Interim Report 2003 AV Concept Holdings Limited

The Board of Directors of AV Concept Holdings Limited (the “Company”) is pleased

to announce the unaudited condensed consolidated interim financial statements
of the Company and its subsidiaries (together the “Group”) for the six months
ended 30 September 2003 as follows:

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

Six months ended
30 September
2003 2002
(unaudited) (unaudited
and as
restated)
Notes HK$’000 HK$’000

TURNOVER 2 835,764 875,260

Cost of sales (761,773 ) (812,805 )

Gross profit 73,991 62,455

Other revenue 602 516
Selling and distribution costs (13,303 ) (13,636 )
Administrative expenses (20,421 ) (24,877 )
Other operating expenses (3,673 ) (3,243)

PROFIT FROM OPERATING

ACTIVITIES 3 37,196 21,215
Finance costs 4 (4,582 ) (5,515)

PROFIT BEFORE TAX 32,614 15,700

Tax 5 (4,494 ) (3,190)

NET PROFIT FROM ORDINARY

ACTIVITIES ATTRIBUTABLE TO
SHAREHOLDERS 28,120 12,510

INTERIM DIVIDEND 6 9,308 3,615

EARNINGS PER SHARE 7

Basic 7.7 cents 3.9 cents

Diluted 7.7 cents N/A

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AV Concept Holdings Limited Interim Report 2003

CONDENSED CONSOLIDATED BALANCE SHEET

30 September 31 March
2003 2003
(audited and
(unaudited) as restated)
Notes HK$’000 HK$’000
NON-CURRENT ASSETS
Fixed Assets 67,112 58,906
Intangible assets 2,250 3,031
Long term investments 33,837 33,837
Other assets 2,327 2,327

105,526 98,101

CURRENT ASSETS
Short term investment 1,380 1,379
Inventories 8 247,453 206,411
Accounts receivable 9 273,064 183,784
Prepayment, deposits and
other receivables 14,367 15,595
Cash and cash equivalents 45,208 64,103

581,472 471,272

CURRENT LIABILITIES
Accounts payable and accrued expenses 10 146,526 119,944
Tax payable 6,744 3,805
Interest-bearing bank borrowings 288,856 229,009
Finance lease payables 3,025 2,638

445,151 355,396

NET CURRENT ASSETS 136,321 115,876

TOTAL ASSETS LESS CURRENT LIABILITIES 241,847 213,977

NON-CURRENT LIABILITIES
Finance lease payables (1,818 ) (1,728)
Other long term payable (452) (460)
Deferred tax (1,104 ) (1,104)

(3,374 ) (3,292)

238,473 210,685

CAPITAL AND RESERVES

Issued capital 11 37,233 36,153
Reserves 201,240 174,532

238,473 210,685

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Interim Report 2003 AV Concept Holdings Limited

CONDENSED STATEMENT OF CHANGES IN EQUITY

Issued Share Exchange
share premium Capital fluctuation Retained
capital account reserve reserve profits Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 1 April 2002
As previously reported 23,632 121,507 13,872 (7,723) 19,454 170,742
Prior year adjustment –
SSAP 12
“Income Taxes” – – – – (962) (962)

As restated 23,632 121,507 13,872 (7,723) 18,492 169,780

Exercise of share options 570 686 – – – 1,256

Rights issue of shares 11,951 17,173 – – – 29,124
Net profit for the period – – – – 12,510 12,510

As at 30 September 2002 36,153 139,366 13,872 (7,723) 31,002 212,670

As at 1 April 2003
As previously reported 36,153 139,366 13,872 (6,308) 28,405 211,488
Prior year adjustment –
SSAP 12
“Income Taxes” – – – – (803) (803)

As restated 36,153 139,366 13,872 (6,308) 27,602 210,685

Exercise of share options 1,080 2,203 – – – 3,283

Net profit for the period – – – – 28,120 28,120
2003 final dividend paid – – – – (3,615) (3,615)

As at 30 September 2003 37,233 141,569 13,872 (6,308) 52,107 238,473

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AV Concept Holdings Limited Interim Report 2003

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six months ended
30 September
2003 2002
(unaudited) (unaudited)
HK$’000 HK$’000

Cash outflow from operating activities (63,018 ) (116,861 )

Cash outflow from investing activities (15,869 ) (3,693)

Cash inflow from financing activities 59,992 110,886

NET DECREASE IN CASH AND

CASH EQUIVALENTS (18,895 ) (9,668)

