Highlights. Internet & Multimedia Services New Growth. Consolidated Results Continued Growth. Pay TV Service Renewed Growth

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2 i-cable Communications Limited is Hong Kong's only fully integrated communications company that owns and operates the territory's second largest advanced broadband distribution network; creates multimedia contents; and offers television and Internet services concurrently. i-cable's vision is to provide "Unlimited Access to Unlimited Content." Its goal is to become Hong Kong's leading provider of integrated multimedia services that include video, data and voice.

3 Highlights Highlights Consolidated Results Continued Growth Turnover increased by 21% to HK$775 million. EBITDA increased by 57% to HK$176 million. Net loss improved by 68% to HK$40 million. Triple Play strategy implementation on plan. Pay TV Service Renewed Growth Subscribers grew by 14% to over 480,000. ARPU rose by 6% to HK$254 and turnover increased by 18% to HK$744 million. EBITDA margin gained by 9 points to 30% and EBITDA increased by 63% to HK$220 million to reflect significant operating leverage. Net profit achieved for the first time. Internet & Multimedia Services New Growth Broadband Service launched in late March. Early mover advantage enables infrastructure rollout and subscriber penetration to rank among the fastest in the world. Broadband Service now available to 700,000 homes. It will reach 1 million by end 2000 and over 1.7 million homes by end 2001 for over 95% market coverage. Midyear target of 20,000 regular and installed broadband subscribers achieved after June when normal supply of cable modems resumed worldwide. 163,000 dial-up subscribers accounting for close to 10% of total dial-up traffic in the market. HK$ million 800 First mover advantage and market leadership position enhanced by Euro 2000 and exclusive multi-year carriage agreements for HBO, CINEMAX and AXN. Viewership share climbed to a new high of 30% H99 1H Group turnover increased by 21% 1

4 Group Results Group Results The unaudited Group loss attributable to Shareholders for the six months ended June 30, 2000 amounted to HK$40 million, an improvement of 68% from the HK$126 million reported for the corresponding period last year (after re-statement due to change in accounting policy as mentioned in Note 2 below). Loss per share was HK$0.02 compared to HK$0.08 for the previous year. revenues increased by 160% to HK$31 million. Earnings before interest, taxes, depreciation and amortisation (after amortisation of programming library but excluding network rental income and expenses) or EBITDA increased by 57% from HK$112 million to HK$176 million. The EBITDA margin increased from 17% to 23%. Turnover for the Group increased by 21% to HK$775 million, as compared with HK$643 million recorded for the same period in TV related revenues increased by 18% to HK$744 million primarily as a result of the solid growth in subscriber base and improved yield from subscribers achieved during the period, while Internet and multimedia related Capital expenditures for the period under review amounted to HK$192 million, as compared to HK$167 million for the same period in The increase was mainly due to expenditures incurred in relation to the rollout of the cable modem service. The net amount of cash and cash equivalents on hand as of June 30, 2000 was HK$1,462 million. Interim Dividend The Board has decided that no interim dividend be paid in respect of the financial year ending December 31, Summary of Unaudited Consolidated Results Six months ended June 30: restated HK$ 000 HK$ 000 Turnover 774, ,575 Operating expenses Programming costs (277,975) (259,438) Network and other operating expenses (152,519) (117,248) Selling, general and administrative expenses (168,292) (153,964) Depreciation and amortisation (227,528) (228,507) (826,314) (759,157) (51,717) (116,582) Network rental income 136,323 Network rental expense (76,504) Operating loss (51,717) (56,763) Interest income 48,647 Non-operating (expenses) / income (929) 55 Finance expense (36,004) (69,520) Loss before taxation (40,003) (126,228) Taxation - credit (Note 3) 186 Loss attributable to shareholders (40,003) (126,042) Basic and diluted loss per share (Note 4) HK$(0.02) HK$(0.08)

