1 BERNSTEIN LITOWITZ BERGER ti & GROSSMANN LLP 2 ALAN SCHULMAN (Bar No . 128661 ) ROBERT S . GANS (Bar No. 214420) 3 BLAIR A. NICHOLAS (Bar No . 178428 ) 12544 High Bluff Drive, Suite 15 0 4 San Diego, CA 92130 = 0 Tel: (858) 793-0070 5 Fax: (858) 793-0323 6 Attorneys for Plaintiffs and Lead Counsel for the Clas s 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 WESTERN DIVISION 1 1 In re GEMSTAR-TV GUIDE Master File No . 02-2775-MRP (PLAx) INTERNATIONAL INC . 12 SECURITIES LITIGATION CLASS ACTION 13 SECOND AMENDED CLASS 14 ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL 15 SECURITIES LAWS 16 17 This Document Relates To : 18 All Actions. 19 20 21 22 23 24 25 26 27 28

SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) I 1. INTRODUCTION 2 1 . This securities class action is brought on behalf of plaintiffs and other 3 persons and entities who purchased or otherwise acquired Gemstar-TV Guide 4 International Inc.'s ("Gemstar" or the "Company") common stock between June 1, 5 2000 and April 1, 2002 (the "Class Period"), to recover damages caused by 6 defendants' violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 7 1934 ("Exchange Act"), §§ 11 and 15 of the Securities Act of 1933 (the "Securities 8 Act"), and Securities and Exchange Commission ("SEC") Rule 1Ob-5 . 9 II. SOURCES OF ALLEGATIONS 10 2. The allegations below are pled based on one or more of the following 1 1 sources of information: 12 (a) Source 1 : Director of Finance ("Director of Finance" or 1 3 "DF") . Throughout the Class Period, the Director of Finance reported directly to 14 ~ defendants Henry Yuen ("Yuen") and Elsie Leung ("Leung"). The Director of 15 Finance is a certified public accountant and was personally responsible, together 16 with Leung, for the recognition and the reporting of Gemstar's licensing an d 17 advertising revenues. The Director of Finance spoke with Yuen and Leung on a 18 weekly basis concerning finance, accounting and SEC reporting issues at Gemstar . 19 The Director of Finance sought approval from Yuen and Leung on all transaction s 20 Gemstar recognized as revenue that exceeded $2 million . Based on the Director of 21 Finance's personal interactions with Yuen and Leung, the Director of Finance has 22 first hand knowledge of Yuen's and Leung's decisions and participation in certain 23 of the transactions detailed below. 24 (b) Source 2 : Vice President of Scientific-Atlanta ("VP. of 25 Scientific-Atlanta" or "VPSA") . The V.P. of Scientific-Atlanta was responsible fo r 26 all negotiations concerning the extension of Scientific-Atlanta's license agreement 27 with Gemstar prior to its expiration on July 23, 1999 . Between December 199 7 28 and June 1999, the V.P. of Scientific-Atlanta spoke on numerous occasions wit h

-1- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Yuen and Gemstar's General Counsel, John Orlick, concerning the license 2 agreement between Scientific-Atlanta and Gemstar, and the expiration of th e 3 license agreement. 4 (c) Source 3 : Corporate Counsel of Fantasy Sports ("Corporate 5 Counsel" or "CC"). Corporate Counsel drafted, negotiated and finalized all 6 contracts and agreements entered into between Fantasy Sports Inc. and Gemstar. 7 Corporate Counsel also attended and participated in all meetings, conference calls 8 and negotiations between representatives of Gemstar and Fantasy Sports, includin g 9 meetings and negotiations between Yuen, Leung, Toby DeWeese (Gemstar's Vice 10 President of Corporate Development), Dave Barber (Gemstar's Manager of 11 Corporate Development), Patrick Hughes (Chief Executive Officer of Fantas y 12 Sports) and Bill Kunkin (Director of Fantasy Sports) . 13 (d) Source 4 : Senior Vice President ("Senior VP" or "SVP") . The 14 Senior VP was employed at Gemstar from early 2001 until March 2002 and 15 reported directly to Yuen and Leung. The Senior VP was responsible for 16 maintaining the accounting systems at Gemstar and participated in numerous 17 meetings and conference calls with Yuen and Leung concerning the Company's 1 8 accounting practices and systems . 19 (e) Source 5: Marketing Manager ("Marketing Manager" or 20 "MM"). The Marketing Manager was employed in the Company's advertisin g 21 department during the Class Period . The Marketing Manager created marketing 22 li campaigns to support Gemstar's TV Guide advertising sales and had direct contact 231 with Yuen and Leung with respect to advertising transactions and the recognitio n 24 of revenues from these transactions . 25 (f) Source 6 : The Securities and Exchange Commission ("SEC") . 26 On October 17, 2002, the SEC commenced a formal order of investigation entitle d 27 In the Matter of Gemstar-TV Guide International, Inc., Commission File No . LA- 28 2590 ("Formal Investigation") . The Formal Investigation was commenced to

-2- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 determine whether Gemstar and any of its former and present officers, directors, o r 2 1 others, violated the federal securities laws in connection with accounting for, and 3 II public reports of, Gemstar's financial performance in the Company's 1999, 2000 , 4 11 2001 and 2002 Forms 10-K and 10-Q . During the Formal Investigation, the SEC 5 issued over 100 subpoenas to witnesses for the production of documents and too k 6 11 investigative testimony from over 55 witnesses, for a total of over 100 days o f 7 testimony. The SEC took over three days of testimony from Leung. On April 1 , 8 1 1 2003, the SEC took one day of general background testimony from Yuen. While 9 Yuen appeared for further testimony on April 23, 2003, he asserted his Fifth 10 Amendment privilege to all questions from the SEC relating to the Formal 11 Investigation. The SEC has also taken the deposition of Gemstar's former 12 Executive Vice President and General Counsel, John Orlick . Based on the 13 information obtained from over 55 witnesses, on June 19, 2003, the SEC filed a 14 formal complaint against Yuen and Leung entitled Securities and Exchange 15 Commission v. Henry C. Yuen and Elsie M Leung, No. CV 03-4376 (C .D . Cal.). 16 On September 30, 2003, the SEC filed an amended complaint . The SEC has 17 charged Yuen and Leung with violations of the federal securities laws for 18 fraudulently misleading investors by overstating and misreporting Gemstar's 19 revenues and other financial results between 2000 and 2002 . The SEC's 20 complaints are based on facts discovered during the SEC's formal investigation 21 and detail previously non-public facts regarding Yuen's and Leung's knowledge 22 and participation in the scheme to mislead investors about Gemstar's financia l 23 performance. The Director of Finance has reviewed the SEC complaints an d 24 stated, based on personal knowledge, that the facts detailed in the SEC complaint s 25 are true and accurate . 26 (g) Source 7 : Gemstar-TV Guide International ("Gemstar" or 27 "GMST"). During the Class Period, Gemstar disseminated press releases and filed 28 documents with the SEC, including Forms 10-Q, 10-K, 8-K and 4 . After the Class

-3- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 11 Period, Gemstar filed restated Forms 10-Q and 10-K with the SEC . The restated 2 SEC filings set forth the errors contained in Gemstar 's prior reported financial 3 results, explain why the financial statements were erroneously reported at the tim e 4 11 the financial statements were prepared, and details the Company's restate d 5 I financial results for each quarterly and annual period during the Class Period . 6 (h) Source 8 : KPMG LLP ("KPMG"). Throughout the Class 7 Period, KPMG served as Gemstar' s outside auditor. KPMG performed quarterly 8 and annual reviews of Gemstar's reported financial results . KPMG met with Yuen 9 and Leung following each quarter to discuss the status of the Company' s 10 outstanding receivables and large transactions and required Yuen and Leung to sig n 11 "management representation letters" attesting to their representations to KPMG In 12 addition, KPMG audited Gemstar's annual financial statements and relied o n 13 representations by Yuen and Leung concerning the purported accuracy o f 14 ~ Gemstar's repo rted financial results and compliance with GAAP. 15 III. JURISDICTION AND VENU E 16 3 . This Court has jurisdiction over the subject matter of this class action 17 pursuant to § 27 of the Exchange Act, 15 U.S .C . § 78aa, as well as pursuant to § 2 2 18 of the Securities Act, 15 U.S .C . § 77v. The claims alleged herein arise under 19 §§ 10(b) and 20(a) of the Exchange Act, 15 U.S .C . §§ 78j(b), 78n and 78t(a), and 20 Rules lOb-5 promulgated thereunder by the SEC, 17 C .F.R. §§ 240 .10b-5 and 21 §§ 11 and 15 of the Securities Act, 15 U.S .C . §§ 77k and 77o . In connection with 22 the acts, conduct and other wrongs complained of herein , the defendants , directly 23 or indirectly, used the means and instrumentalities of interstate commerce, the 24 United States mails , and the facilities of a national securities exchange . 25 4 . Venue is proper in this District pursuant to § 27 of the Exchange Act , 26 1 15 U.S .C. § 78aa and § 22 of the Securities Act, 15 U .S .C . § 77v. Many of the acts 27 and transactions giving rise to the violations of the federal securities law s 28 complained of herein, including the preparation and dissemination to the investing

-4- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 public of materially false and misleading statements, occurred in this District . 2 Gemstar maintains its principal place of business in this District at 135 North Los 3 Robles Avenue, Suite 800, Pasadena, California 91101 . 4 W. THE PARTIES 5 A. Plaintiffs 6 5 . Lead Plaintiff Teachers' Retirement System of Louisiana ("Louisiana 7 Teachers") is a public pension fund system organized for the benefit of current and 8 retired teachers of the State of Louisiana. Louisiana Teachers purchased shares o f 9 Gemstar common stock during the Class Period and suffered damages as a result of 10 the violations of defendants' violations of the Exchange Act . 11 6 . Lead Plaintiff General Retirement System of the City of Detroit 12 ("Detroit General") is a public pension fund system organized for the benefit of 13 current and retired municipal employees of the City of Detroit. Detroit General 14 purchased shares of Gemstar common stock during the Class Period and suffered 15 damages as a result of defendants' violations of the Exchange Act . 16 7. Plaintiff Sherleigh Associates ("Sherleigh") acquired Gemstar 17 common stock pursuant to a Registration Statement and Prox y 18 Statement/Prospectus issued by Gemstar and filed with the SEC on or about 19 June 14, 2001 in connection with Gemstar's merger with SkyMall, Inc . 20 ("SkyMall") and suffered damages as a result of defendants' violations of the 21 Securities Act. 22 B . Defendants 23 8 . Gemstar-TV Guide International, Inc. is a Delaware corporation with 24 its principal place of business located in Pasadena, California . Gemstar is a 25 technology and media company focused on developing, licensing and providing 26 products and services that enhance consumer entertainment . The Company was 27 formed through the merger of Gemstar International Group Limited and TV Guide 28 on July 12, 2000. -Following Gemstar's merger with TV Guide, the Compan y

-5- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 divided into three separate business sectors : (1) the Technology and Licensing 2 Sector (the "Licensing Sector"), which purportedly derived revenues from licens e 3 fees paid by third-party licensees for the Company's intellectual property ; (2) the A Interactive Platform Sector (the "Interactive Sector"), which purportedly derive d 5 revenues from paid advertising on Gemstar's interactive program guide; and 6 (3) the Media and Services Sector (the "Media Sector"), which derived revenues 7 principally from the TV Guide magazine . 8 9 . Henry C . Yuen ("Yuen") is the co-founder of Gemstar and served as 9 II Chief Executive Officer ("CEO") from August 1994 until October 8, 2002 ; 10 President from August 1994 to July 2000; Chairman of the Board from January 11 1999 to April 2003 ; and as a director from April 1992 to April 2003 . As of 12 March 31, 2002, Yuen was the second largest shareholder of Gemstar, reporting 13 beneficial ownership of approximately 40 million shares or over 9% of the tota l 14 issued and outstanding shares of the Company's common stock . On October 8, 15 2002, Gemstar announced that Yuen had resigned as CEO, but would remain with 16 Gemstar as an employee and as Chairman . On April 18, 2003, Gemstar announced 17 that it had terminated Yuen as an employee and as Chairman "for cause." 18 10 . Elsie Ma Leung ("Leung") is a certified public accountant licensed in 19 the State of California and served as Gemstar's Chief Financial Officer ("CFO") 20 from 1994 to November 7, 2002 ; Co-President from July 2000 to October 8, 2002; 21 Chief Operating Officer ("COO") from January 1996 to November 7, 2002 ; and as 22 a director from 1994 to May 2003 . As of March 31, 2002, Leung reported 23 beneficial ownership of over 6,839,570 shares of Gemstar common stock . On 24 November 7, 2002, Gemstar announced that Leung had resigned as Co-President , 25 CFO and COO, but would remain with Gemstar as an employee and as a director. 26 On April 18, 2003, Gemstar announced in a press release that it had terminate d 27 Leung's employment "for cause" and her term as a director would expire withou t 28 renewal on May 20, 2003 .

-6- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 11 V. BACKGROUND 2 11 . During the Class Period, Gemstar's flagship product was th e 3 interactive program guide ("IPG") . Gemstar's IPG illuminates a menu on the 4 I television screen that allows viewers to navigate and select different televisio n 5 programs . Gemstar generated revenues from the IPG in two ways : (1) licensing 6 the IPG technology to customers for a licensing fee ; and (2) selling advertising to 7 customers on the IPG The Company recognized and reported the licensing fees a s 8 Licensing Sector revenues and reported the advertising fees as Interactive Sector 9 revenues . All non-IPG revenue, such as revenue generated from print advertising 10 in TV Guide magazine, was reported in the Media Sector . 11 12 . While Gemstar's consolidated revenues and Media Sector revenues

12 I were slightly declining throughout the Class Period, defendants emphasized the 13 explosive revenue growth of Gemstar's Licensing Sector and Interactive Sector . 14 For example, in Gemstar' s press release announcing Gemstar's financial results for 15 the period ended December 31, 2000, Yuen stated that : "[Gemstar] experienced 16 very strong growth in the first two sectors, the Technology and Licensing Sector 17 and the Interactive Platform Sector, which are the value-drivers of our Company." 18 13 . To highlight the Company's "value drivers," Gemstar's press release s 191 J and SEC filings reported not only Gemstar's consolidated revenues, but also 2 0 separately reported the financial results of the Licensing Sector, the Interactive 21 Sector, and the Media Sector. Throughout the Class Period, Yuen touted that the 22 financial results of the Licensing Sector and Interactive Sector always met or 23 exceeded market analysts' expectations . For example, in Gemstar's press releas e 24 I announcing its financial results for the quarter ended March 31, 2001, Yuen stated : 25 "For these two fast-growing sectors [the Licensing Sector and the Interactiv e 26 Sector], we have exceeded the consensus expectations of the financial analysts, an d 27 I believe, virtually all of the individual estimates . " 28 14 . During the Class Period, Yuen and Leung were intimately involved i n

-7- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 the accounting and financial reporting of Gemstar's three business sectors . (SVP; 2 DF; SEC)' Specifically, Yuen was responsible for approving, negotiating an d 3 structuring all transactions exceeding $2 million . (DF ; SVP) Before approving 4 such transactions, Yuen met with and reviewed the terms of each transaction wit h 5 Gemstar's CFO, Leung. (DF) After the transaction was reviewed and approved by 6 Yuen, Leung was responsible for the recognition of revenue from Gemstar's 7 transactions in the Company's accounting records, which included instructing 8 Gemstar's accounting staff, including the Director of Finance, to make ledge r 9 entries in the accounting ledger. (DF) 10 15 . Immediately following the end of each quarter, Yuen and Leung 11 would meet with Gemstar's outside auditors, KPMG, to discuss the status of certai n 12 transactions that were material to Gemstar's reported financial results . (SEC, DF) 13 These meetings were known at Gemstar as "quarterly closing meetings ." (DF) 14 After these quarterly closing meetings, Yuen and Leung were requested to sign an d 15 send "representation letters" to KPMG confirming their representations about the 16 status of certain transactions and receivables and attesting to the accuracy of th e 17 information Yuen and Leung had provided to KPMG in the course of the annua l 18 audits and quarterly closing meetings . (SEC) 1 9 16. As CEO and CFO, Yuen and Leung drafted, reviewed, edited an d zo approved each of Gemstar's SEC filings and earnings releases disseminated to 2 1 shareholders during the Class Period . (GMST, SEC) Yuen signed Gemstar' s 22 Forms 10-K, and Leung signed Gemstar's Forms 10-K and 10-Q issued during th e 23 Class Period. 24 VI. THE FRAUDULENT SCHEM E 25 17. Throughout the Class Period, Yuen and Leung actively participated in 26 I and directed the issuance of false and misleading statements regarding Gemstar' s 27 28 1 1 All abbreviations inside ( ) refer to the source of the allegation .

