Guoco Group Limited — Annual Report 2008

Jul 22, 2008

2008 Annual Report

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1

Annual Report 2008

Contents

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|||
|---|---|
|PAGE(S)|
|CORPORATE INFORMATION|2-3|
|PROFILE OF DIRECTORS|4-7|
|MANAGING DIRECTOR & CHIEF EXECUTIVE’S STATEMENT|8-9|
|DIRECTORS’ REPORT|10-15|
|CORPORATE GOVERNANCE REPORT|16-20|
|INDEPENDENT AUDITOR’S REPORT|21|
|CONSOLIDATED INCOME STATEMENT|22|
|CONSOLIDATED BALANCE SHEET|23-24|
|COMPANY BALANCE SHEET|25|
|CONSOLIDATED STATEMENT OF CHANGES IN EQUITY|26-27|
|CONSOLIDATED CASH FLOW STATEMENT|28-29|
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS|30-84|
|LIST OF PROPERTIES HELD BY THE GROUP|85|
|FINANCIAL SUMMARY|86|

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In the event of any error or omission in translation of this Annual Report, the English text shall be taken as correct.

2

Far East Hotels and Entertainment Limited

Corporate Information

PLACE OF INCORPORATION

Hong Kong

BOARD OF DIRECTORS

Executive Directors

Deacon Te Ken Chiu, J.P. (Chairman) Derek Chiu, B.A. (Managing Director and Chief Executive) Desmond Chiu, B.A. (Deputy Managing Director) Margaret Chiu, LL.B.

Non-executive Directors Chiu Ju Ching Lan, J.P. Dick Tat Sang Chiu, M.A. Tan Sri Dato’ David Chiu, B.Sc. Dennis Chiu, B.A. Duncan Chiu, B.Sc.

Independent Non-executive Directors

Ip Shing Hing, J.P. Ng Wing Hang Patrick Choy Wai Shek Raymond, MH, J.P. Alternate Directors Chan Chi Hing (Alternate Director to Deacon Te Ken Chiu) Tang Sung Ki, CPA, FCCA (Alternate Director to Desmond Chiu)

COMPANY SECRETARY

Tang Sung Ki, CPA, FCCA

QUALIFIED ACCOUNTANT

Tang Sung Ki, CPA, FCCA

SOLICITORS

Woo Kwan Lee & Lo

AUDITOR

Deloitte Touche Tohmatsu Certifi ed Public Accountants Hong Kong

AUDIT COMMITTEE

Ip Shing Hing, J.P. Duncan Chiu, B.Sc. Ng Wing Hang Patrick Choy Wai Shek Raymond, MH, J.P.

Annual Report 2008 3

Corporate Information

REMUNERATION COMMITTEE

Derek Chiu, B.A. Ng Wing Hang Patrick Choy Wai Shek Raymond, MH, J.P.

PRINCIPAL BANKERS

Allied Banking Corporation (Hong Kong) Limited Bank of China (Hong Kong) Limited Hang Seng Bank Limited Public Bank (Hong Kong) Limited The Bank of East Asia, Limited The Hongkong and Shanghai Banking Corporation Limited

REGISTERED & PRINCIPAL OFFICE

Suite 2308, 23rd Floor, Offi ce Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong

SHARE REGISTRARS

Tricor Standard Limited 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong

STOCK EXCHANGE

The Shares of the Company are listed on The Stock Exchange of Hong Kong Limited

STOCK CODE

037

WEBSITE

www.tricor.com.hk/webservice/00037

4

Far East Hotels and Entertainment Limited

BOARD OF DIRECTORS

Executive Directors

Mr. Deacon Te Ken Chiu, J.P. (Chairman)

Aged 83. Appointed as a Director and Chairman of the Company in 1979. Founder of the Far East Group. He is also the Chairman of Far East Consortium International Limited and Far East Holdings International Limited. Mr. Chiu has more than 50 years of business experience in property investment and development; operation of entertainment and tourism related business; hotel ownership and management; fi nancing and banking. He was a member of the Chinese People’s Political and Consultative Conference from the 6th to 9th; the founder of the Yan Chai Hospital and the Vice Patron of the Community Chest since 1968; the founder and permanent Honorary Chairman of The New Territories General Chamber of Commerce; the founder and Chairman of the Ju Ching Chu Secondary School since 1966. Husband of Madam Chiu Ju Ching Lan. Father of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

Mr. Derek Chiu, B.A. (Managing Director & Chief Executive)

Aged 42. Joined and was appointed as Director of the Company in 1989. He is also a Non-executive Director of Far East Holdings International Limited. He has extensive experience in the operation of amusement parks and entertainment business. Son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Brother of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Dennis Chiu, Desmond Chiu and Duncan Chiu.

Mr. Desmond Chiu, B.A. (Deputy Managing Director)

Aged 41. Joined and was appointed as Director of the Company in 1991 and was appointed as Deputy Managing Director of the Company in 1999. He graduated from the University of Cambridge, the United Kingdom. He is also a Non-executive Director of Far East Holdings International Limited. Son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Brother of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu and Duncan Chiu.

Ms. Margaret Chiu, LL.B.

Aged 51. Joined and was appointed as Director of the Company in 1989. She is also a Non-executive Director of Far East Holdings International Limited. She graduated with law degree from the University of Buckingham, the United Kingdom and has extensive experience in entertainment, television and motion picture business in Hong Kong, the People’s Republic of China and overseas. Daughter of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Sister of Messrs. Dick Tat Sang Chiu, David Chiu, Dennis Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

5

Annual Report 2008

Non-Executive Directors

Madam Chiu Ju Ching Lan, J.P.

Aged 69. Joined the Company and was appointed as Director in 1979. She is also a Non-executive Director of Far East Consortium International Limited. Since 1975, she is the Honorary Vice-President of Hong Kong Girl Guides Association. She has been active in social circles and was Lady Chairman of Yan Chai Hospital for 1977/78. Madam Chiu is the founder and Honorary Chairman of New Territories Women’s and Juveniles Welfare Association. She is a committee member and Supervisor of Ju Ching Chu Secondary School and the Chairman of Kowloon Women’s Welfare Club. She is the member of Shanghai Standing Committee Chinese People’s Political Consultative Conference since 1982. Since 1997, she is also the Honorary VicePresident of Hong Kong Federation of Women. Wife of Mr. Deacon Te Ken Chiu. Mother of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

Mr. Dick Tat Sang Chiu, M.A.

Aged 57. Joined the Far East Group in 1974. Appointed as Director in 1979. He graduated from the University of Cambridge with an honour Master of Arts degree in Economics. Son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Brother of Messrs. David Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

Tan Sri Dato’ David Chiu, B.SC.

Aged 54. Joined the Far East Group in 1975 and was appointed as Director of the Company in 1979. He holds a double degree of Bachelor of Science in Business Administration and Economics at the University of Sophia, Japan. He has over 30 years’ experience in the property development and related business. Since 1978, he had been the Managing Director of Far East Consortium Limited (the predecessor of Far East Consortium International Limited). He was appointed Deputy Chairman and Chief Executive Offi cer of Far East Consortium International Limited (“FECIL”) on 8th December, 1994 and 8th October, 1997 respectively. FECIL is listed on the Hong Kong Stock Exchange. He is also a Non-executive Director of Far East Holdings International Limited.

In 1987, Tan Sri Dato’ David Chiu founded Malaysia Land Holdings Berhad (Mayland Group) in Malaysia. Over the years, Mayland Group has extensive development and become one of the largest real estate developers in Malaysia. He is also the Chairman and substantial shareholder of Tokai Kanko Ltd., which is listed on the Tokyo Stock Exchange. In regard to his devotion to the community services, he is a trustee member of The Better Hong Kong Foundation and Chairman of Mid-Autumn Festival Celebration – People & Forces. In Malaysia, he was fi rst conferred an honorary award which carried the title “Dato” by His Majesty, the King of Malaysia, in July 1997. At the end of 2005, he was awarded a more senior honorary title of “Tan Sri” by His Majesty of Malaysia. He is the son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan and the brother of Messrs. Dick Tat Sang Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

6

Far East Hotels and Entertainment Limited

Mr. Dennis Chiu, B.A.

Aged 49. Joined the Company and was appointed as Director in 1979. He has been actively involved in the business development in the People’s Republic of China, Singapore and Malaysia. He is an Executive Director of Far East Consortium International Limited and an Executive Director of Far East Holdings International Limited. He is also a Non-executive Director of London-listing Fortune Oil Plc. Son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Brother of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Derek Chiu, Desmond Chiu and Duncan Chiu.

Mr. Duncan Chiu, B.SC.

Aged 33. Joined and was appointed as Director of the Company in 1996. Mr. Chiu graduated with a bachelor’s degree in business administration from Pepperdine University of California, USA in 1996. He is also the Managing Director and Chief Executive Offi cer of Far East Holdings International Limited and serves as Non-executive Director of Chinasoft International Limited and Golife Concepts Holdings Limited. He currently serves as Vice Chairman and Treasurer of The Chamber of Hong Kong Listed Companies, Vice President of Innovation & Technology Association, Committee Member of All-China Youth Federation, Vice Chairman of Henan Provincial Youth Federation and Member of The Chinese People’s Political Consultative Conference, Shanghai Committee. Son of Mr. Deacon Te Ken Chiu and Madam Chiu Ju Ching Lan. Brother of Messrs. Dick Tat Sang Chiu, David Chiu, Margaret Chiu, Dennis Chiu, Derek Chiu and Desmond Chiu.

Independent Non-Executive Directors

Mr. Ip Shing Hing, J.P.

Aged 53. Mr. lp was appointed as an Independent Non-executive Director of the Company on 31 March 1997. He holds a Bachelor of Laws Degree from the University of Hong Kong and a Master of Arts in Arbitration and Alternative Dispute Resolution from the City University of Hong Kong. He has been a practising solicitor in Hong Kong for more than 20 years. Mr. Ip is an independent non-executive director of Quam Limited and a member of the independent committees of Wah Sang Gas Holdings Limited.

Mr. Ng Wing Hang Patrick

Aged 55. Mr. Ng was appointed as an Independent Non-executive Director of the Company on 28 September 2004. Mr. Ng is a practising Certifi ed Public Accountant in Hong Kong and is the Managing Director of Messrs. NCN CPA Limited, Certifi ed Public Accountants. Mr. Ng also serves as independent nonexecutive director on the boards of two other listed companies in Hong Kong, namely, Shenyin Wanguo (H.K.) Limited and Dynamic Energy Holdings Limited.

Mr. Choy Wai Shek Raymond, MH, J.P.

Aged 59. Mr. Choy was appointed as an Independent Non-executive Director of the Company on 28 September 2004. Mr. Choy was the Chairman of Sham Shui Po District Council, Hong Kong for the year 1991 to 1994, a member of Hong Kong Affairs Adviser for the year 1994 to 1997, a member of Hong Kong Broadcasting Authority for the year 1995 to 1998. Mr. Choy is now a Vice-chairman of Occupational Safety And Health Council, member of Energy Advisory Committee, member of Consumer Council, a member of CPPCC Guangzhou Committee, a director of Chinese General Chamber Of Commerce.

7

Annual Report 2008

Alternate Directors

Mr. Chan Chi Hing

Aged 45. He was appointed as alternate Director to Mr. Deacon Te Ken Chiu on 17 May 2003. He is the Group Chief Operating Offi cer of Hong Kong for Far East Consortium International Limited (“FECIL”), a listed company in Hong Kong. He is a director of various subsidiaries of that Group. He is responsible for the Hong Kong, Macau and the Mainland based activities with emphasis on the commercial management, hotel and property development and investment, and project development. He is also responsible for the industrial and infrastructure businesses in the Mainland. He joined FECIL in 1990 as the Group Chief Accountant and promoted as the Group Financial Controller in 2002. From 1990 to 2003, he was responsible for that Group’s fi nancial, treasury and accounting functions. He has extensive experience in accounting and auditing of Hong Kong listed companies. In June, 2007, he was appointed as an independent non-executive director of Hidili Industry International Development Limited, a Hong Kong listed company.

Before joining the FECIL Group, he was an audit manager of a big four international accounting fi rm with over ten years audit experience.

Mr. Tang Sung Ki, CPA, FCCA

Aged 48. Joined the Company in 1991 as Assistant Financial Controller and was appointed as alternate Director to Mr. Desmond Chiu on 11th December 1996. Prior to joining the Company, he gained his experience in auditing, accounting and fi nance in a major international CPA fi rm and in various publicly listed companies in Hong Kong. He is a member of the Hong Kong Institute of Certifi ed Public Accountants and a fellow member of The Association of Chartered Certifi ed Accountants. He is also the secretary of the Company and Director of various subsidiaries of the Company.

8

Far East Hotels and Entertainment Limited

Managing Director & Chief Executive’s Statement

RESULTS

I report to the shareholders that the audited consolidated profi t of the Group attributable to shareholders for the year ended 31 March 2008 amounted to HK$3,783,360 (2007: loss of HK$49,430,180).

The directors do not recommend the payment of any dividend for the year.

REVIEW OF OPERATIONS AND PROSPECTS

The overall turnover of Cheung Chau Warwick Hotel has increased by 21% compared with last year. The renovation of our Spa Room and Multi-Function Room has been completed by September 2007. These new elements have enhanced our image as a resort hotel and in return have attracted more business. The sales and marketing department will also focus on developing the Conference group as well. The Food & Beverage division will remain emphasis on local market on one hand, and try to develop outside market through promotions.

The turnover of Beijing Warwick International Apartments has increased by 64% compared with last year. Renovation works on the Level 1, Level 2 and the external wall of the East Wing of the Apartments are now in progress and will be completed before the opening of the Beijing 2008 Olympic Games event. With the approaching of the Olympic Games event in August 2008 and the continued improvement of surrounding environment and facilities, the management believes that the turnover of Beijing Warwick International Apartments will further improve.

On 1 June 2007, a special resolution was passed at an extraordinary general meeting to approve capital reduction of the Company which becomes effective on 20 July 2007. After the capital reduction becomes effective, the Company will have a capital structure that permits the payment of dividends (subject to performance) and the issue of new shares for potential future fund raising exercises.

EMPLOYEES

The Group has approximately 100 employees. Employees are remunerated in accordance with nature of the job and market conditions. Staff incentive bonus would be granted to reward and motivate those wellperformed employees.

9

Annual Report 2008

Managing Director & Chief Executive’s Statement

FINANCE ACTIVITIES

At 31 March 2008, the Group had bank credit facilities amounting to approximately HK$92,172,000 (2007: HK$97,238,000), of which approximately HK$83,172,000 (2007: HK$88,238,000) were utilised. These facilities were secured by legal mortgages over the Group’s properties and deposits.

At 31 March 2008, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other fi nancial derivatives.

Shareholders’ funds at 31 March 2008 amounted to approximately HK$386 million (2007: approximately HK$385 million). Accordingly, the Group’s gearing ratio (total bank credit facilities utilized to shareholders’ funds) at 31 March 2008 is 22% (2007: 23%).

SUBSEQUENT EVENTS

On 29 May 2008, the Group has acquired two pre-sale units in phase 1 of the property development “Celestial Heights” at 80 Sheung Shing Street, Homantin, Kowloon at a total consideration of HK$32,229,000. According to the pre-sale brochure, the anticipated completion date of the construction of the building in this development is 31 July 2009. The Directors believe that the acquisitions will improve the Group’s operating performance and widen its asset base. Details of the acquisition are set out in the Company’s circular dated 18 June 2008.

