THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of the Composite Offer Document or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or otherwise transferred all your shares in Panorama International Holdings Limited, you should at once hand the Composite Offer Document and the accompanying Form(s) of Acceptance to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

Nice Hill Investments Limited

(incorporated in the British Virgin Islands with limited liability)

CANORAMA INTERNATIONAL HOLDINGS LIMITED

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

Composite offer document relating to mandatory unconditional general offers by

KINGSTON SECURITIES LIMITED

on behalf of Nice Hill Investments Limited

(i) for all the issued shares of HK$0.01 each in Panorama International Holdings Limited (other than those Shares already owned by Nice Hill Investments Limited and parties acting in concert with it); and
(ii) for cancellation of all outstanding Options

Joint financial advisers to Nice Hill Investments Limited

KINGSTON CORPORATE FINANCE LIMITED

VEDA CAPITAL

管略资本

Financial adviser to Panorama International Holdings Limited

VINC®

Grand Vinco Capital Limited

Independent financial adviser to the Independent Board Committee of Panorama International Holding Limited

Nuada Limited

A letter from the board of directors of Panorama International Holdings Limited is set out from pages 7 to 15 of the Composite Offer Document.

A letter from Kingston Securities Limited containing, among other things, the details of the terms of the Offers is set out from pages 16 to 21 of the Composite Offer Document.

A letter from the Independent Board Committee to the Independent Shareholders and the Optionholders is set out on page 22 of the Composite Offer Document.

A letter from Nuada Limited containing its advice to the Independent Board Committee in connection with the Offers is set out from pages 23 to 37 of the Composite Offer Document.

The procedures for acceptance and settlement of the Offers are set out from pages 38 to 43 of, and in Appendix I to the Composite Offer Document and in the accompanying Forms of Acceptance. Acceptances of the Share Offer should be received by Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong no later than 4:00 p.m. on Tuesday, 17 October 2006 or such later time and/or date as Nice Hill Investments Limited may determine and announce in accordance with the Takeovers Code.

Acceptances of the Option Offer A and/or Option Offer B should be received by Panorama International Holdings Limited at 8th Floor, Mita Centre, 552-566 Castle Peak Road, Kwai Chung, New Territories, Hong Kong by no later than 4:00 p.m. on Tuesday, 17 October 2006 or such later time and/or date as Nice Hill Investments Limited may determine and announce in accordance with the Takeovers Code.

The Composite Offer Document will be available for inspection on the website of Panorama International Holdings Limited at http://www.panorama.com.hk and on the website of the Stock Exchange at http://www.hkex.com.hk as long as the Offers remain open.

26 September 2006

CHARACTERISTICS OF GEM

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

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

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

CONTENTS

Page

Expected timetable ... iii
Definitions ... 1
Letter from the Board ... 7
Letter from Kingston Securities ... 16
Letter from the Independent Board Committee ... 22
Letter from Nuada ... 23
Appendix I – Further terms of the Offers ... 38
Appendix II – Financial information on the Group ... 44
Appendix III – Statutory and general information ... 86

ii -

EXPECTED TIMETABLE

2006

Opening date of the Offers ... Tuesday, 26 September

Latest time and date for acceptance of the Offers ... 4:00 p.m., Tuesday, 17 October

Closing date of the Offers (Note 1) ... Tuesday, 17 October

Posting of announcement on GEM's website
regarding results of the Offers ... By 7:00 p.m. Tuesday, 17 October

Latest date for posting of remittances for the amount
due in respect of valid acceptances tendered
under the Offers on or before the latest time
for acceptance (Note 2) ... Friday, 27 October

Notes:

The Offers will remain open for acceptance until 4:00 p.m. on Tuesday, 17 October 2006 unless the Offeror revises
or extends the Offers in accordance with the Takeovers Code.
The consideration payable for the Offer Shares tendered under the Offers will be paid as soon as possible but in
any event within 10 days after the receipt by the Registrar (in the case of Share Offer) and the Company (in the
case of the Option Offer A and Option Offer B) of all the valid requisite documents from the accepting Shareholders
and Optionholders respectively.
Acceptance of the Offers shall be irrevocable and incapable of being withdrawn, except as permitted under the
Takeovers Code.

All time references contained in the Composite Offer Document refer to Hong Kong time.

DEFINITIONS

In the Composite Offer Document, unless the context otherwise requires, the following expressions have the following meanings.

"acting in concert" has the meaning ascribed to it under the Takeovers Code

"AFAL" Allan Fung Assets Limited, a company incorporated in the British Virgin Islands with limited liability and which is beneficially owned as to 75% by Mr. Allan Fung, as to 20% by Ms. Leung Siu Kuen, Janet and as to 5% by Ms. Fung Suen Lai, Jacqueline. Ms. Leung Siu Kuen, Janet is the wife of Mr. Allan Fung and is an executive Director. Ms. Fung Suen Lai, Jacqueline is the daughter of Mr. Allan Fung and is a non-executive Director

"Announcement" the announcement dated 5 September 2006 jointly made by the Offeror and the Company containing, among others, details of the Offers

"associates" has the meaning ascribed thereto in the GEM Listing Rules

"Board" the board of Directors

"Business Day" a day (other than a Saturday and days on which a tropical cyclone warning signal no. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours

"CCASS" the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited

"Companies Ordinance" the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

"Company" Panorama International Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM

"Completion" the completion of the sale and purchase of an aggregate of 283,335,000 Sale Shares in accordance with the terms and conditions of S&P Agreements

"Completion Date" 8 September 2006, being the date of Completion

DEFINITIONS

"Composite Offer Document"
this composite offer and response document jointly issued by and on behalf of the Offeror and the Company to all Shareholders and Optionholders in accordance with the Takeovers Code containing, among others, terms and conditions of the Offers, the Form(s) of Acceptance, the advice of Nuada to the Independent Board Committee in respect of the Offers, and the advice of the Independent Board Committee to the Independent Shareholders and the Optionholders in relation to the Offers

"Corporate Guarantees"
the corporate guarantees given by the Company in favour of several financial institutions to secure the indebtedness, liabilities and obligations of the Group owed to such financial institutions and subsisting as at the date of S&P Agreement I (save and except the corporate guarantee given by the Company in respect of the ICBC Facilities)

"Deposit"
the aggregate amount of HK$2,000,000 held by an escrow agent under the New Escrow Agreement

"Director(s)"
the director(s) of the Company

"Escrow Agreement"
an escrow agreement dated 17 July 2006 and entered into among AFAL, Mr. YS Fung, an escrow agent, Nice Hill and Mr. Chin for the purpose of holding the Escrow Money as earnest money pending the entering into of the S&P Agreements

"Escrow Money"
a sum of HK$1,000,000 deposited by Nice Hill with an escrow agent under the Escrow Agreement

"Executive"
the Executive Director of the Corporate Finance Division of the SFC or any of his delegates

"Form(s) of Acceptance"
the accompanying form of acceptance for the Offer Shares and/or the accompanying form of acceptance and cancellation of the outstanding Options

"GEM"
the Growth Enterprise Market of the Stock Exchange

"GEM Listing Rules"
the Rules Governing the Listing of Securities on GEM

"Grand Vinco"
Grand Vinco Capital Limited, a licensed corporation to carry on business in type 1 (dealings in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, the financial adviser to the Company in respect of the Offers

DEFINITIONS

“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“ICBC”	Industrial and Commercial Bank of China (Asia) Limited
“ICBC Facilities”	the banking facilities granted by ICBC to a wholly owned subsidiary of the Company for an overdraft of HK$2,000,000 and an instalment loan of HK$2,400,000 secured by, among other matters, a corporate guarantee by the Company of HK$4,400,000
“Independent Board Committee”	the independent board committee of the Company, comprising one non-executive Director, Dr. Lo Wing Yan, William JP and three independent non-executive Directors, namely Mr. Chan Koon Chung, Johnny, Mr. Chau, Stephen and Mr. Hui Kwok Wah
“Independent Shareholders”	Shareholders other than the Vendors, the Offeror and its concert parties
“Kingston Corporate Finance”	Kingston Corporate Finance Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO, one of the joint financial advisers to the Offeror in respect of the Offers
“Kingston Securities”	Kingston Securities Limited, a licensed corporation to carry on business in type 1 (dealings in securities) regulated activity under the SFO
“Last Trading Day”	Wednesday, 30 August 2006, being the last trading day prior to the release of the Announcement
“Latest Practicable Date”	22 September 2006, being the latest practicable date prior to the printing of the Composite Offer Document for the purpose of ascertaining certain information for inclusion in the Composite Offer Document
“Macau”	the Macau Special Administrative Region of the PRC
“Mr. Allan Fung”	Mr. Fung Yu Hing Allan, the Chairman and an executive Director of the Company, one of the Vendors of S&P Agreement I and a brother of Mr. YS Fung
“Mr. Chin”	Mr. Chin Wai Keung Richard, sole shareholder and sole director of the Offeror

DEFINITIONS

"Mr. YS Fung"
Mr. Fung Yee Sang, an executive Director, the Vendor of the S&P Agreement II and a brother of Mr. Allan Fung

"New Escrow Agreement"
an escrow agreement dated 30 August 2006 entered into contemporaneously with the signing of the S&P Agreement I among AFAL, Mr. Allan Fung, an escrow agent and Nice Hill for the purpose of holding the Deposit in escrow

"Nuada"
Nuada Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO, the independent financial adviser to the Independent Board Committee in respect of the Offers

"Offers"
the Share Offer, the Option Offer A and the Option Offer B

"Offer Share(s)"
issued Share(s) other than those already owned by the Offeror and its concert parties

"Offeror" or "Nice Hill"
Nice Hill Investments Limited, a company incorporated in the British Virgin Islands with limited liability, which is wholly and beneficially owned by Mr. Chin

"Options"
the outstanding options granted under the Pre-IPO Share Option Scheme comprising the Pool A Options and the Pool B Options

"Option Offer A"
the mandatory unconditional cash offer made by Kingston Securities, on behalf of the Offeror, to cancel all outstanding Pool A Options at HK$0.007 per Pool A Option in cash

"Option Offer B"
the mandatory unconditional cash offer made by Kingston Securities, on behalf of the Offeror, to cancel all outstanding Pool B Options at HK$0.001 per Pool B Option in cash

"Optionholders"
holders of Options

"Overseas Shareholders"
Shareholders whose addresses on the register of members of the Company are outside Hong Kong

"Pool A Options"
the outstanding Options with an exercise price of HK$0.033 per Share

"Pool B Options"
the outstanding Options with an exercise price of HK$0.231 per Share

DEFINITIONS

“PRC”	the People’s Republic of China which for the purpose of the Composite Offer Document shall exclude Hong Kong, Macau and Taiwan
“Pre-IPO Share Option Scheme”	the pre-IPO share option scheme adopted by the Company on 25 April 2002 and expired on 9 May 2002
“Registrar”	Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong
“SFC”	the Securities and Futures Commission of Hong Kong
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Sale Shares”	an aggregate of 283,335,000 Shares acquired by the Offeror pursuant to the S&P Agreements
“Share(s)”	share(s) of HK$0.01 each in the share capital of the Company
“Share Offer”	the mandatory unconditional cash offer made by Kingston Securities, on behalf of the Offeror, to acquire all the Offer Shares
“Shareholders”	holders of Shares
“S&P Agreement I”	the agreement for sale and purchase of 251,671,500 Sale Shares between AFAL and Allan Fung and the Offeror dated 30 August 2006
“S&P Agreement II”	the agreement for sale and purchase of 31,663,500 Sale Shares between Mr. YS Fung and the Offeror dated 30 August 2006
“S&P Agreements”	S&P Agreement I and S&P Agreement II
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Undertakings”	written undertakings under seal from each Mr. Allan Fung, Ms. Leung Siu Kuen, Janet (an executive Director and the wife of Mr. Allan Fung) and Mr. YS Fung to Nice Hill that he/she shall not exercise any of his/her Pool A Options as from the date of the said written undertakings up to and including the close of the Offers and will accept the Option Offer A

DEFINITIONS

"Veda Capital"
Veda Capital Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO, one of the joint financial advisers to the Offeror in respect of the Offers

"Vendors"
AFAL and Mr. Allan Fung under S&P Agreement I and Mr. YS Fung under S&P Agreement II

"HK$" and "cents"
Hong Kong Dollars and cents respectively, the lawful currency of Hong Kong

"%"
per cent.

LETTER FROM THE BOARD

PANORAMA INTERNATIONAL HOLDINGS LIMITED

鋪射國際控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

Executive Directors:
Mr. Fung Yu Hing, Allan
(Chairman and Chief Executive Officer)
Ms. Leung Siu Kuen, Janet
Mr. Fung Yee Sang
Mr. Au Lik Man, Simon

Non-executive Directors:
Dr. Lo Wing Yan, William, JP
Ms. Fung Suen Lai, Jacqueline

Independent Non-executive Directors:
Mr. Chan Koon Chung, Johnny
Mr. Chau, Stephen
Mr. Hui Kwok Wah

Registered office:
P.O. Box 309
Ugland House
South Church Street
George Town
Grand Cayman
Cayman Islands
British West Indies

Head office and principal place of
business in Hong Kong
8th Floor, Mita Centre
552-566 Castle Peak Road
Kwai Chung
New Territories
Hong Kong

26 September 2006

To the Independent Shareholders and the Optionholders

Dear Sir or Madam,

Mandatory unconditional general offers by Kingston Securities Limited
on behalf of Nice Hill Investments Limited

(i) for all the issued shares of HK$0.01 each in Panorama International Holdings Limited
(other than those Shares already owned
by Nice Hill Investments Limited and parties acting in concert with it); and
(ii) for cancellation of all outstanding Options

INTRODUCTION

On 30 August 2006, Nice Hill, being the Offeror, entered into the S&P Agreements with the Vendors, pursuant to which the Offeror agreed to purchase and the Vendors agreed to sell an aggregate of 283,335,000 Sale Shares for a total consideration of HK$11,333,400 (equivalent to HK$0.04 per Sale Share). The Sale Shares represent approximately 70.43% of the issued share capital of the Company as at the Latest Practicable Date. The S&P Agreements were completed on 8 September 2006.

For identification purposes only
7 -

LETTER FROM THE BOARD

Immediately following the Completion, the Offeror and parties acting in concert with it owned 283,335,000 Shares, representing approximately 70.43% of the issued share capital of the Company. Accordingly, the Offeror and parties acting in concert with it are required under Rule 26.1 and Rule 13 of the Takeovers Code to make mandatory unconditional cash offers for all the issued Shares and all the outstanding Options not already owned by the Offeror and parties acting in concert with it respectively.

The terms of the Offers are set out under the section headed "Mandatory Unconditional General Offers" below.

The Independent Board Committee comprising one non-executive Director, Dr. Lo Wing Yan, William JP and three independent non-executive Directors, namely Mr. Chan Koon Chung, Johnny, Mr. Chau, Stephen and Mr. Hui Kwok Wah, has been established to consider the terms of the Offers, taking into account the advice from Nuada, and to advise the Independent Shareholders and the Optionholders in respect of the Offers. Ms. Fung Suen Lai, Jacqueline, a non-executive Director, being a daughter of Mr. Allan Fung, interested as to 5% of AFAL and 500,000 Pool B Options, is considered to have direct interests in the Offers and thus will not be a member of the Independent Board Committee. Nuada has been appointed as the independent financial adviser to advise the Independent Board Committee regarding the terms of the Offers and such appointment has been approved by the Independent Board Committee.

The purpose of the Composite Offer Document is to provide you with, among other things, (i) the information relating to the Group, the Offeror and the Offers; (ii) the letter from the Independent Board Committee containing its recommendation and advice to the Independent Shareholders and the Optionholders in respect of the Offers; and (iii) the letter from Nuada containing its advice to the Independent Board Committee in respect of the Offers.

S&P AGREEMENTS

(I) S&P Agreement I

Date: 30 August 2006

Vendors: Mr. Allan Fung as to 18,331,500 Sale Shares and AFAL as to 233,340,000 Sale Shares

Mr. Allan Fung is the Chairman and an executive Director of the Company and AFAL is beneficially owned as to 75% by Mr. Allan Fung, as to 20% by Ms. Leung Siu Kuen, Janet (wife of Mr. Allan Fung) and as to 5% by Ms. Fung Suen Lai, Jacqueline (daughter of Mr. Allan Fung).

Purchaser: Nice Hill

Nice Hill and its sole shareholder, Mr. Chin, are independent of and not connected with the Company, the Directors, chief executive or substantial Shareholders of the Company and the Vendors or any of their respective subsidiaries, or an associate of any of them. As at the Latest Practicable Date, the Offeror and Mr. Chin are not acting in concert (as defined in the Takeovers Code) with any Shareholders.

LETTER FROM THE BOARD

Sale Shares:

an aggregate of 251,671,500 Sale Shares, representing approximately 62.56% of the issued share capital of the Company as at the Latest Practicable Date. The 251,671,500 Sale Shares were the entire shareholdings held by Mr. Allan Fung and AFAL as at the date of S&P Agreement I.

Consideration:

HK$10,066,860, representing a price of HK$0.04 per Sale Share.

The consideration for S&P Agreement I has been/ will be satisfied by Nice Hill in the following manner:

(1) the transfer of the Escrow Money with interest accrued thereon together with payment of an additional sum of HK$1,000,000 to an escrow agent as refundable deposit, together being the Deposit, held by such escrow agent under the New Escrow Agreement. The Deposit was released to the Vendors on Completion;

(2) HK$2,000,000 shall be paid by Nice Hill to AFAL and Mr. Allan Fung within three Business Days upon AFAL and Mr. Allan Fung producing evidence reasonably satisfactory to Nice Hill that the corporate guarantee provided by the Company for the ICBC Facilities has been fully released and discharged, and such payment obligation shall arise on or after Completion (Note);

(3) HK$1,000,000 shall be paid by Nice Hill to AFAL and Mr. Allan Fung within three Business Days upon AFAL and Mr. Allan Fung producing evidence reasonably satisfactory to Nice Hill that all the Corporate Guarantees have been fully released and discharged and such payment obligation shall arise on or after Completion (Note); and

(4) the balance of the consideration was paid by Nice Hill to AFAL and Mr. Allan Fung on Completion.

Note: Pursuant to S&P Agreement I, the ICBC Facilities and the Corporate Guarantees are required to be released and discharged within three months after Completion.

Conditions:

Completion of S&P Agreement I is conditional upon:

(1) the Shares remaining listed and traded on GEM at all times from the date of S&P Agreement I up to and including the Completion Date, excluding any temporary suspension not exceeding ten consecutive trading days for the purposes of clearing any announcements, circulars or documents in relation to the transactions contemplated under S&P Agreement I;

LETTER FROM THE BOARD

(2) trading in the Shares on GEM not being revoked or withdrawn at any time prior to the Completion Date;

(3) there being no indication from the Stock Exchange or the SFC prior to the Completion Date that listing of the Shares will be suspended, revoked or withdrawn at any time after Completion, whether in connection with any of the transactions contemplated by S&P Agreement I or otherwise;

(4) all necessary consents and approvals required to be obtained on the part of AFAL and Mr. Allan Fung in respect of S&P Agreement I and the transactions contemplated thereby having been obtained;

(5) the representations, warranties and indemnities given by AFAL and Mr. Allan Fung joint and severally for S&P Agreement I remaining true and accurate in all respects;

(6) the publication of the Announcement in relation to S&P Agreement I and the transactions contemplated thereby by or on behalf of the Company and Nice Hill which has been cleared by the Stock Exchange and the SFC; and

(7) delivery of the Undertakings.

All of the conditions set out above have been satisfied on the Completion Date.