-8- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 financial performance . The scheme was achieved in five ways . First, defendants 2 recognized and reported over $140 million in revenues based on expired and non- 3 existent agreements, including the recognition and reporting of: (i) over 4 $113 million in non-existent revenues based on an expired license agreement with 5 Scientific-Atlanta; (ii) over $18 million in revenues based on a non-existent 6 agreement with Time Warner ; (iii) over $10 million in revenues based on a non- 7 existent modification to a licensing agreement with Thomson ; and (iv) over 8 $1 million in revenues based on non-existent advertising for the TV Guide Awar d 9 Show. Second, defendants transformed a $6 million acquisition of Fantasy Sports 10 into a $20.75 million acquisition for the sole purpose of artificially inflating 11 Gemstar's Interactive Sector revenues by $20 million . Third, in violation o f 12 Gemstar's own revenue recognition policy, defendants accelerated the recognition 13 of $23 .5 million in up-front license fees over five fiscal quarters rather tha n 14 recognizing the up-front fees over the term of Gemstar's eight-year license 15 agreement with AOL, Inc . ("AOL") . Fourth, defendants concealed over 16 $120 million in advertising purchases made in connection with the sale of 17 Gemstar's WGN TV signal to the Tribune Company ("Tribune"), the Company's 18 settlement with Motorola Inc. ("Motorola"), and the restructuring of Gemstar's 19 eBooks license agreement with Thomson . Lastly, defendants switched ove r 20 $5 million in revenues earned by the Media Sector and reported these revenues as 21 earned by the Interactive Sector. 22 18 . These transactions involved the largest and most important customers 23 in Gemstar's corporate life and accounted for over $250 million of the Company's 24 reported revenues during the Class Period . At no time, however, did defendants 25 disclose these practices to shareholders during the Class Period . Further, to 26 conceal the fraudulent scheme from the Company's outside auditor, Yuen and 27 Leung withheld critical information and made false representations to KPMG in 28 connection with quarterly reviews and annual audits of Gemstar's financial results .

-9- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 19. By engaging in these fraudulent practices, defendants misled 2 shareholders by reporting dramatic growth and acceptance of Gemstar's 3 intellectual property and IPG advertising, when in fact, such growth and 4 acceptance was non-existent during the Class Period . 5 A. Recognizing Revenues, Without Disclosure, 6 On Expired And Non-Existent Agreements 7 1 . Expired Scientific-Atlanta Agreement 8 20 . Scientific-Atlanta is one of the world's largest manufactures of cabl e 9 set-top boxes. On April 3, 1997, Scientific-Atlanta and StarSight Telecast, Inc . 10 entered into a three-year license agreement which expired on July 23, 1999 (the 11 "License Agreement") . (GMST) Pursuant to the License Agreement, Scientific- 12 Atlanta agreed to pay a license fee to StarSight for each cable set-top box 13 Scientific-Atlanta sold incorporating an IPG (GMST) 14 21 . Prior to the expiration of the License Agreement, Scientific-Atlant a 15 constituted Gemstar's top revenue producing customer - accounting for over 21 % 16 of the Company's reported revenues . (GMST) In each of Gemstar's press 17 releases, Forms 10-Q and 10-K issued prior to the expiration of the License 18 Agreement, Gemstar prominently listed Scientific-Atlanta as a major "licensee" o f 19 the Company 's intellectual property. (GMST) 20 22 . Beginning in mid-1998, Gemstar and Scientific-Atlanta attempted to 21 negotiate a possible extension of the License Agreement . (VPSA) Yuen was 22 personally involved in all negotiations with Scientific -Atlanta to extend the 23 expiration of the Licensing Agreement . (VPSA) In mid-November 1998, 24 however, the General Counsel of Scientific -Atlanta informed Yuen and Gemstar's 25 General Counsel , John Orlick, that Scientific-Atlanta had not, and was not, 26 infringing on any of Gemstar 's or StarSight's intellectual property or patents . 27 (VPSA) 28 23 . Thereafter, Gemstar and Scientific -Atlanta were unable to agree o n

-10- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I major terms and between late 1998 and early 2001, Gemstar and Scientific-Atlant a 2 filed seven different lawsuits against each other for the alleged infringement o n

3 I each others' intellectual property. (GMST; SEC) Gemstar's General Counsel 4 I consistently kept Yuen and Leung informed of the litigation status and informe d 5 Yuen and Leung that Gemstar was not making any substantial progress in its

6 I negotiations with Scientific-Atlanta . (SEC; DF) 7 24 . The License Agreement expired on July 23, 1999 . As a result, 8 Scientific-Atlanta stopped making payments to Gemstar and Gemstar stopped

9 I recognizing revenue based on the expired agreement . (GMST; SEC) 10 25 . On February 9, 2000, Gemstar filed a press release announcing its 11 financial results for the quarter ended December 31, 1999, which did not include 12 any revenues recognized based on the expired License Agreement . In the press 13 release, Gemstar also removed Scientific-Atlanta as a major "licensee" of 14 Gemstar's intellectual property. On February 10, 2000, the day after the press 15 release was issued, John Stanek of Lehman Brothers issued a research report 16 announcing that: "The Company did not recognize, nor is it accruing, revenue 17 related to a lapsed Scientific Atlanta contract (Gemstar is suing over breach o f 18 contract)." 19 26. However, in the last days of Gemstar's fiscal year-ended March 31 , 20 1 2000 and without any disclosure or legitimate justification, Gemstar began 21 recognizing revenues in the Licensing Sector based on the expired Licens e 22 Agreement. (GMST) Specifically, Gemstar recognized $12.2 million in non- 23 existent revenues for the quarter ended March 31, 2000, despite the fact tha t 24 Scientific-Atlanta had not made any payments to Gemstar, the parties were i n 25 litigation, there was no licensing agreement or other contract in effect with 26 Scientific-Atlanta, and it was highly unlikely that the expired License Agreement 27 would be renewed as no progress had been made to negotiate a settlement or a new 28 agreement with Scientific-Atlanta. (GMST; VPSA; SEC; DF) This revenue wa s

-11- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I I material to Gemstar's quarterly financial results, increasing the Company' s 2 revenues by over 14% and net earnings by 28% . In fact, had Gemstar not 3 recognized these non-existent revenues based on the expired agreement, Gemstar 4 I I would have reported that its net income for the quarter had decreased by over 11 %,

5 I I as compared to the same period of the prior year, but instead, reported that its net 6 (I income had increased by over 22% . (GMST) 7 27 . This was just the beginning. Between the quarters ended March 31 , 8 11 2000 and March 31, 2002, Gemstar recognized and reported $113 .5 million in 9 revenues based upon the expired License Agreement. (GMST) During this period , 10 Gemstar did not receive any revenue from Scientific-Atlanta, any promise o r 11 agreement to pay Scientific-Atlanta, or any acknowledgement from Scientific- 12 Atlanta that the amounts recorded by Gemstar were collectible from Scientific- 13 Atlanta. (SEC, DF) 14 28 . Before the July 12, 2000 merger with TV Guide, Gemstar reported 15 consolidated earnings and net earnings, but did not report segment financial results . 16 The chart below summarizes the amount of Scientific-Atlanta revenue tha t 17 Gemstar reported on a quarterly and annual basis and its materiality to Gemstar' s 18 consolidated financial results : 19 Period Amount % Revenue % Net Earnings Q 3/31/00 12,228,000 14 .5 28 .0 20 YE 3/31/00 12,228,000 5.0 9.8 Q 6/30/00 7,423,000 11 .7 25 .6 2 1 22 29. After the TV Guide merger, Gemstar began repo rting on a sector basis 23 and reporting EBITDA, which Gemstar defined as operating income before non- 24 cash stock compensation expense, depreciation, amortization, and non-recurring 25 expenses . The chart below summarizes the Scientific-Atlanta revenue that Gemsta r 26 reported after the merger in the Licensing Sector, and its materiality to Gemstar' s 27 financial results : 28

-12- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Period Amount % Sector Revenue % Sector EBITDA Q 9/30/00 13,018 ,000 20.7 31 .7 2 Q 12/31/00 16,058 ,000 21 .0 31 .5 YE 12/31/00 48,727,000 17.8 25.6 3 Q 3/31/01 17,305, 000 21 .3 28.8 Q 6/30/01 21,826,000 27.2 41 .0 4 Q 9/30/01 12,597,000 15 .4 22.4 Q 12/31/01 7,186,000 8.6 12.0 5 YE 12/31/01 58,914,000 18.0 25 .7 Q 3/31/02 5,815, 000 9.4 11 .6 6

7 30. Yuen and Leung personally directed Gemstar's recognition of

8 revenues based on the expired Scientific-Atlanta license agreement . (DF) In the 9 last days of each quarter, Yuen met with Leung and together they decided exactly 10 how much revenue Gemstar should recognize and report based on the expired 11 agreement. (DF) The amount of revenue Yuen and Leung decided to recognize in

12 a particular quarter was not based on Scientific-Atlanta's shipment of cable-set to p 13 boxes that incorporated an IPG, but rather was calculated based upon the amount o f 14 revenue necessary for Gemstar to exceed market analysts' estimates . (DF) After 15 Yuen and Leung calculated the exact amount of revenue required to exceed market 16 analysts' estimates, without any legitimate justification, Leung would recognize 17 and report such revenue in the Licensing Sector. (DF) 18 31 . While defendants were recognizing and reporting $113 .5 million in 19 revenues based on the expired Scientific-Atlanta agreement, defendants were 20 assuring shareholders in the Company's press releases, Forms 10-Q and 10-K, that 21 the revenues reported in the Licensing Sector were "comprised of license fees paid 22 by third-party licensees ": 23 The Technology and Licensing Sector is responsible for the 24 development, licensing and protection of intellectual property and 25 proprietary technologies . Revenues in this sector are comprised of 26 license fees paid by third-party licensees for the Company's 27 proprietary technologies and patent primarily related to video 28 recording, interactive program guides and electronic books .

-13- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 (GMST's press releases dated November 13, 2000, March 7, 2001, May 14, 2001 , 2 August 17, 2001, and November 14, 2001 ; Forms 10-Q for quarters ended 3 September 30, 2000, March 31, 2001, June 30, 2001 and September 30, 2001 ; and, 4 Form 10-K for the nine months ended December 31, 2000 . ) 5 32 . In addition, in Gemstar's earnings release on March 18, 2002, Yue n 6 assured investors that Licensing Sector revenues were "based on units shipped for 7 consumer electronics licensees," by stating: 8 The results of the Technology and Licensing Sector are largely 9 dependent on the activities of our licensees . As the revenues in this 10 sector are based on units-shipped for consumer electronics licensees 11 and per sub/per month for the service provider licensees, our 12 revenue is directly correlated to the activities of our licensees . 13 33 . At no time during the Class Period, however, did defendants disclos e 14 to shareholders that Gemstar was recognizing material amounts of revenues in the 1 5 Licensing Sector based on an expired license agreement with Scientific-Atlanta, a 16 non-licensee. Under the federal securities laws, once defendants voluntarily 1 7 disclosed that revenues reported in the Licensing Sector were "based on" an d 18 "comprised of' license fees paid by "licensees ," defendants were required to 19 disclose all material facts necessary in order to make the statements made not 20 misleading. 17 C.F.R. § 240 .1Ob-5 ("Rule 1Ob-5 ") (it is a violation of Rule lOb-5 21 to "omit to state a material fact necessary in order to make the statements made, in 22 the light of the circumstances under which they were made, not misleading") . 23 34 . Further, each of Gemstar's press releases, Forms 10-Q and 10-K 24 disseminated during the Class Period had removed Scientific-Atlanta as a 25 "licensee" of Gemstar's intellectual property, even though the Company continued 26 to recognize revenue based on the expired License Agreement . This was done 27 despite the fact that members of Gemstar's accounting and finance staff had met 28 with Yuen and Leung in late December 2000 and insisted. that Gemstar disclose in

-14- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 its press releases and SEC filings that the Company was recording revenues based 2 on the expired Scientific-Atlanta license agreement. (DF) Yuen and Leung 3 rejected their demands and decided not to make any disclosure to investors . (DF) 4 By deliberately concealing that the Licensing Sector revenues were based, in large 5 part, on revenues recognized on the expired License Agreement, defendants 6 unlawfully omitted a material fact necessary in order to make the statements mad e 7 not misleading .

8 35 . During the Class Period, Yuen and Leung also deceived Gemstar' s 9 outside auditor, KPMG, in order to further conceal their scheme . Specifically, at 10 the end of each quarter, Yuen and Leung signed management representation letters 11 that were sent to KPMG (DF ; SEC) In these management representation letters , 12 Yuen and Leung represented that Scientific-Atlanta had either verbally or in 13 writing communicated an intention to enter into a new contract, or that Scientific- 14 Atlanta had expressed a willingness to extend the terms and conditions of th e 15 expired contract. (DF, SEC) These representations were false . (VPSA; SEC) 16 After the license agreement expired, Scientific-Atlanta had never expressed any 17 intention or willingness to enter into any new license agreements with Gemstar o r 18 extend any terms or conditions of the expired License Agreement . (VPSA; SEC) 19 36 . In addition to concealing material information from press releases and 20 SEC filings and deceiving KPMG, Gemstar's recognition of revenue based on the 21 expired License Agreement violated basic revenue recognition requirements unde r 22 GAAP. Under SOP 97-2 and SAB 101, revenue may not be recognized unless four 23 basic criteria have been met : (1 ) there is persuasive evidence of an arrangement ; 24 (2) delivery has occurred or services have been rendered ; (3) the seller's price to 25 the buyer is fixed or determinable; and (4) collectibility is reasonably assured . 26 During the Class Period, there was never any agreement, nor persuasive evidence 2 7 of any agreement, between Scientific-Atlanta and Gemstar . In addition, there was 28 no fixed or determinable fee owed by Scientific-Atlanta to Gemstar, because ther e

-15- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 was no enforceable agreement between the parties . (DF) Further, no payments 2 had been received from Scientific-Atlanta since the expiration of the Licens e 3 Agreement nor had Scientific-Atlanta acknowledged any obligation to pay 4 Gemstar any license fees pursuant to the expired License Agreement . Thus, the 5 collection of the license fee from Scientific-Atlanta based on the expired Licens e 6 Agreement was not reasonably assured . (DF) In sum, defendants' recognition o f

7 I revenues based on the expired License Agreement failed to meet three of the fou r 8 basic requirements for revenue recognition under GAAP. 9 37. On November 14, 2002, following Yuen's and Leung's resignation, 10 Gemstar restated its financial results and reversed the $113 .5 million in Licensing 11 Sector revenues it previously reported based on the expired License Agreement . 12 (GMST) In its restated Form 10-K/A for the year ended December 31, 2001, 13 Gemstar admitted that the restatement and revenue reversal was required because 14 the Company had : "misapplied the collectibility criteria of SAB 101, as there was 15 insufficient contemporaneous evidence of Scientific Atlanta 's intent to pay." 16 (GMST, emphasis added .) 17 2. Non-Existent Agreement With Time Warne r 18 38 . In May 1999, Gemstar entered into an eight-year license agreement 19 I with AOL ("AOL Agreement") . (GMST) The AOL Agreement granted AOL a 20 license to Gemstar's proprietary IPG for a per subscriber monthly fee . The AOL 2 1 Agreement also granted AOL's affiliates a license to Gemstar's IPG, but required 22 that AOL provide written notice to Gemstar if AOL elected to have any affiliat e 23 covered under the AOL Agreement. (SEC) In January 2001, AOL merged with 24 Time Warner Inc. ("Time Warner"), and the merger was accomplished through th e 25 creation of a new holding company, AOL/Time Warner, that acquired AOL and 26 Time Warner as its two subsidiaries. 27 39 . From the date of the AOL/Time Warner merger through at leas t 28 December 2002, neither AOL/Time Warner nor AOL provided Gemstar with any

-16- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 II written notice stating that Time Warner should be covered under the AO L 2 1 1 Agreement. (SEC) In fact, on April 3, 2001, Gemstar received two letters from 3 AOL/Time Warner specifically stating that Time Warner was not covered under 4 the AOL Agreement. (SEC) Yuen and Leung were provided with copies of thes e 5 letters and in mid-April 2001 reviewed and discussed these letters with members o f 6 Gemstar's accounting department . (DF) Despite receiving AOL/Time Warner's 7 April 3, 2001 letters and without Gemstar having any agreement with Time 8 Warner, Leung, with approval from Yuen, made the decision to record and report 9 non-existent revenue from Time Warner. (SEC; DF) 10 40. The chart below summarizes the amount of Time Warner revenue that 11 Gemstar reported in the Licensing Sector on a quarterly and annual basis and its 12 materiality to Gemstar's reported financial results : 13 Period Amount % Sector Revenue % Sector EBITD A Q 9/30/01 5,300,000 6 .4 9.4 14 Q 12/31/01 6,000,000 7.2 10 . 1 YE 12/31/01 11,300,000 3 .5 4.9 15 Q 3/31/02 6,800,000 11 13 .5 16 41 . At no time during the Class Period did defendants ever disclose that 17 Gemstar was recognizing revenues based on a non-existent agreement with Time 1 8 Warner, a non-licensee. In fact, at the same time Gemstar was reporting over $1 8 19 million in revenues in the Licensing Sector based on the non-existent Time Warner 20 agreement, defendants were representing in Company press releases and SEC 21 filings that the revenues reported in the Licensing Sector were "based on" and 22 "comprised of' license fees paid by "licensees ." See ¶¶31-32, above. By failing 23 to disclose that a material amount of the revenues reported in the Licensing Sector 24 were based on a non-existent agreement with Time Warner, defendants unlawfully 25 and knowingly concealed a material fact necessary in order to make the statements 26 made not misleading . 27 42. To further effectuate the fraudulent scheme, Yuen and Leung also 28 deceived KPMG. Yuen and Leung signed and sent representation letters to KPMG

