Crypto Flow Technology Limited - Proxy Solicitation & Information Statement 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in MelcoLot Limited (the “ Company ”), you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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MelcoLot Limited

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

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the board of directors of the Company is set out on pages 4 to 10 of this circular. A letter of advice from the independent board committee is set out on page 11 of this circular. A letter of advice of Nuada Limited, the independent financial adviser, containing its opinion and advice to the independent board committee and independent shareholders is set out on pages 12 to 18 of this circular.

A notice convening the extraordinary general meeting of the Company (the “ EGM ”) to be held at Units 31012A, 31st Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong on Thursday, 6 January 2011 at 11:30 a.m. is set out on pages 25 to 27 of this circular. A form of proxy for use at the EGM is also enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

This circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for a minimum period of 7 days from the date of its publication and on the Company’s website at www.melcolot.com.

17 December 2010

CHARACTERISTICS OF GEM

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

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

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Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Letter from Nuada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

DEFINITIONS

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

“2008 Purchase Agreement” the purchase agreement dated 9 January 2008 and entered into between Wu Sheng and Firich in relation to the purchase of certain materials/unfinished parts including but not limited to computer peripherals such as scanners and keyboards for the manufacture of POS and lottery vending terminals by Wu Sheng from Firich Group

“2008 Supply Agreement” the supply agreement dated 9 January 2008 and entered into between Wu Sheng and Firich in relation to the sales and delivery of POS and lottery vending terminals and accessory products including but not limited to POS peripherals such as printer and vacuum fluorescent display (VFD) unit by Wu Sheng to the Firich Group “associate(s)” has the meaning ascribed to it under the GEM Listing Rules “Board” the board of Directors “Company” MelcoLot Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM “connected person(s)” has the meaning ascribed to it under the GEM Listing Rules “Continuing Connected the entering into of the Supply Agreement and the Purchase Transactions” Agreement and the transactions contemplated thereunder “Director(s)” director(s) of the Company “EGM” an extraordinary general meeting proposed to be convened by the Company for the purpose of approving the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps “Firich” Firich Enterprises Co., Ltd., a company incorporated in Taiwan and the issued shares of which are listed on the Taiwan Gre Tai Securities Market, and together with its subsidiaries from time to time is referred to in this circular as the “Firich Group” “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

DEFINITIONS

“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 Supply Agreement and the Purchase Agreement, and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps
“Independent Third Party(ies)” any person or company and its ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are third parties independent of the Company and its connected persons
“Latest Practicable Date” 15 December 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Nuada” Nuada Limited, a corporation licensed to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee and the independent Shareholders in relation to the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps
“POS” an acronym for point of sales “PRC” The People’s Republic of China, which, for the purposes of this circular, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan
“Purchase Agreement” the Purchase Agreement entered into between Wu Sheng and Firich dated 26 November 2010 in relation to the purchase of certain materials/unfinished parts including but not limited to computer peripherals from the Firich Group
“Purchase Caps” the maximum annual amount to be paid by the Group to the Firich Group for each of the three years ending 31 December 2013 in relation to the purchase of certain materials/unfinished parts from the Firich Group by the Group
“Sales Caps” the maximum annual amount to be paid by the Firich Group to the Group for each of the three years ending 31 December 2013 in relation to the sell and deliver of POS and lottery vending terminals and accessory products to the Firich Group by the Group

DEFINITIONS

“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholder(s)”	holder(s) of the issued Share(s)
“Shares”	ordinary shares of HK$0.01 each in the issued share capital of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supply Agreement”	the Supply Agreement entered into between Wu Sheng and Firich
	dated 26 November 2010 in relation to the sell and deliver of POS
	and lottery vending terminals and accessory products to the Firich
	Group
“Wu Sheng”	Wu Sheng Computer Technology (Shanghai) Co., Ltd伍盛計
	算機科技（上海）有限公司, a wholly-owned foreign enterprise
	established in Shanghai, the PRC by Oasis Rich International Ltd.,
	an indirect non wholly-owned subsidiary of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

LETTER FROM THE BOARD

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MelcoLot Limited

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

Executive Directors: Mr. Ko Chun Fung, Henry (Chief Executive Officer) Mr. Moumouris, Christos

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

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

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

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

17 December 2010

To the Shareholders

Dear Sirs or Madams,

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

BACKGROUND

References are made to the announcement and the circular of the Company dated 9 January 2008 and 25 January 2008 respectively in relation to (i) the 2008 Purchase Agreement for the purchase of scanners and keyboards for the manufacture of POS and lottery vending terminal by the Group from the Firich Group; and (ii) 2008 Supply Agreement for the sales of POS and lottery vending terminals and accessory products by the Group to the Firich Group, for a term of three years up to 31 December 2010. As each of the 2008 Purchase Agreement and the 2008 Supply Agreement will soon be expired, the Board is pleased to announce that the Purchase Agreement and the Supply Agreement were entered into in relation to the same subject transactions for a further term of three years ending 31 December 2013.

CONTINUING CONNECTED TRANSACTIONS

On 26 November 2010, Wu Sheng, an indirect non wholly-owned subsidiary of the Company entered into the Purchase Agreement with Firich whereby the Group will purchase from the Firich Group

LETTER FROM THE BOARD

certain materials/unfinished parts including but not limited to computer peripherals such as scanners and printers, for the manufacture of POS and lottery vending terminals. On 26 November 2010, Wu Sheng also entered into the Supply Agreement with Firich whereby the Group has agreed to sell and deliver POS and lottery vending terminals and accessory products to the Firich Group. Each of the Purchase Agreement and the Supply Agreement has a term of three years ending 31 December 2013. Salient terms of each of the Purchase Agreement and the Supply Agreement are set out below:

The Purchase Agreement

Date: 26 November 2010 Parties involved: (1) Wu Sheng; and (2) Firich Term: Three years ending 31 December 2013

Purchase Caps

Pursuant to the Purchase Agreement, the Group will purchase certain materials/unfinished parts including but not limited to computer peripherals, for the manufacture of POS and lottery vending terminals from the Firich Group. The Purchase Caps for each of the three years ending 31 December 2013 will be HK$155 million, HK$202 million and HK$263 million respectively.

