Crypto Flow Technology Limited - Capital/Financing Update 2012

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this prospectus or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

Subject to the granting of listing of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealings in the securities of the Company may be settled through CCASS and you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser for details of the settlement arrangements and how such arrangements may affect your rights and interests.

A copy of the Prospectus Documents and the consent letter referred to in paragraph headed “Qualification and consent of expert” in appendix III to this prospectus have been registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies Ordinance. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of any of these documents.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus.

==> picture [52 x 53] intentionally omitted <==

==> picture [63 x 32] intentionally omitted <==

MelcoLot Limited

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

OPEN OFFER ON THE BASIS OF THREE OFFER SHARES FOR EVERY EXISTING SHARE

Terms used in this cover page have the same meanings as defined in this prospectus.

The latest time for acceptance of and payment for the Offer Shares is at 4:00 p.m. on Wednesday, 7 November 2012. The procedure for application is set out on pages 20 to 21 of this prospectus.

The Open Offer is conditional upon, among others, the fulfillment or waiver of the conditions set out under the section headed “Conditions of the Open Offer” and the paragraph headed “Termination of the Underwriting Agreement” in this prospectus.

The Board wishes to inform that, as the number of Underwritten Shares is below that of the Offer Shares, the Open Offer is not fully underwritten. Subject to fulfillment of the conditions of the Open Offer and the Underwriting Agreement, the Open Offer will proceed regardless of the ultimate subscription level as there are no requirements for minimal levels of subscription pursuant to the Company’s constitutional documents or the law of Cayman Islands.

Shareholders should note that the existing Shares have been dealt in on an ex-entitlement basis since Wednesday, 17 October 2012. If the Underwriters terminate the Underwriting Agreement, or if any of the conditions of the Open Offer is not fulfilled, the Open Offer will not proceed. Any Shareholder or other person dealing in the Shares up to the date on which all conditions of the Open Offer are fulfilled (which is expected to be on Monday, 12 November 2012) will accordingly bear the risk that the Open Offer may not become unconditional and may not proceed. Shareholders and potential investors are advised to exercise due caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their own professional advisers.

Wednesday, 24 October 2012

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a high investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

THE OPEN OFFER IS NOT FULLY UNDERWRITTEN

	Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
The Open Offer is not fully underwritten. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Expected Timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Termination of the Open Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Appendix I – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Appendix II – Unaudited pro forma financial information. . . . . . . . . . . . . . . . . . . . . . . . . . II-1
Appendix III – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

iii

EXPECTED TIMETABLE

The expected timetable for the Open Offer as set out below is indicative purpose only and it has been prepared on the assumption that all the conditions of the Open Offer will be fulfilled. The expected timetable is subject to change, and any change will be announced in a separate announcement by the Company as and when appropriate.

2012

Publication of the announcement of the third quarter results of the Company for the nine months ended 30 September 2012

Monday, 5 November

Latest Time for Acceptance

4:00 p.m., Wednesday, 7 November

Latest time for the Open Offer to become unconditional

6:00 p.m., Monday, 12 November

Announcement of results of the Open Offer

By 7:00 p.m., Tuesday, 13 November

Certificates for the Offer Shares expected to be despatched on or before

to be despatched on or before Wednesday, 14 November Dealings in the Offer Shares commence Thursday, 15 November

All references to times and dates in this prospectus are references to Hong Kong local times and dates.

Effect of bad weather on the Latest Time for Acceptance

If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong on Wednesday, 7 November 2012, being the date of the Latest Time for Acceptance:

(i) at any time before 12:00 noon and no longer in force after 12:00 noon, the Latest Time for Acceptance will be postponed to 5:00 p.m. on the same Business Day; or
(ii) at any time between 12:00 noon and 4:00 p.m., the Latest Time for Acceptance will be postponed to 4:00 p.m. on the next Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m..

If the Latest Time for Acceptance does not take place on Wednesday, 7 November 2012, the dates mentioned in the section headed “Expected timetable” in this prospectus may be affected. An announcement will be made by the Company in such event.

TERMINATION OF THE OPEN OFFER

Either of the Underwriters may terminate the Underwriting Agreement by notice in writing to the Company and one of the other Underwriters at any time prior to the Latest Time for Termination, if at any time prior to the Latest Time for Termination:

(a) in the reasonable opinion of any of the Underwriters, the success of the Open Offer will be materially and adversely affected by:
(i) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(ii) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date thereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(b) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of any of the Underwriters is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(c) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of any of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(d) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(e) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(f) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, will have constituted, in the reasonable opinion of any of the Underwriters, a material omission in the context of the Open Offer; or

TERMINATION OF THE OPEN OFFER

(g) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive Business Days, excluding any suspension in connection with the clearance of the Announcement, the Circular, the Prospectus Documents or other announcements or circulars in connection with the Open Offer.

If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed. A further announcement will be made if the Underwriting Agreement is terminated by the Underwriters.

DEFINITIONS

In this prospectus, the following expressions have the following meanings unless the context otherwise requires:

“2012 CB Holders”

together, Firich, GCH, Intralot and Melco LV

“2012 Convertible Bonds”
the 0.1% convertible bonds due on 13 December 2012 in the principal amount of HK$606,800,000 with a conversion price of HK$0.85 per Conversion Share, which is owned as to (i) HK$399,505,732 by Melco LV; (ii) HK$175,188,566 by GCH; (iii) HK$17,677,251 by Firich; and (iv) HK$14,428,451 by Intralot, conferring rights entitling the 2012 CB Holders to subscribe for 713,882,352 Conversion Shares upon exercise of the conversion rights attached to the 2012 Convertible Bonds in full
“acting in concert”
has the meaning ascribed to it in the Takeovers Code
“Announcement”
the announcement of the Company dated 14 August 2012 in respect of, among other things, the Open Offer
“Application Form” the application form to be used by the Qualifying Shareholders to apply for the Offer Shares
“Approved LVM” the lottery vending machines with specification approved and selected by the CSLA upon authentication, being the lottery vending machines approval and selection process conducted by the CSLA at the very beginning of the lottery vending machines procurement cycle that the authorised distributor must provide the specifications and models of lottery vending terminals to the CSLA for its evaluation and selection before supplying such particular approved model to the CSLA, from time to time
“associate(s)”
has the same meaning as defined in the GEM Listing Rules
“Beijing Haiyin” Beijing Haiyin Huacai Information Technology Limited[#] (北京海熒華彩信息技術有限公司), a company established in the PRC and the holder of 37.5% equity interest in Beijing Telenet, which is owned as to 10.0%, 75.0%, 10.0% and 5.0% by Mr. Ding, the spouse of Mr. Ding, Mr. Li and an Independent Third Party respectively
“Beijing Telenet”
Beijing Telenet Information Technology Ltd.[#] (北京電信達信息技術有限公司), a company established in the PRC, 52.5% of the entire equity interest of which is indirectly beneficially owned by the Company and the remaining 5.0%, 5.0% and 37.5% of the entire equity interest of which are owned by Mr. Ding, Mr. Li and Beijing Haiyin respectively

DEFINITIONS

“Board”	the board of Directors
“Business Day”	a day (excluding Saturday, Sunday or public or statutory holiday
	in Hong Kong and any day on which a tropical cyclone warning
	No. 8 or above is hoisted or remains hoisted between 9:00 a.m.
	and 12:00 noon and is not lowered at or before 12:00 noon or on
	which a “black” rainstorm warning signal is hoisted or remains in
	effect between 9:00 a.m. and 12:00 noon and is not discontinued
	at or before 12:00 noon) on which licenced banks in Hong Kong
	are generally open for business in Hong Kong throughout their
	normal business hours
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Circular”	the circular of the Company dated 26 September 2012 in respect
	of, among other things, the Open Offer
“Company”	MelcoLot 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 same meaning as defined in the GEM Listing Rules
“Conversion Shares”	the new Shares to be allotted and issued upon the exercise of
	conversion rights attached to the 2012 Convertible Bonds and/or
	the Intralot 2013 Convertible Bonds
“CSLA”	the China Sports Lottery Administration Centre of the PRC, the
	state-owned exclusive sports lottery operator responsible for the
	administration of the issuance of sports lotteries in the PRC at a
	national level
“CWL”	the China Welfare Lottery Issuance Centre of the PRC, the state-
	owned exclusive welfare lottery operator responsible for the
	administration of the issuance of welfare lotteries in the PRC at a
	national level
“Director(s)”	the director(s) of the Company
“EGM”	the extraordinary general meeting of the Company convened on
	Monday, 15 October 2012, which approved, among other things,
	the Open Offer and the Underwriting Agreement

DEFINITIONS

“Excluded Options” a total of 37,778,000 Share Options granted to parties acting in concert with any of the Underwriters
“Financial Support” together, the assurance obtained by the Company from (i) its substantial shareholders (as defined under the SFO) that it is their intention to provide support and assistance as may be required to enable the Group to maintain capital and liquidity levels sufficient to meet its obligations; and (ii) the holders of the Company’s convertible bonds and Power Way not to request cash redemption of those bonds on or before the maturity dates and not to request repayment of the Power Way Loan when they/it fall(s) due unless the Group has the necessary financial resources available for cash redemption and repayment to occur respectively
“Firich” Firich Enterprises Co., Ltd., a company with its shares listed on the Taiwan Gre Tai Securities Market, a Shareholder holding 12,977,498 Shares (representing approximately 2.58% of the issued share capital of the Company as at the Latest Practicable Date) and the holder of the 2012 Convertible Bonds in the principal amount of HK$17,677,251 with a conversion price of HK$0.85 per Conversion Share, which entitle the holder to subscribe for 20,796,766 Conversion Shares upon the exercise of the conversion rights attached thereto in full
“Gain Advance” Gain Advance Group Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date
“GCH” Global Crossing Holdings Ltd., a company incorporated in the Independent State of Samoa with limited liability, a Shareholder holding 20,787,042 Shares (representing approximately 4.13% of the issued share capital of the Company as at the Latest Practicable Date), the holder of the 2012 Convertible Bonds in the principal amount of HK$175,188,566 with a conversion price of HK$0.85 per Conversion Share, which entitle the holder to subscribe for 206,104,195 Conversion Shares upon exercise of the conversion rights attached thereto in full, the shareholder of approximately 32.86% of the entire issued share capital of Oasis Rich and a wholly-owned subsidiary of Universal Rich
“GCH Agreement” the agreement dated 26 June 2012 and entered into between GCH and the Company in respect of the GCH Disposal

DEFINITIONS

“GCH Disposal” the disposal of 420,000 shares in Oasis Rich, representing 60% of the entire issued share capital of Oasis Rich beneficially owned by the Company as at the Latest Practicable Date, by the Company pursuant to the GCH Agreement

“GCH Disposal Completion” completion of the GCH Disposal
“GEM” the Growth Enterprise Market of the Stock Exchange “GEM Listing Committee” the listing committee of the Stock Exchange with responsibility for GEM
“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“Group” the Company and its subsidiaries from time to time
“HKSCC” Hong Kong Securities Clearing Company Limited
“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Increase in Authorised Capital” the increase in the authorised share capital of the Company from HK$20,000,000 to HK$55,000,000 by the creation of additional 3,500,000,000 unissued Shares

“Independent Third Party(ies)” person(s) and their respective associates or, in the case of companies, their ultimate beneficial owner(s) and their respective associates, who are independent of and not connected with the Company and its subsidiaries and their respective connected persons
“Intradak” Beijing Intradak System Technology Co., Ltd.[#] (北京英特達系統技術有限公司), a company established in the PRC with limited liability and owned as to 35%, 20% and 45% by Beijing Haiyin, Mr. Ding and an Independent Third Party respectively

“Intradak Exclusivity the exclusivity undertaking entered into between Beijing Telenet Undertaking” and Intradak dated 13 August 2012 in respect of Beijing Telenet’s exclusive rights to supply the Approved LVM mutually specified by Beijing Telenet and Intradak to Intradak

DEFINITIONS

“Intralot”

“Intralot 2013 Convertible Bonds”
“Intralot Agreement”
“Intralot Disposal”
“Intralot Disposal Completion”
“Intralot S.A.”
“Last Trading Day”
“Latest Practicable Date”
“Latest Time for Acceptance”
Intralot International Limited, a company incorporated in the Republic of Cyprus with limited liability and a wholly-owned subsidiary of Intralot S.A., a substantial Shareholder holding 52,973,779 Shares (representing approximately 10.53% of the issued share capital of the Company as at the Latest Practicable Date) and the holder of the 2012 Convertible Bonds in the principal amount of HK$14,428,451 with a conversion price of HK$0.85 per Conversion Share, which entitle the holder to subscribe for 16,974,648 Conversion Shares upon the exercise of the conversion rights attached thereto in full, and the Intralot 2013 Convertible Bonds
the 0.1% convertible bonds due on 9 December 2013 in the principal amount of HK$277,175,310 with a conversion price of HK$0.991 per Conversion Share, which entitle Intralot to subscribe for 279,692,542 Conversion Shares upon the exercise of the conversion rights attached thereto in full
the agreement dated 26 June 2012 and entered into among Intralot, Rising Move and the Company in respect of the Intralot Disposal
the disposal of such number of issued shares in Gain Advance, representing the entire issued share capital of Gain Advance beneficially owned by Rising Move, a direct wholly-owned subsidiary of the Company, and such number of issued shares in Precious Success, representing 49% of the entire issued share capital of Precious Success beneficially owned by Rising Move, by Rising Move to Intralot pursuant to the Intralot Agreement
completion of the Intralot Disposal
Intralot S.A. Integrated Lottery Systems and Services, a company with its shares listed on the Athens Exchange and the holding company of Intralot
26 June 2012, being the last full trading day prior to the release of the Announcement
18 October 2012, being the latest practicable date for the purpose of ascertaining certain information included in this prospectus
4:00 p.m. on Wednesday, 7 November 2012 or such later time or date as the Company may reasonably decide (which shall not be later than 31 December 2012), being the latest time for acceptance of, and payment for, the Offer Shares as described in the Prospectus

DEFINITIONS

“Latest Time for Termination” 6:00 p.m. on the third Business Day following (but excluding) the Latest Time for Acceptance or such later time or date as the Underwriters may reasonably decide and inform the Company in writing, being the latest time to terminate the Underwriting Agreement
“LottVision Investments” LottVision Investments Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of LottVision Limited, a company incorporated in Bermuda with limited liability with its shares listed on the Singapore Exchange Securities Trading Limited
“Melco” Melco International Development Limited, a company incorporated in Hong Kong and the issued shares of which are listed on the Main Board of the Stock Exchange and a substantial Shareholder
“Melco LV” Melco LottVentures Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and a whollyowned subsidiary of Melco, a substantial Shareholder holding 58,674,619 Shares and the holder of the 2012 Convertible Bonds in the principal amount of HK$399,505,732, which entitle the holder to subscribe for 470,006,743 Conversion Shares upon the exercise of the conversion rights attached thereto in full
“Mr. Chang” Mr. Chang Tung-Bing, a former employee of Firich and the holder of the entire equity interest in Universal Rich, which, in turn, holds the entire equity interest in GCH
“Mr. Ding” Mr. Ding Jingge, a substantial shareholder of Beijing Haiyin, a shareholder and a director of Beijing Telenet and a substantial shareholder of Intradak
“Mr. Li” Mr. Li Xuefeng, a substantial shareholder of Beijing Haiyin and a shareholder and a director of Beijing Telenet
“Non-Qualifying Letter” a letter from the Company to the Non-Qualifying Shareholders explaining the circumstances in which the Non-Qualifying Shareholders are not permitted to participate in the Open Offer
“Non-Qualifying the Overseas Shareholder(s) whom the Directors, after making Shareholder(s)” enquiries regarding the legal restrictions under the laws of the relevant places and the requirements of the relevant overseas regulatory bodies or stock exchanges, consider it necessary or expedient to exclude them from the Open Offer

