Paradise Entertainment Limited — Proxy Solicitation & Information Statement 2007

Nov 12, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of 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 securities in Paradise Entertainment Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or to the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

PARADISE ENTERTAINMENT LIMITED

---

(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

SUBSCRIPTION OF NEW SHARES AND

NOTICE OF SPECIAL GENERAL MEETING

A notice convening the special general meeting of the Company to be held at Suite 907-908, 9th Floor, Man Yee Building, No.68 Des Voeux Road Central, Hong Kong on Wednesday, 28 November 2007 at 11:00 a.m. (the “Special General Meeting”) is set out on pages 11 to 12 of this circular. Whether or not you are able to attend the Special General Meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrars of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting should you so wish.

* For identification purposes only

12 November 2007

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Subscription Agreement dated 30 October 2007 . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on the Group and reasons for the Subscription . . . . . . . . . . . . . . . . .	7
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Summary of fund raising activities of
the Company in the past twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Procedure for demanding a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11

– i –

DEFINITIONS

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

• “Announcement”

• the announcement of the Company dated 31 October 2007 in relation to the Subscription

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

• “Board” the board of Directors

• “Business Day” any day other than a Saturday or Sunday on which banks in Hong Kong are open for business

• “Bye-laws” the bye-laws of the Company

• “Companies Act” the Companies Act 1981 of Bermuda (as amended)

• “Company” Paradise Entertainment Limited, an exempt company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange

• “Completion Date” the third Business Day following the last unfulfilled condition precedent under the Subscription Agreement is satisfied or waived

• “connected person(s)” has the same meaning ascribed to it under the Listing Rules

• “Debentures”

• 7% convertible debentures with an aggregate principal amount of HK$76,000,000 to be issued to Profit Peak pursuant to a subscription agreement dated 22 October 2007, details of which have been disclosed in the announcement of the Company dated 23 October 2007

• “Directors”

• the directors of the Company

• “Group” the Company and its subsidiaries

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “Last Trading Day”

• 30 October 2007, being the last day of trading of the Shares on the Stock Exchange before the release of the Announcement

– 1 –

DEFINITIONS

• “Latest Practicable Date” 8 November 2007, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange

• “LT Game” LT Game Limited, a non-wholly owned subsidiary of the Company

• “PRC” The People’s Republic of China, which for the purpose of this circular excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

• “Profit Peak” Profit Peak Holdings Limited, the subscriber of the Debentures

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

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

• “Special General Meeting” the special general meeting of the Company to be held at Suite 907-908, 9th Floor, Man Yee Building, No.68 Des Voeux Road Central, Hong Kong on Wednesday, 28 November 2007 at 11:00 a.m., notice of which is set out on pages 11 to 12 of this circular, or any adjourned meeting

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

• “Subscriber” Fidelity Investments Management (Hong Kong) Limited acting on behalf of various Fidelity funds, being the subscriber under the Subscription Agreement

• “Subscription” the subscription of the Subscription Shares by the Subscriber pursuant to the terms of the Subscription Agreement

• “Subscription Agreement”

• the subscription agreement dated 30 October 2007 made between the Company and the Subscriber in relation to the Subscription

• “Subscription Price” HK$0.19 per Subscription Share

• “Subscription Shares”

• an aggregate of 200,000,000 new Shares to be issued and allotted to the Subscriber pursuant to the terms of the Subscription Agreement

– 2 –

DEFINITIONS

“System”	a computerized system in relation to the operation of a
	real time baccarat system and optional jackpot features
“Trading Day”	a day on which the Shares can be freely traded on the
	Stock Exchange during the whole of the normal trading
	hours of the Stock Exchange
“Warrantholder(s)”	holder(s) of the Warrants
“Warrants”	unlisted warrants issued by the Company entitling the
	holders thereof to subscribe for Shares at an initial
	subscription price of HK$0.21 per Share, subject to
	adjustment, exercisable from 3 April 2007 to 2 April
	2008, both days inclusive
“%”	per cent.

– 3 –

LETTER FROM THE BOARD

PARADISE ENTERTAINMENT LIMITED

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(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

Executive Directors:

Mr. Jay Chun (Chairman and Managing Director)

Mr. Shan Shiyong, alias, Sin Sai Yung

Dr. Ma Xianming, alias, Ma Yin Ming

Mr. Law Wing Kit, Stephen Mr. Park Aaron Changmin

Head Office and Principal Place of Business: Suite 907-908, 9th Floor Man Yee Building No. 68 Des Voeux Road Central Hong Kong

Independent Non-executive Directors:

Mr. Frank Hu Ms. Ma Shiwei Mr. Li John Zongyang

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

12 November 2007

• To the Shareholders, and for information only, the Warrantholders and holders of the Debentures

Dear Sir or Madam,

SUBSCRIPTION OF NEW SHARES AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

The Directors wish to seek the approval of the Shareholders at the Special General Meeting for the approval of the Subscription and a special mandate to allot and issue the Subscription Shares. The purpose of this circular is to provide you with details in relation thereto.

