*********************************************************

The Government announced today (August 31) its financial results for the four months ended July 31, 2004.

Expenditure for the period April to July 2004 amounted to $78.7 billion and revenue to $73.4 billion, resulting in a deficit of $5.3 billion. The revenue included the proceeds received from the issue of notes and bonds totalling $20 billion in July.

A government spokesman said that a deficit in the initial months of a financial year was not unusual as many types of revenue including taxes were mostly received towards the end of the year.

The fiscal reserves stood at $270.1 billion at July 31, 2004.

More detailed figures are shown in Tables 1 and 2.

 TABLE 1.  CONSOLIDATED ACCOUNT
 
                                                Year to date 
                                Month ended     April 1, 2004 to
                                July 31, 2004   July 31, 2004
                                -------------   ----------------
                                 HK $ million     HK $ million
 Revenue                           31,642.5        73,405.5
 Expenditure                      (19,891.1)      (78,695.4)
                                 -------------   ---------------
 Surplus/(Deficit)                 11,751.4        (5,289.9)
                                 --------------   --------------
 
 Financing
   Domestic
     Banking Sector (Note 1)      (11,637.8)        4,136.1
     Non-Banking Sector              (113.6)        1,153.8
   External                             -               -
                                 --------------   --------------
 Total                            (11,751.4)        5,289.9
                                 --------------   --------------
 
 Government Debts as at July 31, 2004 (Note 2)
     HK$26,000 million
 
 Debts Guaranteed by Government as at July 31, 2004 (Note 3)
     HK$4,314.6 million

Notes:

1. Includes transactions with the Exchange Fund and resident banks.

2. In May 2004, the Government issued a $6 billion Toll Revenue Bond to Hong Kong Link 2004 Limited, which in turn issued notes and bonds totalling the same amount to institutional and retail investors. The Toll Revenue Bond is to be repaid by the net toll revenue receivable of Government tolled tunnels and bridges. It matures in May 2016 and may be fully repaid before 2016. In July 2004, the Government issued notes and bonds totalling $20 billion (including US$1.25 billion denominated in United States dollars) to institutional and retail investors. The maturity dates of these notes and bonds fall within the period July 2006 to July 2019.

3. Guarantees provided under the Special Finance Scheme for Small and Medium Enterprises, the Self-employment Business Start-up Assistance Scheme, the SME Loan Guarantee Scheme, the Film Guarantee Fund and the Loan Guarantee Scheme for Severe Acute Respiratory Syndrome Impacted Industries.

 TABLE 2.  FISCAL RESERVES
 
                                                Year to date 
                                Month ended     April 1, 2004 to
                                July 31, 2004   July 31, 2004
                                -------------   ----------------
                                 HK $ million     HK $ million
 Fiscal Reserves at start        258,301.4        275,342.7
   of period
 Add: Consolidated Surplus/       11,751.4         (5,289.9)
   (Deficit)
                                -------------   ----------------
 Fiscal Reserves at end          270,052.8       270,052.8
   of period
                                 ------------   ----------------

Ends/Tuesday, August 31, 2004

NNNN