Xteam Software International Limited to Acquire Software Businesses of Beijing Development

Become the Software Giant in Beijing To

Tap the Enormous Software Market in the PRC

May 20, 2004, 01:00 ET from Xteam Software International Limited

    HONG KONG, May 20 /Xinhua-PRNewswire-FirstCall/ -- Xteam Software
 International Limited ("Xteam" or the "Group")(SEHK: 8178) announced it has
 entered the Conditional Deed for the acquisition of the aggregate interest of
 68% in Astoria Innovations Limited and the entire issue share capital of
 Wisdom Elite Holdings Limited (collectively termed as "Software Businesses")
 of Beijing Development (Hong Kong) Limited ("Beijing Development") (SEHK: 154).
 Xteam also announced it has entered Conditional Agreements (collectively
 termed as "The Snow Fair Acquisition and the Pantosoft Acquisition") to
 increase its stake in Snow Fair Co., Ltd. ("Snow Fair") and Pantosoft
 International Limited ("Pantosoft") to 100%.  The completion of the
 Conditional Deed is subject to the completion of The Snow Fair Acquisition and
 the Pantosoft Acquisition.  The completion of the acquisitions will enable
 Beijing Development to become the largest shareholder of Xteam, holding 56.29%
 of the enlarged share capital base of Xteam.  Xteam is set to become the
 software giant in Beijing, and to tap the burgeoning potential of software
 market in the PRC.
     The Software Businesses of Beijing Development is the pre-eminent player
 in Beijing in provision of software and information management systems to
 various government departments in the PRC, such as the Beijing Education
 Bureau, the Labour and Social Security and Tax Authorities in the PRC.  The
 transaction fees of Software Businesses were HK$55.8 million for the year
 ended 31 December 2003.  Xteam is one of the top-notch providers of the
 Chinese Linux operating system and software in the PRC.  Xteam has established
 a strong presence in Beijing thanks to its leading edge Linux technology and
 R&D expertise.  The new entity, leveraging on both strong positions in
 software in Beijing, will capture a dominant market share in Beijing to
 provide Linux operating systems and software solutions to government
 authorities in four key sectors: social security, labour security, e-
 government and e-education.
     Mr. Brian Ng, Managing Director of Beijing Development, said, "We are
 delighted to amalgamate our Software Businesses with Xteam because of the
 synergistic competitive advantages in providing software solutions to
 government sectors in Beijing.  The combination will allow the Group's
 Software Businesses to further enhance its technical capability and expertise
 in providing cutting-edge Linux software solutions in the PRC."
     Mr. Gary Ma, Chairman of Xteam, said, "We are excited with the acquisition
 of Software Businesses of Beijing Development.  The enlarged Xteam will be
 uniquely positioned as the software giant in Beijing which sets itself apart
 with the breadth of its services offerings across different sectors in the
 Government and the depth of expertise ranging from Linux operating system to
 software development."
     The PRC Government is a dominant consumer of IT products and services.
 The government-led initiatives in the PRC spurred the growth of the domestic
 software companies and pushed Linux to the forefront.  In August 2003, the
 State Council in the PRC announced that all government ministries had to
 purchase only PRC-made software at their next upgrade.  According to CCID, the
 Beijing Municipal Government purchased 2,801 suites of Linux operating systems
 and 11,143 automation software from domestic software companies in 2002.  The
 PRC software market is further boosted by the promotion of e-government and e-
 education by the PRC Government. IDC forecasts that the PRC government's
 expenditure in IT services will increase from US$1.8 billion in 1999 to
 US$4.94 billion in 2004.  These converging forces will cement Xteam's position
 to capture the growing demand of software solutions from the largest sector in
 the PRC.
     Mr. Gary Ma concluded, "The acquisition will reinvigorate Xteam and propel
 it into a new growth mode to capitalize, capture the opportunities available
 and foster the rapid deployment of Linux technology in the PRC as a result of
 the promotion of e-government and e-education by the PRC Government.  Given
 the solid revenue base from the well-established clientele in the government
 sector, Xteam is set to replicate the success models in other sectors of the
 Government and expand its presence throughout the PRC.  The new Xteam will
 become the benchmark of excellence in government software solutions in the
     Pursuant to The Snow Fair Acquisition and the Pantosoft Acquisition, Xteam
 has agreed to purchase an aggregate interest of 31% in Snow Fair and a 49%
 interest in Pantosoft for an aggregate Consideration of HK$20,519,000.  This
 will be settled by the issuance of 139,360,000 new Xteam shares at a price of
 HK$0.145 each (a discount of approximately 4.6% to the closing price of each
 Xteam Share of HK$0.152 on 6 February 2004, or a discount of approximately
 3.3% to the average closing price per Xteam Share for the 10 consecutive
 trading days up to and including 6 February 2004).  Upon the completion of The
 Snow Fair Acquisition and the Pantosoft Acquisition, Xteam will hold a 100%
 stake in both Snow Fair and Pantosoft.
     Pursuant to the Conditional Deed, the acquisition of the Software
 Businesses will be satisfied by the issuing of 2,926,103,814 Consideration
 Shares to Beijing Development and other shareholders of Software Businesses.
 The monetary value of the Consideration Shares is worth an estimated HK$444.8
 million (based on the issue price at HK$0.152 per share as of 6 February 2004).
 Upon the completion of The Snow Fair Acquisition and Pantosoft Acquisition and
 the Conditional Deed, and none of the 143,000,000 outstanding share options of
 Xteam is exercised, Beijing Development will hold 56.29% of the enlarged share
 capital base of Xteam.
     Xteam Software International Limited (SEHK: 8178)
     Xteam Software International Limited (HKSE: 8178) is the first
 professional software solution provider that adopts Linux as its core
 technology.  Xteam principally engages in the provision of the Chinese Linux
 operating system with kernel rewritten to cater for Chinese users in China and
 software based on the Linux operating platform for various hardware
 applications.  While its products support personal computer applications,
 Xteam is most widely recognized for its efficient operating system that leads
 the server, Internet and Intranet markets.  Xteam also provides technical
 support and after sales services to its customers.
     Xteam has set numerous records in the Linux operating system, including
 the release of the first Linux Chinese version in the world that inaugurated a
 new era of Chinese Linux market; has the first successful showcase of the
 commercialized application of Chinese Linux in the OA project of the Beijing
 Government Research Office; develops the first intelligent GUI installer for
 Linux and develops the first genuine E-using Linux Server in China.  Xteam is
 also the first Linux private enterprise listed on the Hong Kong Stock Exchange.
     Beijing Development (Hong Kong) Limited (SEHK: 154)
     Beijing Development is principally engaged in providing software
 development, software and hardware system integration and technical,
 operational and maintenance support in Beijing.  This includes the Yikatong
 project for areas such as education, social insurance and taxation, labor and
 transportation systems.  With Beijing Holdings (SEHK: 392) as its ultimate
 holding company, Beijing Development has become the information technology
 flagship of Beijing Holdings.
     Issued by PR ASIA Consultants Limited on behalf of Xteam Software
 International Limited.
     For enquiries, please contact PR ASIA Consultants Limited:
     Mr. Patrick Yu / Mr. Danny Cheng
     Tel: +852-2586-1638 / +852-2802-2738
     Fax: +852-2583-9138
     Email: patrick.yu@prasia.net / danny.cheng@prasia.net

SOURCE Xteam Software International Limited