Paradise Entertainment Limited — Proxy Solicitation & Information Statement 2016

Oct 5, 2016

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 滙彩控股有限公司[*]

(Incorporated in Bermuda with limited liability) (Stock Code: 1180)

ISSUE OF UNLISTED WARRANTS PURSUANT TO SPECIFIC MANDATE AND NOTICE OF SPECIAL GENERAL MEETING

A notice convening the special general meeting of the Company to be held at Unit C, 19/F., Entertainment Building, 30 Queen’s Road Central, Hong Kong on Monday, 24 October 2016 at 11:00 a.m. (the “SGM”) is set out in this circular. A form of proxy for use by the Shareholders at the SGM is enclosed. Whether or not you are able to attend the SGM, 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 Level 22, Hopewell Centre, 183 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 SGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting (as the case may be) should you so wish.

6 October 2016

• For identification purpose only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

– i –

DEFINITIONS

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

“Board”

the board of the Directors

“Business Day”

a day other than a Saturday or Sunday, on which banks in Hong Kong are open for business generally

“Company”

Paradise Entertainment Limited, a company incorporated under the laws of Bermuda with limited liability and the shares of which are listed on the Stock Exchange (stock code: 1180)

“Completion”

completion of the Subscription Agreement in accordance with the terms thereof

“Completion Date”

the second Business Day after the date on which the conditions set out in the section headed “Conditions” in this circular are fulfilled or, as the case may be, waived by the Subscriber or the Company

“connected person(s)”

has the meaning as ascribed thereto under the Listing Rules

“Director(s)”

the director(s) of the Company

“Group”

the Company together with its subsidiaries

“HK$”

Hong Kong dollar(s), the lawful currency of Hong Kong

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Third Party(ies)”

third party(ies) independent of and not connected with the Company and any of its connected person(s)

“Latest Practicable Date”

3 October 2016, being the latest practicable date for ascertaining certain information contained in this circular

“Issue Price”

the issue price of HK$0.03 per Warrant

– 1 –

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Long Stop Date”	31 October 2016, or such other time and date as may be
	agreed between the Company and the Subscriber in writing
“PRC”	the People’s Republic of China, for the purpose of this
	circular, excludes Hong Kong, Macau and Taiwan
“SGM”	the special general meeting of the Company to be
	convened and held to consider and, if thought fit, approve,
	among other things, the Subscription Agreement and the
	transactions contemplated thereunder and the grant of
	specific mandate to issue the Warrant Shares
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	the ordinary share(s) of HK$0.001 each in the share capital
	of the Company
“Shareholder(s)”	the holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscriber”	Sky Rock Development Limited, a company incorporated
	in the British Virgin Islands with limited liability, the entire
	issued share capital of which is legally and beneficially
	owned by Mr. Chang Wang
“Subscription Agreement”	the conditional warrant subscription agreement dated 22
	September 2016 entered into between the Subscriber and
	the Company in relation to the subscription of Warrants by
	the Subscriber
“Subscription Period”	the one-year period commencing from the Completion Date

– 2 –

DEFINITIONS

“Subscription Price”	a price of HK$1.40 per Warrant Share (subject to
	adjustment) at which holder(s) of the Warrants may
	subscribe for the Warrant Shares
“subsidiary(ies)”	has the meaning as ascribed thereto under the Companies
	Ordinance (Chapter 622 of the Laws of Hong Kong)
“Warrant(s)”	a total of 50,000,000 unlisted warrants conferring rights to
	subscribe for 50,000,000 Warrant Shares at the Subscription
	Price (subject to adjustment), at any time during the
	Subscription Period
“Warrant Share(s)”	the new Shares to be issued by the Company upon the
	exercise of the subscription rights attaching to the Warrants
“%”	per cent.

