CONSOLIDATED WATER CO. LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in United States dollars) 8. Share capital and additional paid in capital (continued) 9. Expenses Direct expenses relate to the production and distribution of water, indirect expenses represent the administrative costs of the Company.  Stockholders are advised that under the provisions of the Land Holding Companies Share Transfer Tax Law of the Cayman Islands, transfer tax is payable on the transfer of shares in the Company. The amount of transfer tax payable under the provisions of this Law is computed by reference to the proportion of the total market value of land, as valued by the Government, attributable to each share in issue (“the taxable value”). The tax payable by the transferor per share transferred is at the rate of 7.5% to 9.0% of the taxable value. In August 1997 the Company established a Class ‘B’ stock option plan designed to deter coercive takeover tactics.  Pursuant to this plan, holders of ordinary shares of common stock and redeemable preferred stock were granted options which entitle them to purchase 1/100 of a share of Class ‘B’ stock at an exercise price of $37.50 if a person or group acquires or commences a tender offer for 20% or more of the Company’s ordinary shares of common stock. Option holders (other than the acquiring person or group) will also be entitled to buy, for the $37.50 exercise price, ordinary shares of the Company’s common stock with a then market value of $75.00 in the event a person or group actually acquires 20% or more of the Company’s ordinary shares of common stock. Options may be redeemed at $0.01 under certain circumstances. 30,000 of the Company’s authorized but unissued ordinary shares have been reserved for issue as Class ‘B’ stock. The Class ‘B’ stock rank pari passu with the ordinary shares of common stock for dividend and voting rights. As at December 31, 2000, no Class ‘B’ stock options have been exercised or redeemed. Year Ended December 31 2000 1999 1998 Cost of water sales comprise the following: Water purchases 2,257,532 2,091,322 2,579,279 Depreciation 992,410 760,901 714,830 Amortisation of intangible asset (Note 3) 64,979 - - Employee costs 741,789 601,678 550,499 Fuel oil 81,102 -  - Royalties (Note 18) 641,428 560,441 570,416 Water Purchase Agreement obligation interest (Note 14) 16,910 58,042 193,589 Electricity 121,185 134,623 121,645 Insurance 64,160 56,308 37,555 Other direct costs 441,802 506,864 398,588 $ 5,423,297 $ 4,770,179 $ 5,166,401 Indirect expenses comprise the following: Employee costs 1,057,900 921,593  721,547 Interest 135,847 127,680 73,495 Depreciation 79,045 56,059 53,915 Professional fees 275,589  131,366  231,739 Insurance 34,829 41,083  29,890 Directors' fees and expenses 104,149 99,760 77,011 Other indirect costs 510,210 414,975 381,783 $ 2,197,569 $ 1,792,516 $ 1,569,380