Paradise Entertainment Limited — Proxy Solicitation & Information Statement 2016

Jun 20, 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 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)

MAJOR TRANSACTION

GRANT OF EXCLUSIVE RIGHT TO MAKE, MARKET AND DISTRIBUTE ELECTRONIC GAMING SYSTEMS INVOLVING ASSIGNMENT AND LICENSE OF CERTAIN PATENTS AND ASSOCIATED TECHNOLOGY

21 June 2016

• For identification purpose only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix II – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15

– i –

DEFINITIONS

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

“Agreement”

the Patents and Technology Assignment and License Agreement dated 25 April 2016 entered into between the LTG Parties and IGT

“Assignment”

the assignment of the Patents and the associated technology in relation to the Licensed Products from the LTG Parties to IGT as contemplated under the Agreement

“Board”

the board of the Directors

“Closing Date”

the date of the Shareholders’ approval of the Company in relation to the Transactions being obtained, i.e. 25 April 2016

“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)

“connected person(s)”

has the meaning as ascribed thereto under the Listing Rules

“Director(s)”

the director(s) of the Company

“FIGL”

Fresh Idea Global Limited, a company established in the British Virgin Islands with limited liability, and a whollyowned subsidiary 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

“IGT”

IGT, a Nevada corporation, being the licensee and the assignee under the Agreement

– 1 –

DEFINITIONS

• “Latest Practicable Date”

• “Licensed Products”

• “Listing Rules”

• “Live ETG”

• “LT Game”

• “LT Game Macau Technology”

• 17 June 2016, being the latest practicable date for ascertaining certain information contained in this circular

any Live ETG or RNG ETG, Mobile/Online Gaming Application, or associated system that either (a) the manufacture, use, offer for sale, sale or importation of which is covered by any Patents, (b) is manufactured or operated using a method or process covered by any Patents, or (c) is developed, manufactured, or operated using any of the LT Game Macau Technology

the Rules Governing the Listing of Securities on the Stock Exchange

gaming systems and associated electronic gaming stations for extending casino games that typically involve a live dealer (e.g., baccarat, roulette, blackjack, craps, etc.) to include multiple stations for players to play the game with the dealer in real time remotely from the table at which the dealer is located

LT Game Limited, a company established in the British Virgin Islands with limited liability, a 82%-owned subsidiary of the Company

all technology that (a) is (i) owned by a LTG Party or any of its affiliates or (ii) licensed to a LTG Party or its affiliate (by a person that is not an affiliate of any LTG Party) with the right to sublicense, in each case (i) or (ii), as of the date of the Agreement, (b) is in the possession or control of LT Game or any of its representatives as of the date of the Agreement, (c) can be licensed and disclosed to IGT upon the terms hereunder without violating any contractual restriction existing as of the date of the Agreement between a LTG Party or its affiliate, on the one hand, and a person that is not an affiliate of a LTG Party, on the other hand, and (d) was developed or is under development for, embodied by, included within, or used to make or operate Live ETGs or RNG ETGs only in Macau

– 2 –

DEFINITIONS

“LTG Parties”

“Macau”

“Machines”

• “Mobile/Online Gaming Application”

“Patents”

“PRC”

“RNG ETG”

“SCL”

collectively, FIGL, SCL and LT Game

the Macao Special Administrative Region of the PRC

Live ETG and/or RNG ETG, being electronic gaming machines installed with the Licensed Products

a software application that enables play of, as or with a Live ETG or RNG ETG through a personal or mobile device, such as a phone, tablet computer, laptop computer, desktop computer or other device that is movable by the player, any associated hardware, networking or other systems that enable such application, in each case where the application is provided by or for the benefit of operators of physical or online gaming establishments (including physical and virtual casinos), physical or online lottery establishments (including agents, operators and locations that support lottery terminals), and patrons, customers and users of the foregoing, whether such uses are online or on-premises or outside of such gaming or lottery establishments, and whether for real money wagering or not

all patents and patent applications that are owned by the LTG Parties and claim any Live ETG, RNG ETG or portion thereof, 29 of which existing as of the date of the Agreement in various countries outside Macau are to be assigned to IGT

the People’s Republic of China, for the purpose of this circular, excludes Hong Kong, Macau and Taiwan

gaming systems and associated electronic gaming stations that operate separately from Live ETGs and that can simulate table game outcomes using only a software driven random number generator

