Guoco Group Limited — Interim / Quarterly Report 2009

Dec 28, 2009

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2009 Interim Report

CONTENTS

	Page
Corporate Information	2
Managing Director and Chief Executive’s Statement	3-4
Interim Financial Information
Condensed Consolidated Income Statement	5
Condensed Consolidated Statement of Comprehensive Income	6
Condensed Consolidated Statement of Financial Position	7-8
Condensed Consolidated Statement of Changes in Equity	9
Condensed Consolidated Cash Flow Statement	10
Notes to the Condensed Consolidated Financial Statements	11-23
Additional Information Required by Listing Rules	24-28

Far East Hotels and Entertainment Limited Interim Report 2009

1

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) Margaret Chiu, LL.B.

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.

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 Director

Chan Chi Hing (Alternate Director to Deacon Te Ken Chiu)

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, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong

Share Registrars

Company Secretary

Tang Sung Ki, CPA, FCCA

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

Solicitors

Woo Kwan Lee & Lo

Auditor

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

Stock Exchange

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

Stock Code

0037

Website

www.tricor.com.hk/webservice/00037

Far East Hotels and Entertainment Limited Interim Report 2009

2

MANAGING DIRECTOR AND CHIEF EXECUTIVE’S STATEMENT

OVERALL RESULTS

For the six months ended 30 September 2009, Far East Hotels And Entertainment Limited (the “Company”) and its subsidiaries (the “Group”) recorded an unaudited consolidated net profit attributable to shareholders of HK$2,829,364 (30/09/2008: net loss of HK$25,978,394).

INTERIM DIVIDEND

The Board has resolved not to declare any interim dividend in respect of the six months ended 30 September 2009 (2008: Nil).

REVIEW OF OPERATIONS AND PROSPECTS

In 2009, most types of business are affected by the worldwide economic crisis, such as hotels and restaurants of the service sector. According to worldwide economists’ prediction, many businesses will start recovering in the coming years. The overall turnover of Cheung Chau Warwick Hotel has decreased by 6% compared with last corresponding period. In 2010, our Sales and Marketing Team will focus more on meeting and conference groups, both local and overseas. In addition, they will also try to extend China market as well as keeping our existing local clientele through advertisings and seasonal promotions. Sales Team will explore more markets besides the regular clients that we are currently having. Joint venture with other brands or obtaining sponsor from other companies to gain more publicity and profits will be another thought. The Food & Beverages Department will also be benefited if the above targets can be reached, that means the list of clientele will be expanded and added to our steady weddings and banquet business from Cheung Chau Island.

The turnover of Beijing Warwick Suite Hotel has decreased by 7% compared with last corresponding period. However, the management believes that the turnover will increase after the 60th anniversary of National Day of the People’s Republic of China. The Sales Team will put more emphasis on both local and overseas short-term business clients and tours, and more preferential price will be offered.

In securities investment and trading, the Group has recorded a profit of approximately HK$5 million.

In July 2009, the Group disposed of an investment property and recognized a gain of approximately HK$4.8 million.

Far East Hotels and Entertainment Limited Interim Report 2009

3

MANAGING DIRECTOR AND CHIEF EXECUTIVE’S STATEMENT

SUBSEQUENT EVENT

In October 2009, the Company entered into a Joint Venture Agreement (the “Agreement”) with Mr. Derek Chiu, a director of the Company, for the formation of a Joint Venture Company (the “JV Company”) which is owned by the Company as to 50% and by Mr. Derek Chiu as to 50%. Pursuant to the Agreement, the JV Company will hold and develop the property located in Yuen Long, New Territories to be acquired by the JV Company from Mr. Derek Chiu. The Company shall pay in aggregate HK$8,650,000 to the JV Company for the subscription for 50 new Shares (at the subscription price of HK$1.00 per Share) and the making of a HK$8,649,950 shareholder’s loan to the JV Company. Capital provided and to be provided to the JV Company under the Agreement will be used to pay for the acquisition of the property. The formation of the JV Company can increase the land portfolio of the Group and enable the Group to have adequate land reserve for future development. Details are disclosed in the announcement dated 16 October 2009.

