Guoco Group Limited — Capital/Financing Update 2007

May 3, 2007

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0037)

CAPITAL REDUCTION AND

ADOPTION OF A NEW SHARE OPTION SCHEME

The Directors announce that the Company proposes to effect a capital reduction by cancelling paid up capital to the extent of HK$0.90 on each of its issued ordinary shares of HK$1.00 and by reducing the nominal value of all of the ordinary shares, both issued and unissued, from HK$1.00 to HK$0.10. Of the credit of approximately HK$440,000,000 arising on the Capital Reduction, an amount of approximately HK$222,000,000 will be applied in writing-off the accumulated losses of the Company as at 31 March 2006, and HK$100,000,000 will be transferred to a special capital reserve to be created by the Company, the application of which will be subject to such conditions as may be imposed by the High Court. The remaining balance of approximately HK$118,000,000 of the credit arising on the Capital Reduction will be credited to the Company’s share premium account.

The Capital Reduction is conditional on approval by the shareholders and confirmation by the High Court and the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares in issue on the Effective Date. The Effective Date of the Capital Reduction is not ascertainable at present but it is anticipated that it will be around July/August 2007. Further announcement(s) on the Effective Date will be made in due course.

In addition, the Company proposes to adopt a new share option scheme, its last one having expired on 21 September 2005.

A circular containing further details concerning the Capital Reduction and the 2007 Share Option Scheme will be despatched to the shareholders on the date of this announcement. The notice of the extraordinary general meeting relating to these matters accompanies this announcement and will also be contained in the abovementioned circular.

CAPITAL REDUCTION

The Directors announce that the Company proposes to effect a capital reduction. As at the date of this announcement, the authorised share capital of the Company is HK$750,000,000 divided into 750,000,000 ordinary shares of HK$1.00 each, of which 488,842,675 ordinary shares of HK$1.00 each have been issued and are fully paid.

The Capital Reduction will be effected by cancelling paid up capital to the extent of HK$0.90 upon each of the ordinary shares in issue as at the date of this announcement and any further ordinary shares which may be issued prior to the date on which the petition for the confirmation of the Capital Reduction is heard by the High Court, and by reducing the nominal value of all the ordinary shares from HK$1.00 to HK$0.10 each.

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On the assumption that no further ordinary shares will be issued after the date of this announcement, a credit of HK$439,958,407.50 will arise as a result of the Capital Reduction. Of the credit arising on the Capital Reduction, an amount of HK$221,897,828 will be applied in writing off the unconsolidated accumulated losses of the Company as at 31 March 2006, being the date to which the last audited accounts were drawn up, and HK$100,000,000 will be transferred to a special capital reserve to be created by the Company, the application of which will be subject to such conditions as may be imposed by the High Court. For example, with the High Court’s approval, the sum credited to such reserve may, subject to conditions imposed by the High Court, be capable of being applied in or towards writing off future losses of the Company. The remaining balance of HK$118,060,579.50 (assuming no further ordinary shares are issued as mentioned above) will be credited to the Company’s share premium account and will therefore also continue to constitute capital of the Company.

CONDITIONS

The Capital Reduction is conditional upon:–

• (1) the passing by the Shareholders of a special resolution to approve the same;

• (2) the confirmation of the Capital Reduction by the High Court and the registration by the Registrar of Companies in Hong Kong of an office copy of the order of the High Court and the minute containing the particulars required by Section 61 of the Companies Ordinance; and

• (3) the Listing Committee of the Stock Exchange granting approval of the listing of, and permission to deal in, the New Shares in issue on the Effective Date.

Assuming that the above conditions are fulfilled, it is expected that the Capital Reduction will become effective immediately following the registration of the order of the High Court and the minute containing the particulars required by Section 61 of the Companies Ordinance.

The Effective Date of the Capital Reduction is not ascertainable at present as it will depend upon the timetable of the High Court. At this stage, it is anticipated that the Capital Reduction would become effective around July/August 2007. An application will be made to the High Court as soon as practicable after the approval of the Capital Reduction by the Shareholders at the extraordinary general meeting and further announcement(s) will be made informing the Shareholders of the progress of the matter in due course.

REASONS FOR THE CAPITAL REDUCTION

The Capital Reduction will enable the Company to write off its unconsolidated accumulated losses as at 31 March 2006. Following the reduction, and resulting write-off of losses, the Company’s capital and reserves will more closely reflect the available net assets of the Company, and would give the Company a capital structure that should, subject to performance, permit the payment of dividends, as and when Directors considered it appropriate in the future.

