

222,526 208,555

Deduct: Minority interests (101) –

Net tangible assets 222,425 208,555

ROJAM ENTERTAINMENT HOLDINGS LIMITED 154 APPENDIX I Accountants’ Report

(a) Fixed assets

Accumulated Net book Cost depreciation value HK$’000 HK$’000 HK$’000

Leasehold improvements 25,738 985 24,753 Studio equipment 22,991 – 22,991 Office equipment, furniture and fixtures 5,602 218 5,384 Computer equipment 1,438 216 1,222 Motor vehicles 424 85 339

56,193 1,504 54,689

(b) Investments in subsidiaries

The amounts represent investment in unlisted shares in subsidiaries at cost.

HK$’000

Finished goods 595 Merchandise 457

1,052 Less: provision (595)

457

(d) Amounts due from/ to related companies

The amounts represent trade receivables from/trade payables to related companies and are unsecured, interest-free and have no fixed terms of repayment. These were fully settled up to the date of 28th February, 2001.

(e) Amounts due from subsidiaries

The amounts are unsecured, interest-free and have no fixed terms of repayment.

(f) Cash and bank balances

Included in the balance is approximately HK$3,080,000 of time deposits pledged as security for a corporate credit cards facility of the same amount granted to the Group.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 155 APPENDIX I Accountants’ Report

(g) Deferred taxation

The deferred taxation assets/(liabilities) not recognised/provided as at 31st December, 2000 amounted to: HK$’000

Accumulated depreciation allowance (637) Potential tax losses 7,483

6,846 (h) Reserves

Movements in reserves during the Relevant Periods are as follows:

Group Company 29th February 2000 (Date of Nine months incorporation) ended to Year ended 31st March 31st December 31st December 1999 2000 2000 2000 HK$’000 HK$’000 HK$’000 HK$’000 Share premium

Balance brought forward –––– Issue of shares ––103,279 103,279

Balance carried forward ––103,279 103,279

Exchange reserve

Balance brought forward –––– Exchange adjustments on translation of accounts of overseas subsidiaries ––142 –

Balance carried forward ––142 –

(Accumulated losses)/ retained earnings

Balance brought forward – (1,302) (2,218) – Combined (loss)/profit for the year/period (1,302) (916) 17,754 1,809

Balance carried forward (1,302) (2,218) 15,536 1,809

ROJAM ENTERTAINMENT HOLDINGS LIMITED 156 APPENDIX I Accountants’ Report

The Company had a distributable reserve of approximately HK$105 million as at 31st December, 2000, represented by share premium and retained earnings of the Company. Under the Companies Law (Revised) of the Cayman Islands, share premium of the Company is distributable to the members, subject to solvency tests.

(i) Commitments under operating leases

At 31st December, 2000, the Group had commitments in respect of land and buildings to make payments in the next twelve months under an operating lease which expires as follows:

HK$’000

Within one year 53 In the second to fifth year inclusive 11,108

(j) Contingent liabilities

As at 31st December, 2000, the Group had no material contingent liabilities.

5. SIGNIFICANT SUBSEQUENT EVENTS

(i) On 28th March, 2001, the Company declared an interim dividend of 1 cent per share totalling approximately HK$10,347,000 for the financial year ended 31st March, 2001.

(ii) Pursuant to a resolution passed by the shareholders of the Company at an extraordinary meeting held on 21st May, 2001, shares options entitling their holders to subscribe for 51,734,220 ordinary shares in the Company of HK$0.1 each were granted to music producers of the Group. Details of the grant of options are set out in the section headed “Pre-IPO Grant of Options” in the Prospectus.

Save as disclosed above and in this report, no significant events have occurred subsequent to 31st December, 2000.

6. SUBSEQUENT ACCOUNTS

No audited accounts have been prepared for the Company or any of the companies comprising the Group in respect of any period subsequent to 31st December, 2000 and, save as disclosed in this report, no dividend or other distribution has been declared, made or paid by the Company or any of its subsidiaries in respect of any period subsequent to 31st December, 2000.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 157 APPENDIX II Profit Estimate

The estimated combined profit after taxation and minority interests but before extraordinary items of the Group for the year ended 31st March, 2001 is set out in the section headed “Profit Estimate” under the section headed “Financial Information” in this prospectus.

BASES

The Directors have prepared the estimate of the combined profit after taxation and minority interests but before extraordinary items of the Group for the year ended 31st March, 2001 based on the audited combined financial statements of the Group for the nine months ended 31st December, 2000 and the unaudited management accounts for the two months ended 28th February, 2001, and estimate of the results of the Group for the remaining one month of the year ended 31st March, 2001. The Directors are not aware of any extraordinary items which have arisen or are likely to arise for the year ended 31st March, 2001. The estimate has been prepared on the basis of accounting policies consistent with those adopted for the purposes of the Accountants’ Report as set out in Appendix I to this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 158 APPENDIX II Profit Estimate

Set out below are texts of letters received from PricewaterhouseCoopers, the reporting accountants of the Company, and from the Sponsor in connection with the estimate of the combined profit after taxation and minority interests but before extraordinary items of the Group for the year ended 31st March, 2001.

PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong

24th May, 2001

The Directors Rojam Entertainment Holdings Limited Core Pacific-Yamaichi Capital Limited

Dear Sirs

We have reviewed the accounting policies and calculations adopted in arriving at the estimate of the combined profit after taxation and minority interests but before extraordinary items of Rojam Entertainment Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the year ended 31st March, 2001 (the “Estimate”) as set out in the subsection headed “Profit Estimate” in the section headed “Financial Information” in the prospectus of the Company dated 24th May, 2001 (the “Prospectus”).

The Estimate, for which the Directors are solely responsible, has been prepared by them based on the audited combined results of the Group for the nine months ended 31st December, 2000 and the unaudited combined results based on management accounts for the two months ended 28th February, 2001 and an estimate of the combined results of the Group for the remaining one month ended 31st March, 2001 on the basis that the current Group structure had been in existence throughout the whole financial year ended 31st March, 2001.

In our opinion, so far as the accounting policies and calculations are concerned, the Estimate has been properly compiled in accordance with the bases made by the Directors as set out in the section “Bases” of Appendix II of the Prospectus, and is presented on a basis consistent in all material respects with the accounting policies presently adopted by the Group as set out in our Accountants’ Report dated 24th May, 2001, the text of which is set out in Appendix I of the Prospectus.

Yours faithfully PricewaterhouseCoopers Certified Public Accountants Hong Kong

ROJAM ENTERTAINMENT HOLDINGS LIMITED 159 APPENDIX II Profit Estimate

24th May, 2001

The Directors Rojam Entertainment Holdings Limited Suite 1502, 15th Floor Cheung Kong Center 2 Queen’s Road Central Central Hong Kong

Dear Sirs,

We refer to the estimate of the combined profit after taxation and minority interests but before extraordinary items of Rojam Entertainment Holdings Limited (the “Company”) and its subsidiaries (together the “Group”) for the year ended 31st March, 2001 (the “Estimate”) as set out in the prospectus of the Company dated 24th May, 2001.

We have discussed with you the bases upon which the Estimate has been made. We have also considered the letter dated 24th May, 2001 addressed to yourselves and ourselves from PricewaterhouseCoopers regarding the accounting policies and calculations upon which the Estimate has been made.

On the basis of the foregoing and on the bases made by you and the accounting policies and calculations reviewed by PricewaterhouseCoopers, we have formed the opinion that the Estimate, for which you, as directors of the Company, are solely responsible, has been made after due and careful enquiry.

Yours faithfully, For and on behalf of Core Pacific – Yamaichi Capital Limited D.C. LEE Managing Director

ROJAM ENTERTAINMENT HOLDINGS LIMITED 160 APPENDIX III Property Valuation

2407 Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

24th May, 2001 The Directors Rojam Entertainment Holdings Limited Suite 1502 Cheung Kong Center No. 2 Queen’s Road Central Hong Kong

Dear Sirs,

In accordance with your instructions to value the property interests of Rojam Entertainment Holdings Limited (referred to as the “Company”), and its subsidiaries (together referred to as the “Group”) in Hong Kong and Japan, we confirm that we have carried out inspections, made relevant enquires and obtained such further information as we consider necessary for the purpose of providing the capital values of such property interests as at 31st March, 2001 (referred to as the “valuation date”).

This letter which forms parts of our valuation report explains the basis and methodology of valuation, and clarifies our assumptions made, titleship of properties and the limiting conditions.

Basis of Valuation

Our valuation is our opinion of the open market value which we would define as intended to mean “the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:

(i) a willing seller;

(ii) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

(iii) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

(iv) that no account is taken of any additional bid by a purchaser with a special interest; and

(v) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

ROJAM ENTERTAINMENT HOLDINGS LIMITED 161 APPENDIX III Property Valuation

Assumptions

Our valuation has been made on the assumption that in the open market the Group sells the property interests in their continued use and in their existing states without the benefit of any deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to increase the value of the property interests.

We have assumed that all consents, approvals and licenses from relevant government authorities for the buildings and structures erected thereon have been granted. Also, we have assumed that all buildings and structures fall within the site are held by the owner or permitted to be occupied by the owner.

We have assumed that all necessary mortgagees’ consent to the creation of the tenancy over the properties have been obtained and are still subsisting.

Titleship Investigation

We have not been provided with any copies of title documents regarding the properties under valuation but have been given copies of the tenancy agreements. We have caused searches to be made at the Land Registry in Hong Kong for the properties 1 to 5. However, no investigation has been made for the legal title or any liabilities attached to the properties in Japan.

All legal documents disclosed in this report are for reference only and no responsibility is assumed for any legal matters concerning the legal title of the property interests set out in this report.

Limiting Conditions

We have not carried out detailed site measurements to verify the correctness of the land or building areas in respect of the relevant properties but have assumed that the areas shown on the legal documents provided to us are correct. Based on our experience of valuation of similar properties in Hong Kong and Japan, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

We have inspected the exterior and, where possible, the interior of certain properties included in the attached valuation certificate. However, no structural survey has been made and we are therefore unable to report as to whether the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

Having examined all relevant documentation, we have relied to a very considerable extent on the information provided by the Group and have accepted advice given to us by it on such matters as planning approvals, statutory notices, easements, tenure, occupation, rentals, site and floor areas and in the identification of those properties in which the Group has valid interests. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We were also advised by the Group that no material factors have been omitted from the information to reach an informed view, and have no reason to suspect that any material information has been withheld.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 162 APPENDIX III Property Valuation

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the properties valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that all the interests are free of encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Opinion of Value

The property interests included in this valuation report, which are held under various tenancy agreements, have no commercial value due to inclusion of non-alienation clause or otherwise due to lack of substantial profit rent or short term nature.

Remarks

Our valuations have been prepared in accordance with generally accepted valuation procedures and comply with the requirements of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

All property values are denominated in Hong Kong dollars.

We enclose herewith the summary of valuation and valuation certificate.

This valuation report is issued subject to our General Service Conditions.

