Wednesday 4th October 2006

Dear Reader,

A note on PCCW's new attempt to privatise Sunday. By proposing to acquire all its assets for cash and a promissory note in a connected transaction, and then to distribute the cash to minority shareholders if they approve the delisting, they are achieving a backdoor privatisation. This is an underhanded and brazen exploitation of the Listing Rules to avoid the privatisation procedures of the Takeover Code. It requires only a simple majority of the independent shares voted to approve the asset sale, but then those who objected to the previous privatisation (at the same price) face the choice of either taking the cash or blocking the delisting (which only requires 10% of the independent shares), in which case they will have shares in a cash shell, and the Exchange will then suspend the listing. Checkmate.

To close this regulatory arbitrage, the Listing Committee should amend the Listing Rules so that any sale which would leave a company as a suspended cash shell under the Listing Rules should require the same level of approval as a delisting.

Now on to the bigger picture...

Building a value proposition for HK (4-Oct-06)
HK Chief Executive Donald Tsang recently convened an Economic Summit of 33 people, which spawned 4 focus groups, including one on financial services, which in turn produced 3 working groups, one of which, headed by HKEx government-appointed director and Chairman Ronald Arculli, has sought submissions on the markets. This is our submission.

Commissions for Labour (27-Sep-06)
The HK Government seeks to increase its intervention in the private contract between providers and purchasers of labour services, by imposing requirements to include commissions in holiday pay. In a submission to the Legco Panel on Manpower, we urge the Government to step back and let the free market function.

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David M Webb