Jiading International Group Holdings Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in M21 Technology Limited, you should at once hand this circular together with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8153)

CONTINUING CONNECTED TRANSACTIONS

Financial Adviser to M21 Technology Limited

Shenyin Wanguo Capital (H.K.) Limited

Independent financial advisor to the Independence Board Committee and the Independent Shareholders

TIS Securities (HK) Limited

A letter from the Independent Board Committee is set out on page 15 and 16 of this circular. A letter from TIS Securities (HK) Limited, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 32 of this circular.

A notice convening a special general meeting of M21 Technology Limited to be held on Saturday, 20 November 2004 at 10:00 a.m. in Conference Room, 5/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong is set out on pages 38 and 39 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment of the meeting should you so wish.

This circular will remain on the “Latest Company Announcement” page of the GEM website at www.hkgem.com for at least 7 days from the date of its posting.

4 November 2004

* For identification only

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. GEM 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-todate information on GEM-listed issuers.

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	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter of advice from TIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38

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DEFINITIONS

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

“Acquisition”	the acquisition of the entire issued share capital of Sky
	Dragon pursuant to the Circular
“Agreements”	the Technical Support Agreement and the Supplemental
	Agreement
“Analog TV Network”	the prevailing analog television network in the PRC
“Basic Subscription Fee”	fee paid by Subscribers for subscription of digital TV
“Board”	board of Directors
“Caps Period”	for a period of 5 months ending 31 March 2005 and 2 years
	ending 31 March 2006 and 2007 for the provision of services
	contemplated under the Agreements;
“Circular”	circular issued by the Company dated 28 June 2004 in
	respect of the major transaction and grant of option
“Company”	M21 Technology Limited, an exempted company
	incorporated under the laws of Bermuda with limited liability
	and the shares of which are listed on the GEM
“Completion”	the completion of the Acquisition
“Digital TV Network”	the newly launched digital television network in the PRC
“Director(s)”	director(s) of the Company
“Extra Subscription Fee”	extra subscription fee paid by Subscribers for subscription
	of the packed TV programs
“First Tier Network”	a fiber optic trunk network covering 14 districts (區) in
	Hunan
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the Growth
	Enterprise Market of the Stock Exchange

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DEFINITIONS

“Group” the Company and its subsidiaries

“Hunan Digital” 湖南數字電視技術有限公司 (Hunan Digital Television Technology Company Limited), a Sino-foreign cooperative joint venture established in the PRC on 28 April 2003 and owned as to 70% by Sky Dragon and as to 30% by Hunan TV

“Hunan TV” 湖南省廣播電視網絡有限責任公司 (Hunan Provincial Television Network Company Limited), the authorised digital television network operator in Hunan Province, the PRC which is owned as to 62% by 湖南廣播電視網絡傳輸中心(Hunan Broadcast Television Network Transmission Centre, for identification only), a state-owned company and as to 38% by 湖南長城通信網絡工程建設有限公司(Hunan Great Wall Communication Network Engineering Development Company Limited, for identification only), a state-owned company
“Independent Board Committee” the independent committee of the Board, which comprises Messrs. Sousa, Richard Alvaro, Chang Carl and Ngai Wai Fung, the independent non-executive Director, established to advise the Independent Shareholders in respect of the Transactions and the Proposed Annual Caps
“Independent Shareholders”
all Shareholders are independent as none of them or their associates has any interest in Hunan TV and in the Transactions;
“Independent Third Party(ies)”
(a) party(ies) and its ultimate beneficiary owner(s), if any, who is/are not connected with the Directors, chief executive, substantial shareholder or management shareholder of the Company and its subsidiaries and their respective associates;
“Latest Practicable Date”
3 November 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular
“PRC”

the People’s Republic of China, for the purpose of this circular, excludes the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan

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DEFINITIONS

“Proposed Annual Caps”
“RFTH Document”
“SFO”
“SGM”
“Second Tier Network”
“Second Tier Network Operator”
“Shareholder(s)”
“Sky Dragon”
“Stock Exchange”
“Subscribers”
“Supplemental Agreement”
the aggregate amount in respect of its portion of the Basic Subscription Fee and the Extra Subscription Fee expected to be received by Hunan Digital for the services contemplated under the Agreements during the Caps Period;
document dated 11 June 2003 issued by 湖南省廣播電視局科技處(The Radio Films and Television Technical Bureau of Hunan Province) regarding the progress of digitalization of the cable television network in Hunan
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
the special general meeting of the Company to be held on Saturday, 20 November 2004 at 10:00 a.m. in Conference Room, 5/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong, the notice of which is set out on pages 38 and 39 of this circular, and any adjournment of such meeting
a fiber optic trunk network covering 108 cities（市）and counties（縣）in Hunan which connected with the First Tier Network
Independent Third Parties operating the Second Tier Network
shareholder(s) of the Company

Sky Dragon Digital Television and Movies Limited, an indirectly wholly-owned subsidiary of the Company

The Stock Exchange of Hong Kong Limited
household subscribers for the digital TV

the supplemental agreement dated 23 August 2004 entered into between Hunan Digital and Hunan TV in respect of, inter alias, setting up of joint bank accounts, the settlement details of the subscription fee and the right to extend the Technical Support Agreement;

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DEFINITIONS

“TIS” TIS Securities (HK) Limited, a deemed licensed corporation licensed to perform 1, 4, 6, 7 and 9 regulated activities (dealing in securities, advising on securities, advising on corporate finance, providing automated trading services and asset management respectively) under the SFO “Technical Support the agreement dated 2 August 2004 entered into between Agreement” Hunan Digital and Hunan TV in respect of the provision of the digitalization-related technical support services and packed TV programs to Hunan TV “Transactions” all the transactions contemplated under the Agreements “HK$” Hong Kong dollar, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “%” per cent.

HK$1.00 = RMB1.06

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LETTER FROM THE BOARD

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M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8153)

Executive Directors: Tong Hing Chi (Chairman) Law Kwok Leung

Non-executive Director: Chan Kwok Sun, Dennis

Principal place of business: 1/F., Mei Ah Centre 28 Chun Choi Street Tseung Kwan O Industrial Estate Kowloon Hong Kong

Independent non-executive Directors: Sousa, Richard Alvaro Chang Carl Ngai Wai Fung

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

4 November 2004

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the Circular of the Company dated 28 June 2004. Subsequent to the approval of the Acquisition by the Shareholders on 13 July 2004, all conditions of the Acquisition had been fulfilled and the Acquisition was completed on 26 August 2004. As mentioned in the Circular, it was expected that the Technical Support Agreement would be entered into between Hunan Digital and Hunan TV. The Board is pleased to announce that on 2 August 2004 and 23 August 2004, Hunan Digital entered into the Technical Support Agreement and the Supplemental Agreement respectively with Hunan TV. Pursuant to the Agreements, Hunan Digital agreed to provide digitalization-related technical support services and packed TV programs to Hunan TV until 1 August 2007.

* For identification only

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LETTER FROM THE BOARD

Hunan Digital is engaged in the development of digital set-top boxes and the system platform for the Digital TV Network and the provision of digitalization-related technical support services to Hunan TV, which is the only Digital TV Network operator at present in Hunan. Hunan TV is the Digital TV Network operator approved by the Government of Hunan Province on 19 December 2002.

Hunan Digital is a Sino-foreign cooperative joint venture established in the PRC and is indirectly owned as to 70% by the Company and as to 30% by Hunan TV. Hunan TV is therefore, upon the Completion, a substantial shareholder of Hunan Digital and a connected person of the Company according to the GEM Listing Rules. The Proposed Annual Caps for the Transactions are HK$2.3 million, HK$31 million and HK$123 million respectively for the Caps Period. As the applicable percentage ratios in respect of the Transactions (other than the profits ratio) are, on an annual basis, more than 25% and the maximum caps exceed HK$10 million, they constitute non-exempt continuing connected transactions under Chapter 20 of the GEM Listing Rules and are therefore subject to reporting, announcement and Independent Shareholders’ approval requirements under Rule 20.35 of the GEM Listing Rules. An ordinary resolution will be proposed to approve the Transactions and the Proposed Annual Caps at the SGM. No Shareholders will be required to abstain from voting at the SGM in respect of such ordinary resolution. The vote will be taken by poll.

The purpose of this circular is (i) to provide the Shareholders with further information relating to the Agreements; (ii) to provide the Shareholders with the recommendation and opinion from the Independent Board Committee as to voting at the SGM in relation to the Transactions and the Proposed Annual Caps; (iii) to set out the letter from TIS containing its recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Transactions and the Proposed Annual Caps and the principal factors and reasons considered by it in arriving at its opinions; and (iv) to give a notice of the SGM at which resolutions as set out in the notice of SGM will be proposed to approve the Transactions and the Proposed Annual Caps. This circular also contains information in compliance with the GEM Listing Rules.

