Document:

EXHIBIT 4(ll)

                              Dated 30 April 2004

                                  PCCW LIMITED

                                      and

                              ASIAN MOTION LIMITED

                                      and

           CITIGROUP GLOBAL MARKETS HONG KONG FUTURES AND SECURITIES
                                    LIMITED

                               PLACING AGREEMENT

                      relating to shares in the capital of
                         Dong Fang Gas Holdings Limited

Linklaters

10th Floor, Alexandra House
Chater Road
Hong Kong

Telephone (852) 2842 4888
Facsimile (852) 2810 8133/2810 1695

Ref: DSY/L-068504-05-01

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THIS AGREEMENT is made on 30 April 2004

BETWEEN:

(1)      PCCW LIMITED, a company duly incorporated under the laws of Hong Kong
         whose registered office is at 39/F, PCCW Tower, TaiKoo Place, 979
         King's Road, Quarry Bay, Hong Kong (the "Guarantor");

(2)      ASIAN MOTION LIMITED, a company duly incorporated under the laws of
         the British Virgin Islands whose registered office is at P.O. Box 957,
         Offshore Incorporations Centre, Road Town, Tortola, the British Virgin
         Islands (the "Vendor"); and

(3)      CITIGROUP GLOBAL MARKETS HONG KONG FUTURES AND SECURITIES LIMITED, a
         company duly incorporated under the laws of Hong Kong whose registered
         office is at 20/F, Three Exchange Square, Central, Hong Kong
         ("Citigroup").

WHEREAS:

(A)      On 5 March 2004, the Guarantor conditionally agreed to sell or procure
         the sale of the entire issued share capital of the Target and other
         assets to the Company in consideration for the issue by the Company of
         1,648,333,333 Shares and HK$3,590 million of convertible loan notes.

(B)      Upon completion of the Disposal, the Vendor will be entitled to become
         the beneficial owner of the Sale Shares. The Vendor will direct the
         Company to issue the Sale Shares directly to the Placees (or their
         nominees), such Sale Shares representing part of the Vendor's
         entitlement to be issued with new Shares as consideration for the
         Disposal.

(C)      The Vendor has agreed to appoint Citigroup and Citigroup has agreed to
         act as placing agent and underwriter for the purpose of procuring, as
         agent of the Vendor, purchasers for (or, failing which, purchasing
         itself) the Sale Shares (on the terms and subject to the conditions
         herein contained).

NOW IT IS HEREBY AGREED as follows:

1        DEFINITIONS AND INTERPRETATION

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

         "Agreement" means this placing agreement (as may be amended or varied
         from time to time by an agreement in writing duly executed by the
         Parties);

         "Associate" has the meaning ascribed thereto in the Listing Rules;

         "Business Day" means any day (excluding a Saturday) on which banks are
         generally open for banking business in Hong Kong;

         "CCASS"  means the Central Clearing and Settlement System operated by
         Hong Kong Securities Clearing Company Limited;

         "Circulars" means the DFG Circular and the PCCW Circular;

         "Closing Date" means the Business Day immediately after Disposal
         Completion, or such other date as the Vendor and Citigroup may agree
         in writing;

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         "Companies Ordinance" means the Companies Ordinance (Chapter 32 of the
         Laws of Hong Kong) for the time being in force;

         "Company" means Dong Fang Gas Holdings Limited, the shares of which
         are listed on the Stock Exchange;

         "Company Group" means the Company and its subsidiaries, and the
         expression "member of the Company Group" shall be construed
         accordingly;

         "Completion" means completion of the Placing in accordance with
         Clause 5;

         "Conditions" means the conditions precedent for completion of the
         Placing as set out in Clause 4.1;

         "DFG Circular" means the circular to shareholders of the Company
         dated 2 April 2004;

         "Disposal" means the sale of the entire issued share capital of the
         Target by the Vendor and other assets procured to be sold by the
         Guarantor to the Company;

         "Disposal Agreement" means the agreement dated 5 March 2004 between
         the Guarantor and the Company in respect of the Disposal (as may be
         amended, varied and supplemented in writing from time to time by the
         parties thereto);

         "Disposal Completion" means completion of the Disposal;

         "Executive" means the Executive Director of the Corporate Finance
         Division of the Securities and Futures Commission or any delegate for
         the time being of the Executive Director;

         "Group" means the Company Group or the Target Group (as the case may
         be), and the expression "relevant member of the Group" shall be
         construed accordingly;

         "Hong Kong" means the Hong Kong Special Administrative Region of the
         People's Republic of China;

         "HK$" means Hong Kong dollars, the lawful currency of Hong Kong;

         "Listing Rules" means the Rules Governing the Listing of Securities on
         The Stock Exchange of Hong Kong Limited for the time being in force;

         "Parties" means the named parties to this Agreement and their
         respective successors and permitted assigns, and "Party" means each
         one of them;

         "PCCW Circular" means the circular to the shareholders of the Guarantor
         dated 26 March 2004;

         "Placee" means any professional institutional and other investor whom
         Citigroup will procure or has procured to purchase any of the Sale
         Shares pursuant to its obligations under this Agreement;

         "Placing" means the placing to the Placees by or on behalf of
         Citigroup of the Sale Shares on the terms and subject to the
         conditions set out in this Agreement;

         "Placing Period" means the period commencing upon the execution of
         this Agreement and ending at 4:00 pm (Hong Kong time) on the second
         Business Day immediately before the Closing Date (or such later time
         and date as the Vendor and Citigroup may agree in writing);

         "Placing Price" means HK$2.65 per Sale Share;

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         "Press Announcement" means the press announcement issued by the
         Guarantor and the Company on 5 March 2004 in respect of, amongst other
         things, the Disposal;

         "Regulation S" means Regulation S under the Securities Act;

         "Sale Shares" means the 237,000,000 Shares to be sold by the Vendor
         and which are to be placed by Citigroup pursuant to this Agreement;

         "Securities Act" means the US Securities Act of 1933, as amended;

         "SFC" means the Securities and Futures Commission of Hong Kong;

         "SFO" means the Securities and Futures Ordinance (Chapter 571 of the
         Laws of Hong Kong) for the time being in force;

         "SGM" means the special general meeting to be convened by the Company
         to consider and approve, amongst other things, the Disposal;

         "Shares" means the shares of HK$0.10 each in the share capital of the
         Company after completion of the Capital Reorganisation (as defined in
         the DFG Circular);

         "Stock Exchange" means The Stock Exchange of Hong Kong Limited;

         "subsidiary" has the same meaning as in Section 2 of the Companies
         Ordinance;

         "Takeovers Code" means the Hong Kong Code on Takeovers and Mergers;

         "Target" means Ipswich Holdings Limited;

         "Target Group" means Target and its subsidiaries, and the expression
         "member of the Target Group" shall be construed accordingly,

         "Taxation" and "Tax" mean all forms of taxation whether of Hong Kong
         or elsewhere in the world whenever imposed and all statutory,
         governmental, state, provincial, local governmental or municipal
         impositions, duties and levies and all penalties, charges, costs and
         interests relating thereto;

         "Unplaced Sale Shares" means any Sale Shares not purchased by the
         Placees;

         "US" or "United States" means the United States of America; and

         "US$" means United States dollars, the lawful currency of the United
         States.

1.2      Any reference to a document being "in the agreed form" means in the
         form of the draft thereof signed for identification on behalf of the
         Vendor and Citigroup with such alterations (if any) as may be agreed
         between the Parties.

1.3      In this Agreement, references to any statute, statutory provision,
         rule of the Takeovers Code or Listing Rules include a reference to
         that statute, statutory provision or Listing Rules as may be from time
         to time amended, extended or re-enacted.

1.4      In this Agreement, references to persons include references to bodies
         corporate, references to singular include references to the plural and
         vice versa.

1.5      In this Agreement, references to "the actual knowledge of the Vendor"
         means "the actual knowledge of the Vendor and the Guarantor".

1.6      Headings in this Agreement are inserted for convenience only and shall
         not affect the interpretation of this Agreement.

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2        APPOINTMENT OF CITIGROUP AND THE PLACING

2.1      Subject to the provisions of this Agreement, the Vendor hereby
         appoints Citigroup as agent (to the exclusion of all others) and
         Citigroup (relying on the representations, warranties and undertakings
         herein contained and subject to the conditions as hereinafter
         mentioned) agrees to act as agent for the Vendor during the Placing
         Period to procure purchasers for the Sale Shares at the Placing Price
         (or, failing such procurement, to purchase from the Vendor by itself
         and/or its nominee at the Placing Price on the Closing Date any
         Unplaced Sale Shares).

2.2      Notwithstanding Clause 2.1 but subject to Clause 2.8, at any time
         Citigroup may elect that some or all of the Sale Shares are purchased
         by it and/or its nominee as principal from the Vendor at the Placing
         Price and, in that event, the Sale Shares may subsequently be sold by
         Citigroup and/or its nominee (each a "Seller") as principal to
         purchasers (the "Purchasers") at any price(s) as the Seller in its
         discretion may determine, without being under any obligation to notify
         the Vendor of the price(s) at which those Sale Shares are sold to
         purchasers provided that: (i) any stamp duty payable in respect of
         such sale by the Seller as principal shall be borne by the relevant
         Seller; (ii) Citigroup shall not (and shall require its sub-placing or
         sub-underwriting agents not to) place or sell any of the Sale Shares
         to any person whom it knows to be a "connected person" (as defined in
         the Listing Rules) of the Company or the Guarantor; and (iii) upon the
         request of the Vendor, Citigroup shall provide forthwith to the Vendor
         for submission to the SFC and/or the Stock Exchange the particulars of
         the Purchasers and particulars of the transactions between the Seller
         and the Purchasers, if the SFC or the Stock Exchange so requires.

2.3      The Vendor hereby confirms that this appointment confers on Citigroup
         all powers, authorities and discretions on behalf of the Vendor which
         are reasonably and properly necessary for, or reasonably incidental
         to, the making of the Placing (including, without limiting the
         foregoing, the completion of the relevant contract notes on behalf of
         the Vendor and the submission of such contract notes and other
         documents for stamping, if applicable) and hereby agrees to ratify and
         confirm such matters which Citigroup may lawfully do in the proper
         exercise of such powers, authorities and discretion in accordance with
         this Agreement.

2.4      Subject to fulfilment of the Conditions, the Vendor shall sell the
         Sale Shares free from all liens, charges and encumbrances and together
         with all rights attaching to them as at the Closing Date, including
         the right to receive all dividends declared, made or paid on or after
         the Closing Date.

2.5      The choice of Placees for the Sale Shares shall be determined solely
         by Citigroup. Citigroup shall not place any of the Sale Shares to any
         person whom it knows to be a "connected person" (as defined in the
         Listing Rules) of the Company or the Guarantor.

2.6      In the event that, as at the close of the Placing Period, there are
         any Unplaced Sale Shares, Citigroup shall purchase, or procure its
         nominees to purchase, on the Closing Date the Unplaced Sale Shares at
         the Placing Price from which Citigroup shall be entitled to deduct all
         the amounts it is entitled to be paid under Clause 7. If there are no
         Unplaced Sale Shares as at the end of the Closing Date, the
         underwriting obligations of Citigroup under Clause 2.1 and under this
         Clause 2.6 shall cease.

2.7      If the trades are to be crossed on the Stock Exchange, Citigroup shall
         be responsible for arranging a broker to report the transactions under
         the Placing to the Stock Exchange. If the SFC or the Stock Exchange so
         requires, Citigroup shall provide forthwith to the SFC

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         and/or the Stock Exchange the particulars of the Placing (including,
         but not limited to, the identities of the Placees), with a copy of such
         information to be provided to the Vendor at the same time.

2.8      Immediately following the close of the Placing Period but in any event
         no later than 10:00 am (Hong Kong time) on the Business Day prior to
         the Closing Date, Citigroup shall give written instructions to the
         Company through the Vendor regarding the issue and allotment of the
         Sale Shares for Completion (or for completion of the purchase by
         Citigroup or its nominee in respect of any Unplaced Sale Shares) and
         provide the Company through the Vendor with such information as is
         necessary for Completion (or for completion of the purchase by
         Citigroup or its nominee in respect of any Unplaced Sale Shares).

3        PRESS ANNOUNCEMENT

         The Guarantor hereby authorises Citigroup to release or cause to be
         released for publication on its behalf, as soon as possible upon the
         execution of this Agreement, a press announcement concerning the
         Placing in the agreed form (together with such amendments as may be
         required by the Stock Exchange).

4        CONDITIONS

4.1      Completion is conditional upon the fulfilment of the following
         conditions:

         4.1.1    the Listing Committee of the Stock Exchange granting listing
                  of and permission to deal in the Sale Shares (and such
                  listing and permission not being subsequently revoked prior
                  to the deposit of the Sale Shares into CCASS under Clause 5.2
                  hereof); and

         4.1.2    completion of the Disposal in accordance with the terms
                  described in the Press Announcement.

         The Vendor shall use all reasonable endeavours to procure the Company
         to furnish such information, supply such documents, pay such fees and
         do all such acts and things as may reasonably be required by Citigroup
         and/or the Stock Exchange in connection with the fulfilment of the
         Conditions. Citigroup shall provide the Vendor and the Company with
         such necessary assistance as may be reasonably requested by the Vendor
         and the Company respectively in connection with the fulfilment of the
         Conditions.

4.2      If the Conditions are not fulfilled on or prior to 21 May 2004 (or
         such later time as may be agreed between the Vendor and Citigroup),
         the obligations and liabilities of Citigroup, the Guarantor and the
         Vendor under the Placing shall be null and void and neither the
         Vendor, the Guarantor nor Citigroup shall have any claim against any
         of the others for costs, damages, compensation or otherwise (provided
         that the Vendor shall reimburse Citigroup any reasonable legal fees
         and out-of-pocket expenses which Citigroup shall be obliged to pay in
         connection with the Placing).

4.3      The Vendor shall inform Citigroup in writing that the Disposal
         Agreement has become unconditional as soon as practicable thereafter.

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5        COMPLETION OF THE PLACING

5.1      Completion shall take place at 3:30 pm (Hong Kong time) on the Closing
         Date (or such other time and/or date as Citigroup and the Vendor may
         agree in writing).

5.2      At or before 10:00 am (Hong Kong time) on the date of Disposal
         Completion, the Vendor shall procure the delivery of the relative
         share certificate(s) for the Sale Shares to Citigroup for deposit into
         the account of the Vendor with Citigroup for the Sale Shares to be
         held in CCASS. Further, the Vendor will, no later than 12:00 noon on
         the Closing Date, provide to the Placing Agent all such further
         documents and authorities as may be necessary or desirable to enable
         the Placing Agent on behalf of the Vendor to effect transfer and
         settlement of the Sale Shares at Completion as required and
         contemplated by this Agreement.

5.3      The Vendor shall procure to be undertaken the actions set out in
         Clause 5.2 at or prior to the times specified in that Clause.
         Citigroup shall render appropriate and prompt assistance to the Vendor
         and/or the Company for such purpose.

5.4      Citigroup (or its nominee or agent) shall, subject to the Vendor duly
         discharging its obligations under Clause 5.2 at or prior to the times
         specified in that Clause, make or procure the making of payment in
         Hong Kong dollars by real time gross settlement in immediately
         available funds to the Vendor before 3:30 pm (Hong Kong time) on the
         Closing Date of an amount equivalent to the Placing Price multiplied
         by the number of Sale Shares (less the amounts payable to Citigroup
         referred to in Clause 7.1) to the bank account notified by the Vendor
         to Citigroup at least two Business Days before the Closing Date.

5.5      The Vendor hereby acknowledges that in performing its functions under
         Clause 2, Citigroup is authorised to appoint one or more sub-placing
         or sub-underwriting agents or selling agents in connection with the
         Placing in accordance with or in anticipation of the terms of this
         Agreement. All fees of such agents shall be paid and borne by
         Citigroup out of the commissions, costs, charges and expenses payable
         by the Vendor under Clause 7. Citigroup may enter into any agreements
         with any of the agents for such purpose, provided that Citigroup shall
         remain responsible for any act or omission carried out by such agent
         in the performance of Citigroup's obligations hereunder.

