CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
INTERIM REPORT FOR 2001

SUSTAINING GROWTH THROUGH
DIVERSIFICATION AND CONSOLIDATION

16 August, 2001 -- Hong Kong

INTERIM RESULTS

We are pleased to report that Cheung Kong Infrastructure Holdings Limited ("CKI") recorded satisfactory earnings growth in the first half of 2001. The unaudited consolidated net profit after tax for the first six months ended 30th June, 2001 was HK$1,509 million, up 8.6 per cent. from the same period last year. Earnings per share were HK$0.67 (2000: HK$0.62).

The Board of Directors has declared an interim dividend for 2001 of HK$0.21 per share (2000: HK$0.20). The interim dividend will be paid on Thursday, 11th October, 2001 to shareholders whose names appear on the Register of Members on Wednesday, 10th October, 2001.

Solid Growth in Infrastructure Investments

CKI's infrastructure investments in energy and transportation reported satisfactory growth of 13 per cent. in profit contribution for the first half of the year attributable to the good performance of the various investments:

•		Profit contribution from the Group's investment in Hongkong Electric Holdings Limited ("Hongkong Electric") was a 24 per cent. increase over the same period last year arising from the increased shareholding in and performance of Hongkong Electric.
•		Profit contributions from Australian infrastructure businesses have exceeded initial projections.
•		The Group's divestment programme brought a gain of HK$572 million, of which HK$351 million was attributable to the sale of Powercor Australia Limited retail business in Australia and HK$221 million from the disposal of Nanhai Power Plant I investment in China. Divestment of the Group's interest in Nanhai Road Network is in progress.
•		The Group has decided to take a more conservative and prudent accounting policy, and has decided to make a provision of HK$500 million against the Group's China infrastructure portfolio of approximately HK$8 billion.

Repositioning Infrastructure-related Businesses

Softening infrastructure materials prices continued to put pressure on profit margins resulting in a reduction of 24 per cent. in profit contribution from this business over the same period last year.

The Group continued to refocus its initiatives on other infrastructure-related businesses. In the environmental industry, CKI obtained an exclusive license to develop and to market in Mainland China the environmentally friendly polymer modified asphalt, a patented technology owned by Polyphalt Inc., a Canadian listed company of which CKI is the majority shareholder. On the electronic infrastructure front, efforts on integrating smart card applications with biometrics, such as fingerprint matching and facial recognition technologies, have been carried out through the Group's newly established subsidiary, bioSecure Systems Limited.

Strong Financial Position

As of 30th June, 2001, key financial figures and our credit rating are as follows :

•		Cash position of HK$3,213 million.
•		Net debt of HK$5,196 million.
•		Net debt to equity ratio of 20 per cent.
•		S&P credit rating of "A-/Stable".

Sustaining Growth through Diversification and Consolidation

In the face of the fast-changing market place, we have adopted strategies to reposition ourselves to be even more responsive in the infrastructure business arena. The Group is currently in a very strong financial position to pursue capital intensive infrastructure projects aggressively.

•		The significant and steady contributions from CKI infrastructure investments continue to provide the Group with a broad profit and cash base. It is expected that the existing energy portfolio will continue to be the major profit generator for the Group. Adequate resources will be allocated to ensure such contributions to be sustained. In addition, initiatives will be carried out to identify energy investment opportunities around Asia, Europe and North America. Meanwhile, we aim to expand the transportation portfolio aggressively both in terms of geography and industry diversification. We have the extensive knowledge, experience and financial resources necessary to invest in the capital intensive transportation industry. We are currently studying a number of investment opportunities in roads, bridges, tunnels, airports and rail systems in markets including Hong Kong, Mainland China, South Korea, and Australia.
•		The infrastructure materials business has been facing increasing pressure with declining volumes due to a slowdown of government housing and domestic infrastructure developments. Profit enhancement and overhead containment programmes are being implemented to optimise the profit and cash contribution from this maturing business, while it faces the challenges at the bottom of its industry cycle.
•		The infrastructure materials and infrastructure-related businesses sector has just been repositioned. We believe that there is large market potential in the environmental industry and electronic infrastructure business. A number of opportunities in clean energy, waste-to-energy, waste handling, biometrics and smart card application are being studied.
•		In addition to investigating new investment opportunities, the Group will continue to capitalise on divestment opportunities at preferential terms.

