Hang Lung Group Limited — Proxy Solicitation & Information Statement 2008

Mar 25, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in PCCW Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer 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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PCCW Limited 電訊盈科有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0008)

DISCLOSEABLE TRANSACTION

RELATING TO 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 OF BERMUDA), AT THE OFFER PRICE OF HK$2.85 PER SCHEME SHARE

Sole Financial Adviser to PCCW Limited and Picville Investments Limited

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A letter from the board of directors of PCCW is set out on pages 5 to 17 of this circular.

25 March, 2008

CONTENTS

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD
	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	TERMS OF THE PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
	CONDITIONS OF THE PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
	INTENTION OF THE OFFEROR WITH REGARD TO PCPD . . . . . . . . . . . . . . . . . . . . .	8
	WITHDRAWAL OF LISTING OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	SHAREHOLDING STRUCTURE OF PCPD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	REASONS FOR THE PROPOSAL AND BENEFITS TO SCHEME SHAREHOLDERS . . .	10
	FINANCIAL EFFECTS OF THE SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	INFORMATION ON THE PCPD GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	INFORMATION ON THE OFFEROR AND THE PCCW GROUP . . . . . . . . . . . . . . . . . . .	13
	LISTING RULES IMPLICATIONS FOR PCCW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
	EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
	GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
APPENDIX — GENERAL INFORMATION
1.	RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
2.	DISCLOSURE OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
3.	SERVICE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
4.	LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
5.	COMPETING INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
6.	MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

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DEFINITIONS

In this circular, the following terms and expressions shall have the following meanings, unless otherwise defined or the context otherwise requires:

• “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 given to it in the Takeovers Code

• “Announcement”

• the announcement dated 13 February, 2008 issued jointly by PCCW, the Offeror and PCPD in relation to the Proposal

• “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 Latest Practicable Date

• “Associate(s)” shall have the meaning given to it in the Takeovers Code

• “Authorisations”

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

• “Business Day” a day (excluding Saturday) on which banks in Hong Kong are generally open for business for more than four hours

• “Citigroup”

• Citigroup Global Markets Asia Limited, a licensed corporation under the SFO, licensed to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) of the regulated activities

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

• “connected person” shall have the meaning given to it in the Listing Rules

• “Court”

• the Supreme Court of Bermuda

— 1 —

DEFINITIONS

“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
	and which will be held in the Conference Room, 14th Floor,
	PCCW Tower, TaiKoo Place, 979 King’s Road, Quarry Bay,
	Hong Kong on 17 April, 2008 at 10:00 a.m., or any
	adjournment thereof
“Effective Date”	the date on which the Scheme, if approved, 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
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“Independent Shareholder(s)”	Shareholder(s) other than Asian Motion, the Offeror, PCCW
	and the parties acting in concert with any of them
“Latest Practicable Date”	19 March, 2008, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“NAV”	net asset value
“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 Period”	the period from the date of the Announcement until the later
	of (i) the Effective Date; (ii) the date on which the Scheme
	lapses; or (iii) the date on which an announcement is made of
	the withdrawal of the Scheme
“Offer Price”	a price of HK$2.85 per Scheme Share payable to the Scheme
	Shareholders under the Scheme
“Optionholder(s)”	holder(s) of Options granted under the Share Option Schemes

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DEFINITIONS

“Options” options granted to Optionholders under the Share Option Schemes which remain unexercised “PCCW” PCCW Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange and with securities in the form of American depositary receipts, each representing 10 ordinary shares of PCCW, traded on the Pink Sheets in the United States of America

• “PCCW Group” PCCW and its subsidiaries, but excluding the PCPD Group

• “PCPD”

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

“PCPD Director(s)”

• the director(s) of PCPD, including the independent non-executive directors on the PCPD Independent Board Committee

• “PCPD Group” PCPD and its subsidiaries

• “PCPD Independent Board Committee”

• the independent board committee of PCPD, comprising Cheung Kin Piu, Valiant, Tsang Link Carl, Brian, Prof. Wong Yue Chim, Richard, SBS, JP and Dr. Allan Zeman, GBS, JP, all of whom are independent non-executive directors of PCPD, which has been established for the purpose to advise the Independent Shareholders in connection with the Proposal

“Pink Sheets”

• a daily listing of bid and ask prices for over-the-counter stocks, published by the National Quotation Bureau

• “Pre-Announcement Last Trading Day”

• 6 February, 2008, being the last trading day prior to the suspension of trading in the Shares pending the issue of the Announcement

• “Proposal”

• the proposal for the privatisation of PCPD by the Offeror by way of the Scheme as described in this circular, including the offer for the Options described herein

• “Record Date”

• the Business Day immediately preceding the Effective Date for the purpose of determining the entitlement of the Scheme Shareholders

“Relevant Authorities” appropriate governments and/or governmental bodies, regulatory bodies, courts or institutions including the SFC and the Stock Exchange

