CTRP » Topics » Regulation of Foreign Currency Exchange and Dividend Distribution

This excerpt taken from the CTRP 20-F filed Apr 12, 2007.

Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended. Under the Rules, RMB is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment in securities outside China unless the prior approval of the State Administration for Foreign Exchange of the People’s Republic of China is obtained.

 

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Pursuant to the Foreign Currency Administration Rules, foreign investment enterprises in China may purchase foreign currency without the approval of the State Administration for Foreign Exchange of the PRC for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject to a cap approved by the State Administration for Foreign Exchange of the People’s Republic of China) to satisfy foreign exchange liabilities or to pay dividends. In addition, if a foreign company acquires a company in China, the acquired company will also become a foreign investment enterprise. However, the relevant PRC government authorities may limit or eliminate the ability of foreign investment enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside China are still subject to limitations and require approvals from the State Administration for Foreign Exchange of the People’s Republic of China.

Dividend Distribution. The principal regulations governing distribution of dividends of wholly foreign-owned companies include:

 

   

The Foreign Investment Enterprise Law (1986), as amended; and

 

   

Administrative Rules under the Foreign Investment Enterprise Law (2001).

Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds, unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

C. Organizational Structure

The following table sets out the details of our subsidiaries as of the date of this annual report:

 

Name

   Country of Incorporation    Ownership Interest  

Ctrip Computer Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip Travel Information Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip Travel Network Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip.com (Hong Kong) Limited

   Hong Kong    100 %

C-Travel International Limited

   The Cayman Islands    100 %

We conduct a majority of our business through our wholly-owned subsidiaries in China. Due to the current restrictions on foreign ownership of air-ticketing, travel agency, online advertising and Internet content provision businesses in China, we have conducted part of our operations in these businesses through a series of contractual arrangements between our PRC subsidiaries and our affiliated Chinese entities, including:

 

   

Beijing Ctrip;

 

   

Shanghai Ctrip Commerce;

 

   

Guangzhou Ctrip;

 

   

Shanghai Huacheng;

 

   

Shanghai Ctrip Charming; and

 

   

Shenzhen Ctrip.

Qi Ji, our co-founder and director, Min Fan, our co-founder and Chief Executive Officer, Jianmin Zhu, our Vice President, and Gangyi Yan, our senior executive, are principal owners of our affiliated Chinese entities. Each of them has signed an irrevocable power of attorney to appoint our Chief Financial Officer, Jane Jie Sun, as attorney-in-fact to vote on all matters of our affiliated Chinese entities for a period of ten years until 2016.

D. Property, Plant and Equipment

Our customer service center, principal sales, marketing and development facilities and administrative offices are located on premises comprising approximately 12,600 square meters in an industry park in Shanghai, China. We own approximately 2,500 square meters of our premises and lease 1,223 square meters of our premises from a company controlled by a family member of one of our directors. We have branch offices in Hong Kong, Beijing, Guangzhou, Shenzhen, Chengdu, Qingdao, Shenyang, Xiamen, Hangzhou, Wuhan and Nanjing. We also maintain a sales network in more than 45 cities in China. We believe that we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our expansion plans in the near future.

 

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On February 3, 2005, we entered into a Land Early Development Cost Compensation Agreement with Shanghai Hong Qiao Lin Kong Economic Development Park Co., Ltd., pursuant to which, in consideration of approximately RMB68 million, we acquired land use rights for approximately 17,000 square meters of land in the Shanghai Hong Qiao Lin Kong Economic Development Park for our new information and technology center, or the New Premises.

On February 13, 2006, we entered into a construction agreement with Shanghai No. 1 Construction Co., Ltd. to construct a new information and technology center on the New Premises, which when completed will house our principal executive offices, 24-hour customer service center, product development center and administrative and support facilities. The total cost for the construction agreement is approximately RMB115 million.

The aggregate investment for the New Premises including the land cost, construction cost and other improvement cost is estimated to be approximately US$30 million, of which US$17 million has been paid with the remainder due at the completion of the construction of the New Premises, which is expected to be around mid-2007.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F. This annual report contains forward-looking statements. See “Introduction — Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Risk Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

A. Overview

We are a leading consolidator of hotel accommodations and airline tickets in China. We aggregate information on hotels and flights and enable our customers to make informed and cost-effective hotel and flight bookings. We also offer packaged-tour products and other products and services.