-17- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 I I which stated that the license revenue generated from Time Warner was bein g 2 recorded under a purported contractual obligation with AOL . (SEC) This 3 representation was false as there was never any contractual obligation for Time 4 j I Warner to pay any fees to Gemstar under the AOL agreement or any othe r 5 I agreement with AOL. (SEC) Further, Yuen represented to KPMG that executives 6 I at AOL/Time Warner had acknowledged that Time Warner was covered under th e 7 AOL Agreement. (SEC) This was also false as nobody from Time Warner had 8 ever acknowledged that Time Warner was covered under the AOL Agreement no r 9 had Time Warner paid any of the $18 .1 million to Gemstar. (SEC) 10 43 . In addition to concealing material information in press releases an d 11 SEC filings and deceiving KPMCy Gemstar's recognition of revenue based on the 12 non-existent agreement with Time Warner violated GAAP . Specifically, in 13 violation of SOP 97-2 and SAB 101, there was never any agreement, nor 14 persuasive evidence of any agreement, between Time Warner and Gemstar. In fact, 15 AOL had informed defendants that Time Warner was not covered under the AOL 16 Agreement. Further, Time Warner had not paid any license fees to Gemstar o r 17 acknowledged that any amounts were due to Gemstar, thus, collection from Tim e 18 Warner was not reasonably assured . (SEC) 19 44 . Following the resignation of Yuen and Leung, Gemstar restated its 20 prior reported financial results and reversed the $18 .1 million of revenue it 21 recognized based on the non-existent agreement with Time Warner . (GMST) 22 Gemstar admitted in its restated Form 10-K/A for the year ended December 31, 23 2001, that the reversal of this revenue was required because the Company had 24 violated GAAP at the time the revenue was recorded : "The Company determined 25 that. due to the insufficient evidence of intent to pay under SAB No. 101, these 26 revenues should not be recoy'nized. "

27 3. Non-Existent Modification To DirecTV Licens e 28 45 . Thomson SA ("Thomson") manufactures consumer electronics,

-18- SECOND AMENDED CLASS ACTION COMPLAINT Master File Nn 02-2775-MRP (PT .AY) 1 11 including DirecTV satellite units . In 1999, Thomson entered into a licens e 2 agreement with Gemstar to incorporate Gemstar's IPG technology into its DirecTV 3 units ("DirecTV License") . Pursuant to the terms of the DirecTV License, 4 Thomson paid Gemstar $9.00 for each DirecTV unit sold. (SEC) In return, 5 Gemstar paid Thomson a market development fund ("MDF") of $4 .00 for each 6 DirecTV unit sold . (SEC) At the end of 2000, however, Thomson and Gemstar 7 disagreed on the amount of cash Thomson owed Gemstar . Yuen met with 8 Thomson representatives and agreed to settle the payment dispute, but the terms of 9 the DirecTV License remained unchanged . (SEC) 1 0 46. Following these negotiations, Yuen informed Leung that during his 11 negotiations with Thomson representatives, Thomson had agreed to alter 12 Gemstar's MDF payments to a platform fee of $4 .00 per unit and also agreed. to 13 pay Gemstar an additional $2 .80 per unit in IPG advertising . (SEC) This was 14 false. Thomson had never agreed to alter the terms of the DirecTV License no r 15 any aspect of the MDF payment terms set forth in the DirecTV License . (SEC) 16 47 . Yuen put Leung in charge of the placement and timing of all Thomson 17 IPG advertising and the recognition of all revenue associated with the non-existen t 18 modified agreement with Thomson. (SEC) Leung instructed Gemstar's IPG staff 19 to run Thomson advertising on the Company's IPG during 2001 without 20 confirming the purported modification with anyone at Thomson or receiving any 21 proof of the purported modification. (DF) 22 48 . Prior to 2001, all revenues and expenses recorded in connection wit h 23 the DirecTV License were recognized in the Licensing Sector. (SEC) This 24 changed, however, in early 2001, when Yuen instructed Leung to change Gemstar's 25 accounting of the revenues generated from the DirecTV License to enable Gemstar 26 to report increased advertising revenues in the Interactive Sector . (SEC) 27 Specifically, in early 2001, Yuen instructed Leung to record $9 .00 per unit as 28 Licensing Sector revenue, $4.00 per unit as Licensing Sector expense, and $2 .80

-19- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 per unit in advertising revenue in the Interactive Sector . (SEC) As a result of the change, rather than reporting only $9.00 per unit in total revenue per the terms of

the DirecTV License - as done by Gemstar in 2000 - Leung caused Gemstar to report $11 .80 per unit in total revenues for the same DirecTV units sold, an increase in revenues of approximately 31% . (SEC). At no time, however, did 6 I defendants ever disclose to shareholders that Gemstar had recorded Interactiv e 7 Sector revenues based on a non-existent modification to the DirecTV License . By 8 failing to disclose this material fact, defendants misled shareholders regarding th e 9 financial performance of the Interactive Sector. 10 49 . In early 2002 and in connection with Geinstar's 2001 annual audit , 11 I KPMG sent a confirmation letter to Thomson to confirm that it owed $12 .42 5 12 million in advertising fees to Gemstar, which included the $10 .1 million in IPG 13 advertising fees that Gemstar had reported based on the non-existent modification 14 to the DirecTV License. (SEC) Thomson refused to sign the confirmation becaus e 15 it was under no contractual obligation to pay advertising fees pursuant to the terms 16 of the DirecTV License . (SEC) Only after Yuen negotiated a settlement with 17 Thomson and signed a rider to the DirecTV License, did Thomson agree to sign the 1 8 confirmation. (SEC) 19 50 . The $10 .1 million in advertising revenue recorded by Gemstar based 20 on the non-existent modification to the Direct-TV License was material t o 21 Gemstar's financial statements as it represented approximately 10% of reporte d 22 Interactive Sector revenues for 2001 . 23 51 . In addition to concealing material information in press releases an d 24 SEC filings, Gemstar's recognition of revenue based on the non-existen t 25 modification to the DirecTV License violated GAAP. Specifically, in violation of 26 SOP 97-2 and SAB 101, there was never any agreement, or persuasive evidence of 27 any agreement, between Thomson and Gemstar relating to Thomson's purchase of 28 IPG advertising from Gemstar at $2 .80 per unit. (SEC) Following the resignation

-lu- NtUUNU AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 of Yuen and Leung, Gemstar restated its financial results and reversed the $10 .1 2 1 million in Interactive Sector revenues it had recognized based on the non-existent 3 I modification to the DirecTV License. (GMST) 4 4 . Non-Existent TV Guide Award Show Advertising 5 52 . In February 2000, before the merger between TV Guide and Gemstar, 6 TV Guide agreed to purchase from Gemstar $57,291 in advertising on Gemstar's 7 I IPG to promote TV Guide's March 5, 2000 airing of the 2000 TV Guide Awards 8 I Show ("Awards Show"). (SEC) TV Guide agreed to buy IPG advertising to run 9 beginning three days before the Awards Show was to air and continuing for one 10 week after the show. (SEC) From February 29 to March 15, Gemstar ran 11 advertisements on the IPG pursuant to its agreement with TV Guide . (SEC) In 12 April 2000, Gemstar sent TV Guide an invoice for $57,291 for the Awards Show 13 IPG advertising, complete with an "affidavit of airing ." (SEC) On May 12, 2000, 1 4 TV Guide paid Genstar $57,291 and Gemstar reported this amount as revenue in 15 its financial statements in its Form 10-K for the year ended March 31, 2000 . 16 (SEC) 17 53 . In early August 2000, Leung, with approval from Yuen, instructed th e 18 Director of Finance to record $1 .3 million in revenue in the books and records o f 19 Geinstar for the quarter ended June 30, for non-existent advertising for the Awards 20 Show. (DF; SEC) Also in early August 2000, TV Guide personnel were informe d 21 that TV Guide would be receiving an invoice from Gemstar for the June 30 quarter, 22 in the amount of $1 .3 million, for non-existent Awards Show advertising . (DF, 23 SEC) In anticipation of receiving the invoice, TV Guide's comptroller wa s 24 instructed to record a $1 .3 million expense in TV Guide's books . (SEC, DF) 25 54 . On August 14, 2000, Gemstar filed its Form 10-Q for the quarter 26 ended June 30, 2000, and included $ 1 .3 million in advertising revenue from TV 27 Guide for the Awards Show. (SEC ; DF) 28 55 . TV Guide received an invoice dated July 31, 2000 from Gemstar, i n

-21- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 the amount of $1 .3 million, stamped as received on August 24, 2000, which

2 purported to be for "advertising thru June 30, 2000 ." (SEC) Although the invoice 3 was false and did not reflect any advertising that TV Guide had purchased from

4 Gemstar, on August 29, 2000, TV Guide paid Gemstar $1 .3 million. (SEC) 5 56 . The Awards Show revenue was material to Gemstar's financial results . 6 For the nine month period, Gemstar reported Interactive Sector revenues of $20 . 1 7 I million. (GMST) The $1 .3 million in Awards Show revenue was 6 .5% of the 8 Interactive Sector revenue during that period. (GMST). Gemstar's reporting of the 9 $1 .3 million in Awards Show revenue violated GAAP because it was based on a 10 fraudulent invoice. In March 2003, Genstar reversed the recognition of the 1 1 revenues based on the non-existent Awards Show advertising . 12 B. Concealing And Improperly Accountin g 13 For The Fantasy Sports' Barter Transactio n 14 57. Fantasy Sports Inc. ("Fantasy Sports"), a small private company with

15 approximately ten employees, provided on-line fantasy sports services . In early 16 2001, Fantasy Sports was nearly insolvent, its liabilities far outweighed its assets,

17 and its 2001 projected revenues were less than $800,000 . (CC) 18 58. In March 2001, Yuen, Leung, Toby DeWeese (Gemstar's Vice 19 President of Corporate Development) and Dave Barber (Gemstar's Manager o f 20 Corporate Development) met with Patrick Hughes (CEO of Fantasy Sports) an d 21 Bill Kunkin (Director of Fantasy Sports) . (CC) During this meeting, Yuen and 22 Leung proposed that Gemstar would purchase Fantasy Sports for approximately $ 6 23 million cash. (CC) Based on Fantasy Sports' poor financial condition, Hughes an d 24 Kunkin agreed to sell Fantasy Sports to Gemstar for approximately $6 million 25 cash. (CC) 26 59 . In early April 2001, Yuen, Leung, DeWeese and Barber from Gemstar 27 and Hughes and Kunkin from Fantasy Sports, together with Corporate Counsel, 28 negotiated an agreement known as the "Purchase Agreement." (CC) The Purchase

-22- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I I Agreement provided that Gemstar would purchase Fantasy Sports and its 2 11 intellectual property for approximately $6 million cash. The purchase agreement 3 was approved by Hughes and Kunkin. (CC) 4 60 . However, in late April 2001, Yuen, DeWeese and Barber informe d 5 I Hughes and Kunkin that Gemstar refused to execute the Purchase Agreement 6 unless Fantasy Sports also agreed to enter into a separate agreement, known as the 7 "Pre-Paid Advertising Agreement." (CC) The Pre-Paid Advertising Agreement 8 provided that Gemstar would increase the purchase of Fantasy Sports to $20 .75 9 million - or $14 .75 million higher than the $6 million cash price that Fantasy 10 Sports had offered to sell itself - provided that in return, Fantasy Sports agreed to 11 purchase $20 million in IPG advertising from Gemstar . (CC) Accordingly, no 12 money would be exchanged in the barter transaction . Rather, the $20 million was 13 simply a fiction created by inflating the acquisition price of Fantasy Sports to 14 $20 .75 million to enable Gemstar to record $20 million in Interactive Sector 15 revenues. This type of artificial inflation of revenues is commonly referred to as a 16 I "round-trip" transaction . 17 61 . When Hughes and Corporate Counsel asked Yuen why Gemsta r 18 wanted to increase the purchase price of Fantasy Sports to $20 .75 million when 19 Fantasy Sports offered to sell itself for $6 million in cash, Yuen responded that the 20 sole reason was to enable Gemstar to recognize $20 million in IPG advertising

21 revenues from the transaction. (CC) Because Fantasy Sports did not have to make 22 any out-of-pocket payments to Gemstar for the IPG advertising, Hughes consented 23 to the terms of the Pre-Paid Advertising Agreement . (CC) 24 62. On June 28, 2001, Fantasy Sports and Gemstar executed the Purchase 25 Agreement and the Pre-Paid Advertising Agreement in which Gemstar: 26 (1) acquired Fantasy Sports' intellectual property for $20 .75 million, of which 27 $750,000 was paid in cash and $20 million was to be paid in the form of IP G 28 advertising; and (2) paid $2 million to acquire a 2-year option to purchase Fantas y

-23- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Sports for $3 million. (GMST) 2 63 . Yuen and Leung personally reviewed, negotiated and approved the 3 final terms and structure of Gemstar's barter transaction with Fantasy Sports. 4 (CC, SEC) Leung was in charge of recording and repo rting the revenues in 5 connection with the Fantasy Sports' barter transaction . (SVP; SEC) During 2001 , 6 Leung recognized $20 .0 million in Interactive Sector revenues based on th e 7 Fantasy Sports' barter transaction, or over 19% of reported Interactive Sector 8 revenues. (SVP; GMST) The chart below shows the amount of revenue reported 9 I and its relationship to Gemstar's Interactive Sector results, during 2001 : 10 Period Amount % Sector Revenue QE 3/31/01 1,921,000 13 . 1 11 QE 6/30/01 4,000,000 19.5 QE 9/30/01 7,001,000 23 .9 12 QE 12/31/01 7,077,000 19. 1 YE 12/31/01 19,999,000 19.7 13 14 64 . On March 18, 2002, Gemstar announced that the Interactive Secto r 15 had recorded its "first profitable quarter" for the quarter ended December 31, 2001 . 16 (GMST) In truth, had defendants not recorded revenues based on the inflate d 17 Fantasy Sports' barter agreement, the Interactive Sector would have reported a loss 18 of over $3 million. (GMST) 19 65 . At no time during the Class Period did defendants ever disclose t o 20 shareholders that a material amount of the revenues reported in the Interactiv e 21 Sector were based on revenues recognized on an inflated ba rter transaction with 22 Fantasy Sports . In addition to concealing this material information from press 23 releases and SEC filings , Gemstar violated GAAP. GAAP requires that a 24 corporation that engages in a nonmonetary ba rter transaction disclose in its 25 financial statements "the nature of the transactions , the basis of accounting for the 26 assets transferred , and the gains or losses recognized on assets transfers." 27 APB 29¶28 (Accounting for Nonmonetary Transactions ) Further, GAAP instructs 28 that: "Entities should disclose the amount of revenue and expense recognized from

-24- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 advertising barter transactions for each income statement period presented ." 2 I EITF 99-17¶8 (Accounting for Advertising Barter Transactions) By concealing 3 the Fantasy Sports' barter transaction in the Company's financial statements, 4 defendants violated GAAP and misled shareholders regarding Gemstar's financia l 5 performance. 6 66 . In addition, under GAAP, Gemstar was required to account for th e 7 I nonmonetary barter transaction based on the fair value of the assets exchanged . 8 APB 29¶18 . GAAP instructs that if one of the parties in a nonmonetary transaction 9 could have elected to receive cash instead of the nonmonetary asset, the amount of 10 the cash can serve as the best evidence of the fair value of the nonmonetary asset 11 exchanged. APB 29T25 . Applying GAAP, the maximum fair value of Fantasy 1 2 Sports was $ 6 million, the amount Fantasy Spo rts offered to sell itself to Gemstar. 13 67. Further confirming the fraudulent nature of this transaction, in mid- 14 June 2001, while Fantasy Sports was still reviewing the terms of the draft 15 I agreements, Yuen and Leung contacted Hughes and informed him that Gemsta r 16 had already recognized and reported approximately $1 .9 million in Interactive 17 Sector revenues for the quarter ended March 31, 2001 based on the unexecuted 18 agreement between Gemstar and Fantasy Sports . (CC). The recognition of these 19 revenues accounted for over 13% of Gemstar's revenues reported in the Interactive 20 Sector for the quarter. (GMST) Under GAAP, Gemstar was strictly prohibite d 21 from recognizing revenues without persuasive evidence of an arrangement with 22 Fantasy Sports. SAB 101, SOP 97-2 . At the time Gemstar recorded and reported 23 these revenues, the Company did not have persuasive evidence of any arrangement 24 with Fantasy Sports nor had Fantasy Sports acknowledged any obligation to pay 25 Gemstar for IPG advertising . 26 68 . On November 11, 2002, KPMG stated in a letter to the SEC tha t 27 Gemstar's audit committee had described the history of the negotiations leading t o 28 the execution of the barter transaction and "it could be inferred from the Audit

