Guoco Group Limited — Proxy Solicitation & Information Statement 2005

Aug 15, 2005

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 TRANSACTIONS

ACQUISITION OF PROPERTIES

Hong Kong, 15 August 2005

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Background of the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Reasons for and financial effects of the Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . .	6
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

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DEFINITIONS

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

• “Acquisitions”

• the acquisition of Property 1 by Purchaser 1 and Property 2 by Purchaser 2

• “Board”

the board of Directors

• “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

• “Development”

• the development on the Land now being constructed or to be constructed and intended to be known as “Mount Beacon”

• “Director(s)”

the director(s) of the Company

• “Formal Agreement 1”

• the formal sale and purchase agreement dated 20 July 2005 entered into between the Vendor and Purchaser 1 in relation to the sale and purchase of Property 1

• “Formal Agreement 2”

• the formal sale and purchase agreement dated 20 July 2005 entered into between the Vendor and Purchaser 2 in relation to the sale and purchase of Property 2

• “Group”

the Company and its subsidiaries

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

• “Land”

all that piece and parcel of land known and registered in the Land Registry as New Kowloon Inland Lot No.6196

• “Latest Practicable Date”

• 12 August 2005, 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

• “Properties” Property 1 and Property 2

• “Property 1”

• Block 1, Floor 2, Unit B, Mount Beacon, 20 Cornwall Street, Kowloon, Hong Kong

• “Property 2”

• Block 1, Floor 7, Unit B, Mount Beacon, 20 Cornwall Street, Kowloon, Hong Kong

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DEFINITIONS

“Provisional Agreement 1”	the provisional sale and purchase agreement dated 17 July
	2005 entered into between the Vendor and Purchaser 1 in
	relation to the sale and purchase of Property 1
“Provisional Agreement 2”	the provisional sale and purchase agreement dated 17 July
	2005 entered into between the Vendor and Purchaser 2 in
	relation to the sale and purchase of Property 2
“Purchaser 1”	Jeanstar Limited, a wholly-owned subsidiary of the Company
“Purchaser 2”	Brighten Heart Limited, a wholly-owned subsidiary 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”	Direct Win Development Limited, being an independent
	third party and not a connected person of the Company
“%”	per cent.

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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 2308, 23rd Floor Office Tower Convention Plaza 1 Harbour Road Wanchai Hong Kong

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 (Alternate Director to Desmond CHIU)

15 August 2005

To the shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTIONS ACQUISITION OF PROPERTIES

INTRODUCTION

By an announcement dated 25 July 2005, the Directors announced that on 17 July 2005, (i) Purchaser 1, a wholly-owned subsidiary of the Company, entered into Provisional Agreement 1 with the Vendor, to acquire Property 1 at a consideration of HK$25,400,000; and (ii) Purchaser 2, a wholly-owned subsidiary of the Company, entered into Provisional Agreement 2 with the Vendor, to acquire Property 2 at a consideration of HK$25,600,000.

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LETTER FROM THE BOARD

The Acquisitions constitute 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 Acquisitions and other information in compliance with the requirements of the Listing Rules.

BACKGROUND OF THE ACQUISITION

Date of Provisional Agreement 1

17 July 2005

Parties

Vendor : Direct Win Development Limited. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are independent third parties and not connected persons of the Company.

Purchaser 1 : Jeanstar Limited, a wholly-owned subsidiary of the Company.

Date of Provisional Agreement 2

17 July 2005

Parties

Vendor : Direct Win Development Limited. Purchaser 2 : Brighten Heart Limited, a wholly-owned subsidiary of the Company.

Sale and purchase

Pursuant to Provisional Agreement 1, the Vendor and Purchaser 1 entered into Formal Agreement 1 on 20 July 2005. Formal Agreement 1, which sets out the terms of the sale and purchase of Property 1 in more detail, supersedes Provisional Agreement 1.

Pursuant to Provisional Agreement 2, the Vendor and Purchaser 2 entered into Formal Agreement 2 on 20 July 2005. Formal Agreement 2, which sets out the terms of the sale and purchase of Property 2 in more detail, supersedes Provisional Agreement 2.

Properties

The Development, of which Property 1 and Property 2 form part, has not yet been completed. Pursuant to Formal Agreement 1 and Formal Agreement 2, the Vendor has agreed to complete the Development in compliance with the conditions of the Government Grant relating to the Land, the building plans and Formal Agreement 1 or Formal Agreement 2 (as applicable) on or before 31 July 2006 subject to such extensions of time as may be granted by the authorized person.

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LETTER FROM THE BOARD

Property 1 is to be situate at Block 1, Floor 2, Unit B, Mount Beacon, 20 Cornwall Street, Kowloon, Hong Kong and will have a gross floor area of approximately 1,935 square feet, with a net floor area of approximately 1,548 square feet. Property 2 is to be situate at Block 1, Floor 7, Unit B, Mount Beacon, 20 Cornwall Street, Kowloon, Hong Kong and will also have a gross floor area of approximately 1,935 square feet, with a net floor area of approximately 1,548 square feet.

Consideration

The purchase price for Property 1 is HK$25,400,000 and the purchase price for Property 2 is HK$25,600,000.

The purchase price for each of the Properties were determined after arm’s length negotiation between Purchaser 1 or Purchaser 2 (as applicable) and the Vendor, an independent third party, with reference to the sale price of the Properties listed by the Vendor. No valuation of Property 1 or Property 2, the construction of which have not been completed, has been done by Purchaser 1 or Purchaser 2.

