CO129-573-14 Kowloon-Canton railway- provision of a renewals fund 7-6-1938 - 11-10-1938 — Page 31

2.

322

Col Ru

than double the economic life of rolling stock as estimated in the light of local experience. No provision is made at all for depreciation to track and

plant.

3.

The depreciation reserve which has been

built up on the above basis and which stood on the

31st of December, 1937, at $917,366 is purely a book

figure and represents no actual cash asset.

4. The total capital account value of rolling stock at the same date was $2,831,189.78. Heavy

expenditure is anticipated in the near future on the

renewal of rolling stock. The Chief Mechanical Engineer

reports that eight A Class locomotives will need re-

boilering or replacing in the near future and that about ten coaches will need to be stripped and rebuilt within the next five years. In the absence of any Renewals Fund, it will, of course, be necessary to provide funds for these renewals from the Colony's

current revenue.

5.

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While there is no means of avoiding that procedure in the present circumstances, it is suggested that the contingency should be avoided in the future by

arranging now for the systematic accumulation of a

Renewals Fund from which future renewals could be met.

The Railway is at present able to show a surplus of revenue over the year and the suggestion of the Manager is that a part of such surpluses should be set aside

to provide a Renewals Fund. I agree that this proposal is financially sound and should like to see the

accumulation of such a fund commenced. Before considering, however, what sums it would be necessary to provide annually and what steps should be taken to make up the

arrears