Crypto Flow Technology Limited — Capital/Financing Update 2007

Oct 31, 2007

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Wafer Systems Limited.

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8198)

SUBSCRIPTION OF NEW SHARES AND RESUMPTION OF TRADING

Financial adviser to the Company

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On 30 October 2007, the Company entered into the Subscription Agreements with each of the Subscribers, pursuant to which the Subscribers conditionally agreed to subscribe for an aggregate of 58,000,000 Subscription Shares at the Subscription Price of HK$1.80 per Share. The Subscription Shares represent (i) approximately 19.47% of the existing issued share capital of the Company of 297,831,245 Shares; (ii) approximately 15.68% of the issued share capital of the Company of 369,831,245 Shares as enlarged by the issue of the Consideration Shares; and (iii) approximately 13.56% of the issued share capital of the Company of 427,831,245 Shares as enlarged by the issue of the Consideration Shares and the Subscription Shares.

The Subscription Price of HK$1.80 per Share represents (i) a discount of approximately 19.28% to the closing price of HK$2.23 per Share as quoted on the Stock Exchange on 29 October 2007, being the last trading day immediately prior to the date of the Subscription Agreements; (ii) a discount of approximately 9.09% to the average of the closing prices per Share of HK$1.98 as quoted on the Stock Exchange for the last five trading days up to and including the last trading day immediately prior to the date of the Subscription Agreements; and (iii) the average of the closing prices per Share of HK$1.80 as quoted on the Stock Exchange for the last ten trading days up to and including the last trading day immediately prior to the date of the Subscription Agreements.

The Subscription is subject to the conditions as set out in the paragraph headed “Conditions of the Subscription” below. An application will be made by the Company to the GEM Listing Committee for the listing of, and permission to deal in, the Subscription Shares.

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The Company is currently held as to approximately 26.71% by Mr. Chan Sek Keung, Ringo, the Chairman and executive director of the Company. Immediately after completion of the Subscription, the shareholding interests of Mr. Chan Sek Keung, Ringo in the Company will be reduced to approximately 18.59% of the then issued share capital of the Company as enlarged by the issue of the Consideration Shares and the Subscription Shares.

The net proceeds from the Subscription of approximately HK$104.1 million will be utilized to develop the businesses to be acquired under the Agreement.

At the request of the Company, trading in the Shares on the Stock Exchange was suspended from 9:30 a.m. on Tuesday, 30 October 2007 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Thursday, 1 November 2007.

THE SUBSCRIPTION AGREEMENTS

Date: 30 October 2007

• Parties Involved: (1) the Company and Legg Mason International Equities (Singapore) Pte. Limited

• (2) the Company and Enso Global Equities Levered Master Partnership LP

• (3) the Company and Enso Global Equities Master Partnership LP

• (4) the Company and Enso Global Opportunities Fund

Legg Mason International Equities (Singapore) Pte. Limited is an asset manager and manages discretionary investment management accounts for and on behalf of certain institutional investors.

Enso Global Equities Levered Master Partnership LP, Enso Global Equities Master Partnership LP and Enso Global Opportunities Fund are discretionary funds managed by Enso Capital Management LLC. Enso Capital Management LLC is an investment management firm which invests in both public securities, as well as uniquely sourced private opportunities.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Subscribers and their respective ultimate beneficial owner(s), are independent of the Company and connected persons of the Company and had no prior business relationship or transactions (as defined in the GEM Listing Rules) with the Company.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Subscribers and their respective ultimate beneficial owner(s), are independent of Power Way and its ultimate beneficial owners and connected persons of Power Way and their ultimate beneficial owners and had no prior business relationship or transactions (as defined in the GEM Listing Rules) with Power Way and its ultimate beneficial owners and are not parties acting in concert with Power Way and its ultimate beneficial owners.

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To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, Legg Mason International Equities (Singapore) Pte. Limited on one side and Enso Global Equities Levered Master Partnership LP, Enso Global Equities Master Partnership LP and Enso Global Opportunities Fund on the other side are independent of and are not connected persons of each other.

Number of Subscription Shares

The 58,000,000 Subscription Shares represent:

• (i) approximately 19.47% of the issued share capital of the Company of 297,831,245 Shares as at the date of this announcement;

• (ii) approximately 15.68% of the issued share capital of the Company of 369,831,245 Shares as enlarged by the issue of the Consideration Shares; and

• (iii) approximately 13.56% of the issued share capital of the Company of 427,831,245 Shares as enlarged by the issue of the Consideration Shares and the Subscription Shares.

The aggregate nominal value of the 58,000,000 Subscription Shares is HK$580,000.

