AV Concept Holdings Limited — Proxy Solicitation & Information Statement 2004

Feb 23, 2004

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 your stockbroker or other licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in the Company (as defined herein), you should at once hand this circular to the purchaser or transferee or to the bank, the stockbroker or other agent through whom the sale or transfer 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 disclaim 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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AV CONCEPT HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

DISCLOSEABLE TRANSACTION

PLACING OF SHARES IN REIGNCOM LIMITED POSSIBLE MAJOR DISPOSAL

AND

PROPOSED DISTRIBUTION

A notice convening an extraordinary general meeting of the Company to be held at The Conference Room, Units 11-15, 11/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong on Wednesday, 10 March 2004 at 11:00 a.m. is set out on page 14 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s Hong Kong branch share registrar, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

23 February 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14

DEFINITIONS

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

• “Announcement”

the announcement of the Company dated 30 January 2004 regarding the Placing

• “associate(s)”

has the meaning ascribed to it under the Listing Rules

• “Board”

the board of Directors

• “Company”

AV Concept Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “Directors”

the directors of the Company

• “Distribution”

a distribution of HK$0.10 per share of the Company in cash to the Shareholders whose names appear on the register of members of the Company on the Record Date.

• “Extraordinary General Meeting”

the extraordinary general meeting of the Company to be held at The Conference Room, Units 11-15, 11/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong on Wednesday, 10 March 2004 at 11:00 a.m. to consider and approve, the disposal of all or any part of the remaining shares of Reigncom held by the Company and the Distribution

• “Group”

the Company and its subsidiaries

• “Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

• “HK$”

Hong Kong dollars

• “KOSDAQ”

The KOSDAQ Stock Exchange, Inc. in the Republic of Korea

• “Latest Practicable Date”

20 February 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular

• “Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

• “Placing”

the placing by the Placing Agent of 150,000 shares in Reigncom

• “Placing Agent”

CLSA Equity Capital Markets Limited

– 1 –

DEFINITIONS

“Placing Agreement” an agreement entered into by the Company and the Placing Agent on 28 January 2004 in respect of the Placing “Record Date” 10 March 2004, being the date for the determination of the entitlements to the Distribution “Reigncom” Reigncom Limited, a company incorporated in the Republic of Korea with limited liability, the shares of which are listed on KOSDAQ “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Shareholder(s)” holder(s) of the shares of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Won” Korean Won, the lawful currency of the Republic of Korea

For the purpose of this circular, amounts denominated in Won have been translated, for the purpose of illustration only, into Hong Kong dollars at a rate of HK$1 = 153 Won. No representation is made that any amount in Won or Hong Kong dollars could have been or could be converted at the above rate or at any other rates or at all.

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LETTER FROM THE BOARD

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AV CONCEPT HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

Directors:

So Yuk Kwan (Chairman) Lee Jeong Kwan So Chi On Lai Yat Hung, Edmund Lai Yun Wing Dr. Hon. Lui Ming Wah, JP Charles E. Chapman

Registered office: Ugland House South Church Street P.O. Box 309 George Town Grand Cayman Cayman Islands British West Indies

• Independent non-executive Directors

Principal office: Units 11-15 11th Floor, Block A Focal Industrial Centre 21 Man Lok Street Hunghom, Kowloon Hong Kong

23 February 2004

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION PLACING OF SHARES IN REIGNCOM LIMITED POSSIBLE MAJOR DISPOSAL

AND SPECIAL DISTRIBUTION

INTRODUCTION

As disclosed in the Announcement, the Company entered into the Placing Agreement with the Placing Agent on 28 January 2004 pursuant to which the Placing Agent on 29 January 2004 placed 150,000 shares in Reigncom held by the Company at an aggregate sale price of approximately HK$92.6 million. Upon completion of the Placing, the Company’s percentage interest in the share capital of Reigncom was reduced from approximately 14.7% to approximately 12.4%.

The purpose of this circular is to give you, among other things, further information on the Placing.

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LETTER FROM THE BOARD

THE PLACING

Pursuant to the Placing Agreement, the Placing Agent on 29 January 2004 placed 150,000 shares in Reigncom held by the Company at an aggregate sale price of approximately HK$92.6 million to independent third parties not connected with the Company or the directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates. The consideration received by the Company pursuant to the Placing was determined on an arm’s length basis between the Company and the Placing Agent by reference to the market price of Reigncom’s shares on KOSDAQ.