SUBSCRIPTION AGREEMENT DATED 30 OCTOBER 2007

Parties

Fidelity Investments Management (Hong Kong) Limited as the subscriber acting on behalf of various Fidelity funds and the Company as the issuer.

The Subscriber is a company incorporated in Hong Kong. Fidelity International Limited (FIL), the parent company, was established nearly 40 years ago and FIL and its subsidiaries manage more than US$280 billion for major institutions as well as private individuals

* For identification purposes only

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LETTER FROM THE BOARD

worldwide. FIL is the UK’s largest mutual fund manager and the European leader in pan-European equities. It is also a top foreign asset manager across the Asia Pacific region. Its US affiliate, Fidelity Management and Research, was founded in Boston in 1946 and is one of the US’s largest mutual fund companies.

To the best of the knowledge and belief of the Directors, the Subscriber and its ultimate beneficial owners are not connected persons of the Company or any of its subsidiaries.

Subscription Shares

The Company will allot and issue and the Subscriber will subscribe for 200,000,000 new Shares, representing (i) approximately 5.46% of the existing issued share capital of the Company of 3,665,897,919 Shares as at the Latest Practicable Date and (ii) approximately 5.17% of the issued share capital of the Company as enlarged by the issue of the Subscription Shares.

The Subscription Shares will be allotted and issued pursuant to a special mandate to be sought at the Special General Meeting.

Subscription Price

The Subscription Price is HK$0.19 per Subscription Share and represents:

• (i) the closing price of HK$0.19 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a premium of approximately 3.26% over the average closing price of HK$0.184 per Share as quoted on the Stock Exchange for five consecutive Trading Days immediately prior to and including the Last Trading Day;

• (iii) a premium of approximately 10.47% over the average closing price of HK$0.172 per Share as quoted on the Stock Exchange for ten consecutive Trading Days immediately prior to and including the Last Trading Day;

• (iv) a discount of 5.00% to the closing price of HK$0.20 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (v) a premium of 150% over the unaudited net asset value per Share of approximately HK$0.076 as at 30 June 2007.

The Subscription Price was determined after arm’s length negotiation between the Subscriber and the Company with reference to the prevailing market prices of the Shares. The total gross proceeds from the Subscription amount to HK$38,000,000. After deducting related expenses of approximately HK$300,000, the net proceeds from the Subscription amount to approximately HK$37,700,000 and the net Subscription Price per Subscription Share amount to approximately HK$0.1885.

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LETTER FROM THE BOARD

Conditions of the Subscription

Completion of the Subscription is conditional upon:

• (i) the passing of the resolutions by the Shareholders (or, where so required by the Listing Rules or the Stock Exchange, independent Shareholders) at the Special General Meeting;

• (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares (either unconditionally, or subject to conditions which are acceptable to the Subscriber in its opinion);

• (iii) (if so required) the Bermuda Monetary Authority granting permission for the allotment and issue of the Subscription Shares;

• (iv) the warranties under the Subscription Agreement remaining true and accurate in all material respects, and not misleading in any material respect as given on the date of the Subscription Agreement and at the Completion Date; and

• (v) there having been no material change in any applicable law which will render the Subscription Shares ineligible for investment under the governing restrictions of any of the accounts of the Subscriber in force as at the date of the Subscription Agreement.

The conditions precedent of (iv) and (v) above may be waived by the Subscriber by written notice to the Company. None of the other conditions precedent may be waived by any party.

Completion of the Subscription

Completion of the Subscription shall take place on the third Business Day following the day on which the last unfulfilled condition precedent is satisfied or waived.

If the conditions precedent shall not have been fulfilled or waived in full at or before 5:00 p.m. on or before 31 December 2007 (or such later date as may be agreed between the Company and the Subscriber), then all rights, liabilities and obligations of the Company and the Subscriber will cease and determine and neither party shall have any claim against the other in respect thereof save for any antecedent breaches of the Subscription Agreement.

Listing of the Subscription Shares

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

Ranking of the Subscription Shares

The Subscription Shares, when fully paid, allotted and issued, will rank pari passu in all respects among themselves and with the existing issued Shares.

