CO129-622-5 Public Utility Companies 16-11-1948 - 16-11-1948 — Page 6

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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