Yours faithfully, For and on behalf of Greater China Appraisal Limited K. K. Ip BLE, ARICS, AHKIS, RPS(GP) Managing Director

Note: Mr. K. K. Ip, who is a Chartered Valuation Surveyor and a Registered Professional Surveyor, has substantial experience in valuation of properties in Hong Kong and the PRC since 1992; and has been involved in property valuation in Japan since 1996.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 163 APPENDIX III Property Valuation

VALUATION SUMMARY

Group I – Property rented by the Group in Hong Kong

Capital value in Existing state as at No. Property 31st March, 2001

1. Flat 521, DB Plaza (Block C) No commercial value 5th Floor, Discovery Bay City Lantau Island New Territories

2. Unit 516, Block M No commercial value 5th Floor Nos. 43-45 Hong Yue Street Kornhill Hong Kong

3. Flat D, Tower 1 No commercial value 3rd Floor, The Floridian No. 18 Sai Wan Terrace Hong Kong

4. Unit 1601, Ruttonjee House No commercial value 16th Floor, Ruttonjee Centre No. 11 Duddell Street Hong Kong

5. Suite 1502 No commercial value 15th Floor, Cheung Kong Center No. 2 Queen’s Road Central Hong Kong

Group II - Property rented by the Group in Japan

6. Warehouse No. 501 No commercial value Fifth District Nos. 4-19, 1-Chome Katsushima, Shinagawa-Ku Tokyo Japan

7. Car Parking Space Nos. 48-53 on No commercial value Roof Top of Commercial Complex Nos. 4-11, 1-Chome Katsushima, Shinagawa-Ku Tokyo Japan

Total: No commercial value

ROJAM ENTERTAINMENT HOLDINGS LIMITED 164 APPENDIX III Property Valuation

VALUATION CERTIFICATE

Group I – Property rented by the Group in Hong Kong

Capital value in Particular of Existing state as at No. Property Description and Tenure Occupancy 31st March, 2001

1. Flat 521, DB Plaza The property comprises a The property is currently No commercial value (Block C) residential unit within a occupied by the Group as staff 5th Floor residential building completed in quarter. Discovery Bay City 1991. Lantau Island New Territories The gross floor area of the property is approximately 77 square metres (829 square feet).

The property is held by the Group under a tenancy agreement for a term of 2 years commencing from 1st July, 2000 to 30th June, 2002 at a monthly rental of HK$16,000 inclusive of rates and management fees.

2. Unit 516, Block M The property comprises a The property is currently No commercial value 5th Floor residential unit within a occupied by the Group as staff Nos. 43-45 Hong residential building completed in quarter. Yue Street 1987. Kornhill Hong Kong The gross floor area of the property is approximately 98 square metres (1,055 square feet).

The property is held by the Group under a tenancy agreement for a term of 2 years commencing from 12th August, 2000 to 11th August, 2002 at a monthly rental of HK$29,000 inclusive of rates and management fees.

3. Flat D, Tower 1 The property comprises a The property is currently No commercial value 3rd Floor, The residential unit within a occupied by the Group as staff Floridian residential building completed in quarter. No. 18 Sai Wan 1997. Te r r a c e Hong Kong The gross floor area of the property is approximately 110 square metres (1,187 square feet).

The property is held by the Group under a tenancy agreement for a term of 2 years commencing from 9th September, 2000 to 8th September, 2002 at a monthly rental of HK$43,000 inclusive of rates and management fees.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 165 APPENDIX III Property Valuation

Capital value in Particular of Existing state as at No. Property Description and Tenure Occupancy 31st March, 2001

4. Unit 1601 The property comprises an The property is currently No commercial value Ruttonjee House office unit within an office occupied by the Group as office. 16th Floor building completed in 1986. Ruttonjee Centre No. 11 Duddell The lettable floor area of the Street property is approximately 153 Hong Kong square metres (1,641 square feet).

The property is held by the Group under a tenancy agreement for a term of 2 years commencing from 26th June, 2000 to 25th June, 2002 at a monthly rental of HK$41,025 exclusive of rates and management fees.

5. Suite 1502 The property comprises an The property is currently No commercial value 15th Floor office unit within an office occupied by the Group as office Cheung Kong building completed in 1998. and studio. Center No. 2 Queen’s Road The lettable floor area of the Central property is approximately 1,119 Hong Kong square metres (12,034 square feet).

The property is held by the Group under a tenancy agreement for a term of 4 years commencing from 1st June, 2000 to 31st May, 2004 at a monthly rental of HK$577,632 exclusive of rates and management fees with the 1st, 2nd, 3rd, the period from 1st September, 2000 to 10th September, 2000, 13th and 14th months of the term being rent free.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 166 APPENDIX III Property Valuation

Group II – Property rented by the Group in Japan

Capital value in Particular of Existing state as at No. Property Description and Tenure Occupancy 31st March, 2001

6. Warehouse No. 501 The property comprises a two- The property is currently No commercial value Fifth District storey with steel reinforced occupied by the Group as office Nos. 4-19, 1-Chome warehouse completed in 1976. and studio. Katsushima Shinagawa-Ku The gross floor area of the Tokyo property is approximately 1,344 Japan square metres (14,460 square feet).

The property is held by the Group under a tenancy agreement for a term of 5 years commencing from 1st January, 2001 to 31st December, 2005 at a monthly rental of JPY2,083,620 exclusive of consumption tax and management fees.

7. Car Parking Space The property comprises 6 car The property is currently No commercial value Nos. 48-53 on parking spaces on the roof top occupied by the Group for the Roof Top of of a commercial complex which purpose of car parking. Commercial includes 3 blocks of 9-storey Complex commercial buildings completed Nos. 4-11, 1-Chome in 1976. Katsushima Shinagawa-Ku The property is held by the Tokyo Group under a tenancy Japan agreement for a term of 2 years commencing from 1st January, 2001 to 31st December, 2002 at a monthly rental of JPY120,000 exclusive of consumption tax.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 167 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

Set out below is a summary of certain provisions of the Memorandum and Articles of Association of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 29th February, 2000 under the Companies Law (Revised) of the Cayman Islands (the “Companies Law”). The Memorandum of Association (the “Memorandum”) and the Articles of Association (the “Articles”) comprise its constitution.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them and that the objects for which the Company is established are unrestricted (including acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects.

(b) The Company may by special resolution alter its Memorandum with respect to any objects, powers or other matters specified therein.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on 21st May, 2001. The following is a summary of certain provisions of the Articles:

(a) Directors

(i) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Law and the Memorandum and Articles and to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine). Subject to the Companies Law, the rules of any Designated Stock Exchange (as defined in the Articles) and the Memorandum and Articles, any share may be issued on terms that, at the option of the Company or the holder thereof, they are liable to be redeemed.

The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may from time to time determine.

Subject to the provisions of the Companies Law and the Articles and, where applicable, the rules of any Designated Stock Exchange (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being

ROJAM ENTERTAINMENT HOLDINGS LIMITED 168 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither the Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any subsidiary

There are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries. The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Companies Law to be exercised or done by the Company in general meeting.

(iii) Compensation or payments for loss of office

Pursuant to the Articles, payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are provisions in the Articles prohibiting the making of loans to Directors.

(v) Disclosure of interests in contracts with the Company or any of its subsidiaries.

A Director may hold any other office or place of profit with the Company (except that of the auditor of the Company) in conjunction with his office of Director for such period and, subject to the Articles, upon such terms as the board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the Articles, the board may also cause the voting power conferred by the shares in any other company held or

ROJAM ENTERTAINMENT HOLDINGS LIMITED 169 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

Subject to the Companies Law and the Articles, no Director or proposed or intended Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board in respect of any contract or arrangement or other proposal in which he is to his knowledge materially interested but this prohibition shall not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving of any security or indemnity to the Director in respect of money lent or obligations incurred or undertaken by him at the request of or for the benefit of the Company or any of its subsidiaries;

(bb) any contract or arrangement for the giving by the Company of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director has himself assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director is or is to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any contract or arrangement in which the Director is interested in the same manner as other holders of shares or debentures or other securities of the Company or any of its subsidiaries by virtue only of his interest in shares or debentures or other securities of the Company;

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(ee) any contract or arrangement concerning any other company in which he is interested only, whether directly or indirectly, as an officer or executive or a shareholder other than a company in which the Director together with any of his associates (as defined by the rules, where applicable, of any Designated Stock Exchange (as defined in the Articles)) is beneficially interested in 5% or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest is derived); or

(ff) any proposal concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director as such any privilege or advantage not accorded to the employees to which such scheme or fund relates.

(vi) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by the Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably expected to be incurred or incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/ or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances,

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life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependents or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependents are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(vii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not greater than one third) will retire from office by rotation provided that no Director holding office as chairman and/or managing director shall be subject to retirement by rotation, or be taken into account in determining the number of Directors to retire. The Directors to retire in every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot. There are no provisions relating to retirement of Directors upon reaching any age limit.

The Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or as an addition to the existing board. Any Director so appointed shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election. Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification.

A Director may be removed by a special resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and may by ordinary resolution appoint another in his place. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors.

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The office or director shall be vacated:

(aa) if he resigns his office by notice in writing delivered to the Company at the registered office of the Company for the time being or tendered at a meeting of the Board whereupon the Board resolves to accept such resignation;

(bb) becomes of unsound mind or dies;

(cc) if, without special leave, he is absent from meetings of the board (unless an alternate director appointed by him attends) for six (6) consecutive months, and the board resolves that his office is vacated;

(dd) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors;

(ee) if he is prohibited from being a director by law; and

(ff) if he ceases to be a director by virtue of any provision of law or is removed from office pursuant to the Articles.

The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the board may determine and the board may revoke or terminate any of such appointments. The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(vii) Borrowing powers

The board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Companies Law, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

(viii) Proceedings of the Board

The board may meet for the despatch of business, adjourn and otherwise regulate their meetings as they think fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have an additional or casting vote.

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(ix) Register of Directors and Officers

The Companies Law and the Articles provide that the Company is required to maintain at its registered office a register of directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 30 days of any change in such directors or officers.

(b) Alterations to constitutional documents

The Articles may be rescinded, altered or amended by the Company in general meeting by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the Memorandum, to confirm any amendment to the Articles or to change the name of the Company.

The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Law:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;

(ii) consolidate and divide all or any of its capital into shares of larger amount than its existing shares.

(iii) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares as the directors may determine;

(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum, subject nevertheless to the provisions of the Companies Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares; and

(v) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may subject to the provisions of the Companies Law reduce its share capital or share premium account or any capital redemption reserve or other undistributable reserve in any way by special resolution.

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(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Law, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(e) Special resolution-majority required

Pursuant to the Articles, a special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than 21 clear days’ notice, specifying the intention to propose the resolution as a special resolution, has been duly given. Provided that, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all Members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than 21 clear days’ notice has been given.

A copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed.

An ordinary resolution is defined in the Articles to mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting held in accordance with the Articles.

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(f) Voting rights (generally and on a poll) and right to demand a poll

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Articles, at any general meeting on a show of hands, every member who is present in person or by proxy or being a corporation, is present by its duly authorised representative shall have one vote and on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share. Notwithstanding anything contained in the Articles, where more than one proxy is appointed by a member which is a clearing house (or its nominees), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by (i) the chairman of the meeting or (ii) at least three members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy for the time being entitled to vote at the meeting or (iii) any member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting or (iv) a member or members present in person or, in the case of a member being a corporation, by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

If a recognised clearing house is a member of the Company it may authorise such person or persons (or its nominee) as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominees) which he represents as that clearing house (or its nominees) could exercise if it were an individual member of the Company.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year, other than the year of incorporation (within a period of not more than 15 months after the holding of the last preceding annual general meeting or a period of 18 months from the date of incorporation, unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Articles)) at such time and place as may be determined by the board.

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(h) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the Companies Law or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting.