The Company has agreed with the Placing Agent that the Company will not, without the prior written consent of the Placing Agent, place any further shares in Reigncom for a period of three months from the date of the Placing unless the new placing price shall be not less than 30% above the placing price of the Placing.

Upon completion of the Placing, the Company’s percentage interest in the share capital of Reigncom was reduced from approximately 14.7% to approximately 12.4%. As at the Latest Practicable Date, the Company holds 825,840 shares in Reigncom, representing an approximately 12.4% interest in Reigncom.

The Placing Agent and its ultimate beneficial owner are independent third parties not connected with the Company or the Directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates.

INFORMATION ON REIGNCOM

Reigncom is a Korean company listed on KOSDAQ since 19 December 2003. As at 29 January 2004 and the Latest Practicable Date, the total market capitalization of Reigncom was approximately HK$4,100 million and HK$4,000 million, respectively. Reigncom and its subsidiaries are principally engaged in the design and sale of MP3 players and other electronic products worldwide. Reigncom is accounted for as an investment in the Company’s financial statements.

The audited profits of the Reigncom group of companies before and after taxation and minority interests for the year ended 31 December 2001 were approximately 7,800 million Won (equivalent to approximately HK$51 million) and approximately 6,200 million Won (equivalent to approximately HK$41 million) respectively, and for the year ended 31 December 2002 were approximately 9,000 million Won (equivalent to approximately HK$59 million) and approximately 8,300 million Won (approximately HK$54 million) respectively. The audited net asset value of the Reigncom group of companies as at 31 December 2002 was approximately 22,700 million Won (equivalent to approximately HK$148 million).

REASONS FOR AND BENEFITS OF THE PLACING

The Group is principally engaged in the marketing and distribution of electronic components, and the design, manufacture and original equipment manufacture of electronic products and Internet appliances.

The Directors consider that it is in the best interests of the Shareholders as a whole for the Company to realize some of the Company’s investment in Reigncom. A gain of approximately HK$76.6 million (net of placing fees and Korean taxes) will be recorded by the Company as a result of the

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LETTER FROM THE BOARD

Placing. The Company will receive net proceeds from the Placing of approximately HK$81.7 million which will be applied as the general working capital of the Group and, subject to the approval by Shareholders, to finance the payment of the Distribution.

POSSIBLE MAJOR DISPOSAL

Whilst the Company does not have any definite plans to dispose of any further shares in Reigncom in the immediate future, the Company wishes to have the flexibility to dispose of further shares in Reigncom to independent third parties who are not connected with the Company or the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or to any of their respective associates should this be in the best interests of the Company.

Any further disposal of shares in Reigncom by the Company may or may not constitute a major transaction for the Company under the Listing Rules, on its own or when aggregated with the Placing (if the Stock Exchange aggregates any further disposals by the Company of shares in Reigncom with the Placing under Rule 14.04(5) of the Listing Rules). Any major transaction of the Company must be made conditional on approval by the Shareholders under Rule 14.10 of the Listing Rules. It would not be practicable for the Company to seek approval from Shareholders prior to every further disposal of shares in Reigncom given that the shares in Reigncom are traded on the KOSDAQ. It is unlikely that potential placees would be willing to commit to purchase shares from the Company conditional upon the Company obtaining Shareholders’ approval when shares in Reigncom are immediately available in the market. In order to comply with the Listing Rules and allow the Company flexibility to dispose of further shares in Reigncom to independent third parties should this be in the best interests of the Company, the Company wishes to seek advance Shareholders’ approval at the Extraordinary General Meeting for any such further disposal of up to 825,840 shares in Reigncom (being the number of shares in Reigncom held by the Company as at the Latest Practicable Date) during a period of 12 months from the date of the Extraordinary General Meeting. Such advance Shareholders’ approval will enable the Directors of the Company to exercise their judgement in determining whether to dispose of further shares in Reigncom and the timing and terms of any such disposal(s) having regard to the market price of Reigncom shares from time to time should the Directors consider such to be in the best interests of the Company. The Company will only proceed with any further disposal of shares in Reigncom if the independent non-executive Directors of the Company consider the terms of such to be fair and reasonable and in the best interests of the Company.