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DEFINITIONS

“Rothschild” N M Rothschild & Sons (Hong Kong) Limited, the independent financial adviser to the PCPD Independent Board Committee in respect of the Proposal and a corporation licensed by the SFC to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) of the regulated activities under the SFO “Scheme” 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 “Scheme Share(s)” Share(s) held by the Scheme Shareholder(s) on the Record Date “Scheme Shareholder(s)” Shareholders other than Asian Motion, the Offeror and PCCW “SFC” the Securities and Futures Commission of Hong Kong “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “SGM” the special general meeting of PCPD to be held at 10:30 a.m. (or as soon thereafter as the Court Meeting shall have concluded or adjourned) in the Conference Room, 14th Floor, PCCW Tower, TaiKoo Place, 979 King’s Road, Quarry Bay, Hong Kong on 17 April, 2008, for the approval and implementation of the Scheme, or any adjournment thereof “Share(s)” share(s) of HK$0.10 each in the share capital of PCPD “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 “%” percent

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LETTER FROM THE BOARD

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PCCW Limited 電訊盈科有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 0008)

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

Registered Office: 39th Floor, PCCW Tower, TaiKoo Place, 979 King’s Road, Quarry Bay, Hong Kong

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, GBM, GBS, OBE, JP Sir Roger Lobo, CBE, LLD, JP Aman Mehta The Hon Raymond George Hardenbergh Seitz

25 March, 2008

To the shareholders of PCCW

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

Reference is made to the announcement dated 13 February, 2008 issued jointly by PCCW, the Offeror and PCPD 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. The Proposal, if effected, constitutes a discloseable transaction for PCCW under the Listing Rules.

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LETTER FROM THE BOARD

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.

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 the Pre-Announcement Last Trading Day;

• 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 the Pre-Announcement Last Trading Day;

• 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 the Pre-Announcement Last Trading Day;

• 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 the Pre-Announcement Last Trading Day;

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

• a discount of approximately 10.1% to the audited consolidated NAV per Share of about HK$3.17 as at 31 December, 2007.

As at the Latest Practicable Date, 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. The consideration payable under the Scheme will be financed from available financial resources of the PCCW Group. Citigroup, the sole financial adviser to PCCW and the Offeror, is satisfied that sufficient financial

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LETTER FROM THE BOARD

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 directors of PCCW believe that the terms of the Scheme and the Proposal are fair and reasonable and in the interests of the shareholders of PCCW as a whole.

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 the Independent Shareholders holding at least 75% of the votes attaching to the Scheme Shares held by the 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 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 cancelling 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) under Section 99 of the Companies Act 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;

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LETTER FROM THE BOARD

• (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

• (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. An announcement will be made by PCCW, the Offeror and PCPD if the Scheme lapses.

Assuming that the above conditions are fulfilled (or, as applicable, waived), it is expected that the Scheme will become effective on or before 9 May, 2008.

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. The Offeror does not have any intention to introduce any major changes to the existing operations and management of the PCPD Group, nor does it have any intention to make any changes to the continued employment of the PCPD Group’s employees. However, PCCW or the Offeror may from time to time review strategic options with regard to the businesses of the PCPD Group. These strategic options may include, but not be limited to, the restructuring or the rationalisation of one or more of the businesses of the PCPD Group.

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 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).

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LETTER FROM THE BOARD

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.

SHAREHOLDING STRUCTURE OF PCPD

The table below sets out the shareholding structure of PCPD as at the Latest Practicable Date and immediately following implementation of the Proposal:

Shareholders Asian Motion Offeror Offeror and parties acting in concert with it Independent Shareholders Total	As at the Latest Practicable Date Immediately following implementation of the Proposal Number of Shares % Number of Shares % 1,481,333,333 61.53 1,481,333,333 61.53 0 0 926,126,540 38.47 1,481,333,333 61.53 2,407,459,873 100.00 926,126,540 38.47 0 0 2,407,459,873 100.00 2,407,459,873 100.00	As at the Latest Practicable Date Immediately following implementation of the Proposal Number of Shares % Number of Shares % 1,481,333,333 61.53 1,481,333,333 61.53 0 0 926,126,540 38.47 1,481,333,333 61.53 2,407,459,873 100.00 926,126,540 38.47 0 0 2,407,459,873 100.00 2,407,459,873 100.00
		100.00 0
		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.

The 2003 Share Option Scheme was approved and adopted on 17 March, 2003. The Shareholders 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 Latest Practicable Date, Options relating to 5,000,000 Shares were 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 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 and the Optionholder accepting the offer for the cancellation of the Options, the Options held by Mr. Chung will be cancelled and the amount of the offer to cancel an Option will be calculated by deducting the exercise price per Share

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LETTER FROM THE BOARD

payable on exercise of an Option from the Offer Price per Share payable under the Scheme. A letter from the Offeror to Mr. Chung setting out the terms of the proposal will be despatched to him on the same day as the despatch of the scheme document relating to the Proposal which will be despatched on or around the date of this circular.

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, 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 Latest Practicable Date, apart from the Options and the Note there were no outstanding options, warrants, derivatives or convertible securities issued by PCPD.