BACKGROUND

The Group is principally engaged in the provision of pre-mastering and media services and the provision of audiovisual play-out services on a digitized platform. Hunan Digital is engaged in the development of digital set-top boxes and the system platform for the Digital TV Network and the provision of digitalization-related technical support services to Hunan TV, which is the only Digital TV Network operator at present in Hunan. Hunan TV is the Digital TV Network operator approved by the Government of Hunan Province on 19 December 2002. Hunan TV is also the only Analog TV Network operator in Hunan.

Hunan Digital is a Sino-foreign cooperative joint venture established in the PRC and is directly owned as to 70% by Sky Dragon, an indirect wholly-owned subsidiary of the Company and as to 30% by Hunan TV. Hunan TV is therefore, upon the Completion, a substantial

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LETTER FROM THE BOARD

shareholder of Hunan Digital and a connected person of the Company according to the GEM Listing Rules. The revenue earned by Hunan Digital, after deducting operating costs, is to be shared by the Company and Hunan TV on the basis of 70% and 30% respectively. Details of Hunan Digital and Hunan TV are referred to in the Circular.

THE TRANSACTIONS

Technical Support Agreement and Supplemental Agreement

Agreements: Technical Support Agreement and Supplemental Agreement

Date: 2 August 2004 and 23 August 2004 respectively

Parties: (1) Hunan Digital, a subsidiary of the Company (2) Hunan TV, a connected person of the Company under the GEM Listing Rules

Details of the Transactions

Technical Support Agreement

Subject to the terms and conditions of the Technical Support Agreement, Hunan Digital agreed to provide the followings to Hunan TV:

1) digitalization-related technical support services; and
2) packed TV programs.
1) Digitalization-related technical support services

Hunan TV is owned as to 62% by 湖南廣播電視網絡傳播中心 (Hunan Broadcast Television Network Transmission Centre) and 38% by 湖南長城通信網絡工程建設有限公司 (Hunan Great Wall Communication Network Engineering Development Company Limited), both being stated-owned companies. Based in Changsha, Hunan TV owns and operates the First Tier Network. The First Tier Network and the Second Tier Network together form a province-wide cable television network in Hunan, covering over 4 million households in the territory of which approximately 3.6 million households are subscribers of the Analog TV operated by Hunan TV. The Digital TV Network has been launched on a trial basis since June 2003 in Hunan in which there are currently around 10,000 Subscribers. The Basic Subscription Fee currently payable by Subscribers is RMB30 per month.

Under the Technical Support Agreement, Hunan Digital will provide digitalizationrelated technical support services to Hunan TV, which include digitising, programming,

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LETTER FROM THE BOARD

production, play-out and broadcasting TV programs, from 1 October 2004. Hunan Digital will also provide a settlement program which deals with Subscriber information, account opening and closing, and settlement from Subscribers. In consideration of the provision of the digitalization-related technical support services to Hunan TV, Hunan Digital will share 20% of the Basic Subscription Fee which is equivalent to RMB6 per month. The remaining 80% of the Basic Subscription fee is to be shared between Hunan TV and the Second Tier Network Operators. Details of the settlement mechanism between Hunan TV and the Second Tier Network Operators are explained under the paragraph headed “Supplemental Agreement” below.

As Hunan is one of the pioneer provinces in the PRC for the digitalization of television network, the Directors advise that there is no public and official comparable information for the digitalization-related technical support services in the PRC. It is the Group’s business to provide audiovisual play-out services to channel suppliers which supply contents to digital cable television operators in Hong Kong, where the revenue derived from such service is calculated on the basis of sharing of the subscription fee received from subscribers by the digital cable television operator. Such play-out services may include digitalization of TV content before play-out and broadcast of such content to channel suppliers which supply contents to digital cable television operators in Hong Kong. The Directors consider the nature of the play-out services provided by the Group is similar and comparable to the nature of the digitalization related technical support services provided by Hunan Digital to Hunan TV, and the sharing ratio of the subscription fee received by Hunan Digital from Hunan TV is generally no less favourable to the Group than terms offered by Hunan TV to other Independent Third Party. As such, the Directors are of the view that the 20% sharing ratio of the Basic Subscription Fee is in line with market practice and has been determined with reference to similar profit sharing arrangements in the media industry in Hong Kong.

2) Packed TV programs

To cater for preferences of individual Subscribers, Hunan Digital will supply packed TV programs to Hunan TV which then offers to the Subscribers. The packed TV programs may include a news channel and motor channel etc. Subscribers will be charged an Extra Subscription Fee. The Extra Subscription Fee payable by Subscribers will be set at RMB30 per month. The packed TV programs are expected to be launched in November 2004.

Under the Agreements, after deducting the fees to Second Tier Network Operators (which is on average 35% according to the signed agreements with the 20 Second Tier Network Operators, however, the sharing ratio may vary among different Second Tier Network Operators which is subject to the terms of the agreements between Hunan TV and each of the 108 Second Tier Network Operators), Hunan Digital and Hunan TV will share the balance of the Extra Subscription Fee in the proportion of 70% and 30% respectively. There are 108 Second Tier Network Operators in Hunan. As Hunan TV

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LETTER FROM THE BOARD

has reached agreements with 20 of the Second Tier Network Operators to which the fees have been fixed at 35% of the Extra Subscription Fee on average, Hunan Digital will accordingly receive 45.5% of the Extra Subscription Fee (which is equivalent to RMB13.65 per month) for the supply of packed TV programs to Hunan TV. There are still 88 Second Tier Network Operators which have not reached agreement with Hunan TV. Being the only Digital TV Network operator in Hunan, all the Second Tier Network Operators have to enter into agreement with Hunan TV in order to provide services to the Subscribers. Pursuant to the RFTH Document and as described under the paragraph headed “The Proposed Annual Caps” below, the rest of the 108 Second Tier Network Operators are expected to enter into agreements with Hunan TV by 2010. The Directors further advise that the percentage of the fee payable to other Second Tier Network Operators is still in negotiation but it is expected that such percentage will be set at a level not significantly different from that of 35% of the Extra Subscription Fee. The progress in entering into agreement between the remaining 88 Second Tier Network Operators and Hunan TV will be disclosed in the quarterly report, interim report and annual report of the Group.

As Hunan is one of the pioneer provinces in the PRC for the digitalization of TV network, the Directors advise that there is no public and official comparable information for the provision of packed TV programs on digitalized TV network in the PRC. The Directors are aware that revenue derived from the supply of packed TV programs to TV operators in Hong Kong is based on the sharing of subscription fee received from subscribers by TV operators. The Directors consider the nature of the provision of packed TV programs by such companies is similar and comparable to that of Hunan Digital to Hunan TV, and the sharing ratio of subscription fee received by Hunan Digital from Hunan TV is generally no less favourable to the Group than terms offered by Hunan TV to other Independent Third Party. As such, the Directors are of the view that the sharing ratio of Extra Subscription Fee is in line with market practice and has been determined with reference to similar profit sharing agreements in the media industry in Hong Kong.

To capitalise on the Digital TV Network, the Directors may consider the provision of other value-added services such as broadband internet access services, on-line shopping and IP phone services, etc to Hunan TV in the future. Hunan Digital may also launch other packages of packed TV programs in the future but at present there is no estimation of the amount of revenue likely to be derived from these packages. Such transactions may constitute continuing connected transactions under the GEM Listing Rules and further announcement will be made by the Company as and when required by the GEM Listing Rules.

Supplemental Agreement

Pursuant to the Supplemental Agreement, Basic Subscription Fee and Extra Subscription Fee will be payable by the Subscribers to bank accounts jointly operated by Hunan TV and the Second Tier Network Operators which will then be apportioned by the bank accordingly.

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LETTER FROM THE BOARD

After deducting the fees payable to the Second Tier Network Operators, the net fee will be credited to a bank account jointly operated by Hunan TV and Hunan Digital which will then be apportioned by the bank accordingly and the respective portion due to Hunan Digital will be credited to Hunan Digital on a quarterly basis. The Directors confirm that the settlement mechanism by joint bank account will be adopted between Hunan TV and the Second Tier Network Operators from the commencement of the Agreements, even though this settlement mechanism is not adopted currently.

Revised effective date of the Agreements

The Agreements will originally become effective on 1 October 2004. However, under the requirements of the GEM Listing Rules, the Transactions and the Proposed Annual Caps are subject to the approval by the Independent Shareholders. Accordingly, Hunan TV and Hunan Digital agreed that the Agreements shall take effect from the first day after the SGM.

THE PROPOSED ANNUAL CAPS

Basis of cap amounts

The respective value of the Proposed Annual Caps for the 5 months ending 31 March 2005 and years ending 31 March 2006 and 2007 are as follows:

For the five months ending 31 March 2005 Average number of Subscribers 48,000 Average number of Subscribers for the packed TV programs 14,400 Total Basic Subscription Fee to Hunan Digital_(HK$’000) 1,359 Total Extra Subscription Fee to Hunan Digital(HK$’000) 928 Proposed Annual Caps(HK$’000)_ 2,300	For the year ending 31 March 2006 2007 267,500 1,075,000 80,250 322,500 18,170 73,019 12,401 49,836 31,000 123,000

As mentioned in the Circular, Hunan Digital has not received any fees from Hunan TV in the trial period and has not provided similar services to any Independent Third Parties since its establishment.