Solution Champion Limited, a company established in the British Virgin Islands with limited liability, and a whollyowned subsidiary of the Company

– 3 –

DEFINITIONS

“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	the ordinary share(s) of HK$0.001 each in the share capital
	of the Company
“Shareholder(s)”	the holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary(ies)”	has the meaning as ascribed thereto under the Companies
	Ordinance (Chapter 622 of the Laws of Hong Kong)
“Term”	the term of the Agreement, unless terminated sooner, will
	remain in effect for a term of 15 years from the date of the
	Agreement
“Transactions”	the transactions as contemplated under the Agreement
“US”	The United States of America
“US$”	US dollars, the lawful currency of US
“%”	per cent.

For reference purpose only and unless otherwise specified, US$ have been translated into HK$ using the rate of US$1.00 to HK$7.80 in this circular.

– 4 –

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

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

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

21 June 2016

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION GRANT OF EXCLUSIVE RIGHT TO MAKE, MARKET AND DISTRIBUTE ELECTRONIC GAMING SYSTEMS INVOLVING ASSIGNMENT AND LICENSE OF CERTAIN PATENTS AND ASSOCIATED TECHNOLOGY

INTRODUCTION

Reference is made to the announcement issued by the Company on 26 April 2016 whereby the Company announced that the LTG Parties (subsidiaries of the Company) and IGT entered into the Agreement pursuant to which the LTG Parties have agreed to grant to IGT the exclusive rights to make, have made, use, sell, offer for sale, import, license/sub-license, and otherwise exploit the Licensed Products worldwide (other than Macau), which involves the assignment and licence of certain patents and associated technology in relation to the Licensed Products for the purpose of facilitating the exercise of the exclusive rights by IGT for the Term of 15 years.

• For identification purpose only

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is, among other things, to provide you with more information in relation to the Transactions. The details of the Agreement are as follows:

AGREEMENT

Date: 25 April 2016 (after trading hours)

Parties: FIGL, as the licensor and the assignor, a company established in the British Virgin Islands with limited liability, and a wholly-owned subsidiary of the Company;

SCL, as the licensor and the assignor, a company established in the British Virgin Islands with limited liability, and a wholly-owned subsidiary of the Company;

LT Game, a company established in the British Virgin Islands with limited liability, a non-wholly owned subsidiary of the Company; and

IGT, as the licensee and the assignee, is a Nevada corporation and a subsidiary of International Game Technology, which is listed on the New York Stock Exchange under the trading symbol “IGT”, and to the best of the Director’s knowledge, information and belief having made all reasonable enquiries, (i) IGT and its ultimate beneficial owner are third parties independent of the Company and connected persons of the Company; and (ii) IGT is principally engaged in the provision of end-to-end gaming solutions to the governmentsponsored and commercial gaming industry.

Subject matters

Pursuant to the Agreement, the LTG Parties have agreed to grant to IGT the exclusive right to make, have made, use, sell, offer for sale, import and otherwise exploit the Licensed Products worldwide (other than Macau), which involves the assignment of certain Patents and associated technology and the grant of an exclusive license to other patents in relation to the Licensed Products for the purpose of facilitating the exercise of the exclusive rights by IGT. Upon early termination of the Agreement, the Patents shall be re-assigned back to the LTG Parties and the grant of exclusive license shall be terminated; whereas upon the completion of the full Term of 15 years, the Assignment and licenses become irrevocable/non-terminable.

