PRC Lottery Related Operations

To become a major vertically integrated player in the PRC Lottery-related sector.

In March 2006, the Group completed the acquisition of a 51% stake in Shenzhen Bozone IT Co. Ltd. (“Bozone”) for cash consideration of RMB 55,880,000 (approximately HK$ 53,731,000). Bozone and its subsidiaries (“Bozone Group”) are principally engaged in the research and development and application of information technology in the lottery field in the PRC. This include application software development and product of large scale online lottery systems and mutli-platform wagering systems, integration of online lottery networks, network security system solutions, wagering terminals, operational solutions and operational consultation services. In short, Bozone is a vertically integrated provide of software, hardware and related services focusing on the traditional welfare lottery segment in the PRC. Bozone’s business model is to provide these services to the Welfare Lottery Centers in the PRC in return for a share of the lottery revenues thus allowing the Group to participate in the growth in revenues of the PRC welfare lottery sector.

Currently, Bozone has contracts in Heilongjiang, Zhejiang and Shenzhen to provide POS machines and/or maintenance services.

It is our objective to become a major vertically integrated player in the PRC lottery-related sector. With the additional staffing and new branch office for the Bozone Group, we are closer to our aim of becoming a one-stop solution provider to Lottery Centres across the PRC. Bozone is currently ranked as the third largest lottery solution provider to the Welfare Lottery in the PRC. We will continue building on our existing products and further develop in the area of POS machines. We will also continue to search for opportunities to expand geographically within the PRC and internationally.