Clarification on two previous disclosures on Music.com, Inc. and Music Semiconductors, Inc.

February 2, 2000 PSE CIRCULAR FOR BROKERS NO. 245-00 February 1, 2000 The Philippine Stock Exchange Tektite Building, Exchange Road Ortigas Center, Pasig City Attention : Listing and Compliance Department SUBJECT : Clarification on two previous disclosures on Music . com, Inc . and Music Semiconductors, Inc . Gentlemen: We wish to make the following clarification on the subject disclosures: 1. Music.com, Inc. investment The percentages earlier provided failed to include the stock options reserved under the company's stock option plan, which options were made part of the computation of the valuation for the investment. In this light please be informed that the percentage ownership on a fully diluted basis of Music.com, Inc.'s equity investors is 18.05%, Music.com Warrantholders 46.19% and MUSIC Corporation 16.51%. The remaining 19.25% is reserved for Stock Options. The pre-money valuation of US$27M was supported by the latest comparable market valuations of related internet companies. This investment provides a post money valuation of US$33.2M. Although the original objective was to achieve a total of US$8M equity investment, the completion of this round of investment only improves the valuation of the business in its future efforts to raise funds since the implementation of the company's business made possible through the $6M investment will continue to add value, content, and visitors to the site. In limiting the number of shares sold at this stage Music.com will be able to realize higher value for its shares in the future. As to the other two investors, it is our understanding that these are Asian funds who would like to remain as passive investors in Music.com, Inc. 2. MUSIC Semiconductors, Inc. In our efforts to comply with the full disclosure rules of the Securities and Exchange Commission and the Philippine Stock Exchange and understanding full well the interest of the investors and the members of the Exchange, we are also constrained by the fact that MUSIC Semiconductors, Inc. is in discussions with a third party involving a family of products, some of which were-recently acquired from Innovative Technologies. Further disclosure on the details of the acquisition might adversely affect said discussions. We would like to seek the Exchange's authority to make further disclosure of said acquisition upon the termination of the related discussions, which in our estimate could take another month. 3. Press Releases We also would like to provide copies of the following press releases: a. "Single-chip switches streamline network design" , Technology Magazine, 24 January 2000. This article features MUSIC Semiconductors, Inc. as one of the few companies fielding single-chip switches together with IBM. This was an article independently written by Mr. Chappell Brown and without any collaboration from MUSIC. b. "X10 . com Hooks Up with Music.com to Offer Free Shop at Creating 21 century Wired Home in New Millennium Contest" a promotion of the New Millennium contest held on www.music.com web site. c. "Music . com, Inc . Tunes in with Hiwire Internet Radio Player" an announcement on the team-up of an internet software company (Hiwire) and Music.com, providing Music.com visitors the ability to connect with radio stations from around the world including Australia, Taiwan, United States, Ecuador, Dublin, Austria and others. d. "Music . com Chooses Microsoft Windows Media Format" a press announcement released by Microsoft announcing the use by Music.com of Microsoft Windows Media Technologies as the preferred format for online music distribution on the Music.com web site. MUSIC Corporation is awaiting the formal disclosure by Music.com, Inc. on the agreement with Microsoft. For further clarification please contact us at the numbers stated above or at our temporary corporate office at 725-7791. Yours truly, (SGD.) MITOS TANTUICO-ZSHORNACK VP Corporate Affairs TECHNOLOGY High speed, low cost, flexibility promised by new breed of IC Single-chip switches streamline network design By Chappell Brown Zurich, Switzerland A movement reminiscent of the single chip processor, which ushered in the microprocessor revolution, is a foot in high-speed networking. Termed a "switch-on-a-chip," recent designs aim at reducing the cost and uprising the throughput of networking switches by integrating circuitry that currently occupies a set of chips. The one chip solution could have an impact on desktop office LANs and on cluster computing by offering a cheap alternative to current LAN hardware. By buffering data at the input and output ports while performing asynchronous transfer mode switching on a single chip, some researchers estimate it will be possible to set up 10-Gbit links among a cluster of 16 computers. That would be a cheaper and faster solution that the Gigabit Ethernet schemes now coming to market. The technology also offers a flexible approach to setting up ad hoc networks to solve a specific problem. A few companies are fielding