Paradise Entertainment Limited — Proxy Solicitation & Information Statement 2010

Mar 15, 2010

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.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited 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.

PARADISE ENTERTAINMENT LIMITED

---

(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

SUBSCRIPTION OF NEW CONVERTIBLE DEBENTURES AND NOTICE OF SPECIAL GENERAL MEETING

A notice convening the special general meeting of the Company to be held at Unit C, 19th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong on Thursday, 1 April 2010 at 11:00 a.m. (the “Special General Meeting”) is set out on pages 19 to 21 of this circular. 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, 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 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 should you so wish.

* For identification purposes only

16 March 2010

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Subscription of New Convertible Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Principal terms of the New Convertible Debentures . . . . . . . . . . . . . . . . . . . . . . .	10
Information on the Group, rationale of the floating Conversion Price and
reasons for entering into the Subscription Agreements . . . . . . . . . . . . . . . . . . .	15
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Summary of fund raising activities of the Company in the past twelve months. . .	17
Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Documents available for inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Responsibility statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

– i –

DEFINITIONS

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

• “5% Limit” has the meaning ascribed to it under the paragraph headed “Restrictions on conversion” of this circular

• “Announcement” the announcement of the Company dated 21 January 2010 in relation to, among other things, the subscription of the New Convertible Debentures

• “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

• “Company”

• Paradise Entertainment Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange

• “Concert Party or Parties” in relation to a Debenture Holder, any party or parties acting in concert with it within the meaning of The Code on Takeovers and Mergers and Share Repurchases published by the Securities and Futures Commission of Hong Kong

• “connected person(s)”

• has the meaning ascribed to it in the Listing Rules

• “Conversion Price”

• “Conversion Share(s)”

• the conversion price of the New Convertible Debentures as described under the paragraph headed “Conversion Price” of this circular the Shares which may fall to be issued by the Company upon the exercise of the conversion rights attaching to the New Convertible Debentures

• “Director(s)”

• director(s) of the Company

• “Edison International”

• Edison International Inc., the subscriber under the Subscription Agreement I

– 1 –

DEFINITIONS

“Existing Convertible collectively, (i) the HK$16,000,000 8% convertible Debenture(s)” debentures due 2013 issued by the Company to Kelton Capital Group Limited on 22 December 2008, of which a principal amount of HK$11,000,000 remains outstanding as at the Latest Practicable Date and (ii) the HK$96,000,000 8% convertible debentures due 2013 issued by the Company to Right Choice Securities Limited on 20 February 2009, of which a principal amount of HK$68,000,000 remains outstanding as at the Latest Practicable Date

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars

• “Hong Kong” Hong Kong Special Administrative Region of the People’s Republic of China

• “Issue Date” the date of first issue of the New Convertible Debentures

• “Last Trading Day” 20 January 2010, being the last Trading Day before the release of the Announcement

• “Latest Practicable Date”

• 12 March 2010, being the latest practicable date for ascertaining certain information contained in this circular

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

• “Maturity Date” 31 December 2014, or if that is not a Business Day, the first Business Day thereafter

• “New Convertible Debenture(s)”

• the 8% convertible debentures due 2014 to be issued by the Company to the Subscribers pursuant to the terms of the Subscription Agreements

• “Pioneer Link”

• Pioneer Link Associates Limited, the subscriber under the Subscription Agreement II

• “Share(s)”

• ordinary share(s) of HK$0.10 each in the share capital of the Company

• “Shareholder(s)”

holder(s) of the Share(s)

– 2 –

DEFINITIONS

• “Special General Meeting”

• the special general meeting of the Company to be convened for the purpose of approving, among other things, the Subscription Agreements and the transactions contemplated thereunder (including the grant of the Special Mandate to cover the allotment and issue of the Conversion Shares)

• “Special Mandate”

• a special mandate to allot and issue the Shares to be sought from the Shareholders at the Special General Meeting to satisfy the Conversion Shares

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Subscribers”

• collectively, Edison International, Pioneer Link and Trueworthy, being the subscribers under the Subscription Agreements

• “Subscription Agreement I” the subscription agreement dated 20 January 2010 entered into between the Company and Edison International in relation to the subscription of the New Convertible Debentures in the aggregate principal amount of HK$116,000,000

