Hang Lung Group Limited — M&A Activity 2008

Feb 14, 2008

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

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PCCW Limited

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 0008)

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PACIFIC CENTURY PREMIUM DEVELOPMENTS LIMITED

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(Incorporated in Bermuda with limited liability) (Stock Code: 0432)

Picville Investments Limited

(Incorporated in the British Virgin Islands with limited liability)

JOINT ANNOUNCEMENT

(1) PROPOSED PRIVATISATION OF PACIFIC CENTURY PREMIUM DEVELOPMENTS LIMITED BY

PICVILLE INVESTMENTS LIMITED BY WAY OF A SCHEME OF ARRANGEMENT (UNDER SECTION 99 OF THE COMPANIES ACT), AT THE OFFER PRICE OF HK$2.85 PER SCHEME SHARE

(2) POSSIBLE DISCLOSEABLE TRANSACTION FOR PCCW LIMITED

(3) RESUMPTION OF TRADING IN SHARES OF PACIFIC CENTURY PREMIUM DEVELOPMENTS LIMITED

Sole Financial Adviser to PCCW Limited and Picville Investments Limited

Citigroup Global Markets Asia Limited

The directors of PCCW, the Offeror and PCPD jointly announce that on 12 February, 2008, the Offeror requested the board of directors of PCPD to put forward a Proposal to the Scheme Shareholders regarding a proposed privatisation of PCPD by way of a scheme of arrangement under Section 99 of the Companies Act.

The Offeror, an indirect wholly-owned subsidiary of PCCW, proposes that all Scheme Shares will be cancelled in exchange for the payment to each Scheme Shareholder of an amount of HK$2.85 in cash for each Scheme Share. As at the date of this announcement, the Scheme Shareholders were interested in 926,126,540 Shares representing approximately 38.47% of the issued share capital of PCPD and the Offeror and parties acting in concert with it were

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interested in 1,481,333,333 Shares, representing approximately 61.53% of the issued share capital of PCPD.

The amount of cash required in order to effect the Proposal is approximately HK$2,642 million, including the amount payable to the Scheme Shareholders and the Optionholder. The consideration payable under the Scheme will be financed from available financial resources of the PCCW Group. Citigroup Global Markets Asia Limited, the sole financial adviser to PCCW and the Offeror, is satisfied that sufficient financial resources are available to the Offeror for the implementation of the Proposal. In connection with the Proposal, the amount of borrowings of the PCCW Group increases by approximately HK$2,642 million, reflecting additional drawings under its existing facilities.

The Proposal will be implemented by way of the Scheme. Following the Effective Date, the listing of the Shares on the Stock Exchange will be withdrawn and PCPD will become an indirect wholly-owned subsidiary of PCCW. The Proposal is conditional upon the fulfilment or waiver, as applicable, of the conditions as described in the section headed “Conditions of the Proposal” below. All conditions will have to be fulfilled or waived, as applicable, on or before 31 August, 2008 (or such later date as the Offeror and PCPD may agree and the Court may allow), otherwise the Proposal will lapse.

PCPD will not make any application to the Stock Exchange to apply for the withdrawal of the listing of the Shares on the Stock Exchange if the Proposal is not approved, or lapses or does not become unconditional for any reason.

As at the date of this announcement, 5,000,000 Options are currently outstanding and exerciseable under the Share Option Schemes, with an exercise price of HK$2.375 per Share. The 5,000,000 outstanding Options are held by Mr. Chung Cho Yee, Mico, a director of PCCW and of a subsidiary of PCPD and a person presumed to be acting in concert with the Offeror under the Takeovers Code. Mr. Chung has undertaken not to exercise any of the Options prior to the Proposal either becoming effective or lapsing and, accordingly, will not be eligible to vote on the Proposal as an Independent Shareholder at the Court Meeting. Conditional upon the Proposal becoming effective, the Offeror will make a cash offer to the Optionholder to cancel the Options. The amount of the offer to cancel an Option will be calculated by deducting the exercise price per Share payable on exercise of an Option from the Offer Price per Share payable under the Scheme.