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LETTER FROM THE BOARD

PARADISE ENTERTAINMENT LIMITED 滙彩控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

Executive Directors: Mr. Jay Chun (Chairman and Managing Director, alternate Director to Mr. Shan Shiyong, alias, Sin Sai Yung) Mr. Shan Shiyong, alias, Sin Sai Yung Mr. Hu Liming

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

Independent Non-executive Directors: Mr. Kai-Shing Tao Mr. Li John Zongyang Ms. Tang Kiu Sam Alice

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

6 October 2016

To the Shareholders

Dear Sir or Madam,

ISSUE OF UNLISTED WARRANTS PURSUANT TO SPECIFIC MANDATE AND NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcements issued by the Company on 22 and 26 September 2016 in relation to the Subscription Agreement and the issue of the Warrants. The purpose of this circular is, among other things, to provide you with more information in relation to the Subscription Agreement and the issue of the Warrants as follows:

AGREEMENT

Date

22 September 2016

• For identification purpose only

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LETTER FROM THE BOARD

Parties

• (1) the Company as the issuer; and

• (2) Sky Rock Development Limited, a company incorporated in the British Virgin Islands with limited liability and the entire issued share capital of which is legally and beneficially owned by Mr. Chang Wang, as the Subscriber. The principal business of the Subscriber is investment holding including Hong Kong listed shares.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, save that Mr. Chang Wang and his spouse are beneficially interested in an aggregate of 272,000 Shares, the Subscriber and its ultimate beneficial owner (Mr. Chang Wang) are Independent Third Parties.

Securities to be issued

Subject to the fulfillment of the conditions to the Subscription Agreement, the Company has agreed to issue, and the Subscriber has agreed to subscribe for, an aggregate of 50,000,000 Warrants at the Issue Price of HK$0.03 per Warrant. Each of the Warrants carries the right to subscribe for one Warrant Share at the Subscription Price of HK$1.40.

The Issue Price and the Subscription Price is determined based on negotiations on arm’s length basis between the Company and the Subscriber with reference to the following factors:

(i) the Group’s financial position

The Group recorded an audited loss of approximately HK$148,913,000 for the year ended 31 December 2015, an unaudited loss of approximately HK$410,453,000 for the six month ended 30 June 2016 and an unaudited net assets value of the Group as at 30 June 2016 was approximately HK$566,037,000, which represents a net asset value per Share of approximately HK$0.54. The unaudited net asset value per Share of approximately HK$0.54 represents a substantial discount to the recent market price per Share and the loss making position of the Group would cause hesitation for potential investors to invest in the Company.

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LETTER FROM THE BOARD

(ii) the historical Share prices and liquidity of the Shares in the market

The table below shows the highest, lowest and average closing prices of the Shares in the past three months immediately preceding the date of entering into the Subscription Agreement:

	Date	Share price
Highest	21 September 2016	1.22
Lowest	9 September 2016	1.13
Average	–	1.18

The table below shows the highest, lowest and average trading volume of the Shares in the past three months immediately preceding the date of entering into the Subscription Agreement:

			Number of
	Date		Shares traded
Highest	9	September 2016	1,520,000
Lowest	Various dates including
		14 July 2016, 29 July 2016
		and 1 September 2016	0
Average	–		170,653

(iii) the current market sentiment

It is noted that the current market sentiment is not positive and the potential investors are sluggish in new investment. The uncertainties in the future and local economy development cause investors to become more conservative and are unwilling to invest substantial sum in the Shares. The issue of Warrants will allow the Subscriber and those potential investors (if the Warrants are transferred) to have an opportunity to observe the performance of the Group before the exercise of the subscription rights attaching to the Warrants.

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LETTER FROM THE BOARD

The Company did not take into account any valuation of the Warrants in determining the Issue Price and the Subscription Price due to the fact that the theoretical value is calculated by a formula taking into accounts certain factors, but it may not take into account the actual circumstances, the Group’s financial position, the market sentiment and the key terms of the Warrants such as the adjustment mechanism, non-listed nature and restrictions on the sale of the Warrant Shares. Such theoretical value may not be an appropriate yardstick for the transaction and can vary on a daily basis as a result of share price fluctuation and different valuation models may generate different theoretical values. In additions, it is consistent with the Directors’ observation that using the theoretical value as pricing benchmark is not common in Hong Kong capital market for the issuance of the unlisted warrant. As such, given that the Issue Price and the Subscription Price were arrived at after arm’s length negotiations, the Directors consider that the above factors are more appropriate for the determination of the Issue Price and the Subscription Price. In view of the above, the Board considers that the terms of the Subscription Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions

Completion of the Subscription Agreement is subject to the fulfillment of the following conditions:

• (a) the passing by the Shareholders in accordance with the Listing Rules and all applicable laws at the SGM, of resolutions approving (i) the Subscription Agreement and the transactions contemplated thereunder; and (ii) the grant of a specific mandate to issue the Warrant Shares to the Subscriber pursuant to the terms provided therein;

• (b) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Warrant Shares;

• (c) the warranties set out in the Subscription Agreement remaining true and correct in all material respects;

• (d) all necessary consents and approvals as may be required to be obtained on the part of the Company in respect of the issue of the Warrants and the transactions contemplated under the Subscription Agreement having been obtained by the Company; and

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LETTER FROM THE BOARD

• (e) if applicable, the Bermuda Monetary Authority granting its consent to the issue of the Warrants and the allotment and issue of the Warrant Shares.

The Subscriber may at any time by notice in writing to the Company waive the condition set out in (c) above and the Company may at any time by notice in writing to the Subscriber waive the condition set out in (d) above.

In the event that any of the conditions referred to above is not fulfilled or waived in full at or before 5:00 p.m. on the Long Stop Date (or such other time and date as may be agreed between the Company and the Subscriber in writing), the Subscription Agreement shall cease and determine and thereafter, neither party shall have any obligations and liabilities hereunder save for any antecedent breaches of the provisions hereof.

Completion

Completion shall take place on the Completion Date.

PRINCIPAL TERMS OF THE WARRANTS

Number of Warrants 50,000,000 Warrants. The Warrants will rank pari passu in all respects among themselves. Issue Price HK$0.03 per Warrant. The net issue price, after deduction of the relevant expenses, is approximately HK$0.0299 per Warrant. Number of Warrant As at the Latest Practicable Date, the Company has a Shares issuable total of 1,052,185,315 Shares in issue. Assuming there is no further issue or repurchase of the Shares and there is no adjustment to the Subscription Price, upon the full exercise of the subscription rights attaching to the Warrants, 50,000,000 Warrant Shares will be issued, which represent approximately 4.75% of the total number of Shares in issue as at the Latest Practicable Date; and (ii) approximately 4.54% of the total number of Shares in issue as enlarged by the allotment and issue of the Warrant Shares.

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LETTER FROM THE BOARD

Subscription Price

Subject to adjustments, the Subscription Price is HK$1.40 per Warrant Share, which represents:

• (i) a discount of approximately 14.63% to the closing price of HK$1.64 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a premium of approximately 6.06% over the closing price of HK$1.32 per Share as quoted on the Stock Exchange on the date of the Subscription Agreement;

• (iii) a premium of approximately 17.45% over the average of the closing price of approximately HK$1.192 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the date immediately preceding the date of the Subscription Agreement; and

• (iv) a premium of approximately 19.05% over the average of the closing price of approximately HK$1.176 as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the date immediately preceding the date of the Subscription Agreement.

The aggregate of the Issue Price and the Subscription Price of HK$1.43 represents:

• (i) a discount of approximately 12.80% to the closing price of HK$1.64 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a premium of approximately 8.33% over the closing price of HK$1.32 per Share as quoted on the Stock Exchange on the date of the Subscription Agreement;

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LETTER FROM THE BOARD

• (iii) a premium of approximately 19.97% over the average of the closing price of approximately HK$1.192 as quoted on the Stock Exchange for the last five consecutive trading days up to and including the date immediately preceding the date of the Subscription Agreement; and

• (iv) a premium of approximately 21.60% over the average of the closing price of approximately HK$1.176 as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the date immediately preceding the date of the Subscription Agreement.

The Issue Price and the Subscription Price were determined after arm’s length negotiations between the Company and the Subscriber, taking into account the recent trading prices of the Shares as well as the “Reasons for the issue of the Warrants” as set out below. The Directors are of the opinion that the Issue Price together with the Subscription Price (which is at a premium) are fair and reasonable and in the best interest of the Company.