• “Subscription Agreement II” the subscription agreement dated 20 January 2010 entered into between the Company and Pioneer Link in relation to the subscription of the New Convertible Debentures in the aggregate principal amount of US$85,500,000 (or approximately HK$662,625,000)

• “Subscription Agreement III”

• the subscription agreement dated 20 January 2010 entered into between the Company and Trueworthy in relation to the subscription of the New Convertible Debentures in the aggregate principal amount of US$1,000,000 (or approximately HK$7,750,000)

• “Subscription Agreements” collectively, the Subscription Agreement I, the Subscription Agreement II and the Subscription Agreement III

• “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

• “Trueworthy”

Trueworthy Group Limited, the subscriber under the Subscription Agreement III

– 3 –

DEFINITIONS

“US$” United States dollars, the lawful currency of the United States of America “%” per cent

For reference purposes only and unless otherwise specified, US$ have been translated into HK$ using the rate of US$1.00 to HK$7.75 in this circular.

– 4 –

EXPECTED TIMETABLE

The expected timetable for the completion of the Subscription Agreements is set out as follows:

2010

Despatch of circular in relation to, among other things, further details of the Subscription Agreements and form of proxy for use by the Shareholders at the Special General Meeting . . . . . . . . . . . Tuesday, 16 March Latest time for lodging the form of proxy for the Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Tuesday, 30 March Time and date of the Special General Meeting to approve, among other things, the Subscription Agreements . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Thursday, 1 April Publication of the announcement of the results of the Special General Meeting in respect of the approval of the Subscription Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 1 April Date on which the conditions of the Subscription Agreements are expected to be fulfilled or, as the case may be, waived by the relevant Subscriber . . . . . . . . . . . . . . . . . . on or before Monday, 19 April Completion date of the Subscription Agreements . . . . . . . on or before Wednesday, 21 April

Dates stated in this circular for events in the timetable are indicative only and may be extended or varied. Any changes to the expected timetable will be announced as and when appropriate.

– 5 –

LETTER FROM THE BOARD

PARADISE ENTERTAINMENT LIMITED

*

(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

Independent Non-executive Directors:

Mr. Frank Hu Mr. Li John Zongyang Mr. Hu Wenxiang

Head Office and Principal Place of Business: Unit C 19th Floor Entertainment Building 30 Queen’s Road Central Hong Kong

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

16 March 2010

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

Dear Sir or Madam,

SUBSCRIPTION OF NEW CONVERTIBLE DEBENTURES AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

The Directors wish to seek the approval of the Shareholders at the Special General Meeting for approving (i) the terms of the Subscription Agreements and the transactions contemplated thereunder (including the grant of the Special Mandate to cover the allotment and issue of the Conversion Shares). The purpose of this circular is to provide you with further details in relation thereto.

* For identification purposes only

– 6 –

LETTER FROM THE BOARD

SUBSCRIPTION OF NEW CONVERTIBLE DEBENTURES

Subscription Agreement I

Date

20 January 2010

Parties

Issuer: The Company Subscriber: Edison International

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Edison International is an investment holding company and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

Principal amount

HK$116,000,000, which shall be satisfied by payment in cash to the Company at completion of the Subscription Agreement I.

Conditions of the Subscription Agreement I

Completion of the Subscription Agreement I is conditional upon:

• (i) the passing of the resolution(s) by the Shareholders (or, if so required by the Listing Rules or the Stock Exchange, the independent Shareholders) at the Special General Meeting approving the terms of the Subscription Agreement I, the creation of the New Convertible Debentures and the issue and allotment of the Conversion Shares;

• (ii) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Conversion Shares;

• (iii) (if applicable) all necessary governmental or regulatory consents, authorizations and approvals that may be required by the Company or Edison International in connection with the issue or the subscription of the New Convertible Debentures having been obtained;

• (iv) (if required) the approval of the Bermuda Monetary Authority of the issue of the New Convertible Debentures and the Conversion Shares; and

• (v) none of the warranties under the Subscription Agreement I having been breached in any material respect (or, if capable of being remedied, has not been remedied), or is misleading or untrue in any material respect.