-25- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 Committee 's description of the results of its investigation, that the transaction 2 was fraudulent." (KPMG, emphasis added) . The next day, on November 14 , 3 2002, Gemstar reversed the $20 million in revenues recognized based on the 4 Fantasy Sports' barter transaction, including the $1 .9 million in revenues 5 recognized before the agreement was executed . Gemstar admitted in its restated 6 Form 10-K/A for the year-ended December 31, 2001, that at the time the Company 7 recognized revenues based on the barter transaction it violated GAAP because the 8 intellectual property Gemstar received from Fantasy Sports "was not appraised" 9 nor did Gemstar find "sufficient contemporaneous evidence to justify the $20.75 10 million valuation for the intellectual property." (GMST) 11 C. Accelerated Recognition Of Revenue Over Five 12 Quarters From Up-Front Payment On Eight-Yea r 13 AOL License Agreement In Violation O f 14 Gemstar 's Revenue Recognition Policy 1 5 69 . In May 1999, Gemstar and AOL entered into an eight-year IP G 16 licensing agreement (the AOL Agreement). (GMST) The agreement provided for 1 7 AOL to have an eight-year license to use Gemstar 's IPG technology, with Gemstar 18 providing technology and support services to AOL . (SEC) AOL agreed to pay 1 9 Gemstar an up-front fee of $25 million, a monthly fee for each AOL subscribe r 20 who accessed the IPG through AOL, and a share of AOL's advertising revenu e 21 from the IPG (SEC) 22 70. In November 1998, while negotiating the AOL Agreement, Gemstar 23 and AOL entered into a Software Loan Agreement. (SEC) Under that agreement, 24 AOL made a $1 .5 million payment to Gemstar, with the right to credit that $1 .5 25 million against any future payments due under the anticipated agreement . (SEC) 26 Gemstar recognized the $1 .5 million payment ratably over the three quarters ended 2 7 December 31, 1998; March 31, 1999 ; and June 30, 1999. (SEC) In May 1999, 28 AOL paid Gemstar $23 .5 million for the up-front fee of $25 million, less the $1 . 5

-26- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 million credit provided for by the 1998 Software Loan Agreement . (SEC) 2 71 . At the direction of Leung, rather than recording and repo rting the 3 $23 .5 million up-front fee over the ei'ht-year term of the AOL Agreement, 4 Gemstar recorded and reported the up-front fee over five quarters, beginning with 5 the quarter ended June 30, 1999 and continuing through the quarter ended June 30 , 6 2000. (DF, SEC) The revenue from the AOL Agreement was material in each 7 fiscal period in which it was recognized and recorded : 8 Fiscal period AOL LPG Revenue % of Total Revenue % of Incom e Q 3/31/2000 5,900,000 7 13 .7 9 Y 3/31/2000 21,600,000 8 .9 17.3 Q 6/30/2000 1,900,000 3 6 .6 10 11 72 . The accelerated recording of the up-front fee over five quarters 12 violated Gemstar's own disclosed policy for recognition of up-front fees from 13 long-term license agreements . (SEC) In Gemstar's Forms 10-Q for the quarter s 14 ended June 30, 1999; September 30, 1999 ; December 30, 1999 ; and June 30, 2000, 15 and Form 10-K for the year ended March 31, 2000, defendants disclosed that : 16 "Revenues from up-front license fees and annual license fees are recognized 17 ratably over the specified term of the particular license." This disclosure was 18 false as evidenced by Gemstar's accelerated reporting of the AOL up-front fee . 19 Further, at no time during the Class Period did Gemstar, Leung or Yuen disclose to 20 shareholders that Gemstar was recognizing material amounts of revenue from the 21 AOL Agreement by accelerating the recognition of the up-front fee contrary to 22 Gemstar's own revenue recognition policy . (GMST) 23 73 . In addition to concealing material information from SEC filings and 24 I violating the Company's own revenue recognition policy, Gemstar's accelerate d 25 recognition of revenues from the AOL Agreement violated GAAP. Under SOP 97- 26 2, revenue from the initial fee should have been recorded over the eight -year life of 27 the contract, which was consistent with Gemstar's own revenue recognition policy . 28 After Yuen and Leung resigned as officers of Gemstar, the Company reversed the

-27- SECOND AMENDED CLASS ACTION COMPLAIN] Master File No . 02-2775-MRP (PLAx) 1 I I improper recognition of revenue based on the AOL up-front fee and admitted in its 2 I I restated Form 10-K/A that "such license fees should be recognized over the term 3 of the agreement on a straight-line basis because of the Company 's continuin ' 4 performance obligations." (GMST) 5 D. Concealing And Improperly Accounting Fo r 6 Transactions With Undisclosed Advertising Purchase s 7 1 . Sale Of WGN TV Signal With 8 Concealed Advertising Purchase 9 74. The Tribune, based in Chicago , operates WGN TV station. Pursuant 10 to a 1990 agreement , Tribune provided Gemstar with the WGN TV signal for 11 exclusive nationwide distribution. (GMST) In August 2000, Gemstar offered to 12 sell the rights to the WGN signal back to the Tribune for approximately $30 0 13 million. (SEC) 14 75 . On or about November 21, 2000, Gemstar sent a proposal to th e 15 Tribune for the sale of the WGN rights for $224 million, of which 50% was to b e 16 paid by a five-year, $112 million advertising commitment by Tribune, which 17 advertising would be controlled by Gemstar in its sole discretion . (SEC) Tribune 18 responded with a counter-proposal that included an advertising commitment, whic h 19 was presented to Gemstar's Board of Directors . (SEC) 20 76. In early January 2001, Gemstar and Tribune had reached an 21 agreement in principle for the sale and purchase of the WGN signal business, 22 which included as a part of the transaction an advertising commitment by Tribune, 23 and the purchase of certain stock by Tribune . (SEC) Gemstar requested that 24 Tribune create two term sheets, one for the purchase of advertising, and one for the 25 stock purchase, to eliminate all "linkage" between the advertising deal and the 26 stock purchase, with the understanding that the advertising deal would never be 27 executed without the other deal. (SEC) Gemstar subsequently sent Tribune an 28 I email informing Tribune that Gemstar had " eliminated all prior email references t o

-28- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 a single document . . . so we have a clean trail on our records for tax and audit ~ 2 purposes with the two separate transactions." (SEC) 3 77. During the course of negotiations, Gemstar included a provision in the 4 agreement prohibiting both parties from making public announcements relating to 5 the transaction, with limited exceptions. (SEC) The final agreement was 6 structured so that Tribune could not disclose the existence of the advertising 7 agreement. (SEC) At one point during the negotiations, Gemstar informed 8 Tribune that the non-disclosure provision was a "deal breaker" and stated tha t 9 Gemstar would not enter into a deal at the agreed-upon price if Tribune insisted on 10 announcing the specific terms of the transaction . (SEC) 11 78 . In or about April 2001, Gemstar and Tribune finalized a transaction t o 12 end Gemstar's distribution of the WGN signal. (SEC) The final transaction 13 included two agreements : one in which Tribune paid $106 million in cash to 14 Gemstar for the WGN signal, and a second in which Tribune committed to 15 purchase $ 100 million of advertising from Gemstar over a period of six years . 16 (SEC) 17 79 . The advertising agreement provided that Tribune would pay Gemstar 18 $100 million over six years, whether or not Tribune used the advertising . (SEC) It 19 further provided that Gemstar had sole discretion over the timing and placement of 20 the advertising, provided that Gemstar could not run more than 50% of any year' s 21 advertising in any one quarter, and at least 15% of the advertising had to be run in 22 TV Guide magazine . (SEC) The final agreement also provided that Tribune could 23 not disclose the existence of the advertising commitment except as required by law . 24 I (SEC) 25 80. Yuen and Leung were aware of the relationship between the sale of 26 WGN and Tribune's advertising purchase . (SEC) Yuen was informed of the 2 7 structure of the transaction and suggested modifications to the deal as it was bein g

281 I negotiated. (SEC) Leung received copies of the final transaction documents

-29- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 (SEC) Leung also controlled the advertising that Gemstar ran for Tribune so that 2 she could ensure that Gemstar met its quarterly earnings estimates . (SEC) 3 81 . Between the second quarter and the fourth quarter of 2001, Gemsta r 4 11 recorded a total of $12 million in revenues in the Interactive Sector based on th e 5 WGN sale agreement, which increased Interactive Sector revenues by 11 .9% . 6 11 (GMST) The amount of Interactive Sector revenue recognized in connection with 7 Tribune's advertising purchase is shown in the chart below : 8 Period Amount % Sector Revenue Q 6/30/01 4,000,000 19. 5 9 Q 9/30/01 5,000,000 17.1 Q 12/31/01 3,000,000 8. 1 10 YE 12/31/01 12,000,000 11. 9 1 1 82 . In Gemstar's SEC filings and press releases, defendants failed t o 12 disclose that Gemstar was recognizing revenues in the Interactive Sector based on 1 3 the sale of the WGN signal to the Tribune . In fact, the only disclosure in 14 Gemstar's SEC filings during the Class Period that referred to the sale of the WGN 15 signal was the following disclosure in Gemstar's Forms 10-Q for the quarter s 16 ended March 31, June 30 and September 30, 2001 : 17 WGN Superstation Transactio n 18 In April 2001, the Company sold the business that distribute s 19 the WGN Superstation signal for approximately its net book value . 20 Accordingly, no gain or loss was recognized as a result of the 21 transaction. 22 83 . Defendants failed to disclose the material fact that the sale of the 23 WGN signal included a $ 100 million IPG advertising purchase by Tribune . By 24 failing to make this material disclosure, Gemstar's shareholders were misled

25 I regarding the terms of the WGN transaction and its material impact on the repo rted 26 I financial results of the Interactive Sector. 27 84. After Yuen and Leung resigned from Gemstar, the Company admitte d 28 that it violated GAAP and reversed the recognition of $26 million in Interactiv e

-30- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Sector revenue and re-allocated it to the sale of the WGN signal . (GMST) 2 Specifically, in the restated Form 10-K/A for the year ended December 31, 2001, 3 Gemstar admitted that it not only violated GAAP, but also the Company's internal 4 revenue recognition policies : "Because the transaction included the sale of assets 5 and an advertising revenue commitment, this multiple-element transaction was 6 covered by both APB 16, `Business Combinations' and our revenue recognitio n policy on multiple-element arrangements." (GMST) s 2. Motorola Settlement With 9 Concealed Advertising Purchase 10 85 . In 1992, the predecessors of Motorola and Gemstar entered into a 11 license agreement that permitted Motorola to implement Gemstar's IPG 12 technology. (GMST) In May 1997, Gemstar initiated an arbitration proceeding 13 against Motorola alleging breach of the 1992 agreement and misappropriation of 14 trade secrets . (GMST) In November 1998, Gemstar also filed a paten t 15 infringement suit against Motorola . (GMST) In the fall of 1999, Yuen served as 16 the principal negotiator in attempting to settle the arbitration and litigation matters 17 against Motorola . (SEC) 18 86 . In March 2000, Gemstar won a binding arbitration against Motorola . 19 (GMST) In May 2000, Motorola filed an action to set aside the arbitration award . 20 Gemstar counterclaimed in June 2000. (GMST; SEC) Yuen supervised the 21 negotiations to resolve all pending litigation against Motorola. (SEC) Between the 22 fall of 1999 through August 2000, the negotiations did not include a provision for 23 Motorola to purchase any advertising from Gemstar. (SEC) 24 87. In August 2000, however, Yuen informed the persons participating in 25 the Motorola negotiations, including Leung, that a portion of the settlement should 26 include a one-time, non-refundable fee that could be used by Motorola as prepaid 27 advertising. (SEC) Motorola agreed to include an advertising component . (SEC) 28 During the negotiations, Gemstar asserted that it should have final discretion ove r

-31- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 timing and placement of any advertising . (SEC) 2 88 . In October 2000, Motorola and Gemstar reached a final settlement . 3 (SEC) Under the settlement, Motorola agreed to pay $188 million to Gemstar, 4 which included a $17.5 million advertising purchase on Gemstar's IPG ("Motorola 5 Settlement"). (GMST) Pursuant to the Motorola Settlement, the IPG advertisin g 6 was to run over the course of four years. (SEC) While Gemstar had to coordinate 7 the timing and placement of the advertising with Motorola, Gemstar retained final 8 discretion as to timing and placement of the advertising . (SEC) This allowed 9 Gemstar to determine when the advertising would be aired, and on which of 10 Gemstar's various platforms, such as the IPG or TV Guide magazine. (SEC) Thus, 11 Gemstar had the ability to air the advertising on particular platforms and in certain 12 quarters to increase revenues, as it desired . (SEC ) 13 89 . Gemstar, however, ran all $17 .5 million of IPG advertising in just 14 over a year - between the quarter ended March 31, 2001 and the quarter ended 15 March 31, 2002 - rather than over four years as provided by the settlement 16 agreement. (SEC) Between the first quarter and the. fourth quarter of 2001, 17 Gemstar recorded a total of $12 .43 million in revenues in the Interactive Sector 18 based on the Motorola Settlement, which increased Interactive Sector revenues b y 19 14 .2% . (GMST) The revenue was material to Gemstar's financial results, as 20 demonstrated by the chart below: 21 Period Amount % Interactive Sector Revenue Q 3/31/01 2,930,000 19.9 22 Q 6/30/01 4,500,000 21 .9 Q 9/30/01 5,000,000 17. 1 23 Q 12/31/01 2,000,000 5 .4 YE 12/31/01 14,430,000 14 .2 24 Q 3/31/02 3,070,000 13 .9 25 90 . Yuen instructed Leung that all Motorola advertising was to run on th e 26 IPG and would be recorded as Interactive Sector revenue . (SEC) Leung 27 determined each quarter the dollar amount of the advertising run by Gemstar unde r 28 the Motorola agreement, and her staff then determined the number of impression s

-32- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 to run on the IPG platform during the period . (SEC) At the end of each quarter, 2 Leung and her staff determined the amount to invoice Motorola for IPG 3 advertising . (SEC) Yuen and Leung, however, falsely represented to KPMG in 4 management representation letters that the advertising ran in connection with th e 5 Motorola Settlement had been requested by Motorola, when it had not . (DF) 6 91 . In Gemstar's SEC filings and press releases, defendants conceale d 7 that the Company was recognizing revenues in the Interactive Sector based on th e 8 Motorola Settlement . On October 16, 2000, Gemstar issued a press release statin g 9 that the Company had reached a settlement with Motorola, but concealed that the 10 settlement included an advertising purchase . Specifically, Gemstar disclosed in th e 11 press release that it had entered into a "long-term make-and-sell license agreement 12 for Gemstar-TV Guide's IPG technology and patents to interface with GMST's 1 3 IPG's." The press release further stated: "Specific terms of the agreement are 14 1 confidential but include payments to Gemstar-TV Guide International, Inc . relating 15 to the settled litigations as well as license fees going forward." (GMST) The press 16 release failed to disclose the material fact that the settlement agreement included a 17 $17 .5 million prepaid advertising commitment . 18 92 . Similarly, defendants disclosed in Gemstar's 2000 Form 10-K that , 19 "[T]he Company received approximately $190 million relating to the settled 20 arbitration and litigation matters as well as future license fees ." (GMST) As with 21 the October 16 press release, defendants failed to disclose that a material amount 22 of the settlement proceeds consisted of an advertising purchase by Motorola . By 23 failing to disclose material information regarding the Motorola Settlement, 24 Gemstar's shareholders were misled regarding the reported financial results of the 25 Interactive Sector. 26 93 . After Yuen and Leung resigned from Gemstar, the Company admitted 27 that it had improperly recognized $17 .5 million in Interactive Sector revenues 28 based on the Motorola Settlement in violation of GAAP. In Gemstar ' s restated

-33- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Form 10-K/A for the year ended December 31, 2001, Gemstar admitted that : "The 2 Company has determined that the advertisement component and the licensing 3 component were subject to multi-element accounting under SAB 101, and that ~ 4 the $17.5 million in advertising payments should be combined with th e 5 technology licensing component and recognized as licensing revenue over th e 6 10 year term of the license agreement." (GMST)

7 3. eBooks Transaction With Concealed Advertising Purchase 8 94 . In 1999, Thomson entered into a $25 million five-year licens e 9 I agreement with Gemstar to produce eBooks, an electronic device that allows user s 10 to download and read material on a handheld device . Thomson manufactured 11 eBooks and Gemstar provided the content and technology . In late 2000, Thomson 12 began selling eBooks. By mid-2001, however, Thomson decided to exit eBook s 13 due to disappointing sales. (SEC) Gemstar agreed to purchase Thomson's 14 remaining eBooks inventory and restructure the license agreement . (SEC) 1 5 95 . Yuen negotiated the restructuring of the eBooks license agreement . 16 (SEC) In late November 2001, Yuen drafted an agreement providing that Gemstar 1 7 would reduce Thomson's license fee from $25 million to $20 million provided that 18 Thomson agreed to purchase $20 million in IPG advertising from Gemstar . (SEC) 19 In return, Gemstar agreed to pay Thomson $20 million in market development 20 funds ("MDF"). (SEC) Thus, by restructuring the eBooks license agreement, 21 Gemstar created a $20 million MDF obligation for the sole purpose of providing 22 $20 million to Thomson to purchase an equal amount of IPG advertising . No 23 money ever changed hands and the MDF obligation was simply fabricated in order 24 to artificially increase the reported revenues in Gemstar's Interactive Sector . In 25 early 2002, Gemstar and Thomson memorialized the transaction . (SEC) 26 96 . The revenue from this transaction was material to Gemstar's financial 27 statements . In the fourth quarter of 2001, Gemstar recorded and reported 28 I approximately $2 .2 million in revenue from the eBooks inventory transaction ,

-34- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I which was approximately 7.7% of Gemstar's Interactive Sector revenue. (GMST) 2 97. Leung was personally responsible for recording all revenues i n 3 connection with the restructuring of the eBooks license agreement . (SVP ; SEC) . 4 At no time, however, did defendants ever disclose to shareholders that a material