Based on the reasons that (i) the number of Subscribers in the PRC is expected to reach 30 million in 2005 according to 《我國有㵟電視向數字化進度時間表》(Timetable for digitalization of cable television networks in the PRC) issued by The State Administration of

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LETTER FROM THE BOARD

Radio Film and Television in 2003; (ii) there are currently approximately 3.6 million households subscribing for the Analog TV Network in Hunan (representing approximately 90% of the aforesaid over 4 million households in the territory); (iii) the completion of the digitalization of cable TV network in all cities and some counties in 3 districts, all cities and some counties in 5 districts, and some cities in 6 districts in Hunan by 2005 pursuant to the RFTH Document and that Hunan TV estimated that there are approximately 300,000 households who are currently subscribing for the Analog TV in the cities and counties of such districts in Hunan will subscribe for digital TV by 2005; (iv) the completion of the digitalization of cable TV Network in all counties in aforesaid 8 districts, and all cities and some counties in aforesaid 6 districts in Hunan by 2008 pursuant to the RFTH Document and that Hunan TV estimated that there are approximately 3.5 million households who are currently subscribing for the Analog TV in the cities and counties of such districts in Hunan will subscribe for digital TV by 2008; and (v) the progressive implementation of digitalization described above and taken into account the rest of the 108 Second Tier Network Operators (i.e. 88) are expected to enter into agreements with Hunan TV by 2010, on the basis that the digital network has to entirely replace the analog network by 2010 pursuant to the RFTH Document, Hunan TV estimates that approximately 0.02 million, 0.3 million, 1.2 million and 3.6 million television subscribers (representing 0.6%, 8.3%, 33.1% and 99.3% of the 3.6 million analogue television subscribers) will subscribe for the digital network for each of the 4 calendar years ending 31 December 2007. Pursuant to the RFTH Document, the digital network has to replace the entire analogue network by 2010.

Based on the above figures, the Company apportioned the average number of expected Subscribers of the digital network for each of the four years ending 31 December 2007 to correspond with the average number of Subscribers during the Caps Period, which will be 48,000, 267,500 and 1,075,000 respectively.

Pursuant to the discussion with the Government of Hunan Province, the Directors anticipate that the Government of Hunan Province will not appoint another digital TV network operator in the foreseeable future. The Directors are also of the view that, based on researches about the development of digital TV carried out by i.e. CVSC — SOFRES MEDIA, an Independent Third Party media market researcher in the PRC, in August 2003, 30% of the Subscribers are likely to subscribe for the packed TV programs.

In the opinion of the Directors, the Transactions are (i) entered into in the ordinary and usual course of business of the Company and on normal commercial terms; and (ii) where there are no comparable commercial terms, on terms that are no less favourable to the Company as compared to similar business arrangements in the market and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

As the cable television network will be digitalized and replaced the existing Analog TV Network nationwide in the PRC in the following decade, the Directors consider that the demand for the related technical support services and packed TV programs will grow

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LETTER FROM THE BOARD

dramatically. The Transactions, which is in line with the Group’s existing business on providing audiovisual play-out services on a digitized platform, thus represent an excellent opportunity for the Group to penetrate into the sectors of technical support and content provision of the media industry in the PRC. Given Hunan TV is the only Digital TV Network operator in Hunan at present, and the cable television network in Hunan Province covering over 4 million households in Hunan will be digitalized and entirely replace the existing Analog TV Network by 2010 pursuant to the RFTH Document, the Directors are of the view that with the rights of Hunan TV to operate digital TV together with the Agreements and the right of Hunan Digital to extend the Agreements upon expiry, future income of Hunan Digital will be secured and allow Hunan Digital to benefit from the future development of digitalization of cable television network in Hunan and possibly other areas in the PRC. The Directors expect that the volume of the Transactions will expand significantly in line with the pace of digitalization in Hunan.

THE SGM

The SGM will be held on Saturday, 20 November 2004 at 10:00 a.m. in Conference Room, 5/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong for the purpose of considering, and if thought fit, approving the Transactions and the Proposed Annual Caps. A notice of the SGM is set out on pages 38 and 39 of this circular.

As Hunan TV is a substantial shareholder of Hunan Digital and a connected person of the Company according to the GEM Listing Rules, the Transactions constitute non-exempt continuing connected transactions for the Company under Chapter 20 of the GEM Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval under the GEM Listing Rules. The SGM will be convened to approve the Transactions and the Proposed Annual Caps by way of poll.

The Agreements will expire on 1 August 2007. However, Hunan Digital is entitled to extend the Agreements upon expiry. If the Agreements are extended (which will be prior to the expiry of the Caps Period, i.e. 31 March 2007), or the Proposed Annual Caps are exceeded or there is a material change to the terms of the Agreements, pursuant to Rule 20.36 of the GEM Listing Rules, the Company will re-comply with the reporting, announcement and Shareholder’s approval requirements relating to continuing connected transactions under Chapter 20 of the GEM Listing Rules. The Company will also comply with the annual review requirements relating to continuing connected transaction under Rules 20.37 to 20.41 of the GEM Listing Rules. Pursuant to Rules 20.39 of the GEM Listing Rules, the Company shall allow, and shall use its best efforts to procure Hunan TV to allow, the auditors sufficient access to the relevant records relating to the Transactions, for the purpose of the annual review to be performed by the auditors.

As at the date of this circular, apart from the Transactions, there are currently no connected transactions between the Group and Hunan TV which will require disclosure and/or approval by the Independent Shareholders in general meetings under the GEM Listing Rules.

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LETTER FROM THE BOARD

Hunan TV and its associates do not have any interest in the Company apart from holding a 30% interest in Hunan Digital. The Directors, having made all reasonable enquires, confirm that, to the best of their knowledge, information and belief, none of the Shareholders or their associates has a material interest in the Transactions and therefore no Shareholders are required to abstain from voting at the SGM in respect of the Transactions and the Proposed Annual Caps.

As at the Latest Practicable Date, no voting trust or other agreement or arrangement or understanding or obligation or entitlement was entered into by or binding upon any Shareholder which has passed or may result in temporarily or permanently passing control over the exercise of the voting right in respect of any of its Shares to a third party.

An Independent Board Committee has been formed to advise the Independent Shareholders on how they should vote in respect of the Transactions and the Proposed Annual Caps. Accordingly, the Independent Board Committee will comprise Messrs. Sousa Richard Alvaro, Chang Carl and Ngai Wai Fung.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy and return the same to the Company’s Hong Kong branch registrar, Abacus Share Registrars Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time of the SGM (or any adjournment thereof). Completion and return of the form of proxy will not preclude the Shareholders from attending and voting in person at the SGM (or any adjournment thereof) should the Shareholders so wish.

RECOMMENDATION

The Board considers that the terms of the Transactions and the Proposed Annual Caps are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution as set out in the notice of the SGM.

Your attention is drawn to (i) the letter from the Independent Board Committee set out on page 15 and 16 of this circular which contains its recommendation to the Independent Shareholders as to voting at the SGM in relation to the Transactions and the Proposed Annual Caps; and (ii) the letter from TIS, which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Transactions and the Proposed Annual Caps and the principal factors and reasons considered by it in arriving at its opinions. The text of the letter from TIS is set out on pages 17 to 32 of this circular.

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LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the advice of TIS, considers that the Transactions and the Proposed Annual Caps are entered into on normal commercial terms, and in the ordinary and usual course of business of the Group and that the terms of the Transactions and the Proposed Annual Caps are fair and reasonable and in the interest of the Group so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favor of the ordinary resolution to be proposed at the SGM in relation to the Transactions and the Proposed Annual Caps.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

On behalf of the Board M21 Technology Limited Tong Hing Chi Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [87 x 49] intentionally omitted <==

M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8153)

4 November 2004

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 4 November 2004 (the “Continuing Connected Transactions Circular”) to the Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Continuing Connected Transactions Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and to advise you the terms of the Transactions and the Proposed Annual Caps whether such terms are in the interest of the Company and the Independent Shareholders as a whole and how to vote on resolutions approving the Transactions and the Proposed Annual Caps.

TIS has been appointed to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Transactions and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned, whether such terms are in the interest of the Company and the Independent Shareholders as a whole and how to vote on resolutions approving the Transactions and the Proposed Annual Caps. Details of its advice, together with the principal factors taken into consideration in arriving at such advice, is set out on pages 17 and 32 of the Continuing Connected Transactions Circular.

Your attention is also drawn to the letter from the Board set out on pages 5 to 14 of the Continuing Connected Transactions Circular and the additional information set out in the appendices of the Continuing Connected Transactions Circular.

