| ◎ Letter
to Shareholders
| Abundant capital supply and sustained economic growth both contributed to the prosperity of the domestic financial market in 2010. Our subsidiary Jih Sun Securities continued to maintain excellent performance and topped all competitors in profitability once more, while the subsidiary Jih Sun Bank turned profitable following the management’s relentless efforts in corporate restructuring. The 2010 business performance and the 2011 business plans for The Company and its subsidiaries are described as below:
1.
2010 business Performance
(1) Changes in the domestic and overseas financial environment
In 2010, driven by a strong economic recovery in Asia as well as easing monetary policies from US, Europe, and Japan, the global economy grew continuously; however, the momentum of economic recovery gradually dissipated during the third quarter, especially when compared to the previous year’s results, following a series of inventory adjustments and the diminishing effects of the existing economic stimulus. Nevertheless, the worldwide recovery was undeniable. According to a study by Global Insight Inc. (GI) worldwide economic growth reached 4.1% in 2010. Although the global economy was back on track, growth contributors were highly diverse as advance economies such as the US, Europe, and Japan lagged significantly in momentum compared with emerging economies such as Mainland China and India. The diverse speeds of growth between advanced and emerging economies contributed further to the already imbalanced trade activities and currency strengths throughout the world.
The domestic economy benefited from the worldwide recovery, especially from Mainland China and other emerging countries, as well as the improved cross-strait relationship following the ECFA; foreign trade activities resumed as a result, which improved capacity utilization and boosted private consumption. According to the statistics and forecasts on income per capita, produced by the Directorate-General of Budget, Accounting, and Statistics, Executive Yuan, Taiwan’s economic growth reached 10.82% in 2010, which set a record high in 21 years.
The "Cross-Strait Financial Supervisory Memorandum of Understanding (MOU) took effect on 16 January 2010 and opened up new opportunities to Taiwan’s financial industry. In addition, the "Economic Cooperation Framework Agreement" was officially signed on 29 June 2010, which included banking and insurance industries as early beneficiaries, and gave Taiwanese banks the permission to set up branches in Mainland China one year after establishing representative offices. As the ECFA became effective on 12 September 2010, it unleashed a massive wave of investments by Taiwanese banks into Mainland China. Currently, there are six local banks whose Chinese branches have commenced operation. On the other hand, Chinese banks are also looking for opportunities in the Taiwanese market. The Bank of China, Bank of Communication, and Mainland China Merchants Bank have set up offices in Taiwan.
(2) The 2011 business plan
Although the global economy continues its recovery in 2011, there exists several uncertainties. In response to changes in the external environment, we have re-developed our business strategies and established plans to improve business performance. Details are as follows:
1. Create an operating structure centered on asset management; prepare to venture into the
Chinese market.
2. Enhance the business performance of subsidiaries.
3. Improve the financial structure of the subsidiary Jih Sun Bank.
This year, the parent company Jih Sun Financial Holding Company will continue to raise cash increment to reinvest in the subsidiary Jih Sun Bank, thereby enhancing its financial structure and health.
(3) The 2011 business targets
The Company has set the following targets based on its 2011 business plans and those of its subsidiaries:
1. Improve the efficiency at which subsidiaries’ proprietary capital is used; raise the consolidated
net asset value from 9.1 times to 10 times or above.
2. Improve the service quality of all businesses; escalate the rankings in major rating agencies.
(4) Major business policies
| 1. |
Enhance the risk management in our subsidiaries; strive to improve the risk management system, data, and tools. |
| 2. |
Research and develop the core system and introduce supporting equipment to enhance the information management and reliability of information services. |
| 3. |
Continue to develop new systems to accommodate the implementation of International Financial Reporting Standards (IFRS). |
| 4. |
Train and retain key talents that are necessary for The Company’s growth. |
| 5. |
Monitor the development of ECFA and the movements of global interest rates to timely adjust The Company’s business strategies. |
|
| |
|
(5) Research and development
The Company’s research and development expenses were spent on various projects including researches on financial markets and management strategies, IT system development, development of risk management tools and new financial instruments, as well as education and training. The total R&D expenses including subsidiaries exceed NT$50 million each year. The major R&D results in 2010 are as follows:
1. Researches relating to domestic financial mergers, acquisition, and investments in Mainland
China.
2. Derivatives developed: 572 call warrants, 101 put warrants, and 401 structured products in total.
3. The development of risk management tools: credit risk grading and alert systems. 2.The summary of 2011 business plan| (I) | Analysis on domestic and overseas economic prospects
Global Insight Inc. (GI) forecasted the world’s economic growth rate will decline from 4.1% in 2010 to 3.7% in 2011, due to the heightened base year of comparison. Overall speaking, economic growth in most parts of the world will be lower in 2011 compared with 2010, but many countries have recovered from the 2008 sub-prime crisis and are expected to resume mild growth. Location-wise, growth contributors were highly diverse as advance economies such as the US, Europe, and Japan lagged significantly in momentum compared with emerging economies such as Mainland China and India. The diverse speeds of growth between advance and emerging economies contributed further to the already imbalanced trade activities and currency strengths throughout the world. In addition, emerging economies are now facing inflationary pressures as a result of their over-heated growth while governments of developed countries have troubles with excessive debt and high unemployment rate. These are the major uncertainties to the world’s economic development in 2011.