A copy of every balance sheet and profit and loss account (including every document required by law to be annexed thereto) which is to be laid before the Company at its general meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report, shall not less than 21 days before the date of the meeting be sent to every person entitled to receive notices of general meetings of the Company under the provisions the Articles.

Auditors shall be appointed and the terms and tenure of such appointment and their duties at all times regulated in accordance with the provisions of the Articles. The remuneration of the auditors shall be fixed by the Company in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than the Cayman Islands. If so, the financial statements and the report of the auditor should disclose this fact and name such country or jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting and any extraordinary general meeting at which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above) be called by at least 21 clear days’ notice in writing, and any other extraordinary general meeting shall be called by at least 14 clear days’ notice (in each case exclusive of the day on which the notice is served or deemed to be served and of the day for which it is given). The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. In addition notice of every general meeting shall be given to all members of the Company other than such as, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, and also to the auditors for the time being of the Company.

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Notwithstanding that a meeting of the Company is called by shorter notice than that mentioned above, it shall be deemed to have been duly called if it is so agreed:

(i) in the case of a meeting called as an annual general meeting, by all members of the Company entitled to attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the issued shares giving that right.

All business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business:

(aa) the declaration and sanctioning of dividends;

(bb) the consideration and adoption of the accounts and balance sheet and the reports of the directors and the auditors;

(cc) the election of directors in place of those retiring;

(dd) the appointment of auditors and other officers;

(ee) the fixing of the remuneration of the directors and of the auditors; and

(ff) the granting of any mandate or authority to the directors to offer, allot, grant options over or otherwise dispose of the unissued shares of the Company representing not more than 20% in nominal value of its existing issued share capital.

(j) Transfer of shares

All transfers of shares may be affected by an instrument of transfer in the usual or common form or the standard form prescribed by the Designated Stock Exchange (as defined in The Articles, i.e. the Stock Exchange) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents

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of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in the Cayman Islands or such other place at which the principal register is kept in accordance with the Companies Law.

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Articles) may determine to be payable or such lesser sum as the Directors may from time to time require is paid to the Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in a relevant newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Articles), at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole 30 days in any year.

(k) Power for the Company to purchase its own shares

The Company is empowered by the Companies Law and the Articles to purchase its own Shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirements imposed from time to time by any Designated Stock Exchange.

(l) Power for any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to ownership of shares in the Company by a subsidiary.

(m) Dividends and other methods of distribution

Subject to the Companies Law, the Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board.

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The Articles provide dividends may be declared and paid out of the profits of the Company, realised or unrealised, or from any reserve set aside from profits which the directors determine is no longer needed. With the sanction of an ordinary resolution dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Companies Law.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to any member or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit. The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address, or in the case of joint holders, addressed to the holder whose name stands first in the register of the Company in respect of the shares at his address as appearing in the register or addressed to such person and at such addresses as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

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All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

(n) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy.

(o) Call on shares and forfeiture of shares

Subject to the Articles and to the terms of allotment, the board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than 14 clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non- payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

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If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding 20 per cent. per annum as the board determines.

(p) Inspection of register of members

Pursuant to the Articles the register and branch register of members shall be open for inspection between 10:00 a.m. and 12:00 noon on every business day by members without charge, or by any other person upon a maximum payment of HK$2.50, at the registered office or such other place in the Cayman Islands at which the register is kept in accordance with the Companies Law or, upon a maximum payment of HK$10.00, at the Registration Office (as defined in the Articles), unless the register is closed in accordance with the Articles.

(q) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment of a chairman.

Save as otherwise provided by the Articles the quorum for a general meeting shall be two members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

A corporation being a member shall be deemed for the purpose of the Articles to be present in person if represented by its duly authorised representative being the person appointed by resolution of the directors or other governing body of such corporation to act as its representative at the relevant general meeting of the Company or at any relevant general meeting of any class of members of the Company.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Cayman law, as summarised in paragraph 4(e) of this Appendix.

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(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available for distribution amongst the members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively.

If the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Law divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(t) Untraceable members

Pursuant to the Articles, the Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, the Company has not during that time received any indication of the existence of the member; and (iii) the Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Articles) giving notice of its intention to sell such shares and a period of three months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Articles), has elapsed since such advertisement and the Designated Stock Exchange (as defined in the Articles) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 183 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

(u) Subscription rights reserve

The Articles provide that to the extent that it is not prohibited by and is in compliance with the Companies Law, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

3. CAYMAN ISLANDS COMPANY LAW

The Company is incorporated in the Cayman Islands subject to the Companies Law (Revised) of the Cayman Islands and, therefore, operates subject to Cayman law. Set out below is a summary of certain provisions of Cayman company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Operations

As an exempted company, the Company’s operations must be conducted mainly outside the Cayman Islands. The Company is required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.

(b) Share capital

The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums or shares of that company allotted pursuant to any arrangement in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The Companies Law provides that the share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association in (a) paying distributions or dividends to members; (b) paying up unissued shares of the company to be issued to members as fully paid bonus shares; (c) in the redemption and repurchase of shares (subject to the provisions of section 37 of the Companies Law); (d) writing-off the preliminary expenses of the company; (e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; and (f) providing for the premium payable on redemption or purchase of any shares or debentures of the company.

No distribution or dividend may be paid to members out of the share premium account unless immediately following the date on which the distribution or dividend is proposed to be paid the company will be able to pay its debts as they fall due in the ordinary course business.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 184 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

The Companies Law provides that, subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, by special resolution reduce its share capital in any way.

The Articles includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. The consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required.

Subject to all applicable laws, the Company may give financial assistance to Directors and employees of the Company, its subsidiaries or any subsidiary of such holding company in order that they may buy Shares in the Company or shares in any subsidiary or holding company. Further, subject to all applicable laws, the Company may give financial assistance to a trustee for the acquisition of Shares in the Company or shares in any such subsidiary or holding company to be held for the benefit of employees of the Company, its subsidiaries, any holding company of the Company or any subsidiary of any such holding company (including salaried Directors).

There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company’s shares. Accordingly, a company may provide financial assistance if the directors of the company consider, in discharging their duties of care and acting in good faith, for a proper purpose and in the interests of the company, that such assistance can properly be given. Such assistance should be on an arm’s- length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

Subject to the provisions of the Companies Law, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a shareholder. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares. However, if the articles of association do not authorise the manner or purchase, a company cannot purchase any of its own shares unless the manner of purchase has first been authorised by an ordinary resolution of the company. At no time may a company redeem or purchase its shares unless they are fully paid. A company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any member of the company holding shares. A payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 185 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases and the directors of a company may rely upon the general power contained in its memorandum of association to buy and sell and deal in personal property of all kinds.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

(e) Dividends and distributions

With the exception of section 34 of the Companies Law, there are no statutory provisions relating to the payment of dividends. Based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may be paid only out of profits. In addition, section 34 of the Companies Law permits, subject to a solvency test and the provisions, if any, of the company’s memorandum and articles of association, the payment of dividends and distributions out of the share premium account (see paragraph 2(m)., above for further details).

(f) Protection of minorities

The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a class action against or derivative actions in the name of the company to challenge (a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are themselves in control of the company, and (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of a company (not being a bank) having a share capital divided into shares, the court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the court shall direct.

Any shareholder of a company may petition the court which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up.

Generally claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the Company’s memorandum and articles of association.

(g) Management

The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his

ROJAM ENTERTAINMENT HOLDINGS LIMITED 186 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(h) Accounting and auditing requirements

A company shall cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

(i) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(j) Taxation

Pursuant to section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Governor-in-Council:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to the Company or its operations; and

(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on the shares, debentures or other obligations of the Company.

The undertaking for the Company is for a period of twenty years from 21st March, 2000.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party to any double tax treaties.

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

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(l) Loans to directors

There is no express provision in the Companies Law prohibiting the making of loans by a company to any of its directors.

(m) Inspection of corporate records

Members of the Company will have no general right under the Companies Law to inspect or obtain copies of the register of members or corporate records of the Company. They will, however, have such rights as may be set out in the Company’s Articles.

An exempted company may, subject to the provisions of its articles of association, maintain its principal register of members and any branch registers at such locations, whether within or without the Cayman Islands, as the directors may, from time to time, think fit. There is no requirement under the Companies Law for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection.

(n) Winding up

A company may be wound up by either an order of the court or by a special resolution of its members. The court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting by special resolution, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval.

A company is placed in liquidation either by an order of the court or by a special resolution of its members. A liquidator is appointed whose duties are to collect the assets of the company (including the amount (if any) due from the contributories), settle the list of creditors and discharge the company’s liability to them, rateably if insufficient assets exist to discharge the liabilities in full, and to settle the list of contributories (shareholders) and divide the surplus assets (if any) amongst them in accordance with the rights attaching to the shares.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators for the purpose of winding up the affairs of the company and distributing its assets.

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As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting shall be called by Public Notice or otherwise as the Registrar of Companies may direct.

For the purpose of conducting the proceedings in winding up a company and assisting the Court, there may be appointed one or more than one person to be called an official liquidator or official liquidator; and the Court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more persons than one are appointed to such office, the Court shall declare whether any act hereby required or authorised to be done by the official liquidator is to be done by all or any one or more of given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the Court.

(o) Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approved by a majority in number representing 75% in value of shareholders or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the Courts. Whilst a dissenting shareholder would have the right to express to the Court his view that the transaction for which approval is sought would not provide the shareholders with a fair value for their shares, the Courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management and if the transaction were approved and consummated the dissenting shareholder would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting shareholders of a United States corporation.

(p) Take-overs

Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may at any time within two months after the expiration of the said four months, by notice require the dissenting shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may apply to the Court of the Cayman Island within one month of the notice objecting to the transfer. The burden is on the dissenting shareholder to show that the Court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority shareholders.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 189 APPENDIX IV Summary of the Constitution of the Company and the Cayman Islands Company Law

(q) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime).

4. GENERAL

Conyers Dill & Pearman, Cayman, the Company’s special legal counsel on Cayman Islands law, have sent to the Company a letter of advice summarising certain aspects of Cayman Islands company law. This letter, together with a copy of the Companies Law (Revised) of the Cayman Islands, is available for inspection as referred to in the paragraph headed “Documents Available for Inspection” in Appendix VI to this prospectus. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

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FURTHER INFORMATION ABOUT THE COMPANY AND ITS SUBSIDIARIES

Incorporation

The Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 29th February, 2000. The Company has established a place of business in Hong Kong at Suite 1502, 15/F., Cheung Kong Center, 2 Queen’s Road Central, Hong Kong and has been registered as an oversea company under Part XI of the Companies Ordinance. Mr. Wong Ho Yan, Daniel has been appointed as the authorised representative of the Company for the acceptance of service of process in Hong Kong. As the Company is incorporated in the Cayman Islands, it is subject to the laws of the Cayman Islands. Its constitution comprises a memorandum of association and articles of association. A summary of certain relevant parts of the Company’s constitution and relevant aspects of the Companies Law is set out in Appendix IV to this prospectus.

Changes in share capital of the Company

As at the date of incorporation of the Company, its authorised share capital was US$50,000 shares divided into 50,000 ordinary shares of US$1.00 each of which one such share was allotted and issued fully paid to Offshore Incorporations (Cayman) Limited on 29th February, 2000. This share was then transferred to Singing Mermaid on 7th April, 2000.