5.6      Any transaction carried out by Citigroup for the purpose of the
         Placing under and in accordance with this Agreement on behalf of the
         Vendor (save and except the underwriting obligations of Citigroup
         referred to in Clauses 2.1 and 2.6 and matters associated therewith)
         shall constitute a transaction carried out at the request of the
         Vendor, as its agent and not in respect of or for the benefit of
         Citigroup's own account and Citigroup shall not be responsible for any
         loss or damage to any persons arising from any such transaction,
         except to the extent any such loss or damage arises out of any fraud,
         wilful default or negligence on the part of Citigroup and/or its
         employees or agents or for any breach by Citigroup of its obligations
         under this Agreement.

5.7      The Sale Shares shall be offered by Citigroup as agent for the Vendor
         at the Placing Price (plus such Hong Kong stamp duty, brokerage, SFC
         transaction levy, investor compensation levy and Stock Exchange
         trading fee payable by purchasers) during the period from the date of
         this Agreement up to the close of the Placing Period and Citigroup
         hereby represents, warrants and undertakes with the Vendor that it
         will comply with the relevant selling restrictions under applicable
         laws and regulations in respect of the Placing.

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6        UNDERTAKINGS OF THE VENDOR

6.1      The Vendor shall (and it shall use all reasonable endeavours to
         procure the Company to) make all appropriate disclosures pursuant to,
         and will comply in all respects with, the Listing Rules, the Takeovers
         Code, the SFO and other applicable laws and regulations in connection
         with the Placing.

6.2      The Vendor shall (and it shall use all reasonable endeavours to
         procure the Company to) promptly provide Citigroup, upon request, with
         all such information known to it or which on reasonable enquiry ought
         to be known to it relating to the Group or the Vendor or otherwise as
         may be required by Citigroup in connection with the Placing for the
         purpose of complying with any applicable law, regulation or direction
         (including the establishment of any defence to any action under any of
         the same, whether relating to due diligence or otherwise) or any
         requirement of the Stock Exchange, the SFC or any other applicable
         regulatory body.

6.3      The Vendor shall (and it shall use all reasonable endeavours to
         procure the Company to) procure that particulars of every significant
         new factor known to it which is capable of materially and adversely
         affecting the Placing and which arises between the date hereof and the
         Closing Date shall be promptly provided to Citigroup.

6.4      Without prejudice to the foregoing obligations, the Vendor undertakes
         with Citigroup that it shall do all such other acts and things as may
         be reasonably required to be done by it to carry into effect the
         Placing in accordance with the terms of this Agreement.

6.5      The Vendor undertakes to Citigroup that (except for: (i) the sale of
         the Sale Shares pursuant to, and any other transactions under, this
         Agreement; (ii) compliance with the requirements of the Listing Rules
         or compliance with the Guarantor's undertaking to the Stock Exchange
         to ensure that sufficient Shares are "held by the public" (within the
         meaning of Rule 8.08 of the Listing Rules); or (iii) any Shares
         acquired by the Vendor after the Closing Date) for a period of three
         months from the Closing Date, it will not and will procure that none
         of its nominees and companies controlled by it (whether individually
         or together and whether directly or indirectly) (for the avoidance of
         doubt, excluding the Company) will:

         6.5.1    offer, sell, contract to sell, grant any option, right or
                  warrant to purchase, or otherwise transfer or dispose of
                  (either conditionally or unconditionally, or directly or
                  indirectly, or otherwise) any Shares or any interests therein
                  beneficially owned or held by the Vendor or any securities
                  convertible into or exercisable or exchangeable for or
                  substantially similar to any such Shares or interests;

         6.5.2    enter into any swap or similar agreement that transfers, in
                  whole or in part, the economic risk of ownership of such
                  Shares, whether any such transaction is to be settled by
                  delivery of Shares or such other securities, in cash or
                  otherwise; or

         6.5.3    announce any intention to enter into or effect any such
                  transaction described in Clause 6.5.1 or 6.5.2,

         without first having obtained the written consent of Citigroup.

6.6      The Vendor undertakes to Citigroup to use its best endeavours to
         procure that, for a period of three months from the Closing Date, the
         Company will not, save pursuant to: (1) the terms of any employee
         share option scheme of the Company; or (2) bonus or scrip dividend or
         similar arrangements which provide for the allotment of Shares in lieu
         of the

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         whole or part of a dividend on Shares of the Company in accordance
         with its bye-laws; or (3) conversion of outstanding convertible bonds
         or loan notes; or (4) the issue of new Shares as consideration and of
         convertible notes by the Company under the Disposal Agreement; or (5)
         any requirements under the Listing Rules in order to ensure that
         sufficient Shares are "held by the public" (within the meaning of Rule
         8.08 of the Listing Rules) following the Closing Date:

         6.6.1    allot or issue, or offer to allot or issue, or grant any
                  option, right or warrant to subscribe (either conditionally
                  or unconditionally, or directly or indirectly, or otherwise)
                  any Shares or any interests in Shares or any securities
                  convertible into or exercisable or exchangeable for or
                  substantially similar to any Shares or interest in Shares; or

         6.6.2    agree (conditionally or unconditionally) to enter into or
                  effect any such transaction with the same economic effect as
                  any of the transactions described in Clause 6.6.1; or

         6.6.3    announce any intention to enter into or effect any such
                  transaction described in Clause 6.6.1 or 6.6.2,

         without first having obtained the written consent of Citigroup.

7        PAYMENT OF FEES, COMMISSIONS AND EXPENSES

7.1      In consideration of the services of Citigroup in relation to the
         Placing, the Vendor shall pay to Citigroup:

         7.1.1    an underwriting commission, in Hong Kong dollars, of 1.5% of
                  the amount equal to the Placing Price multiplied by the
                  number of Sale Shares, which total amount Citigroup is hereby
                  authorised to deduct from the payment to be made by it to the
                  Vendor pursuant to Clause 5.4 (and out of which Citigroup
                  agrees to pay, or procure that Placees and purchasers of any
                  Unplaced Sale Shares pay, all brokerage and sub-underwriting
                  fees other than those specified in this Clause 7.1 and in
                  Clause 7.4, but for the avoidance of doubt, Citigroup shall
                  not be obliged to make any payments to any other agents or
                  sub-agents or advisers of the Vendor);

         7.1.2    if applicable, seller's stamp duty at the rate of 0.1% of the
                  amount equal to the Placing Price per Sale Share multiplied
                  by the number of Sale Shares, which amounts Citigroup is
                  hereby authorised to deduct from the payments to be made by
                  it to the Vendor pursuant to Clause 5.4;

         7.1.3    unless the Sale Shares are to be delivered in board lots or
                  through CCASS, all charges, fees and expenses of the
                  Company's branch share registrars in Hong Kong in effecting
                  the transfer of the Sale Shares, and the issue of
                  certificates therefor in board lots, to the Placees (or,
                  where applicable, Citigroup or its nominee), which amounts
                  Citigroup is hereby authorised to deduct from the payments to
                  be made by it to the Vendor pursuant to Clause 5.4 for the
                  purposes of paying on the Vendor's behalf such costs,
                  charges, fees and expenses; and

         7.1.4    in respect of the Vendor as a seller, SFC transaction levy
                  and investor compensation levy at the prevailing applicable
                  rates (0.005% and 0.002% respectively) and Stock Exchange
                  trading fee at the prevailing applicable rate (0.005%) on the
                  amount equal to the Placing Price multiplied by the number of

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                  Sale Shares, which amounts Citigroup is hereby authorised to
                  deduct from the payments to be made by it to the Vendor
                  pursuant to Clause 5.4.

7.2      If this Agreement is terminated pursuant to Clause 10 or if for any
         reason the Placing is not completed (save as a result of Citigroup's
         or its agent's negligence, fraud, wilful default or breach of this
         Agreement or of any applicable law), the Vendor shall remain liable to
         Citigroup for the payment of all costs, charges and expenses referred
         to in Clause 7.1.3 and for the stamp duty, trading fee, investor
         compensation levy and transaction levy referred to in Clauses 7.1.2
         and 7.1.4 to the extent already incurred.

7.3      The Vendor hereby acknowledges that, in addition to the commissions,
         costs, charges and expenses referred to in Clause 7.1, Citigroup shall
         be entitled to keep for its own account any brokerage fees or
         commission that it may receive from the Placees.

7.4      Each of the Vendor, the Guarantor and the Company shall be liable for
         the costs and expenses of its own legal and other professional
         advisers and out-of-pocket expenses incurred in connection with the
         Placing.

8        REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

8.1      In consideration of Citigroup entering into this Agreement and
         agreeing to perform its obligations hereunder, the Vendor represents,
         warrants and undertakes to Citigroup (save as specifically disclosed
         in writing to Citigroup on or before the signing of this Agreement and
         expressed to be for the purpose of disclosure against the following
         warranties) as follows:

         8.1.1    all facts stated in the Recitals are true and accurate;

         8.1.2    subject to and upon completion of the Disposal, the Sale
                  Shares will be fully paid up and the Vendor will be entitled
                  to become the beneficial owner of the Sale Shares and the
                  Vendor has the necessary power and authority to enable it to
                  sell the Sale Shares to be sold by it hereunder free from any
                  lien, charge, option, warrant, pre-emptive right, or other
                  encumbrance or third party right whatsoever and together with
                  all rights attaching thereto as at the Closing Date;

         8.1.3    the Vendor is duly incorporated and validly existing under
                  the laws of the place of its incorporation and the Vendor has
                  power under its constitutional documents to permit its entry
                  into this Agreement in the manner set out herein and this
                  Agreement (and its performance) has been duly authorised
                  (such authorisation remaining in full force and effect) and
                  executed by and constitutes legally binding obligations of
                  the Vendor, enforceable in accordance with its terms; save as
                  disclosed in the Press Announcement and to be disclosed in
                  the announcement in respect of the Placing, there is: (i) no
                  authorisation, consent or approval required for the purposes
                  of or as a consequence of the Placing or the Disposal either
                  from governmental, regulatory or other public bodies
                  (including, without limitation, the Stock Exchange) or
                  authorities or courts; and (ii) no authorisation, consent or
                  approval required for the purposes of or as a consequence of
                  the Placing or the Disposal from any third party pursuant to
                  any material contractual arrangement or other material
                  arrangement to which the Vendor is a party;

         8.1.4    the Vendor shall ensure that none of its Associates shall
                  purchase any of the Sale Shares under the Placing;

                                      -9-
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         8.1.5    the financial information in relation to the Company Group
                  and the Target Group contained in the Circulars (except, for
                  the avoidance of doubt, the information relating to the
                  Target Group in connection with the proforma financials and
                  related adjustments and all financial analysis in the "Letter
                  from Goldbond" in the DFG Circular) is true, accurate and not
                  misleading in all material respects and has been prepared in
                  accordance with generally accepted accounting principles,
                  standards and practice in Hong Kong;

         8.1.6    all statements of fact in relation to the Company Group and
                  the Target Group contained in the Circulars are true,
                  accurate and not misleading in all material respects, and all
                  statements of opinion, intention or expectation in relation
                  to the Guarantor, the Vendor, the Target Group or the Company
                  Group (except, for the avoidance of doubt, any views,
                  opinions, analysis, recommendations, interpretations,
                  intentions or expectations of the Company, its directors and
                  its advisers in connection with such statements in relation
                  to the Target Group) contained therein (if any) are truly and
                  honestly held and have been made on reasonable grounds after
                  due and careful consideration, and there is no other fact or
                  matter omitted therefrom the omission of which would make any
                  statement therein misleading in any material respect or which
                  is otherwise material in the context of the Placing;

         8.1.7    the Vendor is not in possession of any non-public information
                  relating to the Company Group or the Target Group or their
                  respective businesses the release of which could adversely
                  affect the trading price of the Shares in any material
                  respect and, to the actual knowledge of the Vendor, there is
                  not in existence any material or information relating to the
                  Company Group which will be required to be disclosed by the
                  Company under the Listing Rules and/or the listing agreement
                  it made with the Stock Exchange;

         8.1.8    all information (in either written or electronic form)
                  supplied by or on behalf of the Vendor, (but only to the
                  actual knowledge of the Vendor in relation to the Company
                  Group) the Company or any of their respective officers,
                  directors, employees or advisers, for the purpose of or in
                  connection with the Placing, and all information and records
                  which may be made available to the public by or with the
                  permission of the Vendor and (to the actual knowledge of the
                  Vendor in relation to the Company Group) the relevant member
                  of the relevant Group (including information contained in
                  annual reports, statutory filings and registrations) is and
                  was, when supplied or published, true, accurate and not
                  misleading;

         8.1.9    save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  there is no claim, litigation, arbitration, prosecution or
                  other legal proceedings or investigation or enquiry in
                  progress or pending or threatened against any member of the
                  Company Group or the Target Group, nor is there any claim in
                  progress, pending or threatened or any facts or circumstances
                  which would give rise to a claim against any member of the
                  Company Group or the Target Group, which individually or in
                  the aggregate would have or have had a material adverse
                  effect on the condition, financial, trading or otherwise, or
                  the earnings, business affairs or business prospects (whether
                  or not arising in the ordinary course of business) of the
                  relevant Group as a whole or which is individually or in the
                  aggregate material for disclosure in the context of the
                  Placing;

                                     -10-
<PAGE>

         8.1.10   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  there has been no material adverse change in the condition,
                  financial or otherwise, or the earnings, net assets, business
                  affairs or business prospects (whether or not arising in the
                  ordinary course of business) of the Company Group as a whole
                  since 30 September 2003 or of the Target Group as a whole
                  since 31 December 2003;

         8.1.11   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  each member of the Company Group or the Target Group is duly
                  incorporated and validly existing under the laws of the place
                  of its incorporation and each member of the Company Group or
                  the Target Group has power to own its assets and to conduct
                  its business in the manner presently conducted in all
                  material respects and there has been no petition filed, order
                  made or effective resolution passed for the liquidation or
                  winding up of any member of the relevant Group which is
                  material to the relevant Group;

         8.1.12   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  each member of the Company Group or the Target Group has
                  obtained such authorisations and licences (if any) as are
                  required under the provisions of any applicable law in any
                  jurisdiction in which it carries on business and are material
                  in connection with the operation of its business and there is
                  no material breach by any member of the Company Group or the
                  Target Group of the provisions of any ordinance, statute or
                  regulation governing such authorisations or licences nor is
                  there any reason why any such authorisation or licence should
                  be withdrawn or cancelled;

         8.1.13   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  the Company is not in material breach of any rules,
                  regulations or requirements of the Stock Exchange or its
                  listing agreement made with the Stock Exchange and, other
                  than the relevant Conditions and subject to the satisfaction
                  of the conditions set out in clauses 4.1.1 to 4.1.17 of the
                  Disposal Agreement, all necessary consents (if any) which are
                  relevant (to maintain the listing status of the Company on
                  the Stock Exchange or to complete the Placing and the
                  Disposal in the manner contemplated) have been obtained from
                  the Stock Exchange and other authorities;

         8.1.14   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  there is no order, decree or judgement of any court or
                  governmental agency or regulatory body outstanding or
                  anticipated against any member of the Company Group or the
                  Target Group which may individually or in the aggregate have
                  or has had a material adverse effect upon the condition,
                  financial or otherwise or the earnings, business affairs or
                  business prospects (whether or not arising in the ordinary
                  course of business) of the relevant Group (taken as a whole)
                  or which is individually or in the aggregate material in the
                  context of the Placing and/or the Disposal;

         8.1.15   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group), no
                  member of the Company Group or the Target Group is in
                  material breach of or in default of any contract or agreement
                  which could reasonably be expected to have or has had a
                  material adverse effect upon the condition, financial or
                  otherwise or the earnings, business affairs or business
                  prospects (whether or not arising in the ordinary course of
                  business) of

                                     -11-
<PAGE>

                  the relevant Group (taken as a whole) or which is individually
                  or in the aggregate material in the context of the Placing
                  and/or the Disposal;

         8.1.16   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group), no
                  material outstanding indebtedness of any member of the
                  Company Group or the Target Group has become payable or
                  repayable by reason of any default of any member of the
                  relevant Group and no event has occurred or is impending
                  which may result in such indebtedness becoming payable or
                  repayable prior to its maturity date, in a demand being made
                  for such indebtedness to be paid or repaid or in any step
                  being taken to enforce any security for any such indebtedness
                  of any member of the relevant Group;