According to the statistics and forecasts on income per capita, produced by the Directorate-General of Budget, Accounting, and Statistics, Executive Yuan, Taiwan’s economic growth reached 10.82% in 2010, which set a record high for 21 years. Foreign trade and domestic consumption are expected to grow further in 2011, but as they are compared with last year’s stronger performance, the rate of growth may moderate at around 5.04％, but remain above the average rate of 3.6% since 2000. On the other hand, Taiwan’s economic development in 2011 involves several uncertainties such as the strengthening NT$ currency, rising interest rates and commodity prices, etc.
| | (II)
| The 2011 business plan
Although the global economy continues its recovery in 2011, there exists several uncertainties. In response to changes in the external environment, we have re-developed our business strategies and established plans to improve business performance. Details are as follows:
| 1. |
Create an operating structure centered on asset management; prepare to venture into the Chinese market. |
| 2. |
Enhance the business performance of subsidiaries. |
| 3. |
Improve the financial structure of the subsidiary Jih Sun Bank. |
This year, the parent company Jih Sun Financial Holding Company will continue to raise cash increment to reinvest in the subsidiary Jih Sun Bank, thereby enhancing its financial structure and health. |
| (III) |
The 2011 business targets |
| |
The Company has set the following targets based on its 2011 business plans and those of its subsidiaries:
| 1. |
Improve the efficiency at which subsidiaries’ proprietary capital is used; raise the consolidated net asset value from 9.1 times to 10 times or above. |
| 2. |
. Improve the service quality of all businesses; escalate the rankings in major rating agencies. |
|
| (IV) |
Major business policies |
| |
| 1. |
Enhance the risk management in our subsidiaries; strive to improve the risk management system, data, and tools. |
| 2. |
Research and develop the core system and introduce supporting equipment to enhance the information management and reliability of information services. |
| 3. |
Continue to develop new systems to accommodate the implementation of International Financial Reporting Standards (IFRS). |
| 4. |
Train and retain key talents that are necessary for The Company’s growth. |
| 5. |
Monitor the development of ECFA and the movements of global interest rates to timely adjust The Company’s business strategies. |
|
3. Conclusion
With the efforts of our entire employees and the support of our shareholders, Jih Sun not only turned profitable in 2010, but was also rated favorably by Fitch Ratings. The latest credit ratings on The Company and its subsidiaries, dated 17 January 2011, are as follows:
| 1. |
. For Jih Sun Financial Holding Company, the domestic long-term rating was raised from “BBB+(twn)” to “A-(twn)”; domestic short-term rating was “F2(twn)” and the credit outlook was rated “Stable”. |
| 2. |
For Jih Sun Bank, the domestic long-term rating was raised from “BBB+(twn)” to “A-(twn)”; domestic short-term rating was “F2(twn)” and the credit outlook was rated "Stable". |
| 3. |
For Jih Sun Securities, the domestic long-term rating was raised from “A-(twn)” to “A(twn)”; domestic short-term rating was “F1(twn)” and the credit outlook was rated “Stable”. |
This concludes the description of our business performance for the previous year and prospects for the upcoming year. We are grateful to shareholders’ long-term support over the years and wish to have your continual encouragement and acknowledgment. We wish you good health and prosperity in the future.
Chairman: Huang Jin-Tang General Manager: Chao Yung-Fei |
◎
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: NTD thousand
Year
Item |
Financial
information for the latest 5 years |
2011 up until
31 March (Note 1) |
2010 |
2009 |
2008 |
2007 |
2006 |
Cash and cash equivalents, deposits at
the Central Bank and money market loans to other banks |
40,870,401 |
46,711,033 |
68,266,971 |
39,387,999 |
33,132,709 |
40,643,485 |
Financial assets at fair value through
pr
ofit and loss |
31,758,145 |
11,656,058 |
18,320,435 |
28,584,454 |
42,865,269 |
31,487,520 |
Repurchase notes and bonds investment |
453,095 |
1,313 |
2,027,821 |
8,197,029 |
10,521,733 |
1,604,801 |
Available-for-sale financial assets |
2,349,403 |
2,801,835 |
1,100,179 |
398,003 |
2,473,475 |
2,352,753 |
Receivables |
25,034,890 |
22,324,309 |
12,318,193 |
32,241,897 |
30,683,567 |
24,555,853 |
Loans and discounts |
128,721,950 |
125,873,517 |
138,644,887 |
166,442,058 |
177,294,329 |
123,667,663 |
Held-to-maturity assets |
300,000 |
- |
- |
- |
478,796 |
300,000 |
Investments accounted using the equity
method |
240,883 |
232,966 |
223,536 |
- |
- |
247,539 |
Fixed assets |
5,987,446 |
6,184,963 |
6,557,585 |
