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two factors: the good fortune and the good guidance
of the Hong Kong Telephone Company. The Company was
fortunate in that its equipment was purchased during
a period of keen competition among manufacturers at
about one-tuurd of what it would cost to-day, and it
has shown its foresight in providing a large margin
of plant for future growth at the favourable prices
which then prevailed. The Company has been run
economically and the premium at which its shares were
issued was utilised to write off old plant, while no
bonus shares have been issued at any time.
As the Taxation Committee remarked, however,
there are certain features in the Ordinance under which
the Company functions which are not satisfactory to the
Company, for instance, it is argued that the absolute
limit of 15 per cent dividend is inequitable because
the high rate of profits is due largely to the efficiency
of the Company and to the Canton line which was not in
existence when the original arrangement was made. An
absolute maximum gives the Company no incentive to earn
further profits by greater efficiency and economy after
that point has been reached.
Moreover, the present system of contributing
to a reserve fund for the redemption of the Company's
capital is not entirely satisfactory. A fixed sum of
170,482 is put aside yearly, which is sufficient to
amortise the whole capital by 1975, but interest on
investments of that fund goes into general profit and loss account, while there is no provision for dealing
with depreciation of these investments.
The present bill gives effect to negotiations
with the Company which were initiated and practically
brought to conclusion by ..r. Caine, with a view to
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