On behalf of the Board of Directors, I would like to extend my sincere thanks to all our shareholders for their continued support, and to our staff for their dedication, loyalty and service.

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 4 July 2008

10

Far East Hotels and Entertainment Limited

Directors’ Report

The directors present their annual report and the audited fi nancial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31st March, 2008.

PRINCIPAL ACTIVITIES

The Company acts as an investment holding company and provides corporate management services to its subsidiaries. The principal activities of its subsidiaries and associates are set out in notes 16 and 17, respectively, to the consolidated fi nancial statements.

RESULTS

The results of the Group for the year are set out in the consolidated income statement on page 22.

RESERVES

Details of movements in the reserves of the Group and of the Company during the year are set out in the consolidated statement of changes in equity on page 26 to 27 and note 34 to the consolidated fi nancial statements, respectively.

PROPERTY, PLANT AND EQUIPMENT

Details of movements in property, plant and equipment of the Group and the Company are set out in note 12

INVESTMENT PROPERTIES

Details of movements in investment properties of the Group are set out in note 13 to the consolidated

PROPERTIES

Details of the properties held by the Group at 31st March, 2008 are set out on page 85 of the annual report.

PURCHASE, SALES OR REDEMPTION OF LISTED SECURITIES IN THE COMPANY

During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.

11

Annual Report 2008

Directors’ Report

DIRECTORS

The directors of the Company who held offi ce during the year and up to the date of this report were:

Executive directors

Mr. Deacon Te Ken Chiu (Chairman)

Mr. Derek Chiu (Managing Director and Chief Executive) Mr. Desmond Chiu (Deputy Managing Director) Ms. Margaret Chiu

Non-executive directors

Madam Chiu Ju Ching Lan Mr. Dick Tat Sang Chiu Mr. David Chiu Mr. Dennis Chiu Mr. Duncan Chiu

Independent non-executive directors

Mr. Ip Shing Hing Mr. Ng Wing Hang Patrick Mr. Choy Wai Shek Raymond

Alternate directors

Mr. Chan Chi Hing (Alternate to Mr. Deacon Te Ken Chiu) Mr. Tang Sung Ki (Alternate to Mr. Desmond Chiu)

In accordance with Articles 76, 78 and 79 of the Company’s Articles of Association, one-third of the Directors except Managing Director shall retire from offi ce and, being eligible, offer themselves for re-election.

In view of good Corporate Governance Practices, the Managing Director voluntarily retired from his offi ce at the annual general meeting of the Company held on 24th August, 2006 notwithstanding that he was not required to do so by the Company’s Article 76.

In accordance with Articles 78 and 79 of the Company’s Articles of Association, Mr. David Chiu, Ms. Margaret Chiu, Mr. Desmond Chiu and Mr. Ip Shing Hing shall retire from offi ce at the forthcoming annual general meeting and, being eligible, offer themselves for re-election.

The term of offi ce for each non-executive director is the period up to his or her annual retirement by rotation in accordance with the Company’s Articles of Association.

The Company has received from each of the independent non-executive directors an annual confi rmation of his independence pursuant to Rule 3.13 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) and considers the independent non-executive Directors to be independent.

BIOGRAPHICAL DETAILS OF DIRECTORS

The biographical details of the directors of the Company are set out on pages 4 to 7 of the annual report.

12

Far East Hotels and Entertainment Limited

Directors’ Report

DIRECTORS’ INTERESTS IN SHARES AND UNDERLYING SHARES

At 31st March, 2008, the interests and short positions of the directors and the Company’s chief executives in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) which were required (a) to be notifi ed to the Company and the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows:

(a) Ordinary shares of HK$0.10 each of the Company

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|---|---|---|---|---|---|---|
|Approximate|
|percentage of|
|issued share|
|Personal|Family|Corporate|capital of|
|Name of director|interests|interests|interests|Total|the Company|
|Mr. Deacon Te Ken Chiu|12,491,424|–|108,901,052|(Note 1)|121,392,476|24.83%|
|Mr. Derek Chiu|12,394,000|–|78,430,299|(Note 2)|90,824,299|18.58%|
|Madam Chiu Ju Ching Lan|188,000|–|–|188,000|0.04%|
|Mr. Dick Tat Sang Chiu|12,172,800|–|22,277,033|(Note 3)|34,449,833|7.05%|
|Mr. David Chiu|3,144,627|–|–|3,144,627|0.64%|
|Ms. Margaret Chiu|676,240|–|5,000,000|(Note 4)|5,676,240|1.16%|

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Notes:

1. Of the 108,901,052 shares, (i) 100,939,842 shares were held by various private companies wholly owned by Mr. Deacon Te Ken Chiu of which 72,182,400 shares were held by Achiemax Limited; (ii) 295,210 shares were held by Far East Consortium Limited, a wholly-owned subsidiary of Far East Consortium International Limited; and (iii) 7,666,000 shares were held by Brentford Investments Inc., a wholly-owned subsidiary of Far East Holdings International Limited. Mr. Deacon Te Ken Chiu is a controlling shareholder of these companies.

2. The 78,430,299 shares were held by Energy Overseas Ltd., a company wholly owned by Mr. Derek Chiu.

3. The 22,277,033 shares were held by various private companies wholly owned by Mr. Dick Tat Sang Chiu.

4. The 5,000,000 shares were held by a private company wholly owned by Ms. Margaret Chiu.

(b) Share options of the Company

At an extraordinary general meeting of the Company held on 1st June, 2007, an ordinary resolution to approve the adoption of a new share option scheme that complies with the Listing Rules was duly passed by the shareholders.

13

Annual Report 2008

Directors’ Report

Save as disclosed, as at 31st March, 2008, none of the directors nor the Company’s chief executives nor their respective associates, had interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notifi ed to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listing Companies.

SHARE OPTION SCHEME

Particulars of the Company’s share option scheme are set out in note 43 to the consolidated fi nancial statements.

A summary of the movements in share options pursuant to the expired share option scheme adopted on 22nd September, 1995 during the year is as follows:

Exercise price Name of director Date of grant per share HK$ Mr. Derek Chiu 9.9.1997 3.01 Ms. Margaret Chiu 19.11.1997 1.74 Mr. Tang Sung Ki 29.1.2000 1.00	Number of share options Outstanding Expired Cancelled Outstanding at during during at 1.4.2007 the year the year 31.3.2008 Exercisable period 1,000,000 1,000,000 – – 9.9.1997–8.9.2007 7,000,000 7,000,000 – – 19.11.1997–18.11.2007 6,000,000 – 6,000,000 – 29.1.2000–28.1.2010 14,000,000 8,000,000 6,000,000 –

No share options were granted during the year under the new share options scheme adopted on 1st June, 2007.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

Save as the share options disclosed above, at no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

The title of certain leasehold land and buildings owned by a subsidiary is registered in the name of a company controlled by Mr. Deacon Te Ken Chiu and his family (the “Chiu Family”) as trustee for the said subsidiary.

Save as disclosed above, no contracts of signifi cance to which the Company or any of its subsidiaries was a party and in which a director had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

14

Far East Hotels and Entertainment Limited

Directors’ Report

DIRECTORS’ SERVICE CONTRACTS

None of the Directors of the Company has a contract of service with the Company or any of its subsidiaries not determinable by the Group within one year without payment of compensation (other than statutory compensation).

SUBSTANTIAL SHAREHOLDERS

Save as the interests of certain directors disclosed under the section headed “DIRECTORS’ INTERESTS IN SHARES AND UNDERLYING SHARES”, according to the register of interests maintained by the Company pursuant to Section 336 of the SFO and so far as was known to the directors or chief executive of the Company, as at 31st March, 2008, the following persons or corporations (other than a director or chief executive of the Company) had an interest or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or was, directly or indirectly, interested in fi ve per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any member of the Group or in any options in respect of such capital:-

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|---|---|---|---|---|
|Number of|Percentage of|
|ordinary|issued share capital|
|Name of shareholder|Capacity|shares held|of the Company|
|Achiemax Limited|(Note 1)|Benefi cial owner|72,182,400|14.77%|
|Energy Overseas Ltd.|(Note 2)|Benefi cial owner|78,430,299|16.04%|

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Notes:

1. Mr. Deacon Te Ken Chiu and Mr. Dennis Chiu are directors of Achiemax Limited.

2. Energy Overseas Ltd. is a company wholly owned by Mr. Derek Chiu who is also its director.

Save as disclosed above, as at 31st March, 2008 and so far as is known to the directors or chief executive of the Company, there was no other person (other than a director or chief executive of the Company) who had an interest or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or who was, directly or indirectly, 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 any member of the Group or in any options in respect of such capital.

MAJOR SUPPLIERS AND CUSTOMERS

The fi ve largest suppliers of the Group accounted for less than 30% of the total purchases of the Group in the year.

The fi ve largest customers of the Group accounted for less than 30% of the total sales of the Group in the year.

EMPLOYEES AND REMUNERATION POLICIES

The Group has approximately 100 employees. Employees are remunerated in accordance with nature of the job and market conditions. Staff incentive bonus would be granted to reward and motivate those well performed employees.

Annual Report 2008 15

Directors’ Report

CORPORATE GOVERNANCE

A report on the principal corporate governance practices adopted by the Company is set out on pages 16 to 20 of the annual report.

AUDIT COMMITTEE

The Company’s audit committee comprises Independent Non-executive Directors and Non-executive Directors.

The principal duties of the Audit Committee include the review and supervision of the Group’s fi nancial reporting system, fi nancial statements and internal control procedures.

SUFFICIENCY OF PUBLIC FLOAT

Based on the information that is publicly available to the Company and within the knowledge of the Directors of the Company as at the date of this annual report, the Company has maintained the prescribed public fl oat under the Listing Rules.

EMOLUMENT POLICY

The Company has established a Remuneration Committee with written terms of reference pursuant to the provisions set out in the Code. The Remuneration Committee is principally responsible for formulation and making recommendation to the Board on the Group’s policy and structure for all remuneration of directors and senior management.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Board has adopted a new code of conduct regarding Directors’ securities transactions on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Model Code. The Directors confi rmed that there was not any non-compliance with the standard set out in the Model Code and the Company’s code of conduct regarding Directors’ securities transactions during the year ended 31st March, 2008.

POST BALANCE SHEET EVENTS

Details of post balance sheet events are set out in note 46 to the consolidated fi nancial statements.

AUDITOR

A resolution will be submitted to the annual general meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as auditor of the Company.

On behalf of the Board

Derek Chiu

Managing Director and Chief Executive

Hong Kong, 4 July, 2008

16

Far East Hotels and Entertainment Limited

Corporate Governance Report

COMMITMENT TO CORPORATE GOVERNANCE

The Company is committed to maintaining statutory and regulatory standards and adherence to the principles of corporate governance emphasizing transparency, independence, accountability, responsibility and fairness. The Board and the Senior Management of the Company ensure that effective self-regulatory practices exist to protect the interests of the shareholders of the Company.

The Company has applied the principles of the Code Provisions under the Code on Corporate Governance Practices (the “Code”) contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) throughout the year ended 31 March 2008.

THE BOARD OF DIRECTORS

The Board’s primary responsibilities are to formulate long-term corporate strategy, to oversee the management of the Group, to evaluate the performance of the Group and to assess the achievement of targets periodically set by the Board. The Board is directly accountable to the shareholders and is responsible for preparing the accounts.

The Board comprises fourteen Directors, whose biographical details are set out in the “Profi le of the Directors” of this Annual Report. Four of the Directors are executive, fi ve are non-executive, three are independent non-executive and two are alternate. The eight non-executive Directors have a broad range of fi nancial, regulatory and commercial experience and skills, which contribute to the effective strategic management of the Group. The executive Directors are not permitted to engage in any other business which is in competition with that of the Group, and are required, with the exception of the Chairman, to devote all of their active business time to the business and affairs of the Group.

Please refer to the Report of Directors of this Annual Report for the composition of the Board.

The posts of Chairman and Managing Director & Chief Executive are held separately by Mr. Deacon Te Ken Chiu and Mr. Derek Chiu respectively and their roles and responsibilities are separate and are set out in writing.

The Chairman is responsible for formulating and setting Group strategies and policies in conjunction with the Board.

The Managing Director & Chief Executive is responsible for managing the Group strategic initiatives, investor relations, corporate and investor communications, mergers/acquisitions and fi nancing.

Pursuant to the requirement of the Listing Rules, the Company has received confi rmation from all three independent non-executive Directors of their independence from the Company and considers them to be independent.

17

Annual Report 2008

Corporate Governance Report

The Board met on four occasions during the year ended 31 March 2008. The attendance of individual Directors at the Board meetings is set out in the table below.

==> picture [469 x 360] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Number of|Attendance|
|meetings attended|rate|
|Executive Directors|
|Deacon Te Ken Chiu|(Chairman)|2/4|50%|
|Derek Chiu|(Managing Director and Chief Executive)|4/4|100%|
|Desmond Chiu|(Deputy Managing Director)|1/4|25%|
|Margaret Chiu|0/4|0%|
|Non-executive Directors|
|Chiu Ju Ching Lan|0/4|0%|
|Dick Tat Sang Chiu|0/4|0%|
|Tan Sri Dato’ David Chiu|0/4|0%|
|Dennis Chiu|0/4|0%|
|Duncan Chiu|3/4|75%|
|Independent Non-executive Directors|
|Ip Shing Hing|2/4|50%|
|Ng Wing Hang Patrick|2/4|50%|
|Choy Wai Shek Raymond|2/4|50%|
|Alternate Directors|
|Chan Chi Hing|0/4|0%|
|(Alternate Director to Deacon Te Ken Chiu)|
|Tang Sung Ki|2/4|50%|
|(Alternate Director to Desmond Chiu)|

----- End of picture text -----

18

Far East Hotels and Entertainment Limited

Corporate Governance Report

CORPORATE GOVERNANCE

The Board confi nes itself to making broad policy decisions, such as the Group’s overall strategies, policies and business plans, while delegating responsibility for more detailed consideration to the various Board Committees and management. Management is responsible for overseeing the Group’s business operations, implementing the strategies laid down by the Board and making day-to-day operating decisions.

The Board has established Audit and Remuneration Committees in accordance with the Code and a majority of the members of Committees are independent non-executive directors.

The Company has complied with the Code as set out in Appendix 14 of the Listing Rules throughout the year ended 31 March 2008, with deviations from code provision A.4.1 and A.4.2 of the Code in respect of the service term and rotation of Directors.

None of the existing Non-executive Directors of the Company is appointed for a specifi c term and Managing Director is not subject to re-election by rotation by the Company’s Articles of Association (the “Articles”) 76. This constitutes a deviation from code provision A.4.1 and A.4.2 of the Code. However, all Directors of the Company excluding Managing Director are subject to the retirement by rotation at each annual general meeting under Articles 78 and 79 of the Company. In view of good Corporate Governance Practices, Managing Director voluntarily retired from his offi ce at the annual general meeting of the Company held on 24 August 2006 notwithstanding that he was not required to do so by the Company’s Article 76. As such, the Company considers that suffi cient measures have been taken to ensure that the Company’s Corporate Governance Practices are no less exacting than those in the Code.