In 2006, we derived 57%, 36%, 5% and 2% of our revenues from our hotel reservation, air ticketing, packaged-tour and other businesses, respectively.

This excerpt taken from the CTRP 20-F filed Jun 26, 2006.

Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended. Under the Rules, RMB is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment in securities outside China unless the prior approval of the State Administration for Foreign Exchange of the People’s Republic of China is obtained.

Pursuant to the Foreign Currency Administration Rules, foreign investment enterprises in China may purchase foreign currency without the approval of the State Administration for Foreign Exchange of the PRC for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject to a cap approved by the State Administration for Foreign Exchange of the People’s Republic of China) to satisfy foreign exchange liabilities or to pay dividends. In addition, if a foreign company acquires a company in China, the acquired company will also become a foreign investment enterprise. However, the relevant PRC government authorities may limit or eliminate the ability of foreign investment enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside China are still subject to limitations and require approvals from the State Administration for Foreign Exchange of the People’s Republic of China.

Dividend Distribution. The principal regulations governing distribution of dividends of wholly foreign-owned companies include:

 

    The Foreign Investment Enterprise Law (1986), as amended; and

 

    Administrative Rules under the Foreign Investment Enterprise Law (2001).

Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds, unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

C. Organizational Structure

The following table sets out the details of our subsidiaries as of the date of this annual report:

 

Name

  

Country of Incorporation

   Ownership Interest  

Ctrip Computer Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip Travel Information Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip Travel Network Technology (Shanghai) Co., Ltd.

   China    100 %

Ctrip.com (Hong Kong) Limited

   Hong Kong    100 %

C-Travel International Limited

   The Cayman Islands    100 %

 

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We conduct a majority of our business through our wholly-owned subsidiaries in China. Due to the current restrictions on foreign ownership of air-ticketing, travel agency, online advertising and Internet content provision businesses in China, we have conducted part of our operations in these businesses through a series of contractual arrangements between our PRC subsidiaries and our affiliated Chinese entities, including:

 

    Beijing Ctrip;

 

    Shanghai Ctrip Commerce;

 

    Guangzhou Ctrip;

 

    Shanghai Huacheng;

 

    Shanghai Ctrip Charming; and

 

    Shenzhen Shencheng.

Qi Ji, our co-founder and director, Min Fan, our co-founder and Chief Executive Officer, and Jianmin Zhu, our Vice President, are principal owners of our affiliated Chinese entities. Each of them has signed an irrevocable power of attorney to appoint our Chief Financial Officer, Jane Jie Sun, as attorney-in-fact to vote on all matters of our affiliated Chinese entities for a period of ten years until 2016.

D. Property, Plant and Equipment

Our customer service center, principal sales, marketing and development facilities and administrative offices are located on premises comprising approximately 10,200 square meters in an industry park in Shanghai, China. We own approximately 2,500 square meters of our premises and lease 1,223 square meters of our premises from a company controlled by the spouse of our Chairman, James Jianzhang Liang. We have branch offices in Hong Kong, Beijing, Guangzhou, Shenzhen, Chengdu, Qingdao, Shenyang, Xiamen, Hangzhou, Wuhan and Nanjing. We also maintain a sales network in more than 40 cities in China. We believe that we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our expansion plans in the near future.

On February 3, 2005, we entered into a Land Early Development Cost Compensation Agreement with Shanghai Hong Qiao Lin Kong Economic Development Park Co., Ltd., pursuant to which, in consideration of approximately RMB65 million, we acquired land use rights for approximately 16,670 square meters of land in the Shanghai Hong Qiao Lin Kong Economic Development Park for our new information and technology center (the “New Premises”).

On February 13, 2006, we entered into a construction agreement with Shanghai No. 1 Construction Co., Ltd. to construct a new information and technology center on the New Premises, which when completed will house our principal executive offices, 24-hour customer service center, product development center and administrative and support facilities. The total cost for the construction agreement is approximately RMB115 million.

