This summary note prepared by the company is intended only to update and for the information of the investors of the company of the latest regulatory development in Internet & Telephone Lottery Sales in China.

This note summarizes the key provisions of the “Interim Measures for the Administration of Internet Lottery Sales (「互聯网销售彩票管理暂行办法」)” and the “Interim Measures for the Administration of Telephone Lottery Sales (「电话销售彩票管理暂行办法」)” announced on 9 October 2010 by the Ministry of Finance (MOF), China.

 

These Interim Measures are made on the basis of the Regulation on Administration of Lotteries that came into effect in 2009, with the general purpose to promote the healthy and orderly development of lottery in China by introducing measures to regulate the sales of lotteries via the Internet and telephone across the nation together with safeguards to protect the legal interests of market participants.

Definition

l   Internet Lottery Sales means the sales of lotteries via the Internet using software such as Internet browser or client-side.

l   Telephone Lottery Sales means the sales of lotteries through SMS, voice calling, etc, using fixed‐line telephone or mobile phone.

 

Responsibilities of the authorities

Supervisory and regulatory:The MOF assumes the supervision and regulation of Internet lottery sales.

 

Issuing:China Welfare Lottery Issuance Center and ChinaSports Lottery Issuance Center (Lottery Issuing Authorities) are responsible for the overall planning andmanagement of Internet lottery sales for Welfare Lottery and Sports Lottery respectively.

 

Sales:Provincial Welfare Lottery Centres and Provincial Sports Lottery Centres (Lottery Sales Authorities) are authorized by their respective Lottery Issuing Authority to be responsible for the operation of the Internet lottery sales for Welfare Lottery and Sports Lottery respectively.

 

Business Operation： Lottery Issuing Authorities canwork with cooperation partners, or authorize Lottery Sales Authorities for the business operation of Internet lotterysales, or engage in sales agents for the business operation of Internet lotteryagency sales.

 

2. Telephone Lottery Sales

Supervisory and regulatory:The MOF assumes the supervision and regulation of Telephone Lottery Sales nationwide. Provincial authorities of the MOF assume the supervision and regulation of Telephone lottery sales locally/within the relevant province.

 

Issuing:China Welfare Lottery Issuance Center and ChinaSports Lottery Issuance Center (Lottery Issuing Authorities) are responsible for the overall planning andmanagement of Telephone lottery sales for Welfare Lottery and Sports Lottery nationwide respectively.

 

Sales:Provincial Welfare Lottery Centres and Provincial Sports Lottery Centres (Lottery Sales Authorities) are responsible for the operation of the Telephone lottery sales for Welfare Lottery and Sports Lottery locally/within the relevant province respectively.

 

Business Operation:  Lottery Sales Authorities can work with cooperation partners, or engage in sales agents for the business operation of telephone lottery agency sales.

 

Requirements for cooperation partners and Sales Agents

1. Should have independent legal entity qualification;

2. Should have registered capital of no less than RMB 50 million (for Internet Lottery Sales), and no less than RMB 10 million (for Telephone Lottery Sales);

3. Should have the venue and security measures that meet the relevant requirements;

4. Should be a well-established organization, and have internal control and risk management system in place;

5. The entity and its senior management have no criminal records or bad commercial credit records in the past 5 years;

6. Should have license for operationof Internet information service (for Internet Lottery Sales), and license for operation of value-added telecom services (for Telephone Lottery Sales).

 

(End of note)