Adjustments to the Subscription Price

The Subscription Price will be subject to adjustments in certain events, including:

• (i) an alteration to the nominal value of the Shares as a result of consolidation or subdivision;

• (ii) issue of Shares credited as fully paid to the Shareholders by way of capitalization of profits or reserves, other than Shares issued in lieu of a cash dividend;

• (iii) payment or making of any capital distribution to the Shareholders; and

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LETTER FROM THE BOARD

• (iv) offer to the Shareholders for subscription by way of rights, or grant to the Shareholders any options or warrants to subscribe for new Shares, at a price which is less than 80% of the current market price on the date of the announcement of the terms of the offer or grant.

The Board confirmed that the above are normal anti-dilutive adjustment events.

Subscription Period and lot size

The subscription rights attaching to the Warrants can be exercised at any time during the period of one year commencing from the Completion Date in integral multiples of 10,000,000 Warrants.

The Subscriber shall not be entitled to exercise the subscription rights attaching to the Warrants to the extent that immediately after such exercise:

• (i) there will not be sufficient public float of the Shares as required under the Listing Rules; and

• (ii) the Subscriber whether alone or together with parties acting in concert with it would be obliged to make a general offer under the Hong Kong Code on Takeovers and Mergers in force from time to time.

Transferability of Warrants

• The Warrants shall be in registered form and is freely transferable to any person (other than a connected person of the Company) in integral multiples of 10,000,000 Warrants (or if at the time of transfer, the outstanding number of Warrants are less than 10,000,000, the whole but not in part of the outstanding Warrants) by instrument of transfer in any usual or common form or such other form as may be approved by the Directors provided that no transfer of the Warrants can be made to connected persons unless with the prior written consent of the Company.

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LETTER FROM THE BOARD

• Restriction on transfer of Warrant Shares

The Subscriber must not transfer and/or dispose of the Warrant Shares at a price less than HK$1.80.

• Ranking of the Warrant Shares

The Warrant Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued Shares as at the date of allotment and issue of the relevant Warrant Shares.

Voting rights

The holder(s) of the Warrants will not be entitled to receive notices of, attend or vote at any meeting of the Company by reason only of it being a holder of the Warrants. The holder of the Warrants shall not have the right to participate in any distributions and/or offers of further securities made by the Company.

• Rights of holder(s) of Warrants during the Subscription Period on winding-up

If an effective resolution is passed during the Subscription Period for the winding-up of the Company and such winding-up is not for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement, the holder(s) of the Warrants shall be entitled at any time within six weeks after the passing of such resolution to exercise the Warrants. Subject to the foregoing, if the Company is wound up, all Warrants which have not been exercised at the date of the passing of such resolution shall lapse.

Listing

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Warrant Shares which may fall to be allotted and issued upon exercise of the subscription rights attaching to the Warrants. No listing of the Warrants will be sought on the Stock Exchange or any other stock exchanges.

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LETTER FROM THE BOARD

REASONS FOR THE ISSUE OF WARRANTS

The Group is principally engaged in the development, provision and sales of electronic gaming systems and the provision of casino management services.

Mr. Chang Wang, the sole shareholder and director of the Subscriber, is well-known in the gaming and casino industry in Macau. Mr. Chang is the founder of Mocha Clubs, the largest slot hall operator in Macau. Mocha Clubs operates around 2,000 gaming machines across ten locations, and it is one of the largest non-casino-based operations in Macau. Mr. Chang started the company in 2002. The first club in Macau began with 64 slot machines and electronic table game (“ETG”) stations. By the end of 2004 Mr. Chang expanded the chain to 3 Mocha Slot Clubs in Macau with an installed base of over 600 machines. He sold his company in 2004. During this time period he was an innovator and developer of the first video slot, sicbo and roulette ETG to Macau. He was instrumental in helping to design some of the leading gaming suppliers’ ETG machines main platform design and user interface screen layout for Chinese players. Mr. Chang is also sought after as an expert consultant by gaming supplier companies and Macau casinos to better understand and penetrate the lucrative Macau gaming machine market trends and burgeoning Chinese electronic gaming player. Before Mocha Slot Clubs, Mr. Chang served as an executive director of two technology companies in Hong Kong. Prior to that he was the managing director of a golf resort development company in Australia.