         8.1.17   save as disclosed in the Circulars (but only to the actual
                  knowledge of the Vendor in relation to the Company Group), no
                  member of the Company Group or the Target Group is a party to
                  or under any obligation which is material and which is of an
                  unusual or unduly onerous nature; neither this Agreement nor
                  the Placing or the Disposal will constitute or give rise to a
                  breach of or default under any agreement or other arrangement
                  to which any member of the relevant Group is a party or give
                  rise to any rights of any third party in respect of any
                  assets of the relevant Group and which is individually or in
                  the aggregate material in the context of the Placing and/or
                  the Disposal;

         8.1.18   each of the copy of: (i) the audited consolidated accounts of
                  the relevant member of the Target Group or the Company Group
                  for the financial year ended on 31 December 2003 or 31 March
                  2003 respectively; and (ii) the audited consolidated interim
                  accounts of the relevant member of the Company Group for the
                  six months ended 30 September 2003, which have been provided
                  to Citigroup prior to the execution of this Agreement (in
                  each case concerning the Company Group, only to the actual
                  knowledge of the Vendor in relation to the Company Group):

                  (i)    have been prepared on a recognised and consistent
                         basis and in accordance with generally accepted
                         accounting principles, standards and practice in Hong
                         Kong; and

                  (ii)   comply with all applicable laws, statutes and
                         regulations in all material respects and show a true
                         and fair view of the state of affairs of the relevant
                         Group and of its results for the period in question;

                  (iii)  are not affected by any unusual or non-recurring items
                         and do not include transactions not normally
                         undertaken by the relevant member of the relevant
                         Group (save as disclosed in the said relevant
                         accounts);

                  (iv)   make adequate provision for all Taxation whether in
                         Hong Kong or any other part of the world in respect of
                         all accounting periods ended on or before the
                         respective date for which the relevant member of the
                         relevant Group was then or might at any time
                         thereafter become or have been liable;

         8.1.19   the Company is duly incorporated and validly existing under
                  the laws of the place of its incorporation and, subject to
                  the satisfaction of the conditions set out in clauses 4.1.1
                  to 4.1.17 of the Disposal Agreement, the Company has power
                  under its constitutional documents to permit the issue of the
                  Sale Shares to the Placees in the manner set out herein; save
                  as disclosed in the Circulars and subject to the

                                     -12-
<PAGE>

                  satisfaction of the conditions set out in clauses 4.1.1 to
                  4.1.17 of the Disposal Agreement, there is: (i) no
                  authorisation, consent or approval required for the
                  purposes of or as a consequence of the Placing or the
                  Disposal either from governmental, regulatory or other
                  public bodies (including, without limitation, the Stock
                  Exchange) or authorities or courts; and (ii) no
                  authorisation, consent or approval required for the
                  purposes of or as a consequence of the Placing or the
                  Disposal from any third party pursuant to any material
                  contractual arrangement or other material arrangement to
                  which the Company or any other member of the Company Group
                  or the Vendor is a party;

         8.1.20   save as disclosed in the Circulars and subject to the
                  satisfaction of the conditions set out in clauses 4.1.1 to
                  4.1.17 of the Disposal Agreement (but only to the actual
                  knowledge of the Vendor in relation to the Company Group),
                  the compliance by the Vendor or the Company with all the
                  relevant provisions of this Agreement, as well as the
                  consummation of the transactions herein contemplated, will
                  not conflict with or result in a breach or violation of, or
                  result in any third party consent being required under, the
                  constitutional documents of the Vendor or the Company, any of
                  the material terms or provisions of any material indenture,
                  mortgage, deed of trust, loan agreement or other agreement or
                  instrument to which any member of the Company Group, the
                  Target Group or the Vendor or by which any member of the
                  relevant Group or the Vendor is a party or to which any of
                  the material property or assets of any member of the relevant
                  Group or the Vendor is subject, or any applicable law, rule
                  or regulation, including, without limitation, the Listing
                  Rules or any order of any court or governmental agency or
                  body having jurisdiction over any member of the relevant
                  Group or the Vendor or the property or assets of any member
                  of the relevant Group or the Vendor;

         8.1.21   save as disclosed in the Circulars, the interim report of the
                  Company for the six months ended 30 September 2003, and the
                  latest annual report and audited financial statements of the
                  Company or the Target (but only to the actual knowledge of
                  the Vendor in relation to the Company Group), no unissued
                  share capital of any member of the Company Group or the
                  Target Group is under any option (or agreed conditionally or
                  unconditionally to be put under any option) and no person has
                  any outstanding warrant, pre-emptive right or any other right
                  of any description to require shares to be allotted or issued
                  by any member of the relevant Group;

         8.1.22   the Vendor has not been, is not and will not be at any time
                  engaged in any market misconduct or insider dealing for the
                  purposes of the SFO in connection with the Placing and the
                  related transactions entered into or to be entered into
                  pursuant to this Agreement; neither the Vendor nor any person
                  acting on the Vendor's behalf or under its control has taken
                  or will take, directly or indirectly, any action designed or
                  which was designed, or which constitutes or has constituted
                  or might reasonably be or have been expected to cause or
                  result in, stabilisation or manipulation of the price of any
                  Shares or other securities of the Company;

         8.1.23   neither the Vendor nor (to the actual knowledge of the Vendor
                  in relation to the Company and its affiliates) the Company
                  nor any of their affiliates (as defined in Rule 405 under the
                  Securities Act), nor any person acting on behalf of any such
                  person (save as to Citigroup and its agents whose actions as
                  the Vendor's agent are not warranted in such terms): (i) has
                  engaged or will engage in any "directed

                                     -13-
<PAGE>

                  selling efforts" (as defined in Regulation S) with respect
                  to the Sale Shares; or (ii) has offered or sold or will
                  offer or sell any security, has solicited or will solicit
                  offers to buy any security or has taken or will take any
                  other action under circumstances that would require
                  registration of any of the Sale Shares under the Securities
                  Act;

         8.1.24   neither the Vendor and its affiliates nor, to the actual
                  knowledge of the Vendor, the Company nor any of its
                  affiliates (as defined in Rule 405 under the Securities Act),
                  nor any person acting on behalf of any such person (save as
                  to Citigroup and its agents whose actions as the Vendor's
                  agent are not warranted in such terms) has, directly or
                  indirectly, taken or will take any action designed to cause
                  or to result in, or that has constituted or which might
                  reasonably be expected to cause or result in, the
                  stabilisation in violation of applicable laws or manipulation
                  of the price of any security of the Company to facilitate the
                  sale or resale of the Sale Shares;

         8.1.25   the Vendor and, to the actual knowledge of the Vendor, the
                  Company have complied and will comply with the "offering
                  restrictions" (as such term is defined in Regulation S);

         8.1.26   subject to the fulfilment of the requirements as disclosed in
                  the Circulars and to be disclosed in the announcement in
                  respect of the Placing, the sale of the Sale Shares by the
                  Vendor pursuant to this Agreement will not result in any
                  breach of and will comply with all relevant provisions of the
                  Listing Rules and all other applicable laws, rules and
                  regulations;

         8.1.27   save as disclosed in the Circulars and subject to the
                  satisfaction of the conditions set out in clauses 4.1.1 to
                  4.1.17 of the Disposal Agreement, the Company has the full
                  right, power and authority to allot and issue the Sale Shares
                  and all necessary authorisations, approvals, consents and
                  licences relating to the same have been, or will, prior to
                  Completion, be unconditionally obtained and are, or will,
                  immediately prior to Completion, be in full force and effect;
                  and

         8.1.28   based on the information supplied to the Vendor by the
                  Company and to the actual knowledge of the Vendor, the
                  Company is a "foreign issuer" (as such term is defined in
                  Regulation S) which reasonably believes that there is no
                  "substantial US market interest" (as such term is defined in
                  Regulation S) in the Sale Shares or securities of the Company
                  of the same class as the Sale Shares.

8.2      Citigroup hereby represents, warrants and undertakes to the Vendor
         as follows:

         8.2.1    United States The Sale Shares have not been and will not be
                  registered under the Securities Act and may not be offered or
                  sold within the United States or to, or for the account or
                  benefit of, US persons except in accordance with Regulation S
                  or pursuant to an exemption from the registration
                  requirements of the Securities Act. Citigroup represents that
                  it has offered and sold the Sale Shares, and agrees that it
                  will offer and sell the Sale Shares, only in accordance with
                  Rule 903 of Regulation S. Accordingly, neither it, its
                  affiliates nor any persons acting on its or their behalf have
                  engaged or will engage in any directed selling efforts (as
                  such term is defined in Regulation S) with respect to the
                  Sale Shares, and it and they have complied and will comply
                  with the offering restrictions requirement of Regulation S.

                  Citigroup represents that it has not entered and agrees
                  that it will not enter into any contractual arrangement
                  with any distributor (as that term is defined in Regulation

                                     -14-
<PAGE>

                  S) with respect to the distribution or delivery of the Sale
                  Shares, except with its affiliates or with the prior
                  written consent of the Company.

         8.2.2    United Kingdom (i) It has not offered or sold and, prior to
                  the expiry of a period of six months from the Closing Date,
                  will not offer or sell any Sale Shares to persons in the
                  United Kingdom except to persons whose ordinary activities
                  involve them in acquiring, holding, managing or disposing of
                  investments (as principal or agent) for the purposes of their
                  businesses or otherwise in circumstances which have not
                  resulted and will not result in an offer to the public in the
                  United Kingdom within the meaning of the Public Offers of
                  Securities Regulations 1995; and (ii) it has only
                  communicated or caused to be communicated, and will only
                  communicate or cause to be communicated, any invitation or
                  inducement to engage in investment activity (within the
                  meaning of section 21 of the Financial Services and Markets
                  Act 2000 (the "FSMA")) in connection with the issue or sale
                  of any Sale Shares in circumstances in which section 21(1) of
                  the FSMA does not apply to the Company or the Vendor; and
                  (iii) it has complied and will comply with all applicable
                  provisions of the FSMA with respect to anything done by it in
                  relation to the Sale Shares in, from or otherwise involving
                  the United Kingdom.

         8.2.3    Hong Kong (i) It has not offered or sold and will not offer
                  or sell in Hong Kong, by means of any document, any of the
                  Sale Shares other than to persons whose ordinary business is
                  to buy or sell shares or debentures, whether as principal or
                  agent, or in circumstances which do not constitute an offer
                  to the public within the meaning of the Companies Ordinance,
                  (except if permitted to do so under the securities laws of
                  Hong Kong); (ii) it has not issued and will not issue any
                  advertisement, invitation or document relating to the Sale
                  Shares, whether in Hong Kong or elsewhere, which is directed
                  at, or the contents of which are likely to be accessed or
                  read by, the public in Hong Kong (except if permitted to do
                  so under the securities laws of Hong Kong), other than with
                  respect to Sale Shares which are or are intended to be
                  disposed of only to persons outside Hong Kong or only to
                  "professional investors" within the meaning of the SFO and
                  any rules made thereunder; and (iii) neither itself,
                  Citigroup Global Markets Asia Limited nor any persons
                  controlling, controlled by or under the same control as
                  either of them (except in the capacity of an exempt principal
                  trader as such term is defined in the Takeovers Code)
                  acquired any voting rights in the Company during the period
                  commencing six months prior to the date of the Press
                  Announcement and ending on the date of the SGM which
                  constituted a "disqualifying transaction" for the purpose of
                  the Takeovers Code and it did not (and Citigroup Global
                  Markets Asia Limited and any persons controlling, controlled
                  by or under the same control as it did not) acquire or
                  dispose of any voting rights in the Company in the period
                  between the date of the Press Announcement and the date of
                  the SGM without the prior consent of the Executive.

         8.2.4    Singapore Documents or materials in connection with the offer
                  or sale, or invitation for subscription or purchase, of the
                  Sale Shares may not be circulated or distributed, and the
                  Sale Shares may not be offered or sold, or be made the
                  subject of an invitation for subscription or purchase,
                  whether directly or indirectly: (i) to persons in Singapore
                  other than under circumstances in which such offer, sale or
                  invitation does not constitute an offer or sale, or
                  invitation for subscription or purchase, of the Sale Shares
                  to the public in Singapore; or (ii) to the public or any
                  member of the public in Singapore other than: (A) to an
                  institutional investor or

                                     -15-
<PAGE>

                  other person specified in Section 274 of the Securities and
                  Futures Act, Chapter 289 of Singapore (the "SFA"); (B) to a
                  sophisticated investor, and in accordance with the
                  conditions, specified in Section 275 of the SFA; or (C)
                  otherwise pursuant to, and in accordance with the
                  conditions of, any other applicable provision of the SFA.

         8.2.5    Capacity Citigroup is duly incorporated and validly existing
                  under the laws of the place of its incorporation and
                  Citigroup has power under its constitutional documents to
                  permit its entry into this Agreement in the manner set out
                  herein and this Agreement (and its performance) has been duly
                  authorised (such authorisation remaining in full force and
                  effect) and executed by and constitutes legally binding
                  obligations of Citigroup, enforceable in accordance with its
                  terms; there is no authorisation, consent, approval or (save
                  as referred to in Clause 2.7) notification required for the
                  purposes of or as a consequence of the Placing either from
                  governmental, regulatory or other public bodies (including,
                  without limitation, the Stock Exchange) or authorities or
                  courts or from any third party pursuant to any contractual or
                  other arrangement to which Citigroup is a party.

         8.2.6    Private Placing That:

                  (a)    the Placing will be a private placement of securities
                         and not an offer to the public within the meaning of
                         the Companies Ordinance and will be effected by
                         telephone conversations leading to concluded
                         contracts;

                  (b)    it will, whether before or after Completion, continue
                         to provide information regarding the Placees as
                         required by the Stock Exchange and/or the relevant
                         regulatory authority or governmental agency in Hong
                         Kong for delivery to the Stock Exchange and/or the
                         relevant regulatory authority or governmental agency
                         in Hong Kong; and

                  (c)    it will procure that any sub-agent and/or
                         sub-underwriter appointed by Citigroup or any other
                         person through whom it may effect the Placing or offer
                         any Sale Shares shall observe the foregoing provisions
                         of this Clause 8.2.6.

         8.2.7    Compliance with certain laws Subject as set out in this
                  Agreement, Citigroup confirms and undertakes to the Vendor
                  and the Guarantor:

                  (a)    not to, directly or indirectly, engage in unlawful
                         price stabilisation in relation to the Placing; and

                  (b)    not to:

                         (i)  distribute or publish any documents (including,
                              without limitation to the foregoing, any
                              prospectus, form of application, offering
                              circular, advertisement or other offering
                              material or any report or other document
                              calculated to invite or lead to offers or
                              agreements being made to purchase any of the Sale
                              Shares); or

                         (ii) make any representations or statements in
                              relation to the Placing or offer any
                              representation or statement regarding the
                              Company, the Vendor or the Target Group or the
                              financial or business position or prospects of
                              the Company, the Vendor or the Target Group,

                                     -16-
<PAGE>

                         which was not or is not, at the time of making the
                         same, general knowledge in the marketplace in any
                         country or jurisdiction, except where such offer, sale
                         or delivery is made under circumstances that shall not
                         result in or constitute a breach of any applicable
                         laws and regulations or give rise to a requirement for
                         any prospectus to be published or filed or any
                         registration or qualification to be made or obtained
                         (other than such as are made or obtained by Citigroup)
                         in any such country or jurisdiction and all offers,
                         sales and deliveries of Sale Shares shall be made on
                         such terms.

8.3      In consideration of Citigroup entering into this Agreement and
         agreeing to perform its obligations hereunder, the Guarantor
         represents, warrants or undertakes to Citigroup that the Guarantor is
         duly incorporated and validly existing under the laws of the place of
         its incorporation and the Guarantor has power under its constitutional
         documents to permit its entry into this Agreement in the manner set
         out herein and this Agreement (and its performance) has been duly
         authorised (such authorisation remaining in full force and effect) and
         executed by and constitutes legally binding obligations of the
         Guarantor, enforceable in accordance with its terms; save for those
         disclosed in the Circulars and to be disclosed in the announcement in
         respect of the Placing, there is no authorisation, consent, approval
         or notification required for the purposes of or as a consequence of
         the Placing either from governmental, regulatory or other public
         bodies (including, without limitation, the Stock Exchange) or
         authorities or courts or from any third party pursuant to any
         contractual or other arrangement to which the Guarantor is a party.