Cash and cash equivalents at beginning of period 64,103 30,672

CASH AND CASH EQUIVALENTS AT END

OF PERIOD 45,208 21,004

ANALYSIS OF BALANCES OF CASH AND

CASH EQUIVALENTS
Cash and bank balances 45,208 21,004

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Interim Report 2003 AV Concept Holdings Limited

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial statements (“interim financial

statements”) have been prepared in accordance with the Hong Kong Statement of
Standard Accounting Practice (“SSAP”) No. 25 “Interim Financial Reporting” and the
applicable disclosure requirement of Appendix 16 to the Rules Governing the Listing of
Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the
“Stock Exchange”). These interim financial statements should be read in conjunction
with the annual financial statements for the year ended 31 March 2003.

The interim financial statements have been prepared in accordance with the principal
accounting policies set out in the Group’s audited financial statements for the year
ended 31 March 2003, except that the Group has adopted the revised SSAP 12 “Income
Taxes” to account for the deferred taxation which became effective on 1 January 2003.

The adoption of the revised SSAP 12 represents a change in accounting policy, which
has been applied retrospectively and the comparative figures have been restated
accordingly. This change in accounting policy has resulted in a decrease of HK$772,000
and an increase of HK$288,000 in the profit attributable to shareholders for the six
months ended 30 September 2003 and 2002, respectively. The opening reserves at 1
April 2003 and 2002 have been reduced by HK$803,000 and HK$962,000, respectively.

2. SEGMENT INFORMATION

The Group principally engages in the marketing and distribution of electronic components
and the design, manufacture and original equipment manufacture of electronic products.

An analysis of the Group’ s turnover and contribution to profit from operating activities
for the Group’s business segments is as follows:

Segment tur nover Segment results

Six months ended Six months ended
30 September 30 September
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
HK$’000 HK$’000 HK$’000 HK$’000

Business segments:
Marketing and distribution 721,822 730,438 23,978 27,435
Design, manufacture and
original equipment
manufacture 113,942 144,822 13,811 (5,892 )

835,764 875,260 37,789 21,543

Interest income 11 312

Unallocated corporate expenses (417) (573)
Unrealised holding loss on
short term investment (187) (67 )

Profit from operating activities 37,196 21,215

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AV Concept Holdings Limited Interim Report 2003

An analysis of the Group’s turnover for the Group’s geographical segments is as follows:

Segment turnover
Six months ended
30 September
2003 2002
(unaudited) (unaudited)
HK$’000 HK$’000

Geographical segments:
Hong Kong 663,004 644,315
Singapore 89,104 86,362
USA and Canada 54,143 5,782
Korea 16,531 135,920
EU 7,525 2,476
Japan 5,058 –
Other locations 399 405

835,764 875,260

3. PROFIT FROM OPERATING ACTIVITIES

Six months ended

30 September
2003 2002
(unaudited) (unaudited)
HK$’000 HK$’000

Profit from operating activities is arrived at after

charging/(crediting):

Depreciation 7,664 6,243

Unrealised holding loss on short term investment 187 67
Exchange losses/(gains), net 333 (88 )
Interest income (11 ) (312)

4. FINANCE COSTS

Six months ended

30 September
2003 2002
(unaudited) (unaudited)
HK$’000 HK$’000

Interest on bank loans and overdrafts wholly repayable

within five years 4,430 5,366
Interest on finance leases 152 149

4,582 5,515

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Interim Report 2003 AV Concept Holdings Limited

5. TAX

Hong Kong profits tax has been provided at the rate of 17.5% (2002: 16%) on the
estimated assessable profits arising in Hong Kong during the period. Taxes on profits
assessable elsewhere have been calculated at the rates of tax prevailing in the countries
in which the Group operates, based on existing laws, interpretations and practices in
respect thereof.

Six months ended

30 September
2003 2002
(unaudited) (unaudited)
HK$’000 HK$’000

Provision for tax in respect of profit for the period:

Hong Kong 3,714 3,451
Overseas 8 27
Deferred 772 (288)

Tax charge for the period 4,494 3,190

6. INTERIM DIVIDEND

The Board of Directors has resolved to declare an interim dividend of HK2.5 cents per
ordinary share in issue in respect of the six months ended 30 September 2003 (2002:
HK1.0 cent) payable on or before 16 January 2004 to shareholders whose names appear
on the register of members of the Company on 29 December 2003.

