XN000022-1975-11-19 — Page 5

WEDNESDAY, NOVEMBER 19, 1975

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GOVERNMENT DIRECTORS FOR TRAMWAY COMPANY

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DR. THE HON, S.Y. CHUNG SUGGESTED TODAY THAT THE GOVERNMENT SHOULD APPOINT ONE OR TWO OFFICIALS TO THE BOARD OF DIRECTORS OF THE TRAMWAY COMPANY, AS IN THE CASE OF THE TWO BUS COMPANIES.

HE WAS SPEAKING IN SUPPORT OF THE TRAMWAY (AMENDMENT) BILL 1975, WHICH SOUGHT TO ABOLISH ROYALTY PAYABLE BY THE COMPANY, RAISE TRAM FARES FROM 20 CENTS TO 30 CENTS FROM NEXT MONTH, AND SET UP THE +PROFIT EQUALIZATION FUND.+

HE SAID THE FINANCIAL STATEMENTS OF THE COMPANY WERE NO LONGER AVAILABLE TO THE PUBLIC SINCE IT BECAME A SUBSIDIARY OF HONG KONG AND KOWLOON WHARF AND GODOWN COMPANY LIMITED, WHILE THE COMPANY WOULD BE VIRTUALLY GUARANTEED A PROFIT AFTER TAX OF 15 PER CENT ON NET FIXED ASSETS WITH THE +PROFIT EQUALIZATION FUND+.

+ IT IS ESSENTIAL THAT THE GOVERNMENT SHOULD REGULARLY AND FREQUENTLY MONITOR BOTH THE COMPANY'S OPERATING EFFICIENCY AND FINANCIAL POSITION, HE SAID.

DR. CHUNG SAID THE PROFIT EQUALIZATION FUND, WHICH TAKES UP PROFITS IN EXCESS OF 15 PER CENT OF THE COMPANY'S AVERAGE NET FIXED ASSETS FOR A PARTICULAR YEAR, WAS FIRST PROPOSED BY HIM, TOGETHER WITH THE ABOLITION OF ROYALTY, DURING THE DEBATE ON THE LAST TRAM FARE INCREASE IN 1972. HE WAS PLEASED THE GOVERNMENT HAD ACTED ON HIS ADVICE.

THE OPERATION OF THE FUND, TOGETHER WITH THE ABOLITION OF ROYALTY, COULD SIGNIFICANTLY PROLONG THE INTERVAL BETWEEN FARE INCREASES. HE SAID ANOTHER INCREASE WOULD PROBABLY HAVE BEEN NECESSARY EARLY IN 1978 BUT IT WAS LIKELY THAT THIS COULD BE DELAYED TO MID-1980.

DR. CHUNG SAID THAT MORE THAN TWO-THIRDS OF THE TOTAL FIXED ASSETS OF THE TRAMWAY COMPANY, ON WHICH THE PROFITABILITY OF THE COMPANY WAS ASSESSED, WERE IN HOLDINGS OF LAND AT THE RUSSELL STREET DEPOT.

IF THE PRECEDENT OF REVALUATION OF FIXED ASSETS WAS TO BE ACCEPTED BY THE GOVERNMENT, DR. CHUNG SAID, THE COMPANY COULD LIKELY REVALUE ITS LAND HOLDINGS IN THE LIGHT OF RISING LAND PRICES SINCE 1965, WHEN THE LAST REVALUATION WAS MADE.

+WHEN THIS HAPPENS, THE NET FIXED ASSETS OF THE COMPANY COULD BE DOUBLED OVERNIGHT AND CONSEQUENTLY THERE COULD BE ANOTHER SUBMISSION FROM THE COMPANY FOR 'FURTHER FARE INCREASES IN ORDER TO BRING ITS RETURN OR PROF IT ON NET FIXED ASSETS TO THE PERMITTED LEVEL OF 15 PER CENT, HE SAID.

DR. CHUNG SAID