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The Egged bus cooperative paid out a NIS 10 million dividend at the beginning of December, its first dividend in four years. After deducting 25 percent for taxes, each of Egged's 2,226 members received NIS 3,500.

Members who oppose the present management, led by Arik Feldman, assume that the dividend's timing is in anticipation of February's elections for positions among the cooperative's institutions. The dividend payment, as opposed to a salary increase, harms retirees who cannot participate in the elections, since their pensions are linked to members' salaries.

This is Egged's first dividend since February 1999, when the cooperative paid members 60 percent of their December 1998 salary. That payment was made just days before the court ruled in a dispute, between the cooperative and members, relating to Egged's attempt to register as a corporation and to issue shares. At the time, members also complained that the money was intended to buy their silence.

Egged receives an annual government subsidy of NIS 1.1 billion. At the beginning of the year, the cooperative claimed it was unable to finance NIS 35 million of a NIS 70 million public transportation security plan. This year, Egged raised NIS 45 million from institutional investors through the issue of 8-percent linked bonds.

Egged spokesman Ron Ratner said that the dividend was due to the cooperative's positive financial results in 2002. This is despite the fact that the Maalot rating agency rated Egged's bonds issued in December 2002 as AA-, and determined that the cooperative had a negative net worth. The firm's revenues also have declined continuously due to reduced transportation of workers from the territories and a drop in tourism and special trips as a result of the security situation. This has led to a decline in the cooperative's cash flow from operations.

Ratner said that the government subsidy is intended to finance discounts Egged gives parts of the population, such as soldiers, disabled people and those receiving welfare assistance. He said that every four years when elections take place, some people try to link the vote to developments in the cooperative.

Egged, which currently is a single business unit, is planning to turn its urban branches into independent profit centers. The change will allow Egged to properly account for costs in preparation of upcoming battles over public transportation tenders, which are a part of the Transportation Ministry-led reforms in the sector. The change will be the first of a series of steps that will turn Egged into a corporation. Egged sources said the status change is expected to occur in March.

The reforms have led to an efficiency drive during the last year, including the closing of cafeterias, salary cuts and less overtime.