8.4      The representations, warranties and undertakings set out in Clause 8
         are given as at the date hereof and are true and accurate and in
         force, and shall remain true and accurate and in force up to and
         including the Closing Date as if given or made on such date, with
         reference in each case to the facts and circumstances then subsisting.
         The Vendor undertakes to notify Citigroup of any material matter or
         event coming to its attention prior to Completion which shows or may
         show any of the representations, warranties and undertakings set out
         in Clause 8.1 to be or to have been untrue, inaccurate or misleading,
         in any material respect. The Guarantor undertakes to notify Citigroup
         of any material matter or event coming to its attention prior to
         Completion which shows or may show any of the representations,
         warranties and undertakings set out in Clause 8.3 to be or to have
         been untrue, inaccurate or misleading, in any material respect.
         Citigroup undertakes to notify the Vendor of any material matter or
         event coming to its attention prior to Completion which shows or may
         show any of the representations, warranties and undertakings set out
         in Clause 8.2 to be or to have been untrue, inaccurate or misleading,
         in any material respect.

8.5      Save as a result of Citigroup's or its agent's negligence, fraud,
         wilful default or breach of this Agreement or any applicable laws,
         rules or regulations, Citigroup shall not be responsible for and no
         claim shall be made against Citigroup by the Company or the Vendor to
         recover any loss, damage, cost, charge or expense which the Vendor or
         the Company may suffer or incur by reason of or arising out of the
         carrying out by Citigroup of any work pursuant to its rights or
         obligations hereunder, or for any alleged insufficiency of the Placing
         Price or otherwise in connection with the Placing.

8.6      The rights and remedies of each Party in respect of the
         representations, warranties and undertakings referred to in Clause 8
         shall not be affected by: (i) Completion; (ii) any investigation made
         into the affairs of any Party or the relevant Group or any knowledge
         held or gained of any such affairs by or on behalf of the other Party
         or the relevant Group;

                                     -17-
<PAGE>

         or (iii) any event or matter whatsoever, other than a specific and
         duly authorised written waiver or release by the other Party.

8.7      Citigroup acknowledges and accepts that each of all warranties,
         representations and undertakings provided by the Vendor set out in
         Clauses 8.1.5 and 8.1.18 of this Agreement as they relate to the
         Company, any member of the Company Group or their respective
         directors, business, activities, assets, affairs and financial or
         other information shall also be subject to and qualified by any and
         all things specifically disclosed in the audited consolidated accounts
         of the Company for the financial year ended on 31 March 2003, the
         audited consolidated interim accounts of the Company for the six
         months ended 30 September 2003 or the Disposal Agreement.

8.8      The Vendor undertakes to deliver a legal opinion (from Linklaters
         addressed to Citigroup) in a form reasonably satisfactory to Citigroup
         before the Closing Date and such opinion is solely in respect of the
         enforceability of the guarantee by PCCW-HKT Telephone Limited dated 30
         April 2004 in favour of Citigroup for the Vendor's obligations under
         this Agreement.

9        INDEMNITY

9.1      The Vendor undertakes to indemnify Citigroup for itself and as trustee
         for each of its agents, subsidiaries and associated companies involved
         in connection with the Placing, their respective directors, officers,
         employees and agents (duly authorised as permitted herein) and each
         person who controls (including but not limited to controlling persons
         within the meaning of Section 15 of the Securities Act or Section
         20(a) of the US Securities Exchange Act of 1934) Citigroup or any of
         its subsidiaries or associated companies (in this Clause 9, the
         "Indemnified Parties") against all or any costs, expenses (including
         legal fees reasonably incurred), fees, claims, actions, liabilities,
         demands, proceedings or judgements (including, but not limited to, all
         such losses, costs, charges, liabilities or expenses suffered or
         reasonably incurred in disputing or defending any claims, actions,
         demands, proceedings or judgements (in this Clause 9, the
         "Proceedings") and/or in establishing its rights to be indemnified
         pursuant to this Clause 9.1 and/or in seeking advice in relation to
         any Proceedings) brought or established, or threatened to be brought
         or established, against any of the Indemnified Parties by any Placee
         or by any governmental agency, regulatory body or other person:

         9.1.1    directly or indirectly arising out of or in connection with
                  any breach of any of the representations, warranties and
                  undertakings on the part of the Vendor contained in Clauses 6
                  and 8 (other than Clauses 8.2, 8.5 and 8.7); or

         9.1.2    directly or indirectly arising out of or in connection with
                  the Placing or any transactions contemplated hereby which do
                  not in any such case arise from Citigroup's or its agent's
                  fraud, negligence or wilful default or breach of this
                  Agreement or of any applicable laws, rules or regulations.

9.2      The indemnities contained in Clause 9.1 shall remain in full force and
         effect notwithstanding Completion in accordance with its terms and
         shall extend to include all costs, charges and expenses which
         Citigroup and/or any of the relevant Indemnified Parties may
         reasonably incur or pay in disputing, settling or compromising any
         matter to which the indemnity might relate and in establishing the
         right to indemnification pursuant to this clause in respect of any
         matter.

                                     -18-
<PAGE>

9.3      The Vendor shall not, without the prior written consent of Citigroup,
         settle or compromise or consent to the entry of any judgement with
         respect to any pending or threatened claim, action, suit or proceeding
         in respect of which indemnification or contribution may be sought
         hereunder (whether or not the relevant Indemnified Parties are actual
         or potential parties to such claim or action) from any of the relevant
         Indemnified Parties. Such prior written consent of Citigroup is not
         required if the Vendor procures that such settlement, compromise or
         consent includes an unconditional release of each relevant Indemnified
         Party from all liability arising out of such claim, action, suit or
         proceeding.

9.4      Citigroup shall not (and it shall procure that none of the Indemnified
         Parties shall), without the prior written consent of the Vendor,
         settle or compromise or consent to the entry of any judgement with
         respect to any pending or threatened claim, action, suit or proceeding
         in respect of which indemnification or contribution may be sought
         hereunder. As soon as reasonably practicable after receipt by the
         relevant Indemnified Parties of notice of commencement of any claim,
         action or proceeding for which indemnification may be sought
         hereunder, Citigroup shall (and it shall procure the relevant
         Indemnified Parties to) deliver notice of such claim, action, suit or
         proceeding to the Vendor, but the failure so to notify the Vendor will
         not relieve it from any liability under Clause 9.1 unless and to the
         extent such failure results in the forfeiture by the Vendor of
         substantial rights and defences. Except to the extent that it would be
         inappropriate due to actual or potential conflicting interests between
         the parties (including situations in which there are one or more legal
         defences available to the Indemnified Party that are different from or
         additional to those available to the Vendor), the parties will
         co-operate with each other (so far as each is reasonably able) to
         procure the giving of all such information and render all such
         assistance to one another as may reasonably be requested in connection
         with such proceedings. Subject to the above, Citigroup shall (and it
         shall procure the Indemnified Parties to) have due regard to any
         reasonable request which the Vendor may make in relation to the
         conduct of the defence of such proceedings. If any amount is received
         by any of the Indemnified Parties in respect of any proceedings
         otherwise than under this indemnity, Citigroup shall procure that the
         relevant Indemnified Parties in receipt of any such amount repays to
         the Vendor the corresponding portion of any amount paid under the
         indemnity in Clause 9.1 which is referable to the matter giving rise
         to the proceedings less any reasonable out-of-pocket costs and
         expenses incurred by any Indemnified Party in recovering the same and
         any tax suffered on the receipt (and subject to such repayment being
         for no greater amount than the amount paid under the indemnity in
         Clause 9.1 by the Vendor to the Indemnified Party in respect of such
         matter).

9.5      The Vendor agrees that none of the Indemnified Parties will have any
         liability (save for any obligations imposed on them under this
         Agreement or under any applicable laws) to the other Parties, directly
         or indirectly, arising out of or in connection with the Placing or any
         transactions contemplated hereby.

9.6      The Vendor shall not, and shall use all reasonable endeavours to
         procure that no member of the Company Group or the Target Group will,
         at any time prior to or on the Closing Date do or omit to do anything
         which may cause any of the representations, warranties and
         undertakings set out in Clause 8.1 to be untrue in any material
         respect.

9.7      Citigroup shall not, and shall procure that its agents, staff and
         employees (as well as any other person or company who or which is
         controlled by, a controller of, or under the same control as,
         Citigroup) will not, at any time prior to or on the Closing Date do or
         omit to do

                                     -19-
<PAGE>

         anything which may cause any of the representations, warranties and
         undertakings set out in Clause 8.2 to be untrue in any material
         respect.

10       TERMINATION

10.1     Notwithstanding anything contained in this Agreement, if at any time
         prior to 3:30 pm (Hong Kong time) on the Closing Date (the "Cut-Off
         Time"):

         10.1.1   there develops, occurs or comes into force:

                  (i)    any new law or regulation or any change in existing
                         laws or regulations; or

                  (ii)   any significant or adverse change in the local,
                         national or international economic, political,
                         military or financial conditions, securities market
                         conditions or currency exchange rates or exchange
                         controls, including without limitation, any outbreak
                         or escalation of international hostilities,
                         declaration by the federal government of the United
                         States or the government of Hong Kong of a national
                         emergency or other calamity or crisis; or

                  (iii)  the declaration of a general banking moratorium by the
                         US or Hong Kong authorities; or

                  (iv)   any suspension of dealings in the Shares for a period
                         of over two consecutive trading days (other than as a
                         result of: (a) suspension of dealings for reason of
                         the Company's insufficient public float; or (b) the
                         Company announcing the Placing); or

                  (v)    any moratorium, suspension or material restriction on
                         trading in shares or securities generally on the Stock
                         Exchange or the establishment of minimum prices for
                         shares or securities generally on the Stock Exchange,

                  in the case of each of (i) to (v), the effect of which, in the
                  opinion of Citigroup: (1) has or is reasonably likely to have
                  a material adverse effect on the financial position of the
                  Company Group and the Target Group taken as a whole; or (2) is
                  or would be materially adverse to the success of the Placing;
                  or (3) is so material and adverse as to make it impracticable
                  or inadvisable or inexpedient to proceed with the Placing on
                  the terms and in the manner contemplated herein;

         10.1.2   any breach of any of the representations, warranties and
                  undertakings by the Vendor or the Guarantor set out in Clause
                  6 or Clause 8.1, 8.3 and 8.4 comes to the knowledge of
                  Citigroup, or any event occurs or any matter arises on or
                  after the date hereof and prior to the Closing Date which if
                  it had occurred or arisen before the date hereof would have
                  rendered any of such representations, warranties and
                  undertakings untrue or incorrect or there has been a breach
                  of, or failure to perform, any other provision of this
                  Agreement on the part of the Vendor (and in each of the
                  aforesaid cases, the effect of which, in the opinion of
                  Citigroup: (1) has or is reasonably likely to have a material
                  adverse effect on the financial position of the Company Group
                  and the Target Group taken as a whole; (2) is or would be
                  materially adverse to the success of the Placing; or (3) is
                  so material and adverse as to make it impracticable or
                  inadvisable or inexpedient to proceed with the Placing on the
                  terms and in the manner contemplated herein); or

                                     -20-
<PAGE>

         10.1.3   any change or any development involving a prospective change
                  in the general affairs, prospects, earnings, business,
                  properties, stockholders' equity or in the financial or
                  trading position of the Company Group and the Target Group
                  taken as a whole, which in the opinion of Citigroup is so
                  material and adverse as to make it impractical or inadvisable
                  or inexpedient to proceed with the Placing on the terms and
                  in the manner contemplated herein,

         then and in any such case, Citigroup may terminate this Agreement
         without liability to the Vendor and the Company by giving notice in
         writing to the Vendor, which notice may be given at any time prior to
         the Cut-Off Time.

10.2     Without prejudice to any other provisions of this Agreement, Citigroup
         shall have the right exercisable at any time by notice in writing to
         the Vendor to terminate this Agreement if any of the Sale Shares are
         not delivered by or on behalf of the Vendor in accordance with Clause
         5.2 (save where such non-delivery of the Sale Shares is as a result of
         any non-performance of any provision of this Agreement by Citigroup or
         any fraud, wilful default or negligence on the part of Citigroup
         and/or its employees or agents).

10.3     In the event that Citigroup terminates this Agreement in accordance
         with Clauses 10.1 or 10.2, all obligations of each of the Parties
         under this Agreement shall cease and determine and no Party shall have
         any claim against any other Party in respect of any matter arising out
         of or in connection with this Agreement except for:

         10.3.1   any antecedent breach of any obligation under this Agreement;
                  and

         10.3.2   liabilities under Clauses 7.2 and 9.

11       ANNOUNCEMENTS

         Save for the Press Announcement, the Circulars and the press
         announcements in respect of the Placing, the results of the
         extraordinary general meeting of the Guarantor and/or the ongoing
         connected transactions with the group of companies of the Guarantor to
         be released by the Company and/or the Guarantor, and save as required
         by law or by the Stock Exchange or the SFC, the Vendor undertakes to
         procure that no public announcement or communication to the press or
         to the Stock Exchange concerning the Placing or any member of the
         Company Group or the Target Group which is material in relation to the
         Placing shall be made by or on behalf of the Vendor or the Company
         between the date hereof and seven days after the Closing Date without
         prior written approval from Citigroup as to the content, timing and
         manner of making thereof (such approval not to be unreasonably
         withheld or delayed). For the avoidance of doubt: (i) the press
         announcement in respect of the Placing to be released by the Company
         shall be approved by Citigroup before it is released (such approval
         not to be unreasonably withheld or delayed); and (ii) the Guarantor,
         the Vendor, the Company and other members of the Company Group and the
         Target Group which are material in relation to the Placing shall be
         free to make press releases (or make communication) to respond to
         questions posed by the press on a basis consistent with the strategy
         agreed in advance with Citigroup.

12       TIME OF THE ESSENCE

         Any time, date or period mentioned in this Agreement may be extended
         by mutual agreement between the Vendor and Citigroup but as regards
         any time, date or period

                                     -21-
<PAGE>

         originally fixed or any date or period so extended as aforesaid, time
         shall be of the essence.

13       GUARANTEE OF THE VENDOR'S OBLIGATIONS

13.1     In consideration of Citigroup entering into this Agreement and
         agreeing to perform its obligations hereunder, the Guarantor:

         13.1.1   undertakes to Citigroup that it will procure the due and
                  punctual performance by the Vendor of all of its obligations,
                  commitments and undertakings under or pursuant to this
                  Agreement (the "Vendor's Obligations"); and

         13.1.2   guarantees to Citigroup the due and punctual performance by
                  the Vendor of the Vendor's Obligations and the due and
                  punctual payment by the Vendor of any moneys payable by the
                  Vendor pursuant to this Agreement or for any breach of this
                  Agreement (the "Vendor's Payments").

13.2     Vendor's Default

         If and whenever the Vendor defaults for any reason whatsoever in the
         performance or satisfaction of any Vendor's Obligation or any Vendor's
         Payment, the Guarantor shall forthwith upon demand unconditionally
         perform (or procure performance of) and satisfy (or procure the
         satisfaction of) the Vendor's Obligation or the Vendor's Payment (as
         the case may be) in regard to which such default has been made in the
         manner prescribed by this Agreement and so that the same benefits
         shall be conferred on Citigroup as it would have received if the
         Vendor's Obligations or the Vendor's Payments (as the case may be) had
         been duly performed and satisfied by the Vendor.

13.3     Continuing Guarantee

         This guarantee is to be a continuing guarantee and accordingly is to
         remain in force until all the Vendor's Obligations and Vendor's
         Payments shall have been performed or satisfied.

