Hang Lung Group Limited — Capital/Financing Update 2009

Aug 20, 2009

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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PCCW Limited

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(Incorporated in Hong Kong with limited liability) (Stock Code: 00008)

DISCLOSEABLE TRANSACTION

PROPOSED DISPOSAL BY PACIFIC CENTURY PREMIUM DEVELOPMENTS LIMITED OF A SUBSIDIARY HAVING AN INDIRECT INTEREST IN A PROJECT SITE IN BEIJING

On 20 August 2009, Excel Bright, an indirect wholly-owned subsidiary of PCPD, entered into the Agreement with Eagle Fit, pursuant to which Excel Bright agreed to sell and Eagle Fit agreed to purchase from Excel Bright the Sale Share (representing the entire issued share capital of Prime Asset) and the Shareholder Loan, on and subject to the terms and conditions of the Agreement. The total consideration payable by Eagle Fit for the acquisition of the Sale Share and the Shareholder Loan will be US$118,000,000, subject to adjustments. Based on the carrying value of the Project Company, it is estimated that a gain of approximately HK$235 million before tax will accrue to the PCCW Group after Completion.

The principal asset of Prime Asset is its equity interest in the Project Company. The Project Company is a wholly foreign owned enterprise established in the PRC, and its principal activities at completion of the Transaction are investment in and development of the Project located at No. 4 Gong Ti Bei Lu, Chaoyang District, Beijing, the PRC. The Project is currently under construction.

PCPD has its shares listed on the main board of the Stock Exchange and is a subsidiary of the Company. As at the date of this announcement, the Company is interested in approximately 61.53% of PCPD's issued share capital.

As one or more applicable percentage ratio(s) under Rule 14.07 of the Listing Rules in respect of the Transaction is 5% or more but all the applicable percentage ratios are less than 25%, the Transaction constitutes a discloseable transaction for the Company under Rule 14.06 of the Listing Rules.

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THE AGREEMENT

Date

20 August 2009

Parties

Vendor : Excel Bright, an indirect wholly-owned subsidiary of PCPD

• Purchaser : Eagle Fit, an indirect wholly-owned subsidiary of Shui On Construction

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Eagle Fit and Shui On Construction are third parties independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

Assets to be disposed of

Pursuant to the Agreement, Excel Bright has agreed to sell and Eagle Fit has agreed to purchase (i) the Sale Share (representing the entire issued share capital of Prime Asset) and (ii) the Shareholder Loan.

The principal asset of Prime Asset is its equity interest in the Project Company. The Project Company is a wholly foreign owned enterprise established in the PRC, and its principal activities at completion of the Transaction are investment in and development of the Project located at No. 4 Gong Ti Bei Lu, Chaoyang District, Beijing, the PRC. The Project is currently under construction.

After Completion, both Prime Asset and the Project Company will cease to be subsidiaries of PCPD and the Company, and the Company and PCPD will no longer have any equity interest in the Project or the Project Site.

The Consideration

Initial Consideration

Subject to adjustments, the Consideration payable by Eagle Fit to Excel Bright for the acquisition of the Sale Share and the Shareholder Loan shall be US$118,000,000 in total. Out of the Consideration, the consideration for the sale and purchase of the Shareholder Loan shall be a sum equal to the principal amount of the Shareholder Loan, and the balance shall be the consideration for the sale and purchase of the Sale Share.

The Initial Consideration in the sum of US$118,000,000 shall be payable by Eagle Fit to Excel Bright in the following manner:

• (i) the Deposit of US$23,600,000 shall be payable by Eagle Fit to Excel Bright immediately on demand by Excel Bright; and

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• (ii) the sum of US$94,400,000 (being the balance of the Initial Consideration) shall be paid on Completion.

An irrevocable standby letter of credit issued by a bank in Hong Kong for a sum of US$23,600,000 has been delivered by Eagle Fit to Excel Bright upon the signing of the Agreement, in support of the performance by Eagle Fit of its obligation to pay the Deposit to Excel Bright.

