Guoco Group Limited — Proxy Solicitation & Information Statement 2004

Nov 3, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in Far East Hotels and Entertainment Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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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)

(Stock Code: 0037)

DISCLOSEABLE TRANSACTION

DISPOSAL OF PROPERTY

3 November, 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2-3
Background of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3-4
Financial Effects of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Reason for the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6-8

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DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

• “Board” the board of Directors “Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

• “Company” Far East Hotels and Entertainment Limited, a company incorporated in Hong Kong with limited liability whose shares are listed on the main board of the Stock Exchange

• “connected person” has the meaning ascribed to it under the Listing Rules “Director(s)” the director(s) of the Company

• “Disposal” the disposal of the Property pursuant to the Provisional Sale and Purchase Agreement

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

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

• “Latest Practicable Date” 1 November 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Property” 3rd Floor to 6th Floor, Lisa House, No.33-37 Nelson Street, Kowloon, Hong Kong, including the car-lift shaft and carlift installed

• “Provisional Sale and the provisional sale and purchase agreement dated 6 October Purchase Agreement” 2004 entered into between the Vendor and the Purchaser in relation to the sale and purchase of the Property

• “Purchaser”

• Wonderful Scenery Properties Limited or its nominees, being independent third party and not a connected person of the Company

• “SFO”

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Vendor”

Jenago Limited, a wholly-owned subsidiary of the Company

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LETTER FROM THE BOARD

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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

Non-Executive Directors CHIU JU Ching-lan, J.P. Dick Tat-sang CHIU David Tat-cheong CHIU Dennis Tat-shing CHIU Duncan CHIU

Registered Office Suite 3408, 34th Floor Office Tower, Convention Plaza. 1 Harbour Road Wanchai Hong Kong

Independent Non-executive Directors IP Shing Hing NG Wing Hang Patrick CHOY Wai Shek Raymond

Alternate Directors

CHAN Chi-hing (Alternate Director to Deacon Te-ken CHIU) TANG Sung-ki (Alternate Director to Desmond CHIU)

3 November, 2004

To the shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION DISPOSAL OF PROPERTY

INTRODUCTION

By an announcement dated 12 October 2004, the Directors announced that on 6 October 2004, the Vendor, a wholly-owned subsidiary of the Company, had entered into the Provisional Sale and Purchase Agreement with the Purchaser to dispose of the Property at a consideration of HK$34,500,000.00.

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LETTER FROM THE BOARD

The Disposal constitutes a discloseable transaction of the Company under the Listing Rules. The purpose of this circular is to provide the shareholders of the Company with further information on the Disposal and other information in compliance with the requirements of the Listing Rules.

BACKGROUND OF THE DISPOSAL

Date of the Provisional Sale and Purchase Agreement:

6 October 2004

Parties

Vendor : Jenago Limited, a wholly-owned subsidiary of the Company

Purchaser: Wonderful Scenery Properties Limited or its nominees, which to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, are independent third parties and not connected persons of the Company.

Property

The property is 3rd Floor to 6th Floor, Lisa House, No. 33-37 Nelson Street, Kowloon, Hong Kong, including the car-lift shaft and car-lift installed, which is held by the Group for leasing purpose. The lease for the Property shall expire on 28th February, 2005 and the current rental of the Property payable under the lease is HK$210,000.00 per calendar month.

Conditions

The Property will be sold with the underlying lease described under the paragraph headed “Property” above. The Disposal is subject to the Vendor, prior to completion of the Disposal, having entered into a new lease with the existing tenant of the Property for a term of 2 years commencing from 1 March 2005 at a monthly rental of HK$250,000.00 (exclusive of management fees, rates and other expenses). If the Vendor does not enter into such new lease with the existing tenant, then the Purchaser can choose to demand a return of all consideration paid to the Vendor in respect of the Disposal thereby terminating the subject transaction or require the date of completion of the Disposal to be extended until such new lease is entered into between the Vendor and the existing tenant.

Consideration

The total consideration is HK$34,500,000.00 and was determined after arm’s length negotiation by reference to the valuation of the Property as at 31 March 2004 mentioned in the paragraph headed “Financial effects of the Disposal” below but taking into account the improved property market conditions in Hong Kong since that date. No professional valuation of the Property has been made by the Group for the purpose of the Disposal.

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LETTER FROM THE BOARD

Terms of Payment

The consideration shall be payable in cash as follows:

• (a) an initial deposit of HK$1,000,000.00 was paid by the Purchaser to the Vendor upon the signing of the Provisional Sale and Purchase Agreement;

• (b) a further deposit of HK$2,450,000.00 was paid by the Purchaser to the Vendor on 21 October 2004; and

• (c) the balance of HK$31,050,000.00 will be paid by the Purchaser on or before completion of the Disposal.

Formal agreement and completion:

As at the Latest Practicable Date, the Vendor and the Purchaser could not agree to the terms of a formal sale and purchase agreement in relation to the Property. Accordingly, the parties agreed to proceed to completion of the sale and purchase of the Property in accordance with the terms of the Provisional Sale and Purchase Agreement. As at the Latest Practicable Date, completion of the sale and purchase of the Property is scheduled to take place by 23 December 2004.