14       NOTICES

14.1     All notices delivered hereunder shall be in writing and shall be
         communicated to the following addresses:

         If to Citigroup, to:

                 20th Floor, 3 Exchange Square
                 Central
                 Hong Kong

                 Facsimile: (852) 2501 8110

                 Attention:  Legal Department

         If to the Vendor, to:

                 39/F, PCCW Tower
                 TaiKoo Place
                 979 King's Road

                                     -22-
<PAGE>

                 Quarry Bay
                 Hong Kong

                 Facsimile: (852) 2962 5725

                 Attention: Company Secretary

         If to the Guarantor, to:

                 39/F, PCCW Tower
                 TaiKoo Place
                 979 King's Road
                 Quarry Bay
                 Hong Kong

                 Facsimile: (852) 2962 5725

                 Attention: Company Secretary

14.2     Any such notice shall be served either by hand or by facsimile. Any
         notice shall be deemed to have been served, if served by hand, when
         delivered and if sent by facsimile, on receipt of confirmation of
         transmission. Any notice received on a Sunday or public holiday shall
         be deemed to be received on the next Business Day.

15       MISCELLANEOUS

15.1     Each Party undertakes with the other Parties that it shall execute and
         perform and procure that there are executed and performed such further
         documents and acts as the other Parties may reasonably require to give
         effect to the provisions of this Agreement.

15.2     This Agreement constitutes the entire agreement and understanding
         between the Parties in connection with the Placing. This Agreement
         supersedes all previous agreements or understandings which shall cease
         to have any further force or effect and no Party has entered into this
         Agreement in reliance upon any representation, warranty or undertaking
         which is not set out or referred to in this Agreement.

15.3     No variation of this Agreement shall be valid unless it is in writing
         and signed by or on behalf of each of the Parties. The expression
         "variation" shall include any variation, supplement, deletion or
         replacement however effected.

15.4     This Agreement may be executed in any number of counterparts and by
         the Parties on separate counterparts, each of which is an original but
         all of which together constitute one and the same instrument.

15.5     No failure or delay by any Party in exercising any right or remedy
         provided by law under or pursuant to this Agreement shall impair such
         right or remedy or operate or be construed as a waiver or variation of
         it or preclude its exercise at any subsequent time and no single or
         partial exercise of any such right or remedy shall preclude any other
         or further exercise of it or the exercise of any other right or
         remedy.

15.6     Notwithstanding any other provisions in this Agreement, no Party shall
         have any right to make any claim against the Guarantor in connection
         with this Agreement unless legal proceedings for such claim commences
         before the date which is two years after the Closing Date.

                                     -23-
<PAGE>

16       APPLICABLE LAW AND JURISDICTION

         This Agreement is governed by and shall be construed in accordance
         with the laws of Hong Kong for the time being in force and the Parties
         hereby irrevocably submit to the non-exclusive jurisdiction of the
         Hong Kong courts.

                                     -24-
<PAGE>

IN WITNESS WHEREOF this Agreement has been entered into on the day and year
first before written.

SIGNED by                          )
for and on behalf of               )
PCCW LIMITED                       )
in the presence of:                )

SIGNED by                          )
for and on behalf of               )
ASIAN MOTION LIMITED               )
in the presence of:                )

SIGNED by                          )
for and on behalf of               )
CITIGROUP GLOBAL MARKETS           )
HONG KONG FUTURES AND              )
SECURITIES LIMITED                 )
in the presence of:                )

                                     -25-

<PAGE>

Contents
-------------------------------------------------------------------------------

Clause   Heading                                                            Page

1        DEFINITIONS AND INTERPRETATION.......................................1

2        APPOINTMENT OF CITIGROUP AND THE PLACING.............................4

3        PRESS ANNOUNCEMENT...................................................5

4        CONDITIONS...........................................................5

5        COMPLETION OF THE PLACING............................................6

6        UNDERTAKINGS OF THE VENDOR...........................................7

7        PAYMENT OF FEES, COMMISSIONS AND EXPENSES............................8

8        REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.........................9

9        INDEMNITY...........................................................18

10       TERMINATION.........................................................20

11       ANNOUNCEMENTS.......................................................21

12       TIME OF THE ESSENCE.................................................21

13       GUARANTEE OF THE VENDOR'S OBLIGATIONS...............................22

14       NOTICES.............................................................22

15       MISCELLANEOUS.......................................................23

16       APPLICABLE LAW AND JURISDICTION.....................................24

                                      -i-EXHIBIT 4(mm)

                               Dated May 12, 2004

                           PCCW CAPITAL NO. 3 LIMITED

                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                -----------------------------------------------

                         SUPPLEMENTAL AGENCY AGREEMENT

                -----------------------------------------------

                                                           RICHARDS BUTLER
                                                           20th Floor
                                                           Alexandra House
                                                           16-20 Charter Road
                                                           Central
                                                           Hong Kong

<PAGE>

                                     INDEX

Clause                                                                  Page No.

1.  Interpretation.............................................................1
2.  Transfer of obligations and rights.........................................2
3.  Amendments to the agreement................................................2
4.  Copies available for inspection............................................2
5.  Notices....................................................................2
6.  Counterparts...............................................................3
7.  Descriptive Headings.......................................................4
8.  Governing Law and Submission to Jurisdiction...............................4
9.  Contracts (Rights of Third Parties) Act 1999...............................5

SCHEDULE - CONDITIONS OF THE NOTES.............................................6

SIGNATORIES...................................................................24

<PAGE>

                           PCCW CAPITAL NO. 3 LIMITED

                                U.S.$456,000,000

                    7.88 per cent. Guaranteed Notes due 2013

                 unconditionally and irrevocably guaranteed by

                           PCCW-HKT TELEPHONE LIMITED

                         SUPPLEMENTAL AGENCY AGREEMENT

THIS SUPPLEMENTAL AGREEMENT is dated May 12, 2004 and made BETWEEN:

(1)  PCCW CAPITAL NO. 3 LIMITED (the "Issuer");

(2)  PCCW LIMITED ("PCCW");

(3)  PCCW-HKT TELEPHONE LIMITED (the "New Guarantor"); and

(4)  DEUTSCHE BANK AG, HONG KONG BRANCH as fiscal agent and principal paying
     agent (the "Fiscal Agent").

WHEREAS:

(A)  The Issuer, PCCW and the Fiscal Agent entered into an agency agreement
     dated 24th January, 2003 (the "Agreement").

(B)  PCCW executed a deed of guarantee dated 24th January, 2003 (the "Deed of
     Guarantee").

(C)  Holders of the Notes passed an Extraordinary Resolution on May 12, 2004
     approving the novation of all obligations under the Deed of Guarantee by
     PCCW to the New Guarantor and certain amendments to the Conditions; and
     authorising the Fiscal Agent to enter into this supplemental agency
     agreement (the "Supplemental Agreement").

(D)  PCCW and the New Guarantor have executed a deed of novation of even date
     (the "Deed of Novation") pursuant to which all obligations of PCCW under
     the Deed of Guarantee have been novated to the New Guarantor.

NOW IT IS HEREBY AGREED as follows:

1.   INTERPRETATION

     Unless the context otherwise requires:-

     (a)  all capitalised words and expressions used in this Supplemental
          Agreement shall have the same meanings as ascribed to them in the
          Agreement;

     (b)  all references in the Agreement (including any Schedule thereto) to
          the "Agreement" shall be construed to mean the Agreement as amended
          and supplemented pursuant to the terms of this Supplemental
          Agreement; and

                                      -1-
<PAGE>

     (c)  all references in the Agreement (including any Schedule thereto) to
          the "Guarantor" shall be construed as referring to PCCW-HKT Telephone
          Limited; and

     (d)  all references in the Global Note (dated 24th January, 2003 executed
          by the Issuer) to the "Guarantor" shall be construed as referring to
          PCCW-HKT Telephone Limited.

2.   TRANSFER OF OBLIGATIONS AND RIGHTS

(1)  In consideration of the assignment referred to in sub-clause (2) below,
     the New Guarantor undertakes to assume and perform all responsibilities,
     duties, liabilities and obligations which PCCW contracted to perform under
     the Agreement in every way, as if the original responsibilities, duties,
     liabilities and obligations had fallen to the New Guarantor, as original
     obligor, instead of PCCW. The Fiscal Agent hereby acknowledges, agrees to
     accept and consents to such assumption and performance by the New
     Guarantor.

(2)  PCCW hereby assigns all of its rights and benefits in respect of the
     Agreement to the New Guarantor. The Fiscal Agent hereby acknowledges,
     agrees and consents to such assignment.

(3)  With effect from the date of this Supplemental Agreement, PCCW shall be
     completely and absolutely released from all of its responsibilities,
     duties, liabilities and obligations under the Agreement and shall cease to
     have any rights and benefits under the Agreement.

3.   AMENDMENTS TO THE AGREEMENT

     From the date of this Supplemental Agreement:

     (a)  Clause 10(2) of the Agreement shall be deleted;

     (b)  Clause 23 of the Agreement (relating to notices) shall be deleted and
          replaced by Clause 5 of this Supplemental Agreement;

     (c)  Clause 27 of the Agreement (relating to governing law and
          jurisdiction) shall be deleted and replaced by Clause 8 of this
          Supplemental Agreement; and

     (d)  the Conditions, as set out in Part II of Schedule 2 of the Agreement
          shall be replaced by the Conditions set out in the Schedule to this
          Supplemental Agreement.

4.   COPIES AVAILABLE FOR INSPECTION

(1)  This Supplemental Agreement and the Deed of Novation shall be deposited
     with the Fiscal Agent and shall be held in safe custody by the Fiscal
     Agent at its specified office.

(2)  The Paying Agents shall hold copies of this Supplemental Agreement and the
     Deed of Novation available for inspection by Noteholders and Couponholders
     at this specified office during normal business hours. For this purpose,
     the Issuer and the Guarantor shall furnish the Paying Agents with
     sufficient copies of each of such documents.

5.   NOTICES

     Any notice required to be given under the Agreement (including this
     Supplemental Agreement) to any of the parties shall be delivered in
     person, sent by pre-paid post (first class if inland, first class airmail
     if overseas) or by facsimile addressed to:

                                      -2-
<PAGE>

        The Issuer:            PCCW Capital  No. 3 Limited
                               39th Floor, PCCW Tower
                               TaiKoo Place, 979 King's Road
                               Quarry Bay
                               Hong Kong

                               Facsimile No: +852 2962 5725

                               (Attention: Company Secretary)

        The New Guarantor:     PCCW-HKT Telephone Limited
                               39th Floor, PCCW Tower
                               TaiKoo Place, 979 King's Road
                               Quarry Bay
                               Hong Kong

                               Facsimile No: +852 2962 5725

                               (Attention:  Company Secretary)

        The Fiscal Agent:      Deutsche Bank AG, Hong Kong Branch
                               55th Floor, Cheung Kong Center
                               2 Queen's Road Central
                               Hong Kong

                               Facsimile No:  +852 2203 7320

                               (Attention: Trust & Securities Services)

        With a copy to:        Deutsche Bank AG London
                               Winchester House
                               1 Great Winchester Street
                               London EC2N 2DB

                               Facsimile No: +44 207 547 6149

                               (Attention: Trust & Securities Services)

     or such other address of which notice in writing has been given to the
     other parties to the Agreement under the provisions of this clause.

     Any such notice shall take effect, if delivered in person, at the time of
     delivery, if sent by post, three days in the case of inland post or seven
     days in the case of overseas post after despatch, and, in the case of
     facsimile, the start of the business day in the place of receipt
     immediately following, the time of despatch, provided that in the case of
     a notice given by facsimile transmission such notice shall forthwith be
     confirmed by post. The failure of the addressee to receive such
     confirmation shall not invalidate the relevant notice given by facsimile.

6.   COUNTERPARTS

     This Supplemental Agreement may be executed in any number of counterparts,
     all of which, taken together, shall constitute one and the same agreement
     and any party may enter into this Supplemental Agreement by executing a
     counterpart.

                                      -3-
<PAGE>

7.   DESCRIPTIVE HEADINGS

     The descriptive headings in this Supplemental Agreement are for
     convenience of reference only and shall not define or limit the provisions
     of this Supplemental Agreement.

8.   GOVERNING LAW AND SUBMISSION TO JURISDICTION

(1)  The provisions of the Agreement (including this Supplemental Agreement)
     are governed by, and shall be construed in accordance with, English law.

(2)  Each of the Issuer and the New Guarantor irrevocably agrees for the
     benefit of the Paying Agents that the courts of England are to have
     jurisdiction to settle any dispute which may arise out of or in connection
     with the Agreement (including this Supplemental Agreement) and that
     accordingly any suit, action or proceedings arising out of or in
     connection with the Agreement (together referred to as "Proceedings") may
     be brought in the courts of England.

(3)  Each of the Issuer and the New Guarantor irrevocably and unconditionally
     waives and agrees not to raise any objection which it may have now or
     subsequently to the laying of the venue of any Proceedings in the courts
     of England and any claim that any Proceedings have been brought in an
     inconvenient forum and further irrevocably and unconditionally agrees that
     a judgment in any Proceedings brought in the courts of England shall be
     conclusive and binding upon the Issuer and may be enforced in the courts
     of any other jurisdiction.

(4)  Nothing in this clause shall limit any right to take Proceedings against
     the Issuer in any other court of competent jurisdiction, nor shall the
     taking of Proceedings in one or more jurisdictions preclude the taking of
     Proceedings in any other jurisdiction, whether concurrently or not.

(5)  Each of the Issuer and the New Guarantor irrevocably and unconditionally
     appoints RB Secretariat Limited at its registered office for the time
     being (currently at 10th Floor, Beaufort House, 15 St. Botolph Street,
     London EC3A 7EE, England) as its agent for service of process in England
     in respect of any Proceedings and undertakes that in the event of it
     ceasing so to act it will appoint another person with a registered office
     in London as its agent for that purpose.

(6)  Each of the Issuer and the New Guarantor:

     (a)  agrees to procure that, so long as any of the Notes remains liable to
          prescription, there shall be in force an appointment of such a person
          with an office in London with authority to accept service as
          aforesaid;

     (b)  agrees that failure by any such person to give notice of such service
          of process to the Issuer or the New Guarantor shall not impair the
          validity of such service or of any judgment based thereon;

     (c)  consents to the service of process in respect of any Proceedings by
          the airmailing of copies, postage prepaid, to the Issuer or the New
          Guarantor (as the case may be) in accordance with clause 5 of this
          Supplemental Agreement; and

     (d)  agrees that nothing in the Agreement (including this Supplemental
          Agreement) shall affect the right to serve process in any other
          manner permitted by law.

                                      -4-
<PAGE>

9.   CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

     A person who is not a party to this Supplemental Agreement has no right
     under the Contracts (Rights of Third Parties) Act 1999 to enforce any
     terms of this Supplemental Agreement, but this does not affect any right
     or remedy of a third party which exists or is available apart from that
     Act.

SIGNED by each of the parties (or their duly authorised representatives) on the
date which appears first on page 1.

                                      -5-
<PAGE>

                                    SCHEDULE

                            CONDITIONS OF THE NOTES

The U.S.$456,000,000 7.88 per cent. Guaranteed Notes due 2013 (the "Notes",
which expression shall in these Conditions, unless the context otherwise
requires, include any further notes issued pursuant to Condition 15 and forming
a single series with the Notes) of PCCW Capital No.3 Limited (the "Issuer") are
issued subject to and with the benefit of an Agency Agreement dated 24th
January, 2003 made between the Issuer, PCCW Limited ("PCCW") and Deutsche Bank
AG, Hong Kong Branch as fiscal agent and principal paying agent (the "Fiscal
Agent") and any other paying agents appointed from time to time pursuant
thereto (together with the Fiscal Agent, the "Paying Agents"), as amended and
supplemented pursuant to a supplemental agency agreement dated May 12, 2004
made between the Issuer, PCCW, PCCW-HKT Telephone Limited (the "Guarantor") and
the Fiscal Agent (together, the "Agency Agreement", which expression shall
include such further amendments or supplements thereto or restatements thereof
as exist from time to time).

The statements in these Conditions include summaries of, and are subject to,
the detailed provisions of and definitions in the Agency Agreement. Copies of
the Agency Agreement are available for inspection during normal business hours
by the holders of the Notes (the "Noteholders") and the holders of the interest
coupons appertaining to the Notes (the "Couponholders" and the "Coupons",
respectively) at the specified office of each of the Paying Agents. The
Noteholders and the Couponholders are entitled to the benefit of, are bound by,
and are deemed to have notice of, all the provisions of the Agency Agreement
applicable to them. References in these Conditions to the Fiscal Agent and the
Paying Agents shall include any successor appointed under the Agency Agreement.