PCCW-HKT Partners Limited, an indirect wholly-owned subsidiary of PCCW and a person deemed to be acting in concert with the Offeror for the purposes of the Takeovers Code, is the holder of the Note. The Note is convertible into an aggregate of 672,222,222 new Shares at a conversion price of HK$3.60 per Share. PCCW-HKT Partners Limited has confirmed to PCCW, the Offeror and PCPD that PCCW-HKT Partners Limited will not exercise any of the conversion rights conferred by the Note, and will not transfer the Note or any part thereof, in each case, prior to the Proposal either becoming effective or lapsing. Accordingly, PCCWHKT Partners Limited will not be eligible to vote on the Proposal as an Independent Shareholder at the Court Meeting. Having regard to the fact that PCCW-HKT Partners Limited is a person acting in concert with the Offeror for the purposes of the Takeovers Code, the Offeror will not make an offer to PCCW-HKT Partners Limited to cancel the conversion rights conferred by the Note and PCCW-HKT Partners Limited has consented to this arrangement.

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Other than the Options and the Note, as at the date of this announcement there were no outstanding options, warrants, derivatives or convertible securities issued by PCPD.

As at the date of this announcement, apart from the Options and the Note, there are no outstanding derivatives in respect of securities in PCPD entered into by the Offeror or any person acting in concert with it.

An independent board committee of PCPD, comprising all four independent non-executive directors of PCPD, has been established to advise the Independent Shareholders in connection with the Proposal. The independent board committee has yet to consider or evaluate the Proposal. An independent financial adviser will be appointed to advise the independent board committee of PCPD in connection with the Proposal.

PCPD will send to its Shareholders a Scheme Document containing further details of the Proposal and the Scheme, the expected timetable, an explanatory statement as required by the Companies Act, information regarding PCPD, the Offeror and PCCW, the recommendations of the independent board committee of PCPD in respect of the Proposal, a letter of advice from the independent financial adviser to such independent board committee, a notice convening the Court Meeting and a notice of the SGM as well as the particulars required by the Takeovers Code and the Listing Rules.

At the request of PCPD, trading in the Shares on the Stock Exchange was suspended from 10:24 a.m. on 11 February, 2008, pending the issue of this announcement. An application has been made by PCPD to the Stock Exchange for the resumption of trading in the Shares with effect from 2:30 p.m. on 14 February, 2008 on the Stock Exchange.

Shareholders of PCPD and potential investors should be aware that the implementation of the Proposal is subject to the conditions set out below being fulfilled or waived, as applicable, and thus the Proposal may or may not become effective, and that the independent board committee of PCPD has yet to consider or evaluate the Proposal. They are advised to exercise caution when dealing in the Shares.

INTRODUCTION

On 12 February, 2008, the Offeror requested the board of directors of PCPD to put forward the Proposal to the Scheme Shareholders regarding a proposed privatisation of PCPD by way of the Scheme involving the cancellation of all the Scheme Shares, as a result of which it is intended that PCPD will become an indirect wholly-owned subsidiary of PCCW. Having reviewed the Proposal, the board of directors of PCPD (other than the members of the independent board committee referred to below) has agreed to put the Proposal forward to the Scheme Shareholders.

TERMS OF THE PROPOSAL

The Scheme will provide that the Scheme Shares be cancelled and, in consideration thereof, each Scheme Shareholder will be entitled to receive HK$2.85 in cash for every Scheme Share held.

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The Offer Price represents:

• a premium of approximately 26.1% over the closing price of HK$2.26 per Share as quoted on the Stock Exchange on 6 February, 2008 (being the last trading day prior to the suspension of trading in the Shares pending the issue of this announcement);

• a premium of approximately 27.8% over the average closing price of about HK$2.23 per Share based on the daily closing prices as quoted on the Stock Exchange over the 5 trading days up to and including 6 February, 2008;

• a premium of approximately 19.2% over the average closing price of about HK$2.39 per Share based on the daily closing prices as quoted on the Stock Exchange over the 30 trading days up to and including 6 February, 2008;

• a premium of approximately 15.4% over the average closing price of about HK$2.47 per Share based on the daily closing prices as quoted on the Stock Exchange over the 120 trading days up to and including 6 February, 2008;

• a premium of approximately 2.5% to the audited consolidated net asset value per Share of about HK$2.78 as at 31 December, 2006; and

• a discount of approximately 5.9% to the unaudited consolidated net asset value per Share of about HK$3.03 as at 30 June, 2007.

As at the date of this announcement, there were 2,407,459,873 Shares in issue and the Scheme Shareholders were interested in 926,126,540 Shares, representing approximately 38.47% of the issued share capital of PCPD. At the Offer Price, which was arrived at after taking into account the factors set out in the section headed “Reasons for the Proposal”, the Proposal values the entire issued share capital of PCPD at approximately HK$6,861 million.