On 13th April, 2000, written resolutions of the then sole shareholder of the Company were passed pursuant to which:

(a) the authorised and issued share capital of the Company was re-denominated into Hong Kong dollars as a result of which the authorised share capital of the Company became HK$390,000 divided into 50,000 shares of HK$7.80 each; and

(b) every issued and unissued share of HK$7.80 in the capital of the Company was subdivided into 78 Shares as a result of which the Company has an authorised share capital of HK$390,000 divided into 3,900,000 Shares.

On 15th April, 2000, Singing Mermaid subscribed for 999,999 Shares, details of which are summarised in paragraph (a) of the section headed “Group reorganisation” in this Appendix.

On 17th April, 2000, Billion Moment subscribed for 176,470 Shares in consideration for the payment of HK$17,647.

On 8th May, 2000, the following steps were taken:

(a) a written resolution of all the then shareholders of the Company was passed pursuant to which the authorised share capital of the Company was increased from HK$390,000 to HK$5,000,000,000 by the creation of an additional 49,996,100,000 Shares;

(b) Singing Mermaid subscribed for 465,666,667 Shares in consideration for the payment of HK$46,566,667; and

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On 25th May, 2000, a written resolution of all the then shareholders of the Company was passed pursuant to which the authorised share capital of the Company was reduced from HK$5,000,000,000 to HK$500,000,000 by the cancellation of 45,000,000,000 unissued Shares.

On 10th July, 2000, Singing Mermaid subscribed for 299,999,923 Shares in consideration for the payment of HK$38,999,989.99.

On 4th August, 2000, the following steps were taken:

(a) AEON Credit Service Co., Ltd. subscribed for 3,125,000 Shares in consideration for the payment of HK$2,500,000;

(b) AEON Credit Service (Asia) Co., Ltd. subscribed for 3,125,000 Shares in consideration for the payment of HK$2,500,000; and

On 14th August, 2000, Media Factory, Inc. subscribed for 6,250,000 Shares in consideration for the payment of HK$5,000,000.

On 30th August, 2000, SOFTBANK Entertainment Limited subscribed for 91,750,000 Shares in consideration for the payment of JPY1,000,000,000.

On 29th September, 2000, Avex Inc. subscribed for 2,700,000 Shares in consideration for the payment of HK$2,160,000.

On 13th October, 2000, NTT (Hong Kong) Limited, a wholly-owned subsidiary of Nippon Telegraph and Telephone Corporation, subscribed for 18,750,000 Shares in consideration for the payment of HK$15,000,000.

Assuming that the Placing becomes unconditional and the issue of Shares mentioned herein is made but taking no account of any Shares which may be issued upon the exercise of options pursuant to the Pre-IPO Grant of Options or the Share Option Scheme, the authorised share capital of the Company will be HK$500,000,000 divided into 5,000,000,000 Shares of which 1,104,684,403 Shares will be fully paid or credited as fully paid, and 3,895,315,597 Shares will remain unissued. Other than pursuant to the exercise of any options which may be granted under the Share Option Scheme or the Pre-IPO Grant of Options, there is no present intention to issue any part of the authorised but unissued share capital of the Company and, without the prior approval of the shareholders of the Company in general meeting, no issue of Shares will be made which would effectively alter the control of the Company.

Save as disclosed herein, there has been no alteration in the share capital of the Company since the date of its incorporation.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 192 APPENDIX V Statutory and General Information

Changes in the share capital of the subsidiaries

The subsidiaries of the Company are referred to in the Accountants’ Report, the text of which is set out in Appendix I to this prospectus.

In addition to those set out in the section headed “Group reorganisation” in this Appendix, the following alterations in the share capital of the Company’s subsidiaries have taken place within the two years preceding the date of this prospectus:

(a) On 8th February, 2000, two subscribers’ shares of HK$1.00 each in the capital of Rojam.com Limited (formerly known as komuro.com Limited) were allotted at par and issued to Abacus (Nominees) Limited and Beecroft Limited respectively.

(b) On 8th March, 2000, two subscribers’ shares of HK$1.00 each in the capital of Rojam Management Limited were allotted at par and issued to Descona Limited and Seconda Limited respectively.

(c) On 10th July, 2000, 60 units of contribution of JPY50,000 each in the capital of Rojam Technology Japan Limited were issued to its initial shareholder in consideration of JPY3,000,000 paid-in-capital.

(d) On 10th July, 2000, 60 units of contribution of JPY50,000 each in the capital of Rojam Link Japan Limited were issued to its initial shareholders in consideration of an aggregate of JPY3,000,000 paid-in-capital.

(e) On 6th February, 2001, one share of US$1.00 in the capital of Rojam Investment Limited was allotted at par and issued to the Company.

Save as disclosed herein and in the section headed “Group reorganisation” in this Appendix, there has been no alteration in the share capital of the subsidiaries of the Company within the two years preceding the date of this prospectus.

Group reorganisation

The companies now comprising the Group underwent a reorganisation to rationalise the Group’s structure in preparation for the listing of the Shares on GEM. As a result, the Company became the holding company of the Group. The Group reorganisation involved the following:

(a) On 15th April, 2000, the Company acquired the entire issued share capital of REL pursuant to the transfer of the beneficial interest in 100,000 shares of HK$1.00 each in the capital of REL by Singing Mermand and in consideration for such acquisition, the Company has procured the allotment and issue of an aggregate of 999,999 Shares to Singing Mermaid, credited as fully paid.

(b) On 20th April, 2000, the following steps were taken:

(i) one share of US$1.00 in Rojam International Limited was allotted at par and issued to the Company; and

(ii) 9,998 shares of HK$1.00 each in the capital of Rojam Management Limited were allotted at par and issued to the Company.

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(c) On 29th April, 2000, the Company acquired the beneficial interests in two shares of HK$1.00 each in the capital of Rojam Management Limited pursuant to a transfer at par by the then existing shareholders of Rojam Management Limited.

(d) On 24th May, 2000, the following steps were taken:

(i) REL disposed of 1,000 shares of HK$1.00 each in the capital of Touch & Knock On Limited to Richtone Holding Limited for a cash consideration of HK$1.00.

(ii) REL disposed of 1,000 shares of HK$1.00 each in the capital of TK Destination Limited to Richtone Holding Limited for a cash consideration of HK$1.00.

(e) On 7th September, 2000, 998 shares of HK$1.00 each in the capital of Rojam.com Limited (formerly known as komuro.com Limited) were allotted at par and issued to the Company.

(f) On 15th September, 2000, the following steps were taken:

(i) the Company acquired 32 units of shares in Rojam Link Japan Limited, a company which was inactive, from the then existing shareholders of Rojam Link Japan Limited for a consideration of JPY1,600,000; and

(ii) the Company acquired the entire paid-up capital of JPY 3 million in Rojam Technology Japan Limited, a company which was inactive, from the then existing shareholder of Rojam Technology Japan Limited, Mr. Masahiro Seki, who is independent of the directors, chief executive and substantial shareholders of the Group and their respective Associate for a consideration of JPY3,000,000.

(g) On 19th September, 2000, the Company acquired the beneficial interests in two shares of HK$1.00 each in the capital of Rojam.com Limited pursuant to a transfer at par by the then existing shareholders of Rojam.com Limited.

(h) On 6th February, 2001, one share of US$1.00 in the capital of Rojam Investment Limited was allotted at par and issued to the Company.

Resolutions of the shareholders of the Company passed at an extraordinary general meeting held on 21st May, 2001

On 21st May, 2001, resolutions of the shareholders of the Company were passed at an extraordinary general meeting pursuant to which, inter alia:

(a) the Company adopted its new articles of association;

(b) conditional on the GEM Listing Committee granting listing of and permission to deal in, the Shares in issue and to be issued as mentioned herein and any new Shares which may fall to be issued pursuant to the exercise of options granted under the Share Option Scheme and on the obligations of the Underwriters under the Underwriting and Placing Agreement becoming unconditional and not being terminated in accordance with the terms of that agreement or otherwise, in each case on or before 23rd June, 2001:

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(i) the Placing of the New Shares was approved and the Placing of the Sale Shares was noted and the Directors were authorised to allot and issue the New Shares in connection therewith;

(ii) the rules of the Share Option Scheme were approved and adopted and the Directors were authorised, at their absolute discretion, to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of subscription rights under any options which may be granted under the Share Option Schemes and to take all such steps as they consider necessary or desirable to implement the Share Option Scheme;

(c) the Pre-IPO Grant of Options was approved and the Directors were authorised to allot, issue and deal with Shares pursuant to the exercise of subscription rights under such options and to take all such steps as they consider necessary or desirable in relation to the same;

(d) a general unconditional mandate was given to the Directors to allot, issue and deal with Shares or securities convertible into Shares or to make offers or agreements or grant options including warrants which would or might require Shares to be allotted and issued, save that, otherwise than by way of rights, scrip dividend schemes or similar arrangements, or pursuant to the exercise of any subscription rights under the options granted under the Share Option Scheme or pursuant to the Pre-IPO Grant of Options such mandate is limited to Shares with an aggregate nominal value not exceeding the sum of (i) 20% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Placing and (ii) the aggregate nominal amount of the share capital of the Company purchased by the Company under the authority referred to in paragraph (f) below, such mandate is to expire at the conclusion of the next annual general meeting of the Company or the expiry of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or the Companies Law or any other applicable laws of the Cayman Islands to be held, or when revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, whichever occurs first; and

(e) a general unconditional mandate was given to the Directors to exercise all powers of the Company to purchase, on the Stock Exchange or on any other stock exchange on which the relevant securities of the Company may be listed and which is recognised by the Securities and Futures Commission and the Stock Exchange for this purpose, such number of Shares (and any other relevant securities) as will represent up to 10% of the aggregate nominal value of the share capital of the Company in issue immediately following the completion of the Placing such mandate to expire at the conclusion of the next annual general meeting of the Company or the expiry of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or the Companies Law or any other applicable laws of the Cayman Islands to be held, or when revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, whichever occurs first.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 195 APPENDIX V Statutory and General Information

Repurchase by the Company of its own securities

This section includes the information required by the Stock Exchange to be included in this prospectus concerning the repurchase by the Company of its own securities.

(a) Regulations of the GEM Listing Rules

The GEM Listing Rules permit companies whose listing is on GEM to repurchase their securities on GEM subject to certain restrictions, the most important of which are summarised below:

(i) Number of Shares subject to the repurchases mandate

The total number of shares which a company is authorised to repurchase on the Stock Exchange are shares representing up to a maximum of 10% of the then existing issued share capital in the company or warrants to subscribe for shares in the company representing up to 10% of the amount of warrants then outstanding at the date of passing of the relevant resolution granting the repurchase mandate.

(ii) Connected parties

A company is prohibited from knowingly repurchasing shares of the company on GEM from a “connected person”, that is, a director, a chief executive, or a substantial shareholder or management shareholder of the company or any of its subsidiaries or their respective associates (as defined in the GEM Listing Rules). A connected person shall not knowingly sell his shares to the company.

(b) Reasons for repurchases

Repurchases of Shares will only be made if the Directors believe that such repurchases will benefit the Company and its shareholders. Such repurchases may depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and its assets and/or its earnings per Share.

In repurchasing securities, the Company may only apply funds legally available for such purpose in accordance with the articles of association of the Company, the GEM Listing Rules and the applicable laws of the Cayman Islands.

(d) General

There might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position to be disclosed in this prospectus) in the event that the Buyback Mandate is exercised in full. However, the Directors do not propose to exercise the Buyback Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 196 APPENDIX V Statutory and General Information

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates has any present intention to sell Shares to the Company or its subsidiaries if the Buyback Mandate is exercised.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Buyback Mandate in accordance with the articles of association of the Company, the GEM Listing Rules and the applicable laws of the Cayman Islands.