1.   FORM, DENOMINATION AND TITLE

(1)  Form and Denomination

     The Notes are in bearer form, serially numbered, in the denomination of
     U.S.$250,000 with Coupons attached on issue.

(2)  Title

     Title to the Notes and to the Coupons will pass by delivery.

(3)  Holder Absolute Owner

     The Issuer, the Guarantor and any Paying Agent may (to the fullest extent
     permitted by applicable laws) deem and treat the holder of any Note or
     Coupon as the absolute owner for all purposes (whether or not the Note or
     Coupon shall be overdue and notwithstanding any notice of ownership or
     writing on the Note or Coupon or any notice of previous loss or theft of
     the Note or Coupon).

2.   STATUS OF THE NOTES

     The Notes and the Coupons constitute direct, unconditional and (subject to
     the provisions of Condition 4(1)) unsecured obligations of the Issuer and
     (subject as provided above) rank and will rank pari passu, without any
     preference among themselves, with all other outstanding

                                      -6-
<PAGE>

     unsecured and unsubordinated obligations of the Issuer, present and
     future, save for such obligations as may be preferred by mandatory
     provisions of applicable law.

3.   GUARANTEE

     PCCW executed a deed of guarantee (the "Deed of Guarantee") dated 24th
     January, 2003. Pursuant to the authority of an Extraordinary Resolution of
     Noteholders passed at a meeting of the Noteholders held on May 12, 2004,
     all obligations under the Deed of Guarantee have, by virtue of a deed of
     novation (the "Deed of Novation") dated May 12, 2004, been novated by PCCW
     to the Guarantor. Pursuant to the Deed of Guarantee, as novated, the
     Guarantor unconditionally and irrevocably guarantees (the "Guarantee") the
     due and punctual payment of the principal of and interest on the Notes as
     and when the same shall become due and payable, together with any
     additional amounts in respect of the Notes payable pursuant to Condition
     8. The obligations of the Guarantor under the Guarantee constitute direct,
     unconditional and (subject to the provisions of Condition 4(1)) unsecured
     obligations of the Guarantor and (subject as provided above) rank and will
     rank pari passu with all other outstanding unsecured and unsubordinated
     obligations of the Guarantor, present and future, save for such
     obligations as may be preferred by mandatory provisions of applicable law.
     The originals of the Deed of Guarantee and the Deed of Novation are held
     by the Fiscal Agent on behalf of, and copies are available for inspection
     by, the Noteholders and Couponholders at its specified office during
     normal business hours.

4.   NEGATIVE PLEDGE

(1)  Negative Pledge

     For so long as any of the Notes remains outstanding, neither the Issuer
     nor the Guarantor will, and the Guarantor will procure that none of the
     Principal Subsidiaries (other than Listed Principal Subsidiaries) will,
     create, incur, assume or permit to exist any Lien (other than Permitted
     Liens) upon any of their respective property or assets, owned as at 24th
     January, 2003 (the "Issue Date") or as have been or may be acquired after
     the Issue Date, to secure any Indebtedness of the Guarantor or such
     Principal Subsidiaries (or any guarantee or indemnity in respect thereof)
     without, in any such case, making effective provision whereby the Notes
     will be secured either at least equally and rateably with such
     Indebtedness or by such other Lien as shall have been approved by an
     Extraordinary Resolution of the Noteholders for so long as such
     Indebtedness will be so secured, unless, after giving effect thereto, the
     aggregate outstanding principal amount of all such secured Indebtedness
     (excluding that of Listed Principal Subsidiaries and their respective
     Subsidiaries and Indebtedness secured by Permitted Liens) entered into
     after the Issue Date would not exceed 50 per cent. of the Guarantor's
     Adjusted Consolidated Net Worth.

(2)  Interpretation

     For the purposes of these Conditions:

     "Adjusted Consolidated Net Worth" means the sum of (a) all amounts paid up
     (or credited as paid up) on all classes of the Guarantor's issued share
     capital, revenue or capital reserves, capital contribution, or any other
     accounts that are included as shareholders' funds under generally accepted
     accounting principles and practices in Hong Kong ("HK GAAP") and (b) the
     aggregate outstanding principal amount of Subordinated Indebtedness;

                                      -7-
<PAGE>

       "Principal Subsidiary" at any time shall mean a Subsidiary of the
       Guarantor:

       (i)    as to which one or more of the following conditions is satisfied:

              (a)    its net profit or (in the case of a Subsidiary of the
                     Guarantor which has Subsidiaries) consolidated net profit
                     attributable to the Guarantor (in each case before taxation
                     and exceptional items) is at least 5 per cent. of the
                     consolidated net profit of the Guarantor and its
                     Subsidiaries (before taxation and exceptional items but
                     after deducting minority interests in Subsidiaries); or

              (b)    its net assets or (in the case of a Subsidiary of the
                     Guarantor which has Subsidiaries) consolidated net assets
                     attributable to the Guarantor (in each case after deducting
                     minority interests in Subsidiaries) are at least 5 per
                     cent. of the consolidated net assets (after deducting
                     minority interests in Subsidiaries) of the Guarantor and
                     its Subsidiaries;

              all as calculated by reference to the then latest audited
              financial statements (consolidated or, as the case may be,
              unconsolidated) of the Subsidiary of the Guarantor and the then
              latest audited consolidated financial statements of the Guarantor
              provided that: (1) in the case of a Subsidiary of the Guarantor
              acquired after the end of the financial period to which the then
              latest relevant audited accounts relate, the reference to the
              then latest audited accounts for the purposes of the calculation
              above shall, until audited accounts for the financial period in
              which the acquisition is made are published, be deemed to be a
              reference to the accounts adjusted to consolidate the latest
              audited accounts of the Subsidiary in the accounts; (2) if, in
              the case of a Subsidiary of the Guarantor which itself has one or
              more Subsidiaries, no consolidated accounts are prepared and
              audited, its consolidated net assets and consolidated net profits
              shall be determined on the basis of pro forma consolidated
              accounts of the relevant Subsidiary and its Subsidiaries prepared
              for this purpose by its auditors; (3) if the accounts of a
              Subsidiary of the Guarantor (not being a Subsidiary referred to
              in (1) above) are not consolidated with those of the Guarantor
              then the determination of whether or not the Subsidiary of the
              Guarantor is a Principal Subsidiary shall, if the Guarantor
              requires, be based on a pro forma consolidation of its accounts
              (consolidated, if appropriate) with the consolidated accounts of
              the Guarantor and its Subsidiaries; or

       (ii)   to which is transferred all or substantially all of the assets of
              a Subsidiary of the Guarantor which immediately prior to the
              transfer is a Principal Subsidiary, provided that, with effect
              from such transfer, the Subsidiary which so transfers its assets
              and undertakings shall cease to be a Principal Subsidiary (but
              without prejudice to paragraph (i) above) and the Subsidiary of
              the Guarantor to which the assets are so transferred shall
              forthwith upon such transfer become a Principal Subsidiary.

       A certificate of the auditors of the Guarantor as to whether or not a
       Subsidiary is a Principal Subsidiary shall be conclusive and binding on
       all parties in the absence of manifest error;

       "Indebtedness" of any Person means any indebtedness for or in respect of
       money borrowed that has a final maturity of one year or more from its
       date of incurrence or issuance and that is evidenced by any agreement or
       other instrument, excluding trade payables; provided, however, that for
       the purposes of determining the amount of Indebtedness of the Guarantor
       or any of its Subsidiaries outstanding at any relevant time, the amount
       included as Indebtedness

                                      -8-
<PAGE>

       of the Guarantor or such Subsidiary in respect of finance leases shall
       be the net amount from time to time properly characterised as
       "obligations under finance leases" in accordance with HK GAAP;

       "Lien" means any mortgage, charge, pledge, lien, encumbrance,
       hypothecation, title retention, security interest or security
       arrangement of any kind;

       "Listed Principal Subsidiary" means any Principal Subsidiary, the shares
       of which are at the relevant time listed on The Stock Exchange of Hong
       Kong Limited or any other recognised stock exchange;

       "Permitted Liens" means:

       (i)    Liens existing on or prior to the Issue Date;

       (ii)   Liens for taxes or assessments or other applicable governmental
              charges or levies;

       (iii)  Liens created or arising by operation of law or created in the
              ordinary course of business, including, but not limited to,
              landlords' liens and statutory liens of carriers, warehousemen,
              mechanics, materialmen, vendors and other liens securing amounts
              which are not more than 60 days overdue or which are being
              contested in good faith;

       (iv)   Liens incurred or deposits made in the ordinary course of
              business in connection with workers' compensation, unemployment
              insurance and other types of social security or to secure the
              performance of tenders, statutory obligations, surety and appeal
              bonds, bids, leases, government contracts or undertakings,
              performance and return of money bonds, interconnection, access or
              resale agreements with other telecommunications companies or
              organisations, and similar obligations;

       (v)    easements, rights-of-way, zoning and similar restrictions and
              other similar charges or encumbrances not interfering with the
              ordinary conduct of the business of the Guarantor and any
              Principal Subsidiaries;

       (vi)   Liens created on any property or assets acquired, leased or
              developed (including improved, constructed, altered or repaired)
              after the Issue Date; provided, however, that (i) any such Lien
              shall be confined to the property or assets acquired, leased or
              developed (including improved, constructed, altered or repaired);
              (ii) the principal amount of the debt encumbered by such Lien
              shall not exceed the cost of the acquisition or development of
              such property or assets or any improvements thereto (including
              any construction, repair or alteration) or thereon and (iii) any
              such Lien shall be created concurrently with or within three
              years following the acquisition, lease or development (including
              construction, improvement, repair or alteration) of such property
              or assets;

       (vii)  rights of setoff of a financial institution with respect to
              deposits or other accounts of the Guarantor or any Principal
              Subsidiary held by such financial institution in an amount not to
              exceed the aggregate amount owed to such financial institution by
              the Guarantor or such Principal Subsidiary, as the case may be;

       (viii) Liens on documents and the goods they represent in connection
              with letters of credit, trade finance and similar transactions
              entered into in the ordinary course of business;

                                      -9-
<PAGE>

       (ix)   Liens arising in connection with industrial revenue, development
              or similar bonds or other indebtedness or means of project
              financing (provided that the Liens arising in connection with
              such industrial revenue, development or similar bonds or other
              indebtedness or means of project financing do not exceed the
              value of the project financed and are limited to the project
              financed);

       (x)    Liens in favour of the Guarantor or any Principal Subsidiary;

       (xi)   leases, subleases, licenses and sublicenses granted to third
              parties in the ordinary course of business;

       (xii)  attachment, judgment and other similar Liens arising in
              connection with court proceedings which are effectively stayed
              while the underlying claims are being contested in good faith by
              appropriate proceedings;

       (xiii) any Lien against any property or assets of a Person existing at
              the time such Person becomes a Principal Subsidiary or arising
              after such acquisition pursuant to contractual commitments
              entered into prior to and not in contemplation of such
              acquisition;

       (xiv)  any Lien existing on any property or assets prior to the
              acquisition thereof, which Lien was not created in connection
              with the acquisition thereof, except for Liens permitted pursuant
              to clause (vi) above;

       (xv)   Liens on any property or assets of the Guarantor or any Principal
              Subsidiary in favour of any government or any subdivision
              thereof, securing the obligations of the Guarantor or such
              Principal Subsidiary under any contract or payment owed to such
              governmental entity pursuant to applicable laws, rules,
              regulations or statutes;

       (xvi)  Liens created in connection with any sale/leaseback transaction;

       (xvii) any renewal or extension of any of the Liens described in the
              foregoing clauses which is limited to the original property or
              assets covered thereby; or

      (xviii) Liens in respect of Indebtedness with respect to which the
              Guarantor or any Principal Subsidiary has paid money or deposited
              money or securities with a fiscal agent, trustee or depository to
              pay or discharge in full the obligations of the Guarantor and its
              Subsidiaries in respect thereof (other than the obligations that
              such money or securities so paid or deposited, and the proceeds
              therefrom, be sufficient to pay or discharge such obligations in
              full);

       "Person" means any individual, corporation, partnership, joint venture,
       association, joint stock company, trust, unincorporated organisation,
       government or any agency or political subdivision thereof or any other
       entity;

       "Subordinated Indebtedness" means the principal amount of Indebtedness
       of the Guarantor (including perpetual debt, which the Guarantor is not
       required to repay) which (i) has a final maturity and a weighted average
       life to maturity longer than the maturity of the Notes and (ii) is
       issued or assumed pursuant to, or evidenced by, an indenture, other
       instrument or agreement containing provisions for the subordination of
       such Indebtedness to the Notes including (x) a provision that, in the
       event of any bankruptcy, insolvency or other similar proceeding in
       respect of the Guarantor, the holders of the Notes shall be entitled to
       receive

                                      -10-
<PAGE>

       payment in full in cash of all principal, Additional Amounts (as defined
       below) and interest on the Notes (including all interest arising after
       the commencement of such proceeding whether or not an allowed claim in
       such proceeding) before the holder or holders of any such Subordinated
       Indebtedness shall be entitled to receive any payment of principal,
       interest or premium thereon, (y) a provision that, if an Event of
       Default has occurred and is continuing under the Notes, the holder or
       holders of any such Subordinated Indebtedness shall not be entitled to
       payment of any principal, interest or premium in respect thereof unless
       or until such Event of Default shall have been cured or waived or shall
       have ceased to exist, and (z) a provision that the holder or holders of
       such Subordinated Indebtedness may not accelerate the maturity thereof
       as a result of any default relating thereto so long as any Note is
       outstanding; and

       "Subsidiary" means, in relation to any company, any company or other
       business entity of which the first-named company owns or controls
       (either directly or through one or more other Subsidiaries) more than 50
       per cent. of the issued share capital, or other ownership interest,
       giving ordinary voting power to elect directors, managers or trustees of
       such company or other business entity, or any company or other business
       entity which at any time has its accounts consolidated with those of the
       first-named company or which, under Hong Kong law or regulations and
       under HK GAAP from time to time, should have its accounts consolidated
       with those of the first-named company.

5.     INTEREST

(1)    Interest Rate and Interest Payment Dates

       The Notes bear interest from (and including) the Issue Date at the rate
       of 7.88 per cent. per annum, payable semi-annually in arrear in equal
       instalments on 24th January and 24th July of each year (each an "Interest
       Payment Date"). The first payment, for the period from and including 24th
       January, 2003 to but excluding 24th July, 2003 and amounting to
       U.S.$9,850 per U.S.$250,000 principal amount of Notes, shall be made on
       24th July, 2003.

       The period from (and including) the Issue Date to (but excluding) the
       first Interest Payment Date and each successive period from (and
       including) an Interest Payment Date to (but excluding) the next
       succeeding Interest Payment Date is herein referred to as an "Interest
       Period".

(2)    Interest Accrual

       Each Note will cease to bear interest from (and including) its due date
       for redemption unless, upon due presentation, payment of the principal in
       respect of the Note is improperly withheld or refused or unless default
       is otherwise made in respect of payment. In such event, interest will
       continue to accrue until whichever is the earlier of:

       (a)    the date on which all amounts due in respect of such Note have
              been paid; and

       (b)    five days after the date on which the full amount of the moneys
              payable in respect of such Notes has been received by the Fiscal
              Agent and notice to that effect has been given to the Noteholders
              in accordance with Condition 12.

                                      -11-
<PAGE>

(3)    Calculation of Broken Interest

       When interest is required to be calculated in respect of a period ending
       other than on an Interest Payment Date, it shall be calculated on the
       basis of a 360-day year consisting of 12 months of 30 days each and, in
       the case of an incomplete month, the number of days elapsed on the basis
       of a month of 30 days.

6.     PAYMENTS

(1)    Payments in respect of Notes

       Payments of principal and interest in respect of each Note will be made
       against presentation and surrender (or, in the case of part payment only,
       endorsement) of such Note, except that payments of interest due on an
       Interest Payment Date will be made against presentation and surrender
       (or, in the case of part payment only, endorsement) of the relevant
       Coupon, in each case only at the specified office outside the United
       States of any of the Paying Agents.