The amount of cash required in order to effect the Proposal is approximately HK$2,642 million, including the amount payable to the Scheme Shareholders and the Optionholder (in relation to the offer to the Optionholder, as at the date of this announcement, 5,000,000 Options are currently outstanding and are held by Mr. Chung Cho Yee, Mico, a director of PCCW and of a subsidiary of PCPD and a person presumed to be acting in concert with the Offeror under the Takeovers Code. Mr. Chung has undertaken not to exercise any of the Options prior to the Proposal either becoming effective or lapses. The Offeror will only make a cash offer to the Optionholder to cancel the Options conditional upon the Proposal becoming effective). The consideration payable under the Scheme will be financed from available financial resources of the PCCW Group. Citigroup Global Markets Asia Limited, the sole financial adviser to PCCW and the Offeror, is satisfied that sufficient financial resources are available to the Offeror for the implementation of the Proposal. In connection with the Proposal, the amount of borrowings of the PCCW Group increases by approximately HK$2,642 million, reflecting additional drawings under its existing facilities.

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CONDITIONS OF THE PROPOSAL

The Proposal will become effective and binding on PCPD and all Scheme Shareholders subject to the fulfilment or waiver (as applicable) of the following conditions:

• (a) the approval of the Scheme (by way of poll) by a majority in number of the Scheme Shareholders representing not less than three-fourths in value of the Shares of the Scheme Shareholders, present and voting either in person or by proxy at the Court Meeting, provided that:

• (i) the Scheme is approved (by way of poll) by Independent Shareholders holding at least 75% of the votes attaching to the Scheme Shares held by Independent Shareholders that are voted either in person or by proxy at the Court Meeting; and

• (ii) the number of votes cast (by way of poll) against the resolution to approve the Scheme at the Court Meeting is not more than 10% of the votes attaching to all the Scheme Shares held by the Independent Shareholders;

• (b) the passing of a special resolution by a majority of not less than three-fourths of the votes cast by the Shareholders present and voting, in person or by proxy, at the SGM, to approve and give effect to the reduction of the issued share capital of PCPD by canceling and extinguishing the Scheme Shares and, immediately thereafter, apply the reserve created as a result of the aforesaid cancellation of the Scheme Shares to pay up in full and issue to the Offeror such number of new Shares as is equal to the number of Scheme Shares cancelled;

• (c) the Court's sanction of the Scheme (with or without modifications) and, the delivery to the Registrar of Companies in Bermuda of a copy of the order of the Court for registration;

• (d) compliance, to the extent necessary, with the procedural requirements of Section 46(2) of the Companies Act and compliance with any conditions imposed under Section 46(2) of the Companies Act in each case in relation to the reduction of the issued share capital of PCPD;

• (e) all Authorisations (if any) in connection with the Proposal having been obtained or made from, with or by (as the case may be) the Relevant Authorities in Bermuda and/or Hong Kong and/or any other relevant jurisdictions;

• (f) all Authorisations (if any) remaining in full force and effect without variation, and all necessary statutory or regulatory obligations in all relevant jurisdictions having been complied with and no requirement having been imposed by any Relevant Authorities which is not expressly provided for, or is in addition to requirements expressly provided for, in relevant laws, rules, regulations or codes in connection with the Proposal or any matters, documents (including circulars) or things relating thereto, in each aforesaid case up to and at the time when the Scheme becomes effective; and

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• (g) all necessary consents (other than any that may be required from any member of the PCCW Group) which may be required under any existing contractual obligations of PCPD and/or its subsidiaries being obtained and remaining in full force and effect without modification.

The Offeror reserves the right to waive condition (g), either in whole or in respect of any particular matter. In the event that condition (e) and/or condition (f) is not/are not fulfilled, the Offeror reserves the right to assess the materiality of such non-fulfillment and to waive the fulfillment of any such condition to such extent as it considers appropriate. Conditions (a) to (d) cannot be waived in any event. All of the above conditions will have to be fulfilled or waived, as applicable, on or before 31 August, 2008 (or such other date as the Offeror and PCPD may agree and the Court may allow), otherwise the Proposal will lapse.

Assuming that the above conditions are fulfilled (or, as applicable, waived in whole or in part), it is expected that the Scheme will become effective on or before 31 August, 2008.

Shareholders of PCPD and/or potential investors should be aware that implementation of the Proposal is subject to the conditions set out above being fulfilled or waived, as applicable, and thus the Proposal may or may not become effective, and that the independent board committee of PCPD has yet to consider or evaluate the Proposal. They are advised to exercise caution when dealing in the Shares of PCPD.

INTENTION OF THE OFFEROR WITH REGARD TO PCPD

It is the intention of the Offeror to maintain the existing business of the PCPD Group upon the successful privatisation of PCPD, and the Offeror has no intention to seek a listing of the Shares on any stock exchange in the foreseeable future.

