| ◎ Letter
to Shareholders
| Dear
ladies and gentlemen: Looking
back at 2008, our global economy was struck by the U.S. credit crunch that spread
throughout every corner of the earth, and the slowdown of economic expansion triggered
stock market crashes throughout the world. The International Monetary Fund (IMF)
estimated growth rates of merely 1% for U.S., European, and Japanese economies;
as a result the export volumes of emerging markets, represented primarily by China
and India, decreased sharply and China's economic growth fell below 10% for the
first time in 5 years. Global economy continued its downward correction as we
entered 2009; the IMF forecasted a decrease in the global economic growth rate
from the previous year's 3.7% to 2.2% for the year 2009. Based on past experience,
a global economic grow rate below 3% indicates worldwide recession; this is especially
true for the U.S. and other developed countries who suffered tremendous damage
from the sub-prime crisis. We shall witness substantial setbacks in economic activities
in 2009 as the economic growth rates for the U.S, Eurozone, Japan, and Britain
were estimated at -0.7%, -0.5%, -0.2%, and -1.3%, respectively. The main driving
forces behind the emerging market economies are exports, which depend heavily
on demands from developed countries, and are therefore unlikely to ride through
the storm unharmed. The IMF also estimated the economic growth rate of emerging
market economies to fall from last year's 6.6% to 5.1%. As
far as the local economy is concerned, The Directorate General of Budget, Accounting,
and Statistics, Executive Yuan, announced on 18 Feb 2009 that Taiwan's economic
growth rate for 2008 had fallen sharply from previous year's 5.7% to 0.12%; this
was the lowest since 2001 and was contributed by the falling of both domestic
and foreign demands. Retail consumption had fallen substantially to -2.1% as rising
unemployment suppressed consumers' willingness to spend; this marked the first
setback ever since official income statistics were produced. Although the government
was actively promoting public infrastructure, investors' confidence was lost due
to the fall of corporate earnings without signs of recovery. The growth of private
sector investments fell sharply from the previous year's 0.5% to -2%. The global
recession also dragged down export growth from the previous year's 5.9% to -0.1%.
The
Directorate General of Budget, Accounting, and Statistics, Executive Yuan, forecasted
the annual growth of the domestic economy at -2.97% for 2009, of which -2.93%
was contributed by domestic demands. The basis of this forecast were the stagnant
local economy, the low wage growth that suppressed private spending, and major
cutbacks in corporate investments due to reduced earnings. In terms of net foreign
demands, The Directorate-General forecasted a contribution from net exports of
merely -0.03%; this was much lower than the previous year's 2.17% because our
main export counterparties such as the U.S. and Europe are encountering economic
recessions. The
company's net interest revenue for 2008 amounted to NT$$3.966 billion and non-interest
net revenue accumulated to NT$4.13 billion, producing total net revenues of NT$8.096
billion; operating expenses amounted to NT$6.707 billion, bad debts amounted to
NT$5.113 billion, and income tax amounted to NT$68 million, producing a consolidated
net loss after tax of NT$3.792 billion and after tax loss per share of NT$1.75.
The financial turmoil had impacted financial markets all over the world; other
peer financial holding companies also reported substantially lower earnings in
their latest years in comparison with 2007. After tax profits across 14 financial
holding companies were reduced by approximately NT$117.7 billion in aggregate
and we could not avoid such a disaster. Revenues from loans and wealth management
sectors of our subsidiary, Jih Sun International Commercial Bank, reduced substantially
following a series of interest rate cuts by The Central Bank, rising credit risk
concerns, and falling investors' confidence. Jih Sun International Commercial
Bank had also made additional loan loss provisions totaling NT$5.113 billion in
light of rising bad debt risks, resulting in an after tax net loss of NT$3.797
billion; this was the main contributor to the consolidated net loss of the entire
financial holding company for the year 2008. The following are summaries of our
performance and strategies for each of the company's four major business groups:
1.
