HTC 2011 Annual Report Download - page 83

3. Capital Surplus
Under the Company Law, capital surplus can only be used to
offset a deficit. However, the capital surplus from shares 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, with capitalization 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.
(1) Additional paid-in capital - issuance of shares in excess of par
The additional paid-in capital was NT$9,056,323 thousand as
of January 1, 2010. In April 2010, the retirement of treasury
stock caused a decrease of NT$172,188 thousand in additional
paid-in capital. The bonus to employees of NT$4,859,236
thousand for 2009 was approved in the stockholders' meeting
in June 2010. Of the approved bonus, NT$1,943,694 thousand
was in the form of common stock, consisting of 5,021 thousand
common shares at their fair value, which were distributed
in 2010. The difference between par value and fair value of
NT$1,893,488 thousand was accounted for as additional paid-
in capital in 2010. As a result, the additional paid-in capital as
of December 31, 2010 was NT$10,777,623 thousand.
Also, in June 2011, the bonus to employees of NT$8,491,704
thousand (US$280,449 thousand) for 2010 was approved
in the stockholders' meeting. Of the approved bonus,
NT$4,245,851 thousand (US$140,224 thousand) was in the
form of common stock, consisting of 4,006 thousand common
shares at their fair value, which were distributed in 2011. The
difference between par value and fair value of NT$4,205,796
thousand (US$138,901 thousand) was accounted for as
additional paid-in capital in 2011. In December 2011, the
retirement of treasury stock caused a decrease of NT$173,811
thousand (US$5,740 thousand) in additional paid-in capital.
As a result, the additional paid-in capital as of December 31,
2011 was NT$14,809,608 thousand (US$489,105 thousand).
(2) Treasury stock transactions and expired stock options
In June 2011, the Company resolved to transfer treasury
shares to employees. In 2011, the number of shares for
transfer to employees was 6,000 thousand, with 5,875
thousand shares exercised. Based on the fair value at the
grant date, NT$1,750,767 thousand (US$57,821 thousand) was
accounted for as capital surplus - treasury stock transactions,
and NT$37,503 thousand (US$1,239 thousand) for the
unexercised 125 thousand shares was accounted for as capital
surplus - expired stock options. Also, in December 2011, the
retirement of treasury stock caused decreases in treasury
stock transactions and expired stock options of NT$20,309
thousand (US$671 thousand) and NT$435 thousand (US$15
thousand), respectively. As a result, the treasury stock
transactions and expired stock options as of December 31,
2011 were NT$1,730,458 thousand (US$57,150 thousand) and
NT$37,068 thousand (US$1,224 thousand), respectively.
The fair values at the grant date for the fifth and sixth
stock option buyback were NT$394.105 and NT$210.121,
respectively. These fair values were estimated using the
Black-Scholes option valuation model. The inputs to the
model were as follows:
5th Buyback 6th Buyback
Assumption Exercise price (NT$) $598.83 $797.30
Expected dividend yield 3.71% 3.71%
Expected life 1.67 months 1.67 months
Expected price volatility 56.99% 56.99%
Risk-free interest rate 0.7157% 0.7157%
Fair value $394.105 $210.121
(3) Long-term equity investments
As of January 1, 2010, the capital surplus from long-term
equity-method investments was NT$18,411 thousand. When
the Company did not subscribe for the new shares issued
by an equity-method investee, Huada Digital Corporation,
in September 2011, the Company's total investment carrying
value and capital surplus decreased by NT$374 thousand
(US$12 thousand) each in 2011. As a result, the capital surplus
from long-term equity-method investments as of December
31, 2011 was NT$18,037 thousand (US$596 thousand).
(4) Merger
The additional paid-in capital from a merger was NT$25,189
thousand as of January 1, 2010. In April 2010, the retirement
of treasury stock caused a decrease of NT$479 thousand
in additional paid-in capital from a merger. As a result, the
additional paid-in capital from a merger as of December 31,
2010 was NT$24,710 thousand. Also, in December 2011, the
retirement of treasury stock caused a decrease of NT$287
thousand (US$9 thousand) in additional paid-in capital from
a merger. As a result, the additional paid-in capital from a
merger as of December 31, 2011 was NT$24,423 thousand
(US$807 thousand).
4. Appropriation of Retained Earnings and Dividend Policy
(1) 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.
(2) Legal reserve shall be appropriated until it has reached the
Company's paid-in capital. This reserve may be used to
offset a deficit. Under the revised Company Law issued on
January 4, 2012, when the legal reserve has exceeded 25% of
the Company's paid-in capital, the excess may be transferred
to capital or distributed in cash.
(3) As part of a high-technology industry and as 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
Bank of Taiwan in the committee's name. The pension fund balances
were NT$447,728 thousand and NT$481,685 thousand (US$15,908
thousand) as of December 31, 2010 and 2011, respectively.
Based on the Statement of Financial Accounting Standards No. 18 -
"Accounting for Pensions," issued by the Accounting Research and
Development Foundation of the ROC, pension cost under a defined
benefit pension plan should be calculated by the actuarial method.
1. The Company's net pension costs under the defined
benefit plan in 2010 and 2011 were as follows:
2010 2011
NT$ NT$ US$ (Note 3)
Service cost $4,915 $5,980 $197
Interest cost 6,539 6,858 227
Projected return on plan assets (8,582) (9,206) (304)
Amortization of unrecognized
net transition obligation, net - - -
Amortization of net pension
benefit 297 492 16
Net pension cost $3,169 $4,124 $136
2. The reconciliations between pension fund status and
prepaid pension cost as of December 31, 2010 and 2011
were as follows:
2010 2011
NT$ NT$ US$ (Note 3)
Present actuarial value of benefit
obligation
Vested benefit obligation $1,525 $10,026 $331
Non-vested benefit obligation 190,908 192,737 6,365
Accumulated benefit obligation 192,433 202,763 6,696
Additional benefits on future salaries 150,480 162,889 5,380
Projected benefit obligation 342,913 365,652 12,076
Fair value of plan assets (447,728) (481,685) (15,908)
Funded status (104,815) (116,033) (3,832)
Unrecognized pension loss (54,130) (67,794) (2,239)
Prepaid pension cost $(158,945) $(183,827) $(6,071)
3. Assumptions used in actuarially determining the
present value of the projected benefit obligation were
as follows:
2010 2011
Weighted-average discount rate 2.00% 2.00%
Assumed rate of increase in future compensation 3.75% 4.00%
Expected long-term rate of return on plan assets 2.00% 2.00%
The payments from the fund amounted to NT$1,702 thousand in 2010
and NT$793 thousand (US$26 thousand) in 2011.
(19) STOCKHOLDERS' EQUITY
1. Capital Stock
The Company's outstanding common stock as of January 1,
2010 amounted to NT$7,889,358 thousand, divided into 788,936
thousand common shares at NT$10.00 par value. In April 2010,
the Company retired 15,000 thousand treasury shares amounting
to NT$150,000 thousand. In June 2010, the stockholders
approved the transfer of retained earnings of NT$386,968
thousand and employee bonuses of NT$50,206 thousand
to capital stock. As a result, the amount of the Company's
outstanding common stock as of December 31, 2010 increased to
NT$8,176,532 thousand, divided into 817,653 thousand common
shares at NT$10.00 par value.
In June 2011, the stockholders approved the transfer of retained
earnings of NT$403,934 thousand (US$13,340 thousand) and
employee bonuses of NT$40,055 thousand (US$1,323 thousand)
to capital stock. Also, in December 2011, the Company retired
10,000 thousand treasury shares amounting to NT$100,000
thousand (US$3,303 thousand). As a result, the amount of the
Company's outstanding common stock as of December 31, 2011
increased to NT$8,520,521 thousand (US$281,400 thousand),
divided into 852,052 thousand common shares at NT$10.00
(US$0.33) par value.
2. 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,
and was issued, at a premium, at 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:
(1) To vote; and
(2) To receive dividends and participate in new share issuance
for cash subscription.
Taking into account the effect of stock dividends, the GDRs
increased to 9,015.1 thousand units (36,060.5 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, 2011, there were 6,404.4 thousand units of GDRs
redeemed, representing 25,617.5 thousand common shares, and
the outstanding GDRs represented 10,443 thousand common
shares or 1.25% of the Company's common shares.
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