Of the Company’s audited unconsolidated accumulated losses, as at 31 March 2006, of HK$221,897,828, a large part of this, in the amount of HK$163,600,000, represented an aggregate impairment loss in respect of the Company’s interest in an associated company, Bolan Holdings N.V., a company with interests in a historical theme park in Sydney, Australia, which was closed in 2003. To date, Bolan Holdings N.V. has yet to inform the Company of alternative plans for the property. The balance of the Company’s audited unconsolidated accumulated losses reflected other provisions made by the Company in respect of its advances to its subsidiaries, and in small part, to its operating losses as the holding company of a wider group of companies.

In addition, the ordinary shares have, for some time, been traded on the Stock Exchange at prices below their nominal value of HK$1.00 each. The closing price of an ordinary share on the Stock Exchange on 2 May 2007 was HK$0.400 and the price has, since April 2000, ranged from HK$0.190 to HK$0.930.

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Under the Companies Ordinance, a company may not issue shares at a discount to their nominal value unless, amongst other things, the matter is sanctioned by the High Court. Moreover, the Companies Ordinance provides that a company the net assets of which are less than its paid-up share capital may not effect a capital reduction to re-designate the nominal value of its shares unless, among other things, the capital reduction is sanctioned by the High Court.

Over the past years, there were many occasions when the stock market performed strongly, giving rise to opportunities for Hong Kong listed companies to raise new capital to strengthen its financial resources. However, due to the aforementioned constraints, the Company has not been able to capture those opportunities.

The Directors have, accordingly, determined to proceed with the Capital Reduction as the most appropriate means of preparing the Company’s capital structure for potential future fund raising exercises, although at this stage, no specific arrangements for issuing New Shares, either for the purpose of fund raising or as consideration for the acquisition of any business or assets, have been formulated by the Directors.

IMPACT OF THE CAPITAL REDUCTION

Implementation of the Capital Reduction will not, of itself, alter the underlying assets, business operations, management or financial position of the Company or the proportionate interests of the Shareholders, except for the payment of the related expenses. The Directors believe that the Capital Reduction will not have any adverse effect on the financial position of the Company and its subsidiaries.

FREE EXCHANGE OF CERTIFICATES FOR NEW SHARES AND TRADING ARRANGEMENTS

Shareholders may submit existing certificates for the ordinary shares to the registrar of the Company, Standard Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, for exchange, at the expense of the Company, up to four weeks from the Effective Date for certificates for the New Shares.

Details of such free exchange of share certificates, the relevant trading arrangements and timetable will be announced as soon as the Effective Date of the Capital Reduction is ascertainable.

2007 SHARE OPTION SCHEME

The Company proposes to adopt a new share option scheme in full compliance with Chapter 17 of the Listing Rules. The Company’s last share option scheme expired on 21 September 2005. The Directors consider that the 2007 Share Option Scheme will assist the recruitment of senior staff and will provide additional incentive to employees and other relevant persons by giving them the opportunity to participate in the Company and its performance.

The adoption of the 2007 Share Option Scheme is conditional upon:–

• (a) the passing by the Shareholders of an ordinary resolution to approve the same; and

• (b) the Listing Committee of the Stock Exchange granting approval of the listing of, and permission to deal in, shares to be issued pursuant to the exercise of any options granted under the 2007 Share Option Scheme.

As at the date of this announcement, there were 20,000,000 options outstanding as granted pursuant to the 1995 Share Option Scheme, at an exercise price ranging from HK$1.00 to HK$3.01 per share. The latest date for exercising the outstanding options is 28 January 2010. The outstanding options will be cancelled subject to the consent of the relevant holders of the options granted pursuant to the 1995 Share Option Scheme as at the date of the adoption of the 2007 Share Option Scheme.

GENERAL

Notice of an Extraordinary General Meeting of the Company to approve the Capital Reduction and the adoption of the 2007 Share Option Scheme accompanies this announcement. In addition, a circular containing further details of the Capital Reduction and the proposed 2007 Share Option Scheme will be despatched to the Shareholders on the date hereof.

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DEFINITIONS

“Capital Reduction” the reduction of the capital of the Company as set out in this announcement; “Companies Ordinance” the Companies Ordinance (Cap 32) of the Laws of Hong Kong; “Company” Far East Hotels and Entertainment Limited (遠東酒店實業有限公司 ), a company incorporated in Hong Kong with limited liability under the Companies Ordinance; “Directors” the directors of the Company; “Effective Date” the effective date of the Capital Reduction; “High Court” the High Court of the HKSAR; “HKSAR” the Hong Kong Special Administrative Region of the People’s Republic of China; “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited; “New Shares ordinary shares of par value HK$0.10 each in the issued and unissued share capital of the Company on the Capital Reduction becoming effective; “Shareholders” the holders of the Company’s ordinary shares from time to time; “Stock Exchange” The Stock Exchange of Hong Kong Limited; and “2007 Share Option the new share option scheme proposed to be adopted by the Company. Scheme”

By Order of the Board Far East Hotels And Entertainment Limited Tang Sung Ki Company Secretary