Individual Financial Services Group
The
growth of our consumer banking businesses became tough due to unfavorable government
policies imposed and the contraction of the overall economy. Mortgage loans remained
the primary product of our consumer banking sector in 2008, and priority was given
to quality customers and properties in metropolitan districts. Although the government
had initiated a series of rapid interest rate cuts during the fourth quarter,
the company however maintained its vigilant business strategy. On one hand we
had responded to market changes by adjusting our product structure and increasing
revenues from risk-adverse products, thereby creating revenues of more than NT$9
million from the sale of insurance product complements, and added value to customers'
mortgage loans; on the other hand the implementation of risk management policies
and the relentless collection efforts of our front line staff enabled us to continue
improving our asset quality. Business objectives for our consumer banking sector
in 2009 are as follows: (I) Deepen customer relationship;
explore value-added services to existing products (II) Strengthen asset structure;
increase risk-adverse revenues (III) Establish distribution channels; explore
new forms of commercial opportunities (IV) Enhance the effectiveness of risk
management; improve asset quality (V) Employ and retain talented employees;
enforce successor training Following a sudden downturn
of the global economy in 2008, the consumption power of the public was reducing,
and the domestic credit card market had shrunken rapidly as a result. The Bank's
credit card sector was also affected. As a response to the changing environment,
The Bank had realigned its business strategies toward product segmentation and
promoting installment businesses with retail partners. Installment purchases at
retail partners had grown against the declining trend by 63% compared to the previous
year. Card loyalty was also one of our business focuses. Our discount scheme with
National Petroleum Corporation started in July 2008, and with other automobile
benefits such as daily five-time fuel reward points and Dodohome parking, the
card usage rate increased by 3% while our market share of issued cards rose to
1.35%. Our credit card business strategies for 2009 are as follows: (I)Strengthen
our main product lines and capture seasonal consumption. (II) Introduce high-yield
financial products; enhance revenues and the asset quality of revolving credit.
(III) Guide customers to make payments via low-cost channels and reduce operating
costs. (IV) Stimulate active card usage with continuous consumption schemes;
eliminate dormant card accounts. (V) Widen distribution channels for insurance
products to increase fee income. (VI) Focus on promoting high-yield installment
businesses. 2.
Corporate Financial Services Group
Jih
Sun Bank's Corporate Banking sector had always focused on customer relationships
and risk management as its core business values. In 2008 The Bank introduced its
"Customer Relationship Management" concept which focuses on collecting and analyzing
customers' consumption behaviors for a more effective grasp over market changes
while facilitating our marketing strategies. The Bank also targets high value
customers as priority and provides customized, automated and networked banking
services that minimize the operating costs of both companies; thereby creating
win-win solutions between the financial holding company and its customers. Solutions
for risk management enhancements include the continuous development of customer-based
risk and value systems. These enhancements include the credit grading model, post-lending
management and monitoring, customers risk-grading and industry risk analysis.
Our goal is to achieve flexible risk-based pricing and risk control over the various
changes in our business environment. Our major achievements in 2008 are listed
below:
| (I) |
Targeted improving the asset structure and asset returns of Corporate Banking
as our main goals while maintaining asset quality. | | (II)
| Focused on
selling self-liquidating finances such as: account receivables, import / export
financing, TMU and derivatives etc, thereby reducing the weight of high risk lending
and increasing non-interest bearing revenues. In 2008, account receivables invoices
grew by 49%, import / export financing volume grew by 12%, TMU volume grew by
55%, and DCI volume grew by 59%. | | (III) |
We had organized 6 syndication loan cases totaling NT$25.1 billion as the lead
arranger in 2008; total fee income amounted to NT$3.57 million. We have successfully
structured medium and long- term funding for our customers while increasing the
weight of fee income by acting as lead arrangers. | | (IV)
| Our underwriting activities
consisted of a balance between lead-arranging and co-lead arranging. Underwriting
cases were selected cautiously under our fundamental principle of risk management.
We have lead-arranged and co-lead arranged a total of 30 cases, ranking fourth
among the industry. | | (V)
| For share Administration
services, we have maintained our spirit of "customer centric" as well as our fine
service quality. In 2008 we have delivered agency services to a total of 125 companies
and more than 530 thousand shareholders, ranking eighth in the industry. |
The
worldwide financial turmoil and share market crashes caused long shadows over
our future prospects. The finance industry is facing its greatest challenge of
the century following the rapid downturn of the global economy while corporate
investments became more conservative than ever. To respond to the changing environment,
Jih Sun's Corporate Banking has established strong risk management and risk-based
pricing mechanisms while strengthening its asset quality. We shall also take this
opportunity to nurture human resources, implement differentiated business strategies
to improve market competitiveness, and enhance our complementary selling skills
to create synergistic benefits. The following is a summarized description of our
2009 business strategies:| (I) |
Business focus for 2009 (1) Implement customer segmentation and provide differentiated
services with China, Hong Kong, and Taiwan as niche markets. (2) Penetrate
the Taiwanese market; increase the scope and depth of customer relationships.
(3) Shift our revenue focus from interest-bearing loans to fee income and maintain
stable profit growth. (4) Actively explore E-commerce opportunities and become
the leading brand name for corporate Internet banking services. | | (II)
| Target business
goals (1) Provide reliable, secure, yet efficient products and services anytime,
anywhere. (2) Be the best financial partner for small and medium enterprises.