5 I amount of revenues reported in the Interactive Sector for the fourth quarter of 200 1 6 resulted from the eBooks transaction with Thomson . By concealing this material 7 information, defendants misled shareholders regarding the financial performance 8 of Gemstar's Interactive Sector. 9 98 . In addition to concealing material information regarding the eBooks 10 transaction from press releases and SEC filings, Gemstar's accounting for th e 11 transaction violated GAAP. Gemstar's creation of the MDF obligation solely for 12 the purpose of providing funds for Thomson to purchase a corresponding amount 1 3 of IPG advertising from Gemstar violated CON 2¶160 and SAS 69 . After the 14 resignation of Yuen and Leung, Gemstar reversed the Interactive Sector revenues 15 recognized in connection with the eBooks transaction. 16 4. Diverting Revenues Earned By The Media Sector 17 And Reporting These Revenues In The Licensing Secto r 1 8 99 . In the second half of 2001, defendants misled investors regarding the 19 financial performance of the Interactive Sector by diverting $5 .6 million in Media 20 Sector revenues to the Interactive Sector. (MM) 21 100 . The Media Sector generates revenues from print advertising in th e 22 TV Guide magazine. (GMST) To market and promote Gemstar's IPG advertising, 23 Yuen offered customers who paid for print advertising an equal amount of fre e 24 advertising on Gemstar's IPG (MM; SEC) This free IPG advertising was known 25 at Gemstar as a "free rotation" on the IPG. (MM) 26 101 . Prior to the end of the third quarter of 2001, Yuen instructed Leung 27 that with respect to all customers who paid for print advertising and received free 28 IPG advertising, Gemstar should recognize the print advertising revenues a s

-35- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRPPLAx) 1 Interactive Sector revenues, rather than as Media Sector revenues . (MM) Yuen 2 informed Gemstar's advertising department that the revenue switch was imperative 3 because the Interactive Sector had to be "force fed" advertising revenues from th e 4 I TV Guide magazine. (MM) 5 102. Leung supervised the preparation of customer invoices and accounting 6 for these transactions. (SVP, MM) To conceal the revenue switch from KPMG , 7 Leung directed Gemstar's financial staff to send invoices to customers indicatin g 8 an amount due for print advertising as well as an amount due for IPG advertising, 9 even though Gemstar had given the IPG advertising to its customers for free . 10 (MM) After these invoices were sent to customers, Yuen instructed Gemstar' s 11 accounting staff to switch the recognition of the print advertising revenues from the 12 Media Sector to the Interactive Sector. (MM; SEC) 13 103 . The $5 .6 million switch from the Media Sector to the Interactiv e 14 Sector increased revenues in the Interactive Sector by 5 .5% in 2001 . (GMST) 15 Gemstar recorded this amount as Interactive Sector revenue even though: (1) the 16 advertisers had already committed to purchase print advertising ; (2) Gemstar gave 17 the advertisers an equal amount of IPG advertising for free ; and (3) Gemstar 18 shifted the revenue from the Media Sector to the Interactive Sector by invoicin g 19 the advertisers for the IPG and print advertising, but recording the revenue only as 20 IPG advertising revenue . (MM) Further, at no time during the Class Period di d 21 defendants ever disclose that a material amount of the reported Interactive Sector 22 revenues were based on revenues generated from print advertising from the 23 TV Guide magazine . By failing to disclose this material fact, defendants misled 24 investors regarding the financial performance of the Interactive Sector . 25 104 . Following Yuen's and Leung's resignation from Gemstar, th e 26 Company restated the $5 .6 million in revenues recognized in the Interactive Sector 27 and reclassified these revenues to the Media Sector. In its restated 2001 Form 10- 28 K/A, Gemstar admitted it violated GAAP : "The Company has determined that

-36- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAN:) 1 11 these revenues should be reclassified as revenues of other sectors, primarily 2 Media and Services, to more accurately reflect the substance of these 3 transactions and to comply with multi-element accounting principles under 4 SAB 101 ." (GMST) 5 VII. MISREPRESENTATIONS AND OMISSIONS 6 IN SEC FILINGS AND PRESS RELEASE S 7 105 . In addition to the false and misleading statements and omission s 8 detailed above, Lead Plaintiffs set forth below each of defendants' fals e 9 representations and omissions in SEC filings and press releases issued during the 10 Class Period and explains why each representation was materially false and 11 misleading when made . 12 A. Quarter And Fiscal Year Ended March 31, 200 0 13 106. On May 31, 2000, after the market closed, Gemstar announced its 14 financial results for the quarter and year-ended March 31, 2000 . For the quarter 15 ended March 31, 2000, the Company reported revenues of $84 million, operating 16 income of $39.5 million, net income of $27 .3 million and net income per share o f 17 $0.11 . The Company announced that compared with the same quarter of the prior 18 year its financial results reflected "an increase of 53% in revenues, 81% increase in 19 operating income, 95% increase in net income and 89% increase in dilute d 20 earnings per share." For the year-ended March 31, 2000, Gemstar reported 21 revenues of $241 .4 million, operating income of $110 .9 million, net income of 22 $81 .3 million and net income per share of $0 .33 . The Company noted in its 23 earnings release that compared with the prior year, its year-end financial results 24 reflected "an increase of 44% in revenues, 52% increase in operating income, 57% 25 increase in net income and 44% increase in diluted earnings per share ." Yuen 26 stated in the Company's earnings release that, " Fiscal year 2000 has been a 27 landmark year for Gemstar. Our financial performance in the last quarter and for 28 the year reflects our continuing abilily to meet our strategic and financia l

-37- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 I objectives." In response to Gemstar's earnings announcement , the Company's 2 I stock price increased to over $50 per share on June 1, 2000 - representing a one- 3 day stock price increase of over 15% . 4 107 . On or about June 28, 2000, Gemstar filed with the SEC its Form 10-K 5 for the year-ended March 31, 2000, which confirmed the financial results 6 announced in the Company's earnings release and further falsely represented that 7 the Company's financial results were presented in conformity with GAAP. The 8 Form 10-K also disclosed that : "Revenues from up-front license fees and annual 9 license fees are recognized ratably over the specified term of the particular 10 license." At no time during 1999, 2000 or 2001, did Gemstar disclose any revenu e 11 recognition policy with respect to expired license agreements . The Form 10-K wa s 12 approved and signed by Yuen and Leung . 13 108 . Gemstar's press release and Form 10-K failed to disclose that a 14 I material amount of the Company's quarterly and yearly revenue and income was 15 based on accelerated revenues recorded in connection with the AOL Agreement 16 and the expired license agreement with Scientific-Atlanta. Further, the recognition 17 of revenues on these transactions violated Gemstar's disclosed revenue recognitio n 18 policy with respect to up- front license fees and violated GAAP. See ¶¶36-37, 72, 19 above. The chart below shows the amount of Gemstar's quarterly and annual 20 revenue that was improperly overstated by the inclusion of accelerated AOL 21 revenue and Scientific-Atlanta revenue: 22 AOL % Revenue % Net Income S/A % Revenue % Net Incom e Q4 5,900,000 7 13.7 12,228,000 14.5 28.3 23 FY 21,600,000 8.9 17.3 12,228,000 5 9 .8 24 109 . The combined effect of the reporting of accelerated revenue from the 25 AOL Agreement and recognition of revenue from Scientific-Atlanta, for the quarter 26 and year, is shown below : 27 Combined AOL and S/A % Revenue % Net Income Q4 18,128,000 21 .2 42 28 FY 33,828,000 14 27.1

-38- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 B. Quarter Ended June 30, 200 0 2 110. On August 14, 2000, after the market closed, Gemstar announced it s 3 financial results for the quarter ended June 30, 2000, reporting revenues of 4 $63 .2 million, operating income of $35 .0 million, net income of $28 .9 million, and 5 net income per share of $0.12 . The Company stated in its earnings release that, 6 compared with the same period of the prior fiscal year, the Company showed an 7 "increase of 40% in revenues, an 85% increase in operating income, a 100 % 8 increase in net income, and a 100% increase in diluted earnings per share despit e 9 an increase in share count of 3%." 10 111 . On or about August 14, 2000 , Gemstar filed with the SEC its 11 Form 10-Q for the quarter ended June 30, 2000 , which confirmed the financial 12 results announced in the Company's ea rnings release and further falsely 13 represented that the Company's financial results were presented in conformity with 14 GAAP. The Form 10-Q was prepared and signed by Leung and approved by Yuen . 15 112 . Gemstar 's press release and Form 10 -Q failed to disclose that a 16 material amount of the Company 's quarterly revenue and income was based on the 17 accelerated reporting of income from the AOL Agreement, the expired agreement 18 with Scientific-Atlanta, and the non-existent advertising for TV Guide 's Awards 19 Show. Further, the recognition of revenue from these transactions violated 20 Gemstar's disclosed revenue recognition policy with respect to up-front license 21 fees and violated GAAP. See ¶¶36-37, 56, 72, above. The chart below shows the 22 amount of Gemstar's quarterly revenue that was improperly overstated by the 23 inclusion of the revenues from AOL, Scientific-Atlanta, and the Awards Show: 24 Revenue % Revenue % Net Incom e Scientific-Atlanta 7,423,000 11 .7 25 .6 25 AOL 1,900,000 3.0 6.6 Awards Show 1,300,000 2.1 4.5 26 Total 10,623,000 16.8 36.7 27 C. Quarter Ended September 30, 200 0 28 113 . On November 13, 2000, after the market closed, Gemstar announced

-39- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 its financial results for the quarter ended September 30, 2000 . In its earnings 2 release, Gemstar announced the pro forma financial results of its four reporting 3 segments: (1) the Technology and Licensing Sector; (2) the Interactive Platform 4 Sector; (3) the Media and Services Sector ; and (4) the Investments and Holding s 5 Sector.

6 114 . In Gemstar's November 13, 2000 earnings release (and as repeated in

7 each of Gemstar's earnings releases and Forms 10-Q and 10-K issued thereafte r 8 during the Class Period) the Company disclosed that its : "Technology and 9 Licensing Sector is responsible for the development, licensing and protection of 10 intellectual property and proprietary technology. Revenues in this Sector are 11 comprised of license fees paid by third-party licensees for the Company' s 12 proprietary technologies and patents primarily related to video recordings 13 interactive program guides and electronic books ." For the Licensing Sector, the 14 Company reported pro forma revenues of $63 million, an increase of 32 % 15 compared to the pro forma revenues for the same quarter of the prior year, an d 16 EBITDA of $41 .1 million. 17 115 . On or about November 14, 2000, Gemstar filed with the SEC it s 1 8 Form 10-Q for the quarter ended September 30, 2000, which confirmed th e 19 financial results announced in the Company' s earnings release and further falsely 20 represented that Gemstar's financial results were presented in conformity with 21 GAAP.

22 116. Gemstar's press release and Form 10-Q concealed that a materia l 23 amount of the Company's quarterly revenue and income was based on the expired 24 Scientific-Atlanta agreement . Further, the recognition of revenue from the expired 25 Scientific-Atlanta was contrary to Gemstar's representations concerning the

26 revenue derived in the Licensing Sector and violated GAAP. See ¶¶31-33, 36-37, 27 above. During the quarter, Gemstar improperly recognized $13,018,000 in revenue

28 based on the expired Scientific-Atlanta agreement, which represented 20 .7% of the

-40- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 quarter's reported Licensing Sector revenue and 31 .7% of reported EBITDA . 2 D. Quarter And Fiscal Period Ended December 31, 200 0 3 117 . On March 7, 2001, Gemstar issued a press release announcing 4 financial results for the quarter and nine months ended December 31, 2000 . The 5 press release reported Gemstar's consolidated EBITDA for the quarter of 6 $112 .3 million on consolidated revenues of $358 .1 million. For the nine month s 7 ended December 31, 2000, Gemstar reported consolidated EBITDA of 8 $242 .2 million on consolidated revenues of $731 .1 million. The press release 9 reported Licensing Sector revenues for the quarter of $76 .5 million and EBITDA 10 of $51 .0 million; and Licensing Sector revenues for the twelve months ended

11 December 31, 2000 of $280 .5 million and pro forma EBITDA of $190 .0 million. 12 Further, the press release reported Interactive Sector revenues for the quarter of

13 $10 .7 million and $23 .1 million for the twelve months ended December 31, 2000 . 14 118 . In the press release, Yuen stated : "We exceeded our own financia l 15 goals and the consensus estimates of the financial community . In particular, we 16 experienced very strong growth in the first two sectors, the Technology and 17 Licensing Sector and the Interactive Platform Sector, which are the value-drivers 18 for our Company. For the twelve months, the combined revenues for these two 19 sectors increased by 45% over the same period last year, and EBITDA increased b y 20 more than 80%." 21 119. On April 2, 2001, Gemstar filed a Form 10-K for the year ended

22 December 31, 2000 . The Form 10-K was signed by Yuen and Leung. The Form 23 10-K confirmed the financial results announced in Gemstar' s earnings release . 24 120 . Gemstar's press release and Form 10-K concealed that a material 25 amount of the Company's quarterly revenue and income was based on revenues 26 recognized on the expired Scientific-Atlanta agreement, the accelerated reporting 27 of income from the AOL Agreement, and revenues recognized based on non- 28 existent Awards Show advertising. Further, Gemstar's financial results for the nine

-41- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 months and twelve months ended December 31, 2000, were overstated in violation 2 of the Company's own disclosed revenue recognition policy with respect to up- 3 front fees and violated GAAP. See ¶¶36-37, 56, 72, above . Gemstar disclosed 4 sector results on a twelve-month basis, and the improperly recognized revenue i s 5 summarized in the following chart: I 6 YE Revenue % Sector Revenue % Sector EBITDA Scientific-Atlanta 48,727,000 17.8 25 .6 7 AOL 7,800,000 2 .8 4.1 Awards Show 1,300,000 5 .6 2 .7 8 9 E . Quarter Ended March 31, 2001 10 121 . On May 14, 2001, Gemstar issued a press release announcing its 11 financial results for the quarter ended March 31, 2001 . In the press release, 12 Gemstar announced Licensing Sector revenues of $81 .3 million and EBITDA o f 13 $60 .1 million. Gemstar also reported increased Interactive Sector revenues of ~ 14 1 $14 .7 million and consolidated revenue for the quarter of $352 .5 million and 15 consolidated EBITDA of $120.0 million. On May 15, 2001, Gemstar filed its 16 Form 10-Q for the quarter ended March 31, 2001, which Yuen approved and was 17 signed by Leung. The Form 10-Q confirmed the financial results announced in 18 Gemstar's press release . 19 122. Gemstar's press release and Form 10-Q failed to disclose that a 20 material amount of the Company's reported revenue and income was based o n 21 revenues recognized on the expired Scientific -Atlanta agreement, the unexecuted 22 agreement with Fantasy Sports, the non-existent agreement with Thompson 23 DirecTV, and the Motorola Settlement. Of a total of $ 14.7 million of Interactive 24 Sector revenue, approximately 48% came from these transactions . Further, the 25 recognition of revenue from these transactions was directly contrary to Gemstar' s 26 representations concerning the revenue derived in the Licensing Sector and 27 violated GAAP. See ¶¶36-37, 51 , 64-68, 93, above. The chart below summarizes 28 the improperly recognized revenue:

-42- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 Revenue % Sector Revenue % Sector EBITDA Scientific-Atlanta 17,305,000 21.3 (L) 28 .8 2 Fantasy Sports 1,921,000 13.1 (IP) 19.0 Thomson DirecTV 2,240,000 15.2 (IP) 22. 1 3 Motorola 2,930,000 19.9 (IP) 29.0 Total IP Sector 7,091,000 48 .2 70. 1 4 5 F. Quarter Ended June 30, 200 1 6 123 . On August 13, 2001, Gemstar issued a press release announcing its 7 financial results for the quarter ended June 30, 2001 . In the press release, Gemstar 8 announced that Licensing Sector revenues were $80 .2 million and EBITDA wa s 9 $53 .2 million, an increase of 36% and 43%, respectively, compared to the same 10 quarter of the prior year. Gemstar announced that Interactive Sector revenues were 11 $20.5 million, an increase of 510% compared to the same quarter of the prior year. 12 124. On August 14, 2001, Gemstar filed its Form 10-Q for the quarter 13 ended June 30, 2001 . Yuen approved the Form 10-Q, and it was signed by Leung . 14 The Form 10-Q confirmed the financial results announced in Gemstar's earning s 15 release. 16 125 . Gemstar's press release and Form 10-Q failed to disclose that a 17 material amount of the Company's quarterly revenue and income was based on 18 revenues recognized on the expired Scientific-Atlanta agreement, the non- 19 monetary barter transaction with Fantasy Sports, the non-existent modification t o 20 the DirecTV License, the Motorola Settlement, and the sale of WGN to the 21 Tribune. Further, the reporting of revenue from these transactions violated GAAP. 22 See ¶¶36-37, 5.1, 64-68, 84, 93, above . The chart below summarizes th e 23 improperly recognized revenue: 24 Revenue % Sector Revenue % Sector EBITDA Scientific-Atlanta 21,826,000 27.2 (L) 41 .0 25 Fantasy Sports 4,000,000 19.5 (IP) 49.6 Thomson DirecTV 600,000 2.92 (IP) 7.4 26 Motorola 4,500,000 22.0 (IP) 55 .8 Tribune 4,500,000 22.0 (IP) 55 .8 27 Total IP Sector 13,600,000 66.4 168. 6 28