7,174,022 |
7,513,899 |
5,829,426 |
Intangible assets |
319,073 |
645,910 |
995,480 |
1,277,176 |
1,553,008 |
286,229 |
Other financial assets |
10,652,314 |
11,199,073 |
13,436,989 |
13,546,528 |
13,262,074 |
13,477,533 |
Other assets |
1,707,453 |
2,102,593 |
2,564,934 |
4,588,963 |
3,833,927 |
1,530,203 |
Total assets |
248,395,053 |
229,733,570 |
264,457,010 |
301,838,129 |
323,612,786 |
245,983,005 |
Deposits from the Central Bank and money
market loans from other banks |
6,967,852 |
10,854,230 |
10,799,605 |
15,788,814 |
20,438,892 |
6,742,623 |
Commercial paper payable |
6,205,029 |
4,048,252 |
2,535,632 |
5,900,898 |
3,031,069 |
7,005,274 |
Deposits and remittances |
178,713,753 |
157,014,292 |
189,171,538 |
196,854,701 |
195,625,701 |
174,412,395 |
Financial liabilities at fair value
through
pr
ofit and loss |
1,139,766 |
607,644 |
575,457 |
404,651 |
806,644 |
767,360 |
Repurchase notes and bonds liabilities |
2,689,120 |
4,063,729 |
13,036,553 |
16,686,328 |
32,777,473 |
3,764,519 |
Payables |
13,736,763 |
15,157,726 |
13,746,975 |
17,512,598 |
17,012,921 |
14,543,269 |
Other loans |
5,060,000 |
2,980,000 |
1,650,000 |
5,395,000 |
6,175,000 |
3,600,000 |
Loans from The Central Bank and other
banks |
- |
- |
- |
- |
- |
- |
Bond payable |
4,500,000 |
8,500,000 |
10,401,500 |
16,000,000 |
20,000,000 |
4,500,000 |
Preferred shares (liability) |
- |
- |
- |
- |
- |
- |
Operating and liability
pr
ovisions |
406,408 |
403,091 |
347,084 |
325,378 |
338,655 |
55,081 |
Other financial liabilities |
119,658 |
86,450 |
106,068 |
644,911 |
405,843 |
225,951 |
Other liabilities |
511,958 |
408,747 |
468,280 |
718,337 |
1,251,256 |
1,391,112 |
Total liabilities |
220,050,307 |
204,124,161 |
242,838,692 |
276,231,616 |
297,863,454 |
217,007,584 |
Equity of parent company's shareholders’
equity |
Share capital |
25,816,100 |
49,628,234 |
26,124,494 |
26,124,494 |
40,627,970 |
25,816,100 |
Capital reserves |
- |
- |
- |
- |
1,670,054 |
- |
Retained earnings |
Before dividend distribution |
2,817,422 |
(23,812,134) |
(4,116,742) |
(320,358) |
(15,366,125) |
3,410,929 |
After dividend distribution |
Note
2 |
(23,812,134) |
(4,116,742) |
(320,358) |
(15,366,125) |
Note
2 |
Other items of shareholders' equity |
(312,612) |
(230,346) |
(413,002) |
(217,851) |
(1,201,753) |
(277,654) |
Minority interest |
23,836 |
23,655 |
23,568 |
20,228 |
19,186 |
26,046 |
Shareholders' equity:
Total value |
Before dividend distribution |
28,344,746 |
25,609,409 |
21,618,318 |
25,606,513 |
25,749,332 |
28,975,421 |
After dividend distribution |
Note
2 |
25,609,409 |
21,618,318 |
25,606,513 |
25,749,332 |
Note
2 |
| Note
1: |
Financial information was reviewed by CPAs. |
| Note
2: |
The 2010 earnings appropriation is still pending for resolution during the 2011 general shareholders meeting. |
2.Summarized consolidated
income statement
Unit:
NTT thousand
Year
Item |
Financial
information for the latest 5 years |
2011
up until 31 March (Note 1) |
2010 |
2009 |
2008 |
2007 |
2006 |
Net interest revenue |
3,278,286 |
2,186,135 |
3,679,848 |
5,042,652 |
6,564,443 |
860,982 |
Non-interest net revenue |
6,142,301 |
5,785,710 |
4,416,367 |
7,978,482 |
(6,310,975) |
1,281,475 |
Net revenue |
9,420,587 |
7,971,845 |
8,096,215 |
13,021,134 |
253,468 |
2,142,457 |
Bad loans expense |
568,970 |
6,477,178 |
5,113,162 |
4,944,922 |
5,033,979 |
399,419 |
Provision for various
insurance obligations |
- |
- |
- |
- |
- |
- |
Operating expenses |
5,982,572 |
6,506,378 |
6,707,012 |
7,944,269 |
8,287,960 |
1,485,335 |
Net
profit
(loss) before tax from continuing operations |
2,869,045 |
(5,011,711) |
(3,723,959) |
131,943 |
(13,068,471) |
257,703 |
Income tax expense (benefit) |
49,122 |
578,193 |
68,006 |
58,880 |
30,325 |
(7,290) |
Consolidated net
profit (loss) after tax from continuing operations |
2,819,923 |
(5,589,904) |
(3,791,965) |
73,063 |
(13,098,796) |
264,993 |
Gains/losses from discontinued
operations (Net of taxes) |
- |
- |
- |
- |
- |
- |
Extraordinary income/expenses
(after tax) |
- |
- |
- |
- |
- |
- |
Cumulative effects from changes in
accounting policies (after tax) |
- |
- |
- |
- |
402,718 |
- |
Consolidated net
profit (loss) |
2,819,923 |
(5,589,904) |
(3,791,965) |
73,063 |
(12,696,078) |
264,993 |
Consolidated net
profit (loss) |
Attributable to parent
company's shareholders |
2,817,422 |
(5,593,148) |
(3,796,384) |
69,632 |
(12,699,458) |
264,443 |
Attributable to minority
shareholders |
2,501 |
3,244 |
4,419 |
3,431 |
3,380 |
550 |
Earnings per ordinary share
(after retrospective adjustments)(Note 2) |
1.17 |
(2.79) |
(3.36) |
0.06 |
(12.53) |
0.10 |
| Note
1: |
Financial information was reviewed by CPAs. |
| Note
2: |
The Company reduced its paid up capital on 26 June 2007 and 8 June 2010 to offset accumulated losses; retrospective adjustments were made based on the reduction percentages. |
II.