No connected person (as defined in the GEM Listing Rules) has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the Buyback Mandate is exercised.

If as a result of a repurchase of Shares, a shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Hong Kong Code on Takeovers and Mergers (the “Code”). As a result, a shareholder, or a group of shareholders acting in concert, depending on the level of increase in the shareholder’s interests, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Code.

FURTHER INFORMATION ABOUT THE BUSINESS

Summary of material contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the date of this prospectus which are or may be material:

(a) a deed of assignment dated 14th April, 2000 between (i) Guo Ye Enterprises Limited; (ii) Singing Mermaid; and (iii) REL pursuant to which Guo Ye Enterprises Limited assigned its debt due from REL in the sum of US$1,480,000 to Singing Mermaid in consideration of US$1,480,000;

(b) an agreement dated 15th April, 2000 between Singing Mermaid and the Company pursuant to which the Company acquired the entire issued share capital of REL, brief particulars of which are set out in paragraph (a) of the section headed “Group reorganisation” in this Appendix;

(c) an agreement dated 24th May, 2000 between REL and Richtone Holding Limited pursuant to which REL disposed of its entire interest in Touch & Knock On Limited, brief particulars of which are set out in paragraph (d)(i) of the section headed “Group reorganisation” in this Appendix;

(d) an agreement dated 24th May, 2000 between REL and Richtone Holding Limited pursuant to which REL disposed of its entire interest in TK Destination Limited, brief particulars of which are set out in paragraph (d)(ii) of the section headed “Group reorganisation” in this Appendix;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 197 APPENDIX V Statutory and General Information

(e) a licence agreement dated 5th July, 2000 entered into by REL and Shanghai Chikou Entertainment Co., Ltd. (“SCE”), brief particulars of which are set out in paragraph (1)(a) in the paragraph headed “Non-exempt continuing connected transactions” in the section headed “General Overview of the Group” in this prospectus;

(f) a licence agreement dated 5th July, 2000 entered into by REL and SCE, brief particulars of which are set out in paragraph (1)(b) in the paragraph headed “Non-exempt continuing connected transactions” in the section headed “General Overview of the Group” in this prospectus;

(g) a sale and purchase agreement dated 15th September, 2000 between the Company and Mr. Ishizaka Kenichiro, pursuant to which the Company acquired 16 units of shares in Rojam Link Japan Limited for a consideration of JPY 800,000;

(h) a sale and purchase agreement dated 15th September, 2000 between the Company and Mr. Tatsuoka Masaki, pursuant to which the Company acquired 16 units of shares in Rojam Link Japan Limited for a consideration of JPY 800,000;

(i) a sale and purchase agreement dated 15th September, 2000 between the Company and Mr. Seki Masahiro, pursuant to which the Company acquired 60 units of shares in Rojam Technology Japan Limited for a consideration of JPY 3,000,000;

(j) a sale and purchase agreement dated 28th December, 2000 between SK Planning. and Rojam Technology Japan Limited pursuant to which Rojam Technology Japan Limited acquired music equipment and instruments and music studio fixtures from Sk Planning. in consideration of JPY484,099,200 (inclusive of consumption tax);

(k) a deed of assignment dated 29th December, 2000 between (i) Mr. Tetsuya Komuro; (ii) Singing Mermaid; and (iii) REL pursuant to which Mr. Tetsuya Komuro assigned a debt due from REL in the sum of HK$12,464,586.80 to Singing Mermaid in consideration of Singing Mermaid’s undertaking to repay the debt on demand;

(l) a deed of assignment dated 29th December, 2000 between (i) REL; (ii) Singing Mermaid; and (iii) SCE pursuant to which REL assigned a debt due from SCE in the sum of HK$21,251,272 to Singing Mermaid in consideration of a full release and discharge of REL’s obligations to pay part of a debt (being the sum of HK$21,251,272) owed to Singing Mermaid;

(m) a supplementary agreement dated 17th May, 2001 entered into by REL and SCE amending certain provisions of the material contract as referred to in paragraph (e) above, which is more particularly described in paragraph (1)(a) in the paragraph headed “Non-exempt continuing connected transactions” in the section headed “General Overview of the Group” in this prospectus;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 198 APPENDIX V Statutory and General Information

(n) a supplementary agreement dated 17th May, 2001 entered into by REL and SCE amending certain provisions of the material contract as referred to in paragraph (f) above, which is more particularly described in paragraph (1)(b) in the paragraph headed “Non-exempt continuing connected transactions” in the section headed “General Overview of the Group” in this prospectus;

(o) a non-competition undertaking dated 21st May, 2001 and given by Mr. Tetsuya Komuro, brief particulars of which are set out in the paragraph headed “Non-competition Undertaking” in the section headed “General Overview of the Group” in this prospectus;

(p) the Underwriting and Placing Agreement; and

(q) a deed of indemnity dated 23rd May, 2001 entered into by Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Arihito Yamada and Mr. Tomohiko Domen in favour of the Group containing the indemnities referred to in the paragraph headed “Estate Duty and Tax Indemnities” in this appendix.

Intellectual Property

As at the Latest Practicable Date, the Group had registered the following trade and service marks:

Trade/ Place of Registration Registration service marks registration Class (Notes 1&2) number date

Rojam.com Hong Kong 09 195/2001 23rd May, 2000 Hong Kong 16 194/2001 23rd May, 2000 Hong Kong 35 193/2000 23rd May, 2000 Hong Kong 38 192/2001 23rd May, 2000 Hong Kong 41 191/2001 23rd May, 2000 Hong Kong 42 196/2001 23rd May, 2000

As at the Latest Practicable Date, the Group is the registrant of the domain name specified below:

Domain name Registration date Expiry date

Rojam.com 15th January, 2000 15th January, 2002

ROJAM ENTERTAINMENT HOLDINGS LIMITED 199 APPENDIX V Statutory and General Information

As at the Latest Practicable Date, the Group had applied for registration of the following trade and service marks:

Place of Trade/ application for Application Application service marks registration Class (Notes 1&2) number date

Rojam.com Macau 09 N/006267 6th July, 2000 Macau 16 N/006268 6th July, 2000 Macau 41 N/006265 6th July, 2000 Macau 42 N/006266 6th July, 2000

Macau 09 N/006264 6th July, 2000 Macau 16 N/006263 6th July, 2000 Macau 41 N/006262 6th July, 2000 Macau 42 N/006261 6th July, 2000

Rojam.com Japan 09, 15, 16, 25, 2000-83449 28th July, 2000 35, 38, 41, 42

Japan 09, 15, 16, 25, 2000-83450 28th July, 2000 35, 38, 41, 42

Rojam.com Thailand 09 432089 11th September, 2000 Thailand 16 432090 11th September, 2000 Thailand 35 430951 31st August, 2000 Thailand 42 432091 11th September, 2000

Thailand 09 432092 11th September, 2000 Thailand 16 432093 11th September, 2000 Thailand 35 430952 31st August, 2000 Thailand 42 432094 11th September, 2000

Rojam.com Republic of 09, 16, 25, 35, 45-2000-00028 12th June, 2000 Korea 38, 41, 42 24

Republic of 09, 16, 25, 35, 45-2000-00028 12th June, 2000 Korea 38, 41, 42 23

Rojam.com Taiwan ROC 09 (89)040209 13th July, 2000 Taiwan ROC 16 (89)040210 13th July, 2000 Taiwan ROC 25 (89)040211 13th July, 2000 Taiwan ROC 35 (89)040212 13th July, 2000 Taiwan ROC 38 (89)040213 13th July, 2000 Taiwan ROC 41 (89)040214 13th July, 2000 Taiwan ROC 42 (89)040215 13th July, 2000

ROJAM ENTERTAINMENT HOLDINGS LIMITED 200 APPENDIX V Statutory and General Information

Place of Trade/ application for Application Application service marks registration Class (Notes 1&2) number date

Taiwan ROC 09 (89)040216 13th July, 2000 Taiwan ROC 16 (89)040217 13th July, 2000 Taiwan ROC 25 (89)040218 13th July, 2000 Taiwan ROC 35 (89)040219 13th July, 2000 Taiwan ROC 38 (89)040220 13th July, 2000 Taiwan ROC 41 (89)040221 13th July, 2000 Taiwan ROC 42 (89)040222 13th July, 2000

Rojam.com Malaysia 09 2000-07752 16th June, 2000 Malaysia 16 2000-07758 16th June, 2000 Malaysia 35 2000-07757 16th June, 2000 Malaysia 42 2000-07756 16th June, 2000

Malaysia 09 2000-07751 16th June, 2000 Malaysia 16 2000-07755 16th June, 2000 Malaysia 35 2000-07754 16th June, 2000 Malaysia 42 2000-07753 16th June, 2000

Rojam.com Singapore 09 T00/10195B 13th June, 2000 Singapore 16 T00/10194D 13th June, 2000 Singapore 35 T00/10193F 13th June, 2000 Singapore 41 T00/10192H 13th June, 2000 Singapore 42 T00/10191Z 13th June, 2000

Singapore 09 T00/10188Z 13th June, 2000 Singapore 16 T00/10187A 13th June, 2000 Singapore 35 T00/10186C 13th June, 2000 Singapore 41 T00/10185E 13th June, 2000 Singapore 42 T00/10189H 13th June, 2000

Rojam.com European 09, 16, 25, 35, 1708643 15th June, 2000 Trade Marks 38, 41, 42 Office

European 09, 16, 25, 35, 1708601 15th June, 2000 Trade Marks 38, 41, 42 Office

Rojam.com United States 09, 15, 16, 25, 76069865 14th June, 2000 of America 35, 38, 41, 42

United States 09, 15, 16, 25, 76077290 26th June, 2000 of America 35, 38, 41, 42

ROJAM ENTERTAINMENT HOLDINGS LIMITED 201 APPENDIX V Statutory and General Information

Place of Trade/ application for Application Application service marks registration Class (Notes 1&2) number date

Rojam.com Canada 09, 16, 38, 41, 1,063,514 15th June, 2000 42

Canada 09, 16, 38, 41, 1,063,515 15th June, 2000 42

Rojam.com Indonesia 09 D00 13230 20th June, 2000 Indonesia 16 D00 13231 20th June, 2000 Indonesia 35 J00 13232 20th June, 2000 Indonesia 42 J00 13229 20th June, 2000

Indonesia 09 D00 13235 20th June, 2000 Indonesia 16 D00 13234 20th June, 2000 Indonesia 35 J00 13233 20th June, 2000 Indonesia 42 J00 13236 20th June, 2000

R Device Hong Kong 09 2000 12307 1st June, 2000 (in color) Hong Kong 16 2000 12308 1st June, 2000 Hong Kong 35 2000 12309 1st June, 2000 Hong Kong 38 2000 12310 1st June, 2000 Hong Kong 41 2000 12311 1st June, 2000 Hong Kong 42 2000 12312 1st June, 2000

China 09 2000078657 5th June, 2000 China 16 2000078658 5th June, 2000 China 25 2000078659 5th June, 2000 China 35 2000078660 5th June, 2000 China 38 2000078661 5th June, 2000 China 41 2000078662 5th June, 2000 China 42 2000078663 5th June, 2000

