CHYY Development Group Limited — Capital/Financing Update 2004

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

IIN INTERNATIONAL LIMITED 國訊國際有限公司[*]

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8128)

DISCLOSEABLE TRANSACTION INVOLVING

THE ACQUISITION AND SUBSCRIPTION OF 51% OF THE ENTIRE ISSUED SHARE CAPITAL OF TM TECHNOLOGY CORPORATION AND ISSUE OF CONSIDERATION SHARES

The Board is pleased to announce that on 28 May 2004, FFGL (as purchaser), a wholly-owned subsidiary of IIN, has entered into the Sale and Purchase Agreement with KIHL (as vendor), DVL (as assignor), SHEL (as assignor) and Mr. Li (as warrantor) in relation to the acquisition of 51% shareholding interest in TM Technology Corporation, incidental to which, FFGL would also:

1. take the assignment of two investor’s loan of US$325,000 each due and payable by TM Technology Corporation to DVL and SHEL respectively at cost; and

2. subscribe for 255,000 ordinary shares of US$0.01 each in the share capital of TM Technology Corporation for an aggregate amount of RMB2,360,000.

TM Technology Corporation is a company incorporated under the laws of the British Virgin Islands with an authorised share capital of US$50,000.00 divided into 5,000,000 shares of US$0.01 each. TM Technology Corporation is the sole beneficial owner of 100% Equity Interest in Chengdu TM Network Corporation (成都天盟網絡技術有限公司 ), a limited liability company incorporated under the laws the People’s Republic of China with a registered capital in the amount of RMB30,000,000.

Each of the percentage ratios (except the profits ratio) is more than 5% but less than 25%. The transaction contemplated herein constitutes a discloseable transaction for IIN. IIN will issue a circular within 21 days after publication of this announcement to its shareholders setting out further details of the Sale and Purchase Agreement and other information prescribed by the GEM Listing Rules.

* For identification purpose only

– 1 –

The consideration in respect of the transactions contemplated herein will be satisfied in the following manner:

1. the consideration in the amount of RMB9,100,000 payable by FFGL in respect of the Acquisition will be comprised of the Acquisition Cash Consideration (representing approximately RMB2,280,000), payable by a banker’s draft or a cheque drawn in favour of TM Technology Corporation and the issuance and allotment of the Acquisition Consideration Shares (representing approximately RMB6,820,000) to KIHL;

2. the consideration in the amount of US$650,000 payable by FFGL in respect of the Assignment will be satisfied by issuance and allotment of the Assignment Consideration Shares (comprising 57,613,640 ordinary shares in IIN to be issued and allotted at HK$0.088 per share) equally split between DVL and SHEL; and

3. the Subscription Price of RMB2,360,000 (or an equivalent amount in Hong Kong dollars, being HK$2,205,607.48) shall be satisfied by a banker’s draft or cheque drawn in favour of TM Technology Corporation.

The Directors (including the independent non-executive directors) consider that the businesses transacted under the Sale and Purchase Agreement are in the best interest of the Company and its Shareholders as a whole and the terms of it are entered into in a normal commercial basis which are fair and reasonable as far as the shareholders are concerned.

A circular containing details of the businesses transacted under the Sale and Purchase Agreement including, amongst other matters, the Acquisition and the Subscription will be sent within 21 days from the date of this announcement to shareholders of the Company in accordance with the requirements under the GEM Listing Rules as soon as practicable.

The Sale and Purchase Agreement was signed by the Parties after 12:30 p.m. on 28 May 2004 and the Company has, in accordance with Rule 9.06 and 17.10 of the GEM Listing Rules, forthwith requested the suspension of trading of its shares on GEM with effect from 2:30 p.m. on 28 May 2004. The Company has made an application to the Stock Exchange to resume trading of its shares on GEM from 9:30 a.m. on 4 June 2004.

SALE AND PURCHASE AGREEMENT

Date: 28 May 2004

Parties of the Sale and Purchase Agreement

Purchaser: Future Faith Group Limited, an investment holding company wholly owned by IIN, incorporated under the laws of the British Virgin Islands and having its registered office at TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands.

Vendor: Kaiser Investment Holdings Limited, an investment holding company incorporated under the laws of the British Virgin Islands and having its registered office at Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands. KIHL is wholly owned by Mr. Li.

