UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1997

Notes:

1. No consolidated accounts were prepared for the six months ended 30 June 1996 as the result and net worth of the subsidiary were considered by the Directors to be immaterial to the Group. The amounts shown for 1996 represent, in all material respects, the comparatives for the Group's accounts.

2. Turnover comprises fares and other income from the operation of franchised public buses.

3. Taxation represents provision for Hong Kong Profits Tax calculated at the rate of 16.5% (1996 - 16.5%) on the estimated assessable profits for the period.

4. The calculation of earnings per share is based on the profit attributable to Shareholders of HK$264,100,000 (1996 - HK$241,500,000) and 403,639,413 shares in issue during the period.

RESULTS

The Group's unaudited profit attributable to Shareholders for the six months ended 30 June 1997 amounted to HK$264.1 million (1996 - HK$241.5 million for the Company). As the profit from franchised bus operations for the period under review fell short of the permitted return by HK$39.8 million, the full amount retained in the Development Fund of HK$0.2 million was notionally transferred to the profit and loss account.

INTERIM DIVIDEND

The Board has declared an interim dividend of 26 cents per share (1996 - 24 cents per share), totalling HK$104.9 million (1996 - HK$96.9 million), for the year ending 31 December 1997. This interim dividend will be paid on 9 October 1997 to the Shareholders who are on the Register of Members at the close of business on 3 October 1997. The Register will be closed from 29 September 1997 to 3 October 1997, both dates inclusive. To qualify for the interim dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the Company's Registrars, Central Registration Hong Kong Limited of 17th floor, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:00 p.m. on 26 September 1997.

OPERATIONS

The Kowloon Motor Bus Company (1933) Limited ("KMB")

In the first half of 1997, 16 new routes were introduced; 279 new buses were licensed and orders for 200 additional buses were placed. Total ridership for the period was 524.7 million passenger trips, or a daily average of 2.9 million, representing an increase of 3.6% over the same period last year. The growth in ridership resulted mainly from an increase in the number of buses in service and improved frequencies. Fare revenue increased by 9.8% as compared with the first six months of 1996 as a result of growth in ridership and of the modest fare increases which came into effect in March and April 1996 (for cross harbour routes and other routes respectively). Bus operating costs for the period under review increased by approximately 11% as compared with the same period last year. The increase was mainly due to a rise in salaries, wages and other staff costs. As at 30 June 1997, KMB had 12,108 employees.

New Franchise

KMB has been granted a new franchise by the Government of the Hong Kong Special Administrative Region to operate a public bus service for the period from 1 September 1997 to 31 July 2007. The network of routes operated by KMB under the previous franchise which expired on 31 August 1997 remains intact under the new franchise. While all these routes have been specified as non-exclusive routes under the new franchise, the Directors believe that, so long as KMB continues to provide a proper and efficient bus service on these routes, its operating rights would not be eroded. Furthermore, although the new franchise is not subject to any Profit Control Scheme providing for a permitted return, KMB has been assured that, in exercising its rights under the Public Bus Services Ordinance and the franchise, particularly the right to determine KMB's fares, Government will continue to adopt the policy of allowing KMB to make a reasonable return on its investment.

Proposed Transfer of Ownership and Eventual Replacement of the Lai Chi Kok Depot

The Company is now in the process of arranging for the transfer of the ownership of its permanent depot site at NKML3, Lai Chi Kok to a wholly-owned subsidiary company. As announced on 15 July 1997, following the transfer, the subsidiary company will lease the site back to KMB at a nominal rent for the latter's operations, until a replacement depot on the West Kowloon Reclamation is available for use. Once the replacement depot (which will be constructed on a site to be provided by Government through a tenancy agreement) is ready for use, the Company will seek the release of the Lai Chi Kok site from its franchised bus operations. At this stage, however, the Company has no concrete plans regarding the eventual development or disposal of the Lai Chi Kok depot.

Internal Group Restructuring

As announced on 15 August 1997, the Group is considering an internal group restructuring for the purposes of streamlining the Group's operations, but such restructuring will not involve any significant acquisitions or disposals of any assets or businesses by the Group from or to any party outside the Group.

Long Win Bus Company Limited ("LWBC")

KMB's wholly-owned subsidiary, LWBC, was granted a franchise by Government in October 1996 to operate 12 bus routes to serve Tung Chung New Town and the new Chap Lap Kok Airport when it commences operations in April 1998. The first of these routes, North Lantau External Service Route E31 (plying between Tsuen Wan and Tung Chung) was introduced in June 1997 following the opening of the Lantau Link and the North Lantau Highway. The initial demand on the route was overwhelming from a combination of people travelling to and from work related to the airport and Tung Chung Development projects and people making sightseeing visits to the new Lantau Link. To supplement the service on Route E31, two additional recreational services (from Tsuen Wan and Kwai Fong MTR Station) were operated at all weekends and public holidays from early June until the end of August 1997.

With the growth in population in Tung Chung following the occupation by the tenants and owners of the public housing and home ownership scheme estates, which began in late July 1997, and the completion of roads on the Airport Island and the delivery of new Trident super low floor double-deck buses from January 1998 onwards, new services will be gradually introduced to cope with passenger demand. Preparation is gearing up for full scale operation commencing April 1998 by constructing a bus depot in Siu Ho Wan, North Lantau and a bus servicing site at Tung Chung. With a fleet of some 140 new super low floor buses and a service-oriented staff force, LWBC will be able to deliver an efficient, comfortable and high quality transport service to its customers.

Cross-Border Shuttle Bus Service

Art East Limited, an equity joint venture formed between KMB and a Shenzhen based company to run a cross-border shuttle bus service between Lok Ma Chau (Hong Kong) and Huanggang (Shenzhen), began operation on 20 March 1997. Up to 30 June 1997, the cross-border service, running with a total of 10 air-conditioned single-deck buses, had a total ridership of approximately 308,000 passenger trips. It is expected that ridership will gradually increase as more people find it convenient to use this border crossing.

DEALINGS IN THE COMPANY'S LISTED SECURITIES

During the period, the Company has not purchased, sold or redeemed any of the Company's own shares.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

No director of the Company is aware of information which would reasonably indicate that the Company is not or was not in compliance with the Code of Best Practice, as set out by the Stock Exchange of Hong Kong Limited in Appendix 14 to the Listing Rules at any time during the six months ended 30 June 1997.

PROSPECTS

As the leading bus transport operator in Hong Kong, we will continue to rally our resources towards providing a world class service to our customers. The grant of two new franchises to the Group stands testimony to our commitment to excellence. Looking ahead, we see strong growth potential in the bus transport industry in the Chek Lap Kok airport and neighbouring Northern Lantau/Tung Chung, in the New Territories and in mainland China. We will focus our resources to improve the quality of bus services to meet the rising expectations of the community and to explore growth opportunities in various other areas. Your directors are confident that the Group will be able to continue its growth in the future.

P C Woo
Chairman

Hong Kong, 11 September 1997

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