XN000022-1989-03-13 — Page 6

MONDAY, MARCH 13, 1989

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HOWEVER, AS PUBLIC UTILITY COMPANIES, KOWLOON MOTOR BUS COMPANY (KMB) AND CHINA MOTOR BUS COMPANY (CMB) ARE REQUIRED ΤΟ PROVIDE INFORMATION IN CONFIDENCE FOR INDEPENDENT ASSESSMENT BY THE GOVERNMENT, THE TRANSPORT ADVISOTY COMMITTEE, AND THE EXECUTIVE COUNCIL.

THE LIMITED FINANCIAL INFORMATION MADE AVAILABLE TO THE PUBLIC IS AS MUCH AS THE LAW (THE COMPANY ORDINANCE) REQUIRES THE FRANCHISED BUS COMPANIES TO DISCLOSE, AND IS AS MUCH AS THEY ARE WILLING то RELEASE.

ANY LACK OF PUBLIC JUSTIFICATION FOR PARE INCREASES IS NOT BECAUSE THE GOVERNMENT IS UNWILLING TO DIVULGE THE INFORMATION; RATHER, IT IS BECAUSE THE INFORMATION IS OBTAINED IN CONFIDENCE AND THE GOVERNMENT WOULD BE IN A BREACH OF TRUST AND OF THE LAW IF IT DID SO.

THE PROFIT CONTROL SCHEME PROVIDES FOR A PERMITTED LEVEL OF RETURN OF 15 PER CENT FOR CMB AND 16 PER CENT FOR KMB. THE PERMITTED RETURN IS EXPRESSED AT A PERCENTAGE OF THE OPERATOR'S AVERAGE NET FIXED ASSETS IN AN ACCOUNTING YEAR.

THE PERMITTED RETURN IS THE GROSS RETURN TO THE COMPANY AND IS SUBJECT TO COMPULSORY DEDUCTIONS FOR THE INTEREST ON BORROWING ΤΟ FINANCE FIXED ASSET ACQUISTION AND THE INTEREST ON THE DEVELOPMENT FUND BALANCE UNDER THE TERMS OF THE FRANCHISE.

IN PRACTICE, THE EFFECTIVE OR NET RATE OF RETURN ACHIEVED FOR KMB HAS ONLY BEEN AROUND 13.4 PER CENT AND FOR CMB IT HAS BEEN ABOUT 14 PER CENT.

THE FRANCHISE PROVIDES THAT IF THE ACTUAL RETURN ACHIEVED EXCEEDS THE PERMITTED RETURN, THEN THE EXCESS WILL BE TRANSFERRED THE DEVELOPMENT FUND.

TO

THE PUBLIC BUS SERVICES ORDINANCE PROVIDES FOR THE OPERATION OF THE PROFIT CONTROL SCHEME TO BE REVIEWED EVERY TWO YEARS. HOWEVER, THERE IS NO PROVISION TO REVIEW THE BASIC TERMS OF THE SCHEME, SUCH AS THE RATE OF THE PERMITTED RETURN.

THE FRANCHISE. AND THEREBY THE TERMS OF THE PROFIT CONTROL SCHEME EMBODIED IN THE FRANCHISE,

ARE A LEGALLY BINDING AGREEMENT BETWEEN THE GOVERNMENT AND THE FRANCHISED BUS COMPANIES WHICH THE GOVERNMENT CANNOT CHANGE UNILATERALLY.

1975,

SINCE THE INCEPTION OF THE PROFIT CONTROL SCHEME IN BUS COMPANIES HAVE, GENERALLY, GRADUALLY IMPROVED AND EXPANDED SERVICES TO MEET AN EVERGROWING DEMAND.

THE THEIR

THE PUBLIC EXPECTS AND GETS RELATIVELY CHEAP, FREQUENT, AND, MOST OF THE TIME, RELIABLE SERVICES WITH GROWING STANDARDS OF COMFORT.

THE GOVERNMENT CONSIDERS THAT THE PROFIT CONTROL SCHEME. HAS BEEN ABLE, BY AND LARGE, ΤΟ ACHIEVE ITS OBJECTIVES, AND THAT NO DRASTIC CHANGES TO ITS BASIC TERMS ARE NECESSARY.

BRIEFINGS FOR TRAFFIC AND TRANSPORT COMMITTEES OF ALL DISTRICT BOARDS ON THE PROFIT CONTROL SCHEME WILL BE COMPLETED BY APRIL 27 THIS YEAR.

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