DEFINITIONS

“Oasis Rich” Oasis Rich International Ltd., a company incorporated in the Republic of Mauritius with limited liability and an indirect 60%-owned subsidiary of the Company as at the Latest Practicable Date
“Offer Share(s)” the new Share(s) to be offered to the Qualifying Shareholders under the Open Offer, which will be a total of 1,508,900,799 Shares
“Open Offer” the proposed issue of the Offer Shares on the basis of three Offer Shares for every existing Share held by the Qualifying Shareholders on the Record Date on the terms as set out in the Prospectus Documents
“Overseas Shareholder(s)” the Shareholder(s) with registered address on the register of members of the Company outside Hong Kong at the close of business on the Record Date
“Power Way” Power Way Group Limited, a company incorporated in the British Virgin Islands with limited liability and the equity interest of which is owned as to approximately 58.70%, 28.87% and 12.43% by Melco LV, GCH and LottVision Investments, respectively as at the Latest Practicable Date
“Power Way Loan” the aggregate of the principal amount of loan and the interest accrued thereon owed by the Company to Power Way of approximately HK$89,338,196 as at 31 May 2012
“PRC” the People’s Republic of China, which for the purpose of this prospectus excludes Hong Kong, the Macao Special Administration Region of the People’s Republic of China and Taiwan
“Precious Success” Precious Success Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date
“Prospectus” this prospectus issued by the Company in relation to the Open Offer
“Prospectus Documents” the Prospectus and the Application Form
“Prospectus Posting Date” 24 October 2012, being the date of the despatch of the Prospectus Documents

DEFINITIONS

“Qualifying Shareholders”	the Shareholders, other than the Non-Qualifying Shareholder(s),
	whose names appear on the register of members of the Company
	as at the close of business on the Record Date
“Record Date”	19 October 2012, being the date of the determination of the
	assured entitlements under the Open Offer
“Rising Move”	Rising Move International Limited, a company incorporated in the
	British Virgin Islands with limited liability and a direct wholly-
	owned subsidiary of the Company
“Set Off”	the set off of the Power Way Loan as at 31 May 2012 in order to
	settle the underwriting and payment obligations of Power Way in
	accordance with the Underwriting Agreement
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	the ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	the holder(s) of the issued Shares
“Share Options”	the 106,770,000 outstanding share options granted under the share
	option scheme approved by the Shareholders on 20 April 2002
	outstanding as at the Latest Practicable Date
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	the subscription price of HK$0.078 per Offer Share
“substantial shareholder(s)”	has the meaning as defined in the GEM Listing Rules
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“trading day”	a day on which the Stock Exchange is open for the business of
	dealings in securities
“Transactions”	together, the Intralot Agreement and the GCH Agreement
	(including the repurchase of the Intralot 2013 Convertible Bonds
	and the GCH 2012 Convertible Bonds by the Company pursuant
	to the Intralot Agreement and the GCH Agreement, respectively),
	the Open Offer, the Underwriting Agreement (including the
	Whitewash Waiver), the Increase in Authorised Capital and the
	transactions contemplated thereunder

DEFINITIONS

“Underwriters” together, Melco LV and Power Way
“Underwriting Agreement” the agreement dated 14 August 2012 and entered into among the Underwriters and the Company in relation to the Open Offer
“Underwritten Shares” 1,273,566,615 Untaken Shares to be underwritten by the Underwriters of which a maximum of 128,205,128 Untaken Shares will be underwritten by Melco LV and a maximum of 1,145,361,487 Untaken Shares will be underwritten by Power Way pursuant to the terms of the Underwriting Agreement
“Universal Rich” Universal Rich Holdings Limited, a company incorporated in the Independent State of Samoa with limited liability and the holder of the entire equity interest in GCH, the entire issued shares of which are owned by Mr. Chang
“Untaken Shares” those Offer Shares not taken up by the Shareholders
“Whitewash Waiver” a waiver from the obligation of the Underwriters and the parties acting in concert with any of them to make a mandatory general offer to the Shareholders in respect of the Shares and securities issued by the Company not already owned or agreed to be acquired by the Underwriters and the parties acting in concert with any of them as a result of the underwriting of the Offer Shares under the Underwriting Agreement in accordance with Note 1 on dispensations from Rule 26 of the Takeovers Code
“Wu Sheng” Wu Sheng Computer Technology (Shanghai) Co., Ltd.[#] (伍盛計算機科技(上海)有限公司), a company established in the PRC with limited liability and a wholly-owned subsidiary of Oasis Rich
“Wu Sheng Exclusivity the exclusivity undertaking entered into between Beijing Telenet Undertaking” and Wu Sheng dated 13 August 2012 in respect of Beijing Telenet’s exclusive right to procure the Approval LVM mutually specified by Wu Sheng and Beijing Telenet from Wu Sheng
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“RMB” Renminbi, the lawful currency of the PRC
“US$” the United States of America dollar(s), the lawful currency of the United States of America
“%” per cent.

DEFINITIONS

In this prospectus, unless otherwise specified, amounts in RMB and US$ are converted to HK$ at the conversion rates of HK$1.24 = RMB1.00 and HK$7.80 = US$1.00 for illustration only. No representation was made that any amounts in RMB or US$ could have been or could be converted into HK$ at such rate or any other rates.

# the English translations of Chinese names or words in this prospectus, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

LETTER FROM THE BOARD

==> picture [52 x 53] intentionally omitted <==

==> picture [63 x 32] intentionally omitted <==

MelcoLot Limited

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

Executive Directors: Mr. Ko Chun Fung, Henry (Chief Executive Officer) Mr. Chrysafidis, Evangelos

Non-executive Directors: Mr. Chan Sek Keung, Ringo (Chairman) Mr. Wang, John Peter Ben

Independent Non-executive Directors: Mr. Tsoi, David Mr. Pang Hing Chung, Alfred Mr. So Lie Mo, Raymond

Registered office: 4th Floor, Scotia Centre P.O. Box 2804 George Town Grand Cayman KY1-1112 Cayman Islands

Head office and principal place of business in Hong Kong: Units 3101-2A, 31st Floor The Centrium 60 Wyndham Street Central, Hong Kong

24 October 2012

To the Qualifying Shareholders and, for information only, to the Non-Qualifying Shareholders

Dear Sir or Madam,

OPEN OFFER ON THE BASIS OF THREE OFFER SHARES FOR EVERY EXISTING SHARE

1. INTRODUCTION

On 14 August 2012, the Company announced the Open Offer at the Subscription Price of HK$0.078 per Offer Share on the basis of three Offer Shares for every existing Share held on the Record Date and the entering into of the Underwriting Agreement with the Underwriters on 14 August 2012 in relation to the Open Offer.

The purpose of this prospectus is to provide you with, among other things, further details regarding the Open Offer, including (i) the procedures for application and payment for the Open Offer; (ii) certain financial information of the Group; and (iii) general information of the Group.

On 26 September 2012, the Circular was despatched to the Shareholders. All of the resolutions including, among other things, the Open Offer, were approved at the EGM on 15 October 2012.

LETTER FROM THE BOARD

2. THE OPEN OFFER

Issue Statistics

Basis of the Open Offer

: Three Offer Shares for every existing Share held by the Qualifying Shareholders on the Record Date

Number of Shares in issue

: 502,966,933 Shares

Number of Offer Shares

: 1,508,900,799 Offer Shares proposed to be offered to the Qualifying Shareholders

Aggregated nominal value of the Offer Shares

: HK$15,089,007.99

Subscription Price for the Offer Shares

: HK$0.078 per Offer Share

Underwriters

: Melco LV and Power Way
Number of Offer Shares
underwritten by the Underwriters
: Up to 128,205,128 Underwritten Shares to be underwritten by Melco LV, provided that the total subscription price of the Underwritten Shares to be taken by Melco LV shall not exceed the amount of HK$10 million;

up to 1,145,361,487 Underwritten Shares to be underwritten by Power Way; and

immediately upon completion of the Open Offer, the Underwritten Shares to be subscribed by Power Way together with the Shares held or to be held by Melco LV and other non public shareholders shall not be more than 75% of the total shareholdings of the Company as enlarged by the Offer Shares

1,508,900,799 Offer Shares to be issued pursuant to the terms of the Open Offer represent three times of the issued share capital of the Company as at the Latest Practicable Date and 75% of the enlarged issued share capital of the Company immediately upon completion of the Open Offer (assuming no new Shares are issued except pursuant to the Open Offer between the Latest Practicable Date and completion of the Open Offer).

As at the Latest Practicable Date, save for (i) 106,770,000 Share Options; (ii) the 2012 Convertible Bonds in the principal amount of HK$606,800,000 conferring rights entitling the holders of which to subscribe for 713,882,352 Conversion Shares; and (iii) the Intralot 2013 Convertible Bonds in the principal amount of HK$277,175,310 conferring rights entitling the holders of which to subscribe for 279,692,542 Conversion Shares, the Company has no other outstanding warrants, options or convertible securities.

LETTER FROM THE BOARD

The undertakings

Each of the 2012 CB Holders and the holder of the Intralot 2013 Convertible Bonds has given an irrevocable undertaking in favour of the Company and the Underwriters not to exercise the conversion rights attached to the 2012 Convertible Bonds and the Intralot 2013 Convertible Bonds held by it on or before the Record Date.

Each of the holders of the Excluded Options has given an irrevocable undertaking in favour of the Company and the Underwriters not to exercise nor transfer the Excluded Options granted to him/her on or before the completion date of the Open Offer.

Terms of the Open Offer

Subscription Price

The Subscription Price is HK$0.078 per Offer Share, payable in full when a Qualifying Shareholder applies for the Offer Shares.

The Subscription Price represents:

(a) a discount of approximately 21.2% to the closing price of HK$0.099 per Share quoted on the Stock Exchange on the Last Trading Day;
(b) a discount of approximately 23.5% to the average of the closing prices of approximately HK0.102 per Share for the last five full trading days up to and including the Last Trading Day;
(c) a discount of approximately 28.4% to the average of the closing prices of approximately HK$0.109 per Share for the last ten full trading days up to and including the Last Trading Day;
(d) a discount of approximately 6.0% to the theoretical ex-entitlement price of approximately HK$0.083 per Share (assuming that all Shareholders take up their respective assured entitlements to the Offer Shares) based on the closing price of HK$0.099 per Share quoted on the Stock Exchange on the Last Trading Day;
(e) a discount of approximately 9.3% to the theoretical ex-entitlement price of approximately HK$0.086 (assuming that no Shareholders take up their respective assured entitlements to the Offer Shares and the Underwriters are called upon to subscribe for the Underwritten Shares subject to the terms and conditions under the Underwriting Agreement) based on the closing price of HK$0.099 per Share quoted on the Stock Exchange on the Last Trading Day; and
(f) a discount of approximately 22.8% to the closing price of HK$0.101 per Share quoted on the Stock Exchange on the Latest Practicable Date.

LETTER FROM THE BOARD

The Subscription Price was arrived at after arm’s length negotiation among the Company and the Underwriters with reference to, among other things, the then market environment, the prevailing market price of the Shares, the financial position of the Group and the funding requirements in repaying the Power Way Loan and exploring potential investment opportunities. The Directors consider the terms of the Open Offer and the Subscription Price to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Fractions of the Offer Shares

Given the basis of the Open Offer is three Offer Shares for every existing Share held on the Record Date, there will not be any fractional entitlements of the Offer Shares.

No application for excess Offer Shares

The invitation to subscribe for Offer Shares to be made to the Qualifying Shareholders will not be transferable. No Qualifying Shareholder is entitled to apply for any Offer Shares which are in excess to his/her/its assured entitlements. Any Offer Shares not taken up by the Qualifying Shareholders, and the Offer Shares to which the Non-Qualifying Shareholders would otherwise have been entitled to under the Open Offer, will not be available for subscription by other Qualifying Shareholders by way of excess application and will be taken up by the Underwriters as described in the section headed “6. Underwriting arrangements” below.

The absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements. However, having considered (i) the structure of the Open Offer was arrived at after arm’s length negotiation among the Underwriters and the Company; (ii) the relatively thin discount of the theoretical ex-entitlement price to the then prevailing market prices of the Shares (details of which are set out under paragraph headed “Terms of the Open Offer” above) provides no significant incentive for the Qualifying Shareholders to take up additional Offer Shares; (iii) those Qualifying Shareholders who choose to accept their respective assured entitlements under the Open Offer in full can maintain their respective existing shareholdings in the Company after the Open Offer; and (iv) the Open Offer already assures the Qualifying Shareholders who are optimistic about the future development of the Company to entitle to the Offer Shares in proportion to their shareholding, the Directors consider that the absence of excess application arrangement is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Since no excess application procedure for the Offer Shares is available and Melco LV, being one of the Underwriters, is a substantial shareholder of the Company, the absence of an excess application procedure under the Open Offer has been specifically approved at the EGM in compliance with Rule 10.42(2) of the GEM Listing Rules.

LETTER FROM THE BOARD

Status of the Offer Shares

When allotted, issued and fully-paid, the Offer Shares will rank pari passu in all respects with the existing Shares then in issue. Holders of fully-paid Offer Shares will be entitled to receive all dividends and distributions which are declared, made or paid after the date of issue and allotment of the fully-paid Offer Shares.

Share Certificates for the Offer Shares

Subject to the fulfillment of the conditions of the Open Offer and the Underwriting Agreement, certificates for all Offer Shares are expected to be posted to successful applicants at their own risk on or before Wednesday, 14 November 2012.

Application for listing

The Company has applied to the GEM Listing Committee of the Stock Exchange for the listings of, and permission to deal in, the Offer Shares. No part of the equity or debt securities of the Company is listed or dealt in or on which listing or permission to deal is being or is proposed to be sought on any other stock exchange.

The primary listing of the Shares is on the Stock Exchange. Subject to the granting of the listings of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Offer Shares on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealings in the Offer Shares which are registered in Hong Kong will be subject to the payment of stamp duty and other applicable fees in Hong Kong.

Board lot size of the Offer Shares

The board lot size of the Offer Share will remain as 4,000 Shares.

3. QUALIFYING SHAREHOLDERS AND RIGHTS OF THE NON-QUALIFYING SHAREHOLDERS

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. The Company has sent (i) the Prospectus Documents to the Qualifying Shareholders; and (ii) this prospectus with the Non-Qualifying Letter, for information only, to the Non-Qualifying Shareholders. To qualify for the Open Offer, the Shareholder must be registered as a member of the Company on the Record Date and must not be a NonQualifying Shareholder.

LETTER FROM THE BOARD

Rights of the Non-Qualifying Shareholders

This prospectus has not been registered or filed under the applicable securities legislation of any jurisdiction other than Hong Kong. There were seven Overseas Shareholders on the Record Date with registered address located in Cyprus, Taiwan, the United States of America, South Korea and the PRC.