– 7 –

LETTER FROM THE BOARD

Completion of the Subscription Agreement I

Completion of the Subscription Agreement I shall take place one Business Day after the date on which the conditions specified above are fulfilled or, as the case may be, waived by Edison International. There is no long stop date for the Subscription Agreement I.

Subscription Agreement II

Date

20 January 2010

Parties

Issuer: The Company Subscriber: Pioneer Link

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Pioneer Link is an investment holding company and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

Principal amount

US$85,500,000 (or approximately HK$662,625,000), which shall be payable to the Company by Pioneer Link at completion of the Subscription Agreement II.

Conditions of the Subscription Agreement II

Completion of the Subscription Agreement II is conditional upon:

• (i) the passing of the resolution(s) by the Shareholders (or, if so required by the Listing Rules or the Stock Exchange, the independent Shareholders) at the Special General Meeting approving the terms of the Subscription Agreement II, the creation of the New Convertible Debentures and the issue and allotment of the Conversion Shares;

• (ii) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Conversion Shares;

• (iii) (if applicable) all necessary governmental or regulatory consents, authorizations and approvals that may be required by the Company or Pioneer Link in connection with the issue or the subscription of the New Convertible Debentures having been obtained;

• (iv) (if required) the approval of the Bermuda Monetary Authority of the issue of the New Convertible Debentures and the Conversion Shares; and

– 8 –

LETTER FROM THE BOARD

• (v) none of the warranties under the Subscription Agreement II having been breached in any material respect (or, if capable of being remedied, has not been remedied), or is misleading or untrue in any material respect.

Completion of the Subscription Agreement II

Completion of the Subscription Agreement II shall take place one Business Day after the date on which the conditions specified above are fulfilled or, as the case may be, waived by Pioneer Link. There is no long stop date for the Subscription Agreement II.

Subscription Agreement III

Date

20 January 2010

Parties

Issuer: The Company Subscriber: Trueworthy

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Trueworthy is an investment holding company and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

Principal amount

US$1,000,000 (or approximately HK$7,750,000), which shall be payable to the Company by Trueworthy at completion of the Subscription Agreement III.

Conditions of the Subscription Agreement III

Completion of the Subscription Agreement III is conditional upon:

• (i) the passing of the resolution(s) by the Shareholders (or, if so required by the Listing Rules or the Stock Exchange, the independent Shareholders) at the Special General Meeting approving the terms of the Subscription Agreement III, the creation of the New Convertible Debentures and the issue and allotment of the Conversion Shares;

• (ii) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Conversion Shares;

• (iii) (if applicable) all necessary governmental or regulatory consents, authorizations and approvals that may be required by the Company or Trueworthy in connection with the issue or the subscription of the New Convertible Debentures having been obtained;

– 9 –

LETTER FROM THE BOARD

• (iv) (if required) the approval of the Bermuda Monetary Authority of the issue of the New Convertible Debentures and the Conversion Shares; and

• (v) none of the warranties under the Subscription Agreement III having been breached in any material respect (or, if capable of being remedied, has not been remedied), or is misleading or untrue in any material respect.

Completion of the Subscription Agreement III

Completion of the Subscription Agreement III shall take place one Business Day after the date on which the conditions specified above are fulfilled or, as the case may be, waived by Trueworthy. There is no long stop date for the Subscription Agreement III.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of the Subscribers and its ultimate beneficial owners are independent of and not connected with each other. The Subscription Agreement I, the Subscription Agreement II and the Subscription Agreement III are not inter-conditional with each other.

PRINCIPAL TERMS OF THE NEW CONVERTIBLE DEBENTURES

The following is a summary of the principal terms of the New Convertible Debentures:

Conversion Price

The Conversion Price shall be the higher of (i) the average closing price of the Shares of any three consecutive Trading Days (as selected by the Debenture Holder) within the sixty Trading Days immediately prior to the conversion date or (ii) the par value for the time being of the Shares, which is HK$0.10.

