Guoco Group Limited — Proxy Solicitation & Information Statement 2002

Jul 31, 2002

IMPORTANT

If you are in any doubt as to any aspect of this document or as to the action you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in FAR EAST HOTELS AND ENTERTAINMENT LIMITED , you should at once hand this document with the accompanying proxy form to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED 遠東酒店實業有限公司

(Incorporated in Hong Kong under the Companies Ordinance)

PROPOSAL FOR A CAPITAL REORGANISATION

Financial Adviser

Asian Capital

(Corporate Finance) Limited

A notice convening an extraordinary general meeting of Far East Hotels And Entertainment Limited to be held at the Penthouse, Far East Consortium Building, 121 Des Voeux Road Central, Hong Kong on Friday, 23rd August, 2002 at 3:20 p.m. (or so soon thereafter as the annual general meeting convened for the same place and date at 3:00 p.m. and the extraordinary general meeting convened for the same place and date at 3:10 p.m. shall each have been concluded or adjourned) is set out in the appendix to this document. Whether or not you propose to attend the meeting, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the registered office of the Company at Suite 2806, 28th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the meeting.

31st July, 2002

DEFINITIONS

• “Announcement”

• “Board”

• “Capital Reorganisation”

• “CCASS”

• “Companies Ordinance”

• “Company”

• “Directors”

• “Extraordinary General Meeting”

• “High Court”

• “HKSAR”

• “HKSCC”

• “Increase in Authorised Capital”

• “Latest Practicable Date”

• “New Shares”

• “Reduction of Capital”

• “Shareholders”

• “Shares”

“Stock Exchange”

The announcement issued by the Board in respect of the Capital Reorganisation dated 19th July, 2002;

The board of Directors;

The Reduction of Capital and Increase in Authorised Capital;

the Central Clearing and Settlement System established and operated by HKSCC;

the Companies Ordinance (Cap 32) of the Laws of Hong Kong;

Far East Hotels And Entertainment Limited;

the directors of the Company;

• the extraordinary general meeting of the Company to be held at the Penthouse, Far East Consortium Building, 121 Des Voeux Road Central, Hong Kong on Friday 23rd August, 2002 at 3.20 p.m. (or so soon thereafter as the annual general meeting and the extraordinary general meeting convened for the same place and date at 3.00 and 3:10 p.m. respectively shall have been concluded or adjourned);

the High Court of the HKSAR;

• the Hong Kong Special Administrative Region of the People’s Republic of China;

Hong Kong Securities Clearing Company Limited;

• the restoration of the authorised share capital of the Company to HK$750,000,000 by the creation of an additional 6,750,000,000 New Shares;

• 25th July, 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

• shares of par value HK$0.10 each in the issued and unissued share capital of the Company on the Reduction of Capital becoming effective;

• the reduction of the capital of the Company as set out in this circular and the Announcement;

the holders of Shares from time to time;

• shares of par value HK$1.00 each in the authorised share capital of the Company; and

The Stock Exchange of Hong Kong Limited

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EXPECTED TIMETABLE

Latest time for the shareholders to lodge forms of proxy for the Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3:20 pm 21st August, 2002

Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3:20 pm 23rd August, 2002

Announcement of the outcome of the Extraordinary General Meeting . . . . . . . . . . . . . . 26th August, 2002

The following events are conditional on the result of the Extraordinary General Meeting and the relevant court hearings. The dates are, therefore, tentative:

Hearing of Petition for confirmation of the Reduction of Capital

by the High Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22nd October, 2002

Last time and date of trading in the Shares . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on 22nd October, 2002

Effective date of the Reduction of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23rd October, 2002

Commencement of trading in the New Shares . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on 23rd October, 2002

First day for free exchange of the certificates for the Shares for

new certificates for the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23rd October, 2002

Latest date for free exchange of the certificates for the Shares for

new certificates for the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3rd December, 2002

Note:

The actual date of the Hearing of the Petition (and before that, the date of the Hearing of the Summons for Directions) will depend upon the availability of the High Court which, in turn, depends upon the projected length and scope of the relevant