-43- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 G. Quarter Ended September 30, 2001 2 126 . On November 14, 2001, after the market closed, Gemstar announced 3 its financial results for the quarter ended September 30, 2001 . For the Technology 4 I and Licensing Sector, the Company reported revenues of $82 .1 million, an increas e 5 of 30% compared to pro forma revenues for the same quarter of the prior year . For 6 the Interactive Platform Sector, the Company reported revenues of $29 .2 million, 7 I an increase of 339% compared to pro forma revenues for the same quarter of th e 8 prior year. Further, the Company's earnings release reported that consolidated pro 9 forma revenues for the quarter ended September 30, 2001 were $335 .1 million, 10 operating loss was $136 .2 million, net loss was $131 .5 million, and net loss per 11 share was $0.32 . In the earnings release Gemstar highlighted the rapid growth 12 purportedly experienced by the Licensing Sector and Interactive Sector : 13 • Continued solid performance in the Technology and Licensing 14 Sector, with quarterly revenues up 30% and EBITDA up 37% 15 year-over-year on a comparable basis. 16 • Continuing strong growth in the Interactive Platform Sector, 17 with revenues up 339% year-over-year, and up 42% over the 18 second quarter, 2001 . 19 127 . In addition, Yuen stated in Gemstar's November 14, 2001 earning s 20 release that: 21 We had a great quarter, delivering results in line with our forecasts a s 22 well as exceeding the consensus estimates of the analysts who follow 23 the Company . This quarter's results have once again demonstrated 24 the strength of our unique business model . . . Although today's 25 advertising environment has been challenging, we were able to deliver 26 our targets and in fact, beat analysts' consensus expectations . 27 128 . On or about November 14, 2001, Gemstar filed with the SEC its Form 28 10-Q for the quarter ended September 30, 2001, which confirmed the financial

-44- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 results announced in the Company ' s earnings release and further represented that 2 the Company's financial results were presented in conformity with GAAP. The 3 Form 10-Q was prepared and signed by Leung and approved by Yuen. 4 129. Gemstar's press release and Form 10 -Q concealed that a material 5 amount of the Company's quarterly revenue and income was based on revenues 6 recognized on the expired Scientific-Atlanta agreement, the non-existent 7 agreement with Time Warner, the Fantasy Sports barter transaction, the non- 8 existent modification to the DirecTV License, the Motorola Settlement, the sale of 9 WGN to the Tribune, and the diversion of revenues from the Media Sector to th e 10 Interactive Sector. Further, the recognition of revenue from these transactions was 11 contrary to Gemstar's representations concerning the revenues reported in the 12 Licensing Sector and Interactive Sector and violated GAAP. See ¶¶36-37, 43-44, 13 51, 64-68, 84, 93, 104, above. The chart below summarizes the improperly 14 recognized revenue : 15 Revenue % Sector Revenue % Sector EBITD A Scientific-Atlanta 12,597,000 15.4 22.4 16 Time Warner 5,283,000 6 .4 9 .4 Total Licensing Sector 17,880,000 21 .8 31 . 8 17 Fantasy Sports 7,001,000 24.0 148 .9 Thomson DirecTV 2,800,000 9 .6 59.6 18 Motorola 5,000,000 17.1 106.4 Tribune 4,500,000 15.4 95.7 19 Diversion Revenue 600,000 2 .1 12.7 Total IP Sector 19,901,000 68.2 423 .3 20 21 H. Quarter And Fiscal Year Ended December 31, 2001 22 130. On March 18, 2002, Gemstar issued a press release announcing its 23 financial results for the quarter and year ended December 31, 2001 . Yuen 24 trumpeted in the earnings release that, " We are proud to report results among the 25 best - if not the best - of any technology and/or media company in the U.S. 26 despite the weak national economy ." ¶110. For the quarter, Gemstar reported 27 consolidated EBITDA of $118 .6 million, on consolidated revenues of $346 .4 28 million. For the year, Gemstar reported consolidated EBITDA of $457 .2 million

-45- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I I on consolidated revenues of $1 .4 billion. For the quarter, Licensing Sector 2 11 revenues were $83 .3 million, and EBITDA was $59.7 million. For the year, the 3 Licensing Sector revenues were $327 .0 million, an increase of 30% compared to 4 2000, and EBITDA for the year was $229 .2 million, an increase of 42% compared 5 to 2000 . The press release also announced Interactive Sector revenues o f 6 $37 .1 million, resulting in the first profitable quarter for this sector . For the year, 7 Gemstar reported Interactive Sector revenues of $101 .4 million. 8 131 . Gemstar's press release and Form 10-K concealed that a materia l 9 amount of the Company 's quarterly revenue and income was based on revenues 10 recognized on the expired Scientific-Atlanta agreement , the non-existent Time 11 Warner Agreement, the Motorola Settlement, the sale of WGN to the Tribune, the 12 non-existent modification to the Direct TV License, the purchasing of Thomson's 13 eBook inventory, and the barter transaction with Fantasy Sports . In addition, the 14 recognition of revenue from these transactions was directly contrary to Gemstar's 15 stated revenue recognition policy, contrary to the representations concerning the 16 revenue reported for the Licensing Sector and Interactive Sector, and violated 17 GAAP. See ¶¶36-37, 43-44, 51, 64-68 , 84, 93, 98, 104, above . The chart below 18 summarizes the improperly recognized revenue : 19 Revenue % Sector Revenue % Sector EBITD A Scientific-Atlanta 58,914,000 18.0 25.7 20 Time Warner 11,300,000 3 .5 4.9 Total Licensing Sector 70,214,000 21 .5 30.6 21 Fantasy Sports 19,999,000 19.7 N/A Thomson DirecTV 10,140,000 9.99 N/A 22 Motorola 14,430,000 14.22 N/A Tribune 12,000,000 11 .83 N/A 23 Diversion Revenue 5,600,000 5.52 N/A Thomson eBooks 2,287,000 2.25 N/A 24 Total IP Sector 64,456,000 63 .55 N/A 25 VIII. YUEN AND LEUNG PROFIT FRO M 26 THE FRAUDULENT SCHEM E 27 132 . During the Class Period, Yuen and Leung received over $30 million in 28 salary and bonus enhancements based on Gemstar's overstated financial results .

-46- SECOND AMENDED CLASS ACTION COMPLAIN] Master File No. 02-2775-MRP (PLAx) 1 (GMST) Specifically, Yuen's yearly base salary was set at $1 million and Leung' s 2 base salary was set at $700,000, not including annual performance salary an d 3 bonus enhancements . (GMST) The award of annual performance enhancement s

4 I was dependant on the Company's reported financial results . Specifically, pursuant 5 to Yuen's and Leung's employment agreements, their base salaries increase d

6 I annually based on a percentage of any increase in Gemstar's reported revenues and 7 EBITDA. (GMST) 8 133 . By inflating Gemstar' s revenues and EBITDA throughout the Class 9 Period, Yuen increased his base salary from $1 million in 1998 to over $1 .9 million 1 0 for the year-ended March 31, 2000, $2 .2 million for the year-ended December 31 , 11 2000, and $4 .5 million for the year-ended December 31, 2001 . (GMST) Leung's 12 base salary increased from $819,292 in the year-ended March 31, 2000, t o 13 $916,634 million for the year-ended December 31, 2000, and over $1 .3 million for 14 the year-ended December 31, 2001 . (GMST) 15 134. In addition to the base salary enhancements, Gemstar paid Yuen a n 16 I annual merit bonus, which was calculated based on his base salary multiplied by a 17 percentage of any increase in Gemstar's EBITDA . (GMST) In addition, Yuen and 18 Leung received annual incentive bonuses, which were calculated based on thei r 19 yearly base salary multiplied by a percentage of any increase in Gemstar's earnings 20 per share . (GMST) Yuen and Leung had the option of accepting the merit and 21 incentive bonuses in the form of cash or stock options. (GMST) 22 135 . Based on Gemstar's overstated financial results reported during the 23 Class Period, Yuen received approximately $18 .8 million in salary and bonuses an d 24 exercised stock options for a taxable profit of over $14 .6 million. (GMST) During 25 the same period, Leung received over $5 .3 million in salary and bonuses, and 26 exercised stock options for a taxable profit of approximately $4 .9 million. 27 (GMST) In total, Yuen and Leung received over $30 million in salary and bonu s 28 enhancements that were directly tied to Gemstar's inflated' financial result s

-47- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 reported during the Class Period. (GMST) 2 IX. THE SCHEME UNRAVELS 3 A. 2001 Form 10-K: Disclosure Of The Scheme 4 136 . On or about April 1, 2002, only twelve days after the Company's 5 March 18 earnings release , Gemstar filed with the SEC its Form 10-K for the 6 fiscal year-ended December 31, 2001, which was approved and signed by Yue n 7 I and Leung . While confirming the financial results announced in the March 1 8 8 earnings release, defendants disclosed in the Form 10-K - for the first time - the 9 following material information : (i) between January 1, 2000 and December 31 , 10 2001, Gemstar had recognized and reported $107 .6 million in revenue based on an 11 expired licensing agreement with Scientific-Atlanta, and (ii) during 2000, the 12 Company had recognized $20 million in advertising revenues based on a 13 nonmonetary barter transaction. Specifically, the 2001 Form 10-K disclosed that : 14 We have a significant amount of receivables due from five entities. 15 At December 31, 2001, approximately $223 .4 million, or 57%, of the 16 Company's receivables are due from five entities, inclusive of $107. 6 17 million due from Scientific-Atlanta . 18 ** * 19 Technology and Licensing Sector - Pro Forma 20 During 1997 through 1999, Scientific-Atlanta was under a license 21 agreement with the Company for the incorporation of interactive 22 program guides into Scientific-Atlanta set-top boxes . The license 23 expired on July 23, 1999, however, Scientific-Atlanta continued to 24 ship set-top boxes incorporating IPGs which are the same or similar to 25 the products shipped during the term of the agreement . . . . The 26 Company has accrued an aggregate of $107 .6 million ($58 .9 million, 27 $36 .5 million and $12 .2 million for the year ended December 31 , 28 2001, the nine months ended December 31, 2000 and for the perio d

-48- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 from July 23, 1999 through March 31, 2000, respectively) in license 2 fees from Scientific-Atlanta. 3 4 Interactive Platform Sector - Pro Form a 5 In April 2001, the Company entered into a nonmonetary transaction 6 with an unrelated company in which $20 .8 million of intellectual 7 property was acquired in exchange for $750,000 in cash and 8 advertising having a fair value of $20 million . 9 137 . Market analysts reacted negatively to defendants' disclosures in the 10 2001 Form 10-K. For example, CIBC World Markets analyst John Corcoran 11 immediately issued a report stating : "This accounting treatment troubles us " 12 because Gemstar was "accruing revenue that it never actually received ." On 13 April 6, 2002, Bloomberg published an article entitled "Gemstar Investors Ask If 14 Emperor Has Clothes" which noted : "The disclosure, in the company's 10-K filing 15 at the Securities and Exchange Commission on Monday, wasn't mentioned a week 16 earlier when Yuen discussed the company's fourth-quarter earnings with analysts 17 on a conference call ." Further, on April 8, 2002, CIBC World Markets analyst 18 John Cocoran was quoted in an article entitled "Gemstar Bookkeeping Prolongs 19 Stock Woes," published by Multichannel News stating, "We believe Gemstar's 20 accounting treatment of this [Scientific-Atlanta] item raises issues that Wall Street 21 did not know existed regarding the revenue growth for Tech & Licensing, the 22 quality of the revenue, the risk to the revenue already recognized and the growth 23 rate of cash flow." 24 138 . As a result of the disclosures in the Form 10-K, Gemstar's stock price 25 fell by nearly 40% - dropping from $14 .75 per share on April 1, 2002, to $8 .88 per 26 share on April 2, 2002. 27 28

-49- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 B. Yuen And Leung Refuse To Certify The Accuracy 2 Of Gemstar's Prior Reported Financial 3 Results Pursuant To SEC Order No . 4-460 4 139 . On June 27, 2002, the SEC issued Order No . 4-460, in response to the 5 increased reports of accounting irregularities at public companies . Pursuant to 6 ~ I SEC Order No. 4-460, Yuen and Leung were required to file with the SEC a 7 I statement in writing, under oath, declaring Gemstar's most recent Form 10-K file d 8 with the SEC and all reports on Form 10-Q and Form 8-K filed subsequent to th e 9 filing of the Company's most recent Form 10-K : (i) do not contain any untrue 10 I statement of material fact ; (ii) do not omit to state a material fact necessary t o 11 make the statements made in the SEC filings, not misleading ; and (iii) the 12 Company's SEC filings have been reviewed with the Company's audit committee, 13 or in the absence of an audit committee, the independent members of the 14 Company's Board of Directors. Under SEC Order No . 4-460, Yuen and Leung 15 were required to file their sworn certifications with the SEC on August 14, 2002 .

16 140 . On August 14, 2002, however, Yuen and Leung refused to certify th e 17 accuracy of the Company's prior reported financial results, despite having signed 18 the Company's prior financial statements throughout the Class Period . (GMST) 19 Further, Gemstar announced that based on a review conducted "by the audit 20 committee of its board of directors," the Company would restate its prior reporte d 21 financial results. 22 C. Resignations Of Yuen And Leung An d 23 Commencement Of SEC's Formal Investigatio n 24 141 . On October 8, 2002, Gemstar announced that Yuen had resigned as 25 CEO and Leung had resigned as Co-President and Co-Chief Operating Officer. In 26 connection with their resignations, Gemstar filed a Form 8-K with the SEC 27 disclosing that it had agreed to pay Yuen a total of $56.7 million in cash and stock , 28 of which approximately $29 .48 million was payable in cash . (GMST) Further, in

-50- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 connection with Leung's resignation, Gemstar had agreed to pay approximately 2 $14.4 million in cash and stock, of which approximately $8 .16 million was payabl e 3 I in cash. (GMST) 4 142 . Two weeks later, on October 21, 2002, Gemstar announced that the 5 I SEC had issued a "formal order of investigation" in connection with its 6 investigation into whether Gemstar and certain of its officers and directors had 7 "violated the federal securities laws ." (GMST) 8 D. KPMG Characterizes Gemstar's Barter 9 Transaction With Fantasy Sports As Fraudulen t 10 143 . On November 6, 2002, Gemstar filed a Form 8-K with the SE C 11 I reporting that Gemstar had dismissed its independent auditors, KPMG, and that , 12 based on the recommendations of its Audit Committee, Gemstar had decided t o 13 restate its financial statements . 14 144 . Seven days later, on November 13, 2002, Gemstar filed an amended 15 Form 8-K with the SEC, which attached a letter from KPMG to the SEC date d 16 November 11, 2002 . KPMG stated in the letter to the SEC that Gemstar's audit 17 committee had described the history of the negotiations leading to the execution of 18 the barter transaction and "it could be inferred from the Audit Committee's 19 description of the results of its investigation, that the transaction was 20 fraudulent." (KPMG, emphasis added) . 21 E. Gemstar Restates Its 1999, 2000 And 2001 Financial Result s 22 145 . On November 14, 2002, Gemstar filed with the SEC a second 23 amended Form 10-K/A for the year ended December 31, 2001, a Form 10-Q/A for 24 the quarter ended March 31, 2002, as well as Forms 10-Q for the quarters ended 25 June 30, 2002 and September 30, 2002 . In these SEC filings, Gemstar restated its 26 consolidated financial results for the year ended March 31, 2000, the nine months 27 ended December 31, 2000, the quarter ended March 31, 2001, the period ended 28 September 30, 2001, the year ended December 31, 2001, the quarter ende d

-51- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Marc: 131, 2001 and the quarter ended June 30, 2002. 2 146 . In addition to other adjustments, Gemstar restated the $113 .5 n iillion 3 in reN enues it recognized based on the expired License Agreement with Scie atific- 4 Atlan ;a, as well as the $20 million in revenue it recognized based on the it flated 5 barter transaction with Fantasy Sports . Gemstar's restated Form 10-K/A f :)r the 6 years nded December 31, 2001, admitted that the Company violated GAAP at the

7 time it recognized revenue based on the expired License Agreement with 8 Scien .ific-Atlanta: 9 [Tlhe Company determined that it had misapplied the collectibility 10 criteria of SAB 101, as there was insufficient contemporaneous 11 evidence of Scientific-Atlanta's intent to pay. 12 147. In the same Form 10-K/A, Gemstar admitted that it had vi Dlated 13 GAA when it recognized advertising revenues based on the barter agreemer. t with 14 Fanta ;y Sports : 15 [T]he Company did not find sufficient contemporaneous 16 evidence to justify the $20 .75 million valuation for the intellectual 17 property received [from Fantasy Sports] . The intellectual property 18 was not appraised at the time of the transaction . Given the substance 19 of the negotiations considered as a whole, the Company concluded 20 that the most reliable evidence of the valuation of the intellectual 2 1 property was the cash component of the transaction negotiated and 22 agreed upon by the parties . Consequently, the Company determined 23 that the best evidence of the fair value of the intellectual property was 24 $7 million, which was the total amount of cash consideration that the 25 sellers had requested and could receive under the terms of the 26 transaction. 27 28

