The financial incentives are granted by the municipal government to reward the Group for prompt
tax payments and qualification as a high technology project. Such financial incentives are
recorded within operating expenses as they are calculated with reference to business tax,
individual income tax, and enterprise income tax, if any, paid or withheld by the Group
companies at a predetermined percentage. The central government or municipal government could
decide at any time to immediately eliminate or reduce these financial incentives. There is no
guarantee that the Group will continue to receive these government financial incentives in the
future. There are no conditions or performance obligations attached to these government
financial incentives and once received, are not refundable. As a result, government financial
incentives are recognized as income when received.