Letter To Shareholders - Mitac

17) Capital reserve
The R.O.C. Securities and Exchange Law requires that capital reserve shall be
exclusively used to cover accumulated deficits or to increase capital and shall not be
used for any other purpose. However, capital reserve arising from paid-in capital in
excess of par value on issuance of common stock and donations can be capitalized
once a year, provided that the Company has no accumulated deficits and the amount
to be capitalized does not exceed 10% of the paid-in capital; unless legal reserve is
insufficient to cover accumulated deficits, capital reserve cannot be used for this
purpose.
18) Retained earnings
A. Legal reserve
Except for covering accumulated deficits or increasing capital, the legal reserve
shall not be used for any other purpose. Capitalization of the legal reserve is
permitted, provided that the balance of the reserve exceeds 50% of the
Company’s paid-in capital and the amount capitalized does not exceed 50% of
the balance of the reserve.
B. Undistributed earnings: According to the Company's Articles of Incorporation,
current year's earnings, if any, shall be distributed in the following order:
(a) Covering prior years' operating losses, if any;
(b) Paying all taxes and dues;
(c) Setting aside 10% of the remaining amount, after deducting (a) and (b), as
legal reserve;
(d) Setting aside special retained earnings reserve of the remaining amount,
after deducting (a), (b) and (c), by the resolution at the stockholder’s
meeting.
(e) Allocating dividends and bonuses.
(f) Allocating at least 5% of the remaining amount, after deducting (a), (b),
(c), (d) and (e) as employees’ bonus.
The distribution of the Company’s undistributed earnings shall be proposed
by the Board of Directors and resolved in the annual Stockholder’s meeting.
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