The Company will make further announcement(s) in respect of any further disposal of shares in Reigncom, if any, as may be required pursuant to the Listing Rules. The Company will disclose details of any further disposal(s) of shares in Reigncom which may be made during the relevant financial year (including the view of the independent non-executive Directors and the gain or loss on any such disposal(s)) in the Company’s relative annual report, interim report and results announcement.

The Company intends to apply the proceeds from any future disposal of shares in Reigncom as the general working capital of the Group. Depending on the circumstances prevailing at the time of any further disposal of shares in Reigncom, the Company may consider whether it is appropriate to propose any further special dividend to the Shareholders out of the proceeds from any future disposal of shares in Reigncom.

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LETTER FROM THE BOARD

SPECIAL DISTRIBUTION

The Directors will hold a board meeting of the Company on 3 March 2004 to recommend the Distribution of HK$0.10 per share of the Company (equivalent to a total Distribution of approximately HK$40 million) in cash to the Shareholders whose names appear on the register of members of the Company on the Record Date. The proposed Distribution is subject to recommendation at the Board meeting to be held on 3 March 2004 and the approval by the Shareholders at the Extraordinary General Meeting and will be payable on 1 April 2004.

The Company had an audited consolidated net tangible asset value as at 31 March 2003 of approximately HK$208 million and an unaudited consolidated net tangible asset value as at 30 September 2003 of approximately HK$236 million. The Company recorded an audited consolidated net profit attributable to shareholders of approximately HK$13 million for the year ended 31 March 2003 and an unaudited consolidated net profit attributable to shareholders of approximately HK$28 million for the six months ended 30 September 2003. The Company paid an aggregate of interim and final dividend for the year ended 31 March 2003 of approximately HK$7 million and an interim dividend for the six months ended 30 September 2003 of approximately HK$9 million. The Company will record a gain of approximately HK$76.6 million (net of placing fees and Korean taxes) as result of the Placing, the Directors (including the independent non-executive Directors) are of the view that the Distribution of approximately HK$40 million is appropriate.

CLOSURE OF REGISTER OF MEMBERS

The register of members will be closed from 9 March 2004 to 10 March 2004 (both days inclusive) during which period no transfer of shares will be effected. In order to qualify for the proposed Distribution, Shareholders should ensure that all transfers, accompanied by the relevant shares certificates, must be lodged with the Company’s Hong Kong branch share registrar, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 8 March 2004.

REVISED USE OF PROCEEDS OF THE PLACING

As stated in the Announcement, it was the Company’s original intention to apply the whole of the net proceeds of the Placing of approximately HK$81.7 million as general working capital of the Group. As a result of the proposed Distribution, the Company has revised the intended application of the net proceeds of the Placing. Subject to the approval by Shareholders of the Distribution, the Company shall apply approximately HK$40 million of the net proceeds of the Placing to finance the payment of the Distribution and the balance of approximately HK$41.7 million of the net proceeds of the Placing shall be applied as general working capital of the Group.

EXTRAORDINARY GENERAL MEETING

Set out on page 14 of this circular is a notice convening the Extraordinary General Meeting at which ordinary resolutions will be proposed to approve any further disposal of up to 825,840 shares in Reigncom (being the number of shares in Reigncom held by the Company as at the Latest Practicable Date) during a period of 12 months from the date of the Extraordinary General Meeting and the Distribution.

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LETTER FROM THE BOARD

A form of proxy for use at the Extraordinary General Meeting is enclosed. Whether or not you are able to attend the Extraordinary General Meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the Extraordinary General Meeting. Completion and return of your form of proxy will not preclude you from attending and voting in person at the Extraordinary General Meeting should you so wish.

RECOMMENDATION

The Directors consider that it is fair and reasonable and in the interests of the Shareholders as a whole to allow the Company flexibility to dispose of further shares in Reigncom to independent third parties should this be in the best interests of the Company, and recommend the Shareholders to vote in favour of the resolution to be proposed at the Extraordinary General Meeting to approve any further disposal(s) of up to 825,840 shares in Reigncom (being the number of shares in Reigncom held by the Company on the Latest Practicable Date) during the period of 12 months commencing on the date of the Extraordinary General Meeting. No Shareholder has to abstain from voting on the said resolution.