As at the Latest Practicable Date, apart from the Options and the Note, there were 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 BENEFITS TO SCHEME SHAREHOLDERS

Reasons for the Proposal

The management of PCCW has noted that the Share price 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 to PCPD in 2004. The Shares have also been trading at a significant discount to NAV of PCPD. Based on PCPD’s published unaudited interim financial statements as at 30 June, 2007, the unaudited consolidated NAV per Share was approximately HK$3.03. The Shares have therefore traded at discounts of approximately 25.4%, 23.8% and 21.5% to the aforesaid unaudited consolidated NAV of approximately HK$3.03 per Share (or approximately 28.7%, 27.1% and 24.9% to the audited consolidated NAV per Share of approximately HK$3.17 as at 31 December, 2007), compared with the closing price of HK$2.26 per Share on the Pre-Announcement Last Trading Day, the latest one-month (up to the Pre-Announcement Last Trading Day) volume-weighted average price of approximately HK$2.31 per Share, and the latest two-month (up to the Pre-Announcement Last Trading Day) volume-weighted average price of approximately HK$2.38 per Share, respectively. Since the publication of the Announcement, PCPD has published its preliminary results for the year ended 31 December, 2007 on 6 March, 2008. Based on the audited consolidated financial statements of PCPD as at 31 December, 2007, the audited consolidated NAV per Share is approximately HK$3.17.

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LETTER FROM THE BOARD

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 the Pre-Announcement Last Trading Day is approximately 2.6 million 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 have the following benefits:

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 price of the Shares 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 required of a company listed on the Stock Exchange.

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 and is in the interest of the shareholders of PCCW as a whole for PCCW to privatise PCPD.

Benefits to Scheme Shareholders

The PCPD Directors (other than the members of the PCPD Independent Board Committee whose recommendation in respect of the Proposal will be set out in the letter from the PCPD Independent Board Committee in the scheme document relating to the Proposal which will be despatched on or around the date of this circular) agree with PCCW’s view as set out in the section headed “Reasons for the Proposal” above. In the circumstances, the PCPD Directors (other than the members of the PCPD Independent Board Committee) have decided to put forward the Proposal to the Scheme Shareholders for their consideration.

Given the scarcity of land supply in Hong Kong, PCPD has faced and will continue to face difficulties in securing large-scale sites with suitable development potential which meet the investment and development criteria of PCPD. Furthermore, having considered the costs of and potential obstacles to the redevelopment of telephone exchanges in Hong Kong, including, amongst others, uncertainties associated with the long lead-time for obtaining approval from the relevant government authorities, the management of PCPD expects that the potential profit realisation from these redevelopment opportunities in the near term is uncertain and limited. Although the PCPD Group will continue to explore potential opportunities in property development, it remains a challenge for the PCPD Group to replicate its historical financial performance in the near term.

In view of 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.

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LETTER FROM THE BOARD

Having also considered the other principal factors as discussed above, the management of PCPD (other than the members of the PCPD Independent Board Committee) 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 indirectly owned approximately 61.53% of PCPD as at the Latest Practicable Date, the PCPD Directors (other than the members of the PCPD Independent Board Committee) 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, 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 PCPD Directors (other than the members of the PCPD Independent Board Committee) 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.

FINANCIAL EFFECTS OF THE SCHEME

PCCW currently indirectly owns approximately 61.53% of PCPD, hence the results, assets and liabilities of PCPD are consolidated into the financial statements of PCCW. The share of the net assets and profit attributable to the Scheme Shareholders are included in the “minority interests” and “profit attributable to the minority interests” in the consolidated balance sheet and consolidated income statement of PCCW. If the Proposal is effected, PCCW will own a 100% interest in PCPD and the above mentioned items relating to “minority interests” will no longer appear on the consolidated financial statements of PCCW. PCCW expects that the Proposal will not have any immediate material effect on the consolidated earnings, assets and liabilities of PCCW, save as to any goodwill which may arise as a result of and the cost to be incurred in relation to the implementation of the Proposal.

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 Hong Kong 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.

On 18 February, 2008, PCPD announced that it had entered into two agreements with PCCW-HKT Telephone Limited, an indirect wholly-owned subsidiary of PCCW, for the disposal of the entire issued share capitals of two subsidiaries, at a total cash consideration of HK$51,000,000. The disposal, which constitutes a connected transaction for PCPD under the Listing Rules, is expected to

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LETTER FROM THE BOARD

be completed on 31 March, 2008. The management of PCPD continues to review strategic options with regard to the businesses of the PCPD Group. These strategic options may include, but may not be limited to, the restructuring or the rationalisation of one or more of the businesses of the PCPD Group.

A summary of the audited consolidated financial results of the PCPD Group for each of the three years ended 31 December, 2005, 2006 and 2007 is set out below:

		(Audited)
		For the year ended
		31 December,
	2005	2006		2007
	HK$ million	HK$ million	_HK$ _	million
Turnover	5,127	7,263		3,134
Profit before taxation	710	1,160		870
Profit after taxation/profit attributable to equity
holders of PCPD	597	965		784

The audited consolidated NAV of the PCPD Group as at 31 December, 2007 and as at 31 December, 2006 were approximately HK$7,624 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.

LISTING RULES IMPLICATIONS FOR PCCW

The Proposal, if effected, constitutes a 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 this circular to its shareholders within 21 days after publication of the Announcement, i.e., on 5 March, 2008. PCCW has applied for a waiver from strict compliance with Rule 14.38 of the Listing Rules such that the latest date for despatch of the circular be postponed to 31 March, 2008. Such extension has been approved by the Stock Exchange.