For illustrative purpose only:

• (A) on the basis that the Conversion Price is HK$0.273 per Share, being the average closing price of the three consecutive Trading Days immediately prior to and including the date of the Subscription Agreements, the Conversion Price represents:

• (i) a premium of approximately 1.11% over the closing price of HK$0.27 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a premium of approximately 0.37% over the average closing price of HK$0.272 per Share as quoted on the Stock Exchange over the five consecutive Trading Days immediately prior to and including the Last Trading Day;

– 10 –

LETTER FROM THE BOARD

• (iii) a premium of approximately 0.37% over the average closing price of HK$0.272 per Share as quoted on the Stock Exchange for ten consecutive Trading Days immediately prior to and including the Last Trading Day; and

• (iv) a discount of approximately 33.41% to the unaudited net asset value per Share of approximately HK$0.41 (adjusted) as at 30 June 2009.

• (B) on the basis that the Conversion Price is HK$0.243 per Share, being the average closing price of the three consecutive Trading Days immediately prior to and including the Latest Practicable Date, the Conversion Price represents:

• (i) a discount of approximately 0.41% to the closing price of HK$0.244 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) the average closing price of HK$0.243 per Share as quoted on the Stock Exchange over the five consecutive Trading Days immediately prior to and including the Latest Practicable Date;

• (iii) a discount of approximately 2.02% to the average closing price of HK$0.248 per Share as quoted on the Stock Exchange for ten consecutive Trading Days immediately prior to and including the Latest Practicable Date; and

• (iv) a discount of approximately 40.73% to the unaudited net asset value per Share of approximately HK$0.41 (adjusted) as at 30 June 2009.

• (C) on the basis that the Conversion Price is HK$0.10 per Share, being the par value for the time being of the Shares, the Conversion Price represents:

• (i) a discount of approximately 62.96% to the closing price of HK$0.27 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 63.24% to the average closing price of HK$0.272 per Share as quoted on the Stock Exchange over the five consecutive Trading Days immediately prior to and including the Last Trading Day;

• (iii) a discount of approximately 63.24% to the average closing price of HK$0.272 per Share as quoted on the Stock Exchange for ten consecutive Trading Days immediately prior to and including the Last Trading Day; and

• (iv) a discount of approximately 75.61% to the unaudited net asset value per Share of approximately HK$0.41 (adjusted) as at 30 June 2009.

– 11 –

LETTER FROM THE BOARD

During the period after the share consolidation of the Company becoming effective on 30 September 2009 and up to the Latest Practicable Date, the Shares were trading within the range from HK$0.213 to HK$0.330 per Share. Shareholders and potential investors of the Company should, however, note that the Conversion Price has not been fixed at the date of the Subscription Agreements. The Conversion Prices adopted in this circular have been selected by the Company for illustrative and disclosure compliance purposes only and should not in any way be read or construed as the Company’s or the Board’s view of the likely price levels of the Shares in the future.

The Conversion Price was determined after arm’s length negotiation between the Subscribers and the Company. The total gross proceeds from the subscription of the New Convertible Debentures amount to HK$786,375,000. After deducting related expenses of approximately HK$1,300,000, the net proceeds from the subscription of the New Convertible Debentures amount to approximately HK$785,075,000 and the net Conversion Price per Conversion Share is (i) on the basis that the Conversion Price is HK$0.273 per Share, approximately HK$0.273, (ii) on the basis that the Conversion Price is HK$0.243 per Share, approximately HK$0.243 and (iii) on the basis that the Conversion Price is HK$0.10 per Share, approximately HK$0.10.

Conversion Shares

As at the Latest Practicable Date, the issued share capital of the Company comprised 489,714,791 Shares.

For illustrative purpose only:

• (A) on the basis that the Conversion Price is HK$0.273 per Share, being the average closing price of the three consecutive Trading Days immediately prior to and including the date of the Subscription Agreements, the maximum numbers of new Shares to be issued under the Subscription Agreement I, the Subscription Agreement II and the Subscription Agreement III will be 424,908,424 Shares, 2,427,197,802 Shares and 28,388,278 Shares respectively, representing approximately 86.77%, 495.63% and 5.80% respectively of the issued share capital of the Company as at the date of the Subscription Agreements and approximately 12.61%, 72.02% and 0.84% respectively of the issued Shares as enlarged by the issue of the Conversion Shares;

