D-Link 2005 Annual Report Download - page 49
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
(3) Legal reserve
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 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.
(4) Distribution of earnings and dividend 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 5%~10% as employee bonuses. An additional reserve on certain
earnings may also be retained. The remaining earnings may be distributed as stockholders’
dividends.
According to ROC SFB regulations, an 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
1999. 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 based on the industry environment,
business growth, and long-term financial planning. D-Link considers the capital budget to
determine the distribution of stock dividends accompanied by cash dividends, which should
be no less than 10% of total dividends.
Information about the dividends to shareholders, directors’ and supervisors’ remuneration,
and employees’ bonuses of 2004 and 2003 that were distributed from unappropriated
earnings is as follows:
2004 2003
Dividends distributed per common share (in dollars):
Cash $ 2.00 1.50
Stock (par value) 0.20 -
$ 2.20 1.50
2004 2003
Employees’ bonuses—stock (par value) $ 68,000 100,000
Employees’ bonuses—cash 49,042 54,590
Directors’ and supervisors’ remuneration 46,817 24,734
$ 163,859 179,324