Having made enquiries regarding the legal restrictions under the laws of Cyprus, Taiwan, the United States of America, South Korea and the PRC and the requirements of the relevant regulatory body or stock exchanges, the Directors have been advised by its legal advisers that there are no specific legal restrictions and/or regulatory requirements applicable in Cyprus, Taiwan and the PRC in terms of offering the Offer Shares with respect to the Open Offer to the Overseas Shareholders whose registered addresses are in Cyprus, Taiwan and the PRC. In view of this, the Directors have decided to extend the Open Offer to the Overseas Shareholders whose registered addresses are in Cyprus, Taiwan and the PRC. Accordingly, such Overseas Shareholders together with the Shareholders with registered addresses in Hong Kong are the Qualifying Shareholders.

The Directors were informed by the Company’s legal advisers as to the laws of the United States of America and South Korea that this prospectus must be registered in the relevant places before extending the Open Offer to such Shareholders in the United States of America and South Korea. The Directors are of the view that it is necessary and expedient to exclude the Overseas Shareholders in the United States of America and South Korea and such Overseas Shareholders will be regarded as Non-qualifying Shareholders as the extension of the Open Offer to the Non-Qualifying Shareholder would, or might, in the absence of compliance with registration or other special formalities, be unlawful or impracticable and the cost to be incurred would outweigh the possible benefits to the relevant Non-Qualifying Shareholder and the Company. The Company has sent a copy of this prospectus to each of the Non-Qualifying Shareholders for information only, but not the Application Form.

No action has been taken to permit the offering of the Offer Shares, or the distribution of this prospectus or the Application Form, in any territory or jurisdiction outside Hong Kong, Cyprus, Taiwan and the PRC. Accordingly, no person receiving a copy of this prospectus or the Application Form in any territory or jurisdiction outside Hong Kong, Cyprus, Taiwan and the PRC may treat it as an offer or invitation to apply for the Offer Shares, unless in the relevant jurisdiction such an offer or invitation could lawfully be made without compliance with any registration or other legal or regulatory requirements.

It is the responsibility of any person (including but without limitation to nominee, agent and trustee) receiving a copy of this prospectus or the Application Form outside Hong Kong and wishing to take up the Offer Shares to satisfy himself/herself/itself as to the full observance of the laws and regulations of the relevant territory or jurisdiction including the obtaining of any governmental or other consents for observing any other formalities which may be required in such territory or jurisdiction, and to pay any taxes, duties and other amounts required to be paid in such territory or jurisdiction in connection therewith. The Company will not be responsible for verifying the legal qualification of such Overseas Shareholders and/or residents in such territory or jurisdiction, thus, should the Company suffer any losses or damages due to non-compliance with the relevant laws of such territory or jurisdiction by any such Overseas Shareholders and/or residents, the Overseas Shareholders and/or residents shall be responsible to compensate the Company for the same. The Company shall not be obliged to issue the Offer Shares to any such Overseas Shareholders and/or residents, if at the Company’s absolute discretion issuing the Offer

LETTER FROM THE BOARD

Shares to them does not comply with the relevant laws of such territory or jurisdiction. Any acceptance by any person will be deemed to constitute a representation and warranty from such person to the Company that these local laws and requirements have been complied with. If you are in any doubt as to your position, you should consult your professional advisers.

4. PROCEDURES FOR ACCEPTANCE AND PAYMENTS

Qualifying Shareholders will find enclosed with this prospectus the Application Form which entitles the Qualifying Shareholders to subscribe, subject to payment, for the number (or any lesser number) of Offer Shares shown therein. If a Qualifying Shareholder wishes to exercise his/her/its rights to subscribe for the Offer Shares specified in the Application Form (or a number of Offer Shares less than that specified in the Application Form), the Qualifying Shareholder must lodge the Application Form in accordance with the instructions printed thereon, together with a remittance for the full amount payable on acceptance, with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by no later than 4:00 p.m. on Wednesday,7 November 2012. All remittances must be made by cheques or cashier’s orders in Hong Kong dollars. Cheques must be drawn on an account with, and cashier’s orders must be issued by a licensed bank in Hong Kong and made payable to “MelcoLot Limited – Open Offer Account” and crossed “ACCOUNT PAYEE ONLY”.

It should be noted that unless the duly completed Application Form, together with the appropriate remittance, has been lodged with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, by 4:00 p.m. on Wednesday,7 November 2012, the relevant assured allotment and all rights and entitlement thereunder will be deemed to have been declined and will be cancelled.

The Application Form contains further information regarding the procedures to be followed if Qualifying Shareholders wish to accept the whole or part of their assured entitlements under the Open Offer.

All cheques and cashier’s orders accompanying completed Application Form will be presented for payment immediately upon receipt and all interest earned on such monies (if any) will be retained for the benefit of the Company. Completion and return of an Application Form with a cheque and/or a cashier’s order, will constitute a warranty by the applicant that the cheque and/or the cashier’s order will be honoured on first presentation. Without prejudice to the other rights of the Company in respect thereof, the Company reserves the right to reject any Application Form in respect of which the accompanying cheque and/or cashier’s order is dishonoured on first presentation, and, in such event, the relevant assured allotment and all rights and entitlement given pursuant to which will be deemed to have been declined and will be cancelled.

The Application Form is for use only by the person(s) named therein and is not transferable or renounceable. No receipt will be issued in respect of any acceptance monies received.

LETTER FROM THE BOARD

If the conditions of the Underwriting Agreement are not fulfilled and/or the Underwriting Agreement is terminated in accordance with its terms before the Latest Time for Termination, the monies received in respect of acceptance of Offer Shares will be returned to the Qualifying Shareholders or, in case of joint applicants, to the first-named person without interest by means of cheques despatched by ordinary post to the respective addresses specified in the register of members of the Company at their own risk on or before Wednesday,14 November 2012.

Qualifying Shareholders are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of applying for, holding, disposing of or dealing in the Offer Shares. It is emphasised that none of the Company, the Directors or any other parties involved in the Open Offer accept responsibility of any tax effects or liabilities of holders of the Offer Shares resulting from the application for, holding, disposal of, or dealing in the Offer Shares.

5. CONDITIONS OF THE OPEN OFFER

The Open Offer and completion of the Underwriting Agreement are conditional upon the satisfaction of the following conditions:

(a) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the GEM Listing Rules and the Companies Ordinance not later than the Prospectus Posting Date;
(b) the posting of the Prospectus Documents to the Qualifying Shareholders on the Prospectus Posting Date and a letter in the agreed form to the Non-Qualifying Shareholders, if any, for information purpose only explaining the circumstances in which they are not permitted to participate in the Open Offer on or before the Prospectus Posting Date;
(c) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of and permission to deal in the Offer Shares by no later than the first day of their dealings;
(d) the obligations of the Underwriters becoming unconditional and that the Underwriting Agreement is not terminated in accordance with its terms;
(e) compliance with and performance of an irrevocable undertaking by each of the 2012 CB Holders and the holder of the Intralot 2013 Convertible Bonds in favour of the Company and the Underwriters not to exercise the conversion rights attached to the 2012 Convertible Bonds and the Intralot 2013 Convertible Bonds, such undertaking shall be in the agreed form;
(f) compliance with and performance of an irrevocable undertaking by each of the holders of the Excluded Options in favour of the Company and the Underwriters not to exercise the Excluded Options;

LETTER FROM THE BOARD

(g) the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or his delegate granting the Whitewash Waiver to the Underwriters and parties acting in concert with any of them and the satisfaction of all conditions (if any) attached to the Whitewash Waiver granted;
(h) the GCH Disposal Completion;
(i) the Intralot Disposal Completion;
(j) the passing by no later than the Prospectus Posting Date by the Shareholders (or, where appropriate, the independent Shareholders) at the EGM, among other things, the following resolutions:
(i) an ordinary resolution to approve the Increase in Authorised Capital;
(ii) an ordinary resolution to approve the Open Offer; and
(iii) an ordinary resolution to approve the Whitewash Waiver;
(k) all necessary consents and approvals required to be obtained on the part of Power Way in respect of the Underwriting Agreement and the transactions contemplated thereunder having been obtained and remaining in full force and effect;
(l) all necessary consents and approvals required to be obtained on the part of Melco LV in respect of the Underwriting Agreement and the transactions contemplated thereunder having been obtained and remaining in full force and effect; and
(m) if applicable, all necessary consents and approvals required to be obtained by Melco in respect of the Underwriting Agreement and the transactions contemplated thereunder having been obtained and remaining in full force and effect.

As at the Latest Practicable Date, the relevant consents and approvals in conditions (k), (l) and (m) above identified are the respective board approvals of each of the parties to the Underwriting Agreement.

As at the Latest Practicable Date, save for conditions (j), (k), (l) and (m) above, none of conditions precedent above have been satisfied. Conditions (a) and (b) have been fulfilled on the Prospectus Posting Date.

None of the conditions set out above are capable of being waived. If any of the above conditions is not satisfied by the Latest Time for Termination, completion of the Open Offer will not proceed. As the Open Offer is subject to the above conditions, it may or may not proceed accordingly.

LETTER FROM THE BOARD

The Board wishes to emphasise that the Open Offer is inter-conditional with Intralot Disposal Completion and GCH Disposal Completion, details of which are set out in the Circular. As such, there is no assurance of all the conditions in the Intralot Agreement, the GCH Agreement and the Underwriting Agreement will be fulfilled and/or waived (as the case maybe). If any of the conditions precedent set out in the aforesaid agreements cannot be fulfilled and/or waived (as the case maybe), the Open Offer will not proceed. Shareholders and potential investors are urged to exercise caution when dealing in the securities of the Company.

6. UNDERWRITING ARRANGEMENTS

The Underwriting Agreement

Date : 14 August 2012 Underwriters : Melco LV and Power Way[(Note)] Number of the : 1,508,900,799 Offer Shares proposed to be offered to the Offer Shares Qualifying Shareholders Number of the : Melco LV has agreed to underwrite not more than Underwritten Shares 128,205,128 Underwritten Shares in the first place provided that the total subscription price for the Offer Shares to be taken up by Melco LV shall not exceed the amount of HK$10 million and Power Way has agreed to underwrite not more than 1,145,361,487 Underwritten Shares in the second place provided that immediately upon completion of the Open Offer, the Underwritten Shares to be subscribed by Power Way together with the Shares held or to be held by Melco LV and other non public Shareholders shall not be more than 75% of the total shareholdings of the Company as enlarged by the Offer Shares

Commission : Nil Subscription Price : HK$0.078 per Offer Share

Note: Underwriting does not fall within the ordinary course of business of the Underwriters. The Company has explored and held discussions with potential commercial underwriters in relation to the possibility of underwriting the Open Offer. However, the Company was unable to procure other underwriter(s) at acceptable costs to the Company.

As at the Latest Practicable Date, (i) Melco LV, an indirect wholly-owned subsidiary of Melco, is a substantial shareholder of the Company; and (ii) Power Way is indirectly owned by Melco LV as to 58.70%. As at the Latest Practicable Date, Melco LV is interested in 58,674,619 Shares, representing approximately 11.67% of the issued share capital of the Company, and is entitled to subscribe for 176,023,857 Offer Shares. The underwriting obligations of Melco LV to underwrite not more than 128,205,128 Offer Shares is independent of and does not include any of

LETTER FROM THE BOARD

Melco LV’s entitlement to take up its entitled Offer Shares. Save for the underwriting obligations of the Underwriters under the Underwriting Agreement, no Shareholders or the parties acting in concert with any of the Underwriters have indicated whether they will take up their assured entitlements under the Open Offer or not.

The Underwritten Shares

As the number of Underwritten Shares is below that of the Offer Shares, the Open Offer is not fully underwritten. Subject to fulfillment of the conditions of the Open Offer and the Underwriting Agreement, the Open Offer will proceed regardless of the ultimate subscription level as there are no requirements for minimal levels of subscription pursuant to the Company’s constitutional documents or the law of the Cayman Islands. Having made reasonable enquiries, the Directors confirm that the Company has also complied with all the applicable statutory requirements regarding the minimal levels of subscription of the Open Offer. As at the Latest Practicable Date, none of the substantial shareholders of the Company have undertaken to take up their respective assured entitlement to the Open Offer either in part or in full.

The Set Off

The Power Way Loan, being the aggregate of the principal amount of such loan and the interest accrued thereon, amounts to approximately HK$89.3 million as at 31 May 2012. The aggregate Subscription Price required to be paid by Power Way under the Underwriting Agreement will be settled by way of set off against the Power Way Loan. The exact amount of the Power Way Loan to be set off will be equal to the product of the Subscription Price and the exact number of Offer Shares to be taken up by Power Way. The interest on the outstanding Power Way Loan from 1 June 2012 up to and including the date of completion of the Set Off will be settled by the Company in cash.

Termination of the Underwriting Agreement

(a) in the reasonable opinion of any of the Underwriters, the success of the Open Offer will be materially and adversely affected by:
(i) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or

LETTER FROM THE BOARD

(ii) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/ or after the date thereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(b) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of any of the Underwriters is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(c) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of any of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(d) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(e) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(f) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, will have constituted, in the reasonable opinion of any of the Underwriters, a material omission in the context of the Open Offer; or
(g) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive Business Days, excluding any suspension in connection with the clearance of the Announcement, the Circular, the Prospectus Documents or other announcements or circulars in connection with the Open Offer,

If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed. A further announcement will be made if the Underwriting Agreement is terminated by the Underwriters.

LETTER FROM THE BOARD

7. REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

Pursuant to the loan agreement dated 14 July 2008 (as amended by supplemental agreements dated 1 December 2009, 21 March 2011 and 24 February 2012) entered into between Power Way and the Company, Power Way had advanced a loan in the sum of HK$80.0 million to the Company and such loan bears interest at the rate of 5% per annum for the period up to 13 July 2010, and at the rate of 1% per annum for the period of 14 July 2010 to 14 July 2013, being its maturity date. Power Way provided the Power Way Loan to finance the Group’s acquisition, through Gain Advance, of the entire equity interest in KTeMS Co., Ltd. at the consideration of US$12 million (equivalent to approximately HK$93.6 million) in 2008. As at 31 May 2012, the Power Way Loan, which is the aggregate of the principal amount of such loan and the interest accrued thereon, amounted to approximately HK$89,338,196. The Directors consider that the settlement of the Power Way Loan under the Underwriting Agreement through the Set Off will enable the Group to repay substantial part of the liabilities of the Company under the Power Way Loan without cash outflow and will allow the Group to reduce its gearing level.

Notwithstanding the view of the Directors that the Group has the financial ability to meet the interest payments on the Power Way Loan as they fall due, the Directors are mindful of the significant deterioration in economic and credit conditions that have affected the world economies in recent months. Given the uncertain economic outlook in the near to medium term, the Group is well conscious of the risk that the Company may not be able to obtain the necessary funding, either through debt or equity financing or both, to re-finance the Power Way Loan as and when it falls due.

The Directors, having taken the prudent approach in evaluating the current financial position of the Group, consider the Open Offer will allow the Group to (i) strengthen its capital base; (ii) improve its gearing ratio; (iii) remove the uncertainty over the Company’s financial position to pay all of the outstanding remaining balance under the Power Way Loan; (iv) save the future interest expense in connection with the Power Way Loan; and (v) provide an equitable means for the Shareholders to participate in the future development of the Company. In addition, the Directors consider that the Open Offer will provide additional working capital and strengthen the Group’s financial position. As set out in the unaudited interim report of the Company for the six months ended 30 June 2012, the total net liabilities of the Group were approximately HK$668.8 million as at 30 June 2012.

