This administrative guidance is established in accordance with relative legislations including Law for Donation to Charities of People’s Republic of China, Enterprise Income Tax Law of People’s Republic of China, Individual Income Tax Law of People’s Republic of China, due to the following courses: to win understanding and support from every social sector and make ample use of the advantages of social groups; to explore and adopt as many channels under supervision of the state law and regulation to collect charity funds; to strive for support and sponsorship from individuals and groups who care for Chinese national culture from all over the world; to organize and sponsor creative activities, exhibitions, research, publish and other activities of the culture and art exchange groups; last but not the least, to train culture and art talents and to promote development and prosperity of Chinese literature and art as well as that of social charity work.

　　Article I　China Literature and Art Foundation is a social group approved by the People’s Bank of China and registered in the Ministry of Civil Affairs. The state encourages the development of social charity course, and welcomes charity donations from natural persons, legal persons and other organizations. The legislative rights and interests of CLAF are guarded by laws including Law for Donation to Charities of People’s Republic of China.

　　Article II　According to CLAF Chart, this foundation accepts donations, i.e. money and materials, from social groups and individuals from China and other parts of the world. The donation is voluntary, and the two parts can negotiate and make the best of the donations.

　　Article III　Donators to this foundation, including natural persons, legal persons and other organizations, shall receive preferential tax policy in accordance with relative laws and regulations.

　　I. Companies and other enterprises who make donations to charity in accordance with the state law shall receive preferential tax policy in the enterprise income tax, as approved by laws and regulations (Article 24 of Law for Donation to Charities of People’s Republic of China). The charitable donations of the enterprise which value within 12% of its yearly profit shall be deducted when accounting its income tax (Article 9 of Enterprise Income Tax Law of People’s Republic of China).

　　II. Natural persons and legal persons who make donations to charity in accordance with the state law shall receive preferential tax policy in the individual income tax, as approved by laws and regulations (Article 25 of Law for Donation to Charities of People’s Republic of China). The donations which value within 30% of the individual income shall be deducted when accounting the individual income tax (Implementation Regulation of Individual Income Tax Law of People’s Republic of China).

　　Article IV　The donations from outside China shall receive preferential tax policy of the import tax and VAT, i.e. cut down or exempt from import tax and VAT (Article 26 of Law for Donation to Charities of People’s Republic of China).

　　Article V　This foundation will reward in many ways the social groups and individuals who support the development of Chinese literature and art with donations. In order to guarantee the rights and interests of the two parties, to make a donation to this foundation requires a donation agreement approved by both parties. The donation agreement shall clarify the form and amount of the donation, as well as the direction of the donation. The two parties shall sign and approve the agreement. The donation money shall be put into the designated account of this foundation, and the donation materials shall be transferred to this foundation. CLAF will deliver donation certifications to donators (social groups and individuals). CLAF will organize donation ceremonies or press conference regarding to the form and value of the donation. Honorary titles will be awarded to donators regarding to the form and value of the donation. Media coverage will be followed (if approved by the donators in the first place). CLAF will carry out the rewards committed in the agreement.

　　Article VI　This foundation and our partners will establish funds and conclude corporation agreements to allocate the donations strictly in accordance with the direction of the donations. CLAF will clarify the directions and channels of the donations and provide fund forms to partners to report data and statistics. According to Regulation of Foundations, each fund of this foundation shall receive annual inspection of the Ministry of Civil Affairs.

　　Article VII　This foundation carries out the state regulated accounting system. CLAF possesses an integrated accounting and supervising system and enforces accounts adjusts in accordance with the law. This foundation assures the legality, actuality, accuracy and completeness of the accounting data.

　　Article VIII　This foundation possesses the legitimate right to supervise and inspect the realization and implementation of each fund. The sponsored groups shall report the implementation of the fund and provide a detailed accounting form after the fund item is fully implemented.

　　Article IX　The utilization of the funds of this foundation shall strictly apply to the Chart of China Literature and Art Foundation and to the Implementation Regulation of China Literature and Art Foundation. This foundation shall accept supervision of CLAF Council and from all social sectors.

　　Article X　Council of China Literature and Art Foundation is in the final power to interpret this guidance.

China Literature and Art Foundation

Sept.8.2008