Completion Date: 8 September 2006

(II) S&P AGREEMENT II

Date: 30 August 2006

Vendor: Mr. YS Fung (brother of Mr. Allan Fung) is an executive Director

He was the sole legal and beneficial owner of the 31,663,500 Sale Shares as at the date of S&P Agreement II.

As at the date of S&P Agreement II, Mr. YS Fung had misplaced the original share certificate(s) of the 31,663,500 Sale Shares and would, if he could not locate the original share certificate(s) by or about 15 September 2006, apply to the Company for new share certificate(s) of the 31,663,500 Sale Shares to be issued in his own name to replace the original share certificate(s).

The said share certificate(s) have been subsequently recovered by Mr. YS Fung and have been presented for Completion.

10 -

LETTER FROM THE BOARD

Purchaser: Nice Hill

Sale Shares: 31,663,500 Sale Shares, representing approximately 7.87% of the issued share capital of the Company as at the Latest Practicable Date. The 31,663,500 Sale Shares were the entire shareholdings held by Mr. YS Fung as at the date of S&P Agreement I.

Conditions: The sale and purchase of the 31,663,500 Sale Shares under S&P Agreement II is not subject to any conditions precedent.

Consideration: HK$1,266,540, representing a price of HK$0.04 per Sale Share, has been fully settled.

Completion Date: 8 September 2006

(III) BASIS OF CONSIDERATION

The consideration per Sale Share of HK$0.04 represents:

(a) a discount of approximately 11.11% to the closing price of HK$0.045 per Share as quoted by the Stock Exchange on the Last Trading Day;

(b) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 5 trading days up to and including the Last Trading Day;

(c) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 10 trading days up to and including the Last Trading Day;

(d) a discount of approximately 16.20% to the average closing price of approximately HK$0.048 per Share for the 30 consecutive trading days up to and including the Last Trading Day;

(e) a discount of approximately 75.96% to the audited consolidated net asset value per Share of approximately HK$0.166 per Share as at 31 March 2006 based on the audited accounts of the Company for the financial year ended 31 March 2006; and

(f) a discount of approximately 34.43% to the closing price of HK$0.061 per Share as quoted by the Stock Exchange on the Latest Practicable Date.

MANDATORY UNCONDITIONAL GENERAL OFFERS

Immediately following the Completion on 8 September 2006, the Offeror and parties acting in concert with it owned in aggregate 283,335,000 Shares, representing approximately 70.43% of the issued share capital of the Company. Accordingly, the Offeror and parties acting in concert with it are required under Rule 26.1 and Rule 13 of the Takeovers Code to make mandatory unconditional cash offers for all the issued Shares and all the outstanding Options not already owned by the Offeror and parties acting in concert with it respectively.

11 -

LETTER FROM THE BOARD

Principal terms of the Offers

Kingston Securities will, on behalf of the Offeror, make the Offers in compliance with the Takeovers Code on the following basis:

for each Offer Share ... HK$0.04 in cash

for cancellation of each Pool A Option ... HK$0.007 in cash

for cancellation of each Pool B Option ... HK$0.001 in cash

As at the Latest Practicable Date, there were (i) 402,300,000 Shares in issue; and (ii) 27,750,000 Options entitling the Optionholders to subscribe for a total of 27,750,000 new Shares.

Each of Mr. Allan Fung, Ms. Leung Siu Kuen, Janet and Mr. YS Fung has provided the Undertakings to the Offeror that he/she shall not exercise any of his/her Pool A Options as from the date of the said Undertakings up to and including the close of the Offers but will accept the Option Offer A.

As at the Latest Practicable Date, there were 27,750,000 Options entitling Optionholders to subscribe for a total of 27,750,000 new Shares, out of which 15,900,000 Pool A Options are exercisable at an exercise price of HK$0.033 per Share and 11,850,000 Pool B Options are exercisable at an exercise price of HK$0.231 per Share. Based on the price per Offer Share of HK$0.04, only 15,900,000 Pool A Options are in the money.

As at the Latest Practicable Date, save for the Undertakings, i) there were no arrangements in relation to shares of the Offeror or the Company and which might be material to the Offers; and ii) there were no agreements or arrangements to which the Offeror is a party which relate to circumstances in which it may or may not invoke or seek a pre-condition or a condition to the Offers. As at the Latest Practicable Date, save for the Undertakings, none of the Offeror and parties acting in concert with it had received any irrevocable commitment to accept the Offers.

Effect of not accepting Option Offer A and Option Offer B

Pursuant to the Pre-IPO Share Option Scheme, the Company shall within 7 days after the Share Offer has become or declared unconditional give notice to the Optionholders, whereupon they shall be entitled to exercise the outstanding Options in full or in part in accordance with the Pre-IPO Share Option Scheme at any time within 14 days after the date of such notice and, to the extent any of the outstanding Options have not been so exercised, such Options shall upon the expiry of such period lapse.

The Company and the Offerer had jointly announced on 8 September 2006 that the Share Offer has become unconditional. The Company gave notice to the Optionholders on 15 September 2006. Accordingly, any outstanding Options not so exercised shall lapse after 29 September 2006.

12 -

LETTER FROM THE BOARD

Notwithstanding the above, Option Offer A and Option Offer B will remain open for acceptance by the Optionholders until 4:00 p.m. on Tuesday, 17 October 2006 unless the Offeror revises or extends the Offers in accordance with the Takeovers Code.

Comparisons of value

The price of HK$0.04 for each Offer Share is the same as the price agreed to be paid by Nice Hill for each Sale Share under the S&P Agreements and represents:

(a) a discount of approximately 11.11% to the closing price of HK$0.045 per Share as quoted by the Stock Exchange on the Last Trading Day;

(b) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 5 trading days up to and including the Last Trading Day;

(c) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 10 trading days up to and including the Last Trading Day;

(d) a discount of approximately 16.20% to the average closing price of approximately HK$0.048 per Share for the 30 consecutive trading days up to and including the Last Trading Day;

(f) a discount of approximately 34.43% to the closing price of HK$0.061 per Share as quoted by the Stock Exchange on the Latest Practicable Date.

The price of HK$0.007 for cancellation of each Pool A Option is equivalent to the difference between the price for each Offer Share and the subscription price for each Pool A Option whereas given the exercise price of the Pool B Option is substantially above the offer price for the Offer Shares under the Share Offer, the offer price for cancellation of each Pool B Option is HK$0.001.

Total consideration

As at the Latest Practicable Date, there are 402,300,000 Shares in issue. Based on the offer price of HK$0.04 per Offer Share, the entire issued share capital of the Company is valued at HK$16,092,000 and the 118,965,000 Offer Shares under the Share Offer are valued at HK$4,758,600.

Based on the offer price of HK$0.007 per Pool A Option, the total consideration payable under the Option Offer A for cancellation of the Pool A Options amounts to HK$111,300. Based on the offer price of HK$0.001 per Pool B Option, the total consideration payable under the Option Offer B for cancellation of the Pool B Options amounts to HK$11,850.

13 -

LETTER FROM THE BOARD

Kingston Securities, Kingston Corporate Finance and Veda Capital are satisfied that there are sufficient financial resources available to the Offeror to meet the full acceptance of the Offers.

INFORMATION ON THE COMPANY

The Company, incorporated in the Cayman Islands with limited liability, is an investment holding company and its issued Shares are listed on GEM. The Group is an entertainment programme provider principally engaged in the distribution of video programmes in video compact disc and digital video disc formats for home entertainment in Hong Kong, Macau, PRC and other Asian regions including Taiwan, South Korea, Singapore, Thailand, and Malaysia, and the Philippines.

Based on the 2006 annual report of the Company, the net profit attributable to equity holders of the Company for the year ended 31 March 2006 was approximately HK$2.3 million and the audited consolidated net asset value of the Group as at 31 March 2006 was approximately HK$66.9 million.

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

Your attention is drawn to the section headed "Information on the Offeror and its intention regarding the Group" in the letter from Kingston Securities as set out on pages 16 to 21 of the Composite Offer Document.

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror has no intention to privatize the Company. The Offeror intends to maintain the listing of the Shares on the Stock Exchange. The Company, the Directors and the Offeror have jointly and severally undertaken to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the Shares will be held by the public at all times.

The Stock Exchange has indicated that if, upon closing of the Offers, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public or if the Stock Exchange believes that:

(i) a false market exists or may exist in the Shares; or
(ii) there are insufficient Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend trading in the Shares.

GENERAL

Your attention is drawn to the statutory and general information set out in Appendix III to the Composite Offer Document.

14 -

LETTER FROM THE BOARD

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 22 of the Composite Offer Document. Your attention is also drawn to the letter of advice from Nuada which contains, among other things, their advice to the Independent Board Committee in respect of the terms of the Offers and the principal factors and reasons considered by it in arriving at such advice. The text of the letter from Nuada is set out from pages 23 to 37 of the Composite Offer Document.

By Order of the Board of
Panorama International Holdings Limited
Au Lik Man, Simon
Executive Director

15 -

LETTER FROM KINGSTON SECURITIES

KINGSTON SECURITIES LIMITED

Suite 2801, 28th Floor

One International Finance Centre

1 Harbour View Street, Central, Hong Kong

26 September 2006

To the Independent Shareholders and the Optionholders

Dear Sir or Madam,

Mandatory unconditional general offers by Kingston Securities Limited on behalf of Nice Hill Investments Limited

(ii) for cancellation all outstanding Options

INTRODUCTION

On 30 August 2006, Nice Hill, being the Offeror, has entered into the S&P Agreements with the Vendors, pursuant to which the Offeror agreed to purchase and the Vendors agreed to sell an aggregate of 283,335,000 Shares for a total consideration of HK$11,333,400 (equivalent to HK$0.04 per Share). The Sale Shares represent approximately 70.43% of the issued share capital of the Company as at the Latest Practicable Date. The S&P Agreements were completed on 8 September 2006.

Immediately following the Completion, the Offeror and parties acting in concert with it owned in aggregate 283,335,000 Shares, representing approximately 70.43% of the issued share capital of the Company. Accordingly, the Offeror and parties acting in concert with it are required under Rule 26.1 and Rule 13 of the Takeovers Code to make mandatory unconditional cash offers for all the issued Shares and all the outstanding Options not already owned by the Offeror and parties acting in concert with it respectively.

MANDATORY UNCONDITIONAL GENERAL OFFERS

Principal terms of the Offers

Kingston Securities, on behalf of the Offeror, makes the Offers in compliance with the Takeovers Code on the following basis:

for each Offer Share ... HK$0.04 in cash

for cancellation of each Pool A Option ... HK$0.007 in cash

for cancellation of each Pool B Option ... HK$0.001 in cash

LETTER FROM KINGSTON SECURITIES

As at the Latest Practicable Date, there were (i) 402,300,000 Shares in issue; and (ii) 27,750,000 Options entitling the Optionholders to subscribe for a total of 27,750,000 new Shares.

Save for the Options, there are no outstanding warrants or options or derivatives or securities convertible into Shares. Taking into account the aggregate of 283,335,000 Shares to be acquired by the Offeror and its concert parties, 118,965,000 Offer Shares will be subject to the Share Offer. The Offeror did not have interest in any outstanding warrants or options or derivatives or securities convertible into Shares as at the Latest Practicable Date.

Comparisons of value

The price of HK$0.04 for each Offer Share is the same as the price agreed to be paid by Nice Hill for each Sale Share under the S&P Agreements and represents:

(a) a discount of approximately 11.11% to the closing price of HK$0.045 per Share as quoted by the Stock Exchange on the Last Trading Day;

(c) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 5 trading days up to and including the Last Trading Day;

(d) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 10 trading days up to and including the Last Trading Day;

(e) a discount of approximately 16.20% to the average closing price of approximately HK$0.048 per Share for the 30 consecutive trading days up to and including the Last Trading Day;

(f) a discount of approximately 75.96% to the audited consolidated net asset value per Share of approximately HK$0.166 per Share as at 31 March 2006 based on the audited accounts of the Company for the financial year ended 31 March 2006; and

17 -

LETTER FROM KINGSTON SECURITIES

(f) a discount of approximately 34.43% to the closing price of HK$0.061 per Share as quoted by the Stock Exchange on the Latest Practicable Date.

Total consideration

The Offers will be entirely financed by a loan facility granted to the Offeror by Kingston Securities. The payment of interest on, repayment of or security for any liability under the facility granted by Kingston Securities will not depend on the business of the Company. Kingston Securities, Kingston Corporate Finance and Veda Capital are satisfied that there are sufficient financial resources available to the Offeror to meet full acceptance of the Offers.

Save for the undertaking of the Offeror to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the Shares will be held by the public at all times, there is no agreement to, arrangement for or understanding of any transfer, charge or pledge of the Shares acquired in pursuance of the Offers to any other persons by the Offeror.

Effect of accepting the Offers

By accepting (i) the Share Offer, the accepting Shareholders will sell their Shares and all rights attached to them to the Offeror, including the rights to receive all dividends and distributions, if any, declared, made or paid on or after their acceptance of the Share Offer; and (ii) the Option Offer A and/or the Option Offer B, the accepting Optionholders will surrender to the Company their Options for cancellation by the Company.

Effect of not accepting Option Offer A and Option Offer B

18 -

LETTER FROM KINGSTON SECURITIES

Stamp Duty

Stamp duty arising in connection with acceptance of the Offers amounting to HK$1 for every HK$1,000 (or part thereof) of the amount payable in respect of relevant acceptances by the Shareholders, or the market value of the Shares, whichever is greater, will be deducted from the amount payable to the Shareholders who accept the Share Offer. The Offeror will then pay such stamp duty deducted to the Stamp Office of the Inland Revenue Department of Hong Kong.

The amounts due to the Shareholders or the Optionholders (as the case may be) who accept the Offers should be paid by the Offeror to the Shareholders or the Optionholders (as the case may be) as soon as possible but in any event within 10 days of the date of receipt of a duly completed and valid Form(s) of Acceptance in accordance with the Takeovers Code.

Dealings in Shares

Save for the S&P Agreements, there had been no dealings in the Shares by the Offeror and parties acting in concert with it during the six-month period prior to the date of the Announcement and up to the Latest Practicable Date.

Compulsory acquisition

The Offeror and parties acting in concert with it do not intend to exercise any right which may be available to it to acquire compulsorily any outstanding issued Shares or Options not acquired under the Offers after it is closed.

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

The Offeror is a private investment holding company incorporated in the British Virgin Islands and has not been engaged in any business save for holding of the 283,335,000 Sale Shares since its incorporation. The entire issued share capital of the Offeror is wholly and beneficially owned by Mr. Chin who is also the sole director of the Offeror. Mr. Chin, aged 57, has over 29 years of extensive management experience in trading, contracting and finance business and over 12 years of experience in the positions of managing director of multi-national corporations. Mr. Chin was the deputy chairman and an executive director of Dickson Group Holdings Limited (Stock Code: 313), a listed company on the Stock Exchange, between 2002 and 2004.

19 -

LETTER FROM KINGSTON SECURITIES

It is the intention of the Offeror that the existing principal activities of the Group will remain unchanged and the Offeror has no intention to make any material changes to the employees or management of the Group or to dispose of any material assets or businesses of the Group other than in its ordinary course of business and has no intention to inject any material assets or businesses into the Group as at the Latest Practicable Date.

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror has no intention to privatise the Company. The Offeror intends to maintain the listing of the Shares on the Stock Exchange. The Company, the Directors and the Offeror have jointly and severally undertaken to the Stock Exchange to take appropriate steps to ensure that not less than 25% of the Shares will be held by the public at all times.

(iii) a false market exists or may exist in the Shares; or
(iv) there are insufficient Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend trading in the Shares.

FURTHER TERMS OF THE OFFERS

Further terms and conditions of the Offers, including, among other things, procedures for acceptance and settlement, the acceptance period and taxation matters are set out in Appendix I to the Composite Offer Document and in the Forms of Acceptance.

GENERAL

To ensure equality of treatment of all Shareholders, those registered Shareholders who hold Shares as nominee for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. In order for the beneficial owners of the Shares whose investments are registered in nominee names to accept the Share Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the Share Offer.

The attention of the Overseas Shareholders is drawn to the section headed "Overseas Shareholders" in Appendix I to the Composite Offer Document.

20 -

LETTER FROM KINGSTON SECURITIES

Stockbrokers, banks and others who deal in relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to associates and other persons under Rule 22 of the Takeovers Code and those clients are willing to comply with them. Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw attention to the relevant rules pursuant to the Takeovers Code. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in any relevant security undertaken for a client during any 7 day period is less than HK$1 million.

This dispensation does not alter the obligation of principals, associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved.

Intermediaries are expected to co-operate with the Executive in its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that stockbrokers and other intermediaries will supply the Executive with relevant information as to those dealings, including identities of clients, as part of that co-operation.

Independent Shareholders and Optionholders are strongly advised to consider carefully the information contained in the letter from the Board, the letter from the Independent Board Committee and the letter from Nuada set out in the Composite Offer Document.

Your attention is drawn to the additional information set out in the Appendices, which form part of the Composite Offer Document.

Yours faithfully,

For and on behalf of

Kingston Securities Limited

Chu, Nicholas Yuk-yui

Director

21 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

PANORAMA INTERNATIONAL HOLDINGS LIMITED

鋪射國際控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8173)

26 September 2006

To the Independent Shareholders and the Optionholders

Dear Sir or Madam,

Mandatory unconditional general offers by Kingston Securities Limited on behalf of Nice Hill Investments Limited

(ii) for cancellation of all outstanding Options

The Independent Board Committee refers to the composite offer and response document dated 26 September 2006 issued jointly by the Offeror and the Company (the "Composite Offer Document"), of which this letter forms part. Terms defined in the Composite Offer Document shall bear the same meanings when used herein unless the context requires otherwise.

The Independent Board Committee has been established to give a recommendation to the Independent Shareholders and the Optionholders in respect of the Offers. We, being the members of the Independent Board Committee, have declared that we are independent and do not have any conflict of interest in respect of the Offers and we are therefore able to consider the terms of the Offers and make recommendations to the Independent Shareholders and the Optionholders. Nuada has been appointed as the independent financial adviser to advise us in this respect.

Your attention is drawn to the "Letter from the Board" and the "Letter from Kingston Securities" set out from pages 7 to 21 of the Composite Offer Document and the "Letter from Nuada" setting out its advice to us regarding the Offers as set out from pages 23 to 37 of the Composite Offer Document. Having considered the advice given in the "Letter from Nuada", we concur with the advice of Nuada and recommend the Independent Shareholders and the Optionholders to accept the Offers.

Notwithstanding our recommendations, the Independent Shareholders and the Optionholders should consider carefully the terms and conditions of the Offers.

Yours faithfully,

For and on behalf of the Independent Board Committee

Lo Wing Yan, William
Non-executive Director

Chan Koon Chung, Johnny
Independent non-executive Director

Chau, Stephen
Independent non-executive Director

Hui Kwok Wah
Independent non-executive Director

For identification purposes only

LETTER FROM NUADA

The following is the text of a letter of advice from Nuada Limited to the Independent Board Committee for the purpose of inclusion in this circular.

Nuada Limited
7th Floor, New York House
60 Connaught Road Central
Hong Kong

26 September 2006

To the Independent Board Committee
Panorama International Holdings Limited

Dear Sirs,

Mandatory unconditional cash offers
by Kingston Securities Limited
on behalf of Nice Hill Investments Limited
for all the issued Shares
(other than those Shares already owned by
Nice Hill Investments Limited
and parties acting in concert with it)
and
to cancel all the outstanding Options of
Panorama International Holdings Limited

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee with respect to the terms of the Offers, details of which are set out in the Composite Offer Document, of which this letter forms part. Unless the context otherwise requires, capitalized terms used in this letter shall have the same meanings as ascribed to them under the section headed “Definitions” in the Composite Offer Document.