• (B) on the basis that the Conversion Price is HK$0.243 per Share, being the average closing price of the three consecutive Trading Days immediately prior to and including the Latest Practicable Date, the maximum numbers of new Shares to be issued under the Subscription Agreement I, the Subscription Agreement II and the Subscription Agreement III will be 477,366,255 Shares, 2,726,851,851 Shares and 31,893,004 Shares respectively, representing approximately 97.48%, 556.82% and 6.51% respectively of the issued share capital of the Company as at the date of the

– 12 –

LETTER FROM THE BOARD

Subscription Agreements and approximately 12.81%, 73.19% and 0.86% respectively of the issued Shares as enlarged by the issue of the Conversion Shares; and

• (C) on the basis that the Conversion Price is HK$0.10 per Share, being the par value for the time being of the Shares, the maximum numbers of new Shares to be issued under the Subscription Agreement I, the Subscription Agreement II and the Subscription Agreement III will be 1,160,000,000 Shares, 6,626,250,000 Shares and 77,500,000 Shares respectively, representing approximately 236.87%, 1,353.08% and 15.83% respectively of the issued share capital of the Company as at the date of the Subscription Agreements and approximately 13.89%, 79.32% and 0.93% respectively of the issued Shares as enlarged by the issue of the Conversion Shares.

The exchange rate of US$1.00 to HK$7.75 will be adopted for the purpose of conversion of the New Convertible Debentures to be issued under the Subscription Agreement II and the Subscription Agreement III into the Conversion Shares.

Maturity Date

31 December 2014, or if that is not a Business Day, the first Business Day thereafter. Notwithstanding that the New Convertible Debentures shall mature on the Maturity Date, the Company shall be entitled to repay the outstanding principal amount of the New Convertible Debentures together with interests accrued thereon (if any) on the 14th Business Day after the Maturity Date.

Interest

8% per annum payable quarterly on or before the fifth Business Day of January, April, July and October in each year.

Notwithstanding the low interest rate environment since last year, given that (i) the Company is unable to secure bank borrowings as it is not able to provide satisfactory collateral which the prospective lenders demand for such borrowings as disclosed in the section headed “Information on the Group, rationale of the floating Conversion Price and reasons for entering into the Subscription Agreements” below, (ii) the limited fundraising means available to the Company and (iii) the substantial amount of funds raised from the issue of the New Convertible Debentures, the Directors consider that the interest rate of 8% per annum is relatively fair and reasonable.

Ranking

The New Convertible Debentures constitute direct, unconditional, unsubordinated and unsecured obligations of the Company and each Debenture Holder will at all times rank senior to other holders of subsequently issued debt instruments, including but not limited to debentures, bonds, notes and other securities.

– 13 –

LETTER FROM THE BOARD

The Conversion Shares to be issued upon exercise of the conversion rights attaching to the New Convertible Debenture will rank pari passu in all respects with the existing Shares in issue as at the date on which the relevant conversion rights are exercised.

Listing

No application will be made for the listing of the New Convertible Debentures on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares to be allotted and issued upon the exercise of the conversion rights attaching to the New Convertible Debentures.

Voting Rights of Debenture Holders

Each of the Debenture Holders does not have any voting rights at the general meetings of the Company by reason of it being a Debenture Holder.

Transferability of New Convertible Debentures

The New Convertible Debentures will be freely transferable but may not be assigned or transferred to a connected person of the Company without the prior written consent of the Company.

Early Redemption

The Company may, at any time between the Issue Date and the date falling fourteen days before (and excluding) the Maturity Date by giving notice in writing to all Debentures Holders, elect to redeem the whole or any part of the New Convertible Debentures at 112% of the outstanding principal amount thereof.

Restrictions on conversion

No conversion rights to the New Convertible Debentures may be exercised by a Debenture Holder if and to the extent that following such exercise, that Debenture Holder and its Concert Parties, taken together, will, directly or indirectly, control or be interested in more than 5% of the issued share capital of the Company (the “5% Limit”).

No conversion rights to the New Convertible Debentures may be exercised by a Debenture Holder if and to the extent that following such exercise, the Company will be in breach of the minimum public float requirement stipulated under Rule 8.08 of the Listing Rules.