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 30/09/2009, the Group had bank credit facilities amounting to approximately HK$67,774,000 (31/03/2009: HK$86,963,000), of which approximately HK$62,274,000 (31/03/2009: HK$83,959,000) were utilised. These facilities, other than HK$3,500,000 (31/03/2009: HK$3,500,000) which was unsecured, were secured by legal mortgages over the Group’s properties and deposits.

At 30/09/2009, the Group had no material exposure under foreign exchange contracts, interest or currency swaps or other financial derivatives.

Shareholders’ funds at 30/09/2009 amounted to approximately HK$289 million (31/03/2009: approximately HK$286 million). Accordingly, the Group’s gearing ratio (total bank credit facilities utilized to shareholders’ funds) at 30/09/2009 is 22% (31/03/2009: 29%).

Far East Hotels and Entertainment Limited 4 Interim Report 2009

INTERIM FINANCIAL INFORMATION

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 September 2009

Notes Revenue from hotel operation Property rental income Cost of sales Dividend income from listed securities Increase (Decrease) in fair value of held-for-trading investments Other income Gain on disposal of investment property Decrease (Increase) in fair value of financial liabilities at fair value through profit and loss Administrative expenses Finance costs 5 Share of results of associates Profit (Loss) before taxation Taxation 6 Profit (Loss) for the period Profit (Loss) for the period attributable to: Owners of the Company Non-controlling interests Earnings (Loss) per share – Basic 7	Six months ended 30 September 2009 2008 (unaudited) (unaudited) HK$ HK$ 8,221,443 8,727,114 5,529,300 6,485,019 (13,956,538) (14,055,572)
	(205,795) 1,156,561 246,110 337,902 4,470,167 (16,928,258) 31,445 66,102 4,803,681 – 540,425 (2,749,799) (6,639,545) (6,944,147) (929,335) (1,127,461) 512,211 210,706
	2,829,364 (25,978,394) – –
	2,829,364 (25,978,394)
	2,829,364 (25,978,394) – –
	2,829,364 (25,978,394)
	Cents Cents 0.58 (5.31)

Far East Hotels and Entertainment Limited 5 Interim Report 2009

INTERIM FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2009

Profit (Loss) for the period Exchange differences arising on translation of foreign operations Total comprehensive income for the period Total comprehensive income for the period attributable to: Owners of the Company Non-controlling interests	Six months ended 30 September 2009 2008 (unaudited) (unaudited) HK$ HK$ 2,829,364 (25,978,394) (30,944) (756,532)
	2,798,420 (26,734,926)
	2,798,420 (26,734,926) – –
	2,798,420 (26,734,926)

Far East Hotels and Entertainment Limited 6 Interim Report 2009

INTERIM FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 September 2009

Notes NON-CURRENT ASSETS Property, plant and equipment Paintings 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 Deposits and prepayment Deposits for acquisition of properties Amount due from an associate Amounts due from related companies Pledged bank deposits Bank balances and cash	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 98,023,246 101,628,623 4,220,000 3,800,000 81,822,140 104,022,140 987,439 1,001,448 2,438,598 1,926,387 159,188,314 159,188,314
	346,679,737 371,566,912
	28,016 28,016 12,950,304 10,195,070 491,759 414,450 3,139,865 3,407,945 1,497,397 2,506,804 – 4,844,170 203,562 203,562 – 420,716 2,134,730 2,132,323 9,257,698 2,040,796
	29,703,331 26,193,852