The balance of the Initial Consideration of US$94,400,000 and (unless already received by Excel Bright prior to Completion) the Deposit of US$23,600,000 shall be paid by Eagle Fit to Excel Bright at Completion.

Adjustments to Consideration

The Consideration shall be adjusted in the following manner:

• (i) if the Net Asset Value exceeds RMB678,000,000, the Consideration shall be adjusted upward by adding to the Initial Consideration the US$ equivalent of such excess; or

• (ii) if the Net Asset Value is less than RMB678,000,000, the Consideration shall be adjusted downward by deducting from the Initial Consideration the US$ equivalent of such shortfall.

The Consideration shall not be adjusted other than in the manner set out above.

The Agreement provides for procedures relating to the preparation of the Completion Accounts and the finalization of the Net Asset Value, including certain agreed principles for determining the Net Asset Value.

The adjustment payment shall be made by Excel Bright or Eagle Fit (as appropriate) within 7 Business Days after the date on which the Completion Accounts and the calculation of the Net Asset Value have become binding pursuant to the terms of the Agreement.

The Consideration was determined following commercial and arm’s length negotiations between the parties by reference to the net asset value of the Project Company.

Post-Completion Undertaking by Eagle Fit

Under the Agreement, Eagle Fit has agreed and undertaken with Excel Bright that, after Completion:

• (a) Shui On Construction shall continue to be the majority shareholder (viz. retaining not less than 50% direct or indirect interest) of the Prime Asset Group and a corresponding interest of not less than 50% in the Project Site until the completion of construction of the Project;

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• (b) Eagle Fit shall procure the Project Company to maintain the standard of the Project at a level at least at par with the current standard of the Project as a benchmark; and

• (c) Eagle Fit shall, and shall procure the Prime Asset Group and its associates, to ensure that the name of the development on the Project Site (or any part thereof) and the name of any company in the Prime Asset Group shall not use or include the word “Pacific Century” or “盈科” or in any way suggest any continuing association with Excel Bright or any of its holding companies, subsidiaries or associates.

Shui On Construction will also be required to deliver to Excel Bright at Completion an undertaking that it shall, and shall procure Eagle Fit, the Prime Asset Group and its associates to, comply with the above post-Completion obligations of Eagle Fit.

Completion

Under the Agreement, Completion is to take place on the Completion Date.

Some other terms

The Agreement also contains provisions relating to certain specified matters of Prime Asset and the Project Company during the period prior to Completion, including arrangement regarding design/construction contracts, new contracts and commitments, the design and construction work relating to the Project and the Project Site, and the business and operation of Prime Asset and the Project Company pending Completion.

FURTHER INFORMATION RELATING TO PRIME ASSET AND THE PROJECT SITE

For the financial year ended 31 December 2007, the audited net profits before and after taxation and extraordinary items attributable to Prime Asset were approximately HK$3.4 million, whereas the audited net losses before and after taxation and extraordinary items attributable to the Project Company were approximately RMB9.8 million.

For the financial year ended 31 December 2008, the audited net profits before and after taxation and extraordinary items attributable to Prime Asset were approximately HK$0.4 million, whereas the audited net losses before and after taxation and extraordinary items attributable to the Project Company were approximately RMB7.7 million.

The Project Site is located at No. 4 Gong Ti Bei Lu, Chaoyang District, Beijing, the PRC. Based on information in the State-owned Land Use Right Certificate, the Project Site has an area of approximately 14,123.43 sq.m.. The Project Site was acquired by the Project Company pursuant to contract for grant of land use rights entered into in 2006 at a total cost of RMB558 million. The book value of the Project Site as at 31 July 2009 was approximately RMB604 million which comprises the total cost of the land use rights of RMB558 million and the construction cost

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incurred of approximately RMB46 million. The Project Site is currently under construction and development.