WITHDRAWAL OF LISTING OF SHARES

Upon the Scheme becoming effective, all Scheme Shares will be cancelled. Share certificates for the Shares held by the Scheme Shareholders will thereafter cease to have effect as documents of, or evidence of, title and should be returned to PCPD for cancellation. PCPD will apply to the Stock Exchange for the withdrawal of the listing of the Shares on the Stock Exchange pursuant to Rule 6.15 of the Listing Rules. The Scheme Shareholders will be notified by way of a press announcement of the exact dates of the Court Meeting and the SGM to approve and give effect to the Scheme, and the dates on which the Scheme and the withdrawal of the listing of the Shares on the Stock Exchange will become effective. The Scheme will lapse if it does not become effective on or before 31 August, 2008 (or such later date as the Offeror and PCPD may agree and the Court may allow), and the Scheme Shareholders will be notified by way of a press announcement accordingly. A detailed timetable for the Proposal will be included in a Scheme Document to be despatched to the Shareholders, which will also contain, inter alia , further details of the Proposal.

PCPD will not make any application to the Stock Exchange to apply for the withdrawal of the listing of the Shares on the Stock Exchange if the Proposal is not approved, lapses or does not become unconditional for any reason.

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SHAREHOLDING STRUCTURE OF PCPD

The table below sets out the shareholding structure of PCPD as at the date of this announcement and immediately following implementation of the Proposal:

Shareholders Asian Motion Offeror Offeror and concert parties Independent Shareholders Total	As at the date of this announcement Number of Shares % 1,481,333,333 61.53 0 0 1,481,333,333 61.53 926,126,540 38.47 2,407,459,873 100.00	Immediately following implementation of the Proposal Number of Shares % 1,481,333,333 61.53 926,126,540 38.47
		2,407,459,873 100.00 0 0
		2,407,459,873 100.00

Following the Effective Date and the withdrawal of listing of the Shares on the Stock Exchange, PCPD will become an indirect wholly-owned subsidiary of PCCW.

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The 2003 Share Option Scheme was approved and adopted on 17 March, 2003. The shareholders of PCPD approved the termination of the 2003 Share Option Scheme and the adoption of the 2005 Share Option Scheme at PCPD's annual general meeting held on 13 May 2005. The 2005 Share Option Scheme became effective on 23 May, 2005 following its approval by the shareholders of PCCW. No further options were granted under the 2003 Share Option Scheme following its termination, but the provisions of such scheme remain in full force and effect with respect to Options granted prior to its termination. No share options have been granted under the 2005 Share Option Scheme since its adoption.

As at the date of this announcement, 5,000,000 Options are currently outstanding and exerciseable under the Share Option Schemes, with an exercise price of HK$2.375 per Share. The Options are held by Mr. Chung Cho Yee, Mico, a director of PCCW and of a subsidiary of PCPD. Mr. Chung is therefore a connected person (as defined in the Listing Rules) of PCCW and PCPD. Mr. Chung has undertaken to the Offeror and PCPD not to exercise any of the Options prior to the Proposal either becoming effective or lapsing and, accordingly, will not be eligible to vote on the Proposal as an Independent Shareholder at the Court Meeting. Conditional upon the Proposal becoming effective, the Offeror will make a cash offer to the Optionholder to cancel the Options. The amount of the offer to cancel an Option will be calculated by deducting the exercise price per Share payable on exercise of an Option from the Offer Price per Share payable under the Scheme.

PCCW-HKT Partners Limited, an indirect wholly-owned subsidiary of PCCW and a person deemed to be acting in concert with the Offeror for the purposes of the Takeovers Code, is the holder of the Note. The Note is convertible into an aggregate of 672,222,222 new Shares of PCPD at a conversion price of HK$3.60 per Share. PCCW-HKT Partners Limited has confirmed to PCCW, the Offeror and PCPD that PCCW-HKT Partners Limited will not exercise any of the conversion rights conferred by the Note, and will not transfer the Note or any part thereof, in each case, prior to the Proposal either becoming effective or lapsing.

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Accordingly, PCCW-HKT Partners Limited will not be eligible to vote on the Proposal as an Independent Shareholder at the Court Meeting. Having regard to the fact that PCCW-HKT Partners Limited is a person acting in concert with the Offeror for the purposes of the Takeovers Code, the Offeror will not make an offer to PCCW-HKT Partners Limited to cancel the conversion rights conferred by the Note and PCCW-HKT Partners Limited has consented to this arrangement.