Far East Hotels and Entertainment Limited 7 Interim Report 2009

INTERIM FINANCIAL INFORMATION

Notes CURRENT LIABILITIES Trade and other payables 10 Deposits received Amounts due to directors Amounts due to associates Amounts due to related companies Amount due to a minority shareholder Provision for onerous contracts Bank borrowings – due within one year 11 Financial liabilities at fair value through profit and loss Bank overdrafts NET CURRENT ASSETS (LIABILITIES) CAPITAL AND RESERVES Share capital 12 Reserves NON-CURRENT LIABILITIES Deferred taxation Provision for long service payments Bank borrowings – due after one year 11	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 7,576,556 7,305,296 4,198,717 3,153,914 – 370,000 490,381 385,381 335,363 315,192 4,029,055 3,344,671 – 3,706,000 8,670,010 9,064,231 – 540,425 – 2,495,979
	25,300,082 30,681,089
	4,403,249 (4,487,237)
	351,082,986 367,079,675
	48,884,268 48,884,268 240,148,765 237,350,345
	289,033,033 286,234,613
	6,391,062 6,391,062 2,055,013 2,055,013 53,603,878 72,398,987
	62,049,953 80,845,062
	351,082,986 367,079,675

Far East Hotels and Entertainment Limited 8 Interim Report 2009

INTERIM FINANCIAL INFORMATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2009

							Retained
			Capital	Property			profits	Attributable	Non-
	Share	Share	redemption	revaluation	Exchange	Special	(Accumulated	to owners of	controlling
	capital	premium	reserve	reserve	reserve	reserve	losses)	the Company	interests	Total
	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$	HK$
At 1 April 2009 (Audited)	48,884,268	210,865,965	28,990,000	2,938,532	(3,910,466)	83,486,921	(85,020,607)	286,234,613	–	286,234,613
Transfer prior year loss to
special reserve	–	–	–	–	–	(28,776,650)	28,776,650	–	–	–
Exchange differences arising
on translation of
foreign operations	–	–	–	–	(30,944)	–	–	(30,944)	–	(30,944)
Profit for the period	–	–	–	–	–	–	2,829,364	2,829,364	–	2,829,364
At 30 September
2009 (Unaudited)	48,884,268	210,865,965	28,990,000	2,938,532	(3,941,410)	54,710,271	**(53,414,593) **	289,033,033	–	289,033,033
At 1 April 2008 (Audited)	48,884,268	210,865,965	28,990,000	2,938,532	(3,320,491)	89,445,045	(12,985,049)	364,818,270	–	364,818,270
Transfer prior year loss to
special reserve	–	–	–	–	–	(5,958,124)	5,958,124	–	–	–
Exchange differences arising
on translation of
foreign operations	–	–	–	–	(756,532)	–	–	(756,532)	–	(756,532)
Loss for the period	–	–	–	–	–	–	(25,978,394)	(25,978,394)	–	(25,978,394)
At 30 September
2008 (Unaudited)	48,884,268	210,865,965	28,990,000	2,938,532	(4,077,023)	83,486,921	(33,005,319)	338,083,344	–	338,083,344

Far East Hotels and Entertainment Limited 9 Interim Report 2009

INTERIM FINANCIAL INFORMATION

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 September 2009

Net cash (used in) operating activities Net cash from (used in) investing activities Net cash (used in) from financing 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 2009 2008 (unaudited) (unaudited) HK$ HK$ (2,252,292) (13,989,288) 31,399,454 (4,066,174) (19,434,281) 2,931,522
	9,712,881 (15,123,940) (455,183) 19,457,028)
	9,257,698 4,333,088

Far East Hotels and Entertainment Limited 10 Interim Report 2009

INTERIM FINANCIAL INFORMATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Preparation

The unaudited condensed consolidated interim 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 2009 annual financial statements.

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

2. Principal Accounting Policies

The accounting policies used in the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31st March 2009 except as described below:

In current period, the Group has applied the following amendments and interpretations (“new HKFRSs”), issued by the HKICPA, which are effective for the group’s financial year beginning on 1st April 2009.