The Directors (including the independent non-executive Directors) also consider that the proposed Distribution is fair and reasonable and in the interests of the Shareholders as a whole and recommend the Shareholders to vote in favour of the resolution to be proposed at the Extraordinary General Meeting to approve the proposed Distribution. No shareholder has to abstain from voting on the resolution approving the Distribution.

GENERAL

The Placing constitutes a discloseable transaction for the Company under the Listing Rules.

Your attention is drawn to the additional information contained in the Appendix hereto.

Yours faithfully, For and on behalf of the Board

AV CONCEPT HOLDINGS LIMITED So Yuk Kwan Chairman

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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 jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained herein the omission of which would make any statement contained in this circular misleading.

2. INFORMATION ABOUT THE DIRECTORS

The biographies of all the Directors are as follows:

Executive Directors

Mr. So Yuk Kwan, aged 54, is the founder and Chairman of the Group. He is responsible for the formulation of the Group’s overall strategic planning and business development. Mr. So holds a Master Degree in Business Administration from the University of East Asia and he is also a Fellow Member of the British Institute of Management. Mr. So has over 28 years’ experience in the electronics industry. Presently, he is the Vice Chairman of both of the Executive Committee and the External Affairs Sub-Committee of The Hong Kong Electronic Industries Association. Mr. So is also a member of the Electronics Advisory Committee of Hong Kong Trade Development Council, a member of the technology panel of Hong Kong Industrial Technology Centre Corporation, a committee member of the Hong Kong – Shenzhen Electronics Joint Committee and a member of Advisory Committee (Industry) of Cooperative Education Centre of City University of Hong Kong. Mr. So Yuk Kwan is the father of Mr. So Chi On.

Mr. Lee Jeong Kwan, aged 43, is the Managing Director and overall in charge of the Group’s semiconductors distribution business. Mr. Lee has extensive experience in the semiconductors industry. Prior to joining the Group, Mr. Lee held various senior management positions with Samsung Electronics Corporation in Hong Kong and Korea. Mr. Lee holds a Bachelor of Science Degree in Electronics Engineering from Hanyang University, Korea.

Mr. So Chi On, aged 26, is the Executive Director responsible for the marketing and new business development of the Group’s digital electronic products. Mr. So holds a Bachelor Degree in Business Administration from the University of Wisconsin Madison. Mr. So Chi On is the son of Mr. So Yuk Kwan.

Mr. Lai Yat Hung, Edmund, aged 38, is the Executive Director and Chief Financial Officer overseeing the finance and corporate matters of the Group. Mr. Lai has extensive experience in financial management and corporate development. Prior to joining the Group, he worked with an international certified public accountants firm in the UK and Hong Kong. Mr. Lai holds a Bachelor of Engineering Degree from the University of London, United Kingdom, and he is also a member of the Institute of Chartered Accountants in England and Wales.

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APPENDIX

GENERAL INFORMATION

Mr. Lai Yun Wing, aged 55, is the Director of Administration, Human Resources and Site Management of the Group’s manufacturing activities in the PRC. Mr. Lai joined the Group in 1995. He has worked with the Group in Singapore and Malaysia and since 2001, Mr. Lai has been involved in policy-making to enhance the operational efficiency of the Group’s manufacturing facilities. Mr. Lai holds a Master Degree in Business Administration from the University of East Asia and a member of British Institute of Management.

Independent non-executive Directors

Dr. Hon. Lui Ming Wah, JP, aged 65, is an established industrialist and a member of the Legislative Council of HKSAR. Dr. Lui is the Honorary Chairman of the Hong Kong Electronic Industries Association, the Chairman of Hong Kong Shandong Chamber of Commerce and an Executive Committee Member of the Chinese Manufacturers Association of Hong Kong. In addition, he is also a member of Hong Kong International Arbitration Centre, a standing committee member of the Shandong Committee of China Political Consultative Congress and a member of the Board of Mandatory Provident Fund Schemes Authority. Dr. Lui obtained a Master Degree in Applied Science from the University of New South Wales in Australia and a Doctorate in Engineering from the University of Saskatchewan in Canada. He is currently the Managing Director of Keystone Electronic Co. Ltd.

Mr. Charles Edward Chapman, aged 55, has profound experience in the electronics industry for more than 23 years. Mr. Chapman maintains good connections with the local and overseas governments as well as trade organisations worldwide. Prior to joining The Hong Kong Electronic Industries Association as Executive Director in 1988, Mr. Chapman, a journalist by profession, worked for eleven years as Economics Editor of the Hong Kong Trade Development Council and for eight years as Business Editor of a local English-language newspaper.

