| ◎ Letter
to Shareholders
| Dear
ladies and gentlemen: Looking
back at year 2007, credit tightened and confidence broke down on a worldwide scale
following the sub-prime crisis of the USA; chaos ruled in international financial
markets and on top of that, there were also uncertainties relating to foreign
political issues, which contributed to the stagnant growth of the global economy.
Fortunately strong domestic demand from emerging countries led by China and India
recovered some of the shortfalls created by the contraction of the US economy;
as a result International Monetary Fund (IMF) merely adjusted its estimation of
the 2007 global economic growth from 5.5% forecasted a year ago to 5.2%, which
was still much higher than the ten-year average of 4.4%. Looking ahead to 2008,
as the US economy continues to contract due to an unsatisfactory real estate market
performance, the slowdown in imports is expected to hit exporting activities in
Europe, Asia, and China. IMF forecasted that the 2008 global economic growth will
drop from last year's 5.2% to 4.8%.
As for the domestic economy, Directorate-General of Budget, Accounting, and Statistics
of the Executive Yuan estimated that Taiwan's economic growth has reached an outstanding
5.5% in 2007; this was mainly due to a major increase in net exports contribution
to 3%. The growth in domestic demand was below expectations as manufacturers preferred
to invest abroad and the general wage increment was insufficient to cover inflation
and the surge in raw material prices; the consumption willingness was depressed.
On the other hand, non-economic factors such as political expectations built up
as elections drew near; with stimulating policies in place, the government should
provide positive incentives to the domestic economy.
Looking to the future, the domestic unemployment rate is expected to be maintained
around 4%; as the labor market and inflation stabilize, consumer spending should
gradually improve. However due to the declining global economy, contribution from
net exports is not expected to be as strong as it was in the previous year. In
general, the Directorate-General of Budget, Accounting, and Statistics forecasted
a lower economic growth of 4.5% for year 2008; Taiwan is expected to change from
an export-driven economy in the previous year to a domestic-driven economy. In
2007, the company accumulated net interest revenues of NT$5.459 billion and non-interest
revenues of NT$7.562 billion to total revenue of NT$13.021 billion. After deducting
NT$7.944 billion operating expenses, NT$4.945 billion bad debts and NT$590 million
income taxes, consolidated net profit after taxes came to NT$730 million, earnings
per share was NT$0.03. The main contributor was the subsidiary Jih Sun Securities,
who delivered a remarkable net profit of NT$2.663 billion for the year; however,
subsidiary Jih Sun International Commercial Bank was still under the credit improvement
stage and made additional bad debt provisions that resulted in a net loss of NT$2.392
billion and affected group profitability. The current status and future strategies
of our four major business groups are explained below: 1.
Individual Financial Services Group Mortgage
loan in 2007 were challenging due to a slowdown in the real estate market and
restraints imposed by the government; the consumers banking business registered
a marginal growth of only 1.2%. Although asset quality deteriorated following
the cash and credit cards crisis in 2006, our collection departments have since
implemented stringent risk control procedures and asset quality continues to improve.
We have adjusted our credit card business strategy to focus on cardholders' benefits
and consumption per card increased against all odds. The overall business plans
for consumer banking in 2008 are as follows: | (1) | Strengthen
relationships with customers and establish a versatile sales force | | (2)
| Adjust
our asset allocation to increase less risky fee income | | (3) | Develop
new forms of marketing channel and exploit commercial opportunities over the Internet
| | (4) | Raise
the effectiveness of our risk management and improve asset quality | | (5) | Recruit,
educate key personnel and enforce our succession training programs |
2. Corporate Financial Services Group
The
development of globalization and cross-strait commercial activities in recent
years has accelerated the migration of small and medium enterprises; Taiwan's
financial market has shrunk ever since. On top of that, the abundance of funds
supplied by an excessive number of banks is driving down profit margins of corporate
lending. In response to the changing financial environment and an attempt to diversify
business risk, we intend to increase our fee income by providing more non-lending
services, lower our reliance on loan to achieve higher returns on equity for our
shareholders. In
the corporate financial services group, Jih Sun targets medium and small capitalization
customers for the sale of OBU non-lending businesses and the capital market services
such as factoring, hedging and investments, cash management, trade financing,
IPO, SPO, financial consultancy and other related products. They are means to
satisfy corporate customers' diverse needs for financial planning and management
as well as rich sources of fee income. Further more, Jih-Sun also enhances cross-selling
through stronger customer relationships. A customer relationship management system
was established to systematically manage marketing activities to achieve a better
understanding of customers' needs and improve customer satisfaction. As for risk
management, Jih-Sun is collaborating with FITCH for the development of an advanced
Basel II credit risk management system in an attempt to balance business growth
with risk management, and achieve higher risk-adjusted returns. The overall business
plans for the corporate finance segment in 2008 are as follows:
| (1) |
Increase revenues: Reach deep into our existing base while exploring new customers
| | (2)
| Lower credit
risk: Increase less risky assets, strengthen credit and loan portfolio management. | | (3) | Optimize
income structure: Focus on non-lending businesses | | (4) |
Control operation costs: Reinforce management and analytical capabilities;enhance
efficiency and the integration of operations | | (5) | Maximum
utilization of talents: Recruit key talents and reinforce performance-driven incentive
schemes |
| | 3.