5 Group Results Notes: (1) The Company was incorporated on May 21, 1999 and on November 1, 1999 the Company became the holding company of the Group pursuant to a group reorganisation. Details of the Group s reorganisation are set out in the Company s prospectus dated November 12, The Group resulting from the reorganisation is regarded as a continuing entity and accordingly, the consolidated results of the Group have been prepared on the basis that the Company was the holding company of the Group for both periods presented, rather than from November 1, (2) Change in accounting policy In prior periods, deferred expenses, including preoperating expenses, pre-maturity expenses and other deferred expenses, were deferred according to defined bases and amortised on a straight line basis over the term or remaining term of the initial subscription television broadcasting licence which expires on May 31, With effect from January 1, 2000, the Group adopted an accounting policy of recognising all such costs as an expense in the period they are incurred in order to comply with Interpretation 9 Accounting for pre-operating costs issued by the Hong Kong Society of Accountants. The new accounting policy has been adopted retrospectively. In adjusting prior periods figures, the deficit balance of revenue reserve as at January 1, 1999 was restated and increased by HK$963,004,000 representing write-off to the prior periods consolidated profit and loss account the unamortised balance of deferred expenses as at December 31, Upon adoption of Interpretation 9 and restating the prior periods results and reserves, the Group s loss attributable to shareholders for the six months ended June 30, 2000 has decreased by HK$75,139,000 (1999: HK$75,139,000) as a result of no more amortisation of deferred expenses after its write-off. (3) Taxation Taxation in the consolidated results represents: Six months ended June 30: HK$ 000 HK$ 000 Hong Kong Profits Tax (3,413) (2,319) Underprovision in respect of prior periods (4) Deferred tax credit 3,413 2,509 Net taxation credit 186 The provision for Hong Kong Profits Tax is calculated separately on the taxable profit of each entity within the Group at 16% (1999: 16%) per annum. (4) Basic and diluted loss per share The calculation of basic loss per share is based on the net loss of HK$40,003,000 (1999: HK$126,042,000) and the weighted average of 2,014,000,000 (1999: 1,600,000,000) ordinary shares outstanding. The 1,600,000,000 ordinary shares outstanding as a result of the Group s reorganisation on November 1, 1999 are included in the calculation of the weighted average number of shares as if those shares were outstanding since January 1, The issue of potential ordinary shares in connection with the Company s convertible bonds would not give rise to an increase in loss per share and therefore had no dilutive effect on the calculation of diluted loss per share. 3

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7 Business Review Business Review Another important step was taken during the period under review towards achieving the Group s Triple Play strategy with the launch of a cable modembased Broadband Service. Given its first or early mover advantage, years of experience competing in this market and sound financial position, the Group is best placed in the more open competitive environment for Pay Television and Internet services. Pay Television Service Renewed Growth The renewed growth momentum since the second half of 1999 continued well into 2000, spurred on by the economic recovery. That resulted in 67% more subscribers being added during the 6-month period under review compared to the same period a year ago. The installed subscriber base exceeded 480,000 as at June 30, Average monthly yield per subscriber rose to HK$254 and monthly churn declined to 1.4%. With revenue being 18% higher than a year ago, and operating expenses rising by only 6% because of significant operating leverage, EBITDA margin improved from 21% to 30%. EBITDA grew by 63% to HK$220 million and net profit was achieved for this core business for the first time. During the period, the Group s Pay Television Service continued to build market penetration and subscriber loyalty as the No. 1 Station for News, Movies and Sports. Viewership share in subscriber homes climbed to a new high of 30% and advertising revenue grew by 90 per cent over the same period in The conclusion of Euro 2000 was immediately followed by the also popular World Cup 2002

