Dream International Limited — Proxy Solicitation & Information Statement 2003

Aug 8, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in 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 or transferred all your shares in Dream International Limited, you should at once hand this circular to the purchaser or the transferee or to the bank or stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.

This circular does not constitute an offer of, nor is it calculated to invite offers for, shares or other securities of Dream International Limited.

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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DREAM INTERNATIONAL LIMITED 德林國際有限公司

(Incorporated in Hong Kong with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF DREAM INKO CO., LTD

Financial Adviser

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Independent financial adviser to the Independent Board Committee

EQUITAS CAPITAL LIMITED

A letter from the independent board committee is set out on page 11 of this circular. A letter from Equitas Capital Limited containing its advice to the independent board committee is set out on pages 12 to 21 of this circular.

A notice convening the extraordinary general meeting of Dream International Limited to be held at Pacific Room II, Towers Wing, 9/F., The Royal Pacific Hotel and Towers Hong Kong, 33 Canton Road, China Hong Kong City, Tsimshatsui, Hong Kong at 10:00 a.m. on Tuesday, 26th August, 2003 is set out on pages 27 to 28 of this circular. Whether or not you are able to attend, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not later than 48 hours before the time of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you so wish.

8th August, 2003

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Proposed acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Nature of business of Dream International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Reasons for the proposed acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Expected date of completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Extraordinary general meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . .	11
LETTER FROM EQUITAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
NOTICE OF EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
ACCOMPANYING DOCUMENT
– Form of proxy

• i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

• “Acquisition”

the proposed acquisition by J.Y. International of the entire share capital of Dream Korea

• “Associate(s)”

has the meaning ascribed to it in the Listing Rules

• “Board” the board of Directors

• “C&H Korea”

• C & H Co., Ltd., a company incorporated in the Republic of Korea and the substantial shareholder of the company

• “C&H Korea Group” C&H Korea and its Subsidiaries (other than the Group)

“Company” or	Dream International Limited, a company incorporated in Hong
“Dream International”	Kong with limited liability and the shares of which are listed on
	the main board of the Stock Exchange
“Director(s)”	the director(s) of the Company
“Dream Korea”	Dream INKO Co., Ltd, a company incorporated on 4th August,
	2003 with limited liability in the Republic of Korea as described
	herein
“Equitas”	Equitas Capital Limited, a deemed licenced corporation under the
	SFO and the independent financial adviser to the Independent
	Board Committee
“Group”	the Company and its Subsidiaries
“Hong Kong”	The Hong Kong Special Administrative Region of the People’s
	Republic of China
“Hong Kong GAAP”	accounting principles generally accepted in Hong Kong
“Independent Board Committee”	an independent committee of the Board, comprising the
	independent non-executive Directors, namely Mr. David, Kwai
	Che Tse and Mr. Valiant, Kin Piu Cheung
“Independent Shareholders”	shareholders of the Company other than the Vendors and their
	respective Associates
“J.Y. International”	J.Y. International Company Limited, a direct wholly owned
	subsidiary of the company incorporated in Hong Kong

the Republic of Korea, usually referred to as “South Korea”

“Korea”

• 1 -

DEFINITIONS

“Korean GAAP”	accounting principles generally accepted in Korea
“Latest Practicable Date”	4th August, 2003, being the latest practicable date for
	ascertaining certain information referred to in this circular prior
	to the printing of this circular
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“ODM”	“original design manufacturing”, under which the manufacturer
	creates and owns both the internal and external design of the
	products which are sold under the brandname of the customer or
	the Group
“OEM”	“original equipment manufacturing”, under which products are
	designed and manufactured in whole or in part in accordance with
	a customer’s specifications and are marketed under the
	customer’s brandname
“PRC”	the People’s Republic of China which, for the purpose of this
	circular, excludes Hong Kong, the Macau Special Administrative
	Region of the People’s Republic of China and Taiwan
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the Laws of
	Hong Kong
“Shares”	shares of US$0.01 each in the share capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subsidiaries”	has the meaning ascribed to it under the Companies Ordinance
	(Chapter 32 of the Laws of Hong Kong), as amended from time to
	time
“Uni-Link”	Uni-Link Technology Limited, a company incorporated in Hong
	Kong, the issued share capital of which is beneficially owned as
	to approximately 76% by Mr Kyoo Yoon Choi and as to the
	balance by various senior management staff of C&H Korea Group
	and the Group
“United States”	the United States of America

• 2 -

DEFINITIONS

“Vendors”	Mr. Kyoo Yoon Choi; Ms. Woul Hee Cha; Mr. Woo Jin Choi; Ms.
	You Jin Choi; Ms. Soo Jin Choi; Ms. Shin-Hee Cha; Mr. Sung
	Sick Kim; Mr. Chul Hong Min; Mr. Young Dae Noh; Mr. Tae Sub
	Choi; Mr. Yong Kook Kim; Mr. Moon Chul Son; and Mr. Won
	Sun Park
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“KRW”	Korean won, the lawful currency of Korea
“US$”	United States dollars, the lawful currency of the United States

For the purposes of illustration only and unless otherwise stated, the translation of United States dollars and Korean won into Hong Kong dollars is based on the exchange rate of US$1.00 = HK$7.80 and HK$1.00 = KRW160. Such translations should not be construed as a representation that the amounts in question have been, could have been or could be converted at any particular rate or at all.

