Television Broadcasts Limited — M&A Activity 2004

Jul 26, 2004

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

UPDATE ON THE STATUS OF THE FULFILLMENT OF THE CONDITIONS PRECEDENT OF THE SALE AND PURCHASE AGREEMENT DATED 7 OCTOBER 2003 AND NEGOTIATION OF VARIOUS PROJECTS

The Board wishes to update on the status of the following:

• a by the Supplemental Letter of Intent dated 21 July 2004 and entered into between Oriental Overseas and Party A, the parties agreed to extend the exclusivity period for conducting due diligence review and for entering into of the share transfer agreement and the relevant documents in relation to the proposed acquisition of not more than 50% equity interest in the PRC Company, from three months to six months from the date of the Letter of Intent, that is, to until 22 October 2004;

• b on 21 July 2004, HTH informed Hangzhou Jinjiang Group that it has decided not to proceed with the proposed acquisition of an interest in Hangzhou Jinjiang Green Power;

• c by the BCS Supplemental Letter of Intent dated 21 July 2004 and entered into between HTH and Beijing Xuce, the parties agreed to extend the latest time for completion of the due diligence exercise in relation to the proposed acquisition of an approximately 32.89% interests in BCS General Energy & Environment, to 9 September 2004; and

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• d HTH has issued a notice to Angola Group confirming the lapse of the Sale and Purchase Agreement in relation to the acquisition of the entire issued share capital of King Glory on 31 December 2003 in accordance with the terms therein on 21 July 2004.

Although the exclusivity period for conducting the due diligence exercise in relation to the proposed acquisition of not more than 50% equity interest in the PRC Company and of an approximately 32.89% interests in BCS General Energy & Environment has been extended to 22 October 2004 and 9 September 2004, respectively, no agreement has been reached as to the terms and conditions of the proposed acquisitions, the proposed acquisitions may or may not be consummated.

Further announcement(s) will be made by the Company in respect of the proposed acquisitions as and when appropriate.

INFORMATION ON THE GROUP

The Group is principally engaged in electrical engineering contracting business, trading in electrical equipment and materials and direct investments in Hong Kong and the PRC. As part of its diversification policy so as to minimize the adverse impact arising from contraction of the electrical engineering market, the Group has taken steps to diversify into the business of waste incineration and processing.

The following is a summary of the update status of the Sale and Purchase Agreement and the various projects referred to in this announcement:

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			Arrangement	Arrangement
Description			as	previously
of the project	Parties involved		announced		Update status
Proposed acquisition of not	(i)	Oriental Overseas;	–	The Letter of Intent was	–	The Supplemental Letter of Intent
more than 50% equity interest	(ii)	Party A, an Independent		entered into on 23 April 2004		was entered into on 21 July 2004
in the PRC Company		Third Party, who is the	–	As at 21 July 2004, refundable		to extend the exclusivity period
		authorized representative		earnest money in the total		for conducting due diligence
		of two shareholders of		amount of HK$20,000,000		review and for entering into of
		the PRC Company who		has been paid to Party A,		the share transfer agreement
		in aggregate are interested		the authorized representative		and the relevant documents to
		in 20% equity interest in		of the two shareholders		until 22 October 2004.
		the PRC Company. The two		of the PRC Company
		shareholders are Independent
		Third Parties.
Framework Agreement in	(i)	HTH;	–	The Framework Agreement	–	On 21 July 2004, HTH
relation to the acquisition of	(ii)	Hangzhou Jinjiang Group,		was entered into on 24		informed Hangzhou Jinjiang
an interest in Hangzhou Jinjiang		an Independent Third Party		December 2003		Group that it has decided not to
Green Power			–	There was no provision for		proceed with the proposed
				payment of deposit or earnest		acquisition of an interest in
				money under the Framework		Hangzhou Jinjiang Green Power.
				Agreement		The decision of the Group not to
						proceed with the proposed
						acquisition will not result in any
						liability on the part of the Group
Proposed acquisition of about	(i)	HTH;	–	The BCS Letter of Intent was	–	The BCS Supplemental Letter
32.89% interests in BCS	(ii)	Beijing Xuce,		entered into on 17 February		was entered into on 21 July 2004
General Energy & Environment		an Independent Third Party		2004		to extend the latest time for
			–	The Deposit Payment		completion of the due diligence
				Agreement was entered into		exercise in relation to the
				on 9 March 2004 and HTH		proposed acquisition of
				has paid to Beijing Xuce		an approximately 32.89%
				a refundable deposit of		interests in BCS General Energy
				HK$10,000,000		& Environment to 9 September
						2004