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

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FAR EAST HOTELS AND ENTERTAINMENT LIMITED 遠東酒店實業有限公司

(Incorporated in Hong Kong under the Companies Ordinance)

Executive Directors: Deacon Te-ken CHIU, J.P. (Chairman) Derek CHIU (Managing Director and Chief Executive) Desmond CHIU (Deputy Managing Director) Margaret CHIU

Registered Office: Suite 2806, 28th Floor Great Eagle Centre 23 Harbour Road Wanchai Hong Kong

Non-Executive Directors:

Daniel Tat-jung CHIU (Vice Chairman) CHIU JU Ching-lan, J.P. Dick Tat-sang CHIU David Tat-cheong CHIU Dennis Tat-shing CHIU Duncan CHIU

Independent Non-executive Directors:

Ho-fai MA Shing-hing IP

Alternate Directors:

Janny Lin-chun LEUNG (Alternate Director to Deacon Te-ken CHIU) Sung-ki TANG (Alternate Director to Desmond CHIU)

31st July, 2002

To Shareholders

Dear Sir or Madam,

INTRODUCTION

The Directors announced on 19th July, 2002 their intention to put forward to the Shareholders the Capital Reorganisation involving:-

• (i) a proposed reduction of the capital of the Company by adjusting the nominal value of the shares of the Company by way of cancelling paid up capital to the extent of HK$0.90 on each of the issued shares and by reducing the nominal value of all the issued and unissued shares from HK$1.00 to HK$0.10; and

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

• (ii) a proposed restoration of the Authorised Capital of the Company after the Reduction of Capital becomes effective to the original amount of HK$750,000,000 by the creation of an additional 6,750,000,000 new shares of HK$0.10 each.

The purpose of this circular is to give you further information regarding the Capital Reorganisation.

CAPITAL REORGANISATION

The Board is putting forward to the Shareholders the Capital Reorganisation.

Reduction of Capital

As at the Latest Practicable Date, the authorised capital of the Company was HK$750,000,000 divided into 750,000,000 Shares of par value HK$1.00 each, of which 488,842,675 Shares have been issued and are fully paid. The proposed Reduction of Capital will be effected by cancelling paid up capital to the extent of HK$0.90 upon each of the 488,842,675 Shares in issue as at the Latest Practicable Date and any further Shares which may be issued prior to the date on which the petition for the confirmation of the Reduction of Capital is heard by the High Court and by reducing the nominal value of all the ordinary shares in the capital of the Company from HK$1.00 to HK$0.10 each.

On the assumption that no further Shares are issued after the Latest Practicable Date, a credit of HK$439,958,407 will arise as a result of the Reduction of Capital. Of this credit, up to an amount of HK$41,005,830 may be applied towards writing-off part or all of the accumulated losses of the Company as at 31st March, 2002 as described below. The balance of the credit will be transferred to a special capital reserve account to be created by the Company, the application of which will be subject to such conditions as may be imposed by the High Court.

Increase in Authorised Capital

It is further proposed that conditional upon the Reduction of Capital becoming effective, the authorised capital of the Company will immediately be restored to the original amount of HK$750,000,000 by the creation of an additional 6,750,000,000 New Shares.

Upon the Increase in Authorised Capital becoming effective and on the basis of 488,842,675 Shares in issue at the Latest Practicable Date, the authorised capital of the Company will be HK$750,000,000 divided into 7,500,000,000 New Shares, of which 488,842,675 New Shares will be in issue and credited as fully paid.

Conditions of the Reduction of Capital

The Reduction of Capital is conditional on the following:

1. the passing by the Shareholders of a special resolution to approve the Reduction of Capital and the Increase in Authorised Capital to be proposed at the Extraordinary General Meeting to be convened by the Company;

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

1. the confirmation of the Reduction of Capital 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

2. 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 Reduction of Capital 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.