The Directors and the senior management of the Company have also explored other financing methods through discussions with and enquiries to certain financial institutions and placing agents on the possibility of debt financing and equity issuances, including but not limited to share placement and rights issue. However, the Company is in a net liability position, debt financing would result in the Company being subject to additional interest burden and further increase its gearing ratio and jeopardize the financial structure of the Company. Share placement would only be available to certain placees which may cause dilution effect to the existing Shareholders, and the Directors and the senior management were unable to procure underwriting support from independent underwriters to underwrite a rights issue of a similar size at a reasonable cost to the Company. In view of the above, the Directors considered that it would be more beneficial to the Company to raise long-term equity capital through the Open Offer rather than the aforesaid alternate means of financing. The Underwriting Agreement, in particular, the underwriting obligations of the Underwriters and the number of Underwritten Shares, was determined after arm’s length discussion among the Company and the Underwriters. Therefore, the Directors consider that the Underwriting Agreement is in the interests of the Company and Shareholders as a whole.

LETTER FROM THE BOARD

The gross proceeds from the Open Offer are estimated to be not less than approximately HK$58.4 million (assuming no Shareholder take up their respective assured entitlements to the Offer Shares) and not more than HK$117.7 million (assuming all Shareholders take up their respective assured entitlements to the Offer Shares).

The minimum gross proceeds from the Open Offer of approximately HK$58.4 million are estimated based on the Underwriters to take up 748,419,206 Offer Shares at HK$0.078 per Offer Share. After deducting estimated expenses of approximately HK$1.5 million payable by the Company relating to the Open Offer, the net proceeds from the Open Offer will amount to not less than approximately HK$56.9 million (equivalent to the net Subscription Price of approximately HK$0.076 per Offer Share). The Company intends to use the entire net proceeds from the Open Offer to repay the Power Way Loan. The remaining balance of the Power Way Loan will only be repaid when the Group has the necessary financial resources available for repayment.

The maximum gross proceeds of approximately HK$117.7 million from the Open Offer are estimated based on 1,508,900,799 Offer Shares to be issued at HK$0.078 per Offer Share. After deducting estimated expenses relating to the Open Offer, the net proceeds from the Open Offer will amount to approximately HK$116.2 million (equivalent to the net Subscription Price of approximately HK$0.077 per Offer Share). The Company intends to use the net proceeds from the Open Offer to fully repay the Power Way Loan amounting to approximately HK$89.3 million as at 31 May 2012. The remaining amount of the net proceeds from the Open Offer of approximately HK$26.9 million will be used as additional working capital to strengthen the Company’s financial position and to develop its lottery business, including but not limited to, system upgrade for a high-frequency lottery game system in Chongqing, the development of its paperless lottery sales channels, such as mobile network and/or internet, and the balance for upgrading tele-betting system in Shandong and marketing expenses.

As at the Latest Practicable Date, the Company has neither identified nor commenced any negotiations for any potential acquisitions.

LETTER FROM THE BOARD

8. SHAREHOLDING STRUCTURES

Set out below are shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after completion of the Open Offer.

Shareholders *Whitewash Waiver* *applicants and their* *respective concert parties* Melco LV Power Way Intralot Firich(1) GCH(2) Other(3) *Sub-total* Directors and directors of the Group and their respective associates(4) Other Shareholders(4) *Total* *Public Shareholders(1), (2), (5) Offer Shares taken up by* *the Underwriters pursuant* *to the Underwriting* *Agreement*(6)	As at the Latest Practicable Date Approx. % of No. of issued Shares Shares 58,674,619 11.67% – 0.00% 52,973,779 10.53% 12,977,498 2.58% 20,787,042 4.13% 48,000 0.01% *145,460,938* *28.92%* 78,664,000 15.64% 278,841,995 55.44% *502,966,933* *100.00%* *291,867,493* *58.03%*	Immediately after completion of the Open Offer (assuming all Shareholders take up their respective assured entitlements to the Offer Shares) Approx. % of No. of issued Shares Shares 234,698,476 11.67% – 0.00% 211,895,116 10.53% 51,909,992 2.58% 83,148,168 4.13% 192,000 0.01% *581,843,752* *28.92%* 313,888,000 15.60% 1,116,135,980 55.48% *2,011,867,732* *100.00%* *1,251,386,140* *62.20%* – *0.00%*	Immediately after completion of the Open Offer (assuming no Shareholder take up their respective assured entitlements to the Offer Shares) Approx. % of No. of issued Shares Shares 186,879,747 14.94% 620,214,078 49.56% 52,973,779 4.23% 12,977,498 1.04% 20,787,042 1.66% 48,000 0.00% *893,880,144* *71.43%* 78,472,000 6.27% 279,033,995 22.30% *1,251,386,139* *100.00%* *312,846,535* *25.00%* *748,419,206* *59.81%*

Notes:

(1) As Firich is not a connected person of the Company as defined under the GEM Listing Rules, Firich is a public Shareholder.

LETTER FROM THE BOARD

(2) GCH is wholly owned by Mr. Chang, a former employee of Firich. As GCH is not a connected person of the Company upon completion of the Transactions as defined under the GEM Listing Rules, GCH is a public Shareholder upon completion of the Transactions.
(3) “Other” under the “Whitewash Waiver applicants and their respective concert parties” category represents the spouse of a director of Power Way, who was not a Director or a director of members of the Group as at the Latest Practicable Date.
(4) A director of Oasis Rich owned 192,000 Shares as at the Latest Practicable Date. Upon completion of the Transactions, the director will no longer be a director of the Group and the Shares held by such director will be classified under the category of “Other Shareholders”.
(5) Public Shareholders comprise Firich, GCH, “Other” under the “Whitewash Waiver applicants and their respective concert parties” category and other Shareholders as at the Latest Practicable Date and in the above 2 scenarios, except for GCH being a non-public Shareholder as at the Latest Practicable Date.
(6) Offer Shares taken up by the Underwriters pursuant to the Underwriting Agreements represent the number of the Offer Shares taken up by Melco LV and/or Power Way in the capacity of underwriters pursuant to the Underwriting Agreement. For the avoidance of doubt, the entitled Offer Shares taken up by Melco LV in the capacity of Shareholder are not included.

In the event that no Qualifying Shareholders subscribe for the Offer Share and the Underwriters are called upon to subscribe for the Underwritten Shares pursuant to its obligation and subject to the conditions under the Underwriting Agreement, the public float of the Company will decrease from approximately 58.03% as at the Latest Practicable Date to 25.00% immediately upon completion of the Open Offer. Furthermore, the Underwriters will only take up 748,419,206 Offer Shares but not the fully underwritten 1,273,566,615 Offer Shares given one of the terms of the Underwriting Agreement requires, immediately upon completion of the Open Offer, the Underwritten Shares to be held and subscribed by the Underwriters and other non public Shareholders shall not be more than 75% of the total shareholding of the Company as enlarged by the Offer Shares.

As at the Latest Practicable Date, save for the underwriting obligations of the Underwriters under the Underwriting Agreement, no Shareholders have indicated they will take up their assured entitlements under the Open Offer or not.

9. WARNING OF THE RISKS OF DEALING IN SHARES

Shareholders should note that existing Shares have been dealt in on an ex-entitlement basis since Wednesday, 17 October 2012. If the Underwriters terminate the Underwriting Agreement (see the paragraph headed “Termination of the Underwriting Agreement” above), or if any of the conditions of the Open Offer (see the section headed “5. Conditions of the Open Offer” above) is not fulfilled, the Open Offer will not proceed.

Any Shareholder or other person dealing in the Shares up to the date on which all conditions of the Open Offer are fulfilled (which is expected to be on Monday, 12 November 2012) will accordingly bear the risk that the Open Offer may not become unconditional and may not proceed. Shareholders and potential investors are advised to exercise due caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their own professional advisers.

LETTER FROM THE BOARD

10. FUND-RAISING ACTIVITIES BY THE COMPANY DURING THE PAST 12 MONTHS

The Company has not conducted any fund raising activities in the past 12 months immediately preceding the Latest Practicable Date.

11. RISK FACTORS

Shareholders and prospective investors should consider carefully all the information set out in this prospectus and, in particular, should evaluate the following risks in connection with an investment in the Company before making any investment decision (including the Open Offer) in relation to the Company.

Risks relating to the Group’s business

Reliance on the major customer

Since the establishment of Beijing Telenet in 2006, Intradak has been the sole customer of Beijing Telenet and, vice versa, Beijing Telenet has been the sole supplier to Intradak. For the five months ended 31 May 2012, Intradak, being the largest customer of the Group, accounted for approximately 79% of the Group’s revenue.

The Group, through Beijing Telenet, has entered into the Intradak Exclusivity Undertaking with Intradak in order to secure the business of the Group for a period of one year. Pursuant to the Intradak Exclusivity Undertaking, Intradak granted an exclusive right to Beijing Telenet for supplying the Approved LVM mutually specified by Intradak and Beijing Telenet for a term of one year. During the term of the Intradak Exclusivity Undertaking, Intradak shall solely procure the Approved LVM from Beijing Telenet and shall not directly or indirectly, without the written consent of Beijing Telenet, procure the Approved LVM from any other third party enterprises, corporations or individuals other than Beijing Telenet. In the event that the Intradak Exclusivity Undertaking failed to be renewed after one year and Intradak decides to terminate its business relationship with the Group, the Group may not be able to find a new customer(s) in a timely manner or on terms acceptable to the Group or at all, and any such new prospective customer(s) may not be able to replace the sales volume previously generated by Intradak, which will adversely affect the sales performance of the Group and thus its overall results of operation and financial position.

Furthermore, if Intradak decides to terminate its business relationship with the Group upon the expiry of the Intradak Exclusivity Undertaking, the Group may not be able to find a new customer(s) in a timely manner or on terms acceptable to the Group or at all, and any such new prospective customer(s) may not be able to replace the sales volume previously generated by Intradak, which will adversely affect the sales performance of the Group and thus its overall results of operation and financial position.

It is further emphasised that given the strong reliance on a major customer, should there be business failure and any interruption in the business of Intradak arising from any unexpected or catastrophic events, the Group’s business and hence its operation and financial position will be adversely affected.

LETTER FROM THE BOARD

Reliance on the major supplier

For each of the three years ended 31 December 2011 and five months ended 31 May 2012, Wu Sheng, a wholly-owned subsidiary of Oasis Rich, being the largest supplier of the Group, accounted for approximately 99%, 99%, 100% and 100% respectively of the Group’s total purchase of raw materials. Upon completion of the Transactions, Wu Sheng will remain the major supplier of Beijing Telenet and also that of the Group.

Pursuant to the Wu Sheng Exclusivity Undertaking, Wu Sheng granted an exclusive right to Beijing Telenet for procuring the Approved LVM mutually specified by Wu Sheng and Beijing Telenet for a term of one year. During the term of the Wu Sheng Exclusivity Undertaking, Wu Sheng shall solely supply the Approved LVM to Beijing Telenet at prices set in accordance with the existing pricing policy and shall not directly or indirectly, without the written consent of Beijing Telenet, supply the Approved LVM to (i) competitors or potential competitors of Beijing Telenet, (ii) Intradak; or (iii) any other third party enterprises, corporations or individuals other than Beijing Telenet. Wu Sheng further undertook that it shall not directly or indirectly compete with Beijing Telenet in connection with the supply of the Approved LVM. In the event that the Wu Sheng Exclusivity Undertaking failed to be renewed after one year and Wu Sheng decides to terminate its business relationship with the Group, the Group may not be able to find a new supplier(s) in a timely manner or on terms acceptable to the Group or at all, and the Group’s business, results of operations and financial condition could be adversely affected.

It is further emphasised that given the strong reliance on a major supplier, should there be business failure and any interruption in the business of Wu Sheng arising from any unexpected or catastrophic events, the Group’s business and hence its operation and financial position will be adversely affected.

The Group maintains a significant level of liabilities and the business of the Group may be adversely affected by the lack of refinancing options

The Group has been building up significant level of liabilities, which is mainly attributable to the outstanding convertible bonds in the principal amount of HK$883,975,310 as at the Latest Practicable Date. Upon completion of the Transactions, although it is expected that there will be substantial debt reduction of convertible bonds in the principal amount of HK$452,363,876 and a full or partial retirement of the Power Way Loan (as the case may be), there remains a significant portion of the 2012 Convertible Bonds that are outstanding and are expected to mature on 13 December 2012 and there is uncertainty as to how much of the Power Way Loan will remain outstanding. The Group is well conscious of the risk that the Company may not be able to obtain the necessary funding, either through debt or equity financing or both, to re-finance the Power Way Loan and to redeem the 2012 Convertible Bonds as and when they fall due. The current level of gearing could potentially constrain the Group’s operation with significant consequences such as, among others, (i) constrains on the Group’s working capital position and capital expenditures due to the use of a substantial portion of the Group’s cash flows for debt servicing, and (ii) limit the Group’s ability to obtain, as well as an increase in the cost of, additional financing to fund future working capital and capital expenditures. Hence, the Directors cannot provide absolute assurance that the Group will have the ability to raise necessary financing to fund the Group’s working capital, capital expenditures and other debt obligations. As such, the Group’s business, prospects and financial condition may be materially and adversely affected.

LETTER FROM THE BOARD

Availability of high quality and appropriately priced raw materials and products

The Group relies on external producers/suppliers for the supply of all raw materials and product parts. Liquid crystal display panels, scanners and printers, being the primary raw materials, as well as other components, are sourced from overseas and the PRC. If the Group is unable to find readily available high quality raw materials or products, the Group’s delivery schedule as well as its financial results and condition may be adversely affected.

Reliance on key executives and personnel

Given the specialised nature of the business for which the Group conducts in, the future success of the Group will depend to a large extent on the continued efforts of the Directors and senior management of the Group as a whole. There is no assurance that these key executives or personnel will not voluntarily terminate their employment with the Group. Although the Group does not rely on any one particular Director or senior management staff of the Group, the loss of any of the Group’s key executives or personnel could be detrimental to the ongoing success of the Group’s operations.

The Group’s continued success will also depend on its ability to attract and retain qualified personnel in order to manage its existing operations as well as its future growth. The Group may not be able to successfully attract, assimilate or retain the personnel they need and this could negatively impact on the Group’s ability to expand their business effectively.

Risk relating to seasonality

The Group has historically experienced seasonality, which is expected to continue. The Group generally receives more orders in the second half of the year. The Directors believe the reason for this is that agents of the CSLA generally reduce conducting purchases and replacement of Approved LVM during the first half of the year where this period has PRC national holidays such as the New Year and the Chinese New Year in January and February and the “Golden Week” in early May when the mainland Chinese celebrate during Labour Day. Although the Company issues quarterly reports, investors should be aware that comparisons of sales and operating results between different periods within a single financial year, or between different periods in different financial years, are not necessarily meaningful and cannot be relied on as indicators of the Group’s performance due to the seasonality factors.