On 30 August 2006, the Offeror entered into the S&P Agreements with the Vendors, pursuant to which the Offeror agreed to purchase and the Vendors agreed to sell an aggregate of 283,335,000 Sale Shares for a total consideration of HK$11,333,400 (equivalent to HK$0.040 per Sale Share). The Sale Shares represented approximately 70.43% of the issued share capital of the Company as at the date of the Announcement. Completion of the S&P Agreements took place on 8 September 2006. Upon Completion and as at the Latest Practicable Date, the Offeror and parties acting in concert with it owned in aggregate 283,335,000 Shares, representing approximately 70.43% of the issued share capital of the Company as at the Latest Practicable Date.

23 -

LETTER FROM NUADA

Accordingly, Kingston Securities, on behalf of the Offeror, is making a mandatory unconditional cash offer for all the issued Shares (other than those already owned by the Offeror and parties acting in concert with it) pursuant to Rule 26.1 of the Takeovers Code and comparable offers for all the outstanding Options pursuant to Rule 13 of the Takeovers Code. Detailed terms and conditions of the Offers, including the procedures for acceptance, are set out in the Composite Offer Document, in particular in "Letter from the Board", "Letter from Kingston Securities" and Appendix I to the Composite Offer Document.

The Independent Board Committee (comprising one non-executive Director, namely Dr. Lo Wing Yan, Willian JP and three independent non-executive Directors, namely Mr. Chan Koon Chung, Johnny, Mr. Chau, Stephen and Mr. Hui Kwok Wah) has been formed to advise the Independent Shareholders and the Optionholders on the terms of the Offers. We have been appointed by the Company as the independent financial adviser to advise the Independent Board Committee in respect of the Offers and such appointment has been approved by the Independent Board Committee.

BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have relied on the accuracy of the information, opinions and representations contained or referred to in the Composite Offer Document and provided to us by the Company, the Directors and the management of the Company. We have assumed that all information, opinions and representations contained or referred to in the Composite Offer Document were true and accurate at the time when they were made and continued to be true and accurate at the date of Composite Offer Document. We have also assumed that all statements of belief, opinion and intention made by the Directors and the Offeror in the Composite Offer Document were reasonably made after due enquiries and considerations. We have no reasons to doubt that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. We consider that we have reviewed sufficient information to enable us to reach an informed view and to justify reliance on the accuracy of the information contained in the Composite Offer Document to provide a reasonable basis for our opinions and recommendations. Having made all reasonable enquiries, the Directors have confirmed that, to the best of their knowledge, there are no other facts or representations the omission of which would make any statement in the Composite Offer Document, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Company, the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs, financial condition and future prospects of the Group and/or the Offeror.

In formulating our opinions, we have not considered the taxation implications on the Independent Shareholders and the Optionholders arising from acceptances or non-acceptances of the Offers as these are particular to their individual circumstances. It is emphasized that we will not accept responsibility for any tax effect on or liability of any person resulting from his or her acceptance or non-acceptance of the Offers. In particular, the Independent Shareholders and the Optionholders who are overseas residents or are subject to overseas taxation or Hong Kong taxation on securities dealings should consult their own tax positions, and if in any doubt, should consult their own professional advisers.

24 -

LETTER FROM NUADA

In formulating our opinions, we have made reference to the Business Comparables (as defined hereafter) which are listed on the Stock Exchange and we consider are engaging in businesses similar to that of the Group for analysis purpose on a best knowledge and best endeavor basis. We have assumed the truthfulness and accuracy of the information available to us regarding the Business Comparables. We have not, however, carried out any independent verification of the information available to us regarding the Business Comparables, nor have we conducted an independent investigation into the business and affairs, financial condition and future prospects of the Business Comparables. Our opinions are necessarily based upon the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations, and opinions made available to us as of the Latest Practicable Date. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein which may come or be brought to our attention after the date thereof.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee in respect of the Offers, we have taken into consideration the following principal factors and reasons:

The Share Offer

Pursuant to Rule 26.1 of the Takeovers Code, Kingston Securities, on behalf of the Offeror, is making the Share Offer.

The price of HK$0.040 for each Offer Share (the "Share Offer Price") is the same as the price payable by the Offeror for each Sale Share under the S&P Agreements. The Share Offer Price represents:

(a) a discount of approximately 11.11% to the closing price of HK$0.045 per Share as quoted by the Stock Exchange on the Last Trading Day;

(b) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 5 trading days up to and including the Last Trading Day;

(c) a discount of approximately 11.11% to the average closing price of HK$0.045 per Share for the 10 trading days up to and including the Last Trading Day;

(d) a discount of approximately 16.20% to the average closing price of HK$0.048 per Share for the 30 consecutive trading days up to and including the Last Trading Day;

(e) a discount of approximately 75.96% to the audited consolidated net asset value per Share of approximately HK$0.166 per Share as at 31 March 2006 based on the audited financial statements of the Company for the financial year ended 31 March 2006; and

(f) a discount of approximately 34.43% to the closing price of HK$0.061 per Share as quoted by the Stock Exchange on the Latest Practicable Date.

25 -

LETTER FROM NUADA

Historical Share price performance

The graph below illustrates the closing price level of the Shares during the period from 1 August 2005 to 22 September 2006 (being the 12 calendar months period prior to the date of the Announcement and thereafter up to the Latest Practicable Date) (the "Review Period").

Historical Share price performance

Note: Trading of Shares was suspended during the period from 31 August 2006 to 5 September 2006.

Data source: Website of the Stock Exchange (www.hkex.com.hk)

During the Review Period, the closing price of the Shares ranged from the lowest of HK$0.039 per Share (recorded on 18 July 2006) to the highest of HK$0.096 per Share (recorded on 18 April 2006). The Share Offer Price is below the closing prices of the Shares during the Review Period, except that of HK$0.039 per Share recorded on 18 July 2006. We also note that the Share Offer Price represents a discount of approximately 46.7% to the daily average closing price of the Shares of approximately HK$0.075 per Share for the Review Period. The Share Offer Price also represents a discount of approximately 34.4% to the closing price of the Shares of HK$0.061 on the Latest Practicable Date.

26 -

LETTER FROM NUADA

We also note that the closing price of the Shares had dropped substantially from its highest of HK$0.096 per Share on 18 April 2006 to HK$0.045 per Share on the Last Trading Day. We would like to remind the Independent Shareholders that although the Share Offer Price is below the closing price of the Shares most of the days during the Review Period and represents a discount to the daily average closing price of the Shares for the Review Period as well as the closing price of the Shares on the Latest Practicable Date, there is no guarantee that the trading price of the Shares will sustain and be higher than the Share Offer Price during and after the Offer period. The Independent Shareholders, in particular those who may wish to realise their investments in the Shares, are thus reminded to closely monitor the market price of the Shares during the Offer period.

Liquidity of the Shares

The average daily trading volume of the Shares and its percentage to the total number of issued Share and the total number of Shares held by the Independent Shareholders respectively during the Review Period is set out as follows:

Historical trading volume of the Shares

	Average daily trading volume (Shares)	Percentage to the total number of issued Shares (%) (Note 1)	Percentage to the number of issued Shares held by the Independent Shareholders (%) (Note 2)
2005
August	21,793	0.005	0.018
September	20,476	0.005	0.017
October	0	0.000	0.000
November	29,545	0.007	0.025
December	210,000	0.052	0.177
2006
January	0	0.000	0.000
February	61,500	0.015	0.052
March	172,174	0.043	0.145
April	30,588	0.008	0.026
May	26,500	0.007	0.022
June	177,273	0.044	0.149
July	65,714	0.016	0.055
August (Note 3)	28,636	0.007	0.024
September (up to the Latest Practicable Date) (Note 3)	2,333,846	0.580	1.962

Data source: Website of the Stock Exchange (www.hkex.com.hk)

LETTER FROM NUADA

Notes:

Based on 402,300,000 Shares in issue as at the Latest Practicable Date.
Based on 118,965,000 issued Shares held by the Independent Shareholders as at the Latest Practicable Date.
Trading of Shares was suspended during the period from 31 August 2006 to 5 September 2006.

As illustrated in the table above, the trading volume of the Shares during the Review Period had been extremely thin. During the period from 1 August 2006 to the Last Trading Day, the highest daily average trading volume amounted to 210,000 Shares recorded in December 2005, only representing approximately 0.052% to the total number of issued Shares and approximately 0.177% to the number of Shares held by the Independent Shareholders respectively. For the 283 trading days during the Review Period, there were 243 trading days with no trading of Shares, representing approximately 85.9% of the total number of trading days during the Review Period. We, however, note that the trading volume of the Shares revived after the release of the Announcement. The average daily trading volume of Shares in September up to the Latest Practicable Date amounted to approximately 2,333,846 Shares, representing approximately 0.580% to the total number of issued Shares and approximately 1.962% to the number of Shares held by the Independent Shareholders respectively, being the highest during the Review Period. The trading volume of the Shares on the Latest Practicable Date was 1,080,000 Shares, representing approximately 0.268% to the total number of issued Shares and 0.908% to the number of Shares held by the Independent Shareholders respectively, which we consider was still thin. Based on the above, we consider that the liquidity of the Shares was in general low during the Review Period.

Given the low liquidity of the Shares, we consider that despite the Share Offer Price represents a discount to the market price of the Shares as detailed in the section headed "Historical Share price performance" above, the Independent Shareholders who may wish to realise their investment in the Company, especially those with relatively sizeable shareholdings, might not be able to do so without having an adverse impact on the market price level of the Shares. Therefore, we consider that the Share Offer provides an alternative for the Independent Shareholders who would like to realise their investment in the Shares. Nevertheless, Independent Shareholders who intend to dispose part or all of their Shares are reminded to closely monitor the market price and the liquidity of the Shares during the Offer period and consider selling their Shares in the open market, instead of accepting the Share Offer, if the net proceeds from the disposal of such Shares in the open market would exceed that receivable under the Share Offer.

Financial performance and future prospects of the Group

The Group is an entertainment programme provider principally engaged in the distribution of video programmes in video compact disc and digital video disc formats for home entertainment in Hong Kong, Macau, Mainland China and other Asian regions including Taiwan, South Korea, Singapore, Malaysia and the Philippines.

LETTER FROM NUADA

A summary of the audited consolidated financial statements of the Group for the three years ended 31 March 2006 and the unaudited consolidated financial statements of the Group for the three months ended 30 June 2006 are set out below:

	For the year ended			For the three months ended
	2004 (HK$'000) (Audited)	31 March 2005 (HK$'000) (Audited)	2006 (HK$'000) (Audited)	30 June 2006 (HK$'000) (Unaudited)
Turnover	90,172	79,986	83,901	15,144
Gross Profit	36,621	33,070	28,302	4,261
Net Profit/(Loss)	9,058	4,394	2,450	(1,178)
Earning/(Loss) per Share	HK$2.26 cents	HK$1.09 cents	HK$0.57 cent	HK$(0.24) cent
	As at 31 March
Net asset value	2004 (HK$'000) (Audited)	2005 (HK$'000) (Audited)	2006 (HK$'000) (Audited)
	57,775	62,971	66,941
Net asset value per Share	HK$0.144	HK$0.157	HK$0.166

For the financial year ended 31 March 2005, the Group recorded a turnover of approximately HK$79.99 million, representing a decrease of approximately 11.3% from approximately HK$90.17 million for the financial year ended 31 March 2004, while the gross profit decreased approximately 9.7% to approximately HK$33.07 million from approximately HK$36.62 million for the year ended 31 March 2004 and the net profit decreased approximately 51.5% to approximately HK$4.39 million from approximately HK$9.06 million for the financial year ended 31 March 2004. As advised by the Company, the decreases in profits were mainly attributable to the lowering profit margin due to the increases in cost of sales, distribution costs and finance costs, the general downturn of the entertainment industry and the intensifying competition in the marketplace.

For the financial year ended 31 March 2006, the turnover of the Group increased approximately 4.9% to approximately HK$83.90 million as compared to that for the financial year ended 31 March 2005, but the gross profit decreased approximately 14.4% to approximately HK$28.30 million and the net profit decreased 44.2% to approximately HK$2.45 million respectively as compared to that for the financial year 31 March 2005. As advised by the Company, the decreases in profits were mainly attributable to the lowering profit margin due to the increases in cost of sales, distribution costs and finance costs, the general downturn of the entertainment industry and the intensifying competition in the marketplace. The Company further advised that the proportion of the income generated from film exhibition and film distribution, the profit margin of which is relatively lower than that of sales from video discs and sub-licensing of film rights, increased for the financial year ended 31 March 2006, and thus lowering the profit margin as a whole.

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LETTER FROM NUADA

It is noted that the net profit and the earnings per Share of the Company has been deteriorating for the three financial years ended 31 March 2006. In addition, the Group recorded an unaudited loss of approximately HK$1.18 million and an unaudited loss per Share of approximately HK$0.24 cent per Share for the three months ended 30 June 2006. As stated in the First Quarterly Report 2006/2007 of the Company, the unaudited loss for the three months ended 30 June 2006 can be largely attributable to the downturn in consumer spending due to the decline in the general entertainment business, as well as increased pricing pressure from competitors. Taking into account the past audited profitable record of Group for the three financial years ended 31 March 2006, the deteriorating profits of the Group for the three financial years ended 31 March 2006 and the published unaudited loss of the Group for the three months ended 30 June 2006, we consider it is uncertain whether the Group would be able to maintain profitability or make losses in the future. We consider that we are not in the position to opine on the future financial performance of the Group.

As at 31 March 2006, the net asset value of the Group amounted to approximately HK$66.94 million, representing an increase of approximately 6.3% from approximately HK$62.97 million as at 31 March 2005 and approximately 16.3% from approximately HK$57.58 million as at 31 March 2004. In particular, we note that film rights, which may be subject to substantial impairment losses, were a substantial portion of the Group's assets, constituting approximately 37.4%, 45.9% and 48.0% to the total asset value of the Group for each of the three financial years ended 31 March 2006 respectively. The impairment loss recognized in respect of film rights amounted to approximately HK$3.62 million for the financial year ended 31 March 2005, while there were no impairment loss recognized in respect of film rights for the financial year ended 31 March 2004 and the financial year ended 31 March 2006.

As at 31 March 2005, the Group had a net current asset value of approximately HK$9.45 million, representing an increase of approximately 26.5% from approximately HK$7.47 million as at 31 March 2004. As at 31 March 2006, the net current asset value of the Group decreased approximately 43.5% to approximately HK$5.34 million as compared with that as at the financial year ended 31 March 2005. As at 31 March 2006, the Group had a negative balance of cash and cash equivalents of approximately HK$11.07 million, comprising bank balances and cash of approximately HK$6.80 million and bank overdrafts of approximately HK$17.87 million. The Group had a negative balance of cash and cash equivalents amounted to approximately HK$17.23 million as at 31 March 2005 and approximately HK$17.68 million as at 31 March 2004.

Given (a) the fact that film rights, which may be subject to substantial impairment losses, constitutes a substantial portion of the Group's asset; (b) the fluctuation in the net current asset value of the Group for the three financial years ended 31 March 2006; and (c) the negative balance of cash and cash equivalents of the Group for the three years ended 31 March 2006, we are of the view that the future asset value of the Group is uncertain. We consider that we are not in the position to opine on the future financial condition of the Group.

As stated in the Letter from Kingston Securities, it is the intention of the Offeror that the existing principal activities of the Group will remain unchanged and the Offeror has no intention to make any material changes to the employees or management of the Group or to dispose of any material assets or businesses of the Group other than in its ordinary course of business and has no intention to inject any material assets or businesses into the Group as at the Latest Practicable Date. It is also stated in the

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LETTER FROM NUADA

Letter from Kingston Securities that the Offeror does not intend to privatise the Company, but intends to maintain listing of the Shares on the Stock Exchange. The Company, the Directors and the Offeror have jointly and severally undertaken to the Stock Exchange to take appropriate steps following the close of the Offers to ensure that not less than 25% of the issued Shares will be held by the public. As such, we consider that there should not be any material changes on the business operations and the listing status of the Group immediately following the close of the Offers.

Price/earnings multiples

Price/earnings multiple is one of the most commonly used benchmarks, taking into account the nature of business, for valuing a company. For comparison purpose and to the best of our knowledge, we have identified five companies listed on the Stock Exchange which we consider engaging in businesses similar to that of the Group (the "Business Comparables"). Details of the Business Comparables are set out below:

Company name	Stock code	Principal businesses (Note 1)	Market Capitalisation (Note 2)	Closing share price on the Last Trading Day (Note 1)	Earnings per share as stated in the latest audited accounts	P/E multiple (times)
China Star Entertainment Limited	326	Distribution of film, television, drama series, and video	HK$137,943,365	HK$0.265	Loss	N/A
Mei Ah Entertainment Group Ltd.	391	Film and programme distribution in audio visual product formats, film exhibition and film rights sub-licensing, provision of information technology and related services, website design and management services	HK$300,690,000	HK$0.390	HK$0.0260	15.00

LETTER FROM NUADA

Company name	Stock code	Principal businesses (Note 1)	Market Capitalisation (Note 2)	Closing share price on the Last Trading Day (Note 1)	Earnings per share as stated in the latest audited accounts	P/E multiple (times)
Riche Multi-Media Holdings Ltd.	764	Distribution of video programmes, sub-licensing of video programme rights, film exhibition and provision of video conversion services	HK$773,102,700	HK$0.150	Loss	N/A
Universe International Holdings Ltd.	1046	Distribution of films in various videogram formats, licensing and sub-licensing of film rights, film exhibition and leasing of investment property and machines for replication of optical discs	HK$81,230,269	HK$0.050	HK$0.0061	8.20
Golden Harvest Entertainment (Holdings) Limited	1132	Worldwide film distribution, film exhibition, film processing, film production and television drama series production and video distribution	HK$196,885,788	HK$0.148	Loss	N/A
The Company	8173	Distribution of video programmes in video compact disc and digital video disc formats for home entertainment	HK$18,103,500	HK$0.045	HK$0.0057	7.89
Price/earnings multiple represented by the Share Offer Price of HK$0.040 per Share						7.02

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LETTER FROM NUADA

Notes:

Source: Website of the Stock Exchange (www.hkex.com.hk)
The market capitalisation is calculated based on the respective closing share prices on the Last Trading Day of the Business Comparables and the Company and their respective issued share capital as at their respective latest financial year ends.

Upon comparison, we note that the price/earnings multiples represented by both the closing price of the Shares of HK$0.045 per Share on the Last Trading Date and the Share Offer Price of HK$0.040 per Share of approximately 7.89 times and approximately 7.02 times respectively is below that of the Business Comparables. However, we would also like to point out the limitations involved in the price/earnings multiple analysis given above, including but not limited to, the limited number of the Business Comparables, the different scope of business, size of operation and market positioning of the Business Comparables as well as the various circumstances and factors affecting the share price performance of the Business Comparables specifically. In addition, in view of the fact that the Group recorded an unaudited loss for the three months ended 30 June 2006 and three of the Business Comparables also recorded losses for their respective latest financial years, we consider that the price/earnings multiple may not be an appropriate reference in assessing the fairness and reasonableness of the Share Offer Price.

