CMB_1985 — Page 21

10.

Franchise

Pursuant to the Public Omnibus Services Ordinance 1975 the company has been granted a franchise effective from 1st September, 1975 which provides, inter alia, that the company's bus operating profits shall not exceed a permitted return of 15% per annum of the average net fixed assets of the company in an accounting year.

(a)

The "net fixed assets" as defined in the company's franchise amounted to:-

1985

1984

$000's

$000's

Land, buildings, motor buses and plant, fixtures and equipment

243,825

261,675

Stores and spare parts

56,140

44,098

Insurance deposit with Hong Kong Government

400

400

300.365

306,173

Average

303,269

(b)

The permitted return for the year ended 30th June, 1985 is calculated as follows:-

Operating receipts.

1985

$000's

1984

$000's

Bus fares, including students' travel scheme grants

Advertising and other income

524,069

454,387

5,349

4,870

529,418

459,257

Expenses

Operating expenses, including provision for spare parts

obsolescence and insurance

414,326

365,729

Depreciation of fixed assets— per profit control scheme

32,179

31,931

Taxation (note 5(a))

21,397

14,943

467,902

412,603

Operating surplus for profit control scheme

61,516

46,654

Transfer to development fund

(16,026)

(42)

Permitted return for the year to 30th June, 1985, being 15% on

average net fixed assets, stores and spare parts, amounting to $303,269,202 (1984: $310,738,842)(note 10(a))

45,490

46,612

Less: Interest at 8% on average balance of development fund

in accordance with note 1(g) 3(i)

(1,521)

(812)

Interest at up to 8% p.a. on borrowed capital in accordance

with note 1(g) 3(ii)

(3,275)

(4,830)

40,694

40,970

Non-operating income

10,316

6,053

Profit attributable to the shareholders of the company

51,010

47,023

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