The proposed Purchase Caps are determined based on (i) the historical amount of purchase of the products from Firich by the Group pursuant to 2008 Purchase Agreement; and (ii) the volume of expected materials/unfinished parts that will need to be purchased by Wu Sheng in each of the three years ending 31 December 2013 in order to meet its expected sales demand of POS and lottery vending terminals after taking into account the expected growth rate in the lottery market. For each of the three years ended 31 December 2008 and 31 December 2009, and ending 31 December 2010, purchase of the products from Firich by the Group pursuant to 2008 Purchase Agreement amounted to approximately HK$117.2 million, HK$41.6 million and is expected to be approximately HK$73.8 million respectively. The previous purchase caps were affected by the Company’s ability to win tenders from the end customers, namely the operators of the China Sports Lottery Administration Center (“CSLA”) and the China Welfare Lottery Issuing Centre (“CWL”) and the CSLA and CWL operators’ pace of replacement of obsolete and old terminal models. The fluctuation of the previous purchase caps was due to the Company failing to win some tenders in the past two years. Further, given that new terminal models are expected to be launched in forthcoming years, most of the CSLA and CWL operators have halted the replacement of their lottery vending terminals in order to capture the new terminal models. As such the demand for the lottery vending terminals was stagnant in the past two years. The Directors (including the independent non-executive Directors) expect that with the commencement of new procurement cycle for the lottery vending terminals and the stockpiled demand from the CSLA and CWL operators, the increment of Purchase Caps will reasonably reflect the growth of the lottery business of the Company. The purchase prices of the materials/ unfinished parts will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the manufacturing costs or purchase costs in manufacturing or purchasing the materials/unfinished parts by the Firich Group and such purchase prices will be no less favourable to the Group than that offered from Independent Third Parties.

LETTER FROM THE BOARD

Conditions to the Purchase Agreement

The Purchase Agreement will become effective upon fulfillment of the following conditions:

(1) the passing by the independent Shareholders at the EGM to be convened and held of an ordinary resolution to approve the Purchase Agreement and the transactions contemplated thereunder;
(2) all necessary consents, authorizations, licences and approvals required to be obtained on the part of the Firich Group in respect of the Purchase Agreement having been obtained;
(3) all necessary consents, authorizations, licences and approvals required to be obtained on the part of Wu Sheng in respect of the Purchase Agreement having been obtained; and
(4) the entering into of the Supply Agreement and the passing of an ordinary resolution by the independent Shareholders at the EGM to approve the Supply Agreement and the transactions contemplated thereunder.

The Supply Agreement

Date: 26 November 2010

Parties involved: (1) Wu Sheng; and (2) Firich Term: Three years ending 31 December 2013

Sales Caps

Pursuant to the Supply Agreement, Firich, for itself and on behalf of its subsidiaries will purchase and the Group will sell and deliver POS and lottery vending terminals and accessory products to the Firich Group. The Sales Caps for each of the three years ending 31 December 2013 will be HK$33 million, HK$43 million and HK$56 million respectively.

The Sales Caps is determined with reference to on (i) the historical amount of sales of the products to Firich by the Group pursuant to 2008 Supply Agreement; and (ii) the expected sales demand of POS and lottery vending terminals and accessory products of the Firich Group after taking into account the expected growth rate in the lottery market in the Asian region. For each of the three years ended 31 December 2008 and 31 December 2009, and ending 31 December 2010, selling of the products to Firich by the Group pursuant to 2008 Supply Agreement amounted to approximately HK$21.7 million, HK$26.1 million and is expected to be approximately HK$2.0 million respectively. The previous sales caps were affected by the Firich Group’s ability to win tenders from CSLA and CWL operators and the CSLA and CWL operators’ pace of replacement of obsolete and old terminal models. As mentioned in the above section headed “Purchase Caps”, in view of new terminal models being expected to be launched in forthcoming years, most of the CSLA and CWL operators have halted the replacement of their lottery vending terminals in order to capture the new terminal models. As such the demand for the lottery vending

LETTER FROM THE BOARD

terminals was stagnant in the past two years. The Directors (including the independent non-executive Directors) expect that with the commencement of new procurement cycle for the lottery vending terminals and the stockpiled demand from the CSLA and CWL operators, the sales of the lottery vending terminal will increase significantly. The Directors (including the independent non-executive Directors) believe that the lottery business of the Company was at a start-up stage, in view of the lottery business of the Company will be on the growing trend in the coming years, the Sales Caps will reasonably reflect the growth of the lottery business of the Company.

The selling price of POS and lottery vending terminals and accessory products will be determined with reference to the selling price of similar products sold by Wu Sheng to Independent Third Parties and such selling prices will be no less favourable to the Group than that offered to Independent Third Parties. The selling price of the POS and lottery vending terminals and accessory products will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the selling price of similar products sold by Wu Sheng to Independent Third Parties.

