PREPARATION:

1. Place flour, powdered sugar, baking powder and salt in large bowl; stir to combine. Cut butter into flour mixture with pastry blender or 2 knives until mixture forms pea-sized pieces. Add water, 1 tablespoon at a time; toss with fork until mixture holds together. Divide dough in half; cover and refrigerate 30 minutes or until firm.
2. Meanwhile, melt caramels and milk in medium saucepan over low heat, stirring constantly; stir in coconut. Remove from heat; cool.
3. Working with 1 portion at a time, roll out dough on lightly floured surface to 1/8-inch thickness. Cut dough with 3-inch round cookie cutter. Reroll trimmings and cut out more cookies.
4. Preheat oven to 400°F. Grease cookie sheets; set aside. Beat egg and water in cup. Place 1/2 teaspoon caramel mixture in center of each dough round. Moisten edge of dough round with egg mixture. Fold dough in half; press edges firmly to seal in filling. Press edges with fork. Place crescents on prepared cookie sheets; brush with egg mixture. Cut 3 slashes across top of each cookie with tip of knife. Bake 15 to 20 minutes or until golden brown. Remove cookies to wire racks; cool completely. Store tightly covered at room temperature.