Subject to the foregoing, the Debenture Holder shall have the right to convert the New Convertible Debentures into the Conversion Shares at the Conversion Price on any Business Day commencing on and including the Issue Date up to and including the Maturity Date.

– 14 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP, RATIONALE OF THE FLOATING CONVERSION PRICE AND REASONS FOR ENTERING INTO THE SUBSCRIPTION AGREEMENTS

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 provision of management services.

As disclosed in the paragraph headed “Conversion Price” above, the Conversion Price shall be the higher of (i) the average closing price of the Shares of any three consecutive Trading Days (as selected by the Debenture Holder) within the sixty Trading Days immediately prior to the conversion date or (ii) the par value for the time being of the Shares, which is HK$0.10. In other words, the Conversion Price is floating and will be determined upon the conversion of the New Convertible Debentures.

It is an essential term of the New Convertible Debentures that the Conversion Price is floating, thereby conferring greater flexibility and incentive for the Debenture Holders to convert the New Convertible Debentures having regard to the latest Share price performance. In the event that the Debenture Holders do take advantage of the flexibility of a floating Conversion Price and convert, whether wholly or partially, the New Convertible Debentures into Conversion Shares at any time prior to their stated maturity, the Company will not only stand to gain from a larger shareholder base but the Company will also reduce its overall gearing and save substantial interest payments (amounting, in aggregate, to approximately HK$63 million per annum) to the extent of the New Convertible Debentures converted by the Debenture Holders, which will in turn improve the balance sheet and operating results of the Group as a whole. The Directors noted the potential massive dilutive effect on existing Shareholders upon full conversion of the New Conversion Debentures by the Debenture Holders but taking into account the above factors, consider the floating nature of the Conversion Price to be, on balance, fair and reasonable to Shareholders.

The Directors also consider that the issue of the New Convertible Debentures represents a good opportunity to raise additional working capital for the Group without any immediate dilutive effect on the shareholding of the existing Shareholders. The Directors have not considered alternative means for fund raising because (i) the size of funds that could be raised from an issue of securities under the existing general mandate could not meet with the financial needs of the Company as detailed in the section headed “Use of proceeds” below, (ii) a rights issue or an open offer takes a longer timeframe to complete and involves a higher transaction cost compared to the issue of New Convertible Debentures and besides, a rights issue or an open offer needs to be fully underwritten and the Company is unable to secure such underwriting on terms that are commercially acceptable to it given the size of the funds raised and (iii) other debt financing such as bank borrowings where prospective lenders will invariably demand satisfactory collateral for such borrowings which the Company does not own and is unable to provide.

Accordingly, the Directors are of the view that the entering into of the Subscription Agreements is in the best interests of the Company and the Shareholders as a whole and that the terms of the Subscription Agreements and the New Convertible Debentures are fair and reasonable.

– 15 –

LETTER FROM THE BOARD

USE OF PROCEEDS

The aggregate gross amount to be raised under the issue of the New Convertible Debentures will be approximately HK$786,375,000. After deduction of the relevant cost for the transactions contemplated under the Subscription Agreements of approximately HK$1,300,000, the net proceeds are expected to be approximately HK$785,075,000. The Directors intend to settle the outstanding liabilities of approximately HK$240 million from the net proceeds and use the remaining net proceeds of approximately HK$545 million mainly on the expansion of the Group’s gaming business including the launch of (i) a casino catering to high rollers at San Kin Yip Commercial Center in Macau of which the estimated capital expenditure for renovation, furniture & fixtures and equipment of HK$70 million, marketing & promotional expense of HK$23 million and working capital of HK$375 million amount to HK$468 million and (ii) a club house at the San Kin Yip Commercial Center in Macau of which the estimated capital expenditure for renovation, furniture & fixtures and equipment of HK$50 million, marketing & promotional expense of HK$15 million and working capital of HK$12 million amount to HK$77 million.

It is expected that the expansion of the Group’s gaming business will be implemented progressively commencing from the second quarter of 2010.

