Six months ended 30 June
                                         Note        1999         1998
                                              HK$'million  HK$'million

Turnover                                   1      2,871.1      2,669.5
                                               ==========   ==========
Other revenue                              2         61.8         27.3
                                               ==========   ==========
Operating profit                                    433.7        394.3
Financial expenses                                  (67.2)       (60.0)
                                               ----------   ----------
                                                    366.5        334.3
Share of loss of jointly controlled entity           (0.1)          --
                                               ----------   ----------
Profit before taxation                              366.4        334.3
Taxation                                   3        (65.4)       (46.6)
                                               ----------   ----------
Profit after taxation                                 301        287.7
Minority interest                                    (0.1)        (0.1)
                                               ----------   ----------
Profit attributable to shareholders                 300.9        287.6
                                               ==========   ==========
Earnings per share                         4   74.6 cents   71.3 cents
                                               ==========   ==========

Notes:

1. Turnover

Turnover comprises fares, trading receipts and other income derived from passenger transport operations, but excludes intra-group transactions.

2. Other revenue

Other revenue mainly comprises interest income earned during the period.

3. Taxation

Hong Kong Profits Tax has been provided at the rate of 16% (1998 - 16%) on the estimated assessable profits for the period.

4. Earnings per share

The calculation of earnings per share is based on the profit attributable to shareholders of HK$300,900,000 (1998 - HK$287,600,000) and 403,639,413 shares in issue during the period (1998 - 403,639,413 shares).

RESULTS

The Group's unaudited profit attributable to shareholders for the six months ended 30 June 1999 was HK$300.9 million (1998 - HK$287.6 million). Earnings per share for the period amounted to 74.6 cents (1998 - 71.3 cents). These represent an increase of 4.6% over the same period of 1998. The Group's results were mainly derived from the operation of franchised bus services.

INTERIM DIVIDEND

The Board has declared an interim dividend of 28 cents per share (1998 - 27 cents per share), totalling HK$113 million (1998 - HK$109 million), for the year ending 31 December 1999. This interim dividend will be paid on 5 October 1999 to the shareholders who are on the Register of Members at the close of business on 30 September 1999. The Register will be closed from 27 September to 30 September 1999, 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 Hong Kong share registrars, Central Registration Hong Kong Limited at Rooms 1901-1905, 19th Floor Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:00 p.m. on 24 September 1999.

OPERATIONS

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

• In the first half of 1999, the total number of passenger trips made on KMB buses was 522.8 million (a daily average of 2.89 million). This represents an increase of 2.1% over the corresponding period of the previous year. The growth in ridership was mainly due to the introduction of new routes and buses, improved frequencies as well as the strengthening of KMB's marketing and business promotion efforts. The fare revenue for the period under review amounted to HK$2,725.8 million, representing an increase of 4.7% as compared with the first six months of 1998. The increase in fare receipts was mainly due to the ridership growth as well as the introduction of more air-conditioned buses which were well received by commuters. Bus operating costs for the period under review also increased by 4.9% due to a rise in salaries and wages and in other payroll costs, an increase in financial expenses and additional operating costs incurred as a result of the introduction of new routes and the enhancement of service quality.

• 13 new routes were introduced during the period under review. This included the operation of seven feeder routes taken over from the Kowloon-Canton Railway Corporation with effect from 3 May 1999 and six other routes linking various districts in Kowloon and the New Territories, including one recreational route, two overnight routes and one express route.

• 122 new air-conditioned double-deck buses were licensed during the period under review. At 30 June 1999, KMB had 3,770 double-deck and 275 single-deck licensed buses in service, of which a total of 2,247 or 56% were air-conditioned. In addition, there were 92 buses under construction and 69 buses on order.

Long Win Bus Company Limited ("LWB")

• The total ridership of LWB for the period under review was 8.7 million passenger trips (a daily average of 47,952). The daily ridership on the Airbus routes rose steadily throughout the period due mainly to the introduction of, and the growth in demand on, the North District routes. The ridership on the North Lantau external routes stabilized whilst that on the Airport shuttle routes declined.