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LETTER FROM THE BOARD

As described above, conditional upon the Proposal becoming effective, and the Optionholder accepting the offer for the cancellation of the Options, the Options held by Mr. Chung Cho Yee, Mico will be cancelled. A letter from the Offeror to Mr. Chung setting out the terms of the proposal will be despatched to him on the same date as the despatch of the scheme document relating to the Proposal which will be despatched on or around the date of this circular. 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. 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.

MEETINGS

As at the Latest Practicable Date, 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 are not entitled to and 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. Each of the Offeror and Asian Motion and their respective concert parties 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 purpose of giving effect to the Scheme.

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LETTER FROM THE BOARD

EXPECTED TIMETABLE

Set out below is an expected timetable of the Scheme:

• Latest time for lodging transfers of Shares to qualify for attending and voting at the Court Meeting and the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on Monday, 14 April, 2008

Register of members of PCPD closed for determination of
entitlements of Scheme Shareholders to attend Tuesday, 15 April, 2008 to
and vote at the Court Meeting and of Shareholders Thursday, 17 April, 2008
to attend and vote at the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(both days inclusive)
Latest time for lodging forms of proxy
in respect of the Court Meeting . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Tuesday, 15 April, 2008
Latest time for lodging forms of proxy
in respect of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . .10:30 a.m. on Tuesday, 15 April, 2008
Suspension of dealing in the Shares . . . . . . . . . . . . . . . . . . .9:30 a.m. on Thursday, 17 April, 2008
Court Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Thursday, 17 April, 2008
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:30 a.m. on Thursday, 17 April, 2008
Announcement of the results of the Court Meeting no later than 7:00 p.m. on
and the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 17 April, 2008
Resumption of dealing in the Shares . . . . . . . . . . . . . . . . . . . . .9:30 a.m. on Friday, 18 April, 2008
Latest time for dealing in the Shares . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Monday, 28 April, 2008
Latest time for lodging transfers of Shares
to qualify for entitlements under the Scheme . . . . . . . . . . . .4:30 p.m. on Tuesday, 6 May, 2008
Court hearing of the petition to sanction the Scheme
(Note 1 and Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 9 May, 2008
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 9 May, 2008
Effective Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 9 May, 2008
Public holiday in Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 12 May, 2008
Announcement of (i) the result of the Court hearing of the
petition to sanction the Scheme, (ii) the Effective Date and no later than 9:00 a.m. on
(iii) the withdrawal of the listing of the Shares . . . . . . . . . . . . . . . . . . . .Tuesday, 13 May, 2008
Withdrawal of the listing of the Shares on the
Stock Exchange becomes effective . . . . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 13 May, 2008
Cheques for cash entitlements under the Scheme
to be despatched . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .on or before Monday, 19 May, 2008

— 15 —

LETTER FROM THE BOARD

Shareholders of PCCW should note that the above timetable is subject to change. Further announcement(s) will be made in the event that there is any change.

Notes:

1. All references in this document to times and dates are references to Hong Kong times and dates, other than the expected date of the Court hearing of the petition to sanction the Scheme and the Effective Date, which are the relevant dates in Bermuda. Bermuda time is 11 hours behind Hong Kong time.

2. The Scheme shall become effective upon all the conditions set out in the paragraph headed “Conditions of the Proposal” above being fulfilled and/or otherwise waived (as the case may be).

GENERAL

To the best of PCCW’s directors’ knowledge, information and belief having made all reasonable enquiry, the Scheme Shareholders and their respective ultimate beneficial shareholders are third parties independent of PCCW and its connected persons.

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

The PCPD Independent Board Committee, comprising all four independent non-executive directors of PCPD, has been established to advise the Independent Shareholders in connection with the Proposal. Rothschild has been appointed as the independent financial adviser to advise the PCPD Independent Board Committee in connection with the Proposal.

In view of the relatively insignificant interest of Mr. Chung Cho Yee, Mico 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 the publication of the 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 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 in respect of the Proposal (other than the payment to cancel his Options if the Proposal becomes effective), 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 PCPD Independent Board Committee with respect to the Proposal, a letter of advice from Rothschild, the independent financial adviser to the PCPD 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

— 16 —

LETTER FROM THE BOARD

will be despatched to the Shareholders. Conditional upon the Proposal becoming effective and the Optionholder accepting the offer for the cancellation of the Options, the Options held by Mr. Chung Cho Yee, Mico will be cancelled. A letter from the Offeror to Mr. Chung setting out the terms of the proposal will be despatched to him on the same date as the despatch of the scheme document relating to the Proposal which will be despatched on or around the date of this circular.

Details of any dealings in Shares, during the period commencing six months prior to the date of the 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.

Associates of the Offeror are reminded to disclose their dealings in any securities in PCPD.

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, 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.

Your attention is drawn to the information set out in the Appendix to this circular.