HKAS 1 (Revised)	Presentation of Financial Statements
HKAS 23 (Revised)	Borrowing Costs
HKAS 32 & 1 (Amendments)	Puttable Financial Instruments and
	Obligations Arising on Liquidation
HKFRS 1 & HKAS 27	Cost of an Investment in a Subsidiary, Jointly
(Amendments)	Controlled Entity or Associate
HKFRS 2 (Amendments)	Vesting Conditions and Cancellations
HKFRS 7 (Amendments)	Improving Disclosures about
	Financial Instruments issued in 2008
HKFRS 8	Operating Segments
HK(IFRIC) – Int 9 & HKAS 39	Embedded Derivatives
(Amendments)
HK(IFRIC) – Int 13	Customer Loyalty Programmes
HK(IFRIC) – Int 15	Agreements for the Construction of Real Estate

Far East Hotels and Entertainment Limited 11 Interim Report 2009

INTERIM FINANCIAL INFORMATION

HK(IFRIC) – Int 16 Hedges of a Net Investment in a Foreign Operation HKFRSs (Amendments) Improvements to HKFRSs issued in 2008, except for the amendments to HKFRS 5 that is effective for annual periods beginning on or after 1st July 2009 HKFRSs (Amendments) Improvements to HKFRSs 2009 in relation to the amendments to paragraph 80 of HKAS 39

The adoption of these new and revised HKFRSs had no material effect on the results or financial position of the Group for the current or prior accounting periods except for the impact as described below.

HKFRS 8 “Operating Segments”

The Group has adopted HKFRS 8 Operating Segments with effect from 1st April 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor Standard (HKAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. There are no material changes in the identification of the Group’s reportable segments following the adoption of HKFRS 8.

HKAS 1 (Revised) “Presentation of Financial Statements”

As a result of the adoption of HKAS 1 (Revised), details of changes in equity during the period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expense are presented in the consolidated income statement, if they are recognized as part of profit or loss for the period, or otherwise in the consolidated statement of comprehensive income. Corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented.

Far East Hotels and Entertainment Limited 12 Interim Report 2009

INTERIM FINANCIAL INFORMATION

The Group has not early applied the following new standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Amendments to HKFRS 5 as part of
	Improvements to HKFRSs issued in 20081
HKFRSs (Amendments)	Improvements to HKFRSs 20092
HKAS 27 (Revised in 2008)	Consolidated and Separate Financial Statements1
HKAS 39 (Amendments)	Eligible Hedged Items1
HKFRS 1 (Amendments)	Additional Exemptions for First-time Adopters3
HKFRS 2 (Amendments)	Group Cash-settled Share-based
	Payment Transactions3
HKFRS 3 (Revised in 2008)	Business Combinations1
HK(IFRIC) – Int 17	Distributions of Non-cash Assets to Owners1
HK(IFRIC) – Int 18	Transfers of Assets from Customers4

• 1 Effective for annual periods beginning on or after 1st July 2009. 2 Amendments that are effective for annual periods beginning on or after 1st July 2009 or 1st January 2010, as appropriate.

• 3 Effective for annual periods beginning on or after 1st January 2010. 4 Effective for transfers on or after 1st July 2009.

The application of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary. The directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. Segments Information

Business segments

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

Far East Hotels and Entertainment Limited 13 Interim Report 2009

INTERIM FINANCIAL INFORMATION

Principal activities are as follows:

Hotel operation	–	operation of a hotel
Property letting	–	leasing of investment properties
		and service apartments
Securities investment	–	investment and trading in securities
and trading

Segment information about these businesses is presented below.

2009 REVENUE RESULTS Segment profit (loss) Bank interest income Gain on disposal of investment property Unallocated corporate expenses Finance costs Share of results of associates Profit before taxation Taxation Profit for the period	Securities Hotel Property investment operation letting and trading Consolidated HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,221,443 5,529,300 – 13,750,743	Securities Hotel Property investment operation letting and trading Consolidated HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,221,443 5,529,300 – 13,750,743
	608,214 (814,008) 5,256,702	5,050,908 1,142 4,803,681 (6,609,243) (929,335) 512,211
		2,829,364 –
		2,829,364