Risk relating to the industry

Risk relating to the prolonged delays experienced in the new equipment procurement cycle of the CSLA

As disclosed in the annual report of the Company for the year ended 31 December 2011, new equipment procurement cycle of the CSLA has been subject to prolonged delay. The management is of the view that the demand for and timing of the new equipment procurement cycle from the customers are uncertain. Given the unpredictable nature of the CSLA’s new equipment procurement cycle and in the event of any material delays in the new equipment procurement cycle, the Group’s financial results and positions can be materially adversely affected as a result.

LETTER FROM THE BOARD

Risk relating to the Group’s ability to keep up with technological changes in the PRC lottery industry in order to remain competitive

The Group, through Beijing Telenet, is one of the largest authorised terminal distributors approved by the CSLA. However, the Group’s performance depends on the Group’s ability to continually adapt its existing products and technological know-how, timely recruitment of personnel with the relevant skills and development of new lottery products and technologies which keep up with the latest technological trends in the PRC lottery industry. In order to remain competitive, the Group has to invest funds and resources, which include staff, offices and licences, to the continued research and development of existing and potential products and technologies. However, the effect of emerging and future technological changes in relation to product specifications to the Group’s research and development plans or the level of technologies required by CSLA and CWL are unpredictable. The inability to respond to the technological developments and requirements in the PRC lottery industry may lead to the loss of business, therefore will adversely affect the Group’s business operations and profitability. If the Group is not able to respond to new developments successfully or do not respond in a cost-effective way, the Group’s operations and financial results could be materially adversely affected.

Risk relating to the PRC

Reliance on the PRC market

Most of the Group’s assets are located in the PRC, and all of the Group’s products and services are sold in the PRC market. If there is any adverse change in the financial, economic, industrial, political, fiscal, social, legal or regulatory conditions in the PRC, the Group’s performance may be adversely affected.

Adverse changes in the PRC’s economic conditions

The growth of the PRC lottery industry is linked to the PRC’s economic conditions. In the event of an economic hard-landing in the PRC or that the growth of the economy in the PRC is at a lesser pace than anticipated, the demand for lottery products may decline or grow at a lesser pace than anticipated and, therefore, the Group’s operating results and profitability could be adversely affected.

Risk relating to the Open Offer

Termination of the Underwriting Agreement

Shareholders should note that the Underwriters are entitled to terminate their obligations under the Underwriting Agreement giving notice in writing to the Company upon the occurrence of any of the events stated in the paragraph headed “Termination of the Underwriting Agreement” in this prospectus on or before the Latest Time for Termination.

LETTER FROM THE BOARD

Protection to minority shareholders under Cayman Islands law

As a company incorporated in the Cayman Islands, the Company’s corporate affairs are governed by the memorandum and the articles of association of the Company, the Companies Law and common law of the Cayman Islands. Cayman Islands law relating to the protection of the interests of minority shareholders differs in certain respects from those established under statutes and under judicial precedents in Hong Kong or other jurisdictions. Such difference may mean that the remedies available to the Company’s minority shareholders may be different from those they would otherwise have or are familiar with under the laws of Hong Kong or other jurisdictions.

12. PUBLICATION OF THE THIRD QUARTER RESULTS ANNOUNCEMENT OF THE COMPANY

The unaudited financial information of the Group for the nine months ended 30 September 2012 (the “Third Quarter Results”) is expected to be published on Monday, 5 November 2012. Such financial information will be published on both the website of the Stock Exchange (www.hkex.com. hk) and the website of the Company (www.melcolot.com). Shareholders and potential investors are advised to consider the Third Quarter Results and exercise due caution when dealing in the Shares or participating in the Open Offer, and if they are in any doubt about their position, they should consult their own professional advisers.

13. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF THE SHARE OPTIONS AND THE 2012 CONVERTIBLE BONDS

Adjustment to the exercise price and number of the outstanding Share Options and the 2012 Convertible Bonds may be required under the relevant terms of the Share Option Scheme and the relevant instrument(s). Further announcement will be made in this regard if deemed appropriate and necessary.

14. FURTHER INFORMATION

Your attention is drawn to the information set out in the appendices to this prospectus.

Yours faithfully, For and on behalf of the Board MelcoLot Limited Ko Chun Fung, Henry

Executive Director and Chief Executive Officer

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The audited financial information of the Group for each of the three years ended 31 December 2009, 2010 and 2011 and five months ended 31 May 2012 can be referred to the annual reports of the Company for the years ended 31 December 2009 (pages 35 to 99), 2010 (pages 36 to 101) and 2011 (pages 37 to 103) and the Circular (pages IV-1 to IV-75) respectively. The unaudited financial information of the Group for the six months ended 30 June 2012 can be referred to the interim report of the Company for the six months ended 30 June 2012 (pages 6 to 20). The above-mentioned financial information has been published on both the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.melcolot.com).

The unaudited financial information of the Group for the nine months ended 30 September 2012 is expected to be published on 5 November 2012. Such financial information will be published on both the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.melcolot.com).

2. STATEMENT OF INDEBTEDNESS

At the close of business on 31 August 2012, being the latest practicable date for the purpose of the statement of indebtedness prior to the printing of this prospectus, the Group had outstanding borrowings of approximately HK$884.6 million, comprising an unsecured loan with principal and interest of HK$80.0 million and HK$9.5 million respectively owed to Power Way and unlisted secured convertible bonds with an aggregate carrying amount of the debt component of approximately HK$795.1 million. The principal amount of the convertible bonds was approximately HK$884.0 million and the Group had pledged (i) 90 issued shares of Precious Success, representing approximately 45% of the existing issued share capital of Precious Success, to secure the 2012 Convertible Bonds; (ii) 378,000 issued shares of Oasis Rich, representing approximately 54% of the existing issued share capital of Oasis Rich, to secure the 2012 Convertible Bonds; and (iii) 5,000 issued shares of KTeMS Co., Ltd., representing approximately 50% of the existing issued share capital of KTeMS Co., Ltd, to secure the Intralot 2013 Convertible Bonds.

Save as disclosed in this section headed “2. Statement of indebtedness”, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities at the close of business on 31 August 2012.

3. WORKING CAPITAL

Taking into account the assumed successful completion of the Transactions and after taking into account the financial resources available to the Group including its internally generated funds and the Financial Support, the Directors are of the opinion that the Group has sufficient working capital to satisfy its requirements for at least the next 12 months from the date of this prospectus.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 May 2012, being the date to which the latest published audited consolidated financial statements of the Group were made up.

5. FINANCIAL AND TRADING PROSPECTS

Pursuant to the regulations on lottery management recently issued by China’s Ministry of Finance and Ministry of Civil Affairs, all lottery sales by unlicensed organisations are designated as illegal and consequently several websites selling CWL lottery tickets and CSLA lottery tickets have suspended operations in the PRC. The implementation of standardised formal approval and operating requirements should aid the planned development of the industry as a whole and paperless channels in particular. This presents an opportunity to the Group as the environment is now more supportive of participants determined to comply with government policies and frameworks. The overall China lottery market continues to grow and paperless distribution channels are envisaged to be a key growth engine given their ability to effectively penetrate wide geographic areas and reach untapped market segments. The Company will seek to leverage its access to advanced lottery industry knowhow and global best practices to capitalise on these opportunities.

Although the exercise to evaluate and approve lottery terminals for the new procurement has not been concluded by the CSLA, the Group has already strengthened its position in the terminal distribution business through the added participation in Beijing Telenet. Further efforts are ongoing to enhance the operating structure and strengthen the financial position of the Group. Subsequent to these strategic changes the Company will be better positioned to exploit opportunities in the dynamic China lottery market, with a particular focus on paperless channels.

I – 2

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

A. UNAUDITED PRO FORMA STATEMENTS OF ADJUSTED CONSOLIDATED NET TANGIBLE LIABILITIES OF THE REMAINING GROUP

On 26 June 2012, the Company entered into an agreement with Intralot International Limited (“Intralot”), a substantial shareholder of the Company, in relation to the sale of the Group’s entire 100% equity interest of Gain Advance (“GA Sale Shares”) and 49% equity interest of Precious Success (“PS Sale Shares”), and the repurchase of Intralot’s portion of convertible bonds due in 2013 (“Intralot 2013 Convertible Bonds”) with outstanding principal of HK$277,175,310 by the Company (collectively the “Intralot Disposal”). The consideration payable by Intralot for the purchase of the GA Sale Shares and the PS Sale Shares and the consideration payable by the Company for the repurchase of the Intralot 2013 Convertible Bonds shall be set off against each other at the completion date of the Intralot Disposal.

On 26 June 2012, the Company entered into an agreement with Global Crossing Holdings Limited (“GCH”), a 32.86% non-controlling shareholder of Oasis Rich, in relation to the sale of the Group’s entire 60% equity interest of Oasis Rich (“OR Sale Shares”), and the repurchase of GCH’s portion of convertible bonds due in 2012 (“GCH 2012 Convertible Bonds”) with outstanding principal of HK$175,188,566 by the Company (collectively the “GCH Disposal”). The consideration payable by GCH for the purchase of the OR Sale Shares and the consideration payable by the Company for the repurchase of the GCH 2012 Convertible Bonds shall be set off against each other at the completion date of the GCH Disposal.

On 14 August 2012, the Company proposes an open offer (the “Open Offer”) of not more than 1,729,046,799 new ordinary shares of the Company of HK$0.01 each (the “Offer Shares”) at a price of HK$0.078 per share on the basis of three new Offer Shares for every one existing share, to raise capital of not more than approximately HK$134.9 million, before share issue expenses. As set out in the prospectus of the Company dated 24 October 2012 (the “Prospectus”), the maximum number of Offer Shares and maximum amount of capital to be raised were subsequently reduced to 1,508,900,799 and approximately HK$117.7 million (before share issue expenses) respectively, as a result of 4,390,000 share options of the Company were lapsed during the period from 14 August 2012 up to the Record Date (as defined in the Prospectus) and 106,770,000 share options remain unexercised at the Record Date. In addition, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Melco LottVentures Holdings Limited (“Melco LV”), a substantial shareholder of the Company, and Power Way Group Limited (“Power Way”), a related company and the lender of HK$80 million loan owed by the Company (the “Power Way Loan”), in relation to the Open Offer. Melco LV has agreed to underwrite not more than 128,205,128 underwritten shares in the first place provided that the total subscription price for the Offer Shares to be taken up by Melco LV shall not exceed HK$10 million and Power Way has agreed to underwrite not more than 1,145,361,487 underwritten shares in the second place provided that immediately upon completion of the Open Offer, the underwritten shares to be subscribed by Power Way together with the shares of the Company held or to be held by Melco LV and other non-public shareholders shall not be more than 75% of the total shareholdings of the Company as enlarged by the Offer Shares. The aggregate subscription price required to be paid by Power Way under the Underwriting Agreement will be settled by way of set off against the outstanding principal and accrued interest of the Power Way Loan.

The completion of the GCH Disposal, the Intralot Disposal and the Open Offer are conditional on each other as set out in the circular of the Company dated 26 September 2012 (the “Circular”). The completion of the GCH Disposal, the Intralot Disposal and the Open Offer are also conditional on, among other things, the approval of the off-market repurchase of the Intralot 2013 Convertible Bonds and the GCH 2012 Convertible Bonds by at least three-fourths of the votes cast on a poll by the Independent Shareholders (as defined in the Circular) of the Company under the Hong Kong Code on Share Repurchases.

II – 1

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma statements of adjusted consolidated net tangible liabilities are prepared solely for the purpose to illustrate the net tangible liabilities of the Group excluding Gain Advance and its subsidiary (“Gain Advance Group”) and Oasis Rich and its subsidiary (“Oasis Rich Group”) (collectively referred to as the “Remaining Group”) as if the Intralot Disposal, including the repurchase of the Intralot 2013 Convertible Bonds, and the GCH Disposal, including the repurchase of the GCH 2012 Convertible Bonds (collectively referred to as the “Disposals”), and the Open Offer had been completed on 31 May 2012. The Remaining Group still includes the assets and liabilities and the financial results and cash flows of Precious Success and its subsidiaries (the “Precious Success Group”), assuming that Precious Success will become an indirect 51% subsidiary of the Company upon completion of the Intralot Disposal.

The following two unaudited pro forma statements of adjusted consolidated net tangible liabilities have been prepared based on different assumed subscription result under the Open Offer immediately after completion of the Disposals and the Open Offer:

(1) It is assumed that all shareholders take up their respective assured entitlements to the Offer Shares, without taking into account of any share which may be issued upon exercise of the outstanding share options or conversion rights attached to all outstanding convertible bonds of the Company.
(2) It is assumed that (a) no shareholders take up their respective entitlements to the Offer Shares; (b) no subscription rights attached to the outstanding share options or conversion rights attached to all outstanding convertible bonds of the Company has been exercised; and (c) Melco LV and Power Way will take up their respective obligations to subscribe for the underwritten shares in accordance with the Underwriting Agreement.

Basis of preparation of the unaudited pro forma statements of adjusted consolidated net tangible liabilities of the Remaining Group

The unaudited pro forma statements of adjusted consolidated net tangible liabilities of the Remaining Group are prepared in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Rules”) to illustrate the effect of the Disposals and the Open Offer.

The unaudited pro forma statements of adjusted consolidated net tangible liabilities of the Remaining Group are prepared based on the audited consolidated statements of financial position of the Group, the Oasis Rich Group and the Gain Advance Group as at 31 May 2012 as set out in Appendix IV, III and II to the Circular, respectively, after making pro forma adjustments relating to the Disposals and the Open Offer, as if the Disposals and the Open Offer had been completed on 31 May 2012.

The unaudited pro forma statements of adjusted consolidated net tangible liabilities are based on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes. Narrative description of the pro forma adjustments that are (i) directly attributable to the transactions and (ii) factually supportable is summarised in the accompanying notes.

The unaudited pro forma statements of adjusted consolidated net tangible liabilities have been prepared by the directors of the Company for illustrative purposes only and are based on a number of assumptions, estimates, uncertainties and currently available information. Because of their hypothetical nature, the unaudited pro forma statements of adjusted consolidated net tangible liabilities do not purport to predict the adjusted consolidated net tangible liabilities of the Remaining Group upon the completion of the Disposals and the Open Offer or any future date.

II – 2

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Scenario I

Assuming that all shareholders take up their respective assured entitlements to the Offer Shares, without taking into account of any share which may be issued upon exercise of the outstanding share options or conversion rights attached to all outstanding convertible bonds of the Company, the following is the unaudited pro forma statement of adjusted consolidated net tangible liabilities of the Remaining Group upon completion of the Disposals and the Open Offer:

Unaudited Pro Forma Statement of Adjusted Consolidated Net Tangible Liabilities

					Unaudited
					pro forma
					adjusted
					consolidated
	Consolidated net				net tangible
	tangible liabilities				liabilities of the
	of the Group				Remaining
	as at 31 May 2012		Pro forma adjustments		Group
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)	(Note 3)	(Note 4)
Net tangible liabilities attributable
to the shareholders of the Company	(682,685) 136,717		30,299	113,205	(402,464)
Number of shares issued_(’000)_	502,967				2,011,868
Consolidated net tangible liabilities
per share prior to completion of the
Disposals and the Open Offer_(Note 5)_	HK$(1.36)
Unaudited pro forma adjusted
consolidated net tangible liabilities
per share after completion of the
Disposals and the Open Offer_(Note 6)_					HK$(0.20)

Notes:

(1) Extracted from the consolidated statement of financial position of the Group as at 31 May 2012 set out in Appendix IV to the Circular.

II – 3

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

(2) The adjustments reflect (a) the de-consolidation of the assets and liabilities of Oasis Rich as at 31 May 2012, (b) the recognition of amount due from/to Oasis Rich Group, and (c) the pro forma gain arising from the GCH Disposal, net of capital gain tax amounting to HK$17,100,000, assuming that the GCH Disposal had taken place on 31 May 2012. Financial information of Oasis Rich Group is set out in Appendix III to the Circular.

Carrying value of the GCH 2012 Convertible Bonds Carrying value of net assets of Oasis Rich Group attributable to the Group’s 60% equity interest therein Pro forma gain on GCH Disposal recognised in profit or loss Pro forma capital gain tax arising on GCH Disposal	HK$’000 166,615 (12,798) 153,817 (17,100) 136,717

For the purpose of determining the pro forma gain on the GCH Disposal, it is assumed that no consideration is allocated to repurchase the conversion option component of the GCH 2012 Convertible Bonds due to the GCH 2012 Convertible Bonds were close to maturity and the conversion options were deeply out of the money, and hence the entire consideration paid by the Group for the repurchase of the GCH 2012 Convertible Bonds is allocated to the liability component of the GCH 2012 Convertible Bonds.

For the purpose of unaudited pro forma statement of adjusted consolidated net tangible liabilities, the Group has estimated the capital gain taxes in the People’s Republic of China (the “PRC”) of approximately HK$17,100,000 arising from the GCH Disposal based on 10% capital gain tax rate of the relevant outstanding principal of GCH 2012 Convertible Bonds minus 60% share of registered share capital of the PRC subsidiary of Oasis Rich to be disposed of. The amount of the capital gain taxes are subject to change upon completion.

(3) The adjustments reflect (a) the de-consolidation of the assets and liabilities of Gain Advance, (b) the recognition of non-controlling interests amounting to HK$5,371,000 representing 49% equity interest in Precious Success as at 31 May 2012, calculated based on 49% of the carrying amounts of the net assets of Precious Success, and (c) the pro forma gain arising from the Intralot Disposal, assuming that the Intralot Disposal had taken place on 31 May 2012, net of capital gain tax amounting to HK$18,700,000. Financial information of Gain Advance Group and Precious Success Group are set out in Appendices II and I to the Circular, respectively.

Carrying value of the Intralot 2013 Convertible Bonds Assumed fair value of Gain Advance Group Assumed fair value of the Group’s 49% equity interest in Precious Success Group Pro forma gain on Intralot Disposal recognised in profit or loss Pro forma capital gain tax arising on Intralot Disposal	HK$’000 191,659 (137,289) (5,371) 48,999 (18,700) 30,299

For the purpose of determining the pro forma gain on the Intralot Disposal, the directors of the Company assumed that the fair value of Gain Advance Group and 49% equity interest in Precious Success Group approximated the carrying values as at 31 May 2012 of the net assets of Gain Advance Group and of the net assets of Precious Success Group attributable to the Group’s 49% equity interest therein, respectively. Furthermore, it is assumed that no consideration is allocated to repurchase the conversion option component of the Intralot 2013 Convertible Bonds due to the assumed aggregated fair value of Gain Advance Group and the Group’s 49% equity interest in Precious Success Group was lower than the assumed fair value of the liability component of the Intralot 2013 Convertible Bonds as at 31 May 2012, and hence the entire consideration paid by the Group for the repurchase of the Intralot 2013 Convertible Bonds is allocated to the liability component of the Intralot 2013 Convertible Bonds.

For the purpose of unaudited pro forma statement of adjusted consolidated net tangible liabilities, the Group has estimated the capital gain taxes in the PRC of approximately HK$18,700,000 arising from the Intralot Disposal based on 10% capital gain tax rate of the relevant outstanding principal of Intralot 2013 Convertible Bonds minus 49% share of registered share capital of the PRC subsidiaries of Precious Success to be disposed of. The amount of the capital gain taxes are subject to change upon completion.

The financial impact of the Intralot Disposal is to be determined based on the carrying amount of the Intralot 2013 Convertible Bonds, the carrying value and fair value of the net assets of Gain Advance Group and Precious Success Group at the completion date and is therefore subject to change upon completion of the Intralot Disposal.

II – 4

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

(4) The adjustments reflect (a) the estimated proceeds received by the Group arising from the Open Offer when all shareholders take up their respective entitlements to the Offer Shares on the basis of three Offer Shares for every one existing share of the Company held as at 31 May 2012 for a total of 1,508,900,799 Offer Shares of HK$0.078 each in the aggregate amount of HK$117,694,000, (b) the payment of share issue expense amounting to HK$1,500,000 directly attributable to the Open Offer, and (c) the payment of legal and professional fee of HK$4,289,000 in relation to the Disposals in which HK$1,300,000 has been provided for in other payables and accruals as at 31 May 2012, assuming that the Disposals and the Open Offer had taken place on 31 May 2012.
(5) The calculation of the consolidated net tangible liabilities per share prior to completion of the Disposals and the Open Offer is based on 502,966,933 shares in issue as at 31 May 2012.
(6) The calculation of the unaudited pro forma adjusted consolidated net tangible liabilities per share after completion of the Disposals and the Open Offer is based on 2,011,867,732 shares comprising 502,966,933 shares in issue as at 31 May 2012 and 1,508,900,799 Offer Shares to be issued.

Scenario II

Assuming that (a) no shareholders take up their respective entitlements to the Offer Shares; (b) no subscription rights attached to the outstanding share options or conversion rights attached to the outstanding convertible bonds of the Company has been exercised; and (c) Melco LV and Power Way will take up their respective obligations to subscribe for the underwritten shares in accordance with the Underwriting Agreement, the following is the unaudited pro forma statement of adjusted consolidated net tangible liabilities of the Remaining Group upon completion of the Disposals and the Open Offer:

Unaudited Pro Forma Statement of Adjusted Consolidated Net Tangible Liabilities

Net tangible liabilities attributable to the shareholders of the Company Number of shares issued_(’000) Consolidated net tangible liabilities per share prior to completion of the Disposals and the Open Offer(Note 6) Unaudited pro forma adjusted consolidated net tangible liabilities per share after completion of the Disposals and the Open Offer(Note 7)_	Consolidated net tangible liabilities of the Group as at 31 May 2012 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (682,685) 136,717 30,299 5,511 48,377 502,967 HK$(1.36)	Unaudited pro forma net adjusted consolidated net tangible liabilities of the Remaining Group HK$’000 (461,781)

		1,251,386

		HK$(0.37)

II – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX II

Notes:

(1) Extracted from the consolidated statement of financial position of the Group as at 31 May 2012 set out in Appendix IV to the Circular.
(2) The adjustments reflect (a) the de-consolidation of the assets and liabilities of Oasis Rich as at 31 May 2012, (b) the recognition of amount due form/to Oasis Rich Group, and (c) the pro forma gain arising from the GCH Disposal, assuming that the GCH Disposal had taken place on 31 May 2012, net of capital tax gain amounting to HK$17,100,000. Financial information of Oasis Rich Group is set out in Appendix III to the Circular.

Carrying value of the GCH 2012 Convertible Bonds Carrying value of net assets of Oasis Rich Group attributable to the Group’s 60% equity interest therein Pro forma gain on GCH Disposal recognised in profit or loss Pro forma capital gain tax arising on GCH Disposal	HK$’000 166,615 (12,798) 153,817 (17,100) 136,717

For the purpose of the unaudited pro forma statement of adjusted consolidated net tangible liabilities, the Group has estimated the capital gain taxes of approximately HK$17,100,000 arising from the GCH Disposal based on 10% capital gain tax rate of the relevant outstanding principal of GCH 2012 Convertible Bonds minus 60% share of registered share capital of the PRC subsidiary of Oasis Rich to be disposed of. The amount of the capital gain taxes are subject to change upon completion.

(3) The adjustments reflect (a) the de-consolidation of the assets and liabilities of Gain Advance, (b) the recognition of non-controlling interests amounting to HK$5,371,000 representing 49% equity interest in Precious Success as at 31 May 2012, calculated based on 49% of the carrying amounts of the net assets of Precious Success, and (c) the pro forma gain arising from the Intralot Disposal, net of capital gain tax amounting to HK$18,700,000, assuming that the Intralot Disposal had taken place on 31 May 2012. Financial information of Gain Advance Group and Precious Success Group are set out in Appendices II and I to the Circular, respectively.

Carrying value of the Intralot 2013 Convertible Bonds Assumed fair value of Gain Advance Group Assumed fair value of the Group’s 49% equity interest in Precious Success Group Pro forma gain on Intralot Disposal recognised in profit or loss Pro forma capital gain tax arising on Intralot Disposal	HK$’000 191,659 (137,289) (5,371) 48,999 (18,700) 30,299

II – 6

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

For the purpose of the unaudited pro forma statement of adjusted consolidated net tangible liabilities, the Group has estimated the capital gain taxes in the PRC of approximately HK$18,700,000 arising from the Intralot Disposal based on 10% capital gain tax rate of the relevant outstanding principal of Intralot 2013 Convertible Bonds minus 49% share of registered share capital of the PRC subsidiaries of Precious Success to be disposed of. The amount of the capital gain taxes are subject to change upon completion.

The financial impact of the Intralot Disposal is to be determined based on the carrying amount of the Intralot 2013 Convertible Bonds and the carrying value and fair value of the net assets of Gain Advance Group and Precious Success Group at the completion date and is therefore subject to change upon completion of the Intralot Disposal.

(4) The adjustments reflect (a) the estimated proceeds of HK$10,000,000 to be received by the Group arising from the issuance of 128,205,128 Offer Shares of the Company underwritten by Melco LV as set out in the Underwriting Agreement when no shareholders take up their respective entitlements to the Offer Shares, (b) the payment of legal and professional fee of HK$4,289,000 in relation to the Disposals in which HK$1,300,000 has been provided for in other payables and accruals as at 31 May 2012, and (c) the payment of share issue expense amounting to HK$1,500,000 directly attributable to the Open Offer, assuming that the Open Offer had taken place on 31 May 2012.
(5) The adjustments reflect (a) the estimated increase in share capital and reserves of the Group arising from the issuance of 620,214,078 Offer Shares underwritten by Power Way as set out on page 28 of the Prospectus when no shareholders take up their respective entitlements to the Offer Shares to the extent that the public float will decrease from 58% to 25%, assuming that the Open Offer had taken place on 31 May 2012, and (b) the settlement of the portion of Power Way Loan and accrued interest in aggregate amounting to HK$48,377,000 by way of set off of the underwriting and payment obligations of Power Way, assuming that the Open Offer had taken place on 31 May 2012.
(6) The calculation of the consolidated net tangible liabilities per share prior to completion of the Disposals and the Open Offer is based on 502,966,933 shares in issue as at 31 May 2012.
(7) The calculation of the unaudited pro forma adjusted consolidated net tangible liabilities per share after completion of the Disposals and the Open Offer is based on 1,251,386,139 shares comprising 502,966,933 shares in issue as at 31 May 2012 and 748,419,206 Offer Shares underwritten by Melco LV and Power Way to be issued.

II – 7

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of an accountants’ report, prepared for the sole purpose of inclusion in this prospectus, received from the independent reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, in respect of the unaudited pro forma statements of adjusted consolidated net tangible liabilities of the Group.

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA STATEMENTS OF ADJUSTED CONSOLIDATED NET TANGIBLE LIABILITIES

==> picture [108 x 51] intentionally omitted <==

TO THE DIRECTORS OF MELCOLOT LIMITED

We report on the unaudited pro forma statements of adjusted consolidated net tangible liabilities of MelcoLot Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which have been prepared by the directors of the Company for illustrative purposes only, to provide information about how the disposals of the entire equity interest of Gain Advance Group Limited (“Gain Advance”), entire 60% equity interest of Oasis Rich International Ltd. (“Oasis Rich”) and 49% equity interest of Precious Success Holdings Limited, and the open offer of new shares of the Company on the basis of three offer shares for every existing share might have affected the consolidated net tangible liabilities of the Group excluding Gain Advance and its subsidiary, and Oasis Rich and its subsidiary (collectively referred to as the “Remaining Group”) presented, for inclusion in Appendix II of the prospectus issued by the Company dated 24 October 2012 (the “Prospectus”). The basis of preparation of the unaudited pro forma statements of adjusted consolidated net tangible liabilities is set out in Part A of Appendix II to the Prospectus.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma statements of adjusted consolidated net tangible liabilities in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Rules, on the unaudited pro forma statements of adjusted consolidated net tangible liabilities and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma statements of adjusted consolidated net tangible liabilities beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

II – 8

UNAUDITED PRO FORMA FINANCIAL INFORMATION

APPENDIX II

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma statements of adjusted consolidated net tangible liabilities with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma statements of adjusted consolidated net tangible liabilities have been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma statements of adjusted consolidated net tangible liabilities as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Rules.

The unaudited pro forma statements of adjusted consolidated net tangible liabilities are for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of their hypothetical nature, do not provide any assurance or indication that any event will take place in future and may not be indicative of the financial position of the Remaining Group as at 31 May 2012 or any future date.

Opinion

In our opinion:

(a) the unaudited pro forma statements of adjusted consolidated net tangible liabilities have been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma statements of adjusted consolidated net tangible liabilities as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

24 October 2012

II – 9

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This prospectus, for which the 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 Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this prospectus misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately after completion of the Open Offer, will be as follows:

Authorised:		HK$
5,500,000,000	Shares as at the Latest Practicable Date	55,000,000.00
	and upon completion of the Open Offer
Issued and fully paid or credited as fully paid assuming that all Shareholders take up their
respective assured entitlements to the Offer Shares:
502,966,933	Shares as at the Latest Practicable Date	5,029,669.33
1,508,900,799	New Shares to be issued upon completion	15,089,007.99
	of the Open Offer
2,011,867,732	Shares upon completion of the Open Offer	20,118,677.32

Issued and fully paid or credited as fully paid assuming that all Shareholders take up their respective assured entitlements to the Offer Shares:

Issued and fully paid or credited as fully paid assuming no Shareholders take up their respective assured entitlements to the Offer Shares:

502,966,933 Shares as at the Latest Practicable Date 748,419,206 New Shares to be issued upon completion of the Open Offer 1,251,386,139 Shares upon completion of the Open Offer	5,029,669.33 7,484,192.06
	12,513,861.39

III – 1

APPENDIX III

GENERAL INFORMATION

When allotted, issued and fully-paid up, the Offer Shares will rank pari passu in all respects, including the rights as to voting, dividends, distributions and returns of capital, with the existing Shares then in issue. Holders of fully-paid Offer Shares will be entitled to receive all dividends and distributions which are declared, made or paid after the date of allotment and issue of the fully-paid Offer Shares. The Shares in issue are listed on GEM and the Offer Shares to be issued will also be listed on GEM. No part of the securities, including debt securities, of the Company is listed on, dealt in, nor is the listing or permission to deal in the securities of the Company being or proposed to be sought, on any other stock exchanges.

There is no arrangement under which future dividends are/will be waived or agreed to be waived.

Particulars of the Share Options are set out below:

The share option scheme (the “ Old Share Option Scheme ”) adopted at the general meeting of the Company on 20 April 2002 has expired on 20 April 2012. The Share Options granted thereunder prior to the Old Share Option Scheme’s expiry date will continue to be valid and exercisable in accordance with the terms of the Old Share Option Scheme.

