Dadi International Group Limited — Proxy Solicitation & Information Statement 2002

Dec 30, 2002

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 a stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Milkyway Image Holdings Limited (the “Company”), you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale 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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Milkyway Image Holdings Limited 銀河映像控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

REFRESHER OF THE SCHEME MANDATE LIMIT

OF EXISTING SHARE OPTION SCHEME

A letter from the board of directors of the Company is set out on pages 3 to 5 of this circular. A notice convening the extraordinary general meeting of the Company to be held at 1/F No. 77 Hung To Road, Kwun Tong, Kowloon, Hong Kong at 12:00 noon on Friday, 17th January, 2003 is set out on pages 6 of this circular.

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 Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

• (a) the information contained in this circular is accurate and complete in all material respects and not misleading;

• (b) there are no other matters the omission of which would make any statement in this circular misleading; and

• (c) 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.

A form of proxy for the extraordinary general meeting is enclosed with this circular. Whether or not you intend to attend and vote at the extraordinary general meeting, you are requested to complete the enclosed form of proxy and return it in accordance with the instructions printed thereon to the office of the Company at 1/F No. 77 Hung To Road, Kwun Tong, Kowloon, Hong Kong attention to the Company Secretary as soon as practicable and in any event not later than 48 hours before the time appointed for holding such meeting or any adjournment thereof.

Completion and return of the form of proxy will not preclude you from attending and voting at the extraordinary general meeting or any adjourned meeting should you so wish.

30th December, 2002

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

* 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. 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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CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6

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DEFINITIONS

In this circular, the following expressions have the meanings respectively set out below unless the context requires otherwise:

“associate(s)”	has the meaning ascribed to it under the GEM Listing
	Rules
“Board”	the board of Directors
“business day”	any day on which the Stock Exchange is open for
	business of dealing in securities
“Capitalisation Issue”	the issue of 475,990,000 Shares issued for capitalisation
	of part of the share premium account of the Company as
	referred to in the paragraph headed “Written resolutions
	of all the Shareholders of the Company passed on 2nd
	August, 2002” in Appendix IV to the Prospectus
“Company”	Milkyway Image Holdings Ltd., a company incorporated
	in the Cayman Islands with limited liability, the Shares
	of which are listed and traded on GEM
“Directors”	the directors of the Company
“Existing Share Option Scheme”	the existing share option scheme of the Company
	adopted by the Company on 2nd August, 2002, the
	principal terms of which are summarised in the paragraph
	headed “Share Option Scheme” in Appendix IV to the
	Prospectus
“Extraordinary General Meeting”	the extraordinary general meeting of the Company to be
	held on 17th January, 2003 regarding the proposed
	refresher of the Scheme Mandate Limit
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Committee”	the listing committee of GEM
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“GEM website”	The internet website www.hkgem.com is operated by the
	Stock Exchange for the purpose of GEM

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	DEFINITIONS
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Latest Practicable Date”	27th December, 2002, being the latest practicable date
	prior to the printing of this circular for the purpose of
	ascertaining certain information contained herein
“Pre-IPO Share Option Scheme”	the share option scheme adopted by the Company on 2nd
	August, 2002 before the Share Offers as detailed in the
	Prospectus
“Prospectus”	the prospectus of the Company dated 13th August, 2002
“PRC”	the People’s Republic of China
“Scheme Mandate Limit”	the total number of Shares which may be issued upon
	exercise of all options to be granted under the Existing
	Share Option Scheme and any other schemes as at the
	date of adoption of the Existing Share Option Scheme
“Share(s)”	ordinary share(s) of HK$0.01 each in the capital of the
	Company
“Share Offers”	the placement of 131,292,000 new Shares to investors
	and public offer of 14,588,000 new Shares to members of
	the public in Hong Kong as detailed in the Prospectus
“Shareholder(s)”	holder(s) of Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong Dollars, the lawful currency of Hong Kong
“%”	per cent.

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LETTER FROM THE BOARD

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Milkyway Image Holdings Limited 銀河映像控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

Executive Directors: Mr. TO Kei Fung Mr. NG Hung Keung Ms. Chan Dao Ho

Independent Non-Executive Directors: Mr. Tam Kwok Fai, Jasper Ms. Ho Mei Yee

Registered office: Century Yard Cricket Square Hutchins Drive P. O. Box 2681 GT George Town Grand Cayman British West Indies

Head office and principal place of business in Hong Kong: 1/F No.77 Hung To Road, Kwun Tong Kowloon, Hong Kong 30th December, 2002

To the Shareholders

Dear Sir or Madam,

REFRESHER OF THE SCHEME MANDATE LIMIT OF EXISTING SHARE OPTION SCHEME

INTRODUCTION

The Board proposes to refresh the Scheme Mandate Limit since the Scheme Mandate Limit at the time of adoption of the Existing Share Option Scheme has not taken into account the Shares issued pursuant to the Capitalisation Issue and the Share Offers which took place after the adoption date of the Existing Share Option Scheme. An ordinary resolution will be proposed to refresh the Scheme Mandate Limit at the Extraordinary General Meeting accordingly.

* For identification only

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LETTER FROM THE BOARD

The purpose of this circular provides you with details regarding the refreshing of the Scheme Mandate Limit and to enable you to make an informed voting decision.

REFRESH OF THE SCHEME MANDATE LIMIT

Pursuant to the GEM Listing Rules, the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Existing Share Option Scheme and any other share option schemes of the Company, if any, must not exceed 30% of the Shares in issue, as the same may be varied from time to time.