* For identification only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Transactions and the Proposed Annual Caps and the advice of TIS, we are of the opinion that the terms of the Transactions and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve the Transactions and the Proposed Annual Caps.

Yours faithfully,

Independent Board Committee of

M21 Technology Limited

Sousa, Richard Alvaro Independent Non-executive Director

Chang Carl Independent Non-executive Director

Ngai Wai Fung Independent Non-executive Director

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LETTER OF ADVICE FROM TIS

Set out below is a full text of the letter of advice from TIS to the Independent Board Committee and the Independent Shareholders in relation to the Technical Support Agreement and Supplemental Agreement, which has been prepared for the purpose of incorporation in this circular.

TIS Securities (HK) Limited Unit 1010., 10/F., Tower Two Lippo Centre 89 Queensway Hong Kong 4 November 2004

To the Independent Board Committee and Independent Shareholders of M21 Technology Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

We refer to our appointment by the Company as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders with respect to the connected transactions in connection with the Technical Support Agreement and Supplemental Agreement (collectively referred as the “Continuing Connected Transactions”) and the proposed caps for the Continuing Connected Transactions, details of which are contained in the “Letter from the Board” set out in pages 5 to 14 of the circular to the shareholders of the Company dated 4 November 2004 (the “Circular”), of which this letter forms part. Capitalized terms used in this letter shall have the same respective meanings as defined in the Circular unless the context requires otherwise.

Pursuant to the GEM Listing Rules, the Continuing Connected Transactions will constitute non-exempt continuing connected transactions for the Company under Chapter 20 of the GEM Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval under Rule 20.35 of the GEM Listing Rules. An ordinary resolution will be proposed to approve the Continuing Connected Transactions and the Proposed Annual Caps at the SGM. In our capacity as independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to provide you with an independent opinion and recommendation as to whether the terms of the Continuing Connected Transactions are fair and reasonable and whether the Continuing Connected Transactions are in the interests of the Company and the Independent Shareholders as a whole and to advise the Independent Shareholders how to vote.

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LETTER OF ADVICE FROM TIS

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and the senior management of the Company. We have assumed that all statements, information, representations, opinions and reports contained or referred to in the Circular or otherwise provided by the Directors and the senior management of the Company for which they are solely and wholly responsible were true, accurate and complete at the time they were made and given and will continue to be so at the date of despatch of the Circular. We have also assumed that all statement of belief, opinion and intention made by the Directors in the Circular were reasonably made after due and careful enquiry and are based on honestlyheld opinion.

We have been advised by the Directors that no material fact has been omitted from the information and representations provided in and referred in the Circular. We consider that we have reviewed sufficient information to reach an informed view and have no reason to doubt the truth, accuracy and completeness of the information provided and representations made to us. We have not, however, conducted an independent verification of the information nor have we conducted any independent investigation into the business, financial conditions and affairs of the Group or Hunan Digital or the future prospects of the industry in which the Group and Hunan Digital operate.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation and arriving at our opinion as to the fairness and reasonableness of the terms of the Continuing Connected Transactions, we have considered the principal factors and reasons set out below:

Background of the Continuing Connected Transaction

As stated in the “Letter from the Board” set out in pages 5 to 14 of the Circular (the “Letter”), subsequent to the approval of the acquisition of the entire issued share capital of Sky Dragon which directly owned 70% shareholding of Hunan Digital by the Shareholders on 13 July 2004 (the “Acquisition”), all conditions of the Acquisition had been fulfilled and was completed on 26 August 2004. Details of the Acquisition can be referred in the circular of the Company dated 28 June 2004.

Hunan Digital is engaged in the development of digital set-top boxes and the system platform for the Digital TV Network and provision of digitalization-related technical support services to Hunan TV, which is the only Analog TV and Digital TV Network operator in Hunan. On 2 August 2004 and 23 August 2004, Hunan Digital entered into the Technical Support Agreement and the Supplemental Agreement respectively with Hunan TV. Pursuant to the Agreements, Hunan Digital provides digitalization-related technical support services and packed TV programs to Hunan TV until 1 August 2007. Hunan Digital is a Sino-foreign cooperative joint venture established in the PRC for a period of 30 years and is indirectly owned as to 70% by the

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LETTER OF ADVICE FROM TIS

Company and as to 30% by Hunan TV. Hence, Hunan TV is a substantial shareholder of Hunan Digital and a connected person of the Company according to the GEM Listing Rules. The Proposed Annual Caps are HK$2.3 million, HK$31 million and HK$123 million respectively for the 5 months ending 31 March 2005 and the two years ending 31 March 2007.

The Group is principally engaged in the provision of pre-mastering and media services and the provision of audiovisual play-out services on a digitalized platform.

Nature of the Continuing Connected Transactions

Technical Support Agreement

As stated in the Letter , Hunan Digital will be engaged in the provision of the digitalizationrelated technical support services and packed TV programs to Hunan TV.

For the digitalization-related technical support services, Hunan Digital owns front-end broadcast equipment in a master programming room for the provision of the digitalization-related technical support services which include digitizing, programming, production and broadcasting TV programs to Hunan TV. Hunan Digital also owns a Subscriber settlement program which administrates processing of Subscriber information, account opening and closing, and settlement from the Subscriber. Based in Changsha, Hunan TV owns and operates a fibre optic trunk network covering 14 major districts（區）in Hunan (the “First Tier Network”). The First Tier Network is connected to fiber optic trunk networks in 108 cities（市）and counties（縣）in Hunan (the “Second Tier Network”). The First Tier Network and the Second Tier Network together form a province-wide cable television network in Hunan, covering over 4 million households in the territory of which 3.6 million households are subscribers of the analog TV operated by Hunan TV. As stipulated in the Technical Support Agreement, Hunan Digital shares 20% of the Basic Subscription Fee, equivalent to RMB6 per month, in return of the provision of the digitalization-related technical support services to Hunan TV. The remaining 80% of the Basic Subscription Fee is to be shared between Hunan TV and the Independent Third Parties operating the Second Tier Network (the “Second Tier Network Operators”).

For the packed TV programs, in order to cater for preferences of individual Subscriber, Hunan Digital will be supplying packed TV programs to Hunan TV which then offers to the Subscribers. Subscribers may choose to subscribe for the packed TV programs by paying an extra subscription fee (the “Extra Subscription Fee”). The Extra Subscription Fee payable by Subscribers will be set at RMB30 per month. The packed TV programs, which may include a news channel and a motor channel, have not yet been launched and are expected to be launched before the end of November 2004. As stipulated in the Technical Support Agreement, subject to a deduction out of the Extra Subscription Fee which is payable to Second Tier Network Operators, Hunan Digital and Hunan TV will share the balance of the Extra Subscription Fee in the proportion of 70% and 30% respectively. There are 108 Second Tier

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LETTER OF ADVICE FROM TIS

Network Operators in Hunan. As Hunan TV has reached agreement with 20 of the Second Tier Network Operators pursuant to which the deduction has been fixed at 35% of the Extra Subscription Fee on average, Hunan Digital will effectively receive 45.5% of the Extra Subscription Fee (which is equivalent to RMB13.65 per month) for the supply of packed TV programs to Hunan TV. The remaining 88 Second Tier Network Operators have not yet reached agreement with Hunan TV. Being the only Digital TV Network operator in Hunan, all the Second Tier Network Operators have to enter into agreement with Hunan TV in order to provide digital TV services to the Subscribers. The Directors were of the view that since: (i) the Second Tier Networks are located in Hunan Province and are connected to the First Tier Network operated by Hunan TV; (ii) operations and services provided by each of the Second Tier Network Operators to Hunan TV are very similar; and (iii) the same Extra Subscription Fee is applied to all subscribers of packed TV programs in Hunan to be supplied by Hunan Digital and offered by Hunan TV, the fee rates for the remaining 88 Second Tier Network Operators will not be significantly different from those agreed between Hunan TV and the 20 Second Tier Network Operators. The progress of agreement between the remaining 88 Second Tier Network Operators and Hunan TV will be disclosed in the quarterly report, interim report and annual report of the Group.

Supplemental Agreement

As stated in the Letter, Basic Subscription Fee and Extra Subscription Fee will be payable by the Subscribers to bank accounts jointly operated by Hunan TV and the Second Tier Network Operators which will then be apportioned by the bank accordingly. The net fee, after deduction by the Second Tier Network Operators, will be credited to a bank account jointly operated by Hunan TV and Hunan Digital which will then be apportioned by the banks on a pre-set ratio (i.e. 20% of the Basic Subscription Fee and 70% of the balance of the Extra Subscription Fee after deducting the fees to the Second Tier Network Operators mentioned in the previous page) in accordance with the instructions jointly given by Hunan TV and Hunan Digital and the respective portion due to Hunan Digital will be credited to Hunan Digital on a quarterly basis. The Directors confirmed the settlement mechanism by joint bank account will be adopted between Hunan TV and the Second Tier Network Operators from the commencement of the Agreements. Hunan TV and Hunan Digital agreed that if the shareholders’ approvals of the SGM are made, this settlement mechanism between Hunan TV and Hunan Digital will take effect from the first day after the SGM. The first payment to Hunan Digital is temporarily set at the end of December 2004.

