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Press Release

8 April 2009

RCG Holdings Limited 

 (a company incorporated in Bermuda with limited liability)

(Stock Code: HKSE: 802; AIM: RCG)

Acquisition of a minority stake

The Board announces that on 7 April 2009, Virtual Storage Center Sdn Bhd ('Virtual Storage'), an indirect wholly-owned subsidiary of the Company, entered into an Agreement with the Top Digital Holdings Limited, whereby the Virtual Storage has agreed to acquire from Top Digital Holdings Limited the Sale Shares, representing 15% of the entire issued share capital of A-1, for an aggregate consideration of HK$135,000,000, (£11.84 million*),  which shall be satisfied by the allotment and issue of 15,000,000 Consideration Shares credited as fully paid at an issue price of HK$9.00 (78.95 pence*)  per Consideration Share.

Consideration

The total consideration payable for the Sale Shares is HK$135,000,000 (£11.84 million*) which shall be  satisfied by the allotment and issue of 15,000,000 Consideration Shares in the Company at a price of HK$9.00 (78.95 pence*) per Consideration Share upon Completion credited as fully paid.

The consideration was determined after arm's length negotiations between the Purchaser and the Vendor with reference to

(a)     the valuation of the entire interest in the Licensing Agreement of  approximately  HK$900  million (£78.95 million) (15% being equivalent to HK$135,000,000 or £11.84 million) prepared by an independent valuer engaged by the Group; and  

(b)    the factors set out in the section headed 'Reasons for the Acquisition'  below.

The Issue Price of HK$9.00 (78.95 pence*) per Consideration Share represents: 

• a premium of approximately 30.25% over the closing price of HK$6.91 (60.61 pence*)  per Share as quoted on the Hong Kong Stock Exchange and a premium of approximately  33.65% over the closing price of 58.25 pence (HK$6.64*)  per Share as quoted on AIM on the Last Trading Day; 

• a premium of approximately 30.62% over the average closing price of approximately HK$6.89 (60.44 pence*)  per Share as quoted on the Hong Kong Stock Exchange and a premium of approximately 35.63% over the average closing price of approximately  57.40 pence (HK$6.54*)  per Share as quoted on AIM for the last five trading days up to and including the Last Trading Day; and 

• a premium of approximately 28.02% over the closing price of HK$7.03 (61.67 pence*)  per Share as quoted on the Hong Kong Stock Exchange and a premium of approximately  35.04% over the closing price of 57.65 (HK$6.57*) pence per Share as quoted on AIM for the last ten trading days up to and including the Last Trading Day. Based on the closing price of HK$6.91 (60.61 pence*)  per Share as quoted on the Hong Kong Stock Exchange on the Last Trading Day, the total market value of the Consideration Shares amounted to approximately HK$103.65 million (£9.09 million*).

The Issue Price of the Consideration Shares was determined after arm's length negotiation between the Company and the Vendor with reference to the prevailing market price and the recent trading volume  of the Shares and the business prospects of the Group. The Directors consider that the issue price of the Consideration Shares is fair and reasonable and in the interests of the Company and its Shareholders  as a whole.

Consideration Shares

The Consideration Shares represent:

• approximately 6.44% of the existing issued share capital of the Company; and 

• approximately 6.05% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The Consideration Shares shall be allotted and issued under the General Mandate granted on 8 April 2008, under which the Directors have been authorised by the Shareholders to allot and issue up to 30% of the issued share capital of the Company. In compliance with the Hong Kong Listing Rules, the Directors will not exercise such mandate to exceed 20% of the aggregate nominal value of the Shares in issue and also will not exercise it to the extent of issuing more than 34,775,000 Shares thereby causing the controlling Shareholders as at the date of this announcement to cease to be controlling Shareholders after such issue.  No new Shares have been issued under the General Mandate since its grant and up to the date of this announcement other than the issuance of 1,265,000 Shares pursuant to the exercise of share options under the Company's Share Options Scheme. An application will be made to the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Consideration Shares, which will rank pari passu in all respects with the then existing Shares save for entitlement to the 2008 final dividend as declared by the Board on 11 March 2009.