– 6 –

LETTER FROM THE BOARD

LT Game, as the supplier, and IGT, as the distributor, are parties to an existing distribution agreement effective from 15 August 2014 involving the distribution of products that would be deemed the Licensed Products in the US and Canada, which is terminated upon the signing of the Agreement.

Fees

Pursuant to the Agreement,

• (i) in consideration of the grant of the exclusive rights under the Agreement, IGT shall pay a one-time, non-refundable and non-creditable upfront payment of US$12,950,000 (equivalent to HK$101,010,000) in instalments by cash as follows:–

• (a) 20% within two business days after the Closing Date;

• (b) 50% within two business days after (i) LTG Parties have provided to IGT a true, correct, and complete copy of all of the Patents and associated technology within 30 days after the date of signing of the Agreement in accordance with the Agreement or (ii) the Closing Date (whichever is later); and

• (c) 30% within two business days after (i) LTG Parties have completed the required disclosure (which shall be completed within 90 days after the date of signing of the Agreement) in accordance with the Agreement or (ii) the Closing Date (whichever is later); and

• (ii) in addition, during the Term, IGT will also have to pay to the LTG Parties earn-out payments for IGT’s placements of Licensed Products based upon a flat fee per unit (for sale) or flat fee per unit per day (for lease) as determined by the parties to the Agreement. The amount of flat fee for Live ETG will be on a descending scale after each of a five-year period; while the amount of flat fee will remain the same for RNG ETG throughout the Term. Depend on the actual selling price/rent of the Machines to be sold/leased by IGT, the LTG Parties estimate that the aggregate earn-out payments will represent approximately 2.6% to 12% of IGT’s sales and lease revenue for the Licensed Products (of which for Live ETG: ranging from 12% to 5.6% of the selling price of the Machine and 11% to 5.1% of the rental for the Machine, respectively; and for RNG ETG: ranging from 3.1% to 2.6% of the selling price of the Machine and 5.1% to 3.4% of the rental for the Machine, respectively), taking into account the fees of comparable electronic gaming systems in the market. The flat fee will not vary with the actual number of Machines sold or leased by IGT. For the Mobile/Online Gaming Application, such Licensed Product is not a ready-to-market product, and there will still be some development works to be done. To make sure all eventualities in the Patents are covered, the Group successfully negotiated with IGT to include this future product at 5% royalty rate. IGT is required to make such earn-out payments on a quarterly basis.

– 7 –

LETTER FROM THE BOARD

IGT may terminate the Agreement at any time after full payment of the upfront payment of US$12,950,000 (equivalent to HK$101,010,000) due to LT Game as mentioned above for any or no reason by 90 days advance written notice to LT Game.

For the avoidance of doubt, there is not any minimum sales or distribution target being set pursuant to the Agreement, taking into account (i) the one-time, non-refundable and non-creditable upfront payment of US$12,950,000 (equivalent to HK$101,010,000) payable under the Agreement; and (ii) the reassignment arrangement upon early termination of the Agreement.

The earn-out payments arrangement was determined after arms’ length negotiations between the parties with reference to various factors, including but not limited to the historical sales of the Licensed Products, the expected future prospects of the development of the Licensed Products, the reasons for and benefits of the Transactions as set out in this circular and the terms of licensing agreements adopted by the participants in the gaming industry.

The Agreement covers two categories of Licensed Product – Live ETG and RNG ETG. Live ETG is ready-to-market and novel with fewer competitive products in the market and thus the Company is able to negotiate with IGT, who is willing to pay a higher flat fee per unit or flat fee per unit per day (i.e. royalty/earn-out), which represents a percentage higher than the market benchmark rate of approximately 5% of sale, for Live ETG. RNG ETG is still a product under development. The addressable market for this product is bigger but it is highly competitive. There is less differentiated factor in this product than Live ETG product so the agreed earn-out fee for RNG ETG is more or less comparable to the aforesaid market benchmark percentage.