Wealth Management Group
From
the product side, we continued to offer marketable products and services that
meet customers' needs, improved the productivity of our sales force and achieved
the 2007 profit target. At the customer end, we strengthened customer relationships
by raising satisfaction through product innovation and quality service. Within
our operations, we improved our internal procedures while actively introducing
new products and systematic services. As for talent development, we have effectively
raised the efficiency and productivity of our staffs through solid on-the-job
training. Our major achievements are as follows:
| (1) | The
performance of our brokerage business was remarkable. Fee income grew by 46.79%
compared to the corresponding period last year. Revenues from wealth management
and international businesses reached 250 million. Pre-tax profit of the segment
was NT$2.268 billion, or 164.34% of our profit target. | | (2)
| The bank has
been actively recruiting in the wealth management segment. Compared to year 2006,
sales force increased by 60% and productivity per financial consultant improved
by 106% in 2007. | | (3) | The
size of managed assets under wealth management has also grown; customers' funds
held in trust increased by 35% from 2006. | | (4) | As
a result of our active efforts in the trust business, total "assets held in trust"
grew by 16% from 2006, and the balance of our "monetary loans and collaterals
held in trust" ranked first among all market participants as of the end of 2007. | | (5) | Introduced
a "dynamic hedging portfolio" consisted of annuity equity funds and bond funds
to achieve lower investment costs, progressive profit realization, and the best
allocation of customers' assets. | | (6)
| Strategic alliance with
CNYES.COM and Willmobile for the introduction of the first mobile trading platform
in the domestic market, WTS, which combined the use of GSM cell phones for placing
orders, market monitoring, intelligent stock selection and analysis. |
The
overall business plans for wealth management in 2008 are as follow: | (1) |
Expand the size of assets under management; recruit finance specialists and broaden
our banking network. | | (2)
| Enhance sales performance, launch
our overseas mutual funds depository platform, implement a financial planning
system for our financial consultants and focus on training. | | (3) | Reach
deeply into our customers for more effective cross-selling. Design the best products
and services based on customers' needs; reward customer referral through cross-selling
competitions. | | (4) | Raise
customer satisfaction and brand image. Strengthen our staff training, adapt a
graded relationship management approach, launch privilege loyalty programs and
follow up with satisfaction surveys. | | (5) |
Explore e-commerce opportunities, enhance our HTS and WTS functionality, develop
and execute our mobile banking systems to provide the most convenient services. | | (6)
| Improve the quality of our market research, establish
a fair reward policy, recruit top talents, and collaborate in information exchange
with worthy partners to meet the needs of our distribution channels. |
4.