Mr. Chang Wang also has a good business relationship with the Company as Mr. Chang had previously invested in the Company in 2007 (through subscription of convertible notes) and 2013 (through subscription of warrants), respectively. As such, the Company was interested at the prospects of Mr. Chang Wang being a strategic investor of the Company, who may be able to assist the Company in raising additional capital in the long run and for marketing purposes. The Company therefore contemplated the possibility of issuing the Warrants to the Subscriber (nominee of Mr. Chang Wang) to bring him into the Company as a strategic investor, and will further explore the potential business opportunity that Mr. Chang can introduce to the Company taking into account his extensive business connection in the gaming industry in Macau. However, as at the Latest Practicable Date, the Company did not have any concrete plan for any contemplated business plans or opportunities that are considering by the Company which are relevant to introducing Mr. Chang as a strategic investor.

The Company considered issuing the Warrants to be an appropriate mode of fund-raising, taking into account that: (i) although only a minimal amount may be raised from the initial subscription of the Warrants, the Company may receive a much larger sum of money if the subscription rights attaching to the Warrants are exercised in full; (ii) the subscription price is at a premium; (iii) issuing the Warrants can broaden the Shareholder and capital base of the Company; and (iv) the Warrants are not interest-bearing and will not result in any immediate dilution effect on the shareholding of the existing Shareholders. The net proceeds from the subscription of Warrants

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LETTER FROM THE BOARD

are approximately HK$1,498,000 which will be applied as the general working capital of the Group. Although only a minimal amount will be raised from the initial subscription of the Warrants, the Board is of the view that, if the subscription rights attaching to the Warrants are exercised in full, the Company will receive net proceeds in the amount of approximately HK$71,498,000 (including the Issue Price of the Warrants) and increasing the shareholding to be held by Mr. Chang Wang, which will help broaden the capital base of the Company.

Further, given the Warrants are transferable in whole or in part, the number of the warrantholders may expand. In the event that more warrantholders exercise the subscription rights, the shareholders base of the Company will be further broadened.

The Company has also considered other alternative fund raising methods including issuing new Shares, debt financing and bank borrowings. Placing of new Shares has the likely disadvantage that the placement Shares may have to be set at deep discount to share price for the placing agent or placees, in light of the current market sentiment while issuing new Shares at premium to market prices is not realistic.

In addition, the interest burden resulted from the debt financing and bank borrowings may not be beneficial to the Company. Furthermore, whilst the Company has considered that both an open offer and a rights issue which would allow the Shareholders to maintain their respective prorata shareholdings in the Company, however, given that the Group had incurred losses for the year ended 31 December 2015 and for the six months ended 30 June 2016, the Company considered that there would be limited number of underwriters who is interested to underwrite an open offer or a rights issue of the Company and also for those underwriters who are interested in such open offer or rights issue, a deep discount to the prevailing market price of the Shares might be required by them. Also, rights issue and open offer require approval from relevant authorities and involve, among other things, the preparation and the issue of a prospectus, and the printing and handling of application forms and, thereby are relatively time consuming and costly.

The Company has also considered the possibility of listing of the Warrants. However, the application for listing of the Warrants would incur additional costs which will further reduce the net proceeds from the issue of the Warrants. In addition, the application for listing of the Warrants could delay the whole fund raising process. Further, the Warrants are issued to single holder at the time of issue, and such issue cannot meet the requirement on adequate spread of holders of such warrants pursuant to Rule 11.23(3)(b). Therefore, the Directors are of the view that the issue of unlisted Warrants would be a more appropriate option.

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LETTER FROM THE BOARD

The Directors also consider that the Subscription Agreement was entered into on normal commercial terms after arm’s length negotiations between the Company and the Subscriber and that the terms of the Subscription Agreement (including the Issue Price and the Subscription Price) are fair and reasonable so far as the interests of the Company and its Shareholders as a whole are concerned.