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Sale and purchase agreement	(i)	HTH;	–	The Sale and Purchase	–	On 21 July 2004, HTH issued
dated 7 October 2003	(ii)	Angola Group,		Agreement in relation to the		a notice to Angola Group
		an Independent Third Party		acquisition of the entire issued		confirming the lapse of the Sale
				share capital of King Glory		and Purchase Agreement on
				was entered into on 7 October		31 December 2003 in accordance
				2003		with the terms therein. HTH
			–	No deposit or earnest money		is not under any liability towards
				has been paid by HTH under		Angola Group for issuing the
				the Sale and Purchase		notice confirming the lapse of the
				Agreement		Sale and Purchase Agreement

Details of the update status are set out in the paragraph headed “Update on the status of the fulfillment of the conditions precedent of the sale and purchase agreement dated 7 October 2003 and negotiation of various projects” below.

UPDATE ON THE STATUS OF THE FULFILLMENT OF THE CONDITIONS PRECEDENT OF THE SALE AND PURCHASE AGREEMENT DATED 7 OCTOBER 2003 AND NEGOTIATION OF VARIOUS PROJECTS

Proposed acquisition of not more than 50% equity interest in the PRC Company

References are made to the announcements made by the Company dated 26 April and 8 July 2004, respectively, in relation to, among other things, the proposed acquisition of not more than 50% equity interest in the PRC Company which was licensed to operation an internet cafe chain in the PRC.

On 23 April 2004, HTH and Party A signed the Letter of Intent. Party A is an Independent Third Party who is the authorized representative of two shareholders of the PRC Company who in aggregate are interested in 20% equity interest in the PRC Company. Based on information available to the Company so far, the shareholders of the PRC Company are Independent Third Parties.

After the signing of the Letter of Intent, the Company has commenced the due diligence review of the affairs of the PRC Company. As at the date of this announcement, the Company has not yet completed the due diligence review of the affairs of the PRC Company and no agreement has been reached between the parties in respect of the terms and conditions of the proposed acquisition. By the Supplemental Letter of Intent dated 21 July 2004 entered into

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between Oriental Overseas and Party A, the parties agreed to extend the exclusivity period for (i) conducting due diligence review on the legal, financial and operational affairs of the PRC Company; and (ii) entering into of the share transfer agreement and the relevant documents, from three months to six months from the date of the Letter of Intent, that is, to until 22 October 2004. Apart from the extension of the exclusivity period, all other terms of the Letter of Intent remain unchanged.

It was stated in the announcement made by the Company dated 26 April 2004 that pursuant to the Letter of Intent, Oriental Overseas has to pay an amount of HK$20,000,000 (“Earnest Money”) as earnest money. As at 21 July 2004, the total amount of the Earnest Money has been paid by Oriental Overseas to Party A as agent of the two shareholders who in aggregate are interested in 20% of the equity interest of the PRC Company, pursuant to the Letter of Intent. No collateral is being provided for the Earnest Money. The Earnest Money is funded by internal resources of the Company. In accordance with the terms of the Letter of Intent as supplemented and varied by the Supplemental Letter of Intent, the Earnest Money shall be returned by Party A on behalf of the two shareholders who in aggregate are interested in 20% of the equity interest of the PRC Company to Oriental Overseas without interest within seven days from the end the six-months exclusivity period, that is seven days from 22 October 2004, unless the parties agree to further extend the exclusivity period or enter into the share transfer agreement by the end of the six-months exclusivity period. Upon the entering into of the share transfer agreement in relation to the proposed acquisition, the Earnest Money shall be applied towards satisfying the consideration payable thereunder.

