09:18     AV CONCEPT HOLD<00595> - Announcement (2)                           

                                                                              
    The investment guideline as agreed by New Concept only                    
    sets out the broad nature of the Authorised                               
    Investments forming the Portfolio. UBS has full                           
    authority to decide which investments be made as long                     
    as those investments fall within the broad investment                     
    guideline. New Concept will have to get UBS's                             
    acceptance of the special written instructions before                     
    UBS will act upon such special instructions. Such                         
    special written instructions may require UBS to alter                     
    the holdings or investment positioning of the                             
    Portfolio that would not normally have been done under                    
    UBS's normal discretion or under the current agreed                       
    upon strategic asset allocation.                                          
                                                                              
    Pursuant to the DM Agreement, UBS shall receive an                        
    agreed fee for providing the investment management                        
    services calculated with reference to the value of the                    
    Portfolio. The Directors believe that the fee is                          
    reasonable. New Concept may terminate the DM Agreement                    
    at any time by giving to the other party written notice.                  
                                                                              
    PORTFOLIO                                                                 
    On 2 March 2005, New Concept transferred US$12 million                    
    (equivalent to approximately HK$93.6 million) to the                      
    Portfolio Account, representing the then level of cash                    
    available to be set aside as a reserve for the Group.                     
                                                                              
    On 24 March 2005, New Concept withdrew cash of US$2                       
    million from the Portfolio Account and the funds                          
    managed under the DM Agreement were reduced to US$10                      
    million (equivalent to approximately HK$78 million).                      
                                                                              
    Set out below is the tactical asset allocation of the                     
    Portfolio as at 17 May 2005 in percentage terms.                          
                                                                              
    Note   Percentage allocation                                              
                                                                              
    Equities   52%                                                            
    Alternative investments   34%                                             
    Bonds   6%                                                                
    Liquidity   (1)   8%                                                      
                                                                              
    100%                                                                      
                                                                              
    Note:                                                                     
    (1)   Liquidity refers to cash and bank deposits.                         
                                                                              
    REASONS FOR AND BENEFITS OF THE DM AGREEMENT                              
    The Group is principally engaged in the marketing and                     
    distribution of electronic components, and the design                     
    and manufacture of electronic products. The Group has                     
    been maintaining a robust cash position over the past                     
    year. For the financial year ended 31 March 2004, the                     
    Company paid to its shareholders dividends totaling                       
    approximately HK$83.0 million (31 March 2003:                             
    approximately HK$7 million) including a special                           
    dividend of approximately HK$40.5 million. For the six                    
    months ended 30 September 2004, the Company paid                          
    interim dividend of approximately HK$11.3 million.                        
    The Group has also been retaining surplus cash reserve                    
    for working capital and other purposes including future                   
    business growth. By entering into the DM Agreement,                       
    the Group appointed a professional banker to manage                       
    the portion of the surplus funds held by the Group                        
    which the Directors consider to be in excess of the                       
    Group's then working capital requirement in order to                      
    better manage such surplus funds with a view to obtaining                 
    a better return thereon. The Directors acknowledge and                    
    agree that the value of the investments in the Portfolio                  
    may increase or decrease and there may be unquantifiable                  
    risks involved in such investments. There is no guarantee                 
    that the investment and management of the Portfolio                       
    will produce the desired results. As at 30 April 2005,                    
    the unaudited unencumbered cash and bank balances of                      
    the Group (excluding the cash deposits in the                             
    Portfolio) amounted to approximately HK$111 million.                      
    The Directors believe that the DM Agreement will not                      
    affect the Group's flexibility in its working capital                     
    management and that the terms of the DM Agreement are                     
    fair and reasonable and in the interests of the                           
    Shareholders as a whole.