Net asset value

We note that the Share Offer Price represents a discount of approximately 75.96% to the audited consolidated net asset value per Share of approximately HK$0.166 per Share as at 31 March 2006 based on the audited financial statements of the Company for the financial year ended 31 March 2006. In assessing the Share Offer Price, we have attempted to make reference to the premium/(discount) represented by the closing share prices of the Business Comparables on the Last Trading Day over/(to) their respective net asset value per share ("NAV per share") as follows:

Company name	Stock code	Market Capitalisation (Note 1)	Closing share price on the Last Trading Day (Note 2)	NAV per share (Note 3)	Premium/(Discount) over/(to) NAV per share (Note 4)
China Star Entertainment Limited	326	HK$137,943,365	HK$0.265	HK$1.151	(77.0)%
Mei Ah Entertainment Group Ltd.	391	HK$300,690,000	HK$0.390	HK$0.309	26.2%
Riche Multi-Media Holdings Ltd.	764	HK$773,102,700	HK$0.150	HK$0.033	354.6%
Universe International Holdings Ltd.	1046	HK$81,230,269	HK$0.050	HK$0.178	(71.9)%
Golden Harvest Entertainment (Holdings) Limited	1132	HK$196,885,788	HK$0.148	HK$0.309	(52.1)%
The Company	8173	HK$18,103,500	HK$0.045	HK$0.166	(72.9)%
Discount to NAV per Share represented by the Share Offer Price of HK$0.040 per Share					(76.0)%

LETTER FROM NUADA

Notes:

The market capitalisation is calculated based on the respective closing share prices of the Business Comparables and the Company on the Last Trading Day and their respective issued share capital as at their respective latest financial year ends.
Source: Website of the Stock Exchange (www.hkex.com.hk)
The NAV per share is calculated based on the respective net asset value as stated in their respective latest audited consolidated financial statements of the Business Comparables and the Company and their respective issued share capital as at their respective latest financial year ends.
The premium/(discount) over/(to) NAV per Share is calculated based on the respective closing share price of the Business Comparables and the Company on the Last Trading Day and their respective NAV per share calculated as stated in Note 3 above.

As illustrated above, the premium/(discount) represented by the closing share prices of the Business Comparables on the Last Trading Day over/(to) their respective NAV per share varies largely from a premium of approximately 354.6% to a discount of approximately 77.0%. Given the limited number of the Business Comparables and the wide diversity of the premium/(discount) represented by the closing share prices of the Business Comparables on the Last Trading Day over/(to) their respective NAV per share, we consider that the reference to the net asset value of the Business Comparables might not be a good indicator to assess the Share Offer Price.

The Option Offer A and the Option Offer B

As at the Latest Practicable Date, there were 27,750,000 Options entitling the Optionholders to subscribe for a total of 27,750,000 new Shares, out of which 15,900,000 Pool A Options are exercisable at an exercise price of HK$0.033 per Share at any time up to 8 May 2012 and 11,850,000 Pool B Options are exercisable at an exercise price of HK$0.231 per Share at any time up to 8 May 2012.

Pursuant to Rule 13 of the Takeovers Code, Kingston Securities, on behalf of the Offeror, is making the Option Offer A and the Option Offer B on the following basis:

For cancellation of each Pool A Option …………………………………………HK$0.007 in cash
For cancellation of each Pool B Option …………………………………………HK$0.001 in cash

Based on the Share Offer Price of HK$0.040 per Share, only 15,900,000 Pool A Options are in the money. The offer price of HK$0.007 for cancellation of each Pool A Option is equivalent to the difference between the Share Offer Price of HK$0.040 per Share and the exercise price of Pool A Options of HK$0.033 for each new Share. As such, we consider the determination of the offer price for Pool A Options justifiable, and thus fair and reasonable.

In addition, as stated in the letter from the Board in this Composite Offer Document, any outstanding Options shall lapse if not exercised on or before 29 September 2006 (the "Final Exercise Date") pursuant to the Pre-IPO Share Option Scheme. Accordingly, we consider that the Optionholders of the Pool A Options, shall accept the Option Offer A if they, having regard to their own circumstances, do not intend to exercise their Options on or before the Final Exercise Date.

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LETTER FROM NUADA

Three of the Optionholders, namely Mr. Allan Fung, Ms. Leung Siu Kuen, Janet and Mr. YS Fung (the "Undertaken Optionholders"), have provided the Undertakings to the Offeror that he/she shall not exercise any of his/her Pool A Options as from the date of the said Undertakings up to and including the close of the Offers and will accept the Option Offer A. By accepting the Option Offer A, the accepting Optionholders will surrender to the Company their Options for cancellation by the Company.

Given the offer price for each Pool B Option is set at nominal value and the Pool B Options are currently "out of money", we consider the offer price for the Pool B Options acceptable and advise the Independent Board Committee to advise the Optionholders of the Pool B Options to accept the Option Offer B. By accepting the Option Offer B, the accepting Optionholders will surrender to the Company their Options for cancellation by the Company.

However, the Optionholders (other than the Undertaken Optionholders) who intend to accept the Option Offer A or the Option Offer B (as the case may be) should also be reminded to closely monitor the market price and the liquidity of the Shares during the Offer period and shall, having regard to their own circumstances, consider exercising their Options and dispose of the Shares so converted in the open market, instead of accepting the Option Offer A or the Option Offer B (as the case may be), if the market price per Share exceeds their respective exercise price (i.e. "in the money") during the Offer period and the net proceeds from the sales of such converted Shares in the open market after deducting all transaction costs would exceed the net amount receivable under the Option Offer A or the Option Offer B (as the case may be). The Optionholders should exercise caution in doing so and monitor the market closely.

RECOMMENDATION

Having considered (a) the low liquidity of the Shares during the Review Period; (b) the deteriorating profits of the Group for the three financial years ended 31 March 2006 and the published unaudited loss of the Group for the three months ended 30 June 2006; (c) the fact that film rights, which may be subject to substantial impairment losses, constitutes a substantial portion of the Group's asset; (d) the fluctuation in the net current asset value of the Group for the three financial years ended 31 March 2006; and (e) the negative balance of cash and cash equivalents of the Group for the three years ended 31 March 2006, we are of opinion that the discount represented by the Share Offer Price to the market price of the Shares during the Review Period is acceptable and that the Share Offer Price is fair and reasonable so far as the Independent Shareholders are concerned. In addition, the Share Offer is incidental to and as a result of the completion of the purchase of the Sale Shares by the Offeror at HK$0.040 per Share (the "Purchase Price"). Under the Share Offer, the Independent Shareholders are treated even-handedly by the Offeror as the Share Offer Price is equivalent to the Purchase Price. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to accept the Share Offer.

Nevertheless, we consider that the future prospects, asset value and profitability of the Group are uncertain as detailed in the section headed "Financial information and future prospects of the Group" above. We reiterate that we are not in the position to opine on the future financial performance and condition as well as the future Share price performance of the Company.

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LETTER FROM NUADA

The Independent Shareholders, in particular those who intend to accept the Share Offer, are reminded to note the recent increase in trading volume and Share price after the release of the Announcement in relation to the Offers, and that there is no guarantee that the current market price will not sustain and will not be higher than the Share Offer Price during and after the Offers. The Independent Shareholders who intend to accept the Share Offer are reminded to closely monitor the market price and the liquidity of the Shares during the Offer period and shall, having regard to their own circumstances, consider selling their Shares in the open market, instead of accepting the Share Offer, if the net proceeds from the sale of such Shares would be higher than that receivable under the Offers.

Furthermore, despite the discount represented by the Share Offer Price to the market price of the Shares during the Review Period as detailed above, given the low liquidity of the Shares during the Review Period, we would like to remind the Independent Shareholders who may wish to realise their investment in the Shares that they might not be able to do so, especially those with sizeable shareholdings, in the open market, without adversely affecting the market price level of the Shares. Thus, the Share Offer represents an alternative for the Independent Shareholders who would like to realise their investment in the Shares. We would like to remind the Independent Shareholders that there is no guarantee whether the current market price of the Shares will sustain or will not sustain and will or will not be higher than the Share Offer Price during and after the Offers.

Regarding the Option Offer A, given the offer price of HK$0.007 for cancellation of each Pool A Option is equivalent to the difference between the Share Offer Price of HK$0.040 per Share and the exercise price of Pool A Options of HK$0.033 for each new Share, we consider the determination of the offer price under Option Offer A justifiable, and thus fair and reasonable. In addition, as stated in the letter from the Board in this Composite Offer Document, any outstanding Options shall lapse if not exercised on or before 29 September 2006 (the "Final Exercise Date") pursuant to the Pre-IPO Share Option Scheme. Accordingly, we consider that the Optionholders of the Pool A Options, shall accept the Option Offer A if they, having considered their own circumstances, do not intend to exercise their Options on or before the Final Exercise Date. We, therefore, recommend the Independent Board Committee to advise the Optionholders of the Pool A Options to accept the Option Offer A.

It is noted that three of the Optionholders, namely Mr. Allan Fung, Ms. Leung Siu Kuen, Janet and Mr. YS Fung, have provided the Undertakings to the Offeror that he/she shall not exercise any of his/her Pool A Options as from the date of the said Undertakings up to and including the close of the Offers and will accept the Option Offer A.

Given the offer price for each Pool B Option is set at nominal value and Pool B Options are currently "out of money", we consider the offer price for the Pool B Option acceptable and fair and reasonable. Accordingly, we recommend the Independent Board Committee to advise the Optionholders of the Pool B Options to accept the Option Offer B.

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LETTER FROM NUADA

price per Share exceeds their respective exercise price (i.e. in the money) during the Offer period and the net proceeds from the sales of such converted Shares in the open market after deducting all transaction costs would exceed the net amount receivable under the Option Offer A or the Option Offer B (as the case may be). The Optionholders should exercise caution in doing so and monitor the market closely.

We would also like to remind the Independent Shareholders and the Optionholders that as stated in the Letter from Kingston Securities, the Stock Exchange has stated that if, at the close of the Offers, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that 1) a false market exists or may exist in trading of the Shares; or 2) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend dealing in the Shares.

The Independent Shareholders and the Optionholders should read carefully the procedures for accepting the Offers as detailed in Appendix I to the Composite Offer Document and are strongly advised that the decision to realise or hold their investment in the Shares is subject to individual circumstances and investment objectives.

Yours faithfully,

For and on behalf of

Nuada Limited

Po Chan
Executive Director

Bernard Chan
Executive Director

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APPENDIX I

FURTHER TERMS OF THE OFFERS

1. PROCEDURES FOR ACCEPTANCE

A. The Share Offer

If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title in respect of your Shares are in your name, and you wish to accept the Share Offer, you must send the duly completed relevant Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title and/or any indemnity or indemnities required in respect thereof, to the Registrar, Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in any event not later than 4:00 p.m. on Tuesday, 17 October 2006 or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code.

If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title in respect of your Shares is/are in the name of a nominee company or some name other than your own, and you wish to accept the Share Offer whether in full or in respect of part of your holding of Shares, you must either:

(a) lodge your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title, with the nominee company, or other nominee, and with instructions authorising it to accept the Share Offer on your behalf and requesting it to deliver the relevant Form of Acceptance duly completed together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title to the Registrar; or

(b) arrange for the Shares to be registered in your name by the Company through the Registrar and send the relevant Form of Acceptance duly completed together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title to the Registrar; or

(c) if your Shares have been lodged with your broker/custodian bank through CCASS, instruct your licensed securities dealer/custodian bank to authorise HKSCC Nominees Limited to accept the Share Offer on your behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your broker or custodian bank for the timing on processing of your instruction, and submit your instruction to your broker/custodian bank as required by them; or

(d) if your Shares have been lodged with your Investor Participant’s Account with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominees Limited.

APPENDIX I

FURTHER TERMS OF THE OFFERS

If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title in respect of your Shares is/are not readily available and/or is/are lost, as the case may be, and you wish to accept the Share Offer, the relevant Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipts and/or other document(s) of title or that it/they is/are not readily available. If you find such document(s) or if it/they become available, it/they should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate(s), you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instruction given, should be returned to the Registrar.

If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your Share certificate(s), and you wish to accept the Share Offer, you should nevertheless complete the relevant Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to any of Kingston Corporate Finance, Veda Capital, Kingston Securities, the Company, the Offeror or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such Share certificates to the Registrar and to authorise and instruct the Registrar to hold such Share certificate(s), subject to the terms and conditions of the Share Offer, as if it/they were delivered to the Registrar with the relevant Form of Acceptance.

An acceptance may not be counted as valid unless:

(a) it is received by the Registrar on or before the latest time for acceptance at 4:00 p.m. on Tuesday, 17 October 2006 and the Registrar has recorded that the acceptance and any relevant documents required under paragraph (b) below have been so received; and

(b) the relevant Form of Acceptance is duly completed and is:

(i) accompanied by Share certificate(s) in respect of the relevant Shares and, if that/those Share certificate(s) is/are not in the name of the acceptor, such other documents (e.g. a duly stamped transfer of the relevant Shares in blank or in favour of the acceptor executed by the registered holder) in order to establish the right of the acceptor to become the registered holder of the relevant Shares; or

(ii) from a registered Shareholder or his personal representatives (but only up to the amount of the registered holding and only to the extent that the acceptance relates to the Shares which are not taken into account under the other subparagraph of this paragraph (b)); or certified by the Registrar or the Stock Exchange.

If the relevant Form of Acceptance is executed by a person other than the registered Shareholder, appropriate evidence of authority (e.g. grant of probate or certified copy of a power of attorney) must be produced.

APPENDIX I

FURTHER TERMS OF THE OFFERS

No acknowledgement of receipt of any Form of Acceptance, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

B. The Option Offer A and Option Offer B

(a) If you accept the Option Offer A and/or Option Offer B, you should complete the relevant Form of Acceptance and renunciation of outstanding Options accompanying the Composite Offer Document in accordance with the instructions printed thereon, which form part of the terms and conditions of the Option Offer A and/or Option Offer B.

(b) The completed relevant Form of Acceptance and renunciation of outstanding Options should be forwarded, together with the relevant Option certificate(s) (if any) stating the number of outstanding Options in respect of which you intend to accept the Option Offer A and/or Option Offer B, by post or by hand to the principal place of business of the Company in Hong Kong at 8th Floor, Mita Centre, 552-566 Castle Peak Road, Kwai Chung, New Territories, Hong Kong, marked “Panorama International Holdings Limited – Option Offer” on the envelope, as soon as possible and in any event so as to reach the principal place of business of the Company in Hong Kong at aforesaid address by no later than 4:00 p.m. on Tuesday, 17 October 2006.

No acknowledgement of receipt of any Form(s) of Acceptance and Option Certificates and/or any other documents will be given.

2. SETTLEMENT

A. The Share Offer

Provided that the Form(s) of Acceptance and relevant Share certificate(s) and/or transfer receipt(s) and/or any document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are in complete and good order and have been received by the Registrar by not later than 4:00 p.m. on Tuesday, 17 October 2006 being the latest time for acceptance of the Share Offer, a cheque for the amount due to the accepting Shareholders in respect of the Shares tendered by them under the Share Offer, less seller’s ad valorem stamp duty payable by them, will be despatched to the accepting Shareholders to the addresses specified on the Forms of Acceptance by ordinary post at their own risk within 10 days of the date on which all the relevant documents are received by the Registrar to render such acceptance complete and valid.

B. The Option Offer A and Option Offer B

Provided that the Form(s) of Acceptance and renunciation of the outstanding Options and Option certificate(s) (if any) are in complete and good order and have been received by the Company not later than 4:00 p.m. on Tuesday, 17 October 2006, a cheque for the amount due to each of the Optionholders in respect of the Options surrendered by the relevant Optionholders under the Option Offer A and/or Option Offer B will be despatched to each of them within 10 days after the date on which all the relevant documents are received by the Company to render such acceptance complete and valid.

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APPENDIX I

FURTHER TERMS OF THE OFFERS

Settlement of the consideration to which any accepting Shareholder(s) or Optionholder(s) is/are entitled under the Offers will be implemented in full in accordance with the terms of the Offers, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such accepting Shareholder and Optionholder.

3. ACCEPTANCE PERIOD AND REVISIONS

Unless the Offers have previously been revised, the latest time and date for acceptance will be 4:00 p.m. on Tuesday, 17 October 2006. The Offeror reserves the right to revise the Offers after the despatch of the Composite Offer Document until such day as it may determine and in accordance with the Takeovers Code. If the Offeror revises such terms, all Independent Shareholders and Optionholders, whether or not they have already accepted the Offers, will be entitled to accept the revised Offers under the revised terms.

If the Offers are revised, the announcement of such revision will state the next closing date. If the Offers are revised, it will remain open for acceptance for a period of not less than 14 days from the posting of the revised offer document.

In order to be valid, relevant Form(s) of Acceptance for the Share Offer must be received by the Registrar and relevant Form(s) of Acceptance for the Option Offer A and Option Offer B must be received by the Company in accordance with the instructions printed thereon by 4:00 p.m. on Tuesday, 17 October 2006.

Effect of not accepting Option Offer A and Option Offer B

APPENDIX I

FURTHER TERMS OF THE OFFERS

4. ANNOUNCEMENTS

By 6:00 p.m. on Tuesday, 17 October 2006, which is the closing date of the Offers, or such later time and/or date as the Executive may in exceptional circumstances permit, the Offeror must inform the Executive and the Stock Exchange of its decisions in relation to any revision, extension or expiry of the Offers. The Offeror shall publish an announcement to be posted on the Stock Exchange’s website by 7:00 p.m. on the closing date of the Offers stating whether the Offers have been revised, extended or expired. The announcement shall specify the number of Shares/Options (a) for which valid acceptances have been received, (b) held, controlled or directed by the Offeror or persons acting in concert with it before the period of the Offers; and (c) acquired or agreed to be acquired by the Offeror or any person acting in concert with it during the period of the Offers.

The announcement must specify the percentages of the relevant classes of share capital, and the percentages of voting rights of the Company represented by these numbers of Shares.

5. RIGHT OF WITHDRAWAL

Acceptances of the Offers by the Independent Shareholders shall be irrevocable and cannot be withdrawn except in the circumstances set out in Rule 19.2 of the Takeovers Code which is to the effect that if the Offeror is unable to comply with any of the requirements of making announcements relating to the Offers as described under the section headed “Announcements” above, the Executive may require that acceptors be granted a right of withdrawal on terms acceptable to the Executive until such requirements can be met.

6. STAMP DUTY

Hong Kong stamp duty at a rate of HK$1.00 for every HK$1,000 (or part thereof) of the amount payable which is based on the number of accepted Shares and the market value of the Share or the offer price of the Share (at the discretion of the Collector of Stamp Duty) in respect of relevant acceptances will be deducted from the consideration payable to the accepting Shareholders. The Offeror will then, on behalf of the accepting Shareholders, pay such amount to the Inland Revenue Department of Hong Kong. The Offeror will also pay stamp duty payable by it as purchaser of the Shares pursuant to the Share Offer based on the gross consideration payable to the accepting Shareholders in respect of the Share Offer.

7. TAXATION

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their accepting the Offers. It is emphasised that none of the Offeror, Kingston Securities or Kingston Corporate Finance or Veda Capital or any of their respective directors or any persons involved in the Offers accept responsibility for any tax effects or liabilities of any person or persons as a result of their acceptance of the Offers.

8. OVERSEAS SHAREHOLDERS

The making of the Offers to Overseas Shareholders may be prohibited or affected by the laws of the relevant jurisdiction. Overseas Shareholders should obtain appropriate legal advice on, inform themselves about and observe any applicable legal requirement. It is the responsibility of each Overseas Shareholder who wishes to accept the Offers to satisfy himself, herself or itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required and the compliance with other necessary formalities or legal requirements.