-52- SECOND AMENDED CLASS ACTION COII [PLAINT Master File No . 02-2775-MRI (PLAx) 1 F. KPMG Withdraws Audit Opinions 2 And Gemstar Restates Financia l 3 Results For The Second Time 4 148 . On or about December 19, 2002, KPMG withdrew its audit opinion s 5 ~ I on Gemstar's financial statements for the 1999, 2000, and 2001 fiscal years, an d 6 I stated that its reports and representations should not be relied upon . (KMPG) 7 149. On January 23, 2003, Gemstar announced another large restatement o f 8 its financial results, reversing over $100 million in revenues previously reporte d 9 between March 31, 2000 and September 30, 2002, including : (a) the reversal of 10 $18 .1 million in licensing revenues recognized in connection with the non-existent 11 agreement with Time Warner, and (b) the reversal of $26 .8 million in previously 12 reported licensing revenues based on the Motorola Settlement . (GMST)

13 G. Gemstar Restates Its Financial Results For The Third Tim e 14 150 . On March 10, 2003, Gemstar announced another large restatement of 15 its financial results, reversing an additional $110 million in previously reporte d 16 consolidated revenues . Specifically, Gemstar announced that for the period 17 between March 31, 2000 and September 31, 2002, the Company reversed a n 18 additional $42 million and $74 .5 million of previously recognized revenue in the 19 Licensing Sector and Interactive Sector, respectively . 20 151 . As of March 31, 2003, Gemstar has restated and reverse d 21 I approximately $357 million in previously reported revenues in connection with 22 more than twenty transactions Qoin' back to 1999. The chart below summarizes 23 the relevant restatements of the financial results reported by Gemstar during th e 24 Class Period: 25 As Reported As Restated Percent Restated 2000 (Year Ended 26 March 31, 2000) Consolidated Operation s 27 Revenues $241,439 $229,211 5 % Operating Income (Loss) $110,925 $98,697 11 % 28 Net Income (Loss) $81,317 $73,607 9.5%

-53- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 As Reported As Restated Percent Restated 2000 (9 Months Ended 2 December 31, 2000) Consolidated Operation s 3 Revenues $731,109 $669,904 8% Operating Income (Loss) $(219,436) $(281,923) 22% 4 Net Income (Loss) $(213,114) $(215,458) 1 % Technology & Licensing Secto r 5 Revenues $280,529 $196,025 30% Q12001 (3 Months Ended 6 March 31, 2001) Consolidated Opera tions 7 Revenues $352,468 $312,949 11% Operating Income (Loss) $(127,739) $(159,442) 20% 8 Net Income (Loss) $(123,240) $(161,073) 23% Technology & Licensing Secto r 9 Revenues $81,333 $48,785 40% Interactive Platform Secto r 10 Revenues $14,698 $7,082 52% Q2 2001 (3 Months Ended 1 1 June 30, 2001) Consolidated Operation s 12 Revenues $334,230 $272,912 18% Operating Income (Loss) $(140,327) $(194,412) 28% 13 Net Income (Loss) $(134,757) $(196,158) 31% Technology & Licensing Secto r 14 Revenues $80,236 $33,949 58% Interactive Platform Secto r 15 Revenues $20,484 $5,3955 74% Q3 2001 ( 3 Months Ended 16 September 30, 2001 ) Consolidated Operation s 17 Revenues $335,114 $274,465 18% Operating Income (Loss) $(131,161) $(186,793) 30% 18 Net Income (Loss) $(131,473) $(181,511) 28% Technology & Licensing Secto r 19 Revenues $83,061 $41,918 49% Interactive Platform Secto r 20 Revenues $29,181 $7,157 75%

21 * 12 Months Ended December 31, 2001 22 23 24 25 26 27 28

-54- SECOND AMENDED CLASS ACTION COMI 'LAINT Master File No . 02-2775-MRP :PLAx) 1 As Reported As Restated Percent Restated 2001 (12 Months Ende d 2 December 31, 2001) Consolidated Operation s 3 Revenues $1,368,170 $1,172,558 14% EBITDA $457,236 $267,564 41% 4 Operating Income (Loss) $(561,015) $(730,444) 23% Net Income (Loss) $(599,622) $(750,676) 20% 5 Technology & Licensing Secto r Revenues $326,969 $192,482 41% 6 EBITDA $229,189 $57,282 75% Interactive Platform Secto r 7 Revenues $101,420 $38,510 62% EBITDA $(18,949) $(40,175) 53% 8 152 . SEC Regulation S-X (17 C .F.R. § 210 .4-01 (a)(1)) provides that 9 financial statements filed with the SEC which are not prepared in compliance with 10 GAAP are presumed to be misleading and inaccurate, despite footnotes or other 11 disclosures. Regulation S-X requires that interim financial statements must also 12 comply with GAAP, with the exception that interim financial statements need not 13 include disclosures which would be duplicative of disclosures accompanyin g 14 annual financial statements. 17 C.F.R. § 210.10-01(a) 15 153 . By restating its financial results, Gemstar has admitted that the 16 publicly-issued financial statements for each of the restated periods were not 17 prepared in conformity with GAAP, and that Gemstar materially misrepresented it s 18 financial performance and results of operations . Under GAAP, the restatement o f 19 previously issued financial statements is reserved for circumstances where no 20 lesser remedy is available. Under Accounting Principles Board Opinion No . 20, 21 Accounting Changes, restatements are required to correct material accountin g 22 errors that existed at the time the financial statements were prepared and issued . In 23 addition, Gemstar was not only required to restate its prior reported financial 24 statements but was also required under GAAP to disclose the "nature of an error i n 25 previously issued financial statements and the effect of its correction on income 26 before extraordinary items, net income, and the related per share amounts shoul d 27 be disclosed in the period in which the error was discovered and corrected." 28 ABP 20136-37. In compliance with the requirements of GAAP, Gemstar 's restated -55- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 SEC filings disclose the nature of the accounting errors occurring at the time the 2 Company's financial statements were prepared, the provisions of GAAP violated 3 by Gemstar, and the effect of the correction of the errors on the Company's prior 4 reported financial results . See ¶¶37, 44, 51, 56, 68, 73, 84, 93, 98, 104, above . 5 H. Gemstar Terminates Yuen's And 6 Leung's Employment "For cause" 7 154 . On April 18, 2003, Gemstar filed a Form 8-K with the SEC 8 announcing that it had terminated Yuen's and Leung's employment from Gemstar 9 "for cause. " 10 1. The SEC Determines That Yuen And 11 Leung Were Involved In And 12 Approved Of The Restated Transaction s 13 155 . On May 5, 2003, the SEC filed a motion in the Central District of 14 California in support of an application for a temporary order pursuant to the 15 Sarbanes-Oxley Act to place into escrow the cash Gemstar agreed to pay Yuen and 16 Leung in connection with their resignations from Gemstar ("Freeze Motion") . 17 Based on its Formal Investigation, the SEC represented in the Freeze Motion that, 18 "Yuen and Leung were aware of the details of the restated transactions, but still 19 approved recognition and reporting of the revenue." (SEC) The SEC also stated in 20 its Freeze Motion that : "During the staff's investigation, it has discovere d 21 information suggesting that Yuen and Leung were involved in many of these 22 [restated] transactions, and that Yuen and Leung played a critical role in the 23 decisions to recognize and report the revenue that has been restated . . . Moreover, 24 the staff's investigation to date suggests that some of the conduct involved in 25 recognition of this revenue was fraudulent ." (SEC) 26 156. On May 12, 2003, the Central District of California issued an order 27 granting the SEC's Freeze Motion. 28

-56- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 J. The SEC Charges Yuen And 2 Leung With Violations Of 3 The Federal Securities Law s 4 157. On or about June 19, 2003, the SEC filed a formal complaint entitled 5 Securities and Exchange Commission v. Henry C. Yuen and Elsie M Leung, No . 6 CV 03-4376, in the Central District of California. On September 30, 2003, the 7 SEC filed an amended complaint. The SEC has charged Yuen and Leung with 8 violations of the federal securities laws for fraudulently misleading investors by 9 overstating and misreporting Gemstar's revenues and other financial results 10 between 2000 and 2002 . 11 X. EXCHANGE ACT COUNTS 12 A. COUNT I: 13 Against All Defendants For Violations 14 Of Section 10(b) Of The Exchange Act 15 And Rule 10b-5 Promulgated Thereunde r 16 158. Lead Plaintiffs repeat and reallege each of the allegations set forth in 17 the foregoing paragraphs . This Count is brought pursuant to Section 10(b) of the 18 Exchange Act, and Rule 10b-5 promulgated thereunder, on behalf of all persons 19 who purchased or otherwise acquired Gemstar common stock on the open marke t 20 during the Class Period. 21 159 . As detailed above, throughout the Class Period, Gemstar, Yuen and 22 Leung, by the use and means of instrumentalities of interstate commerce and/or the 23 mails, made a series of false and misleading statements and omissions , all of which 24 caused the market price of Gemstar's common stock to be artificially inflated 25 throughout the Class Period . 26 160 . As detailed herein, Gemstar, Yuen and Leung acted with scienter 27 throughout the Class Period, in that they each had actual knowledge of or were 28 deliberately reckless in disregarding the misrepresentations and omissions o f

-57- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) I material facts set forth herein. 2 161 . As a result of these deceptive practices and false and misleading 3 I statements and omissions, the market price of Gemstar's common stock wa s 4 I artificially inflated during the Class Period. Unaware of the false and misleadin g 5 I nature of the representations and omissions described above and the deceptive an d 6 manipulative devices employed by the defendants, Lead Plaintiffs and the other 7 members of the Class, in reliance on either the integrity of the market or directl y 8 on the statements and reports of defendants, purchased Gemstar's common stock at 9 the artificially inflated prices. 10 162 . Had Lead Plaintiffs and the other members of the Class known of th e 11 I material adverse information not disclosed by defendants, or been aware of the 12 truth behind defendants' material misstatements, they would not have purchase d 13 Gemstar common stock at the artificially inflated prices . 14 163 . By virtue of the foregoing, defendants have violated Section 10(b) of 15 the Exchange Act and Rule I Ob-5 promulgated thereunder. 16 B. COUNT II : 17 Against Yuen And Leung For Violation s 18 Under Section 20(a) Of The Exchange Ac t 1 9 164 . Lead Plaintiffs repeat and reallege each of the allegations set forth in 20 the foregoing paragraphs . This Count is brought pursuant to Section 20(a) of the 2 1 Exchange Act on behalf of all persons who purchased or otherwise acquire d 22 Gemstar common stock on the open market during the Class Period. 23 165 . Defendants Yuen and Leung were controlling persons of the Compan y 24 I within the meaning of Section 20(a) of the Exchange Act during the Class Period . 25 Specifically, throughout the Class Period, Yuen and Leung had the power an d 26 authority to cause the Company to engage in the wrongful conduct complained o f 27 herein by reason of the following : 28 (a) By virtue of his integral positions as CEO, President an d

-58- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Chairman of the Board of Gemstar, as well as his substantial ownership of Gemstar 2 stock, Yuen was a control person of Gemstar and had the power and influence to 3 direct the management of Gemstar. As alleged herein, Yuen exercised such power 4 and influence to cause Gemstar to engage in the wrongful conduct complained of 5 herein; and 6 (b) As CFO, Leung directed the preparation of Gemstar ' s financial 7 statements and reports . By virtue of her positions as Co-President, COO, CFO and 8 a director of Gemstar, as well as her substantial ownership of Gemstar common 9 stock, Leung was a control person of Gemstar and as such had the power and 10 influence to direct the management of Gemstar. Leung exercised such power and 11 influence to cause Gemstar to engage in the wrongful conduct complained o f 12 herein. 13 166 . By reason of their positions of control over the Company, as alleged 14 herein, Yuen and Leung are liable as controlling persons for Gemstar's violations 15 of Section 10(b) and Rule I Ob-5 . 16 XI. SECURITIES ACT COUNT S 17 167. The allegations in Section XI are asserted only on behalf of plaintiff 18 Sherleigh Associates and other persons and entities who acquired Gemstar's 19 common stock pursuant to the Registration Statement and Proxy 20 Statement/Prospectus ("Registration Statement/Prospectus") filed with the SEC on 21 or about June 14, 2001 in connection with Gemstar's merger with SkyMall Inc . 22 ("SkyMall"). The non-fraud claims alleged below are brought pursuant to the 23 Securities Act of 1933, 15 U.S .C . §§ 77k and 77o, and are pled separate and apart 24 from the above allegations and do not incorporate by reference any of the above 25 allegations or assert any intentional or fraudulent conduct against any defendant . 26 Pursuant to the Ninth Circuit's decision in Vess v. Ciba-Geigy Corp. USA, 317 F.3d 27 1097, 1103-1105 (9th Cir. 2003), these non-fraud allegations below are pled to 28 satisfy the notice pleading standards of Fed . R. Civ. P. 8(a) .

-59- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 A. The Parties 2 1. Plaintiff 3 168 . Plaintiff Sherleigh Associates acquired Gemstar common stock 4 pursuant to the Registration Statement/Prospectus and suffered damages as a result 5 of the violations of law alleged below. Sherleigh Associates does not allege any 6 intentional act or fraudulent conduct on behalf of the defendants and is only 7 asserting claims against defendants under the Securities Act . 8 2 . Defendants - 9 169. Gemstar-TV Guide International, Inc. is a Delaware corporation with 10 its principal place of business located in Pasadena, California . On June 14, 2001, 11 Gemstar filed the Registration Statement/Prospectus with the SEC in connection 12 with its merger with SkyMall .

13 170. Henry C . Yuen ("Yuen") is the co-founder of Gemstar and served as 14 its Chief Executive Officer from August 1994 until October 8, 2002 ; President 15 from August 1994 to July 2000 ; Chairman of the Board from January 1999 to April 16 2003 ; and as a Director from April 1992 to April 2003 . Yeun signed the 17 Registration Statement/Prospectus. 18 171 . Elsie Ma Leung ("Leung") served as Gemstar's Chief Financial 19 Officer from 1994 to November 7, 2002; Co-President from July 2000 to 20 October 8, 2002 ; Chief Operating Officer from January 1996 to November 7, 2002 ; 21 and as a director from 1994 to May 2003 . Leung signed the Registratio n 22 Statement/Prospectus. 23 B. Gemstar's False And Misleading 24 Registration Statement/Prospectus 25 172. On June 14, 2001, Gemstar filed the Registration 26 Statement/Prospectus with the SEC in connection with its merger with SkyMall . 27 Pursuant to the Registration Statement/Prospectus, SkyMall shareholders would 28 receive $1 .50 in cash and 0.03759 shares of Gemstar common stock in exchang e

-60- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 for each share of SkyMall common stock. 2 173 . The Registration Statement/Prospectus incorporated: (i) the 3 Agreement and Plan of Merger ("Merger Agreement") entered into between 4 SkyMall and Gemstar on May 14, 2001 ; (ii) Gemstar's Forms 10-K for the year-

5 I March 31, 2000; (iii) Gemstar's Form 10-K for the nine months ende d 6 December 31, 2000 ; and (iv) Gemstar's Form 10-Q for the quarter ended 7 March 31, 2001 . To induce SkyMall shareholders to support and proceed with th e 8 merger, the Registration Statement/Prospectus incorporated the following untrue 9 statements of material fact and omitted to state material facts necessary to make the 10 following statements made not misleadin g 11 (a) The statement contained in Gemstar's Form 10-K for the nine 12 months ended December 31, 2000, and Form 10-Q for the quarter ended March 31, 13 2001, that: "The Technology and Licensing Sector is responsible for th e 14 development, licensing and protection of intellectual property and proprietary 15 technologies. Revenues in this sector are comprised of license fees from third- 16 party licensees for [Gemstar's] proprietary technologies and patents primaril y 17 related to video recording, interactive program guides and electronic books ." 18 (b) The statement contained in Gemstar's Forms 10-K for the year 19 I ended March 31, 2000 and nine months ended December 31, 2000 and Form 10- Q 20 for the quarter ended March 31, 2001, that: "Revenues from up-front license fees 21 and annual license fees are recognized ratably over the specified term of th e 22 particular license ." 23 (c) The statement contained in Gemstar's Form 10-Q for the 24 11 quarter ended March 31, 2001, that: "The Condensed Consolidated Financia l 25 Statements reflect all adjustments, consisting of normal recurring adjustments, 26 which are, in the opinion of management , necessary to present fairly the financial 27 position, results of operations and cash flows for such periods ." 28 (d) The statement contained in Gemstar's Form 10-Q for th e

-61- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 quarter ended March 31, 2001, that : "[t]he accompanying interim financial 2 statements are unaudited but, in the opinion of management, reflect all adjustments 3 (consisting of normal recurring accruals) necessary for a fair presentation of the

4 consolidated financial position of [Gemstar] and its results of operations and cas h 5 flows for such periods . 6 (e) The statement contained in Gemstar's Form 10-K for the 7 quarter and year-ended March 31, 2000, that the Company's quarterly revenue s 8 were $84 million, operating income was $39 .5 million, net income wa s 9 $27.3 million, and net income per share was $0 .11 ; and year-end revenues were 1 0 $241 .4 million, net income was $81 .3 million and net income per share was $0 .33 . 11 (f) The statement contained in Gemstar's Fonn 10-Q for the 12 quarter ended March 31, 2001, that the Company's Technology and Licensing 13 Sector revenues were $81 .3 million, Interactive Platform Sector revenues were 14 $14.7 million, consolidated pro forma revenues were $352 .5 million, operating loss 15 was $127.7 million, net loss was $123 .2 million, and net loss per share was $0 .30 . 16 (g) The statement contained in Section 5 .4 of the Merger 17 Agreement, that since January 1, 1998 Gemstar had filed with the SEC all require d 18 reports and forms, and none of its prior SEC filings "contains any untrue statement 19 of a material fact or omits to state any material fact required to be stated therein or 20 necessary in order to make the statements therein, in light of the circumstances 21 under which they were made, not misleading." 22 174 . The statements in the Registration Statement/Prospectus were untrue 23 I statements of material fact and omitted to state material facts necessary to make the 24 statements made not misleading . Specifically, Gemstar's representation in the 25 Registration Statement/Prospectus that the revenues in the Technology an d 26 Licensing Sector were comprised of "license fees from third-party licensees," 27 failed to disclose that a material amount of the revenues reported in the Licensin g 28 Sector were comprised of revenues recognized based on an expired licens e