(3) Be the most reliable and most efficient bank that best understands customers'
needs. | | (III) | Company
development strategies (1) Rooted in Taiwan, grow into the Great China District
and establish regional brand awareness. (2) Exercise sound risk management;
enhance financial structure. (3) Diversify business risk; achieve stable earnings
growth. (4) Create synergies within the financial holding company and enhance
core competitiveness advantages. |
| |
3. Wealth management Group
The
2008 financial crisis struck the global economy in an unprecedented scale that
shook the wealth management market. However, from the product perspective, The
Company continued its introduction of marketable products and services that delivered
customers' needs in an attempt to boost the productivity of its sales force; in
terms of customers, we have deepened our relationships through product innovation
and quality services that delivered higher customer satisfaction; in terms of
internal processes, we have re-modeled our operating procedures while actively
introducing new products and services; and as for personnel development, our solid
training and education shall effectively raise the efficiency and productivity
of our employees. Our major achievements are listed below:
| (I) | he
Company received approval for "Specialized Security Wealth Management Accounts",
which enables us to further satisfy customers' one-stop needs. | | (II)
| Our market share in brokerage business for
the year 2008 was 3.94%. | | (III)
| The "Jih Sun Dynamic Locked-Return Investment Plan"
introduced back in December 2007 has accumulated NT$127 million in sales. Following
the success of this scheme, The Bank launched its "Smart Investment" annuity plan
in October 2008 as an attempt to convey the concept of long-term investment while
satisfying customers' short, medium, and long-term finance goals during bearish
times. | | (IV) | Offered
customers the opening of "All-Purpose Electronic Accounts" with improved operating
procedures and efficiencies that provided more convenient services to our customers.
| | (V) |
Actively explored opportunities of trust services. The asset size of our "Securities
Trust" has grown by NT$3.706 billion, or 20.8% compared to 2007, against the force
of the financial crisis. |
For balanced development
of our wealth management sector, a "telemarketing team" was established under
the personal banking unit of our wealth management segment to serve customers'
needs for insurance products. The
2009 business plans for the Wealth Management Group are summarized below: | (I) |
Expand the asset size of our wealth management segment. | | (II)
| Raise sales force productivity. | | (III) |
Enhance budget and cost control; ensure that every dollar is spent in the most
appropriate way. | | (IV) |
Integrate resources across business units within the group, strengthen customer
relationships, create cross-selling synergies, and improve competitive advantages. | | (V) |
Raise customer satisfaction and brand image; intensify training of service staff,
implement ratings-based customer management. | | (VI) |
Effectively balance between brokerage commission discounts and business solicitation;
ensure the profitability of our business growth. |
4.
Investment and Proprietary Trading Group
In 2008 our Investment and Proprietary Trading Group adhered
to its principles over balanced risk and return, and maximized its returns under
limited risks through accurate forecasts, active trading, efficient transaction
processes, and improved market competitiveness. The main
focus of our banking services was satisfying the needs of customers across various
business segments. Our goal was to raise customers' revenue contribution through
bank-wide business planning and supported by good working capital management,
maintenance of adequate liquidity reserves, flexible funding strategies, and appropriate
financial investments that maximize The Company's profitability. The
main focus of our Securities Proprietary Trading Division was searching for profitable
prospects while maintaining stability, and earn profits from the trading of bonds
as well as other related products. The domestic share market has turned bearish
under a worldwide recession; our Proprietary Trading Division shall lower its
investment positions and hedge using financial derivatives whenever necessary.
Overall speaking we still delivered an above-average performance compared to our
peer competitors; we shall continue trading our existing positions flexibly and
adhere to the various risk indicators to preserve our profit stability. The
2009 business plans of our Investment and Proprietary Trading Group are stated
below: | (I) | Financial
synergy: increase revenues and profitability; make the most effective use of funds.
| | (II)
| Customer synergy: increase customer
base and revenue contribution; raise cross-selling synergies. | | (III) |
Internal synergy: raise the efficiency of transaction flows; enforce the various
risk controls; ensure regulatory and policy compliance. | | (IV) |
Personnel synergy: improve work standards and skills; introduce healthy organizational
culture and enhance internal communications; implement performance-based reward
policies; attract and retain key talents. |
The
following are the latest credit ratings on The Company and its subsidiaries; rated
by Fitch Ratings on 14 Nov 2008: Subject
| Fitch
Ratings (Announced on 14 Nov 2008) | Long
term credit rating | Short
term credit rating | Prospect
| | Jih
Sun Financial Holding | BBB+(twn) |
F2(twn) | Negative
| | Jih Sun
International Commercial Bank | BBB+(twn) |
F2(twn) | Negative
| | Jih Sun
Securities | A-(twn) | F2(twn)
| Negative |
With
our ultimate corporate spirit of delivering top quality services, we shall raise
customers' trust, actively seek to improve business profitability, and thereby
create shareholders' value. The business strategies of Jih Sun Financial Holding
Company for the coming year are detailed below: | I.