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LETTER OF ADVICE FROM TIS

there is a material change to the terms of the Agreements, pursuant to Rule 20.36 of the GEM Listing Rules, the Company will re-comply with the reporting, announcement and Shareholder’s approval requirements relating to continuing connected transactions under Chapter 20 of the GEM Listing Rules.

Reasons for and benefits of entering into the Continuing Connected Transaction

The Directors had considered the following factors before entering into the Agreements:

(i) there are currently approximately 3.6 million households subscribing for the Analog TV Network in Hunan (representing approximately 90% of the aforesaid over 4 million households in the territory), of which approximately 10,000 are Subscribers of the Digital TV Network operated by Hunan TV during the trial period since June 2003;
(ii) the number of Subscribers in the PRC is expected to reach 30 million in 2005 according to《我國有線電視向數字化進度時間表》(Timetable for digitalization of cable television networks in the PRC) issued by The State Administration of Radio Film and Television in 2003;
(iii) pursuant to the RFTH Document, Hunan Province is divided into 14 major districts, the digitalization plan of Hunan province will be divided into 3 stages. The first stage of the digitalization plan (from now to the end of 2005) covers all cities and some counties in 3 major districts, all cities and some counties in another 5 major districts, and some cities in the rest 6 major districts in Hunan (the “2005 Digitalized Area”). Based on the RFTH Document, the Directors estimated that approximately 300,000 households situated in the 2005 Digitalized Area currently subscribing the analog TV will change to digital TV. The second stage of the digitalization plan (from 2006 to the end of 2008) covers the rest counties in the aforesaid 3 and 5 major districts, and all cities and some counties in the aforesaid the rest 6 major districts in Hunan (the “2008 Digitalized Area”). Based on the RFTH Document, the Directors estimated that approximately 3.2 million households situated in the 2008 Digitalized Area currently subscribing the analog TV will change to digital TV. The third stage of digitalization plan (from 2009 to the end of 2010) covers the rest counties in the aforesaid 6 major districts in Hunan, i.e. all households of approximately 3.6 million currently subscribing for the Analog TV Network will be changed to Digital TV Network by 2010. The Directors were of the view that the digitalization progress can be implemented as scheduled in the RFTH document, which was issued by Radio Films and Television Technical Bureau of Hunan Province, an official media authority to implement media infrastructure development in Hunan;
(iv) digital TV operators, except Hunan Province, in all of the other provinces or direct municipal cities in the PRC currently conduct the digital TV business by providing TV network and technical services at the same time, Hunan Digital is venturing into the first joint venture in the PRC where the roles of TV network and technical services are

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LETTER OF ADVICE FROM TIS

segregated. The Directors viewed that the Company may apply this segregation business model to other provinces in the PRC if the markets are suitable for the Group to develop and the required approvals from the relevant authorities can be obtained;

(v) There was no indication from Government of Hunan Province to appoint another digital TV network operator. In addition, the Directors were of the view that given that (i) the establishment of Digital TV Network is a capital intensive investment; (ii) Hunan TV is the only existing Analog TV Network operator and only authorized Digital TV Network operator at present who possesses the required market information, experience and technical know-how for the digitization program; and (iii) Hunan TV is a state-owned enterprise, therefore Hunan Government to appoint another Digital TV network operator in the short to medium term, at least for the Caps Period, is very unlikely;
(vi) Hunan Digital will be the only partner to Hunan TV providing the services as stipulated in the Technical Support Agreement for the foreseeable future;
(vii) the Continuing Connected Transactions is in line with the Group’s current business to provide audiovisual play-out services to channel suppliers which supply contents to digital cable TV operators in Hong Kong; and
(viii) Hunan Digital is entitled to extend the Agreements upon expiry. The Directors considered that as the cable TV Network in the PRC will be digitalized nationwide in the following decade, the demand for the related technical support services and packed TV programs will be growing dramatically.

Thus the Directors believed that it is an excellent opportunity for the Group to extend its existing business geographically into the PRC by penetrating into the areas of technical support and packed TV programs providing sector of the media industry in Hunan, the PRC, the Directors considered that the Agreements not only would secure future income of Hunan Digital and enable Hunan Digital to benefit from future development of digitalization in Hunan and possibly other areas of the PRC.

We reviewed the relevant documents as set out in the preceding paragraph and discussed with the Directors and the directors of Hunan Digital and considered that (i) the plan to complete the digitalization cable TV in the 2005 Digitalized Area and the 2008 Digitalized Area pursuant to the RFTH Document can be fulfilled with the implement of Hunan media authorities concerned. On this basis, the Directors expected that the current level of totally about 3.5 million households situated in the 2005 Digitalized Area and the 2008 Digitalized Area subscribing the Analog TV will become Digital TV subscribers by 2008 which can secure Hunan Digital providing technical support services to Hunan TV for these households; (ii) digital cable TV is a technological advanced network for modern media industry which can provide more capacity for the data and TV programs to transmit to the end users as compared to the traditional analog system hence more value added services, like packed TV programs,

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LETTER OF ADVICE FROM TIS

can be implemented in, of which, Hunan Digital can derive extra income on top of the basic technical support services. Hence, with the income derived from the Agreements, the Directors believed that the Agreements are in the interest of the Group and will significantly benefit the Group with an additional source of income based on the Group’s forecast. We reviewed income forecast (the “Forecast”) of Hunan Digital for the 5 months ending 31 March 2005 and 2 years ending 31 March 2007 prepared and provided by the Company. We discussed with the Company the bases and assumptions, upon which the Forecast has been made. The revenues in the Forecast are estimated to form the value of the Proposed Annual Caps for the relevant periods, representing approximately 19.7%, 243.9% and 967.8% of the audited turnover for the financial year ended 31 March 2004. Details of the bases and assumptions calculating the Proposed Annual Caps and the respective amounts can be referred in the paragraph headed “Basis of setting the Proposed Annual Caps” below. We were of the opinion that the Forecast, for which the Directors are solely responsible, has been made after due and careful consideration. As advised by the Directors, it is the Company’s intention to extend the provision of other services to Hunan TV as it develops in the future. Moreover, we considered that the Agreements provide an opportunity for the Group to tap the PRC market and Hunan would be an important milestone for the Group’s business expansion.

Given that (i) the Agreements can provide the Group with a stream of revenue; (ii) the Agreements provide an opportunity for the Group to tap the market in the PRC; and (iii) the Agreements are in line with the original course of business of the Group, we consider that the Agreements provide an good opportunity to the Group to develop its business in Hunan in the PRC.

Terms of the Continuing Connected Transaction

The Directors emphasized that TV digitalization in the PRC is still at its initial stage of development, so far no sophisticated data or market research in digital TV industry can be found in the PRC though the Directors are aware that some operators in some provinces or direct municipal cities in the PRC are currently providing digital TV services to the end users, however, no public or official information is available to the public or the industry players. Based on their professional experience in the TV and media industry, the Directors assessed that size of the market, growth of the industry and demand of the audience in Hunan in considering the terms of Agreement and whether is beneficial to the Group. We considered that since the development of digital TV in the PRC is in a budding stage and, to our knowledge, the business model of Hunan Digital, a sino-foreign joint venture, is to provide technical services to the local Hunan TV network operator and is the first of its kind in the PRC. Digital TV operators, except Hunan Province, in all of the provinces or direct municipal cities in the PRC currently conduct the digital TV business by providing TV network and technical services at the same time, Hunan Digital is venturing into the first joint venture in the PRC where the roles of TV network and technical services are segregated. Accordingly we cannot find any comparables in the PRC providing similar business model like Hunan Digital where we could compare the terms of the Agreement.

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LETTER OF ADVICE FROM TIS

The payout services provided to channel suppliers which supply contents to TV network operator in Hong Kong set out below is for information but should not be used as direct comparable since we considered that such information is not totally relevant because the market size, stage of development of digital TV, taste of the audience, policies of media industry and average personal income of the audience direct are different between the PRC and Hong Kong. As the revenue derived from the supply of technical services and packed TV programs to TV operators in Hong Kong is similar to that of Hunan Digital to Hunan TV, we considered that it is useful to take it as additional information for the market practice and types and ranges of the remuneration to provide similar services.