• 3 -

LETTER FROM THE BOARD

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DREAM INTERNATIONAL LIMITED 德林國際有限公司

(Incorporated in Hong Kong with limited liability)

Executive Directors: Chul Hong Min Young M. Lee Tae Sub Choi

Non-executive Director:

Kyoo Yoon Choi

Registered office and principal place of business in Hong Kong: 8th Floor Tower 5, China HK City 33 Canton Road Tsimshatsui Kowloon Hong Kong

Independent non-executive Directors:

David, Kwai Che Tse Valiant, Kin Piu Cheung

8th August, 2003

To the shareholders and, for information only, the holders of share options of the Company

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF DREAM KOREA

INTRODUCTION

The Directors announced on 18th July, 2003 that J.Y. International, a wholly owned subsidiary of Dream International is proposing to acquire the entire issued share capital of Dream Korea in an acquisition, the principal elements of which are as follows:

PROPOSED ACQUISITION

The sale and purchase agreement

Date: 18th July, 2003

Vendors:

Mr. Kyoo Yoon Choi; (to hold approximately 84.58% of Dream Korea before completion) Ms. Woul Hee Cha; (see note) Mr. Woo Jin Choi; (see note) Ms. You Jin Choi; (see note)

• 4 -

LETTER FROM THE BOARD

Ms. Soo Jin Choi; (see note) Ms. Shin-Hee Cha; (to hold approximately 4.03% of Dream Korea before completion) Mr. Sung Sick Kim; (to hold approximately 2.96% of Dream Korea before completion) Mr. Chul Hong Min; (to hold approximately 2.69% of Dream Korea before completion) Mr. Young Dae Noh; (to hold approximately 2.69% of Dream Korea before completion) Mr. Tae Sub Choi; (to hold approximately 1.08% of Dream Korea before completion) Mr. Yong Kook Kim; (to hold approximately 0.81% of Dream Korea before completion) Mr. Moon Chul Son; and (to hold approximately 0.64% of Dream Korea before completion) Mr. Won Sun Park (to hold approximately 0.54% of Dream Korea before completion)

Note: Mr. Kyoo Yoon Choi together with his direct family, being Ms. Woul Hee Cha, Mr. Woo Jin Choi, Ms. You Jin Choi and Ms. Soo Jin Choi, will hold approximately 84.58% of Dream Korea immediately before completion of the Acquisition.

Purchaser: J.Y. International

Assets to be acquired and consideration

Subject to the fulfilment, or waiver, of the conditions set out under the section headed “Conditions of the transaction” below, J.Y. International will acquire from the Vendors the entire issued share capital of Dream Korea for a consideration of US$17 million (representing approximately HK$132.6 million) which will be satisfied in full and in cash upon completion of the Acquisition out of Dream International’s cash resources. No deposit has been paid in relation to the sale and purchase agreement. As at 31st December, 2002, Dream International’s cash and bank deposits amounted to approximately HK$238.1 million.

The consideration under the sale and purchase agreement was determined after arm’s length negotiation with reference to, among other things, the pro forma unaudited net profit of Dream Korea and the earnings multiples of comparable companies in Hong Kong and Korea. Based on the pro forma unaudited profit after tax of Dream Korea for the year ended 31st December, 2002, the consideration represents a price to earnings multiple of 7.2 times.

The Directors are of the view that the Acquisition is on normal commercial terms and both fair and reasonable.

Information on Dream Korea

Dream Korea, a company incorporated in the Republic of Korea with limited liability, owns and operates the marketing, design and product development of the plush stuffed toys businesses which, as part of the reorganisation of certain businesses of C&H Korea, was transferred from C&H Korea to Dream Korea, at that time a wholly owned subsidiary of C&H Korea. After the transfer, the shares in Dream Korea were distributed in specie on a pro rata basis to the shareholders of C&H Korea (the vendors in the Acquisition). C&H Korea’s remaining businesses comprise ownership of a building in Seoul, a leather goods and accessory agency, fabric and textile manufacturing in Sri Lanka through its

• 5 -

LETTER FROM THE BOARD

wholly owned subsidiary Jung Yoon Textiles (Private) Limited and investment holdings including its 58.5% interest in Dream International and its 52.5% interest in Gina World Co., Ltd., a company listed on the Korean Securities Dealers Automated Quotation in Korea, engages in the marketing and distribution of toy products in the Korean market and is a customer of the Group. The Group purchases fabric and textiles from Jung Yoon Textiles (Private) Limited.

The shareholders may wish to note that the company to be acquired has been registered and incorporated as “Dream INKO Co., Ltd”. C&H Korea was unable to register the company as “Dream Korea Ltd.” as the name is registered to a third party. J.Y. International and the Vendors have agreed to this amendment.

The following is a summary of the pro forma unaudited results of Dream Korea as derived from the audited accounts of the C&H Korea Group for the two years ended 31st December, 2002, based on Korean GAAP (Note 1) : –

Turnover_(Note 2) Other income(Note 3)_ Profit before taxation Taxation Profit after taxation	2002 KRW’000 HK$’000 114,712,387 716,952 86,652 542 114,799,039 717,494 4,268,394 26,677 (1,332,492) (8,328) 2,935,902 18,349	2001 KRW’000 HK$’000 100,724,305 610,450 314,200 1,904 101,038,505 612,355 1,652,973 10,018 (581,320) (3,523) 1,071,653 6,495	2001 KRW’000 HK$’000 100,724,305 610,450 314,200 1,904 101,038,505 612,355 1,652,973 10,018 (581,320) (3,523) 1,071,653 6,495
			612,355
			10,018 (3,523)
			6,495

• Note: 1. The above summary has been translated in Hong Kong dollars using the conversion rates of 160 KRW to one Hong Kong dollar for 2002 and 165 for 2001.

• Consists of the sale of goods purchased from the Group and the sale of materials to the Group.

• Commission income.

The pro forma unaudited net asset value of Dream Korea as at 31st December, 2002 was approximately KRW3,932 million which is equivalent to approximately HK$24.58 million.

Conditions of the transaction

Completion of the sale and purchase agreement is conditional upon the following conditions being fulfilled or, where permitted, waived:

• (a) no breach of the warranties given by the Vendors pursuant to the sale and purchase agreement;

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LETTER FROM THE BOARD

• (b) Dream Korea having been established or acquired by the Vendors and having become the sole owner of the marketing, design and product development of the stuffed plush toys businesses free and clear of all encumbrances or third party rights;

• (c) the approval by Independent Shareholders of sale and purchase agreement and the transaction contemplated under the aforesaid agreement; and

• (d) all other consents, if any, of the Stock Exchange and, or, any other relevant governmental or regulatory authorities and other relevant third parties.