INTERNAL CONTROL

The Board has overall responsibility for maintaining a sound and effective internal control system of the Group. The Group’s internal control system includes a well defi ned management structure with limits of authority which is designed for the achievement of business objectives, safeguard assets against unauthorized use or disposition, ensure proper maintenance of books and records for the provision of reliable fi nancial information for internal use or publication, and to ensure compliance with relevant legislations and regulations.

COMMUNICATION WITH SHAREHOLDERS

The Board adopts an open and transparent communication policy and encourages full disclosure to the public as a way to enhance corporate governance. The Board aims to provide our shareholders and the public with the necessary information for them to form their own judgement on the Company.

AUDITOR’S REMUNERATION

For the year ended 31 March 2008, the Auditor of the Company received approximately HK$800,000 for audit service (2007: approximately HK$700,000).

Annual Report 2008 19

Corporate Governance Report

MODEL CODE FOR DIRECTORS’ SECURITIES TRANSACTIONS

The Board has adopted a new code of conduct regarding Directors’ securities transactions on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules. The Directors confi rmed that there were not any non-compliance with the standard set out in the Model Code and the Company’s code of conduct regarding Directors’ securities transactions during the year ended 31 March 2008.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the fi nancial statements of the Group. With the assistance of the Finance Department which is under the supervision of the Qualifi ed Accountant of the Company, the Directors ensure the preparation of the fi nancial statements of the Group are in accordance with statutory requirements and applicable accounting standards. The Directors also ensure the publication of the fi nancial statements of the Group is in a timely manner.

The Statement of the Auditor of the Company regarding their reporting responsibilities on the fi nancial statements is set out in the Independent Auditor’s Report of this Annual Report.

AUDIT COMMITTEE

The Company has established an Audit Committee. The terms of the Audit Committee are consistent with the provisions set out in the relevant section of the Code.

The Audit Committee has reviewed with management and auditor the accounting principles and practices adopted by the Group and discussed auditing, internal controls, and fi nancial reporting matters including the review of the fi nancial statements. The Audit Committee comprises three independent non-executive directors, namely, Mr. Ip Shing Hing, Mr. Ng Wing Hang Patrick, Mr. Choy Wai Shek Raymond and one nonexecutive director, Mr. Duncan Chiu.

The principal duties of the Audit Committee include the review and supervision of the Group’s fi nancial reporting system, fi nancial statements and internal control procedures. It also acts as an important link between the Board and the Company’s auditor in matters within the scope of the group audit.

The Group’s interim report for the six months ended 30 September 2007 and the annual report for the year ended 31 March 2008 have been reviewed by the Audit Committee, and with recommendation to the Board for approval.

During the fi nancial year ended 31 March 2008, two meetings were held by the Audit Committee. The individual attendance record of each member of the Audit Committee is as follows:

==> picture [469 x 93] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Number of|Attendance|
|meetings attended|rate|
|Ip Shing Hing|2/2|100%|
|Ng Wing Hang Patrick|2/2|100%|
|Choy Wai Shek Raymond|2/2|100%|
|Duncan Chiu|0/2|0%|

----- End of picture text -----

20

Far East Hotels and Entertainment Limited

Corporate Governance Report

REMUNERATION COMMITTEE

The Company has established a Remuneration Committee with written terms of reference pursuant to the provisions set out in the Code. The committee comprises two independent non-executive directors, namely Mr. Ng Wing Hang Patrick, Mr. Choy Wai Shek Raymond and the Managing Director & Chief Executive, Mr. Derek Chiu of the Company. The Remuneration Committee is principally responsible for formulation and making recommendation to the Board on the Group’s policy and structure for all remuneration of directors and senior management.

The terms of reference of the Remuneration Committee are consistent with the terms set out in the relevant section of the Code. No Director is involved in deciding his own remuneration.

During the fi nancial year ended 31 March 2008, one meeting was held by the the Remuneration Committee. The individual attendance record of each member of the Remuneration Committee is as follows:

==> picture [469 x 80] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Number of|Attendance|
|Meetings attended|rate|
|Derek Chiu|1/1|100%|
|Ng Wing Hang Patrick|1/1|100%|
|Choy Wai Shek Raymond|1/1|100%|

----- End of picture text -----

Annual Report 2008 21

Independent Auditor’s Report

==> picture [82 x 60] intentionally omitted <==

TO THE MEMBERS OF FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(incorporated in Hong Kong with limited liability)

We have audited the consolidated fi nancial statements of Far East Hotels And Entertainment Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 22 to 84, which comprise the consolidated and Company balance sheets as at 31st March, 2008, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated fi nancial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certifi ed Public Accountants and the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 141 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certifi ed Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated fi nancial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31st March, 2008 and of the Group’s profi t and cash fl ows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance.

Deloitte Touche Tohmatsu

Certifi ed Public Accountants Hong Kong 4th July, 2008

22

Far East Hotels and Entertainment Limited

Consolidated Income Statement

For the Year ended 31st March, 2008

NOTES Revenue from hotel operation Property rental income License fee income Cost of sales Gross loss Dividend income from listed securities Increase in fair value of held-for-trading investments Other income Gain (loss) on disposal of available-for-sale investments Gain on disposal of investment properties Increase in fair value of investment properties 13 Increase in fair value of f nancial liabilities at fair value through prof t or loss Administrative expenses Finance costs 6 Share of results of associates Prof t (loss) before taxation 7 Taxation 10 Prof t (loss) for the year Earnings (loss) per share 11	2008 2007 HK$ HK$ 16,558,252 13,662,525 10,488,655 6,056,855 – 637,255 (28,235,399) (29,335,921)
	(1,188,492) (8,979,286) 146,641 281,807 3,175,850 21,069,893 3,684,586 2,962,688 3,428,900 (82,950) 969,015 – 27,249,807 3,915,586 (497,635) – (25,693,950) (18,517,444) (4,219,585) (3,747,005) 550,552 (45,933,469)
	7,605,689 (49,030,180) (3,822,329) (400,000)
	3,783,360 (49,430,180)
	0.77 cents (10.11)cents

23

Annual Report 2008

Consolidated Balance Sheet

At 31st March, 2008

NOTES NON-CURRENT ASSETS Property, plant and equipment 12 Investment properties 13 Prepaid lease payments 14 Interests in associates 17 Available-for-sale investments 18 Other non-current assets 19 CURRENT ASSETS Prepaid lease payments 14 Held-for-trading investments 20 Inventories 21 Trade and other receivables 22 Deposits and prepayment Amount due from an associate 24 Amounts due from related companies 25 Pledged bank deposits 26 Bank balances and cash 26 CURRENT LIABILITIES Trade and other payables 27 Deposits received Amounts due to associates 24 Amounts due to related companies 29 Amount due to a minority shareholder 30 Obligations under f nance leases-due within one year 31 Secured bank borrowings-due within one year 32 Financial liabilities at fair value through prof t or loss NET CURRENT ASSETS	2008 2007 HK$ HK$ 106,371,482 110,092,520 143,014,342 125,024,535 1,029,464 1,057,446 4,535,780 11,785,228 180,411,545 186,004,545 3,373,523 –
	438,736,136 433,964,274
	28,016 28,050 22,517,895 20,480,520 437,303 415,956 3,468,789 431,683 7,214,889 1,632,335 203,562 203,562 472,489 572,488 2,410,948 2,324,734 19,457,028 40,230,730
	56,210,919 66,320,058
	6,310,615 7,175,104 1,499,709 463,346 1,697,717 6,777,085 212,406 171,822 1,718,594 2,213,400 – 442,773 5,195,638 4,264,068 497,635 –
	17,132,314 21,507,598
	39,078,605 44,812,460
	477,814,741 478,776,734

24

Far East Hotels and Entertainment Limited

Consolidated Balance Sheet

At 31st March, 2008

NOTES CAPITAL AND RESERVES Share capital 33 Reserves NON-CURRENT LIABILITIES Deferred taxation 35 Provision for long service payments 36 Obligations under f nance leases-due after one year 31 Secured bank borrowings-due after one year 32	2008 2007 HK$ HK$ 48,884,268 488,842,675 337,157,233 (104,290,439)
	386,041,501 384,552,236
	11,741,752 7,919,423 2,055,013 2,055,013 – 276,200 77,976,475 83,973,862
	91,773,240 94,224,498
	477,814,741 478,776,734

The fi nancial statements on pages 22 to 84 were approved and authorised for issue by the Board of Directors on 4th July, 2008 and are signed on its behalf by:

DEREK CHIU DIRECTOR

DUNCAN CHIU DIRECTOR

25

Annual Report 2008

Company Balance Sheet

At 31st March, 2008

NOTES NON-CURRENT ASSETS Property, plant and equipment 12 Investments in subsidiaries 16 Interests in associates 17 Available-for-sale investments 18 Other non-current assets 19 CURRENT ASSETS Held-for-trading investments 20 Other receivables Deposits and prepayment Amounts due from subsidiaries 23 Amount due from an associate 24 Amount due from a related company 25 Pledged bank deposits 26 Bank balances and cash 26 CURRENT LIABILITIES Other payables Amounts due to subsidiaries 28 Amounts due to associates 24 Amounts due to related companies 29 Obligations under f nance leases-due within one year 31 Secured bank borrowings-due within one year 32 NET CURRENT ASSETS CAPITAL AND RESERVES Share capital 33 Reserves 34 NON-CURRENT LIABILITIES Provision for long service payments 36 Obligations under f nance leases-due after one year 31 Secured bank borrowings-due after one year 32	2008 2007 HK$ HK$ 1,702,032 1,760,585 77,789,728 77,789,728 3 3 157,026,351 157,026,351 3,373,523 –
	239,891,637 236,576,667
	590,000 658,000 3,198,123 93,680 477,168 370,058 169,529,290 166,926,816 203,563 203,563 420,716 420,716 2,279,834 2,197,794 17,431,598 36,186,034
	194,130,292 207,056,661
	1,005,516 1,342,307 8,107,444 13,132,171 37,336 10,704 544,348 403,764 – 442,773 3,240,000 2,240,000
	12,934,644 17,571,719
	181,195,648 189,484,942
	421,087,285 426,061,609
	48,884,268 488,842,675 344,566,117 (89,434,166)
	393,450,385 399,408,509
	1,176,900 1,176,900 – 276,200 26,460,000 25,200,000
	27,636,900 26,653,100
	421,087,285 426,061,609

DEREK CHIU DIRECTOR

DUNCAN CHIU DIRECTOR

26

Far East Hotels and Entertainment Limited

Consolidated Statement of Changes in Equity

For the Year ended 31st March, 2008

At 1st April, 2006 Exchange differences arising on translation of foreign operations Share of movements in post – acquisition reserves of an associate Change in fair value of available-for – sale investments Surplus on revaluation of properties (note 12b) Net income recognised directly in equity Loss for the year Total recognised income and expense for the year At 31st March, 2007 Capital reduction Transfer prior year loss to special reserve Exchange differences arising on translation of foreign operations Share of movements in post – acquisition reserves of an associate Change in fair value of available-for – sale investments Transfer to income statement on sales of available-for-sale investments Net income recognised directly in equity Prof t for the year Total recognised income and expense for the year At 31st March, 2008	Capital Investment Property Share Share Capital redemption revaluation revaluation Exchange Special Accumulated capital premium reserve reserve reserve reserve reserve reserve losses Total HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ (Note 1) (Note 2) (Note 3) 488,842,675 92,805,386 21,223,231 28,990,000 651,750 – (1,197,963) – (196,578,012) 434,737,067
	– – – – – – (944,676) – – (944,676) – – – – – – (2,096,757) – – (2,096,757) – – – – (651,750) – – – – (651,750) – – – – – 2,938,532 – – – 2,938,532
	– – – – (651,750) 2,938,532 (3,041,433) – – (754,651) – – – – – – – – (49,430,180) (49,430,180)
	– – – – (651,750) 2,938,532 (3,041,433) – (49,430,180) (50,184,831)
	488,842,675 92,805,386 21,223,231 28,990,000 – 2,938,532 (4,239,396) – (246,008,192) 384,552,236
	(439,958,407) 118,060,579 – – – – – 100,000,000 221,897,828 – – – – – – – – (10,554,955) 10,554,955 – – – – – – – (2,017,832) – – (2,017,832) – – – – – – 2,936,737 – – 2,936,737 – – – – 215,900 – – – – 215,900 – – – – (215,900) – – – (3,213,000) (3,428,900)
	(439,958,407) 118,060,579 – – – – 918,905 89,445,045 229,239,783 (2,294,095) – – – – – – – – 3,783,360 3,783,360
	(439,958,407) 118,060,579 – – – – 918,905 89,445,045 233,023,143 1,489,265
	48,884,268 210,865,965 21,223,231 28,990,000 – 2,938,532 (3,320,491) 89,445,045 (12,985,049)386,041,501

27

Annual Report 2008

Consolidated Statement of Changes in Equity

For the Year ended 31st March, 2008

Notes

1. The capital reserve represents the portion of profi t on disposal in 1982 of the Group’s assets to an associate, which is deferred to the extent of the Group’s attributable interests therein. The amounts deferred will be recognised as the Group’s profi t only when the Group’s equity interest in the associate is decreased or the assets are sold to third parties.

2. The capital redemption reserve represents the repurchase of shares of HK$1.00 each of the Company on The Stock Exchange of Hong Kong Limited during the fi nancial year of 1994/1995, 1995/1996 and 1997/1998. The nominal value of the cancelled shares was credited to capital redemption reserve and the aggregate consideration paid was debited to retained earnings.

3. The special reserve arose as a result of the capital reduction of HK$439,958,407 took effect in 2007/2008. An amount of HK$221,897,828 of the total amount was applied towards writing off the unconsolidated accumulated losses of the Company as at 31st March, 2006, and HK$100,000,000 was transferred to a special reserve. The remaining balance of HK$118,060,579 was credited to the share premium account of the Company. The Company is permitted to utilise the special reserve sum of HK$100,000,000 for writing off any further audited losses which may be incurred by the Company after 31st March, 2006. The loss for the year ended 31st March, 2007 amounted to HK$10,554,955 was written off against the special reserve of HK$100,000,000. In the case of any future non-permanent losses which may, from time to time, have been written off against such HK$100,000,000 reserve, any recovery from the Company’s investments in respect of which such losses were recorded (up to HK$100,000,000 or the amount of such written-off losses, whichever is less) will, likewise, be re-credited to the same special capital reserve for the protection of the creditors existing at the date when the proposed reduction becomes effective.