By Order of the board of PCCW Limited Alexander Anthony Arena Group Managing Director

— 17 —

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 PCCW. The board of directors of PCCW 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 the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(i) Interests of directors in PCCW and its associated corporation

As at the Latest Practicable Date, the interests and short positions of the directors and chief executive of PCCW and their Associates in the shares, underlying shares and debentures of PCCW or any of its associated corporations (within the meaning of Part XV of the SFO) which: (a) were required to be notified to PCCW and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (b) were required pursuant to Section 352 of the SFO to be entered in the register referred to therein; or (c) are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to PCCW and the Stock Exchange were as follows:

(A) Interests in PCCW

The table below sets out the aggregate long positions in the shares and underlying shares of PCCW held by the directors and chief executive of PCCW:

					Number of
		Number of ordinary shares			underlying shares held		Percentage of issued
Name of director/	Personal	Family	Corporate	Other	under equity		share
chief executive	interests	interests	interests	interests	derivatives	Total	capital
Li Tzar Kai, Richard	—	—	250,109,824	1,650,518,335	—	1,900,628,159	28.04%
			(Note 1(a))	(Note 1(b))
Alexander Anthony	760,000	—	—	—	15,800,200	16,560,200	0.24%
Arena					(Note 2)
Peter Anthony Allen	253,200	—	—	—	4,629,200	4,882,400	0.07%
					(Note 3)
Chung Cho Yee, Mico	1,176,260	18,455	—	—	14,390,400	15,585,115	0.23%
		(Note 4)			(Note 3)
Lee Chi Hong, Robert	992,600	511	—	—	6,000,000	6,993,111	0.10%
	(Note 5(a))	(Note 5(b))			(Note 3)
Sir David Ford	—	—	—	—	3,000,000	3,000,000	0.04%
					(Note 3)
Prof Chang Hsin-kang	64,000	—	—	—	—	64,000	0.001%
Dr The Hon Sir Li	600,000	—	—	—	—	600,000	0.009%
Kwok Po, David

Notes:

1. (a) Of these shares, Pacific Century Diversified Limited (“PCD”), a wholly-owned subsidiary of Chiltonlink Limited, held 216,362,824 shares and Eisner Investments Limited held 33,747,000 shares. Li Tzar Kai, Richard owned 100% of Chiltonlink Limited and Eisner Investments Limited.

— 18 —

GENERAL INFORMATION

APPENDIX

• (b) These interests represented:

  • (i) a deemed interest in 36,726,857 shares of PCCW held by Yue Shun Limited, a subsidiary of Hutchison Whampoa Limited (“HWL”). Cheung Kong (Holdings) Limited (“Cheung Kong”) through certain subsidiaries held more than one-third of the issued share capital of HWL. Li Tzar Kai, Richard was a discretionary beneficiary of certain discretionary trusts which held units in unit trusts which in turn held interests in certain shares of Cheung Kong and HWL. Li Tzar Kai, Richard was also interested in one-third of the issued share capital of two companies, which owned all the shares of the trustee companies which acted as trustees of such discretionary trusts and unit trusts. Accordingly, Li Tzar Kai, Richard was deemed, under the SFO, to have an interest in the 36,726,857 shares of PCCW held by Yue Shun Limited;

  • (ii) a deemed interest in 87,018,177 shares of PCCW held by Pacific Century Group Holdings Limited (“PCGH”). Li Tzar Kai, Richard was the founder of certain trusts which held 100% interests in PCGH. Accordingly, Li Tzar Kai, Richard was deemed, under the SFO, to have an interest in the 87,018,177 shares of PCCW held by PCGH; and

  • (iii) a deemed interest in 1,526,773,301 shares of PCCW held by Pacific Century Regional Developments Limited (“PCRD”), a company in which PCGH had, through certain wholly-owned subsidiaries being Anglang Investments Limited, Pacific Century Group (Cayman Islands) Limited, Pacific Century International Limited and Borsington Limited, an aggregate of 75.33% interest. Li Tzar Kai, Richard was the founder of certain trusts which held 100% interests in PCGH. Accordingly, Li Tzar Kai, Richard was deemed, under the SFO, to have an interest in the 1,526,773,301 shares of PCCW held by PCRD.

• These interests represented Alexander Anthony Arena’s beneficial interest in: (a) 200 underlying shares held in the form of 20 American depositary receipts which constituted listed equity derivatives; and (b) 15,800,000 underlying shares in respect of share options granted by PCCW to Alexander Anthony Arena as beneficial owner, the details of which are set out in paragraph (C) below.

• These interests represented the interests in underlying shares in respect of share options granted by PCCW to these directors as beneficial owners, the details of which are set out in paragraph (C) below.

• These shares were held by the spouse of Chung Cho Yee, Mico.

• (a) These shares were held jointly by Lee Chi Hong, Robert and his spouse.

• (b) These shares were held by the spouse of Lee Chi Hong, Robert.

(B) Interests in associated corporation of PCCW

The table below sets out the long position in the Shares and underlying shares of PCPD held by the director and chief executive of PCCW:

					Number of
					underlying		Percentage
		Number of Shares			shares held		of issued
Name of director/	Personal	Family	Corporate	Other	under equity		share
chief executive	interests	interests	interests	interests	derivatives	Total	capital
Chung Cho Yee, Mico	—	—	—	—	5,000,000	5,000,000	0.21%

— 19 —

GENERAL INFORMATION

APPENDIX

The above interest represented the interest in underlying shares in respect of share options granted by PCPD to the director and chief executive of PCCW as beneficial owner pursuant to the 2003 Share Option Scheme, the details of which are set out as follows:

					Number of
Name of director/				Exercise	options
chief executive	Date of grant	Vesting period	Exercisable period	price	outstanding
	(Note)	(Note)	(Note)	HK$
Chung Cho Yee, Mico	12.20.2004	Fully vested on 12.20.2004	12.20.2004 to 12.19.2014	2.375	5,000,000

Note: All dates are shown month/day/year.