The aggregate investment for the new premises including the land cost, construction cost and other improvement cost is estimated to be approximately between US$25 million and US$30 million, of which US$6 million has been paid with the remainder due at the completion of the construction of the new premises, which is expected to be around mid-2007.

 

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This excerpt taken from the CTRP 20-F filed Jun 22, 2005.

Regulation of Foreign Currency Exchange and Dividend Distribution

 

Foreign Currency Exchange. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended. Under the Rules, RMB is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment in securities outside China unless the prior approval of the State Administration for Foreign Exchange of the People’s Republic of China is obtained.

 

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Table of Contents

Pursuant to the Foreign Currency Administration Rules, foreign investment enterprises in China may purchase foreign exchange without the approval of the State Administration for Foreign Exchange of the PRC for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject to a cap approved by the State Administration for Foreign Exchange of the People’s Republic of China) to satisfy foreign exchange liabilities or to pay dividends. In addition, if a foreign company acquires a company in China, the acquired company will also become a foreign investment enterprise. However, the relevant Chinese government authorities may limit or eliminate the ability of foreign investment enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside China are still subject to limitations and require approvals from the State Administration for Foreign Exchange of the People’s Republic of China.

 

Dividend Distribution. The principal regulations governing distribution of dividends of wholly foreign-owned companies include:

 

    The Foreign Investment Enterprise Law (1986), as amended; and

 

    Administrative Rules under the Foreign Investment Enterprise Law (2001).

 

Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds, unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

 

C. Organizational Structure

 

The following table sets out the details of our subsidiaries:

 

Name


   Country of Incorporation

   Ownership Interest

Ctrip Computer Technology (Shanghai) Co., Ltd.

   China    100%

Ctrip Travel Information Technology (Shanghai) Co., Ltd.

   China    100%

Ctrip Travel Network Technology (Shanghai) Co., Ltd.

   China    100%

Ctrip.com (Hong Kong) Limited

   Hong Kong    100%

 

We conduct a majority of our business through our wholly-owned subsidiaries in China. Due to the current restrictions on foreign ownership of air-ticketing, travel agency, advertising and Internet content provision businesses in China, we have conducted part of our operations in these businesses through a series of contractual arrangements with our affiliated Chinese entities, including:

 

    Beijing Ctrip;

 

    Ctrip Commerce;

 

    Guangzhou Guangcheng;

 

    Shanghai Huacheng;

 

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    Shanghai Ctrip Charming; and

 

    Shenzhen Shencheng.

 

Qi Ji, who is a co-founder and director of our company, Min Fan, who is a co-founder and Chief Operating Officer of our company, and Jianmin Zhu, who is a Vice President of our company, are principal owners of our affiliated Chinese entities. Each of them has signed an irrevocable power of attorney to appoint our President and Chief Financial Officer, Neil Nanpeng Shen, as attorney-in-fact to vote on all matters of our affiliated entities for a period of ten years until 2013.

 

D. Property, Plant and Equipment

 

Our customer service center, principal sales, marketing and development facilities and administrative offices are located on premises comprising approximately 8,100 square meters in an industry park in Shanghai, China. We own 2,514 square meters of our premises and lease part of the remaining area of our premises from a company controlled by the spouse of our Chief Executive Officer, James Jianzhang Liang. We have branch offices in Hong Kong, Beijing, Guangzhou and Shenzhen. We also maintain a network of sales offices in about 37 cities in China. We believe that we will be able to obtain adequate facilities, principally through the leasing of appropriate properties, to accommodate our expansion plans in the near future.

 

In February 2005, we entered into an agreement to acquire land use rights for approximately 16,670 square meters of land in the Shanghai Hong Qiao Lin Kong Economic Development Park. We plan to build a new information and technology center on the premises and move our principal executive offices, 24-hour customer service center, product development center and administrative and support facilities to the new premises. The aggregate investment for the new premises is estimated to range from approximately US$19 million to US$20 million to be paid over the period from 2005 until the completion of the construction of the new premises, which is expected to be around mid-2007.

 

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