REASONS FOR AND BENEFITS OF THE TRANSACTION AND USE OF NET PROCEEDS

It is believed that disposal of the PCCW Group’s interest in the Project, at a time when the property market in Beijing has improved and has shown signs of rebounding, would release the PCPD Group’s capital, allowing PCPD to focus its resources on the existing landmark developments at Hokkaido in Japan and Phang-nga in southern Thailand, while at the same time providing greater financial flexibility for the PCPD Group to explore and capitalise on business and investment opportunities globally, particularly in a market where sizeable capital is in short supply during the global economic downturn. It is also believed that this will be beneficial to the Company.

Based on the carrying value of the Project Company, it is estimated that a gain, subject to adjustments to the Consideration, if any, of approximately HK$235 million before tax will accrue to the PCCW Group after Completion. The net proceeds from the Transaction will be used by the PCPD Group for working capital and further business developments and investments worldwide.

The Board considers that the terms of the Transaction are fair and reasonable and in the interests of the PCCW Group and the shareholders of the Company as a whole.

LISTING RULES IMPLICATIONS

As one or more applicable percentage ratio(s) under Rule 14.07 of the Listing Rules in respect of the Transaction is 5% or more but all the applicable percentage ratios are less than 25%, the Transaction constitutes a discloseable transaction for the Company under Rule 14.06 of the Listing Rules.

GENERAL INFORMATION

PCCW is the holding company of HKT Group Holdings Limited (HKT), Hong Kong's premier telecommunications provider and a world-class player in Information and Communications Technologies. PCCW also holds a majority interest in PCPD, and overseas investments including the wholly-owned UK Broadband Limited.

As the provider of Hong Kong's first quadruple-play experience, PCCW/HKT offers a range of innovative media content and services across four platforms – fixed-line, broadband Internet access, TV and mobile. In addition, the PCCW Group meets the sophisticated needs of the local and international business community, while supporting network operators with cutting-edge technical services and handling large-scale IT outsourcing projects for public and private sector organizations.

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PCPD has its shares listed on the main board of the Stock Exchange and is a subsidiary of the Company. As at the date of this announcement, the Company is interested in approximately 61.53% of PCPD's issued share capital.

The PCPD Group is principally engaged in the development and management of premium property and infrastructure projects, as well as investment in premium-grade buildings, in the Asia-Pacific region. The principal activity of Excel Bright is investment holding.

Eagle Fit is a company incorporated in the British Virgin Islands and is an indirect wholly-owned subsidiary of Shui On Construction, the shares of which are listed on the main board of the Stock Exchange. As far as the Company is aware after making reasonable enquiries, the principal business activity of Eagle Fit is investment holding, and Shui On Construction and its subsidiaries are principally engaged in property development, asset management, cement production, construction, investment in property development and venture capital investment in Hong Kong and the PRC.

DEFINITIONS

Unless otherwise defined, capitalised terms used in this announcement shall have the following meanings:

• “Agreement”

• the agreement relating to the sale and purchase of the Sale Share and the Shareholder Loan entered into between Excel Bright as vendor and Eagle Fit as purchaser on 20 August 2009

• “Board”

the board of Directors

• “Business Day”

• a day (other than a Saturday or Sunday or any day on which a tropical cyclone signal no. 8 or above or black rainstorm signal is hoisted in Hong Kong) on which banks in Hong Kong are generally open for business

• “Company” or "PCCW"

• PCCW Limited (Stock Code: 00008), a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “Completion” completion of the Transaction pursuant to the terms and conditions of the Agreement

• “Completion Accounts” the accounts of the Project Company as at the Completion Date to be prepared in accordance with the terms of the Agreement

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• “Completion Date”

• “Consideration”

• “Deposit”

• “Director(s)”

• “Eagle Fit”

• “Excel Bright”

• “HK$”

• “Hong Kong”

• “Initial Consideration”

• “Listing Rules”

• “Long Stop Date”

• “Net Asset Value”