Conditions Precedent

Completion of the Acquisition shall be conditional upon fulfillment of the following conditions:

(A)    the Purchaser undertaking a due diligence investigation in respect of A-1 including but not limited to the financial affairs, contracts, business, assets, results, legal and financing structure of A-1 and the Purchaser being in its sole and reasonable discretion satisfied with the results of such due diligence investigation;

(B)    no event having occurred since the date of the Agreement, the consequence of which is to materially and adversely affect the financial position, business or property, results of operations or business prospects of A-1 and such material adverse effect shall not have been caused; 

(C)    the warranties in the Agreement remaining true and accurate and not misleading at Completion as if repeated at Completion and at all times between the date of the Agreement and Completion; and

(D)    listing approval for the Consideration Shares having been obtained by the Company from the Hong Kong Stock Exchange, 

and if the above conditions have not been fulfilled or waived by the Purchaser on or before 17 April 2009 (or such other date as the parties may agree), the provisions of the Agreement shall from such date have no effect and no party shall have any liability under them (without prejudice to the rights of any of the parties in respect of antecedent breaches).

Completion

Completion of the Acquisition shall take place on the fifth business days after the fulfillment or waiver of the last of the conditions precedent in the Agreement or at such other time as the parties may agree.

INFORMATION ON A-1

A-1 was established to provide exclusive information technology and business processes outsourcing and consultancy services to China Information Broadcast Network Co., Limited ('CATV'), an online content provider and entertainment platform based in PRC. The exclusive services, covered under an outsourcing agreement between A-1 and CATV, involves strategic planning, business and technological transformation, administration and management services for CATV's more than 50 million subscribers and users. A-1 plans to provide membership services upgrade and reward programs to CATV, which includes the provision of facial recognition logon application as well as the software application of Virtual Storage to CATV's subscribers.

A-1 has committed to purchase 21 million FxGuard Windows Logon software ('WinLogon') licenses and 21 million Virtual Storage and Workgroups application software ('VSW') licenses from the Company over a period of three years from the date of execution of the Licensing Agreement. WinLogon is a facial recognition software allowing users to logon to their PCs or notebooks using their facial features captured using a web camera. VSW is a remote online storage software application that allows users to store, share and retrieve data via their web browsers.

Virtual Storage has been in negotiation with A-1 and CATV to provide its proprietary WinLogon facial recognition software as well as its in-house developed VSW to A-1. The specifications of these products  suit well to A-1 and CATV's requirements. 

INFORMATION ON THE VENDOR

Top Digital Holdings Limited is a BVI incorporated and an investment holding company wholly owned by the shareholders of CATV. It is the wholly-owned parent of A-1 prior to RCG's strategic investment 
into A-1.

INFORMATION ON THE GROUP

The Group is an international provider of biometric and RFID products and solutions services. The Group focuses on developing, sourcing and selling products and solutions services in the Asia Pacific region. The Group's products and solutions services include biometric access control devices, biometric consumer products, RFID-enabled asset management systems, RFID ticket anti-counterfeit and management system solutions, RFID hospital management system solutions, intelligent surveillance systems using facial recognition technology and M2M applications.

LICENSING AGREEMENT

A-1 has executed a Licensing Agreement with Virtual Storage to purchase a minimum of 21 million each of WinLogon and VSW licenses over a contractual period of three years from the date of execution of the licensing agreement signed between Virtual Storage and A-1 on 7 April 2009. The net present value of the revenues of the Licensing Agreement is valued at approximately HK$900 million (£78.95* million) by the independent valuer engaged by the Group. The purchase will be carried out in stages with orders of not less than 5 million of each license per order. A-1 will in turn resell the licenses to CATV's subscribers, as a device for its membership services upgrading and reward program.  Given the volumes stated in the Licensing Agreement, the Directors view that this transaction has the potential to add significantly to RCG's performance in the medium term.

The Licensing Agreement also entails both A-1 and Virtual Storage working together to develop a management platform over the internet, intranet and corporate portals. The collaboration also involves information integration, design, development, implementation, control and maintenance relating to the use, creation, installation or integration of software, hardware, networks, systems and technologies. 

FINANCIAL INFORMATION ON A-1

Since A-1 has not commenced business operation since the date of its incorporation on 2 April 2009, A-1 has no turnover, net profit before or after taxation and extraordinary items.

REASONS FOR THE ACQUISITION

The Company is an investment holding company. The Group is an international provider of biometric and RFID products and solution services with a primary focus in the Asia Pacific markets.