Digitalization-related technical support services

As stipulated in the Technical Support Agreement, Hunan Digital shares 20% of the Basic Subscription Fee, equivalent to RMB6 per month, in return of the provision of the digitalizationrelated technical support services to Hunan TV. It is the Group’s business to provide audiovisual play-out services to channel suppliers which supply contents to digital cable television operators in Hong Kong, where the revenue derived from such service is calculated on the basis of sharing of the subscription fee received from subscribers by the digital cable television operator. Such play-out services may include digitalization of TV content before play-out and broadcast of such content to subscribers of digital cable TV network in Hong Kong. The Directors considered that the nature of the play-out services provided by the Group in Hong Kong is similar and comparable to the nature of the digitalization related technical support services provided by Hunan Digital to Hunan TV. As there is no comparable transactions in the PRC to judge whether they were on normal commercial terms, the Directors considered that the level of Basis Subscription Fee offered by Hunan TV is generally no less favorable to the Group than terms offered by Hunan TV to other independent third party. As such, in the opinion of the Directors, the 20% sharing ratio of the Basic Subscription Fee is in line with the market practice and has been determined with reference to similar profit sharing arrangements with other service providers in the media industry in Hong Kong.

We had reviewed the relevant terms of the contracts entered into between the Group and channel suppliers which supply contents to the digital cable TV operators in Hong Kong which providing similar technical support services and forming similar profit sharing arrangement, we viewed that (i) by sharing part of the subscription fee is in line with the market practice in Hong Kong; (ii) the sharing ratio of 20% is within the range for providing similar services to independent channel suppliers which supply contents to digital cable TV operators in Hong Kong by the Group; and (iii) Hunan Digital and Hunan TV determined the sharing ratio after arm’s length negotiations. We are of view that the terms of the Agreements for providing digitalization-related technical support services as stipulated in the Technical Support Agreement offered by Hunan TV are no less favourable to the Group than terms available to independent third parties and are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

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LETTER OF ADVICE FROM TIS

Packed TV program

As stipulated in the Technical Support Agreement, in return of the provision of the packed TV programs, Hunan Digital and Hunan TV share 70% and 30% respectively of the Extra Subscription Fee, currently set at RMB30 per month, after deducted the fee payable to the independent third party companies operating the Second Tier Networks, which is on average 35% of the Extra Subscription Fee according to the signed agreements with the 20 Second Tier Network Operators, however, the sharing ratio may vary among different Second Tier Network Operators which is subject to the terms of the agreements between Hunan TV and each of the 108 Second Tier Network Operators. The Directors further advised that the actual fee payable to remaining 88 Second Tier Network Operators have not reached agreement with Hunan TV and will be subject to further negotiation between Hunan TV and the remaining 88 Second Tier Network Operators. The Directors considered that the fee payable to such companies is expected to be set at a level not significantly different from that of 35% of the Extra Subscription Fee with reference to the ratio previously agreed and signed between Hunan TV and the first 20 Second Tier Network Operators. In other words, Hunan Digital shares 45.5% of the Extra Subscription Fee, equivalent to RMB13.65 per month, in return of the provision of packed TV programs to Hunan TV.

The Directors were aware that content supply companies supply packed TV programs to TV operators in Hong Kong, where the revenue derived from such service is calculated on the basis of sharing subscription fee received from subscribers of TV operators. The Directors considered the nature of the provision of packed TV programs by such companies in Hong Kong is similar and comparable to that of Hunan Digital to Hunan TV. As there is no comparable transactions in the PRC to judge whether they were on normal commercial terms, the Directors considered that and the level of Extra Subscription Fee offered by Hunan TV is generally no less favorable to the Group than terms offered by Hunan TV to other independent third party. As such, in the opinion of the Directors, the sharing ratio of Extra Subscription Fee is in line with the market practice in Hong Kong and has been determined with reference to similar profit sharing agreements with other service providers in the media industry in Hong Kong.

We had reviewed the relevant terms of the contract entered into between the Group and the channel suppliers and TV operators in Hong Kong supplying similar packed TV programs and forming similar profit sharing arrangement, we viewed that (i) by sharing part of the subscription fee is in line with the market practice in Hong Kong; (ii) the sharing ratio of 45.5% is within the range for providing similar services to independent TV operators in Hong Kong; (iii) the fee payable to the unsigned 88 Second Tier Network Operators will not be significantly different from that of 35% of the Extra Subscription Fee with reference to the ratio previously agreed and signed between Hunan TV, the only authorized First Tier Network Operator, and the first 20 Second Tier Network Operators and (iv) Hunan Digital and Hunan TV determined

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LETTER OF ADVICE FROM TIS

the sharing ratio after arm’s length negotiations. We are of view that the terms of the Agreements for supplying packed TV programs as stipulated in the Technical Support Agreement offered by Hunan TV are no less favourable to the Group than terms available to independent third parties and are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

Supplemental Agreement

For the collection of Basic Subscription Fee and Extra Subscription Fee, as stated in the Letter, such fees will be payable by the Subscribers to bank accounts jointly operated by Hunan TV and the Second Tier Network Operators which will then be apportioned by the bank accordingly. The net fee, after deduction by the Second Tier Network Operators, will be credited to a bank account jointly operated by Hunan TV and Hunan Digital which will then be apportioned by the bank accordingly and the respective portion due to Hunan Digital will be credited to Hunan Digital on a quarterly basis. The Directors expected that the first payment to Hunan Digital will be at the end of December 2004.

As stated in the Letter, the process of the collection of Subscription Fee and Extra Subscription Fee are all settled in the joint bank accounts between Hunan TV and Second Tier Network Operators and between Hunan TV and Hunan Digital. As the settlement arrangement is performed by the bank and the bank will deposit the predetermined proportion of fees to the relevant bank accounts quarterly, it can secure such Subscription Fee and Extra Subscription Fee paid by the Subscribers, can be directly shared by Hunan TV. Once Hunan TV receives the aforesaid fees, the bank will credit the above-mentioned amount of fees to the joint bank account of Hunan Digital and Hunan TV. Thus, we consider that such arrangement will secure the recoverability of the fees receivables and we consider that Supplemental Agreement is fair and reasonable to the Company.

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LETTER OF ADVICE FROM TIS

Basis of setting the Proposed Annual Caps

We noted that the Directors proposed that the Proposed Annual Caps in respect of the transactions as stipulated in the Agreements for the 5 months ending 31 March 2005 and the two years ending 31 March 2007 (the “Caps Period”) are as follows:

		For the
	5	months ending	For the	year ending
		31 March	31	March
		2005	2006	2007
Average number of Subscribers
per month during the period_(Note 1)_		48,000	267,500	1,075,000
Average number of Subscribers for the
packed TV programs per month
during the period_(Note 2)_		14,400	80,250	322,500
		(HK$’000)	(HK$’000)	(HK$’000)
Total revenue from providing
digitalization-related technical
support services during the period_(Note_	3)	1,359	18,170	73,019
Total revenue from supplying packed
TV programs during the period_(Note 4)_		928	12,401	49,836
Proposed Annual Caps		2,300	31,000	123,000

Note: RMB is translated into Hong Kong dollars at a conversion rate of HK$1 equivalent to RMB1.06

As mentioned in the announcement concerning the Continuing Connected Transactions made by the Company on 17 September 2004, the proposed cap period is 6 months ending 31 March 2005 and the two years ending 31 March 2007. As time lapsed, the relevant Caps Period is revised to 5 months ending 31 March 2005 and the two years ending 31 March 2007.

The Proposed Annual Caps is based on two variables, the number of Subscribers and number of Subscribers for packed TV programs.

The estimated average number of Subscribers per month during the three respective periods in the Caps Period (Note 1 above) directly affecting the income for providing digitalizationrelated technical support services in the Caps Period is determined with reference to the estimation done by Hunan TV which is based on the RFTH Document and to the Directors’ expectation of the potential growth in the demand of digital TV services. Excluding the conversion of existing analog TV Subscribers to digital TV, the Directors estimated that the potential growth of digital TV in Hunan from now to the end of 2007 will not be more than

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6% (i.e. approximately 200,000 additional households) in total with consideration of the future market development and preliminary schedule of progress of development for digitalization of Hunan TV network as referred to in the RFTH Document and the estimation on the number of digital TV Subscribers made by Hunan TV.

Corresponding with the current number of households subscribing analog TV in each of the cities and counties of 14 major districts in Hunan under the digitalization plan mentioned in the RFTH Document, Hunan TV estimated that 20,000, 301,300, 1,202,050 and 3,600,000 television subscribers (representing 0.6%, 8.3%, 33.1% and 99.3% of the 3.6 million analogue television subscribers) will subscribe for the digital network for each of the 4 calendar years ending 2007. Pursuant to the RFTH Document, the digital network has to replace the entire analogue network by 2010. With reference to the current number of households subscribing analog TV in each of the cities and counties in Hunan and the households currently subscribing analog TV to be changed to digital TV under the stage of digitalization and the digitalization rollout plan in the abovementioned areas as mentioned in the RFTH Document and the potential growth of 6% of digital TV in Hunan excluding those from analog TV conversion from now to the end of 2007, the Directors concurred with Hunan TV’s projection on the number of subscribers subscribing digital TV.