• In response to the changing market and demand patterns of the airport-related passengers, LWB has implemented various measures to rationalize the shuttle network and to improve the effectiveness and efficiency of its vehicle deployment. LWB introduced a new Airbus route A43 (North District - Airport) and a special Airbus service A41P (Ma On Shan - Airport) on 30 January 1999 and 30 June 1999 respectively. These new services have been well received by the public. Since the end of June 1999, LWB has been operating 14 bus routes with the number of buses allocated for operation during the peak hours reduced from 121 to 118. In spite of operating fewer buses, the catchment of LWB's network has extended to cover North District and Ma On Shan. With an increased focus on the operation of Airbus routes and a rationalized shuttle network, the overall efficiency of LWB has improved.

• At 30 June 1999, LWB had 150 air-conditioned double-deck buses and 3 air-conditioned single-deck buses serving Tung Chung and the Airport. All the double-deck buses are super-low floor buses with wheelchair access and many of the features recommended by the United Kingdom Disabled Persons Transport Advisory Committee. The entire fleet is equipped with the Octopus Smart Card System.

Sun Bus Limited ("SB")

• This year is SB's second year of operation. Its mission is to stay ahead in the non-franchised bus sector by rendering total bus services customized to target users' needs and providing them with maximum value for money. It aims to become one of the leading operators in the non-franchised bus sector by the end of 2000. In the first half of 1999, SB mainly focussed on providing non-franchised bus services to the residential and employee segments of the transport market. As at 30 June 1999, SB operated 33 routes with a fleet of 62 air-conditioned single-deck buses. These buses are less than two years of age and have a seating capacity ranging from 20 to 50 persons. For the second half of 1999, SB will strive to further expand its fleet and continue to focus on the "residential" and "employee" service sectors.

Joint Venture Companies

• The two joint venture bus companies of the Group have been operating respectively three bus routes in Dalian and a cross boundary bus service between Lok Ma Chau (HKSAR) and Huanggang (Shenzhen). The level of ridership of these services during the first half of 1999 was satisfactory.

DIRECTORS' INTERESTS IN SHARES

As at 30 June 1999, the interests of the Directors in the issued share capital of the Company as required to be recorded in the register maintained under Section 29 of the Securities (Disclosure of Interests) Ordinance (SDI Ordinance) were as follows:

                                           Shares of HK$1 each
                                 Personal      Family Corporate      Other
                                 Interests  Interests Interests  Interests

Dr the Hon Woo Pak Chuen, JP*      210,047          -         -          -
Raymond Kwok Ping Luen             393,350          -         -          -
Yu Shu Chuen                         2,943     70,803         -  5,768,281
                                                                   (Note 1)
Walter Kwok Ping Sheung, JP         61,522          -         -          -
Ng Siu Chan                              - 11,196,877         -          -
William Louey Lai Kuen           1,058,465          -         -          -
John Chan Cho Chak, JP               2,000          -         -          -
Charles Lui Chung Yuen           1,091,404          -         -  1,299,965
                                                                   (Note 2)
Winnie J Ng                         25,200          -         - 11,196,877
                                                                   (Note 3)
Dr James Kung Ziang Mien,                -          -         -          -
   OBE*
George Chien Yuan Hwei               2,000          -         -          -
The Hon Eric Li Ka Cheung,               -          -         -          -
   JP*
Tsim Tak Po (Alternate              10,000          -         -          -
   Director to
   Mr Raymond Kwok Ping Luen)
Lana Woo (Alternate Director
   to Dr the Hon Woo Pak             9,475          -         -          -
   Chuen, JP)
Patrick Chan Kai Lung                    -          -         -          -
   (Alternate Director
   to Mr Walter Kwok Ping
   Sheung, JP)

(*Independent Non-Executive Director)

Notes:

1. HSBC International Trustee Ltd held 5,768,281 shares in the Company as trustee of a discretionary trust. Mr Yu Shu Chuen is deemed to have interest in the discretionary trust.

