Acer 2007 Annual Report Download - page 98

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(d) Legal reserve, unappropriated earnings, and dividend policy
The Company’s articles of incorporation stipulate that at least 10% of annual net income
after deducting accumulated deficit, if any, must be retained as legal reserve until such
retention equals the amount of authorized common stock. In addition, a special reserve
should be set up in accordance with SFB regulations. The remaining balance of annual net
income, if any, can be distributed as follows:
y at least 5% as employee bonuses; employees may include subsidiaries’ employees that
meet certain criteria set by the board of directors;
y 1% as remuneration for directors and supervisors; and
y the remainder, after retaining a certain portion for business considerations, as dividends
and bonuses for stockholders.
Since the Company operates in an industry experiencing rapid change and development,
distribution of earnings shall be made in view of the year’s earnings, the overall economic
environment, the related laws and decrees, and the Company’s long-term development and
steady financial position. The Company has adopted a steady dividend policy, in which a
cash dividend comprises at least 10% of the total dividend distributed.
According to the ROC Company Act, the legal reserve can be used to offset an accumulated
deficit and may be distributed in the following manner: (i) when it reaches an amount equal
to one-half of the paid-in capital, it can be transferred to common stock at the amount of
one-half of legal reserve; and (ii) when it reaches an amount exceeding one-half of the
authorized common stock, dividends and bonuses can be distributed from the excess portion
of the legal reserve.
Beginning in 2000, pursuant to SFB regulations, an amount equal to the total amount of any
deduction items of shareholders’ equity shall be provided from the net income of the current
year as a special reserve that cannot be distributed as dividend or bonus. Accordingly,
such special reserve shall be adjusted to reflect the changes in the deduction items. Any
reversal of the special reserve can be added back to unappropriated earnings for distribution
of dividends or bonus. As of December 31, 2006, the Company retained a special reserve
of NT$283,921, to cover the amount by which treasury stock cost was below market value
and other deduction items of stockholders’ equity. Such special reserve was reversed in
2007.
The appropriation of 2005 and 2006 earnings was approved by the shareholders at meetings
on June 15, 2006, and June 14, 2007, as follows:
2005 2006
NT$ NT$
Dividend per share
Cash 3.0 3.85
Stock 0.2 0.15
3.2 4.00
Employee bonus.stock (par value) 374,546 333,708
Employee bonus.cash 374,546 424,719
Directors’ and supervisors’ remuneration 93,637 94,803
842,729 853,230
The appropriation of earnings did not differ from the resolutions approved by the
Company’s directors.
Assuming the above employee bonus and directors’ and supervisors’ remuneration are paid
in cash and expensed in the year when the earnings are recognized, the earnings per share,
not computed retroactively, for 2005 and 2006 would be reduced from NT$3.83 and
NT$4.45 to NT$3.45 and NT$4.08, respectively. Stock dividends distributed to employees
represented 1.66% and 1.43% of the outstanding common shares as of December 31, 2005
and 2006, respectively.