Based on the estimation made by Hunan TV that 20,000, 301,300, 1,202,050 and 3,600,000 television subscribers will subscribe for the Digital TV Network for each of the 4 calendar years ending 2007 and their apportions in each year will form the expected number of Subscribers at the end of each month for that year. The average number of expected Subscribers of the digital network per month during the three respective period of the Caps Period will be 48,000, 267,500 and 1,075,000 for the 5 months ending 31 March 2005 and 2 years ending 31 March 2007 respectively, which is equivalent to the sum of the expected number of Subscribers at the end of each month in the respective period of the Caps Period divided by total months included in the respective period for the 5 months ending 31 March 2005 and 2 years ending 31 March 2007 respectively. Pursuant to discussions with the Government of Hunan Province, the Directors anticipated that the Government of Hunan Province will not appoint another digital TV network operator in the foreseeable future.

We considered that the stage to complete the digitalization cable TV in all cities and some counties in the districts in Hunan pursuant to the RFTH Document can be carried out with the implementation of Hunan media authorities concerned and the basis for estimating the number of Subscribers and the estimated number of Subscribers in the Caps Period made by the Directors are fair and reasonable. The income of each year for providing digitalization-related technical support services (Note 3 above) is calculated by multiplying estimated average number of Subscribers per month of the respective period, then by total number of months included in the respective period and by the Basic Subscription Fee of RMB6 per month to be received by Hunan Digital, details of the Basic Subscription Fee can be referred in paragraph headed “Terms of the Continuing Connected Transaction” under sub-paragraph headed “Digitization-related technical support services” above.

— 28 —

LETTER OF ADVICE FROM TIS

We noted that the number of Subscribers and the number of Subscribers for packed TV programs would directly affect the income for supplying packed TV programs to Hunan TV. The Directors were of the view that the demand for packed TV programs would be very high since no specific channel is currently available in Hunan. The Directors estimated the average number of Subscribers for packed TV programs per month of the period (Note 2 above) in the Caps Period will be 30% of the average number of Subscribers per month during the respective period with reference to the research report prepared by CVSC — SOFERS MEDIA in August 2003 and taking into account their professional media experience, local audiences’ taste, local demand of specific content TV programs, like infotainment and motor information. The Directors also advised that all packed TV programs must be censored by the relevant media authorities, and the packed TV programs are expected to be launched before the end November 2004. CVSC — SOFER MEDIA is a leading TV market research provider in the PRC and is a joint venture company between 央視市場研究股份有限公司and Taylor Nelson Sofres. CVSC — SOFER MEDIA is principally engaged in market research of TV viewers’ rate, advertisement survey and media and product survey in the PRC. We considered that the demand for packed TV programs will be high due to more new and specific channels are available to digital TV and with reference to a research report prepared by CVSC — SOFERS MEDIA, an independent third party media market researcher in the PRC, we considered that it is fair and reasonable to estimate 30% of the Subscribers would choose to subscribe for the packed TV programs.

The income of each year for providing packed TV programs services (Note 4 above) is calculated by multiplying the estimated average number of Subscribers for packed TV per month during the respective period, then by total number of months included in the respective period and by the Extra Subscription Fee of RMB13.65 per month to be received by Hunan Digital, details of the Extra Subscription Fee can be referred in paragraph headed “Terms of the Continuing Connected Transaction” under sub-paragraph headed “Packed TV Program” above.

We considered that (i) the stage of digitalization cable TV in Hunan pursuant to the RFTH Document can be completed with the implementation of Hunan media authorities concerned and the Digital TV Network will fully replace the Analog TV Network in Hunan by 2010; (ii) the estimation of number of households will subscribe for the digital TV for 2004 to 2007 done by Hunan TV which is in line with the stage of digitalization of the households from analog TV to digital TV in Hunan pursuant to the RFTH Document; (iii) the potential growth rate of digital TV Subscribers of not more than 6% from now to the end 2007 in total (not including the conversion of current analog TV Subscribers to digital TV) is estimated by the Directors in a conservative manner; (iv) the method of calculating the estimated average number of Subscribers per month during the three respective periods in the Caps Period is reasonable; (v) the high demand of the Subscribers for packed TV programs with specific channel which is currently not available in Hunan; (vi) the relevant information found in the research report prepared by CVSC — SOFERS MEDIA for estimating the number of

— 29 —

LETTER OF ADVICE FROM TIS

Subscribers for packed TV programs to determinate the Proposed Annual Caps is fair and reasonable as far as the Independent Shareholders are concerned based on the reason stated above.

Annual review of the Continuing Connected Transactions

In compliance with the annual review requirements under Chapter 20 of the GEM Listing Rules, in addition to obtaining the Independent Shareholders’ approval for the Continuing Connected Transactions and the Proposed Annual Caps at the SGM, the Company will comply with the following:

the annual aggregate amount receivable by the Group pursuant to the Agreements for the five months ending 31 March 2005 and 2 financial years ending 31 March 2007 shall not exceed the cap amount of HK$2,300,000, HK$31,000,000 and HK$123,000,000 respectively;
the transactions under the Agreements are entered into in the ordinary and usual course of business of the Group;
(i) on normal commercial terms or, if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favorable to the Group than terms available to or from (as appropriate) independent third parties; and
(ii) in accordance with the Agreements and on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole;
the details of the transactions under the Agreements shall be disclosed in the Company’s annual report and accounts pursuant to Rule 20.45 of the GEM Listing Rules;
the independent non-executive Directors shall examine the transactions under the Agreements every year and make their confirmations in the Company’s annual report and accounts whether the transactions is entered into:
(i) in the ordinary and usual course of business of the Company;
(ii) on normal commercial terms or, if no comparable transactions can be referred to, on terms no less favorable than those given to (or obtained from, wherever applicable) independent third parties; and
(iii) in accordance with the Agreements and on terms that are fair and reasonable and in the interest of the Company’s shareholders as a whole;

— 30 —

LETTER OF ADVICE FROM TIS

the Company’s auditors shall review these transactions every year and confirm in writing (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report) to the Board whether the transactions:
(i) have been approved by the Board;
(ii) have been entered into in accordance with the terms of the Agreements; and
(iii) the aggregate amount of the transactions has not exceeded the cap amount set out in paragraph 1 above;
the Company will undertake to provide sufficient facility for the Company’s auditors to inspect their respective accounts and records, thus enabling the auditors to assess the above connected transactions and make the relevant reports;
the Company undertakes to immediately notify the Stock Exchange if it comes to its knowledge or has reasons to believe that the independent non-executive Directors and/ or auditor will be unable to confirm the matters set out in Rules 20.37 and 20.38 of the GEM Listing Rules in which event the Company may have to comply with Rules 20.35(3) and (4) of the GEM Listing Rules and any other conditions the Stock Exchange considers appropriate in respect of the non-exempt continuing connected transactions of the Company;
in the event that the aggregate amount under the Agreements in any year exceeds the respective Proposed Annual Cap or if the relevant agreement is renewed or there is a material change to the terms of the Agreements, the Company will comply with the provisions of Chapter 20 of the GEM Listing Rules dealing with connected transaction; and
in the event that the transaction set out above shall continue after the expiry of the waiver ending on 31 March 2007, the Company will comply with the provisions of Chapter 20 of the GEM Listing Rules in relation to such transaction prior to such expiry.

— 31 —

LETTER OF ADVICE FROM TIS

RECOMMENDATION

Having considered the above mentioned principal factors and reasons, we consider that the terms of the Agreements and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Group as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution, which will be proposed at the SGM to approve the Continuing Connected Transactions and the Proposed Annual Caps.

Yours faithfully, For and on behalf of TIS Securities (HK) Limited Tai Chi Ching Vincent Chung Managing Director Director

— 32 —

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this circular is accurate and complete in all material respects and not misleading; (2) there are no other facts the omission of which would make any statement herein misleading; and (3) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DISCLOSURE OF INTERESTS

(a) Directors’ and Chief Executive’s interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of each Director or chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have 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 Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange, were as follows:

	Personal	Corporate	Other
Name of Director	Interests	Interests	Interests
Mr. Tong Hing Chi	7,812,500	—	—
Mr. Law Kwok Leung	7,812,500	111,718,750	—
		(Note 1)
Mr. Chan Kwok Sun, Dennis	—	—	111,718,750
			(Note 1)

Note:

111,718,750 Shares are held by Sino Regal Holding Limited (“SRH”), a company in which Mr. Law Kwok Leung and Mr. Chan Kwok Sun, Dennis have an equity interest of 70% and 30% therein respectively.

— 33 —

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which he was taken or deemed to have 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 Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange.

(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, so far as is known to any Director or chief executive of the Company, the following persons (not being a Director or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the shares or underlying shares of the Company 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 and section 336 of the SFO or, who were or were expected, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any option in respect of such capital:

		Percentage
	Number of	of issued
Name of Shareholder	shares held	share capital
	(Note 1)
SRH	111,718,750(L)	35.8%
Note:

(L) denotes a long position.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors knows of any person (not being a Director or chief executive of the Company) who had an interest or short position in shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and section 336 of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital.