The correspondence address of Mr. So Yuk Kwan, Mr. Lee Jeong Kwan, Mr. So Chi On, Mr. Lai Yat Hung, Edmund and Mr. Lai Yun Wing is at Unit 11-15, 11th Floor, Block A, Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong. The correspondence address of Dr. Hon. Lui Ming Wah, JP is at 11/F., Po Yip Building, 23 Hing Yip Street, Kwun Tong, Kowloon, Hong Kong and the correspondence address of Mr. Charles Edward Chapman is at Unit 1201, 12/F., 100 Granville Road, TST East, Kowloon, Hong Kong.

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GENERAL INFORMATION

APPENDIX

3. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which 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 they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules or which were required to be entered into the register required to be kept under section 352 of the SFO were as follows:

Long positions in shares of the Company

	Number	of shares and nature of	interests
				Approximately
	Personal			percentage
Name of Directors	interests	Other interests	Total	shareholding
Mr. So Yuk Kwan	–	133,034,300 (Note)	133,034,300	33.03%
Mr. Lee Jeong Kwan	3,000,000	–	3,000,000	0.74%
Mr. So Chi On	–	133,034,300 (Note)	133,034,300	33.03%
Mr. Lai Yat Hung, Edmund	3,742,607	–	3,742,607	0.93%
Mr. Lai Yun Wing	5,964,900	–	5,964,900	1.48%

Note: B.K.S. Company Limited, which is a wholly-owned subsidiary of Credit Cash Limited, is the legal and beneficial owner of 133,034,300 shares of HK$0.10 each in the issued share capital of the Company. The entire issued share capital of Credit Cash Limited is held by Ansbacher (BVI) Limited, which is the trustee of a discretionary trust, the beneficiaries of which include Mr. So Chi On and other family members of Mr. So Yuk Kwan.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which 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 they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules or which were required to be entered into the register required to be kept under section 352 of the SFO.

As at the Latest Practicable Date:

• (i) none of the Directors had any direct or indirect interests in any assets which have since 31 March 2003 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group; and

• (ii) none of the Directors was materially interested in any contracts or arrangements subsisting at the date of this circular which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX

(b) Interests of Shareholders

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by the Directors and the chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the shares and underlying shares of the Company 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 were, directly or indirectly, interested in 10 per cent. or more of the shares of the Company.

		Percentage of
		the Company’s issued
Name	Number of shares held	share capital
B.K.S. Company Limited	133,034,300_(Note)_	33.03%
Credit Cash Limited	133,034,300_(Note)_	33.03%
Ansbacher (BVI) Limited	133,034,300_(Note)_	33.03%
Madam Yeung Kit Ling	133,034,300_(Note)_	33.03%

Note: 133,034,300 shares in the Company were beneficially held by B.K.S. Company Limited which is a wholly-owned subsidiary of Credit Cash Limited. Credit Cash Limited is a company wholly-owned by Ansbacher (BVI) Limited, which is the trustee of a discretionary trust, the beneficiaries of which include Mr. So Chi On, Madam Yeung Kit Ling and other family members of Mr. So Yuk Kwan. Therefore, the shares in which B.K.S. Company Limited is shown as being interested duplicate the stated interests of Credit Cash Limited, Ansbacher (BVI) Limited and Madam Yeung Kit Ling.

Save as disclosed above, the Directors and the chief executive of the Company are not aware that there is any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10 per cent. 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.

4. MATERIAL CONTRACTS

The following are all the contracts (not being contracts in the ordinary course of business) entered into by the Group during the two year period prior to the Latest Practicable Date:

• (a) The underwriting agreement dated 3 April 2002 entered into between the Company and B.K.S. Company Limited in relation to the rights issue of one rights share for every two shares held by members of the Company on the register of members on 13 May 2002 at a subscription price of HK$0.26 per rights share;

• (b) the subscription agreement dated 9 December 2003 entered into between the Company and B.K.S. Company Limited in respect of the subscription of 17,000,000 new shares of the Company at HK$0.80 per new share; and

• (c) The Placing Agreement.

