In the company's IPO prospectus ,the directors recommend annually the distribution to shareholders of 15% to 25% of the Company's distributable annual earnings as cash dividends (except with respect to 1997, for which dividends were paid from distributable earnings attributable only to the period following completion of the H Share offer). The amount actually distributed will be determined based on operating requirements and cash flow considerations.
The Articles of Association provide that the Company may declare interim and final dividends. The articles of Association provide that distributable earnings shall equal the after-tax income of the Company as determined by (a) international accounting standards or (b) PRC accounting rules and standards, whichever yields a lower amount. The Directors of the Company expect that, final and interim dividends will be paid during the second and fourth quarters of each year, respectively.
The Articles of Association also provide that any cash dividend will be declared in RMB and paid in Hong Kong dollars converted at the average closing exchange rate for Hong Kong dollars quoted by the PBOC for each day of the calendar week prior to the declaration date for the dividend. If the Company does not have sufficient Hong Kong dollars for the dividend payment, the company will obtain such Hong Kong dollars through swap centers or by other authorized means

Taxation concerned with transfer of the Company's share

1st: Hong Kong
Tax on dividends

No tax will be payable in Hong Kong in respect of dividends paid by the Company.

Profit Tax

No tax is imposed in Hong Kong in respect of gains from the sale of property (such as the H Shares) other than gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where such gains are derived from or arise from in Hong Kong from such trade, profession or business. In such circumstances, trading gains will be chargeable to Hong Kong profits tax which is currently imposed at a rate of 16 per cent on corporations and at a rate of 15 per cent on persons other than corporations. Gains from sales of the H Shares effected on the Hong Kong Stock Exchange will be considered to be derived from or arising in Hong Kong. Liability for Hong Kong profits tax would thus arise in the case of those persons carrying on a business of trading or dealing in securities in Hong Kong.

Stamp Duty

Hong Kong stamp duty, currently charged at the rate of HK$1.00 per HK$1,000 or part thereof of the consideration for, or the value of, H Shares, will be payable by the purchaser on every purchase, and by the seller on every sale of H Shares that are registered on the Company's Hong Kong branch registered (i.e., a total of HK$ 2 per HK$1,000 or part thereof will be payable on any sale and purchase transaction in relation to H Shares).In addition, a fixed duty of HK$5 is currently payable on an instrument of transfer of H Shares.

Estate Duty

Estate duty is levied and paid upon the principal value of properties situated in Hong Kong passing on the death of a person. H Shares are regarded so Hong Kong properties for estate duty purposes. Hong Kong estate duty is imposed on the principal value of a deceased's estate at graduated rates from 5 per cent to 15 per cent . In respect of the estate of persons dying on or after 1st April, 1996, no estate duty is payable where the principal value of the estate dose not exceed HK$7.5 million whereas the maximum rate of 15 per cent applies where the principal value exceeds HK$10.5 million.

2nd: The United Kingdom
Tax on dividends

A holder of H Shares who is not resident in the United Kingdom will not be subject to tax in the United Kingdom on dividends paid by the Company unless such holder carries on a business in the United Kingdom through a branch or agency to which the H Shares in question are attributable.
Holders of H Shares who are resident in the United Kingdom will generally be subject to United Kingdom income tax or corporation tax on the gross amount of dividends paid by the Company, but will normally be entitled to a credit for any PRC withholding tax charged on the dividend upto the rate of withholding permitted by the double tax between the UK and the PRC and to a refund of any PRC withholding tax withheld in excess of that rate.

Tax on capital gains

A holder of H Shares who is resident or ordinarily resident in the United Kingdom may, depending on their particular circumstances, suffer a liability to United Kingdom tax on capital gains arising on the disposal of any H Shares. However, individual holders of H Shares who are resident or ordinarily resident, but not domiciled, in the United Kingdom will only be liable to tax on the amounts (if any) remitted to the United Kingdom in respect of such gains.
Holders of H Shares who are not resident or ordinarily resident in the United Kingdom for tax purposes may, if they carry on a business in the United Kingdom through a branch or agency to which such H Shares are attributable, be liable to United Kingdom tax on capital gains on the disposal of such H Shares.

Stamp Duty/Stamp Reserve Duty

Dealings in the H Shares on the London Stock Exchange which are settled entirely by book entry through CCASS will not by liable to United Kingdom stamp duty or United Kingdom stamp duty reserve tax. If instruments of transfer or other documents transferring ownership are executed in the United Kingdom (for example, if settlement of a transaction if effected by the transfer of a share certificate to a broker or other intermediary in London), the transferee would be subject to United Kingdom stamp duty at the rate of 0.5% of the consideration payable in respect of the H Shares transferred rounded up to the next whole multiple of 15. This liability to United Kingdom stamp duty will be in addition to any liability to Hong Kong stamp duty.

Inheritance Tax

Liability to United Kingdom inheritance tax (at a rate of 40 per cent) may arise on the death of, or a gift of H Shares by, a holder of H Shares who is domiciled (or deemed to be domiciled) in the United Kingdom.