Rojam.com China 09 2000078664 5th June, 2000 China 16 2000078665 5th June, 2000 China 25 2000078666 5th June, 2000 China 35 2000078653 5th June, 2000 China 38 2000078654 5th June, 2000 China 41 2000078655 5th June, 2000 China 42 2000078656 5th June, 2000

ROJAM ENTERTAINMENT HOLDINGS LIMITED 202 APPENDIX V Statutory and General Information

Notes:

1. All trade mark applications/registrations are subject to the International Classification of Goods and Services (Nice Classification). The main goods and services covered by the applications/registrations set out above are as follows:

Class 9 –“Audio, video and audio-visual recordings; apparatus for recording, transmission or reproduction of sound or images; computers and computer peripheral devices; computer software, CD-ROMs, compact discs, minidiscs; electronic devices for storing data; apparatus for telecommunication; electronic notice board; integrated circuit cards; coin-operated juke box; glasses, sunglasses”

Class 15 –“Musical instrument”

Class 16 –“Paper, cardboard and goods made from these materials, not included in other classes; printed matter; photographs; stationary; adhesives for stationery or household purposes; office requisites (except furniture); instructional and teaching materials (except apparatus); plastic materials for packaging (not included in other classes); playing cards; brochures; calendars; cards”

Class 25 –“Clothing; footwear; headgear”

Class 35 –“Advertising, rental of advertising space; business management, business administration; compilation of information into computer databases; public relations”

Class 38 –“Telecommunications, cellular telephone communication; radio, television and cable television broadcasting; computer aided transmission of sound and images; communications by computer terminals”

Class 41 –“Entertainment services; sporting and cultural activities; providing information on entertainment, sporting and cultural activities; distributing audio, video, television programs for others via global computer network; discotheque services; club services; presentation of live performances; production of shows, television and radio programs; video film production; modelling for artists; organisation of shows; party planning (entertainment)”

Class 42 –“Computer services; leasing access time to computer databases; designing and providing web sites, home page and bulletin board; providing audio, video and audio-visual recordings via global computer network; consultation, design, research and development in the fields of computers, computer programs and international computer networks; providing multiple- user access to a computer or electronic bulletin board; access to an on-line database for chat room activities being real-time interaction with other computer users; licensing and management of intellectual properties”

2. The descriptions of goods and services covered by applications/registrations in different countries may vary according to the trade mark practices in different countries. The specifications of goods and services set out under (1) above should not be viewed as the exact descriptions of goods and services covered by all applications and registrations in all countries.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 203 APPENDIX V Statutory and General Information

FURTHER INFORMATION ABOUT DIRECTORS, SENIOR MANAGEMENT AND STAFF

Disclosure of interests

(a) Immediately following completion of the Placing, the interests of the Directors in the securities of the Company and its associated corporations (within the meaning of the SDI Ordinance) which, once the Shares are listed, will have to be notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under section 31 of, or Part I of the Schedule to, the SDI Ordinance), or which will be required pursuant to section 29 of the SDI Ordinance to be entered in the register referred to therein once the Shares are listed, or pursuant to Rules 5.40 to 5.59 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange once the Shares are listed will be as follows:

Interests in Shares Approximate percentage holding of Shares in issue immediately following the completion of the Placing (assuming the Over-allocation Name of Personal Family Corporate Option is Director interests interests interests not exercised)

Mr. Tetsuya Komuro (Note 1) 467,892,667 1,100,000 – 42.46 Kebo Wu (Note 2) ––75,883,333 6.87 Tomohiko Domen 27,022,000 ––2.45 Arihito Yamada 8,913,600 ––0.81 Wong Ho Yan, Daniel (Note 3) – 5,306,000 – 0.48

Notes:

1 Shares under the family interests are held by Ms. Asami Yoshida who is the spouse of Mr. Tetsuya Komuro, the executive Director. Accordingly, Mr. Tetsuya Komuro is taken to be interested in the 1,100,000 Shares.

2 These Shares are held by Billion Moment, in which Mr. Kebo Wu owns 90% beneficial interest. Accordingly, he is taken to be interested in the 75,883,333 Shares held by Billion Movement.

3 These Shares are held by Ms. Cheng Wing Ki, Aouda, the spouse of Mr. Wong Ho Yan, Daniel (being one of the executive Directors). Accordingly, he is taken to be interested in the 5,306,000 Shares held by Ms. Cheng Wing Ki, Aouda.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 204 APPENDIX V Statutory and General Information

(b) So far as the Directors or the chief executive of the Company are aware, immediately following the completion of the Placing and taking no account of Shares which may be taken up under the Placing, the following shareholders will be interested in more than 10% of the Shares then in issue:

Approximate percentage holding of Shares in issue immediately following the completion of the Placing (assuming the Over-allocation Option Name Number of Shares is not exercised)

Mr. Tetsuya Komuro (Note) 468,992,667 42.46

Note: Mr. Asami Yoshida, the spouse of Mr. Tetsuya Komuro, executive Director, holds 1,100,000 Shares. Accordingly, Mr. Tetsuya Komuro is taken to be interested, together with his personal interests, in the 468,992,667 Shares.

(c) Mr. Tetsuya Komuro, an executive Director, has been granted options in respect of the Shares pursuant to the Pre-IPO Grant of Option as described in the section headed “Pre-IPO Grant of Options” in this prospectus. The exercise of the option is conditional upon the Placing becoming unconditional and the Stock Exchange granting listing of and permission to deal in the Shares in issue and to be issued as mentioned in this prospectus and are exercisable at HK$0.10. Details of the option granted to Mr. Tetsuya Komuro are set out in the section headed “Pre-IPO Grant of Options”. Mr. Tetsuya Komuro has also granted the Over-allocation Option to the Underwriters, exercisable by CPY International, details of which are set out in the paragraph headed “Over-allocation Option” in the section headed “Underwriting” in this prospectus.

Save as disclosed herein, none of the Directors nor the chief executive of the Company has for the purposes of section 28 of the SDI Ordinance, nor is any of them taken or deemed to have under section 31 of, or Part 1 of the Schedule to, the SDI Ordinance, any interests in the securities of the Company or any of its associated corporations (within the meaning of the SDI Ordinance) or any interests which will have to be entered in the register to be kept by the Company pursuant to section 29 of the SDI Ordinance or, pursuant to Rules 5.40 to 5.59 of the GEM Listing Rules relating to securities transactions by directors, to be notified to the Company and the Stock Exchange once the Shares are listed on GEM.

Particulars of service agreements

(a) Each of the executive Directors has entered into a service agreement with the Company. Particulars of these agreements, save as indicated, are in all material respects identical and are set out below:

(i) Each service agreement with Mr. Kebo Wu, Mr. Tomohiko Domen, Mr. Arihito Yamada and Mr. Wong Ho Yan, Daniel is of two years’ duration. In the case of Mr. Tomohiko Domen, his service agreement commenced on 7th April, 2000; in the case of Mr.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 205 APPENDIX V Statutory and General Information

Kebo Wu and Mr. Wong Ho Yan, Daniel, their service agreements commenced on 2nd May, 2000; and in the case of Mr. Arihito Yamada, his service agreement commenced on 1st July, 2000. It is provided in each of these agreements that their terms of service shall continue after the respective commencement dates until terminated by either party giving to the other not less than three months’ prior written notice, such notice to expire upon or after their respective initial terms of service.

(ii) The service agreement with Mr. Tetsuya Komuro is of three years’ duration commencing on 21st May, 2001 and shall continue for successive three year periods until terminated by either party giving to the other not less than six months’ prior written notice, such notice to expire upon or after the initial term of three years.

(iii) Each of the executive Directors is entitled to options under the Share Option Scheme and a discretionary bonus further detailed in the sections below and each of Mr. Tomohiko Domen, Mr. Arihito Yamada and Mr. Wong Ho Yan, Daniel is entitled to monthly salaries in consideration for their performance of their duties as executive Directors.

(iv) In addition to providing the services as an executive Director, Mr. Tetsuya Komuro has also been engaged by the Company to provide services to Rojam International Limited, a wholly-owned subsidiary of the Company, in the capacity of a chief executive producer and will be further remunerated with the grant of options in respect of Shares pursuant to the Pre-IPO Grant of Options (as more particularly described in the section headed “Pre-IPO Grant of Options” in this prospectus) and a discretionary bonus to be paid at the absolute discretion of the Board.

(v) Each Director shall abstain from voting and not be counted in the quorum in respect of any resolution of the Board regarding the amount of bonus payable to himself.

Save as disclosed, none of the Directors has entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

Directors’ remuneration

(a) An aggregate of approximately HK$6,804,000 were paid to the Directors as remuneration for the nine months ended 31st December, 2000. Further information in respect of the Directors’ remuneration is set out in Appendix I to this prospectus.

(b) It is expected that the remuneration to be paid to the Directors by the Group in respect of the year ended 31st March, 2001, other than discretionary bonus and benefits in kind, will be approximately HK$8,806,000.

The executive Directors may be granted, at the absolute discretion of the Board, options pursuant to the Share Option Scheme as part of their remuneration package.

Each of the executive Directors is entitled to a discretionary bonus as determined by the Board at its absolute discretion. The maximum aggregate amount of such discretionary bonus payable to all the executive Directors for any financial year shall not be more than 10% of the net profit of the

ROJAM ENTERTAINMENT HOLDINGS LIMITED 206 APPENDIX V Statutory and General Information

Group for the relevant financial year. Such discretionary bonus will be divided in accordance with the relative contributions and responsibilities of the executive Directors.

None of the non-executive Directors is expected to receive any other remuneration for holding their office as a non-executive Director.

Agency fees or commissions received

The Underwriters will receive an underwriting commission and CPY will receive an advisory fee and a documentation fee as mentioned in the paragraph “Underwriting arrangements and expenses” under the section headed “Underwriting” of this prospectus.

Related party transactions

Summarised here below are the related party transactions of the Group during the two years ended 31st March, 2000 and the nine months ended 31st December, 2000:

1. Purchase of fixed assets from SK Planning

The Group has acquired the music equipment and instruments and music studio fixtures of the said Tokyo studio pursuant to the sale and purchase agreement made between Rojam Technology Japan Limited and SK Planning, details of which have been set out in the section headed “Summary of material contracts” in this appendix. The said agreement was completed on 28th December, 2000.

2. Art direction fee paid to HAL Communications, Inc.

HAL Communications, Inc., a company wholly-owned by Mr. Hiroshi Ozawa and his spouse, has been engaged by the Group to provide art direction services in developing the website for the Group. Mr. Hiroshi Ozawa served as a Director between the period 1st July, 2000 to 20th December, 2000.

The Group has also entered into other the related party transactions within the two years immediately preceding the date of this prospectus as mentioned in section 3(h) of the Accountants’ Report set out in Appendix I to this prospectus, the paragraph headed “Summary of material contracts” in this Appendix and in the section “Connected Party Transactions” in this prospectus.

3. Licence Agreement in respect of the use of “fortune telling device” on the Group’s website.

Pursuant to an agreement dated 1st April, 2000, HAL Communications, Inc., a company wholly-owned by Mr. Hiroshi Ozawa and his spouse, has granted Rojam International Limited a non-exclusive licence to upload and make available for access the “fortune telling device” owned by HAL Communications, Inc. on the Group’s website (“the Licence”). The Group is not required to pay HAL Communications, Inc. any fee for the Licence.