2. Mr Charles Lui Chung Yuen and members of his family together have interests in certain private trusts which beneficially held 1,299,965 shares in the Company.

3. Miss Winnie J Ng has interest in certain trusts which beneficially held 11,196,877 shares in the Company.

As at 30 June 1999, none of the Directors had any non-beneficial interest in the share capital of the Company.

During the period under review, the Company did not grant to the Directors any right to subscribe for the shares of the Company.

SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

The Company has been notified of the following interests in the Company's issued shares as at 30 June 1999, which amounted to 10% or more of the Company's issued share capital.

                                                              Percentage
                                                                of total
                                            Shares held    Issued Shares

Sun Hung Kai Properties Limited             133,822,373           33.15%
Arklake Limited                              66,027,552           16.36%
Kowloon Development Company Limited          45,213,369           11.20%

The register of substantial shareholders indicates that the interest disclosed by Sun Hung Kai Properties Limited includes the 66,027,552 shares disclosed by Arklake Limited.

APPOINTMENT OF CHAIRMAN

The Board is pleased to announce the appointment of the Honourable Sir Sze-Yuen Chung, GBM, GBE, PhD, FREng, JP as an independent Non-executive Director and as Chairman of the Company and of its subsidiary companies, KMB and LWB, with effect from 12 August 1999.

DEALINGS IN THE COMPANY'S LISTED SECURITIES

During the period, the Company and its subsidiaries did not purchase, sell or redeem any of the Company's own shares.

COMPLIANCE WITH THE CODE OF BEST PRACTICE

None of the Directors of the Company is aware of information which would reasonably indicate that the Company is, or was at any time during the six month period ended 30 June 1999, not in compliance with the Code of Best Practice as set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that the independent Non-executive Directors of the Company are not appointed for a specific term but are subject to retirement by rotation and re-election at the Annual General Meeting in accordance with the Bye-Laws of the Company.

The Company has complied with the additional requirement to establish an audit committee with the scope of authority and responsibilities defined according to the guidance issued by the Hong Kong Society of Accountants.

YEAR 2000 COMPLIANCE

The Group is fully aware of the impact of the Year 2000 issue and has rigorously conducted contingency planning including scenario analyses and impact assessments. Appropriate actions have been taken, including the adoption of the Year 2000 conformity requirements issued by the British Standards Institution (DISC PD2000-1), i.e. neither performance nor functionality is affected by dates prior to, during and after the Year 2000. A Year 2000 compliance programme was implemented to address all critical areas. A project team led by a Year 2000 co-ordinator provided regular progress reports to the management. As at 30 June 1999, all relevant computer systems and applications that had not been Year 2000 compliant were converted. Business partners and major suppliers have also been requested to provide assurances that the Group is not exposed to risks arising from their Year 2000 non-compliance. In addition, contingency plans have been developed to minimize the potential impact on the Group's operations in exceptional circumstances. The aggregate costs for the Year 2000 modifications did not have a significant effect on the Group's operating results. As at 30 June 1999, there were no material commitments in respect of the Year 2000 modifications.

PROSPECTS

In the light of the present economic climate, KMB has recently declared that it will not apply for a fare increase in 1999. At the same time, salaries and wages for KMB's employees will be contained at the current level. The Group will seek to increase its return by rationalising its bus route network, improving its productivity and exploring new business opportunities, both locally and in Mainland China. With the steady revival of Hong Kong's economic conditions and the continuous development of various new towns in the New Territories, we are confident that there is plenty of room for the business growth of the Group. With a firm commitment to efficient, convenient and high quality transport services, the Group strives to maintain its position as a world class transport industry leader.

S. Y. Chung
Chairman

Hong Kong, 9 September 1999

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