single-chip switches-IBM Corp. introduced its Prizma in 1998, while Music Semiconductors (Hackettstown, N.J.) recently fielded its Epoch switch. Epoch's ability to prioritize traffic means network designers can add multimedia capability without degrading quality of service. Using a pipelined multiprotocol architecture, the switch can identify and prioritize up to 1.4 million flows per second, according to the company. IBM is also targeting multimedia networking. The Prizma architecture is optimized to handle multipoint connections for diverse services such as voice-over-Internet Protocol or video. Video streams, for example, may need a broadcast mode point to multipoint-while voice requires routing through a selective subset of nodes, or multicast. Multicast is implemented partly in the data packet header and also via tables that can be stored on-chip and dynamically updated. The 2.4 million-transistor design evolved at IBM's Research Laboratory in Zurich, where the overall design objective was to develop a high-performance switching technology that was both modular and scalable. The internal circuitry supports automatic load sharing, modular scaling for aggregate throughput and flexible support for port configuration. For example, the number of input and output ports can be increased by using multiple chips in either a single or multistage configuration. Throughout is in increased by connecting switch chips in parallel. The speed and flexibility of the architecture results from the separation of data and the control flows. A global shared packet buffer and parallel I/O routing trees feed the data directly to designated output port. This arrangement avoids bottlenecks created by sharing control flow processing with data routing. cdll Music.com Chooses Microsoft Windows Media Format Online Music Destination Will Use Windows Media to Build Out Technology Infrastructure And Improve Consumer Experience REDMOND, Wash., and MORRISTOWN, N.J. Jan. 26, 2000 MIcrosoft Corp. and Music.com Inc. today announced that Music.com has chosen Microsoft @ Windows Media Technologies as the preferred format for online music distribution on its popular Music.com Web site. Launched in October 1998, Music.com' is an International destination for a wide range of music enthusiasts, with more than 1.5 million unique visitors per month. The Interactive Web site offers downloadable music in all genres as well as an Internet radio tuner, video clips, music news, chat rooms, auctions and links to other sites. "Building out our technology capabilities is paramount to providing the best consumer experience on Music.com," said Adam Somers, senior vice president of partnerships at Music.com. "Windows Media provides the mission-critical reliability and quality our users are demanding and will help us become an indispensable online destination for all music lovers." The news comes on the heels of a ZD Labs study published Jan. 13 that shows that audio files in the Windows Media format sound more like CD-quality audio in half the size of MB3. In addition, study participants overwhelmingly chose Windows Media over MP3 for the quality of live audio streaming at 32 kbps and 64 kbps. LexLib "With Windows Media, music comes out sounding the way it was meant to", added Ted Cohen, a Music.com board member. "People want an emotional experience with their music, not a technology transparent." "Music.com has built a powerful site in a very short time, with music for every taste," said Will Poole, general manager of the Digital Media Division at Microsoft. "Now, with Windows Media, its customers will get the high quality they demand in the music they love." About Music . com Music.com is an Internet company located at http://www.music.com/. Music.com, along with its business partners, operates an Internet site providing aggregator and gateway services to the consumer and professional music industry. About Windows Media Windows Media is the leading digital media, platform, providing consumers, content providers, solution providers, software developers and corporations with unmatched audio and video quality. Windows Media Technologies, which includes Windows Media Player, Windows Media Services, Windows Media Tools and the Windows Media SDK, is available for free* download at http://www.microsoft.com/windows/windowsmedia/. The Windows Media Player is the fastest growing media player. More than 50 million copies have been downloaded to date growing by more than one every second. About Microsoft Founded in 1975, Microsoft (Nasdaq "MSFT") is the worldwide leader in software for personal and business computing. The company offers a wide range of products and services designed to empower people through great software any time, any place and on any device. * Connect-time charges may apply. Microsoft and Windows Media are either registered trademarks or trademarks of Microsoft Corp. In the United States and/or other countries. Music.com is trademark of Music.com Inc. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass/ on Microsoft's corporate information pages.