Investment and Proprietary Trading Group In
2007, our investment and proprietary trading group focused on the balance between
risk and return, execution of efficient trades, accurate forecasts and active
portfolio management to achieve the highest return within limited risk while raising
our competitiveness among market participants. The focus of our banking segment
was to satisfy the needs of customers operating across different industries, increase
the contribution of each customer, collaborate in intra-bank funding, maintain
sufficient liquidity and active uses of funds while participating in financial
market transactions for the best interests of the bank. Our securities segment
focuses on identifying profitable opportunities and maintaining earnings stability,
hedging the risk of investment losses through short selling, interest rate swaps,
long and short strategies etc. The overall business plans for this group in 2008
are as follow: | (1) | In
terms of financial performance: Increase revenues and net profit margins, raise
cost effectiveness. | | (2)
| In terms of customer performance:
Increase customer base and contribution, raise cross-selling effectiveness. | | (3) | In
terms of internal performance: Raise the efficiency of trade execution, establish
overseas trading platforms and compliance managers. | | (4) | In
terms of employee performance: Advance the quality of work and job skills, strengthen
the organizational culture and internal communication, implement performance-driven
reward systems, recruit and retain key personnel. |
As
for our credit ratings, Fitch Ratings reviewed the credit ratings of Jih Sun Financial
Holding and its subsidiaries on Oct 17, 2007; the results are as follows: Subject
| Fitch
Ratings (Announced on Oct 17, 2007) | Long
term credit rating | Short
term credit rating | Prospect
| | Jih
Sun Financial Holding | A-(twn) | F2(twn) | Stable | | Jih
Sun International Commercial Bank | A-(twn) | F2(twn) | Stable | | Jih
Sun Securities | A(twn) | F1(twn) | Stable
|
In
the future, Jih Sun Financial Holding will continue serving its target customers
with the utmost innovative and proactive spirits, expanding its business scale
while dedicating towards the maximization of shareholders' value. The business
strategies of Jih Sun Financial Holding for the coming year are as follows: | 1.
| Strengthen our financial structure and increase
overall profitability Raise funds to increase working capital and improve financial
structure; continue monitoring overdue loan ratios, explore business opportunities,
and plan for the best allocation of assets and businesses that maximize profitability.
| | 2 | .
Execute integrated cross-selling and effective marketing Develop common objectives
(such as KPI) across the group; enhance intra-group cross-selling and capitalize
on the synergy as a financial holding company through close collaboration between
affiliated companies. Execute effective marketing campaigns based on cost effectiveness
analysis to meet the earnings targets of the company while achieving high customer
satisfaction. | | 3. |
Improve sales performance and increase fee income. We will continue to improve
our ability to generate risk-less revenue from sources such as enhanced wealth
management, establishment of sub-brokerage platforms etc, and increase the weight
of fee income from our subsidiary bank and security brokerage. | | 4. | Increase
the proportion of returns contributed from less risky assets and execute preventive
risk management Raise the level of our preventive risk management that reduces
losses from investments in risky assets, focus on the search for less risky business
opportunities such as secured lending, and improve our overall asset quality with
the adaptation of the Basel II credit risk management system. | | 5. |
Explore e-commerce opportunities and differentiate niche customers Actively explore
e-commerce opportunities, reduce manual operating costs, differentiate niche segments
using data mining technologies based on customers' needs, and offer differentiated
services and products to meet those needs. | | 6.
| Product innovation for higher customer satisfaction
Develop differentiated products to meet customers' needs. Launch internal satisfaction
campaigns such as service ambassador, secret surveys etc to raise overall customer
satisfaction. | | 7. | Raise
operating efficiency and cost effectiveness Take initiative to improve the costs
of risk, credit, and operations while reducing internal operating costs through
increased automation, higher productivity, revised procedures and standardized
workflow. | | 8. | Establish
overseas platforms and improve our brand image With the establishment of JS Cresvale
Securities International ltd. and OBU platforms, we will be able to explore overseas
business opportunities. Through marketing campaigns that raise our brand awareness
and image, we will be able to increase our overall corporate value. |
In
the future, the Jih Sun Group will continue to commit to its core value of ongoing
business, provide the best services to customers with innovation and efficiency
to become their closest financial partner, and achieve a three-win situation between
shareholders, employees, customers while pursuing to improve overall performance.
|

◎
Financial Information
| I. | Summarized
financial information for the latest 5 years |
| II.
| Financial
analysis for the latest 5 years | | III.
| Financial
Reports |
I.