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GENERAL INFORMATION

APPENDIX

5. INDEBTEDNESS

As at the close of business on 31 December 2003 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), the Group had total outstanding borrowings of approximately HK$243,260,000, comprising import and trust receipt loans of approximately HK$236,446,000 and obligations under finance leases of approximately HK$6,814,000. In addition, as at 31 December 2003, the Group had contingent liabilities in respect of and guarantees given in connection with certain facilities granted to a supplier of approximately HK$3,900,000 and bills discounted of approximately HK$10,779,000.

As at 31 December 2003, certain of the above bank borrowings and banking facilities granted to the Group were secured by fixed charges over certain leasehold land and buildings held by the Group, which had an aggregate net book value of approximately HK$8,295,000 as at that date.

Save as aforesaid and apart from intra-group liabilities and normal accounts payables, the Group did not have any outstanding mortgages, charges, debentures, loan capital and overdraft, debt securities or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities as at the close of business on 31 December 2003.

The Directors have confirmed that there has been no material change in the indebtedness or contingent liabilities of the Group since 31 December 2003.

6. WORKING CAPITAL

Taking into account the proceeds from the Placing available to the Group and in the absence of unforeseen circumstances, the Directors are of the opinion that the Group will have sufficient working capital for its present requirements.

7. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Directors consider that the strong customer demand noted in 2003 is expected to continue for the forseeable future. Sales of digital electronic components, including flash memory IC’s, micro-controller units and TFT-LCD IC’s are set to rise and prices are expected to remain robust. The Group’s recent investment in capital equipment and product development has transformed its design and manufacture operations into a profit contributor to the Group. The sales growth of the Group’s EMS services is expected to continue and orders from Reigncom and Japanese customers are expected to rise substantially.

8. SERVICE CONTRACTS

None of the Directors had entered into any service agreement with any member of the Group nor were there any other service agreements proposed which will not expire or be determinable by the Group within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

9. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

10. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by:

• (a) the Chairman of the meeting; or

• (b) at least five members present in person or by proxy and entitled to vote; or

• (c) any member or members present in person or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all members having the right to attend and vote at the meeting; or

• (d) any member or members present in person or by proxy and holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at The Conference Room, Units 11-15, 11/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong up to and including 10 March 2004:

• (a) the memorandum and articles of association of the Company;

• (b) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;

• (c) the audited consolidated accounts of the Group for each of the two years ended 31 March 2002 and 31 March 2003; and

• (d) this circular.

12. GENERAL

• (a) The secretary of the Company is Ms. Chan Lap Sau, ACIS .

• (b) The English text of this circular should prevail over the Chinese text in the case of inconsistency.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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AV CONCEPT HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “Meeting”) of AV Concept Holdings Limited (the “Company”) will be held at The Conference Room, Units 11-15, 11/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong on Wednesday, 10 March 2004 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following ordinary resolutions of the Company:

1. “THAT the disposal in one or more transactions of up to 825,840 shares of Reigncom Limited during the period from 10 March 2004 to 9 March 2005 (both dates inclusive) to independent third parties who are not connected with the Company or the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or to any of their respective associates be and is hereby approved and that the directors of the Company (the “Directors”) be and are hereby authorised to carry out and effect such disposal(s) in such manner as they may in their absolute discretion determine (provided that the independent non-executive Directors of the Company consider the terms of any such disposal(s) to be fair and reasonable and in the best interests of the Company) and to do all acts and things which in their opinion are necessary or desirable to effect such disposals. ”

2. “THAT, upon the recommendation of the Directors:

• (a) a distribution of HK$0.10 per share in cash to those shareholders whose names appear on the register of members of the Company on 10 March 2004 (the “Distribution”) be and is hereby approved; and

• (b) any of the Directors be and is hereby authorized to do such act to effect the Distribution as he may deem necessary. ”

By Order of the Board AV CONCEPT HOLDINGS LIMITED So Yuk Kwan Chairman

Hong Kong, 23 February 2004

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll or on a show of hands, vote on his behalf. A proxy need not be a member of the Company.

1. 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 of such power of attorney or authority, must be lodged with the Company’s branch share registrar, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting.

2. The register of members will be closed from Tuesday, 9 March 2004 to Wednesday, 10 March 2004 (both days inclusive) during which period no transfer of shares will be registered. In order to qualify for the proposed special distribution, all transfers of shares accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar, Tengis Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:30 p.m. on Monday, 8 March 2004.

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