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9 Business Review Qualifying Rounds. Exclusive multi-year carriage agreements were concluded with major regional channels HBO, CINEMAX and AXN ahead of new competition. Internet & Multimedia Services New Growth Following the award of a Fixed Telecommunications Network Services (FTNS) licence in January, the Group formally launched its cable modem-based Broadband Service in March. Encouraging results have already been achieved since launch. With infrastructure being rolled out at the average rate of 80,000 homes per month, this service was already available to about 550,000 homes in over 2,700 buildings at the end of June, making it not only the fastest rollout of cable modem service in Hong Kong, but also one of the fastest in the world as well. Initial marketing activities target existing Pay Television subscribers who have a higher possession rate of personal computers and Internet accounts at home than the general population in Hong Kong. This has proven to be an excellent marketing strategy for a variety of reasons with over one in ten subscriber homes marketed adding broadband to their subscription so far. The leveraging of the Group s market position in television content for broadband application is underway. A news website has been launched as the world s first Cantonese 24-hour video online news channel with a video news on demand service as well. Similarly, a sports website will also be launched shortly. Network Infrastructure Built for More Growth The Group continued its fibre trunk conversion programme during the period under review and rolled out its Broadband Service at a rapid speed at the same time. At the end of June, more than 60 per cent of the homes (over 1.1 million) in Hong Kong were already connected to the Group s HFC (hybrid fibre coaxial) network. The conversion programme is expected to be substantially completed by the end of 2001 when only 2% of total homes passed in Hong Kong will not be covered by this two-way broadband infrastructure. The midyear target of 20,000 regular installed broadband subscribers was achieved in July when normal supply of cable modems resumed worldwide after June to meet demand. As at June 30, there were 12,000 installed subscribers. In the meantime, dial-up subscription continued to grow to 163,000 at the end of June net of conversions to broadband service. Together, they represent close to 10% of total dial-up Internet traffic volume in the market. 7

10 Business Review Outlook - Continued Growth Pay Television Service In July, the Hong Kong Government decided in principle to award five new Pay Television Service licences. The new operators are expected to launch their services within the next year. One of the new licensees, a subsidiary of the dominant terrestrial television broadcaster in Hong Kong, is barred from starting service for 18 months from licence award and restrictive firewall conditions will be written into its licence to separate its operations from the parent company. The Group is confident that its leading position in the provision of Pay Television Service in Hong Kong will be maintained as it has enjoyed significant first mover advantage with a loyal and solid customer base. Competition is not alien to the Group. The Group will continue to enhance its proprietary channels and programmes as well as its local content in order to move ahead of its competitors. Internet & Multimedia Services Broadband services are taking the Hong Kong market by storm. The combined market penetration in the residential sector for all operators will probably exceed 10% by the end of this year. Insightful investment in the physical infrastructure in past years has given the Group a tremendous cost and speed advantage in launching its Broadband Cable broadband service now in most parts of Hong Kong Hong Kong Island Causeway Bay Jardines Lockout Sai Ying Pun Tai Hang Shau Kei Wan Central Mid Levels Quarry Bay Wanchai Sai Wan Ho Happy Valley North Point Sheung Wan Braemar Hill Kowloon Choi Hung Diamond Hill Kwun Tong Ngau Chi Wan Tai Kok Tsui Yau Tong Kowloon City Lok Fu Wang Tau Hom Choi Wan Ho Man Tin Lam Tin Ngau Tau Kok Tze Wan Shan Beacon Hill Kowloon Tong Shek Kip Mei Chuk Yuen Kowloon Bay Mongkok Sau Mau Ping Yau Ma Tei Cheung Sha Wan Lai Chi Kok Tung Tau Yau Yat Tsuen New Territories Ma On Shan Tai Wai Tuen Mun Tsing Lung Tau Tsuen Wan Ting Kau Sham Tseng Tin Shui Wai Tseung Kwan O Tsing Yi Siu Lek Yuen Tung Chung