Summarized financial information for the latest 5 years (I)
Summarized consolidated balance sheet and income statement 1. Summarized
consolidated balance sheet
Unit: NT$ thousand
Year | Financial
information for the latest 5 years (Note 1) | Current
year-to-date as at Mar 31, 2008(Note
2) | Item | 2007 | 2006 | 2005 | 2004 | 2003 |
Cash and cash equivalents,
deposits at the Central Bank of China and money market loans to other banks | 39,387,999 | 33,132,709 | 23,630,027 | 22,475,117 | 27,563,450 | 60,005,764 |
Financial assets whose changes
in fair value are recognized through the income statement | 29,085,510 | 43,439,405 | 50,309,751 | 33,236,472 | 17,141,272 | 25,521,119 |
| Repurchase notes and bonds
investments | 8,197,029 | 10,521,733 | 7,496,389 | 16,647,116 | 3,740,161 | 4,456,902 |
| Available-for-sale assets | 1,804,279 | 3,889,813 | 3,757,659 | 3,553,551 | 3,393,873 | 1,785,169 |
| Accounts receivable | 31,851,121 | 30,201,222 | 27,439,618 | 28,139,863 | 26,628,769 | 29,480,791 |
| Loans | 166,442,058 | 177,294,329 | 192,194,880 | 183,455,064 | 167,482,530 | 148,752,064 |
| Held-to-maturity assets | - | 478,796 | 478,796 | 478,796 | - | - |
Investments accounted using
the equity method | - | - | - | 1,811,389 | 1,314,352 | 214,497 |
| Fixed assets | 7,174,022 | 7,513,899 | 7,736,947 | 7,238,404 | 6,747,370 | 7,135,979 |
| Goodwill
and intangible assets | 1,277,176 | 1,553,008 | 1,805,003 | 273,674 | 302,753 | 1,177,711 |
| Other
financial assets | 4,349,909 | 4,309,719 | 5,368,239 | 8,838,684 | 6,863,431 | 4,057,077 |
| Other assets | 7,954,299 | 8,067,506 | 19,571,616 | 16,703,078 | 10,135,247 | 7,509,146 |
| Total assets | 297,523,402 | 320,402,139 | 339,788,925 | 322,851,208 | 271,313,208 | 290,096,219 |
Deposits from the Central Bank of China and money
market loans from other banks | 15,788,814 | 20,438,892 | 30,815,424 | 29,046,572 | 29,049,485 | 14,312,199 |
| Commercial notes payable | 4,104,939 | 1,042,058 | 1,219,088 | 4,508,615 | 2,242,279 | 4,215,578 |
| Deposits | 192,930,750 | 192,897,399 | 206,467,286 | 205,201,709 | 173,967,414 | 193,386,004 |
Financial liabilities whose
changes in fair value are recognized through the income statement | 404,651 | 806,644 | 517,473 | 123,893 | 716,507 | 322,171 |
| Repurchase notes and bonds
liabilities | 16,686,328 | 32,777,473 | 28,298,419 | 17,938,396 | 9,920,195 | 12,160,035 |
| Accounts payable | 17,121,822 | 16,530,576 | 18,070,330 | 15,648,946 | 11,842,492 | 17,523,056 |
| Other borrowings | 7,190,959 | 8,164,011 | 6,132,880 | 8,406,505 | 7,617,000 | 11,239,571 |
Loans from the Central
Bank of China or other banks | - | - | - | - | - | - |
| Bonds payable | 16,000,000 | 20,000,000 | 20,000,000 | 10,000,000 | 5,000,000 | 10,401,500 |
| Preference
shares | - | - | - | - | - | - |
Provision for operating
expenses and liabilities | 325,378 | 338,655 | 323,523 | 284,027 | 285,606 | 333,737 |
| Other financial liabilities | 85,500 | 86,400 | 87,300 | 162,570 | 159,690 | 85,500 |
| Other
liabilities | 1,277,748 | 1,570,699 | 1,512,526 | 1,233,894 | 1,191,714 | 2,528,347 |
| Total
liabilities | 271,916,889 | 294,652,807 | 313,444,249 | 292,555,127 | 241,992,382 | 266,507,698 |
| Holding company’s
equity | Paid-up capital | 26,124,494 | 40,627,970 | 22,532,732 | 22,532,732 | 26,124,494 | 26,124,494 |
| Capital surplus | - | 1,670,054 | 9,493,239 | 10,127,045 | 10,147,555 | - |
| Retained
earnings | Before distribution | -320,358 | -15,366,125 | -4,394,614 | -649,225 | -1,401,274 | -2,294,340 |
| After distribution | -320,358 | -15,366,125 | -4,394,614 | -649,225 | -1,401,274 | -2,294,340 |
| Other equity items | -217,851 | -1,201,753 | -1,304,003 | -1,730,949 | -1,973,677 | -263,239 |
| Minority interest | 20,228 | 19,186 | 17,322 | 16,478 | 15,490 | 21,606 |
| Total shareholders’
equity | Before distribution | 25,606,513 | 25,749,332 | 26,344,676 | 30,296,081 | 29,320,826 | 23,588,521 |
| After distribution | 25,606,513 | 25,749,332 | 26,344,676 | 30,296,081 | 29,320,826 | 23,588,521 |
| Note
1: | The 2007, 2006, and 2005
financial data have been audited. Cash and cash equivalents, repurchase notes
and bonds investments, investments accounted using the equity method, fixed assets,
total assets, commercial notes payable, repurchase notes and bonds liabilities,
bonds payable, provision for operating expenses and liabilities, total liabilities,
and shareholders' equity for 2004 and 2003 were audited figures; the remaining
items have been reorganized by the company. | | Note
2: | The financial data has been audited.