— 34 —

GENERAL INFORMATION

APPENDIX

3. LITIGATION

As at the Latest Practicable Date, none of the members of the Group is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has any existing or proposed service contracts with the Company or any member of the Group which does not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, no contract or arrangement of significance in relation to the Group’s business to which the Company or any of its subsidiaries was a party and in which any of the Directors had a material interest, whether directly or indirectly, subsisted at the Latest Practicable Date.

None of the Directors nor expert referred in paragraph 8 has any direct or indirect interest in any assets which had been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, the Company or any of its subsidiaries during the period since 31 March 2004, the date to which the latest published audited financial statements of the Group were made up, up to and including the Latest Practicable Date.

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or management shareholders (as defined in the GEM Listing Rules) or substantial shareholder or any of their respective associates had an interest in a business which competes or may compete with the business of the Group or has any other conflict of interest which any such person has or may have with the Group.

7. MATERIAL ADVERSE CHANGE

Save as disclosed herein, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2004, being the date to which the latest published audited financial statements of the Group was made up.

— 35 —

GENERAL INFORMATION

APPENDIX

8. QUALIFICATION AND CONSENT OF EXPERT

TIS Securities (HK) Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter dated 4 November 2004 for incorporation in this circular and reference to its name in the form and context in which they appear.

The qualification of the expert who has provided its advice as contained in this circular is as follows:

Name Qualification

TIS Securities (HK) Limited

A licensed corporation under the SFO and engaged in types 1, 4, 6, 7 and 9 regulated activities.

TIS Securities (HK) Limited is not interested in any Shares or shares in any member of the Group nor does it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Shares or shares in any member of the Group.

9. MISCELLANEOUS

The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and the head office and principal place of business of the Company is at 1/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong.
The principal share registrar and transfer office of the Company is Butterfield Corporate Services Limited at Rosebank Centre, 11 Bermudiana Road, Pembroke, Bermuda.
The Hong Kong branch share registrar and transfer office of the Company is Abacus Share Registrars Limited at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
The company secretary of the Company is Mr. Chan Lun Ho, a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.
The qualified accountant of the Company is Mr. Sit Hon Wing, an associate member of the Hong Kong Institute of Certified Public Accountants and a member of the Association of Chartered Certified Accountants.

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GENERAL INFORMATION

APPENDIX

The compliance officer of the Company is Mr. Law Kwok Leung, an executive Director of the Company and a member of the Chartered Institute of Marketing, a fellow member of the Institute of Analysts and Programmers and full member of the Institute of Management.
The members of the an audit committee of the Company comprising Mr. Sousa, Richard Alvaro, a solicitor, Mr. Chang Carl who has vast experience in the broadcasting, publishing and other media related industries and Mr. Ngai Wai Fung who is the president of a local corporate services group. All of them are independent non-executive Directors.

The audit committee review the effectiveness of both the external and internal audit and of internal controls and risk evaluation.

Shenyin Wanguo Capital (H.K.) Limited is the financial adviser to the Company, the registered office of which is situated at 28/F., Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong.
The English text of this circular shall prevail over the Chinese text in case of inconsistency.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company at 1/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong during normal business hours on any weekday other than public holidays, from the date of this circular up to and including the date of the SGM:

(a) the Technical Support Agreement;
(b) the Supplemental Agreement;
(c) the letter from the Independent Board Committee, the text of which is set out on page 15 and 16 in this circular;
(d) the letter of advice from TIS Securities (HK) Limited to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 17 to 32 in this circular; and
(e) the written consent from TIS Securities (HK) Limited referred to in paragraph 8 of this appendix.

— 37 —

NOTICE OF SPECIAL GENERAL MEETING

==> picture [87 x 49] intentionally omitted <==

M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

(incorporated in Bermuda with limited liability)

(Stock Code: 8153)

NOTICE IS HEREBY GIVEN that a special general meeting (the “meeting”) of M21 Technology Limited (the “Company”) will be held on Saturday, 20 November 2004 at 10:00 a.m. in Conference Room, 5/F., Mei Ah Centre, 28 Chun Choi Street, Tseung Kwan O Industrial Estate, Kowloon, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution of the Company.

ORDINARY RESOLUTION

“ THAT

(i) the transactions contemplated under the agreement and the supplemental agreement dated 2 August 2004 and 23 August 2004 respectively (the “Agreements”) entered into between Hunan Digital Television Technology Company Limited (“Hunan Digital”) and Hunan Provincial Television Network Company Limited (“Hunan TV”), a copy of which has been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification; and (ii) the Proposed Annual Caps as described and defined in the continuing connected transactions circular dated 4 November 2004 and despatched to Shareholders, a copy of which has been produced to this meeting marked “B’ and signed by the chairman of this meeting for the purpose of identification, be and are hereby approved, confirmed and ratified.”

On Behalf of the Board

M21 Technology Limited Tong Hing Chi

Chairman

Hong Kong, 4 November 2004

* For identification only

— 38 —

NOTICE OF SPECIAL GENERAL MEETING

Registered office: Principal place of business: Clarendon House 1/F., Mei Ah Centre 2 Church Street 28 Chun Choi Street Hamilton HM11 Tseung Kwan O Industrial Estate Bermuda Kowloon Hong Kong

Notes:

A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or (if holding two or more shares) more proxies in respect of the whole or any part of his holding of shares to attend and, in the event of a poll, vote in his stead. A proxy need not be a member of the Company but must attend the meeting in person.
A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting in person, you are urged to complete and return the form of proxy in accordance with the instructions printed thereon.
To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the Company’s Hong Kong branch share registrar and transfer office, Abacus Share Registrars Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint holders of any share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto, but if more than one of such holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any share stands shall for this purpose be deemed joint holders thereof.
At the SGM the resolution put to the vote of the meeting shall be decided by way of poll:
(i) by the chairman of the SGM; or
(ii) by at least three shareholders present in person (or in case of a shareholder being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the SGM; or
(iii) by any shareholder or shareholders present in person (or in case of a shareholder being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the SGM; or
(iv) by any shareholder or shareholders present in person (or in case of a shareholder being a corporation by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

— 39 —

AI assistant

Jiading International Group Holdings Limited — Proxy Solicitation & Information Statement 2004

51299_rns_2004-11-04_a2ac999a-9830-482c-ad9f-aa551c030d5d.pdf

M21 TECHNOLOGY LIMITED （智庫科技有限公司） [*]

CONTINUING CONNECTED TRANSACTIONS

TIS Securities (HK) Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

M21 TECHNOLOGY LIMITED （智庫科技有限公司） [*]

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

BACKGROUND

LETTER FROM THE BOARD

THE TRANSACTIONS

Technical Support Agreement and Supplemental Agreement

Details of the Transactions

Technical Support Agreement

LETTER FROM THE BOARD

2) Packed TV programs

LETTER FROM THE BOARD

Supplemental Agreement

LETTER FROM THE BOARD

Revised effective date of the Agreements

THE PROPOSED ANNUAL CAPS

Basis of cap amounts

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

LETTER FROM THE BOARD

THE SGM

LETTER FROM THE BOARD

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

M21 TECHNOLOGY LIMITED （智庫科技有限公司） [*]

CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LETTER OF ADVICE FROM TIS

CONTINUING CONNECTED TRANSACTIONS

LETTER OF ADVICE FROM TIS

PRINCIPAL FACTORS AND REASONS CONSIDERED

Background of the Continuing Connected Transaction

LETTER OF ADVICE FROM TIS

Nature of the Continuing Connected Transactions

Technical Support Agreement

LETTER OF ADVICE FROM TIS

Supplemental Agreement

LETTER OF ADVICE FROM TIS

Reasons for and benefits of entering into the Continuing Connected Transaction

LETTER OF ADVICE FROM TIS

Terms of the Continuing Connected Transaction

LETTER OF ADVICE FROM TIS

Digitalization-related technical support services

Packed TV program

LETTER OF ADVICE FROM TIS

Supplemental Agreement

Basis of setting the Proposed Annual Caps

LETTER OF ADVICE FROM TIS

Annual review of the Continuing Connected Transactions

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

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

3. LITIGATION

4. SERVICE CONTRACTS

5. INTEREST IN CONTRACTS AND ASSETS

6. COMPETING INTEREST

7. MATERIAL ADVERSE CHANGE

8. QUALIFICATION AND CONSENT OF EXPERT

Name Qualification

9. MISCELLANEOUS

10. DOCUMENTS AVAILABLE FOR INSPECTION

M21 TECHNOLOGY LIMITED （智庫科技有限公司） [*]

(Stock Code: 8153)

ORDINARY RESOLUTION

“ THAT

More from Jiading International Group Holdings Limited

Jiading International Group Holdings Limited Proxy Solicitation & Information Statement 2004

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M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**

M21 TECHNOLOGY LIMITED （智庫科技有限公司） **[*]**