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company showing the effects following the conversion of the Existing Convertible Debentures and the New Convertible Debentures:

Mr. Jay Chun August Profit Investments Limited (Note 1) Best Top Offshore Limited (Note 2) Dr. Ma Xianming, alias, Ma Yin Ming (Note 3) Kelton Capital Group Limited (Note 4) Right Choice Securities Limited (Note 4) Other holder(s) of the Existing Convertible Debentures (Note 5) Edison International Pioneer Link Trueworthy Debenture Holder(s) (other than the Subscribers) (Note 5) Other public Shareholders Total	As at the Latest Practicable Date % 1,241,600 0.25 41,807,200 8.54 36,075,800 7.37 672,200 0.14 – – – – – – – – – – – – – – 409,917,991 83.70	Solely upon full conversion of the Existing Convertible Debentures at HK$0.32, subject to the 5% Limit % 1,241,600 0.17 41,807,200 5.68 36,075,800 4.89 672,200 0.09 34,375,000 4.67 36,829,490 5.00 175,670,510 23.85 – – – – – – – – 409,917,991 55.65	Solely upon full conversion of the New Convertible Debentures at HK$0.273, subject to the 5% Limit % 1,241,600 0.04 41,807,200 1.24 36,075,800 1.07 672,200 0.02 – – – – – – 168,510,465 5.00 168,510,465 5.00 28,388,278 0.84 2,515,085,297 74.63 409,917,991 12.16	Upon full conversion of the Existing Convertible Debentures at HK$0.32 and the New Convertible Debentures at HK$0.273, subject to the respective 5% Limit % 1,241,600 0.03 41,807,200 1.16 36,075,800 1.00 672,200 0.02 34,375,000 0.95 180,854,215 5.00 31,645,785 0.88 180,854,215 5.00 180,854,215 5.00 28,388,278 0.78 2,490,397,797 68.85 409,917,991 11.33	Solely upon full conversion of the New Convertible Debentures at HK$0.243, subject to the 5% Limit % 1,241,600 0.03 41,807,200 1.12 36,075,800 1.00 672,200 0.02 – – – – – – 186,291,296 5.00 186,291,296 5.00 31,893,004 0.85 2,831,635,514 75.99 409,917,991 10.99	Upon full conversion of the Existing Convertible Debentures at HK$0.32 and the New Convertible Debentures at HK$0.243, subject to the respective 5% Limit % 1,241,600 0.03 41,807,200 1.06 36,075,800 0.91 672,200 0.01 34,375,000 0.87 198,635,045 5.00 13,864,955 0.35 198,635,045 5.00 198,635,045 5.00 31,893,004 0.80 2,806,948,016 70.65 409,917,991 10.32	Solely upon full conversion of the New Convertible Debentures at HK$0.10 by the Subscribers, subject to the 5% Limit % 1,241,600 0.01 41,807,200 0.50 36,075,800 0.43 672,200 0.01 – – – – – – 417,673,240 5.00 417,673,240 5.00 77,500,000 0.93 6,950,903,520 83.21 409,917,991 4.91	Upon full conversion of the Existing Convertible Debentures at HK$0.32 and the New Convertible Debentures at HK$0.10, subject to the respective 5% Limit % 1,241,600 0.01 41,807,200 0.49 36,075,800 0.42 672,200 0.01 34,375,000 0.40 212,500,000 2.47 – – 430,016,990 5.00 430,016,990 5.00 77,500,000 0.90 6,926,216,020 80.53 409,917,991 4.77
	489,714,791 100.00	736,589,791 100.00	3,370,209,296 100.00	3,617,084,296 100.00	3,725,825,901 100.00	3,972,700,901 100.00	8,353,464,791 100.00	8,600,339,791 100.00

– 16 –

LETTER FROM THE BOARD

Notes:

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

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

• (3) Dr. Ma Xianming, alias, Ma Yin Ming is an executive Director.

• (4) Kelton Capital Group Limited and Right Choice Securities Limited are the holders of the Existing Convertible Debentures.

• (5) The 5% Limit applies to all the holders of the Existing Convertible Debentures and all the Debenture Holders. Accordingly, none of the holders of the Existing Convertible Debentures and all the Debenture Holders will become a substantial shareholder of the Company (as defined under the Listing Rules) by reason only of the full conversion of the Existing Convertible Debentures or the New Convertible Debentures.