As the Company has not yet completed the due diligence review of the affairs of the PRC Company and the parties have not yet reached any agreement in relation to the terms and conditions of the proposed acquisition, the proposed acquisition of not more than 50% equity interest in the PRC Company may or may not be consummated.

As stated in the announcement made by the Company dated 26 April 2004, the proposed acquisition of not more than 50% equity interest in the PRC Company is in line with the corporate strategy of the Group to minimize the adverse impact arising from the contraction of the electrical engineering market through vertical integration into construction related business and horizontal diversification. The Group has commenced its diversification strategy by entering into a co-operation agreement with China Sciences Group for the establishment of the Dongguan JV. The proposed acquisition of an interest in the PRC Company is a further step in this diversification policy of the Group. As such, the Board is of the view that the entering into of

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the Supplemental Letter of Intent for extending the exclusivity period for conducting due diligence review of the affairs of the PRC Company is in the interest of the Company and the shareholders as a whole.

Framework Agreement in relation to the acquisition of an interest in Hangzhou Jinjiang Green Power

References are made are made to the announcements made by the Company dated 24 December 2003 and 8 July 2004, respectively, in relation to, among other things, the entering into of the Framework Agreement in relation to the acquisition of an interest in Hangzhou Jinjiang Green Power.

The Framework Agreement was entered into between HTH and Hangzhou Jinjiang Group. Hangzhou Jinjiang and its beneficial owners are Independent Third Parties. Hangzhou Jinjiang Green Power is owned as to approximately 77.94% by Hangzhou Jinjiang Group and as to the remaining approximately 22.06% by �������� (China Jieneng Investment Co.)*, a state owned enterprise. Hangzhou Jinjiang Green Power is engaged in the business of waste incineration and processing for generation for electricity.

Under the terms of the Framework Agreement, HTH was granted the exclusive right to negotiate with Hangzhou Jinjiang Group in relation to the proposed acquisition of an interest in Hangzhou Jinjiang Green Power for a period of three months from the date of the Framework Agreement, that is, up to 23 March 2004. In spite the expiration of the exclusivity period, HTH has continued with the due diligence exercise of the affairs of Hangzhou Jinjiang Green Power with the assistance and permission of Hangzhou Jinjiang Group. After careful consideration, the Board was of the view that it is not appropriate for the Group to acquire an interest in Hangzhou Jinjiang Green Power for the time being. The Board is of the view that as the Group is in the process of setting up the Dongguan JV, it should in the meantime continue with its diversification strategy into the business of waste incineration and processing through investments in the construction of new plants in return for the right to operate the facilities and should reconsider acquiring equity interests in existing plant at a later stage. Accordingly, the Board decided that the Group should not proceed with the proposed acquisition of an interest in Hangzhou Jinjiang Green Power. On 21 July 2004, HTH informed Hangzhou Jinjiang Group that it has decided not to proceed with the proposed acquisition of an interest in Hangzhou Jinjiang Green Power.

As only provisions in the Framework Agreement relating to the right of the Group to undertake a due diligence exercise of the affairs of Hangzhou Jinjiang Green Power and the exclusivity

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right in relation to the proposed acquisition are legally binding on the parties and all other terms of the Framework Agreement are non-legally binding, the decision of the Group not to proceed with the proposed acquisition will not result in any liability on the part of the Group. There was no provision for payment of deposit or earnest money under the Framework Agreement. In addition, the Board does not consider the decision not to proceed with the proposed acquisition to have any material adverse impact on the financial and operational aspects of the Group.

Proposed acquisition of about 32.89% interest in BCS General Energy & Environment

References are made to the announcements made by the Company dated 17 February and 10 March 2004, respectively, in relation to, among other things, the proposed acquisition of an approximately 32.89% interests in BCS General Energy & Environment and the making of a refundable deposit.