With the broad and secure foundation established over the past five years, we aim to continue sustaining the Group's growth through diversification and consolidation in the coming years.

I would like to thank the Board of Directors and our staff for their hard work and dedication, and our shareholders for their continued support of our vision.

Li Tzar Kuoi, Victor
Chairman

Hong Kong, 16th August, 2001

FINANCIAL REVIEW

Financial Resources, Treasury Activities and Gearing Ratio

The Group's capital expenditure and investments for the period were funded from cash on hand, internal cash generation, the syndication loan drawn since September 1997 and new project loans drawn during the period.

The Group maintained bank balances and cash totalling HK$3,213 million as at 30th June, 2001, of which more than 90 per cent. were denominated in Hong Kong dollars or U.S. dollars.

As at 30th June, 2001, total borrowings of the Group amounted to HK$8,409 million, which included Hong Kong dollar syndication loan of HK$3,800 million, foreign currency bank and other borrowings of HK$4,477 million and RMB bank loans of HK$132 million. Of the total borrowings, 47 per cent. were repayable in 2002, 4 per cent. repayable in 2003 and the remaining portion repayable in 2004 to 2006. Committed borrowing facilities available to the Group, but not yet drawn as at 30th June, 2001, amounted to HK$25 million. Of these undrawn facilities, 37 per cent. will expire in 2002 and the remaining portion will expire in 2003. The Group's financing activities continue to be well received and fully supported by its bankers.

The Group adopts conservative treasury policies in cash and financial management. To achieve better risk control and minimise cost of funds, the Group's treasury activities are centralised. Cash is generally placed in short-term deposits mostly denominated in Hong Kong or U.S. dollars. The Group's liquidity and financing requirements are reviewed regularly. The Group will consider new financing while maintaining an appropriate level of gearing in anticipation of new investments or maturity of bank loans.

As at 30th June, 2001, the Group maintained a gearing ratio at 20 per cent. which was based on its net debt of HK$5,196 million and equity of HK$25,436 million. This ratio was lower than the gearing ratio of 34 per cent. at the end of 2000, mainly because of the repayment of a short-term Australian dollar bridging loan during the period. In view of the expiry of the HK$3,800 million syndication loan in 2002 and potential project financing requirements from business growth, the Group has established a medium term note programme of up to US$2 billion in March 2001.

To minimise currency risk exposure, the Group has a policy of hedging its investments in other countries with the appropriate level of borrowings denominated in the local currencies of those countries. As at 30th June, 2001, the Group has swapped the floating interest rates of its borrowings totalling HK$4,294 million into fixed interest rates. The Group will consider entering into further interest and currency swap transactions to hedge against its interest rate and currency risk exposures, as appropriate.

Charge on Group Assets

As at 30th June, 2001, certain of the Group's land and buildings and a fixed deposit with net book values totalling HK$59 million were pledged to secure a bank loan and a performance bond totalling HK$61 million.

The assets of a non-wholly owned subsidiary with a net book value of HK$52 million were pledged as a floating charge to secure debentures with a face value totalling HK$5 million issued by the aforesaid subsidiary. In addition to the floating charge, a second charge on the subsidiary's land and buildings with a net book value of HK$7 million was created to secure a mortgage loan of HK$7 million borrowed by the subsidiary.

Contingent Liabilities

As at 30th June, 2001, the Group was subject to outstanding performance bonds totalling HK$25 million.

Employees

The Group, including its subsidiaries but excluding associated companies, employs a total of 2,352 employees. Employees' cost (excluding directors' emoluments) amounted to HK$217 million. The Group ensures that the pay levels of its employees are competitive and that its employees are rewarded on a performance related basis within the general framework of the Group's salary and bonus system.

Preferential subscription of 2,978,000 new shares of the Company had been given to its employees who had submitted the pink application forms to subscribe for shares of HK$1.00 each in the Company at HK$12.65 per share on flotation of the Company in 1996. The Group does not have any share option scheme for employees.