As at the date of this announcement, apart from the Options and the Note there are no outstanding options, warrants, derivatives or convertible securities issued by PCPD.

As at the date of this announcement, apart from the Options and the Note, there are no outstanding derivatives in respect of securities in PCPD entered into by the Offeror or any person acting in concert with it.

REASONS FOR THE PROPOSAL AND BENEFIT TO SCHEME SHAREHOLDERS

Reasons for the Proposal

The management of PCCW has noted that the share price of PCPD has underperformed both the Hang Seng Index and the Hang Seng Property Index since the transfer of the PCCW Group's Cyberport development rights, property investments and facilities management operations into Dong Fang Gas Holdings Limited (which was subsequently renamed as PCPD) in 2004. The Shares have also been trading at a significant discount to net asset value (“NAV”). Based on PCPD's latest published unaudited interim financial statements as at 30 June, 2007, the unaudited consolidated NAV per Share of PCPD was approximately HK$3.03. The Shares of PCPD are therefore trading at discounts of approximately 25.4%, 23.8% and 21.5% to the aforesaid unaudited consolidated NAV per share, comparing with the closing price of HK$2.26 per Share on 6 February, 2008, the latest one-month volumeweighted average price of HK$2.31 per Share, and the latest two-month volume-weighted average price of HK$2.38 per Share, respectively.

Furthermore, the trading volume of the Shares has been thin, resulting in low trading liquidity of the Shares. The average daily trading volume for the last 12-months up to and including 6 February, 2008 (being the last trading day in the Shares prior to suspension of trading in the Shares, pending the release of this announcement) is approximately 2,584,321 Shares, representing approximately 0.11% of the total Shares in issue and approximately 0.28% of the total Scheme Shares.

Benefits to PCCW and its shareholders

A privatisation of PCPD should benefit the PCCW Group in the following two ways:-

First, once privatised, PCPD will be able to concentrate on property projects that create value over a longer term and will not be distracted and pressurised to deliver short term performance for the benefit of its public shareholders due to the requirement of regular reporting and disclosure of its financial results. This pressure will always be present as long as the Share price continues to trade at such substantial discount to PCPD’s NAV.

Second, PCPD's management will be able to focus on running its property business without the distraction of maintaining regular shareholder reports and other ongoing obligations as required by a listed issuer on the Stock Exchange.

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The board of directors of PCCW considers that the offer price is reasonable and in light of the benefits stated above, it makes economic sense for PCCW to privatise PCPD.

Benefit to Scheme Shareholders

The directors of PCPD (other than the members of the independent board committee of PCPD referred to under "General" below which has been established to advise the Independent Shareholders in connection with the Proposal but has yet to consider or evaluate the Proposal, and which will set out its advice in the Scheme Document to be despatched to Shareholders) agree with PCCW’s view as set out in the section headed “Reasons for the Proposal” above. In the circumstances, the directors of PCPD (other than the members of the independent board committee as referred to above) have decided to put forward the Proposal to the Scheme Shareholders for their consideration.

Given the unsatisfactory share price performance and trading liquidity, PCPD has not raised any funds from the equity capital markets in the last three years and PCPD has no intention to raise any funds from the equity capital markets in the foreseeable future. Having also considered the other principal factors as discussed above, the management of PCPD (other than the members of the independent board committee as referred to above) is of the view that the costs associated with the maintenance of the listing of the Shares on the Stock Exchange and PCPD’s publicly listed status are no longer warranted.

Since PCCW already owns approximately 61.53% of PCPD as at the date of this announcement, the directors of PCPD (other than the members of the independent board committee as referred to above) believe that it is unlikely that the Scheme Shareholders will receive any other offer to acquire the Shares from a third party without the approval of PCCW. In addition, Scheme Shareholders should note that no discussions have taken place (or are taking place) between PCCW and any third party regarding the disposal of any of the Shares held by PCCW through Asian Motion and PCCW has no intention of discontinuing the business of PCPD.

Having considered all the above factors, the directors of PCPD (other than the members of the independent board committee of PCPD as referred to above) believe that the Proposal represents an attractive opportunity for the Scheme Shareholders to realise their entire investment at a premium to current market value under the current highly volatile stock market environment.

INFORMATION ON THE PCPD GROUP

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 PCPD Group holds the development rights for the Cyberport project, which is owned by the Government of the Hong Kong Special Administrative Region and includes the prestigious Bel-Air residential development. While the PCPD Group continues to explore high end development potential in Hong Kong, it also actively pursues opportunities in the property market of Mainland China and seeks investment and development opportunities with growth potential in other parts of the Asia-Pacific region.

