Crypto Flow Technology Limited — Proxy Solicitation & Information Statement 2007

Dec 28, 2007

THis CiRCULAR is iMPORTANT AND REQUiREs YOUR iMMEDiATE ATTENTiON

This circular is for information purposes only and does not constitute an invitation or offer to acquire or subscribe for securities.

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

if you have sold or transferred all your shares in Wafer Systems Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or the transferee or to the bank, the licensed securities dealer or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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

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

REFREsHMENT OF GENERAL MANDATE TO issUE sHAREs

independent Financial Adviser to the independent Board Committee and the independent shareholders of the Company

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A letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders is set out on page 8 of this circular. A letter from Ample Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, is set out on pages 9 to 14 of this circular.

A notice convening the EGM to be held at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Wednesday, 16 January 2008 at 3:30 p.m. is set out on pages 15 to 17 of this circular. A form of proxy for the EGM is enclosed with this circular of the Company. Whether or not you propose to attend the EGM, you are requested to complete the form of proxy and return the same to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-7, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time appointed for the EGM. Completion and delivery of the form of proxy will not preclude you from attending and voting at the EGM in person if you so wish.

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

31 December 2007

• For identification purpose only

characteristics of gem

gem has been established as a market designed to accommodate companies to which a high investment risk may be attached. in particular, companies may list on gem with neither a track record of profitability nor any obligation to forecast future profitability. furthermore, there may be risks arising out of the emerging nature of companies listed on gem and the business sectors or countries in which the companies operate. 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 a liquid market in the securities traded on gem.

the principal means of information dissemination on gem is publication on the internet website operated by the stock exchange. gem listed companies are not generally required to issue paid announcements in gazetted newspapers. accordingly, prospective investors should note that they need to have access to the gem website at www.hkgem.com in order to obtain up-to-date information on gem-listed issuers.

• i -

contents

	Page
Definitions 1
Letter from the Board	3
Letter from the Independent Board committee	8
Letter from the Independent Financial Adviser	9
notice of eGM	15

• ii -

Definitions

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

• “AGM”

the annual general meeting of the Company held on 27 April 2007 in which the Shareholders had approved, among other matters, the General Mandate

• “associate(s)” has the meaning ascribed to it under the GEM Listing Rules

• “Board”

the board of Directors

Wafer Systems Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM

• “Company” Wafer Systems Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM

• “Director(s)” director(s) of the Company “EGM” the extraordinary general meeting proposed to be convened by the Company at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Wednesday, 16 January 2008 at 3:30 p.m. to consider and, if thought fit, to approve the New General Mandate, a notice of which is set out on pages 15 to 17 of this circular

• “GEM” the Growth Enterprise Market of the Stock Exchange

• “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM

• “General Mandate” the general mandate granted to the Directors, to allot, issue and deal with Shares up to 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the AGM

• “Group” the Company and its subsidiaries from time to time “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Board Committee” the independent committee of the Board, comprising all the independent non-executive Directors, set up to advise the Independent Shareholders as to the fairness and reasonableness of the New General Mandate

• 1 -

Definitions

• “Independent Financial Adviser” Ample Capital Limited, a licensed corporation to carry out types 4 or “Ample Capital” (advising on securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities under the SFO, the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders regarding the New General Mandate

• “Independent Shareholders” Shareholders other than Mr. Chan Sek Keung, Ringo and his associates

• “Latest Practicable Date” 27 December 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “New General Mandate” the new general mandate proposed to be granted to the Directors at the EGM to allot, issue and deal with new Shares up to 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the relevant resolution by the Independent Shareholders

• “SFO” the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)

• “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholder(s)” holder(s) of the Share(s)

• “Stock Exchange” the Stock Exchange of Hong Kong Limited

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

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letter from the board

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

Executive Director:

Mr. Chan Sek Keung, Ringo (Chairman & Chief Executive Officer)

Independent non-executive Directors:

Mr. Pang Hing Chung, Alfred Mr. David Tsoi Mr. So Lie Mo, Raymond

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

Head office and principal place of business: Units 901-7, 9th Floor Prosperity Millennia Plaza 663 King’s Road North Point Hong Kong

31 December 2007

To the Independent Shareholders

Dear Sir and Madam,

refreShmeNt of GeNeral maNdate to ISSUe ShareS

INtrodUCtIoN

The purpose of this circular is to provide you with information in relation to (i) the New General Mandate; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders on the New General Mandate; (iii) the recommendation from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the New General Mandate; and (iv) the notice of EGM at which relevant resolution will be proposed to the Independent Shareholders to consider and, if thought fit, to approve the New General Mandate.

• For identification purpose only

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letter from the board

refreShmeNt of GeNeral maNdate to ISSUe ShareS

At the AGM, the General Mandate was granted to the Directors to exercise the powers of the Company to issue, allot and deal with up to 58,138,949 new Shares, being 20% of the aggregate nominal amount of share capital of the Company in issue as at the date of the AGM.

During the period between the date on which the General Mandate was granted to the Latest Practicable Date, 58,000,000 new Shares had been issued under the General Mandate, representing approximately 99.76% of the aggregate number of Shares which may be issued, allotted and dealt with under the General Mandate. As the General Mandate is substantially utilized and such mandate has not been refreshed since it was granted at the AGM, the Directors propose to seek approval from the Independent Shareholders at the EGM to refresh the General Mandate and grant to the Directors the New General Mandate to authorise the Directors to further issue, allot and deal with new Shares not exceeding 20% of the aggregate nominal amount of share capital of the Company in issue as at the date of the EGM.

Based on the 432,198,495 Shares in issue as at the Latest Practicable Date and on the basis that no further Shares will be issued and/or repurchased by the Company between the Latest Practicable Date and the date of the EGM, if the New General Mandate is approved at the EGM, the total number of new Shares that may be issued under the New General Mandate will be 86,439,699 Shares, representing 20% of the 432,198,495 Shares in issue as at the date of the EGM. If the New General Mandate is approved by the Independent Shareholders at the EGM, it will be and will continue to be in force from the date of the EGM until the earliest of (i) the conclusion of the next annual general meeting of the Company; or (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Company’s articles of association or any applicable laws of the Cayman Islands to be held; or (iii) the passing of an ordinary resolution by the Shareholders in a general meeting revoking or varying such mandate, whichever occurs first.

reaSoNS for the refreShmeNt of GeNeral maNdate

As discussed above, the Company had issued 58,000,000 new Shares under the General Mandate, representing approximately 99.76% of the aggregate number of Shares which may be issued, allotted and dealt with under the General Mandate. The Directors considered that the New General Mandate will enhance and maintain the Company’s financial flexibility for any future fund raising exercises of the Group to satisfy any future funding needs to develop the recently acquired lottery-related businesses of the Group, as referred to in the circular of the Company dated 19 November 2007 or provide general working capital to the Group.

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letter from the board

fUNd raISING aCtIVItIeS of the ComPaNY dUrING the PaSt 12 moNthS

actual use of

date of

announcement

event

Net proceeds

Intended use of proceeds

proceeds as at the latest Practicable date

31 October 2007 Subscription of A p p r o x i m a t e l y will be utilised Nil 58,000,000 new HK$104.1 to develop the Shares million recently acquired lottery-related businesses, as referred to in the circular of the Company dated 19 November 2007

reQUIremeNtS UNder the Gem lIStING rUleS

The EGM will be convened and held at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Wednesday, 16 January 2008 at 3:30 p.m. to consider and, if thought fit, to approve the New General Mandate. Pursuant to Chapter 17 of the GEM Listing Rules, the resolution to be proposed at the EGM to approve the New General Mandate is subject to Independent Shareholders’ approval by way of poll and any controlling Shareholders and their associates, or where there are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution. Since the Company had no controlling Shareholder (as defined in the GEM Listing Rules) as at the Latest Practicable Date, Mr. Chan Sek Keung, Ringo, being a Director, and his associates which, in aggregate, were interested in 74,560,000 Shares, representing approximately 17.25% of the issued share capital of the Company, will abstain from voting in favour of, and have no intention to vote against, the resolution to be proposed at the EGM regarding the approval of the New General Mandate.

The Independent Board Committee comprising the three independent non-executive Directors namely, Mr. Pang Hing Chung, Alfred, Mr. David Tsoi and Mr. So Lie Mo, Raymond, has been set up to advise the Independent Shareholders as to whether or not the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Ample Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the New General Mandate.

A notice convening the EGM is set out on pages 15 to 17 of this circular and a proxy form for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return

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letter from the board

the same to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-7, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time fixed for the EGM. Completion and delivery of the form of proxy will not preclude you from attending and voting at the EGM in person if you so wish.

ProCedUreS for demaNdING a Poll bY ShareholderS

Article 66 of the Company’s articles of association sets out the procedures by which Shareholders may demand a poll.

A resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

1. by the Chairman of such meeting; or

2. by at least three members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

3. by a member or members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or

4. by a member or members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

A demand by a person as proxy for a member or in the case of a member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a member.

reCommeNdatIoN

Your attention is drawn to (i) the letter from the Independent Board Committee as set out on page 8 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders regarding the New General Mandate; and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as set out on pages 9 to 14 of this circular containing its advice to the Independent Board Committee and the Independent Shareholders in this regard.

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letter from the board

The Independent Board Committee, having taking into account the advice from the Independent Financial Adviser in relation to the New General Mandate, considers that the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the EGM to approve the New General Mandate.

reSPoNSIbIlItY StatemeNt

This circular includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, (i) the information contained in this circular is accurate and complete in all material respects and not misleading; (ii) there are no other facts the omission of which would make any statement herein misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

Yours faithfully,

For and on behalf of the Board of Wafer Systems limited Chan Sek Keung, ringo

Chairman & Chief Executive Officer

• 7 -

Letter from the Independent Board CommIttee

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8198)

Units 901-7, 9th Floor Prosperity Millennia Plaza 663 King’s Road North Point Hong Kong

31 December 2007

To the Independent Shareholders

Dear Sir and Madam,

refreShment of GeneraL mandate to ISSUe ShareS

We have been appointed as members of the Independent Board Committee to advise you in respect of the New General Mandate, details of which are set out in the “Letter from the Board” in the circular of the Company dated 31 December 2007, of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the said circular unless the context otherwise requires.

We wish to draw your attention to the letter of advice from Ample Capital as set out on pages 9 to 14 of this circular, which contains its advice and recommendation to us as to whether or not the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole, as well as the principal factors and reasons for its advice and recommendation.

Having considered, amongst other matters, the factors and reasons considered by, and the opinion of, Ample Capital as stated in its aforementioned letter of advice, we are of the opinion that the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the EGM to approve the New General Mandate.

Yours faithfully,

For and on behalf of the Independent Board Committee mr. pang hing Chung, alfred mr. david tsoi mr. So Lie mo, raymond

Independent non-executive Directors

• For identification purpose only

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letter from the independent financial adviser

The following is the full text of a letter of advice from Ample Capital to the Independent Board Committee and the Independent Shareholders prepared for the purpose of inclusion in this circular:

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Unit A, 14/F. Two Chinachem Plaza 135 Des Voeux Road Central Hong Kong

31 December 2007

To the Independent Board Committee and the Independent Shareholders of Wafer systems limited

Dear Sirs or Madams,

refreshment of General mandate to issUe neW shares

introdUction

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection with the New General Mandate, details of which are set out in the “Letter from the Board” (the “Letter from the Board”) in the circular (the “Circular”) issued by the Company to the Shareholders dated 31 December 2007, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

Pursuant to Chapter 17 of the GEM Listing Rules, the resolution to be proposed at the EGM to approve the New General Mandate is subject to Independent Shareholders’ approval by way of poll and any controlling Shareholders and their associates, or where there are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution. Since the Company had no controlling Shareholder (as defined in the GEM Listing Rules) as at the Latest Practicable Date, Mr. Chan Sek Keung, Ringo, being a Director, and his associates which, in aggregate, were interested in 74,560,000 Shares, representing approximately 17.25% of the issued share capital of the Company, will abstain from voting in favour of and have no intention to vote against the resolution to be proposed at the EGM regarding the approval of the New General Mandate.

An independent board committee, comprising all the independent non-executive Directors, namely Mr. Pang Hing Chung, Alfred, Mr. David Tsoi and Mr. So Lie Mo, Raymond, has been established to advise the Independent Shareholders in relation to the New General Mandate.

Basis of oUr advice

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Circular and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all information and representations contained or referred to in the Circular and all information and representations which have been provided by

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letter from the independent financial adviser

the Directors and the management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and presentation provided to us by the Directors.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

principal factors taKen into accoUnt

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders in respect of the New General Mandate, we have taken the following principal factors and reasons into consideration:

(a) Background

The General Mandate granted to the Directors was approved at the AGM held on 27 April 2007 to allot and deal with up to 58,138,949 new Shares, being 20% of the aggregate nominal amount of share capital of the Company in issue as at the date of the AGM.

During the period between the date on which the General Mandate was granted to the Latest Practicable Date, 58,000,000 new Shares had been issued under the General Mandate, representing approximately 99.76% of the aggregate number of Shares which may be issued, allotted and dealt with under the General Mandate. As the General Mandate is substantially utilized and such mandate has not been refreshed since it was granted at the AGM, the Directors propose to seek approval from the Independent Shareholders at the EGM to refresh the General Mandate and grant to the Directors the New General Mandate to authorise the Directors to further issue, allot and deal with new Shares not exceeding 20% of the aggregate nominal amount of share capital of the Company in issue as at the date of the EGM.

Based on the 432,198,495 Shares in issue as at the Latest Practicable Date and if the New General Mandate is approved at the EGM and on the basis that no further Shares will be issued and/or repurchased by the Company between the Latest Practicable Date and the date of the EGM, the total number of new Shares that may be issued under the New General Mandate is 86,439,699 Shares, representing 20% of the 432,198,495 Shares in issue as at the EGM date.

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letter from the independent financial adviser

(b) history of fund raising exercises

According to the information provided by the Directors, we summarise the equity fund raising activities of the Company during the past 12 months immediately preceding the Latest Practicable Date in the following table:

				actual use of
				proceeds as
				at
				the latest
date of			intended use	practicable
announcement	event	net proceeds	of proceeds	date
31 October	Subscription	Approximately	will be	Nil
2007	of 58,000,000	HK$104.1	utilised to
	new Shares	million	develop the
			recently
			acquired
			lottery-related
			businesses, as
			referred to in
			the circular of
			the Company
			dated 19
			November
			2007 (the
			“Circular”)

On top of that, the Company entered into an agreement on 8 October 2007 to acquire the entire issued share capital of Precious Success Holdings Limited and 60% of the entire issued share capital of Oasis Rich International Ltd (together the “Sale Shares”) at a consideration of HK$668,000,000, which was satisfied by the Company allotting and issuing 72,000,000 new Shares at the issue price of HK$0.85 per Share and issuing convertible bonds in the aggregate principal amount of HK$606,800,000, details of which are set out in the Circular.

Save for the above, there were no other fund raising exercises or transactions in relation to the issue of new shares of the Company for the 12 months immediately preceding the Latest Practicable Date.

(c) liquidity position of the Group

In accordance with the Company’s interim report for the six months ended 30 June 2007, the Group had cash and bank balances of approximately HK$33.5 million and a current ratio of approximately 154% on the basis of total current assets over total current liabilities. This has not taken into account the effect of the subscription conducted in October 2007 with net proceeds of approximately HK$104.1 million as mentioned above. The Directors confirmed that there is no definite plan for any investment or acquisition of the Group nor is there any

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letter from the independent financial adviser

immediate funding need for the operation of the Group. However, the Directors cannot preclude the possibilities that additional funding may still be needed for investment development as well as other opportunities arise in the future.

(d) financial flexibility

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

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

In view of that, the Board anticipates that there might be funding needs from the Company to capture investment opportunities, in particular those related to the lottery business, in the future. The Directors considered that the New General Mandate will enhance and maintain the Company’s financial flexibility for any future fund raising exercises of the Group to satisfy any future funding needs to develop the recently acquired lottery-related businesses of the Group or provide general working capital to the Group.

We are of the view that if investment or acquisition opportunities arise, decisions have to be made promptly and it is critical that the Group has the financial resources to meet such needs. As mentioned above, the General Mandate has been substantially utilised. Under such circumstances, if there is no grant of the New General Mandate between now to the next annual general meeting of the Company, the Company may have to wait till April 2008 (i.e. the normal time to convene the Company’s next annual general meeting), which is around four months from the date of this letter before a new general mandate may be granted to the Directors by resolution of Shareholders. The New General Mandate provides the Group with maximum flexibility as allowed under the GEM Listing Rules to allot and issue securities for cash or as consideration to acquire suitable assets as and when such opportunities arise. The increased amount of capital which may be raised under the New General Mandate provides an additional option of financing to the Group when assessing and negotiating potential acquisitions and/or investment. In addition, the utilization of the New General Mandate will have the effect of strengthening the capital and shareholders’ base of the Company. Consequently, we are of the opinion that the New General Mandate is in the interests of the Company and the Shareholders as a whole.

(e) other fund raising alternatives

Other than raising fund by way of issuing equity capital, we understand from the Directors that the Group will also consider other financing methods such as bank financing, debt financing and funding through internal resources to meet its financing requirements arising from future investment of the Group, depending on the then financial position, capital structure and cost of funding of the Group as well as the then market condition. However, equity financing is interest and security free by nature. As such, we are of the view that the New General Mandate will serve as one of the alternatives for the Company to finance the Group’s business development needs.

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letter from the independent financial adviser

(f) potential dilution to shareholding of the independent shareholders

We set out below the shareholding structure of the Company as at the Latest Practicable Date and the potential shareholding dilution of existing Independent Shareholders upon full utilization of the New General Mandate (assuming that the New General Mandate is approved at the EGM):

Mr. Chan Sek Keung, Ringo_(Note)_ Power Way Group Limited Independent Shareholders Shares that may be issued under the New General Mandate Total	as at the latest practicable date Shares % 74,560,000 17.25 72,000,000 16.66 285,638,495 66.09 – – 432,198,495 100.00	Upon full utilisation of the new General mandate Shares % 74,560,000 14.38 72,000,000 13.88 285,638,495 55.07 86,439,699 16.67 518,638,194 100.00	Upon full utilisation of the new General mandate Shares % 74,560,000 14.38 72,000,000 13.88 285,638,495 55.07 86,439,699 16.67 518,638,194 100.00
			100.00

Note: Mr. Chan Sek Keung, Ringo, Chairman, Chief Executive Officer and Executive Director of the Company, is deemed, by virtue of the SFO, to be interested in the 56,400,000 Shares held by Woodstock Management Limited, a company wholly-owned by him, in addition to 18,160,000 Shares held by him personally.

Shareholders should be aware that the if the New General Mandate is approved by the Independent Shareholders at the EGM, it will be and continue to be in force from the date of the EGM until the earliest of (i) the conclusion of the next annual general meeting of the Company; or (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Company’s articles of association or any applicable laws of the Cayman Islands to be held; or (iii) the passing of an ordinary resolution by the Shareholders in a general meeting revoking or varying such mandate, whichever occurs first.

As set out above, 86,439,699 Shares would be issued upon full utilization of the New General Mandate, represents 20% of the issued share capital of the Company as at the Latest Practicable Date, or approximately 16.67% of the issued share capital of the Company as enlarged by the Shares to be issued under the New General Mandate. The aggregate shareholding of the existing Independent Shareholders would decrease from approximately 66.09% to approximately 55.07%, representing a potential maximum dilution of approximately 16.67% upon full utilization of the New General Mandate.

Taking into account that (i) the New General Mandate allows the Company to raise capital by allotment and issuance of Shares before the next annual general meeting; (ii) the New General Mandate provides more flexibility and options of financing to the Group for further development of its business and for other potential future investment as and when such opportunities arise; and (iii) the shareholding of all the Shareholders will be diluted to the same extent upon any utilisation of the New General Mandate, we consider such dilution or potential dilution of shareholding of the Independent Shareholders acceptable.

• 13 -

letter from the independent financial adviser

(g) terms of the new General mandate

Pursuant to Rule 17.42A(1) of the GEM Listing Rules, any controlling shareholders and their associates, or where there are no controlling shareholders, directors (excluding independent non-executive directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution to be proposed at the EGM. As mentioned above, Mr. Chan Sek Keung, Ringo, being an executive Director, and his associates will abstain from voting in favour of and have no intention to vote against the resolution to be proposed at the EGM regarding the approval of the New General Mandate.

As mentioned before, it is further stipulated that if the New General Mandate is approved by the Independent Shareholders at the EGM, it will be and continue to be in force from the date of the EGM until the earliest of (i) the conclusion of the next annual general meeting of the Company; or (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Company’s articles of association or any applicable laws of Hong Kong to be held; or (iii) the passing of an ordinary resolution by the Shareholders in a general meeting revoking or varying such mandate, whichever occurs first. Such duration is in compliance with Rule 17.42 of the GEM Listing Rules.

In view of the said stringent provisions and requirements of the GEM Listing Rules, we believe that there are sufficient control and measures to guide the refreshment of the General Mandate and the continuity of the New General Mandate. In this respect, we consider that the terms of the granting of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned.

recommendation

Having taken into account the principal factors and reasons referred to the above, we are of the opinion that the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Shareholders, and also advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to approve the New General Mandate to be proposed at the EGM.

Yours faithfully, For and on behalf of ample capital limited h. W. tang President

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Notice of eGM

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8198)

Notice of eXtRAoRDiNARY GeNeRAL MeetiNG

Notice iS HeReBY GiVeN that an extraordinary general meeting (the “ eGM ”) of Wafer Systems Limited (the “ company ”) will be held at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Wednesday, 16 January 2008 at 3:30 p.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company:

oRDiNARY ReSoLUtioN

“ tHAt

• (a) subject to paragraph (c) of this resolution, and pursuant to the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, the exercise by the directors (the “Directors”) of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant, whether conditionally or unconditionally, offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are convertible into the shares in the Company) which would or might require the exercise of such powers, be and is hereby generally and unconditionally approved;

• (b) the approval in paragraph (a) of this resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are convertible into the shares in the Company) which would or might require the exercise of such powers after the end of the Relevant Period;

• (c) the aggregate nominal amount of share capital allotted, issued or dealt with or agreed conditionally or unconditionally to be allotted, issued or dealt with (whether pursuant to options or otherwise) by the Directors pursuant to the approval in paragraph (a) of this resolution, otherwise than pursuant to:

• (i) a Rights Issue (as hereinafter defined); or

• For identification purpose only

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Notice of eGM

• (ii) the grant or exercise of any option under any share option scheme of the Company or any other option, scheme or similar arrangement for the time being adopted for the grant or issue to employee, director, advisor or business consultant of the Company and/or any of its subsidiaries of shares in the Company or rights to acquire for shares in the Company; or

• (iii) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares in the Company in accordance with the Articles of Association of the Company in force from time to time; or

• (iv) any issue of shares in the Company upon the exercise of rights of subscription or conversion under the terms of any warrants or convertible bonds issued by the Company or any securities which carry rights to subscribe for or are convertible into shares in the Company,

shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue on the date of the passing of this resolution and the authority pursuant to paragraph (a) of this resolution shall be limited accordingly; and

• (d) for the purpose of this resolution,

“Relevant Period” means the period from the date of the passing this resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association of the Company or any applicable law of the Cayman Islands to be held; and

• (iii) the passing of an ordinary resolution by the shareholders of the Company in general meeting revoking or varying the authority given to the Directors by this resolution.

“Rights Issue” means an offer of shares in the Company, or offer or issue of warrants, options or other securities giving rights to subscribe for Shares open for a period fixed by the Directors to holders of shares on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements, or having regard to any restrictions or obligations under the laws of, or the requirements of, or the expense or delay which may be involved in determining the existence or extent of any restrictions or obligations under the laws of, or the requirements of, any jurisdiction applicable to the Company, or any recognised regulatory body or any stock exchange in any territory applicable to the Company).”

By order of the Board of Wafer Systems Limited Pang Kin Man, edmond Company Secretary

Hong Kong, 31 December 2007

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Notice of eGM

Notes:

• (i) A member of the Company entitled to attend and vote at the above meeting is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is holder of two or more shares may appoint more than one proxy to attend and vote instead of him. A proxy need not be a member of the Company.

• (ii) In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a certified copy thereof, must be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 1806-7, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong no later than 48 hours before the time appointed for the meeting (or any adjournment thereof).

• (iii) Completion and return of the form of proxy will not preclude members of the Company from attending and voting in person at the meeting or any adjournment thereof should they so desire.

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