|
2.Summarized consolidated income statement
Unit:
NT$ thousand
Year | Financial
information for the latest 5 years (Note 1) | Current
year-to-date as at Mar 31,2008 (Note
2) | Item | 2007 | 2006 | 2005 | 2004 | 2003 |
| Net interest income | 5,458,743 | 6,768,402 | 8,871,565 | 8,145,938 | 5,772,000 | 1,127,895 |
| Net non-interest
income | 7,562,391 | -6,514,934 | 1,286,198 | 3,283,358 | 1,007,187 | 1,104,943 |
| Net profit | 13,021,134 | 253,468 | 10,157,763 | 11,429,296 | 6,779,187 | 2,232,838 |
| Bad debt expense | 4,944,922 | 5,033,979 | 5,782,738 | 1,638,028 | 676,153 | 2,286,267 |
| Provision for insurance
obligations | - | - | - | - | - | - |
| Operating expenses | 7,944,269 | 8,287,960 | 8,658,048 | 7,787,972 | 6,132,024 | 1,898,369 |
| Net income before tax from continuing operations | 131,943 | -13,068,471 | -4,283,023 | 2,003,296 | -28,990 | -1,951,798 |
| Income tax expense | 58,880 | 30,325 | 109,112 | 880,372 | 424,975 | 20,722 |
| Consolidated income after tax from continuing operations | 73,063 | -13,098,796 | -4,392,135 | 1,122,924 | -453,965 | -1,972,520 |
| Net income
after tax from discontinued operations | - | - | - | - | - | - |
Extraordinary gain/loss
(after tax) | - | - | - | - | - | - |
| Cumulative effects
from changes in accounting principles (after
tax) | - | - | - | - | - | - |
| Net income before consolidation | - | - | - | - | - | - |
| Consolidated earnings
(loss) | 73,063 | -12,696,078 | -4,392,135 | 1,122,924 | -453,965 | -1,972,570 |
| Consolidated
earnings (loss) | Attributable
to shareholders of the holding company | 69,632 | -12,699,458 | -4,394,267 | 1,120,848 | -1,973,982 | -1,973,982 |
| Attributable to the minority interest | 3,431 | 3,380 | 2,132 | 2,076 | 1,412 | 1,412 |
| Earnings per
share (Note 3) | 0.03 | -6.52 | -3.12 | 0.82 | -0.33 | -0.91 |
| Note
1: | The 2007, 2006 and 2005 financial
data have been audited. The bad debt expenses, net income before tax from continuing
operations, income tax expense, consolidated net income after tax from continuing
operations, consolidated net income, and earnings per share for 2004 and 2003
were audited figures. The remaining items have been reorganized by the company.
| | Note 2: | The
financial data has been audited | | Note
3: | The company reduced its capital on Jun
26, 2007 to cover its losses; the per-share data has been adjusted retrospectively
based on the reduction ratio. |
II.