– 2 –

Assignors:

• DragonTech Ventures Limited is a venture investment company incorporated under the laws of Cayman Islands and having its registered office at P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies. DVL’s investments focus mainly in the information technology, biotechnology and industrial technology sector in the PRC.

Star Harvest Enterprise Ltd. is a venture investment company incorporated under the laws of British Virgin Islands and having its registered office at 2nd Floor, Abbott Building, Road Town, Tortola, British Virgin Islands. SHEL’s investments focus mainly in the technology sector.

Warrantor:

Mr. Li Nong, holder of PRC Passport Number G05230016, is a PRC citizen of 19th Floor, Building C, Crown Building Bi-Pacific Plaza, No. 58, North Kehua Road, Chengdu, Sichuan Province, People’s Republic of China (610041), the PRC. Mr. Li is the sole beneficial owner of KIHL.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of KIHL, DVL, SHEL and Mr. Li is an independent third party not connected with the Directors, chief executive, substantial shareholders or management shareholders of the Company or its subsidiaries or any of their respective Associates.

Transactions contemplated under the Sale and Purchase Agreement

1. Acquisition of 51% shareholding interest in TM Technology Corporation

FFGL agreed to:

1. acquire 51% of the entire issued share capital of TM Technology Corporation from Kaiser Investment Holdings Limited for a consideration of RMB9,100,000 comprised of the Acquisition Cash Consideration and Acquisition Consideration Shares; and

2. take up the assignment of two investor’s loans due and payable by TM Technology Corporation to DVL and SHEL in the amount of US$325,000 each, totaling US$650,000.

Please refer to diagram (b) below in respect of the shareholding of TM Technology Corporation immediately after the Acquisition.

2. Subscription of shares in TM Technology Corporation

FFGL agreed to subscribe for 255,000 ordinary shares of US$0.01 each in the share capital of TM Technology Corporation for cash at a consideration of RMB2,360,000. The subscription represents approximately 17% of the issued share capital of TM Technology Corporation as enlarged by the subscription by both FFGL and KIHL.

KIHL has agreed to subscribe for 245,000 ordinary shares of US$0.01 each in the share capital of TM Technology Corporation at a consideration of RMB2,280,000 which will be satisfied by the full amount of the Acquisition Cash Consideration. The Kaiser Subscription represents approximately 16.33% of the issued share capital of TM Technology Corporation as enlarged by the subscription by both FFGL and KIHL.

– 3 –

Please refer to diagram (c) below in respect of the shareholding of TM Technology Corporation immediately after the Acquisition, Subscription and Kaiser Subscription.

3. Assignment of investor’s loans

FFGL agreed to take up the assignment of two investor’s loans of US$325,000 each due and payable by TM Technology Corporation to DVL and SHEL respectively at cost.

• (a) Shareholding Structure of TM Technology Corporation immediately prior to the Acquisition and Subscription:

==> picture [313 x 157] intentionally omitted <==

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

KIHL DVL SHEL
77.5% 11.25% 11.25%
TM Technology Corporation
100%
Chengdu TM Network Corporation
----- End of picture text -----

• (b) Shareholding Structure of TM Technology Corporation immediately after the Acquisition but before the Subscription:

==> picture [313 x 157] intentionally omitted <==

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

FFGL KIHL DVL SHEL
51% 26.5% 11.25% 11.25%
TM Technology Corporation
100%
Chengdu TM Network Corporation
----- End of picture text -----

• (c) Shareholding structure of TM Technology Corporation immediately after the Acquisition, Subscription and Kaiser Subscription:

==> picture [313 x 157] intentionally omitted <==

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

FFGL KIHL DVL SHEL
51% 34% 7.5% 7.5%
TM Technology Corporation
100%
Chengdu TM Network Corporation
----- End of picture text -----

– 4 –

(1), (2) and (3) are transactions contemplated under and form part and parcel to the Sale and Purchase Agreement. Upon Completion, FFGL will hold 51% shareholding interest in TM Technology Corporation and the same will become a subsidiary of IIN.