(C) Directors’ rights to acquire shares of PCCW

As at the Latest Practicable Date, the directors’ interests in share options of PCCW which remain outstanding are summarised below:

					Number of
Name of director/				Exercise	options
chief executive	Date of grant	Vesting period	Exercisable period	price	outstanding
	(Note)	(Note)	(Note)	HK$
Alexander Anthony	08.28.1999	08.17.2000 to 08.17.2004	08.17.2000 to 08.17.2009	11.7800	3,200,000
Arena	08.26.2000	08.26.2001 to 08.26.2005	08.26.2001 to 08.26.2010	60.1200	1,600,000
	02.20.2001	08.26.2001 to 08.26.2005	08.26.2001 to 01.22.2011	16.8400	1,600,000
	07.25.2003	07.25.2004 to 07.25.2006	07.25.2004 to 07.23.2013	4.3500	6,400,000
	02.08.2005	02.08.2006 to 02.08.2007	02.08.2006 to 02.07.2009	4.4750	3,000,000
Peter Anthony Allen	08.28.1999	08.17.2000 to 08.17.2002	08.17.2000 to 08.17.2009	11.7800	272,000
	08.26.2000	08.26.2001 to 08.26.2005	08.26.2001 to 08.26.2010	60.1200	178,600
	02.20.2001	08.26.2001 to 08.26.2005	08.26.2001 to 01.22.2011	16.8400	178,600
	07.25.2003	07.25.2004 to 07.25.2006	07.25.2004 to 07.23.2013	4.3500	2,000,000
	02.08.2005	02.08.2006 to 02.08.2007	02.08.2006 to 02.07.2009	4.4750	2,000,000
Chung Cho Yee, Mico	08.28.1999	08.17.2000 to 08.17.2004	08.17.2001 to 08.17.2009	11.7800	3,575,200
	08.26.2000	08.26.2001 to 08.26.2005	08.26.2001 to 08.26.2010	60.1200	1,060,000
	02.20.2001	08.26.2001 to 08.26.2005	08.26.2001 to 01.22.2011	16.8400	1,060,000
	07.25.2003	07.25.2004 to 07.25.2006	07.25.2004 to 07.23.2013	4.3500	5,695,200
	02.08.2005	02.08.2006 to 02.08.2007	02.08.2006 to 02.07.2009	4.4750	3,000,000
Lee Chi Hong, Robert	07.25.2003	07.25.2004 to 07.25.2006	07.25.2004 to 07.23.2013	4.3500	5,000,000
	02.08.2005	02.08.2006 to 02.08.2007	02.08.2006 to 02.07.2009	4.4750	1,000,000
Sir David Ford	07.25.2003	07.25.2004 to 07.25.2006	07.25.2004 to 07.23.2013	4.3500	1,000,000
	02.08.2005	02.08.2006 to 02.08.2007	02.08.2006 to 02.07.2009	4.4750	2,000,000

Note: All dates are shown month/day/year.

— 20 —

APPENDIX

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the directors or the chief executive of PCCW or their Associates had any interests or short positions in the shares, underlying shares and debentures of PCCW or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to PCCW and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules and which were required to be entered into the register required to be kept under Section 352 of the SFO.

(ii) Interests of substantial shareholders and other persons required to be disclosed under the SFO

As at the Latest Practicable Date, so far as is known to the directors and chief executive of PCCW, the following persons (other than any directors or chief executive of PCCW) were substantial shareholders of PCCW (as defined in the Listing Rules) and had interests or short positions in the shares and underlying shares which fall to be disclosed to PCCW under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were required to be entered into the register required to be kept under Section 336 of the SFO or who is, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of PCCW or any other member of the PCCW Group:

(A) Interests of substantial shareholders

		Number of shares/	Percentage of
Name of shareholder	Note	underlying shares held	issued share capital
PCRD		1,526,773,301	22.52%
PCGH	1	1,613,791,478	23.81%
Star Ocean Ultimate Limited	2	1,613,791,478	23.81%
The Ocean Trust	2	1,613,791,478	23.81%
The Starlite Trust	2	1,613,791,478	23.81%
OS Holdings Limited	2	1,613,791,478	23.81%
Ocean Star Management Limited	2	1,613,791,478	23.81%
The Ocean Unit Trust	2	1,613,791,478	23.81%
The Starlite Unit Trust	2	1,613,791,478	23.81%
China Network Communications Group	3	1,343,571,766	19.82%
Corporation (“China Netcom”)

Notes:

1. These interests represented (i) PCGH’s beneficial interests in 87,018,177 shares; and (ii) PCGH’s interests through its controlled corporations (being its wholly-owned subsidiaries, Borsington Limited, Pacific Century International Limited, Pacific Century Group (Cayman Islands) Limited and Anglang Investments Limited, which together controlled 75.33% of PCRD) in 1,526,773,301 shares held by PCRD.