| Improve financial structure; increase overall
earnings We shall obtain adequate working capital for group operations through
the issuance of paid-up capital. The additional capital will also strengthen The
Company's financial structure and lower its overdue loan ratio. In addition, The
Company seeks to achieve the optimal asset allocation across the requirements
of its various businesses; thereby controlling operating costs and raising The
Company's overall profitability. | | II.
| Integrate cross-selling opportunities;
create group synergies Through the sharing of group resources and the promoter
of Jih Sun Ambassador, all business units under the group shall collaborate on
cross-selling to fully utilize our strengths in product diversity and marketing
skills. Our marketing efforts will be allocated based on customer relationship
management and product effectiveness analyses to fulfill customers' diverse needs
and create synergies. | | III. |
Strengthen customer relationship; increase fee income Manage customers' needs
in all aspects, act in customers' best interests to offer the most suitable financial
products, gain customers' satisfaction and trust while increasing the amounts,
as well as the weight, of fee income from various business activities. | | IV. |
Increase returns from less risky assets; enhance preventive risk management Review
and validate the structure of our risk models. Reduce losses on risky assets of
various categories by implementing operational risk reporting and automated self-evaluation
systems, verifying accounting entries and the data quality of operational losses
reported, and enhancing risk management through Basel II-compliant management
and procedures. Focus on developing less risky business opportunities to improve
our overall asset quality. | | V.
| Explore E-commerce opportunities; segment niche customers
Establish interfaces between product platforms to structure an international online
platform and guide customers toward the use of electronic banking and securities
trading systems for higher operating efficiency. Satisfy customers' needs for
timely services while reducing human processing costs. Furthermore, we shall be
enabled to segment niche customers, introduce more diversity into our service
and product portfolios to capture the demands of niche customers. | | VI. |
Raise customer satisfaction; unleash the full potential of a financial holding
structure Satisfy customers' needs by developing new products based on the
customers' characteristics; complement our efforts with internal customer satisfaction
programs such as service ambassador, secret surveys, and satisfaction surveys
via electronic platforms etc. Our goal is to achieve full-scale improvements in
customer satisfaction that brand us the ideal financial partner. | | VII. |
Promote process restructuring; enhance cost efficiency Actively manage our
various risk costs, credit costs, and operating costs. Reduce internal operating
costs and improve efficiency by restructuring our existing processes, such as:
automated services, improved production efficiency, organization restructuring,
and the implementation of standardized procedure. | | VIII. |
Establish overseas platform; raise brand image Continue promoting businesses
in Taiwan, Hong Kong, China, and other foreign regions through foreign subsidiaries
such as Jih Sun CRESVALE, OBU platform, or other channels in compliance with government
regulations and policies. Raise The Company's brand awareness and brand image
through propaganda and marketing events that eventually improve our overall corporate
value. In the future, Jih Sun shall uphold its belief and core value in perpetual
business to provide the best, most innovative and most efficient services to its
customers; it is our wish to become the customers' closest financial partner.
While pursuing the best business performance, we shall also deliver our promise