-62- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 I agreement with Scientific-Atlanta, a non- licensee. 2 175 . Specifically, Gemstar's Form 10-K for the period ended March 31 , 3 2000 failed to disclose that Gemstar had recognized and reported over 4 $12 .2 million in revenues based on the expired license agreement with Scientific- 5 Atlanta, which overstated revenues by over 14% . Further, Gemstar's Form 10-K 6 for the period ended December 31, 2000 failed to disclose that Gemstar ha d

7 I recognized and reported $48 .7 million in Licensing Sector revenues based on a n 8 expired license agreement with Scientific-Atlanta, inflating Licensing Sector 9 revenues by over 17% . Finally, in Gemstar's Form 10-Q for the quarter ended 10 March 31, 2001, Gemstar failed to disclose the material fact that it had recognized 11 and reported $17 .3 million in Licensing Sector revenues based on the expired 12 license agreement with Scientific-Atlanta, inflating Gemstar's reported Licensing 13 Sector revenues for that period by 27% . 14 176 . In addition, the statement contained in Gemstar's Form 10-K for th e 15 I nine months ended December 31, 2000 and Form 10-Q for the quarter ended 16 March 31, 2001, that : "Revenues from up-front license fees and annual license fee s 17 are recognized ratably over the specified term of the particular license," was also 18 false and misleading . Specifically, in May 1999, Gemstar and AOL entered into a n 19 eight-year IPG license agreement and AOL paid Gemstar a $23 .5 million up-front 20 fee for the eight-year term of the license . Rather than recognizing the up-front fe e 21 ratably over the terms of the license, as per the Company's own revenue 22 recognition policy, Gemstar recognized the entire up-front fee over five quarters, 23 beginning with the quarter ended June 30, 1999 and ending with the quarter ende d 24 June 30, 1999. The accelerated revenue recognition represented over 8 .9% of the 25 revenue and 17 .3% of the net income reported by Gemstar for the year-ende d 26 March 31, 2000 . 27 177 . Moreover, Gemstar's financial statements in the Form 10-Q for the 28 quarter ended March 31, 2001 were not prepared in accordance with GAAP

-63- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 because Gemstar had erroneously recognized and reported $1 .9 million in 2 Interactive Sector revenues based on a non-existent agreement with Fantasy Sports . 3 Under GAAP, Gemstar was prohibited from recognizing revenues without 4 I persuasive evidence of an arrangement . SAB 101, SOP 97-2 . There was no 5 I persuasive evidence of any arrangement between Gemstar and Fantasy Sport s 6 during this period . In fact, Gemstar did not execute any agreement with Fantas y 7 Sports until late June 2001 . As a result of recording these revenues, Gemstar 8 materially overstated its reported Interactive Sector revenues by 14% for the 9 quarter. 10 178 . In addition, Gemstar's recognition of revenue based on the expired 11 Scientific-Atlanta license agreement and non-existent Fantasy Sports agreement 12 violated GAAP because at the time Gemstar recognized and repo rted this revenue 13 there was no persuasive evidence of any agreement between Gemstar an d 14 Scientific-Atlanta or Gemstar and Fantasy Sports . SAB 101, SOP 97-2 . 15 179. On November 14, 2002, Gemstar restated its financial results and 16 reversed all revenue recognized based on the expired Scientific-Atlanta licens e 17 agreement, the AOL up-front fee, and the unexecuted agreement with Fantasy 18 Sports. With respect to the expired Scientific-Atlanta agreement, Gemstar 19 admitted that it "had misapplied the collectibility criteria of SAB 101, as there wa s 20 insufficient contemporaneous evidence of Scientific-Atlanta's intent to pay ." With 21 respect to the AOL up-front fee, Gemstar admitted in its restated Form 10-K/A tha t 22 "such license fees should be recognized over the term of the agreement on a 23 I straight-line basis because of the Company 's continuing performance 24 I obligations." (GMST) Accordingly, and directly contrary to the representations i n 25 the Registration Statement/Prospectus, Gemstar has admitted that its prior reporte d 26 financial results were not prepared in accordance with GAAP. 27 180. On July 18, 2001, Gemstar announced the completion of it s

28 I acquisition of SkyMall pursuant to the Gemstar Registration Statement and Proxy

-64- SECOND AMENDED CLASS ACTION COMPLAINT Master File Nn 02-2775-MRP (PT .Ax' Statement/Prospectus . The SkyMall acquisition was valued at over $50 million. 2 1 . COUNT I: 3 Against All Defendants For Violations 4 Under Section 11 Of The Securities Act 5 181 . This Count is brought pursuant to Section 11 of the Securities Act, an d 6 does not allege fraud by defendants . This Count is based on strict liability . 7 182. This Count is brought on behalf of persons who acquired Gemstar 8 common stock pursuant to the Registration Statement/Prospectus . As the issuer of 9 the securities, Gemstar is strictly liable for the material misstatements in and 10 omissions from the Registration Statement/Prospectus . As persons who signed the 11 Registration Statement/Prospectus and who are identified therein as directors of 12 Gemstar, Yuen and Leung are presumptively liable under Section 11 . 13 183 . As alleged above, the Registration Statement/Prospectus was 14 materially inaccurate and misleading, contained untrue statements of material facts, 15 omitted to state other material facts necessary to make the statements made not 16 misleading, and concealed and failed adequately to disclose material facts . 17 184. Defendant Yuen was identified in the Gemstar Registration 18 Statement/Prospectus as Chairman of the Board and Chief Executive Officer o f 19 Gemstar. Leung was identified in the Gemstar Registration Statement/Prospectus 20 as Chief Financial Officer, Co-President, Co-Chief Operating Officer and Director . 21 185 . Defendants Yuen and Leung failed to make a reasonable investigation 22 or possess reasonable grounds to believe that the statements contained in the 23 Registration Statement/Prospectus were true and devoid of any omission of 24 material fact, including the material misstatements and omissions . Therefore, Yuen 25 and Leung are liable to those persons who acquired Gemstar common stock 26 pursuant to the Registration Statement/Prospectus, which contained material 27 misstatements and omissions . 28 186 . Scherling Associates and other members of the Class acquire d

-65- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 Gemstar shares pursuant to the Registration Statement/Prospectus . At the time that 2 Scherling Associates and other members of the Class acquired Geinstar commo n 3 stock pursuant to the Registration Statement/Prospectus, they were without 4 knowledge of the facts concerning the inaccurate and misleading statements an d 5 omissions alleged herein. 6 187. Scherling Associates and the members of the class who acquired 7 shares pursuant to the Registration Statement/Prospectus have sustained substantial 8 damage as a direct and proximate result of defendants' violations of the Securitie s 9 Act. 10 2. COUNT II: 11 Against Yuen And Leung For Violations 12 Of Section 15 Of The Securities Ac t 13 188 . This Count does not allege fraud by defendants . This Count is based 14 I on strict liability. 1 5 189 . This Count is brought on behalf of the members of the class who 16 acquired Gemstar common stock pursuant to the Registration 1 7 Statement/Prospectus. 18 190 . Yuen and Leung were controlling persons of Gemstar within the

19 meaning of Section 15 of the Securities Act during the Class Period . Specifically, 20 throughout the Class Period, Yuen and Leung had the power and authority to cause 21 the Company to engage in the wrongful conduct complained of herein by reason o f 22 the following : 23 (a) Defendant Yuen had the power and authority to cause Gemstar 24 to engage in the conduct complained of by virtue of his positions as Chairman o f 25 the Board, President and CEO of Gemstar. 26 (b) Defendant Leung had the power and authority to cause the 27 Company to engage in the wrongful conduct complained of by virtue of her 28 positions as Co-President, CFO, and director of Gemstar .

-66- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 191 . Neither Yuen or Leung made a reasonable investigation or possesse d 2 I reasonable grounds for the belief that the statements contained in the Registratio n 3 Statement/Prospectus were true and devoid of any omissions of material fact . 4 Therefore, as alleged herein, Yuen and Leung are liable jointly and severally to 5 Sherleigh Associates and the members of the class who acquired Gemstar share s 6 pursuant to the Registration Statement/Prospectus . 7 XII. CLASS ALLEGATION S 8 192 . Plaintiffs bring this action as a class action pursuant to Federal Rule s 9 of Civil Procedure 23(a) and 23(b)(3) on behalf of a class (the "Class") of all 1 0 persons and entities who : (i) purchased or otherwise acquired Gemstar commo n 11 stock between June 1, 2000 and April 1, 2002, inclusive, and who were damaged 12 thereby; and (ii) all persons or entities who acquired Gemstar common stock 13 pursuant to the Registration Statement and Proxy Statement/Prospectus filed with 14 the SEC on or about June 14, 2001 in connection with Gemstar's merger with 15 SkyMall Inc., and were damaged thereby. Excluded from the Class are : the 16 defendants herein; members of the families of each of the Individual Defendants ; 17 any parent, subsidiary, affiliate, partner, officer, executive or director of any 18 defendant; any entity in which any such excluded person has a controlling interest ; 19 and the legal representatives, heirs, successors and assigns of any such excluded 20 person or entity. 21 193 . The members of the Class are so numerous that joinder of all 22 I members is impracticable. While the exact number of Class members is unknow n 23 to Plaintiffs at the present time and can only be ascertained from books and records 24 maintained by Gemstar and/or its agent(s), Plaintiffs believe that Class member s 25 number in the thousands . As of November 4, 2002, Gemstar had 408,155,58 4 26 (I shares of common stock issued and outstanding which, at all relevant times, trade d 27 on the NASDAQ National Market System, an efficient market . During the Class 28 Period, Gemstar was followed and reported on by market analysts at numerou s

-67- SECOND AMENDED CLASS ACTION COMPLAINT Master File No . 02-2775-MRP (PLAx) 1 securities firms . 2 194 . Common questions of law and fact exist as to all members of the 3 Class and predominate over any questions solely affecting individual members of 4 the Class . Among the questions of law and fact common to the Class are: • Whether the federal securities laws were violated by defendants' acts and omissions alleged herein ; • Whether defendants participated in and pursued the common course of conduct complained of herein ; • Whether the documents, reports, filings, releases, and statements disseminated to the Class by defendants during the Class Period misrepresented material facts about the business, performance, and financial results of Gemstar; • With respect to the claims brought for violation of Section 10(b) of the Exchange Act, whether defendants acted knowingly or with deliberate recklessness in misrepresenting material facts; • With respect to the claims brought for violation of the Securities Act, whether Gemstar's Registration Statement/Prospectus misrepresented material facts about Gemstar ; • Whether the market price of Gemstar's common stock during the Class Period was artificially inflated due to the misrepresentations complained of herein; and • Whether Plaintiffs and the other members of the Class have sustained damages and, if so, the appropriate measure thereof . 195 . Plaintiffs will fairly and adequately represent and protect the interests of the members of the Class . Plaintiffs have retained competent counsel experienced in class and securities litigation and intend to prosecute this action vigorously. Plaintiffs are members of the Class and do not have interests antagonistic to, or in conflict with, the interests of the other members of the Class .

-68- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 196. Plaintiffs' claims are typical of the claims of the members of the 2 Class . Plaintiffs and all members of the Class purchased and/or acquired Gemstar 3 common stock during the Class Period at artificially inflated prices and have 4 sustained damages arising out of the wrongful course of conduct alleged herein . 5 197. A class action is superior to other available methods for the fair and 6 efficient adjudication of this controversy. Since the damages suffered by 7 individual class members may be relatively small, the expense and burden of 8 individual litigation make it virtually impossible for the class members 9 individually to seek redress for the wrongful conduct alleged . Plaintiffs know of 10 no difficulty that will be encountered in the management of this litigation that 11 would preclude its maintenance as a class action . 12 XIII. PRAYER FOR RELIEF AS TO ALL CLASS CLAIM S 13 WHEREFORE, Plaintiffs, on behalf of themselves and the members of the 14 Class, pray for a judgment as follows : 15 1 . Declaring this action to be a proper class action maintainable pursuant 16 to Rule 23 of the Federal Rules of Civil Procedure and declaring Plaintiffs to be 17 proper Class representatives; 18 2 . Awarding Plaintiffs and the other members of the Class rescissory 19 and/or compensatory damages as a result of the wrongs complained of herein ; 20 3 . Awarding Plaintiffs and other members of the Class their costs an d 21 expenses in this litigation, including reasonable attorneys' fees and experts' fees 22 and other costs and disbursements ; and 23 4. Granting Plaintiffs and the other members of the Class such other and 24 further relief as the Court may deem just and proper. 25 26 27 28

-69- SECOND AMENDED CLASS ACTION COMPLAINT Master File No. 02-2775-MRP (PLAx) 1 XIV. JURY TRIAL DEMANDE D 2 Plaintiffs demand a trial by jury of all issues so triable . 3 Dated: October 9, 2003 Respectfully submitted, 4 BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP 5 6 BLAIR A. NICHOLAS

ALAN SCHULMAN ROBERT S . GANS BLAIR A. NICHOLAS 12544 High Bluff Drive, Suite 150 San Diego, CA 9213 0 Tel : 858 793-0070 Fax: (858) 793-0323 Attorneys for Plaintiffs and Lead Counsel for the Clas s ::ODMA\PCDOCS\blbeca\ 1 1160\2

-70- SECOND AMENDED CLASS ACTION COMPLAINT Master File Nn2-2775-MRP (PT,Ax' 1 DECLARATION OF SERVICE 2 I, the undersigned, declare: 3 1 . That declarant is and was, at all times herein mentioned, a citizen o f 4 the United States and a resident of the County of San Diego, over the age of 1 8 5 years, and not a party to or interested in the within action; that declarant's business 6 address is 12544 High Bluff Drive, Suite 150, San Diego, California 92130 . 7 2. That on October 10, 2003, declarant caused to be served : 8 - SECOND AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS; and . 9 - DECLARATION OF SERVICE . 10 11 by placing a true copy(ies) thereof enclosed in sealed envelopes addressed a s 12 follows : 13 SEE ATTACHED SERVICE LIS T 14 ❑ (BY U.S. MAIL) I am personally and readily familiar with the business practice of Bernstein Litowitz Berger & Grossmann LLP for 15 collecting and ~ processing of correspondence for mailing with the United States Postal Service, and Ip caused such envelope (s) with 16 postage thereon fully prepaid to be placed in the United States Postal Service at San Diego, California . 17 ❑ (BY FACSIMILE I am personally and readily familiar with the 18 business practice o Bernstein Litowitz Berger & Grossmann LLP for collection and processing of document(ss) to be transmitted by 19 facsimile and I caused such document(s) on this date to be transmitted by facsimile to the offices of addressee (s) at the numbers listed below . 20 ® (By OVERNIGHT MAIL) I am personally and readily familiar with 21 the business practice of Bernstein Litowitz Berger & Grossmann LLP for collection and processing of correspondence for overni ht 22 delivery, and I caused such document(s) described herein to be deposited for delivery to a facility regularly maintained by Federal 23 Express for overnight delivery (as indicated by *). 24 ® (FEDERAL) I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made . 25 26 27 28

-I- DECLARATION OF SERVICE Master File No. 02-2775-MRP (PLAx) 3 . That there is a regular communication by mail between the place of mailing and the places so addressed. Dated this loth day of October 2003 .

GAMAE M. THORNTON

: :ODMA\PCDO CS\blbeca\ 1 1583\1

-2- DECLARATION OF SERVICE Master File No . 02-2775-MRP (PLAx) GEMSTAR-TV GUIDE INTERNATIONAL, INC . SERVICE LIST October 10, 2003 Page 1

ATTORNEYS FOR DEFENDANT(S) :

Stanley S . Arkin Ronald L. Olson Michelle A. Rice Lawrence C. Barth Sean R. O'Brien MUNGER, TOLLES & OLSON LLP ARKIN KAPLAN LLP 355 South Grand Avenue , 35th Floor 590 Madison Avenue, 35th Floor Los Angeles , CA 90071-1560 New York, NY 10022 Tel: (213) 683-9100 Tel: (212) 333-0200 Fax: (213) 687-3702 Fax: (212) 333-2350 Attorneysfor Defendant Attorneys for Defendants Gemstar-TV Guide International, Inc. Henry C. Yuen and Elsie M Leung Kristin Linsley Myles David Wheeler John P . Hunt Frederick A. Haist MUNGER, TOLLES & OLSON LLP AUGUSTINI & WHEELER 33 New Montgomery Street, 19th Floor 523 West 6th Street, Suite 300 San Francisco, CA 94105-1560 Los Angeles , CA 90014-1226 Tel: (415) 512-4000 Tel: (213) 629-888 8 Fax: (415) 512-4077 Fax : (213) 688-7600 Attorneys for Defendant Attorneysfor Defendants Gemstar-TV Guide International, Inc. Henry C. Yuen and Elsie M. Leung

: :ODMA\PCDOCS'bIbeca\10986\I A