Guoco Group Limited — Interim / Quarterly Report 2007

Dec 15, 2006

==> picture [70 x 70] intentionally omitted <==

FAR EAST HOTELS AND ENTERTAINMENT LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0037)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006

INTERIM RESULTS

The Board of Directors of Far East Hotels And Entertainment Limited (the “Company”) announces the unaudited interim financial results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2006 as follows:

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006

Notes Turnover 3 Cost of sales Other income Administrative expenses Finance costs 5 Gain on disposal of investment property Share of results of associates (Loss) Profit before taxation Taxation 6 (Loss) Profit for the period (Loss) Earnings per share 7 – basic – diluted	Six months ended 30 September 2006 2005 (unaudited) (unaudited) (restated) HK$ HK$ 78,816,826 10,820,994 (86,297,331) (15,370,323) (7,480,505) (4,549,329) 818,263 490,165 (5,598,430) (5,772,575) (1,482,242) (869,762) – 39,282 (23,981,539) 11,701,968 (37,724,453) 1,039,749 – – (37,724,453) 1,039,749 Cent Cent (7.72) 0.21 N/A N/A

– 1 –

CONDENSED CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2006

Notes Non-current Assets Property, plant and equipment Investment properties Prepaid lease payments Intangible asset Interests in associates 8 Available-for-sale investments Deposits for acquisition of investment properties Current Assets Prepaid lease payments Held-for-trading investments Inventories Trade and other receivables 9 Amounts due from associates Amounts due from related companies Pledged bank deposits Bank balances and cash Current Liabilities Trade and other payables 10 Deposits received Amounts due to associates Amounts due to related companies Amount due to a minority shareholder Obligations under finance leases – due within 1 year Secured bank borrowings – due within 1 year Net Current Assets Capital and Reserves Share capital 11 Reserves Non-current Liabilities Deferred taxation Provision for long service payments Obligations under finance leases – due after 1 year Secured bank borrowings – due after 1 year	30/09/2006 (unaudited) HK$ 96,363,478 107,608,949 24,291,156 3,713,500 37,624,643 188,042,945 – 457,644,671 609,904 19,263,670 487,612 15,515,350 203,562 672,489 2,283,307 6,268,020 45,303,914 6,295,857 353,000 8,511,130 146,759 2,274,510 440,607 4,021,538 22,043,401 23,260,513 480,905,184 488,842,675 (92,706,238) 396,136,437 7,519,423 2,055,013 502,437 74,691,874 84,768,747 480,905,184	31/03/2006 (audited) HK$ 113,399,358 54,656,000 10,084,070 4,656,200 61,615,454 188,943,545 10,200,000 443,554,627 251,582 9,591,610 418,164 8,321,421 200,390 672,488 2,238,753 38,852,673 60,547,081 6,901,172 353,000 4,651,129 135,400 1,472,440 507,363 3,465,700 17,486,204 43,060,877 486,615,504 488,842,675 (54,105,608) 434,737,067 7,519,423 2,055,013 718,973 41,585,028 51,878,437 486,615,504

– 2 –

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis Of Preparation

The unaudited condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and should be read in conjunction with the 2006 annual financial statements.

2. Significant Accounting Policies

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2006 except that the Group has changed certain of its accounting policies following its adoption of the new/revised Hong Kong Financial Reporting Standards (“HKFRSs”), Hong Kong Accounting Standards (“HKASs”) and Interpretations (“INTs”) (hereinafter collectively referred to as “new HKFRSs”) which have become effective for accounting periods commencing on or after 1 January 2006. The applicable new HKFRSs adopted in this interim financial statements are set out below:

HKAS 19 (Amendment) Actuarial gains and losses, group plans and disclosures HKAS 21 (Amendment) Net investment in a foreign operation HKAS 39 (Amendment) Cash flow hedge accounting of forecast intragroup transactions HKAS 39 (Amendment) The fair value option HK(IFRIC) – INT 4 Determining whether an arrangement contains a lease

The adoption of the above new HKFRSs did not have any material effect on how the results of operations and financial position of the Group are prepared and presented.

The Group has not early applied the following new standards, amendments and interpretations that have been issued but are not yet effective. The Directors of the Company anticipate that the application of these standards, amendments or interpretations will have no material impact on the financial statements of the Group.

HKAS 1 (Amendment) Capital Disclosures[1] HKFRS 7 Financial Instruments: Disclosure[1] HK(IFRIC) – INT 8 Scope of HKFRS 2[4] HK(IFRIC) – INT 9 Reassessment of Embedded Derivatives[3] HK(IFRIC) – INT 10 Interim financial reporting and impairment[2]

1 Effective for accounting periods beginning on or after 1 January 2007.

2 Effective for accounting periods beginning on or after 1 November 2006.

3 Effective for accounting periods beginning on or after 1 June 2006

4 Effective for accounting periods beginning on or after 1 May 2006.

Certain comparative figures for prior accounting period have been restated to conform with the current period’s presentation.