7. EARNINGS PER SHARE

The calculation of basic earnings per share is based on the net profit from ordinary
activities attributable to shareholders of HK$28,120,000 (2002: HK$12,510,000) and the
weighted average of 363,302,749 (2002: 320,531,637) ordinary shares in issue during
the period.

Diluted earnings per share for the six months ended 30 September 2003 is based on the
net profit attributable to shareholders of HK$28,120,000 and the weighted average number
of ordinary shares of 366,551,443, after adjusting for the effects of all dilutive potential
shares.

Diluted earnings per share for the six months ended 30 September 2002 have not been
disclosed, as the share options outstanding during the period had an anti-dilutive effect
on the basic earnings per share for the period.

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AV Concept Holdings Limited Interim Report 2003

8. INVENTORIES

30 September 31 March
2003 2003
(unaudited) (audited)
HK$’000 HK$’000

Raw materials 92,427 47,070

Work in progress 20,462 8,506
Finished goods 134,564 150,835

247,453 206,411

9. ACCOUNTS RECEIVABLE

The Group seeks to maintain strict control over its outstanding receivables and has a
credit control policy to minimise credit risk. A credit committee consisting of senior
management and the directors of the Group has been established to review and approve
large customer credits.

The aged analysis of the accounts receivable as at 30 September 2003, based on the
invoice due date and stated net of provision for doubtful debts, is as follows:

30 September 31 March
2003 2003
(unaudited) (audited)
HK$’000 HK$’000

Accounts receivable:
Current 187,777 111,215
Less than 30 days 50,429 43,583
31 - 60 days 17,416 15,576
Over 60 days 17,442 13,410

273,064 183,784

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Interim Report 2003 AV Concept Holdings Limited

10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The aged analysis of the accounts payable as at 30 September 2003, based on the
invoice due date, is as follows:

30 September 31 March
2003 2003
(unaudited) (audited)
HK$’000 HK$’000

Accounts payable:
Current 61,157 55,671
Less than 30 days 52,628 50,072
31 - 60 days 13,554 2,270
Over 60 days 3,073 1,707

130,412 109,720

Accrued expenses 16,114 10,224

146,526 119,944

11. SHARE CAPITAL

Number of Share
shares capital
(unaudited) (unaudited)
HK$’000

Ordinary shares of HK$0.10 each

Authorised:
At 30 September 2003 and 31 March 2003 800,000,000 80,000

Issued and fully paid:

At 1 April 2003 361,532,419 36,153

Exercise of share options 10,800,000 1,080

At 30 September 2003 372,332,419 37,233

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AV Concept Holdings Limited Interim Report 2003

BUSINESS REVIEW
Turnover of the Group for the six months ended 30 September 2003 decreased
5% to HK$835,764,000 (2002: HK$875,260,000). For the same period, profit
attributable to shareholders rose 125% to HK$28,120,000 (2002: HK$12,510,000).

Marketing and Distribution

During the six months under review, turnover from the distribution of
semiconductors dropped by 1% to HK$721,822,000 (2002: HK$730,438,000). The
corresponding operating profit also fell 13% to HK$23,978,000 (2002:
HK$27,435,000).

In the first quarter of the period, the SARS outbreak in Hong Kong and Pearl
River Delta area slowed the Group’s semiconductors distribution business. Margins
on the component sales were kept low to maintain steady flow of goods and to
avoid any accumulation of inventory over the SARS affected period.

Second quarter turnover recovered strongly as the effect of SARS retreated.

Customer orders previously held up were received. Demands for semiconductors
from manufacturers operating in the Pearl River Delta region revived very quickly.

Performance of the digital consumer electronics products was particularly strong.

Samsung Electronics is one of the recognised leaders in the digital electronics
market. Sales of Samsung Electronics components used in digital cameras, MP3
players and TFT – LCD displays were exceptional. Semiconductors including
flash memories, LCD display IC’s, micro-controller IC’s distributed by the Group
were of great demand.

Overall turnover for the six months under review remained little changed from the
last corresponding period.

The concentration of sales and backlog orders in the second quarter of the
financial period had increased the Group’s accounts receivable as at the balance
sheet date. The effect is temporarily and the accounts receivable is expected to
return to a normal low level in the third quarter of the financial year.

