Guoco Group Limited — Interim / Quarterly Report 2007

Dec 27, 2007

INTERIM REPORT 2007

CONTENTS

	Page
Corporate Information	2
Managing Director and Chief Executive’s Statement	3-4
Other Information	5-10
Condensed Consolidated Income Statement	11
Condensed Consolidated Balance Sheet	12-13
Condensed Consolidated Statement of Changes in Equity	14
Condensed Consolidated Cash Flow Statement	15
Notes to the Condensed Consolidated Financial Statements	16-26

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Interim Report 2007

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

Qualifi ed Accountant

Audit Committee

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

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 Offi ce

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

Tang Sung Ki, CPA, FCCA

Stock Code

Solicitors

037

Woo Kwan Lee & Lo

Website

Auditors

www.tricor.com.hk/webservice/00037

Deloitte Touche Tohmatsu Certifi ed Public Accountants Hong Kong

2

Far East Hotels & Entertainment Limited

MANAGING DIRECTOR AND CHIEF EXECUTIVE’S STATEMENT

Overall Results

For the six months ended 30 September 2007, Far East Hotels And Entertainment Limited (the “Company”) and its subsidiaries (the “Group”) recorded an unaudited consolidated net profi t attributable to shareholders of HK$12,718,989 (30/09/2006: net loss of HK$37,724,453).

Interim Dividend

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 September 2007 (2006: Nil).

Review of Operations and Prospects

The turnover of Cheung Chau Warwick Hotel has increased by 25% compared with last corresponding period. During the period under review, a series of renovation and upgrading work of Cheung Chau Warwick Hotel has been completed. This includes the completion of 8 full seaview guest rooms, 1 suite, plus the adding of the Warwick Spa Room and the Multi-Function Room. For the fi rst time, singing events with local singers and live band were introduced at the Poolside buffet dinner during August and September of 2007.

With the strengthening of the sales team and the widening of the sales network, the turnover of Beijing Warwick International Apartments has increased by 22% compared with last corresponding period and the operating loss continues to narrow. As the 2008 Beijing Olympic Games event is approaching and the surrounding environment and facilities continue to improve, the management believes that the turnover of Beijing Warwick International Apartments will further increase.

In securities investment and trading, the Group has recorded a profi t of approximately HK$22.7 million.

In the long run, the Company will seek more business opportunities to maximize its return.

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Interim Report 2007

Capital Reduction

On 1 June 2007, a special resolution was passed in 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 well-performed employees.

Finance Activities

At 30/09/2007, the Group had bank credit facilities amounting to approximately HK$99,721,000 (31/03/2007: HK$97,238,000), of which approximately HK$90,721,000 (31/03/2007: HK$88,238,000) were utilised. These facilities were secured by legal mortgages over the Group’s properties and deposits.

At 30/09/2007, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other fi nancial derivatives.

Shareholders’ funds at 30/09/2007 amounted to approximately HK$396 million (31/03/2007: approximately HK$385 million). Accordingly, the Group’s gearing ratio (total bank credit facilities utilized to shareholders’ funds) at 30/09/2007 is 23% (31/03/2007: 23%).

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Far East Hotels & Entertainment Limited

OTHER INFORMATION

Directors’ Interests in Shares and Underlying Shares

At 30 September 2007, 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 Issuers, were as follows:

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

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

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Interim Report 2007

Notes:

1. Of the 108,901,052 shares, (i) 100,939,842 shares were held by various private companies controlled 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 controlled by Mr. Derek Chiu.

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

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

(b) Share options of the Company

Pursuant to a share option scheme which was adopted by an ordinary resolution passed on 22 September 1995, particulars of share options granted and outstanding as at 30 September 2007 were as follows:

Name of Director Capacity Ms. Margaret Chiu Benef cial owner Mr. Tang Sung Ki Benef cial owner	Number of Number of share options underlying held shares 7,000,000 7,000,000 6,000,000 6,000,000
	13,000,000 13,000,000

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Far East Hotels & Entertainment Limited

Except 1,000,000 share options held by Mr. Derek Chiu that were expired on 8 September 2007, no share options were granted, expired or exercised during the period concerned.

At an extraordinary general meeting of the Company held on 1 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. No share options were granted under this new share option scheme during the period concerned.

Save as disclosed above, as at 30 September 2007, 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 Listed Issuers.