Conditions to the Supply Agreement

The Supply Agreement will become effective upon fulfillment of the following conditions:

(1) the passing by the independent Shareholders at the EGM to be convened and held of an ordinary resolution to approve the Supply Agreement and the transactions contemplated thereunder;
(2) all necessary consents, authorizations, licences and approvals required to be obtained on the part of Wu Sheng in respect of the Supply Agreement having been obtained;
(3) all necessary consents, authorizations, licences and approvals required to be obtained on the part of the Firich Group in respect of the Supply Agreement having been obtained; and
(4) the entering into of the Purchase Agreement and the passing of an ordinary resolution by the independent Shareholders at the EGM to approve the Purchase Agreement and the transactions contemplated thereunder.

Reasons for entering into the Supply Agreement and the Purchase Agreement

The Firich Group has been a leading POS system provider focusing in high quality and high performance POS systems in the retail, hospitality, lottery, medical and entertainment businesses since 1995. For over a decade, the Firich Group has been a strong growing provider of versatile POS systems to accommodate different applications in different industries, offering comprehensive POS services for its customers. The Directors (including the independent non-executive Directors) are of view that the Supply Agreement and the Purchase Agreement will benefit the Group by securing a quality supply of materials/unfinished parts from a reputable supplier like the Firich Group and the sales of POS and lottery vending terminals and accessory products to the Firich Group will enhance the Group’s sales as well as promoting the Group’s products through the cooperation with the Firich Group. The Directors consider the Continuing Connected Transactions have no disadvantages for the Company.

LETTER FROM THE BOARD

The Directors (including the independent non-executive Directors) consider that the entering into the Supply Agreement and the Purchase Agreement is in the usual and ordinary course of business of the Group and the terms of the Supply Agreement and the Purchase Agreement were negotiated on an arm’s length basis and on normal commercial terms between the Group and Firich. The Directors (including the non-executive Directors) are of the view that the terms and conditions of the Supply Agreement and the Purchase Agreement including the Sales Caps and Purchase Caps are fair and reasonable and in the interests of the Company and Shareholders as a whole. As none of the Directors have material interest in the Continuing Connected Transactions, no Director is required to abstain from voting on the relevant board resolution.

IMPLICATIONS OF THE GEM LISTING RULES

Firich is an indirect substantial shareholder of Wu Sheng, an indirect non wholly-owned subsidiary of the Company, and therefore a connected person of the Company as defined in the GEM Listing Rules. Accordingly, the transactions contemplated under the Supply Agreement and the Purchase Agreement respectively constitute continuing connected transactions on the part of the Company under Chapter 20 of the GEM Listing Rules. As both the Sales Caps and Purchase Caps exceed HK$10,000,000 per annum, the entering into of the Supply Agreement and the Purchase Agreement will be subject to the reporting, annual review, announcement and independent Shareholders’ approval requirements pursuant to Rule 20.35 of the GEM Listing Rules. Firich and its associates, holding approximately 6.7% of the issued share capital of the Company, are required to abstain from voting on the relevant resolution(s) to be proposed at the EGM to approve the Supply Agreement, the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

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. Tsoi, David, 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 Supply Agreement and the Purchase Agreement including the Sales Caps and the Purchase Caps 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. Nuada has been appointed as the independent financial adviser by the Company to advise the Independent Board Committee and the independent Shareholders on the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

INFORMATION ON THE GROUP

Wu Sheng is a wholly-owned foreign enterprise established in Shanghai, the PRC and is principally engaged in the manufacturing of lottery terminals for CSLA.

LETTER FROM THE BOARD

EGM

The notice convening the EGM is set out on pages 25 to 27 of this circular. At the EGM, an ordinary resolution will be proposed to be voted by way of poll to approve the Supply Agreement, the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps. A form of proxy for use at the EGM is also enclosed with this circular. To be valid, the enclosed form of proxy, together with any power of attorney or other authority under which it is signed must be completed in accordance with the instructions printed thereon and delivered to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. The completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting in person if you so wish.

Firich and its associates, holding approximately 6.7% of the issued share capital of the Company, are required to abstain from voting on the relevant resolution(s) to be proposed at the EGM to approve the Supply Agreement, the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

RECOMMENDATIONS

The Directors (including the independent non-executive Directors) consider that the terms of the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps are fair and reasonable and the entering into the Supply Agreement and the Purchase Agreement is in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the independent Shareholders to vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

Your attention is drawn to (i) the letter from the Independent Board Committee as set out on page 11 of this circular which contains the recommendation of the Independent Board Committee to the independent Shareholders regarding the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps; and (ii) the letter from Nuada to the Independent Board Committee and the independent Shareholders as set out on pages 12 to 18 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 Nuada, considers that the terms of the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps 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 Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board MelcoLot Limited

Ko Chun Fung, Henry Executive Director and Chief Executive Officer

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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MelcoLot Limited

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

Units 3101-2A, 31st Floor The Centrium 60 Wyndham Street Central, Hong Kong

17 December 2010

To the independent Shareholders

Dear Sirs and Madams,

CONTINUING CONNECTED TRANSACTIONS

We have been appointed as members of the Independent Board Committee to advise you in respect of the terms of the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps, details of which are set out in the “Letter from the Board” in the circular dated 17 December 2010, of which this letter forms part. Capitalized 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 Nuada as set out on pages 12 to 18 of this circular, which contains its advice and recommendation to us as to whether or not the terms of the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps are fair and reasonable so far as the independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole, as well as the principal factors and reasons for its advice and recommendation.

Having considered, amongst other matters, the factors and reasons considered by, and the opinion of, Nuada as stated in its aforementioned letter of advice, we are of the opinion that the terms of the Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps 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 Supply Agreement and the Purchase Agreement and the transactions contemplated thereunder including the Sales Caps and the Purchase Caps.

