Silver Grant International Industries Limited
(Incorporated in Hong Kong under the Companies Ordinance)


The board of directors (the "Directors") of Silver Grant International Industries Limited (the "Company") are pleased to announce that the unaudited results of the Company and its subsidiaries (the "Group") for the six months ended 30th June, 1998 was as follows:


1. The exceptional item for the six months ended 30th June, 1998 represents the profit realized on the repurchase and cancellation of US$30,522,000 nominal value of convertible bonds.

2. The amount represents deficit on valuation of listed investments held for long term purposes based on market value as at 30th June, 1998.

3. Out of the profit on disposal of listed investments in 1997, HK$37,176,000 was transferred from the asset revaluation reserve to the profit and loss account upon the disposal of the listed investments.

4. The exceptional item represents the gain of an associated company arising on the deemed disposal of the interest in Jiangxi Copper Company Limited ("JCC") upon the listing of its shares on The Stock Exchange of Hong Kong Limited ("HKSE") and The London Stock Exchange Limited.

5. Taxation consists of provision for Hong Kong Profits Tax based on the estimated profit of the period as adjusted for tax purpose at the rate of 16% (1997: 16.5%). No deferred taxation has been provided as there is no significant timing differences arising during the period or as at the period end date.

6. No interim dividend has been proposed (1997: Nil).

7. Earnings per share

The calculation of the basic and diluted earnings per share for the six months ended 30th June, 1998 is based on the following data:


During the six months ended 30th June, 1998, the Group was engaged in investment in, among other things, infrastructure projects, department stores, automotive components manufacturing and property. The Group also makes direct investment in industrial companies as a result of which it currently also holds shares in companies incorporated in the People's Republic of China ("PRC") and listed on HKSE, namely, Qingling Motors Co. Ltd and JCC.

The Group's profit after taxation for the first half of 1998 representing a 39.6% decrease from the first half of 1997. This change was due to the factors described below:

Firstly, the Group has an operating loss from continuing operation before exceptional item of HK$3.6 million. This is mostly attributable to the interest expenses provision made on the outstanding convertible bonds which was issued in August, 1997 with initial principal amount of US$115.0 million.

Secondly, the Group has also realized exceptional profit of HK$114.1 million as a result of the repurchase and cancellation of US$30.5 million nominal value of convertible bonds.

Thirdly, the overwhelming drop in the stock market caused significant decrease in the market values of the Group's listed investments held for long term purposes. As a result, a provision of HK$27.8 million was made.

Lastly, the Group's share of profit from continuing operations of associated companies is primarily a combined result of the interest expenses incurred in relations to the investment in JCC and the operating profits from its infrastructure associate, China Infra-structure Investment Limited ("CIIL").


The year 1998 is a very hard time for many corporations in Hong Kong including the Group. The Directors are of the opinion that the current financial turmoil will last for some time. For that reason, the Group will slow down its pace of making new investments. Nonetheless, the Group will concentrate its effort on existing investments with an aim to streamline their operations and to minimize investment risk, especially exchange exposure risk.

In January this year, the Group further increased its investment in infra-structure by injecting HK$200.0 million by way of shareholder's loan to CIIL, an associated company of the Group which currently holds a portfolio of eight infra-structure projects including five roads and three bridges located in the major provinces and cities in PRC. For projects under development, the construction works are progressing on schedule. As for completed projects, some of them is already contributing to the recurrent income and cash flow of the Group.

Risk management is always of a high priority to the Directors. The Directors aim to further strengthen the Company's risk management over the second half of this year. The Directors identified business areas of the Group which are vulnerable to foreign exchange risk. The Directors has also formulated strategies to minimize the Group's foreign exchange exposure. These strategies include but not limit to eliminating currency mismatch in PRC direct investments by funding, to a large extent, the investments in RMB funds. In addition, the Group is closely monitoring the market to identify opportunties to repurchase the Group's convertible bonds at favorable prices. Indeed the Group already repurchased and cancelled certain of the convertible bonds to reduce its foreign currency liabilities.


In light of the financial turmoil, the Directors consider it is beneficial to the Group to retain as much resources as possible in the Group for better liquidity. For this reason, the Directors did not propose to declare any interim dividend for the six months ended 30th June, 1998.


During the period, the Group repurchased and cancelled certain convertible bonds of an aggregate principal amount of US$30,522,000.00 at a total consideration of approximately US$16,584,000.00


By nature of its business, the Group's reliance on computer system in its daily operations is limited except for the accounting function which is a system made up by commercial software packages building on a LAN network.

The Group had started testing the computer system in 1997. In the first half year of 1998, all computer hardware had been tested and are all year 2000 compliant. The Group is currently consulting its software suppliers to check whether the application programs in use are all year 2000 compliant or not. In case of non-year 2000 compliant programs, the Group will upgrade the programs to year 2000 compliant versions.

In case of software upgrading, if necessary, the estimated cost of upgrading is minimal and will not exceed HK$0.2 million in any case. This amount of expenditure is covered in the routine budgeting of the Group's expenditure and does not require specific board approval. For the time being, no material expenditure is spent in particular to the year 2000 issue. Future expenditure, if any, will probably be charged to the profit and loss when incurred.

Nonetheless, the Group is confident in solving the year 2000 problem in the first half year of 1999.


None of the Directors is aware of any information that would reasonably indicate that the Company is not, or was not for any part of the six months period ended 30th June, 1998, 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.

By Order of the Board
Gao Jian Min
Managing Director

Hong Kong, 28th August, 1998

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