for all-win results for shareholders, employees, and our customers. |
|

◎
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 Item |
Financial information for the
latest 5 years (Note 1) |
Year to date 31 Mar 2009 (Note
2) | |
2008 |
2007 |
2006 |
2005 |
2004 |
| Cash and cash equivalents,
deposits at the Central Bank and money market loans to other banks |
68,337,327 | 39,387,999 | 33,132,709 | 23,630,027 | 22,475,117 | 62,721,483 | |
Financial assets whose changes in fair value are recognized through
the income statement |
18,566,385 | 29,085,510 | 43,439,405 | 50,309,751 | 33,236,472 | 12,504,421 | |
Repurchase notes and bonds investments |
2,027,821 | 8,197,029 | 10,521,733 | 7,496,389 | 16,647,116 |
3,643,973 | |
Available-for-sale assets |
2,431,138 | 1,804,279 | 3,889,813 | 3,757,659 | 3,553,551 | 2,191,437 | |
Accounts receivable |
12,244,484 | 31,851,121 | 30,201,222 | 27,439,618 | 28,139,863 | 12,737,388 | |
Loans |
138,644,887 |
166,442,058 |
177,294,329 |
192,194,880 |
183,455,064 |
128,879,252 | |
Held-to-maturity assets |
- |
- |
478,796 | 478,796 | 478,796 | - | | Investments
accounted using the equity method |
223,536 | - |
- |
- |
1,811,389 | 234,093 | |
Fixed assets |
6,557,585 | 7,174,022 | 7,513,899 | 7,736,947 | 7,238,404 | 6,457,665 | |
Goodwill and intangible assets |
995,480 | 1,277,176 |
1,553,008 |
1,805,003 | 273,674 | 880,498 | |
Other financial assets |
3,969,840 | 4,349,909 | 4,309,719 | 5,368,239 | 8,838,684 | 7,286,658 | |
Other assets |
5,638,608 | 7,954,299 | 8,067,506 | 19,571,616 | 16,703,078 | 5,562,796 | |
Total assets |
259,637,091 |
297,523,402 |
320,402,139 |
339,788,925 |
322,851,208 |
243,099,664 | |
Deposits from the Central Bank and money market loans from
other banks | 10,799,605 | 15,788,814 | 20,438,892 | 30,815,424 | 29,046,572 | 10,450,553 | |
Commercial notes payable |
1,197,518 | 4,104,939 | 1,042,058 | 1,219,088 | 4,508,615 | 1,548,303 | |
Deposits and remittance |
184,425,328 |
192,930,750 |
192,897,399 |
206,467,286 |
205,201,709 |
176,528,945 | |
Financial liabilities whose changes in fair value are recognized through
the income statement |
575,457 | 404,651 | 806,644 | 517,473 | 123,893 | 748,464 | |
Repurchase notes and bonds liabilities |
13,036,553 | 16,686,328 | 32,777,473 | 28,298,419 | 17,938,396 | 7,592,060 | |
Accounts payable |
13,673,266 | 17,121,822 | 16,530,576 | 18,070,330 | 15,648,946 | 11,515,642 | |
Other borrowings |
2,988,114 | 7,190,959 | 8,164,011 | 6,132,880 | 8,406,505 | 2,649,358 | |
Loans from the Central Bank or other banks |
- |
- |
- |
- |
- |
- | |
Bonds payable |
10,401,500 | 16,000,000 | 20,000,000 | 20,000,000 | 10,000,000 | 10,000,000 | |
Preference shares |
- |
- |
- |
- |
- |
- | |
Provision for operating expenses and liabilities |
347,084 | 325,378 | 338,655 | 323,523 | 284,027 | 364,755 | |
Other financial liabilities |
81,900 | 85,500 | 86,400 | 87,300 | 162,570 | 111,241 | |
Other liabilities |
492,448 | 1,277,748 | 1,570,699 | 1,512,526 | 1,233,894 | 572,026 | |
Total liabilities |
238,018,773 |
271,916,889 |
294,652,807 |
313,444,249 |
292,555,127 |
222,081,347 | |
Holding company’s equity |
Paid up capital |
26,124,494 | 26,124,494 | 40,627,970 | 22,532,732 | 22,532,732 |
26,124,494 | |
Capital reserves |
- |
- |
1,670,054 | 9,493,239 | 10,127,045 |
- | | Retained
earnings | Before
distribution | (4,116,742) |
(320,358) | (15,366,125) |
(4,394,614) |
(649,225) | (4,771,108) | |
After distribution |
(4,116,742) |
(320,358) | (15,366,125) |
(4,394,614) |
(649,225) | (4,771,108) | |
Other equity items |
(413,002) | (217,851) | (1,201,753) |
(1,304,003) |
(1,730,949) |
(359,559) | |
Minority interest |
23,568 | 20,228 | 19,186 | 17,322 | 16,478 | 24,490 | |
Total shareholders’ equity |
Before distribution |
21,618,318 | 25,606,513 | 25,749,332 | 26,344,676 | 30,296,081 | 21,018,317 | |
After distribution |
21,618,318 | 25,606,513 | 25,749,332 | 26,344,676 | 30,296,081 | 21,018,317 |