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 30 September 2007, 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 5% or more of

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Interim Report 2007

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:

			Approximate
			percentage
			of issued
		Number of	share capital
		ordinary shares	of the
Name of Shareholder	Capacity	held	Company
Achiemax Limited	Benef cial owner	72,182,400	14.77%
(Note 1)
Energy Overseas Ltd.	Benef cial owner	78,430,299	16.04%
(Note 2)

Notes:

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

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

Save as disclosed above, as at 30 September 2007 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.

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.

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Far East Hotels & Entertainment Limited

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 2007, 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.

Audit Committee

The Audit Committee of the Company 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 fi nancial reporting matters, including a review of the unaudited interim fi nancial statements for the six months ended 30 September 2007.

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Interim Report 2007

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 confi rmed that they have complied with the required standard set out in the Model Code throughout the six months ended 30 September 2007.

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 14 December 2007

10

Far East Hotels & Entertainment Limited

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

Notes Turnover 3 Revenue from hotel operation Property rental income License fee income Cost of sales Dividend income from listed securities Increase (Decrease) in fair value of held-for-trading investment Gain on disposal of investment property Other income Administrative expenses Finance costs 5 Share of results of associates Prof t (Loss) before taxation Taxation 6 Prof t (Loss) for the period Earnings (Loss) per share 7	Six months ended 30 September 2007 2006 (unaudited) (unaudited) HK$ HK$ 66,440,650 78,816,826
	8,258,442 6,574,945 3,855,265 3,154,352 – 637,255 (12,864,973) (13,161,007)
	(751,266) (2,794,455) 33,241 – 22,674,665 (4,686,050) 50,010 – 901,224 818,263 (8,132,900) (5,598,430) (2,324,783) (1,482,242) 268,798 (23,981,539)
	12,718,989 (37,724,453) – –
	12,718,989 (37,724,453)
	Cents Cents 2.60 (7.72)

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Interim Report 2007

CONDENSED CONSOLIDATED BALANCE SHEET

AT 30 SEPTEMBER 2007

Notes Non-current Assets Property, plant and equipment Investment properties Prepaid lease payments Interests in associates 8 Available-for-sale investments 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 f nance leases – due within 1 year Secured bank borrowings – due within 1 year Net Current Assets	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 108,711,111 110,092,520 124,024,535 125,024,535 1,043,438 1,057,446 5,354,026 11,785,228 182,697,045 186,004,545
	421,830,155 433,964,274
	28,050 28,050 28,995,975 20,480,520 426,830 415,956 2,418,612 2,064,018 203,562 203,562 572,489 572,488 2,372,807 2,324,734 51,394,820 40,230,730
	86,413,145 66,320,058
	7,060,218 7,175,104 307,549 463,346 1,182,085 6,777,085 182,856 171,822 2,060,400 2,213,400 122,390 442,773 5,311,671 4,264,068
	16,227,169 21,507,598
	70,185,976 44,812,460
	492,016,131 478,776,734

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Far East Hotels & Entertainment Limited

Notes Capital and Reserves Share capital 11 Reserves Non-current Liabilities Deferred taxation Provision for long service payments Obligations under f nance leases – due after 1 year Secured bank borrowings – due after 1 year	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 48,884,268 488,842,675 347,567,493 (104,290,439)
	396,451,761 384,552,236
	7,919,423 7,919,423 2,055,013 2,055,013 180,526 276,200 85,409,408 83,973,862
	95,564,370 94,224,498
	492,016,131 478,776,734

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Interim Report 2007

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

At 1 April 2007 (Audited) Capital reduction Exchange differences arising on translation of foreign operations Change in fair value of available-for-sale investments Prof t for the period At 30 September 2007 (Unaudited) At 1 April 2006 (Audited) Exchange differences arising on translation of foreign operations Change in fair value of available-for-sale investments Loss for the period At 30 September 2006 (Unaudited)	Special Capital Investment Property Retained prof ts Share Share Capital capital redemption revaluation revaluation Exchange (accumulated capital premium reserve reserve reserve reserve reserve reserve losses) Total HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
	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) 118,060,580 – 89,445,044 – – – – 232,452,783 – – – – – – – – (956,594) – (956,594) – – – – – 137,130 – – – 137,130 – – – – – – – – 12,718,989 12,718,989
	48,884,268 210,865,966 21,223,231 89,445,044 28,990,000 137,130 2,938,532 (5,195,990) (836,420) 396,451,761
	488,842,675 92,805,386 21,223,231 – 28,990,000 651,750 – (1,197,963) (196,578,012) 434,737,067 – – – – – – – (224,427) – (224,427) – – – – – (651,750) – – – (651,750) – – – – – – – – (37,724,453) (37,724,453)
	488,842,675 92,805,386 21,223,231 – 28,990,000 – – (1,422,390) (234,302,465) 396,136,437