(2)    Method of Payment

       Payments will be made by credit or transfer to an account in U.S. dollars
       maintained by the payee, or, at the option of the payee, by a cheque in
       U.S. dollars drawn on a bank in New York City.

(3)    U.S. Paying Agents

       Notwithstanding the foregoing, payments will be made at the specified
       office in the United States of any Paying Agent and (if no such
       appointment is then in effect) the Issuer shall appoint and maintain a
       Paying Agent with a specified office in New York City at which payments
       will be made:

       (a)    if (i) the Issuer has appointed Paying Agents with specified
              offices outside the United States with the reasonable expectation
              that the Paying Agents would be able to make payment at the
              specified offices outside the United States of the full amount
              payable with respect to the Notes in the manner provided above
              when due, (ii) payment of the full amount due in U.S. dollars at
              all specified offices of the Paying Agents outside the United
              States is illegal or effectively precluded by exchange controls or
              other similar restrictions and (iii) the payment is then permitted
              under United States law; or

       (b)    at the option of the relevant holder, if the payment is then
              permitted under United States law without involving, in the
              opinion of the Issuer, adverse tax consequences for the Issuer or
              the Guarantor.

(4)    Missing Unmatured Coupons

       Each Note should be presented for payment together with all relative
       unmatured Coupons, failing which the full amount of any relative missing
       unmatured Coupon (or, in the case of payment not being made in full, that
       proportion of the full amount of the missing unmatured Coupon which the
       amount so paid bears to the total amount due) will be deducted from the
       amount due for payment. Each amount so deducted will be paid in the
       manner mentioned above against presentation and surrender (or, in the
       case of part payment only, endorsement) of the relative missing Coupon at
       any time before the expiry of 10 years after the Relevant Date (as
       defined in Condition 8) in respect of the relevant Note (whether or not
       the Coupon

                                      -12-
<PAGE>

       would otherwise have become void pursuant to condition 9) or, if later,
       five years after the date on which the Coupon would have become due, but
       not thereafter.

(5)    Payments subject to Applicable Laws

       Payments in respect of principal and interest on the Notes are subject in
       all cases to any fiscal or other laws and regulations applicable in the
       place of payment, but without prejudice to the provisions of Condition 8.

(6)    Payment only on a Presentation Date

       A holder shall be entitled to present a Note or Coupon for payment only
       on a Presentation Date and shall not, except as provided in Condition 5,
       be entitled to any further interest or other payment if a Presentation
       Date is after the due date.

       "Presentation Date" means a day which (subject to Condition 9):

       (a)    is or falls after the relevant due date;

       (b)    is a Business Day in the place of the specified office of the
              Paying Agent at which the Note or Coupon is presented for payment;
              and

       (c)    in the case of payment by credit or transfer to a U.S. dollar
              account in New York City as referred to above), is a Business Day
              in New York City.

       In this Condition, "Business Day" means, in relation to any place, a day
       (other than a Saturday or Sunday) on which commercial banks and foreign
       exchange markets settle payments and are open for general business
       (including dealing in foreign exchange and foreign currency deposits) in
       that place.

(7)    Initial Paying Agents

       The names of the initial Paying Agents and their initial specified
       offices are set out at the end of these Conditions. The Issuer reserves
       the right at any time to vary or terminate the appointment of any Paying
       Agent and to appoint additional or other Paying Agents provided that (a)
       it will at all times maintain a Fiscal Agent having its specified office
       in Hong Kong, (b) if any European Union Directive on the taxation of
       savings implementing the conclusions of the ECOFIN Council Meeting of
       26th-27th November, 2000 or any law implementing or complying with, or
       introduced in order to conform to, such Directive is introduced, the
       Issuer will ensure it maintains a Paying Agent in a European Union Member
       State that will not be obliged to withhold or deduct tax pursuant to any
       such Directive, (c) if any Notes are listed on the Luxembourg Stock
       Exchange or any other stock exchange, it will at all times maintain a
       Paying Agent having its specified office in Luxembourg, or, as the case
       may be, in such place as may be required by the rules and regulations of
       any other relevant stock exchange (or any other relevant authority) and
       (d) the specified office of a Paying Agent shall not be located within
       the United States. Notice of any termination or appointment and of any
       changes in specified offices shall be given to the Noteholders promptly
       by the Issuer in accordance with Condition 12.

       The Agents shall act solely as Agent of the Issuer and will not thereby
       assume any obligations towards or relationship of agency or trust for or
       with any of the owners or holders of Notes or Coupons.

                                      -13-
<PAGE>

7.     REDEMPTION AND PURCHASE

(1)    Redemption at Maturity

       Unless previously redeemed or purchased and cancelled as provided below,
       the Issuer will redeem the Notes at their principal amount on 24th
       January, 2013.

(2)    Redemption for Taxation Reasons

       If (a) as a result of any change in, or amendment to, the laws or
       regulations of a Relevant Jurisdiction (as defined in Condition 8), or
       any change in the official interpretation of the laws or regulations of a
       Relevant Jurisdiction, which change or amendment becomes effective after
       24th January, 2003 on the next Interest Payment Date (i) the Issuer is or
       would be required to pay Additional Amounts (as defined in Condition 8)
       as provided or referred to in Condition 8; or (ii) the Guarantor would be
       unable for reasons outside its control to procure payment by the Issuer
       and in making payment itself would be required to pay such Additional
       Amounts; or (iii) the Guarantor or any of its Subsidiaries has or will
       become obliged to pay any Additional Amounts in respect of the
       Intercompany Loan (as defined in Condition 8) and (b) the requirement
       cannot be avoided by the Issuer, the Guarantor or any of such
       Subsidiaries, as the case may be, taking reasonable measures available to
       it provided that such measures do not involve the Issuer, the Guarantor
       or such Subsidiary incurring material expenses, the Issuer may at its
       option, having given not less than 30 nor more than 60 days' notice to
       the Noteholders in accordance with Condition 12 (which notice shall be
       irrevocable), redeem all the Notes, but not some only, at any time at
       their principal amount together with interest accrued to (but excluding)
       the date of redemption, provided that no notice of redemption shall be
       given earlier than 90 days before the earliest date on which the Issuer,
       the Guarantor or such Subsidiary of the Guarantor, as the case may be,
       would be required to pay such Additional Amounts were a payment in
       respect of the Notes then due. Prior to the publication of any notice of
       redemption pursuant to this paragraph, the Issuer shall deliver to the
       Fiscal Agent a certificate signed by two Directors of the Issuer, the
       Guarantor or such Subsidiary of the Guarantor, as the case may be,
       stating that the requirement referred to in (a) above will apply on the
       next Interest Payment Date and cannot be avoided by the Issuer, the
       Guarantor or such Subsidiary of the Guarantor, as the case may be, taking
       reasonable measures available to it provided that such measures do not
       involve the Issuer, the Guarantor or such Subsidiary incurring material
       expenses and an opinion of independent legal advisers of recognised
       standing to the effect that the Issuer, the Guarantor or such Subsidiary
       of the Guarantor, as the case may be, has or will become obliged to pay
       such Additional Amounts as a result of the change or amendment.

(3)    Redemption at the Option of the Issuer

       The Issuer may give:

       (a)    not less than 30 nor more than 60 days' notice to the Noteholders
              in accordance with Condition 12; and

       (b)    not less than 15 days before the giving of the notice referred to
              in (a), notice to the Fiscal Agent

       (which notices shall be irrevocable and shall specify the date fixed for
       redemption), to redeem all (but not some only) of the Notes on any
       Interest Payment Date during the period

                                      -14-
<PAGE>

       commencing on 24th January, 2007 and ending on 24th January, 2010 (both
       dates inclusive) at their principal amount. Upon the expiry of such
       notice, the Issuer shall be obliged to redeem the Notes.

(4)    [intentionally blank]

(5)    Redemption at the Option of the Holders

(a)    Early Redemption

       In the event that the Notes have not been previously redeemed, upon any
       Noteholder giving to the Issuer not less than 30 nor more than 60 days'
       notice expiring on 24th January, 2010 (or expiring on any Interest
       Payment Date thereafter), the Issuer will redeem in whole (but not in
       part) the Notes the subject of the notice on such Interest Payment Date,
       at their principal amount.

(b)    Exercise

       To exercise the right to require redemption of any Notes under this
       Condition 7(5), the holder of the Notes must deliver at the specified
       office of any Paying Agent on any Business Day (as defined in Condition
       6(6)) in the place of such specified office, a duly signed and completed
       notice of exercise in the form (for the time being current and which may,
       if this Note is held in a clearing system, be any form acceptable to the
       clearing system delivered in any manner acceptable to the clearing
       system) obtainable from any specified office of any Paying Agent (a "Put
       Notice") and in which the holder must specify a bank account (or, if
       payment is required to be made by cheque, and address) to which payment
       is to be made under this Condition accompanied by such Notes or evidence
       satisfactory to the Paying Agent concerned that such Notes will,
       following the delivery of the Put Notice, be held to its order or under
       its control. A Put Notice given by a holder of any Note shall be
       irrevocable except where, prior to the due date of redemption, an Event
       of Default has occurred and be continuing, in which event such holder, at
       its option, may elect by notice to the Issuer to withdraw the Put Notice
       and instead to give notice that the Note is immediately due and repayable
       under Condition 10.

(6)    Purchases

       The Issuer, the Guarantor or any of the Guarantor's Subsidiaries (as
       defined above) may at any time purchase Notes (provided that all
       unmatured Coupons appertaining to the Notes are purchased with the Notes)
       in any manner and at any price. If purchases are made by tender, tenders
       must be available to all Noteholders alike.

(7)    Cancellations

       All Notes which are (a) redeemed or (b) purchased by or on behalf of the
       Issuer, the Guarantor or any of the Guarantor's Subsidiaries will
       forthwith be cancelled, together with all relative unmatured Coupons
       attached to the Notes or surrendered with the Notes, and accordingly may
       not be reissued or resold.

                                      -15-
<PAGE>

(8)    Notices Final

       Upon the expiry of any notice as is referred to in paragraph (2), (3) or
       (5) above the Issuer shall be bound to redeem the Notes to which the
       notice refers in accordance with the terms of such paragraph.

8.     TAXATION

(1)    Payment without Withholding

       All payments in respect of the Notes by or on behalf of the Issuer or the
       Guarantor and all payments made by PCCW or any of its Subsidiaries in
       respect of the inter-company loans of the proceeds of the offering of the
       Notes from the Issuer to PCCW or any of its Subsidiaries (collectively,
       the "Intercompany Loan") shall be made without withholding or deduction
       for, or on account of, any present or future taxes, duties, assessments
       or governmental charges of whatever nature imposed or levied by or on
       behalf of any of the Relevant Jurisdictions ("Taxes"), unless such
       withholding or deduction of the Taxes is required by law. In that event,
       the Issuer, PCCW or such Subsidiary of PCCW (whether, the Guarantor, or
       another subsidiary of PCCW), as the case may be, will pay such additional
       amounts ("Additional Amounts") as may be necessary in order that the net
       amounts received by the Noteholders and Couponholders or in connection
       with the Intercompany Loan after such withholding or deduction shall
       equal the respective amounts which would have been receivable in respect
       of the Notes, the Coupons or in connection with the Intercompany Loan, as
       the case may be, in the absence of such withholding or deduction; except
       that no Additional Amounts shall be payable in relation to any payment in
       respect of any Note or Coupon:

       (a)    to, or to a third party on behalf of, a holder who is liable to
              the Taxes in respect of the Note or Coupon by reason of his having
              some connection with a Relevant Jurisdiction other than the mere
              holding of the Note or Coupon or receiving principal or interest
              in respect thereof; or

       (b)    presented for payment more than 30 days after the Relevant Date
              (as defined below) except to the extent that a holder would have
              been entitled to Additional Amounts on presenting the same for
              payment on the last day of such period of 30 days assuming that
              day to have been a Presentation Date; or

       (c)    where such withholding or deduction is imposed on a payment to an
              individual and is required to be made pursuant to any European
              Union Directive on the taxation of savings implementing the
              conclusions of the ECOFIN Council meeting of 26th to 27th
              November, 2000 or any law implementing or complying with, or
              introduced in order to conform, to such Directive; or

       (d)    presented for payment by or on behalf of a Noteholder or
              Couponholder who would have been able to avoid such withholding or
              deduction by presenting the relevant Note or Coupon, as the case
              may be, to another Paying Agent in a European Union Member State;
              or

       (e)    in respect of any such Taxes that would not have been so imposed,
              deducted or withheld if the holder or beneficial owner of a Note
              or the beneficial owner of any payment on such Note had (i) made a
              declaration of non-residence or any other claim or filing for
              exemption to which it is entitled or (ii) complied with any
              certification,

                                      -16-
<PAGE>

              identification, information, documentation or other reporting
              requirement concerning the nationality, residence, identity or
              connection with a Relevant Jurisdiction of such holder or
              beneficial owner of such Note or any payment on such Note
              (provided that (x) such declaration of non-residence or other
              claim or filing for exemption or such compliance is required by
              the applicable law of a Relevant Jurisdiction as a precondition to
              exemption from, or reduction in the rate of the imposition,
              deduction or withholding of, such Taxes and (y) at least 30 days
              prior to the first payment date with respect to which such
              declaration of non-residence or other claim or filing for
              exemption or such compliance is required under the applicable law
              of a Relevant Jurisdiction, the holder or the beneficial owner, as
              the case may be, of such Note at that time has been notified by
              the Issuer or any other person through whom payment may be made
              that a declaration of non-residence or other claim or filing for
              exemption or such compliance is required to be made); or

       (f)    in respect of any payment under or with respect to a Note to any
              holder that is a fiduciary or partnership or any person other than
              the sole beneficial owner of such payment or Note, to the extent
              that a beneficiary or settlor with respect to such fiduciary, a
              member of such a partnership or the beneficial owner of such
              payment or Note would not have been entitled to such Additional
              Amounts had such beneficiary, settlor, member or beneficial owner
              been the actual holder of such Note; or

       (g)    in respect of any estate, inheritance, gift, sales, excise,
              transfer or personal property tax or similar tax, assessment or
              governmental charge; or

       (h)    any combination of items (a) through (g) above.

(2)    Interpretation

       In these Conditions:

       (a)    "Relevant Date" means the date on which the payment first becomes
              due but, if the full amount of the money payable has not been
              received by the Fiscal Agent on or before the due date, it means
              the date on which, the full amount of the money having been so
              received, notice to that effect shall have been duly given to the
              Noteholders by the Issuer in accordance with Condition 12; and

       (b)    "Relevant Jurisdiction" means the British Virgin Islands or any
              political subdivision or any authority thereof or therein having
              power to tax, the Hong Kong Special Administrative Region of the
              People's Republic of China or any political subdivision or any
              authority thereof or therein having power to tax or any other
              jurisdiction in which the Issuer, PCCW or such Subsidiary of PCCW
              (whether the Guarantor, or another subsidiary of PCCW), as the
              case may be, is resident for tax purposes from or through which
              payments in respect of the Notes or the Intercompany Loan, as the
              case may be, are made or any political subdivision or any
              authority thereof or therein having power to tax.

(3)    Additional Amounts

       Any reference in these Conditions to any amounts in respect of the Notes
       or the Intercompany Loan shall be deemed also to refer to any Additional
       Amounts which may be payable under this Condition.

                                      -17-
<PAGE>

9.     PRESCRIPTION

       Notes and Coupons will become void unless presented for payment within
       periods of 10 years (in the case of principal) and five years (in the
       case of interest) from the Relevant Date in respect of the Notes or, as
       the case may be, the Coupons, subject to the provisions of Condition 6.