If any of the conditions (which have not previously been waived by J.Y. International, except for conditions (c) and (d) which cannot be waived) have not been fulfilled on or before 5:00 p.m. on 30th September, 2003 (or such later date as the Vendors and J.Y. International may agree in writing) then the sale and purchase agreement will lapse.

Under the Listing Rules, the sale and purchase agreement is subject to the approval of the Independent Shareholders.

Shareholding structure of Dream International

The following charts summarise the shareholding structure of Dream International before and after the completion of the sale and purchase agreement.

Immediately after restructuring and before the completion of the sale and purchase agreement

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----- Start of picture text -----

Vendors
100% 100%
C&H Korea Dream Korea
58.5%
Dream International
100% 100% 100%
J.Y. International C&H Toy of America, C&H Toys (Suzhou)
Inc. Co. Ltd.
100% 100%
Jung Yoon Toys
J.Y. Toys Co., Limited
(Shanghai) Co. Ltd.
----- End of picture text -----

• 7 -

LETTER FROM THE BOARD

Immediately after the completion of the sale and purchase agreement

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----- Start of picture text -----

Vendors
100%
C&H Korea
58.5%
Dream International
100% 100% 100%
J.Y. International C&H Toy of America, C&H Toys (Suzhou)
Inc. Co. Ltd.
100% 100%
Jung Yoon Toys
J.Y. Toys Co., Limited
(Shanghai) Co. Ltd.
100%
Dream Korea
----- End of picture text -----

NATURE OF BUSINESS OF DREAM INTERNATIONAL

Dream International is incorporated in Hong Kong and its shares are listed on the main board of the Stock Exchange. The Group is principally engaged in the design, development, manufacturing and sales of a wide range of plush stuffed toys as well as steel and plastic toys on an OEM and ODM basis .

The consolidated net assets of the Group was approximately HK$521.4 million as at 31st December, 2002.

The following is a summary of audited consolidated results of the Group for the two years ended 31st December, 2002:–

Turnover Profit before taxation Taxation Profit after taxation	2002 HK$ million 910.4 124.2 (10.3) 113.9	2001 HK$ million 756.0 105.0 (6.1) 98.9

• 8 -

LETTER FROM THE BOARD

REASONS FOR THE PROPOSED ACQUISITION

Prior to the listing of Dream International on the Stock Exchange, the businesses of the present Group and Dream Korea operated together. The businesses of Dream Korea were not included in the Group at the time of listing as under the then existing corporate structure of C&H Korea a significant Korean capital gains tax liability would have been incurred by C&H Korea. The businesses of Dream Korea provides the functions of marketing, design and product development of plush stuffed toys exclusively for Dream International, which give rise to a number of continuing connected transactions which are disclosed in the annual report of Dream International in accordance with the Listing Rules. The Directors and the Vendors believe that recombining Dream Korea with the Group will give rise to operational efficiencies from which a more profitable business will result. As disclosed in the prospectus of Dream International, it has always been the intention of C&H Korea that the Group would take over the marketing, design and product development responsibilities for certain specified customers within five years after its listing. Further, by acquiring Dream Korea many of the on-going connected transactions of the Group will be eliminated.

EXPECTED DATE OF COMPLETION

The expected date of completion is three business days after and excluding the date the conditions are first satisfied or, where permitted, waived by J.Y. International but no later than 5:00 p.m. on 30th September, 2003 (or such later date as the vendors and J.Y. International may agree in writing).

EXTRAORDINARY GENERAL MEETING

The acquisition of the entire issued share capital of Dream Korea from the Vendors constitutes a connected transaction for Dream International under the Listing Rules for three of the Vendors of shares in Dream Korea, Mr. Kyoo Yoon Choi, Mr. Chul Hong Min and Mr. Tae Sub Choi are directors of Dream International. Furthermore, Mr. Kyoo Yoon Choi is a substantial shareholder of Dream International and of C&H Korea, which controls 58.5% of Dream International. The acquisition of the entire issued share capital of Dream Korea constitutes a disclosable transaction for Dream International under the Listing Rules as the consideration exceeds 15% of the consolidated net tangible asset value of the Group as disclosed in its latest published annual report. The Acquisition is subject to approval by shareholders of Dream International. Mr. Kyoo Yoon Choi, Mr. Chul Hong Min and Mr. Tae Sub Choi together with the other vendors and their respective Associates including C&H Korea and Uni-Link are required to abstain from voting on the resolution regarding the Acquisition to be considered at the extraordinary general meeting.

RECOMMENDATION

The Board believes that the resolution to be proposed at the extraordinary general meeting is in the best interests of the Company and its shareholders as a whole and recommends all Independent Shareholders to vote in favour of the resolutions set out in the notice of the extraordinary general meeting.

• 9 -

LETTER FROM THE BOARD

In addition, your attention is drawn to the letter from the Independent Board Committee set out on page 11 of this circular which contains its recommendation to the Independent Shareholders in connection with the Acquisition, and the letter of advice from Equitas set out on pages 12 to 21 of this circular which contains its recommendation to the Independent Board Committee and the principal factors and reasons taken into consideration.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendix to this circular and notice of the extraordinary general meeting.

Yours faithfully,

For and on behalf of

Dream International Limited

Young M. Lee Director

• 10 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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DREAM INTERNATIONAL LIMITED 德林國際有限公司

(Incorporated in Hong Kong with limited liability)

8th August, 2003

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED ACQUISITION OF DREAM KOREA

We have been appointed the Independent Board Committee to advise Independent Shareholders in connection with the Acquisition, details of which are set out in the letter from the “Letter from the Board” in the circular dated 8th August, 2003, of which this letter forms a part. The terms used in this letter shall have the same meanings as defined in this circular unless the context otherwise requires.

Having taken into account the advice of Equitas, we consider the terms of the Acquisition to be fair and reasonable so far as the interests of the Company and its shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution which will be proposed at the extraordinary general meeting to approve the Acquisition.