28

Far East Hotels and Entertainment Limited

Consolidated Cash Flow Statement

For the Year ended 31st March, 2008

OPERATING ACTIVITIES Prof t (loss) before taxation Adjustments for: Dividend income from listed securities Interest income Allowance for doubtful debts Amortisation of intangible asset Impairment loss on intangible asset Release of prepaid lease payments Depreciation Finance costs Loss on disposal of property, plant and equipment Gain on disposal of investment properties (Gain) loss on disposal of available-for-sale investments Increase in fair value of f nancial liabilities at fair value through prof t or loss Increase in fair value of investment properties Share of results of associates Exchange gain Operating cash f ows before movements in working capital Decrease in available-for-sale investments Increase in held-for-trading investments (Increase) decrease in inventories (Increase) decrease in trade and other receivables Increase in deposits and prepayment Increase in amount due from an associate Decrease in amounts due from related companies (Decrease) increase in trade and other payables Increase in deposits received (Decrease) increase in amounts due to associates Increase in amounts due to related companies CASH (USED IN) GENERATED FROM OPERATIONS AND NET CASH USED IN OPERATING ACTIVITIES	2008 2007 HK$ HK$ 7,605,689 (49,030,180) (146,641) (281,807) (1,469,011) (1,562,702) 251,845 3,481,040 – 1,885,400 – 2,770,800 28,016 139,833 9,763,070 8,990,868 4,219,585 3,747,005 162,473 340,417 (969,015) – (3,428,900) 82,950 497,635 – (27,249,807) (3,915,586) (550,552) 45,933,469 (1,446,073) (2,387,075)
	(12,731,686) 10,194,432 5,808,900 – (2,037,375) (10,888,910) (21,347) 2,208 (3,288,951) 2,776,363 (5,582,554) – – (3,172) 99,999 100,000 (864,489) 273,932 1,036,363 110,346 (5,079,368) 2,125,956 40,584 36,422
	(22,619,924) 4,727,577

29

Annual Report 2008

Consolidated Cash Flow Statement

For the Year ended 31st March, 2008

INVESTING ACTIVITIES Dividend received from an associate Dividends received from investments Interest received Proceeds on disposal of investment properties Proceeds on disposal of property, plant and equipment Proceeds on disposal of available-for-sale investment Increase in pledged bank deposits Acquisition of property, plant and equipment Acquisition of investment properties Acquisition of non-current assets NET CASH FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Interest paid on bank and other borrowings Interest paid on f nance leases Repayment of obligations under f nance leases New bank and other borrowings raised Repayment of bank and other borrowings (Repayment of) advance from a minority shareholder NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS BROUGHT FORWARD CASH AND CASH EQUIVALENTS CARRIED FORWARD, represented by bank balances and cash	2008 2007 HK$ HK$ 7,800,000 1,800,000 146,641 281,807 1,469,011 1,562,702 10,229,015 – 93,978 – – 2,204,300 (86,214) (85,981) (3,592,269) (6,033,193) – (42,752,949) (3,373,523) –
	12,686,639 (43,023,314)
	(4,155,247) (3,657,477) (64,338) (89,528) (1,060,209) (507,363) 5,000,000 63,420,000 (10,065,817) (20,232,798) (494,806) 740,960
	(10,840,417) 39,673,794
	(20,773,702) 1,378,057 40,230,730 38,852,673
	19,457,028 40,230,730

30

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

1. GENERAL

The Company is a public limited company incorporated in Hong Kong with its shares listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered offi ce and principal place of business of the Company are disclosed in the section headed “Corporate information” in the annual report.

The Company is engaged in investment holding company and provides corporate management services to its subsidiaries. The principal activities of its subsidiaries and associates are set out in notes 16 and 17 respectively.

The consolidated fi nancial statements are presented in Hong Kong dollars, which is the functional currency of the Company.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group and the Company have applied, for the fi rst time, the following new standards, amendments to Hong Kong Financial Reporting Standards (“HKFRS”) and interpretations (“HK(IFRIC)-Int”) (new “HKFRSs”) issued by the Hong Kong Institute of Certifi ed Public Accountants (the “HKICPA”), which are effective for the Group’s and the Company’s fi nancial year beginning 1st April, 2007.

HKAS 1 (Amendment) Capital Disclosures HKFRS 7 Financial Instruments: Disclosures HK(IFRIC)-Int 8 Scope of HKFRS 2 HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment HK(IFRIC)-Int 11 HKFRS 2: Group and Treasury Share Transactions

The adoption of the new HKFRSs has resulted in the following areas:

• The impact of application of HKFRS 7 “Financial Instruments: Disclosures” has been to expand the disclosures provided in the consolidated fi nancial statements regarding the Group’s fi nancial instruments, especially on the sensitivity analysis to market risk.

• The impact of application of HKAS 1 (Amendment) “Capital Disclosures” has been to disclose information regarding its objectives, policies and processes for managing capital.

The application of the remaining new HKFRSs has had no material effect on how the results and fi nancial position of the Group and the Company for the current or prior accounting periods are prepared and presented. Accordingly, no prior period adjustment has been required.

31

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS - continued

The Group and the Company have not early adopted the following new and revised standards, amendment or interpretations that have been issued but are not yet effective. The directors of the Company are in the process of assessing the potential impact and so far concluded that the application of these standards or interpretations will have no material impact on the results and the fi nancial position of the Group and the Company.

HKAS 1 (Revised) Presentation of Financial Statements1 HKAS 23 (Revised) Borrowing Costs1 HKAS 27 (Revised) Consolidated and Separate Financial Statements2 HKAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation1 HKFRS 2 (Amendment) Vesting Conditions and Cancellations1 HKFRS 3 (Revised) Business Combinations2 HKFRS 8 Operating Segments1 HK(IFRIC)-Int 12 Service Concession Arrangements3 HK(IFRIC)-Int 13 Customer Loyalty Programmes4 HK(IFRIC)-Int 14 HKAS 19-The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction3

1 Effective for annual periods beginning on or after 1st January, 2009

2 Effective for annual periods beginning on or after 1st July, 2009

3 Effective for annual periods beginning on or after 1st January, 2008

4 Effective for annual periods beginning on or after 1st July, 2008

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated fi nancial statements have been prepared on the historical cost basis except for investment properties and certain fi nancial instruments, which are measured at fair values, as explained in the accounting policies set out below.

The consolidated fi nancial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards issued by the HKICPA. In addition, the consolidated fi nancial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance. The principal accounting policies adopted are below:

Basis of consolidation

The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

32

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Basis of consolidation - continued

Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses have been eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

Revenue from the operation of hotels is recognised when services are rendered.

Rental income under operating leases is recognised in the consolidated income statement on a straight-line basis over the terms of the relevant leases.

Dividends from investments are recognised when the Group’s right to receive payment is established.

License fee income is recognised when the Group’s entitlement to such payments have been established and is recognised on a straight-line basis over the term of license period.

Interest income from a fi nancial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount.

33

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment loss.

Depreciation is provided to write off the cost of the assets over their estimated useful lives, and after taking into account their estimated residual value, using the straight-line method.

Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

When an item of property, plant and equipment is transferred to investment property carried at fair value, if the carrying amount is increased, the surplus attributable to building and prepaid lease payments for land is credited directly to equity (property revaluation reserve). On subsequent disposal of the investment property, the revaluation surplus included in equity may be transferred to accumulated losses. The transfer from revaluation surplus to accumulated losses is not made through profi t or loss.

Paintings

Paintings are stated at cost less any identifi ed impairment loss.

Investment properties

Investment properties are properties held to earn rentals and/or capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. When an owner-occupied property became an investment property, the property is measured at its fair value at the date of transfer. Subsequent to initial recognition, investment properties are measured using the fair value model. Gains or losses arising from changes in the fair value of investment properties are included in profi t or loss for the period in which they arise.

34

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Investment properties - continued

Leasehold land held for a currently undetermined future use is regarded as held for capital appreciation purpose and classifi ed as an investment property, and carried at fair value. Changes in fair value of the leasehold land are recognised directly in profi t or loss for the period in which changes take place.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefi ts are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the year in which the item is derecognised.

Transfer from investment property to property, plant and equipment will be made when there is a change in use, evidenced by commencement of owner occupation. Property interests held under operating lease previously classifi ed as an investment property is accounted for as if it were a fi nance lease and measured under the fair value model. The Group shall continue to account for the lease as a fi nance lease, even if subsequent event changes the nature of the property interest so that it is no longer classifi ed as investment property.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identifi ed impairment loss.

Investments in associates

An associate is an entity over which the investor has signifi cant infl uence and that is neither a subsidiary nor an investment in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated fi nancial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any identifi ed impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any longterm interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

When there is a difference between the reporting date of an associate and that of the Group (that is no more than three months) and it is impracticable to prepare another set of fi nancial statements that are of the same date as the Group, adjustments are made for the effects of signifi cant transactions or events that occur between the reporting date of the associate and that of the Group.

35

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Investments in associates - continued

Any excess of the Group’s share of the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profi t and loss.

Where a group entity transacts with an associate of the Group, profi ts and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Owner-occupied leasehold interest in land

The land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classifi cation. To the extent that the allocation of the lease payments between the land and buildings elements can be made reliably, the leasehold interests in land are classifi ed as prepaid lease payments under operating leases, which are carried at cost and amortised over the lease term on a straight-line basis.

Impairment of tangible assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised in the profi t or loss immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised in the profi t or loss immediately.

Inventories

Inventories, representing inventories of goods, beverages and general stores, are stated at the lower of cost and net realisable value. Cost is calculated using the fi rst-in, fi rst-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

36

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments

Financial assets and fi nancial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and fi nancial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of fi nancial assets and fi nancial liabilities (other than fi nancial assets and fi nancial liabilities at fair value through profi t or loss) are added to or deducted from the fair value of the fi nancial assets or fi nancial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of fi nancial assets or fi nancial liabilities at fair value through profi t or loss are recognised immediately in profi t or loss.

Financial assets

The Group’s fi nancial assets are classifi ed into fi nancial assets at fair value through profi t or loss (“FVTPL”), available-for-sale investments and loans and receivables. All regular way purchases or sales of fi nancial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a fi nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset, or, where appropriate, a shorter period to the net carrying amount of the fi nancial asset at initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those fi nancial assets designated as at FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profi t or loss (“FVTPL”)

Financial assets at FVTPL comprise fi nancial assets held for trading. A fi nancial asset is classifi ed as held for trading if:

• it has been acquired principally for the purpose of selling in the near future; or

• it is a part of an identifi ed portfolio of fi nancial instruments that the Group manages together and has a recent actual pattern of short-term profi t-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

At each balance sheet date subsequent to initial recognition, fi nancial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in profi t or loss in the period in which they arise. The net gain or loss recognised in profi t or loss excludes any dividend or interest earned on the fi nancial assets.

37

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial assets - continued

Available-for-sale investments

Available-for-sale investments are non-derivatives that are either designated or not classifi ed as fi nancial assets at fair value through profi t or loss, loans and receivables or held-to-maturity investments. At each balance sheet date subsequent to initial recognition, available-for-sale investments are measured at fair value. Changes in fair value are recognised in equity, until the investment is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profi t or loss.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identifi ed impairment losses at each balance sheet date subsequent to initial recognition.

On adoption of HKAS 39, certain investment securities previously carried at cost are classifi ed as available-for-sale investments and measured at fair value. Corresponding adjustments were made to the Group’s accumulated loss. Upon disposal of such investments, the amount previously recorded in the accumulated losses is transferred to profi t or loss.

Loans and receivables

Loans and receivables (including trade and other receivables, amounts due from subsidiaries, amount due from an associate, amounts due from related companies, pledged bank deposits, bank balances and cash) are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less any identifi ed impairment losses.

38

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial assets - continued

Impairment of fi nancial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the fi nancial assets have been impacted.

For an available-for-sale equity investment, a signifi cant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

Objective evidence of impairment could include:

• signifi cant fi nancial diffi culty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or fi nancial re-organisation.

For certain categories of fi nancial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period of 30 days, observable changes in national or local economic conditions that correlate with default on receivables.

For fi nancial assets carried at amortised cost, an impairment loss is recognised in profi t or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash fl ows discounted at the original effective interest rate.

For fi nancial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment loss will not be reversed in subsequent periods.

39

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial assets - continued

Impairment of fi nancial assets - continued

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of trade receivables and amounts due from subsidiaries, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profi t or loss. When such receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profi t or loss.

For fi nancial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profi t or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profi t or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in equity.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a fi nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the fi nancial liability, or, where appropriate, a shorter period to the net carrying fi nancial liability at initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities at fair value through profi t or loss

Financial liabilities at FVTPL has two subcategories, including fi nancial liabilities held for trading and those designated at FVTPL on initial recognition.

40

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial liabilities and equity - continued

Financial liabilities at fair value through profi t or loss - continued

A fi nancial liability is classifi ed as held for trading if:

• it has been incurred principally for the purpose of repurchasing in the near future; or

• it is a part of an identifi ed portfolio of fi nancial instruments that the Company/Group manages together and has a recent actual pattern of short-term profi t-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A fi nancial liability other than a fi nancial liability held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or signifi cantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the fi nancial liability forms part of a group of fi nancial assets or fi nancial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

At each balance sheet date subsequent to initial recognition, fi nancial liabilities at FVTPL are measured at fair value, with changes in fair value recognised directly in profi t or loss in the period in which they arise. The net gain or loss recognised in profi t or loss includes any interest paid on the fi nancial liabilities.

Other fi nancial liabilities (including trade and other payables, amounts due to associates and related companies and amount due to a minority shareholder and secured bank borrowings) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

41

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Derecognition

Financial assets are derecognised when the rights to receive cash fl ows from the assets expire or, the fi nancial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the fi nancial assets. On derecognition of a fi nancial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profi t or loss.

Financial liabilities are derecognised when the obligation specifi ed in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the fi nancial liability derecognised and the consideration paid and payable is recognised in profi t or loss.

Leasing

Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.

The Group as lessor

Rental income under operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a fi nance lease obligation. Lease payments are apportioned between fi nance charges and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profi t or loss.

Rentals payable under operating lease are charged to profi t or loss on a straight-line basis over the term of the relevant lease. Benefi ts received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

42

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Foreign currencies

In preparing the fi nancial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profi t or loss in the period in which they arise.

For the purposes of presenting the consolidated fi nancial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fl uctuate signifi cantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the exchange reserve). Such exchange differences are recognised in profi t or loss in the period in which the foreign operation is disposed of.

Taxation

Taxation represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from the profi t as reported in the consolidated income statement because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes income statement items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have enacted or substantively enacted by the balance sheet.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

43

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

Payments to defi ned contribution retirement benefi t plans or the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Share-based payments

In relation to share options granted before 7th November, 2002 and vested before 1st January, 2005, the fi nancial impact of share options granted is not recorded in the consolidated balance sheet and the company balance sheet until such time as the options are exercised, and no charge is recognised in the consolidated income statement in respect of the value of options granted in the year. Upon the exercise of the share options, the resulting shares issued are recorded as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded as share premium. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

44

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet dates, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed below:

Useful lives of property, plant and equipment

In applying the accounting policy on property, plant and equipment with respect to depreciation, management estimates the useful lives of various categories of property, plant and equipment according to the industrial experiences gained over the development history of the Group and also by reference to the relevant industrial norm.

Income taxes

No deferred tax asset has been recognised in respect of tax losses of HK$119,273,000 and HK$102,207,000 as at 31st March, 2008 and 2007, respectively, due to the unpredictability of future profi t streams. The realisability of the deferred tax asset mainly depends on whether suffi cient future profi ts or taxable temporary differences will be available in the future.

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the Group is currently organised into four operating divisions-hotel operation, property letting, securities investment and trading, and investment holding. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Hotel operation – operation of a hotel Property letting – leasing of investment properties and service apartments Securities investment and trading – investment and trading in securities Investment holding – investment in a sauna business licence of which licence expired in 2007

Segment information about these businesses is presented below.