– 3 –

3. Business And Geographical Segments Business segments

2006 REVENUE Turnover RESULTS Segment results Bank interest income Unallocated corporate expenses Finance costs Share of results of associates Loss before taxation Taxation Loss for the period 2005 REVENUE Turnover RESULTS Segment results Bank interest income Unallocated corporate expenses Finance costs Share of results of associates Profit before taxation Taxation Profit for the period Geographical segments	Securities Hotel Property investment Investment operation letting and trading holding HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 6,574,945 3,154,352 68,450,274 637,255 (431,972) (2,057,037 ) (4,686,051 ) (48,986) Six months ended 30 September (unaudited and restated) 5,946,196 3,398,094 845,636 631,068 (93,727) (1,997,220 ) (1,943,993 ) (311,632)	Consolidated HK$ 78,816,826 (7,224,046) 561,804 (5,598,430) (1,482,242) (23,981,539) (37,724,453) – (37,724,453) 10,820,994 (4,346,572) 326,690 (5,772,575) (869,762) 11,701,968 1,039,749 – 1,039,749

Hong Kong Other regions in the People’s Republic of China	Sales revenue by geographical market 2006 2005 (unaudited) (unaudited) HK$ HK$ 75,662,474 7,431,300 3,154,352 3,389,694 78,816,826 10,820,994	Sales revenue by geographical market 2006 2005 (unaudited) (unaudited) HK$ HK$ 75,662,474 7,431,300 3,154,352 3,389,694 78,816,826 10,820,994
		10,820,994

4. Depreciation And Amortisation

During the period, depreciation of HK$2,676,651 (2005: HK$2,050,396) was charged in respect of the Group’s property, plant and equipment.

During the period, amortisation of prepaid lease payments of HK$353,255 (2005: HK$536,520) was charged in respect of the Group’s prepaid lease payments.

During the period, amortisation of HK$942,700 (2005: HK$942,700) was charged in respect of the Group’s intangible assets.

5. Finance Costs

Finance Costs
Interest on bank and other borrowings: Wholly repayable within 5 years Not wholly repayable within 5 years Interest on finance leases	Six months ended 2006 (unaudited) HK$ 3,800 1,426,977 51,465 1,482,242	30 September 2005 (unaudited) HK$ 24,521 829,820 15,421
		869,762

– 4 –

6. Taxation

No provision for Hong Kong Profits Tax has been made in the financial statements as the Company and its subsidiaries have no assessable profit in both periods.

7. (Loss) Earnings Per Share

(a) Basic (loss) earnings per share

The calculation of basic (loss) earnings per share is based on the loss for the period of HK$37,724,453 (2005: profit of HK$1,039,749) and 488,842,675 (2005: 488,842,675) ordinary shares in issue during the period.

(b) Diluted (loss) earnings per share

No diluted loss per share is presented for this period as the exercise of the potential dilutive ordinary shares would result in a reduction in loss per share.

No dilutive earnings per share has been presented for last period because the exercise price of the Company’s option was higher than the average market price for shares in the last period.

8. Interests In Associates

The following financial information is extracted from the unaudited financial statements, as adjusted, of the Group’s principal associates.

Operating results for the six months ended 30 June 2006: Turnover Profit (Loss) before taxation Profit (Loss) before taxation attributable to the Group Share of tax attributable to the Group Profit (Loss) after taxation attributable to the Group Financial position at 30 June 2006: Non-current assets Current assets Current liabilities Non-current liabilities Net assets Net assets attributable to the Group	Bolan Holdings N.V. 30 June 2006 (unaudited) HK$ 585,913 (87,555) (39,400) – (39,400) 171,029,126 519,684 (4,196,119) (113,192,064) 54,160,627 24,372,282	Central More Limited 30 June 2006 (unaudited) HK$ 1,218,426 1,206,226
		603,113 (95,294)
		507,819
		9,552,318 18,557,960 (7,273,856) –
		20,836,422
		10,418,211

9. 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 receivables at the reporting date:

0 – 30 days 31 –60 days Over 60 days Trade receivables Other receivables Trade And Other Payables The following is an aged analysis of trade payables at the reporting date: 0 – 30 days 31 –60 days Over 60 days Trade payables Other payables	30/09/2006 (unaudited) HK$ 146,499 59,728 67,749 273,976 15,241,374 15,515,350 30/09/2006 (unaudited) HK$ 333,928 368,197 1,378,979 2,081,104 4,214,753 6,295,857	31/03/2006 (audited) HK$ 79,157 40,100 296,086
		415,343 7,906,078
		8,321,421
		31/03/2006 (audited) HK$ 668,825 356,828 1,634,882
		2,660,535 4,240,637
		6,901,172

10. Trade And Other Payables

– 5 –

11. Share Capital

There were no movements in the share capital of the Company in either the current or the prior interim reporting period.