Yours faithfully,

For and on behalf of the Independent Board Committee

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

Independent non-executive Director

LETTER FROM NUADA

The following is the text of a letter of advice from Nuada in connection with the Purchase Agreement and the Supply Agreement (including the relevant annual caps) which has been prepared for inclusion in this circular.

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17th Floor, BLINK, 111 Bonham Strand Sheung Wan, Hong Kong 香港上環文咸東街111號BLINK 17字樓

17 December 2010

To the Independent Board Committee and the independent Shareholders of MelcoLot Limited

Dear Sirs and Madams,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the independent Shareholders in respect of the Purchase Agreement and the Supply Agreement (including the relevant annual caps), details of which have been set out in the letter from the Board (the “ Board’s Letter ”) in the circular to the Shareholders dated 17 December 2010 (the “ Circular ”), of which this letter forms part. Unless otherwise stated, terms used in this letter have the same meanings as those defined in the Circular.

On 26 November 2010, Wu Sheng (an indirect non wholly-owned subsidiary of the Company) entered into the Purchase Agreement with Firich whereby Wu Sheng will purchase from the Firich Group certain materials/unfinished parts including but not limited to computer peripherals such as scanners and printers for the manufacture of POS and lottery vending terminals. On the same day, Wu Sheng entered into the Supply Agreement with Firich whereby Wu Sheng has agreed to sell and deliver POS and lottery vending terminals and accessory products to the Firich Group. Each of the Purchase Agreement and the Supply Agreement has a term of three years ending 31 December 2013.

Firich is an indirect substantial shareholder of Wu Sheng, and therefore a connected person of the Company as defined in the GEM Listing Rules. Accordingly, the transactions contemplated under the Purchase Agreement and the Supply Agreement respectively constitute continuing connected transactions on the part of the Company under the GEM Listing Rules. As stated in the Board’s Letter, the entering into of the Purchase Agreement and the Supply Agreement will be subject to the reporting, annual review, announcement and independent Shareholders’ approval requirements pursuant to Rule 20.35 of the GEM Listing Rules.

The Independent Board Committee has been formed to advise the independent Shareholders as to whether the Purchase Agreement and the Supply Agreement are in the interests of the Company and the Shareholders as a whole and whether their respective terms (including the relevant annual caps) are fair and reasonable. We have been appointed to advise the Independent Board Committee and the independent Shareholders in those regards.

LETTER FROM NUADA

BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have relied on the accuracy of the information, opinions and representations contained or referred to in the Circular and provided to us by the Company, the Directors and the management of the Company, which we have assumed to be true, accurate and complete at the time when they were made and continued to be true, accurate and complete as at the date hereof. We have also assumed that all statements of belief, opinion and intention made by the Board in the Circular were reasonably made after due enquiries and considerations. We have no reason to doubt that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading.

We consider that we have reviewed sufficient information, including the relevant information and documents provided by the Company and the Directors and the management of the Company and the information published by the Company, to enable us to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular to provide a reasonable basis for our opinions and recommendations. We have assumed that the information and documents reviewed and relied on by us in formulating our opinions are true, accurate and complete at the time when they were made and continued to be true, accurate and complete as at the date hereof. Having made all reasonable enquiries, the Board has confirmed that, to the best of its knowledge, 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 Company and the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs, financial condition and future prospects of the Group and/or the Firich Group.

In formulating our advices, our opinions are necessarily based upon the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations and opinions made available to us as of the Latest Practicable Date. Our opinion does not in any manner address the Company’s own decision to proceed with the Purchase Agreement and the Supply Agreement, and the transactions contemplated thereunder. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein, which may come or be brought to our attention after the Latest Practicable Date.

PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the Purchase Agreement and the Supply Agreement, we have taken into consideration the following principal factors:

1. Background

The Group is principally engaged in the lottery business. The subsidiaries of the Company are engaged in various lottery related businesses and ventures in the PRC and other Asian countries, as well as in the manufacturing of lottery terminals for the sports and welfare lottery businesses in the PRC. Wu Sheng is a wholly-owned foreign enterprise established in Shanghai, the PRC and is principally engaged in the manufacturing of lottery terminals for China’s sports lottery.

LETTER FROM NUADA

Firich is an indirect substantial shareholder of Wu Sheng. The Firich Group has been a leading POS system provider focusing in high quality and high performance POS systems in the retail, hospitality, lottery, medical and entertainment businesses since 1995. For over a decade, the Firich Group has been a strong growing provider of versatile POS systems to accommodate different applications in different industries, offering comprehensive POS services for its customers.

References are made to the announcement and the circular of the Company dated 9 January 2008 and 25 January 2008 respectively in relation to (i) the 2008 Purchase Agreement for the purchase of scanners and keyboards for the manufacture of POS and lottery vending terminals by the Group from the Firich Group; and (ii) 2008 Supply Agreement for the sales of POS and lottery vending terminals and accessory products by the Group to the Firich Group, for a term of three years up to 31 December 2010. As each of the 2008 Purchase Agreement and the 2008 Supply Agreement will soon be expired, the Purchase Agreement and the Supply Agreement were entered in relation to the same subject transactions for a further term of three years ending 31 December 2013.

The Directors are of the view that the Purchase Agreement and the Supply Agreement will benefit the Group by securing a quality supply of materials/unfinished parts from a reputable supplier like the Firich Group and the sales of POS and lottery vending terminals and accessory products to the Firich Group will enhance the Group’s sales as well as promoting the Company’s products through the cooperation with the Firich Group.