45

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

5. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

Business segments - continued

2008

Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ REVENUE 16,558,252 10,488,655 – – 27,046,907 RESULTS Segment (loss) prof t (102,115) 24,341,972 615,449 – 24,855,306 Bank interest income 1,155,860 Unallocated corporate expenses (14,736,444) Finance costs (4,219,585) Share of results of associates 550,552 Prof t before taxation 7,605,689 Taxation (3,822,329) Prof t for the year 3,783,360 ASSETS Segment assets 35,339,689 198,332,729 208,477,883 – 442,150,301 Interests in associates 4,535,780 Unallocated assets 48,260,974 Consolidated total assets 494,947,055 LIABILITIES Segment liabilities 2,387,533 6,657,858 756,311 – 9,801,702 Deferred tax liabilities 11,741,752 Borrowings 83,172,113 Unallocated liabilities 4,189,987 Consolidated total liabilities 108,905,554 Securities Hotel Property investment Investment operation letting and trading holding Unallocated Consolidated HK$ HK$ HK$ HK$ HK$ HK$ OTHER INFORMATION Capital additions 1,257,624 2,262,801 399,880 – 13,200 3,933,505 Depreciation 3,080,927 5,155,746 – – 1,526,397 9,763,070 Release of prepaid lease payments 28,016 – – – – 28,016 Allowance for doubtful debts – 251,845 – – – 251,845 Gain on disposal of investment properties – (969,015) – – – (969,015) Loss on disposal of property, plant and equipment – 28,820 – – 133,652 162,472	Securities Hotel Property investment Investment operation letting and trading holding HK$ HK$ HK$ HK$ 16,558,252 10,488,655 – –	Consolidated HK$ 27,046,907 24,855,306 1,155,860 (14,736,444) (4,219,585) 550,552 7,605,689 (3,822,329) 3,783,360 442,150,301 4,535,780 48,260,974 494,947,055 9,801,702 11,741,752 83,172,113 4,189,987 108,905,554
	(102,115) 24,341,972 615,449 –

46

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

5. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

Business segments - continued

2007

REVENUE RESULTS Segment (loss) prof t Bank interest income Unallocated corporate expenses Finance costs Share of results of associates Loss before taxation Taxation Loss for the year ASSETS Segment assets Interests in associates Unallocated assets Consolidated total assets LIABILITIES Segment liabilities Deferred tax liabilities Finance lease obligations Borrowings Unallocated liabilities Consolidated total liabilities	Securities Hotel Property investment Investment operation letting and trading holding HK$ HK$ HK$ HK$ (Note 1) 13,662,525 6,056,855 – 637,255	Consolidated HK$ 20,356,635
	(696,204) (1,931,524) 21,268,751 (3,146,882)	15,494,141 690,639 (15,534,486) (3,747,005) (45,933,469)
	36,818,667 182,184,716 206,514,307 – 2,116,001 7,332,797 50,000 –
		(49,030,180) (400,000)
		(49,430,180)
		425,517,690 11,785,228 62,981,414
		500,284,332
		9,498,798 7,919,423 718,973 88,237,930 9,356,972
		115,732,096

47

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

5. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

Business segments - continued

Securities Hotel Property investment Investment operation letting and trading holding Unallocated HK$ HK$ HK$ HK$ HK$ OTHER INFORMATION Capital additions 2,336,251 56,649,891 – – – Depreciation 2,957,944 5,666,475 – – 366,449 Release of prepaid lease payments 28,050 111,783 – – – Allowance for doubtful debts – 264,136 – – 3,216,904 Amortisation of intangible assets – – – 1,885,400 – Impairment loss on intangible assets – – – 2,770,800 – Loss on disposal of property, plant and equipment – 323,261 – – 17,156

Consolidated HK$ 58,986,142 8,990,868 139,833 3,481,040 1,885,400 2,770,800 340,417

Geographical segments

The Group’s operations are located in Hong Kong and other regions in the PRC.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:

Hong Kong Other regions in the PRC	2008 2007 HK$ HK$ (Note 1) 17,096,833 14,299,780 9,950,074 6,056,855
	27,046,907 20,356,635

48

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

5. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued

Geographical segments - continued

The following is an analysis of the carrying amount of segment assets, and additions to investment properties, property, plant and equipment, analysed by the geographical area in which the assets are located:

Hong Kong Other regions in the PRC	Additions to investment Carrying amount of properties, property, segment assets plant and equipment 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 440,896,195 443,244,469 2,330,357 56,222,988 54,050,860 57,039,863 1,603,148 2,763,154
	494,947,055 500,284,332 3,933,505 58,986,142

Note 1: In the prior financial year, gross proceeds arising from the sales of securities of HK$145,548,664 was presented as part of group’s revenue for segment presentation purpose. However, in the current financial year, the amount of revenue for segment reporting purposes does not include the gross proceeds arising from the sales of securities. Accordingly, the amount of revenue for segment reporting purposes for prior year have been restated.

6. FINANCE COSTS

FINANCE COSTS
Interest on bank and other borrowings: Wholly repayable within f ve years Not wholly repayable within f ve years Interest on f nance leases	2008 2007 HK$ HK$ 189,151 6,728 3,966,096 3,650,749 64,338 89,528
	4,219,585 3,747,005

49

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

7. PROFIT (LOSS) BEFORE TAXATION

Prof t (loss) before taxation has been arrived at after charging: Amortisation of intangible asset (included in cost of sales) Depreciation: Owned assets Assets held under f nance leases Allowance for doubtful debts Release of prepaid lease payments Impairment loss on intangible asset (included in cost of sales) Auditor’s remuneration Current year Underprovision prior years Directors’ remuneration and other staff costs, including retirement benef t schemes contributions of HK$293,987 (2007: HK$381,845) Loss on disposal of property, plant and equipment Operating lease rentals in respect of buildings and after crediting: Share of taxation of associates (included in share of results of associates) Bank interest income Exchange gain, net Other interest income

2008 2007 HK$ HK$ – 1,885,400 9,763,070 8,777,778 – 213,090

9,763,070 10,876,268 251,845 3,481,040 28,016 139,833 – 2,770,800 607,466 575,045 150,000 – 6,733,605 5,061,304 162,472 340,417 4,528,865 3,404,466 107,623 186,662 1,155,860 690,639 2,015,577 1,399,986 313,151 872,063

Property rental income, net of:-

Outgoings from properties that generated rental income during the year of HK$5,028,562 (2007: HK$2,020,315).

Outgoings from properties that did not generate rental income during the year of HK$1,125,624 (2007: HK$822,105).

50

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

8. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable to each of the fourteen (2007: fourteen) directors were as follows:

Name of directors 2008 Mr. Deacon Te Ken Chiu Mr. Derek Chiu Mr. Desmond Chiu Ms. Margaret Chiu Madam Chiu Ju Ching Lan Mr. Dick Tat Sang Chiu Mr. David Chiu Mr. Dennis Chiu Mr. Duncan Chiu Mr. Ip Shing Hing Mr. Ng Wing Hang Mr. Choy Wai Shek Mr. Chan Chi Hing Mr. Tang Sung Ki 2007 Mr. Deacon Te Ken Chiu Mr. Derek Chiu Mr. Desmond Chiu Ms. Margaret Chiu Madam Chiu Ju Ching Lan Mr. Dick Tat Sang Chiu Mr. David Chiu Mr. Dennis Chiu Mr. Duncan Chiu Mr. Ip Shing Hing Mr. Ng Wing Hang Mr. Choy Wai Shek Mr. Chan Chi Hing Mr. Tang Sung Ki	Salaries Retirement Performance and other benef t schemes related Fees benef ts contributions bonus Total HK$ HK$ HK$ HK$ HK$ (Note)
	20,000 – – – 20,000 10,000 844,654 12,000 400,000 1,266,654 10,000 – – – 10,000 10,000 191,049 12,000 – 213,049 10,000 355,000 – – 365,000 10,000 – – – 10,000 10,000 – – – 10,000 10,000 – – – 10,000 10,000 180,000 9,000 – 199,000 120,000 – – – 120,000 120,000 – – – 120,000 120,000 – – – 120,000 10,000 – – – 10,000 10,000 477,824 12,000 – 499,824 480,000 2,048,527 45,000 400,000 2,973,527
	20,000 – – – 20,000 10,000 871,914 12,000 350,000 1,243,914 10,000 – – – 10,000 10,000 227,213 12,000 – 249,213 10,000 300,000 – – 310,000 10,000 – – – 10,000 10,000 – – – 10,000 10,000 – – – 10,000 10,000 180,000 9,000 – 199,000 120,000 – – – 120,000 120,000 – – – 120,000 120,000 – – – 120,000 10,000 – – – 10,000 10,000 435,400 12,000 – 457,400 480,000 2,014,527 45,000 350,000 2,889,527

Note: The performance related bonus payable to the executive directors is determined based on the performance of the individual directors.

51

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

8. DIRECTORS’ EMOLUMENTS - continued

Included in the above, certain leasehold land and buildings of the Group are occupied by a director and the estimated rateable value of this director’s quarter amounts to approximately HK$541,800 (2007: HK$516,000).

No directors waived any emoluments in the year ended 31st March, 2008 and 2007.

During the year ended 31st March, 2008 and 2007, no emolument was paid to the directors as an inducement to join or upon joining the Group or as compensation for loss of offi ce.

9. EMPLOYEES’ EMOLUMENTS

Of the fi ve individuals with the highest emoluments in the Group, three (2007: three) were directors whose emoluments are disclosed above. The emoluments of the remaining two (2007: two) individuals were as follows:

Salaries and other benef ts Retirement benef t schemes contributions	2008 2007 HK$ HK$ 696,345 651,054 24,000 24,000
	720,345 675,054

10. TAXATION

Taxation charge represents the deferred taxation charged for the year.

No provision for Hong Kong Profi ts Tax has been made in the consolidated fi nancial statements as the Company and its subsidiaries have no assessable profi t in both years. No provision for People’s Republic of China (“PRC”) Enterprise income tax as there is no assessable profi t for both years for the subsidiary operated in PRC.

52

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

10. TAXATION - continued

Taxation for the year can be reconciled to the profi t (loss) before taxation per the consolidated income statement as follows:

Prof t (loss) before taxation Tax at the domestic income tax rate of 17.5% Tax effect of share of results of associates Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of tax losses not recognised Tax effect of utilisation of tax losses previously not recognised Effect of different tax rates of subsidiaries operating in other jurisdictions Others Taxation for the year Details of deferred taxation are set out in note 35.	2008 2007 HK$ HK$ 7,605,689 (49,030,180)
	1,330,996 (8,580,282) (96,347) 8,038,357 425,670 1,296,949 (243,352) (187,570) 4,143,601 1,705,873 (1,157,134) (996,987) (146,519) (681,788) (434,586) (194,552)
	3,822,329 400,000

11. EARNINGS (LOSS) PER SHARE

(a) Basic earnings (loss) per share

The calculation of basic earnings (loss) per share is based on the profit for the year of HK$3,783,360 (2007: loss of HK$49,430,180) and 488,842,675 (2007: 488,842,675) ordinary shares in issue during the year.

(b) Diluted earnings (loss) per share

No diluted earnings (loss) per share is presented for as the exercise of the potential dilutive ordinary shares would result in an increase in earning per share (2007: a reduction in loss per share).

53

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

12. PROPERTY, PLANT AND EQUIPMENT

COST At 1st April, 2006 Exchange adjustments Additions Disposals Reclassif ed to investment property At 31st March, 2007 Exchange adjustments Additions Disposals At 31st March, 2008 DEPRECIATION AND IMPAIRMENT At 1st April, 2006 Exchange adjustments Provided for the year Eliminated on disposals Reclassif ed to investment property At 31st March, 2007 Exchange adjustments Provided for the year Eliminated on disposals At 31st March, 2008 CARRYING VALUES At 31st March, 2008 At 31st March, 2007	THE GROUP THE COMPANY Furniture, Furniture, Leasehold Hotel f xtures, f xtures, land and property equipment, equipment, buildings Buildings in motor vehicles Leasehold motor vehicles in Hong Kong in PRC Hong Kong and others improvements Total and others HK$ HK$ HK$ HK$ HK$ HK$ HK$ 21,781,844 83,102,660 37,323,408 32,901,211 857,298 175,966,421 2,319,341 – 2,137,027 – 429,537 – 2,566,564 – – 1,196,875 – 2,437,693 2,398,625 6,033,193 38,908 – – – (945,689) (601,750) (1,547,439) (32,578) (1,934,860) – – – – (1,934,860) –
	19,846,984 86,436,562 37,323,408 34,822,752 2,654,173 181,083,879 2,325,671 – 3,802,891 – 748,257 – 4,551,148 – – – – 2,317,157 1,616,348 3,933,505 399,880 – – – (790,722) – (790,722) (412,550)
	19,846,984 90,239,453 37,323,408 37,097,444 4,270,521 188,777,810 2,313,001
	1,433,224 29,655,506 16,919,944 13,828,864 729,525 62,567,063 348,086 – 815,832 – 308,333 – 1,124,165 – 474,245 3,695,248 746,472 3,147,587 927,316 8,990,868 232,422 – – – (605,272) (601,750) (1,207,022) (15,422) (483,715) – – – – (483,715) –
	1,423,754 34,166,586 17,666,416 16,679,512 1,055,091 70,991,359 565,086 – 1,595,863 – 590,307 – 2,186,170 – 454,894 4,517,033 746,472 3,240,729 803,942 9,763,070 230,803 – – – (534,271) – (534,271) (184,920)
	1,878,648 40,279,482 18,412,888 19,976,277 1,859,033 82,406,328 610,969
	17,968,336 49,959,971 18,910,520 17,121,167 2,411,488 106,371,482 1,702,032
	18,423,230 52,269,976 19,656,992 18,143,240 1,599,082 110,092,520 1,760,585

54

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

12. PROPERTY, PLANT AND EQUIPMENT - continued

Notes:

• (a) The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Leasehold land and buildings and hotel property	Over the shorter of the terms of the lease,
	or 50 years
Leasehold improvements, furniture, f xtures,
equipment, motor vehicles and others	10% to 33.3%

• (b) Last year, a property, comprising a leasehold interest in land and buildings with an aggregate fair value of HK$13,500,000 was transferred from property, plant and equipment and prepaid lease payments for land to investment properties. The fair value of such building and prepaid lease payments for land at the date of transfer was determined by reference to a valuation carried out by Lanbase Surveyors Limited, independent qualifi ed professional valuers not connected with the Group. The difference between the aggregate fair value of building and prepaid lease payments for land and their aggregate carrying value amounted to HK$2,938,532, which is attributable to prepaid lease payments for land and has been credited to the equity.

• (c) The properties located in Hong Kong with a carrying value HK$36,878,856 (2007: HK$38,080,222) and the PRC with a carrying value HK$49,959,971 (2007: HK$52,269,976) are held under medium-term leases.

• (d) The carrying values of the Group’s and the Company’s motor vehicles includes an amount of HK$Nil (2007: HK$1,623,677) in respect of assets held under fi nance leases.

13. INVESTMENT PROPERTIES

AT FAIR VALUE At 1st April, 2006 Additions Reclassif ed from property, plant and equipment and prepaid lease payments Increase in fair value recognised in consolidated income statement At 31st March, 2007 Disposals Increase in fair value recognised in consolidated income statement At 31st March, 2008	THE GROUP HK$ 54,656,000 52,952,949 13,500,000 3,915,586
	125,024,535 (9,260,000) 27,249,807
	143,014,342

55

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

13. INVESTMENT PROPERTIES - continued

Certain investment properties with a carrying value of HK$43,474,000 (2007: HK$36,284,000) are registered in the name of a company controlled by Mr. Deacon Te Ken Chiu and his family (the “Chiu Family”) as trustee for the Group.