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A summary of the audited consolidated financial results of the PCPD Group for each of the two years ended 31 December, 2005 and 2006 and the unaudited consolidated financial results of the PCPD Group for the six months ended 30 June, 2007 is set out below:

	(Audited)	(Audited)	(Unaudited)
	For the year ended		For the six months
	31 December,		ended 30 June,
	2005	2006	2007
	HK$'million	HK$'million	HK$'million
Turnover	5,127	7,263	2,100
Profit before taxation	710	1,160	617
Profit after taxation / profit attributable to	597	965	606
equity holders of PCPD

The unaudited consolidated net assets of the PCPD Group as at 30 June, 2007 and the audited consolidated net assets of the PCPD Group as at 31 December, 2006 were approximately HK$7,299 million and HK$6,683 million, respectively.

INFORMATION ON THE OFFEROR AND THE PCCW GROUP

The Offeror was incorporated in the British Virgin Islands with limited liability and is an indirect wholly-owned subsidiary of PCCW. At present, the Offeror has no trading activities and does not hold any Shares.

PCCW is the premier telecommunications provider in Hong Kong and a world-class player in Information and Communications Technologies. As the provider of Hong Kong's first quadruple-play experience, PCCW offers a range of innovative media content and services across four platforms - fixed-line, broadband Internet access, TV and mobile. In addition, PCCW meets the sophisticated needs of the international business community, while supporting network operators with cutting-edge technical services and handling large-scale IT outsourcing projects for public and private sector organisations.

OVERSEAS SHAREHOLDERS OF PCPD

The making of the Proposal to persons not resident in Hong Kong may be subject to the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any applicable legal and regulatory requirements. It is the responsibility of any overseas Scheme Shareholders of PCPD wishing to accept the Proposal to satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required, and the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such jurisdiction.

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LISTING RULES IMPLICATIONS FOR PCCW AND PCPD

The Proposal constitutes a possible discloseable transaction for PCCW under the Listing Rules, which is subject to the reporting, announcement and circular requirements of the Listing Rules. Pursuant to Rule 14.38 of the Listing Rules, PCCW is required to send a discloseable transaction circular to its shareholders within 21 days after publication of this announcement.

As described above, if the Proposal becomes effective, the Offeror will make a cash offer to Mr. Chung Cho Yee, Mico, the holder of 5,000,000 Options, to cancel those Options. The aggregate amount payable to Mr. Chung to cancel those Options, calculated by deducting the exercise price per Share payable on exercise of an Option from the Offer Price per Share payable under the Scheme, would be HK$2,375,000. Mr. Chung is a director of PCCW, and therefore a connected person of PCCW (as defined under Chapter 14A of the Listing Rules). Therefore payment of the consideration to Mr. Chung under the offer to cancel the Options would constitute a connected transaction for PCCW under the Listing Rules. However, each of the applicable percentage ratios in respect of the potential payment of the consideration to Mr. Chung under the offer to cancel the Options under the Listing Rules is expected to be less than 0.1% and, accordingly, PCCW is exempt from the reporting, announcement and independent shareholders’ approval requirements under Rule 14A.31(2) of the Listing Rules.

The Proposal does not constitute a notifiable transaction (as defined under Rule 14.04 of the Listing Rules) nor a connected transaction (as defined under Chapter 14A of the Listing Rules) of PCPD.

MEETINGS

As at the date of this announcement, Asian Motion was interested in 1,481,333,333 Shares, representing approximately 61.53% of the issued share capital of PCPD. Asian Motion is, in common with the Offeror, a wholly-owned subsidiary of PCCW. Accordingly, the Shares in which Asian Motion is interested will not form part of the Scheme Shares and Asian Motion will not have the right to vote at the Court Meeting. In view of the interests of Asian Motion in the Proposal, any holders of Scheme Shares who are acting in concert with Asian Motion, PCCW and the Offeror will not vote at the Court Meeting.

Asian Motion has indicated that if the Scheme is approved at the Court Meeting, it will vote in favour of the special resolution to be proposed at the SGM to approve and give effect to the Scheme (including the cancellation of the Scheme Shares and the reduction of the issued share capital of PCPD). Each of the Offeror and Asian Motion will undertake to appear by counsel at the hearing of the petition to sanction the Scheme and to undertake to the Court to be bound thereby and to execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed and done by the Offeror and Asian Motion, respectively, for the purposes of giving effect to the Scheme.