– 6 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

On 23 October 2007, the Company announced that it had entered into a subscription agreement with Profit Peak (the “Profit Peak Agreement”) for the proposed issue of the Debentures to Profit Peak or its nominee(s). As at the Latest Practicable Date, the Profit Peak Agreement had been completed.

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date, (ii) assuming completion of the Subscription and (iii) assuming full conversion of the Debentures at the conversion price of HK$0.20 per Share and completion of the Subscription:

Shareholder Mr. Jay Chun August Profit Investments Limited (Note 1) Best Top Offshore Limited (Note 2) The Subscriber Holders of Debentures Other public Shareholders Total Notes:	As at the Latest Practicable Date No. of Shares % (approx.) 68,568,000 1.87 361,714,000 9.87 353,190,000 9.63 – – – – 2,882,425,919 78.63 3,665,897,919 100.00	Assuming completion of the Subscription No. of Shares % (approx.) 68,568,000 1.77 361,714,000 9.36 353,190,000 9.14 200,000,000 5.17 – – 2,882,425,919 74.56 3,865,897,919 100.00	Assuming full conversion of the Debentures at the conversion price of HK$0.20 per Share and completion of the Subscription No. of Shares % (approx.) 68,568,000 1.61 361,714,000 8.52 353,190,000 8.32 200,000,000 4.71 380,000,000 8.95 2,882,425,919 67.89 4,245,897,919 100.00	Assuming full conversion of the Debentures at the conversion price of HK$0.20 per Share and completion of the Subscription No. of Shares % (approx.) 68,568,000 1.61 361,714,000 8.52 353,190,000 8.32 200,000,000 4.71 380,000,000 8.95 2,882,425,919 67.89 4,245,897,919 100.00
				100.00

1. August Profit Investments Limited is a company wholly owned by Mr. Jay Chun, the Chairman and the Managing Director.

2. Best Top Offshore Limited is a company wholly owned by Mr. Shan Shiyong, alias, Sin Sai Yung, an executive Director.

INFORMATION ON THE GROUP AND REASONS FOR THE SUBSCRIPTION

The Group is principally engaged in the research, development and sales of biopharmaceutical products. The Group is also engaged in the development, provision and sales of electronic gaming system and related repair, maintenance, consulting and/or marketing services.

The Directors consider that the Subscription by the Fidelity group to become an investor will broaden the Company’s shareholder base and enhance the corporate profile of the Company in the investment community through the reputation and extensive experience

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LETTER FROM THE BOARD

of the Fidelity group in the global asset and fund management industry. In addition, the Subscription will strengthen the financial position of the Group and will provide additional working capital to fund the business expansion and development plans of the Group.

Accordingly, the Directors are of the view that the terms of the Subscription, including the Subscription Price, which have been negotiated on an arm’s length basis in accordance with normal commercial terms, are fair, reasonable and in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS

The total gross proceeds from the Subscription amount to HK$38,000,000. After deducting related expenses of approximately HK$300,000, the net proceeds from the Subscription amount to approximately HK$37,700,000. The Company intends to apply the net proceeds for general working capital of the Group, including funding its strategic investment activities, before the Company identifies any suitable investment opportunity.

SUMMARY OF FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

The following table summarises the capital raising activities of the Group for the twelve months immediately before the Latest Practicable Date:

				Actual use of
				proceeds up to the
Date of		Net proceeds	Intended use of	Latest Practicable
announcement	Event	(approximately)	proceeds	Date
4 December 2006	Issue of 900 redeemable	HK$15,288,000	For the development	HK$15,288,000
	voting preference		and expansion of the	has been fully
	shares by LT Game to		System including the	utilized
	an investor		acquisition of
			terminals linked to
			the System and the
			related hardware and
			software for
			installation at the
			casinos operated by
			Sociedade de Jogos
			de Macau, S.A. and
			for general working
			capital requirements
			of LT Game
5 March 2007	Issue of the HK$33	HK$31,500,000	About 80% of the net	HK$31,500,000
	million convertible		proceeds for the	has been fully
	note to Opal Bright		business of LT Game	utilized
	Group Ltd.		and the rest as
			working capital of
			the Group
20 March 2007	Placing of the Warrants	HK$5,600,000	As general working	HK$5,600,000 has
			capital of the Group	been fully utilized

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LETTER FROM THE BOARD

Actual use of proceeds up to the Date of Net proceeds Intended use of Latest Practicable announcement Event (approximately) proceeds Date 23 October 2007 Issue of the Debentures HK$75,700,000 As general working HK$9,700,000 has to Profit Peak capital of the Group been utilized and the remaining balance of HK$66,000,000 of the net proceeds is kept with the banks as deposits

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting to be held at Suite 907-908, 9th Floor, Man Yee Building, No.68 Des Voeux Road Central, Hong Kong on Wednesday, 28 November 2007 at 11:00 a.m. is set out on pages 11 to 12 of this circular for the purpose of considering and, if thought fit, passing with or without amendments the resolution as set out therein.