Financial analysis for the latest 5 years (1)
Financial analysis on consolidated information for the latest 5 years
| Year | Financial
analysis for the latest 5 years | Current
year-to-date as at Mar 31, 2008 (Note
1) | | Analysis | 2007 | 2006 | 2005 | 2004 | 2003 |
| Operating
efficiency | Total
asset turnover (times) | 0.044 | 0.001 | 0.03 | 0.035 | 0.025 | 0.008 | Loan to deposit ratio of subsidiary banks (%) | 78.8 | 90.7 | 91.98 | 89.93 | 96.74 | 70.89 |
Past-due loan ratio of subsidiary banks (%) | 4.46 | 5.36 | 2.73 | 3.91 | 3.68 | 4.39 |
Revenue per employee($ thousands) | 3,303 | 59 | 1,908 | 2,191 | 1,595 | 551 |
Net profit per employee($ thousands) | 18 | -2,940 | -825 | 215 | -107 | -487 |
| Profitability | Return
on assets (%) | 1.25 | -2.79 | -0.4 | 1.19 | 0.86 | -0.34 |
| Return on equity (%) | 0.28 | -48.74 | -15.51 | 3.77 | -1.54 | -8.02 |
| Net profit margin (%) | 0.56 | -5,008.95 | -43.24 | 9.82 | -6.7 | -88.34 |
Earnings per share ($)(Note 2) | 0.03 | -6.52 | -3.12 | 0.82 | -0.33 | -0.91 |
| Financial
structure | Debt
to assets ratio (%) | 91.39 | 91.96 | 92.25 | 90.62 | 89.19 | 91.87 |
| Debt to equity ratio (%) | 1,061.91 | 1,144.31 | 1,189.78 | 965.65 | 825.33 | 1,129.82 |
| Double leverage ratio applicable to financial holdings (%) | 120.58 | 119.88 | 122.51 | 106.04 | 101.87 | 122.46 |
| Degree
of leverage | Degree
of operating leverage | 8.27 | 0.93 | 0.82 | 1.27 | -15.91 | 0.89 |
| Degree of financial leverage applicable to financial holdings | 1.95 | 0.99 | 1 | 1.02 | 0.99 | 0.99 |
| Growth
rate | Asset
growth rate (%) | -7.14 | -5.71 | 5.25 | 19 | 12.41 | -2.5 |
| Profit growth rate (%) | 101.01 | -195.65 | -314.13 | 6,667.41 | 92.81 | -1618.77 |
| Cash
flow | Cash
flow ratio (%) (Note 3) | 41.03 | 10.3 | - | - | - | 20.5 |
| Cash flow adequacy ratio (%) (Note 3) | 63.41 | - | - | - | - | 103.06 |
| Cash flow reinvestment ratio (%) (Note 3) | - | 2,056.63 | - | 6.3 | 46.02 | 56 |
| Business
scale | Market
share of assets (%) | | 1.65 | 1.84 | 2.17 | 2.14 | 1.45 |
| Market share of equity (%) | | 1.68 | 1.83 | 2.55 | 2.81 | 1.08 |
| Market share of deposits held by subsidiary banks (%) | 0.81 | 0.86 | 0.95 | 0.98 | 0.89 | 0.98 |
| Market share of loans granted by subsidiary banks (%) | 0.84 | 0.94 | 1.08 | 1.09 | 1.07 | 0.88 |
| Capital
adequacy | Capital
adequacy ratio of subsidiary banks (%) | 8.75 | 9.04 | 8.65 | 10.06 | 9.3 | 8.75 |
| Capital adequacy ratio of subsidiary security brokerage (%) | 384.95 | 289.69 | 256 | 322.37 | 443.25 | 384.95 |
| Capital adequacy ratio of subsidiary insurance agencies (%) | 74.7 | 64.78 | 46.46 | 75.3 | - | 74.7 |
Eligible capital of subsidiary banks ($ thousands) | 14,609,791 | 16,397,579 | 19,607,152 | 20,721,547 | 16,856,534 | 14,609,791 |
| Eligible capital of subsidiary security brokerage($ thousands) | 13,279,912 | 11,868,546 | 11,413,887 | 12,112,494 | 11,564,925 | 13,279,912 |
| Eligible capital of subsidiary insurance agencies($ thousands) | 5,702 | 10,183 | 6,710 | 1,741 | - | 5,702 |
Group eligible capita l($ thousands) | 55,477,683 | 23,272,744 | 25,630,781 | 26,749,604 | 25,507,841 | 55,477,683 |
Legal capital requirement of subsidiary banks ($ thousands) | 13,356,067 | 14,515,447 | 18,140,733 | 16,470,196 | 14,495,218 | 13,356,067 |
| Legal capital requirement of subsidiary security brokerage ($thousands) | 5,174,724 | 6,145,460 | 6,687,786 | 5,635,959 | 3,913,691 | 5,174,724 |
| Legal capital requirement of subsidiary insurance agencies ($ thousands) | 3,817 | 7,860 | 7,222 | 1,156 | - | 3,817 |
Group legal capital requirement ($ thousands) | 50,017,841 | 20,955,405 | 24,956,254 | 22,309,710 | 18,579,457 | 50,017,841 |
| Group capital adequacy ratio (%) | 121.93 | 111.06 | 102.7 | 119.9 | 137.3 | 121.93 |
| According to Section 46 of the Financial Holding Company Act, the disclosure
of aggregate loans, guarantees, or other transactions conducted by all subsidiaries
of the financial holding company with an individual, a related individual, or
a related company | 184,229
million | 45,626
million | 29,011
million | 9,985
million | 8,599
million | 184,229
million | Analysis
of variations greater than 20%: The significant improvements in total
asset turnover, revenue per employee, net profit per employee, return on total
assets, return on equity, net profit margin, earnings per share, degree of operating
leverage, degree of financial leverage applicable to financial holdings, and profitability
growth in the current year was due to the remarkable performance of subsidiary
Jih Sun Securities Co. Ltd, who contributed a net profit of NT$2.663
billion; however subsidiary Jih Sun International Commercial Bank has made additional provisions
for doubtful loans in an attempt to speed up bad debts write downs and to improve
asset quality, resulting in a net loss of NT$2.392 billion after provision.