11 Service to rapidly catch up with the former monopoly and to leave the new operators behind. The Group has adopted the well proven and most competitive cable modem technology and delivers the service over reliable wireline transmission network. The Group is confident that with the rapid roll-out and take up rate of its broadband service, it will become a major player in the Hong Kong broadband service market. Other Opportunities The Group is actively seeking new opportunities for new revenue streams. Good progress has been made to develop an IP telephony service with a field test scheduled for the last quarter of this year. The Group is also investigating the opportunity for thirdgeneral mobile services when the Government invite application for licences. Preparation for the business to business portal site the Group invested to develop for the Greater China Region together with six other Hong Kong and China conglomerates and Commerce One of the US has been completed. The site - Asia2B - was officially launched in late July. Continued growth is expected as the Group continues to exploit its first or early mover advantage to succeed in competition. Investments made in past years will prove to be valuable and insightful with new revenues generated based on incremental investments. That will position the Group well and differentiate it from its competitors. Compliance with Code of Best Practice None of the Directors of the Company is aware of any information which would reasonably indicate that the Company was not in compliance with the Code of Best Practice, as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, at any time during the six months ended June 30, Directors Interests in Shares At June 30, 2000, Directors of the Company had the following beneficial interests in the securities of the Company and its associated corporations (within the meaning of the Securities (Disclosure of Interests) Ordinance (the "SDI Ordinance")) :- No. of Ordinary Shares Nature of Interest The Company Mr. Stephen T.H. Ng 750,000 Personal interest Mr. John T. Hung 20,000 Personal interest The Wharf (Holdings) Limited Mr. Gonzaga W.J. Li 686,549 Personal interest Mr. Stephen T.H. Ng 230,057 Personal interest Harbour Centre Development Limited Mr. F.K. Hu 50,000 Corporate interest 9

12 Note: The 50,000 shares regarding Corporate Interest in which Mr. F.K. Hu was taken to be interested as stated above was the interest held by a corporation in general meetings of which Mr. Hu was either entitled to exercise (or was taken under the SDI Ordinance to be able to exercise) or control the exercise of one-third or more of the voting power. As at June 30, 2000, Mr. Stephen T.H. Ng had personal interests in options to subscribe for 1,500,000 ordinary shares of the Company granted under the Company s Share Option Scheme on February 8, 2000 at a total consideration of HK$10. The option rights are exercisable during the period from April 1, 2001 to December 31, 2009 at a subscribtion price of HK$10.49 per share. Save as disclosed above: (i) there were no interests held as at June 30, 2000 by any Directors and Chief Executive of the Company in securities of the Company and its associated corporations (within the meaning of the SDI Ordinance), and (ii) during the financial period, there existed no rights to subscribe for equity or debt securities of the Company which held by any Directors or Chief Executive of the Company or any of their spouses or children under 18 years of age nor had there been any exercises of any such rights by any of them, as recorded in the register kept by the Company under section 29 of the SDI Ordinance. Substantial Shareholders' Interests Given below are the names of all parties which were, directly or indirectly, interested in 10 per cent or more of the nominal value of the share capital of the Company and the respective relevant numbers of shares in which they were, and/or were deemed to be, interested as at June 30, 2000 as recorded in the register kept by the Company under section 16(1) of the SDI Ordinance:- No. of Names Ordinary Shares (i) Wharf Communications Investments Limited 1,600,000,000 (ii) The Wharf (Holdings) Limited 1,600,034,575 (iii) WF Investment Partners Limited 1,602,672,774 (iv) Wheelock and Company Limited 1,603,095,200 (v) Bermuda Trust (Guernsey) Limited 1,603,095,200 Note: For the avoidance of doubts and double counting, it should be noted that duplication occurs in respect of all of the above-stated shareholdings to the extent that the shareholdings stated against party (i) above are entirely duplicated or included in the shareholdings stated against party (ii) above, with the same duplication of the shareholdings in respect of (ii) in (iii), (iii) in (iv) and (iv) in (v); all of the above named parties were deemed to be interested in the relevant shareholdings under the SDI Ordinance as at June 30, Purchase, Sale or Redemption of Shares Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company s listed securities during the period under review. By Order of the Board Wilson W.S. Chan Secretary Hong Kong, August 28,

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