All of the Group’s investment properties are situated in Hong Kong and are held under medium-leases.

The fair value of the Group’s investment properties at 31st March, 2008 and 2007 has been arrived at on the basis of a valuation carried out on that date by Lanbase Surveyors Limited, an independent qualifi ed professional valuers not connected with the Group, who have appropriate qualifi cations and recent experience in the valuation of similar properties in the relevant location. The valuation report on these properties is signed by a director of Lanbase Surveyors Limited who is a member of The Hong Kong Institute of Valuers (“HKIS”), and the valuation, which is prepared in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by HKIS, was arrived at by adopting the direct comparison approach making reference to the recent transactions of similar properties under the prevailing property market conditions.

All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classifi ed and accounted for as investment properties. As at 31st March, 2008, the carrying amount of such property interests amounted to HK$143,014,342 (2007: HK$125,024,535).

14. PREPAID LEASE PAYMENTS

The prepaid lease payments represent leasehold land in Hong Kong held under medium-term leases and are analysed for reporting purposes as:

Non-current assets Current assets	THE GROUP 2008 2007 HK$ HK$ 1,029,464 1,057,446 28,016 28,050
	1,057,480 1,085,496

56

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

15. INTANGIBLE ASSET

GROSS AMOUNT At 1st April, 2006 Impairment loss recognised At 31st March, 2007 and 2008 AMORTISATION AND IMPAIRMENT At 1st April, 2006 Charged for the year Impairment loss recognised At 31st March, 2007 and 2008 CARRYING VALUES At 31st March, 2007 and 2008	THE GROUP AND THE COMPANY HK$ 11,312,400 (11,312,400)
	–
	6,656,200 1,885,400 (8,541,600)
	–
	–

The intangible asset represents the cost of acquisition of a sauna business licence operating in the PRC. Under an agreement signed with a PRC partner on 23rd September, 2002, the Group transferred the right of business operation to the PRC partner for a period of four years commencing from 1st October, 2002 at an annual fee of RMB1,300,000. The intangible asset is amortised over the licence period of the asset of six years. Last year, the Group recognised an impairment loss of HK$2,770,800 upon the expiry of the agreement.

16. INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost Less: Impairment loss recognised	THE COMPANY 2008 2007 HK$ HK$ 89,209,222 89,209,222 (11,419,494) (11,419,494)
	77,789,728 77,789,728

57

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

16. INVESTMENTS IN SUBSIDIARIES - continued

Particulars of the subsidiaries of the Company at 31st March, 2008 and 31st March, 2007 are as follows:

		Proportion of	Proportion of
		nominal value
	Paid up	of issued ordinary
	issued ordinary	share capital/
	share capital/	registered capital
Name of subsidiary	registered capital	held by the Company		Principal activities
		Directly Indirectly
		%	%
Alabama Investment	HK$9,000	97.8	–	Hotel operation
Company Limited	Ordinary shares
Anway Century Limited	HK$1	100	–	Inactive
	Ordinary share
Bright Unit Limited	HK$1	100	–	Inactive
	Ordinary share
Brighten Heart Limited	HK$1	100	–	Property investment
	Ordinary share
Cankon Properties Limited	HK$2	100	–	Property investment
	Ordinary shares
Far East Communication	HK$2	100	–	Investment holding
Technology Limited	Ordinary shares
Faubert Investment Limited	HK$2	100	–	Inactive
	Ordinary shares
Gaingrace Limited	HK$1	100	–	Property investment
	Ordinary share
Garmelo Secretarial Limited	HK$2	100	–	Provision of company
	Ordinary shares			secretarial services
Grand Sparkle Limited	HK$1	100	–	Property investment
	Ordinary share
Jeanstar Limited	HK$1	100	–	Property investment
	Ordinary share

58

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

16. INVESTMENTS IN SUBSIDIARIES - continued

		Proportion of	Proportion of
		nominal value
	Paid up	of issued ordinary
	issued ordinary	share capital/
	share capital/	registered capital
Name of subsidiary	registered capital	held by the Company		Principal activities
		Directly Indirectly
		%	%
Jenago Limited	HK$2	100	–	Inactive
	Ordinary shares
Kingwell Century Limited	HK$2	100	–	Property holding
	Ordinary shares
Lai Chi Kok Amusement	HK$25,200,000	100	–	Property investment
Park Company, Limited	Ordinary shares
Long Challenge Limited	HK$10,000	100	–	Investment holding
	Ordinary shares
Mainstar International	HK$1	100	–	Property investment
Limited	Ordinary shares
Neochem Development	HK$100	100	–	Property sub-letting
Limited	Ordinary shares
Ongrade Limited	HK$1	100	–	Property investment
	Ordinary share
Rex Entertainment Limited	HK$100,000	100	–	Property investment
	Ordinary shares
Saneworld Limited	HK$1	100	–	Property investment
	Ordinary share
Sintex Holdings Limited	US$1	100	–	Investment holding
	Ordinary share
Superlight Limited	HK$2	100	–	Investment holding
	Ordinary shares

59

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

16. INVESTMENTS IN SUBSIDIARIES - continued

		Proportion of	Proportion of
		nominal value
	Paid up	of issued ordinary
	issued ordinary	share	capital/
	share capital/	registered capital
Name of subsidiary	registered capital	held by the Company		Principal activities
		Directly Indirectly
		%	%
Beijing Hai Lian Property	RMB25,115,180	–	90	Property investment
Management Co., Ltd.	Paid up registered			and service
	capital			apartments
				operation
Chartersend Limited	HK$2	–	100	Inactive
	Ordinary shares
Far East Global	HK$2	–	100	Property sub-letting
Entertainment Limited	Ordinary shares
Jones Town Limited	HK$2	–	100	Property investment
	Ordinary shares
Oneyon Limited	HK$2	–	100	Investment holding
	Ordinary shares
Tradeland Investments	HK$250,000	–	100	Investment holding
Limited	Ordinary shares
Yuk Sue Investment	HK$2	–	100	Securities trading and
Limited	Ordinary shares			investment

All subsidiaries are incorporated and operate in Hong Kong except for Sintex Holdings Limited which is incorporated in the British Virgin Islands and operates in Hong Kong, and Beijing Hai Lian Property Management Co., Ltd. which is a Sino-foreign equity joint venture registered and operating in the PRC.

None of the subsidiaries had any debt securities outstanding at the end of the year.

60

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

17. INTERESTS IN ASSOCIATES

Unlisted shares, at cost Share of post-acquisition loss, net of dividend Impairment loss recognised	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 212,578,514 212,578,514 212,578,512 212,578,512 (208,042,734)(200,793,286) – – – – (212,578,509) (212,578,509)
	4,535,780 11,785,228 3 3

The Group has discontinued recognition of its share of loss of an associate. The amounts of unrecognised share of this associate, extracted from the relevant unaudited management accounts of associate for the year are as follows:

Unrecognised share of prof t (loss) of an associate for the year Accumulated unrecognised share of loss of an associate	Year ended 31st March, 2008 2007 HK$ HK$ 3,227,852 (29,358,157)
	(26,130,305) (29,358,157)

In the prior fi nancial year, the directors of the Company have reviewed the carrying amount of the investment in an associate of the Company as at 31st March, 2007, and recognised an impairment loss of HK$48,978,509. The impairment was made by reference to a valuation carried out on that date on the underlying assets of the associate performed by Land Asia Surveyors Limited, an independent qualifi ed professional valuers not connected with the Group, as the directors of the Company do not have any defi nite plan of redevelopment of an amusement park owned by the associate.

The valuation was arrived by using the “existing use basis” approach.

Annual Report 2008 61

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

17. INTERESTS IN ASSOCIATES - continued

Particulars of the associates of the Group at 31st March, 2008 are as follows:

			Proportion of
	Place of		nominal value of
	incorporation/	Issued	issued share capital
Name of associate	operation	share capital	held by the Group	Principal activities
			%
Bestyard Limited	Hong Kong	HK$2	50	Property sub-letting
		Ordinary shares
Bolan Holdings N.V.	Netherlands	US$100	45	Investment holding
	Antilles/	Common shares
	Australia	US$6,000
		Non-cumulative
		5% preference
		shares
Central More Limited	Hong Kong	HK$2	50	Property development
		Ordinary shares
Nob Hill Management	Hong Kong	HK$2	50	Property management
Limited		Ordinary shares
Polyspring Limited	Hong Kong	HK$4	50	Inactive
		Ordinary shares

62

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

17. INTERESTS IN ASSOCIATES - continued

The summarised fi nancial information in respect of the Group’s associates is set out below:

Results

Results
Revenue Prof t (loss) for the year Group’s share of result of associates for the year	Year ended 31st March, 2008 2007 HK$ HK$ 4,130,045 4,912,786
	1,101,104 (102,287,869)
	550,552 (45,933,469)

Financial position

Financial position
Total assets Total liabilities Net assets Group’s share of net assets of associates	At 31st March, 2008 2007 HK$ HK$ 11,754,170 27,886,708 (2,682,611) (69,556,599)
	9,071,559 (41,669,891)
	4,535,780 11,785,228

18. AVAILABLE-FOR-SALE INVESTMENTS

Equity securities listed in Hong Kong, at fair value Unlisted equity securities overseas, at cost Unlisted equity securities overseas, at cost	THE GROUP 2008 2007 HK$ HK$ – 5,593,000 180,411,545 180,411,545
	180,411,545 186,004,545
	THE COMPANY 2008 2007 HK$ HK$ 157,026,351 157,026,351

At the balance sheet date, the listed available-for-sale investments are stated at fair value determined by reference to the quoted market bid prices available on the Stock Exchange. The unlisted equity securities are stated at cost as their fair values cannot be measured reliably.

63

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

18. AVAILABLE-FOR-SALE INVESTMENTS - continued

The unlisted equity securities are measured at cost less impairment, if any, at each balance sheet date because the range of reasonable fair value estimates is so signifi cant that the directors of the Group are of the opinion that their fair values cannot be measured reliably.

Particulars of the available-for-sale investments at 31st March, 2008 are as follows:

Effective percentage of issued ordinary share capital held Place of Name of company by the Group incorporation Principal activities % Warwick Holdings S.A. 16.09 Luxemburg Investment holding, hotel investment and operation

Last year, the listed equity securities with carrying value of HK$5,593,000 are registered in name of Mr. Derek Chiu, director of the Company, as trustee for the Group. These securities were fully disposed of during the year.

The Group’s interest in a former overseas associate, Warwick Holdings S.A., was reclassifi ed as investment securities in early January 1988 after the Group disposed of part of its interest therein and the Group was no longer in a position to exercise signifi cant infl uence over the investee. The investment is stated at its carrying value at the date of reclassifi cation, which comprises its cost of acquisition plus the Group’s share of its post-acquisition profi ts accounted for using the equity method up to that date, as reduced by any impairment loss.

The Chiu Family together with the related trusts are controlling shareholders of Warwick Holdings S.A..

19. OTHER NON-CURRENT ASSETS

Paintings, at cost	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 3,373,523 – 3,373,523 –

64

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

20. HELD-FOR-TRADING INVESTMENTS

Equity securities listed in Hong Kong, at fair value Warrants listed in Hong Kong, at fair value Equity securities listed in Hong Kong, at fair value	THE GROUP 2008 2007 HK$ HK$ 16,472,395 13,681,420 6,045,500 6,799,100
	22,517,895 20,480,520
	THE COMPANY 2008 2007 HK$ HK$ 590,000 658,000

The fair values of held-for-trading investments have been determined by reference to the quoted market bid prices available on the Stock Exchange.

21. INVENTORIES

The amount represents food and beverage and other consumable, of which HK$296,924 (2007: HK$288,057) are stated at net realisable value.

22. TRADE AND OTHER RECEIVABLES

The Group generally allows an average credit period of not more than 30 days to its customers.

The following is an aged analysis of trade and other receivables at the balance sheet date:

0-30 days 31-60 days Over 60 days Trade and other receivables Less: allowance for doubtful debts	THE GROUP 2008 2007 HK$ HK$ 3,409,065 3,511,084 53,974 23,082 516,295 378,557
	3,979,334 3,912,723 (510,545) (3,481,040)
	3,468,789 431,683

In current year, included in other receivables of the Group and the Company were amounts of HK$3,196,000 (2007: HK$80,000) which bear interests ranging from 5% to Hong Kong Prime Rate (2007: 8%) per annum.

65

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

22. TRADE AND OTHER RECEIVABLES - continued

Before accepting any new customer, the Group has assessed its credit quality and defi ned credit rating limits. The limit attributed to customers are reviewed every year. 98% (2007: 68%) of the trade receivables are neither past due nor impaired, and no impairment has been made to trade receivables.

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of HK$59,724 (2007: HK$137,503) which are past due at the reporting date for which the Group has not provided for impairment loss, taking into account the past default experience. The Group does not hold any collateral over these balances.

Aging of trade and other receivables which are past due but not impaired

Overdue by 0-30 days Overdue by over 30 days Total	2008 2007 HK$ HK$ 53,974 23,082 5,750 114,421
	59,724 137,503

Movement in the allowance for doubtful debts

Balance at beginning of the year Allowance for doubtful debts Amounts written off as uncollectible Balance at end of the year	2008 2007 HK$ HK$ 3,481,040 115,491 251,845 3,481,040 (3,222,340) (115,491)
	510,545 3,481,040

In determining the recoverability of a trade debtor, the Company considers any change in the credit quality of the trade debtors from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believes that there is no further credit provision required in excess of the allowance for doubtful debts.

23. AMOUNTS DUE FROM SUBSIDIARIES

The amounts are unsecured and repayable on demand. Except for an amount of HK$104,287,297 (2007: HK$78,894,573), which bears interest ranging from Hong Kong Prime Rate minus 4% to Hong Kong Prime Rate plus 2% (2007: Hong Kong Prime Rate minus 4%) per annum, the remaining amounts are interest-free.

The directors of the Company expect that the amounts due from subsidiaries will be settled within one year as it is planned that certain subsidiaries will obtain funding to settle the outstanding amounts within one year.

66

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

24. AMOUNTS DUE FROM/TO ASSOCIATES

The amounts are unsecured, interest-free and repayable on demand.

25. AMOUNTS DUE FROM RELATED COMPANIES

Details of the amounts due from companies controlled by the directors are as follows:

THE GROUP Maximum Balance Balance amount Name of at at outstanding Name of company directors related 31.3.2008 1.4.2007 during the year HK$ HK$ HK$ Far East Holdings Deacon Te Ken Chiu 420,716 420,716 420,716 International Limited David Chiu Margaret Chiu Dennis Chiu Derek Chiu Desmond Chiu Duncan Chiu Tang Dynasty City Pte. Ltd. Deacon Te Ken Chiu 51,773 151,772 151,772 Dennis Chiu Derek Chiu Margaret Chiu Duncan Chiu (Alternate to Deacon Te Ken Chiu) 472,489 572,488	THE GROUP Maximum Balance Balance amount Name of at at outstanding Name of company directors related 31.3.2008 1.4.2007 during the year HK$ HK$ HK$ Far East Holdings Deacon Te Ken Chiu 420,716 420,716 420,716 International Limited David Chiu Margaret Chiu Dennis Chiu Derek Chiu Desmond Chiu Duncan Chiu Tang Dynasty City Pte. Ltd. Deacon Te Ken Chiu 51,773 151,772 151,772 Dennis Chiu Derek Chiu Margaret Chiu Duncan Chiu (Alternate to Deacon Te Ken Chiu) 472,489 572,488	THE COMPANY
		Maximum Balance Balance amount at at outstanding 31.3.2008 1.4.2007 during the year HK$ HK$ HK$ 420,716 420,716 420,716 – – –
	472,489 572,488	420,716 420,716

The above amounts are unsecured, interest-free and repayable on demand.