Financial analysis for the latest 5 years
(1)
Financial analysis based on the consolidated information for the latest 5 years
Year
Analysis Item |
Financial analysis for the
last 5 years |
2011
up until 31 March
(Note 1) |
2010 |
2009 |
2008 |
2007 |
2006 |
Operating efficiency |
Total asset turnover (times) |
0.038 |
0.035 |
0.031 |
0.043 |
0.001 |
0.009 |
Loan to deposit ratio (%) – The Bank Subsidiary |
70.89 |
76.45 |
68.59 |
78.80 |
90.70 |
69.71 |
Overdue loan ratio (%) – The Bank Subsidiary |
1.75 |
1.99 |
4.02 |
4.46 |
5.36 |
1.69 |
Revenue per employee (in thousand
dollars) |
2,724 |
2,359 |
2,183 |
3,303 |
59 |
613 |
Profit per employee (in thousand dollars) |
815 |
(1,655) |
(1,024) |
18 |
(2,940) |
76 |
Profitability |
Return on assets (%) |
1.64 |
(1.46) |
0.04 |
1.33 |
(2.54) |
0.23 |
Return on shareholders’ equity
(%) |
10.45 |
(23.67) |
(16.06) |
0.28 |
(48.74) |
0.92 |
Net
pr
ofit
margin (%) |
29.93 |
(70.12) |
(46.84) |
0.56 |
(5,008.95) |
12.37 |
Earnings per share ($) (Note
2) |
1.17 |
(2.79) |
(3.36) |
0.06 |
(12.53) |
0.10 |
Financial structure |
Debt to assets ratio (%) |
88.59 |
88.85 |
91.83 |
91.52 |
92.04 |
88.22 |
Debt to equity ratio (%) |
776.34 |
797.07 |
1,123.30 |
1,078.76 |
1,156.78 |
748.94 |
Double leverage ratio
applicable to financial holding companies (%) |
120.23 |
121.66 |
125.32 |
120.58 |
119.88 |
119.95 |
Financial ratios applicable to
the financial holding company in accordance with Article 41 of The Financial
Holding Company Act (%) |
None |
None |
None |
None |
None |
None |
Solvency |
Current ratio (%) – The Financial
Holding Company |
26.85 |
32.96 |
12.12 |
53.22 |
630.64 |
28.07 |
Liquid ratio (%) – The Financial
Holding Company |
26.84 |
32.96 |
12.12 |
53.22 |
630.62 |
28.06 |
Interest coverage ratio (%) –The
Financial Holding Company |
34.56 |
(46.59) |
(27.92) |
2.06 |
(191.29) |
13.01 |
Consolidated current ratio (%) |
109.90 |
104.83 |
104.68 |
106.42 |
105.85 |
106.89 |
Consolidated liquid ratio (%) |
109.75 |
104.66 |
104.44 |
106.12 |
105.51 |
106.71 |
Consolidated interest coverage
ratio (%) |
3.16 |
(0.90) |
0.29 |
1.02 |
(1.31) |
1.71 |
Leverage |
Operating leverage |
1.21 |
0.84 |
0.76 |
8.08 |
0.93 |
1.35 |
Financial leverage – The Financial
Holding Company |
1.03 |
0.98 |
0.97 |
1.95 |
0.99 |
1.08 |
Growth rate |
Asset growth rate (%) |
8.12 |
(13.13) |
(12.38) |
(6.73) |
(5.74) |
(0.97) |
Profit growth rate (%) |
157.25 |
(34.58) |
(2,922.40) |
101.01 |
(205.12) |
91.02 |
Cash flow |
Cash flow ratio (%) (Note 3) |
- |
- |
94.92 |
42.55 |
10.69 |
7.47 |
Cash flow adequacy ratio (%) |
3280.95 |
3259.32 |
2739.57 |
1627.08 |
771.52 |
4179.92 |
Cash flow reinvestment ratio
(%) (Note 3) |
- |
- |
623.31 |
777.39 |
- |
127.91 |
Business scale |
Market share of assets (%) |
0.86 |
0.85 |
1.05 |
1.45 |
1.63 |
0.86 |
Market share of equity (%) |
1.42 |
1.35 |
1.32 |
1.56 |
1.88 |
1.42 |
Market share of deposits (%) –
The Bank Subsidiary |
0.60 |
0.55 |
0.71 |
0.81 |
0.86 |
0.59 |
Market share of loans (%) – The
Bank Subsidiary |
0.65 |
0.67 |
0.79 |
0.84 |
0.94 |
0.62 |
Capital adequacy |
Capital adequacy ratio (%) – The
Bank Subsidiary |
9.44 |
8.64 |
8.58 |
8.75 |
9.04 |
9.44 |
Capital adequacy ratio (%) – The
Securities Subsidiary |
505.04 |
480.86 |