We are still able to maintain a consolidated net profit of NT$730
million for the year. The significant
increases in cash flow ratio and cash flow adequacy in the current year were result
of stronger profitability compared to the previous year leading to higher net
cash inflow from operating activities.Cash flow reinvestment ratio
dropped due to a reduction in bonds issued by subsidiaries in the current year,
which resulted in lower levels of repurchase notes and bonds liabilities, and
substantial cash outflow from investing activities. |
| Note
1: | Except for capital adequacy and disclosures
required under Section 46 of the Financial Holdings Company Act which were dated
Dec 31, 2007, the remaining financial information was audited as at Mar 2008.
| | Note 2: |
The company reduced its capital on Jun 26, 2007 to cover its losses; the per-share
data has been adjusted retrospectively based on the reduction ratio. | | Note
3: | Net cash flow from operating activities
was negative and therefore excluded from calculation. | | Note
4: | Return on total assets and return on
equity as at Mar 31, 2008 were not annualized | | Note
5: | The amounts as of Dec 31, 2007 and Mar
31,2008 were estimated based on the consolidated net worth and assets reported
by peer banks in Q3 2007 plus monthly earnings published in the Market Observation
Post System. | | Note 6: |
Market shares of loans and deposits held by subsidiary banks for the current year
were dated Feb 2008. Financial ratios: | 1.
| Operating efficiency (1) Total asset
turnover = net revenue / total assets (2) Loan to deposit ratio of subsidiary
banks = total loans of subsidiary banks / total deposits (3) Overdue loans
ratio of subsidiary banks = total overdue loans of subsidiary banks / total loans
(4) Revenue per employee = net revenue / total number of employees (5) Net
profit per employee = net profit after tax / total number of employees | | 2. |
Profitability (1) Return on total assets = (net profit after tax + interest
expense * (1 - tax rate)) / average total assets (2) Return on equity
= net profit after tax / average shareholders' equity (3) Net profit margin
= net profit after tax / net revenue (4) Earnings per share = (net profit
after tax - preference share dividends) / weighted average number of shares
issued | | 3. |
Financial structure (1) Debt to assets ratio = total liabilities / total assets
(2) Debt to equity ratio = total liabilities / shareholders' equity (3) Double
leverage ratio applicable to financial holdings = equity investments specified
under section 36-2 and 37 of the Financial Holding Company Act / shareholders'
equity | | 4. |
Degree of leverage: (1) Degree of operating leverage = (net revenue - variable
costs) / net profit before tax (2) Degree of financial leverage applicable
to financial holdings = net profit before tax + interest expense / net profit
before tax | | 5. |
Growth rate: (1) Asset growth rate = (current year total assets - previous
year total assets) / previous year total assets (2) Profit growth rate
= (current year net profit before tax - previous year net profit before tax) /
previous net profit before tax | | 6.
