09:26 CS CONSERVAT P<00351> - Announcement (4) (ii) Beijing Yuk Chak fails to convert BCS General Energy & Environment into a sino-foreign joint venture enterprise and obtain the approval from the relevant government authorities agreeing to convert BCS General Energy & Environment into a sino-foreign joint venture and the issue of the amended approval certificate and/or business licence of BCS General Energy & Environment within a period of 9 months from the completion of the Acquisition Agreements, unless agreed otherwise by Asset Palace and Beijing Yuk Chak in writing. In such case, Beijing Yuk Chak will refund the entire HK$19,000,000, which comprises of the HK$10,000,000 earnest money and the HK$9,000,000 payment in cash, without interest, to Asset Palace within 7 business days upon receipt of the relevant notice of termination from Asset Palace. Information of BCS General Energy & Environment The principal business of BCS General Energy & Environment is research, development, production and sale of various boiler products in conjunction with the provision of related technical services with the application of waste combustion electric power technology in the PRC. It is the holder of many patent rights of the necessary technology for application in waste incineration and processing for power generation. BCS General Energy & Environment is a limited company established in the PRC with a registered capital of RMB7.6 million (equivalent to approximately HK$7.14 million), which has been fully paid. Its profits before tax attributable to the Equity Interest for each of the two financial years ended 31 December 2003 immediately preceding the Acquisition Agreements were RMB1,156,637 (equivalent to approximately HK$1,087,269), RMB1,164,626 (equivalent to approximately HK$1,094,779) respectively. Its net loss attributable to the Equity Interest for the six months ended 30 June 2004 was approximately RMB487,364 (equivalent to approximately HK$458,135). Apart from the Equity Interest owned by Beijing Yuk Chak, the remaining equity interest of BCS General Energy & Environment is owned as to approximately 36.84% by CSEG and the remaining approximately 30.27% equity interest is owned by twenty natural persons ("Remaining BCS Shareholders"), who are either the founders or employees of BCS General Energy & Environment. According to the best knowledge, information and belief of the Directors, CSEG is a large scale enterprise group established by *| (Chinese Academy of Science). Both CSEG and the Remaining BCS Shareholders are third parties independent of the Company and its connected persons. Upon Completion, BCS General Energy & Environment will be accounted as an associate of the Group. The board of directors of BCS General Energy & Environment currently has seven members. Asset Palace will nominate two directors to the board of directors of BCS General Energy & Environment. Reasons for the Acquisition The principal businesses of the Group are computer hardware and provision of maintenance support services, software design and development, and guaranteed income investments in a power plant and a motor spare parts business in the PRC. As stated in the interim report of the Group for the six months ended 30 June 2004, the Group will go on to explore other investment opportunities which may include waste incineration and processing business in the PRC since the Board views this as an excellent opportunity for the Group to invest in a unique business with vast market potential. Further to the setting up of the joint venture in Guilin, the PRC and the proposed acquisition of 39% interest of a joint venture in Dongguan, the PRC as detailed in the Company's announcement dated 1 December 2004, the Board considers that the Acquisition is a step forward to implement and is consistent with the Group's aforesaid current investment strategy. In view of the principal business of BCS General Energy & Environment and its holding many patent rights of the necessary technology for application in waste incineration and processing, the Board considers that the Acquisition will have a synergistic effect on the Group's future development in the waste incineration industry. The Board also considers that the terms of the Acquisition Agreements are fair and reasonable as far as the Shareholders are concerned. GENERAL