10.    EVENTS OF DEFAULT

       The holder of any Note may give notice to the Issuer that the Note is,
       and it shall accordingly forthwith become, immediately due and repayable
       at its principal amount, together with interest accrued to the date of
       repayment, if any of the following events ("Events of Default") shall
       have occurred and be continuing:

       (a)    failure to pay principal of any Note within five Business Days in
              Hong Kong and New York after the due date for such payment; or

       (b)    failure to pay interest on any Note within 30 Business Days in
              Hong Kong and New York after the due date for such payment; or

       (c)    failure to perform any other covenant or agreement of the Issuer
              or the Guarantor in the Agency Agreement, the Guarantee or the
              Notes and (except where the failure is incapable of remedy when no
              continuation or notice as is hereinafter mentioned will be
              required) such failure continues for 60 days after there has been
              given by registered or certified mail, to the Issuer or the
              Guarantor by the Fiscal Agent (as instructed by the relevant
              Noteholder) or by the relevant Noteholder, a written notice
              specifying such failure and requiring it to be remedied; or

       (d)    (i) failure to pay upon final maturity (after giving effect to the
              expiration of any applicable grace period therefor) the principal
              of any Indebtedness of the Issuer, the Guarantor or any Principal
              Subsidiary, (ii) acceleration of the maturity of any Indebtedness
              of the Issuer, the Guarantor or any Principal Subsidiary following
              a default by the Issuer, the Guarantor or such Principal
              Subsidiary unless such Indebtedness is discharged or such
              acceleration is annulled within 10 days of the due date or date of
              acceleration, or (iii) failure to pay any amount payable by the
              Issuer, the Guarantor or any Principal Subsidiary under any
              guarantee or indemnity in respect of any Indebtedness of any other
              Person unless such obligation is discharged or otherwise satisfied
              within 10 days of the due date; provided, however, that no such
              event set forth in (i), (ii) or (iii) above shall constitute an
              Event of Default unless the aggregate Indebtedness to which all
              such events relate exceeds US$30,000,000 (or its equivalent in any
              other currency) (the "Specified Limit"); or

       (e)    the Issuer, the Guarantor or any Principal Subsidiary becomes
              insolvent and is unable to pay its debts as they fall due, stops,
              suspends or threatens to stop or suspend payment of all or a
              material part of its debts, begins negotiations or takes any
              proceeding or other step with a view to readjustment, rescheduling
              or deferral of all of its Indebtedness (or any part of its
              Indebtedness which it will or might otherwise be unable to pay
              when due) or proposes or makes a general assignment or any
              arrangement or composition with or for the benefit of its
              creditors or a moratorium is agreed or declared in respect of or
              affecting all or a material part of the Indebtedness of the
              Issuer, the Guarantor or any Principal Subsidiary or of the Issuer
              or the Guarantor and their respective Subsidiaries taken as a
              whole; or

                                      -18-
<PAGE>

       (f)    distress, attachment, execution or other legal process is levied,
              enforced or sued out on or against all or any material part of the
              assets of the Issuer, the Guarantor or any Principal Subsidiary in
              respect of which the cost or loss to the relevant company or the
              amount claimed against the relevant company exceeds the Specified
              Limit and is not discharged or stayed within 30 days (or such
              longer period as the holders of a majority in principal amount of
              the Notes may permit) unless and for so long as it is being
              contested in good faith and diligently by the Issuer, the
              Guarantor or Principal Subsidiary, as the case may be; or

       (g)    any present or future encumbrance on or over all or any material
              part of the assets of the Issuer, the Guarantor or any Principal
              Subsidiary becomes enforceable and any step (including the taking
              of possession or the appointment of a receiver, manager or similar
              officer) is taken to enforce that encumbrance; or

       (h)    any bona fide step is taken by any person for the dissolution of
              the Issuer, the Guarantor or any Principal Subsidiary (except for
              the purpose of and followed by a reconstruction or amalgamation on
              terms approved by the holders of a majority in principal amount of
              the Notes before that step is taken or in the case of a Principal
              Subsidiary whereby the undertaking and assets of the Principal
              Subsidiary are transferred or otherwise vested in the Guarantor or
              another of its Subsidiaries pursuant to a merger of the Principal
              Subsidiary with the Guarantor or such other Subsidiary or by way
              of a voluntary winding-up or dissolution where there are surplus
              assets in any such Principal Subsidiary and such surplus assets
              attributable to the Guarantor and/or any other Subsidiary are
              distributed to the Guarantor and/or such other Subsidiary); or

       (i)    the Issuer ceases to be a direct or indirect wholly-owned
              Subsidiary of PCCW; or

       (j)    the Issuer carries on any business activity whatsoever other than
              in connection with the Notes or incurs any Indebtedness (other
              than to the Guarantor or the Guarantor's Subsidiaries and carries
              on any activities in connection therewith, including without
              limitation entering into any hedging or derivative transaction in
              connection with the Intercompany Loan or otherwise) or makes any
              issue of bonds, notes, debenture stock, loan stock, or other debt
              securities of any kind other than the Notes; or

       (k)    any event occurs which under the laws of any relevant jurisdiction
              has an analogous or equivalent effect to any of the events
              referred to in paragraphs (e) through (h) above; or

       (l)    if the Guarantee ceases to be, or is claimed by the Guarantor not
              to be, in full force and effect.

11.    REPLACEMENT OF NOTES AND COUPONS

       Should any Note or Coupon be lost, stolen, mutilated, defaced or
       destroyed it may be replaced at the specified office outside the United
       States of the Fiscal Agent, upon payment by the claimant of the expenses
       incurred in connection with the replacement and on such terms as to
       evidence and indemnity as the Issuer may reasonably require. Mutilated or
       defaced Notes or Coupons must be surrendered before replacements will be
       issued.

                                      -19-
<PAGE>

12.    NOTICES

(1)    Notices to the Noteholders

       All notices to the Noteholders will be valid if published in a leading
       English language daily newspaper with general circulation in Asia as the
       Issuer may decide and, if the Notes are listed on the Luxembourg Stock
       Exchange and the rules of that exchange so require, in one daily
       newspaper published in Luxembourg. It is expected that publication will
       normally be made in the Asian Wall Street Journal and, if appropriate,
       the Luxemburger Wort. The Issuer shall also ensure that notices are duly
       published in a manner which complies with the rules and regulations of
       any stock exchange or other relevant authority on which the Notes are for
       the time being listed. Any such notice will be deemed to have been given
       on the date of the first publication or, where required to be published
       in more than one newspaper, on the date of the first publication in all
       required newspaper.

(2)    Notices from the Noteholders

       Notices to be given by any Noteholder shall be in writing and given by
       lodging the same, together with the relative Note or Notes, with the
       Fiscal Agent or, if the Notes are held in a clearing system, may be given
       through the clearing system in accordance with the standard rules and
       procedures.

13.    MEETINGS OF NOTEHOLDERS AND MODIFICATION

(1)    Provisions for Meetings

       The Agency Agreement contains provisions for convening meetings of the
       Noteholders to consider any matter affecting their interests, including
       the modification by Extraordinary Resolution of these Conditions or the
       Guarantee or the provisions of the Agency Agreement. The quorum at any
       meeting for passing an Extraordinary Resolution will be one or more
       Persons present holding or representing more than 50 per cent. in
       principal amount of the Notes for the time being outstanding, or at any
       adjourned meeting one or more Persons present whatever the principal
       amount of the Notes held or represented by him or them, except that at
       any meeting the business of which includes the modification of certain of
       these Conditions and provisions of the Agency Agreement the necessary
       quorum for passing an Extraordinary Resolution will be one or more
       Persons present holding or representing not less than two-thirds, or at
       any adjourned meeting not less than one-third, of the principal amount of
       the Notes for the time being outstanding. An Extraordinary Resolution
       passed at any meeting of the Noteholders will be binding on all
       Noteholders, whether or not they are present at the meeting, and on all
       Couponholders.

(2)    Modification

       The Fiscal Agent may agree, without the consent of the Noteholders or
       Couponholders, to any modification of any of these Conditions or any of
       the provisions of the Agency Agreement either (i) for the purpose of
       curing any ambiguity or manifest or proven error or of curing, correcting
       or supplementing any defective provision contained herein or therein or
       (ii) in any manner which is not materially prejudicial to the interests
       of the Noteholders. Any modification shall be binding on the Noteholders
       and the Couponholders and, unless the Fiscal Agent agrees otherwise, any
       modification shall be notified by the Issuer to the Noteholders as soon
       as practicable thereafter in accordance with Condition 12.

                                      -20-
<PAGE>

14.    CURRENCY INDEMNITY

       The Issuer's and the Guarantor's obligations under the Notes to make
       all payments in U.S. dollars will not be satisfied by any payment,
       recovery or any other realisation of proceeds in any currency other
       than U.S. dollars. If, for the purpose of obtaining a judgment in any
       court with respect to any obligation of the Issuer or, as the case may
       be, the Guarantor under any Notes it shall become necessary to convert
       into any other currency or currency unit any amount in the currency or
       currency unit due under any Notes then such conversion shall be made
       by the Fiscal Agent at the market exchange rate (as determined by the
       Fiscal Agent) as in effect on the date of entry of the judgment (the
       "Judgment Date"); it being understood that the Fiscal Agent shall
       effect such conversion only after receipt of the relevant funds from
       the Issuer or, as the case may be, the Guarantor and that such
       conversion may require up to three Business Days in Hong Kong, New
       York City and the financial centre of the currency into which any
       amount is converted to effect after the receipt of such funds. If
       pursuant to any such judgment, conversion shall be made on a date (the
       "Substitute Date") other than the Judgment Date and there shall occur
       a change between the market exchange rate for U.S. dollars as in
       effect on the Substitute Date and the market exchange rate as in
       effect on the Judgment Date, the Issuer agrees to pay such additional
       amounts (if any) in U.S. dollars as may be necessary to ensure that
       the amount paid is equal to the amount in such other currency or
       currency unit which, when converted at the market exchange rate as in
       effect on the Judgment Date, is the amount due under any Notes. Any
       amount due from the Issuer or, as the case may be, the Guarantor under
       this Condition shall be due as a separate debt and is not to be
       affected by or merged into any judgment being obtained for any other
       sums due in respect of any Notes. In no event, however, shall the
       Issuer or, as the case may be, the Guarantor be required to pay more
       in U.S. dollars due under the Notes at the market exchange rate as in
       effect on the Judgment Date than the amount of U.S. dollars stated to
       be due under the Notes so that in any event the Issuer's and the
       Guarantor's obligations under the Notes will be effectively maintained
       as obligations in U.S. dollars and the Issuer or, as the case may be,
       the Guarantor shall be entitled to withhold (or be reimbursed for, as
       the case may be) any excess of the amount actually realised upon any
       such conversion on the Substitute Date over the amount due and payable
       on the Judgment Date.

15.    FURTHER ISSUES

       The Issuer may from time to time without the consent of the
       Noteholders or Couponholders create and issue further notes, having
       terms and conditions the same as those of the Notes, or the same
       except for the amount of the first payment of interest, which may be
       consolidated and form a single series with the outstanding Notes.

16.    SUBSTITUTION

       The Issuer may at any time substitute, without the consent of the
       Noteholders or the Couponholders, the Guarantor or a Subsidiary of the
       Guarantor (such substituted company being hereinafter called the "New
       Company") to assume liability for the due and punctual payment of all
       payments and the performance of all the Issuer's obligations under the
       Notes and the Coupons then outstanding. Upon any such substitution,
       the New Company shall succeed to the rights and obligations of the
       Issuer (or any previous substitute) under the Notes and the Issuer (or
       any previous substitute) shall be released from its liability on the
       Notes. Such substitution shall be permitted only if, in addition to
       assuming the obligations of the Issuer (or of any previous substitute)
       under the Notes:

                                      -21-
<PAGE>

       (i)    the New Company shall, by means of a deed poll (the "Substitution
              Deed Poll"), agree to indemnify each Noteholder and Couponholder
              against (A) any taxes, duties, fees, assessments or governmental
              charges of whatever nature which are imposed on such holder with
              respect to such Note, and which would not have been so imposed had
              such substitution not been made, (B) any taxes, duties, fees,
              assessments or governmental charges of whatever nature imposed on
              or relating to such substitution and (C) any costs or expenses of
              the act of such substitution;

       (ii)   unless such New Company is the Guarantor, the Guarantor shall in
              the Substitution Deed Poll irrevocably guarantee all payments in
              respect of the Notes;

       (iii)  the New Company shall warrant, by means of the Substitution Deed
              Poll, that all necessary governmental approvals and consents for
              the assumption by the New Company of its obligations and the
              giving and implementation of the Guarantor's guarantee (if
              applicable) have been obtained and are in full force and effect
              and the obligations of the New Company under the Notes and of the
              Guarantor under its guarantee to guarantee payments in respect of
              the Notes (if applicable) are legal, valid, binding and
              enforceable in accordance with their terms, subject to applicable
              bankruptcy, insolvency and similar laws affecting creditors'
              rights generally and general principles of equity; and

       (iv)   the New Company shall have obtained legal opinions from
              independent legal advisers of recognised standing in the country
              of incorporation of the New Company, Hong Kong and England that
              the obligations of the New Company and, unless the New Company is
              the Guarantor, the Guarantor in respect of the Notes and the
              Substitution Deed Poll, as the case may be, are legal, valid and
              binding and that all consents and approvals as aforesaid have been
              obtained.

       Not more than 30 nor less than 15 days prior to the effective date of
       the substitution by the New Company, the Issuer shall give notice to
       the Noteholders and the Couponholders, in accordance with Condition
       12, of the substitution, stating that copies, or pending execution
       thereof final drafts, of the Substitution Deed Poll and other relevant
       documents and of the legal opinions are available for inspection by
       Noteholders and Couponholders at the specified offices of the Paying
       Agents during normal business hours. The originals of the Substitution
       Deed Poll and other documents will be delivered to the Fiscal Agent to
       hold until there are no claims outstanding in respect of the Notes or
       the Coupons.

       Upon the substitution becoming effective (x) references (if any) in
       these Conditions to the British Virgin Islands shall be replaced by
       references to the country of incorporation and, if different, the
       country of tax residence of the New Company and (y) if the New Company
       is not the Guarantor, all references in the Conditions to the
       Guarantor shall apply to the Guarantor in its capacity as such
       pursuant to Condition 16(ii) above.

17.    CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

       The Notes confer no right under the Contracts (Rights of Third
       Parties) Act 1999 to enforce any term of these Notes, but this does
       not affect any right or remedy of a third party which exists or is
       available apart from that Act.

                                      -22-
<PAGE>

18.    GOVERNING LAW AND SUBMISSION TO JURISDICTION

(1)    Governing Law

       The Agency Agreement, the Guarantee, the Notes and the Coupons are
       governed by, and will be construed in accordance with, English law.

(2)    Jurisdiction of English Courts

       The Issuer irrevocably agrees for the benefit of the Noteholders and
       the Couponholders that the courts of England are to have jurisdiction
       to settle any disputes which may arise out of or in connection with
       the Notes or the Coupons and that accordingly any suit, action or
       proceedings arising out of or in connection therewith (together
       referred to as "Proceedings") may be brought in the courts of England.
       The Issuer irrevocably and unconditionally waives and agrees not to
       raise any objection which it may have now or subsequently to the
       laying of the venue of any Proceedings in the courts of England and
       any claim that any Proceedings have been brought in an inconvenient
       forum and further irrevocably and unconditionally agrees that a
       judgment in any Proceedings brought in the courts of England shall be
       conclusive and binding upon it and may be enforced in the courts of
       any other jurisdiction. Nothing in this Condition shall limit any
       right to take Proceedings against the Issuer in any other court of
       competent jurisdiction, nor shall the taking of Proceedings in one or
       more jurisdictions preclude the taking of Proceedings in any other
       jurisdiction, whether concurrently or not.

(3)    Appointment of Process Agent

       The Issuer hereby irrevocably and unconditionally appoints RB
       Secretariat Limited at its registered office for the time being
       (currently at 10th Floor, Beaufort House, 15 St. Botolph Street,
       London EC3A 7EE, England at its registered office for the time being
       as its agent for service of process in England in respect of any
       Proceedings and undertakes that in the event of such agent ceasing so
       to act it will appoint another person as its agent for that purpose.

                                  FISCAL AGENT

                       Deutsche Bank AG, Hong Kong Branch
                         55th Floor, Cheung Kong Center
                             2 Queen's Road Central
                                    Hong Kong

                                      -23-
<PAGE>

                                  SIGNATORIES

PCCW CAPITAL NO. 3 LIMITED

By:

PCCW LIMITED

By:

PCCW-HKT TELEPHONE LIMITED

By:

DEUTSCHE BANK AG, HONG KONG BRANCH

By:

                                      24

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