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Interim Report 2003 AV Concept Holdings Limited

Design and Manufacture

The six months under review should be recognised as a beginning of a new page
for the Group’s design and manufacture business.

Turnover for the period fell 21% to HK$113,942,000 (2002: HK$144,822,000) and
profit from operations rose to HK$13,811,000 (2002: loss of HK$5,892,000).

The drop in turnover of the design and manufacture business segment was solely
attributable to the adoption of a new business model in our provision of
manufacturing services to Reigncom Limited (“Reigncom”), a company incorporated
in the Republic of Korea and an investee company of the Group.

In April 2003, the Group entered into a new electronic manufacturing services
(“EMS”) agreement with Reigncom. Under the new agreement, the Group’s sales
to Reigncom are based only on the EMS fees chargeable on the products
manufactured. Raw materials used in the manufacture of the products are
consigned by Reigncom.

Prior to the new agreement, the Group is responsible for the purchase of these
raw materials. Accordingly, sales to Reigncom are based on the FOB price of the
completed products which included the costs of the raw materials and the EMS
fees chargeable.

The change in the business model caused an apparent drop in sales to Reigncom
to HK$16,531,000 (2002: HK$135,920,000). If the same basis of the new EMS
agreement were applied, the pro-forma 2002 sales to Reigncom would have been
HK$8,327,000. Thus reflecting a growth in the Reigncom EMS service sales of
99% in 2003.

In March 2003, the Group won its first major Japanese EMS customer to provide
SMT printed circuit board assembly services. Production output rose rapidly from
the initial 30,000 units per month in April 2003 to over 140,000 units per month in
September 2003. Our consistent production quality had won many praises from
our customers and further Japanese EMS orders are expected.

In addition to the Group’s EMS services, sales of the Group’s own ODM products
also played a major role in the period under review. Turnover for the ODM products
during the six months recorded exceptional growth to HK$77,978,000 (2002:
HK$5,632,000). The success of our current range of MP3 players has attracted
many new orders. In addition, much interest has also been generated for our
next year’s product range.
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AV Concept Holdings Limited Interim Report 2003

Investment in Reigncom

On 15 October 2003, Reigncom was granted a conditional approval for the

proposed listing of its shares on KOSDAQ in the Republic of Korea. Formal
approval for listing is expected to be granted on 18 December 2003 and dealings
in Reigncom’s shares are expected to commence on 19 December 2003. The
IPO offer price has been set at 47,000 Won (approximately HK$305) per share.

Based on the expected IPO offer price, the market value of the Company’s interest
in Reigncom would be approximately 45,864 million Won (approximately
HK$297,631,000). As a result of the shares to be issued by Reigncom pursuant
to the IPO, the Company’s percentage interest in the share capital of Reigncom
will be reduced from the current level of about 18.8% to about 15.0% immediately
following the share offer.

PROSPECTS
The full year financial performance for the Group’s semiconductor distribution
business is a picture of great optimism. Strong customer demand noted in the
second quarter is expected to continue for the remainder of the financial year
and beyond. Looking into 2004, 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 long history as a leading distributor for Samsung Electronics

components should enable us to secure reliable and timely supply of critical
components for our customers and to capitalise in this growing digital electronic
components market.

The Group’s recent investment in capital equipment and product development

has transformed our design and manufacture operations into a solid profit
contributor to the Group. We have firmly established our reputation for quality
EMS services and leading edge product design for MP3 products.

The sales growth of the Group’s EMS services is expected to continue at an even
faster rate. Orders from Reigncom and Japanese customers are expected to rise
substantially in the coming year. Thus generating a meaningful return on
investment for the EMS operation.

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Interim Report 2003 AV Concept Holdings Limited

Based on our current successful range of ODM MP3 products, a new product
lineup has been designed for 2004. Same emphasis has been put in the product’s
industrial design, details and user interface. These are the important attributes
that differentiate our ODM products to those of the mass market. Much interest
has already been generated and the directors are very optimistic of the sales of
our new 2004 range of products.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 September 2003, the Group had cash and bank balances of
HK$45,208,000 (2002: HK$21,004,000).

Seasonal factors has increased the Group’s gearing ratio as at 30 September

2003 to 1.05 (as at 31 March 2003: 0.82). This is calculated based on the
Group’s total borrowing, net of cash and bank balances, of HK$248,491,000 (as
at 31 March 2003: HK$169,272,000) and the Group’s net tangible assets of
HK$236,223,000 (as at 31 March 2003: HK$207,654,000).