Like many other licensing agreements in US, an upfront payment is common but it is normally creditable against future royalties. The Company believes that the Licensed Product has a strong competitive advantage over its competitors and, on that basis, has successfully negotiated with IGT to include a non-creditable and non-refundable term for the upfront payment. The upfront fee was arrived at after arm’s length negotiation between the parties to the Agreement taking into account, inter alia, (i) the book value of the Patents and the associated technology in relation to the Licensed Products; (ii) the absence of the minimum sales or distribution target being set pursuant to the Agreement; (iii) the current market conditions of electronic gaming business and with reference to the license fees of comparable electronic gaming systems in the market; (iv) the extensive sales networks maintained by IGT which will facilitate the sales of the Licensed Products and the future possible sources of revenue as a result of such exclusive arrangement; and (v) the reasons for and benefits of the Transactions as set out in this circular.

– 8 –

LETTER FROM THE BOARD

CONDITION

Completion of the Transactions is conditional upon the obtaining of the Shareholders’ approval in respect of the Transactions as required under the Listing Rules, which had already been satisfied on 25 April 2016 and the Transactions were completed on 25 April 2016 accordingly.

INFORMATION ON THE PATENTS TO BE ASSIGNED

The Patents and the associated technology relate to certain technological know-how applied in the Licensed Products, which have to be assigned to IGT if the Licensed Products are to be exclusively distributed and marketed by IGT worldwide (excluding Macau), in particular, the US.

As the Patents have only been put to commercial use in the year of 2015, the historical profits attributable to the Patents for the financial year of 2014 was not available. The unaudited revenue and net profits (both before and after taxation) attributable to the Patents for the year ended 31 December 2015 were approximately HK$3.5 million and nil, respectively. The unaudited net profits (both before and after taxation) attributable to the Patents for the three months ended 31 March 2016 were approximately nil and nil, respectively. The unaudited book value of the Patents as at 31 March 2016 (being the date of the latest available management accounts of the Group) were approximately HK$439 million.

FINANCIAL EFFECT OF THE TRANSACTIONS

The financial effects of the Transactions are summarised as follows:

a. Assets

As of 31 December 2015, the consolidated total assets of the Group were approximately HK$1,276,544,000. It is currently expected that the unaudited consolidated total assets of the Group after the completion of the Transactions would be decreased to approximately HK$971,568,000.

b. Liabilities

As of 31 December 2015, the consolidated total liabilities of the Group were approximately HK$299,980,000. It is currently expected that completion of the Transactions will not have any impact on the consolidated total liabilities of the Group.

– 9 –

LETTER FROM THE BOARD

c. Cash flows

In view of the non-refundable upfront payment of US$12,950,000 (equivalent to HK$101,010,000), it is currently expected that completion of the Transactions will have positive impact on the cash flows of the Group.

d. Earnings

Subject to the review by the Group’s auditors, based on the unaudited book value of approximately HK$439 million of the Patents as stated in the latest available management accounts as at 31 March 2016 and the non-refundable upfront fee of US$12,950,000 (equivalent to HK$101,010,000) (before taking into account of the earn-out payments to the Group under the Agreement), the Group currently expects to record a loss of approximately HK$338 million upon the completion of the Transactions.

Notwithstanding the aforesaid, the Group will also receive earn-out payments for IGT’s placements of Licensed Products during the Term based upon a flat fee per unit or flat fee per unit per day, which the LTG Parties estimate to range from 2.6% to 12% of IGT’s sales revenue. The Directors believe the Transactions will be able to continue to generate profit attributable to the Shareholders in the future. Depend on factors including but not limited to the then market situation and the actual selling price/rent of the Machines to be sold/leased by IGT, the Board currently expects that the estimated amount of earn-out payments to be paid by IGT is approximately US$44 million (equivalent to approximately HK$343 million, which is arrived at by the senior manager of the Company in charge of the Transaction based on, among other things, the market demand data provided by IGT and the estimation of the market share based on the Group’s performance in Macau. Such projection is assumed solely for determining the estimated earn-out payment amount and shall not be regarded as any indication directly or indirectly as to the revenue, profitability or trading prospects of the Group.