Taking into account (i) the principal business of the Group in the manufacturing of lottery terminals for the sports and welfare lottery businesses in the PRC; (ii) the Group has been purchasing materials/unfinished parts for the manufacture of POS and lottery vending terminals from the Firich Group under the 2008 Purchase Agreement, and has been selling POS and lottery vending terminals and accessory products to the Firich Group under the 2008 Supply Agreement, which will soon be expired; and (iii) the Purchase Agreement and the Supply Agreement will benefit the Group by securing a quality supply of materials/unfinished parts from the Firich Group and the sales of POS and lottery vending terminals and accessory products to the Firich Group will enhance the Group’s sales as well as promoting the Company’s products through the cooperation with the Firich Group, we consider that the transactions contemplated under the Purchase Agreement and the Supply Agreement are in the ordinary and usual course of business of the Group, and the Purchase Agreement and the Supply Agreement will enable the Group to continue purchasing the materials/unfinished parts from Firich and selling products to Firich, and thus enabling smooth operation of the Group’s business.

2. Principal terms of the Purchase Agreement

Pursuant to the Purchase Agreement, Wu Sheng will purchase certain materials/unfinished parts including but not limited to computer peripherals, such as scanners and printers, for the manufacture of POS and lottery vending terminals from the Firich Group for a term of three years ending 31 December 2013. The purchase prices of the materials/unfinished parts will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the manufacturing costs or purchase costs in manufacturing or purchasing

LETTER FROM NUADA

the materials/unfinished parts by the Firich Group, and such purchase prices will be no less favourable to the Group than that offered from Independent Third Parties.

As mentioned above, the Group has been purchasing from the Firich Group under the 2008 Purchase Agreement. For reference purpose, in accordance with the GEM Listing Rules, it was disclosed in the annual report 2009 of the Company for the financial year ended 31 December 2009, all the independent non-executive Directors had reviewed the continuing connected transactions and confirmed that they had been entered into (i) in the ordinary and usual course of business of the Group; (ii) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are no normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) Independent Third Parties; and (iii) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole. For reference purpose, as advised by the Company, the Group has not purchased any materials/unfinished parts from Independent Third Parties.

Given the Purchase Agreement is entered into in the ordinary and usual course of business of the Group and the purchase prices of the materials/unfinished parts for the purchases by the Group from the Firich Group will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the manufacturing costs or purchase costs in manufacturing or purchasing the materials/unfinished parts by the Firich Group, and will be no less favourable to the Group than that offered from Independent Third Parties, we consider that the terms of the Purchase Agreement are fair and reasonable so far as the Company and independent Shareholders are concerned.

3. Principal terms of the Supply Agreement

Pursuant to the Supply Agreement, Firich, for itself and on behalf of its subsidiaries, will purchase and Wu Sheng will sell and deliver POS and lottery vending terminals and accessory products to the Firich Group for a term of three years ending 31 December 2013. The selling prices of the POS and lottery vending terminals and accessory products will be determined with reference to the selling price of similar products sold by Wu Sheng to Independent Third Parties and will be no less favourable to the Group than that offered to Independent Third Parties. The selling prices of the POS and lottery vending terminals and accessory products will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the selling prices of similar products sold by Wu Sheng to Independent Third Parties.

As mentioned above, the Group has been selling POS and lottery vending terminals to the Firich Group under the 2008 Supply Agreement. For reference purpose, in accordance with the GEM Listing Rules, it was disclosed in the annual report 2009 of the Company for the financial year ended 31 December 2009, all the independent non-executive Directors have reviewed the continuing connected transactions and confirmed that they have been entered into (i) in the ordinary and usual course of business of the Group; (ii) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are no normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) Independent Third Parties; and (iii) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole. In addition, for reference purpose, we have reviewed the historical sales of similar products to Independent Third Parties by

LETTER FROM NUADA

the Group, in particular the pricing offered, and the related sample invoices regarding historical sales of the POS and lottery vending terminals by the Group to the Firich Group and to Independent Third Parties, and found that the selling prices offered by the Group to the Firich Group are comparable to those offered to Independent Third Parties.

Given the Supply Agreement is entered into in the ordinary and usual course of business of the Group and the selling prices of the POS and lottery vending terminals and accessory products for the sales by the Group to the Firich Group will be reviewed and agreed between the parties every year and will be determined based on normal commercial terms with reference to the selling prices of similar products sold by Wu Sheng to Independent Third Parties, and will be no less favourable to the Group than that offered to Independent Third Parties, we consider that the terms of the Supply Agreement are fair and reasonable so far as the Company and independent Shareholders are concerned.

4. The relevant annual caps

The Purchase Caps for the transactions contemplated under the Purchase Agreement for each of the three years ending 31 December 2013 will be HK$155 million, HK$202 million and HK$263 million respectively. The Purchase Caps are determined based on (i) the historical amount of purchase of the products from Firich by the Group pursuant to the 2008 Purchase Agreement; and (ii) the volume of expected materials/unfinished parts that will need to be purchased by Wu Sheng in each of the three years ending 31 December 2013 in order to meet its expected sales demand of POS and lottery vending terminals after taking into account the expected growth rate in the lottery market.

The Sales Caps for the transactions contemplated under the Supply Agreement for each of the three years ending 31 December 2013 will be HK$33 million, HK$43 million and HK$56 million respectively. The Sales Caps is determined with reference to (i) the historical amount of sales of the products to Firich by the Group pursuant to the 2008 Supply Agreement; and (ii) the expected sales demand of POS and lottery vending terminals and accessory products of the Firich Group after taking into account the expected growth rate in the lottery market in the Asian region.