538.25 |
384.95 |
289.69 |
505.04 |
Capital adequacy ratio (%) – The
Property Insurance Agency Subsidiary |
81.06 |
83.51 |
78.42 |
74.70 |
64.78 |
81.06 |
Eligible capital (in thousand
dollars) – The Bank Subsidiary |
11,125,656 |
10,044,171 |
10,787,514 |
14,609,791 |
16,397,579 |
11,125,656 |
Eligible capital (in thousand
dollars) – The Securities Subsidiary |
16,048,786 |
15,130,813 |
13,476,105 |
13,279,912 |
11,868,546 |
16,048,786 |
Eligible capital (in thousand
dollars) – The Property Insurance Agency Subsidiary |
5,167 |
5,466 |
6,898 |
5,702 |
10,183 |
5,167 |
Net eligible capital (in
thousand dollars) - Group |
21,497,432 |
20,465,707 |
20,031,474 |
23,371,387 |
23,272,744 |
21,497,432 |
Capital requirement (in
thousand dollars) – The Bank subsidiary |
9,430,359 |
9,303,703 |
10,055,416 |
13,356,067 |
14,515,447 |
9,430,359 |
Capital requirement (in
thousand dollars) – The Securities Subsidiary |
4,766,616 |
4,719,966 |
3,755,537 |
5,174,724 |
6,145,460 |
4,766,616 |
Capital requirement (in
thousand dollars) –The Property Insurance Agency Subsidiary |
3,187 |
3,273 |
4,398 |
3,817 |
7,860 |
3,187 |
Total capital requirement (in
thousand dollars) - Group |
15,065,438 |
15,393,668 |
14,030,389 |
19,167,154 |
20,955,405 |
15,065,438 |
Capital adequacy ratio (%) - Group |
142.69 |
132.95 |
142.77 |
121.93 |
111.06 |
142.69 |
The sums and percentages of
aggregate loans, guarantees, or other transactions conducted by all
subsidiaries of The Financial Holding Company with a single individual,
related party, or affiliated company, which are subject to disclosure under Article
46 of the Financial Holding Company Act. |
24,460 million |
26,314 million |
152,706 million |
184,229 million |
45,626 million |
24,460 million |
Variations exceeding 20% in the last 2 years:
1. Net
pr
ofit per employee, return on assets, return on
shareholders' equity, net
pr
ofit
margin, earnings per share, degree of operating leverage, asset growth rate,
and
pr
ofit growth rate increased
mainly because of higher investment gains recognized in 2010 as compared with
2009.
2. Interest coverage ratios
increased at both company and group levels mainly because of higher net
pr
ofit before tax and interest in 2010 |
| Note: |
Industry-specific key performance indicators were: loan-to-deposit ratios, overdue loan ratios, and debt to equity ratios for the subsidiary Bank; double leverage ratios, market share of assets, and market share of equity for The Financial Holding Company; market share of deposits, market share of loans, and capital adequacy analysis for the subsidiary The Bank, etc. |
| Note
1: |
With the exception of the capital adequacy data and any disclosures required under Article 46 of The Financial Holding Company Act, the market share of assets and net worth were dated 31 Dec 2010, and the subsidiary The Bank’s market share of deposits and loans were dated 28 Feb 2011. All remaining financial information was CPA-reviewed data dated Mar 2011. |
| Note
2: |
The Company reduced its paid-in capital on 26 June 2007 and 8 June 2010 to offset accumulated losses; retrospective adjustments were made based on the reduction percentages. |
| Note
3: |
Cash flow from operating activities resulted in a net outflow; thus not calculated.