The net proceeds arising from the Transactions of approximately HK$101 million will be retained by the Group for future development and other potential investment and/or as its general working capital.

Shareholders should note that the above figures are for illustrative purpose only. The actual financial effects of the Transactions may be different from the above and will be determined based on the actual value of the Patents on the date of the completion of the Transactions and the review by the Group’s auditors upon finalization of the consolidated financial statements of the Group.

– 10 –

LETTER FROM THE BOARD

REASONS AND BENEFITS FOR THE TRANSACTIONS

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

The LTG Parties recognize that the US gaming market is highly competitive with well entrenched local gaming machine manufacturers operating in a complex regulatory environment. Being a new-comer to the US gaming market, and in view of the fierce competition from the wellestablished gaming machines manufacturers in the US, it is a challenging task for the Group to open up this market in view of the substantial resources and effort required. To smooth out the challenges faced by the Group, the Group has been actively seeking a strategic partner, which has strong standing in the US as well as global gaming market, so that the Group can leverage on the strategic partner’s existing resources, expertise and well-established market standing for the opening of the US as well as the global markets in an efficient and effective manner.

Upon consideration of different modes of co-operation, the LTG Parties believe that this assignment of Patents and associated technology and license deal with the world’s leading gaming technology provider, IGT, is the best path to creating value for LTG Parties and their respective shareholders in markets outside Macau.

With IGT’s well established effective game distribution platform and extensive market penetration worldwide, the Board believes that the grant of the exclusive rights to IGT will help further boost the sales and popularity of the Licensed Products and subsequently increase the revenue base and generate a scaleable income to the Group under the earn-out payments arrangement in the years to come.

If IGT is granted the exclusive right to sell the Licensed Products worldwide (other than Macau), in particular to the US market, the Patents in relation to the Licensed Products are required to be assigned and/or licensed to IGT so that IGT can legally sell the Machines to casinos in the US and proceed with purchase orders for the Machines currently on hand.

The Directors believe that the Transactions will facilitate the expansion and operations of electronic gaming business and increase the revenue base of the Group. The Directors also consider that the terms of the Transactions are on normal commercial terms, fair and reasonable and in the interest of the Shareholders as a whole.

– 11 –

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

As the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Transactions exceed 25% but less than 75%, the Transactions constitute major transactions of the Company and are therefore subject to the reporting, announcement and Shareholders’ approval requirements under the Listing Rules.

So far as the Directors are aware of after making reasonable enquiries, none of the Shareholders would have been required to abstain from voting if the Company were to convene a general meeting for the approval for the Agreement and the Transactions. As such, written Shareholders’ approval may be accepted in lieu of holding a general meeting pursuant to Rule 14.44(2) of the Listing Rules. Mr. Jay Chun and his wholly-owned company, August Profit Investments Limited, are holding an aggregate of 630,960,880 Shares (representing approximately 59.96% of the issued share capital of the Company), gave their written approval on the entering into of the Agreement and the Transactions on 25 April 2016. Accordingly, no special general meeting of the Company will be convened for the purpose of approving the Agreement and the Transactions.

RECOMMENDATION

Although no general meeting will be convened for approving the Transactions, the Directors (including the independent non-executive Directors) believe that the Transactions and Agreement are fair and reasonable and are in the best interests of the Company and the Shareholders as a whole. Accordingly, if the general meeting were convened for approving the Transactions, the Directors would have recommended the Shareholders to vote in favour of the Transactions.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the Appendices to this circular.