For each of the three years ended 31 December 2008 and 31 December 2009, and ending 31 December 2010, (i) purchase of the products from Firich by the Group pursuant to the 2008 Purchase Agreement amounted to approximately HK$117.2 million, HK$41.6 million and is expected to be approximately HK$73.8 million respectively; and (ii) selling of the products to Firich by the Group pursuant to 2008 Supply Agreement amounted to approximately HK$21.7 million, HK$26.1 million, and is expected to be approximately HK$2.0 million respectively. Details regarding the historical fluctuation in purchases from and sales to the Firich Group by the Group are set out in the sections headed “Purchase Caps” and “Sales Caps” respectively in the Board’s letter.

As stated in the Board’s Letter, the Directors believe that the lottery business of the Company was at a start-up stage, in view of the lottery business of the Company will be on the growing trend in the coming years, the Purchase Caps and the Sales Caps will reasonably reflect the growth of the lottery business of the Company. For reference purpose, according to the published information available from the website of the Ministry of Finance of the PRC, for the first three quarters of

LETTER FROM NUADA

2010, the sales of lottery amounted to approximately RMB118.040 billion (representing an increase of approximately 23.2% as compared to the previous corresponding period) of which approximately RMB68.711 billion was attributable to sales of welfare lottery (representing an increase of approximately 25.6% as compared to the previous corresponding period), while approximately RMB49.329 billion was attributable to sales of sports lottery (representing an increase of approximately 20.0% as compared to the previous corresponding period). In particular in September 2010, the sales of lottery amounted to approximately RMB13.956 billion (representing an increase of approximately 24.9% as compared to the previous corresponding period), of which approximately RMB8.072 billion was attributable to sales of welfare lottery (representing an increase of approximately 26.9% as compared to the previous corresponding period), while approximately RMB5.884 billion was attributable to sales of sports lottery (representing an increase of approximately 22.2% as compared to the previous corresponding period). The booming lottery market may sustain or promote the demand for lottery-related devices including POS and lottery vending terminals as well as the related materials/semi-products for the manufacture of such devices.

In assessing the fairness and reasonableness of the Purchase Caps and the Sales Caps, we have reviewed the actual purchases from and the actual sales to the Firich Group by the Group for the two years ended 31 December 2009 and for the six months ended 30 June 2010 and the expected purchases from and sales to the Firich Group by the Group for the remaining half of 2010, which is projected in proportion to that for the first half of 2010, and the related sample invoices, and taking into account the future prospects as anticipated by the Board with reference to the official statistics regarding the lottery market in the PRC as detailed above. Notwithstanding the historical purchases from and sales to the Firich Group by the Group had fluctuated, against the backdrop of the booming lottery market in the PRC as indicated by the relevant official statistics, taking into account the lottery business of the Company is stepping out from its start-up stage and the highest amount of purchases by the Group from the Firich Group for the year ended 31 December 2008 and the highest amount of sales by the Group to the Firich Group for the year ended 31 December 2009, we consider that the Purchase Caps and the Sales Caps are fair and reasonable to enable smooth operation of the Group’s business.

Taking into account (i) the lottery business of the Company was at a start-up stage, and the Directors believe that the lottery business of the Company will be on the growing trend in the coming years; (ii) the potential growth of the lottery market in the PRC; (iii) the Purchase Agreement and the Supply Agreement will benefit the Group by securing a quality supply of materials/unfinished parts from Firich and the sales of POS and lottery vending terminals and accessory products to the Firich Group will enhance the Group’s sales as well as promoting the Company’s products through the cooperation with the Firich Group; and (iv) the purchase prices and the selling prices for the transactions contemplated under the Purchase Agreement and the Supply Agreement respectively will be on normal commercial terms and on terms no less favourable to the Group than that offered from or to (as appropriate) the Independent Third Parties, we consider that the annual caps for the transactions contemplated under the Purchase Agreement and the Supply Agreement respectively are fair and reasonable.

LETTER FROM NUADA

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole and in the ordinary and usual course of business of the Group, and the terms of the Purchase Agreement and the Supply Agreement (including the relevant annual caps) are on normal commercial terms, and fair and reasonable so far as the Company and the independent Shareholders are concerned. As such, we advise the independent Shareholder and the Independent Board Committee to recommend the independent Shareholders to vote in favour of the relevant resolutions to approve the Purchase Agreement and the Supply Agreement and the transactions contemplated thereunder (including the Sales Caps and the Purchase Caps) at the EGM.

Yours faithfully, For and on behalf of Nuada Limited Bernard Chan Executive Director

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

2. DISCLOSURE OF INTERESTS

(i) Directors’ Interests

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

Long positions in ordinary Shares

Number of Share

Name of Director Mr. Chan Sek Keung, Ringo (“Mr. Chan”) Mr. Tsoi, David Mr. Pang Hing Chung, Alfred	Beneficial owner 18,876,000 788,500 1,500,000	Held by controlled corporation(s) 34,400,000 (Note 2) – –	Total number of Share 53,276,000 788,500 1,500,000	Approximate percentage of issued share capital of the Company
				(Note 1) 10.60% 0.16% 0.30%

Notes:

(1) As at the Latest Practicable Date, the total number of issued shares of the Company was 502,621,933.
(2) Mr. Chan is deemed to be interested in 34,400,000 ordinary Shares beneficially held by Woodstock Management Limited, a company wholly-owned by him.