At the annual general meeting of the Company held on 18 May 2012, the Shareholders approved the adoption of a new share option scheme (the “ 2012 Share Option Scheme ”) under which the Directors may grant share options to eligible persons to subscribe for Shares, subject to the terms and conditions as stipulated therein. Unless otherwise cancelled or amended, the 2012 Share Option Scheme will remain valid for a period of 10 years from the date of its adoption. No outstanding share options had been granted under the 2012 Share Option Scheme as at the Latest Practicable Date.

The outstanding number of Share Options as at the Latest Practicable Date are as follows:

Type of participant Directors: Mr. Ko Chun Fung, Henry	Date of grant 31.3.2008 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1)	Exercisable period 1.10.2008 to 31.3.2018 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020	Number of Share Options outstanding Exercise at the Latest price Practicable per Share Date HK$ 0.890 4,354,000 0.367 4,000,000 0.152 5,000,000	Number of Share Options outstanding Exercise at the Latest price Practicable per Share Date HK$ 0.890 4,354,000 0.367 4,000,000 0.152 5,000,000
				4,354,000 4,000,000 5,000,000

III – 2

GENERAL INFORMATION

APPENDIX III

Type of participant Mr. Chrysafidis, Evangelos Mr. Chan Sek Keung, Ringo Mr. Wang, John Peter Ben Mr. Tsoi, David Mr. Pang Hing Chung, Alfred Mr. So Lie Mo, Raymond	Date of grant 18.11.2010 (Note 1) 20.2.2003 (Note 3) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 31.3.2008 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1)	Exercisable period 18.5.2011 to 17.11.2020 20.2.2004 to 19.2.2013 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 1.10.2008 to 31.3.2018 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020	Exercise price per Share HK$ 0.152 0.138 0.367 0.152 0.890 0.367 0.152 0.367 0.152 0.367 0.152 0.367 0.152	Number of Share Options outstanding at the Latest Practicable Date 1,000,000 1,200,000 3,000,000 2,000,000 3,846,000 3,000,000 5,000,000 200,000 200,000 200,000 200,000 200,000 200,000	Number of Share Options outstanding at the Latest Practicable Date 1,000,000 1,200,000 3,000,000 2,000,000 3,846,000 3,000,000 5,000,000 200,000 200,000 200,000 200,000 200,000 200,000
					1,000,000 1,200,000 3,000,000 2,000,000 3,846,000 3,000,000 5,000,000 200,000 200,000 200,000 200,000 200,000 200,000
					33,600,000

III – 3

GENERAL INFORMATION

APPENDIX III

Type of participant Substantial shareholder: Employees: Advisers: (Note 4)	Date of grant 31.3.2008 (Note 1) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 31.3.2008 (Note 1) 16.2.2009 (Note 2) 10.7.2009 (Note 2) 18.11.2010 (Note 1) 12.1.2007 (Note 3) 31.3.2008 (Note 1) 16.2.2009 (Note 2) 10.7.2009 (Note 2) 18.11.2010 (Note 1)	Exercisable period 1.10.2008 to 31.3.2018 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 1.10.2008 to 31.3.2018 16.2.2010 to 15.2.2019 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020 12.1.2008 to 11.1.2017 1.10.2008 to 31.3.2018 16.2.2010 to 15.2.2019 10.7.2010 to 9.7.2019 18.5.2011 to 17.11.2020	Exercise price per Share HK$ 0.890 0.367 0.152 0.890 0.300 0.367 0.152 0.088 0.890 0.300 0.367 0.152	Number of Share Options outstanding at the Latest Practicable Date 4,354,000 4,000,000 5,000,000	Number of Share Options outstanding at the Latest Practicable Date 4,354,000 4,000,000 5,000,000
					4,354,000 4,000,000 5,000,000
					13,354,000
					6,367,000 3,200,000 6,258,000 11,480,000
					27,305,000
					1,275,000 6,606,000 8,300,000 9,130,000 7,200,000
					32,511,000
					106,770,000

III – 4

GENERAL INFORMATION

APPENDIX III

Notes:

(1) These grants under the Old Share Option Scheme are exercisable for a period not later than 10 years from the date of grant, within which there is a total vesting period of one year, starting from six months of the grant date at stepped six months increments of 50% of the total Share Options granted.
(2) These grants under the Old Share Option Scheme are exercisable for a period not later than 10 years from the date of grant, within which there is a total vesting period of three years, starting from the first anniversary of the grant date at stepped annual increments of 33% of the total Share Options granted.
(3) These grants under the Old Share Option Scheme are exercisable for a period not later than 10 years from the date of grant, within which there is a total vesting period of four years, starting from the first anniversary of the grant date at stepped annual increments of 25% of the total Share Options granted.
(4) Advisers are individuals who rendered consultancy services in respect of the business development to the Group without receiving any compensation. The Group granted Share Options to them for recognising their services similar to those rendered by other employees.

3. DISCLOSURE OF INTERESTS

(i) Directors’ and chief executive’s interests

As at the Latest Practicable Date, the interests or short positions of each Director and chief executive of the Company in the shares, debentures or underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he or she was taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules were as follows:

(a) Long positions in the Shares

Name of Director Mr. Chan Sek Keung, Ringo Mr. Tsoi, David Mr. Pang Hing Chung, Alfred		Number of Shares	Number of Shares	Total number of Shares 53,276,000 976,000 1,500,000	Approximate percentage of the issued share capital of the Company
		Beneficial owner 18,876,000 976,000 1,500,000	Held by controlled corporation(s) 34,400,000 (Note 2) – –
					(Note 1) 10.59% 0.19% 0.30%

III – 5

GENERAL INFORMATION

APPENDIX III

Notes:

(1) As at the Latest Practicable Date, the total issued Shares was 502,966,933.
(2) Mr. Chan Sek Keung, Ringo is deemed to be interested in 34,400,000 Shares beneficially held by Woodstock Management Limited, a company wholly owned by him.
(b) Long positions in the Share Options

Name of Director (Note 2) Mr. Ko Chun Fung, Henry Mr. Chrysafidis, Evangelos Mr. Chan Sek Keung, Ringo Mr. Wang, John Peter Ben Mr. Tsoi, David Mr. Pang Hing Chung, Alfred Mr. So Lie Mo, Raymond	Number of Share Options held 13,354,000 1,000,000 6,200,000 11,846,000 400,000 400,000 400,000	Number of underlying Shares 13,354,000 1,000,000 6,200,000 11,846,000 400,000 400,000 400,000	Approximate percentage of the issued share capital of the Company
			(Note 1) 2.66% 0.20% 1.23% 2.36% 0.08% 0.08% 0.08%

Notes:

(1) As at the Latest Practicable Date, the total issued Shares was 502,966,933.
(2) Each of the above Directors is the beneficial owner of the Share Options granted to him.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company or their respective associates (within the meaning of the GEM Listing Rules) had any interests and short positions in the shares, debentures or underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he or she was taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

III – 6

GENERAL INFORMATION

APPENDIX III

(ii) Substantial shareholders’ interests

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the shares, debentures or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and section 336 of the SFO or, who were or were expected, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Company were as follows:

(a) Long positions in the Shares

Name of Shareholder Melco Mr. Ho, Lawrence Yau Lung Intralot S.A. Mr. Chang Firich		Number of Shares Held by Beneficial controlled Total number owner corporation(s) of Shares – 58,674,619 58,674,619 (Note 2) – 58,674,619 58,674,619 (Note 3) – 52,973,779 52,973,779 (Note 4) – 20,787,042 20,787,042 (Note 5) 2,097,498 10,880,000 12,977,498 (Note 6)	Number of Shares Held by Beneficial controlled Total number owner corporation(s) of Shares – 58,674,619 58,674,619 (Note 2) – 58,674,619 58,674,619 (Note 3) – 52,973,779 52,973,779 (Note 4) – 20,787,042 20,787,042 (Note 5) 2,097,498 10,880,000 12,977,498 (Note 6)	Approximate percentage of the issued share capital of the Company (Note 1) 11.67% 11.67% 10.53% 4.13% 2.58%
		Beneficial owner – – – – 2,097,498	Held by controlled corporation(s) 58,674,619 (Note 2) 58,674,619 (Note 3) 52,973,779 (Note 4) 20,787,042 (Note 5) 10,880,000 (Note 6)

III – 7

GENERAL INFORMATION

APPENDIX III

(b) Long positions in the underlying Shares

Number of underlying Shares

Name of Shareholder Melco Mr. Ho, Lawrence Yau Lung Intralot S.A. Mr. Chang Firich	Beneficial owner – 13,354,000 (Note 7) – – 20,796,766	Held by controlled corporation(s) 470,006,742 (Note 2) 470,006,742 (Note 3) 366,376,270 (Note 4) 206,104,195 (Note 5) –	Total number of underlying Shares 470,006,742 483,360,742 366,376,270 206,104,195 20,796,766	Approximate percentage of the issued share capital of the Company
				(Note 1) 93.45% 96.10% 72.84% 40.98% 4.13%

Notes:

(1) As at the Latest Practicable Date, the total issued Shares was 502,966,933.
(2) Melco is deemed by the SFO to be interested in 58,674,619 Shares and 470,006,742 underlying Shares from convertible bonds in the Company as described in (8) below by virtue of its indirect holding of its wholly owned subsidiaries, Melco Leisure and Entertainment Group Limited and Melco LV.
(3) Mr. Ho, Lawrence Yau Lung is deemed by the SFO to be interested in 58,674,619 Shares and 470,006,742 underlying Shares from convertible bonds in the Company as described in (8) below by virtue of his controlling interests in Melco, which is held by his controlled corporations, and his indirect holding of Melco Leisure and Entertainment Group Limited and Melco LV.
(4) Intralot S.A. is deemed by the SFO to be interested in 52,973,779 Shares and 366,376,270 underlying Shares from convertible bonds in the Company as described in (8) and (9) below by virtue of its indirect holding of its wholly owned subsidiaries, Intralot Holdings International Limited and Intralot.
(5) Mr. Chang is deemed by the SFO to be interested in 20,787,042 Shares and 206,104,195 underlying Shares from convertible bonds in the Company as described in (8) below by virtue of his direct holding in the entire share capital of Universal Rich and its wholly owned subsidiary, GCH. Pursuant to a sale and purchase agreement dated 15 December 2011, Universal Rich acquired the entire share capital of GCH from Firich.
(6) Firich is deemed by the SFO to be interested in 10,880,000 Shares by virtue of its direct holding of its wholly owned subsidiary, Toprich Company Limited.
(7) Mr. Ho, Lawrence Yau Lung renders consultancy services in respect of the business development of the Group without receiving any compensation. The Company granted the Share Options to him for recognising his services similar to those rendered by other employees.

III – 8

GENERAL INFORMATION

APPENDIX III

(8) On 13 December 2007, the Company issued the 2012 Convertible Bonds with principal amount of HK$606,800,000 to Power Way as part of the consideration for the acquisition of subsidiaries, which entitle the holder to convert them into 713,882,352 Shares within 5 years from the date of issue at a conversion price of HK$0.85 per Share subject to anti-dilutive adjustments. If the 2012 Convertible Bonds have not been converted, they will be redeemed on maturity date of 13 December 2012. Power Way had subsequently distributed all 2012 Convertible Bonds to its shareholders, and as to principal amount of HK$399,505,732 by Melco LV, HK$175,188,566 by GCH, HK$17,677,251 by Firich and the balance of HK$14,428,451 by Intralot, after several transfers, as at the Latest Practicable Date.
(9) Pursuant to an agreement dated 7 September 2008 (as amended by a supplemental agreement dated 26 September 2008) entered into between the Company and Intralot, the Company issued the Intralot 2013 Convertible Bonds with principal amount of HK$277,175,310 to Intralot, as part of the consideration for the acquisition of intangible assets on 9 December 2008, which entitle the holder to convert them into 279,692,542 Shares within 5 years from the date of issue at a conversion price of HK$0.991 per Share subject to anti-dilutive adjustments. If the Intralot 2013 Convertible Bonds have not been converted, they will be redeemed on maturity date of 9 December 2013. In addition, upon obtaining two agreements in connection with the recognised projects in China, the Company shall pay the success payment, satisfied by convertible bonds, to Intralot, which are convertible into 69,709,080 Shares at a conversion price of HK$1.0759 per share.

(iii) Interests of connected company (where the Director is a director or employee of such company)

Save as disclosed above in this section and save for Mr. Chrysafidis, Evangelos is an employee of Intralot S.A., none the Directors or proposed Directors were a director or employee of a company which has an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the shares, debentures or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and section 336 of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Company or had any options in respect of such shares.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

III – 9

GENERAL INFORMATION

APPENDIX III

5. DIRECTORS’ INTEREST IN ASSETS/CONTRACTS AND OTHER INTERESTS

(a) As at the Latest Practicable Date, none of the Directors or proposed Director had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 May 2012, the date to which the latest audited consolidated financial statements of the Group were made up.
(b) As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group since 31 May 2012, being the date to which the latest audited consolidated financial statements of the Group were made up, and which was significant in relation to the business of the Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interests in businesses which competed or might compete with the business of the Group or had any other conflict of interests which any such person had or might have with the business of the Group.

7. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was involved or might become a party in any material litigation.

8. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company or any of its subsidiaries within the two years immediately preceding the date of this prospectus and are or may be material:

(i) a supplemental agreement dated 18 January 2011 in supplement to the an agreement dated 28 December 2006 and both entered into among Shandong Kai Chuan Ji Yuan Electronic and Information Technology Ltd.[#] (山東省開創紀元電子商務信息有限公司) (“Shandong Kai Chuan Ji Yuan”), Shandong Zhenglu Industrial Company Limited[#] (山東正魯實業有限責任公司) and Beijing Huaying in respect of the proposed increase of the registered capital of Shandong Kai Chuan Ji Yuan from RMB2,666,700 (equivalent to approximately HK$3,306,708) to RMB10,000,000 (equivalent to approximately HK$12,400,000);
(ii) the Intralot Agreement;
(iii) the GCH Agreement;
(iv) the Wu Sheng Exclusivity Undertaking;
(v) the Intradak Exclusivity Undertaking;

III – 10

GENERAL INFORMATION

APPENDIX III

(vi) the outsource agreement dated 26 June 2012 (as supplemented by the supplemental agreement entered into on the even date) and entered into between PAL (Beijing) Information Technology Ltd.[#] （寶加（北京）信息技術有限公司） (“ PAL Beijing ”) and Beijing Yobit Games Limited, a company established in the PRC with limited liability and wholly owned by Beijing Haiyin;
(vii) a deed of termination dated 13 August 2012 and entered into between PAL Beijing and Beijing Yobit Games Limited, a company established in the PRC with limited liability and wholly owned by Beijing Haiyin, in relation to the termination of the Outsource Agreement in accordance with its terms and no consideration is payable thereunder; and
(viii) the Underwriting Agreement.
English name is for identification purpose only

9. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of Deloitte Touche Tohmatsu (“ Deloitte ”) who had given opinion or advice which is contained in this prospectus:

Name Qualification Deloitte Certified Public Accountants

Deloitte had given and had not withdrawn its written consent to the issue of this prospectus with the inclusion herein of its letter and reference to its name and opinions in the form and context in which they appear in this prospectus.

