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Article 8
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For a company repurchasing its own shares for reasons specified in Article 28-2, paragraph 1, subparagraphs 1 through 3 of the Securities and Exchange Act, the total monetary amount of shares repurchased shall not exceed the retained earnings plus the following realized capital gains:
- gain on disposal of assets that has not yet been transferred to the retained earnings account; and
- the gains listed under Article 241 of the Company Act ("income derived from the issue of new shares at a premium" and "income from endowments received by the company"); provided, however that where the endowment received consists of the company's own shares, the income shall not be recorded until the shares have been sold.
The term "retained earnings" as used in the preceding paragraph includes legal reserve, special reserve, and undistributed earnings. However, the following items shall be excluded:
- Earnings distributed through resolution of a meeting of the board of directors or a meeting of the shareholders.
- Special reserve set aside by the company pursuant to Article 41, paragraph 1 of the Securities and Exchange Act. However, special reserve set aside pursuant to Article 14, paragraph 1 of the Regulations Governing Securities Firms shall not be subject to this restriction.
Calculation of the dollar amount of shares that may be repurchased shall be based on financial reports for the latest accounting period prior to a resolution of a meeting of the board of directors. The financial reports must have been audited or reviewed in a lawful and transparent manner by a certified public accountant, and must have been issued an audit report or review report with an unqualified opinion or an unqualified opinion with modified wording. However, this shall not apply with respect to an interim financial report for which the CPA has issued a qualified opinion because equity-method investment and the share of the profit or loss of associates and joint ventures accounted for using the equity method was calculated based on financial reports of the invested company that were not audited or reviewed by a certified public accountant.
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