Far East Hotels and Entertainment Limited Interim Report 2009

14

INTERIM FINANCIAL INFORMATION

2008 REVENUE RESULTS Segment profit (loss) Bank interest income Unallocated corporate expenses Finance costs Share of results of associates Loss before taxation Taxation Loss for the period Geographical segments Hong Kong Other regions in the People’s Republic of China	Securities Hotel Property investment operation letting and trading Consolidated HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,727,114 6,485,019 – 15,212,133	Securities Hotel Property investment operation letting and trading Consolidated HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,727,114 6,485,019 – 15,212,133	Securities Hotel Property investment operation letting and trading Consolidated HK$ HK$ HK$ HK$ Six months ended 30 September (unaudited) 8,727,114 6,485,019 – 15,212,133
	914,810 241,751 (19,340,155)		(18,183,594) 53,833 (6,931,878) (1,127,461) 210,706
			(25,978,394) –
			(25,978,394)
		13,750,743 15,212,133

Far East Hotels and Entertainment Limited 15 Interim Report 2009

INTERIM FINANCIAL INFORMATION

4. Depreciation and Amortisation

During the period, depreciation of HK$3,878,619 (2008: HK$4,268,406) was charged in respect of the Group’s property, plant and equipment.

During the period, amortisation of HK$14,008 (2008: HK$14,008) was charged in respect of the Group’s prepaid lease payments.

5. Finance Costs

Interest on bank borrowings: Wholly repayable within 5 years Not wholly repayable within 5 years	Six months ended 30 September 2009 2008 (unaudited) (unaudited) HK$ HK$ 84,073 436,802 845,262 690,659
	929,335 1,127,461

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. Earnings (Loss) Per Share

(a) Basic earnings (loss) per share

The calculation of basic earnings (loss) per share is based on the profits for the period of HK$2,829,364 (2008: loss of HK$25,978,394) and 488,842,675 (2008: 488,842,675) ordinary shares in issue during the period.

Far East Hotels and Entertainment Limited 16 Interim Report 2009

INTERIM FINANCIAL INFORMATION

(b) Diluted earnings (loss) per share

No diluted earnings (loss) per share for the six months ended 30 September 2008 and 30 September 2009 were presented as there was no potential dilutive ordinary shares subsisted during the period.

8. Interests in Associates

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

Results

Revenue Profit 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 2009 2008 (unaudited) (unaudited) HK$ HK$ 2,446,807 1,829,962
	1,024,422 421,412
	512,211 210,706
	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 60,555,005 59,803,153 (68,783,783) (68,439,341)
	(8,228,778) (8,636,188)
	2,438,598 1,926,387

Far East Hotels and Entertainment Limited 17 Interim Report 2009

INTERIM FINANCIAL INFORMATION

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 and other receivables Less: allowance for doubtful debts	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 3,104,111 3,398,878 11,479 – 534,820 519,612
	3,650,410 3,918,490 (510,545) (510,545)
	3,139,865 3,407,945

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	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 707,082 495,384 373,709 449,781 2,855,483 3,065,808
	3,936,274 4,010,973 3,640,282 3,294,323
	7,576,556 7,305,296

Far East Hotels and Entertainment Limited 18 Interim Report 2009

INTERIM FINANCIAL INFORMATION

11. Bank Borrowings

Bank Borrowings
Bank borrowings comprise: Mortgage loans Bank loans Secured Unsecured 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 five years More than five years Less: Amount due within one year shown under current liabilities Amount due after one year	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 33,933,888 51,503,218 28,340,000 29,960,000
	62,273,888 81,463,218
	58,773,888 77,963,218 3,500,000 3,500,000
	62,273,888 81,463,218
	8,670,010 9,064,231 5,269,920 5,674,011 17,639,678 20,113,479 30,694,280 46,611,497
	62,273,888 81,463,218 (8,670,010) (9,064,231)
	53,603,878 72,398,987

Far East Hotels and Entertainment Limited 19 Interim Report 2009

INTERIM FINANCIAL INFORMATION

12. Share Capital

Authorised: At 1 April and at 30 September Issued and fully paid: At 1 April and at 30 September	Number of shares Share capital 2009 2008 2009 2008 HK$ HK$ 750,000,000 750,000,000 75,000,000 75,000,000
	488,842,675 488,842,675 48,884,268 48,884,268

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;

Far East Hotels and Entertainment Limited 20 Interim Report 2009

INTERIM FINANCIAL INFORMATION

• (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 benefit thereof has not agreed otherwise, the special reserve shall not be treated as realised profits 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 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.