The Vendor and the Purchaser share a common perspective on the potential development of Internet and online platform development in PRC. The Chinese government stimulated the development of information technologies in PRC through its policies including 2006-2020 National Informatization Development Strategy and 'Eleventh Five-Year Plan' for Informatization of National Economy and Social Development, an ambitious plan to bring Internet to villages across PRC, and Ministry of Education's project to enable at least 90% of primary and middle schools in the PRC to be connected to the Internet, resulting of rapid development of Internet and its use in the country. The Directors consider that the Acquisition will contribute to the growth the Group.  

According to the 23rd Statistical Survey Report on the Internet Development in China conducted by the China Internet Network Information Center, in 2008, there was a total of 298 million persons in PRC  connected to Internet on a regular basis, the largest community in the world in country-by country basis. In the case of PRC, there are 187 million people using the facility for online games, 249 million for accessing music online, and 202 million for accessing video online, with each person spent in average of 16.6 hours per week online. A report jointly published by the Game Publication Working Committee of the Publishers Association of China and the international market research firm IDC also stated that the China's online game industry revenue in 2008 reached RMB18.38 billion, a year-on-year increase of 76.6%.  

In light of the above, the Directors (including independent non-executive Directors) consider that the terms of the Agreement, including the consideration payable for the Sale Shares, are fair and reasonable and the Acquisition is in the best interests of the Company and the Shareholders as a whole. The Directors also believe that the investment is in line with the Group's strategies on acquisition for improving the visibility of the Group's sales and for penetration into PRC market.

  CHANGE IN SHAREHOLDER STRUCTURE

Assuming that no further Shares are allotted and issued before Completion, the changes of the shareholding structure of the Company as a result of the Acquisition are shown as follows:

	As at the date of this announcement		Upon the allotment and issue of the Consideration Shares
	No. of Shares	%	No. of Shares	%
The Offshore Group Holdings Limited (Note 2)	62,000,000	26.62	62,000,000	25.01
Full Future Group Limited (Note 3)	18,000,000	7.73	18,000,000	7.26
Chu Wai Man Raymond	295,000	0.13	295,000	0.12
Total - controlling shareholders	80,295,000	34.48	80,295,000	32.39
Veron International Limited (Note 1)	64,096,040	27.52	64,096,040	25.86
Public Shareholders:
Vendor	-	-	15,000,000	6.05
Others	88,483,960	38.00	88,483,960	35.70
	232,875,000	100.00	247,875,000	100.00

Notes:

1.    The beneficial owner of Veron International Limited is Kung Nina (Estate of Nina Kung also known as Nina T. H. Wang).

2.    The entire issued share capital of The Offshore Group Holdings Limited is beneficially owned by an individual, Mr. Chan Chun Chuen. Tam Miu Ching is the wife of Mr. Chan Chun Chuen. Therefore, Mr. Chan Chun Chuen and Tam Miu Ching are deemed to be interested in the 62,000,000 shares held by The Offshore Group Holdings Limited under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the 'SFO').

3.    The entire issued share capital of Full Future Group Limited is held by a Director, Chu Wai Man Raymond. Chu Wai Man Raymond is also a director of Full Future Group Limited. Yun Po Kow Rowena is the wife of Chu Wai Man Raymond and is therefore deemed under the SFO to be interested in the 21,495,000 Shares (which includes interests in Shares, options and interests through Full Future Group Limited) held by Chu Wai Man Raymond for the purposes of the SFO.

LISTING RULES IMPLICATION

The Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Hong Kong Listing Rules.

As stated on the section headed 'Waivers' in the listing document of the Company dated 4 February 2009, the Hong Kong Stock Exchange has granted the waivers from strict compliance with Rules 10.07 and 10.08 of the Hong Kong Listing Rules on the following conditions:

• any issue of new Shares (or convertible securities) or the entering into of an agreement in this regard during the first six months after Listing must be either for cash to fund a specific acquisition or as part or full consideration for a specific acquisition;

• such acquisition must be assets or businesses which will contribute to the growth of the Group; and 

• any such issue of new Shares (or convertible securities) will not result in the controlling shareholders of the Company ceasing to be the controlling shareholders of the Company as a result of the dilution of their holdings of Shares (i.e. deemed disposed of Shares) upon the issue of securities by the Company within six months of the Listing

The Directors consider that the Acquisition is in compliance with the above conditions because:

• the issue of the Consideration Shares is used as full consideration for the Acquisition;

