CO129-622-5 Public Utility Companies 16-11-1948 - 16-11-1948 — Page 7

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be limited, it would then be necessary to provide that the dividends

distributed should not be increased by the issue of bonus shares or

of shares on bonus terms. While companies are charging considerably

more than pre-war rates for their services, the nood to acquire

additional funds to finance rehabilitation, i.c. to replace assets

rather than to add to them, should not be on terms providing the

shareholders with substantial additional profits, or dividend rights

out of keeping with the rates at which funds could otherwise have

been acquired. In somewhat similar circumstances the Hong Kong Wharf

& Godown Co. raised $9 million additional capital by issuing shares

at a premium of 100%. Future issues of capital by those companies

might well be on terms approved by the Governor-in-Council, presum-

ably at or near the market rate. In order that companies which have

not yet issued shares to finance rehabilitation should not be penal-

ised in comparison with those which have already issued shares on

bonus terms, in computing charges to consumers dividends at 12% might

have to be allowed in respect of the pre-September 1939 issued

capital plus half of the capital issued at par since 1945, bonus issues

being disregarded for dividend carning purposo, i.e. companies which

have issued shares cn bonus terms since September 1939 might be allowe1

a lower average dividend.

8.

It is customary for earnings by a public utility company

above a "basic dividend" to be shared between the company and the

public by reference to a sliding scale allowing the payment of

incrcased dividends as rates are reduced. It might be considered

reasonable to apply this principle, already long-established clsc-

where, to the power companies here. In the case of the transport

companies change difficulties make any close adjustment of fares

impracticable at prosent and in those circumstances, of the surplus

earned over say, 12%, the proportion which would otherwise

applied to a reduction of fares, might well be paid to public funds

as an additional royalty in accordance with provisions similar to

those at present applicable to the Hong Kong Telephone Co. Ltd.

On the assumption that it is reasonable that the charges

9.

be

by public utility companies increased to meet present day conditions

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