Yours faithfully, For and on behalf of Paradise Entertainment Limited Jay Chun Chairman

– 12 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three years ended 31 December 2015, 2014 and 2013 are disclosed in the following documents which have been published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.hk1180.com):

• annual report of the Company for the year ended 31 December 2015 published on 26 April 2016 (pages 24 – 95)

• http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0426/LTN20160426247.pdf

• annual report of the Company for the year ended 31 December 2014 published on 28 April 2015 (pages 24 – 93)

• http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0428/LTN20150428428.pdf

• annual report of the Company for the year ended 31 December 2013 published on 28 April 2014 (pages 23 – 89)

• http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0428/LTN20140428528.pdf

2. INDEBTEDNESS

As at the close of business on 30 April 2016, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding indebtedness comprising guaranteed and secured, and unguaranteed and unsecured indebtedness of HK$22,000 and HK$84,055,000, respectively. The indebtedness comprised as follows:

As at 30 April 2016, the Group’s finance lease, promissory note and amounts due to the Directors stood at HK$22,000 and HK$80,619,000 and HK$3,436,000, respectively. As at 30 April 2016, the Group had capital commitments and operating lease commitments of approximately HK$4,792,000 and HK$133,459,000, respectively. As of the same date, the Group did not have any contingent liabilities.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have outstanding at the close of business on 30 April 2016 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, obligations under finance lease contracts, liabilities under acceptances (other than normal trade bills) or acceptable credits, debentures, mortgages, charges, finance lease or hire purchases commitments, guarantees or contingent liabilities.

– 13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL

The Directors are of the opinion that taking into account: (i) the existing financial resources available to the Group and the Group’s expected internally generated funds; (ii) the upfront payment of US$12,950,000 (equivalent to HK$101,010,000); (iii) the controlling Shareholder agreed in writing to provide or procure financial support to the Company and/or the Group, the Group will have sufficient working capital for its present requirements, this is, at least the next 12 months from the date of this circular in the absence of unforeseen circumstances.

4. MATERIAL CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or prospect of the Group since 31 December 2015, the date to which the latest published audited consolidated financial statements of the Group were made up.

5. FINANCIAL AND TRADING PROSPECT

In June 2015, Macau government announced a reversal of its transit visa policy that was tightened in 2014 after it was abused by high rollers and junket agents. Starting from 1 July 2015, mainland China passport holders transiting through Macau are allowed to stay in the city for a longer period up to seven days and gain second entry within 30 days, thereby increasing the number of well-heeled mainland customers visiting Macau. Notwithstanding this revision in policy, the number of tourists to Macau continued to decrease and according to the data from relevant Macau government authority, the downward trend in the gross revenue of casinos in Macau persisted in the first two months of 2016.

In addition, Macau is going to implement a full smoking ban on casino floors and smoking is no longer allowed in designated VIP rooms. Industry players have expressed concern that a full smoking ban might deter certain gamers and affect casino revenues, which is being challenged by China’s anti-graft and austerity campaign. Against the backdrop of a sluggish market, the Group is awaiting the Macau government to promulgate more effective supportive policies in order to revitalise the economy of Macau.

Due to the need to fulfill certain complicated regulatory requirements, there was a delay in obtaining the necessary approvals from the Nevada Gaming Board for the Group’s gaming terminals. This in turn resulted in further delay in the marketing and sales of the Group’s products. Being a new-comer to the US gaming market and in view of the fierce competition from the wellestablished gaming machines manufacturers in the US, it is a challenging task for the Group to open up this market in view of the substantial resources and effort required. To smooth out the challenges faced by the Group, the Group successfully sought IGT as its strategic partner, which has strong stand in the US as well as worldwide gaming market, so that the Group can leverage on the strategic partner’s existing resources, expertise and well-established market stand for the opening of the US as well as the global market in an efficient and effective manner.

– 14 –

GENERAL INFORMATION

APPENDIX II

1. 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.