Yours faithfully, For and on behalf of the Independent Board Committee

David, Kwai Che Tse Valiant, Kin Piu Cheung Independent non-executive Director Independent non-executive Director

• 11 -

LETTER FROM EQUITAS

The following is the text of a letter of advice received from Equitas in relation to the discloseable and connected transaction, which letter has been prepared for the purpose of inclusion in this circular:

EQUITAS CAPITAL LIMITED 盈均財務顧問有限公司

5/F Winning Centre, 46-48 Wyndham Street, Central, Hong Kong.

8th August, 2003

The Independent Board Committee

Dream International Limited

8th Floor Tower 5, China HK City 33 Canton Road Tsimshatsui Kowloon Hong Kong

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION Proposed acquisition of Dream Korea

We, Equitas Capital Limited, refer to our appointment by the Directors of the Company as independent financial adviser to advise the Independent Board Committee in relation to the proposed acquisition by J.Y. International, a wholly owned subsidiary of the Company, of the entire issued share capital of Dream Korea. The Acquisition constitutes a discloseable and connected transaction for the Company under the Listing Rules as the principal Vendors are connected persons of the Company. The Acquisition is, accordingly, subject to approval by Independent Shareholders in general meeting.

Equitas is unconnected with any of the Company; C&H Korea; Dream Korea; the directors, chief executive and the controlling and/or substantial shareholders of the Company, C&H Korea or Dream Korea; and the Associates of each of them and, accordingly, is considered suitable to give independent advice to you. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, its substantial shareholders, Dream Korea or any party associated with any of them.

The expressions defined in the circular to the shareholders (and, for information only, the holders of share options) of the Company dated 8th August, 2003, of which this letter forms part, have the same meanings in this letter unless the context requires otherwise.

• 12 -

LETTER FROM EQUITAS

In formulating our opinion, we have reviewed the published information on the Company, including its annual reports and audited financial statements for the two years ended 31st December, 2001 and 2002, the sale and purchase agreement for the Acquisition, the pro forma unaudited financial information of Dream Korea which has been reviewed the Company’s auditors, and the operating and cash flow budgets of Dream Korea for the two years ending 31st December, 2004. We have also discussed with the Directors their plans for Dream Korea and the conditions in the toys industry as they relate to the business of the Group and Dream Korea. We consider that the information which we have received is sufficient for us to reach our opinion as set out in this letter and to justify our relying on such information as the basis therefor and we have no reason to doubt the truthfulness and accuracy of the information provided to us. The Directors have confirmed to us that no material facts have been omitted from the information supplied and opinions expressed. We have relied on such information and opinions and have not conducted a comprehensive review of the business, operations or financial condition of the Group and Dream Korea or the current state or likely prospects of the sectors of the toys industry in which the Group and Dream Korea operate.

PROPOSED ACQUISITION

On 18th July, 2003, the Directors announced that J.Y. International, a wholly owned subsidiary of the Company, had on that day entered into a sale and purchase agreement with the Vendors whose names are set out in the section headed “ The sale and purchase agreement ” in the Letter from the Board of this circular to acquire the entire issued share capital of Dream Korea for a consideration of US$17 million (equivalent to approximately HK$132.6 million), payable in cash in full upon completion.

A summary of the terms of the sale and purchase agreement is set out in the section headed “ PROPOSED ACQUISITION ” in the Letter from the Board.

The shareholding and corporate structure of the Group before and after completion of the proposed Acquisition is set out in the section headed “ Shareholding structure of Dream International ” in the Letter from the Board.

Conditions of the Acquisition

Completion of the sale and purchase agreement is conditional upon the following conditions being fulfilled or, where permitted, waived:

• (a) no breach of the warranties given by the Vendors pursuant to the sale and purchase agreement;

• (b) Dream Korea having been established or acquired by the Vendors and having become the sole owner of the marketing, design and product development of the stuffed plush toys businesses free and clear of all encumbrances or third party rights;

• (c) the approval by Independent Shareholders of the sale and purchase agreement and the transaction contemplated there; and

• 13 -

LETTER FROM EQUITAS

• (d) all other consents, if any, of the Stock Exchange and/or any other relevant governmental or regulatory authorities and other relevant third parties.

If any of the conditions (which have not previously been waived by J.Y. International, except for conditions (c) and (d) which cannot be waived) have not been fulfilled on or before 5:00 p.m. on 30th September, 2003 (or such later date as the Vendors and J.Y. International may agree in writing) then the sale and purchase agreement will lapse.

Expected date of completion

The expected date of completion is three business days after and excluding the date the conditions are first satisfied or, where permitted, waived by J.Y. International but no later than 5:00 p.m. on 30th September, 2003 (or such later date as the Vendors and J.Y. International may agree in writing).

INFORMATION ON DREAM KOREA

Dream Korea is a limited liability company incorporated in the Republic of Korea on 4th August, 2003 initially as a wholly owned subsidiary of C&H Korea. As a result of the reorganisation of certain business of C&H Korea, Dream Korea now owns and operates the marketing, design and product development of the plush stuffed toys businesses previously owned and operated by C&H Korea and the shareholders of C&H Korea (who are the Vendors of the Acquisition) became direct shareholders, on a pro rata basis, in Dream Korea. The remaining businesses of C&H Korea comprise the ownership of a commercial building in Seoul, a leather goods and accessory agency, fabric and textiles manufacturing in Sri Lanka through its wholly owned subsidiary Jung Yoon Textiles (Private) Limited and a number of investment holdings including its 58.5% interest in the Company and a 52.5% interest in Gina World Co., Ltd., a Korean company listed on the Korean Securities Dealers Automated Quotation in Korea which is engaged in the business of marketing and distribution of toy products in the Korean market.

The following is a summary of the pro forma unaudited results of Dream Korea as derived from the audited accounts of C&H Korea for the two years ended 31st December, 2002, based on Korean GAAP (Note 1) .

Turnover_(Note 2)_ Commission income Profit before taxation Taxation Profit after taxation	2002 KRW’000 HK$’000 114,712,387 716,952 86,652 542 114,799,039 717,494 4,268,394 26,677 (1,332,492) (8,328) 2,935,902 18,349	2001 KRW’000 HK$’000 100,724,305 610,450 314,200 1,904 101,038,505 612,355 1,652,973 10,018 (581,320) (3,523) 1,071,653 6,495

• 14 -

LETTER FROM EQUITAS

• Notes: 1. The above summary has been translated into Hong Kong dollars using the conversion rates of 160 KRW to one Hong Kong dollar for 2002 and 165 for 2001.