Terms of Payment

(i) Property 1

The purchase price shall be paid by Purchaser 1 to the Vendor’s solicitors as stakeholders in the following manner:

• (a) an initial deposit of HK$1,270,000 has been paid by Purchaser 1 on 17 July 2005 upon the signing of Provisional Agreement 1;

• (b) HK$1,270,000 has been paid by Purchaser 1 on 20 July 2005 as part payment of the purchase price upon the signing of Formal Agreement 1;

• (c) HK$1,270,000 will be payable by Purchaser 1 towards part payment of the purchase price on or before 14 September 2005;

• (d) HK$1,270,000 will be payable by Purchaser 1 towards part payment of the purchase price on or before 11 January 2006; and

• (e) the balance of the purchase price of HK$20,320,000 will be payable within 14 days of Purchaser 1 being notified in writing that the Vendor is in a position validly to assign Property 1 to Purchaser 1.

(ii) Property 2

The purchase price shall be paid by Purchaser 2 to the Vendor’s solicitors as stakeholders in the following manner:

• (a) an initial deposit of HK$1,280,000 has been paid by Purchaser 2 on 17 July 2005 upon the signing of Provisional Agreement 2;

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LETTER FROM THE BOARD

• (b) HK$1,280,000 has been paid by Purchaser 2 on 20 July 2005 as part payment of the purchase price upon the signing of Formal Agreement 2;

• (c) HK$1,280,000 will be payable by Purchaser 2 towards part payment of the purchase price on or before 14 September 2005;

• (d) HK$1,280,000 will be payable by Purchaser 2 towards part payment of the purchase price on or before 11 January 2006; and

• (e) the balance of the purchase price of HK$20,480,000 will be payable within 14 days of Purchaser 2 being notified in writing that the Vendor is in a position validly to assign Property 2 to Purchaser 2.

The Acquisitions will be funded as to approximately 70% by bank facilities secured by the grant of mortgage over the Properties and as to approximately 30% by internal resources of the Group.

Completion

The Vendor shall notify Purchaser 1 and Purchaser 2 respectively in writing that it is in a position validly to assign Property 1 or Property 2 (as applicable) within one month of the issue of the Certificate of Compliance or the consent of the Director of Lands to assign, whichever shall happen first. Completion of the sale and purchase of Property 1 and Property 2 respectively shall take place within 14 days of the date of such notification. Completion is expected to take place on or about 31 July 2006.

REASONS FOR AND FINANCIAL EFFECTS OF THE ACQUISITIONS

In view of the recent property market condition, the Directors consider that the Acquisitions are a sound investment opportunity for the Group. The Group intends to sell the Properties if they can be realised at an appropriate price in light of the then prevailing market conditions, otherwise the Properties will be held by the Group as investment properties and leased out. The Directors consider that upon completion of the Acquisitions, the asset portfolio of the Group will widen. The Directors also believe that the Acquisitions will improve the Group’s operating performance and earnings base through the rental income of the Properties net of the interest expenses of the relevant bank mortgage loans. It is expected that approximately 70% of the consideration for the Acquisitions would be funded by bank facilities secured by the grant of mortgage over the Properties and the remaining 30% by internal resources of the Group. Thus upon completion, the liabilities of the Group would increase in accordance with the amount of consideration funded by bank borrowings and the Group’s bank balance would decrease in accordance with the amount of consideration funded by internal resources of the Group.

The Directors (including the independent non-executive Directors) are of the view that the Acquisitions are on normal commercial terms which are fair and reasonable and in the interests of the Company and its shareholders as a whole.

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LETTER FROM THE BOARD

GENERAL

The principal business activities of the Group are hotel operation, property letting, securities investment and 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 Vendor is property development.

Each of the Acquisitions constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. As both Acquisitions involve the same vendor and Provisional Agreement 1 and Provisional Agreement 2 were entered into on the same date, the Acquisitions are required to be aggregated under the Listing Rules and on an aggregate basis constitute a discloseable transaction of the Company under Chapter 14 of 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 12,394,000 188,000 12,172,800 3,144,627 676,240 41,067,091	Corporate interests 108,901,052 (Note 1) 78,430,299 (Note 2) – 22,277,033 (Note 3) – 5,000,000 (Note 4) 214,608,384	Total 121,392,476 90,824,299 188,000 34,449,833 3,144,627 5,676,240 255,675,475	Approximate percentage of issued share capital of the Company 24.83% 18.58% 0.04% 7.05% 0.64% 1.16%
				52.30%

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 Technology 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.

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GENERAL INFORMATION

APPENDIX

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

2. 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 or chief executive of the Company, as at the Latest Practicable Date, the following persons or corporations (other than a Director or chief executive of the Company) had an 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 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.

			Approximate
			percentage of
			issued share
		Interests in shares	capital of
Name of Shareholder	Capacity	of the Company	the Company
Achiemax Limited	Beneficial owner	72,182,400	14.77%
(Note 1)
Energy Overseas Limited	Beneficial owner	78,430,299	16.04%
(Note 2)

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GENERAL INFORMATION

APPENDIX

Notes:

1. Mr. Deacon Te-ken Chiu and Mr. Dennis Tat-shing CHIU are directors of Achiemax Limited;

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

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

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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