26. PLEDGED BANK DEPOSITS, BANK BALANCES AND CASH

The pledged bank deposits carry interest at the rate ranging from 1.395% to 4.1275% per annum and represent deposits pledged to a bank to secure banking facilities granted to the Group.

Bank balances carry interest at prevailing market interest rates ranging from 0.85% to 5% per annum.

67

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

27. TRADE AND OTHER PAYABLES

The following is an aged analysis of trade payables at the balance sheet date:

0-30 days 31-60 days Over 60 days Trade payables Other payables	THE GROUP 2008 2007 HK$ HK$ 974,698 800,790 125,830 229,556 1,596,711 1,652,950
	2,697,239 2,683,296 3,613,376 4,491,808
	6,310,615 7,175,104

The average credit period on purchase of goods is 60 days. The Group has fi nancial risk policies in place to ensure that all payables within credit time frame.

28. AMOUNTS DUE TO SUBSIDIARIES

The amounts are unsecured, interest-free and repayable on demand.

29. AMOUNTS DUE TO RELATED COMPANIES

Name of Name of company common directors Great Eastern Advertising Derek Chiu & Publishing Co., Ltd. Tang Dynasty City Pte. Ltd. Deacon Te Ken Chiu Dennis Chiu Derek Chiu Margaret Chiu Duncan Chiu (Alternate to Deacon Te Ken Chiu) Far East Theatres Management Deacon Te Ken Chiu Limited Chiu Ju Ching Lan Dick Tat Sang Chiu David Chiu	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 26,114 47,783 26,114 47,783 – – 331,943 231,942 186,292 124,039 186,291 124,039
	212,406 171,822 544,348 403,764

The amounts are unsecured, interest-free and repayable on demand.

68

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

30. AMOUNT DUE TO A MINORITY SHAREHOLDER

The amount is unsecured, interest-free and repayable on demand.

31. OBLIGATIONS UNDER FINANCE LEASES

THE GROUP AND THE COMPANY Amounts payable under f nance leases: Within one year In the second to f fth year inclusive Less: Future f nance charges Present value of lease obligations Less: Amount due within one year shown under current liabilities Amount due after one year	Minimum lease payments 2008 2007 HK$ HK$ – 486,420 – 283,744	Present value of minimum lease payments 2008 2007 HK$ HK$ – 442,773 – 276,200
	– 770,164 – (51,191)	– 718,973 – –
	– 718,973	– 718,973 – (442,773)
		– 276,200

It is the Group’s policy to lease certain of its motor vehicles under fi nance leases. The average lease term ranges from four to fi ve years. Interest rates are fi xed at the contract date ranging from 2.5% to 3.6%. All leases are on a fi xed repayment basis and no arrangements have been entered into for contingent rental payments. All outstanding fi nance leases have been repaid during the year.

69

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

32. SECURED BANK BORROWINGS

Bank borrowings comprise: Mortgage loans Bank loans The above borrowings are repayable as follows: Within one year More than one year, but not exceeding two years More than two years, but not exceeding f ve years More than f ve years Less: Amount due within one year shown under current liabilities Amount due after one year	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 53,472,114 60,797,930 – – 29,700,000 27,440,000 29,700,000 27,440,000
	83,172,114 88,237,930 29,700,000 27,440,000
	5,195,638 4,264,068 3,240,000 2,240,000 5,525,353 4,405,667 3,240,000 2,240,000 22,017,290 14,425,265 9,220,000 6,720,000 50,433,832 65,142,930 14,000,000 16,240,000
	83,172,113 88,237,930 29,700,000 27,440,000 (5,195,638) (4,264,068) (3,240,000) (2,240,000)
	77,976,475 83,973,862 26,460,000 25,200,000

The bank borrowings carry fl oating-rate interest based on the bank’s prime rate and the effective rates ranged from 2.95% to 6.62% (2007: 4.95% to 7%) per annum.

33. SHARE CAPITAL

Authorised: At 1st April, 2007 Capital reduction At 31st March, 2008 Issued and fully paid: At 1st April, 2007 Capital reduction At 31st March, 2008	Number of shares Share capital 2008 2007 2008 2007 HK$ HK$ 750,000,000 750,000,000 750,000,000 750,000,000 – –(675,000,000) –
	750,000,000 750,000,000 75,000,000 750,000,000
	488,842,675 488,842,675 488,842,675 488,842,675 – –(439,958,407) –
	488,842,675 488,842,675 48,884,268 488,842,675

70

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

33. SHARE CAPITAL - continued

Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 1st June, 2007, and the subsequent Order of the High Court of the Hong Kong Special Administrative Region (the “High Court”) granted on 20th July, 2007, the Company effected a capital reduction which took effect on 20th July, 2007 (the “Capital Reduction”). The paid-up capital on each of its issued ordinary share of HK$1.00 was cancelled to the extent of HK$0.90 per share, and the nominal value of all of the ordinary shares of the Company, both issued and unissued, was reduced from HK$1.00 per share to HK$0.10 per share.

A total credit of HK$439,958,407 arose as a result of the Capital Reduction. An amount of HK$221,897,828 of the total amount was applied towards writing off the unconsolidated accumulated losses of the Company as at 31st March, 2006, and HK$100,000,000 was transferred to a special reserve. The remaining balance of HK$118,060,579 was credited to the share premium account of the Company.

An undertaking was given to the High Court by the Company in connection with the Capital Reduction. Pursuant to the undertaking, an amount of HK$100,000,000 arising from the Capital Reduction, and any reversal, on or after 1st April, 2006, of the following provisions recorded in the books of account of the Company:

• (1) the HK$11,419,494 impairment loss recognised in respect of the Company’s subsidiaries;

• (2) various provisions in the aggregate amount of HK$131,025,752, against loans due from the Company’s subsidiaries;

• (3) the HK$163,600,000 provision in respect of the Company’s investment in an associated company;

• (4) the HK$3,500,000 provision for a deposit paid in respect of a proposed additional interest in a subsidiary; and

• (5) the HK$1,200,000 provision in respect of long service awards/severance payments,

up to an aggregate amount of HK$221,897,828, shall be credited to a special reserve in the accounting records of the Company.

While any debt of or claim against the Company as at 20th July, 2007 (the effective date of the Capital Reduction) remains outstanding, and the person entitled to the benefi t thereof has not agreed otherwise, the special reserve shall not be treated as realised profi ts and (for so long as the Company remains a listed company) shall be treated as an undistributable reserve pursuant to section 79C of the Hong Kong Companies Ordinance.

71

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

33. SHARE CAPITAL - continued

The undertaking is subject to the following provisions:

1. the amount standing to the credit of the special reserve may be applied for the same purposes as a share premium account may be applied or may be reduced by the aggregate of any increase in the Company’s issued share capital or share premium account resulting from an issue of shares for cash or other new consideration or upon a capitalisation of distributable reserves after 20th July, 2007; and

2. an amount of up to HK$100,000,000 of the special reserve may be applied by the Company for the purpose of eliminating any loss sustained after 31st March, 2006, provided that such loss is referable to an audited balance sheet of the Company as published from time to time, and provided further that if subsequent to the elimination, any of the Company’s investments against which provision for impairment loss or diminution in value has been made shall be revalued in the accounting records of the Company in excess of the provision, or such investment shall be realised for a sum in excess of the amount of such provision, then a sum equal to the amount of the revaluation or the sum realised in excess of the amount of the provision, up to an aggregate amount of HK$100,000,000, shall be re-credited to the special reserve.

34. RESERVES

THE COMPANY At 1st April, 2006 Loss for the year At 31st March, 2007 Capital reduction (Note 33) Transfer prior year loss to special reserve (Note 33) Loss for the year At 31st March, 2008	Capital Share Capital Special redemption Accumulated premium reserve reserve reserve losses Total HK$ HK$ HK$ HK$ HK$ HK$ 92,805,386 21,223,231 – 28,990,000 (221,897,828) (78,879,211) – – – – (10,554,955) (10,554,955)
	92,805,386 21,223,231 – 28,990,000 (232,452,783) (89,434,166) 118,060,579 – 100,000,000 – 221,897,828 439,958,407 – – (10,554,955) – 10,554,955 – – – – – (5,958,124) (5,958,124)
	210,865,965 21,223,231 89,445,045 28,990,000 (5,958,124) 344,566,117

72

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

35. DEFERRED TAXATION

The following are the major deferred tax liabilities (assets) recognised by the Group and movements thereon during the current and prior years:

At 1st April, 2006 Charge to consolidated income statement Charge to equity for the year At 31st March, 2007 Charge to consolidated income statement At 31st March, 2008	Accelerated Revaluation tax on investment Tax depreciation properties losses Total HK$ HK$ HK$ HK$ 9,605,218 – (2,085,795) 7,519,423 204,452 – 195,548 400,000 – 514,243 (514,243) –
	9,809,670 514,243 (2,404,490) 7,919,423 231,569 4,768,716 (1,177,956) 3,822,329
	10,041,239 5,282,959 (3,582,446) 11,741,752

For the purposes of balance sheet presentation, the above deferred tax assets and liabilities have been offset.

At 31st March, 2008, the Group has unused tax losses of approximately HK$139,743,000 (2007: HK$115,947,000) available for offset against future profi ts. A deferred tax asset has been recognised in respect of approximately HK$20,470,000 (2007: HK$13,740,000) of such tax losses. No deferred tax asset has been recognised in respect of the remaining tax losses of approximately HK$119,273,000 (2007: HK$102,207,000) due to the unpredictability of future profi t streams. The unrecognised tax losses may be carried forward indefi nitely except for an amount of approximately HK$19,632,000 (2007: HK$25,879,000) which will expire in the following years:

2008/2007 2009/2008 2010/2009 2011/2010 2012/2011	2008 2007 HK$ HK$ – 7,820,000 6,548,000 6,023,000 6,120,000 5,630,000 3,817,000 3,511,000 3,147,000 2,895,000
	19,632,000 25,879,000

At 31st March, 2008, the Company has unused tax losses of approximately HK$37,403,000 (2007: HK$23,155,000) available for offset against future profi ts. No deferred tax asset has been recognised due to the unpredictability of future profi t streams.

73

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

36. PROVISION FOR LONG SERVICE PAYMENTS

The Group did not have any formal retirement scheme before participating in the Mandatory Provident Fund Scheme and makes provision for long service payments on an annual basis. The directors are of the opinion that the provision at the balance sheet date is suffi cient to cover the Group’s probable obligations. The level of this provision will be reviewed on an annual basis and adjusted as appropriate.

Movements in the provision for long service payments during the year are as follows:

At beginning and end of the year	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 2,055,013 2,055,013 1,176,900 1,176,900

37. MAJOR NON-CASH TRANSACTIONS

In current year, the Group entered into a fi nance lease in respect of the acquisition of property, plant and equipment with a total capital value at the inception of the lease of HK$341,236 (2007: nil).

In current year, consultancy fee of HK$5,808,900 (2007: nil) was settled in the form of certain availablefor-sale investment held by the Group.

38. PLEDGE OF ASSETS

At the balance sheet date, the bank credit facilities of the Group and the Company amounted to approximately HK$92,172,000 (2007: HK$97,238,000) and HK$33,700,000 (2007: HK$36,440,000) respectively, of which approximately HK$83,172,000 (2007: HK$88,238,000) and HK$29,700,000 (2007: HK$27,440,000) were utilised, respectively. These facilities were secured by the following:

Property, plant and equipment Investment properties Bank deposits	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ 52,226,329 55,326,309 – – 89,900,000 80,530,000 – – 2,410,948 2,324,734 2,279,834 2,197,794
	144,537,277138,181,043 2,279,834 2,197,794

74

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

39. CONTINGENT LIABILITIES

Guarantee given to banks in respect of banking facilities utilised by subsidiaries Guarantee given to banks in respect of banking facilities granted to subsidiaries	THE GROUP THE COMPANY 2008 2007 2008 2007 HK$ HK$ HK$ HK$ – – 56,135,179 56,135,179
	– – 56,135,179 56,135,179

40. COMMITMENTS

(a) Operating lease arrangements

The Group as lessee:

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of premises which fall due as follows:

Within one year In the second to f fth year inclusive Over f ve years	THE GROUP 2008 2007 HK$ HK$ 4,656,836 3,643,866 18,627,342 13,375,464 53,553,609 41,798,325
	76,837,787 58,817,655

Leases are negotiated for terms ranging from two to twenty-eight years with fi xed rentals over the lease term.

The Group as lessor:

Within one year In the second to f fth year inclusive	THE GROUP 2008 2007 HK$ HK$ 3,066,335 – 277,193 –
	3,343,528 –

75

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

40. COMMITMENTS - continued

(a) Operating lease arrangements - continued

The Group as lessor: - continued

Property rental income earned during the year was HK$10,488,655 (2007: HK$6,056,855). The properties are expected to generate an average rental yield of 2%-10% per annum and have committed tenants for a term of two years.

(b) Capital commitments

Capital expenditure contracted for but not provided in the consolidated f nancial statements in respect of: acquisition of property, plant and equipment acquisition of investment properties	THE GROUP 2008 2007 HK$ HK$ 66,250 274,954 – –
	66,250 274,954

41. RETIREMENT BENEFIT SCHEMES

The Group operates a Mandatory Provident Fund Scheme (the “MPF”) for all qualifying employees in Hong Kong commencing from December 2000. The assets of the Schemes are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% of relevant payroll costs to the MPF, which contribution is matched by employees.

According to the relevant laws and regulations in the PRC, the PRC subsidiary is required to contribute a certain percentage of the salaries of its employees to the state-managed retirement benefi t scheme. The only obligation of the Group with respect to the retirement benefi t scheme is to make the required contributions under the scheme.

42. RELATED PARTY TRANSACTIONS

During the year, the Group paid rental expense amounting to HK$984,038 (2007: HK$603,525) to an associate.

Details of amounts due from/to associates are disclosed in note 24.

In addition, a subsidiary entered into a lease agreement with its minority shareholder for the use of land located in the PRC at an annual rental of RMB4,200,000 for a term of twenty-eight years commencing from 1996. During the year, rentals of HK$3,064,828 (2007: HK$3,343,866) were paid to the minority shareholder.

76

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

43. SHARE OPTION SCHEME

In accordance with the Company’s share option scheme (the “Scheme”), which was adopted pursuant to an ordinary resolution passed on 22nd September, 1995, the Board of Directors of the Company may grant options to eligible employees, including executive directors of the Company and its subsidiaries, to subscribe for shares in the Company. All outstanding options were cancelled pursuant to a Board of Directors meeting of the Company held on 19th December, 2007.