12. Commitments

(a) Operating lease arrangements

The Group as lessee:

At 30/9/2006, 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 fifth year inclusive Over five years	30/09/2006 (unaudited) HK$ 4,597,647 16,930,588 53,529,412 75,057,647	31/03/2006 (audited) HK$ 4,138,585 16,274,339 54,925,894
		75,338,818

The Group as lessor:

Property rental income earned during the period was HK$3,154,352 (2005: HK$3,398,094).

At 30/9/2006, the Group had not contracted with tenants for future minimum lease payments under non-cancellable operating leases.

(b) Capital commitments

Capital commitments
Capital expenditure contracted for but not provided in the financial statements in respect of: Acquisition of property, plant and equipment Acquisition of investment properties	30/09/2006 (unaudited) HK$ – – –	31/03/2006 (audited) HK$ 1,725,502 40,800,000
		42,525,502

OVERALL RESULTS

For the six months ended 30 September 2006, Far East Hotels And Entertainment Limited (the “Company”) and its subsidiaries (the “Group”) recorded an unaudited consolidated net loss attributable to shareholders of HK$37,724,453 (30/ 09/2005: net profit of HK$1,039,749).

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 September 2006 (2005: Nil).

REVIEW OF OPERATIONS

The overall turnover of Cheung Chau Warwick Hotel has increased by 10% compared with last corresponding period. During the period under review, as more renovated rooms are available for sale, hence room revenue has increased by approximately HK$1 million compared with last corresponding period. However, the food and beverage revenue has decreased compared with last corresponding period due to the keen competition of competitors of Cheung Chau Island.

The overall turnover and performance of Beijing Warwick International Apartments remain stable during the period under review.

The directors of the Company’s associate Bolan Holdings N.V. have re-assessed its interest in land situated in Sydney, Australia and made an impairment provision of asset value by US$10 million, of which the Group shared HK$24,570,000.

PROSPECTS

The next phase of upgrading renovation works of Cheung Chau Warwick Hotel is tentatively scheduled to be completed in the middle of 2007. After renovation, more functional activities can be provided at the open area of swimming pool and barbecue site. The management believes that both the average occupancy rate and the average room rate will further improve.

As the 2008 Olympic Games event is approaching, the management believes that the turnover of Beijing Warwick International Apartments will further increase.

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 well-performed employees.

FINANCE ACTIVITIES

At 30/09/2006, the Group had bank credit facilities amounting to approximately HK$90,713,000 (31/03/2006: HK$57,169,000), of which approximately HK$78,713,000 (31/03/2006: HK$45,051,000) were utilised. These facilities were secured by legal mortgages over the Group’s properties and deposits.

At 30/09/2006, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

– 6 –

Shareholders’ funds at 30/09/2006 amounted to approximately HK$396 million (31/03/2006: approximately HK$435 million). Accordingly, the Group’s gearing ratio (total bank credit facilities utilized to shareholders’ funds) at 30/09/2006 is 20% (31/03/2006: 10%).

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

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

CORPORATE GOVERNANCE

The Company has complied with Code of Corporate Governance Practices (the “Code”) as set out in Appendix 14 of the Listing Rules throughout the six months ended 30 September 2006, 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 specific 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 retires from his office at the last annual general meeting of the Company notwithstanding that he is not required to do so by the Company’s Article 76. As such, the Company considers that sufficient measures have been taken to ensure that the Company’s Corporate Governance Practices are no less exacting than those in the Code.

AUDIT COMMITTEE

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 non-executive director, Mr. Duncan Chiu.

The audit committee has reviewed with management the accounting principles and practices adopted by the Group, and discussed financial reporting matters, including a review of the unaudited interim financial statements for the six months ended 30 September 2006.

REMUNERATION COMMITTEE

The Company had 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 of the Company, Mr. Derek Chiu. 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 Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Listing Rules.

Upon enquiry by the Company, all directors of the Company have confirmed that they have complied with the required standard set out in the Model Code throughout the six months ended 30 September 2006.

DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE

The financial and other information of the Company required by Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange in due course.

On behalf of the Board Derek Chiu Managing Director & Chief Executive

15 December 2006

As at the date of this statement, the executive Directors 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; 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).

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

– 7 –