USE OF PROCEEDS

Assuming the full exercise of the subscription rights attaching to the Warrants, the total gross and net funds to be raised, including the funds raised by the subscription of Warrants, are approximately HK$71,500,000 and HK$71,498,000. The net proceeds of approximately HK$71,498,000 shall be applied as the general working capital of the Group (i.e. payment of rental, salary, market expenses and of purchase of gaming machines).

Since the proceeds that may be raised from the issue of Warrants will depend on the exercise of subscription rights which is out of control of the Company, the proceeds that will actually be raised therefrom may not match with the Company’s capital requirements but will serve as additional source of funds for such purposes.

The Company currently does not have immediate additional capital requirement for its general working capital and does not have any concrete future business expansion plan that needs specific capital requirement. However, the Company will review its business plan from time to time and the proceeds that may be raised from the issue of the Warrants would strengthen the Company’s financial position for its future business development. The Company shall not rule out the possibility of alternative fund raising methods should the subscription of the Warrant Shares not match the future capital needs.

Assuming the full exercise of the subscription rights attaching to the Warrants, the net price to the Company of each Warrant, which is calculated by dividing the aggregate net proceeds from the subscription of Warrants and the exercise of the subscription rights attaching to the Warrants by the total number of the Warrants, is approximately HK$1.4299.

As at the Latest Practicable Date, the Company did not have any concrete plan for any contemplated acquisitions, disposals or other matters that may have a material impact on the Company which is necessary for the Shareholders and the public to appraise the position of the Company during the exercise period of the Warrants. However, the Company will review its business plan from time to time and may consider potential business expansion and investment opportunities when the opportunities arise.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, other than the entering into the Subscription Agreement, the Company had not entered, or contemplated to enter, into any other arrangements, agreements or understanding (whether formal or informal and whether express or implied) with the Subscriber (if any) and/or the Placing Agent.

SHAREHOLDING STRUCTURE

As at the Latest Practicable Date, the Company had 1,052,185,315 Shares in issue. The shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the full exercise of the subscription rights attaching to the Warrants (assuming that there will be no further changes in the total number of Shares in issue prior to such exercise and no adjustment to the Subscription Price) are as follows:

Mr. Jay Chun (Note 1) Mr. Shan Shiyong, alias, Sin Sai Yung (Note 2) Subscriber and its associates Public Shareholders Total	As at the Latest Practicable Date No. of Shares Approximate % 630,960,880 59.97 26,097,580 2.48 272,000 0.03 394,854,855 37.52 1,052,185,315 100.00	Immediately after the full exercise of the subscription rights attaching to the Warrants No. of Shares Approximate % 630,960,880 57.25 26,097,580 2.37 50,272,000 4.56 394,854,855 35.82 1,102,185,315 100.00	Immediately after the full exercise of the subscription rights attaching to the Warrants No. of Shares Approximate % 630,960,880 57.25 26,097,580 2.37 50,272,000 4.56 394,854,855 35.82 1,102,185,315 100.00
			100.00

Notes:

1. Among the 630,960,880 Shares owned by Mr. Jay Chun (an executive Director), 630,836,720 Shares are held by August Profit Investments Limited, a company wholly owned by Mr. Jay Chun.

2. The 26,097,580 Shares are held by Best Top Offshore Limited, a company wholly owned by Mr. Shan Shiyong, alias, Sin Sai Yung (an executive Director).

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

The Company has not conducted any fund raising activity in the past twelve months from the Latest Practicable Date.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

Pursuant to Rule 15.02(1) of the Listing Rules, the Warrant Shares to be issued on exercise of the Warrants must not, when aggregated with all other equity securities remain to be issued on exercise of any other subscription rights, if all such rights were immediately exercised, whether or not such exercise is permissible, exceed 20% of the total number of Shares in issue at the time the Warrants are issued. Options granted under share option schemes which comply with Chapter 17 of the Listing Rules are excluded for the purpose of such limit.

As at the Latest Practicable Date, the Company does not have any securities with subscription rights outstanding and not yet exercised.

