Depending upon the number of Shares to be subscribed by the Subscriber pursuant to the Subscription Agreement, the Subscriber may acquire a controlling interest in the Company for the purposes of the Takeovers Code. On the basis of the existing issued share capital of the Company, the Subscriber would be interested in 30% or more of the enlarged issued share capital of the Company if it subscribes for 194,936,068 or more new Shares pursuant to the Subscription Agreement. The Subscriber will make an application to the Executive pursuant to Note 1 of the Notes on Dispensations from Rule 26 of the Takeovers Code for the Whitewash Waiver, the grant of which will be subject to the approval by the Independent Shareholders by way of a poll at the SGM of the Company. Prime Pacific International Limited, UHL and Mr. Ko and their respective associates and parties acting in concert with any of them will abstain from voting in the SGM in respect of the resolution to approve the Whitewash Waiver. The granting of the Whitewash Waiver is a condition of the First Tranche Completion. If the condition is not satisfied before the long stop date of the First Tranche Completion, the Subscription Agreement will terminate.

So far as the Subscriber is aware, the Subscriber, General Instrument Corporation ("GIC", a holding company of the Subscriber and a wholly-owned, directly held subsidiary of Motorola, Inc.) and parties acting in concert with any one of them currently do not hold any voting rights in the issued share capital of the Company and they have not dealt in the Shares during the six months prior to the date of this announcement.

The Company will apply the net proceeds of approximately HK$52.5 million from the subscription under the first tranche as to approximately HK$7.8 million for capital expenditure to upgrade the existing digital systems of the Group, approximately HK$15.6 million for research and development and approximately HK$29.1 million for general working capital of the Group. The Company will apply the proceeds of approximately HK$58.5 million from the subscription under the second tranche as to approximately HK$10 million for capital expenditure to upgrade the existing digital systems of the Group, approximately HK$15 million for research and development and approximately HK$33.5 million for general working capital of the Group. The Company intends to apply the proceeds of up to approximately HK$140.4 million to be received from any subscription under the third and fourth tranches for general working capital of the Group and for the continued development of its existing business.

Mr. Ko and UHL, as the shareholders of the Company, entered into the Shareholders' Deed with the Subscriber on 18 May 2004. Pursuant to the Shareholders' Deed, among other things, Mr. Ko and UHL undertake to the Subscriber not to, and will procure Mr. Ko Associates and UHL Associates not to, dispose of any interest in the Group subject to certain terms and conditions set out in the Shareholders' Deed. Such restrictions apply during the period commencing on the date of the Subscription Agreement and ending on the date 6 months after the date of the First Tranche Completion.

On 18 December 2003, GIC entered into the Non-exclusive Distributor Agreement with DVNCL. On 18 May 2004, GIC entered into the Services Agreement with DVNGL and the Design and Development Agreement with DVN Technology and the Company (as guarantor of the obligations of DVN Technology under the Design and Development Agreement). Details of each of the agreements are set out in the paragraph headed "Commercial Contracts and possible continuing connected transactions" below. Upon the First Tranche Completion, the Subscriber will become a substantial shareholder of the Company and GIC, being a holding company of the Subscriber, will therefore become a connected person of the Company. The Purchases and the Transactions will then constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

An independent board committee will be established by the Company to advise the Independent Shareholders as to whether the terms of the Subscription Agreement, the Whitewash Waiver, the Purchases to be made in each of the years ending 31 December 2004, 2005 and 2006, the Purchase Caps, the Transactions to be made in each of the years ending 31 December 2004, 2005 and 2006 and the Transactions Caps are fair and reasonable so far as the disinterested and Independent Shareholders are concerned. The Company will appoint an independent financial adviser to advise the independent board committee in this regard. An announcement will be made by the Company as soon as the independent financial adviser is appointed. A circular containing, among other things, further details of the Subscription Agreement, the Whitewash Waiver, the Commercial Contracts, the recommendation from the independent board committee of the Company to the Independent Shareholders in respect of the Subscription Agreement, the Whitewash Waiver, the Purchases to be made in the year ending 31 December 2004, 2005 and 2006, the Purchase Caps, the Transactions to be made in the year ending 31 December 2004, 2005 and 2006 and the Transactions Caps, the letter of advice from the independent financial adviser to the independent board committee of the Company and a notice convening the SGM will be despatched to the shareholders of the Company as soon as practicable.

Shareholders and investors should note that completion of the Subscription is subject to a number of conditions. The release of this announcement does not in any way imply that any of the First Tranche Completion, Second Tranche Completion, Third Tranche Completion or Fourth Tranche Completion will occur. Shareholders and investors should exercise caution when dealing in the Shares.

Trading of the Shares on the Stock Exchange has been suspended at the request of the Company with effect from 9:30 a.m. on 22 April 2004 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of the trading of the Shares with effect from 9:30 a.m. on 19 May 2004.

About DVN
DVN (Holdings) Limited (SEHK: 500) is a leading media technology company specializing in the development of comprehensive digital broadcast platforms for TV operators over which pay TV services, programme contents, related value-added services and applications to end-users are delivered. DVN's technologically advanced yet cost effective digital TV platform, custom-made for PRC operators, has made it a key player in making digital broadcasts in China a reality. DVN has so far installed over 20 digital broadcasting systems in more than 10 municipalities and provinces to enable the rollout of a range of channel rebroadcasts, near video on demand, online information, interactive advertising and TV-commerce services. A nationwide survey report conducted by the Academy of Broadcasting Science, SARFT of China in 2002 ranked DVN's branded set top boxes the highest in adoption rate amongst TV operators in the country. Based in Hong Kong and listed on the Stock Exchange of Hong Kong in 1989, DVN has been operating in the technology sector since 1982.