MONDAY, SEPTEMBER 1, 1975
3
KMB AND CMB GET NEW FRANCHISES
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FRANCHISES SETTING OUT THE CONDITIONS UNDER WHICH HONG KONG'S TWO MAJOR BUS COMPANIES, THE KOWLOON MOTOR BUS COMPANY (KMB) AND THE CHINA MOTOR BUS COMPANY (CMB), CAN OPERATE HAVE BEEN GRANTED BY THE GOVERNOR IN COUNCIL AND WILL COME INTO FORCE FROM TODAY (MONDAY, SEPTEMBER 1).
ONE OF THE MAJOR PROVISIONS OF THE FRANCHISES WHICH HAVE BEEN GRANTED UNDER THE TERMS OF THE PUBLIC OMNIBUS SERVICES ORDINANCE 1975, IS THE FIXING, FOR THE FIRST TIME, OF A PERMITTED RATE OF RETURN FOR THE TWO COMPANIES. IN THE CASE OF KMB, THE RATE OF RETURN IS 16 PER CENT, BASED ON THE VALUATION OF ITS FIXED ASSETS IN JULY 1959 - THE LAST TIME THE COMPANY'S ASSETS WERE VALUED,
FOR CMB THE RATE OF RETURN IS 15 PER CENT, BUT THIS WILL BE ON A VALUATION CARRIED OUT IN 1962 AT THE TIME THE COMPANY FIRST ISSUED ITS SHARES TO THE PUBLIC.
ANOTHER PROVISION OF THE FRANCHISES, WHICH IS ALSO LAID DOWN IN THE NEW ORDINANCE, IS THE ESTABLISHMENT OF A PROFIT CONTROL SCHEME. UNDER THE SCHEME, EACH COMPANY IS REQUIRED TO MAINTAIN A RESERVE (CALLED THE DEVELOPMENT FUND) AND ANY PROFITS EARNED IN EXCUSS OF THE PERMITTED RATE OF RETURN IS CREDITED TO THIS FUND.
IN A YEAR WHEN A COMPANY EARNS LESS THAN THE PERMITTED RATE OF RETURN IT WILL BE ALLOWED TO DRAW FROM THE FUND THE AMOUNT NEEDED TO BRING IT UP TO THE PERMITTED RETURN,
THE COMPANIES WILL ALSO HAVE TO PAY EIGHT PER CENT INTEREST ON THE BALANCE IN THE FUND EACH YEAR AND THIS WILL BE ADDED TO THE FUND.
THE MAIN PURPOSES OF THE FUND ARE TO ASSIST WITH CAPITAL EXPANSION FOR BUS OPERATIONS, BY ENSURING RETENTION OF PROFITS FOR THIS PURPOSE IN THE COMPANY, AND ALSO AS A PROFIT EQUALISATION FUND.
THE NEW FRANCHISES GIVE THE COMPANIES EXCLUSIVE RIGHTS TO OPERATE BUS SERVICES ON SPECIFIED ROUTES AS OPPOSED TO THE PREVIOUS FRANCHISES WHICH WERE GRANTED ON A GEOGRAPHICAL BASIS.
THE FRANCISES WILL LAST FOR 10 YEARS IN THE FIRST INSTANCE, THAT IS FROM SEPTEMBER 1, 1975 UNTIL AUGUST 31, 1985.
1985. BUT THE CONCEPT OF A ROLLING FRANCHISE HAS BEEN ACCEPTED WITH THE POSSIBILITY OF EXTENSIONS EVERY TWO YEARS FOLLOWING COMPREHENSIVE REVIEWS OF THE COMPANIES' OPERATIONS AND THEIR PERFORMANCE UNDER THE FRANCHISES.
AFTER THE REVIEWS, AND SUBJECT TO SATISFACTORY PERFORMANCE, RECOMMENDATIONS FOR THE EXTENSION OF EACH FRANCHISE FOR FURTHER PERIODS OF TWO YEARS WOULD BE SUBMITTED TO THE GOVERNOR IN COUNCIL FOR DECISION. PROVIDED, THEREFORE, THE COMPANIES OPERATE SATISFACTORILY THEY CAN LOOK FORWARD TO A PERIOD OF CONTINUITY.
/THE ROUTES