Transfer of Loan Note

Character Group PLC
4 October 2001



         The Character Group PLC ('Character Group' or 'the Company')

                      Transfer of Convertible Loan Note


At a meeting of the Board of the board of directors of Character Group
yesterday, the transfer of the £4.6 million convertible loan note, issued by
the Company on 16 July 2001 (the 'Loan Note'), by Toys Investment SA ('TISA')
to Valtidone SpA ('Valtidone') was duly approved. Approval by the Board was
subject to TISA and Valtidone satisfying the Board that Valtidone is
independent of TISA. Following consultation with the Company's brokers,
Collins Stewart Limited and the Panel on Takeovers and Mergers, the Board was
satisfied in this regard.

Valtidone is an investment vehicle of Mr Fabrizio Bertola (of Milan, Italy)
and of certain other members of the Bertola family.

The Loan Note bears interest at a rate of 5% per annum on the principal amount
outstanding from time to time and such interest is payable at quarterly
intervals in arrears on 1 October 2001 and thereafter on 30 September, 31
December, 31 March and 30 June in every year until redeemed or converted. The
Loan Note is redeemable on 30 days written notice expiring on or at any time
after 16 July 2004 or at other times in the event of the happening of an event
of default by the Company.

The Loan Note is convertible into fully paid ordinary shares of 5 pence in the
capital of the Company, at a conversion price of 40 pence per ordinary share.
Conversion in full would give rise to the issue and allotment by the Company
of 11,500,000 new ordinary shares (equivalent to approximately 21.8% of the
fully diluted ordinary share capital of the Company).

The exercise of conversion rights is subject to a number of conditions
principally being:


 i. that the holder of the Loan Note is not a concert party in relation to TISA
    (within the meaning of the City Code on Takeovers and Mergers); and

ii. that there will not as a consequence of the allotment of shares upon
    conversion be less than 25% of the Company's issued shares in public hands
    (within the meaning of the Listing Rules of the UK Listing Authority).



4 October 2001