Financial ratios: |
| Financial ratios: |
1.Operating efficiency
(1) Total asset turnover = net revenue / total assets
(2) Loan to deposit ratio of subsidiary bank = total loans of subsidiary bank / total deposits
(3) NPL ratio of subsidiary bank = total non-performing loans of the subsidiary bank / 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 the financial holding company = equity investments specified
under sections 36-2 and 37 of the Financial Holding Company Act / net worth |
4.Debt servicing capability:
| (1) |
Current ratio = current assets / current liabilities |
| (2) |
Liquid ratio = (current assets – inventory – prepayments) / current liabilities |
| (3) |
Interest coverage ratio = net profit before income tax and interest / interest expenses for the current period |
5. Degree of leverage:
| (1) |
Degree of operating leverage = (net revenue – variable costs) / net profit before tax |
| (2) |
Degree of financial leverage applicable to the financial holding company = net profit before tax + interest expense / net profit before tax |
6. 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 |
7. Cash flow
| (1) |
Cash flow ratio = net cash flow from operating activities/( overdraft and money market loans from other banks + commercial paper payable + financial liabilities at fair value through profit and loss + notes and bond repurchase 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 |
8. Business scale
| (1) |
Market share of assets = total assets / total assets held by 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 bank = total deposits / total deposits held by all financial institutions eligible to undertake loans and deposits
|
| (4) |
Market share of loans granted by subsidiary bank = total loans / total loans granted by all financial institutions eligible to undertake loans and deposits |
9. Capital adequacy
| (1) |
Group eligible capital = eligible capital of the financial holding company + (ownership percentage in subsidiaries × eligible capitals of each subsidiary) – mandatory deductions |
| (2) |
Group legal capital requirement = legal capital requirement of the financial holding company + ownership percentage in subsidiaries × legal capital requirement of each subsidiary |
| (3) |
Group capital adequacy ratio = group net eligible capital / group legal capital requirement |
|
III.Financial
Reports:
◎Dividends
Policy
| I. Market price,
net worth, earnings, and dividends per share and other relevant information in
the last 2 years |
Year
Item |
2010
(Note 2) |
2009
(Note 1) |
Year to date
31 March 2010
(Note 7) |
Market
price per share |
Highest |
13.65 |
7.29 |
14.65 |
Lowest |
3.42 |
2.46 |
12.45 |
Average |
6.64 |
4.57 |
13.80 |
Net worth per
share |
Before distribution |
10.97 |
5.155 |
11.21 |
After distribution |
Note 8 |
5.155 |
Note 9 |
Earnings per share |
Weighted
average outstanding shares - before the
proposed
distributions (Note 3) |
2,351,855,760 |
2,003,486,945 |
2,351,855,760 |
Weighted
average outstanding shares - after the
proposed
distributions
(Note 3) |
2,545,108,080 |
2,003,486,945 |
Note 9 |
Earnings
per share - before the
proposed
distributions (Note 3) |
1.17 |
(2.79) |
0.10 |
Earnings
per share - after the
proposed
distributions
(Note 3) |
1.08 |
(2.79) |
Note 9 |
Dividend per
share |
Cash dividends |
0.09 |
- |
Note 9 |
Stock
dividends |
From earnings |
0.82 |
- |
Note 9 |
From capital reserves |
- |
- |
Note 9 |
Accumulated unpaid dividends |
- |
- |
- |
Analysis of investment returns |
P/E ratio (Note 4) |
5.68 |
(3.15) |
Note 9 |
Price to
dividends ratio
(Note 5) |
73.79 |
- |
Note 9 |
Cash
dividend yield (%)
(Note 6) |
1.36 |
- |
Note 9 |
|
| Note 1: |
The Company still accumulated losses in 2009; hence no earnings were available for distribution.
|
| Note 2: |
The 2010 earnings appropriation was passed under the resolution of the 4th board of directors during the 18th meeting dated 2011.03.30. |
| Note 3: |
The Company reduced its paid-in capital on 8 June 2010 to offset accumulated losses; retrospective adjustments were made based on the reduction percentage. |
| Note 4: |
P/E ratio = Average closing price per share for the year / earnings per share. |
| Note 5: |
Price to dividend ratio = Average closing price per share for the year / cash dividends per share. |
| Note 6: |
Cash dividend yield = Cash dividend per share / average closing price per share for the current year. |
| Note 7: |
Financial information was reviewed by CPAs. |
| Note 8: |
The 2010 earnings appropriation is still pending for resolution during the 2011 general shareholders meeting. |
| Note 9: |
Not applicable for quarterly statistics. |
|
◎Deviation and causes of deviation of The Company’s actual governance from The Corporate Governance Best-Practice Principles for Financial Holding Companies
Item |
Implementation |
Deviations and causes of deviation from The Corporate Governance Best-Practice Principles for Financial Holding Companies |
1.
Shareholding structure and shareholders’ equity
| (1) |
The handling of shareholders’
disputes and suggestions by the financial holding company |
| (2) |
Updates on the financial holding
company’s major shareholders and their owners with the ultimate controlling
interests |
| (3) |
Risk management
procedures and firewalls established by the
financial holding company against other affiliated companies |
|
| (1) |
The Company’s
spokesperson and acting spokesperson are responsible for handling
shareholders’ suggestions, disputes, and other issues. Assistance from Share
Administration and Legal departments is sought when dealing with share
administration-related and legal affairs. |
| (2) |
The Company’s shareholding structure is quite
concentrated. The major corporate shareholders re
presented
more than 60% of the entire Board of Directors. The Company maintains a good
relationship with its shareholders and is immediately aware of any
significant ownership changes. |
| (3) |
The Company consistently checks whether its trade
counterparties are stakeholders, and performs the necessary actions as
required by law. Credit and
non-credit extension transactions with The Company’s re
presentative,
major shareholders, affiliated companies, and stakeholders are conducted in
compliance with Article 44 and 45 of The Financial Holding Company Act and
other regulations.