Consideration

1. The total consideration under the Sale and Purchase Agreement is approximately HK$15,780,000. The consideration pertaining to the Acquisition shall be payable in the following manners:

(a) Acquisition Cash Consideration

The Acquisition Cash Consideration represents approximately 25% of the aggregate consideration of the Acquisition being approximately RMB2,280,000 (or an equivalent amount in Hong Kong dollars, being HK$2,130,841.12) payable on Completion by way of a cheque or cashier order drawn. Pursuant to the Sale and Purchase Agreement, KIHL would invest the Acquisition Cash Consideration in TM Technology Corporation via the Kaiser Subscription. As a result, the Acquisition Cash Consideration will be settled by FFGL by way of a cheque or cashier order drawn in favour of TM Technology Corporation which will constitute the subscription money under the Kaiser Subscription.

(b) Acquisition Consideration Shares

The Acquisition Consideration Shares represent approximately 75% of the aggregate consideration of the Acquisition being approximately RMB6,820,000 (or an equivalent amount in Hong Kong dollars, being HK$6,373,831.78) payable by way of issuance and allotment of 49,029,480 consideration shares (representing approximately 3.41% and approximately 3.18% of the existing and enlarged issued share capital of IIN respectively) in IIN to KIHL, credited as fully paid, calculated at HK$0.13 per share on Completion.

The issue price of HK$0.13 per consideration share represents a premium of approximately 88.41% to the closing price of HK$0.069 per Share as quoted on the Stock Exchange on 28 May 2004 (the trading day on which the Sale and Purchase Agreement was signed) and a premium of approximately 71.05% to the average closing price of HK$0.076 per Share of the 10 consecutive trading days ending on 28 May 2004 (the trading day on which the Sale and Purchase Agreement was signed), as quoted on the Stock Exchange.

1. The consideration pertaining to the Assignment shall be payable in the following manners:

(a) Assignment Consideration Shares

The Assignment Consideration Shares represent 100% of the consideration under the Assignment being US$650,000 (being the aggregate of two loans of US$325,000 each payable to DVL and SHEL) payable by way of issuance and allotment of 57,613,640 consideration shares (representing approximately 4.01% and approximately 3.73% of the existing and enlarged issued share capital of IIN respectively) in IIN to DVL and SHEL, credited as fully paid, at HK$0.088 per share on Completion.

– 5 –

The issue price of HK$0.088 per consideration share represents a premium of approximately 27.54% to the closing price of HK$0.069 per Share as quoted on the Stock Exchange on 28 May 2004 (the trading day on which the Sale and Purchase Agreement was signed) and a premium of approximately 15.79% to the average closing price of HK$0.076 per Share of the 10 consecutive trading days ending on 28 May 2004 (the trading day on which the Sale and Purchase Agreement was signed), as quoted on the Stock Exchange.

1. The Subscription Price in cash in the gross amount of RMB2,360,000 (or its equivalent amount in Hong Kong dollars, being HK$2,205,607.48) or otherwise RMB9.25 (or its equivalent amount in Hong Kong dollars, being HK$8.64) per Subscription Share is payable by FFGL to TM Technology Corporation on Completion.

So far as is known, or can be ascertained after reasonable enquiry, by the Directors, the extent of shareholding of the Substantial Shareholders of the Company are as follows (assuming there is no further issue of Shares before Completion and there is no acquisition of Shares by the Substantial Shareholders before Completion):

Note:

1. The sole shareholder of Multico Holdings Limited and Huiya South China Investments Limited is Transpac Nominees Pte Ltd which in turn is a wholly-owned subsidiary of Transpac Capital Pte Ltd. Transpac Nominees Pte Ltd, through Multico Holdings Limited and Huiya South China Investments Limited, is holding the 371,988,350 Shares as nominee for three investment funds, namely Transpac Capital 1996 Investment Trust, Transpac Capital Parallel 1996 Investment Trust and Transpac Managers III Ltd in respect of approximately 96.0 per cent., 3.0 per cent. and 1.0 per cent. of the 371,988,350 Shares.

2. Wu Shu Min is an executive Director.

3. Zhu Rong is a non executive Director.

Basis of Determining the Consideration

No valuation report has been prepared in determining the various considerations and Subscription Price contemplated under the Sale and Purchase Agreement.

Notwithstanding the foregoing, the basis of determining the various consideration and Subscription Price contemplated under the Sale and Purchase Agreement has been arrived at after arm’s length commercial negotiation among the parties having regard to the relevant factors including the economics of the

– 6 –

transaction and being a price acceptable to the Parties, taking into consideration of the valuable customer network developed by the Chengdu TM Network Corporation, the prospects of the business, the possibility of any expansion plan that the Chengdu TM Network Corporation may implement, the strategic value of Chengdu TM Network Corporation as well as the potential business opportunity provided to IIN.