APPENDIX I

FURTHER TERMS OF THE OFFERS

9. GENERAL

(i) Acceptance of the Offers by any person or persons holding Shares/Options will be deemed to constitute a warranty by such person or persons to the Offeror that the Shares/Options acquired under the Offers are sold by any such person or persons free from all liens, charges, encumbrances, equities and third party rights and together with all rights attaching thereto, including the right to receive all dividends and distributions declared, made or paid on or after their acceptance of the Offers.

(ii) All communications, notices, Forms of Acceptance, Share certificates, Option certificates, transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to be delivered by or sent to or from the Shareholders or the Optionholders will be delivered by or sent to or from them, or their designated agents, through post at their own risk, and none of the Offeror, the Company Kingston Corporate Finance, Veda Capital, Kingston Securities or the Registrar or any of their respective agents, accepts any liability for any loss in postage or any other liabilities that may arise as a result thereof.

(iii) The provisions set out in the Form(s) of Acceptance form part of the terms of the Offers.

(iv) The accidental omission to despatch the Composite Offer Document and/or the Form(s) of Acceptance or any of them to any person to whom the Offers are made will not invalidate the Offers in any way.

(v) The Offers and all acceptances will be governed by and construed in accordance with the laws of Hong Kong.

(vi) Due execution of a Form of Acceptance will constitute an authority to the Company, the Offeror, any director of the Offeror, Kingston Corporate Finance, Veda Capital, Kingston Securities or such person or persons as the Offeror may direct, to complete and execute any document on behalf of the person or persons accepting the Offers and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as it may direct, the Shares or the Options in respect of which such person or persons has/have accepted the Offers.

(vii) References to the Offers in the Composite Offer Document and in the Form(s) of Acceptance shall include any revision thereof.

(viii) The English text of the Composite Offer Document and of the Form(s) of Acceptance shall prevail over their respective Chinese text.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

1. SUMMARY OF FINANCIAL RESULTS FOR THE THREE YEARS ENDED 31 MARCH 2006

The following financial information has been extracted from the audited financial statements of the Group for each of the three years ended 31 March 2006:

Consolidated income statement

	For the year ended 31 March
	2006
HK$'000	2005
HK$'000	2004
HK$'000
Turnover	83,901	79,986	90,172
Cost of sales	(55,599)	(46,916)	(53,551)
Gross profit	28,302	33,070	36,621
Other operating income	893	285	88
Distribution costs	(1,022)	(415)	(557)
Administrative expenses	(19,032)	(19,206)	(20,592)
Other operating expenses	(3,247)	(1,975)	(2,655)
Impairment loss recognised in
respect of film rights	-	(3,617)	-
Profit from operations	5,894	8,142	12,905
Finance costs	(2,512)	(1,337)	(1,136)
Profit before taxation	3,382	6,805	11,769
Taxation	(932)	(1,662)	(2,060)
Profit for the year	2,450	5,143	9,709
Attributable to:
Equity holders of the Company	2,305	4,394	9,058
Minority Interest	145	749	651
	2,450	5,143	9,709
Earnings per share
- Basic	HK0.57 cent	HK1.09 cents	HK2.26 cents
- Diluted	HK0.56 cent	HK1.06 cents	HK2.20 cents

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Consolidated balance sheet

	As at 31 March
	2006
HK$’000	2005
HK$’000	2004
HK$’000
NON-CURRENT ASSETS
Property, plant and equipment	4,898	1,402	1,811
Film rights	72,461	66,149	47,034
Films in progress	793	490	1,305
Trademark	15	30	45
Payment for acquisition of film rights	2,066	1,334	11,799
	80,233	69,405	61,994
CURRENT ASSETS
Inventories	22,377	22,909	20,771
Trade and other receivables	26,853	35,804	27,181
Amount due from a related company	6,537	520	1,048
Pledged bank deposits	8,218	10,127	10,097
Bank balances and cash	6,796	5,441	4,595
	70,781	74,801	63,692
CURRENT LIABILITIES
Trade and other payables	37,716	37,492	22,808
Amounts due to related companies	3	1,594	5,817
Taxation payable	105	394	431
Obligations under finance leases
– due within one year	430	503	986
Bank and other borrowings
– due within one year	27,187	25,370	26,176
	65,441	65,353	56,218
NET CURRENT ASSETS	5,340	9,448	7,474
TOTAL ASSETS LESS
CURRENT LIABILITIES	85,573	78,853	69,468
NON-CURRENT LIABILITIES
Other payable	6,596	11,000	9,000
Obligations under finance leases
– due after one year	1,099	394	392
Bank and other borrowings
– due after one year	6,760	1,204	438
Deferred tax liabilities	4,177	3,284	1,863
	18,632	15,882	11,693
	66,941	62,971	57,775
CAPITAL AND RESERVES
Share capital	4,023	4,023	4,016
Reserves	56,173	52,348	47,908
	60,196	56,371	51,924
MINORITY INTERESTS	6,745	6,600	5,851
TOTAL EQUITY	66,941	62,971	57,775

There were neither extraordinary nor exceptional items existing during each of the three years ended 31 March 2006.

No dividend has been paid or declared by the Company for each of the three years ended 31 March 2006.

The adoption of new Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants for accounting period on or after 1 January 2005 did not result in substantial changes to the Group's accounting policy except for HKAS 1, HKAS 32, HKAS 39 and HKFRS 2 (details are set out in Note 2 to the financial statements in Appendix II to the Composite Offer Document).

There was no qualification in the auditor's reports for each of the three years ended 31 March 2006.

45 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

2. FINANCIAL STATEMENTS

The following is a summary of the audited consolidated accounts of the Company for the two years ended 31 March 2006 as extracted from the 2006 annual report of the Company.

Consolidated profit and loss account

Year ended 31 March 2006

| | Notes | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- | --- |
| Turnover | 6 | 83,901 | 79,986 |
| Cost of sales | | (55,599) | (46,916) |
| Gross profit | | 28,302 | 33,070 |
| Other operating income | | 893 | 285 |
| Distribution costs | | (1,022) | (415) |
| Administrative expenses | | (19,032) | (19,206) |
| Other operating expenses | | (3,247) | (1,975) |
| Impairment loss recognised in respect of film rights | | - | (3,617) |
| Profit from operations | 8 | 5,894 | 8,142 |
| Finance costs | 9 | (2,512) | (1,337) |
| Profit before taxation | | 3,382 | 6,805 |
| Taxation | 13 | (932) | (1,662) |
| Profit for the year | | 2,450 | 5,143 |
| Attributable to: | | | |
| Equity holders of the Company | | 2,305 | 4,394 |
| Minority Interest | | 145 | 749 |
| | | 2,450 | 5,143 |
| Earnings per share | | | |
| - Basic | 14 | HK0.57 cent | HK1.09 cents |
| - Diluted | 14 | HK0.56 cent | HK1.06 cents |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

As at 31 March 2006

Consolidated balance sheet

	Notes	2006	2005
		HK$'000	HK$'000
NON-CURRENT ASSETS
Property, plant and equipment	15	4,898	1,402
Film rights	16	72,461	66,149
Films in progress		793	490
Trademark	17	15	30
Payment for acquisition of film rights		2,066	1,334
		80,233	69,405
CURRENT ASSETS
Inventories	19	22,377	22,909
Trade and other receivables	20	26,853	35,804
Amount due from a related company	21	6,537	520
Pledged bank deposits	32	8,218	10,127
Bank balances and cash		6,796	5,441
		70,781	74,801
CURRENT LIABILITIES
Trade and other payables	22	37,716	37,492
Amounts due to related companies	21	3	1,594
Taxation payable		105	394
Obligations under finance leases
- due within one year	23	430	503
Bank and other borrowings
- due within one year	24	27,187	25,370
		65,441	65,353
NET CURRENT ASSETS		5,340	9,448
TOTAL ASSETS LESS
CURRENT LIABILITIES		85,573	78,853
NON-CURRENT LIABILITIES
Other payable	26	6,596	11,000
Obligations under finance leases
- due after one year	23	1,099	394
Bank and other borrowings
- due after one year	24	6,760	1,204
Deferred tax liabilities	29	4,177	3,284
		18,632	15,882
		66,941	62,971
CAPITAL AND RESERVES
Share capital	25	4,023	4,023
Reserves		56,173	52,348
		60,196	56,371
MINORITY INTERESTS		6,745	6,600
TOTAL EQUITY		66,941	62,971

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

As at 31 March 2006

Balance sheet

	Notes	2006	2005
		HK$'000	HK$'000
NON-CURRENT ASSET
Interests in subsidiaries	18	42,439	42,541
CURRENT ASSETS
Other receivables		113	113
Bank balances		1	1
		114	114
CURRENT LIABILITY
Other payables		300	377
NET CURRENT LIABILITIES		(186)	(263)
		42,253	42,278
CAPITAL AND RESERVES
Share capital	25	4,023	4,023
Reserves	28	38,230	38,255
TOTAL EQUITY		42,253	42,278

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Consolidated statement of changes in equity

For the year ended 31 March 2006

	Attributable to equity holders of the Company
	Share capitalHK$’000(note 25)	Share premiumHK$’000	Special reserveHK$’000	Translation reserveHK$’000	Retained profitsHK$’000	TotalHK$’000	Minority interestHK$’000	Total equityHK$’000
At 1 April, 2004	4,016	12,937	10,440	37	24,494	51,924	5,851	57,775
Exchange differences arising from translation of operations outside Hong Kong and gain not recognised in the consolidated income statement	-	-	-	30	-	30	-	30
Issue of shares on exercise of share options	7	16	-	-	-	23	-	23
Profit for the year	-	-	-	-	4,394	4,394	749	5,143
At 1 April, 2005	4,023	12,953	10,440	67	28,888	56,371	6,600	62,971
Opening adjustment for the adoption of HKAS 39	-	-	-	-	1,520	1,520	-	1,520
As restated	4,023	12,953	10,440	67	30,408	57,891	6,600	64,491
Profit for the year	-	-	-	-	2,305	2,305	145	2,450
At 31 March, 2006	4,023	12,953	10,440	67	32,713	60,196	6,745	66,941

The special reserve of the Group represents the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the group reorganisation (the "Group Reorganisation") to rationalise the group structure in preparation of the listing of the Shares on the GEM of the Stock Exchange, and the nominal value of the Company's shares issued in exchange.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

For the year ended 31 March 2006

Consolidated cash flow statement

| | 2006
HK$'000 | 2005
HK$000 |
| --- | --- | --- |
| OPERATING ACTIVITIES | | |
| Profit before taxation | 3,382 | 6,805 |
| Adjustments for: | | |
| Gain on disposal of property, plant and equipment | (550) | (122) |
| Interest income | (185) | (30) |
| Amortisation of film rights | 27,132 | 21,925 |
| Depreciation of property, plant and equipment | 2,055 | 1,155 |
| Interest and finance charge | 2,512 | 1,337 |
| Impairment loss recognised in respect of film rights | - | 3,617 |
| Bad debts written off | 135 | 243 |
| Amortisation of trademark | 15 | 15 |
| Operating cash flow before movements in working capital | 34,496 | 34,945 |
| Decrease (Increase) in inventories | 532 | (2,138) |
| Decrease (Increase) in trade and other receivables | 8,816 | (8,866) |
| Increase in trade and other payables | 224 | 14,684 |
| Decrease in amounts due to related companies | (1,591) | (4,223) |
| Net cash generated from operations | 42,477 | 34,402 |
| Interest received | 185 | 30 |
| Hong Kong Profits Tax paid | (328) | (278) |
| NET CASH GENERATED FROM OPERATING ACTIVITIES | 42,334 | 34,154 |
| INVESTING ACTIVITIES | | |
| Purchase of film rights | (32,413) | (32,043) |
| Purchase of property, plant and equipment | (5,551) | (749) |
| Payment for acquisition of film rights | (2,066) | (1,334) |
| Decrease (Increase) in pledged bank deposits | 1,909 | (30) |
| Proceeds from disposal of property, plant and equipment | 550 | 125 |
| NET CASH USED IN INVESTING ACTIVITIES | (37,571) | (34,031) |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

| | 2006
HK$'000 | 2005
HK$000 |
| --- | --- | --- |
| FINANCING ACTIVITIES | | |
| New bank loans raised | 14,821 | 2,500 |
| New finance leases raised | 1,369 | 653 |
| (Advance) Repayment from a related company | (6,017) | 528 |
| (Decrease) Increase in other payable | (2,884) | 2,000 |
| Repayment of bank and other borrowings | (2,641) | (2,938) |
| Interest and finance charge paid | (2,512) | (1,337) |
| Repayment of obligations under finance leases | (737) | (1,134) |
| Proceeds from issue of shares | - | 23 |
| NET CASH GENERATED FROM FINANCING ACTIVITIES | 1,399 | 295 |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 6,162 | 418 |
| CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR | | |
| | (17,234) | (17,682) |
| EFFECT OF FOREIGN EXCHANGE RATE CHANGES | | |
| | - | 30 |
| CASH AND CASH EQUIVALENTS AT END OF THE YEAR | | |
| | (11,072) | (17,234) |
| ANALYSIS OF THE BALANCES OF
CASH AND CASH EQUIVALENTS | | |
| Bank balances and cash | 6,796 | 5,441 |
| Bank overdrafts | (17,868) | (22,675) |
| | (11,072) | (17,234) |

51 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes to the financial statements

1. GENERAL

The Company is incorporated as an exempted company with limited liability in the Cayman Islands and its shares are listed on the GEM of the Stock Exchange. Its ultimate holding company is Allan Fung Assets Limited, a company incorporated in the British Virgin Islands.

The Company is an investment holding company. The activities of its subsidiaries are set out in note 35.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARD

In the current year, the Group has adopted all of the new and revised Hong Kong Financial Reporting Standards ("HKFRSs"), Hong Kong Accounting Standards ("HKASs") and Interpretations (hereinafter collectively referred to as "new HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") that are relevant to its operations and effective for accounting period on or after 1 January, 2005. The adoption of new HKFRSs did not result in substantial changes to the Group's accounting policy except the followings:

HKAS 1 "Presentation of Financial Statements"

HKAS 1 has affected the presentation of minority interests and other disclosures. Comparative figures have been restated accordingly.

HKAS 32 "Financial Instruments: Disclosure and Presentation" and HKAS 39 "Financial Instruments: Recognition and Measurement"

HKAS 32 and HKAS 39 established principles for disclosure, presentation, recognition and measurement of financial instruments, including non-derivative financial assets, non-derivative financial liabilities and derivative instruments for hedging activities. The Group has adopted HKAS 32 and HKAS 39 prospectively from 1 April, 2005.

Under HKAS 39, financial assets are classified as "financial assets at fair value through profit or loss", "available-for-sales financial assets", "loans and receivables", or "held-to-maturity financial assets". "Financial assets at fair value through profit or loss", "available-for-sales financial assets" are carried at fair value, with changes in fair values recognised in the income statement and equity respectively. "Loans and receivables" and "held-to-maturity financial assets" are measured at amortised cost using the effective interest method after initial recognition.

	2006	2005
	HK$'000	HK$'000
The adoption of HKAS 39 resulted in:
Increase in retained earnings	1,520	-
Increase in finance cost	507	-
Decrease in basic earning per share	HK0.13 cent	-
Decrease in diluted earning per share	HK0.12 cent	-

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

HKFRS 2 “Share Based Payments”

The adoption of HKFRS 2 has resulted in a change in the accounting policy for share based payments. Until 31 March, 2005 the provision of share options to employees did not result in an expenses in the income statements. Effective on 1 April, 2005, the Group expenses the fair value of share options in the income statement. Under the transitional provision, retrospective treatment is required only in respect of share options granted after 7 November, 2002 and had not yet vested on 1 April, 2005. The Group had no such options.

At the date of authorisation of these financial statements, the following Standards were in issue but not yet effective:

HKAS 1 (Amendment) Capital Disclosures

HKAS 19 (Amendment) Employee Benefits – Actuarial Gain and Losses, Group Plans and Disclosures

HKAS 39 (Amendment) The Fair Value Option

HKAS 39 and HKFRS 4 (Amendments) Financial Instruments: Recognition and Measurement and Insurance Contracts – Financial Guarantee Contracts

HKFRS 7 Financial Instruments – Disclosures

The Directors anticipate that the adoption of these Standards in future periods will have no material impact on the financial statements of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention and in accordance with HKFRSs issued by HKICPA, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Company Ordinance. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March each year.

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

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

Interests in subsidiaries

Interests in subsidiaries are included in the Company's balance sheet at cost less any identified impairment loss.

APPENDIX II
FINANCIAL INFORMATION ON THE GROUP

Recognition of revenue

Sales of goods are recognised when goods are delivered and title has passed.

Income from exhibition of film and film distributions income are recognised when the right to receive payment is established and the amount can be measured reliably.

Sub-licensing income is recognised on an accrual basis in accordance with the terms of the underlying licence agreements.

Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives, using the straight line method, at the following annual rates:

Leasehold improvements	10%
Furniture and fixtures	30%
Office equipment	30%
Motor vehicles	30%

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Film rights

Advances prepaid and paid by instalments under licensing agreements for reproduction and distribution of audio-visual products and for sub-licensing of film titles, in specific geographical areas and time periods, are recorded as payment for acquisition of film rights. Upon receipt of the master materials of films, all required payments under the licensing agreements are recorded as film rights. The balances payable under the licensing agreements are recorded as liabilities.

Film rights are stated at cost less accumulated amortisation and any accumulated impairment losses.

The cost of film rights is amortised on a systematic basis over the underlying licence periods, with reference to projected revenues from the relevant film right.

Films in progress

Films in progress are stated at cost less any identified impairment losses. Costs included all direct costs associated with the production of films. Costs of films is transferred to film rights upon completion.

Trademark

Trademark represents licence fee paid for the use of trademark and is stated at cost less accumulated amortisation and any identified impairment losses. The cost of trademark is amortised on a straight line basis over the estimated useful life.

54 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Taxation

Income tax expenses represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes income statement items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

55 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Leased assets

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership of the assets concerned to the Group. Assets held under finance leases are capitalised at their fair values at the date of acquisition. The corresponding liability to the lessor, net of interest charges, is included in the balance sheet as a finance lease obligation. Finance costs, which represent the difference between the total leasing commitments and original principal at the inception of the respective leases value of the assets acquired, are charged to the income statement over the period of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the annual rentals are charged to the income statement on a straight line basis over the relevant lease term.

Retirement benefits scheme

The Group operates a Mandatory Provident Fund Scheme (the "MPF Scheme") for all qualifying employees in Hong Kong. The assets of the schemes are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% of relevant payroll costs to the MPF Scheme, which contribution is matched by employees.

The employees of the subsidiary in Singapore are members of a state-managed retirement benefits scheme operated by the government of Singapore. The subsidiary is required to contribute certain percentage of their payroll costs, depending on the age of individual employee and its nationality, to the retirement benefits scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefits scheme is to make the specified contributions.

Share-based employee compensation

All share-based payment arrangements granted after 7 November 2002 are recognised in the consolidated financial statements. The Group operates equity settled share-based compensation plans for remuneration of its employees.

All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets).

All share-based compensation is ultimately recognised as an expense in income statement with a corresponding credit to additional paid-in capital, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised than originally estimated.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the share issued are reallocated to share capital with any excess being recorded as additional paid-in capital.

56 -

APPENDIX II
FINANCIAL INFORMATION ON THE GROUP

Foreign currencies

Transactions in currencies other than Hong Kong dollars are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in currencies other than Hong Kong dollars are re-translated at the rates prevailing on the balance sheet date. Profits and losses arising on exchange are included in the income statement.