Based on the above regulation, The Company had implemented internal policies
including the “Jih Sun International Commercial Bank - Financial Holding
Company Act Article 44 Compliant Stakeholders Lending Policy”, “Jih Sun
Financial Holding and Subsidiaries Lending, Endorsement, and Other
Transactions with the Same Party, Same Related Party, and Same Affiliated
Enter
prise”, and “Non-Credit
Extension Transaction Policy with the Stakeholders of Jih Sun Financial
Holding Co., Ltd. and Subsidiaries”. A stakeholders
system was implemented in accordance with the Financial Holding Company Act,
the Securities Exchange Act, and the Banking Act to facilitate timely examination
on whether the counterparty is a stakeholder. Transactions with stakeholders
will then be handled according to the relevant regulations. Credit and
non-credit extension transactions with The Company’s re
presentative,
major shareholders, affiliated companies, and stakeholders are conducted in
compliance with Article 44 and 45 of The Financial Holding Company Act and
other regulations. Based on the above laws and regulations, The Company had
implemented internal policies including the “Jih Sun International Commercial
Bank - Financial Holding Company Act Article 44 Compliant Stakeholders
Lending Policy”, “Jih Sun Financial Holding Mandatory Reporting and
Disclosures under Article 46 of the Financial Holding Company Act”, and
"Non-Credit Extension Transaction Policy with the Stakeholders of Jih
Sun Financial Holding Co., Ltd. and Subsidiaries". |
|
None |
2. The constitution and obligations of the
board of directors
| (1) |
The appointment of Independent
Directors by the financial holding company |
| (2) |
Regular assessment of CPAs’
independence. |
|
| (1) |
The
Company has complied with regulations and its Articles
of Incorporation by appointing 3 Independent Directors and establishing an
Audit Committee during the 2009 annual general meeting. |
| (2) |
The independence
of the CPAs and the audit team are under regular review. |
|
None |
3. Establishment of communication channels
with stakeholders |
Contact
and communication channels to The Board of Directors and the HR department
were established. Information is maintained on a regular basis. |
None |
4. Disclosure of information
| (1) |
Establishment of a website for
the disclosure of financial performance and corporate governance. |
| (2) |
Other means of information
disclosure undertaken by the financial holding company (such as the establishment
of an English website, appointment of dedicated personnel for the collection
and disclosure of information, implemetation of the
spokesperson system, the disclosure of
press
release details on The Company’s website, etc) |
|
| (1) |
The
Company has establishment a website for the disclosure of financial
performance and corporate governance. |
| (2) |
| 1. |
Both the Spokesperson Policy and the Acting
Spokesperson System have been established, along with “Jih Sun Financial
Holding Principles of External Communication”. |
| 2. |
A
system was established for posting public information over the Internet. |
| 3. |
An
English website has been established. |
| 4. |
Assigned
dedicated personnel for the collection of information relating to The Company
in order to facilitate more transparent and timely disclosure of information. |
| 5. |
The
Company has disclosed all information relevant to corporate governance in
compliance with the regulations. |
|
|
None |
5. Presence of other functional committees
such as nomination and remuneration committees organized by the financial
holding company |
The Company has no remuneration
committee at
present, but has
assembled an Audit Committee and created the “Jih Sun Financial Holding Audit
Committee Foundation Principles”. The committee consists entirely of
Independent Directors, and exists mainly to supervise the following matters:
| (1) |
Fair
presentation of The Company's financial
statements. |
| (2) |
Selection,
dismissal, independence, and performance of CPAs. |
| (3) |
Implementation
of The Company’s internal control policies. |
| (4) |
Company's
compliance with the relevant regulations and rules. |
| (5) |
Control
over The Company's existing or potential risks. |
| (6) |
Other
matters required by laws and regulations or by The Company's Articles of
Incorporation. |
The
Company has established a Risk Management Committee and the accompanying
policy – “Jih Sun Financial Holding Risk Management Guidelines”. The Company's
risk management
principles are as
follows:
| (1) |
Establish a scientific risk management system that analyzes risks
objectively and helps achieve reasonable returns. |
| (2) |
An efficient risk management structure allows each business unit
to perform its daily operations while a dedicated risk management team within
the unit reports regularly to The Board of Directors for immediate and
effective risk monitoring. Upon discovery of substantial risk exposure that
is potentially detrimental to finance, operations, or regulatory compliance,
immediate actions must be taken and reported to The Board of Directors. |
| (3) |
Adopt an overall risk management system that monitors the
capital adequacy of The Company and its subsidiaries based on their business
sizes, credit risks, market risks, operational risks, and future
prospects. Exercise supervision over The Company’s total exposure and allocate
investments based on its distinct capital and debt characteristics. |
|
Jih Sun
Holding expects to establishts own remuneration committee in accordance
with the “Remuneration Committee Foundation and Authorization Principles for
Publicly Traded Companies” before
2011/09/30. |
| 6. |
Please elaborate on the financial
holding company’s actual governance as well as deviation and causes of
deviation from the ”Governance Principles of Financial Holding Companies”:
the “Corporate Governance Principles for Financial Holding Companies” did not
specify any ap
pro
priate internal corporate governance
principle. The Company had appointed independent
directors and established its own general shareholders meeting
principles, board of directors meetings
principles, directors election rules, and guidelines
on independent directors’ responsibilities; it had also implemented robust
internal audit and control policies that are consistent with the fundamental
principles of corporate governance. |
| 7. |
Other information relevant to the
understanding towards actual corporate governance (such as employees’
welfare, care for employee-investor relations, stakeholders’ interests, directors’ and
supervisors’ ongoing education, risk management policies and the execution of
risk assessment standards, execution of customer policies, The Company’s
insurance against directors’ and supervisors’ liabilities, etc) |
| |
| (1) |
To enhance the supervisory and managerial efficiency of the
board of directors, the “Jih Sun Financial Holding and Subsidiaries Board of
Directors Meeting Rules” were created to
provide
the basis for future board of directors meetings. |
| (2) |
Directors’ and supervisors’ ongoing education: All of The
Company’s Directors have completed their mandatory courses and learning hours
in 2010. Please see P.31 ~ P.33 of this annual report for details |
| (3) |
Risk management policies,
practices,
and risk assessment standards:
The Company’s risk management system possesses the following 2 characteristics: |
| |
| a. |
Timeliness: Raise alerts, responsive actions, and
avoidance measures in a timely manner to all possible risks involved during
the decision making
processes
undertaken by The Company and its subsidiaries. |
| b. |
Effectiveness: The Company and its subsidiaries have
implemented
proper
procedures, supervision, and contingency plans to
address the risks they are facing and to ensure the effectiveness of their
risk management systems.
The Company’s risk management system is capable of identifying the following
risks: |
| |
| (1) |
Assets and liabilities risk: Includes risks of liquidity and
structural interest rate. |
| (2) |
Market risk. |
| (3) |
Credit risk. |
| (4) |
Operational
risk. |
| (5) |
The Company seeks to
effectively identify, measure, monitor, and control the various risks
involved in any business operations, and contain potential risks within
tolerable levels to deliver returns at reasonable risks. Please refer to the
corresponding sections of this annual report for details. |
|
|
| (4.) |
The execution of customer policies: The Company has
implemented and enforced the Jih Sun Financial Holding client data
confidentiality measures to
protect
customers’ interests. All disclosures, transfers, or uses of customers' data
were
properly ap
proved by the respective customers in the forms of
contracts or written consents. |
| (5) |
The Company’s insurance against directors’ and supervisors’
liabilities: The Company has purchased liability insurances for its Directors
in accordance with Article 39 and 49 of the Corporate Governance Principles
for TSE/GTSM Listed Companies. These insurance policies cover the duration of
service for each Director. |
| (6) |
The rights and care for employees: The Company is especially
dedicated to im
prove employee work
efficiency and loyalty by
providing
the best welfare and maintaining employer/employee relationship through care
and
protection of employees’
rights. |
| (7) |
Investors’ relationship: To im
prove
the transparency of financial and business information, The Company has
appointed a spokesperson and an acting spokesperson to address the public and
provide
accurate and rational explanations to investors’ queries. Furthermore, The
Company makes regular public announcements as required by laws and
regulations and uploads such information to the Market Observation Post
System and to The Company’s website for investors’ easy access. |
| (8) |
Suppliers’ relations: The Company has maintained a good
relationship with its suppliers and developed mutual trust through
information sharing, which in turn raises satisfaction and loyalty between both
parties and facilitates positive influence on work efficiency. |
| (9) |
Stakeholders' interests:
* The Company’s transactions with its stakeholders are carried out in
accordance with its policies and stringent operating
procedures.
* The Company’s Directors had complied with the
”Board of Directors Conference Rules of Jih Sun Financial Holding Co., Ltd.
and Subsidiaries” by disassociating themselves from resolutions which pose
conflicting of interests. |
| (10) |
Fulfillment of social responsibilities:
Please refer to P.54 ~ P.58 of this annual report (VI. Fulfillment of social responsibilities). |
|
| 8. |
If there were evaluations on corporate governance, whether self-assessed or delegated
to other
professional
institutions, all evaluation results including major issues, suggestions, and
rectification
progresses must be
disclosed: Not applicable. |
| Note 1: |
For requirements on Directors’ and Supervisors’ ongoing
education, please refer to “Guidelines for Promoting Ongoing Education to
Directors and Supervisors of Public Listed Companies” published by Taiwan
Stock Exchange. |
| Note
2: |
Must address the
progress of corporate governance in risk
management policies, risk evaluation standards, and the
protection of consumers’ or clients’ interests. |
| Note 3: |
The Company’s self-assessment report
mentioned here refers to the evaluation of corporate governance measures,
performed and commented by The Company itself, and a report on The Company’s
performance and
practices with
regards to these corporate governance measures. |
|
◎ Annual
Report
◎
IR Contact Information
| Shareholders' relationship | |
| | Stockholder Matters Consultancy |
| Registrar&Transfer Dept. :
Hsu I Ping | Tel
: (02)2382-6789 | |
|