FINANCIAL EFFECTS OF THE DISPOSAL

Based on the audited consolidated balance sheet of the Group as at 31 March 2004, the carrying value of the Property as at 31 March 2004 as valued by an independent firm of valuers was HK$26,000,000.00, being the latest valuation carried out on the Property. The Property was acquired in September 2002 at the total purchasing cost of approximately HK$32,200,000.00. Based on the carrying value of the Property of HK$26,000,000.00 as mentioned above and after deducting all relevant expenses, the Company expects to recognise in its income statement a gain of approximately HK$8,000,000.00, subject to audit. Based on the audited consolidated balance sheet of the Group as at 31 March 2004, the effect of the Disposal on the consolidated assets and liabilities of the Group is a reduction of investment property by HK$26,000,000.00 and a reduction of bank borrowings by HK$15,831,356.00, and upon completion of the Disposal, the cash balance of the Group will increase by approximately HK$20,000,000.00 after repayment of bank borrowings of HK$13,620,000.00 and after deducting relevant expenses. The effect of the Disposal on the consolidated income statement of the Group is that the rental income of the Group attributable of the Property will decrease. The rental income of the Group attributable to the Property for the financial year ended 31 March 2004 was HK$2,240,000.00, based on the audited consolidated financial statements of the Group for that financial year.

According to the financial statements of the Vendor, the net profit both before and after taxation and extraordinary items attributable to the Property for the financial years ended 31 March 2003 and 31 March 2004 were HK$1,385,000.00 and HK$2,064,000.00 respectively.

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LETTER FROM THE BOARD

REASON FOR THE DISPOSAL

The Disposal is made in view of the improved property market conditions in Hong Kong. The sale proceeds from the Disposal will be used for general working capital purposes of the Group only. The Directors (including the independent non-executive Directors) are of the view that the Disposal is on normal commercial terms which are fair and reasonable and is in the interest of the Company and its shareholders as a whole.

GENERAL

The principal business activities of the Group are hotel operation, property rental, securities trading, loan financing and investment holding.

To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, the principal business activity of the Purchaser is property investment.

As the consideration involved in the Disposal represents approximately 18.28% of the total market capitalisation of the Company, the Disposal constitutes a discloseable transaction for the Company under the Listing Rules.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information contained in the appendix to this circular.

Yours faithfully, DEREK CHIU

Managing Director and Chief Executive

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules 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 enquiries, that to the best of their knowledge and belief, there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF DIRECTOR’S INTERESTS

As at the Latest Practicable Date, 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 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 Companies, were as follows:-

(a) Ordinary shares of HK$1.00 each of the Company

Name of Director Mr. Deacon Te-ken Chiu Mr. Derek Chiu Madam Chiu Ju Ching-lan Mr. Dick Tat-sang Chiu Mr. David Tat-cheong Chiu Ms. Margaret Chiu	Personal interests 12,491,424 394,000 188,000 12,172,800 3,144,627 676,240 29,067,091	Corporate interests 111,901,052 (Note 1) 108,430,299 (Note 2) – 22,277,033 (Note 3) – 5,000,000 (Note 4) 247,608,384	Total 124,392,476 108,824,299 188,000 34,449,833 3,144,627 5,676,240 276,675,475	Percentage of issued share capital of the Company 25% 22% 0% 7% 1% 1%
				56%

Notes:

1. Of the 111,901,052 shares, 100,939,842 shares were held by various private companies controlled by Mr. Deacon Te-ken Chiu, 295,210 shares were held by Far East Consortium Limited, a wholly-owned subsidiary of Far East Consortium International Limited, and 10,666,000 shares were held by Brentford Investments Inc., a whollyowned subsidiary of Far East Technology International Limited. Mr. Deacon Te-ken Chiu is a controlling shareholder of these companies.

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GENERAL INFORMATION

APPENDIX

1. The 108,430,299 shares were held by Energy Overseas Ltd, a company controlled by Mr. Derek Chiu.

2. The 22,277,033 shares were held by various private companies controlled by Mr. Dick Tat-sang Chiu.

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

(b) Share options of the Company

Number of share options Name of Director Capacity held Mr. Deacon Te-ken Chiu Beneficial owner 5,000,000 Mr. Derek Chiu Beneficial owner 1,590,000 Madam Chiu Ju Ching-lan Beneficial owner 4,000,000 Ms. Margaret Chiu Beneficial owner 7,000,000 Mr. Sung-ki Tang Beneficial owner 6,150,000 23,740,000	Number of underlying shares 5,000,000 1,590,000 4,000,000 7,000,000 6,150,000
	23,740,000

Save as disclosed above, as at the Latest Practicable Date, 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 Companies.

3. SUBSTANTIAL SHAREHOLDERS

Save for the interests of certain Directors disclosed above, 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, there is no other person/entity (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had notified to the Company any interest or short position 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 ten per cent. 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.

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GENERAL INFORMATION

APPENDIX

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Group which does not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or claim of material importance and, so far as the Directors are aware, no litigation or claim of material importance is pending or threatened against the Company or any of its subsidiaries.

6. COMPETING INTEREST

As at the Latest Practicable Date, in so far as the Directors are aware, none of the Directors or their respective associates (as defined in the Listing Rules) have any interest in a business which competes or is likely to compete with the business of the Group.

7. GENERAL

• (a) The secretary and qualified accountant of the Company is Mr. TANG Sung-ki CPA, FCCA .

• (b) The share registrar of the Company is Standard Registrars Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (c) The English language text of this circular shall prevail over the Chinese language text.

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