AUDIT COMMITTEE

The Group's interim report for the six months ended 30th June, 2001 was reviewed by the Audit Committee ("Committee"). Regular meetings have been held by the Committee since its establishment and it shall meet at least twice each year.

PUBLICATION OF INTERIM RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG KONG LIMITED

A detailed interim results announcement for the six months ended 30th June, 2001 containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Stock Exchange") will be published on the website of the Stock Exchange in due course.

 

CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
NOTICE OF PAYMENT
OF INTERIM DIVIDEND, 2001

The Board of Directors of Cheung Kong Infrastructure Holdings Limited announces that the Group's unaudited consolidated net profit after tax for the six months ended 30th June, 2001 amounted to HK$1,509 million which represents earnings of HK$0.67 per share. The Directors have resolved to pay an interim dividend for 2001 of HK$0.21 per share to shareholders whose names appear on the Register of Members of the Company on Wednesday, 10th October, 2001. The dividend will be paid on Thursday, 11th October, 2001.

The Register of Members of the Company will be closed from Wednesday, 3rd October, 2001 to Wednesday, 10th October, 2001, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all share certificates with completed transfer forms either overleaf or separately, must be lodged with the Company's Branch Share Registrars, Central Registration Hong Kong Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:00 p.m. on Friday, 28th September, 2001.

Hong Kong, 16th August, 2001

CONSOLIDATED INCOME STATEMENT
for the six months ended 30th June 2001

		2001	2000
HK$ million	Notes	(unaudited)	(unaudited)
Turnover	1
Group turnover		1,196	1,342
Share of turnover of jointly controlled entities		705	249
		1,901	1,591
Group turnover	1	1,196	1,342
Other revenue	2	1,334	584
Operating costs	3	(2,217)	(1,247)
Operating profit*	4	313	679
Finance costs		(307)	(281)
Share of results of associates		1,438	850
Share of results of jointly controlled entities		191	240
Profit before taxation		1,635	1,488
Taxation	5	(138)	(106)
Profit after taxation		1,497	1,382
Minority interests		12	7
Profit attributable to shareholders	4	1,509	1,389
Proposed interim dividend		473	451
Earnings per share	6	HK$0.67	HK$0.62
Proposed interim dividend per share		HK$0.21	HK$0.20

* Operating profit is stated after a provision (see notes 3 and 4).

 