Total facilities available to the Group from its bankers amounted to HK$477,170,000
(as at 31 March 2003: HK$442,170,000). The management is confident that the
Group has adequate financial resources for its business growth and forecast
requirement for the coming year.

CLOSURE OF REGISTER OF MEMBERS

The register of members will be closed from 23 December 2003 to 29 December
2003 (both days inclusive) during which period no transfer of shares will be
registered. In order to qualify for the interim dividend, all transfers of shares
accompanied by the relevant share certificates must be lodged with the Company’s
branch share registrar, Tengis Limited, G/F, Bank of East Asia Harbour View
Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:30 p.m. on 22
December 2003.

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AV Concept Holdings Limited Interim Report 2003

DIRECTORS’ INTERESTS IN SHARES

As at 30 September 2003, the interests and short positions of the directors and
their respective associates in the shares, underlying shares and debentures of
the Company or any of its associated corporations within the meaning of Part XV
of the Securities and Futures Ordinance (“SFO”) as recorded in the register
required to be kept by the Company pursuant to Section 352 of the SFO or as
otherwise notified to the Company and The Stock Exchange of Hong Kong Limited
(the “Stock Exchange”) pursuant to the Model Code for Securities Transactions
by Directors of Listed Companies (the “Model Code”) were as follows:

1. Interests in shares of the Company

Percentage
of the
Number of shares and nature of interests Company’s
Personal Other issued
Company interests interests Total share capital

Mr. So Yuk Kwan – 123,508,300 (Note) 123,508,300 33.17%

Mr. Lee Jeong Kwan 3,000,000 – 3,000,000 0.81%
Mr. So Chi On – 123,508,300 (Note) 123,508,300 33.17%
Mr. Lai Yat Hung, Edmund 3,242,607 – 3,242,607 0.87%
Mr. Lai Yun Wing 6,464,900 – 6,464,900 1.74%

Note : B.K.S. Company Limited, which is a wholly-owned subsidiary of Credit Cash

Limited, is the legal and beneficial owner of 123,508,300 shares of HK$0.1 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.

2. Interests in underlying shares of the Company

The interests of the directors in the share options of the Company are
separately disclosed in the section “Share Option Scheme” below.

Apart from as disclosed under the heading “Share Option Scheme” below, at
no time during the period were rights to acquire benefits by means of the
acquisition of shares in or debentures of the Company granted to any directors
or their respective associates, or were any such rights exercised by them or
was the Company or any of its subsidiaries a party to any arrangement to
enable the directors to acquire such rights in any other body corporate.

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Interim Report 2003 AV Concept Holdings Limited

Save as disclosed above, as at 30 September 2003, none of the directors and

their respective associates had any personal, family, corporate or other interests
or short positions in the shares, underlying shares and debentures of the Company
and its associated corporations as recorded in the register required to be kept by
the Company pursuant to Section 352 of the SFO or as otherwise notified to the
Company and the Stock Exchange pursuant to the Model Code.

SHARE OPTION SCHEME

The following share options were outstanding under the New Scheme and the
Old Scheme during the period:

Number of share options Company’s share price

Granted Date of Exercise Exercise
Name or during Exercised Lapsed At 30 grant of period of price of At
category of At the during during September share share share grant date
participant 1 April 2003 period the period the period 2003 options options options of options
(both dates
inclusive)
(Note 1) (Note 2) (Note 3)
HK$ HK$

Director

Lai Yat Hung, 4,125,000@ – – (4,125,000) – 28 December 1999 28 June 2000 – 0.72 1.72
Edmund 27 June 2003

Lai Yat Hung, 2,250,000@ – – (2,250,000) – 20 October 2000 20 April 2001 – 0.31 0.53
Edmund 19 April 2003

Sub-total 6,375,000 – – (6,375,000) –

Other employees

In aggregate 4,125,000@ – – (4,125,000) – 28 December 1999 28 June 2000 – 0.72 1.72

27 June 2003

3,000,000@ – – (3,000,000) – 20 October 2000 20 April 2001 – 0.31 0.53

19 April 2003

27,000,000# – (10,800,000) (450,000) 15,750,000 22 May 2002 23 May 2002 – 0.304 0.31
12 May 2012

Sub-total 34,125,000 – (10,800,000) (7,575,000) 15,750,000

Total 40,500,000 – (10,800,000) (13,950,000) 15,750,000

# The number of outstanding share options under the new share option scheme adopted
by the Company on 13 May 2002 (the “New Scheme”).