On consolidation, the assets and liabilities of the Group’s operation outside Hong Kong are translated at the exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rate for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the year in which the operation is disposed of.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at cost, being the fair value of the consideration given and except for financial assets and financial liabilities at fair value through profit and loss, including transaction costs that are directly attributable to the acquisition.

Financial assets

The Group’s financial assets are classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables including accounts receivable, time deposits, other receivables and amount due from a related company are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in the income statement when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

57 -

APPENDIX II
FINANCIAL INFORMATION ON THE GROUP

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definition of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss has two sub-categories, including financial liabilities held for trading and those designated at fair value through profit or loss on initial recognition. At each balance sheet date subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise.

Other financial liabilities

Other financial liabilities include trade and other payables, bank and other borrowings which fall within the category of other financial liabilities. These financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group's cash management.

For the purpose of the balance sheet, cash and cash balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

58 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the process of applying the Group’s accounting policies which are described in note 3, management has made the following judgements that have most significant effect of the amounts recognised in the financial statements which are dealt with below.

Allowance for bad and doubtful debts

The provision policy for bad and doubtful debts of the Group is based on the evaluation of collectability and aging analysis of the debts and on managements’ judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Impairment loss of film rights

The Group evaluates whether film rights have suffered any impairment loss whenever events or changes in circumstances indicate that the carrying amount of the film rights may not be recoverable, in accordance with the relevant accounting policy set out above. The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations require the use of estimates.

Fair value of financial instruments

Financial instruments are carried at the balance sheet at fair value. The use of methodologies, models and assumptions in pricing and valuing the financial assets and liabilities is subjective and requires varying degrees of judgement by management, which may result in significantly different fair values and results. All significant financial valuation models are strictly controlled and regularly recalibrated and vetted.

5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s activities expose it to a variety of financial risks, including foreign exchange risk, credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Foreign exchange risk

The Group carries out its business mainly in Hong Kong and most of the transactions are denominated in Hong Kong dollars and United States dollars. The Group’s assets and liabilities are mainly denominated in Hong Kong dollars. The Group had neither engaged in any derivative activities nor committed to any financial instruments to hedge its balance sheet exposures. In view of the stability of the exchange rate between Hong Kong dollars and United States dollars, the Directors consider the Group’s foreign exchange risk to be minimal.

59 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Credit risk

The Group's credit risk is primarily attributable to trade and other receivables included in the balance sheet which represent the Group's maximum exposure to credit risk in relation to the Group's financial assets. No other financial assets carry a significant exposure to credit risk. The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers. The Group performs ongoing credit evaluation of its customers' financial condition and requires no collateral from its customers. The allowance for doubtful debts is based upon a review of the expected collectibility of all trade and other receivables.

Liquidity risk

The Group manages its liquidity risk by maintaining sufficient cash mainly from internally generated cashflow.

Cash flow and fair value interest-rate risk

As the Group has no significant interest-bearing assets, the Group's income and operating cash flows are substantially independent of changes in market interest rates.

The Group's interest-rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group does not use any financial instrument to manage its interest-rate risk.

6. TURNOVER

Turnover represents the net amounts received and receivable for sales of goods by the Group to outside customers, less returns and allowances, and revenue received and receivable from sub-licensing of film rights, film exhibition and film distribution, and is analysed as follows:

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| Sales of goods | 61,730 | 65,608 |
| Sub-licensing of film rights | 10,389 | 9,896 |
| Film exhibition and film distribution income | 11,782 | 4,482 |
| | 83,901 | 79,986 |

7. BUSINESS AND GEOGRAPHICAL SEGMENTS

Turnover and contribution to operating results and assets and liabilities by business segment has not been prepared as the Group has only one business segment which is the distribution of film rights by different audio-visual programmes and sub-licensing.

As the Group's turnover for the year ended 31 March, 2006 are substantially made to customers based in Hong Kong and the operations of the Group are substantially located in Hong Kong, no separate analysis for the geographical segment information is provided accordingly.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

8. PROFIT FROM OPERATIONS

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| Profit from operations has been arrived at after charging: | | |
| Staff costs | | |
| - Directors' remuneration
(Note 11) | 3,689 | 3,779 |
| - Other staff costs | 8,731 | 9,340 |
| - Retirement benefits scheme
contributions, excluding
Directors' contributions | 433 | 410 |
| Total staff costs | 12,853 | 13,529 |
| Depreciation | | |
| - Owned assets | 1,164 | 335 |
| - Assets under finance leases | 891 | 820 |
| Amortisation of film rights
included in cost of sales | 27,132 | 21,925 |
| Amortisation of trademark
included in administrative
expenses | 15 | 15 |
| Auditors' remuneration | 300 | 250 |
| Cost of inventories included
in cost of sales | 16,012 | 22,472 |
| Bad debts written off | 135 | 243 |
| and after crediting: | | |
| Sundry income | 90 | 133 |
| Exchange gain | 68 | - |
| Gain on disposal of plant,
property and equipment | 550 | 122 |
| Interest income | 185 | 30 |

61 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

9. FINANCE COSTS

	2006	2005
	HK$'000	HK$'000
Interest on:
Bank borrowings wholly repayable within five years	1,154	951
Other borrowings wholly repayable within five years	1,264	252
Finance leases	94	134
	2,512	1,337

10. PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The profit attributable to shareholders includes a loss of HK$25,000 (2005: loss of HK$41,000) which has been dealt with in the financial statements of the Company.

11. DIRECTORS' REMUNERATION

The emoluments paid or payable to each of the nine (2005: nine) Directors were as follows:

For the year ended 31 March, 2006

| | Fee
HK$'000 | Salaries and other benefits
HK$'000 | Retirement benefits scheme contributions
HK$'000 | Total
HK$'000 |
| --- | --- | --- | --- | --- |
| Executive Directors | | | | |
| Mr. Fung Yu Hing, Allan | - | 895 | 12 | 907 |
| Ms. Leung Siu Kuen, Janet | - | 685 | 12 | 697 |
| Mr. Fung Yee Sang | - | 839 | 12 | 851 |
| Mr. Au Lik Man, Simon | - | 498 | 12 | 510 |
| Non-executive Directors | | | | |
| Dr. Lo Wing Yan, William, JP | 170 | - | - | 170 |
| Ms. Fung Suen Lai, Jacqueline | 60 | 322 | 12 | 394 |
| Independent non-executive Directors | | | | |
| Mr. Chan Koon Chung, Johnny | 60 | - | - | 60 |
| Mr. Chau, Stephen | 60 | - | - | 60 |
| Mr. Hui Kwok Wah | 40 | - | - | 40 |
| | 390 | 3,239 | 60 | 3,689 |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

For the year ended 31 March, 2005

| | Fee
HK$'000 | Salaries and
other benefits
HK$'000 | Retirement
benefits
scheme
contributions
HK$'000 | Total
HK$'000 |
| --- | --- | --- | --- | --- |
| Executive Directors | | | | |
| Mr. Fung Yu Hing, Allan | – | 911 | 12 | 923 |
| Ms. Leung Siu Kuen, Janet | – | 698 | 12 | 710 |
| Mr. Fung Yee Sang | – | 921 | 12 | 933 |
| Mr. Au Lik Man, Simon | – | 496 | 12 | 508 |
| Non-executive Directors | | | | |
| Dr. Lo Wing Yan, William, JP | 180 | – | – | 180 |
| Ms. Fung Suen Lai, Jacqueline | 60 | 313 | 12 | 385 |
| Independent non-executive Directors | | | | |
| Mr. Chan Koon Chung, Johnny | 60 | – | – | 60 |
| Mr. Chau, Stephen | 60 | – | – | 60 |
| Mr. Hui Kwok Wah | 20 | – | – | 20 |
| | 380 | 3,339 | 60 | 3,779 |

During the year, no emoluments were paid by the Group to any Directors as in inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors waived any emoluments during the year.

63 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

12. EMPLOYEES' EMOLUMENTS

During the year, the five highest paid individuals in the Group included four (2005: four) Directors, details of whose emoluments are set out in note 11 above.

The emoluments of the remaining one (2005: one) individual for the year ended 31 March, 2006, were as follows:

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| Salaries and other benefits | 409 | 378 |
| Bonus | 12 | 16 |
| Retirement benefits schemes
contributions | 12 | 12 |
| | 433 | 406 |

The aggregate emoluments of the highest paid employee for the year is within the emoluments band ranging from nil to HK$1,000,000.

13. TAXATION

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| The charge comprises: | | |
| Hong Kong Profits Tax | 39 | 200 |
| Taxation in other jurisdictions | – | 41 |
| Deferred tax charge (Note 29) | 893 | 1,421 |
| | 932 | 1,662 |

Hong Kong Profits Tax is calculated at 17.5% of the estimated assessable profit for the both years.

Taxation in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The charge for the year can be reconciled to the profit per the income statement as follows:

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| Profit before taxation | 3,382 | 6,805 |
| Tax at the domestic income
tax rate of 17.5% (2005: 17.5%) | 592 | 1,191 |
| Tax effect of income not
taxable in determining
taxable profit | – | (73) |
| Tax effect of expenses that are
not deductible in determining
taxable profit | 277 | 503 |
| Effect of different tax rates of
operation in other jurisdictions | – | 35 |
| Tax loss utilised | – | (3) |
| Unrecognised tax loss | 63 | 9 |
| Tax charge for the year | 932 | 1,662 |

Details of deferred taxation are set out in Note 29.

14. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

| | 2006
HK$'000 | 2005
HK$'000 |
| --- | --- | --- |
| Earnings | | |
| Profit attributable to equity holders
of the Company for the year | 2,305 | 4,394 |
| Number of shares | | |
| Weighted average number of
ordinary shares | 402,300,000 | 402,225,205 |
| Effect of dilutive potential
ordinary shares: | | |
| Share options | 9,906,738 | 10,648,573 |
| Weighted average number of
ordinary shares for the purposes
of diluted earnings per share | 412,206,738 | 412,873,778 |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

15. PROPERTY, PLANT AND EQUIPMENT

THE GROUP

| | Leasehold improvements
HK$'000 | Furniture and fixtures
HK$'000 | Office equipment
HK$'000 | Motor Vehicles
HK$'000 | Total
HK$'000 |
| --- | --- | --- | --- | --- | --- |
| COST | | | | | |
| At 1 April, 2004 | – | 2,544 | 3,557 | 2,210 | 8,311 |
| Additions | – | 29 | 94 | 626 | 749 |
| Disposals | – | (237) | (121) | (381) | (739) |
| At 31 March, 2005 | – | 2,336 | 3,530 | 2,455 | 8,321 |
| Additions | 2,528 | 864 | 330 | 1,829 | 5,551 |
| Disposals | – | (1,568) | (94) | (1,093) | (2,755) |
| At 31 March, 2006 | 2,528 | 1,632 | 3,766 | 3,191 | 11,117 |
| ACCUMULATED DEPRECIATION | | | | | |
| At 1 April, 2004 | – | 2,223 | 2,396 | 1,881 | 6,500 |
| Provided for the year | – | 217 | 617 | 321 | 1,155 |
| Disposals | – | (237) | (118) | (381) | (736) |
| At 31 March, 2005 | – | 2,203 | 2,895 | 1,821 | 6,919 |
| Provided for the year | 232 | 346 | 586 | 891 | 2,055 |
| Disposals | – | (1,568) | (94) | (1,093) | (2,755) |
| At 31 March, 2006 | 232 | 981 | 3,387 | 1,619 | 6,219 |
| NET BOOK VALUE | | | | | |
| At 31 March, 2006 | 2,296 | 651 | 379 | 1,572 | 4,898 |
| At 31 March, 2005 | – | 133 | 635 | 634 | 1,402 |

At 31 March, 2006, the net book value of the Group's motor vehicles includes an amount of HK$1,572,000 (2005: HK$634,000) in respect of assets held under finance leases.

At 31 March, 2005, the net book value of the Group's furniture and fixtures and office equipments included an amount of HK$76,000 and HK$406,000 respectively, in respect of assets held under finance leases.

66 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

16. FILM RIGHTS

| | THE GROUP
HK$'000 |
| --- | --- |
| COST | |
| At 1 April, 2004 | 106,675 |
| Additions | 44,657 |
| At 31 March, 2005 | 151,332 |
| Additions | 33,444 |
| At 31 March, 2006 | 184,776 |
| AMORTISATION AND IMPAIRMENT | |
| At 1 April, 2004 | 59,641 |
| Provided for the year | 21,925 |
| Impairment loss recognised | 3,617 |
| At 31 March, 2005 | 85,183 |
| Provided for the year | 27,132 |
| At 31 March, 2006 | 112,315 |
| CARRYING AMOUNT | |
| At 31 March, 2006 | 72,461 |
| At 31 March, 2005 | 66,149 |

The amortisation period adopted for film rights is 2 to 5 years.

67 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

17. TRADEMARK

| | THE GROUP
HK$'000 |
| --- | --- |
| COST | |
| At 1 April, 2004, 31 March, 2005
and 31 March, 2006 | 75 |
| AMORTISATION | |
| At 1 April, 2004 | 30 |
| Provided for the year | 15 |
| At 31 March, 2005 | 45 |
| Provided for the year | 15 |
| At 31 March, 2006 | 60 |
| CARRYING AMOUNT | |
| At 31 March, 2006 | 15 |
| At 31 March, 2005 | 30 |

The amortisation period adopted for trademark is 5 years.

18. INTERESTS IN SUBSIDIARIES

	THE COMPANY
	2006	2005
	HK$'000	HK$'000
Unlisted shares, at cost	25,572	25,572
Amounts due from subsidiaries	16,867	16,969
	42,439	42,541

The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment. In the opinion of the Directors, the amounts will not be repayable within twelve months from the balance sheet date and are shown as non-current.

Details of the Company's subsidiaries as at 31 March, 2006 are set out in note 35.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

19. INVENTORIES

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Work in progress	2,066	3,346
Finished goods	20,311	19,563
	22,377	22,909

All inventories are stated at cost.

20. TRADE AND OTHER RECEIVABLES

The Group generally allows an average credit period of 30 to 90 days to its trade customers. The aged analysis of trade receivables at the balance sheet date is as follows:

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Trade receivables:
0 – 30 days	5,640	15,795
31 – 60 days	2,885	3,891
61 – 90 days	2,852	2,672
91 – 180 days	6,369	1,817
Over 180 days	5,337	3,304
	23,083	27,479
Other receivables	3,770	8,325
	26,853	35,804

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

21. AMOUNTS DUE FROM/TO RELATED COMPANIES

During the year, the Group had the following balances with related Companies:

	THE GROUP
	Balance at 31.3.2006
HK$'000	Balance at 1.4.2005
HK$'000	Maximum amount outstanding during the year
HK$'000
Amount due from a related company:
Golden Scene Company Limited (Note a)	6,537	-	6,537
Applause Pictures Limited (Note b)
Applause Pictures Limited	-	520	520
	6,537	520
Amounts due to related companies:
Golden Scene Company Limited (Note a)	-	1,587
Panorama Entertainment Holdings Limited (Note c)	3	7
	3	1,594

Notes:

(a) One of directors of Golden Scene Company Limited is also a director of a subsidiary of the Company. The amount is unsecured, interest-free and repayable on demand.

(b) Applause Pictures Limited was a company of which Mr. Fung Yu Hing, Allan, an executive Director, was a director and had beneficial interest. During the year, Mr. Fung Yu Hing, Allan has resigned as an executive Director and has no beneficial interest in Applause Pictures Limited. The amount is unsecured, interest-free and repayable on demand.

(c) Panorama Entertainment Holdings Limited is a company in which Mr. Fung Yu Hing, Allan, Ms. Leung Siu Kuen, Janet and Ms. Fung Suen Lai, Jacqueline have beneficial interests. The amount is unsecured, interest-free and repayable on demand.

70 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

22. TRADE AND OTHER PAYABLES

The aged analysis of trade payables at the balance sheet date is as follows:

Trade payables:	THE GROUP
	2006	2005
	HK$’000	HK$’000
0 – 30 days	5,732	2,952
31 – 60 days	3,285	4,733
61 – 180 days	8,531	7,474
Over 180 days	9,504	7,399
	27,052	22,558
Other payables	10,664	14,934
	37,716	37,492

23. OBLIGATIONS UNDER FINANCE LEASES

Amounts payable under finance leases are as follows:	THE GROUP
	Present value of minimum lease payments		Minimum lease payments
	2006
HK$’000	2005
HK$’000	2006
HK$’000	2005
HK$’000
Within one year	430	503	493	558
In the second to fifth years inclusive	1,099	394	1,230	440
	1,529	897	1,723	998
Less: Future finance charges	–	–	(194)	(101)
Present value of lease obligations	1,529	897	1,529	897
Less: Amount due within one year shown under current liabilities	(430)	(503)
Amount due after one year	1,099	394

The average lease term was 2 years (2005: 2 years). For the year ended 31 March, 2006, the average effective annual interest rate is 3.0% (2005: 2.9%). Interest rates are fixed at the contract date. All leases were on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The Group's obligations under finance leases were secured by the lessor's charge over the leased assets.

The fair value of the Group's obligations under finance leases, determined based on the present value of the estimated future cash flows discounted using the prevailing market rate at the balance sheet date approximate to their carrying amounts.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

24. BANK AND OTHER BORROWINGS

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Bank overdrafts	17,868	22,675
Bank borrowings	14,867	2,120
Other borrowings	1,212	1,779
	33,947	26,574
Analysed as:
Secured	32,467	26,091
Unsecured	1,480	483
	33,947	26,574
The maturity profile of the above loans and overdrafts is as follows:
On demand or within one year	27,187	25,370
More than one year, but not exceeding two years	6,760	1,204
	33,947	26,574
Less: Amounts due within one year shown under current liabilities	(27,187)	(25,370)
Amounts due after one year	6,760	1,204

The average effective annual interest rate during the year for bank overdrafts and bank borrowings are 8.44% and 7.09% respectively (2005: 8.55% and 6.24% respectively).

The other borrowing represented a loan granted by a financial institution bears interest at 5% per annum.

The carrying amounts of both current and non-current borrowings approximate to their fair values.

72 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

25. SHARE CAPITAL

| | No. of shares | Amount
HK$'000 |
| --- | --- | --- |
| Authorised: | | |
| Ordinary shares
of HK$0.01 each | 1,500,000,000 | 15,000 |
| Issued and fully paid: | | |
| At 1 April, 2004 | 401,600,000 | 4,016 |
| Exercise of share options | 700,000 | 7 |
| At 31 March, 2005 and 31 March, 2006 | 402,300,000 | 4,023 |

There is no change in the issued share capital of the Company during the current year.

During the year ended 31 March, 2005, 700,000 shares of HK$0.01 each were issued and allotted at HK$0.033 per share as a result of the exercise of share options by the employees of the Company.

All the shares issued during the prior year ranked pari passu with the then existing shares in all respects.

26. OTHER PAYABLE

The amount is unsecured, interest-free and will not be repayable before 31 March, 2007. The carrying amount of other payable approximate to its fair value as at 31 March, 2006.

27. SHARE OPTION SCHEMES

The Company has two share options schemes, including the Share Option Scheme and Pre-IPO Share Option Scheme. Details of the two share option schemes are as follows:

(a) Share Option Scheme

The Share Option Scheme was adopted on 25 April, 2002 for the primary purpose of providing incentives and to recognise the contribution of the eligible participants to the growth of the Group and will expire on 24 April, 2012. Under the Share Option Scheme, the Board may grant options to eligible full-time or part-time employees, including any executive, non-executive and independent non-executive Directors, and consultants or advisers of the Company and/or any of its subsidiaries.