| Cash flow (1) Cash flow ratio = net
cash flow from operating activities / (overdraft and money market loans from
other banks + commercial notes payable + financial assets whose changes in fair
value are recognized through the income statement + repurchase notes and
bonds liabilities + accounts payable within the next year) (2) Cash flow
adequacy ratio = net cash flow from operating activities for the latest 5 years
/ (capital expenditure + cash dividends) for the latest 5 years (3) Cash
flow reinvestment ratio = net cash flow from operating activities / net cash flow
from investing activities | | 7. |
Business scale (1) Market share of assets = total assets / total assets of
all financial holding companies (2) Market share of equity = shareholders'
equity / total shareholders' equity of all financial holding companies (3)
Market share of deposits held by subsidiary banks = total deposits / total deposits
held by all financial institutions eligible for undertaking loans and deposits
(4) Market share of loans granted by subsidiary banks = total loans / total loans
granted by all financial institutions eligible for undertaking loans and
deposits | | 8. | Capital
adequacy (1) Group eligible capital = eligible capital of the financial holding
company + (ownership percentage of subsidiaries × eligible capitals of each
subsidiary) -regulated deductions (2) Group legal capital requirement = legal
capital requirement of the financial holding company + ownership percentage
of subsidiaries × legal capital requirement of each subsidiary (3) Group capital
adequacy ratio = group eligible capital / group legal capital requirement |
|
III.Financial Reports:

◎Dividends
Policy
| I. Market price,
net worth, earnings, and dividends per share for the latest 2 years |
| | 2007 | 2006 |
Year to date Mar 31, 2008 (Note 3) | Market
Price per Share | High
| 10.20
| 8.97 | 9.7 | | Low | 5.51
| 6.49 | 7.18 | | Average | 7.80
| 7.42 |
8.22 | Net
Worth per Share | Before
earnings distribution | 9.787 | 6.53
| 9.021
| |
After earnings distribution | 9.787
| 6.53
| 9.021 | Earnings
per Share | Weighted
average shares outstanding | 2,170,472,657
| 1,948,684,850
| 2,612,449,482
| Earnings
per share | 0.03
| (6.52)
| (0.91) | | Dividends
per share | Cash
Dividend | - |
- | - | | Stock
dividends | Dividends from
retained earnings | - |
- | - | | Dividends
from capital surplus | - |
- | - | | Dividends
accumulated but not yet paid |
- |
- | - | | Analysis
of investment returns | Price
to earnings ratio | 260.00 | (1.14)
| (9.03) | | Price/Dividend
ratio | - |
- | - | | Cash
dividend yield | - |
- | - |
Note
1: Year 2007 resulted in accumulated losses. No profit was available for distribution.
Note 2: Weighted average shares outstanding for 2006 have been adjusted retroactively
for capital reduction. Note 3: The financial data has been audited.
|

◎Deviations
of actual corporate governance from the governance principles of the financial
holding companies and the causes
| Item |
Implementation |
Differences and reasons |
1.Shareholding structure
and shareholders' equity of the financial holding company | (1)
| The handling of disputes and advice from
shareholders by the financial holding company. | | (2)
| Updates on major shareholders and ultimate
shareholders of the financial holding company with controlling interest. | | (3)
| Risk management procedures and firewalls
established by the financial holding company against other affiliated companies. |
|
| (1) |
Handled by specialists of the Public Affairs Division. Share administration and
legal issues are consulted or assisted by Legal & Compliance or Share Administration
departments. | | (2) | Good relationship with
shareholders. Obtains timely updates. | | (3) |
A stakeholders tracking system has been established in compliance with the Financial
Holding Company Act, Securities Exchange Act and Banking Act. The system constantly
checks whether the counterparty is a stakeholder and performs the necessary operations
as required by the regulations. |
|
None |
| 2.The constitution
and obligations of the board of directors | (1)
| The establishment of Independent Directors
by the financial holding company. | | (2) |
Regular evaluation of the independence of auditors. |
|
| (1) |
The company has appointed 3 Independent Directors in compliance with regulations
and the memorandum of association during its 2007 annual shareholder' meeting.
| | (2) | Reviews
on the independence of auditors and the audit team were performed on a regular
basis. |
| None |
| 3. The constitution
and obligations of supervisors | (1)
| The establishment of Independent Supervisors by the
financial holding company. | | (2)
| Communications between the Supervisors, employees, and
shareholders of the financial holding company. |
|
| (1) | The
company has appointed 3 Supervisors in compliance with regulations and the memorandum
of association during its 2007 annual shareholders' meeting. | | (2) |
Contacts may be established through telephone or email when necessary. The company
invites Supervisors to participate in all board of directors meetings and in the
annual general meeting. Supervisors may request for explanations on work performed
from employees or department heads of the company when necessary. |
|
None |
| 4. Establishment of communication
channels with stakeholders. |
Means of communication have been established within the board of directors
and the HR department. | None | |
5. Disclosure of information | (1) | The
establishment of a website to disclose information relating to financial performance
and corporate governance. | | (2) | Other
means of information disclosure by the financial holding company (such as the
establishment of an English website, appointment of dedicated personnel for the
collection and disclosure of information, reinforcement of the spokesperson policy,
the disclosure of details of press releases on the company's website etc). |
|
| (1) | The
company has established |
| |