GENERAL INFORMATION

APPENDIX

Long positions in the underlying shares of the Company

Name of Director (Note 2) Mr. Ko Chun Fung, Henry Mr. Moumouris, Christos Mr. Chan Sek Keung, Ringo Mr. Wang, John Peter Ben Mr. Tsoi, David Mr. Pang Hing Chung, Alfred Mr. So Lie Mo, Raymond	Number of share options held 13,354,000 5,620,000 9,200,000 11,846,000 587,500 400,000 400,000	Number of underlying share 13,354,000 5,620,000 9,200,000 11,846,000 587,500 400,000 400,000	Approximate percentage of shareholding (Note 1) 2.66% 1.12% 1.83% 2.36% 0.12% 0.08% 0.08%

Notes:

(1) As at the Latest Practicable Date, the total number of issued Shares was 502,621,933.
(2) Each of the above Directors is the personal beneficial owner of the share options granted to him.

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

(ii) Substantial Shareholders’ Interests

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

GENERAL INFORMATION

APPENDIX

Long positions in ordinary Shares

Name of Shareholder Melco International Development Limited (“Melco International”) Mr. Ho, Lawrence Yau Lung (“Mr. Ho”) Intralot S.A. Integrated Lottery Systems and Services (“Intralot S.A.”) Firich		Number of Share	Number of Share	Total number of share 58,674,619 58,674,619 52,973,779 33,764,540	Approximate percentage of issued share capital of the Company
		Beneficial owner – – – 2,097,498	Held by controlled corporation(s) 58,674,619 (Note 2) 58,674,619 (Note 3) 52,973,779 (Note 4) 31,667,042 (Note 5)
					(Note 1) 11.67% 11.67% 10.54% 6.72%

Long positions in the underlying shares of the Company

Name of Shareholder Melco International Mr. Ho Intralot S.A. Firich		Number of underlying shares
		Beneficial owner – 13,354,000 (Note 6) – 20,796,765

GENERAL INFORMATION

APPENDIX

Notes:

(1) As at the Latest Practicable Date, the total number of issued shares of the Company was 502,621,933.
(2) Melco International is deemed by the SFO to be interested in 58,674,619 shares and 470,006,742 underlying shares from convertible bonds in the Company as described in (7) below by virtue of its indirect holding of its whollyowned subsidiaries, Melco Leisure and Entertainment Group Limited and Melco LottVentures Holdings Limited.
(3) Mr. Ho is deemed by the SFO to be interested in 58,674,619 shares and 470,006,742 underlying shares from convertible bonds in the Company as described in (7) below by virtue of his controlling interests in Melco International, which is held by his controlled corporations, and his indirect holding of Melco Leisure and Entertainment Group Limited and Melco LottVentures Holdings Limited.
(4) Intralot S.A. is deemed by the SFO to be interested in 52,973,779 shares and 366,376,270 underlying shares from convertible bonds in the Company as described in (7) and (8) below by virtue of its indirect holding of its whollyowned subsidiaries, Intralot Holdings International Limited and Intralot International Limited.
(5) Firich is deemed by the SFO to be interested in 31,667,042 shares and 206,104,195 underlying shares from convertible bonds in the Company as described in (7) below by virtue of its indirect holding of its wholly-owned subsidiaries, Firich International Co., Ltd., Global Crossing Holdings Ltd. and Toprich Company Limited.
(6) Mr. Ho renders consultancy services in respect of the business development of the Group without receiving any compensation. The Company granted share options to him for recognizing his services similar to those rendered by other employees.
(7) On 13 December 2007, the Company issued convertible bonds (the “ Convertible Bonds I ”) with principal amount of HK$606,800,000 to Power Way Group Limited as part of the consideration for the acquisition of subsidiaries, which entitle the holder to convert them into 713,882,352 shares within 5 years from the date of issue at a conversion price of HK$0.85 per share subject to anti-dilutive adjustments. If the Convertible Bonds I have not been converted, they will be redeemed on maturity date of 12 December 2012. Power Way Group Limited had subsequently distributed all Convertible Bonds I to its shareholders, and as at the Latest Practicable Date, as to principal amount of HK$399,505,732 by Melco LottVentures Holdings Limited, HK$192,865,817 by Firich and its associates and the balance of HK$14,428,451 by Intralot International Limited.
(8) Pursuant to an agreement dated 7 September 2008 (as amended by a supplemental agreement dated 26 September 2008) entered into between the Company and Intralot International Limited, the Company issued convertible bonds (the “ Convertible Bonds II ”) with principal amount of HK$277,175,310 to Intralot International Limited, as part of the consideration for the acquisition of intangible assets on 9 December 2008, which entitle the holder to convert them into 279,692,542 shares within 5 years from the date of issue at a conversion price of HK$0.991 per share subject to anti-dilutive adjustments. If the Convertible Bonds II have not been converted, they will be redeemed on maturity date of 8 December 2013. In addition, upon obtaining two agreements in connection with the recognized projects in China, the Company shall pay the success payment, satisfied by convertible bonds, to Intralot International Limited, which are convertible into 69,709,080 shares at a conversion price of HK$1.0759 per share.

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

GENERAL INFORMATION

APPENDIX

3. SERVICE CONTRACT

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).

4. MATERIAL ADVERSE CHANGE

The Directors are not aware of any circumstances or events that may give rise to a material adverse change in the financial or trading position of the Group since 31 December 2009, being the date of which the latest audited financial statements of the Group were made up.

5. 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.

6. EXPERT’S QUALIFICATION AND CONSENT

The qualifications of the experts who have given opinions and/or whose names are included in this circular are as follows:

Name of expert	Qualification
Nuada	a licensed corporation to carry out type 6 regulated activity
	under the SFO

Nuada has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, Nuada was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2009, being the date to which the latest published audited financial statements of the Group were made up.

