Xteam Software International Limited 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.

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.

The Software Businesses of Beijing Development is a 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 Labor 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, labor security, e-government and e-education.

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.

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