Up to 31 March, 2006, no options have been granted since the adoption of the Share Option Scheme. The total number of shares in respect of which options may be granted under the Share Option Scheme, the Pre-IPO Share Option Scheme (as referred to below) and any other option schemes is not permitted to exceed 30% of the issued share capital of the Company from time to time. The number of shares in respect of which options may be granted to any individual in any one year is not permitted to exceed 1% of the issued share capital of the Company, without prior approval from the Company's shareholders.

Options granted must be taken up within three days of the date of grant, upon payment of HK$1 per grant.

Options may be exercised at any time during a period to be notified by the board of Directors upon the grant of options provided that the option period shall not exceed 10 years from the date of grant of the options. No minimum period for which an option must be held is required. The exercise price, which is determined by the Board is the highest of: (i) the closing price per share on the date of grant; (ii) the average closing price per share for the five business days immediately preceding the date of grant; and (iii) the nominal value of a share.

73 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

(b) Pre-IPO Share Option Scheme

The Pre-IPO Share Option Scheme was adopted on 25 April, 2002 for the primary purpose of providing incentives and to recognise the contribution of the eligible participants to the growth of the Group and/or to the listing of the Shares on GEM and expired on 9 May, 2002. Options granted prior to such expiry shall continue to be valid and exercisable during the exercise period.

Under the Pre-IPO Share Option Scheme, the Board may grant options to eligible full-time or part-time employees, including any executive, non-executive and independent non-executive Directors, and consultants or advisers of the Company and/or any of its subsidiaries.

As at 31 March, 2006, the number of shares in respect of which options had been granted and remained outstanding under the Pre-IPO Share Option Scheme was 30,000,000 (2005: 30,950,000), representing 7.5% (2005: 7.7%) of the shares of the Company in issue at balance sheet date.

Options granted must be taken up by the end of the next business day following the date of grant, upon payment of HK$1 per grant. Options may be exercised at any time from the expiry of twelve months from and including the date when dealings in the shares first commenced on GEM to the 10th anniversary of the date on which dealings in the shares first commenced on GEM. The exercise price, which is determined by the Board is either 10% of the placing price (options granted at this price being referred to below as "Pool A Options") or 70% of the placing price (options granted at this price being referred to below as "Pool B Options").

The following table discloses the details of the Company's share options held by employees and movements in such holdings during the year ended 31 March, 2006:

Category of participants	Option Type	Outstanding at 1.4.2005	Exercised during the year (Note)	Lapsed during the year	Outstanding at 31.3.2006
Directors of the Company	Pool A Options	14,800,000	–	–	14,800,000
	Pool B Options	10,000,000	–	–	10,000,000
		24,800,000	–	–	24,800,000
Senior management	Pool A Options	–	–	–	–
	Pool B Options	500,000	–	(500,000)	–
		500,000	–	(500,000)	–
Other employees	Pool A Options	1,400,000	–	–	1,400,000
	Pool B Options	4,250,000	–	(450,000)	3,800,000
		5,650,000	–	(450,000)	5,200,000
		30,950,000	–	(950,000)	30,000,000

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

The following table discloses the details of the Company's share options held by employees and movements in such holdings during the year ended 31 March, 2005:

Category of participants	Option Type	Outstanding at 1.4.2004	Exercised during the year (Note)	Lapsed during the year	Outstanding at 31.3.2005
Directors of the Company	Pool A Options	14,800,000	–	–	14,800,000
	Pool B Options	10,000,000	–	–	10,000,000
		24,800,000	–	–	24,800,000
Senior management	Pool A Options	500,000	–	(500,000)	–
	Pool B Options	950,000	–	(450,000)	500,000
		1,450,000	–	(950,000)	500,000
Other employees	Pool A Options	2,100,000	(700,000)	–	1,400,000
	Pool B Options	4,500,000	–	(250,000)	4,250,000
		6,600,000	(700,000)	(250,000)	5,650,000
		32,850,000	(700,000)	(1,200,000)	30,950,000

Details of specific categories of options are as follows:

Option type	Date of grant	Vesting period	Exercisable period	Exercise price HK$
Pool A Options	25.4.2002	26.4.2002 – 08.5.2003	09.5.2003 – 08.5.2012	0.033
Pool B Options	25.4.2002	26.4.2002 – 08.5.2003	09.5.2003 – 08.5.2012	0.231

Note: The closing price of the Company's share immediately before the dates on which the share options were exercised were HK$0.094 and HK$0.098 per share.

The financial impact of share options granted is not recorded in the Company's or the Group's balance sheet until such time as the options are exercised, and no charge is recognised in the income statement in respect of the value of options granted. Upon the exercise of the share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options lapsed or cancelled prior to their exercise date are deleted from the register of outstanding options.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

28. RESERVES

THE COMPANY

| | Share premium
HK$'000 | Contributed surplus
HK$'000 | Accumulated losses
HK$'000 | Total
HK$'000 |
| --- | --- | --- | --- | --- |
| At 1 April, 2004 | 12,937 | 25,571 | (228) | 38,280 |
| Issue of shares on exercise of share options | 16 | – | – | 16 |
| Net loss for the year | – | – | (41) | (41) |
| At 1 April, 2005 | 12,953 | 25,571 | (269) | 38,255 |
| Net loss for the year | – | – | (25) | (25) |
| At 31 March, 2006 | 12,953 | 25,571 | (294) | 38,230 |

The contributed surplus of the Company represents the excess of the net assets of the subsidiaries acquired pursuant to the Group Reorganisation, and the nominal value of the Company's shares issued in exchange.

The Company's reserves available for distribution represent the share premium, contributed surplus and accumulated losses. Under the Companies Law (Revised) Chapter 22 of the Cayman Islands, the share premium of the Company is available for paying distributions or dividends to shareholders subject to the provisions of its Memorandum or Articles of Association and provided that immediately following the distribution of dividend, the Company is able to pay its debts as they fall due in the ordinary course of business. At 31 March, 2006, the reserve available for distribution to shareholders is HK$38,230,000 (2005: HK$38,255,000) which represents the aggregate of share premium and contributed surplus of HK$38,524,000 (2005: HK$38,524,000) net of accumulated losses HK$294,000 (2005: HK$269,000).

29. DEFERRED TAXATION

The following are the major deferred tax liability (asset) recognised by the Group and movements thereon for the year:

| | Accelerated tax depreciation
HK$'000 | Tax losses
HK$'000 | Total
HK$'000 |
| --- | --- | --- | --- |
| THE GROUP | | | |
| At 1 April, 2004 | 8,231 | (6,368) | 1,863 |
| Charge (credit) to income statement for the year | 3,115 | (1,694) | 1,421 |
| At 31 March, 2005 and 1 April, 2005 | 11,346 | (8,062) | 3,284 |
| Charge (credit) to income statement for the year | 1,306 | (413) | 893 |
| At 31 March, 2006 | 12,652 | (8,475) | 4,177 |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

For the purpose of balance sheet presentation, the deferred tax liability (asset) had been offset in accordance with the conditions set out in HKAS 12. The following is the analysis of the deferred tax balances for financial reporting purposes:

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Deferred taxation liability	12,652	11,346
Deferred taxation asset	(8,475)	(8,062)
	4,177	3,284

The Company has no significant unrecognised deferred taxation for the year or at the balance sheet date.

30. OPERATING LEASE ARRANGEMENTS

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Minimum lease payments under operating leases during the year:
Premises	2,932	2,696
Office equipment	232	337
	3,164	3,033

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of premises and office equipment which fall due as follows:

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Premises
Within one year	433	251
In the second to fifth years inclusive	161	-
	594	251
Office equipment
Within one year	164	337
In the second to fifth years inclusive	559	252
	723	589
	1,317	840

Leases are negotiated for an average term of one to two years with fixed rentals.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

31. OTHER COMMITMENTS

	THE GROUP
	2006	2005
	HK$'000	HK$'000
Contracted for but not provided for in the financial statements	15,069	23,451

Other commitments represent licence fees commitment to licensors for which film master materials have not been delivered to the Group.

The Company did not have any significant commitments as at the balance date.

32. PLEDGE OF ASSETS

At 31 March, 2006, the Group pledged time deposits of approximately HK$8,218,000 to banks to secure banking facilities granted to the Group.

At 31 March, 2005, the Group pledged time deposits of approximately HK$10,127,000 and a film right with a carrying value of HK$7,155,000 to banks to secure banking facilities granted to the Group.

33. CONTINGENT LIABILITIES

At 31 March, 2006, the Company has given corporate guarantees with the aggregate amount of HK$40,700,000 (2005: HK$29,250,000) to banks for banking facilities granted to the Group.

78 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

34. RELATED PARTY TRANSACTIONS

During the year, the Group had the following transactions with related parties:

Name of related party	Nature of transactions	THE GROUP
2006
HK$'000	2005
HK$'000
Golden Scene Company Limited
(Note a)	Acquisitions of film rights (Note e)	7,175
Film exhibition expenses (Note e)	1,186	110
Management fee (Note e)	1,000	1,000
Players Pictures Company Limited
("PPCL") (Note b)	Office rental (Note e)	327
Metroplois Communications Limited
("MCL") (Note c)	Office rental (Note e)	327
Brilliant Business Limited
("BBL") (Note d)	Office rental (Note e)	217
Sunny Fancy Limited
("SFL") (Note d)	Office rental (Note e)	305

Notes:

(a) One of the directors of Golden Scene Company Limited is also a director of a subsidiary of the Company.

(b) PPCL is a company beneficially owned equally by Mr. Fung Yu Hing, Allan and Ms. Leung Siu Kuen, Janet.

(d) BBL and SFL are the companies wholly owned by Mr. Fung Yee Sang.

(e) These transactions were entered in accordance with the terms of the relevant agreement.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

During the year, certain Directors provided personal guarantees and security to banks and financial institution to the extent of HK$23,200,000 (2005: HK$5,000,000) to secure credit facilities granted to the subsidiaries of the Company as follows:

(i) Properties owned by Ms. Leung Siu Kuen, Janet, an executive Director of the Company.

(ii) Properties owned by PPCL, MCL, BBL and SFL in which Mr. Fung Yu Hing, Allan, Ms. Leung Siu Kuen, Janet and Mr. Fung Yee Sang have interest.

(iii) Corporate guarantee from Patora Optical Industrial Limited in which the wife of Mr. Fung Yee Sang has interest.

In addition, the Group had certain balances with related companies, details of which are set out in note 21.

35. PARTICULARS OF SUBSIDIARIES

Details of the Company's subsidiaries at 31 March, 2006 are as follows:

Name of subsidiaries	Place of incorporation/ operation (note)	Issued and fully paid share capital	Proportion of nominal value of issued capital		Principal activities
			Held by the Company and its subsidiaries	Attributable to the Group
Panorama Entertainment Group Limited	British Virgin Islands	Ordinary US$200	100%	100%	Investment holding
Panorama Distributions Company Limited	Hong Kong	Ordinary HK$10,000,002	100%	100%	Distribution of video products
Panorama Entertainment Company Limited	Hong Kong	Ordinary HK$10,000	100%	100%	Holding of film rights
Panorama Entertainment (Singapore) Pte Ltd.	Singapore	Ordinary $100,000	100%	100%	Distribution of video products
Punch Pictures Company Limited	Hong Kong	Ordinary HK$100	100%	100%	Production of film
Panorama Film Company Limited	British Virgin Islands	Ordinary US$1	100%	100%	Inactive
Panorama Theatrical Distributions Company Limited	British Virgin Islands	Ordinary US$100	100%	100%	Investment holding

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Name of subsidiaries	Place of incorporation/ operation (note)	Issued and fully paid share capital	Proportion of nominal value of issued capital		Principal activities
			Held by the Company and its subsidiaries	Attributable to the Group
Scenerama Holdings Company Limited	British Virgin Islands	Ordinary US$100	58%	58%	Investment holding
Scenerama Company Limited	British Virgin Islands	Ordinary US$100	57.5%	33.4%	Investment holding
Go Film Distribution Limited	Hong Kong	Ordinary HK$10,000	60%	20%	Distribution of films

Note: They are limited companies incorporated in the respective jurisdictions.

With the exception of Panorama Entertainment Group Limited, all the subsidiaries are indirectly held.

None of the subsidiaries had any debt securities outstanding at the end of the year or at any time during the year.

81 -

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

3. FIRST QUARTERLY RESULTS

Set out below are the unaudited quarterly consolidated results of the Group for the three months ended 30 June 2006 together with the comparative unaudited figures for the corresponding period 2005 as extracted from the First Quarterly Report 2006/2007 of the Company.

| | | Three months ended
30 June, | |
| --- | --- | --- | --- |
| | | 2006 | 2005 |
| | Notes | HK$'000 | HK$'000 |
| Turnover | 2 | 15,144 | 23,239 |
| Cost of sales | | (10,883) | (15,094) |
| Gross profit | | 4,261 | 8,145 |
| Other operating income | | 120 | 586 |
| Distribution costs | | (137) | (424) |
| Administrative expenses | | (4,035) | (4,979) |
| Other operating expenses | | (391) | (645) |
| (Loss) Profit from operations | | (182) | 2,683 |
| Finance costs | | (663) | (346) |
| (Loss) Profit before taxation | | (845) | 2,337 |
| Taxation | 3 | (333) | (923) |
| (Loss) Profit for the period | | (1,178) | 1,414 |
| Attributable to: | | | |
| Equity holders of the Company | | (977) | 1,210 |
| Minority Interest | | (201) | 204 |
| | | (1,178) | 1,414 |
| (Loss) Earnings per share | | | |
| - Basic | 4 | (0.24) HK cent | 0.30 HK cent |
| - Diluted | 4 | N/A | 0.29 HK cent |

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

Notes:

Basis of presentation

The unaudited consolidated result have been prepared under the historical cost convention and in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principals generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Company Ordinance and the GEM Listing Rules. The accounting policies adopted are consistent with those set out in the annual financial statements for the year ended 31 March, 2006.

Turnover

| | Three months ended
30 June, | |
| --- | --- | --- |
| | 2006 | 2005 |
| | HK$’000 | HK$’000 |
| Sales of goods | 10,208 | 14,740 |
| Sub-licensing of film rights | 3,955 | 5,156 |
| Film exhibition and film distribution income | 981 | 3,343 |
| | 15,144 | 23,239 |

Taxation

| | Three months ended
30 June, | |
| --- | --- | --- |
| | 2006 | 2005 |
| | HK$’000 | HK$’000 |
| The charge comprises: | | |
| Hong Kong Profits Tax | – | 54 |
| Deferred tax charge | 333 | 869 |
| | 333 | 923 |

Hong Kong profits tax is calculated at 17.5% (2005: 17.5%) of the estimated assessable profit for both periods.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

4. (Loss) Earnings per share

The calculation of basic (loss) earnings per share is based on the Group's unaudited loss attributable to shareholders for the three months ended 30 June, 2006 of approximately HK$977,000 (2005: profit of approximately HK$1,210,000) and the weighted average number of approximately 402,300,000 ordinary shares for the three months ended 30 June, 2006 (2005: 402,300,000 ordinary shares) in issue during the period after adjustment for the capitalisation issue.

For the three months ended 30 June, 2006, no diluted loss per share has been presented as it is anti-dilutive.

The calculation of diluted earnings per share for the three months ended 30 June, 2005 was based on the Group's unaudited profit attributable to shareholders of approximately HK$1,210,000 and the diluted weighted average number of approximately 412,127,000 ordinary shares in issue during the period. It had been calculated after taking into account all dilutive instruments outstanding as at 30 June, 2005. The effect of the potential dilutive ordinary shares resulting from the exercise of the outstanding share options on the weighted average number of shares in issue during the three months ended 30 June, 2005 was approximately 9,827,000 shares which were deemed to have been issued at no consideration and have been exercised on the date the options were granted.

5. Reserves

	Share capital HK$'000	Share premium HK$'000	Special reserve HK$'000	Translation Accumulated reserve HK$'000	Profits HK$'000	Total HK$'000
At 1 April, 2005	4,023	12,953	10,440	67	28,888	56,371
Profit for the period	–	–	–	–	1,210	1,210
At 30 June, 2005	4,023	12,953	10,440	67	30,098	57,581
At 1 April, 2006	4,023	12,953	10,440	67	32,713	60,196
Loss for the period	–	–	–	–	(977)	(977)
At 30 June, 2006	4,023	12,953	10,440	67	31,736	59,219

4. MATERIAL CHANGE

The Directors confirm that save as disclosed in the 1st Quarterly Report 2006/2007 of the Company, there are no material change in the financial or trading position or outlook of the Group subsequent to 31 March 2006, being the date to which the last published audited financial statements of the Group were made up.

APPENDIX II

FINANCIAL INFORMATION ON THE GROUP

5. STATEMENT OF INDEBTEDNESS

At the close of business on 31 July 2006, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of the Composite Offer Document, the Group had the following borrowings:

| | THE GROUP
HK$'000 |
| --- | --- |
| Bank loans, secured | 40,757 |
| Bank loans, unsecured | 279 |
| Obligations under finance lease | 1,282 |
| Other payable | 5,586 |
| | 47,904 |
| Repayable: | |
| Within 1 year or on demand | 34,902 |
| After 1 year but within 2 years | 6,810 |
| After 2 years but within 5 years | 6,192 |
| After 5 years | - |
| | 47,904 |

At 31 July 2006, the Company has given corporate guarantees with the aggregate amount of HK$51,450,000 to banks for banking facilities granted to the Group.

At 31 July 2006, there is an outstanding capital commitment to contribute approximately HK$16,600,000 for film rights.

Save as disclose above and apart from intra-group liabilities, as at the close of business of 31 July 2006, the Group did not have any debt securities issued and outstanding, or authorized or otherwise created but unissued, any term loans (secured, unsecured, guaranteed or not), any other borrowings or indebtedness in the nature of borrowing including bank overdrafts or loans, or other similar indebtedness, and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments (whether secured or unsecured, guaranteed or not), any mortgages or charges, or other material contingent liabilities or guarantee.

APPENDIX III

STATUTORY AND GENERAL INFORMATION

1. RESPONSIBILITY STATEMENTS

The Composite Offer Document includes particulars given in compliance with the Takeovers Code for the purpose of giving information with regard to the Company and the Offeror.

The information contained in the Composite Offer Document (other than that relating to the Offeror or the terms and conditions of the Offers or future intentions of the Offeror in respect of the Group) has been supplied by the Directors who jointly and severally accept full responsibility for the accuracy of the information contained in the Composite Offer Document (other than that relating to the Offeror or the terms and conditions of the Offers or future intentions of the Offeror in respect of the Group). The Directors confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Composite Offer Document have been arrived at after due and careful consideration and there are no other facts (other than that relating to the Offeror or the terms and conditions of the Offers or future intentions of the Offeror in respect of the Group) not contained in the Composite Offer Document the omission of which would make any statement (other than that relating to the Offeror or the terms and conditions of the Offers or future intentions of the Offeror in respect of the Group) contained in the Composite Offer Document misleading. The issue of the Composite Offer Document has been approved by the Board.

The information contained in the Composite Offer Document relating to the Offeror, the terms and conditions of the Offers and future intentions of the Offeror in respect of the Group has been supplied by the sole director of the Offeror. The sole director of the Offeror accepts full responsibility for the accuracy of the information relating to the Offeror, the terms and conditions of the Offers and future intentions of the Offeror in respect of the Group contained in the Composite Offer Document and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in the Composite Offer Document have been arrived at after due and careful consideration and there are no other facts relating to the Offeror, the terms and conditions of the Offers and future intentions of the Offeror in respect of the Group not contained in the Composite Offer Document the omission of which would make any statement relating to the Offeror, the terms and conditions of the Offers and future intentions of the Offeror in respect of the Group contained in the Composite Offer Document misleading.

