TNAG-1664-FCO40-2313-Hong-Kong-telecommunications-1987 — Page 3

advises that the that that the proposal

in Council for

(a) The order of 31 May 1983 permitted transfer to Telco's subsidiary

(b)

(c)

the

of the

service of property development and the

other

and

assets

services

listed respectively in Annex B and paragraph 4 of Annex C. It did not specify that ownership of any properties, as such, be transferred.

The subsidiary company may develop and manage property on the instructions of Telco without any transfer of ownership.

Telco Properties Limited was incorporated after 31 May 1983 when the order was made. The order clearly applied to the sole Telco subsidiary company in existence at that time, namely Communication Services Limited. Accordingly, the parts of Telco's concession and undertaking to which the order relates may only be transferred to

Communication Services Limited.

Evaluation of the Request

11

Although transfer of ownership is not a pre-requisite for the

the development and management of Telco properties, we

believe that such a transfer would be consistent with Members' previous decision on this subject, albeit to a different subsidiary company.

Proposal

12

Consequently, we propose that, pursuant to section 35 of the Telephone Ordinance, Telco be permitted to transfer the East and West Exchanges to its subsidiary company, Telco Properties Ltd., provided that:

(a) the transfer shall be for the sole purpose of allowing the subsidiary company to develop and manage the property; and

(b)

the transfer shall be carried out in accordance with paragraph 10 of Annex C.

CONFIDENTIAL