HTC 2009 Annual Report Download - page 72

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As a result, the carrying value of this investment became zero and the
Company reversed a capital surplus of NT$2,360 thousand (US$74 thousand)
that was recognized in prior years for the movement of Vitamin D’s capital
surplus in proportion to the Company’s equivalent stock. Also recognized
was the movement of other investees’ capital surplus amounting to
NT$2,566 thousand (US$80 thousand). As of December 31, 2009, the total
capital surplus from long-term equity-method investments was NT$18,411
thousand (US$576 thousand).
The additional paid-in capital from a merger was NT$25,756 thousand as of
January 1, 2008. Then because of treasury stock retirement in January and
November 2009, the additional paid-in capital from a merger decreased to
NT$25,189 thousand (US$787 thousand) as of December 31, 2009.
Appropriation of Retained Earnings and Dividend Policy
Based on the Company Law of the ROC and the Company’s Articles of
Incorporation, 10% of the Company’s annual net income less any deficit
should first be appropriated as legal reserve. From the remainder, there
should be appropriations of not more than 3‰ as remuneration to directors
and supervisors and at least 5% as bonuses to employees.
The appropriation of retained earnings should be proposed by the board of
directors and approved by the stockholders in their annual meeting.
As part of a high-technology industry and a growing enterprise, the Company
considers its operating environment, industry developments, and long-term
interests of stockholders as well as its programs to maintain operating
efficiency and meet its capital expenditure budget and financial goals in
determining the stock or cash dividends to be paid. The Company’s
dividend policy stipulates that at least 50% of total dividends may be
distributed as cash dividends.
Had the Company recognized the employees’ bonuses of NT$1,313,200
thousand as expenses in 2007, the pro forma earnings per share in 2007
would have decreased from NT$50.48 to NT$48.19, which were not adjusted
retroactively for the effect of stock dividend distribution in the following year.
The bonus to employees of NT$6,164,889 thousand for 2008 were approved
in the stockholders’ meeting in June 2009. The bonus to employees
included a cash bonus of NT$1,210,000 thousand and a share bonus of
NT$4,954,889 thousand. The number of shares of 13,357 thousand was
determined by dividing the amount of share bonus by the closing price (after
considering the effect of cash and stock dividends) of the shares of the day
immediately preceding the stockholders’ meeting. The approved amounts
of the bonus to employees were the same as the accrued amounts.
Based on a resolution passed by the Company’s board of directors in
February 2009, the employee bonus for 2009 should be appropriated at 18%
of net income before deducting employee bonus expenses. If the actual
amounts subsequently resolved by the stockholders differ from the proposed
amounts, the differences are recorded in the year of stockholders’ resolution
as a change in accounting estimate. If bonus shares are resolved to be
distributed to employees, the number of shares is determined by dividing the
amount of bonus by the closing price (after considering the effect of cash and
stock dividends) of the shares of the day immediately preceding the
stockholders’ meeting.
As of January 18, 2010, the date of the accompanying independent
auditors’ report, the appropriation of the 2009 earnings had not been
proposed by the Board of Directors. Information on earnings appropriation
can be accessed online through the Market Observation Post System on the
Web site.
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Global Depositary Receipts
The Company issued 14,400 thousand common shares corresponding to
3,600 thousand units of Global Depositary Receipts (GDRs). For this GDR
issuance, the Company’s stockholders, including Via Technologies, Inc., also
issued 12,878.4 thousand common shares, corresponding to 3,219.6
thousand GDR units. Thus, the entire offering consisted of 6,819.6 thousand
GDR units. Each GDR represents four common shares, with par value of
NT$131.1. For this common share issuance, net of related expenses,
NT$1,696,855 thousand was accounted for as capital surplus. This share
issuance for cash was completed and registered on November 19, 2003.
The holders of these GDRs have the same rights and obligations as the
stockholders of the Company. However, the distribution of the offering and
sales of GDRs and the shares represented thereby in certain jurisdictions may
be restricted by law. In addition, the GDRs offered and the shares
represented are not transferable, except in accordance with the restrictions
described in the GDR offering circular and related laws applied in Taiwan.
Through the depositary custodian in Taiwan, GDR holders are entitled to
exercise these rights:
a. To vote; and
b. To receive dividends and participate in new share issuance for cash
subscription.
Taking into account the effect of stock dividends, the GDRs increased to
8,493 thousand units (33,971.9 thousand shares). The holders of these
GDRs requested the Company to redeem the GDRs to get the Company’s
common shares. As of December 31, 2009, there were 3,067.4 thousand
units of GDRs redeemed, representing 12,270 thousand common shares, and
the outstanding GDRs represented 21,702 thousand common shares or
2.75% of the Company’s common shares.
Capital Surplus
Under the Company Law, capital surplus can only be used to offset a deficit.
However, the capital surplus from share issued in excess of par (additional
paid-in capital from issuance of common shares, conversion of bonds and
treasury stock transactions) and donations may be capitalized, which
however is limited to a certain percentage of the Company’s paid-in capital.
Also, the capital surplus from long-term investments may not be used for any
purpose.
The additional paid-in capital was NT$4,374,244 thousand as of January 1,
2008. In January and November 2009, the retirement of treasury stock
caused a decrease of additional paid-in capital amounted to NT$57,907
thousand (US$1,810 thousand) and NT$81,330 thousand (US$2,542
thousand), respectively. In addition, the bonus to employees of
NT$6,164,889 thousand for 2008 were approved in the stockholders’
meeting in June 2009. Of the approved amount, NT$4,954,889 thousand,
representing 13,357 thousand common shares which was determined by fair
value, would be distributed by common stock. The difference between par
value and fair value of NT$4,821,316 thousand (US$150,713 thousand) was
accounted for as additional paid-in capital. As a result, the additional paid-in
capital as of December 31, 2009 was NT$9,056,323 thousand (US$283,099
thousand). Under the Company Law, the Company may transfer the capital
surplus to common stock if there is no accumulated deficit.
The capital surplus from long-term equity investments was NT$15,845
thousand as of January 1, 2008. When the Company did not subscribe for
the new shares issued by Vitamin D Inc. in September 2008, January 2009
and June 2009, adjustments of NT$1,689 thousand, NT$187 thousand (US$6
thousand) and NT$484 thousand (US$15 thousand) were made to the
investment carrying value and capital surplus, respectively. The Company
also determined that the recoverable amount of this investment was less than
its carrying amount and recognized an impairment loss on its carrying value.
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