• “PCCW Group”

the Long Stop Date (or if it is not a Business Day, the next Business Day), or such other date as the parties to the Agreement may agree in writing

• the total consideration payable by Eagle Fit to Excel Bright for the acquisition of the Sale Share and the Shareholder Loan, subject to adjustment in accordance with the terms of the Agreement

• the sum of US$23,600,000 payable by Eagle Fit to Excel Bright immediately on demand by Excel Bright pursuant to the Agreement

the director(s) of the Company

• Eagle Fit Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of Shui On Construction

• Excel Bright Properties Limited, a company incorporated in the British Virgin Islands with limited liability, and an indirect wholly-owned subsidiary of PCPD

• Hong Kong dollars, the lawful currency of Hong Kong

• the Hong Kong Special Administrative Region of the PRC

• the sum of US$118,000,000, being the initial amount of the Consideration before taking into account the adjustments (if any) pursuant to the Agreement

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

• 5 October 2009, or such other date as may be agreed between Excel Bright and Eagle Fit

• the net asset value of the Project Company as at the Completion Date as derived from the Completion Account with adjustments to be made in accordance with the terms of the Agreement

the Company and its subsidiaries

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“PCPD”

• “PCPD Group”

• “Prime Asset”

• “Prime Asset Group”

• “Project”

• “Project Company”

• “Project Site”

• “PRC”

• “RMB”

• “Sale Share”

• “Shareholder Loan”

• “Shui On Construction”

• Pacific Century Premium Developments Limited (Stock Code: 00432), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange

• PCPD and its subsidiaries

• Prime Asset Investment Limited, a company incorporated in Hong Kong with limited liability, and a wholly-owned subsidiary of Excel Bright

• Prime Asset and the Project Company

• a “construction in progress” development project located at the Project Site 北京啟夏房地產開發有限公司 (Beijing Qi Xia Real Estate Development Co., Ltd.*), a wholly foreign owned enterprise established in the PRC, and the sole shareholder of which is Prime Asset

• the site area located at No. 4 Gong Ti Bei Lu, Chaoyang District, Beijing, the PRC

• the People’s Republic of China (excluding, for the purpose of this announcement, Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan)

Renminbi, the lawful currency of the PRC

• the one (1) issued share of HK$1 of and in the share capital of Prime Asset, representing the entire issued share capital of Prime Asset as at the date of the Agreement

• the loan owing by Prime Asset to Excel Bright as at the Completion Date (the principal amount of such loan being the US Dollar equivalent of HK$709,084,509 as at the date of the Agreement but which may be varied after the date of the Agreement until immediately before Completion), being an interest free loan and which, subject to and on the terms and conditions of the Agreement, shall be assigned by Excel Bright to Eagle Fit on Completion

• Shui On Construction and Materials Limited (Stock Code: 00983), a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange

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“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Transaction”

the sale and purchase of the Sale Share and the Shareholder Loan pursuant to the Agreement

“US$” or “US Dollar” United States dollars, the lawful currency of the United States of America

“%”

per cent.

By Order of the Board of PCCW Limited Philana WY Poon Group General Counsel and Company Secretary

Hong Kong, 20 August 2009

The Directors as at the date of this announcement are as follows:

Executive Directors:

Li Tzar Kai, Richard (Chairman); Alexander Anthony Arena (Group Managing Director); Peter Anthony Allen; Chung Cho Yee, Mico and Lee Chi Hong, Robert

Non-Executive Directors:

Sir David Ford, KBE, LVO; Lu Yimin; Zuo Xunsheng (Deputy Chairman) and Li Fushen

Independent Non-Executive Directors:

Professor Chang Hsin-kang, FREng, GBS, JP; Dr The Hon Sir David Li Kwok Po, GBM, GBS, OBE, JP; Sir Roger Lobo, CBE, LLD, JP; Aman Mehta and The Hon Raymond George Hardenbergh Seitz

* For identification only

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