Although the section above headed “Expected Timetable” gives some guideline as to dates, the effective date of the Reduction of Capital and the Increase in Authorised Capital is not ascertainable at present. An application will be made to the High Court in respect of the Reduction of Capital as soon as practicable after the approval of the Reduction in Capital at the Extraordinary General Meeting and further announcement(s) will be made informing the Shareholders of the effective date and, if necessary or appropriate, the progress and results of the application to the High Court.

REASONS FOR THE REDUCTION OF CAPITAL

Since February, 2000, the Shares have been traded on the Stock Exchange at prices ranging from HK$0.29 to HK$0.94 per Share, which are below their nominal value of HK$1.00 each. The closing price of the Shares on the Stock Exchange on the Latest Practicable Date was HK$0.325 per Share.

Under the Companies Ordinance, a company may not issue shares at a discount to the nominal value of such shares unless, among other things, the issue is authorised by a resolution of the Shareholders and is sanctioned by the High Court. The Directors consider that such an exercise will be costly and time consuming, and that it would therefore be desirable to reduce the nominal value of the shares so as to avoid the necessity for such an exercise to be undertaken each time the Company wishes to raise funds. The Directors believe that the Reduction of Capital will therefore give greater flexibility to the Company in pricing issues of New Shares when the opportunities arise in the future. However, no specific arrangements for issuing New Shares for the purposes of fund raising or acquisition of business or assets have been discussed or entered into with any party as at the Latest Practicable Date.

The Company has audited unconsolidated accumulated losses, as at 31st March, 2002, in the amount of HK$41,005,830. The losses are principally attributable to the decline in revenue from the Company’s trading subsidiaries, which revenue has been insufficient to cover the Company’s normal operating expenses. In addition, the Company has incurred losses arising out of investments in respect of certain former subsidiaries and/or subsidiaries that have ceased trading. Of the credit of HK$439,958,407 arising on the Reduction of Capital, the Directors may elect to apply up to an amount of HK$41,005,830 towards writing-off part or all of the accumulated losses of the Company as referred to above.

Whether or not up to an amount of HK$41,005,830 from the credit of HK$439,958,407 arising from the Reduction of Capital is ultimately applied towards writing-off the accumulated losses of the Company to 31st March, 2002 will principally depend upon the view of the Directors as to the prospects

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

of the Company being able to reduce its accumulated losses through returns on investments in its subsidiaries over the near to mid-term. If, at the time of the Company’s application to the High Court, the Directors take the view that the Company will be able to reduce or reverse its accumulated losses in the near to mid-term, it is not proposed that any of the credit arising on the Reduction of Capital will be applied towards writing-off such accumulated losses.

As set out in the section headed “Expected Timetable” to this Circular, the Hearing of the Summons for Directions of the Company and the Hearing of the Petition for the confirmation of the Reduction of Capital is unlikely to take place prior to October, 2002.

EFFECT OF THE REDUCTION OF CAPITAL AND INCREASE IN AUTHORISED CAPITAL ON THE COMPANY’S SHARE OPTION SCHEME

Following the completion of the Reduction of Capital and Increase in Share Capital, such alterations, if any, shall be made to any options issued pursuant to the terms of the share option scheme of the Company adopted on 22nd September, 1995 as the auditors of the Company shall certify in writing to be fair and reasonable in accordance with the provisions of the share option scheme.

IMPACT OF THE REDUCTION OF CAPITAL

Implementation of the Reduction of Capital 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 Board believes that the Reduction of Capital and the Increase in Authorised Capital will not have any adverse effect on the financial position of the Company and its subsidiaries. Each of the New Shares will rank pari passu with each other.

