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140 United Microelectronics Corporation Annual Report 2004
c. The Company has used the intrinsic value method to recognize
compensation costs for its employee stock options
issued since January 1, 2004. The compensation cost for
the year ended December 31, 2004 is NTD 0. Pro forma information
using the fair value method on net income and
earnings per share is as follows:
For the year ended
December 31, 2004
Basic earnings
per share
Diluted earnings
per share
Net income $31,843,381 $31,873,101
Earnings per share (NTD) $1.89 $1.86
Pro forma net income $31,761,407 $31,791,127
Pro forma earnings per share (NTD) $1.89 $1.86
The fair value of the options granted after January
1, 2004 was estimated at the date of grant using the
Black-Scholes option pricing model with the following
weighted-average assumptions for the year ended December
31, 2004: expected dividend yields of 11.40%; volatility
factors of the expected market price of the Company’s
common stock of 0.49%, 0.49%, and 0.48%, respectively;
risk-free interest rate of 2.70%, 2.85%, and 2.70%, respectively;
and a weighted-average expected life of the
option of 4.4 years.
(16) Treasury Stock
a. The Company bought back its own shares from the open
market during the years ended December 31, 2004 and
2003. Details of the treasury stock transactions are as
follows:
Purpose
As of January
1, 2004
In thousands of shares
Increase Decrease As of December
31, 2004
For transfer to 49,114 192,067 – 241,181
employees
For conversion 149,728 – 149,728 –
of the
convertible
bonds into
shares
Total shares 198,842 192,067 149,728 241,181
Purpose
For transfer to
employees
For conversion
of the
convertible
bonds into
shares
As of January
1, 2003
In thousands of shares
Increase Decrease As of December
31, 2003
86,539 99,195 136,620 49,114
149,728 – – 149,728
Total shares 236,267 99,195 136,620 198,842
b. On July 22, 2004, the Company wrote off 149,728 thousand
shares of treasury stock, amounting to NTD 4,923 million,
which were bought back for conversion of the convertible
bonds into shares from August 1 to September 28, 2001
and from August 14 to September 25, 2002.
c. According to the Securities and Exchange Law of the ROC,
total shares of treasury stock shall not exceed 10% of
the Company’s stock issued. Total purchase amount shall
not exceed the sum of the retained earnings, capital reserve-premiums,
and realized capital reserve. As such,
the maximum number of shares of treasury stock that the
Company could hold as of December 31, 2004 and 2003 was
1,779,198 thousand shares and 1,614,074 thousand shares
while the ceiling of the amount was NTD 89,425 million and
NTD 67,177 million, respectively. As of December 31, 2004
and 2003, the Company held 241,181 thousand shares and
198,842 thousand shares of treasury stock, which amounted
to NTD 7,376 million and NTD 7,101 million, respectively.
d. Treasury stock shall not be pledged, nor does it entitle voting
rights or receive dividends, in compliance with Securities
and Exchange Law of the ROC.
e. As of December 31, 2004, the Company’s subsidiaries,
Hsun Chieh and Fortune, held 543,732 thousand shares
and 19,808 thousand shares of the Company’s stock, with
a book value of NTD 20.08 and NTD 8.68 per share, respectively.
The average closing price during December 2004
was NTD 20.08.
As of December 31, 2003, the Company’s subsidiaries,
Hsun Chieh and Fortune, held 503,456 thousand shares
and 18,340 thousand shares of the Company’s stock, with
a book value of NTD 29.32 and NTD 9.37 per share, respectively.
The average closing price during December 2003
was NTD 29.32.
(17) Retained Earnings and Dividend Policies
According to the Company’s Articles of Incorporation, current
year’s earnings, if any, shall be distributed in the following
order:
a. Payment of all taxes and dues;
b. Offset prior years’ operation losses;
c. Set aside 10% of the remaining amount after deducting
items (a) and (b) as a legal reserve;
d. Set aside 0.1% of the remaining amount after deducting
items (a), (b), and (c) as directors’ and supervisors’ remuneration;
and
e. After deducting items (a), (b), and (c) above from the
current year’s earnings, no less than 5% of the remaining
Note 4