2
5
6.
f. in the heavily capitalised companies a "normal maximum" dividend of
15% might be provided for in view of the unsettled conditions in Hong
Kong, rather than the lower margins which obtain elsewhere.
g. companies which have not issued shares on bonus terms might well
be allowed to declare proportionately increased dividends.
5.
If it were decided to require early reductions in the charges
made, and if reasonable uniformity were to be effected in those reduc-
tions it would be necessary to reach decisions in principle on the follow-
ing points:-
ટીડ the dividend which shareholders in the public utility companies
should be entitled to expect in normal circumstances.
b. the basis on which rehabilitation should be financed, bearing in
mind that on one hand consumers are paying considerably more than pre-
war for services rendered, and on the other that while some companies
have already financed rehabilitation on bonus terms other companies
have yet to issue additional capital and claim the right to issue it
on bonus terms.
C. the basis on which profits earned in excess of a stipulated upper
limit should be distributed.
Dividend limitation in respect of public utilities is a practice
with long-standing precedents ranging from United Kingdom legislation
providing for maximum dividends of from 4% to 6% for various public
utilitics, Colonial legislation providing for automatic price reductions
in respect of dividend declarations in excess of 10%, to the local example,
the Hong Kong Telephone Co. Ltd. which is not allowed to increase charges
unless unable to cam 8% on the paid up capital and is required to pay 50%
of profits earned in excess of 12% to Government as an additional royalty.
It is for consideration whether it might not be reasonable to limit the
dividends of the other public utility companies on the same basis as the
Telophone Co.
7. It is, of course, common practice in the United Kingdom, and some
other Colonics, to control the issue of capital and borrowing by public
utility companies, and locally the Hong Kong Telephono Co. Ltd. requires
the consent of Logislative Council to the terms on which new capital is
raised. If it were agreed that dividends of public utility companies should