Subscription Price

The Subscription Price of HK$1.80 per Share represents:

• (i) a discount of approximately 19.28% to the closing price of HK$2.23 per Share as quoted on the Stock Exchange on 29 October 2007, being the last trading day immediately prior to the date of the Subscription Agreements; and

• (ii) a discount of approximately 9.09% to the average of the closing prices per Share of HK$1.98 as quoted on the Stock Exchange for the last five trading days up to and including the last trading day immediately prior to the date of the Subscription Agreements; and

• (iii) the average of the closing prices per Share of HK$1.80 as quoted on the Stock Exchange for the last ten trading days up to and including the last trading day immediately prior to the date of the Subscription Agreements.

The net Subscription Price, after taking into account the estimated legal and professional expenses of the Subscription of approximately HK$0.32 million, would be approximately HK$1.79 per Subscription Share.

The Subscription Price is negotiated and determined after arm’s length negotiations between the Company and the Subscribers with reference to the recent price performance of the Shares. The Directors (including the independent non-executive Directors) consider that the Subscription Price and the terms of the Subscription Agreements are fair and reasonable and the entering into the Subscription Agreements is in the interests of the Company and the Shareholders as a whole.

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Ranking of Subscription Shares

The Subscription Shares, when issued and fully paid, will rank pari passu amongst themselves and with all the existing Shares in issue at the time of allotment and issue of the Subscription Shares.

Conditions of the Subscription

Completion of the Subscription is conditional upon, inter alia:

1. the GEM Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares;

2. if required, all necessary regulatory consents and approvals required to be obtained by the Subscribers in respect of their respective Subscription Agreements and the transactions contemplated thereunder having been obtained; and

3. completion of the Agreement having occurred in accordance with its terms and conditions.

Each of the Subscription Agreements does not provide either party with the right to waive any of the above conditions. Completion of the Agreement is not conditional on completion of the Subscription Agreements.

Completion

Subject to fulfillment of the above conditions, completion of the Subscription will take place no later than five Business Days following the day upon which all of the conditions set out above are satisfied or such later date as the Company and the Subscribers may otherwise agree.

If the conditions are not fulfilled within 90 days after the date of the Subscription Agreements or such later date as may be agreed between the Company and the Subscribers, the obligations and liabilities of each of the Subscribers and the Company under the Subscription will lapse and neither party shall have any claims against the other for costs, damages, compensation or otherwise.

It is expected that none of the Subscribers will become a substantial Shareholder (as prescribed under the GEM Listing Rules) immediately after the Subscription.

Application for listing

An application will be made by the Company to the GEM Listing Committee for the listing of, and permission to deal in, the Subscription Shares.

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General Mandate

The Subscription Shares will be issued under the General Mandate granted to the Directors at the AGM. The General Mandate provides that the Directors may allot, issue and deal with new Shares of up to 20% of the issued share capital of the Company as at the date on which the relevant resolution was passed at the AGM (i.e. 58,138,949 Shares). Upon completion of the Subscription Agreements, the number of unutilised Shares that the Directors may allot, issue and deal with under the General Mandate will be 138,949 Shares, which represent about 0.24% of the maximum number of Shares which the Directors may allot, issue and deal with under the General Mandate. As at the date of this announcement, the Company has not allotted and issued any new Shares that may be issued under the General Mandate.

Lock-up period for the Subscription Shares

The Subscribers have undertaken to the Company not to sell or dispose any of the Subscription Shares within 90 days of the date of the Subscription Agreements. Save as disclosed above, there are no other restrictions on subsequent disposals being imposed on the Subscription Shares under the Subscription Agreements.

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EFFECTS ON SHAREHOLDING

The following table shows the shareholding structure of the Company (1) as at the date of this announcement; (2) upon allotment and issue of the Consideration Shares at completion of the Agreement; (3) immediately after completion of the Subscription; and (4) upon allotment and issue of the Consideration Shares and the Subscription Shares at completion of the Agreement and the Subscription Agreements and maximum conversion of the convertible bonds under the Agreement:

Name of Shareholder Mr Chan Sek Keung, Ringo (Note 1) Mr. Ng Lai Yick_(Note 2) Power Way Public Shareholders comprising – Mr. Ng Lai Yick – QPL International Holdings Limited(Note 3)_ – The Subscribers	As at the date of this announcement Approximate No. of Shares % 79,560,000 26.71 40,034,744 13.44 – – 178,236,501 59.85 N/A N/A 25,536,745 8.58	As at the date of this announcement Approximate No. of Shares % 79,560,000 26.71 40,034,744 13.44 – – 178,236,501 59.85 N/A N/A 25,536,745 8.58	Upon allotment and issue of the Consideration Shares at completion of the Agreement Approximate No. of Shares % 79,560,000 21.51 40,034,744 10.83 72,000,000 19.47 178,236,501 48.19 N/A N/A 25,536,745 6.90	Upon allotment and issue of the Consideration Shares at completion of the Agreement Approximate No. of Shares % 79,560,000 21.51 40,034,744 10.83 72,000,000 19.47 178,236,501 48.19 N/A N/A 25,536,745 6.90	Immediately after completion of the Subscription Approximate No. of Shares % 79,560,000 18.59 N/A N/A 72,000,000 16.83 276,271,245 64.58 40,034,744 9.36 25,536,745 5.97	Immediately after completion of the Subscription Approximate No. of Shares % 79,560,000 18.59 N/A N/A 72,000,000 16.83 276,271,245 64.58 40,034,744 9.36 25,536,745 5.97	Upon allotment and issue of the Consideration Shares and the Subscription Shares at completion of the Agreement and the Subscription Agreements and maximum conversion of the convertible bonds under the Agreement Approximate No. of Shares % 79,560,000 15.65 N/A N/A 152,426,496 29.99 276,271,245 54.36 40,034,744 7.88 25,536,745 5.02	Upon allotment and issue of the Consideration Shares and the Subscription Shares at completion of the Agreement and the Subscription Agreements and maximum conversion of the convertible bonds under the Agreement Approximate No. of Shares % 79,560,000 15.65 N/A N/A 152,426,496 29.99 276,271,245 54.36 40,034,744 7.88 25,536,745 5.02
(1) Legg Mason International Equities (Singapore) Pte. Limited (2) Enso Global Equities Levered Master Partnership LP (3) Enso Global Equities Master Partnership LP (4) Enso Global Opportunities Fund	– – – –	– – – –	– – – –	– – – –	30,000,000 6,408,989 18,391,011 3,200,000	7.01 1.50 4.30 0.75	30,000,000 6,408,989 18,391,011 3,200,000	5.90 1.26 3.62 0.63
– Other public Shareholders Total	– 152,699,756 297,831,245	– 51.27 100.00	– 152,699,756 369,831,245	– 41.29 100.00	58,000,000 152,699,756 427,831,245	13.56 35.69 100.00	58,000,000 152,699,756 508,257,741	11.41 30.05 100.00

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Notes:

1. Mr. Chan Sek Keung, Ringo, Chairman, Chief Executive Officer and executive director of the Company, is deemed, by virtue of the SFO, to be interested in the 56,400,000 Shares held by Woodstock Management Limited, a company wholly-owned by him, in addition to the 23,160,000 Shares held by him personally.

2. Mr. Ng Lai Yick is deemed, by virtue of the SFO, to be interested in the 36,900,000 Shares held by North 22 Nominees Limited, a company wholly-owned by him, in addition to the 3,134,744 Shares held by him personally. Mr. Ng was an ex-Director until May 2001 and currently does not hold any position in the Group.

3. QPL International Holdings Ltd. (“QPL”) was an initial management Shareholder at the time of initial public offering of the Shares on GEM in May 2002. Mr. Kwan Kit Tong, who was appointed to the Board to represent the interest of QPL, resigned as a non-executive Director with effect from 26 August 2007.

4. As at the date of this announcement, the Company had outstanding share options granted to certain directors and employees of the Company to subscribe for 17,355,500 Shares and no other outstanding convertible securities (save for the convertible bonds to be issued under the Agreement).

FUND RAISING ACTIVITIES OF THE COMPANY DURING THE PAST 12 MONTHS

The Company has not carried out any fund raising activities during the past 12 months prior to the date of this announcement.

REASONS FOR THE SUBSCRIPTION AND PROPOSED USE OF PROCEEDS

The Directors considered various ways of raising funds and are of the view that the Subscription represents an opportunity to raise capital for the Company while broadening the shareholder base and the capital base of the Company. The gross proceeds from the Subscription are approximately HK$104.4 million. The Company will bear the costs and expenses in connection with the Subscription and the net proceeds from the Subscription (after deducting the expenses which will be paid by the Company) of approximately HK$104.1 million will be utilised to develop the businesses to be acquired under the Agreement. As at the date of this announcement, none of the transactions contemplated under the Agreement have been completed.

INFORMATION ON THE GROUP

The Group is principally engaged in the provision of network infrastructure solutions, including network infrastructure, network management services and network software, in China and Hong Kong. The Company recently entered into the Agreement to purchase the Sale Shares which in turn owns 80% interest in PAL Development Limited (“PAL”) and 60% interest in Wu Sheng Computer Technology (Shanghai) Co., Ltd (“Wu Sheng”).

The PAL group is principally engaged in various lottery-related businesses and ventures in China as well as other Asian countries, and Wu Sheng is principally engaged in the manufacturing of lottery vending terminals and point of sales (POS) systems. Upon completion of the Agreement, the Company is expected to become one of the leading lottery companies in Asia.