2. SHARE CAPITAL OF THE COMPANY

(a) Authorised and issued share capital

The authorised and issued share capital of the Company as at the Latest Practicable Date was as follows:

HK$

Authorised:

1,500,000,000 Shares

15,000,000.00

Issued and fully paid up or credited as fully paid up:

402,300,000 Shares

4,023,000.00

APPENDIX III

STATUTORY AND GENERAL INFORMATION

All existing Shares rank equally in all respects, including in particular as to dividend, voting rights and capital. No Shares have been issued since the end of the last financial year of the Company which ended on 31 March 2006.

(b) Options

Save for the Options, there were no outstanding warrants or options or derivatives or securities convertible into Shares as at the Latest Practicable Date.

3. DISCLOSURE OF INTERESTS

(a) Interests and short positions of the Directors in the Company and its associated corporations

As at the Latest Practicable Date, the interests or short positions of each Director in the Shares, Options, warrants, derivatives, securities convertible into the shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company or the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO); (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange; or (d) to be disclosed in the Composite Offer Document pursuant to the requirements of the Takeovers Code were as follows:

Long positions in the Options and the underlying Shares

Name of Directors	No. of underlying Shares attributable to
	Type of interests	Pool A Options	Pool B Options	No. of underlying Shares	Approximate percentage of shareholding
Mr. Allan Fung	Beneficial	4,000,000	3,000,000	7,000,000	1.7400%
Ms. Leung Siu Kuen, Janet	Beneficial	4,000,000	2,000,000	6,000,000	1.4914%
Mr. YS Fung	Beneficial	4,000,000	2,000,000	6,000,000	1.4914%
Mr. Au Lik Man, Simon	Beneficial	1,000,000	1,000,000	2,000,000	0.4971%
Dr. Lo Wing Yan, William, JP	Beneficial	1,800,000	500,000	2,300,000	0.5717%
Ms. Fung Suen Lai, Jacqueline	Beneficial	-	500,000	500,000	0.1243%
Mr. Chan Koon Chung, Johnny	Beneficial	-	500,000	500,000	0.1243%
Mr. Chau, Stephen	Beneficial	-	500,000	500,000	0.1243%

APPENDIX III

STATUTORY AND GENERAL INFORMATION

Save as disclosed in this section (a), as at the Latest Practicable Date, none of the Directors, chief executives of the Company or their associates had any interest or short positions in the Shares, Options, warrants, derivatives, securities convertible into the shares or debentures of the Company or any of its associated corporations (which the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange, or to be disclosed in the Composite Offer Document pursuant to the requirements of the Takeovers Code.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO, and so far as is known to any Director or chief executive or the Company, the following persons had, or were deemed or taken to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Name of Shareholders	Beneficial Interests	Interests in controlled corporation	Total	Approximate percentage of shareholder
Nice Hill	283,335,000 (L)	–	283,335,000	70.43%
Mr. Chin (Note)	–	283,335,000 (L)	283,335,000	70.43%
Ms. Kwan Yuet
Wah Rosanna (Note)	–	283,335,000 (L)	283,335,000	70.43%

(L) denotes long position

Note: Mr. Chin is the sole shareholder of Nice Hill and is deemed to be interested in 283,335,000 Shares held by Nice Hill. Ms Kwan Yuet Wah Rosanna is the spouse of Mr. Chin and thus is deemed to be interested in 283,335,000 Shares held by Nice Hill.

Save as disclosed in this section (b), the Directors and chief executive of the Company are not aware of any person who has an interest or short position in the Shares, or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

APPENDIX III

STATUTORY AND GENERAL INFORMATION

(c) Options

Name of Grantees	No. of underlying Shares attributable to		No. of underlying Shares
	Pool A Options	Pool B Options
Mr. Allan Fung	4,000,000	3,000,000	7,000,000
Ms. Leung Siu Kuen, Janet	4,000,000	2,000,000	6,000,000
Mr. YS Fung	4,000,000	2,000,000	6,000,000
Mr. Au Lik Man, Simon	1,000,000	1,000,000	2,000,000
Dr. Lo Wing Yan, William, JP	1,800,000	500,000	2,300,000
Ms. Fung Suen Lai, Jacqueline	–	500,000	500,000
Mr. Chan Koon Chung, Johnny	–	500,000	500,000
Mr. Chau, Stephen	–	500,000	500,000
Staff of the Group	1,100,000	1,850,000	2,950,000
	15,900,000	11,850,000	27,750,000

As at the Latest Practicable, save for the above Options, there were no outstanding convertible debts, options, warrants, derivatives or securities convertible into Shares.

(d) Other interests in the Company

(i) Set out below are a) the names of the Optionholders who had given the Undertakings; and b) their respective interest in the shares, options, warrants, derivatives or securities convertible into the Shares:

Name of Optionholders	Pool A Options held as at the Latest Practicable Date	Pool B Options held as at the Latest Practicable Date
Mr. Allan Fung	4,000,000	3,000,000
Ms. Leung Siu Kuen, Janet	4,000,000	2,000,000
Ms. YS Fung	4,000,000	2,000,000
	12,000,000	7,000,000

APPENDIX III

STATUTORY AND GENERAL INFORMATION

Save for the above Optionholders who undertook to accept the Option Offer A, there were no other persons who, prior to the posting of the Composite Offer Document, have irrevocably committed themselves to accept or reject the Offers. Save for (i) dealings of Shares, Options, warrants, derivatives or securities convertible into the Shares by the above Optionholders as disclosed in section headed “DEALINGS IN SECURITIES” of this Appendix; and (ii) the holding of the Options by the above Optionholders as disclosed in this paragraph, none of the above Optionholders had any interest in, nor had dealt in for the period from the six months prior to the date of the Announcement up to the Latest Practicable Date, the Shares, Options, warrants, derivatives or securities convertible into the Shares.

(ii) no persons had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Offeror and Mr. Chin or their respective associate or concert party of each of them or with any person who was an associate of the Offeror or with the Company or with any person who was an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate as described by the Takeovers Code;

(iii) no benefit (other than statutory compensation) would be given to any Director as compensation for loss of office or otherwise in connection with the Offers;

(iv) save for the Undertakings, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror and Mr. Chin or any person acting in concert with any of them and any director, recent directors, shareholders or recent shareholders of the Company having any connection with or dependent upon the Offers;

(v) there was no agreement or arrangement to which any of the Offeror and Mr. Chin was a party which related to the circumstances in which it might or might not invoke or seek to invoke a condition to the Offers;

(vi) there was no arrangement of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code which existed between the Offeror and Mr. Chin or any person acting in concert with any of them, and any other person;

(vii) no subsidiary of the Company nor pension fund of the Group nor adviser to the Company as specified in class (2) of the definition of “associate” (but including exempt principal traders) in the Takeovers Code owned or controlled any Shares, Options warrants, derivatives or securities convertible into the Shares or had dealt for value in Shares, Options, warrants, derivatives or securities convertible into the Shares or other securities of the Company for the period from six months prior to the date of the Announcement up to the Latest Practicable Date;

90 -

APPENDIX III

STATUTORY AND GENERAL INFORMATION

(viii) no fund manager (other than exempt fund managers) connected with the Company had managed any Shares, Options, warrants derivatives or securities convertible into the Shares on a discretionary basis or had dealt in the Shares, Options, warrants, derivatives or securities convertible into the Shares for the period from six months prior to the date of the Announcement up to the Latest Practicable Date;

(ix) save for the Undertakings, no Directors intended, in respect of their own beneficial interest in the Shares, Options, warrants, derivatives or securities convertible into the Shares, to accept or reject the Offers;

(x) save for the Undertakings, there was no agreement or arrangement between any Director and any other person which was conditional on or dependent upon the outcome of the Offers or otherwise connected with the Offers; and

(xi) save for the Undertakings, there was no contract or arrangement entered into by the Offeror and Mr. Chin existing as at the Latest Practicable Date in which a Director had a material personal interest.

(e) Interests in the Offeror

The Offeror is wholly and beneficially owned by Mr. Chin.

As at the Latest Practicable Date,

(i) neither the Company nor any Directors owned or controlled any share, options, warrants, derivatives or securities convertible into shares of the Offeror or had dealt in the shares, options, warrants, derivatives or securities convertible into shares of the Offeror for the six-month period prior to the date of the Announcement and up to the Latest Practicable Date; and

(ii) none of the Company, Kingston Securities, Kingston Corporate Finance, Veda Capital, Grand Vinco and Nuada had any interests in the shares, options, warrants, derivatives or securities convertible into shares of the Offeror.

DEALINGS IN SECURITIES

(a) By the Offeror and parties acting in concert with it

Save for the S&P Agreements and the Undertakings, there had been no dealings in the Shares, Options, warrants, derivatives or securities convertible into the Shares by the Offeror and parties acting in concert with it during the six-month period prior to the date of the Announcement and up to the Latest Practicable Date.

Pursuant to the Takeovers Code, as the Offers are made through Kingston Securities and Kingston Corporate Finance and Veda Capital are the joint financial advisers to the Offeror, each of Kingston Securities, Kingston Corporate Finance and Veda Capital is deemed to be acting in

APPENDIX III

STATUTORY AND GENERAL INFORMATION

concert with the Offeror for the purpose of the Offers. Neither Kingston Securities, Kingston Corporate Finance nor Veda Capital is a Shareholder nor has dealt for value in the Shares, Options, warrants, derivatives or securities convertible into the Shares in the six-month period prior to the date of the Announcement and up to the Latest Practicable Date.

(b) By the Directors

Save for the S&P Agreements and the Undertakings, there had been no dealings in the Shares, Options, warrants, derivatives or securities convertible into the Shares by any of the Directors during the six-month period prior to the date of the Announcement and up to the Latest Practicable Date.

(c) By the Optionholders who had given the Undertakings

Save for the S&P Agreements and the Undertakings, there had been no dealings in the Shares, Options, warrants, derivatives or securities convertible into the Shares by the Optionholders who had given the Undertakings during the six-month period prior to the date of the Announcement and up to the Latest Practicable Date.

5. MARKET PRICES

(a) The highest and lowest closing price per Share as quoted on the Stock Exchange in the six-month period preceding the date of the Announcement and ending on the Latest Practicable Date, were HK$0.096 per Share on 18 April 2006 and HK$0.039 per Share on 18 July 2006 respectively.

(b) The table below sets out the closing price per Share as quoted on the Stock Exchange on (i) the last business day of each of the six calendar months immediately preceding the date of the Announcement; (ii) the Last Trading Day; and (iii) the Latest Practicable Date:

Date	Closing price of the Shares (HK$)
28 February 2006	0.07
31 March 2006	0.086
28 April 2006	0.088
30 May 2006	0.075
30 June 2006	0.045
31 July 2006	0.05
30 August 2006 (being the Last Trading Day)	0.045
31 August 2006	trading of the Shares was suspended
22 September 2006 (being the Latest Practicable Date)	0.061

APPENDIX III

STATUTORY AND GENERAL INFORMATION

6. LITIGATION

Neither the Company nor any other members of the Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group as at the Latest Practicable Date.

7. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by members of the Group after the date two years prior to the date of the Announcement and up to the Latest Practicable Date and are or may be material:

(a) the four tenancy agreements dated 1 April 2005 entered into by Panorama Distributions Company Limited, a wholly owned subsidiary of the Company, as tenant with Players Pictures Company Limited, Metropolis Communications Limited, Brilliant Business Limited and Sunny Fancy Limited, as landlords in respect of the leasing of the principal place of business of the Company for one year commencing from 1 April 2005 to 31 March 2006 with total aggregate annual value HK$1,176,000; and

(b) the four tenancy agreements dated 1 April 2006 entered into by Panorama Distributions Company Limited, a wholly owned subsidiary of the Company, as tenant with Players Pictures Company Limited, Metropolis Communications Limited, Brilliant Business Limited and Sunny Fancy Limited, as landlords in respect of the leasing of the principal place of business of the Company for one year commencing from 1 April 2006 to 31 March 2007 with total aggregate annual value HK$1,176,000.

8. SERVICE CONTRACTS

None of the Directors has any existing or proposed service contracts with any member of the Group or any associated company of the Company:

(i) which (including both continuous and fixed term contracts) have been entered into or amended within six months before the commencement of the Offers period;

(ii) which are continuous contracts with a notice period of 12 months or more; or

(iii) which are fixed term contracts with more than 12 months to run irrespective of the notice period.

APPENDIX III

STATUTORY AND GENERAL INFORMATION

9. EXPERTS

The following are the qualifications of the experts who have been named in the Composite Offer Document or have given opinions, letters or advice which are contained in the Composite Offer Document:

Name	Qualifications
Kingston Securities	a licensed corporation to carry on business in type 1 (dealing in securities) regulated activity under the SFO
Kingston Corporate Finance	a licensed corporation to carry on business in type 6 (advising on corporate finance) regulated activity under the SFO
Veda Capital	a licensed corporation to carry on business in type 6 (advising on corporate finance) regulated activity under the SFO
Grand Vinco	a licensed corporation to carry on business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO
Nuada	a licensed corporation to carry on business in type 6 (advising on corporate finance) regulated activity under the SFO

Each of Kingston Securities, Kingston Corporate Finance, Veda Capital, Grand Vinco and Nuada has given and has not withdrawn its written consent to the issue of the Composite Offer Document with the inclusion herein of its letter and/or references to its names, in the form and context in which it appears.

10. GENERAL

(a) The registered office of the Company is at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. Its principal place of business in Hong Kong is at 8th Floor, Mita Centre, 552-566 Castle Peak Road, Kwai Chung, New Territories, Hong Kong.

(b) The principal members of the Offeror's concert group comprise (i) the Offeror and Mr. Chin, being the sole director and beneficial owner of the Offeror; (ii) Kingston Corporate Finance and Veda Capital, being the joint financial advisers to the Offeror in respect of the Offers and (iii) Kingston Securities which makes the Offers on behalf of the Offeror and granted a loan facility to the Offeror in respect of the Offers.

(c) The registered office of the Offeror is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Its correspondence address is at Unit G, 10/F., Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong.

APPENDIX III

STATUTORY AND GENERAL INFORMATION

(d) The correspondence address of Mr. Chin is at Unit G, 10/F., Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong.

(e) The correspondence address of Kingston Securities and Kingston Corporate Finance is at 2801, 28th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong.

(f) The correspondence address of Veda Capital is at Suite 11-12, 13/F, Nam Fung Tower, 173 Des Voeux Road Central, Hong Kong.

(g) The correspondence address of Grand Vinco is at Unit 4909-4910, 49/F., The Center, 99 Queen's Road Central, Hong Kong.

(h) The correspondence address of Nuada is at 7th Floor, New York House, 60 Connaught Road Central, Hong Kong.

(i) The secretary of the Company is Ms. Leung Su Wing, Connie at 8th Floor, Mita Centre, 552-566 Castle Peak Road, Kwai Chung, New Territories, Hong Kong.

(j) The Company's Hong Kong branch share registrar and transfer office is Tengis Limited of 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong.

(k) All time references contained in the Composite Offer Document and the Form(s) of Acceptance refer to Hong Kong time.

(l) The English text of the Composite Offer Document and the Form(s) of Acceptance shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours from 9:00 a.m. to 5 p.m. on any Business Day at the office of the Company at 8th Floor, Mita Centre, 552-566 Castle Peak Road, Kwai Chung, New Territories, Hong Kong while the Offers remain open:

(a) the memorandum of association and articles of association of the Company and the Offeror;

(b) the annual reports of the Company for the two years ended 31 March 2006;

(c) the letter from the Independent Board Committee, the text of which is set out on page 22 of the Composite Offer Document;

(d) the letter from Kingston Securities, the text of which is set out from pages 16 to 21 of the Composite Offer Document;

APPENDIX III
STATUTORY AND GENERAL INFORMATION

(e) the letter from Nuada, the text of which is set out from pages 23 to 37 of the Composite Offer Document;

(f) the letter of consent from each of Kingston Securities, Kingston Corporate Finance, Veda Capital, Grand Vinco and Nuada referred to in the paragraph headed “Experts” in this Appendix;

(g) copies of the material contracts referred to in the section headed “Material Contracts” in this Appendix;

(h) the S&P Agreements;

(i) the Undertakings;

(j) the Escrow Agreement;

(k) the New Escrow Agreement; and

(l) the Pre-IPO Share Option Scheme.

Copies of the above documents will be available for inspection on the Company’s website at http://www.panorama.com.hk and on the website of the SFC at http://www.sfc.hk while the Offers remain open.

96 -

AI assistant

Hephaestus Holdings Limited — M&A Activity 2006

51310_rns_2006-09-26_d54b99eb-eb2e-4c07-a1c4-34638e7502c4.pdf

Nice Hill Investments Limited

CANORAMA INTERNATIONAL HOLDINGS LIMITED

KINGSTON SECURITIES LIMITED

KINGSTON CORPORATE FINANCE LIMITED

VINC®

Nuada Limited

DEFINITIONS

PANORAMA INTERNATIONAL HOLDINGS LIMITED

鋪射國際控股有限公司*

INTRODUCTION

S&P AGREEMENTS

(I) S&P Agreement I

Principal terms of the Offers

Effect of not accepting Option Offer A and Option Offer B

Comparisons of value

Total consideration

INFORMATION ON THE COMPANY

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

MAINTAINING THE LISTING STATUS OF THE COMPANY

GENERAL

RECOMMENDATION

KINGSTON SECURITIES LIMITED

Mandatory unconditional general offers by Kingston Securities Limited on behalf of Nice Hill Investments Limited

INTRODUCTION

MANDATORY UNCONDITIONAL GENERAL OFFERS

Principal terms of the Offers

Comparisons of value

Total consideration

Effect of accepting the Offers

Effect of not accepting Option Offer A and Option Offer B

Stamp Duty

Dealings in Shares

Compulsory acquisition

INFORMATION ON THE OFFEROR AND ITS INTENTION REGARDING THE GROUP

MAINTAINING THE LISTING STATUS OF THE COMPANY

FURTHER TERMS OF THE OFFERS

GENERAL

PANORAMA INTERNATIONAL HOLDINGS LIMITED

鋪射國際控股有限公司*

Mandatory unconditional general offers by Kingston Securities Limited on behalf of Nice Hill Investments Limited

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

The Share Offer

Historical Share price performance

Historical Share price performance

Liquidity of the Shares

Price/earnings multiples

RECOMMENDATION

1. PROCEDURES FOR ACCEPTANCE

A. The Share Offer

B. The Option Offer A and Option Offer B

2. SETTLEMENT

A. The Share Offer

B. The Option Offer A and Option Offer B

3. ACCEPTANCE PERIOD AND REVISIONS

Effect of not accepting Option Offer A and Option Offer B

4. ANNOUNCEMENTS

5. RIGHT OF WITHDRAWAL

6. STAMP DUTY

7. TAXATION

8. OVERSEAS SHAREHOLDERS

9. GENERAL

1. SUMMARY OF FINANCIAL RESULTS FOR THE THREE YEARS ENDED 31 MARCH 2006

2. FINANCIAL STATEMENTS

Consolidated profit and loss account

Consolidated statement of changes in equity

Notes to the financial statements

1. GENERAL

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARD

HKAS 1 "Presentation of Financial Statements"

HKAS 32 "Financial Instruments: Disclosure and Presentation" and HKAS 39 "Financial Instruments: Recognition and Measurement"

HKFRS 2 “Share Based Payments”

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Interests in subsidiaries

Recognition of revenue

Property, plant and equipment

Hephaestus Holdings Limited M&A Activity 2006