— 21 —

GENERAL INFORMATION

APPENDIX

1. On April 18, 2004, Li Tzar Kai, Richard transferred the entire issued share capital of PCGH to Ocean Star Management Limited as trustee of The Ocean Unit Trust and The Starlite Unit Trust. The entire issued share capital of Ocean Star Management Limited was held by OS Holdings Limited. The Ocean Trust and The Starlite Trust held all units of The Ocean Unit Trust and The Starlite Unit Trust respectively. Star Ocean Ultimate Limited was the discretionary trustee of The Ocean Trust and The Starlite Trust.

2. China Netcom indirectly holds these interests through its indirect wholly-owned subsidiary China Netcom Corporation (BVI) Limited.

(B) Interests of other persons required to be disclosed under the SFO

As at the Latest Practicable Date, the following person (not being directors, the chief executive or substantial shareholders of PCCW) had interests or short positions in the shares and underlying shares of PCCW as recorded in the register required to be kept under Section 336 of the SFO:

			Number of shares/	Percentage of
**Name **	of shareholder		underlying shares held	issued share capital
Ocean	Star Investment Management Limited	Note	1,613,791,478	23.81%

Note: Ocean Star Investment Management Limited was deemed interested under the SFO in the shares of PCCW by virtue of it being the investment manager of The Ocean Unit Trust and The Starlite Unit Trust which together held 100% of PCGH (see the notes of paragraph 2(ii)(A) above).

(C) Interests in other members of the PCCW Group

Name of non wholly-owned	Name of registered	Number of shares held by	Holding
subsidiaries of PCCW	substantial shareholder(s)	substantial shareholder(s)	percentage
Unihub China Information	China Huaxin Post and	N/A	50%
Technology Company Limited	Telecommunications Economy
	Development Centre
Pacific CyberTrans	Huajian Digital Technology	4,900 ordinary shares	49%
(Holdings) Co. Ltd.	Co. Ltd.
CSL United Personalcom	Tin Sing Telecom Limited	33,000 ordinary shares	33%
Limited (In Members’
Voluntary Liquidation)
JRM (BVI) Company Limited	El Grande Holdings Limited	240 ordinary shares	20%
	China Management Service	120 ordinary shares	10%
	Limited	999,880 preferred shares	12%
Profit Interface No. 8 Limited	Sybond Venture Limited	2,500 ordinary shares	29.41%
(In Voluntary Liquidation)

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GENERAL INFORMATION

APPENDIX

Name of non wholly-owned	Name of registered	Number of shares held by	Holding
subsidiaries of PCCW	substantial shareholder(s)	substantial shareholder(s)	percentage
PCCW (Macau), Limitada	Mappa-Macau Projects &	1 ordinary share (issued at	25%
	Promotions Agency Limited	MOP$500,000)
Unihub Global Network	I-strength Developments Limited	2,357 ordinary shares	23.57%
Technology (China) Limited
Hoover Express Limited	Luen Yum Development	2,000 ordinary shares	20%
	Company Limited
Stable King Development	Luen Yum Development	20 ordinary shares	20%
Company Limited	Company Limited
Ocean Fine Pte Limited	Ocean Fine Industrial	15 ordinary shares	15%
	Development Limited
Unicom Yellow Pages	聯通興業科貿有限公司	N/A	20%
Information Co., Ltd.

Save as disclosed above, the directors and the chief executive of PCCW are not aware that there is any person (other than any directors or chief executive of PCCW) who, as at the Latest Practicable Date, had an interest or a short position in the shares and underlying shares of PCCW which would fall to be disclosed to PCCW under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were required to be entered into the register required to be kept under Section 336 of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of PCCW or any other member of the PCCW Group.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, no director of PCCW had any service contracts with the PCCW Group (excluding contracts expiring or determinable by the PCCW Group within one year without payment of compensation, other than statutory compensation).

4. LITIGATION

As at the Latest Practicable Date, no litigation or claim of material importance is known to the directors of PCCW to be pending or threatened by or against any member of the PCCW Group.

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GENERAL INFORMATION

APPENDIX

5. COMPETING INTERESTS

As at the Latest Practicable Date, the following are the interests of the directors of PCCW in businesses apart from the PCCW Group’s business, which compete or are likely to compete, either directly or indirectly, with the PCCW Group’s business:

Name of director	Name of company	Nature of business	Nature of interests
Li Tzar Kai, Richard	Cheung Kong and its	Property development and	Deemed interests in
	subsidiaries (the	investment, hotel and	Cheung Kong (Note 1)
	“Cheung Kong Group”)	serviced suite operation,
		property and project
		management and
		investment in securities
	HWL and its subsidiaries	Ports and related services,	Certain personal and
	(the “Hutchison Group”)	property and hotels,	deemed interests in
		retail and	HWL (Note 2)
		manufacturing, energy,
		infrastructure, finance
		and investments, and
		telecommunications
Chung Cho Yee, Mico	Capital Strategic Investment	Property investment and	Non-Executive Chairman
(Note 3)	Limited (“CSI”) and its	securities investment	and beneficial owner of
	subsidiaries		35.69% of CSI
Zhang Chunjiang	China Netcom and its	(Note 4)	Chairman of China Netcom
	subsidiaries including		and Chairman and
	China Netcom Group		Executive Director of
	Corporation (Hong Kong)		CNC HK
	Limited (“CNC HK”)
Zuo Xunsheng	China Netcom and its	(Note 4)	Vice President of China
	subsidiaries including		Netcom and Executive
	CNC HK		Director and Chief
			Executive Officer of
			CNC HK
Li Fushen	China Netcom and its	(Note 4)	Chief Accountant of China
	subsidiaries including		Netcom and Executive
	CNC HK		Director, Chief Financial
			Officer and Joint
			Company Secretary of
			CNC HK