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GENERAL

Citigroup Global Markets Asia Limited has been appointed as the sole financial adviser to PCCW and the Offeror in connection with the Proposal.

An independent board committee of PCPD, comprising all four independent non-executive directors of PCPD, has been established to advise the Independent Shareholders in connection with the Proposal. The independent board committee has yet to consider or evaluate the Proposal. An independent financial adviser will be appointed to advise the independent board committee of PCPD in connection with the Proposal. An announcement will be made once the appointment is made.

In view of the relatively insignificant interest of Mr. Chung in the Options, representing approximately 0.21% of the enlarged issued share capital of PCPD following the exercise of the Options in full and the confirmation by Mr. Chung to the Executive prior to this announcement confirming that (1) he has not been involved in PCCW’s and the Offeror's decision making process as regards the making of the Proposal; and (2) at any time prior to the effective date of the Scheme or the date on which the Scheme lapses (whichever is the earlier): (i) he will not be involved in PCCW’s and the Offeror's decision making process as regards the making of the Proposal; (ii) he will not take part or vote as a Shareholder of PCPD at any meetings of Shareholders of PCPD to approve the Proposal; and (iii) he will receive no ancillary benefit (other than the payment to cancel his Options if the Proposal becomes effective) in respect of the Proposal, the Executive has granted a waiver in respect of Rule 2.4 of the Takeovers Code. As such, the board of directors of PCCW does not need to obtain independent advice as to whether the making of the Proposal is in the interests of shareholders of PCCW.

A document containing, amongst other things, further details of the Proposal and the Scheme, the expected timetable, an explanatory statement as required by the Companies Act, the recommendations of the independent board committee of PCPD with respect to the Proposal, a letter of advice from the independent financial adviser to such independent board committee, a notice of the Court Meeting and a notice of the SGM as well as the particulars required by the Takeovers Code will be despatched to the Shareholders as soon as practicable.

Details of any dealings in Shares, during the period commencing six months prior to the date of this announcement, by PCCW, the Offeror and their respective concert parties under the Takeovers Code will be disclosed in the Scheme Document in accordance with the requirements of the Takeovers Code.

PCPD, the Offeror and their respective Associates are reminded to disclose their dealings in any securities in the Company.

Stockbrokers, banks and others who deal in the Shares on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to Associates and other persons under Rule 22 of the Takeovers Code and that those clients are willing to comply with them. Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw to their attention the relevant rules under the Takeovers Code. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in the Shares undertaken for a client during any 7 day period is less than HK$1 million. This dispensation does not alter the obligation of principals,

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Associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved.

Intermediaries are expected to co-operate with the Executive under the Takeovers Code in its dealings enquiries. Therefore, those who deal in the Shares should appreciate that stockbrokers and other intermediaries will supply the Executive with relevant information as to those dealings, including identities of clients, as part of that co-operation.

Save for the Proposal, the Scheme itself, the undertaking of Mr. Chung Cho Yee, Mico not to exercise any of the Options held by him prior to the Proposal either becoming effective or lapsing (as described above) and the confirmation of PCCW - HKT Partners Limited that it will not exercise any of the conversion rights conferred by the Note or transfer the Note prior to the Proposal either becoming effective or lapsing (as described above), there are no arrangements (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to shares of PCCW, the Offeror or PCPD which might be material to the Proposal.

There are no agreements or arrangements to which the Offeror or PCCW is party which relate to the circumstances in which the Offeror may or may not invoke or seek to invoke a precondition or a condition to the Proposal.

SUSPENSION AND RESUMPTION OF TRADING

At the request of PCPD, trading in the Shares on the Stock Exchange was suspended from 10:24 a.m. on 11 February, 2008, pending the issue of this announcement. An application has been made by PCPD to the Stock Exchange for the resumption of trading in the Shares with effect from 2:30 p.m. on 14 February, 2008 on the Stock Exchange.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

“2003 Share Option Scheme” the share option scheme of PCPD adopted on 17 March, 2003, the termination of which was approved by PCPD's shareholders at PCPD's annual general meeting held on 13 May, 2005

“2005 Share Option Scheme” the share option scheme of PCPD which became effective on 23 May, 2005 “acting in concert” shall have the meaning set out in the Takeovers Code “Associate(s)” shall have the meaning set out in the Takeovers Code

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• “Asian Motion”

• Asian Motion Limited, a company incorporated in the British Virgin Islands with limited liability, a wholly-owned subsidiary of PCCW and which is beneficially interested in 1,481,333,333 Shares, representing approximately 61.53% of the issued share capital of PCPD as at the date of this announcement

• “Authorisations”

