Major Shareholder:

• Mr. To Kei Fung ¡V 51.0% interest
• Ms. Lee Po Yi Shirley Anne ¡V10.625 % interest

Company Subsidiaries:

• Milkyway (HK)(100%): Provision of film production services

As a film production company, the Group is principally engaged in the provision of film production services for film companies in Hong Kong. The film production services rendered by the Group comprise mainly three parts, namely the pre-production phase, the shooting phase and the post-production phase.

The Directors believe that the Group generally takes about five to six months to complete a film project from the pre-production phase to the postproduction phase. On average, the Group normally takes approximately two months to complete each of the pre-production phase, the shooting phase and the post-production phase. As at the Latest Practicable Date, the Group has commenced the production of one film project, which is expected to be completed by the end of August 2002.

The Directors believe that the Group's success in the local film industry is, to a large extent, attributable to Mr. To who plays a significant role in the operation of the Group. Since the commencement of the Group's business, Mr. To has been the producer of all the Group's films. Besides, Mr. To has been engaged as the film director of more than 10 films produced by the Group. In light of his reputation in the film industry,

Mr. To has been engaged by three film companies, namely Golden Harvest, One Hundred Years and Teamwork MP as film director, producer and/or consultant of all the films to be produced by the Group as contemplated in the respective film production agreements. The Directors believe that the Group's future operation will be highly dependent on the continuing efforts and contributions to be given by Mr. To.

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

• the experienced management and production team which possesses extensive knowledge in the film production business in Hong Kong, one of the largest and most dynamic film industries in the world;

• a proven track record for producing popular films which had won box office success and obtained numerous awards and acclaims in Hong Kong and overseas film festivals;

• the ability to monitor and control the entire film production process including film producing and film processing, so as to ensure high quality, effective cost control and timely completion of the Group's film production projects; and

• the well-established working relationships with top creative and production personnel and top local actors and actresses in the film production industry so as to ensure consistent quality of the films produced by the Group.

• Reliance on Mr. To;
• Early termination of film production agreement;
• Fluctuation in reported annual revenue;
• Film investment business is an unproven business model of the Group;
• Financial position of the Group;

The Directors believe that Hong Kong's film industry will remain as one of the largest and most dynamic film industries in the Asian region in the coming years. With the view to further capitalising on the anticipated recovery of the local film industry, the Directors will continue the Group's focus on film production in the short to medium term.

The Group intends to enter into long term contracts with popular and well-known artistes and scriptwriters. Besides, the Group will engage more talented film directors to oversee film projects so as to augment the Group's film production capacity and bring in different styles and presentation skills for its film projects.

With the objective of broadening its recurrent income base, the Group may also, where appropriate, selectively invest in films through alliances or partnerships with other local or overseas film companies possessing the relevant experience and expertise as long-term investments. The percentage of the investment and the profit sharing between the Group and its future strategic partner(s) will be determined according to the nature of individual project and the market condition in the corresponding period.

The Directors aim at further improving the quality of the films produced by the Group and the efficiency of the Group's film production process by way of establishing editing and mixing studio installed with advanced editing and sound mixing equipment. The Directors are of the view that by setting up its in-house sound mixing and editing studio, the Group could reduce its reliance on any subcontractors.

The net proceeds from the Placing, after deducting the related expenses, are estimated to amount to approximately HK$17 million (based on the offer price HK$0.3 per share). The Group at present intends to apply the net proceeds as follows: