Crypto Flow Technology Limited - Proxy Solicitation & Information Statement 2008

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 Melco LottVentures 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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Melco LottVentures Limited 新濠環彩有限公司

(formerly known as Wafer Systems Limited) (Incorporated in the Cayman Islands with limited liability) (stock Code: 8198)

CONNECTED AND DisCLOsEABLE TRANsACTiONs iN RELATiON TO (1) DEBTs ACQUisiTiON; (2) ACQUisiTiON OF THE ENTiRE issUED sHARE CAPiTAL OF KTEMs CO., LTD.

Financial adviser to the Company

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

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A letter from the Independent Board Committee containing its advice and recommendation to the independent Shareholders is set out on pages 23 to 24 of this circular of the Company. A letter from Ample Capital, the Independent Financial Adviser to the Independent Board Committee and the independent Shareholders, is set out on pages 25 to 34 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 Tuesday, 15 April 2008 at 3:30 p.m. is set out on pages 42 to 43 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, Wanchai, 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 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.

27 March 2008

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.

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Background information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
1. The Debts Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
2. The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Relationships between the parties involved immediately before and
after the Debts Acquisition and the Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Change in shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Implications of the GEM Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Information on the Group and the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Information on LottVision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Information on KTeMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Requirements of the GEM Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Procedures for demanding a poll by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . .	21
Financial effects on assets, liabilities and earnings . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42

ii -

DEFINITIONS

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

“Acquisition”
the acquisition of the Sale Shares under the Sale and Purchase Agreement and the transactions contemplated thereunder
“Announcement” the announcement of the Company dated 6 March 2008 in relation to the Debts Acquisition and the Acquisition
“Articles” the articles of association of the Company
“associate(s)” has the meaning ascribed to it under the GEM Listing Rules
“Board” the board of Directors
“Business Day” a day (excluding a Saturday, Sunday, public or statutory holiday and days on which a tropical cyclone warning no. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong and Korea at any time between 9:00 a.m. and 5:00 p.m.) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours
“Company” Melco LottVentures Limited (formerly known as Wafer Systems Limited), a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM
“connected person(s)” has the meaning ascribed to it under the GEM Listing Rules
“Consideration Share(s)” 35,700,000 new Share(s) to be issued and allotted by the Company to the Vendors at the Issue Price for settling part of the Sale Consideration
“Debts Acquisition” the LV Debts Acquisition and the PAL Debts Acquisition
“Debt Acquisition Agreements” the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II, the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II
“Deposit” a sum of US$0.4 million (equivalent to approximately HK$3.12 million) paid by the Purchaser to the Designee upon the signing of the Sale and Purchase Agreement
“Designee” a person designated by the Vendors in writing to receive the Sale Consideration on behalf of the Vendors
“Director(s)” director(s) of the Company
1 -

DEFINITIONS

“EGM” the extraordinary general meeting to be convened by the Company at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Tuesday, 15 April 2008 at 3:30 p.m. for the purpose of approving the LV Debts Acquisition and the Acquisition “GEM” the Growth Enterprise Market of the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM

“Group” the Company and its subsidiaries from time to time “Guarantor” Mr. Nam “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 LV Debts Acquisition and the Acquisition
“Independent Financial Ample Capital Limited, a licensed corporation to carry out types Adviser” or “Ample Capital” 4 (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 LV Debts Acquisition and the Acquisition
“Independent Third Party(ies)” third party(ies) independent of the Company and connected person(s) of the Company, and are not connected person(s) of the Company
“Issue Price” the issue price of HK$1.42 per Consideration Share
“Korea”

Republic of Korea

“KTeMS”
KTeMS Co., Ltd., a company incorporated in Korea with limited liability
“Latest Practicable Date”
25 March 2008, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
2 -

DEFINITIONS

“Long Stop Date”
30 September 2008
“LottVision”

LottVision Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on the Singapore Exchange Securities Trading Limited

“LV Debts Acquisition”

the acquisition of the LV Nam Loan and the LV KTeMS Loan under the LV Debt Acquisition Agreement I and LV Debt Acquisition Agreement II and the transactions contemplated thereunder

“LV Debt Acquisition Agreement I”
the debt acquisition agreement dated 28 February 2008 entered into between the Purchaser and LottVision for the sale and purchase of the LV Nam Loan
“LV Debt Acquisition Agreement II”
the debt acquisition agreement dated 28 February 2008 entered into between the Purchaser and LottVision for the sale and purchase of the LV KTeMS Loan
“LV KTeMS Loan”
the loan in the principal amount of HK$31,200,000 which was provided by LottVision, as lender, to KTeMS, as borrower, at an interest rate of 5% per annum under a loan agreement dated 26 July 2007 entered into between LottVision and KTeMS and subsequently amended by an amendment agreement dated 20 September 2007 and second amendment agreement dated 28 February 2008
“LV KTeMS Loan Consideration” HK$31,200,000 for the acquisition of the LV KTeMS Loan under the LV Debt Acquisition Agreement II
“LV KTeMS Loan Promissory Note”

the promissory note in the principal amount of HK$31,200,000 to be issued by the Company to LottVision at completion of the LV Debt Acquisition Agreement II for settling the LV KTeMS Loan Consideration

“LV Nam Loan”

the loan in the principal amount of HK$8,160,000 which was provided by LottVision, as lender, to Mr. Nam, as borrower, at an interest rate of 5% per annum under a loan agreement dated 5 April 2007 entered into between LottVision and Mr. Nam and subsequently amended by an amendment agreement dated 28 February 2008

DEFINITIONS

“LV Nam Loan Consideration”
“LV Nam Loan Promissory Note”
“Mr. Nam”
“Nanum Lotto”
“PAL”
“PALTECH”
“PAL Debts Acquisition”
“PAL Debt Acquisition Agreement I”
“PAL Debt Acquisition Agreement II”
“PAL KTeMS Loan”
HK$8,160,000 for the acquisition of the LV Nam Loan under the LV Debt Acquisition Agreement I
the promissory note in the principal amount of HK$8,160,000 to be issued by the Company to LottVision at completion of the LV Debt Acquisition Agreement I for settling the LV Nam Loan Consideration
Mr. Ho Sung NAM, a director and shareholder holding approximately 63.8% equity interest of KTeMS and a director of PALTECH
Nanum Lotto Co., Ltd., a company incorporated in Korea by KTeMS and other consortium members, which are all Independent Third Parties, and 14% of the issued shares of which are beneficially owned by KTeMS
PAL Development Limited, a company incorporated in Hong Kong with limited liability and an indirect non wholly-owned subsidiary of the Company
PALTECH Company Limited, a company incorporated in Hong Kong with limited liability and a non wholly-owned subsidiary of PAL
the acquisition of the PAL Nam Loan and the PAL KTeMS Loan under the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II and the transactions contemplated thereunder

the debt acquisition agreement dated 28 February 2008 entered into between the Purchaser and PAL for the sale and purchase of the PAL Nam Loan

the debt acquisition agreement dated 28 February 2008 entered into between the Purchaser and PAL for the sale and purchase of the PAL KTeMS Loan

the loan in the principal amount of HK$31,960,000 which was provided by PAL, as lender, to KTeMS, as borrower, at an interest rate of 5% per annum under a loan agreement dated 26 July 2007 entered into between PAL and KTeMS and subsequently amended by an amendment agreement dated 20 September 2007 and second amendment agreement dated 28 February 2008

DEFINITIONS

“PAL KTeMS Loan Consideration”
HK$31,960,000 for the acquisition of the PAL KTeMS Loan under the PAL Debt Acquisition Agreement II
“PAL Nam Loan”
the loan in the principal amount of HK$7,400,000 which was provided by PAL, as lender, to Mr. Nam, as borrower, at an interest rate of 5% per annum under a loan agreement dated 21 March 2007 entered into between LottVision and Mr. Nam and subsequently amended by an amendment agreement dated 28 February 2008
“PAL Nam Loan Consideration”
HK$7,400,000 for the acquisition of the PAL Nam Loan under the PAL Debt Acquisition Agreement I
“PRC”
the People’s Republic of China which for the purpose of this circular, shall exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“Promissory Notes” the LV Nam Loan Promissory Note and the LV KTeMS Loan Promissory Note
“Purchaser” Gain Advance Group Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company
“Reorganisation”
the reorganisation of KTeMS, including but not limited to the transfer and/or assign and/or dispose of all existing business and assets (and the related liabilities thereof) of KTeMS other than the 14% equity interests in Nanum Lotto
“Sale and Purchase Agreement” the sale and purchase agreement dated 28 February 2008 entered into between the Purchaser, the Vendors and the Guarantor for the sale and purchase of the Sale Shares
“Sale Consideration”
the consideration of US$12 million (equivalent to approximately HK$93.6 million), payable by the Purchaser to the Vendors under the Sale and Purchase Agreement, to be satisfied as to US$3.5 million (equivalent to approximately HK$27.3 million) in cash, as to US$6.5 million (equivalent to approximately HK$50.7 million) by way of issue and allotment of the Consideration Shares and as to US$2 million (equivalent to approximately HK$15.6 million) by setting off against the entire PAL Nam Loan and the LV Nam Loan
5 -

DEFINITIONS

“Sale Shares”	10,000 shares of KRW5,000 (equivalent to approximately HK$41.3)
	each in the issued share capital of KTeMS, representing the
	entire issued share capital of KTeMS
“SFO”	the Securities and Futures Ordinance (Cap. 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendors”	Mr. Yong Kyu SEO, Mr. Tae Myong OH, Mr. Jin Sun KIM, Mr.
	Ike Sang SOHN, Mr. Young Bok KIM, Mr. Byung Ho PARK,
	Mr. Kyu Myong JOO and Mr. Kyung Jae WOO all of them are
	Independent Third Parties and Mr. Nam
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“KRW”	Korean Won, the lawful currency of Korea
“US$”	United States dollars, the lawful currency of the United States
	of America
“%”	per cent.

For illustration purpose in this circular, the following exchange rates are used unless otherwise indicated:

US$1.00: HK$7.80

HK$1.00: KRW121.00

LETTER FROM THE BOARD

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Melco LottVentures Limited 新濠環彩有限公司

(formerly known as Wafer Systems Limited) (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8198)

Executive Directors:

Mr. Chan Sek Keung, Ringo (Chairman & Chief Executive Officer) Mr. Ko Chun Fung, Henry

Independent non-executive Directors: Mr. David Tsoi 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 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

27 March 2008

To the Shareholders

Dear Sir and Madam,

CONNECTED AND DISCLOSEABLE TRANSACTIONS

IN RELATION TO

(1) DEBTS ACQUISITION;

(2) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF KTEMS CO., LTD.

INTRODUCTION

Reference is made to the Announcement in relation to the Debts Acquisition and the Acquisition of the entire issued share capital of KTeMS. On 28 February 2008, the Purchaser, a wholly-owned subsidiary of the Company, entered into the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II with LottVision; and the PAL Debt Acquisition Agreement I and the PAL

LETTER FROM THE BOARD

Debt Acquisition Agreement II with PAL, an indirect non wholly-owned subsidiary of the Company. Pursuant to the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II, the Purchaser has conditionally agreed to purchase and LottVision has conditionally agreed to assign and transfer the LV Nam Loan and the LV KTeMS Loan. Likewise, pursuant to the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II, the Purchaser has conditionally agreed to purchase and PAL has conditionally agreed to assign and transfer the PAL Nam Loan and the PAL KTeMS Loan.

On the same day, the Purchaser entered into the Sale and Purchase Agreement with the Vendors and the Guarantor, pursuant to which the Purchaser has conditionally agreed to purchase and the Vendors have conditionally agreed to sale the entire issued share capital of KTeMS, for the Sale Consideration of US$12 million (equivalent to approximately HK$93.6 million).

The purpose of this circular is to provide you with, among other things, further details of (i) the Debts Acquisition; (ii) the Acquisition; (iii) information of the Group; and (iv) to give notice of the EGM.

BACKGROUND INFORMATION

In March 2007 and April 2007, PAL and LottVision have respectively provided the PAL Nam Loan in the principal amount of HK$7,400,000 and the LV Nam Loan in the principal amount of HK$8,160,000 to Mr. Nam for his business development in Korea, who is a director of PALTECH, an indirect non wholly-owned subsidiary of the Company. Mr. Nam is also a director and shareholder holding approximately 63.8% equity interest of KTeMS, a substantial shareholder holding 40% equity interest of PALTECH.

Subsequently in July 2007, PAL and LottVision have respectively provided the PAL KTeMS Loan in the principal amount of HK$31,960,000 and the LV KTeMS Loan in the principal amount of HK$31,200,000 to KTeMS, a company owned as to 63.8% by Mr. Nam and the remaining 36.2% by the Vendors (excluding Mr. Nam), for financing part of its capital contribution in the formation of Nanum Lotto with other consortium entities, who are Independent Third Parties, to hold, operate and/or invest in the lottery business within the Asian region, placing particular focus on the Korean market. As at the Latest Practicable Date, Nanum Lotto has been established and it is currently operating national lotto games in Korea under an exclusive lottery license from the Korean government and 14% of the issued shares of Nanum Lotto are beneficially owned by KTeMS. In addition, each of the PAL KTeMS Loan and the LV KTeMS Loan provides the right to its respective loan holder to capitalise the entire principal amount of the PAL KTeMS Loan (or the LV KTeMS Loan as the case may be) and all interests due and accrued thereon, for an allotment and issue of such number of new shares of KTeMS representing 25% of the enlarged issued share capital of KTeMS on a fully diluted basis.

LETTER FROM THE BOARD

(1) THE DEBTS ACQUISITION

On 28 February 2008, the Purchaser, a wholly-owned subsidiary of the Company, entered into the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II with LottVision; and the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II with PAL, an indirect non wholly-owned subsidiary of the Company. Pursuant to the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II, the Purchaser has conditionally agreed to purchase and LottVision has conditionally agreed to assign and transfer the LV Nam Loan and the LV KTeMS Loan. Likewise, pursuant to the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II, the Purchaser has conditionally agreed to purchase and PAL has conditionally agreed to assign and transfer the PAL Nam Loan and the PAL KTeMS Loan.

The salient terms of the Debt Acquisition Agreements are as follows:

	the LV Debt	the LV Debt	the PAL Debt	the PAL Debt
	Acquisition	Acquisition	Acquisition	Acquisition
	Agreement I	Agreement II	Agreement I	Agreement II
Date	28 February 2008	28 February 2008	28 February 2008	28 February 2008
Parties involved	(1) LottVision	(1) LottVision	(1) PAL	(1) PAL
	(2) the Purchaser	(2) the Purchaser	(2) the Purchaser	(2) the Purchaser
Assets to be	the LV Nam Loan in	the LV KTeMS Loan in	the PAL Nam Loan in	the PAL KTeMS Loan in
acquired	the principal amount of	the principal amount of	the principal amount of	the principal amount of
	HK$8,160,000 excluding	HK$31,200,000 excluding	HK$7,400,000 excluding	HK$31,960,000 excluding
	all interests, fees or other	all interests, fees or	all interests, fees or	all interests, fees or other
	amounts which have or	other amounts which	other amounts which	amounts which have or
	to be accrued thereon	have or to be accrued	have or to be accrued thereon	to be accrued thereon
		thereon	thereon
Consideration	the LV Nam Loan	the LV KTeMS	the PAL Nam Loan	the PAL KTeMS
	Consideration of	Loan Consideration	Consideration of	Loan Consideration
	HK$8,160,000	of HK$31,200,000	HK$7,400,000	of HK$31,960,000
Basis of	the principal value	the principal value	the principal value	the principal value
consideration	of the LV Nam Loan	of the LV KTeMS	of the PAL Nam Loan	of the PAL KTeMS
	of HK$8,160,000	Loan of HK$31,200,000	of HK$7,400,000	Loan of HK$31,960,000
Payment terms	the LV Nam Loan	the LV KTeMS Loan	the PAL Nam Loan	the PAL KTeMS Loan
	Consideration shall be	Consideration shall	Consideration is	Consideration is
	settled by the Purchaser	be settled by the	payable on	payable on
	by procuring the	Purchaser by procuring	demand by PAL	demand by PAL
	Company to issue	the Company to issue
	the LV Nam Loan	the LV KTeMS Loan
	Promissory Note to	Promissory Note to
	LottVision at completion	LottVision at completion
	of the LV Debt	of the LV Debt Acquisition
	Acquisition Agreement I	Agreement II
Long stop date	12 July 2008	12 July 2008	30 September 2008	30 September 2008

LETTER FROM THE BOARD

Conditions precedent

Completion of the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II are inter-conditional and subject to and conditional upon satisfaction of, inter alia, the following conditions:

(i) the warranties given by the Purchaser and LottVision under the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II remaining true, accurate and complete in all material respects;
(ii) all necessary consents and approvals required to be obtained on the part of LottVision in respect of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the transactions contemplated thereunder having been obtained by LottVision;
(iii) all necessary consents and approvals required to be obtained on the part of the Purchaser in respect of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the transactions contemplated thereunder having been obtained by the Purchaser; and
(iv) Shareholders approving at the EGM the entering into of the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II and the transactions contemplated thereunder in accordance with the requirements of the GEM Listing Rules.

Completion of the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II are inter-conditional and subject to and conditional upon satisfaction of, inter alia, the following conditions:

(i) the warranties given by the Purchaser and PAL under the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II remaining true, accurate and complete in all material respects;
(ii) all necessary consents and approvals required to be obtained on the part of PAL in respect of the PAL Debt Acquisition Agreement I, the PAL Debt Acquisition Agreement II and the transactions contemplated thereunder having been obtained by PAL;
(iii) all necessary consents and approvals required to be obtained on the part of the Purchaser in respect of the PAL Debt Acquisition Agreement I, the PAL Debt Acquisition Agreement II and the transactions contemplated thereunder having been obtained by the Purchaser; and
(iv) where necessary, the Shareholders approving at the EGM the entering into of the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II and the transactions contemplated thereunder in accordance with the requirements of the GEM Listing Rules.

As at the Latest Practicable Date, none of the conditions precedent under the Debt Acquisition Agreements has been satisfied.

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LETTER FROM THE BOARD

Completion

Completion of the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II shall take place simultaneously on the third Business Day after the satisfaction of all conditions precedent set out in the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II, respectively. Completion of the PAL Debt Acquisition Agreement I and PAL Debt Acquisition Agreement II shall take place simultaneously on the third Business Day after the satisfaction of all conditions precedent set out in the PAL Debt Acquisition Agreement I and the PAL Debt Acquisition Agreement II, respectively.

Principal terms of the Promissory Notes

The principal terms of the Promissory Notes are summarised as follows:

	the LV Nam Loan the LV KTeMS Loan
	Promissory Note Promissory Note
Issuer	the Company the Company
Note holder	LottVision LottVision
Principal amount	HK$8,160,000 HK$31,200,000
Maturity date	15 July 2008 15 July 2008
Interest rate	5% per annum 5% per annum
Redemption	the Company is required to redeem the outstanding principal amount
	of the Promissory Notes including all interests accrued thereon upon
	the maturity date and shall have the right to redeem all or any part of
	the outstanding principal amount of the Promissory Notes together with
	the applicable interests accrued thereon up to the date of redemption,
	at any time after the issue date of the Promissory Notes until the
	day prior to the maturity date, by giving written notice to the note
	holder

Security upon completion of the Acquisition, the Purchaser will provide 5% and 20% interest in KTeMS as security in respect of its obligations under the LV Nam Loan Promissory Note and the LV KTeMS Loan Promissory Note, respectively

11 -

LETTER FROM THE BOARD

Reasons for the Debts Acquisition

The Directors consider that the Debts Acquisition is beneficial to the Group as it allows the Group to obtain the right to capitalise the LV KTeMS Loan for new shares of KTeMS from LottVision to avoid potential dilution of the Group’s interest in KTeMS following completion of the Acquisition (as discussed in the following section headed “The Acquisition”). Furthermore, as PAL is primarily focus in lottery-related business in the PRC, the PAL Debts Acquisition enables the Group to separate the Group’s PRC lottery business and Asian lottery business and their related assets and liabilities.

Based on the above, the Directors consider that the terms of the Debt Acquisition Agreements are on normal commercial terms and that they are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

(2) THE ACQUISITION

The Sale and Purchase Agreement

Date: 28 February 2008 Parties involved : (1) the Purchaser (2) the Vendors (3) the Guarantor

The Vendors consist of Mr. Nam, a connected person (the connected relationship between Mr. Nam and the Company is discussed in the paragraph below headed “Implications of the GEM Listing Rules”) and 8 individuals who are Independent Third Parties.

Assets to be acquired

The Sale Shares, being 10,000 shares of KRW5,000 (equivalent to approximately HK$41.3) each in the issued share capital of KTeMS, representing the entire issued share capital of KTeMS. Upon completion of the Reorganisation, the sole investment of KTeMS will be the 14% equity interest in Nanum Lotto, which only began operations in December 2007.

The Sale Consideration

The Sale Consideration is US$12 million (equivalent to approximately HK$93.6 million) and shall be settled by the Purchaser to the Vendors in the following manner:

(i) the sum of US$0.4 million (equivalent to approximately HK$3.12 million) has been paid to the Designee in cash upon signing of the Sale and Purchase Agreement as the Deposit and also for settling part of the Sale Consideration;
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LETTER FROM THE BOARD

(ii) the sum of US$1.1 million (equivalent to approximately HK$8.58 million), shall be paid in cash to the Designee at completion of the Sale and Purchase Agreement;
(iii) the sum of US$6.5 million (equivalent to approximately HK$50.7 million), shall be paid by the issue and allotment of the 35,700,000 Consideration Shares at completion of the Sale and Purchase Agreement;
(iv) the sum of US$2 million (equivalent to approximately HK$15.6 million), shall be satisfied by setting off against the entire PAL Nam Loan and the LV Nam Loan at completion of the Sale and Purchase Agreement; and
(v) the sum of approximately US$2 million (equivalent to approximately HK$15.6 million), shall be paid in cash to the Designee within 2 months after completion of the Sale and Purchase Agreement.

The Consideration Shares will be issued at the Issue Price of HK$1.42 per Consideration Share pursuant to a specific mandate to be sought at the EGM and the Company had not issued any Shares under the general mandate granted to the Directors at the extraordinary general meeting of the Company held on 16 January 2008 as at the Latest Practicable Date. The 35,700,000 Consideration Shares representing approximately 8.20% of the existing issued share capital of the Company and approximately 7.58% of the issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares. The issue and allotment of the Consideration Shares will not result in a change of control of the Company. The Issue Price of HK$1.42 per Consideration Share is determined after arm’s length negotiation with reference to the recent closing prices of the Shares and the future prospects of the Group’s lottery-related businesses, and represents:

(i) a premium of approximately 59.55% over the closing price of HK$0.89 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a premium of approximately 12.70% over the closing price of HK$1.26 per Share as quoted on the Stock Exchange immediately before the suspension of trading in the Shares at 2:30 p.m. on 29 February 2008 pending the release of the Announcement;
(iii) a premium of approximately 14.52% over the closing price of HK$1.24 per Share as quoted on the Stock Exchange on 28 February 2008, being the last full trading day preceding the suspension of trading in the Shares at 2:30 p.m. on 29 February 2008;
(iv) a premium of approximately 12.70% over the average closing price of approximately HK$1.26 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including 29 February 2008; and
(v) a discount of approximately 11.25% to the average closing price of approximately HK$1.60 per Share as quoted on the Stock Exchange for the 30 consecutive trading days up to and including 29 February 2008.

An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Share.

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Basis of the Sale Consideration

The Sale Consideration was determined after arm’s length negotiation between the Vendors and the Purchaser with reference to the total investment cost in Nanum Lotto by KTeMS of approximately KRW7,000,000,000 (equivalent to approximately HK$58,000,000) and the exclusive lottery license that Nanum Lotto possesses to operate national lotto games in Korea, which have an annual turnover of approximately US$2.5 billion (equivalent to approximately HK$19.5 billion) in 2006.

Lock-up period for the Consideration Shares

One of the Vendors, namely Mr. Nam undertakes and warrants to the Purchaser that he will not offer, lend, sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of, any of his Consideration Shares in the amount of 22,776,600 Consideration Shares for a period of six months commencing on the date of completion of the Acquisition without prior written consent of the Company. The remaining 12,923,400 Consideration Shares are not subject to the lock-up provision.

Conditions precedent

Completion of the Sale and Purchase Agreement is subject to and conditional upon the satisfaction of, inter alia, the following conditions precedent:

(i) the warranties under the Sale and Purchase Agreement remaining true, accurate and complete in all material respects;
(ii) all necessary filings, licenses, authorisations, registrations, permits, consents and approvals required to be obtained on the part of the Vendors and the Guarantor from banks, regulatory and/or governmental authorities in respect of the sale of the Sale Shares and the transactions contemplated under the Sale and Purchase Agreement having been obtained by the Vendors and the Guarantor;
(iii) all necessary filings, licenses, authorisations, registrations, permits, consents and approvals required to be obtained on the part of the Purchaser from banks, regulatory and/or governmental authorities in respect of the purchase of the Sale Shares and the transactions contemplated under the Sale and Purchase Agreement having been obtained by the Purchaser;
(iv) the Debt Acquisition Agreements having become unconditional;
(v) Shareholders approving at the EGM the entering into of the Sale and Purchase Agreement and the transactions contemplated thereunder in accordance with the requirements of the GEM Listing Rules;
(vi) completion of a legal and financial due diligence on KTeMS, which will take a maximum of four months from the date of the Sale and Purchase Agreement, as determined as reasonably satisfactory by the Purchaser;
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(vii) the procurement of a license to conduct paper lottery business in Korea by KTeMS, provided that the Purchaser shall provide KTeMS with any necessary financial support as reasonably requested by KTeMS, including, but not limited to, (i) the financing of deposits as required under any relevant laws and/or by governmental authorities up to the amount of US$3 million (equivalent to approximately HK$23.4 million); and (ii) the financing of general working capital up to the amount of US$0.5 million (equivalent to approximately HK$3.9 million), in connection with the procurement of such license;
(viii) KTeMS shall provide to the Purchaser a business plan on the development of the paper lottery business in Korea in the format mutually agreed by KTeMS and the Purchaser; and
(ix) completion of the Reorganisation by KTeMS at its own costs, to transfer and/or assign and/or dispose of all KTeMS’s existing businesses and assets (and the related liabilities thereof) other than the 14% equity interest in Nanum Lotto.

If the conditions precedent (other than those including condition (i), (vi), (vii), (viii) and (ix) above that may be waived under the Sale and Purchase Agreement at any time by the Purchaser and for the avoidance of doubt, condition (vii) shall be deemed to have been waived by the Purchaser in the event that the Purchaser fails to meet its obligation to provide KTeMS with any necessary financial support as stated in condition (vii)) are not fulfilled by the parties (or waived by the Purchaser, as the case may be) by 5:00 p.m. on the Long Stop Date, 30 September 2008 or such other date as may be agreed by the parties in writing, the Sale and Purchase Agreement shall terminate and neither party shall have any liabilities to the other under the Sale and Purchase Agreement (save for any antecedent breaches under the Sale and Purchase Agreement) and the Vendors shall return the Deposit to the Purchaser without interest.

If the conditions precedent have not been satisfied on or before the Long Stop Date or such other date as may be agreed by the parties in writing as a result of the default of the Vendors or following the fulfillment of the conditions precedent, the Vendors fail to complete the sale and purchase of the Sale Shares, in breach of the terms and conditions under the Sale and Purchase Agreement, the Vendors shall within 3 Business Days return the Deposit to the Purchaser without interest.

If the conditions precedent have not been satisfied on or before the Long Stop Date or such other date as may be agreed by the parties in writing otherwise than as a result of the sole default of the Purchaser or following the fulfillment of the conditions precedent, the Purchaser fail to complete the sale and purchase of the Sale Shares, in breach of the terms and conditions under the Sale and Purchase Agreement, the Vendors shall be entitled to retain the total amount of the Deposit as liquidated damages.

As at the Latest Practicable Date, none of the conditions precedent under the Sale and Purchase Agreement has been satisfied or waived by the Purchaser.

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Completion

Completion of the Sale and Purchase Agreement shall take place on the second Business Day after the satisfaction of all conditions precedent. Upon completion of the Sale and Purchase Agreement, the Purchaser will hold the entire issued capital of KTeMS and KTeMS will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the Company’s account.

Reasons for the Acquisition

The Directors consider that the Acquisition represents a good opportunity for the Group to expand its existing business and tap, via Nanum Lotto, into the Korean lottery business operations and broaden its existing lottery-related businesses without incurring substantial management resources of the Group, and at the same time benefiting from the lottery operation experience of the consortium entities in Nanum Lotto. The Directors also believe that the lottery business operation of Nanum Lotto will provide synergistic benefits with the other lottery-related businesses of the Group, including the assembly of lottery vending terminals and the lottery-related business and ventures in the PRC.

Based on the above, the Directors consider that the terms of the Sale and Purchase Agreement are on normal commercial terms and the Acquisition is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RELATIONSHIPS BETWEEN THE PARTIES INVOLVED IMMEDIATELY BEFORE AND AFTER THE DEBTS ACQUISITION AND THE ACQUISITION

The following diagrams depict the relationships between the Company, the Purchaser, LottVision, PAL, KTeMS, Mr. Nam and the Vendors immediately before and after completion of the Debts Acquisition and the Acquisition:

Immediately before completion of the Debts Acquisition and the Acquisition:

==> picture [426 x 86] intentionally omitted <==

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

LV Nam Loan
the Vendors
the Company LottVision Mr. Nam (excluding Mr. Nam)
100% 80% 20% 63.8% 36.2%
PAL Nam Loan
LV KTeMS Loan
the Purchaser PAL KTeMS
PAL KTeMS Loan
----- End of picture text -----

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Immediately after completion of the Debts Acquisition and the Acquisition:

==> picture [307 x 189] intentionally omitted <==

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

the LV Nam Loan
Promissory Note and the LV
KTeMS Loan Promissory
Note
the Company LottVision
100% 80% 20%
the Purchaser
PAL
100%
KTeMS
----- End of picture text -----

CHANGE IN SHAREHOLDING STRUCTURE

The shareholding structure of the Company as at the Latest Practicable Date and immediately after the issue and allotment of the Consideration Shares to the Vendors upon completion of the Sale and Purchase Agreement (assuming that no further Shares will be issued or repurchased by the Company from the Latest Practicable Date up to and including the Long Stop Date) are as follows:

Shareholders Mr. Chan Sek Keung, Ringo_(Note 1) Power Way Group Limited (“Power Way”)(Note 2)_ Public Shareholders The Vendors Other public Shareholders Total	As at the Latest Practicable Date No. of Shares Approximate% 74,752,000 17.17 72,000,000 16.53 – – 288,726,995 66.30 435,478,995 100	Immediately after the allotment and issue of the Consideration Shares upon completion of the Sale and Purchase Agreement No. of Shares Approximate% 74,752,00 15.86% 72,000,000 15.28 35,700,000 7.58 288,726,995 61.28 471,178,995 100	Immediately after the allotment and issue of the Consideration Shares upon completion of the Sale and Purchase Agreement No. of Shares Approximate% 74,752,00 15.86% 72,000,000 15.28 35,700,000 7.58 288,726,995 61.28 471,178,995 100
			100

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Notes:

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 18,352,000 Shares held by him personally.
Power Way is held as to 54.79% by Melco LottVentures Holdings Limited (“MLV”), 26.95% by Firich Enterprises Co., Ltd. (“Firich”) and 18.26% by LottVision.
As at the Latest Practicable Date, Power Way holds convertible bonds in the principal amount of HK$606,800,000 carrying the rights to subscribe for Shares at an initial conversion price of HK$0.85 per Share which was issued by the Company to Power Way on 13 December 2007 pursuant to the terms of the agreement (the “Agreement”) dated 8 October 2007 entered into between Power Way, Rising Move International Limited, Melco International Development Limited, LottVision, Firich and the Company. If Power Way exercises the conversion rights attaching to the said convertible bonds in full at the initial conversion price, a total of 713,882,352 Shares will be issued to Power Way. However, no conversion of the convertible bonds shall be made, if immediately upon such conversion, (1) Power Way and its parties acting in concert (as defined under the Hong Kong Code on Takeovers and Mergers (the “Code”) with it will be under an obligation to make a general offer under the Code; (2) each of (i) any of the existing Shareholders holding more than 20% or more of the voting rights of the Company as at the date of the Agreement; and (ii) Power Way and its parties acting in concert (as defined under the Code) will hold 20% or more of the voting rights of the Company respectively; or (3) the public float of the Shares falls below 25% (or any given percentage as required by the GEM Listing Rules) of the issued Shares.
As at the Latest Practicable Date, the Company had 14,302,750 outstanding share options.
To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, neither Power Way nor Mr. Chan Sek Keung, Ringo is a party acting in concert and has other relationship with the Vendors.

IMPLICATIONS OF THE GEM LISTING RULES

LottVision is a substantial shareholder of PAL, which is an indirect non wholly-owned subsidiary of the Company. Accordingly, LottVision is a connected person of the Company within the meanings of the GEM Listing Rules and the LV Debts Acquisition constitutes a connected transaction for the Company under Chapter 20 of the GEM Listing Rules.

Mr. Nam is a director of PALTECH, an indirect non wholly-owned subsidiary of the Company, and he is also a director and shareholder holding approximately 63.8% equity interest of KTeMS, a substantial shareholder holding 40% equity interest of PALTECH. Accordingly, Mr. Nam is a connected person of the Company within the meanings of the GEM Listing Rules and the Acquisition constitutes a connected transaction for the Company under Chapter 20 of the GEM Listing Rules.

The applicable percentage ratios (as defined in the GEM Listing Rules) for each of the LV Debts Acquisition and the Acquisition are more than 2.5%, pursuant to Chapter 20 of the GEM Listing Rules, the LV Debts Acquisition and the Acquisition are subject to the reporting and announcement and independent Shareholders’ approval requirements. Furthermore, as the applicable percentage ratios (as defined in the GEM Listing Rules) for each of the LV Debts Acquisition and the Acquisition are

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more than 5% but less than 25%, accordingly, each of the LV Debts Acquisition and the Acquisition constitute a discloseable transaction under the GEM Listing Rules. As none of the Shareholders has interest in the LV Debts Acquisition or the Acquisition, no Shareholder is required to abstain from voting for the relevant resolution(s) to be proposed at the EGM to approve the LV Debts Acquisition and the Acquisition.

In addition, there are no prior transactions between the Company, the Vendors and LottVision and its ultimate beneficial owners, which would require to be aggregated with the LV Debts Acquisition or the Acquisition under Rules 19.22 and 20.25 of the GEM Listing Rules.

The PAL Debts Acquisition between the Purchaser and PAL is an intra-group transaction where no connected person(s) of the Company is/are entitled to exercise or control the exercise of, 10% or more of the voting power of PAL. Accordingly, the PAL Debts Acquisition is not subject to the reporting and announcement and shareholders’ approval requirements pursuant to Rule 20.31(1) of the GEM Listing Rules.

INFORMATION ON THE GROUP AND THE PURCHASER

The Group is principally engaged in the provision of network infrastructure solutions, including network infrastructure, network management services and network software, in the PRC and Hong Kong. Beside the Group’s network infrastructure business and following the Company’s recently completed acquisition of the entire issued share capital of Power Way Group Limited and 60% of the issued share capital of Oasis Rich International Limited (details of which are discussed in the announcement of the Company dated 18 October 2007), the Group is also engaged in various lotteryrelated businesses and ventures in the PRC and Asian countries, and in the manufacturing of lottery terminals for the China’s sports lottery and the China’s welfare lottery business.

The Purchaser is a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company which is principally engaged in investment holding activities.

INFORMATION ON LOTTVISION

LottVision is a company incorporated in Bermuda with limited liability and is headquartered in Hong Kong and the issued shares of which have been listed on the Singapore Exchange Securities Trading Limited Main Board since December 2002. It is principally engaged in the provision of outsourced security and IT-related services, such as video surveillance and online gaming services, and the manufacture of special purpose devices, such as smart identity card devices.

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INFORMATION ON KTeMS

KTeMS is a company incorporated in Korea with limited liability principally engaged in the development and provision of total business and technology solutions and systems in the lottery-related area for the Korean market. Upon completion of the Reorganisation, the sole investment of KTeMS will be the 14% equity interest in Nanum Lotto which KTeMS invested approximately KRW7,000,000,000 (equivalent to approximately HK$58,000,000). Nanum Lotto is engaged in holding and/or operating and/or investing in the lottery businesses within the Asian region and has only begun its operation of the national lotto games in Korea under an exclusive lottery license from the Korean government in December 2007 and hence, there was no net profits generated by Nanum Lotto for the two financial years ended 31 December 2006.

REQUIREMENTS OF THE GEM LISTING RULES

Pursuant to the GEM Listing Rules, the Independent Board Committee has been set up, comprising the three independent non-executive Directors namely, Mr. David Tsoi, Mr. Pang Hing Chung, Alfred and Mr. So Lie Mo, Raymond, to advise the independent Shareholders as to whether or not the terms of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement 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 by the Company to advise the Independent Board Committee and the independent Shareholders on the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement.

EGM

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 Tuesday, 15 April 2008 at 3:30 p.m. to consider and, if thought fit, to approve, among other things, the LV Debts Acquisition and the Acquisition.

A notice convening the EGM is set out on pages 42 to 43 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 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, Wanchai, 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.

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PROCEDURES FOR DEMANDING A POLL BY THE SHAREHOLDERS

Article 66 of the Articles 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:

by the Chairman of such meeting; or
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
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
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.

FINANCIAL EFFECTS ON ASSETS, LIABILITIES AND EARNINGS

Upon completion of the Debt Acquisition Agreements and the Sale and Purchase Agreement, KTeMS will become an indirect wholly-owned subsidiary of the Company and its accounts will be consolidated with that of the Group. It is expected that both the assets and liabilities of the Group should be increased by approximately HK$66 million and HK$16 million respectively upon the completion of the Debts Acquisition and the Sale and Purchase Agreement. The Acquisition is expected to broaden the revenue base and enhance the earning source of the Group.

RECOMMENDATION

The Directors consider that the terms of the Debt Acquisition Agreements and the Sale and Purchase Agreement are fair and reasonable and the entering into the Debt Acquisition Agreements and the Sale and Purchase Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the independent Shareholders to vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the LV Debts Acquisition and the Acquisition.

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Your attention is drawn to (i) the letter from the Independent Board Committee as set out on pages 23 to 24 of this circular which contains the recommendation of the Independent Board Committee to the independent Shareholders regarding the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement; and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the independent Shareholders as set out on pages 25 to 34 of this circular containing its advice to the Independent Board Committee and the Independent Shareholders in this regard. The Independent Board Committee, having taking into account the advice from the Independent Financial Adviser, considers that the terms of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement 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(s) to be proposed at the EGM to approve the LV Debts Acquisition and the Acquisition.

ADDITIONAL INFORMATION

Please refer to the appendix to this circular for additional information.

Yours faithfully, For and on behalf of the Board of Melco LottVentures Limited Chan Sek Keung, Ringo Chairman and executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [163 x 69] intentionally omitted <==

Melco LottVentures Limited 新濠環彩有限公司

(formerly known as Wafer Systems Limited) (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

27 March 2008

To the independent Shareholders

Dear Sir and Madam,

CONNECTED AND DISCLOSEABLE TRANSACTIONS IN RELATION TO (1) DEBTS ACQUISITION (2) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF KTEMS CO., LTD.

We have been appointed as members of the Independent Board Committee to advise you in respect of terms of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement, details of which are set out in the “Letter from the Board” in the circular dated 27 March 2008, of which this letter forms part. Capitalised terms used in this letter 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 25 to 34 of this circular, which contains its advice and recommendation to us as to whether or not the terms of the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement 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.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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 LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement 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(s) to be proposed at the EGM to approve the LV Debt Acquisition Agreement I, the LV Debt Acquisition Agreement II and the Sale and Purchase Agreement.

Yours faithfully,

For and on behalf of the Independent Board Committee

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

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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:

==> picture [134 x 52] intentionally omitted <==

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

27 March 2008

To the Independent Board Committee and the independent Shareholders of Melco LottVentures Limited

Dear Sirs,

CONNECTED AND DISCLOSEABLE TRANSACTIONS IN RELATION TO

(1) DEBTS ACQUISITION (2) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF KTEMS CO., LTD.

INTRODUCTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee and the independent Shareholders on the LV Debts Acquisition and the Acquisition, details of which are contained in the Letter from the Board (the “Letter from the Board”) set out in the circular (the “Circular”) of the Company to the Shareholders dated 27 March 2008, of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

On 28 February 2008, the Purchaser, a wholly-owned subsidiary of the Company, entered into the LV Debt Acquisition Agreement I and the LV Debt Acquisition Agreement II with LottVision under which the Purchaser has conditionally agreed to purchase and LottVision has conditionally agreed to assign and transfer the LV Nam Loan and the LV KTeMS Loan. On the same date, the Purchaser entered into the Sale and Purchase Agreement with the Vendors and the Guarantor, pursuant to which the Purchaser has conditionally agreed to purchase and the Vendors have conditionally agreed to sell the entire issued share capital of KTeMS.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Company under Chapter 20 of the GEM Listing Rules. Mr. Nam is a director of PALTECH, an indirect non wholly-owned subsidiary of the Company. He is also a director and shareholder holding approximately 63.8% equity interest of KTeMS, a substantial shareholder holding 40% equity interest of PALTECH. Accordingly, Mr. Nam is a connected person of the Company within the meanings of the GEM Listing Rules and the Acquisition constitutes a connected transaction for the Company under Chapter 20 of the GEM Listing Rules.

The LV Debts Acquisition and the Acquisition are subject to the reporting and announcement and independent Shareholders’ approval requirements. As none of the Shareholders has interest in the LV Debts Acquisition or the Acquisition, no Shareholder is required to abstain from voting for the relevant resolution(s) to be proposed at the EGM to approve the LV Debts Acquisition and the Acquisition.

The Independent Board Committee, comprising all the independent non-executive directors, namely Mr. David Tsoi, Mr. Pang Hing Chung, Alfred, and Mr. So Lie Mo, Raymond, has been established to advise the independent Shareholders on the LV Debts Acquisition and the Acquisition.

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 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.

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PRINCIPAL FACTORS TAKEN INTO ACCOUNT

The principal factors and reasons that we have taken into consideration in assessing the LV Debts Acquisition and the Acquisition and the terms thereof and arriving at our opinion are set out as follows:

1. Background and reason for the LV Debts Acquisition and the Acquisition

(a) Business overview of the Group

The Group is principally engaged in the business of network system integration which includes the provision of network infrastructure solutions, network management services and network software, in the PRC and Hong Kong. Beside the Group’s network system integration business and following the Company’s recently completed acquisition of the entire issued share capital of Power Way Group Limited and 60% of the issued share capital of Oasis Rich International Limited (details of which are discussed in the announcement of the Company dated 18 October 2007), the Group is also engaged in various lottery-related businesses and ventures in the PRC and Asian countries, and in the manufacturing of lottery terminals for the China’s sports lottery and the China’s welfare lottery business.

In order to reflect the Group’s principal business focus of lottery-related businesses following completion of the Acquisition, the name of the Company has changed from “Wafer Systems Limited” to “Melco LottVentures Limited”.

In view of that, we understand that the Group is shifting its business focus to lottery-related business.

(b) Background on KTeMS and Nanum Lotto

KTeMS is principally engaged in the development and provision of total business and technology solutions and systems in the lottery-related area for the Korean market. Upon completion of the Reorganisation, the sole investment of KTeMS will be the 14% equity interest in Nanum Lotto which KTeMS invested approximately KRW7,000,000,000 (equivalent to approximately HK$58,000,000). KTeMS also plans to engage in paper lottery business.

Nanum Lotto is engaged in holding and/or operating and/or investing in the lottery businesses within the Asian region and has only begun its operation of the national lotto games in Korea under an exclusive lottery license from the Korean government in December 2007 and hence, there was no net profits generated by Nanum Lotto for the two financial years ended 31 December 2006. The Nanum Lotto consortium constitutes several partners including lottery specialists namely Intralot SA in Greece and Angel Lotto Co., Ltd. in Korea. According to the management of the Company, Intralot SA is a leading supplier of integrated gaming and transaction processing systems, innovative game content and sports betting management, to state-licensed gaming organizations worldwide, while Angel Lotto Co., Ltd. is engaged in consignment selling and operation agency for the Internet charity lottery in Korea.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Nanum Lotto possesses a five years’ exclusive lottery license to operate national lotto games in Korea from December 2007 to December 2012. According to the management of the Company, the annual turnover of lotto games in Korea was approximately US$2,720 million, US$2,473 million and US$2,300 million for the three years ended 31 December 2007. Nanum Lotto, by providing a range of service including fund management, promotion, system construction and management, security, is entitled to a certain percentage of the turnover of the lotto games in accordance with its contract with the Korea government.

We are of the view that the growth of the lottery market of a country is, to a certain extent, correlated to the GDP growth of the country. According to Economic Intelligence Unit, a provider of country, industry and management analysis, South Korea’s GDP is forecasted to have an annual average growth rate of 4.7% in 2008-2012.

(c) Reasons for the LV Debts Acquisition and the Acquisition

The LV Debts Acquisition and the Acquisition can be regarded as an inter-related arrangement for the Group to acquire the entire interest of KTeMS.

The LV Nam Loan in the principal amount of HK$8,160,000 has been provided by LottVision to Mr. Nam for his business development in Korea while the LV KTeMS Loan in the principal amount of HK$31,200,000 has been provided by LottVision to KTeMS for financing part of its capital contribution in the formation of Nanum Lotto. The LV KTeMS Loan provides the right to its holder to capitalize the entire principal amount of the LV KTeMS Loan and all interests due and accrued thereon for an allotment and issue of new shares of KTeMS.

The acquisition of the LV KTeMS Loan is to allow the Group to obtain the right to capitalize the LV KTeMS Loan for new shares of KTeMS from LottVision to avoid dilution of the Group’s interest in KTeMS following completion of the Acquisition. On the other hand, the acquisition of the LV Nam Loan is part of the settlement arrangement of the Sale Consideration of the Acquisition since the sum of US$2 million of the Sale Consideration will be satisfied by setting off against the entire LV Nam Loan, together with the PAL Nam Loan, at completion of the Sale and Purchase Agreement.

Having taken into consideration (i) the Group’s focus on the development of the lottery business; (ii) the exclusive license possessed by Nanum Lotto; (iii) the potential of the Korea lottery market, we consider that the Acquisition is in the interest of the Group and its Shareholders as a whole and in the ordinary and usual course of business

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of the Group. As the LV Debts Acquisition is part of the arrangement to facilitate the Acquisition, we also consider that the LV Debts Acquisition is in the interest of the Group and its Shareholders as a whole and in the ordinary and usual course of business of the Group.

2. Terms of the LV Debts Acquisition

(a) Basis of the consideration

The consideration for the acquisition of the LV Nam Loan and the LV KTeMS Loan is respectively HK$8,160,000 and HK$31,200,000, which equals to the face value of the LV Nam Loan and the LV KTeMS Loan. In view of that, we consider the consideration under the LV Debts Acquisition is fair and reasonable so far as the Company and the Shareholders are concerned and the terms of the LV Debts Acquisition are on normal commercial terms.

(b) Form of payment of the Consideration

The LV Nam Loan Consideration and the LV KTeMS Loan Consideration shall be settled by the Purchaser by procuring the Company to issue the LV Nam Loan Promissory Note and the LV KTeMS Loan Promissory Note respectively to LottVision at completion of the LV Debt Acquisition Agreement I and LV Debt Acquisition Agreement II.

The Promissory Notes have an interest rate of 5% per annum and a maturity date on 15 July 2008. Upon completion of the Acquisition, the Purchaser is required to provide 5% and 20% interest in KTeMS as security in respect of its obligations under the LV Nam Loan Promissory Note and the LV KTeMS Loan Promissory Note respectively.

The 5% interest rate under the Promissory Notes is the same as the interest rate under the original loan agreements of the LV Nam Loan and the LV KTeMS Loan. Moreover, the current interest rates of the bank loans of the Group are in the range of 5.5% to 6.0%. Since the interest rate of the Promissory Notes falls below the existing borrowing cost of the Group, we consider that the terms of the Promissory Notes are fair and reasonable.

3. Terms of the Acquisition

The Sale Consideration is US$12 million (equivalent to approximately HK$93.6 million) and shall be settled by the Purchaser to the Vendors in the following manner:

(i) the sum of US$0.4 million (equivalent to approximately HK$3.12 million) has been paid to the Designee in cash upon signing of the Sale and Purchase Agreement as the Deposit and also for settling part of the Sale Consideration;
(ii) the sum of US$1.1 million (equivalent to approximately HK$8.58 million), shall be paid in cash to the Designee at completion of the Sale and Purchase Agreement;
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) the sum of US$6.5 million (equivalent to approximately HK$50.7 million), shall be paid by the issue and allotment of the 35,700,000 Consideration Shares at completion of the Sale and Purchase Agreement;
(iv) the sum of US$2 million (equivalent to approximately HK$15.6 million), shall be satisfied by setting off against the entire PAL Nam Loan and the LV Nam Loan at completion of the Sale and Purchase Agreement; and
(v) the sum of approximately US$2 million (equivalent to approximately HK$15.6 million), shall be paid in cash to the Designee within 2 months after completion of the Sale and Purchase Agreement.

Since upon completion of the Reorganisation, all existing business and assets of KTeMS other than its 14% equity interests in Nanum Lotto will be transferred and/or assigned and/or disposed, the historical financial information of KTeMS cannot be used to assess the fairness and reasonableness of the Sale Consideration.

To our best knowledge, there are no listed companies in Hong Kong engaged in the operating of lottery games. In order to assess the fairness and reasonableness of the Sale Consideration, we have searched from the internet and identified the following listed companies (the “Lottery Companies”) which are engaged in the operating of lottery games, which are all the listed lottery game operators we can find by our best effort. Although they are of a bigger size in terms of revenue generated compared with Nanum Lotto, we are of the view that the Lottery Companies are still good reference for comparison having considered the limited number of listed lottery game operators we can find.

	Stock Exchange on
	which the shares of the	P/R ratio (note)
Company name	company are listed	(times)
Lottomatica S.p.A.	ltalian Stock Exchange	2.2
OPAP S.A.	Athens Stock Exchange	1.5
Intralot S.A.	Athens Stock Exchange	2.5
Scientific Games Corp.	NASDAQ	2.1
William Hill Plc	London Stock Exchange	1.5
Aristocrat Leisure Ltd.	Australian Stock Exchange	4.4
International Game Technology	New York Stock Exchange	5.6
Average		2.8

Average

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Note: P/R ratio is calculated based on (i) market price of the Lottery Companies as at 28 February 2008, the date of the Sale and Purchase Agreement; and (ii) revenue of the Lottery Companies extracted from the latest whole-year result of the Lottery Companies published on the website of the relevant companies.

Based on (i) the percentage of income sharing agreed between Nanum Lotto and the Korea Government (which is confidential information as agreed between the parties); (ii) the estimated turnover for lotto game in Korea of US$2,300 million in 2007 and (iii) the Sale Consideration for the Sale Shares of US$12 million, which represents consideration for the acquisition of 14% equity interest in Nanum Lotto, the P/R ratio calculated is within the market range and lower than the market average.

Moreover, we noticed from the Sale and Purchase Agreement that each of the Vendors severally undertake and warrant to the Purchaser that they shall procure a commercially reputable accounting firm in Korea to prepare an appraisal report, showing that the aggregate evaluation of the Sale Shares is not less than US$12 million. This can provide a safeguard to the Company that the Sale Consideration will not be higher than the fair value of the Sale Shares.

In view of the above analysis, we are of the view that the Sale Consideration is fair and reasonable so far as the independent Shareholders are concerned and the terms of Acquisition are on normal commercial terms.

(c) The Consideration Shares

According to the terms of the Sale and Purchase Agreement, part of the Sale Consideration will be satisfied by the issue of 35,700,000 new Shares at the Issue Price of HK$1.42 per Consideration Shares.

The Issue Price of HK$1.42 per Consideration Share is determined after arm’s length negotiation with reference to the recent closing prices of the Shares and the future prospects of the Group’s lottery-related businesses, and represents:

(i) a premium of approximately 12.70% over the closing price of HK$1.26 per Share as quoted on the Stock Exchange immediately before the suspension of trading in the Shares at 2:30 p.m. on 29 February 2008 pending the release of the Announcement;
(ii) a premium of approximately 14.52% over the closing price of HK$1.24 per Share as quoted on the Stock Exchange on 28 February 2008, being the last full trading date preceding the suspension of trading in the Shares at 2:30 p.m. on 29 February 2008;
(iii) a premium of approximately 12.70% over the average closing price of approximately HK$1.26 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including 29 February 2008; and
(iv) a premium of approximately 491.7% over the unaudited consolidated net assets of the Company of approximately HK$0.24 per Share as at 30 June 2007.
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the Issue Price represent a premium of the prevailing market price of the Shares and the net asset value per Shares as at 30 June 2007, we consider the Issue Price is fair and reasonable and is the in interest of the Company and the Shareholders as a whole.

4. Effect on the shareholding structure

As at the Latest Practicable Date, 435,478,995 Shares were in issue. The 35,700,000 Consideration Shares representing approximately 8.20% of the existing issued share capital of the Company and approximately 7.58% of the issued share capital of the Company as enlarged by the issue and allotment of the Consideration Shares.

The following table illustrates the Company’s shareholding structure, assuming there is no further change to the share capital of the Company: (i) as at the Latest Practicable Date; and (ii) immediately upon issue and allotment of the Consideration Shares:

			Upon allotment and	Upon allotment and
	As at the Latest		issuance of the
	Practicable Date		Consideration	Shares
		approxi-		approxi-
	Shares	mate %	Shares	mate %
Mr. Chan Sek Keung, Ringo	74,752,000	17.17	74,752,000	15.86
Power Way Group Limited	72,000,000	16.53	72,000,000	15.28
The Vendors	–	–	35,700,000	7.58
Existing public Shareholders	288,726,995	66.30	288,726,995	61.28
Total	435,478,995	100.00	471,178,995	100.00

As illustrated above, the shareholding interests of the existing public Shareholders will be reduced from approximately 66.30% to approximately 61.28% immediately after the issue of the Consideration Shares. Taking into account (i) the reasons for and benefits of the Acquisition as referred to above; (ii) the terms of the Sale and Purchase Agreement are fair and reasonable as discussed above and (iii) the issue of the Consideration Shares will strengthen the capital base of the Company, we consider that the aforementioned dilution effect is acceptable.

Moreover, one of the Vendors, namely Mr. Nam, undertakes and warrants to the Purchaser that he will not offer, lend, sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of, any of his Consideration Shares in the amount of 22,776,600 Consideration Shares for a period of six months commencing on the date of completion of the Acquisition without prior written consent of the Company. This term is in the interest of the existing Shareholders as it will reduce the number of the Consideration Shares available for sale by the Vendors immediately upon the issue and allotment of the Consideration Shares if they intend to do so and accordingly lower the immediate selling force of the Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Financial effects of the LV Debts Acquisition and the Acquisition on the Group

Earnings

For the year ended 31 December 2006, the Group recorded turnover and net profit attributable to equity holders of the Company of approximately HK$326.6 million and HK$5.1 million respectively. The LV Debts Acquisition has no material effect on the turnover and profit of the Group. Upon completion of the Acquisition, KTeMS will become an indirect wholly-owned subsidiary of the Company. Taking into consideration the expected positive future business prospect of the lottery business in Korea, the Acquisition would likely to have a positive impact on the future earnings and profits of the Group by way of enjoying the dividend income from KTeMS’s 14% equity interest in Nanum Lotto.

Gearing and cash position

Based on the interim report of the Company for the six months ended 30 June 2007, the Group’s gearing position (as calculated as total borrowings divided by total assets) was approximately 35.2% as at 30 June 2007 and the unaudited cash and cash equivalents of the Group was approximately HK$33.5 million as at 30 June 2007. The cash position has not taken into account the subscription of the Shares as announced by the Company on 31 October 2007 with a net proceeds of approximately HK$104.1 million. As the LV Debts Acquisition will be settled by the issuance of the Promissory Notes, which have a short term maturity (maturity date being 15 July 2007), the cash position of the Group would ultimately decrease upon the repayment of the Promissory Notes while the Group’s gearing would not be affected.

On the other hand, the Acquisition will be settled partly by cash, the cash (approximately HK$27.3 million) position of the Group would be reduced while the Group’s gearing would not be materially affected.

As a whole, the cash position of the Group would be reduced while the gearing of the Group would not be affected after the LV Debs Acquisition and the Acquisition. Having taken into account the existing cash position of the Group as strengthened by the subscription mentioned above, we are of the view that the cashflow of the Group would not be materially affected as a result of the LV Debts Acquisition and the Acquisition.

Net asset value

The unaudited net asset value of the Group was approximately HK$70.0 million as at 30 June 2007. The LV Debts Acquisition would not have material effect on the net asset value of the Group. On the other hand, since the Acquisition will be settled partly by the issue of the Consideration Shares, the net asset value of the Group would be enhanced.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having taken into account the principal factors and reasons referred to the above, we are of the opinion that the terms of the LV Debts Acquisition and the Acquisition are fair and reasonable so far as the independent Shareholders are concerned and on normal commercial terms and the LV Debts Acquisition and the Acquisition are in the interest of the Company and the Shareholders as a whole and in the ordinary and usual course of business of the Group. 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 resolutions to be proposed at the EGM to approve LV Debts Acquisition and the Acquisition.

Yours faithfully, For and on behalf of Ample Capital Limited H. W. Tang President

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, 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 Company. The Directors, having made all reasonable enquiries, confirm 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 matters 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.

2. SHARE CAPITAL

Authorised Ordinary shares of HK$0.01 each – As at Latest Practicable Date Issued and fully paid – As at the Latest Practicable Date – Consideration Shares to be issued – Upon completion of the Sale and Purchase Agreement	Number of shares ’000 2,000,000 435,479 35,700 471,179	Nominal value HK$’000 20,000 4,355 357
		4,712

3. DISCLOSURE OF INTERESTS

(i) Directors’ Interests

Long positions in the Shares

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executives of the Company in the Shares, underlying Shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which were required, (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of

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GENERAL INFORMATION

APPENDIX

the SFO, to be entered in the register referred to therein; or (c) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange, were as follows:

		Number and class	Approximate
Name	Capacity	of securities	percentage of interest
Chan Sek Keung,	Beneficial Owner	18,352,000 Shares	4.21%
Ringo_(Note 1)_	Interest through a	56,400,000 Shares	12.95%
	controlled corporation
Pang Hing Chung, Alfred	Beneficial Owner	1,500,000 Shares	0.34%
David Tsoi	Beneficial Owner	413,500 Shares	0.09%

Note:

Mr. Chan Sek Keung, Ringo, Chairman, Chief Executive Officer and Executive Director, 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 18,352,000 Shares held by him personally.

Share options

			No. of		Percentage
			underlying		of the issued
			Shares (in		share capital
Name of	Date of	respect of share		Subscription	Exercise	of the
Director	grant	options) held		price	Period	Company
				(HK$)
Chan Sek	30.04.2002		3,000,000	0.550	17.11.2002 to	0.69%
Keung, Ringo					29.04.2012
	20.02.2003		1,200,000	0.138	20.02.2004 to	0.28%
					19.02.2013
Pang Hing Chung,	07.12.2007		200,000	2.720	07.06.2008 to	0.05%
Alfred					06.12.2009
David Tsoi	12.01.2007		562,500	0.088	12.01.2008 to	0.13%
					11.01.2017
	07.12.2007		200,000	2.720	07.06.2008 to	0.05%
					06.12.2009
So Lei Mo, Raymond	07.12.2007		750,000	2.720	07.06.2008 to	0.17%
					06.12.2009

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company had or deemed to have any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required, (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO);

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GENERAL INFORMATION

APPENDIX

or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, none of the Directors (i) 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 December 2006, the date to which the latest published audited financial statements of the Group were made up; and (ii) was materially interested in any contract and arrangement entered into by any member of the Group subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

(ii) Substantial Shareholders’ Interests

So far as is known to any Directors or chief executives of the Company, as at the Latest Practicable Date, the following person (not being a Director or chief executive of the Company) had, or was deemed to have, interest or short position in the Shares 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, or, who 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 member of the Group:

Long positions in the Shares

			Number of	Approximate
		Number of	underlying	percentage
		Share	Shares	of
Name	Capacity	interested	interested	interest
Power Way Group	Beneficial Owner	72,000,000	713,882,352	180.46%
Limited			(Note 5)
(“Power Way”)
Melco LottVentures	Interest through a	72,000,000	713,882,352	180.46%
Holdings Limited	controlled corporation	(Note 1)	(Note 5)
(“Melco LottVentures”)
Melco Leisure and	Interest through	72,000,000	713,882,352	180.46%
Entertainment Group	controlled corporations	(Note 2)	(Note 5)
Limited (“Melco Leisure”)
Melco International	Interest through	72,000,000	713,882,352	180.46%
Development	controlled corporations	(Note 3)	(Note 5)
Limited (“Melco”)
Mr. Ho, Lawrence	Interest through	72,000,000	713,882,352	180.46%
Yau Lung (“Mr. Ho”)	controlled corporations	(Note 4)	(Note 5)
Mr. Ng Lai Yick_(Note 6)_	Beneficial Owner	3,134,744	–	0.72%
	Interest through a	36,900,000		8.47%
	controlled corporation
North 22 Nominees	Beneficial Owner	36,900,000	–	8.47%
Limited_(Note 6)_
Enso Capital Management	Interest through	39,164,000	–	8.99%
LLC (“Enso”)(Note 7)	controlled corporation
Enso Global Equities	Beneficial Owner	23,603,110	–	5.42%
Master Partnership
LP_(Note 7)_
Legg Mason Inc	Interest through Controlled	30,000,000	–	6.89%
	Corporations

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GENERAL INFORMATION

APPENDIX

Notes:

Melco LottVentures is deemed to be interested in the 72,000,000 Shares by virtue of its controlling interests in Power Way.
Melco Leisure is deemed to be interested in the 72,000,000 Shares by virtue of its controlling interests in its wholly-owned subsidiary, Melco LottVentures.
Melco is deemed to be interested in the 72,000,000 Shares by virtue of its controlling interests in its wholly-owned subsidiary, Melco Leisure.
Mr. Ho is deemed to be interested in the 72,000,000 Shares by virtue of his controlling interests in Melco, which are held by him personally and his controlled corporations.
Convertible bonds in the principal amount of HK$606,800,000 carrying the rights to subscribe for Shares at an initial conversion price of HK$0.85 per Share was issued by the Company to Power Way on 13 December 2007 to satisfy part of the consideration of the acquisition of the entire share capital of Previous Success Holdings Limited and 60% of Oasis Rich International Ltd. which was completed in December 2007. If Power Way exercises the conversion rights attaching to the said convertible bonds in full at the initial conversation price, a total of 713,882,352 Shares will be issued to Power Way. However, no conversion of the convertible bonds shall be made, if immediately upon such conversion, (1) Power Way and its parties acting in concert (as defined under the Hong Kong Code on Takeovers and Mergers (the “Code”) with it will be under an obligation to make a general offer under the Code; (2) each of (i) any of the existing Shareholders holding more than 20% or more of the voting rights of the Company as at the date of the Agreement; and (ii) Power Way and its parties acting in concert (as defined under the Code) will hold 20% or more of the voting rights of the Company respectively; or (3) the public float of the Shares falls below 25% (or any given percentage as required by the GEM Listing Rules) of the issued Shares.
Mr. Ng Lai Yick is deemed, by virtue of the SFO, to be interested in the 36,900,000 Shares held by North 22 Nominees Limited, a company wholly-owned by him, in addition to the 3,134,744 Shares held by him personally.
Enso is deemed, by virtue of the SFO, to be interested in the 39,164,000 Shares which include the 23,603,110 Shares held by Enso Global Equities Master Partnership LP, which is a discretionary fund controlled by Enso.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executives of the Company were not aware of any other person (other than the Directors and the chief executives of the Company) who had, or was deemed to have, interest or short position in the Shares or underlying Shares 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, or who 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 member of the Group.

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GENERAL INFORMATION

APPENDIX

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in a business which competes with or may compete with the business of the Group.

5. LITIGATION

As at the Latest Practicable Date, so far as is known to the Directors, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

6. MATERIAL CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2006, the date to which the latest published audited financial statements of he Group were made up.

7. SERVICE CONTRACTS

The Company entered into a service contract with Mr. Chan Sek Keung, Ringo as executive Director, for a term of three years from 1 January 2006, subject to retirement by rotation as required in accordance with the Articles.

Mr. Pang Hing Chung, Alfred and Mr. David Tsoi, independent non-executive Directors, were appointed for a term of two years from 1 April 2004, subject to retirement by rotation as required in accordance with the Articles. Their appointment terms were renewed for a further term of two years from 1 April 2006 under the same level of remunerations.

Mr. So Lie Mo, Raymond was appointed independent non-executive Director with effect from 5 September 2007 for a term of two years and subject to retirement by rotation as required in accordance with the Articles.

Save as disclosed, as at the Latest Practicable Date, none of the Directors had any existing service contract or proposed service contract with the Company or any of its subsidiaries or associated companies in force, which was entered into or amended within 6 months prior to the Latest Practicable Date, or is continuous with a notice period of 12 months or more, or which is a fixed term contract with more than 12 months to run irrespective of the notice period (excluding contracts expiring or determinable by the employer within one year without payment of compensation, other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

8. EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given opinion or advice which is contained in this circular:

Name

Qualification

Ample Capital

a licensed corporation to carry out types 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities under the SFO

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

As at the Latest Practicable Date, Ample Capital did not have 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 December 2006, the date to which the latest published audited financial statements of the Group were made up.

Ample Capital has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of its letter and references to its name in the form and context in which they respectively appears.

9. AUDIT COMMITTEE

The Company established the audit committee with terms and references in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. The primary duties of the audit committee are to review the financial reports and the internal control system of the Company. The audit committee of the Company consists of three independent non-executive directors, namely, Mr. David Tsoi, Mr. Pang Hing Chung, Alfred and Mr. So Lie Mo, Raymond, their particulars are as follows:

Mr. David Tsoi, aged 60, is the chairman of the audit committee of the Company. A Certified Public Accountant by profession Mr. Tsoi currently practises as Director of Alliott, Tsoi CPA Limited. Mr. Tsoi holds a Master’s degree in Business Administration from the University of East Asia, Macau. He is a Fellow Member of the Chartered Association of Certified Accountants, the 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.

Mr. Pang Hing Chung, Alfred, aged 46, is a member of the audit committee of the Company. Mr. Pang is a Managing Director and Vice Chairman of the Investment Banking Division of BOC International. Mr. Pang holds an MBA degree from the Stanford Graduate School of Business and also a Bachelor of Arts degree in Economics from Cornell University.

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GENERAL INFORMATION

APPENDIX

Mr. So Lie Mo, Raymond, aged 59, is a member of the audit committee of the Company. He is also a director of Spectrum Asia Pacific Limited, being a private limited company incorporated in the Cayman Islands which principally provides consulting services in business strategy, alliance and merger and acquisition. Mr. So holds a bachelor degree in business administration from The Chinese University of Hong Kong.

10. MISCELLANEOUS

(a) The registered office of the Company is at 4th Floor, Scotia Centre, P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands, British West Indies.
(b) The head office and principal place of business of the Company in Hong Kong is at Units 901-907, 9th Floor, Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong.
(c) The secretary of the Company is Mr. Pang Kin Man, Edmond, a fellow of each of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators. The qualified accountant of the Company is Mr. Lau Kwok Wing, an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants.
(d) The compliance officer of the Company is Mr. Chan Sek Keung, Ringo.
(e) The principal share registrar of the Company in the Cayman Islands is Butterfield Fund Services (Cayman) Limited at Butterfield House, 68 Fort Street, P.O. Box 705, George Town, Grand Cayman, Cayman Islands. The branch share registrar of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at 1806-7, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(f) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection at the office of the Company at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong during normal business hours during normal business hours i.e. 9:30 a.m. to 6:00 p.m., on any weekday other than public holiday, from the date of this circular up to and including the date of EGM:

(a) the Debts Acquisition Agreements;
(b) the Sale and Purchase Agreement; and
(c) each of the service contracts of the Directors as referred to in the paragraph headed “Service Contracts” in the appendix to this circular.
41 -

NOTICE OF EGM

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Melco LottVentures Limited 新濠環彩有限公司 (formerly known as Wafer Systems Limited)

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

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Melco LottVentures Limited (the “ Company ”) will be held at Units 901-7, 9/F., Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong on Tuesday, 15 April 2008 at 3:30 p.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT :
(a) the first debt acquisition agreement (the “ Debt Acquisition Agreement I ”) and the second debt acquisition agreement (the “ Debt Acquisition Agreement II ”), together with the Debt Acquisition Agreement I is referred herein as the “ Debt Acquisition Agreements ”) both dated 28 February 2008 entered into between Gain Advance Group Limited (“ Gain Advance ”), a wholly-owned subsidiary of the Company, and LottVision Limited (“ LottVision ”) for the sale and purchase of the loan in the principal amount of HK$8,160,000 provided by LottVision to Mr. Ho Sung NAM (“ Mr. Nam ”) and the loan in the principal amount of HK$31,200,000 which was provided by LottVision to KTeMS Co., Ltd. at an aggregate consideration of HK$39,360,000 (the “ Debts Consideration ”), copy of the Debt Acquisition Agreement I and the Debt Acquisition Agreement II have been produced to the EGM marked “A” and “B”, respectively, and signed by the chairman of the EGM for the purpose of identification, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the issue of the promissory notes in the principal amount of HK$39,360,000 (the “ Promissory Notes ”) by the Company to LottVision to satisfy the Debts Consideration pursuant to the terms of the Debt Acquisition Agreements be and are hereby approved; and
42 -

NOTICE OF EGM

(c) the directors of the Company (the “ Directors ”) be and are hereby authorised to execute all such documents and do all such acts and things as they consider desirable, necessary or expedient in connection with and to give effect to the LV Debt Acquisition Agreement I and LV Debt Acquisition Agreement II Agreement and the transactions contemplated thereunder including but not limited to the issue of the Promissory Notes.”
“ THAT :
(a) the sale and purchase agreement (the “ Sale and Purchase Agreement ”) dated 28 February 2008 entered into between Gain Advance, Mr. Yong Kyu SEO, Mr. Tae Myong OH, Mr. Jin Sun KIM, Mr. Ike Sang SOHN, Mr. Young Bok KIM, Mr. Byung Ho PARK, Mr. Kyu Myong JOO, Mr. Kyung Jae WOO and Mr. Nam (the “ Vendors ”) and Mr. Nam as the Vendors’ guarantor in relation to the sale and purchase (the “ Acquisition ”) of the entire issued share capital of KTeMS at a total consideration of US$12,000,000 (the “ Sale Consideration ”), a copy of which has been produced to the EGM marked “C” and signed by the chairman of the EGM for the purpose of identification, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the allotment and issue of 35,700,000 new shares of the Company (the “ Consideration Shares ”) of HK$0.01 each in the share capital of the Company at the issue price of HK$1.42 per Consideration Share to the Vendors or its nominee(s) credited as fully paid to satisfy part of the Sale Consideration be and are hereby approved; and
(c) the Directors be and are hereby (i) authorised to execute all such documents and do all such acts and things as they consider desirable, necessary or expedient in connection with and to give effect to the Sale and Purchase Agreement and the transactions contemplated thereunder including but not limited to the allotment and issue of the Consideration Shares and (ii) granted the unconditional specific mandate to exercise the powers of the Company to allot, issue and deal with the Consideration Shares.”

By order of the Board of Melco LottVentures Limited Pang Kin Man, Edmond Company Secretary

Hong Kong, 27 March 2008

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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 Rooms 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.
44 -

AI assistant

Crypto Flow Technology Limited — Proxy Solicitation & Information Statement 2008

51323_rns_2008-03-26_532fbdd5-cec7-430d-a29a-27f936d6e2ae.pdf

Melco LottVentures Limited 新濠環彩有限公司

CONNECTED AND DisCLOsEABLE TRANsACTiONs iN RELATiON TO (1) DEBTs ACQUisiTiON; (2) ACQUisiTiON OF THE ENTiRE issUED sHARE CAPiTAL OF KTEMs CO., LTD.

Financial adviser to the Company

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

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Melco LottVentures Limited 新濠環彩有限公司

CONNECTED AND DISCLOSEABLE TRANSACTIONS

IN RELATION TO

(1) DEBTS ACQUISITION;

(2) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF KTEMS CO., LTD.

INTRODUCTION

LETTER FROM THE BOARD

BACKGROUND INFORMATION

(1) THE DEBTS ACQUISITION

Conditions precedent

Completion

Principal terms of the Promissory Notes

Reasons for the Debts Acquisition

(2) THE ACQUISITION

The Sale and Purchase Agreement

Assets to be acquired

The Sale Consideration

Basis of the Sale Consideration

Lock-up period for the Consideration Shares

Conditions precedent

LETTER FROM THE BOARD

Completion

Reasons for the Acquisition

RELATIONSHIPS BETWEEN THE PARTIES INVOLVED IMMEDIATELY BEFORE AND AFTER THE DEBTS ACQUISITION AND THE ACQUISITION

CHANGE IN SHAREHOLDING STRUCTURE

IMPLICATIONS OF THE GEM LISTING RULES

INFORMATION ON THE GROUP AND THE PURCHASER

INFORMATION ON LOTTVISION

INFORMATION ON KTeMS

REQUIREMENTS OF THE GEM LISTING RULES

EGM

PROCEDURES FOR DEMANDING A POLL BY THE SHAREHOLDERS

FINANCIAL EFFECTS ON ASSETS, LIABILITIES AND EARNINGS

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Melco LottVentures Limited 新濠環彩有限公司

CONNECTED AND DISCLOSEABLE TRANSACTIONS IN RELATION TO (1) DEBTS ACQUISITION (2) ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF KTEMS CO., LTD.

Yours faithfully,

CONNECTED AND DISCLOSEABLE TRANSACTIONS IN RELATION TO

INTRODUCTION

BASIS OF OUR ADVICE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

1. Background and reason for the LV Debts Acquisition and the Acquisition

(a) Business overview of the Group

(c) Reasons for the LV Debts Acquisition and the Acquisition

2. Terms of the LV Debts Acquisition

(a) Basis of the consideration

3. Terms of the Acquisition

(c) The Consideration Shares

4. Effect on the shareholding structure

5. Financial effects of the LV Debts Acquisition and the Acquisition on the Group

Earnings

Gearing and cash position

Net asset value

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL

3. DISCLOSURE OF INTERESTS

(i) Directors’ Interests

Long positions in the Shares

APPENDIX

Share options

(ii) Substantial Shareholders’ Interests

Long positions in the Shares

4. COMPETING INTERESTS

5. LITIGATION

6. MATERIAL CHANGES

Crypto Flow Technology Limited Proxy Solicitation & Information Statement 2008