Laws of the People's Republic of China

    Article 1  These Rules are formulated in accordance with the provisions
of Article 29 of the Income Tax Law of the People's Republic of China for
Enterprises with Foreign Investment and Foreign Enterprises (hereinafter
referred to as the "Tax Law").

    Article 2  "Income from production and business operations" mentioned in
Article 1, paragraph 1 and paragraph 2 of the Tax Law means income from
production and business operations in manufacturing, mining, communications
and transportation, construction and installation, agriculture, forestry,
animal husbandry, fishery, water conservation, commerce, finance, service
industries, exploration and exploitation, and in other trades.

    "Income from other sources" mentioned in Article 1, paragraph 1 and
paragraph 2 of the Tax Law means profits (dividends), interest, rents, income
from the transfer of property, income from the provision or transfer of
patents, proprietary technology, income from trademark rights and copyrights
as well as other nonbusiness income.

    Article 3  "Enterprises with foreign investment" mentioned in Article 2,
paragraph 1 of the Tax Law and "foreign companies, enterprises and other
economic organizations which have establishments or places in China and
engage in production or business operations" mentioned in Article 2,
paragraph 2 of the Tax Law are, unless otherwise especially specified,
generally all referred to as "enterprises" in these Rules.

    "Establishments or places" mentioned in Article 2, paragraph 2 of the Tax
Law refers to management organizations, business organizations, administrative
organizations and places for factories and the exploitation of natural
resources, places for contracting of construction, installation, assembly,
and exploration work, places for the provision of labor services, and
business agents.

    Article 4  "Business agents" mentioned in Article 3, paragraph 2 of these
Rules means companies, enterprises and other economic organizations or
individuals entrusted by foreign enterprises to engage as agents in any of
the following:

    (1) representing principals on a regular basis in the arranging of
purchases and signing of purchase contracts and the purchasing of commodities
on commission;

    (2) entering into agency agreements or contracts with principals, storing
on a regular basis products or commodities owned by principals, and delivering
on behalf of principals such products or commodities to other parties; and

    (3) having authority to represent principals on a regular basis in
signing of sales contracts or in accepting of purchase orders.

    Article 5  "Head office" mentioned in Article 3 of the Tax Law refers to
the central organization which is established in China by an enterprise with
foreign investment as a legal person pursuant to the laws of China and which
is responsible for the management, operations and control over such
enterprise.

    Income from production and business operations and other income derived
by the branches within or outside China of an enterprise with foreign
investment shall be consolidated by the head office for purposes of the
payment of income tax.

    Article 6  "Income derived from sources inside China" mentioned in
Article 3 of the Tax Law refers to:

    (1) income from production and business operations derived by enterprises
with foreign investment and foreign enterprises which have establishments or
places in China, as well as profits (dividends), interest, rents, royalties
and other income arising within or outside China actually connected with
establishments or sites established in China by enterprises with foreign
investment or foreign enterprises;

    (2) the following income received by foreign enterprises which have no
establishments or sites in China:

    (a) profits (dividends) earned by enterprises in China;

    (b) interest derived within China such as on deposits or loans, interest
on bonds, interest on payments made provisionally for others, and deferred
payments;

    (c) rentals on property leased to and used by lessees in China;

    (d) royalties such as those received from the provision of patents,
proprietary technology, trademarks and copyrights for use in China;

    (e) gains from the transfer of property, such as houses, buildings,
structures and attached facilities located in China and from the assignment
of landuse rights within China;

    (f) other income derived from China and stipulated by the Ministry of
Finance to be subject to tax.

    Article 7  In respect of Chineseforeign contractual joint ventures that
do not constitute legal persons, each partner thereto may separately compute
and pay income tax in accordance with the relevant tax laws and regulations
of the State; income tax may, upon approval by the local tax authorities of
an application submitted by such enterprises, be computed and paid on a
consolidated basis in accordance with the provisions of the Tax Law.

    Article 8  "Tax year" mentioned in Article 4 of the Tax Law begins on
January 1 and ends on December 31 under the Gregorian Calendar.

    Foreign enterprises that have difficulty computing taxable income in
accordance with the tax year stipulated in the Tax Law may, upon approval by
the local tax authorities of an application submitted by such enterprises,
use their own 12month fiscal year as the tax year.

    Enterprises commencing business operations in the middle of a tax year or
actually operating for a period of less than 12 months in any tax year due to
such factors as merger or shutdown shall use the actual period of operations
as the tax year.

    Enterprises that undergo liquidation shall use the period of liquidation
as the tax year.