D-Link 2001 Annual Report Download - page 51

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19
D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
According to the ROC Company Law, D-Link must retain 10% of its annual income as a legal
reserve until such retention equals the amount of authorized common stock. The retention is
accounted for by transfers to a legal reserve upon approval at a stockholders’ meeting. The legal
reserve can only be used to offset an accumulated deficit and may be distributed when it reaches an
amount equal to one-half of the paid-in share capital, one-half of legal reserve may be transferred to
common stock.
(3) Distribution of earnings and dividends policy
After establishing the legal and special reserve, earnings may be distributed in the following order in
accordance with D-Link’ s articles of incorporation: 2% as remuneration to directors and supervisors
and 12.5% as employee bonuses. An additional reserve on certain earnings may also be retained.
The remaining earnings may be distributed as stockholders’ dividends.
According to the ROC Company Law, D-Link must retain 10% of its annual income as a legal
reserve until such retention equals the amount of authorized common stock. The retention is
accounted for by transfers to a legal reserve upon approval at a stockholders’ meeting. The legal
reserve can only be used to offset an accumulated deficit and may be distributed when it reaches an
amount equal to one-half of the paid-in share capital, one-half of legal reserve may be transferred to
common stock.
According to ROC SFC regulations, a ROC publicly listed company should retain a special reserve
equal to any deductions made to stockholders’ equity, related to items such as foreign currency
translation adjustments, before distribution of earnings which were generated after 1998. If the
aforementioned deduction of stockholders’ equity is reversed, the same amount could be removed
from special reserve and transferred to unappropriated earnings.
D-Link has adopted the remaining dividend policy base on the industry environment, business
growth and long-term financial planning. D-Link consider the capital budget to determine the
distribution of stock dividends and then accompanied with cash dividends which should be no less
than 10% of total dividends.
15. Income Taxes
(1) D-Link is subject to a maximum income tax rate of 25 percent. D-Link’ s subsidiaries are subject to
the current tax rate of countries in which they operate.
Income tax benefit (expense) for 2000 and 2001, consisted of the following:
2000 2001
Current $ 38,419 125,677
Deferred (38,378) (71,273)
Additional 10% income surtax on undistributed earnings 6,461 13,627
$ 6,502 68,031