The following table discloses movements of the Company’s share options held by the directors during the current and prior years:

Exercise price Name of director Date of grant per share HK$ Mr. Derek Chiu 9.9.1997 3.01 Madam Chiu Ju Ching Lan 11.4.1996 1.60 Ms. Margaret Chiu 19.11.1997 1.74 Mr. Tang Sung Ki 11.4.1996 1.60 29.1.2000 1.00

Number of shares issued upon exercise of the share options Expired Expired Cancelled At during At during during At 1.4.2006 the year 31.3.2007 the year the year 31.3.2008 Exercisable period 1,000,000 – 1,000,000 (1,000,000) – – 9.9.1997-8.9.2007 4,000,000 (4,000,000) – – – – 11.4.1996-10.4.2006 7,000,000 – 7,000,000 (7,000,000) – – 19.11.1997-18.11.2007 150,000 (150,000) – – – – 11.4.1996-10.4.2006 6,000,000 – 6,000,000 – (6,000,000) – 29.1.2000-28.1.2010 18,150,000 (4,150,000) 14,000,000 (8,000,000) (6,000,000) –

At an extraordinary general meeting of the Company held on 1st June, 2007, an ordinary resolution to approve the adoption of a new share option scheme (the “2007 Share Option Scheme”) that complies with the Listing Rules was duly passed by shareholders. No share options were granted under this 2007 Share Option Scheme during the period and as at 31st March, 2008.

The 2007 Share Option Scheme was adopted for the purpose of providing incentives and rewards to employees or executive or offi cers of the Company or any of its subsidiaries (including executive and non-executive directors) and business consultants, agents and legal or fi nancial advisers who will contribute or have contributed to the Company or any of its subsidiaries. Under the 2007 Share Option Scheme, the board of directors of the Company may grant options to eligible employees, including directors of the Company and its subsidiaries, to subscribe for shares in the Company.

77

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

43. SHARE OPTION SCHEME - continued

At 31st March, 2008, there were no outstanding share options granted under the 2007 Share Option Scheme. The total number of shares in respect of which options may be granted under the 2007 Share Option Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders.

Options may be exercised at any time not exceeding a period of 10 years from the date on which the share options is accepted. The exercise price is determined by the directors of the Company, and will not be less than the higher of (i) the closing price of the Company’s shares on the date of grant, (ii) the average closing price of the shares for the fi ve business days immediately preceding the date of grant; and (iii) the nominal value of the Company’s share.

44. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of net debt, which includes the bank borrowings disclosed in note 32 (net of bank balances and cash) and equity attributable to equity holders of the parent, comprising issued capital and reserves as disclosed in consolidated statement of changes in equity.

The management of the Group reviews the capital structure periodically. As a part of this review, the management of the Group considers the cost of capital and the risks associated with each class of capital. Currently, the management use short term funding to fi nance its acquisition of investment properties and daily operation to minimise the fi nance costs. The Group will balance its overall capital structure through the payment of dividends, as well as the issue of new debt or the redemption of existing debt.

There are no changes on the Group’s approach to capital management during the year.

78

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS

(a) Categories of fi nancial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Held-for-trading investments Available-for-sale investments Financial liabilities Amortised cost Financial liabilities at fair value through prof t or loss Financial assets Loans and receivables (including cash and cash equivalents) Held-for-trading investments Available-for-sale investments Financial liabilities Amortised cost	THE GROUP 2008 2007 HK$ HK$ 26,012,816 43,763,197 22,517,895 20,480,520 180,411,545 186,004,545
	93,111,445 104,575,341 497,635 –
	THE COMPANY 2008 2007 HK$ HK$ 193,063,121 206,028,603 590,000 658,000 157,026,351 157,026,351
	39,394,644 42,328,946

79

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

(b) Financial risk management objectives and policies

The management of the Group and the Company have overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

There has been no signifi cant change to the Group’s and the Company’s exposure to market risks or the manner in which it manages and measures.

(i) Foreign currency risk management

THE GROUP AND THE COMPANY

The carrying amounts of the Company’s and its subsidiaries’ monetary assets and monetary liabilities are mainly denominated in the Company’s and its subsidiaries’ functional currency. A subsidiary of the Company has foreign currency inter-group balances, which expose the Group to foreign currency risk. Other than the foreign currency risk arising on intragroup balances, the Group and the Company does not have other signifi cant foreign currency exposure.

The carrying amounts of the subsidiary’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are HK$ Nil (2007: nil) and HK$20,708,000 (2007: HK$22,900,000) respectively.

Sensitivity analysis

When the functional currency of the group entity (i.e. Renminbi) strengthens 10% against the relevant foreign currency (ie Hong Kong dollars), the Group’s profi t would be increased by HK$2,071,000 (2007: HK$2,290,000). Conversely, a 10% weakening of Renminbi against Hong Kong dollars would have an equal and opposite impact on the Group’s profi t.

In the management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not refl ect the exposure during the year.

(ii) Interest rate risk management

The Group and the Company have exposures to cash fl ow interest rate risk as its pledged bank deposits, bank balances and bank loans are subject to fl oating interest rate. The Group and the Company currently do not have any interest rate hedging policy. However, from time to time, if interest rate fl uctuates signifi cantly, appropriate measures would be taken to manage interest rate exposure. The Group’s interest rate risk is mainly concentrated on the fl uctuation of Hong Kong Dollar Prime Rate on bank loans.

80

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

(b) Financial risk management objectives and policies - continued

(ii) Interest rate risk management - continued

The Group’s and the Company’s exposures to interest rates on fi nancial liabilities are detailed in the liquidity risk management section of this note.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments including pledged bank deposits, bank balances and bank borrowing at the balance sheet date. For variable-rate fi nancial instruments, the analysis is prepared assuming the amount of fi nancial instruments outstanding at the balance sheet date is outstanding for the whole year. A 50 basis point increase or decrease represents management’s assessment of the possible change in interest rate.

THE GROUP

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profi t for the year ended 31st March, 2008 would decrease/increase by HK$301,000 (2007: HK$245,000). This is mainly attributable to the Group’s exposure to

THE COMPANY

If interest rate had been 50 basis points higher/lower and all other variables were held constant, the Company’s profi t for the year ended 31st March, 2008 would decrease/ increase by HK$37,016 (2007: HK$45,351). This is mainly attributable to the Company’s exposure to interest rates on its variable rate fi nancial instruments.

(iii) Other price risks

The Group is exposed to price risks arising from available-for-sale investments and investments held for trading. The management manages the exposure to price risk by maintaining a portfolio of investments with different risk and return profi les.

Other price sensitivity

The sensitivity analyses below have been determined based on the exposure to price risks at the reporting date. If the market price of the available-for-sale investments and investments held for trading had been 10% higher/lower while all other variables were held constant:

• profit of the Group and the Company for the year ended 31st March, 2008 increase/decrease by HK$2,252,000 and HK$59,000 (2007: increase/decrease by HK$2,048,000 and HK$66,000) respectively as a result of the changes in fair value of held-for-trading investments; and

• investment valuation reserve of the Group and the Company would increase/decrease by HK$Nil and HK$Nil (2007: increase/decrease by HK$559,000 and HK$Nil) respectively for as a result of the changes in fair value of available-for-sale investments.

81

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

(b) Financial risk management objectives and policies - continued

(iii) Other price risks - continued

Other price sensitivity - continued

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent price risk as the year end exposure does not refl ect the exposure during the year.

(iv) Credit risk management

As at 31st March 2008, the Group and the Company’s maximum exposure to credit risk which will cause a fi nancial loss to the Group and the Company due to failure to discharge an obligation by the counterparties and fi nancial guarantees provided by the Group and the Company is arising from:

• the carrying amount of the respective recognised fi nancial assets as stated in the consolidated and the Company balance sheet; and

• the amount of contingent liabilities in relation to fi nancial guarantee issued by the Company as disclosed in note 39.

The Group’s and the Company’s credit risk is primarily attributable to trade receivables, other receivables and amounts due from related companies and subsidiaries. In order to minimise the credit risk, the management of the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group and the Company reviews the recoverable amount of each individual debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s and the Company’s credit risk is signifi cantly reduced.

The credit risk on pledged bank deposits and bank balances is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies or state-owned banks in the PRC.

The Group has no signifi cant concentration of credit risk on trade receivables, with exposure spread over a number of counterparties and customers. Other than concentration of credit risk on amounts due from subsidiaries, the Company does not have any other signifi cant concentration of credit risk.

82

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

(b) Financial risk management objectives and policies - continued

(v) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the directors of the Company, which has built an appropriate liquidity risk management framework for the management of the Group’s and the Company’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate working capital and available banking facilities by continuously monitoring the forecast and

Liquidity and interest risk tables

The following tables detail the Group’s and the Company’s remaining contractual maturity for its fi nancial liabilities. For non-derivative fi nancial liabilities, the tables have been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal

For derivative instruments settle on net settlement, the undiscounted net outfl ows on these derivatives are shown in the table.

THE GROUP

Weighted average effective interest rate % 2008 Non-derivative instrument Non-interest bearing – Bank borrowing at variable rate 4.25 Derivative instrument net settlement Financial liabilities at fair value through prof t or loss –	Repayable Total on 6 months Over 5 undiscounted Carrying demand or less 6-12 months 1-2 years 2-5 years years cash f ows amount HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
	3,628,718 5,574,708 – 735,906 – – 9,939,332 9,939,332 – 3,450,158 3,865,340 7,683,644 27,722,676 61,760,574 104,482,392 83,172,113 3,628,718 9,024,866 3,865,340 8,419,550 27,722,676 61,760,574 114,421,724 93,111,445 – 497,635 – – – – 497,635 497,635

83

Annual Report 2008

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

• (b) Financial risk management objectives and policies - continued

• (v) Liquidity risk management - continued

THE GROUP - continued

Weighted average effective interest rate % 2007 Non-derivative instrument Non-interest bearing – Bank borrowing at variable rate 4.83 Obligations under f nance lease 6.07 THE COMPANY Weighted average effective interest rate % 2008 Non-derivative instrument Non-interest bearing – Bank borrowing at variable rate 4.25

Repayable Total on 6 months Over 5 undiscounted Carrying demand or less 6-12 months 1-2 years 2-5 years years cash f ows amount HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ 9,162,307 7,175,104 – – – – 16,337,411 16,337,411 – 4,537,706 4,311,575 8,559,218 25,499,040 95,539,729 138,447,268 88,237,930 – 243,210 243,210 283,744 – – 770,164 718,973 9,162,307 11,956,020 4,554,785 8,842,962 25,499,040 95,539,729 155,554,843 105,294,314 Repayable Total on 6 months Over 5 undiscounted Carrying demand or less 6-12 months 1-2 years 2-5 years years cash f ows amount HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$

8,689,128 1,005,516 – – – – 9,694,644 9,694,644 – 1,948,586 2,019,205 3,963,255 11,290,980 14,734,112 33,956,138 29,700,000 8,689,128 2,954,102 2,019,205 3,963,255 11,290,980 14,734,112 43,650,782 39,394,644

84

Far East Hotels and Entertainment Limited

Notes to the Consolidated Financial Statements

For the Year ended 31st March, 2008

45. FINANCIAL INSTRUMENTS - continued

• (b) Financial risk management objectives and policies - continued

• (v) Liquidity risk management - continued

THE COMPANY - continued

Weighted average effective interest rate % 2007 Non-derivative instrument Non-interest bearing – Bank borrowing at variable rate 5.78 Obligations under f nance lease 6.07	Repayable Total on 6 months Over 5 undiscounted Carrying demand or less 6-12 months 1-2 years 2-5 years years cash f ows amount HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ 13,546,638 1,342,308 – – – – 14,888,946 14,888,946 – 2,031,301 1,794,186 3,501,381 9,808,208 19,393,452 36,528,528 27,440,000 – 243,210 243,210 283,744 – – 770,164 718,973
	13,546,638 3,616,819 2,037,396 3,785,125 9,808,208 19,393,452 52,187,638 43,047,919

(vi) Fair value of fi nancial instruments

• the fair value of fi nancial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and

• the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis using prices or rates from observable current market transactions as input

The directors consider that the carrying amounts of fi nancial assets and fi nancial liabilities recorded at amortised cost in the consolidated fi nancial statements approximate to their fair values.

46. POST BALANCE SHEET EVENTS

Subsequent to 31st March, 2008 the Group entered into provisional contracts with a third party to acquire properties under development at consideration of HK$32,229,000. The anticipated completion of the construction is 31st July, 2009. Details of the acquisition are set out in the Group’s circular dated 18th June, 2008.

Annual Report 2008 85

List of Properties held by the Group

	Approximate
	gross
	f oor area/	Group’s		Term
Location	site areas*	interest	Purpose	of lease
	(square feet)
Leasehold land and buildings
Duplex No. 1 on 1/F and 2/F	2,592	100.0%	Residential	Medium
with Garden and Rear Open Yard
of House 15 (Dynasty Villa 6) and
car park space No. 202,
Dynasty Heights,
No. 2 Yin Ping Road,
Kowloon, Hong Kong
Hotel property
East Bay, Cheung Chau, New Territories	27,000*	97.8%	Hotel	Medium
8443/9000 parts or
shares of and in C.C.L. 1147
Investment properties
Flat A on 8th Floor of	1,793	100.0%	Residential	Medium
Block B10 and Car Park No. 157
on Basement Floor,
Village Gardens (Phase A),
No. 63 Fa Po Street
Yau Yat Chuen, Kowloon
Wing On Street, Peng Chau,	5,230*	100.0%	Cinema	Medium
New Territories
370/700 parts or shares
of and in P.C.L. 415
Various agricultural/building lots	278,686*	100.0%	Commercial	Medium
in Survey District			and
No. 4 in Lai Chi Kok, Kowloon			residential
Flat B, G/F, Block 2,	350	100.0%	Residential	Medium
Bela Vista Villa,
Cheung Chau
Flat H, 5/F, Block 10,	551	100.0%	Residential	Medium
Site 11, 6 Tak Hong Street
Whampoa Garden, Kowloon
Unit B, Block 1, Floor 2,	1,935	100.0%	Residential	Medium
Mount Beacon
No. 20 Cornwall Street, Kowloon
Unit B, Block 1, Floor 7,	1,935	100.0%	Residential	Medium
Mount Beacon
No. 20 Cornwall Street, Kowloon

86

Far East Hotels and Entertainment Limited

Financial Summary

For the year ended 31st March, 2008

RESULTS

Revenue (Loss) prof t before taxation Taxation (Loss) prof t for the year attributable to equity holders of the Company	For the year ended 31st March, 2004 2005 2006 2007 2008 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (restated) 24,226 22,440 20,323 20,357 27,047 (11,246) 3,602 (70,511) (49,030) 7,606 (549) (112) – (400) (3,823) (11,795) 3,490 (70,511) (49,430) 3,783

ASSETS AND LIABILITIES

Total assets Total liabilities Equity attributable to equity holders of the Company	At 31st March, 2004 2005 2006 2007 2008 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (restated) 602,128 539,901 504,102 500,284 494,947 (123,690) (74,087) (69,365) (115,732) (108,905) 478,438 465,814 434,737 384,552 386,042

The above fi nancial summary prior to 2005 has not been adjusted to take into account the effect on adoption of Hong Kong Financial Reporting Standards issued by the HKICPA as the directors consider that it is not practicable to do so.