2. DISCLOSURE OF INTERESTS OF DIRECTORS

As at the Latest Practicable Date, the interests and short positions, if any, of each Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such director or chief executive was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules (the “Model Code”), were as follows:

	Name of				Approximate
	company/			Total	aggregate
	associated	Capacity/Nature	Interests	interests	percentage of
Name of Directors	corporation	of interests	in Shares(1)	in Shares(1)	interests
Mr. Jay Chun	Company	Beneficial owner	124,160	630,960,880	59.96%
	Company	Interest of controlled	630,836,720 (2)
		corporation
Mr. Shan Shiyong, alias,	Company	Interest of controlled	26,097,580 (3)	26,097,580	2.48%
Sin Sai Yung		corporation

Notes:

• (1) All interests in Shares stated above represent long positions.

• (2) These Shares were held by August Profit Investments Limited, a company which is wholly owned by Mr. Jay Chun, who is also the sole director.

• (3) These shares were held by Best Top Offshore Limited, a company which is wholly owned by Mr. Shan Shiyong, alias, Sin Sai Yung, who is also the sole director.

– 15 –

APPENDIX II

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, as far as the Directors are aware, none of the Directors and chief executive officer had any other interests, long positions or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

(i) Directors’ Rights to Acquire Shares or Debentures

At no time during the year ended 31 December 2015 was the Company or any of its subsidiaries a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of Shares in, or debentures of, the Company or any other body corporate. In addition, none of the Directors, or their spouse or children under the age of 18 had any right to subscribe for the securities of the Company or had exercised any such right during the year.

3. DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors, the interests and short positions of the persons or corporations, other than Directors and chief executive of the Company, in the Shares or underlying Shares which have been disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required to be kept by the Company under section 336 of the SFO, or who was interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of the Company were as follows:

(i) Long position in Shares of the Company

			Approximate
			Percentage of
	Capacity/Nature	Total interests	the issued
Name	of interests	in Shares(1)	share capital
August Profit Investments	Beneficial owner	630,836,720	59.95%
Limited(2)
FIL Limited	Investment Manager	84,708,000	8.05%

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GENERAL INFORMATION

APPENDIX II

Notes:

• (1) All interests in Shares stated above represent long positions.

• (2) August Profit Investments Limited is a company wholly owned by Mr. Jay Chun, the Chairman and the executive Director of the Company and the sole director and sole shareholder of August Project Investments Limited.

Save as disclosed above, as at the Latest Practicable Date, the Company had not been notified of any other person who was interested in or had a short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and as recorded in the register required to be kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into a service contract with any member of the Group (excluding contracts expiring or determinable by relevant member of the Group within one year without payment of compensation, other than statutory compensation).

5. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date,

• (i) none of the Directors had any direct or indirect interests in any assets (since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up), which had been acquired or disposed of by, or leased to the Company or any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up), or were proposed to be acquired or disposed of by, or leased to, the Company or any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up); and

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GENERAL INFORMATION

APPENDIX II

• (ii) none of the Directors was materially interested in any contract or arrangement entered into by the Company or any member of the Group (including any company which will become a subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up) which contract or arrangement was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group (including any company which will become subsidiary of the Company by reason of an acquisition which has been agreed or proposed since 31 December 2015, being the date to which the latest audited consolidated financial statements of the Group were made up).

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competed or was likely to compete, either directly or indirectly, with the business of the Group.

7. MATERIAL CONTRACTS

Save for the Agreement, there was no material contract (not being contracts entered into in the ordinary course of business) entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date.

8. MATERIAL LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

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GENERAL INFORMATION

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9. MISCELLANEOUS

• (a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its principal place of business in Hong Kong is Unit C, 19/F., Entertainment Building, 30 Queen’s Road Central, Hong Kong.

• (b) The Company’s Hong Kong share registrar and transfer office is Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The Chief Financial Officer and Company Secretary of the Company is Ms. Ho Suet Man Stella who is an associate member of Hong Kong Institute of Certified Public Accountants.

• (d) The English text of this circular shall prevail over the Chinese text.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Unit C, 19/F, Entertainment Building, 30 Queen’s Road Central, Hong Kong up to and including 5 July 2016:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the annual reports of the Company for the two financial years ended 31 December 2014 and 2015; and

• (c) the Agreement.

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