@ The number of outstanding share options under the old share option scheme adopted by
the Company on 1 April 1996 (the “Old Scheme”).

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AV Concept Holdings Limited Interim Report 2003

Notes:

1. The vesting period of the share options is from the date of grant until the commencement
of the exercise period.

2. The exercise price of the share options is subject to adjustment in the case of rights or
bonus issues, or other similar changes in the Company’ s share capital. The exercise
price and the number of outstanding share options under the New Scheme and the Old
Scheme were adjusted to take into account the effect of the rights issue completed on 3
June 2002.

3. The price of the Company’s shares disclosed as at the date of the grant of share
options is the Stock Exchange closing price on the trading day immediately prior to the
date of the grant of options.

4. The weighted average closing price immediately before the dates on which the options
were exercised was HK$0.46 per share.

The financial impact of share options granted is not recorded in the Company’s
or the Group’s balance sheet until such time as the options are exercised, and no
charge is recorded in the profit and loss account or balance sheet for their cost.
Upon the exercise of the share options, the resulting shares issued are recorded
by the Company as additional share capital at the nominal value of the shares,
and the excess of the exercise price per share over the nominal value of the
shares is recorded by the Company in the share premium account. Options which
are cancelled prior to their exercise date are deleted from the register of
outstanding options.

The directors do not consider it appropriate to disclose a theoretical value of the

share options granted during the period because the directors are of the opinion
that the values of share options calculated using theoretical models are subject
to certain fundamental limitations, due to the subjective nature of and uncertainty
relating to a number of the assumptions of expected future performance input to
the model, and certain inherent limitations of the model itself.

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Interim Report 2003 AV Concept Holdings Limited

SUBSTANTIAL SHAREHOLDERS
As at 30 September 2003, the persons or corporations, other than the directors
or chief executive of the Company, who had interests or short positions in the
shares and underlying shares of the Company as recorded in the register required
to be kept under Section 336 of the SFO or as otherwise notified to the Company,
were as follows:

Percentage of the
Number of Company’s issued
Name shares held share capital

B.K.S. Company Limited 123,508,300 (Note) 33.17%

Credit Cash Limited 123,508,300 (Note) 33.17%
Ansbacher (BVI) Limited 123,508,300 (Note) 33.17%
Madam Yeung Kit Ling 123,508,300 (Note) 33.17%

Note: 123,508,300 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 was shown as being interested duplicate those of Credit
Cash Limited, Ansbacher (BVI) Limited and Madam Yeung Kit Ling.

Save as disclosed above, as at 30 September 2003, the Company has not been
notified by any other person or corporation, other than the directors of the Company
whose interests are set out above, having interests or short positions in the
shares and underlying shares of the Company which would fall to be disclosed to
the Company under the provisions of the SFO, or as recorded in the register
required to be kept under Section 336 of the SFO.

EMPLOYEES AND REMUNERATION POLICIES

As at 30 September 2003, the Group employed a total of approximately 1,400 full
time employees. The Group recruits and promotes individuals based on merit and
their development potentials for the positions offered. Remuneration package is
determined with reference to their performance and the prevailing salary levels in
the market. In addition, the Group operates a share option scheme for eligible
employees to provide incentive to the participants for their contribution and
continuing efforts to promote the interests of the Group.

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AV Concept Holdings Limited Interim Report 2003

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, redeemed or sold
any of the Company’s listed securities during the period.

AUDIT COMMITTEE
The Audit Committee had reviewed with management the accounting principles
and practices adopted by the Group and discussed auditing, internal control and
financial reporting matters including a review of the unaudited interim financial
report for the six months ended 30 September 2003 with the directors.

CODE OF BEST PRACTICE

None of the Directors of the Company is aware of any information that would
reasonably indicate that the Company is not, or was not for any part of the
accounting period for the six months ended 30 September 2003, in compliance
with the Code of Best Practice as set out in Appendix 14 of the Listing Rules.

Non-executive directors of the Company are not appointed for a specific term as
all of the directors, excluding the Managing Director, are subject to retirement by
rotation and re-election at the Annual General Meeting in accordance with the
Company’s Articles of Association.

By Order of the Board

So Yuk Kwan
Chairman

Hong Kong, 5 December 2003

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