Billybala Holdings Limited
(Stock Code: 8117)

Major Shareholder:

• Mr. Cheng Kar Shing ¡V 63.9% interest

Company Subsidiary:

• Billybala iGames Limited (100%): Provision of internet game-on-demand services
• Talent Work Limited (100%): Office leasing

The Group is principally engaged in the provision of arcade game-on-demand service via the Internet through turning existing arcade games into an online version together with game-on-demand and multiplayer features in the Greater China Region. The Group aims to capture the business opportunities offered by the growing Internet population in the Greater China Region by launching the arcade game-on-demand services platform in the region. This arcade game-on-deemed platform is one of the first interactive multiplayer online game platforms in the Greater China Region, which offers a variety of arcade games on a demand basis via the Internet.

Presently, the Group offers its arcade game-on-demand service in Hong Kong only but has also planned to extent its business coverage into other parts of the Greater China Region. Also, in order to enhance its service capability, the Group will develop and launch a PC game on demand platform in the second half of 2002, which will enable other more sophisticated PC game to be played via the Internet.

The Group entered into a cooperative agreement with PCCW IMS Limited, a subsidiary of PCCW, on 6 August 2001. Pursuant to the agreement, the Group would become one of the content providers of www.now.com.hk which is PCCW IMS Limited's broadband content website on the Internet and of the Internet game providers, the Group is the only Internet arcade games provider on www.now.com.hk

The growth of the Internet population in the Greater China Region will continue to contribute to the increase in demand for computer games, particularly the growing trend and rapidly evolving online games via the Internet. Based on the market research of NetValue SA published in February 2001, online game players paying for games accounted respectively for 8.6%, 12.4%, and 4.9% of the growing Internet population in Hong Kong, Taiwan and the PRC, representing a total of approximately over 2.1 million of online game players.

Playing online games has become increasingly popular for game players, who find that playing with or against other game players online via the Internet is more exciting and challenging than playing against the computer. Game developers are also rushing to develop new online and multiplier games or add additional online and interactive features to their existing computer games. As a result, the development of online multiplayer feature game will be the new focus of the game industry.

The Directors believe that the Group has the following competitive advantages:

• the Group's arcade game-on-demand platform is one of the first online arcade game platforms in the Greater China Region to offer interactive online arcade games with multiplayer feature;
• the Group's business model offers a relatively low playing fee for online players compared with the fees charges at traditional arcade game centres;
• the Group possess an extensive library of popular arcade games in the game market;
• the Group has the channel to source the latest released or pre-released arcade games through the management's extensive business network with reputable game producers in the world; and
• the Group has very experienced and well-connected shareholders and management who have helped the Group in establishing business relationships with strategic partners.

• The Group and its arcade game-on-demand platform has a short operating history and such game-on-demand platform is an unproven business model
• The Group has a history of net losses and there is a possibility of future losses
• The Group's pricing model and payment method for the arcade game-on-demand platform may not be successful
• The Group may face keen competition from other competitors including the arcade game centres
• The Group may be subject to litigation or disputes over the contents of its website or the technology of the arcade game-on-demand platform

The Group will dedicate its efforts and resource in furthering its game-on-demand services so as to become one of the leading online arcade and PC game-on-demand services providers by rendering arcade and PC game-on-demand services in the Greater China Region. As a result, the Group will provide interactive multiplayer online features and wide variety of both arcade games and PC games on a demand basis to create an online game community on the Internet.

With the rapid growth of the population of Internet users in the Greater China Region, ICPs, ISPs and game developers in the region have become more aware of the growth in the importance of the Internet. The Directors believe that with the Group's expertise in the game-on-demand business, the Group is well positioned to benefit from the foreseeable trend of playing online games.

Accordingly, the Group has formulated its overall business strategies to achieve its business objective:

• to strengthen the Group's product development and service enhancement;
• to partner with both established and emerging game companies for game souring diversification;
• to form partnership with PCCW IMS Limited for adopting their billing service as payment gateway in offering the Group's game-on-demand services to PCCW IMS Limited's www.now.com.hk subscriber;
• to enhance research and development capabilities for continuous improvement in the service, software and hardware technology for Internet gaming; and
• to establish "Billybala" as a renowned brand name for the Group's game-on-demand service in the Greater China Region.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$16.3 million (based on the offer price HK$0.3 per share). The Group at present intends to apply the net proceeds as follows: