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Vimicro Establishes A Subsidiary In Shanxi Province To Expand Security-Surveillance Business

BEIJING, Sept. 12, 2012 /PRNewswire-FirstCall/ -- Vimicro International Corporation (NASDAQ: VIMC) ("Vimicro" or the "Company"), a leading PC-camera processor and IP-based surveillance solution provider, today announced that the Company recently entered into a strategic cooperative agreement (the "Agreement") with Shanxi Guoxin Investment (Group) Corporation ("Guoxin Group"), the primary financial holding group of the Shanxi provincial government, to establish a subsidiary to develop, produce and market Surveillance Video and Audio Coding ("SVAC")-based security surveillance products and related video sensing and intelligence applications.  This Subsidiary will be located in Taiyuan, the capital city of Shanxi province.  The establishment of the new subsidiary, to be named Zhongtianxin Science and Technology Co., Ltd. (the "Subsidiary"), reflects Company's efforts to expand its security and surveillance business by cooperating with a state-owned enterprise in Shanxi Province.

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Vimicro Corporation (a wholly-owned subsidiary of Beijing-based Vimicro International Corporation), Guoxin Group, and VMF Consulting Company will each make cash capital contributions of RMB 26 million, RMB 98 million and RMB 4 million, respectively, to the Subsidiary. In addition, Vimicro Corporation will also provide certain intellectual property, appraised at RMB 72 million by an independent third-party valuation firm, as part of its capital contribution to the Subsidiary. VMF Consulting Company is also assisting in the process of establishing the Subsidiary. Vimicro Corporation, Guoxin Group and VMF Consulting Company will each hold 49%, 49% and 2%, respectively, of the equity interests of the Subsidiary.

Both Vimicro and Guoxin Group have agreed to actively assist the Subsidiary in pursuing market opportunities, The Subsidiary will apply for preferential treatment from Shanxi provincial government after the incorporation of the Subsidiary, which should result in the attainment of substantial market share.  Additional preferential treatment is expected to be received in terms of taxation, governmental subsidies, industry support and the grant of land-use rights.

Under the Agreement, Guoxin Group has committed to arrange financing of up to RMB 10 billion (US $1.6 billion) to roll out SVAC-based projects in Shanxi province and in other regions in China. As the cooperative partner of Shanxi province, the Subsidiary will have priority to act as the contractor for these projects and also provide SVAC products and services.

Vimicro's Audit Committee and the Board of Directors have reviewed and approved the transaction, including the proposed establishment of the Subsidiary.

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