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SUSPENSION AND RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange was suspended from 9:30 a.m. on Tuesday, 30 October 2007 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Thursday, 1 November 2007.

TERMS USED IN THIS ANNOUNCEMENT

In this announcement, unless the context otherwise requires, terms used herein shall have the following meanings:

“AGM”	the annual general meeting of the Shareholders held on 27 April
	2007
“Agreement”	the agreement dated 8 October 2007 entered into among Rising Move,
	Power Way, Melco, LottVision, Firich and the Company for the sale
	and purchase of the Sale Shares, details of which are set out in the
	announcement of the Company dated 18 October 2007
“associate(s)”	has the meaning ascribed to it under the GEM Listing Rules
“Board”	the board of Directors
“Business Day”	a day (excluding a Saturday and any day on which a tropical cyclone
	warning no. 8 or above or a “black” rainstorm warning signal is
	hoisted and not lowered at or before 5 p.m.) on which banks are
	generally open for business in Hong Kong
“Company”	Wafer Systems Limited, a company incorporated in the Cayman
	Islands with limited liability, the issued Shares of which are listed
	on GEM
“connected person(s)”	has the meaning ascribed to it under the GEM Listing Rules
“Consideration Shares”	72,000,000 new Shares to be allotted and issued to Power Way or its
	nominees to satisfy part of the consideration for the acquisition of
	the Sale Shares under the Agreement, details of which are set out in
	the announcement of the Company dated 18 October 2007
“Director(s)”	director(s) of the Company

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“Firich”	Firich Enterprises Co., Ltd., a company incorporated in Taiwan and
	the issued shares of which are listed on the Taiwan Gre Tai Securities
	Market
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Committee”	the listing sub-committee of the board of directors of the Stock
	Exchange with responsibility for GEM
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“General Mandate”	the general mandate granted by the Shareholders in the AGM to the
	Directors to allot, issue and deal with new Shares not exceeding
	20% of the aggregate nominal amount of the issued share capital
	of the Company as at the date on which the relevant resolution was
	passed
“Group”	the Company and its subsidiaries from time to time
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“LottVision”	LottVision Limited, a company incorporated in Bermuda, the issued
	shares of which are listed on the Singapore Exchange Securities
	Trading Limited
“Melco”	Melco International Development Limited, a company incorporated
	in Hong Kong, the issued shares of which are listed on the Stock
	Exchange
“Power Way”	Power Way Group Limited, a company incorporated in the British
	Virgin Islands which will be owned as to 54.79%, 18.26% and 26.95%
	respectively by Melco LottVentures Holdings Limited (a wholly-
	owned subsidiary of Melco), LottVision and Firich upon completion
	of the Agreement
“Rising Move”	Rising Move International Limited, a company incorporated in
	the British Virgin Islands and a wholly-owned subsidiary of the
	Company
“Sale Shares”	the entire issued share capital of Precious Success Holdings Limited
	and 60% of the issued share capital of Oasis Rich International
	Ltd.

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“SFO”	the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong
	Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscribers”	Legg Mason International Equities (Singapore) Pte. Limited, Enso
	Global Equities Levered Master Partnership LP, Enso Global Equities
	Master Partnership LP and Enso Global Opportunities Fund, and each
	a “Subscriber”
“Subscription”	the subscription of an aggregate of 58,000,000 new Shares by the
	Subscribers pursuant to the terms of the Subscription Agreements
“Subscription Agreements”	the Subscription Agreements entered into between the Company
	and each of the Subscribers dated 30 October 2007 in relation to the
	Subscription
“Subscription Price”	HK$1.80 per Share
“Subscription Shares”	58,000,000 new Shares in aggregate to be subscribed for by the
	Subscribers pursuant to the Subscription Agreements
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.
	By Order of the Board of
	WAFER SYSTEMS LIMITED
	Chan Sek Keung, Ringo
	Chairman and Executive Director

Hong Kong, 31 October 2007

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As at the date of this announcement, the Board consists of one executive Director, namely Mr. CHAN Sek Keung, Ringo, and three independent non-executive Directors, namely Mr. PANG Hing Chung, Alfred, Mr. David TSOI and Mr. SO Lie Mo, Raymond.

This announcement, for which the Directors, including all independent non-executive Directors, collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

• (1) the information contained in this announcement is accurate and complete in all material respects and not misleading;

• (2) there are no other matters the omission of which would make any statement in this announcement misleading; and

• (3) all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

This announcement will remain on the “Latest Company Announcements” page of the GEM website (www.hkgem.com) for at least 7 days from its date of publication and the Company’s website at www.wafersystems.com.

• For identification purpose only

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