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

The effects of the Capital Reorganisation on the Company’s authorised share capital and the components of the shareholders’ fund is set out below:-

		Unaudited	Unaudited
		balances after	balances after
		Capital	Capital
	Audited	Reorganisation	Reorganisation
	balances before	(assuming no	(assuming full
	Capital	write-off of	write-off of
Reorganisation,		accumulated	accumulated
	as at 31st	losses as at 31st	losses as at 31st
	March, 2002	March, 2002)	March, 2002)
	HK$’ million	HK$’ million	HK$’ million
Authorised capital:
750,000,000 Shares	750.00
7,500,000,000 New Shares		750.00	750.00
Shareholders’ fund:
Issued share capital
488,842,675 Shares	488.84
488,842,675 New Shares		48.88	48.88
Share premium	92.81	92.81	92.81
Capital reserves	21.22	461.18	420.17
Capital redemption reserve	28.99	28.99	28.99
Accumulated losses as at 31st March, 2002	(41.01)	(41.01)	–
	590.85	590.85	590.85

FREE EXCHANGE OF CERTIFICATES FOR NEW SHARES AND TRADING ARRANGEMENTS

An application will in due course be made to the Stock Exchange for approval to the Listing of, and permission to deal in, the New Shares. It is not proposed that the New Shares will be listed on any other Stock Exchange.

Subject to the granting of listing of, and permission to deal in, the New Shares on the Stock Exchange, the New Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the New Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Shareholders may submit existing certificates for the Shares to the registrar of the Company, Standard Registrars Limited of 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong for exchange, at the expense of the Company, up to six weeks from the effective date for certificates for the New Shares.

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LETTER FROM THE MANAGING DIRECTOR AND CHIEF EXECUTIVE

Shareholders should note that the timetable set out in the section headed “Expected Timetable” is tentative in nature. 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 Reduction of Capital is ascertainable.

EXTRAORDINARY GENERAL MEETING

There is set out in the appendix to this circular a notice of the Extraordinary General Meeting at which a special resolution will be proposed to approve the Reduction of Capital and the Increase in Authorised Capital of the Company to its original amount.

ACTION TO BE TAKEN

A proxy form for use at the Extraordinary General Meeting is enclosed herewith. Whether or not you intend to attend the Extraordinary General Meeting, you are requested to complete the proxy form and return it to the registered office of the Company at Suite 2806, 28th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Extraordinary General Meeting. Completion and return of a proxy form will not prevent shareholders from attending and voting at the Extraordinary General Meeting if they so wish.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

RECOMMENDATION

The Directors believe that the above-mentioned resolution to be proposed at the Extraordinary General Meeting is in the best interests of the Company and its shareholders. Accordingly, the Directors recommend that all shareholders should vote in favour of the resolution set out in the notice of Extraordinary General Meeting.

Yours faithfully, DEREK CHIU Managing Director and Chief Executive

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NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the Company will be held at the Penthouse, Far East Consortium Building, 121 Des Voeux Road Central, Hong Kong on Friday, 23rd August, 2002 at 3:20 p.m. (or so soon thereafter as the annual general meeting convened for the same place and date at 3:00 p.m. and the extraordinary general meeting convened for the same place and date at 3:10 p.m. shall each have been concluded or adjourned) for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as a Special Resolution of the Company:

SPECIAL RESOLUTION

“THAT

• (i) the Authorised Capital of the Company be reduced from HK$750,000,000 divided into 750,000,000 ordinary shares of HK$1.00 each to HK$75,000,000 divided into 750,000,000 Shares of HK$0.10 each and that such reduction be effected by cancelling paid up capital to the extent of HK$0.90 upon each of the 488,842,675 ordinary shares in issue as at 25th July, 2002 (being the latest practicable date prior to the printing of this notice) and any further ordinary shares which may be issued prior to the date on which the Petition for the confirmation of the reduction herein is heard by the High Court of the Hong Kong Special Administrative Region and by reducing the nominal amount of all the ordinary shares in the capital of the Comhpany from HK$1.00 to HK$0.10 per share;

• (ii) subject to and forthwith upon such reduction of capital taking effect, the Authorised Capital of the Company be increased to its former amount of HK$750,000,000 by the creation of 6,750,000,000 New Shares of HK$0.10 each.”

By order of the Board Sung-ki TANG Secretary

Hong Kong, 31st July, 2002

Notes:

1. Any member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.

1. To be valid, a form of proxy, together with any power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be lodged with the registered office of the Company at Suite 2806, 28th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting.

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