NOTES TO THE CONSOLIDATED INCOME STATEMENT

1.		TURNOVER
		Group turnover represents net sales from infrastructure materials businesses, return on investments and interest income received and receivable from infrastructure project investments, net of withholding tax, where applicable. In addition, the Group also accounts for its proportionate share of turnover of jointly controlled entities. Turnover of associates are not included. By business segment for the six months ended 30th June HK$ million Group turnover 2001 Share of turnover of jointly controlled entities Total Group turnover 2000 Share of turnover of jointly controlled entities Total Infrastructure investments 238 705 943 308 249 557 Infrastructure materials and    infrastructure-related    businesses 958 - 958 1,034 - 1,034 Total 1,196 705 1,901 1,342 249 1,591 By geographical region for the six months ended 30th June HK$ million Group turnover 2001 Share of turnover of jointly controlled entities Total Group turnover 2000 Share of turnover of jointly controlled entities Total Hong Kong 817 - 817 879 - 879 Mainland China 359 705 1,064 456 249 705 Others 20 - 20 7 - 7 Total 1,196 705 1,901 1,342 249 1,591 The comparative figures of turnover for the six months ended 30th June, 2000 have been restated to conform to the current period's presentation.
2.		OTHER REVENUE
		Other revenue includes the following:   Six months ended 30th June HK$ million 2001 2000 Interest income 364 316 Finance lease income 3 2 Distribution from listed stapled securities 18 20 Dividend from other listed securities 2 - Gain on disposals of other listed securities 10 - Gain on disposal of a subsidiary 221 - Charterhire service income 688 208
3.		OPERATING COSTS
		Operating costs include the following:   Six months ended 30th June HK$ million 2001 2000 Depreciation 95 92 Amortisation of costs of investments in    infrastructure projects 87 93 Provision against infrastructure project investments 500 - Cost of charterhire services rendered 686 206 Cost of inventories sold 645 688
4.		SEGMENT INFORMATION
		By business segment for the six months ended 30th June HK$ million Investment in Hongkong Electric* Infrastructure investments Infrastructure materials and infrastructure-related businesses Unallocated items Consolidated   2001 2000 2001 2000 2001 2000 2001 2000 2001 2000                   Segment revenue                 Group turnover - - 238 308 958 1,034 - - 1,196 1,342 Charterhire service income - - - - 688 208 - - 688 208 Others - - 6 15 22 23 - - 28 38   - - 244 323 1,668 1,265 - - 1,912 1,588                   Segment result - - 124 194 130 193 - - 254 387 Provision - - (500) - - - - - (500) - Gain on disposal     of a subsidiary - - 221 - - - - - 221 - Interest and finance     lease incomes - - 288 249 52 58 27 11 367 318 Other revenue - - 30 20 - - - - 30 20 Net corporate overheads - - - - - - (59) (46) (59) (46) Operating profit - - 163 463 182 251 (32) (35) 313 679 Finance costs - - - - - - (307) (281) (307) (281) Share of results of     associates and jointly     controlled entities 1,073 860 556 241 - (11) - - 1,629 1,090 Taxation (118) (89) (1) - (19) (17) - - (138) (106) Minority interests - - - - 12 7 - - 12 7 Profit attributable to     shareholders 955 771 718 704 175 230 (339) (316) 1,509 1,389 * During the period, the Group has a 38.87 per cent. equity interest in Hongkong Electric Holdings Limited, which is listed on The Stock Exchange of Hong Kong Limited.   By geographical region for the six months ended 30th June HK$ million Hong Kong Mainland China Australia Others Unallocated items Consolidated   2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000                           Segment revenue                         Group turnover 817 879 359 456 - - 20 7 - - 1,196 1,342 Charterhire service income 14 7 68 83 5 - 601 118 - - 688 208 Others 18 23 6 15 - - 4 - - - 28 38   849 909 433 554 5 - 625 125 - - 1,912 1,588               Segment result 207 228 57 159 - (3) (10) 3 - - 254 387 Provision - - (500) - - - - - - - (500) - Gain on disposal of     a subsidiary - - 221 - - - - - - - 221 - Interest and finance     lease incomes 52 58 - - 288 249 - - 27 11 367 318 Other revenue 12 - - - 18 20 - - - - 30 20 Net corporate overheads - - - - - - - - (59) (46) (59) (46) Operating profit 271 286 (222) 159 306 266 (10) 3 (32) (35) 313 679 Finance costs - - - - - - - - (307) (281) (307) (281) Share of results of     associates and jointly     controlled entities 1,082 860 196 241 351 - - (11) - - 1,629 1,090 Taxation (138) (106) - - - - - - - - (138) (106) Minority interests - - 10 7 - - 2 - - - 12 7 Profit attributable to     shareholders 1,215 1,040 (16) 407 657 266 (8) (8) (339) (316) 1,509 1,389
5.		TAXATION
		Six months ended 30th June HK$ million   2001 2000 Company and subsidiaries       Hong Kong profits tax - current 20 19   - deferred (1) (2)     19 17 Associates       Hong Kong profits tax - current 118 89   - deferred 1 -     119 89 Total   138 106
		(a)  Hong Kong profits tax is provided for at the rate of 16 per cent. (2000: 16 per cent.) on the estimated assessable profits for the period less available tax relief for losses brought forward.     (b) Tax deferred or accelerated by the effects of timing differences is provided, using the liability method, to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.
6.		EARNINGS PER SHARE
		The calculation of earnings per share is based on the profit attributable to shareholders of HK$1,509 million (2000: HK$1,389 million) and on 2,254,209,945 shares (2000: 2,254,209,945 shares) in issue during the interim period. Diluted earnings per share has not been shown as there was no dilutive effect on the earnings per share if the convertible debentures outstanding during the six months ended 30th June, 2001 and 2000 were fully converted into shares of a non-wholly owned subsidiary which issued the debentures.
7.		COMPARATIVE FIGURES
		Certain comparative figures have been reclassified to conform to the current period's presentation.

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