| STATUTORY RESERVES |
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In accordance with the Regulations on Enterprises with Foreign Investment of China and the
articles of association, Zhengtu Information, being a foreign invested enterprise established in
the PRC, is required to provide for certain non-distributable reserves, namely general reserve
fund, enterprise expansion fund and staff welfare and bonus fund, all of which are appropriated
from after-tax profit as reported in its PRC statutory financial statements. Zhengtu Information
is required to allocate at least 10% of their after-tax profits to the general reserve fund
until such fund has reached 50% of its registered capital. Appropriations to the enterprise
expansion fund and staff welfare and bonus fund are at the discretion of the board of directors
of Zhengtu Information. Appropriation to the staff welfare and bonus fund, if any is charged to
general and administrative expenses. There have not been any appropriations to the enterprise
expansion fund and staff welfare and bonus fund made for the any of the periods stated herein. |
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In accordance with the PRC Company Laws, Zhengtu Network, being a domestic company, must make
appropriations from its after-tax profits as reported in its PRC statutory financial statements
to non-distributable reserve funds, namely statutory surplus fund, statutory public welfare fund
and discretionary surplus fund. Zhengtu Network is required to allocate at least 10% of its
after-tax profits to the statutory surplus fund until such fund has reached 50% of its
registered capital. Appropriation to the statutory public welfare fund is 5% to 10% of their
after-tax profits as reported in the PRC statutory financial statements. |
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General reserve fund and statutory surplus fund are restricted to set-off against losses,
expansion of production and operation and increasing registered capital of the respective
company. Staff welfare and bonus fund and statutory public welfare fund are restricted to the
capital expenditures for the collective welfare of employees. Enterprise expansion fund is
restricted to expansion of production and operation and increasing registered capital of the
respective company. The reserves are not allowed to be transferred to the Company in terms of
cash dividends, loans or advances, neither are they allowed for distribution except under
liquidation. |
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As of 2009 and 2010, Giant Network and Zhengtu Information have appropriated RMB22,349,227 and
RMB21,541,046 (US$3,155,781) to statutory surplus fund and general reserve fund, respectively. |
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