The Korean GAAP are not identical to the Hong Kong GAAP, The Directors have discussed with the auditors of the Company, the directors of C&H Korea and the auditors of C&H Korea the differences between the accounting polices and the Hong Kong and Korean GAAP adopted by the Company and C&H Korea which are relevant to the above summary pro forma unaudited results and the impact to such results if they were restated to conform with Hong Kong GAAP and the Group’s accounting policies. The Directors have noted that except for (i) Korean GAAP and Hong Kong GAAP differences in relation to provision for retirement/severance benefits; and (ii) differences in the accounting policies adopted by C&H Korea in relation to provision for retirement/severance benefits and general provisions against advance payments and other accounts receivables, there are no other material differences in the accounting policies in respect of the plush stuffed toy business of Dream Korea. On this basis, the Directors have represented to us that if the above summary pro forma unaudited results had been prepared in accordance with the accounting policies adopted by the Company, no material differences would be expected.

After completion of the Acquisition, the Directors intend that Dream Korea will continue to follow the Korean GAAP as it is incorporated in Korea and it would be mandatory for Dream Korea to prepare accounts that complies with the Korean GAAP. However, upon consolidation with the Group’s financial statements, Hong Kong GAAP adjustments will be made where necessary.

2. Consists of the sale of goods purchased from the Group and the sale of materials to the Group.

For the year ended 31st December, 2002, the pro forma turnover and profit after taxation achieved by Dream Korea represented an increase of 14% and 174%, respectively, compared with those of the year before. The Directors have informed us that the relatively low profitability of Dream Korea for the year ended 31st December, 2001 was caused mainly by one-off expenses relating to the closing of its German office and an unprofitable sales department, the payment of a sales commission to C&H Toy America (such commission has since been eliminated following a change in business operations) and a bad debt provision against a bankrupt customer. If these expenses were excluded, the profit after taxation of Dream Korea for the year ended 31st December, 2002 would represent an increase of approximately 6% over that of the year before.

The pro forma unaudited net tangible assets of Dream Korea as at 31st December, 2002 amounted to KRW3,932 million, equivalent to approximately HK$24.58 million.

PRINCIPAL FACTORS AND REASONS

In arriving at our opinion and advice stated below, we have considered, inter alia, the following principal factors and reasons:–

1. Background to, and reasons for, the Acquisition

The Company was listed on the Stock Exchange in February, 2002. As explained in the section headed “ REASONS FOR THE PROPOSED ACQUISITION ” in the Letter from the Board, the businesses of Dream Korea were not included in the Group at the time of new listing because of Korean capital gains tax considerations. A deed of undertaking and a commission agreement were entered into between C&H Korea and the Company immediately before the new listing which set out, inter alia, the non-competition undertaking by C&H Korea in favour of the Group and the co-operative arrangement whereby C&H Korea agreed to assist the Group in developing its marketing, design and research and development capabilities.

• 15 -

LETTER FROM EQUITAS

Pursuant to such undertaking and arrangement, C&H Korea is obliged to:

• first offer all customers’ orders received from branded customers (such as Disney, Sega and Banpresto) for production to the Group;

• refer all other sales orders (that is, sales orders from non-branded customers) to the Group;

• assist the Group in developing its marketing, design and research and development capabilities;

• procure that the branded customers to become the direct customers of the Group within five years from the date of listing of the Company; and

• procure Gina World Co., Ltd. to first offer customers’ orders for production to the Group.

As disclosed in the Company’s prospectus for the new listing, it has always been the intention of C&H Korea that the Group will take over the marketing, design and product development capabilities of C&H Korea as well as the responsibilities for the branded customers within five years of the listing.

In addition, the Acquisition will eliminate many of the on-going connected transactions between the Group and the C&H Korea Group, details of which are referred to in paragraph 4. below.

We have discussed with the Directors their reasons for the Acquisition and we consider that the business of Dream Korea well complements that of the Group and that the Acquisition will give rise to a more rational and simplified operational structure for the Group. The Directors believe that recombining Dream Korea with the Group will give rise to greater operating efficiencies from which a more profitable business will result. We agree with the view of the Directors regarding the increased operating efficiencies and we are of the opinion that the resulting cost savings are likely to be significant.

2. Basis of the consideration

Pursuant to the sale and purchase agreement, the consideration payable by J.Y. International for the Acquisition is US$17 million (approximately HK$132.6 million). On the basis of the pro forma unaudited profit after taxation of Dream Korea for the year ended 31st December, 2002 of HK$18,349,000, such consideration represents a price to earnings multiple of 7.2 times.

In assessing the fairness and reasonableness of this multiple, we have compared it with the valuation placed on the Company by the stock market as well as the market valuation of listed companies which are of a similar size. We consider that such comparisons are valid for the simple reason that Dream Korea and the Group represent a near perfect match in terms of business and a broadly based comparable market index will help to put the Company’s market rating in context.

We note that, during the six-month period ended 18th July, 2003 (being the date of the sale and purchase agreement), the Shares in the Company had been trading on the Stock Exchange at prices ranging between HK$1.29 and HK$1.80 per share, which represented price to earnings multiples of between 7.2 times and 10.0 times (based on the Company’s 2002 earnings per share of approximately HK$0.18). As at the Latest Practicable Date, the closing price of the Company’s Shares on the Stock Exchange was HK$1.86, representing a price to earnings multiple of approximately 10.4 times.

• 16 -

LETTER FROM EQUITAS

We further note that, at the time of the new listing in February, 2002, the Company’s Shares were offered to prospective investors at a price to earnings multiple of 8 times (based on the Company’s estimated pro forma fully diluted earnings per share for the year ended 31st December, 2001 of HK$0.149).