As at the Latest Practicable Date, Deloitte did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Deloitte did not have any interest, either directly or indirectly, in any assets which have been since 31 May 2012 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

III – 11

GENERAL INFORMATION

APPENDIX III

10. PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

The brief biographical details of the Directors and members of the senior management of the Company are set out below:

Directors

Executive Directors

Mr. Ko Chun Fung, Henry , aged 52, is an executive Director and Chief Executive Officer (“ CEO ”) of the Company and the Group and a member of the Nomination Committee of the Board. Mr. Ko is also the compliance officer and an authorised representative of the Company to the Stock Exchange. He was appointed to the Board in January 2008.

Mr. Ko is a seasoned professional with a strong track record of successful senior positions in Asia. He has led various high profile ventures in the telecom industry. Prior to entering the lottery industry, he was a founder of iAsia Online Systems Limited, and in his capacity as CEO and executive director, nurtured its growth into a leading financial trading solutions vendor in Hong Kong and the PRC. Mr. Ko then went on the setting up of the lottery business which was subsequently acquired by the Group in late 2007, in his capacity as CEO and executive director of PAL. Upon the acquisition of the lottery business, Mr. Ko was appointed to the Board and as CEO of the Company and continues to lead the lottery business of the Group.

Mr. Ko obtained a Bachelor of Engineering degree (first class honours) in 1982. In 1990 he received an Australian Postgraduate Course Award to study at the Australian Graduate School of Management, where he obtained his Master of Business Administration (“ MBA ”) degree.

Save as disclosed above, Mr. Ko did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Mr. Chrysafidis, Evangelos , aged 40, is an executive Director. He was appointed as an executive Director in April 2012.

Mr. Chrysafidis holds an MSc in finance from the University of Lancaster in the United Kingdom and a business administration and finance degree from the Athens University of Economics and Finance. He is also a graduate of the financial management program of General Electric Company. He held a series of senior positions in the software, semiconductor and medical systems industries, having worked with Microsoft Corporation, Intel Corporation and General Electric Company in the finance discipline, as well as in business development and marketing areas.

III – 12

GENERAL INFORMATION

APPENDIX III

Mr. Chrysafidis is currently a managing director of Intralot Asia Pacific which is a subsidiary of Intralot S.A., a substantial shareholder of the Company, which is engaged in operation of lottery business in China, Taiwan, Korea, Philippines, Malaysia, Australia and New Zealand.

Save as disclosed above, Mr. Chrysafidis did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Non-executive Directors

Mr. Chan Sek Keung, Ringo , aged 53, is the founder and re-elected as Non-executive Chairman of the Company on 5 March 2010. He is also a member of the Remuneration Committee of the Board. Mr. Chan was first appointed to the Board in November 1998 and was executive Director and Chairman of the Board between 24 September 2001 and 30 December 2009. He was redesignated as Non-executive Director on 30 December 2009.

Mr. Chan holds a Bachelor of Science degree in Electrical Engineering from the University of Hong Kong. He is a deputy of the Chinese People’s Political Consultative Conference (CPPCC) for city of Chengdu, Sichuan Province, China.

Save as disclosed above, Mr. Chan did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Mr. Wang, John Peter Ben , aged 52, is a Non-executive Director of the Company. He is currently Chairman and executive director of Summit Ascent Holdings Limited, and holds non-executive directorships in Melco Crown Entertainment Limited and China Precious Metal Resources Holdings Co Ltd, all of which are companies listed on the Main Board of the Stock Exchange. Between August 2009 and March 2012, Mr. Wang was a non-executive director of Carnival Group International Holdings Limited (formerly known as “Oriental Ginza Holdings Limited”), a company listed on the Main Board of the Stock Exchange. Between 2005 and 2009, Mr. Wang was the chief financial officer of Melco International Development Limited, a substantial shareholder of the Company. He has over 20 years of experience in the financial and investment banking industry and had previously worked for Deutsche Bank (HK), CLSA Asia-Pacific Markets (HK), Bear Stearns Asia Limited (HK), Barclays Capital (Singapore), S.G. Warburgs & Co. (London), Salomon Brothers (London), the London Stock Exchange, and Deloitte Haskins & Sells (London). Mr. Wang qualified as a chartered accountant with the Institute of Chartered Accountants of England and Wales in 1985.

Save as disclosed above, Mr. Wang did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

III – 13

GENERAL INFORMATION

APPENDIX III

Independent non-executive Directors

Mr. Tsoi, David , aged 65, is an independent non-executive Director and Chairman of both the Audit Committee and Remuneration Committee and a member of the Nomination Committee of the Board. Mr. Tsoi was appointed as an independent non-executive Director of the Company in October 2001.

A Certified Public Accountant by profession, Mr. Tsoi currently practises as managing director of Alliott, Tsoi CPA Limited. He is a fellow member of the Association of Chartered Certified Accountants, Hong Kong Institute of Certified Public Accountants and an associate member of the Association of Certified General Accountants of Canada and Institute of Chartered Accountants of England & Wales. He is also a fellow member of the Hong Kong Institute of Directors and a member of CPA Australia. Mr. Tsoi holds a Master’s degree in Business Administration from the University of East Asia, Macau.

Mr. Tsoi is currently also an independent non-executive director of CSR Corporation Limited and Enviro Energy International Holdings Limited, both listed on the Main Board of the Stock Exchange.

Save as disclosed above, Mr. Tsoi did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Mr. Pang Hing Chung, Alfred , aged 51, is an independent non-executive Director and a member of both the Audit Committee and Nomination Committee of the Board. Mr. Pang was appointed as an independent non-executive Director of the Company in March 1999.

Mr. Pang is currently vice chairman, Investment Banking, Asia of Standard Bank Plc, Hong Kong Branch and a director of Standard Bank Asia Limited (“ Standard Bank ”) (also a member of Standard Bank’s Asia Executive Committee) and an independent non-executive director of Summit Ascent Holdings Limited, a company listed on the Main Board of the Stock Exchange. Mr. Pang has over 25 years of financial, management and investment banking experience in China, Asia and the United States of America. Before joining Standard Bank, Mr. Pang was managing director and vice chairman, Investment Banking Division, at BOC International Holdings Ltd. (“ BOCI ”) where he was also chairman of BOCI’s Commitment Committee. Prior to joining BOCI, he was managing director and president, Asia at Donaldson Lufkin & Jenrette, a United States of America investment banking firm.

Mr. Pang holds dual Bachelor of Arts (in Economics) & Bachelor of Science (in Electrical Engineering) Degrees from Cornell University, and MBA Degree from Stanford University Graduate School of Business in the United States of America.

III – 14

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, Mr. Pang did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Mr. So Lie Mo, Raymond, aged 63, is an independent non-executive Director, Chairman of the Nomination Committee and a member of both the Audit Committee and Remuneration Committee of the Board. Mr. So was appointed as an independent non-executive Director of the Company in September 2007. Mr. So is an all-round businessman with a wealth of experience and connections in the information technology industry in Asia, and particularly in the greater China region. He has a long and successful track record especially in the information technology services industry. Mr. So has over 30 years of experience in the information technology industry and served in senior executive positions in Asia at various multinational corporations. Mr. So holds a Bachelor of Business Administration degree from The Chinese University of Hong Kong.

Save as disclosed above, Mr. So did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Senior Management

Mr. Yip Ho Chi , aged 42, is Chief Financial Officer and Company Secretary of the Company. Mr. Yip was appointed as Chief Financial Officer of the Company in June 2009. Prior to joining the Company, Mr. Yip had worked over 9 years with Sandmartin International Holdings Limited which is listed on the Main Board of the Stock Exchange and had been serving as its executive director, finance director and company secretary for the last 4 years. Mr. Yip was also an audit manager of Deloitte Touche Tohmatsu with whom he worked for over 7 years.

Mr. Yip holds a Bachelor of Business Administration degree from the University of Hong Kong. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants.

Save as disclosed above, Mr. Yip did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

Ms. Chan Lai Shan, Camily , aged 42, first joined the Group in November 2006. She is currently the Director – Corporate Development of the Group. Ms. Chan possesses a wealth of experience in financial and project management gained from listed conglomerates. She is responsible for strategic and business planning, business development and operations control of the Group. A qualified accountant by profession, she is a member of both the Hong Kong Institute of Certified Accountants and a certified practicing accountant of CPA Australia. She also holds an MBA degree from the Hong Kong University of Science and Technology.

III – 15

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, Ms. Chan did not have any relationships with any Directors, senior management, management shareholders, substantial or controlling shareholders of the Company as at the Latest Practicable Date and did not hold any directorship in other public listed company in the past three years.

The business address of the above Directors and senior management of the Group is Units 3101-2A, 31st Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:30 p.m. (Saturdays, Sundays and public holidays excepted) at the head office and principal place of business in Hong Kong of the Company at Units 3101– 2A, 31st Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong from the date of this prospectus up to and including the Latest Time for Acceptance:

(i) the memorandum and articles of association of the Company;
(ii) the annual reports of the Company for the two years ended 31 December 2010 and 2011;
(iii) the interim report of the Company for the six months ended 30 June 2012;
(iv) the report from Deloitte on the unaudited pro forma statements of adjusted consolidated net tangible liabilities of the Group, the text of which is set out in appendix II to this prospectus;
(v) the written consent from the expert referred to in paragraph headed “Qualification and consent of expert” in this appendix;
(vi) the material contracts referred to under the paragraph headed “Material contracts” in this appendix;
(vii) the circular of the Company dated 11 June 2012 in relation to the continuing connected transaction contemplated under the supply agreement dated 27 March 2012 and entered into between Beijing Telenet and Intradak;
(viii) the Circular; and
(ix) this prospectus.

III – 16

GENERAL INFORMATION

APPENDIX III

12. GENERAL

(a) The translation into Chinese language of this prospectus is for reference only. In the event of any inconsistency, the English text of the this prospectus shall prevail over the Chinese language text.
(b) The principal share and convertible bond registrar and transfer office of the Company is Butterfield Fulcrum Group (Cayman) Limited at Butterfield House, 68 Fort Street, P.O. Box 609, Grand Cayman, Cayman Islands.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(d) The registered address of Somerley Limited, the financial adviser to the Company, is 20th Floor, Aon China Building, 29 Queen’s Road Central, Hong Kong.
(e) The principal bankers of the Group are China Construction Bank (Asia) Corporation Limited and Bank of China (Hong Kong) Limited and their registered addresses are 17th Floor, Devon House, 979 King’s Road, Quarry Bay, Hong Kong and 1 Garden Road, Central, Hong Kong respectively.
(f) The auditor of the Company is Deloitte, its registered address is at 35th Floor, One Pacific Place, 88 Queensway, Hong Kong.
(g) The legal adviser to the Company as to Hong Kong laws is Michael Li & Co. Its registered address is at 19th Floor, Prosperity Tower, No. 39 Queen’s Road Central, Central, Hong Kong.
(h) The legal adviser to the Company as to Cayman Island laws is Conyers Dill & Pearman (Cayman) Limited. Its address is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
(i) The authorised representatives of the Company are Mr. Ko Chun Fung, Henry and Mr. Yip Ho Chi.
(j) As at the Latest Practicable Date, the Audit Committee of the Board comprises three members, including Mr. Tsoi, David, Mr. Pang Hing Chung, Alfred and Mr. So Lie Mo, Raymond, all are independent non-executive Directors. Mr. Tsoi, David has the appropriate financial and accounting experience required by the GEM Listing Rules. The primary duties of the Audit Committee of the Board is to communicate with the management of the Group from time to time, including but not limited to review the accounting principles and practices adopted by the Company, the effectiveness of its internal control systems, the interim and annual results of the Company. The biographical details of the members of the Audit Committee of the Board are set out in paragraph headed “10. Particulars of the Directors and senior management” above.

III – 17

GENERAL INFORMATION

APPENDIX III

(k) As at the Latest Practicable Date, there was no restriction affecting the remittance of profit or repatriation of capital of the Company into Hong Kong from outside Hong Kong. Save and except for RMB, the Group has no exposure to foreign exchange liabilities. The Group will have sufficient foreign exchange, generated from the operation of the PRC subsidiaries to pay forecasted or planned dividends and to meet its foreign exchange liabilities as they become due. The Company will pay its dividends, if any, in HK$.

13. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG

A copy of the Prospectus Documents and the consent letter referred to in paragraph headed “Qualification and consent of expert” in this appendix have been registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies Ordinance.

14. BINDING EFFECT

The Prospectus Documents and all acceptances of any offer or application contained in such documents, are governed by and shall be construed in accordance with the laws of Hong Kong. When an acceptance or application is made in pursuance of any such documents, the relevant document(s) shall have the effect of rendering all persons concerned bound by the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance.

III – 18

AI assistant

Crypto Flow Technology Limited — Capital/Financing Update 2012

51323_rns_2012-10-22_2ec31a94-f3e4-4d13-9667-e9663db6ce15.pdf

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MelcoLot Limited

OPEN OFFER ON THE BASIS OF THREE OFFER SHARES FOR EVERY EXISTING SHARE

CHARACTERISTICS OF GEM

CONTENTS

Effect of bad weather on the Latest Time for Acceptance

TERMINATION OF THE OPEN OFFER

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MelcoLot Limited

OPEN OFFER ON THE BASIS OF THREE OFFER SHARES FOR EVERY EXISTING SHARE

1. INTRODUCTION

LETTER FROM THE BOARD

2. THE OPEN OFFER

Issue Statistics

LETTER FROM THE BOARD

The undertakings

Terms of the Open Offer

Subscription Price

LETTER FROM THE BOARD

Fractions of the Offer Shares

No application for excess Offer Shares

LETTER FROM THE BOARD

Status of the Offer Shares

Share Certificates for the Offer Shares

Application for listing

Board lot size of the Offer Shares

3. QUALIFYING SHAREHOLDERS AND RIGHTS OF THE NON-QUALIFYING SHAREHOLDERS

Qualifying Shareholders

LETTER FROM THE BOARD

Rights of the Non-Qualifying Shareholders

4. PROCEDURES FOR ACCEPTANCE AND PAYMENTS

LETTER FROM THE BOARD

5. CONDITIONS OF THE OPEN OFFER

LETTER FROM THE BOARD

LETTER FROM THE BOARD

6. UNDERWRITING ARRANGEMENTS

The Underwritten Shares

The Set Off

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

7. REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

8. SHAREHOLDING STRUCTURES

LETTER FROM THE BOARD

9. WARNING OF THE RISKS OF DEALING IN SHARES

10. FUND-RAISING ACTIVITIES BY THE COMPANY DURING THE PAST 12 MONTHS

11. RISK FACTORS

Risks relating to the Group’s business

Reliance on the major customer

LETTER FROM THE BOARD

Reliance on the major supplier

The Group maintains a significant level of liabilities and the business of the Group may be adversely affected by the lack of refinancing options

LETTER FROM THE BOARD

Availability of high quality and appropriately priced raw materials and products

Reliance on key executives and personnel

Risk relating to seasonality

Risk relating to the industry

Risk relating to the prolonged delays experienced in the new equipment procurement cycle of the CSLA

LETTER FROM THE BOARD

Risk relating to the Group’s ability to keep up with technological changes in the PRC lottery industry in order to remain competitive

Risk relating to the PRC

Reliance on the PRC market

Adverse changes in the PRC’s economic conditions

Risk relating to the Open Offer

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

Crypto Flow Technology Limited Capital/Financing Update 2012