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Far East Hotels & Entertainment Limited

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007

Net cash from (used in) operating activities Net cash from (used in) investing activities Net cash (used in) from f nancing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	Six months ended 30 September 2007 2006 (unaudited) (unaudited) HK$ HK$ 2,410,497 (21,953,168) 9,164,282 (43,330,704) (410,689) 32,699,219
	11,164,090 (32,584,653) 40,230,730 38,852,673
	51,394,820 6,268,020

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Interim Report 2007

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis Of Preparation

The unaudited condensed consolidated interim fi nancial statements have been prepared in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certifi ed 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 2007 annual fi nancial statements.

2. Application Of New And Revised Hong Kong Financial Reporting Standards

The accounting policies used in the unaudited condensed consolidated interim fi nancial statements are consistent with those followed in the preparation of the Group’s annual fi nancial statements for the year ended 31st March 2007 except as described below:

In current period, the Group has applied, for the fi rst time, a number of new standards, amendments and interpretations (“new HKFRSs”), issued by the HKICPA that is effective for accounting periods beginning on or after 1st January, 2007. The adoption of the new HKFRSs has had no material effect on how the results and fi nancial position of the Group for the current and prior accounting periods have been prepared and presented. Accordingly, no prior period adjustment has been required.

The Group has not early applied the following new standards, amendment or interpretations that have been issued but are not yet effective. The directors of the Company anticipate that application of these standards, amendment or interpretations will have no material impact on the results and the fi nancial position of the Group. HKAS 23 (Revised) Borrowing Costs1 HKFRS 8 Operating Segments1 HK(IFRIC)-Int 12 Service Concession Arrangements2 HK(IFRIC)-Int 13 Customer Loyalty Programmes3 HK(IFRIC)-Int 14 HKAS 19 – The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Interaction2

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Far East Hotels & Entertainment Limited

• 1 Effective for accounting periods beginning on or after 1 January 2009. 2 Effective for accounting periods beginning on or after 1 January 2008. 3 Effective for accounting periods beginning on or after 1 July 2008.

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

3. Business And Geographical Segments

Business segments

2007 REVENUE Turnover RESULTS Segment results Bank interest income Gain on disposal of investment property Unallocated corporate expenses Finance costs Share of results of associates Prof t before taxation Taxation Prof t for the period	Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,258,442 3,855,265 54,326,943 – 66,440,650	Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,258,442 3,855,265 54,326,943 – 66,440,650
	611,302 (1,362,568) 22,707,906 219,745	22,176,385 681,479 50,010 (8,132,900) (2,324,783) 268,798
		12,718,989 –
		12,718,989

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Interim Report 2007

Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ 2006 Six months ended 30 September (unaudited) REVENUE Turnover 6,574,945 3,154,352 68,450,274 637,255 78,816,826 RESULTS Segment results (431,972) (2,057,037) (4,686,051) 26,571 (7,148,489) Bank interest income 486,247 Unallocated corporate expenses (5,598,430) Finance costs (1,482,242) Share of results of associates (23,981,539) Loss before taxation (37,724,453) Taxation – Loss for the period (37,724,453) Geographical segments Sales revenue by geographical market 2007 2006 (unaudited) (unaudited) HK$ HK$ Hong Kong 62,585,385 75,662,474 Other regions in the People’s Republic of China 3,855,265 3,154,352 66,440,650 78,816,826	Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 6,574,945 3,154,352 68,450,274 637,255 78,816,826	Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 6,574,945 3,154,352 68,450,274 637,255 78,816,826	Securities Hotel Property investment Investment operation letting and trading holding Consolidated HK$ HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 6,574,945 3,154,352 68,450,274 637,255 78,816,826
	(431,972) (2,057,037)	(4,686,051) 26,571	(7,148,489) 486,247 (5,598,430) (1,482,242) (23,981,539)
			(37,724,453) –
			(37,724,453)
		66,440,650 78,816,826

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Far East Hotels & Entertainment Limited

4. Depreciation And Amortisation

During the period, depreciation of HK$3,977,655 (2006: HK$3,807,388) was charged in respect of the Group’s property, plant and equipment.