| Note
1: | The 2008, 2007, 2006, 2005,
and 2004 financial data were audited results. | | Note
2: | Based on unaudited, company compared
information. |
2.Summarized consolidated
income statement
Unit:
NT$ thousand
| Year Item |
Financial information for the latest
5 years (Note 1) |
Year to date 31 Mar 2009 (Note
2) | |
2008 |
2007 |
2006 |
2005 |
2004 |
| Net
interest revenue | 3,965,847 | 5,458,743 | 6,768,402 | 8,144,565 | 7,597,938 | 525,644 | |
Net revenue other than interest |
4,130,368 | 7,562,391 | (6,514,934) | 2,013,198 | 3,831,358 | 1,008,014 | |
Total net revenue |
8,096,215 | 13,021,134 | 253,468 | 10,157,763 | 11,429,296 | 1,533,658 | |
Doubtful loans expenses |
5,113,162 | 4,944,922 | 5,033,979 | 5,782,738 | 1,638,028 | 618,897 | |
Provision for insurance obligations |
- | - | - | - | - | - | |
Operating expenses |
6,707,012 | 7,944,269 | 8,287,960 | 8,658,048 | 7,787,972 | 1,553,049 | |
Net profit before tax from continuing
operations | (3,723,959) | 131,943 | (13,068,471) | (4,283,023) | 2,003,296 | (638,288) | |
Income tax expense |
68,006 | 58,880 | 30,325 | 109,112 | 880,372 | 15,150 | |
Consolidated net profit after
tax from continuing operations |
(3,791,965) | 73,063 | (13,098,796) | (4,392,135) | 1,122,924 | (653,438) | |
Net profit after tax from discontinued
operations | - | - | - | - | - | - | |
Extraordinary income/expenses
(after tax) | - | - | - | - | - | - | |
Cumulative effects from changes
in accounting policies (after tax) |
- | - | 402,718 | - | - | - | |
Consolidated net profit |
(3,791,965) | 73,063 | (12,696,078) | (4,392,135) | 1,122,924 |
(653,438) | |
Consolidated net profit |
Attributable to shareholders of
the holding company | (3,796,384) | 69,632 | (12,699,458) | 1,120,848 |
1,120,848 |
(654,366) | |
Attributable to the minority interest |
4,419 | 3,431 | 3,380 | 2,076 |
2,076 |
928 | |
Earnings per ordinary share (Note
3) | (1.75) | 0.03 | (6.52) | (3.12) | 0.82 |
(0.30) |
| Note
1: | The 2008, 2007, 2006, 2005,
and 2004 financial data were audited results. | | Note
2: | Based on unaudited, company prepared
information. | | Note 3:
| The company reduced its capital on 26 Jun
2007 to offset accumulated losses; per-share data was adjusted retrospectively
according to the reduction ratio. |
II.
Financial analysis for the latest 5 years (1)
Financial analysis on consolidated information for the latest 5 years
| Year Analysis |
Financial analysis for the latest
5 years | Year
to date 31 Mar 2009 (Note
1) | |
2008 |
2007 |
2006 |
2005 |
2004 |
| Operating
efficiency | Total
asset turnover (times) | 0.031 | 0.044 | 0.001 | 0.030 | 0.035 | 0.006 | | Loan
to deposit ratio of subsidiary bank (%) |
68.59 | 78.80 | 90.70 | 91.98 | 89.93 | 70.17 | | Overdue
loan ratio of subsidiary bank (%) |
4.02 | 4.46 | 5.36 | 2.73 | 3.91 | 4.03 | | Revenue
per employee($ thousands) |
2,183 | 3,303 | 59 | 1,908 | 2,191 | 438 | | Net
profit per employee($ thousands) |
(1,024) | 18 | (2,940) | (825) | 215 | (187) | |
Profitability |
Return on total assets (%) |
(0.03) | 1.25 | (2.61) | (0.28) | 1.41 | 0.01 | | Return
on equity (%) | (16.06) | 0.28 | (48.74) | (15.51) | 3.77 | (3.07) | |
Net profit margin (%) |
(46.84) | 0.56 | (5,008.95) | (43.24) | 9.82 | (42.61) | |
Earnings per share ($) (Note
2) | (1.75) | 0.03 | (6.52) | (3.12) | 0.82 | (0.30) | |
Financial structure |
Debt to assets ratio (%) |
91.67 | 91.39 | 91.96 | 92.25 | 90.62 | 91.35 | | Debt
to equity ratio (%) | 1,101.01 | 1,061.91 | 1,144.31 | 1,189.78 | 965.65 | 1,056.61 | |
Double leverage ratio applicable to financial holding
companies (%) | 125.32 | 120.58 | 119.88 | 122.51 | 106.04 | 125.40 | |
Degree of leverage |
Degree of operating leverage |
0.76 | 8.27 | 0.93 | 0.82 | 1.27 | 0.67 | | Degree
of financial leverage applicable to financial holdings |
0.97 | 1.95 | 0.99 | 1.00 | 1.02 | 0.95 | |
Growth rate |
Asset growth rate (%) |
