Tax Privilege to Support The Development Of Thin Film Transistor Display (TFT-LCD) Industry

March 25 2005

Approved by the State of Department of P.R.C China, the tax privilege to support the development of thin film transistor display (hereafter referred as TFT-LCD) industry is as below:

•  The book value of the equipment for production in the manufacturing company whose product is TFT-LCD can be completely depreciated at minimum three years.

•  From Nov 1 2003 to Dec 31 2008, all the imported raw material and consumption for production by the manufacturing company of TFT-LCD that can't be produced domestically is exempted from custom duty. The detailed exemption material list will be decided by the Ministry of Finance and other relevant departments.

Brief of <Shanghai Action Plan Of Development Of Advanced Manufacturing Industry> & <Shanghai Advanced Manufacturing Technology Guideline>

In light of the strategy to prioritize the development of service industry and modernized manufacturing industry by the Shanghai government, <Shanghai Action Plan Of Development Of Advanced Manufacturing Industry> and <Shanghai Advanced Manufacturing Technology Guideline> have been formally announced.

The advanced manufacturing industry refers to high technology industries and traditional industries re-equipped with the new high technology.

In the planned high technology industries list by Shanghai government, it includes manufacturing industries in electronic power station equipment, electricity transmit and distribution systems, micro-electronics, precision machining equipment, new-model environment protection and automation control.

<Shanghai Advanced Manufacturing Technology Guideline> lists out the key technology and the core content in each industry. It will be the reference for each industry administration department, development zones and enterprises to decide investment. It has outlined some important leading industries in the future such as nuclear electricity power, satellite key technology, super broad band microwave, electronic information and etc.

Brief of <Shanghai Energy-Conservation Administration Regulations> (Jun 13 2005)

The regulations are made to strengthen the management of construction energy conservation, decrease the energy consumption of the construction, increase the energy utilization rate, improve the environmental quality and contribute to the continuous development of the economy and the society.

The energy conservation on the constructions newly built, renovated and expanded and on the utilization of public constructions and residence constructions in Shanghai is subject to the regulations hereafter mentioned.

The construction energy conservation refers to the activity to apply the isolation measures, select the energy-saving energy consumption systems and energy recycling systems on the construction surrounding protection structures in the process of design, constructing, installment and utilization in light of the relevant construction energy conservation standards established by the state, industry and local governments.

The construction unit must report the construction energy conservation implementation situation in the construction check and accept report to the construction administration department.

In a sales activity on new buildings, the situation and relevant protection requirements for the construction surrounding protection structures, energy consumption systems and energy recycling systems should be narrated in the New Building Utilization Instructions.

In Shanghai, it's encouraged to apply the construction material, energy consumption systems and the relevant construction techniques that are superior to the current construction energy conservation standards.

The governments of each levels should take measures to encourage the scientific research and technology development on the construction energy conservation, promote the utilization of the energy-conservation construction material, energy-recovery systems and relevant construction technique and technology.

Shanghai government encourages the research and development of the energy conservation wall material.

Shanghai government encourages all kinds of investment on the construction energy conservation renovation. The investor can share the benefit generated by the energy conservation renovation in compliance with the agreement.

Forbid to utilize the construction material or energy consumption systems that are not in compliance with the construction energy conservation standards, forbid or limit the utilization of the behindhand construction technique and technology.

Brief of <Regulations To Encourage The High Technology And New Technology Implementation (Shanghai)>

It's encouraged to transfer the high technology or new technology to the relevant project in Shanghai. The specific cognizance institute will investigate the technology level, market prospect, project risk and intellectual property of the project carried out by the high technology or new technology either developed in or introduced to Shanghai. The cognized projects carried out from the research achievements of the software, integrate circuit, modernized biology technology and traditional Chinese medicine industry are qualified to enjoy the privilege hereafter mentioned.

For the approved project, the relevant government department will provide the service for company registration, subsidize of loan interest or bank loan sponsion.

The high technology and new technology can be counted as investment in the project as intangible assets. The investment by the high technology and new technology can account for maximum 35% of total registered capital.

The government will refund the cognized high technology and new technology project the land-use fee, exempt the payment for commission and registration fee for the purchase of the house for operation, refund the real estate tax as subsidize within three years. Started from the cognizance, within three years the local part of the business tax, cooperation tax, VAT will be fully refunded, the next two years, will be half refunded. If the company owns the intellectual property of the high technology and new technology, started from the cognizance, within five years the local part of the business tax, cooperation tax, VAT will be fully refunded, the next three years, will be half refunded.

The company registered and pay income tax in Shanghai will be refunded the invested capital that invested with the profit after tax generated after January 1 1997 on the high technology and new technology project for more than five years.