Conditions precedent

Completion is conditional upon the fulfillment or waiver of the following conditions:

1. the granting by the Listing Committee of the Stock Exchange of the listing of, and permission to deal in, the consideration shares to be issued by IIN upon Completion;

2. the approval from the Ministry of Foreign Trade and Economic Cooperation of Chengdu City in relation to TM Technology Corporation being the owner of the entire registered capital of Chengdu TM Network Corporation;

3. the warranties given by Mr. Li remaining true and accurate and not misleading in any material respect as given at the date of the Sale and Purchase Agreement and at Completion; and

4. if so required, the consents, licences, authorisations, orders, grants, confirmations, permissions, registrations, filings and other approvals necessary or desirable in connection with the implementation of the Sale and Purchase Agreement required by the Parties having been obtained from appropriate governments, governmental, supernational or trade agencies, courts, other regulatory bodies, banks, financial institutions or other third parties on terms satisfactory to the parties hereto and such consents, licences, authorisations, order, grants, confirmations, permissions, registrations and other approvals remaining in full force and effect.

The warranties given by the warrantor cover, amongst other matters, the corporate status, shareholding and capital structure , business activities, accounts and financial information, taxation matters, book keeping records, claims and litigations, properties and intellectual property rights of both TM Technology Corporation and Chengdu TM Network Corporation.

Completion

Completion shall take place as soon as practicable after all the condition precedents are fulfilled (or waived by the relevant Party) or such other date as may be agreed between the Parties. All conditions precedent have to be fulfilled (or otherwise waived by the relevant Party) on or before 15 June 2004 or such other date the Parties may agree between themselves.

INFORMATION ABOUT IIN

The Group is a network solution provider in the PRC, engaging principally in providing network solutions to the PRC telecommunications service providers (primarily fixed line, mobile and data communications operators).

– 7 –

INFORMATION ABOUT CHENGDU TM NETWORK CORPORATION

Chengdu TM Network Corporation is a wholly owned foreign enterprise incorporated under the laws the People’s Republic of China with a registered capital in the amount of RMB30,000,000 whose registered office is at Technology Innovation Center No.5, Gao Peng Avenue, Hi-Tech Zone, Chengdu, PRC.

TM Technology Corporation is the sole beneficial owner of the Equity Interest. The principal business activities of Chengdu TM Network Corporation include, amongst other matters, research and development on software and hardware of computer, sales and provision of maintenance services to retail customers, provision of technical consultation services to automation control system and sophisticated computer network engineering and management system. Products of Chengdu TM Network Corporation which have been released to the market includes (i) Calling Data Recording System, (ii) Wireless Management and Monitoring System; and (iii) IP Management System.

According to the PRC accounting standards (“ PRCGAAP ”), for the two financial years ended 31 December 2002 and 31 December 2003, Chengdu TM Network Corporation recorded an unaudited profit (both before and after taxation and extraordinary items) of approximately RMB617,000 (or an amount equivalent to approximately HK$577,000) and RMB523,000 (or an amount equivalent to approximately HK$489,000) respectively. As reported under the PRCGAAP, as at 31 December 2003, the unaudited total asset value and unaudited net asset value of Chengdu TM Network Corporation amounts to approximately RMB31,535,000 (or an amount equivalent to approximately HK$29,472,000) and RMB26,504,000 (or an amount equivalent to approximately HK$24,770,000) respectively.

Under the Hong Kong accounting standards (“ Hong Kong GAAP ”), as at 31 December 2003, the audited total asset and audited net asset value of Chengdu TM Network Corporation amounts to approximately RMB17,836,000 (or an amount equivalent to approximately HK$16,670,000) and RMB10,007,000 (or an amount equivalent to approximately HK$9,352,000).

Under Hong Kong GAAP, the unaudited total asset and net asset value of TM Technology Corporation as at 31 March 2004 are approximately HK$5,070,000 and HK$0 respectively. No profit is recorded for TM Technology Corporation as it is an investment holding company which has not engaged in any kind of business activities since its incorporation.