We have also considered the valuation represented by the Hang Seng Hong Kong Small-cap (“HSHKSC”) index which is a sub-index of the Hang Seng Hong Kong Composite Index. The HSHKSC index comprises some 64 companies (of which the Company is a constituent) listed and traded on the Stock Exchange with a combined market capitalisation of some HK$150 billion. This index is developed with a base value of 2000 as of 3rd January, 2000. During the six-month period ended 18th July, 2003, the average HSHKSC index was approximately 1037.8, representing a price to earnings multiple of approximately 55 times. Recognising that some of the 64 companies comprising the HSHKSC index may not be comparable with the Company, we have narrowed the constituent companies to comprise only the 27 industrial and commercial companies (excluding banks and financial companies) within the index which showed a profit in 2002. The average prices at which shares of these 27 companies were traded over the six-month period ended 18th July, 2003 represented a weighted average price to earnings multiple of approximately 15 times.

On the basis of the above analysis and comparison, we are of the opinion that the price to earnings multiple of 7.2 times represented by the consideration for the proposed acquisition of the entire issued share capital of Dream Korea is fair and reasonable.

3. Financial effects of the Acquisition

3.1 Earnings

Set out below is a calculation of the pro forma combined profit after taxation of the Group and Dream Korea for the year ended 31st December, 2002 assuming that the Acquisition had been completed for the whole of that year:–

year ended 31st December, 2002 profit after taxation of the Group adjustments profit after taxation of Dream Korea estimated interest income on the cash consideration payable for the Acquisition @2.5% amortisation of the goodwill of HK$108,024,000 arising from the Acquisition over 10 years_(Note)_ pro forma combined profit after taxation	HK$’000 113,891 18,349 (3,315) (10,802) 118,123

HK$0.19

pro forma combined profit after taxation per share

• 17 -

LETTER FROM EQUITAS

Note : No decision has been taken by the Directors in relation to the estimated useful life of the goodwill arising from the Acquisition. For the purpose of this exercise, we have assumed that such goodwill will be amortised on a straight line basis over 10 years.

On the above basis, the Acquisition will have the effect of increasing the Company’s earnings per share by 3.7%. This analysis does not take into account any cost savings which may accrue to the Group as a result of the greater operating efficiencies arising from the Acquisition.

3.2 Net tangible assets

Set out below is a calculation of the pro forma combined net tangible assets of the Group and Dream Korea as at 31st December, 2002 assuming that the Acquisition had been completed as at that date:–

as at 31st December, 2002 net assets of the Group add: net negative goodwill in the accounts of the Group net tangible assets of the Group adjustments net assets of Dream Korea intangible assets in the accounts of Dream Korea consideration payable for the Acquisition pro forma combined net tangible assets pro forma combined net tangible assets per share	HK$’000 521,425 11,978 533,403 24,576 (12) (132,600) 425,367 HK$0.64

On the above basis, the Acquisition will have the effect of decreasing the Company’s net tangible assets per share by 20.3%.

3.3 Funding of the consideration

As at 31st December, 2002, the Group had cash and bank deposits totalling to HK$320.1 million (of which cash and cash equivalent were HK$238.1 million), whilst the Group’s total borrowings amounted to under 8% of its net tangible assets.

As stated in the Letter from the Board, the consideration for the acquisition of Dream Korea of HK$132.6 million will be funded from the Group’s internal cash resources. As the consideration is payable in cash and no issue of Shares is involved, the Acquisition will have no dilutive effect on the percentage shareholdings of Shareholders in the Company.

• 18 -

LETTER FROM EQUITAS

• 3.4 Our analysis of the financial effects of the acquisition

The consideration for the acquisition of Dream Korea represents a premium of some HK$108 million over the underlying net tangible assets. We would not regard this as unusual or unduly onerous as the businesses of Dream Korea are essentially that of an agency in nature. The Directors have represented to us that Dream Korea, capitalised as presently intended, will have sufficient working capital for its immediate requirements.

We note that the pro forma combined profit after taxation of the Group and Dream Korea for the year ended 31st December, 2002, which has been prepared on the basis set out in paragraph 3.1 above, showed an increase of approximately 3.7% after adjusting for a full amortisation of the goodwill arising from the Acquisition over 10 years on a straight line basis but without taking into account any cost savings which may accrue to the Group as a result of the Acquisition. Accordingly, notwithstanding that the Acquisition will have the effect of decreasing the Company’s net tangible assets per share by some 20.7%, we are of the opinion that the Acquisition is in the interests of the Company and its Shareholders.

4. Effect of the Acquisition on connected transactions

Existing connected transactions

According to a circular to shareholders issued by the Company on 30th April, 2003, the Group has the following on-going connected transactions with the C&H Korea Group:

• a) sales to the C&H Korea Group;

• b) referral of sales orders by or to the C&H Korea Group to or by the Group for production of products;

• c) purchases from the C&H Korea Group; and

• d) provision of research and development and product design services by C&H Korea.

• 19 -

LETTER FROM EQUITAS

During the year ended 31st December, 2002, the following connected transactions had been entered into by the Group (as extracted from the Company’s 2002 annual report):

(i) sales to C&H Korea and its subsidiaries: the ultimate holding company: – C&H Korea fellow subsidiaries: – C&H Lanka (P.V.T.) Ltd. – Gina World Co., Ltd. sub-total (ii) purchase from C&H Korea and its subsidiaries: the ultimate holding company: – C&H Korea fellow subsidiaries: – C&H Lanka (P.V.T.) Ltd. – Jung Yoon Textile (Private) Ltd. sub-total (iii) sales commission paid/payable to: the ultimate holding company: – C&H Korea (iv) sales commission received/receivable from: the ultimate holding company: – C&H Korea	2002 HK$’000 401,664 1,469 37,106
	440,239
	105,526 2,525 5,312
	113,363
	1,822
	4,838

Note : We understand that C&H Lanka (P.V.T.) Ltd. has since ceased its operations and is currently in liquidation.

We have been informed by the Directors that, following the completion of the Acquisition, all of the above connected transactions, with the exception of the sales to Gina World Co., Ltd., will be eliminated. We consider that this will result in a significant reduction of the administrative procedures required to monitor and control these transactions, thus positively impacting on the operating efficiencies of the Group.