Assuming (i) full exercise of the subscription rights attaching to the Warrants; and (ii) no Shares are further issued and repurchased, an aggregate of 50,000,000 Shares will be issued, which represent (a) approximately 4.75% of the total number of Shares in issue as at the Latest Practicable Date; and (b) approximately 4.54% of the total number of Shares in issue as enlarged by the issue of the Warrant Shares. Accordingly, the issue of the Warrants is in compliance with Rule 15.02(1) of the Listing Rules.

SGM

A notice convening the SGM to be held at Unit C, 19/F., Entertainment Building, 30 Queen’s Road Central, Hong Kong on Monday, 24 October 2016 at 11:00 a.m. is set out in this circular for the purpose of considering and, if thought fit, passing with or without amendments the resolutions as set out therein.

A form of proxy for use by the Shareholders at the SGM is enclosed. Whether or not you are able to attend the SGM, 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 Level 22, Hopewell Centre, 183 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 SGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish.

Mr. Chang Wang (being the sole shareholder of the Subscriber) and his associates (holding an aggregate of 272,000 Shares, representing approximately 0.03% of the issued share capital of the Company as at the Latest Practicable Date) are required to abstain from voting at the SGM in relation to the approval of the Subscription Agreement and the transactions contemplated thereunder. Save as disclosed, no other Shareholders would be required to abstain from voting at the SGM pursuant to the Listing Rules and/or the Bye-laws.

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LETTER FROM THE BOARD

DOCUMENT AVAILABLE FOR INSPECTION

Copy of the Subscription Agreement 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 SGM and will be available for inspection at the SGM.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. 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.

RECOMMENDATION

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

Yours faithfully, For and on behalf of Jay Chun Chairman

Paradise Entertainment Limited

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NOTICE OF SGM

PARADISE ENTERTAINMENT LIMITED 滙彩控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1180)

NOTICE IS HEREBY GIVEN that the 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 Monday, 24 October 2016 at 11:00 a.m. for the following purposes:

ORDINARY RESOLUTIONS

1. “ THAT :

2. (a) the subscription agreement dated 22 September 2016 (the “Subscription Agreement”) entered into between the Company as issuer and Sky Rock Development Limited as subscriber (the “Subscriber”), pursuant to which the Company has agreed to issue, and the Subscriber has agreed to subscribe for, an aggregate of 50,000,000 warrants (the “Warrants”) at the issue price of HK$0.03 per Warrant (a copy of the Subscription Agreement and the draft instrument have been marked “A” and “B”, respectively and initialed by the chairman of the meeting for identification purpose) be and are hereby approved, ratified and confirmed;

3. (b) the creation and issue of the Warrants by the Company in accordance with the terms and conditions of the Subscription Agreement be and are hereby approved, ratified and confirmed;

4. (c) the directors of the Company be and are hereby granted a specific mandate for the allotment and issue of up to a maximum number of 50,000,000 new shares of HK$0.001 each in the share capital of the Company (the “Warrant Share(s)”) credited as fully paid at the initial subscription price of HK$1.40 per Warrant Share (subject to adjustment and the terms and conditions as set out in the draft instrument), which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the Warrants; and

• For identification purpose only

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NOTICE OF SGM

• (d) any one director or the company secretary of the Company be and is hereby authorised to do all such acts and things (including, without limitation, signing, executing (under hand or under seal), perfecting and delivery of all agreements, documents and instruments) which are in his opinion necessary, appropriate, desirable or expedient to implement or to give effect to the terms of the Subscription Agreement and the transactions contemplated thereunder and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith.”

By Order of the Board Stella Ho Company Secretary

Hong Kong, 6 October 2016

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.

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NOTICE OF SGM

• (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 certified copy of that power or authority, must be deposited at the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form or proxy will not preclude 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 dated 6 October 2016 despatched to its shareholders.

• (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 Mr. Hu Liming and the independent non-executive directors of the Company are Mr. Kai-Shing Tao, Mr. Li John Zongyang and Ms. Tang Kiu Sam Alice.

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