(12.73) | (7.14) | (5.71) | 5.25 | 19.00 | (6.37) | |
Profit growth rate (%) |
(3,001.19) | 101.01 | (195.65) | (314.13) | 6,667.41 | 82.86 | |
Cash flow |
Cash flow ratio (%) (Note 3) |
96.77 | 41.41 | 10.30 |
- |
- | 17.22 | | Cash
flow adequacy ratio (%) (Note 3) |
5,981.16 | 3,689.44 | 516.62 | - | - |
6,300.73 | |
Cash flow reinvestment ratio (%) (Note 3) |
58.53 | - | 2,056.63 | - | 6.30 | 105.95 | |
Business scale |
Market share of assets (%) |
1.26 | 1.47 | 1.65 | 1.84 | 2.17 | 1.12 | | Market
share of equity (%) |
1.64 | 1.67 | 1.68 | 1.83 | 2.55 | 1.54 | | Market
share of deposits held by subsidiary bank (%) |
0.71 | 0.81 | 0.86 | 0.95 | 0.98 | 0.67 | | Market
share of loans granted by subsidiary bank (%) |
0.79 | 0.84 | 0.94 | 1.08 | 1.09 | 0.72 | |
Capital adequacy |
Capital adequacy ratio of subsidiary bank (%) |
8.58 | 8.75 | 9.04 | 8.65 | 10.06 | 8.58 | | Capital
adequacy ratio of subsidiary security brokerage (%) |
538.25 | 384.95 | 289.69 | 256.00 | 322.37 | 538.25 | |
Capital adequacy ratio of subsidiary insurance agency
(%) | 78.42 | 74.70 | 64.78 | 46.46 | 75.30 | 78.42 | | Eligible
capital of subsidiary bank ($ thousands) |
10,787,514 | 14,609,791 | 16,397,579 | 19,607,152 | 20,721,547 |
10,787,514 | |
Eligible capital of subsidiary security brokerage ($
thousands) | 13,476,105 | 13,279,912 | 11,868,546 | 11,413,887 | 12,112,494 |
13,476,105 | |
Eligible capital of subsidiary insurance agency($
thousands) | 6,898 | 5,702 | 10,183 | 6,710 | 1,741 | 6,898 | | Group
net eligible capital($ thousands) |
20,031,474 | 23,371,389 | 23,272,744 | 25,630,781 | 26,749,604 |
20,031,474 | |
Legal capital requirement of subsidiary banks ($ thousands) |
10,055,416 | 13,356,067 | 14,515,447 | 18,140,733 | 16,470,196 |
10,055,416 | |
Legal capital requirement of subsidiary security brokerage
($thousands) | 3,755,537 | 5,174,724 | 6,145,460 | 6,687,786 | 5,635,959 |
3,755,537 | |
Legal capital requirement of subsidiary insurance agencies
($ thousands) | 4,398 | 3,817 | 7,860 | 7,222 | 1,156 | 4,398 | | Group
legal capital requirement ($ thousands) |
14,030,389 | 19,167,154 | 20,955,405 | 24,956,254 | 22,309,710 |
14,030,389 | |
Group capital adequacy ratio (%) |
142.77 | 121.93 | 111.06 | 102.70 | 119.90 | 142.77 | |
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, in accordance with
Section 46 of the Financial Holding Company Act. |
152,706 million |
184,229 million |
45,626 million |
29,011 million |
9,985 million |
98,099 million |
| Analysis
of variations greater than 20%: 1. The
substantial deterioration in current year total asset turnover, revenue per employee,
net profit per employee, return on total assets, return on shareholders equity,
net profit margin, earnings per share, degree of operating leverage, degree of
financial leverage applicable to financial holding companies, and profitability
growth were caused by the recognition of NT$1.547 billion higher investment losses
from Jih Sun International Commercial Bank Ltd, and NT$2.248 billion lesser investment
income from Jih Sun Securities Co., Ltd. compared to the previous year. 2.
The substantial increase in cash flow ratio was due to the receipt of 2007 dividends
from the security brokerage subsidiary, which resulted in a significant increase
in cash flow from operating activities, and the exercise of put options by investors
of the 2005 corporate convertible bond, having elapsed for three years after its
initial issue. The repayment of The Company’s corporate bonds reduced current
liabilities significantly. 3. The substantial
increase in cash flow adequacy ratio was a result of dividends received during
the current year; cash flow from operating activities thus exceeded capital expenditures. 4.
The increase in cash flow reinvestment ratio was a result of substantial net cash
inflow from investing activities during the current year. Investing activities
in the previous year resulted in a net cash outflow. 5.