During the period, amortisation of HK$14,008 (2006: HK$14,008) was charged in respect of the Group’s prepaid lease payments.

During the period, no amortisation (2006: HK$942,700) was charged in respect of the Group’s intangible assets.

5. Finance Costs

Interest on bank and other borrowings: Wholly repayable within 5 years Not wholly repayable within 5 years Interest on f nance leases	Six months ended 30 September 2007 2006 (unaudited) (unaudited) HK$ HK$ 4,659 3,800 2,276,650 1,426,977 43,474 51,465
	2,324,783 1,482,242

6. Taxation

No provision for Hong Kong Profi ts Tax has been made in the fi nancial statements as the Company and its subsidiaries have no assessable profi t in both periods.

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Interim Report 2007

7. Earnings (Loss) Per Share

• (a) Basic earnings (loss) per share

The calculation of basic earnings (loss) per share is based on the profi t for the period of HK$12,718,989 (2006: loss of HK$37,724,453) and 488,842,675 (2006: 488,842,675) ordinary shares in issue during the period.

• (b) Diluted earnings (loss) per share

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

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

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Far East Hotels & Entertainment Limited

8. Interests In Associates

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

Results

Revenue Prof t (loss) for the period Group’s share of results of associates for the period Financial position Total assets Total liabilities Net liabilities Group’s share of net assets of associates	Six months ended 30 September 2007 2006 (unaudited) (unaudited) HK$ HK$ 2,033,520 2,099,389
	537,596 (76,590,319)
	268,798 (23,981,539)
	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 15,110,105 27,886,708 (69,642,400) (69,556,599)
	(54,532,295) (41,669,891)
	5,354,026 11,785,228

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Interim Report 2007

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	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 398,586 200,500 168,615 23,081 82,389 114,422
	649,590 338,003 1,769,022 1,726,015
	2,418,612 2,064,018

10. 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	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 492,587 800,790 436,776 229,556 1,608,551 1,652,950
	2,537,914 2,683,296 4,522,304 4,491,808
	7,060,218 7,175,104

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Far East Hotels & Entertainment Limited

11. Share Capital

Authorised: At 1 April Capital reduction At 30 September Issued and fully paid: At 1 April Capital reduction At 30 September	Number of shares Share capital 2007 2006 2007 2006 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

Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 1 June 2007, and the subsequent Order of the High Court of the Hong Kong Special Administrative Region (the “High Court”) granted on 20 July 2007, the Company effected a capital reduction which took effect on 20 July 2007 (the “Capital Reduction”). The paid-up capital on each of its issued ordinary shares 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$439,958,407.50 arose as a result of the Capital Reduction. An amount of HK$221,897,828 of the total credit was applied towards writing off the unconsolidated accumulated losses of the Company as at 31 March 2006, and HK$100,000,000 was transferred to a special capital reserve. The remaining balance of HK$118,060,579.50 was credited to the share premium account of the Company.

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Interim Report 2007

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 1 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 capital reserve in the accounting records of the Company.

While any debt of or claim against the Company as at 20 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 capital 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.

The undertaking is subject to the following provisos:

1. the amount standing to the credit of the special capital 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 20 July 2007; and

24

Far East Hotels & Entertainment Limited

1. an amount of up to HK$100,000,000 of the special capital reserve may be applied by the Company for the purpose of eliminating any loss sustained after 31 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 recredited to the special capital reserve.

12. Commitments

(a) Operating lease arrangements

The Group as lessee:

At 30/9/2007, 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	30/09/2007 31/03/2007 (unaudited) (audited) HK$ HK$ 3,674,020 3,643,866 12,856,078 13,375,464 38,116,422 41,798,325
	54,646,520 58,817,655

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Interim Report 2007

The Group as lessor:

Property rental income earned during the period was HK$3,855,265 (2006: HK$3,154,352).

At 30/9/2007, the Group had not contracted with tenants for future minimum lease payments under non-cancellable operating leases.

(b) Capital commitments

==> picture [291 x 123] intentionally omitted <==

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

30/09/2007 31/03/2007
(unaudited) (audited)
HK$ HK$
Capital expenditure contracted for but not
provided in the fi nancial statements in
respect of:
Acquisition of property, plant
and equipment – 274,954
----- End of picture text -----

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Far East Hotels & Entertainment Limited