• all necessary authorisations, registrations, filings, rulings, consents, permissions and approvals in connection with the Proposal

• “Companies Act” the Companies Act 1981 of Bermuda (as amended)

• “Court”

• the Supreme Court of Bermuda

• “Court Meeting”

• a meeting of the Scheme Shareholders to be convened at the direction of the Court at which the Scheme will be voted upon

• “Effective Date”

• the date the Scheme becomes effective in accordance with the Companies Act

• “Executive”

• the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director

• “Hong Kong”

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

• “HK$”

Hong Kong dollar(s), the lawful currency of Hong Kong

• “Independent Shareholders” Shareholders other than Asian Motion, PCCW, the Offeror and parties acting in concert with any of them

• “Listing Rules”

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Note”

• a guaranteed convertible note due 2014 in the principal amount of HK$2,420 million issued by PCPD Wealth Limited, a wholly-owned subsidiary of PCPD, and guaranteed by PCPD

• “Offeror”

• Picville Investments Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of PCCW

• “Offer Price”

• a price of HK$2.85 per Scheme Share payable to the Scheme Shareholders under the Scheme

• “Options”

• options granted to Optionholders under the Share Option Schemes which remain unexercised

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• “Optionholder(s)”

• “PCCW”

• “PCCW Group”

• “PCPD”

• “PCPD Group”

• “Proposal”

• “Relevant Authorities”

• “Scheme”

• “Scheme Document”

• “Scheme Share(s)”

• “Scheme Shareholder(s)”

• “SFC”

• “SGM”

• “Share(s)”

• holder(s) of Options granted under the Share Option Schemes

• PCCW Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange

PCCW and its subsidiaries, but excluding the PCPD Group

• Pacific Century Premium Developments Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange

PCPD and its subsidiaries

• the proposal for the privatisation of PCPD by the Offeror by way of the Scheme

• appropriate governments and/or governmental bodies, regulatory bodies, courts or institutions including the SFC and the Stock Exchange

• a scheme of arrangement under Section 99 of the Companies Act between PCPD and the Scheme Shareholders involving the cancellation of all the Scheme Shares

• the document to be issued to all Shareholders containing, among other things, further details of the Proposal and the Scheme, the expected timetable, an explanatory statement as required by the Companies Act, the recommendations of the independent board committee of PCPD with respect to the Proposal, a letter of advice from the independent financial adviser to such independent board committee, a notice convening the Court Meeting and a notice of the SGM as well as the particulars required by the Takeovers Code and the Listing Rules

Share(s) held by Shareholder(s) other than Asian Motion

Shareholder(s) other than Asian Motion

the Securities and Futures Commission of Hong Kong

• the special general meeting of PCPD to be convened to be held immediately following the Court Meeting to consider the capital reduction and the Scheme

share(s) of HK$0.10 each in the share capital of PCPD

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"Shareholder(s)”

holder(s) of the Shares

“Share Option Schemes”

the 2003 Share Option Scheme and the 2005 Share Option Scheme

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Takeovers Code”

The Hong Kong Code on Takeovers and Mergers

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

By Order of the board of Pacific Century Premium Developments Limited Chan Ya Lai, Alice Company Secretary

By Order of the board of Picville Investments Limited Hui Hon Hing, Susanna Director

Hong Kong, 13 February, 2008

As at the date of this announcement, the directors of PCCW are as follows:

Executive Directors:

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

Non-Executive Directors:

Sir David Ford, KBE, LVO; Zhang Chunjiang; Zuo Xunsheng (Deputy Chairman); Li Fushen

Independent Non-Executive Directors:

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

As at the date of this announcement, the directors of PCPD are as follows:

Executive Directors:

Li Tzar Kai, Richard (Chairman); Alexander Anthony Arena (Deputy Chairman); Lee Chi Hong, Robert (Chief Executive Officer); Lam Yu Yee; James Chan and Gan Kim See, Wendy

Independent Non-Executive Directors:

Cheung Kin Piu, Valiant; Tsang Link Carl, Brian; Prof Wong Yue Chim, Richard, SBS, JP and Dr Allan Zeman, GBS, JP

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As at the date of this announcement, the directors of the Offeror are Alexander Anthony Arena and Hui Hon Hing, Susanna.

The directors of PCCW jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to the PCPD Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions (other than that relating to the PCPD Group) expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The directors of PCPD jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to the PCCW Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions (other than that relating to the PCCW Group) expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The directors of the Offeror jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than that relating to the PCPD Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions (other than that relating to the PCPD Group) expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

* For identification only

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