Hong Kong, 4 May 2007

The directors of the Company as at the date of this announcement are as follows:–

As at the date hereof, the executive directors of the Company are Mr. Deacon Te Ken Chiu, Mr. Derek Chiu, Mr. Desmond Chiu, Ms. Margaret Chiu; the non-executive directors are Mrs. Chiu Ju Ching Lan, Mr. Dick Tat Sang Chiu, Mr. David Chiu, Mr. Dennis Chiu, Mr. Duncan Chiu; the independent non-executive directors are Mr. Ip Shing Hing, Mr. Ng Wing Hang Patrick, Mr. Choy Wai Shek Raymond; and the alternate directors are Mr. Chan Chi Hing (alternate director to Mr. Deacon Te Ken Chiu), Mr. Tang Sung Ki (alternate director to Mr. Desmond Chiu).

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0037)

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that an Extraordinary General Meeting of Far East Hotels And Entertainment Limited (遠東酒店實業有限公司 ) (the “Company”) will be held at Warwick Hotel Cheung Chau, East Bay, Cheung Chau, Hong Kong, on Friday, 1 June 2007 at 3:00 p.m. for the purpose of considering and, if thought fit, passing the following resolutions, in the case of resolution number 1, as a Special Resolution; and in the case of resolution number 2, as an Ordinary Resolution:

1. “ THAT the paid-up capital of the Company be cancelled to the extent of HK$0.90 per ordinary share in issue on the date upon which this reduction of capital takes effect and that the nominal value of each ordinary share in the authorised capital of the Company be reduced from HK$1.00 to HK$0.10.”

2. “ THAT the new share option scheme of the Company (the “2007 Share Option Scheme”), the rules of which are contained in the document marked “A” produced to this Meeting and for the purpose of identification signed by the Chairman, be approved and adopted; and subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) granting approval of listing of, and permission to deal in, the shares of the Company falling to be issued pursuant to the exercise of any options granted under the 2007 Share Option Scheme, the directors of the Company be authorised to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary or expedient in order to give full effect to the 2007 Share Option Scheme including but without limitation:

3. (i) to administer the 2007 Share Option Scheme;

4. (ii) to modify and/or amend the 2007 Share Option Scheme from time to time provided that such modification and/or amendment is effected in accordance with the provisions of the 2007 Share Option Scheme relating to modification and/or amendment;

5. (iii) to allot and issue, from time to time, such number of shares as may fall to be issued pursuant to the exercise of the options granted under the 2007 Share Option Scheme, provided always that the total number of shares subject to the 2007 Share Option Scheme, when aggregated with any shares subject to any other share option scheme(s) of the Company, shall not exceed 10 percent of the shares in issue as at the date of passing of this Resolution, but the Company may seek approval of its shareholders in general meeting for refreshing the 10 percent limit under the 2007 Share Option Scheme; and the maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the 2007 Share Option Scheme and any other share option scheme(s) of the Company shall not exceed 30 percent of the shares in issue from time to time;

6. (iv) to make application at the appropriate time or times to the Stock Exchange, and other stock exchanges upon which the issued shares of the Company may for the time being be listed, for listing of and permission to deal in any shares which may hereafter, from time to time, fall to be issued pursuant to the exercise of the options granted under the 2007 Share Option Scheme; and

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• (v) to consent, if it so deems fit and expedient, to such conditions, modifications and/or variations as may be required or imposed by the relevant authorities in relation to the 2007 Share Option Scheme.”

By Order of the Board Far East Hotels And Entertainment Limited Tang Sung Ki Company Secretary

Hong Kong, 4 May 2007

Notes:

1. Any member entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint one or more proxies to attend and, on a poll, vote in his stead in accordance with the Articles of Association of the Company. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person authorised to sign the same.

3. Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders is present at any meeting personally or by proxy, that one of the holders so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

4. The form of proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power of attorney or authority must be lodged with the registered office of the Company at Suite 2308, 23rd Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event so as to arrive not less than 48 hours before the time appointed for holding the Extraordinary General Meeting (or any adjournment thereof), and in default the form of proxy shall be treated as invalid. The completion and return of the form of proxy shall not preclude members from attending and voting in person at the Extraordinary General Meeting (or any adjourned meeting thereof) should they so wish.

5. In accordance with the Company’s Articles of Association, the following categories of members may demand that the vote in respect of the resolution to be put to the Extraordinary General Meeting should be taken on a poll:

6. (a) by the chairman of the meeting; or

7. (b) by at least three members present in person or by proxy for the time being entitled to vote; or

8. (c) by one member or two members present in person or by proxy and entitled to vote, if that member or those two members together hold not less than fifteen per cent of the paid up share capital of the Company.

A poll may be so demanded before or on the declaration of the result of the show of hands.

Please also refer to the published version of this announcement in The Standard.

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