Far East Hotels and Entertainment Limited 21 Interim Report 2009

INTERIM FINANCIAL INFORMATION

13. Commitments

Operating lease arrangements

The Group as lessee:

At 30/09/2009, 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 The Group as lessor: Within one year In the second to fifth year inclusive	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 4,766,769 4,844,725 19,067,075 19,047,619 47,667,688 50,000,000
	71,501,532 73,892,344
	30/09/2009 31/03/2009 (unaudited) (audited) HK$ HK$ 2,416,296 2,481,833 – –
	2,416,296 2,481,833

Property rental income earned during the period was HK$5,529,300 (2008: HK$6,485,019).

Far East Hotels and Entertainment Limited 22 Interim Report 2009

INTERIM FINANCIAL INFORMATION

14. Subsequent Event

In October 2009, the Company entered into a Joint Venture Agreement (the “Agreement”) with Mr. Derek Chiu, a director of the Company, for the formation of a Joint Venture Company (the “JV Company”) which is owned by the Company as to 50% and by Mr. Derek Chiu as to 50%. Pursuant to the Agreement, the JV Company will hold and develop the property located in Yuen Long, New Territories to be acquired by the JV Company from Mr. Derek Chiu. The Company shall pay in aggregate HK$8,650,000 to the JV Company for the subscription for 50 new Shares (at the subscription price of HK$1.00 per Share) and the making of a HK$8,649,950 shareholder’s loan to the JV Company.

Far East Hotels and Entertainment Limited 23 Interim Report 2009

ADDITIONAL INFORMATION REQUIRED BY LISTING RULES

DIRECTORS’ INTERESTS IN SHARES AND UNDERLYING SHARES

At 30 September 2009, 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 notified 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	Family	Corporate		of the
Name of Director	interests	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)

Far East Hotels and Entertainment Limited 24 Interim Report 2009

ADDITIONAL INFORMATION REQUIRED BY LISTING RULES

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 whollyowned 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

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 and outstanding as at 30 September 2009.

Save as disclosed above, as at 30 September 2009, 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 notified 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.

Far East Hotels and Entertainment Limited Interim Report 2009

25

ADDITIONAL INFORMATION REQUIRED BY LISTING RULES

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 2009, 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 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	Beneficial owner	72,182,400	14.77%
(Note 1)
Energy Overseas Ltd.	Beneficial 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 2009 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.

Far East Hotels and Entertainment Limited Interim Report 2009

26

ADDITIONAL INFORMATION REQUIRED BY LISTING RULES

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 2009, with deviations from code provision A.4.1 of the Code in respect of the service term of Directors.

None of the existing Non-executive Directors of the Company is appointed for a specific term. This constitutes a deviation from code provision A.4.1 of the Code. However, all Directors of the Company are subject to the retirement by rotation at each annual general meeting under Articles 78 and 79 of the Company’s Articles of Association. 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 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 financial reporting matters, including a review of the unaudited interim financial statements for the six months ended 30 September 2009.

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 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.

Far East Hotels and Entertainment Limited Interim Report 2009

27

ADDITIONAL INFORMATION REQUIRED BY LISTING RULES

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 standards set out in the Model Code throughout the six months ended 30 September 2009.

On Behalf of the Board

Derek Chiu

Managing Director & Chief Executive

Hong Kong, 14 December 2009

Far East Hotels and Entertainment Limited Interim Report 2009

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