GENERAL INFORMATION

APPENDIX

7. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

(a) As at the Latest Practicable Date, none of the Directors 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 2009, the date to which the latest published audited financial statements of the Group were made up.
(b) As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group since 31 December 2009, being the date to which the latest published audited financial statements of the Company were made up, and which was significant in relation to the business of the Group.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Purchase Agreement and the Supply Agreement will be available for inspection during normal business hours (Saturdays and public holidays excepted) from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:00 p.m. at the principal office of the Company in Hong Kong from the date of this circular up to and including the date of the EGM.

NOTICE OF EGM

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MelcoLot Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8198)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ Meeting ”) of MelcoLot Limited (the “ Company ” together with its subsidiaries (the “ Group ”)) will be held at Units 3101-2A, 31st Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong on Thursday, 6 January 2011 at 11:30 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution of the Company:

ORDINARY RESOLUTION

1. (A) “ THAT :

(a) the purchase agreement (the “ Purchase Agreement ”) dated 26 November 2010 entered into between Firich Enterprises Co., Ltd., 伍豐科技股份有限公司(“ Firich ”, and together with its subsidiaries is referred to herein as the “ Firich Group ”) and Wu Sheng Computer Technology (Shanghai) Co., Ltd 伍盛計算機科技（上海）有限公司(“ Wu Sheng ”), an indirect non wholly-owned subsidiary of the Company, for the purchase of certain materials/unfinished parts including but not limited to computer peripherals such as scanners and printers, for the manufacture of point of sales (“ POS ”) and lottery vending terminals by the Group from the Firich Group for the three years ending 31 December 2013, a copy of which has been produced to the EGM marked “A” 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 maximum annual amount to be paid by the Group to the Firich Group in relation to the purchase of certain materials/unfinished parts under the Purchase Agreement for the three years ending 31 December 2013 of HK$155 million, HK$202 million and HK$263 million respectively be and are hereby approved; and
(c) the directors of the Company (the “ Directors ”) be and are hereby authorized to execute such documents and do such acts and things as they consider desirable, necessary or expedient in connection with and to give effect to the Purchase Agreement and the transactions contemplated thereunder.”

NOTICE OF EGM

(B) “ THAT :

(a) the supply agreement (the “ Supply Agreement ”) dated 26 November 2010 entered into between Firich and Wu Sheng for the sales and delivery of POS and lottery vending terminals and accessory products by the Group to the Firich Group for the three years ending 31 December 2013, a copy of which has been produced to the EGM marked “B” 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 maximum annual amount to be paid by the Firich Group to the Group in relation to the sales and delivery of POS and lottery vending terminals and accessory products under the Supply Agreement for the three years ending 31 December 2013 of HK$33 million, HK$43 million and HK$56 million respectively be and are hereby approved; and
(c) the Directors be and are hereby authorized to execute such documents and do such acts and things as they consider desirable, necessary or expedient in connection with and to give effect to the Supply Agreement and the transactions contemplated thereunder.”

By order of the Board MelcoLot Limited Ko Chun Fung, Henry Executive Director and Chief Executive Officer

Hong Kong, 17 December 2010

Registered office:

4th Floor, Scotia Centre P.O. Box 2804 George Town Grand Cayman Cayman Islands

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

NOTICE OF EGM

Notes:

(i) A member entitled to attend and vote at the above Meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a member of the Company.
(ii) Where there are joint holders of any share of the Company, any one of such joint holders may vote at the Meeting, either personally or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holders be present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first on the Register of Members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
(iii) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, must be lodged with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not less than 48 hours before the time appointed for holding the Meeting.
(iv) Completion and return of the form of proxy will not preclude a member from attending the Meeting and voting in person at the Meeting or any adjournment thereof if he so desires. If a member attends the Meeting after having deposited the form of proxy, his form of proxy will be deemed to have been revoked.

AI assistant

Crypto Flow Technology Limited — Proxy Solicitation & Information Statement 2010

51323_rns_2010-12-16_23bc5b56-3ac1-4770-a075-e79a09e3b75c.pdf

MelcoLot Limited

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

CHARACTERISTICS OF GEM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MelcoLot Limited

CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

BACKGROUND

CONTINUING CONNECTED TRANSACTIONS

LETTER FROM THE BOARD

The Purchase Agreement

Purchase Caps

LETTER FROM THE BOARD

Conditions to the Purchase Agreement

The Supply Agreement

Sales Caps

LETTER FROM THE BOARD

Conditions to the Supply Agreement

Reasons for entering into the Supply Agreement and the Purchase Agreement

LETTER FROM THE BOARD

IMPLICATIONS OF THE GEM LISTING RULES

REQUIREMENTS OF THE GEM LISTING RULES

INFORMATION ON THE GROUP

LETTER FROM THE BOARD

EGM

RECOMMENDATIONS

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

MelcoLot Limited

CONTINUING CONNECTED TRANSACTIONS

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM NUADA

BASIS OF OUR OPINION

PRINCIPAL FACTORS CONSIDERED

1. Background

LETTER FROM NUADA

2. Principal terms of the Purchase Agreement

LETTER FROM NUADA

3. Principal terms of the Supply Agreement

LETTER FROM NUADA

4. The relevant annual caps

LETTER FROM NUADA

LETTER FROM NUADA

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(i) Directors’ Interests

Long positions in ordinary Shares

Number of Share

Long positions in the underlying shares of the Company

(ii) Substantial Shareholders’ Interests

APPENDIX

Long positions in ordinary Shares

Long positions in the underlying shares of the Company

APPENDIX

3. SERVICE CONTRACT

4. MATERIAL ADVERSE CHANGE

5. COMPETING INTERESTS

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