On 17 February 2004, HTH and Beijing Xuce entered into the BCS Letter of Intent for the acquisition of an approximately 32.89% interests in BCS General Energy & Environment. BCS General Energy & Environment is owned as to approximately 36.84% by China Sciences Group, as to approximately 32.89% by Beijing Xuce and as to approximately 30.27% by 20 individuals. Beijing Xuce, its beneficial owners and the 20 individual shareholders are Independent Third Parties. China Sciences Group is the joint venture partner of HTH of the Dongguan JV. Upon the approval of the establishment of the sino-foreign joint venture company for the Dongguan JV by the PRC authorities, China Sciences Group, being a substantial shareholder in a subsidiary of the Company, will become a connected person of the Company within the meaning of the Listing Rules. The following is the shareholding structure of BCS General Energy & Environment:

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----- Start of picture text -----

China Sciences
Beijing Xuce 20 Individuals
Group
32.89% 36.84% 30.27%
BCS General Energy & Environment
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The proposed acquisition is subject to the completion of a due diligence exercise of the affairs of BCS General Energy & Environment within three months from the date of the BCS Letter of Intent, that is, by 16 May 2004. Upon expiration of the three-month period, the Company has continued with its due diligence exercise of the affairs of BCS General Energy &

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Environment with the assistance and permission of Beijing Xuce. As it is anticipated that more time is required to complete the due diligence exercise, the parties consider it more appropriate to enter into a supplemental letter of intent to evidence their intention to extend the period for the exclusive right of negotiation and conduct of the due diligence exercise to until 9 September 2004. By the BCS Supplemental Letter of Intent dated 21 July 2004 and entered into between HTH and Beijing Xuce, the parties agreed to extend the latest time for completion of the due diligence exercise to 9 September 2004.

On 9 March 2004, pursuant to the Deposit Payment Agreement, HTH has paid to Beijing Xuce a refundable deposit in the amount of HK$10,000,000 (equivalent to approximately RMB10.6 million). HTH is not obligated under the terms of the BCS Letter of Intent and the BCS Supplemental Letter of Intent to proceed with the proposed acquisition. According to the terms of the Deposit Payment Agreement and the BCS Supplemental Letter of Intent, in the event the Company is not satisfied with the results of the due diligence exercise or the parties fail to reach an agreement on the terms and conditions of the proposed acquisition by 9 September 2004, Beijing Xuce shall within 7 days after receipt of the written demand from HTH repay the whole of the deposit to HTH. In the event, HTH proceeds with the proposed acquisition, the deposit will be apply towards satisfying the consideration.

As the Company has not yet completed the due diligence review of the affairs of BCS General Energy & Environment and the parties have not yet any agreement in relation to the terms and conditions of the proposed acquisition, the proposed acquisition may or may not be consummated.

As stated in the announcement made by the Company dated 17 February 2004, BCS General Energy & Environment is a member of the China Sciences Group of companies, the joint venture partner of the Group in the Dongguan JV and is the holder of certain technology for application in the waste incineration and processing. The Board is of the view that the proposed acquisition is not only in line with the corporate strategy of the Group to diversify into the waste incineration and processing business, but also enable the Company to have an interest in the holder of the technology for application in waste incineration and processing which would provide the required technical support to the joint venture with China Sciences Group and also other future projects in waster incineration and processing. The Board is therefore of the view that the entering into of the BCS Supplemental Letter of Intent for extending the exclusivity period for conducting due diligence review of the affairs of BCS General Energy & Environment is in the interest of the Company and the shareholders as a whole.

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Sale and purchase agreement dated 7 October 2003

References are made to the announcements made by the Company dated 23 September and 7 October 2003 and a circular dated 27 October 2003, respectively, in relation to, the entering into of the Sale and Purchase Agreement for the acquisition of the entire issued share capital of King Glory.

The Sale and Purchase Agreement was entered into on 7 October 2003, among the Company, HTH as the purchaser, Angola Group as the seller and the legal and beneficial owners of Angola Group as the guarantors, in relation to the acquisition of the entire issued share capital of King Glory by the Company, Angola Group and its legal and beneficial owners are Independent Third Parties.

