Beam letter to shareholders

23rd April 1999 Dear Shareholder, I am pleased to advise you of the results of the Extraordinary General Meeting of the Company, the sale of the Company's computer game publishing and development business, and the Directors' plans for the future of the Company. The Extraordinary General Meeting was held at the Beam premises on 6th April, and both resolutions that were put to the meeting were approved by shareholders. The result of those resolutions meant that the Company was able to proceed with the sale of the computer game publishing and development business, and that transaction was completed on 9th April. Sale proceeds were $7.5 million in cash and assumed liabilities, and have been used to extinguish bank debt and reduce other liabilities. As indicated in the notice of meeting to approve the transaction, the sale proceeds were well below 30 June 1998 book value. However, the sale has been an important step in the financial restructuring of the company as the computer game publishing activity had become a significant drain on the company's financial resources. The computer games released by the Company in late 1998, specifically KKnD 2 and Dethkarz, unfortunately failed to ignite the public's imagination, despite encouraging and very positive early reviews. As well, on-going development activities are a significantly cash-flow negative until release of the product, and Beam's development activities were imposing a cash drain on the Company of about $700,000 per month. The experience of the computer game publishing is now behind us and we now look to opportunities for Beam's remaining businesses. With a modest amount of cash at bank and an established position in the "emerging technology" sector your Directors believe that your Company offers exciting leverage to the current interest in the Internet and in digital technology in general. The Company's hotgames.com (for PC users) and nintendo64.hotgames.com sites already attract over 800,000 unique visit sessions per month, down-loading nearly five million page impressions. The sites - which provide a loyal community of game enthusiasts with news and reviews of computer games - are well positioned for expansion to electronic commerce. Consumers spend over US$ 15 billion annually on computer games, and it is reasonable to expect that over the next few years a significant portion of these sales will occur on the Internet. Based on current traffic, and a continuing commitment to marketing and promoting the site, hotgames.com should attract a reasonable share of that market. hotgames.com management has commenced discussions with third parties who can offer sales and fulfilment services to our growing client base. The online division of the Company provides investors in Beam an opportunity to participate in a growing Internet e-commerce opportunity, with significant potential upside. In addition to hotgames.com is the Company's 3D animation division, Famous Technologies. The international spend on animation software was over US$ 300 million last year and there are heavy demands on animation studios for quality, cost-efficient product brought about by the increasing interest in animated feature films, television series, TV commercials, corporate promotions, computer games, and the Internet. Famous Technologies released its proprietary Famous Faces product (facial animation software) last year to international acclaim (such as the 1998 Editor's Choice Award from 3D Design Magazine). We are enjoying encouraging sales with an average price of A$ 10,000 per installation. And there are thousands more small to medium sized studios that should be attracted to this cost-efficient 3D animation software. Assisted by an A$ 2.1 million R&D Start Grant (to be provided on a non-refundable, matching dollar for dollar spend basis), Famous Technologies' facial animation software will be expanded to a "Complete Virtual Studio" over the next 18 months. As you are aware, trading in the company's shares (ASX:BEM) was suspended at the request of Directors in February. This suspension has allowed the Directors the flexibility to finalise the sale of the games publishing and development business and commence a restructuring of the company's financial position. We are at this stage unable to give a date for re-listing of the Company's shares on the Australian Stock Exchange. I know that this will be deep disappointment to all shareholders, and the Directors are working to accomplish re-listing as soon as possible. There are a number of issues that need to be addressed before the shares can be re-listed, including preparation of accounts that give a current, true and fair picture of the Company. As well, there are issues that still need to be resolved with the Australian Stock Exchange, given that the substantial part of the Company has been sold. The Directors are endeavouring to come to a solution that will minimise costs and enable re-listing as quickly as possible. I would like to thank you for your patience and support of the Company. I know that this has been a frustrating experience for all shareholders. However, as you will have read above, the Company has impressive technology in growth areas with significant potential upside. I look forward to continuing to work with you to realise these goals. Yours Sincerely Alfred Milgrom Chairman