In addition, Li Tzar Kai, Richard, Peter Anthony Allen and Lee Chi Hong, Robert are directors of certain private companies (the “Private Companies”), which are engaged in property development and investment in Hong Kong and Japan.

Further, Li Tzar Kai, Richard, Alexander Anthony Arena and Peter Anthony Allen are directors of PCRD. PCRD acts as an investment holding company of, among others, interests in PCCW and property and infrastructure investment, in the Asia Pacific region, including Vietnam.

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GENERAL INFORMATION

APPENDIX

The business interests of the Private Companies in Hong Kong are not significant when compared with the business of the PCCW Group and it is unlikely that such business interests will compete with the business of the PCCW Group. The business interests in Japan, the Asia Pacific region, including Vietnam are also unlikely to compete with the existing business of the PCCW Group.

Li Tzar Kai, Richard has a controlling interest in some of the Private Companies. Further, he is or may be regarded as interested in PCRD and PCGH due to the interests as disclosed in the above paragraph 2(i) under the section headed “Interests of directors in PCCW and its associated corporation” in this appendix.

As PCRD and the Private Companies are involved in the development and/or investment of properties of different types and/or in different locations, the PCCW Group has been operating independently of, and at arm’s length from, the businesses of those companies.

Furthermore, the PCCW Group holds minority equity interests in a number of Internet-related companies in which the PCCW Group is entitled to appoint, and has appointed, one or more directors to the board of these companies to represent the interests of the PCCW Group. Some or all of these companies may compete directly or indirectly, with certain aspects of the PCCW Group’s business.

Other than as disclosed above, none of the directors is interested in any business, apart from the PCCW Group’s businesses, which competes or is likely to compete, either directly or indirectly, with the PCCW Group’s businesses.

Notes:

1. Certain businesses of the Cheung Kong Group may compete with certain aspects of the business of the PCCW Group. Li Tzar Kai, Richard is one of the discretionary beneficiaries of certain discretionary trusts which hold units in unit trusts which in turn are interested in certain shares of Cheung Kong. Li Tzar Kai, Richard holds one-third of the issued share capital of two companies, which own all the shares in the trustee companies which act as trustees of such discretionary trusts and unit trusts. These trustee companies perform their functions as trustees independently without any reference to Li Tzar Kai, Richard. In view of the above, PCCW considers that Li Tzar Kai, Richard is not able to exert control or influence over the Cheung Kong Group.

2. Li Tzar Kai, Richard was a director of HWL and certain of its subsidiaries until August 16, 2000, the day before the acquisition of Cable & Wireless HKT Limited (now known as PCCW-HKT Limited) became effective. Certain businesses of the Hutchison Group compete with certain aspects of the business of the PCCW Group. Li Tzar Kai, Richard has a personal interest in 110,000 shares in HWL, and is one of the discretionary beneficiaries of certain discretionary trusts which hold units in unit trusts which in turn are interested in certain shares of HWL. Li Tzar Kai, Richard holds one-third of the issued share capital of two companies, which own all the shares in the trustee companies which act as trustees of such discretionary trusts and unit trusts. These trustee companies perform their functions as trustees independently without any reference to Li Tzar Kai, Richard. In view of the above, PCCW considers that Li Tzar Kai, Richard is not able to exert control or influence over the Hutchison Group.

3. Chung Cho Yee, Mico holds direct personal interest in a private company, which engages in property investment or development in Repulse Bay, Hong Kong.

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APPENDIX

GENERAL INFORMATION

1. China Netcom is a state-owned enterprise established under the laws of the PRC. It is engaged principally in the provision of telecommunications services in the PRC and is the holder of more than 70% of CNC HK, whose shares are listed and traded on the Stock Exchange. CNC HK provides fixed-line telecommunications services including fixed-line telephone services, broadband and other Internet-related services, business and data communications services, and international telecommunications services in the PRC and the Asia-Pacific region.

6. MISCELLANEOUS

• (i) The registered office of PCCW is situated at 39th Floor, PCCW Tower, TaiKoo Place, 979 King’s Road, Quarry Bay, Hong Kong.

• (ii) The company secretary of PCCW is Philana W.Y. Poon, B. Comm, J.D.

• (iii) The qualified accountant of PCCW is Peter Anthony Allen. He is a Fellow of both the Institute of Chartered Accountants in England and Wales and the Institute of Certified Public Accountants of Singapore.

• (iv) In the event of inconsistency, the English version of this circular shall prevail over the Chinese version.

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