As stated in the announcement made by the Company dated 7 October 2003 and the circular dated 27 October 2003, completion of the Sale and Purchase Agreement is conditional upon, among other things, the completion of the due diligence of the First JV Company and the terms and conditions of the joint venture contract and articles of association of the First JV Company to the satisfaction of HTH (the “Condition Precedent”), on or before 31 December 2003. The Condition Precedent was not fulfilled by 31 December 2003. Since then, HTH has used its best endeavours to discuss with Angola Group with a view to reach an agreement for the extension of time for fulfillment of the Condition Precedent. After more than six months, no agreement was reached between the parties.

The Board does not wish to spend additional resources in further discussion with Angola Group regarding the Condition Precedent. On 21 July 2004, HTH has issued a notice to Angola Group confirming the lapse of the Sale and Purchase Agreement in relation to the acquisition of the entire issued share capital of King Glory on 31 December 2003 in accordance with the terms therein.

As disclosed in the announcements made by the Company dated 7 October, 28 November, 23 December and 24 December 2003, respectively and the circulars issued by the Company dated 27 October 2003 and 14 January 2004, HTH has entered into a co-operation with China Sciences Group for the formation of the Dongguan JV for carrying out the business of waste incineration and processing, the lapse of the Sale and Purchase Agreement will not have any material adverse effect on the financial and operation of the Group. The Group will in the meantime continue with its diversification into the business of waste incineration and processing through the Dongguan JV. The Group and China Sciences Group have submitted the relevant documents to PRC authorities for the establishment of the Dongguan JV and is awaiting for

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the approval from the authorities. Furthermore, it is a term of the Sale and Purchase Agreement that upon the lapse of the agreement, neither party can make any claim against the other parties to the Sale and Purchase Agreement. No deposit or earnest money has been paid by HTH under the Sale and Purchase Agreement. Accordingly, HTH is not under any liability towards Angola Group for issue the notice confirming the lapse of the Sale and Purchase Agreement.

GENERAL

Although the exclusivity period for conducting the due diligence exercise in relation to the proposed acquisition of not more than 50% equity interest in the PRC Company and of an approximately 32.89% interests in BCS Science General Energy & Environment has been extended to 22 October 2004 and 9 September 2004, respectively, no agreement has been reached as to the terms and conditions of the proposed acquisitions, the proposed acquisitions may or may not be consummated.

Further announcement(s) will be made by the Company in respect of the proposed acquisitions as and when appropriate.

DEFINITIONS

In this announcement, unless otherwise defined, expressions used herein shall have the following meanings:

“associates”

has the meaning ascribed thereto in the Listing Rules;

“Angola Group”

Angola Group Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and owned by four individuals as to 25% each. Each of the four individuals are Independent Third Parties and are guarantors to the Sale and Purchase Agreement;

“Beijing Xuce”

���������� (Beijing Xuce Development Co., Ltd.)*, a company incorporated in the PRC and is interested in approximately 32.89% of the issued share capital of BCS General Energy & Environment. It is an Independent Third Party;

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“Board”

• “BCS General Energy

• & Environment”

• “BCS Letter of Intent”

• “BCS Supplemental Letter of Intent”

• “China Sciences Group”

• “Company”

• “Deposit Payment Agreement”

• “Directors”

• “Dongguan JV”

the board of Directors;

• ���������������� (Beijing China Sciences General Energy & Environment Co., Ltd.)*, a company incorporated in the PRC and owned as to approximately 36.84% by China Sciences Group, as to approximately 32.89% by Beijing Xuce and as to approximately 30.27% by 20 individuals;

• the letter of intent dated 17 February 2004 and entered into between HTH and Beijing Xuce in relation to the proposed acquisition of an approximately 32.89% interests in BCS General Energy & Environment;

• the supplemental letter of intent dated 21 July 2004 entered into between HTH and Beijing Xuce in supplemental to the BCS Letter of Intent;

• ������������ (China Sciences Enterprise Group (Holding) Corporation)*, a large scale enterprise group established by ����� (Chinese Academy of Science);

• China Conservational Power Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on The Stock Exchange of Hong Kong Limited;