• in the opinion of the Director, the Acquisition will contribution to the growth of the Group; and 

• the controlling shareholders of the Company continue to be controlling 32.39% of the then total issued share capital of the Company after Completion

*- Amounts have been converted to UK sterling from HK dollar using the spot rate as at 7 April 2009 of 1£ = HK$11.40 (Source: Bloomberg)

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions shall have the following meaning:

'A-1'	A-1 Development Inc., a company incorporated in the British Virgin Islands and the entire issued shares of which are beneficially owned by the Vendor;
'Acquisition'	the acquisition of the Sale Shares by the Purchaser from the Vendor pursuant to the Agreement;
'Agreement'	the conditional sale and purchase agreement dated 7 April 2009 and entered into between the Vendor and the Purchaser in relation to the Acquisition;
'AIM'	AIM, a market operated by the LSE;
'Board'	the board of Directors;
'Company'	RCG Holdings Limited, a company incorporated in Bermuda with limited liability and the Shares of which are listed on the Hong Kong Stock Exchange and traded on AIM and PLUS Market;
'Completion'	completion of the Acquisition;
'Consideration Shares'	15,000,000 new Shares to be allotted and issued to the  Vendor upon Completion as consideration payable by the Purchaser to the Vendor for the Sale Shares;
'Director(s)'	the director(s) of the Company;
'General Mandate'	the general mandate granted by the Shareholders to the Directors at the annual general meeting of the Company held on 8 April 2008 to allot, issue and deal with up to  30 per cent of the aggregate nominal value of the Shares in issue;
'Group'	the Company and its subsidiaries;
'Hong Kong'	the Hong Kong Special Administrative Region of PRC;
'HK$'	Hong Kong dollars, the lawful currency of Hong Kong;
'Independent Third Party(ies)'	Third party(ies) independent of the Group and its connected persons (as defined under the Hong Kong Listing Rules);
'Issue Price'	HK$9.00 (78.95 pence*) per Consideration Share
'Licensing Agreement'	the licensing agreement dated 7 April 2009 and entered into between A-1 and Virtual Storage Center Sdn Bhd, an indirect wholly-owned subsidiary of the Company, in relation to the purchase of a minimum of 21 million each of WinLogon and VSW software licenses by A-1 from the Company over a period of three years from the date of execution of the Licensing Agreement;
'Last Trading Day'	6 April 2009, being the last trading day of the Shares on the Hong Kong Stock Exchange prior to the signing of  the Agreement;
'Listing'	The listing of the Shares on the main board of the Hong Kong Stock Exchange by way of an introduction
'Hong Kong Listing Rules'	the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange;
'LSE'	London Stock Exchange plc.;
'PLUS Market'	an equity stock exchange based in London, England in the form of a quote-driven electronic trading platform;
'PRC'	the People's Republic of China;
'Purchaser'	Virtual Storage Center Sdn Bhd, an indirect wholly owned  subsidiary of the Company incorporated in Malaysia;
'Sale Shares'	15 ordinary shares in the issued share capital of A-1 beneficially owned by the Vendor, representing 15% of the entire issued share capital of A-1;
'Share(s)'	the share(s) of HK$0.01 each in the capital of the Company;
'Shareholder(s)'	the holder(s) of the Shares;
'Hong Kong Stock Exchange'	the Stock Exchange of Hong Kong Limited;
'Vendor'	Top Digital Holdings Limited, a company incorporated in the British Virgin Islands and the legal and beneficial owner of the entire issued share capital of A-1;
'%'	per cent.

By order of the Board of

RCG Holdings Limited

Chau Pak Kun

Director

For further information:

RCG Holdings Limited
Dr. Raymond Chu, Chairman & CEO  KC Chong, Chief Financial Officer	Tel: + 852 3669 6999
ir@rcg.tv	www.rcg.tv

Media enquiries:

Abchurch Communications Limited
Henry Harrison-Topham / Chris Lane	Tel: +44 (0) 20 7398 7702
henry.ht@abchurch-group.com	www.abchurch-group.com

As at the date of this announcement, the Board comprises the following directors:

Executive Directors

Chu Wai Man Raymond, Chau Pak Kun, Dato' Lee Boon Han and Ying Kan Man

Independent Non-executive Directors

General Dato' Seri Mohd Azumi, Liu Kwok Bond, Jonathan Michael Caplan QC and Li Mow Ming, Sonny

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