• (6) The shareholdings are calculated on the assumption that there is no early redemption of the Existing Convertible Debentures.

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

Save for the proposed issue of convertible debentures to C Y Foundation Group Limited as announced by the Company on 26 August 2009 which had since lapsed as announced by the Company on 31 December 2009, there were no fund raising activities of the Company during the twelve months immediately preceding the date of this announcement.

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting to be held at Unit C, 19th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong on Thursday, 1 April 2010 at 11:00 a.m. is set out on pages 19 to 21 of this circular for the purpose of considering and, if thought fit, passing with or without amendments the resolutions as set out therein. The vote of the Shareholders at the Special General Meeting will be taken by poll in accordance with Rule 13.39(4) of the Listing Rules and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

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, please 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 should you so wish.

– 17 –

LETTER FROM THE BOARD

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

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Subscription Agreements will be available for inspection during normal business hours on any week days (except public holidays) at the principal place of business of the Company in Hong Kong at Unit C, 19th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong from the date of this circular up to and including the date of the Special General Meeting and will be available for inspection at the Special General Meeting.

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 resolutions as set out in the notice of the Special General Meeting are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of such resolutions.

Yours faithfully, For and on behalf of

Paradise Entertainment Limited Jay Chun

Chairman and Managing Director

– 18 –

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 Unit C, 19th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong on Thursday, 1 April 2010 at 11:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT the Subscription Agreement I (as defined and described in the circular of the Company dated 16 March 2010 (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 I be and are hereby approved, confirmed and ratified and that the directors of the Company (the “ Directors ”) be and are hereby authorized on behalf of the Company:

2. (A) 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 I and all transactions contemplated thereunder including, without limitation, (i) the creation and issue by the Company of the New Convertible Debentures (as defined in the Circular) pursuant to the terms of the Subscription Agreement I and (ii) the allotment and issue of the Conversion Shares (as defined in the Circular) upon the exercise of the conversion rights attaching to the New Convertible Debentures, such Conversion Shares to rank pari passu in all respects with all Shares then in issue; and

3. (B) to exercise or enforce all of the rights of the Company under the Subscription Agreement I and to complete the Subscription Agreement I in accordance with its terms.”

* For identification purposes only

– 19 –

NOTICE OF SPECIAL GENERAL MEETING

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

2. (A) 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 II and all transactions contemplated thereunder including, without limitation, (i) the creation and issue by the Company of the New Convertible Debentures (as defined in the Circular) pursuant to the terms of the Subscription Agreement II and (ii) the allotment and issue of the Conversion Shares (as defined in the Circular) upon the exercise of the conversion rights attaching to the New Convertible Debentures, such Conversion Shares to rank pari passu in all respects with all Shares then in issue; and

3. (B) to exercise or enforce all of the rights of the Company under the Subscription Agreement II and to complete the Subscription Agreement II in accordance with its terms.”

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

5. (A) 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 III and all transactions contemplated thereunder including, without limitation, (i) the creation and issue by the Company of the New Convertible Debentures (as defined in the Circular) pursuant to the terms of the Subscription Agreement III and (ii) the allotment and issue of the Conversion Shares (as defined in the Circular) upon the exercise of the conversion rights attaching to the New Convertible Debentures, such Conversion Shares to rank pari passu in all respects with all Shares then in issue; and

– 20 –

NOTICE OF SPECIAL GENERAL MEETING

• (B) to exercise or enforce all of the rights of the Company under the Subscription Agreement III and to complete the Subscription Agreement III in accordance with its terms.”

By Order of the Board Paradise Entertainment Limited Jay Chun

Chairman and Managing Director

Hong Kong, 16 March 2010

Head Office and Principal Place of Business:

Unit C 19th Floor Entertainment Building 30 Queen’s 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, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting. Completion and return of a form or proxy will not preclude the shareholders from attending and voting in person should they so desire.

• (4) A form of proxy for use at the meeting is enclosed with the circular of the Company despatched to the shareholders of the Company on 16 March 2010.

• (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 and Dr. Ma Xianming, alias, Ma Yin Ming, and the independent non-executive directors of the Company are Mr. Frank Hu, Mr. Li John Zongyang and Mr. Hu Wenxiang.

– 21 –