The Shares which may be issued upon exercise of all options to be granted under the Existing Share Option Scheme and any other share option schemes of the Company, if any, shall not exceed 10% of the Shares in issue as at the adoption date of the Existing Share Option Scheme (being the Scheme Mandate Limit), subject to the refresher of the Scheme Mandate Limit from time to time. Options lapsed in accordance with the terms of the Existing Share Option Scheme or any other share option schemes of the Company, if any, shall not be counted for the purpose of calculating the Scheme Mandate Limit.

As at the Latest Practicable Date, there were 627,200,000 Shares in issue and options to subscribe up to 84,000,000 Shares have been granted under the Pre-IPO Share Option Scheme of which 67,200,000 Shares have been exercised as at the Latest Practicable Date.

Except options to subscribe up to 84,000,000 Shares have been granted under the Pre-IPO Share Option Scheme, no options have been granted under the Existing Share Option Scheme to the Directors, employees of the Group, the Group’s suppliers of goods and services and other participants as determined by the Directors as at the Latest Practicable Date.

As at 2nd August, 2002 (the date when the Existing Share Option Scheme was adopted), the issued shares of the Company was 10,000 Shares and the Scheme Mandate Limit of the Existing Share Option Scheme is only 1,000 Shares accordingly.

As the aforesaid Scheme Mandate Limit of the Existing Share Option Scheme has not included the Shares issued under the Capitalisation Issue and the Share Offer, the Directors are of the view that in order to better equip the Company so as to encourage selected participants as incentive or rewards for their contribution to the Group, the Scheme Mandate Limit shall be refreshed to provide the Company with greater flexibility.

Save as disclosed above and assuming no further allotment and issue of Shares and repurchase of Shares and no further grant of options under the Existing Share Option Scheme up to the date of the Extraordinary General Meeting, upon the granting of refresher to the Scheme Mandate Limit by Shareholders in the Extraordinary General Meeting, the Scheme Mandate Limit (as refreshed) will allow the Company to grant options entitling holders thereof to subscribe for 62,720,000 Shares, being 10% of the Shares in issue as at the date of approving refresher of the Scheme Mandate Limit. The Directors expect that the refresher of the Scheme Mandate Limit will not exceed 30% of the Shares in issue.

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LETTER FROM THE BOARD

APPLICATION TO THE STOCK EXCHANGE

Application will be made to the Stock Exchange by the Company for the approval of the listing of and permission to deal in the Shares, representing a maximum of 10% of the Shares in issue as at the date of the Extraordinary General Meeting approving the refresher of the Scheme Mandate Limit, which may be issued pursuant to the exercise of the options under the Existing Share Option Scheme.

EXTRAORDINARY GENERAL MEETING

Notice of the Extraordinary General Meeting to be held at 1/F No.77 Hung To Road, Kwun Tong, Kowloon, Hong Kong at 12:00 noon on Friday, 17th January, 2003 is set out on pages 6 of this circular. Resolution relating to the refresher of the Scheme Mandate Limit will be proposed as ordinary resolution at the Extraordinary General Meeting for your consideration and approval.

A form of proxy for the Extraordinary General Meeting is enclosed with this circular. Whether or not you intend to attend the Extraordinary General Meeting, you are requested to complete the form of proxy and return it to the office of the Company at 1/F No. 77 Hung To Road, Kwun Tong, Kowloon, Hong Kong attention to the Company Secretary in accordance with the instructions printed thereon as soon as practicable but and in any event not less than 48 hours before the time fixed for the meeting or any adjourned meeting. The completion of a form of proxy will not preclude you from attending and voting at the said meetings in person.

RECOMMENDATION

The Directors believe that the refresher of the Scheme Mandate Limit is in the interests of the Company and its Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution at the Extraordinary General Meeting.

Yours faithfully,

By Order of the Board

Milkyway Image Holdings Limited To Kei Fung

Chairman

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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Milkyway Image Holdings Limited 銀河映像控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of Milkyway Image Holdings Limited (the “Company”) will be held at 1/F No.77 Hung To Road, Kwun Tong, Kowloon, Hong Kong at 12:00 noon on Friday, 17th January, 2003 for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT conditional on the Stock Exchange granting the listing of and permission to deal in the shares of the Company to be issued pursuant to the exercise of any options (the “Options”) granted under the existing share option scheme of the Company adopted on 2nd August, 2002, the Directors be and are hereby authorised, at their absolute discretion, to grant Options and to allot and issue shares pursuant to the exercise of any Options up to 10% of the issued share capital of the Company as at the date of this resolution”

By Order of the Board Milkyway Image Holdings Limited To Kei Fung Chairman

Hong Kong, 30th December, 2002

Notes:

1. A shareholder entitled to attend and vote at the meeting convened by this notice is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company and any appointment of proxy shall not preclude the shareholder to vote at the said meeting to attend and vote in person if he so desires. A form of proxy has been enclosed in this circular.

2. To be valid, a form of proxy, together with 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 office of the Company at 1/F No. 77 Hung To Road, Kwun Tong, Kowloon, Hong Kong attention to the Company Secretary not less than 48 hours before the time appointed for holding the meeting or any adjourned meetings thereof.

3. In case of joint holders of a share, the vote of the senior who tenders in vote, whether in person or by proxy, shall be accepted to the exclusion of the vote: of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding.

4. For identification only

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