Alignment with International Accounting Standards in Employees' Allocation of Company's Profit

Under Taiwan law, it is permissible for a company to provide in its charter a provision to allow employees to be allocated a certain percentage of the profit of the company and such profit may be capitalized by issuing new share shares to such employees. When capitalizing such profit, however, the practice has been to use the par value of such shares in the conversation of such allocated profit, resulting in sometimes a huge discrepancy between the market value of the stock received by the employee and the "allocated" par value of the stock. Many in fact have viewed this practice as creating an erosion of the shareholders equity but contrarily many others have held the view that given the low salary standards in Taiwan, such incentives have been necessary to keep the talented employees on board. In addition, given the fact that a "profit" is allocated to employees, such profit is not booked as an expense account, causing the earnings figure to be "inflated" if compared with those prepared in accordance with the international accounting standards. To address these issues, recent discussions among Taiwan’s Ministry of Finance, the industry sectors and the professionals have led to the plan that beginning 2008 the allocated profit will be reflected as an expense and the valuation of the stock as allocated to employees will be earmarked to the market value of such stock on the date the relevant shareholders meeting approve such allocation.