• the deposit payment agreement dated 9 March 2004 and entered into between HTH and Beijing Xuce in relation to the payment of a refundable deposit, as set out in the announcement made by the Company dated 10 March 2004;

the directors of the Company;

• the sino-foreign joint venture to be established between HTH and China Sciences Group in Dongguan, the PRC for carrying on the business of waste incineration and processing, (as disclosed in the circulars issued by the Company dated 27

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October 2003, 14 January 2004 and 9 March 2004 and the announcements made by the Company dated 7 October 2003, 28 November 2003, 2 December 2003 and 24 December 2003, 17 February 2004 and 18 May 2004, respectively);

• “First JV Company”

• a sino-foreign equity joint venture enterprise proposed to be established by King Glory and BCS General Energy & Environment in the PRC to engage in the business of the development, construction and management of waste incineration and processing business project in the PRC involving the construction of incineration boilers and electricity generators pursuant to the terms of the Sale and Purchase Agreement;

• “Framework the framework agreement dated 24 December 2003 and Agreement” entered into between HTH and Hangzhou Jinjiang Group;

• “Group”

the Company and its subsidiaries;

• “HTH”

• Hong Tong Hai Investments Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of the Company;

• “Hangzhou Jinjiang Green Power”

• ������������ (Hangzhou Jinjiang Green Power Co., Ltd.)*, a company incorporated in the PRC and owned as to 77.94% by Hangzhou Jinjiang Group;

• “Hangzhou Jinjiang Group”

• ���������� (Hangzhou Jinjiang Group Co., Ltd.)*, a company incorporated in the PRC;

• “Hong Kong” The Hong Kong Special Administrative Region of the PRC;

• “King Glory” King Glory Development Limited, a company incorporated in the British Virgin Islands;

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• “Independent a party which is independent of and not connected with the Third Party” directors, chief executives and substantial shareholders of the Company and its subsidiaries and their respective associates and not a connected person of the Company (as defined in the Listing Rules);

• “Letter of Intent” the legally binding letter of intent dated 23 April 2003 entered into between Oriental Overseas and Party A in relation to the proposed acquisition of not more than 50% equity interest in the PRC Company;

• “Listing Rules” The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

• “Oriental Overseas” Oriental Overseas Group Limited, a company incorporated in the British Virgin Islands with limited liability and directly wholly owned by the Company;

• “PRC”

• The People’s Republic of China;

• “PRC Company” a company incorporated in the PRC with limited liability and licenced to operate internet cafe chain in the PRC;

• “Party A”

• Mr. Tang Yat Fung, Cabot, the authorized representative of the two shareholders who in aggregate are interested in 20% of the equity interest in the PRC Company;

• “Sale and Purchase

  • the conditional sale and purchase agreement dated 7 October 2003 entered into between

• Agreement” the Company, HTH, Angola Group and the legal and beneficial owners of the entire issued share capital of Angola Group as warrantors;

• “Supplemental Letter the supplemental letter of intent dated 21 July 2004 entered of Intent” into between Oriental Overseas and Party A in supplemental to the Letter of Intent;

“HK$”

Hong Kong dollars, the lawful currency of Hong Kong; and

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“RMB” Renminbi, the lawful currency of the PRC.

As at the date of this announcement, the Board consists of:

Executive Directors

Mr. Hon Ming Kong

Mr. Hon Yik Kwong

Mr. Lee Yu Leung

Mr. Chen Jun Nong

• Mr. Pascal Ting

Non-executive Director

Mr. Li Yong, Alfa

Independent Non-executive Directors

Mr. Fork Siu Lun, Tommy

• Mr. Tsoi Wai Kwong

By Order of the Board

CHINA CONSERVATIONAL POWER HOLDINGS LIMITED

Hon Ming Kong Chairman

Hong Kong, 23 July 2004

For the purpose of this announcement, HK$1.00 = RMB1.06. The conversion rate is for the purpose of illustration only and does not constitute a representation that any amounts have been, could have been, or may be exchanged at the aforementioned or any other rates.

Please also refer to the published version of this announcement in The Standard.

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