4. Assignment of domain name

Pursuant to an agreement dated 2nd April, 2001 made between HAL Communications, Inc., a company wholly-owned by Mr. Hiroshi Ozawa and his spouse, and Rojam International

ROJAM ENTERTAINMENT HOLDINGS LIMITED 207 APPENDIX V Statutory and General Information

Limited, the domain name “rojam.com” was assigned to Rojam International Limited at a total consideration of HK$1.00.

5. Record sale to Factory Orumok, Inc.

REL has sold 13,750 pcs of CD entitled “Zoie Tam Maxi Single – Galapagos Juliet” to Factory Orumok, Inc. on consignment basis at wholesale price of JPY300 per pcs of CD for sale and distribution in Japan. Mr. Tetsuya Komuro, an executive Director, is interested in around 44% of the issued shares of Factory Orumok, Inc. The Directors have confirmed that such transaction with Factory Orumok, Inc. will not continue after the tradings in the Shares commence on the GEM.

6. Banner Advertising

For the period between September 2000 and December 2000, Factory Orumok, Inc. has placed banner advertisement on the Group’s website. For the nine months ended 31st December, 2000, the Group has received from Factory Orumok, Inc. HK$350,000 as banner advertising fee. Mr. Tetsuya Komuro, an executive Director, is interested in around 44% of the issued shares of Factory Orumok, Inc. The Directors have confirmed that such transaction with Factory Orumok, Inc. will not continue after the tradings in the Shares commence on the GEM.

The Group has also entered into other related party transactions within the two years immediately preceding the date of this prospectus as mentioned in section 3(h) of the Accountants’ Report set out in Appendix I to this prospectus, the paragraph headed “Summary of material contracts” in this Appendix and in the section “Connected Party Transactions” in this prospectus.

Other disclosures

(a) REL has, in the nine month period ended 31st December, 2000 been appointed by Touch and Knock On Limited (in which Mr. Tetsuya Komuro has 50% indirect effective interest and Mr. Kebo Wu has 12.5% indirect effective interest) to arrange for the renting of music studios in Hong Kong. For the nine months up to 31st December, 2000, the amount received from Touch and Knock On Limited is HK$228,000.

(b) REL has, in the nine month period ended 31st December, 2000 rented from SK Planning and Shu Corporation Ltd. (in which Mr. Tetsuya Komuro has 50% indirect effective interest) the use of a music studio situate at No.4-19, 1-chome, Katsushima, Shinagawa-ku, Tokyo, Japan (the “Tokyo Studio”). For the nine months up to 31st December, 2000, the amount paid for the use of the studio is HK$635,000. After execution and completion of a sale and purchase agreement dated 28th December, 2000 between SK Planning and Rojam Technology Japan Limited in relation to the acquisition by Rojam Technology Japan Limited of certain music equipment and instruments and music studio fixtures from SK Planning (such sale and purchase agreement has been disclosed under the paragraph headed “Summary of material contracts” in this prospectus), no further studio charges was or will be payable by the Group for the use of the Tokyo studio. The transaction will not be subsisting after the Latest Practicable Date.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 208 APPENDIX V Statutory and General Information

(c) REL has, during the period between 1st July, 2000 and 28th February, 2001 engaged Ms Asami Yoshida, Mr. Tetsuya Komuro’s spouse, in the capacity as an exclusive artiste.

The amount payable to Ms Asami Yoshida for the nine months ended 31st December, 2000 amounted to HK$3,505.00.

Disclaimers

Save as disclosed in this prospectus:

(a) none of the Directors nor any of the persons whose names are listed in the sub-paragraph headed “Consents of experts” under the section headed “Other Information” in this Appendix is interested in the promotion of the Company or in any assets which have within the two years immediately preceding the issue of this prospectus been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group;

(b) none of the Directors nor any of the persons whose names are listed in the paragraph headed “Consents of experts” under the section headed “Other Information” in this Appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to the business of the Group;

(c) no cash, securities or other benefit has been paid, allotted or given within the two years preceding the date of this prospectus to any promoter of the Company nor is any such cash, securities or benefit intended to be paid, allotted or given on the basis of the Offer or related transactions as mentioned in this prospectus;

(d) none of the Directors, their respective Associates or shareholders of the Company who are interested in 5% or more of the issued share capital of the Company so far as is known to the Directors have any interests in the five largest customers of the Group for each of the two years ended 31st March, 2000 and the nine months ended 31st December, 2000.

SHARE OPTION SCHEME

Summary of the principal terms of the Share Option Scheme

The following is a summary of the principal terms of the Share Option Scheme conditionally adopted by a resolution in writing passed by the shareholders of the Company on 21st May, 2001 (“Adoption Date”):

(a) Who may join

The committee of the Board constituted to administer the Share Option Scheme (“Committee”) may, at its discretion, offer any employee (including any executive director) of any company in the Group who is in full-time employment of any company in the Group (“Participant(s)”) options to subscribe for Shares at a price calculated in accordance with sub-paragraph (c) below and subject to the other terms of the Share Option Scheme summarised below.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 209 APPENDIX V Statutory and General Information

(b) Grant of Options

Any grant of options must not be made after a price sensitive development has occurred or a price sensitive matter has been the subject of a decision, until such price sensitive information has been announced pursuant to the requirements of Chapter 16 of the GEM Listing Rules. In particular, during the period of one month immediately preceding the preliminary announcement of annual results or the publication of interim results, no option should be granted until such information has been announced pursuant to the requirements of Chapter 16 of the GEM Listing Rules.

HK$1.00 is payable by each Participant to the Company on acceptance of the offer of an option.

(d) Price of Shares

The subscription price for any Share under the Share Option Scheme will be a price determined by the Committee and notified to each Participant and will be not less than the higher of (i) the nominal value of a Share, (ii) the closing price of a Share as stated in the Stock Exchange’s daily quotations sheet on the date of offer, which must be a business day, and (iii) an amount equal to the average closing price of a Share as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant of the option.

(e) Maximum number of Shares

The maximum number of Shares in respect of which options may be granted under the Share Option Scheme (including Shares in respect of options granted, whether exercised or still outstanding, Shares which could have been issued under options which have been lapsed pursuant to any term providing for lapse by reference to the exercise price of any such options and options cancelled otherwise than pursuant to Rule 23.03(14) of the GEM Listing Rules) when aggregated with any Shares subject to any other schemes or plans involving the issue or grant of options over Shares or other securities by the Company to, or for the benefit of directors and/or full-time employees, may not exceed in nominal amount 30 per cent. of the issued share capital of the Company from time to time (excluding for this purpose any Shares issued pursuant to the exercise of options granted pursuant to the Share Option Scheme (and Shares issued pursuant to the exercise of options under the Pre-IPO Grant of Options); and (ii) any pro rata entitlements to further securities in respect of those securities mentioned in (i)). Subject to this:

(1) the total number of Shares available for issue under options which may be granted under the Share Option Scheme and any other scheme(s) (including for this purpose Shares subject to the Pre-IPO Grant of Options) must not, in aggregate, exceed 10 per cent. of the issued share capital of the Company as at the date of listing of the Shares on GEM (such 10 per cent. being equivalent to 110,468,440 Shares based on 1, 104,684,403 Shares expected then to be in issue) unless further shareholders’ approval has been obtained pursuant to paragraph (2) or (3) below;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 210 APPENDIX V Statutory and General Information

(2) the Directors may seek approval by shareholders in general meeting to renew such 10 per cent. limit. However, the total number of Shares available for issue under options which may be granted under the Share Option Scheme and other such schemes (including for this purpose Shares subject to the Pre-IPO Grant of Options) of the Company in these circumstances must not exceed 10 per cent. of the issued share capital of the Company at the date of the approval to renew the limit which may be renewed by shareholders in general meeting from time to time;

(3) the Directors may seek separate shareholders’ approval in general meeting to grant options beyond the 10 per cent. limited provided that (a) the total number of Shares subject to the Scheme and other such schemes of the Company (including for this purpose Shares subject to the Pre-IPO Grant of Options) does not in aggregate exceed 30 per cent. of the total issued share capital of the Company at the date of approval and (b) the options in excess of the 10 per cent. limit are granted only to participants specified by the Company before such approval is sought.

No option may be granted to any one person which, if exercised in full, would result in the total number of Shares already issued and issuable to him/her under the Share Option Scheme exceeding 25 per cent. of the aggregate number of Shares for the time being issued and issuable under the Share Option Scheme.

(f) Restrictions on grant of options to connected persons

(i) Any grant of option to a connected person (as defined in the GEM Listing Rules) must be approved by all independent non-executive Directors.

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

(g) Time of exercise of option

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period (“Option Period”) to be notified by the Committee to each grantee and in a period within which Shares must be taken up must not be less than 3 years commencing from the date of grant and not more than 10 years from the date of grant. The Committee may provide restrictions on the exercise of an option during the Option Period.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 211 APPENDIX V Statutory and General Information

(h) Rights are personal to grantee

An option may not be transferred or assigned and is personal to the grantee.

(i) Rights on ceasing to be a Participant

If the grantee of an option ceases to be a Participant for any reason other than death, misconduct or certain other grounds, the grantee may exercise the option up to the grantee’s entitlement at the date of cessation, failing which the option will lapse.

(j) Rights on death

If the grantee dies before exercising the option in full, his or her personal representative(s) may exercise the option in full (to the extent not already exercised) within a period of 12 months from the date of death, failing which the option will lapse.

(k) Effects of alterations to capital

In the event of an alteration in the capital structure of the Company, excluding any alteration in the capital structure of the Company as a result of an issue of Shares as consideration in a transaction, whilst such option remains exercisable, such corresponding alterations will be made to the number of Shares which are the subject of unexercised options, the option price, the method of exercise or maximum number of Shares subject to the Share Option Scheme or in respect of which any Participant shall be entitled, provided that no such alteration shall be made so that a Share would be issued at less than its nominal value or which would not give a grantee the same proportion of the issued share capital of the Company as that to which he or she was previously entitled. Any such alteration shall be certified by the Auditors as being fair and reasonable, and (save where an adjustment arises by way of a capitalisation of profits or reserves) as giving Participants the same proportion of equity capital as that to which they were previously entitled and as not requiring any Share to be issued following such adjustment at less than its nominal value as a result thereof. No alteration shall be made if such alteration would result in the aggregate subscription price payable on the exercise in full of the option.

(l) Rights on takeover

If a general offer by way of takeover is made to all the holders of Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) with the terms of the offer having been approved by the holders of not less than 90% in value of the Shares comprised in the offer within four months from the date of the offer and the offeror thereafter gives a notice to acquire the remaining Shares, the grantee (or his or her personal representative(s)) may by notice in writing to the Company within 21 days of such notice exercise the option (to the extent which has become exercisable and not already exercised) to its full extent or to the extent specified in such notice.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 212 APPENDIX V Statutory and General Information

(m) Rights on scheme of arrangement

If a compromise or arrangement between the Company and its members or creditors is proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Company shall give notice to the grantee on the same date as it dispatches the notice to each member or creditor of the Company summoning the meeting to consider such a compromise or arrangement, and thereupon the Participant (or his or her personal representative(s)) may until the expiry of the period commencing with such date and ending with the earlier of the date two months thereafter and the date on which such compromise or arrangement is sanctioned by the court exercise any of his or her options (to the extent which has become exercisable and not already exercised) whether in full or in part, but the exercise of an option as aforesaid shall be conditional upon such compromise or arrangement being sanctioned by the court and becoming effective. Upon such compromise or arrangement becoming effective, all options shall lapse insofar as previously exercised under the Share Option Scheme. The Company may require the grantee (or his or her personal representative(s)) to transfer or otherwise deal with the Shares issued as a result of the exercise of options in these circumstances so as to place the grantee in the same position as nearly as would have been the case had such Shares been subject to such compromise or arrangement.