Pursuant to the Sale and Purchase Agreement, the board of directors of TM Technology Corporation shall be comprised of four members, two of which (including the Chairman who will have the casting vote) shall be appointed by FFGL, one will be appointed by KIHL and the remaining one will be appointed jointly by DVL and SHEL. The foregoing arrangement will ensure FFGL have the control of the board after Completion.

REASONS FOR ENTERING INTO THE SALE AND PURCHASE AGREEMENT

The Directors considered that Acquisition and Subscription of shares in Chengdu TM Network Corporation is in line with the statement of business objective, future plans and strategies as stated in IIN’s prospectus dated 26 November, 2001. The business and products of Chengdu TM Network Corporation are complementary to those of the Group and it is expected that, by the Acquisition and Subscription, the Group would be able to implement its strategy to expand its business scope and further strengthen its market position, including the entry into the wireless network management system arena.

– 8 –

GENERAL

The Directors consider that the Sale and Purchase Agreement was entered into on normal commercial terms in the ordinary and usual course of business of the Group and that the terms of the Sale and Purchase Agreement are fair and reasonable and in the interests of the Group so far as the shareholders of IIN are concerned.

The consideration shares will be allotted and issued pursuant to the general mandate granted to the Directors by the shareholders of IIN at the annual general meeting of IIN held on 28 January 2004.

IIN will make an application to the Listing Committee of GEM for the listing of, and permission to deal in, 106,643,120 consideration shares to be issued pursuant to the Sale and Purchase Agreement.

The transactions contemplated under the Sale and Purchase Agreement constitute a discloseable transaction under Chapter 19 of the GEM Listing Rules. IIN will send a circular within 21 days after publication of this announcement to its shareholders setting out further details of the Sale and Purchase Agreement and other information prescribed by the GEM Listing Rules.

The Sale and Purchase Agreement was signed by the Parties after 12:30 p.m. on 28 May 2004 and the Company has, in accordance with Rule 9.06 and Rule 17.10 of the GEM Listing Rules, forthwith requested the suspension of trading of its shares on GEM with effect from 2:30 p.m. on 28 May 2004. The Company has made an application to the Stock Exchange to resume trading of its shares on GEM from 9:30 a.m. on 4 June 2004.

DEFINITIONS

• “Acquisition” means the acquisition of 51% of the entire issued share capital of TM Technology Corporation under the Sale and Purchase Agreement for a consideration of RMB9,100,000

• “Acquisition Cash means the cash consideration payable by FFGL in the amount of Consideration” RMB2,280,000 in the form of a cheque or cashier order drawn in favour TM Technology Corporation represent approximately 25% of the aggregate consideration under the Acquisition

• “Acquisition Consideration means 49,029,480 ordinary shares in IIN of HK$0.13 per share to be issued Shares” and allotted to Kaiser Investment Holdings Limited representing approximately 75% of the aggregate consideration under the Acquisition

• “Assignment” means the assignment without recourse of two investor’s loans of US$325,000 each due and payable by TM Technology Corporation to DragonTech Ventures Limited and Star Harvest Enterprise Ltd., which form part and parcel to the Sale and Purchase Agreement

• “Assignment Consideration means 57,613,640 ordinary shares in IIN of HK$0.088 per share to be Shares” issued and allotted to DragonTech Ventures Limited and Star Harvest Enterprise Ltd. as to 28,806,820 ordinary shares each respectively

– 9 –

– 10 –

As at the date of this announcement, the member of the Board comprises executive directors namely, Wu Shu Min, Chang Ye Min, William, Jin Feng, non-executive directors namely Zhu Rong, Lo Wai Shun, Christopher Leong Ka Cheong and independent non-executive directors namely, Chan Wai Dune, Ng Ching Wo and Chen Junliang.

By Order of the Board IIN INTERNATIONAL LIMITED Chang Ye Min, William President & Chief Executive Officer

Hong Kong, 3 June 2004

This announcement, 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 IIN. The Directors, having made all reasonable enquiries, confirm that, to the best of their

– 11 –

knowledge and belief: (i) the information contained in this announcement is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this announcement misleading; and (iii) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable

For the purpose of this announcement, unless otherwise indicated, the amount of HK$ have been translated to at the rate of HK$7.8 : US $1.00 and HK$1.00 : RMB1.07 respectively.

This announcement will remain on the GEM website on the “Latest Company Announcements” page for at least 7 days from the day of its posting and on the website of IIN at www.iini.com.

– 12 –