• 20 -

LETTER FROM EQUITAS

New connected transaction

The plush stuffed toys business of C&H Korea intended to be transferred to Dream Korea operates from seven floors (comprising the B1 to B3 and 7th to 10th floors) of a commercial building at 154-8, Samsung-dong, Kangnam-gu, Seoul, Korea owned by C&H Korea. Upon completion of the Acquisition, Dream Korea will enter into a property lease agreement with C&H Korea to rent such premises. The amount to be paid to C&H Korea under the property lease agreement is KRW716,080,800 annually (equivalent to approximately HK$4,475,505), plus, following normal property lease terms in Korea, a refundable deposit of KRW2,368,340,000 (equivalent to approximately HK$14,802,125). The property lease agreement will be for a term of one year and renewable upon expiry. The Directors have informed us that the property lease agreement is on normal commercial terms and has been determined after arm’s length negotiation with reference to the current rental values applicable to the building and similar buildings in that area.

5. Other considerations

• 5.1 We consider that the acquisition of Dream Korea will not materially alter the Group’s risk profile since the business operations of both Dream Korea and the Group are essentially similar and in many ways highly complementary. The sales of Dream Korea are principally made in US dollars and Japanese yen and the purchases principally in US dollars. The Acquisition will, however, introduce an exposure to Korean won because of the payroll and other office expenses of Dream Korea which amounted to about HK$50 million in the year ended 31st December, 2002.

• 5.2 We have been informed by the Directors that there are no foreign exchange restrictions on repatriation of profits from the Republic of Korea. A withholding tax amounting to 27.5% is, however, payable on the payment of dividends.

OUR OPINION AND ADVICE

Having considered these factors and reasons, we, Equitas Capital Limited, are of the opinion that the terms of the sale and purchase agreement are fair and reasonable so far as the interests of the Independent Shareholders are concerned and that the proposed Acquisition is in the interests of the Company and its Shareholders. Accordingly, we advise the Independent Board Committee to recommend to Independent Shareholders that they should vote in favour of the ordinary resolution as set out in the notice of the extraordinary general meeting to approve the Acquisition.

Yours faithfully, For and on behalf of

Equitas Capital Limited Ng Ming Wah, Charles Managing Director

• 21 -

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

2.1 Interests in securities

As at the Latest Practicable Date, the interests and short positions of each Director and chief executive of the Company in the shares, underlying Shares and debentures of the Company or any associated corporations (within the meaning of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Director is taken or deemed to have under such provisions of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

(a) Interests in Shares

		Number	of Shares held
	Personal	Family	Corporate	Other
Name of Director	interests	interests	interests	interests	Total
Mr. Kyoo YoonChoi	–	–	487,500,000	–	487,500,000
			(Note 1)		(Note 1)
Mr. Chul HongMin	660,000	–	–	–	660,000
				(Note 2)	(Note 2)
Mr. Young M.Lee	200,000	–	–	–	200,000
Mr. Tae SubChoi				(Note 2)	(Note 2)

Notes:

1. 382,850,000 Shares, representing approximately 58.5% of the issued share capital of the Company are held by C&H Korea and 104,650,000 Shares, representing approximately 16.0% of the issued share capital of the Company are held by Uni-Link. Mr. Kyoo Yoon Choi together with his wife, Ms. Woul Hee Cha and his three children, Mr. Woo Jin Choi, Ms. You Jin Choi and Ms. Soo Jin Choi, hold approximately 84.57% of the issued share capital of C&H Korea and Mr. Kyoo Yoon Choi beneficially owns approximately 76% of the issued share capital of Uni-Link.

2. 22 -

GENERAL INFORMATION

APPENDIX

1. 382,850,000 Shares, representing approximately 58.5% of the issued share capital of the Company are held by C&H Korea and 104,650,000 Shares, representing approximately 16.0% of the issued share capital of the Company are held by Uni-Link. Mr. Chul Hong Min and Mr. Tae Sub Choi hold approximately 2.69% and 1.08% of the issued share capital of C&H Korea respectively. Further, Mr. Chul Hong Min and Mr. Tae Sub Choi hold approximately 6% and 1% of the issued share capital of Uni-Link, respectively.

2. (b) Interests in underlying Shares

					Number of
	Date of			Number of	total
Name of	grant of	Exercise	Exercise	share option	underlying	Approximate
Director	share options	period	price	outstanding	Shares	percentage
Chul Hong	7th February,	7th February,	HK$1.18	5,840,000	5,840,000	0.89%
Min	2002	2003 to 7th
		February,
		2012
Tae Sub	15th April,	15th April,
Choi	2003	2004 to	HK$1.43	1,950,000	1,950,000	0.30%
		15th April,
		2013
Young M.	7th February,	7th February,	HK$1.18	3,700,000	3,700,000	0.57%
Lee	2002	2003 to 7th
		February,
		2012

• (c) Interests in associated corporations – C&H Korea

		Number of Shares held	Number of Shares held			Approximately
Name of	Personal	Family	Corporate	Other		percentage
Director	interest	interest	interest	interest	Total	of interest
Kyoo YoonChoi	197,100	221,101	Nil	Nil	418,201	76.21%
		(Note)
Chul HongMin	14,750	Nil	Nil	Nil	14,750	2.69%
Tae SubChoi	5,900	Nil	Nil	Nil	5,900	1.07%

Note: These Shares are held by Ms. Woul Hee Cha, Mr. Kyoo Yoon Choi’s wife, and Ms. You Jin Choi and Ms. Soo Jin Choi, Mr. Kyoo Yoon Choi’s two minor children in which Mr. Kyoo Yoon Choi is deemed to be interested.