A form of proxy for use by the Shareholders at the Special General Meeting is enclosed. Whether or not you are able to attend the Special General Meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the branch share registrars of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting thereof should you so wish.

To the best of the Directors’ knowledge, information and belief having made reasonable enquiries, no Shareholder would be required to abstain from voting at the Special General Meeting pursuant to the Listing Rules and/or the Bye-laws.

PROCEDURE FOR DEMANDING A POLL

Pursuant to bye-law 66 of the Bye-laws, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by way of a poll is required by the Listing Rules or (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:

• (i) by the chairman of the meeting; or

• (ii) by at least three Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

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LETTER FROM THE BOARD

• (iii) by a Shareholder or Shareholders present in person (or in the case of a Shareholder 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 Shareholders having the right to vote at the meeting; or

• (iv) by a Shareholder or Shareholders present in person (or in the case of a Shareholder 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 Shareholder or in the case of a Shareholder being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Shareholder.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

RECOMMENDATION

The Directors consider that the resolution as set out in the notice of the Special General Meeting is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of such resolution.

Yours faithfully, For and on behalf of

Paradise Entertainment Limited Jay Chun Chairman

– 10 –

NOTICE OF SPECIAL GENERAL MEETING

PARADISE ENTERTAINMENT LIMITED

*

(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of Paradise Entertainment Limited (the “ Company ”) will be held at Suite 907-908, 9th Floor, Man Yee Building, No.68 Des Voeux Road Central, Hong Kong on Wednesday, 28 November 2007 at 11:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT the Subscription Agreement (as defined and described in the circular of the Company dated 12 November 2007 (the “ Circular ”)), a copy of which is produced to this meeting and marked “A” and signed by the chairman of this meeting for identification purpose, and the transactions contemplated under or incidental to the Subscription Agreement be and are hereby approved, confirmed and ratified and that the directors of the Company be and are hereby authorized on behalf of the Company:

• (i) to sign, seal, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things as they may in their discretion consider necessary or desirable for the purpose of or in connection with the implementation of the Subscription Agreement and all transactions contemplated thereunder;

• (ii) to allot and issue 200,000,000 new ordinary shares (the “ Subscription Shares ”) of HK$0.01 each in the share capital of the Company (the “ Shares ”) in accordance with the terms of the Subscription Agreement, such Subscription Shares to be allotted and issued credited as fully paid and ranking pari passu in all respects with all the Shares then in issue;

• (iii) to exercise or enforce all of the rights of the Company under the Subscription Agreement; and

• (iv) to complete the Subscription Agreement in accordance with its terms.”

By Order of the Board Paradise Entertainment Limited Jay Chun

Chairman

Hong Kong, 12 November 2007

* For identification purposes only

– 11 –

NOTICE OF SPECIAL GENERAL MEETING

Head Office and Principal Place of Business: Suite 907-908, 9th Floor Man Yee Building No.68 Des Voeux Road Central Hong Kong

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Notes:

• (1) A shareholder entitled to attend and vote at the meeting may appoint one or more than one proxy to attend and to vote instead of him. A proxy need not be a shareholder of the Company.

• (2) In the case of joint holders of any share, any one of such persons may vote at the said 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 is present at the said meeting, personally or by proxy, that one of the said persons so present whose name stands first on the register of members in respect of such share shall alone be entitled to vote in respect thereof.

• (3) In order to be valid, the form of proxy together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority, must be deposited at the branch share registrars of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting. Completion and return of a form of proxy will not preclude the shareholders from attending and voting in person at the meeting or any adjourned meeting should they so desire.

• (4) A form of proxy for use at the meeting is enclosed with the circular of the Company dated 12 November 2007 despatched to the shareholders of the Company.

• (5) As at the date of this notice, the executive directors of the Company are Mr. Jay Chun (Chairman and Managing Director), Mr. Shan Shiyong, alias, Sin Sai Yung, Dr. Ma Xianming, alias, Ma Yin Ming, Mr. Law Wing Kit, Stephen and Mr. Park Aaron Changmin and the independent non-executive directors of the Company are Mr. Frank Hu, Ms. Ma Shiwei and Mr. Li John Zongyang.

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