(n) Rights on a Voluntary Winding up

In the event that the Company gives notice of a meeting being convened to consider a resolution for the voluntary winding up of the Company, the Company shall forthwith upon such notice being given, give notice to Participants of the convening of such meeting and a Participant will thereupon become entitled to exercise by notice his or her subsisting options to their full extent or to the extent specified in such notice.

(o) Rights attaching to Shares upon exercise of an option

Shares issued and allotted upon the valid exercise of an option will rank pari passu in all respects with the other Shares of the same class in issue at the date of allotment.

(p) Lapse of Option

An option shall lapse automatically (to the extent not already exercised) on the earliest of:

(i) the expiry of the Option Period;

(ii) the expiry of the periods referred to in sub-paragraph (h), (i), (k), (l) or (m) respectively;

(iii) subject to the scheme of arrangement becoming effective, the expiry of the period referred to in sub-paragraph (l);

(iv) the date on which the grantee of an option ceases to be a Participant by reason of the termination of his or her employment or office or his or her contract for services on grounds including, but not limited to, serious misconduct, bankruptcy, insolvency and conviction of any criminal offence involving integrity or honesty;

ROJAM ENTERTAINMENT HOLDINGS LIMITED 213 APPENDIX V Statutory and General Information

(v) the date of the commencement of the winding-up of the Company;

(vi) the date on which the grantee sells, transfers, charges, mortgages, encumbers or creates any interest in favour of any third party over or in relation to any option in breach of the rules of the Share Option Scheme.

(q) Cancellation of Options granted

Any cancellation of options granted but not exercised must be approved by shareholders of the Company and by shareholders of any holding company which is listed on the Main Board or on GEM in general meeting, with Participants and their associates abstaining from voting. Any vote taken at the meeting to approve such cancellation must be taken by poll.

(r) Period of the Share Option Scheme

Options may be granted to Participants under the Share Option Scheme during the period of 10 years commencing on the Adoption Date.

(s) Alteration to Share Option Scheme and Termination

The Share Option Scheme may be altered in any respect by a resolution of the Committee except that the provisions of the Share Option Scheme relating to matters contained in rule 23.03 of the GEM Listing Rules shall not be altered to extend the class of persons eligible for the grant of options or to the advantage of grantees or prospective grantees except with the prior approval of the shareholders of the Company in general meeting (with Participants and their associates abstaining from voting).

Any alteration to the terms and conditions of the Share Option Scheme, which are of a material nature, must be approved by the Stock Exchange, except where the alterations take effect automatically under the existing terms of the Share Option Scheme.

The Committee or the Company in general meeting may at any time terminate the Share Option Scheme and in such event no further options shall be granted or offered but in all other respects the provisions of the Share Option Scheme shall remain in full force and effect. Upon such termination, details of the options granted (including options exercised or outstanding) under the Share Option Scheme are required under the GEM Listing Rules to be disclosed in the circular to Shareholders seeking approval of the first new scheme established thereafter.

(t) Conditions of the Share Option Scheme

The Share Option Scheme is conditional on (a) the GEM Listing Committee granting approval of the Share Option Scheme and any options which may be granted thereunder and the listing of and permission to deal in any Shares which may be issued pursuant to the exercise of options granted under the Share Option Scheme and (b) the Share Option Scheme being approved by the shareholders of the Company in general meeting (with any persons required to abstain from voting under the GEM Listing Rules so abstaining). Application has been made to the GEM Listing Committee for the approval of the Share Option Scheme, the granting of the options under the Share Option Scheme and the listing of and permission to deal in the Shares which may be issued pursuant to the exercise of the options granted under the Share Option Scheme.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 214 APPENDIX V Statutory and General Information

(u) Administration of the Share Option Scheme

The Share Option Scheme shall be administered by the Committee whose members will include the independent non-executive Directors.

As at the Latest Practicable Date, no options have been granted by the Company under the Share Option Scheme.

OTHER INFORMATION

Estate duty and tax indemnity

Each of Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Arihito Yamada and Mr. Tomohiko Domen has, pursuant to the deed of indemnity referred to in sub-paragraph headed “Summary of material contracts” under the paragraph headed “Further information about the business” in this Appendix, severally pro-rata to their respective attributable interests in the Company given appropriate indemnities in connection with, inter alia, Hong Kong estate duty which might be payable by any member of the Group by reason of any transfer of property (within the meaning of section 35 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong)) to any member of the Group on or before the date on which the Placing becomes unconditional. The deed of indemnity also contains indemnities in respect of taxation which might be payable by any member of the Group on or before the date on which the Placing becomes unconditional.

Each of Mr. Tetsuya Komuro, Billion Moment, Mr. Kebo Wu, Mr. Arihito Yamada and Mr. Tomohiko Domen will however, not be liable under the deed of indemnity in the case where, (a) provision, reserve or allowance has been made for the duty or taxation in the audited accounts of any member of the Group for the period ended 31st December, 2000; (b) the duty or taxation arises as a result of a retrospective change in law and/or tax rates coming into force after the date of the deed of indemnity; (c) the taxation relates to Hong Kong profits tax falling on any member of the Group after the date on which the Placing becomes unconditional unless liability for such profits tax would not have arisen but for some act or omission of the Group; (d) a penalty is imposed on any member of the Group defaulting on any obligation to give information under Section 42(1) of the Estate Duty Ordinance; and (e) to the extent that the taxation arises as a result of any member of the Group being in breach of the deed of indemnity.

Litigation

No member of the Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

Sponsor

CPY has made an application on behalf of the Company to the GEM Listing Committee for the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned herein and any Shares failing to be issued pursuant to the exercise of options granted under the Share Option Scheme.

Promoter

The promoter of the Company is Mr. Tetsuya Komuro. Save as disclosed in this prospectus and within the two years immediately preceding the date of this prospectus, no cash, securities or other benefit has been paid, allotted or given nor are any proposed to be paid, allotted or given to the promoter in connection with the Placing or the related transactions described in this prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 215 APPENDIX V Statutory and General Information

Preliminary expenses

Assuming that the Over-allocation Option is not exercised, the preliminary expenses are estimated to be approximately HK$21 million and are expected to be allocated in the following manner:

(a) approximately HK$17 million will be payable by the Company; and

(b) approximately HK$4 million will be payable by Billion Moment.

Assuming that the Over-allocation Option is exercised in full, the preliminary expenses are estimated to be approximately HK$22 million and are expected to be allocated in the following manner:

(d) approximately HK$2 million will be payable by Mr. Tetsuya Komuro; and

(e) approximately HK$5 million will be payable by Billion Moment.

Qualifications of experts

The following are the qualifications of the experts who have given opinions or advice which are contained in this prospectus:

Name Qualifications

Core Pacific – Yamaichi Capital Limited Registered investment adviser and dealer PricewaterhouseCoopers Certified Public Accountants Conyers Dill & Pearman, Cayman Cayman Islands attorneys-at-law Greater China Appraisal Property valuer

Consents of experts

Each of CPY, PricewaterhouseCoopers, Conyers Dill & Pearman, Cayman and Greater China Appraisal has given and has not withdrawn its written consent to the issue of this prospectus with the inclusion of its report and/or letter and/or the references to its name included herein in the form and context in which they are respectively included.

Binding effect

The prospectus shall have the effect if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance insofar as it is applicable.

Miscellaneous

(a) Save as disclosed in this prospectus:

(i) within the two years preceding the date of this prospectus, no share or loan capital of the Company or its subsidiary has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash;

(ii) no share or loan capital of the Company or its subsidiary is under option or is agreed conditionally or unconditionally to be put under option;

(iii) no founders, management or deferred shares of the Company or its subsidiary have been issued or agreed to be issued; and

(iv) within the two years preceding the date of this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of the Company or its subsidiary.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 216 APPENDIX V Statutory and General Information

(b) None of CPY, PricewaterhouseCoopers, Conyers Dill & Pearman, Cayman and Greater China Appraisal:

(i) is interested beneficially or non-beneficially in any shares in any member of the Group; or

(ii) has any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any shares in any member of the Group.

(d) All necessary arrangements have been made to enable the Shares to be admitted into CCASS for clearing and settlement.

(e) The name, address and description of Billion Moment, being the vendor offering the Sale Shares for sale under the Placing, are as follows:

Number of Name Description Address Sale Shares

Billion Moment Corporation TrustNet Chambers 20,000,000 P. O. Box 3444 Road Town Tortola British Virgin Islands

Billion Moment is held as to 90% and 10% by Mr. Kebo Wu, an executive Director and Ms. Cheng Wing Ki, Aouda respectively. Ms. Cheng Wing Ki, Aouda is the spouse of Mr. Wong Ho Yan, Daniel, an executive Director.

(f) The names, addresses and descriptions of the Grantors in respect of the sale of their respective Shares upon the exercise of the Over-allocation Option are as follows:

Number of Over-allocation Name Description Address Shares

Tetsuya Komuro Director 7-22-31-608 11,070,000 Nishi-Shinjuku Shinjuku-ku Tokyo, Japan

Billion Moment Corporation TrustNet Chambers 2,430,000 P.O.Box 3444 Road Town Totola British Virgin Islands

Mr. Tetsuya Komuro and Billion Moment will only offer their respective Shares for sale under the Placing if the Over-allocation Option is exercised. Further details of the Over-allocation Option is set out in the paragraph headed “Over-allocation Option” in the prospectus.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 217 APPENDIX VI Documents Delivered to the Registrar of Companies and Available for Inspection

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this prospectus delivered to the Registrar of Companies in Hong Kong for registration were copies of the written consents referred to in the paragraph headed “Consents of Experts” in Appendix V to this prospectus, the statement of adjustments made by PricewaterhouseCoopers in arriving at the figures set out in their Accountants’ Report, copies of the material contracts referred to in the paragraph headed “Summary of material contracts” in Appendix V to this prospectus and a statement of the name, description and address of the vendor of the Sale Shares and of the Grantors.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Deacons at Alexandra House, 3rd to 7th and 18th Floors, Central, Hong Kong during normal business hours up to and including 6th June, 2001:

(i) the memorandum and articles of association of the Company;

(ii) the Accountants’ Report on the Group prepared by PricewaterhouseCoopers, the text of which is set out in Appendix I to this prospectus and the related statement of adjustments thereto;

(iii) the letter and summary of the valuation and valuation certificate relating to the property interests of the Group prepared by Greater China Appraisal, the texts of which are set out in Appendix III to this prospectus;

(iv) such audited financial statements as have been prepared for REL for each of the two years ended 31st March, 2000;

(v) the letters received from PricewaterhouseCoopers and CPY in connection with the Estimate, the texts of which one set out in Appendix II to this prospectus;

(vi) the letter of advice prepared by Conyers, Dill & Pearman, Cayman referred to in the section headed “General” in Appendix IV to this prospectus summarising certain aspects of Cayman Islands company law;

(vii) the Companies Law;

(viii) the material contracts referred to in the section headed “Summary of material contracts” in Appendix V to this prospectus;

(ix) the written consents referred to in the section headed “Consents of experts” in Appendix V to this prospectus;

(x) the service contracts referred to in the section headed “Particulars of service agreements” in Appendix V to this prospectus; and

(xi) the rules of the Share Option Scheme.

ROJAM ENTERTAINMENT HOLDINGS LIMITED 218