• 23 -

GENERAL INFORMATION

APPENDIX

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the Shares, underlying Shares and debentures of the Company or any associated corporations (within the meaning of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Director is taken or deemed to have under such provisions of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

2.2 Interests in services contracts

Each of Mr. Chul Hong Min and Mr. Young M. Lee, being executive Directors and Mr. Kyoo Yoon Choi, being a non-executive Director has entered into a service contract with the Company dated 23rd November, 2001 with effect from 1st December, 2001. Mr. Tae Sub Choi, an executive Director has entered into a service contract with the Company dated 1st March, 2003 with effect from 8th April, 2003. All of these service contracts shall continue until terminated by either party giving three months prior written notice. Save as disclosed in this circular, none of the Directors (including the non-executive Directors) has entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

2.3 Interests in contracts

Save as disclosed in the annual report of the Company in respect of the year ended 31st December, 2002 and this circular, none of the Directors was materially interested in any contracts or arrangements which were subsisting at the Latest Practicable Date and were significant in relation to the business of the Group.

2.4 Interests in assets

As at the Latest Practicable Date, save as disclosed herein, none of the Directors had any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, any member of the Group or which were proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2002, the date to which the latest published audited financial statements were made up.

• 24 -

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors, the following party, as at the Latest Practicable Date, other than a Director or chief executive of the Company, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group:

			Approximate
	Name of	Number of	percentage of
Name of Shareholder	Group member	Shares held	shareholding
C&H Korea	Company	382,850,000	58.5%
		(Note 1)
Uni-Link	Company	104,650,000	16.0%
		(Note 1)
Ms. Woul Hee Cha	Company	487,500,000	74.5%
		(Note 2)

• Note 1: 84.57% of the issued share capital of C&H Korea is held by Mr. Kyoo Yoon Choi, his wife Ms. Woul Hee Cha and his three children Mr. Woo Jin Choi, Ms. You Jin Choi and Ms. Soo Jin Choi. Further, 76% of the issued share capital of Uni-Link is beneficially owned by Mr. Kyoo Yoon Choi. Mr. Kyoo Yoon Choi is therefore deemed to be interested in the entire shareholding of C&H Korea and Uni-Link in the Company.

• Note 2: Ms. Woul Hee Cha is deemed to be interested in 487,500,000 Shares of the Company by virtue of her husband’s, Mr. Kyoo Yoon Choi’s interest in the Company through C&H Korea and Uni-Link .

Save as disclosed in this circular, the Directors are not aware of any person as at the Latest Practicable Date was interested, directly or indirectly, in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

4. MATERIAL CHANGE

The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31st December, 2002 (being the date to which the latest audited combined financial statements of the Group were made up).

5. LITIGATION

So far as the Directors are aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

• 25 -

GENERAL INFORMATION

APPENDIX

6. CONSENT

Equitas (an exempt dealer and exempt investment adviser under the repealed Securities Ordinance) is a deemed licensed corporation under the SFO for types 1, 4, 6 and 9 of the regulated activities. Equitas has given and has not withdrawn its consent to the issue of this circular with the inclusion of its letter dated 8th August, 2003 and of references to its name in the form and context in which they are included.

7. MISCELLANEOUS

• (a) As at the Latest Practicable Date, Equitas did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

• (b) As at the Latest Practicable Date, Equitas did not have any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, any member of the Group or which were proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2002, the date to which the latest published audited financial statements were made up.

• (c) The registered office and principal place of business of the Company is at 8th Floor, Tower 5, China HK City, 33 Canton Road, Tsimshatsui, Kowloon, Hong Kong.

• (d) The share registrar and transfer office of the Company in Hong Kong is Abacus Share Registrars Limited at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (e) The company secretary of the Company is Mr. Wong Wai Sing, Wilson. He is a member of the Hong Kong Society of Accountants.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at 8th Floor, Tower 5, China HK City, 33 Canton Road, Tsimshatsui, Kowloon, Hong Kong up to and including 26th August, 2003 and at the Extraordinary General Meeting:

• (a) the sales and purchase agreement; and

• (b) the service contracts of the executive Directors referred to in paragraph 2.2 above.

• 26 -

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [122 x 65] intentionally omitted <==

DREAM INTERNATIONAL LIMITED 德林國際有限公司

(Incorporated in Hong Kong with limited liability)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVE that an extraordinary general meeting of Dream International Limited (the “Company”) will be held at 10:00 a.m. on Tuesday, 26th August, 2003 at Pacific Room II, Towers Wing, 9/F., The Royal Pacific Hotel and Towers Hong Kong, 33 Canton Road, China Hong Kong City, Tsimshatsui, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution of the Company:

Ordinary Resolution

“THAT the sale and purchase agreement (the “Agreement”) dated 18th July, 2003 between J.Y. International Company Limited and Mr. Kyoo Yoon Choi, Ms. Woul Hee Cha, Mr. Woo Jin Choi, Ms. You Jin Choi, Ms. Soo Jin Choi, Ms. Shin-Hee Cha, Mr. Sung Sick Kim, Mr. Chul Hong Min, Mr. Young Dae Noh, Mr. Tae Sub Choi, Mr. Yong Kook Kim, Mr. Moon Chul Son and Mr. Won Wun Park as vendors, relating to the sale and purchase of shares in Dream INKO Co., Ltd (a copy of which has been produced to this meeting marked “A” and signed by the Chairman of this meeting for the purpose of identification), be and is hereby approved and ratified and the directors of the Company be and are hereby authorised to execute such documents and take such actions on behalf of the Company as they may consider necessary and desirable to complete and give effect to the transactions contemplated by the Agreement.”

Yours faithfully, For and on behalf of

Dream International Limited Young M. Lee

Director

Hong Kong, 8th August, 2003

Registered office and principal place of business in Hong Kong: 8th Floor Tower 5, China HK City 33 Canton Road, Tsimshatsui Kowloon Hong Kong

• 27 -

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend and, subject to the provisions of the articles of association of the Company, vote in his stead. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy and the power of attorney, if any, under which it is signed or a notarially certified copy of that power of attorney or authority, must be returned to the registered office and principal place of business of the company in Hong Kong at 8th Floor, Tower 5, China HK City, 33 Canton Road, Tsimshatsui, Kowloon, Hong Kong, and in any event no less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof.

3. Where there are joint registered holders of any shares, any one of such persons may vote at the extraordinary general meeting, either personally or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint holders be present at the extraordinary general meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the company in respect of such shares shall alone be entitled to vote in respect thereof.

4. 28 -