Increase in the capital adequacy ratio of the security brokerage subsidiary: due
to lower trading positions which substantially reduced risk weighted assets. |
| Note: | Industry-specific
key performance indicators were: loan to deposit ratio of subsidiary bank, overdue
loan ratio of subsidiary bank, debt to equity ratio, double leverage ratio applicable
to financial holding companies, market share of assets, market share of equity,
market share of deposits held by the subsidiary bank, market share of loans granted
by the subsidiary bank, and capital adequacy analyses etc. | | Note
1: | Based on unaudited, company prepared
information as at Mar 2009, except for capital adequacy which was based on information
as at 31 Dec 2008. | | Note
2: | The company reduced its capital on 26
Jun 2007 to offset accumulated losses; per-share data was adjusted retrospectively
according to the reduction ratio. | | Note
3: | Cash flow from operating activities
was negative, hence was excluded from computation. 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) Overdue loans ratio of subsidiary bank = total overdue
loans of 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 financial holdings = equity investments specified under sections 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 liabilities
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 bank = total deposits / total deposits held by all financial
institutions eligible of undertaking loans and deposits (4) Market share of
loans granted by subsidiary bank = 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 in subsidiaries × eligible capitals of each
subsidiary) - regulated 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 | | 2008 | 2007 |
Year to date31 Mar 2009 (Note 3) | Market
Price per Share | High
| 9.70
| 10.20
| 3.37 | | Low | 2.20
| 5.51 |
2.46 | | Average | 6.15
| 7.80 | 2.82 | Net
Worth per Share | Before
earnings distribution | 8.266 | 9.787 | 8.036
| |
After earnings distribution | 8.266
| 9.787
| 8.036
| Earnings
per Share | Weighted
average shares outstanding |
2,170,775,425 | 2,170,472,657 | 2,170,775,425 | Earnings
per share | (1.75)
| 0.03 |
(0.3) | | 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 | (3.54)
| 260.00 | (9.4) | | Price/Dividend
ratio | - |
- | - | | Cash
dividend yield | - |
- | - |
Note
1: Retained earnings were negative for years 2008 and 2007, therefore no earnings
were available for distribution. Note 2: Based on self-prepared financial
information. |

◎Deviation
and causes of deviation of the bank's actual governance from the governance principles
of financial holding companies
| Item |
Implementation |
Deviation
and causes of deviation from the governance principles of financial holding companies |
| 1.
Shareholdings structure and shareholders’ equity of the financial
holding company (1) The handling of shareholders’ disputes and advices by the financial
holding company (2) Updates on major shareholders and ultimate shareholders with controlling
interests over the financial holding company (3)
Risk management procedures and firewalls established by the financial
holding company against other affiliated companies. |
(1) Handled by specialized personnel of the Public Relations
department. Assistance from Share Administration and
Legal & Compliance departments is sought when dealing with share administration-related
and legal affairs. (2) The Company maintained good
relationship with its shareholders and is fully aware at all times. (3)
The Company has implemented a stakeholders system in accordance with the Financial
Holding Company, Securities Trading Act, and The Banking Act, which enables The
Company to verify whether its transaction counterparties are stakeholders and
take the necessary compliance procedures. |
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 on the independence of auditors. |
(1) The Company has complied with regulations and the
Memorandum of association and appointed 3 Independent Directors
during its 2007 Annual General Meeting. (2)
The independence of the auditors and the audit team were regularly reviewed. |
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 disclosing information relating to the
financial performance and corporate governance of the financial holding company. (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, reinforcement of the
spokesperson policy, the disclosure of press release details on the company’s
website etc) |
(1) The Company has established its own website for disclosing financial reports,
business performance, and updates on corporate governance. (2)
1. Established
a “Spokesperson Policy” and an ”Agent Spokesperson Policy”. Outlined the
“Guidelines for External Communication”. 2.
Established a system for posting public information over the Internet. 3. Established an English website. 4.
Assigned dedicated personnel to collect information related to
the company in order to improve the transparency and timeliness of information
disclosure. 5. The Company has
complied with the relevant regulations and disclosed all information relating
to its corporate governance. |
None | |
5. The establishment of functional committees
such as an Audit Committee, and the performance of such committees. |
The Companyhas robust internal control procedures in place and
thoroughly conducts self-evaluations. The board of directors and the management
reviews the self-evaluations of each department and the audit reports from the
Audit department; The Company also evaluates the internal audits of each subsidiary
and reports to the Board of Directors on a regular basis. Based on The Company’s
current business scale the functionality of its Supervisors, the functionality
of an audit committee is already incorporated within the operations of The Company.
The Company has also considered the results of its peers and postponed the
establishment of such committee. |
None | |
6. Please elaborate on the bank’s actual governance as well as deviation and causes of deviation
from the ”Governance Principles of Financial Holding Companies”: According to the “Governance Principles of Financial Holding Companies”, The Company
is not required to establish its own internal corporate governance policies. The Company has appointed independent directors and supervisors, established the
Board of Shareholders Conference Rules, Board of Directors Conference Rules, Supervisors
Conference Rules, Directors and Supervisors Election Policies, outlines of Independent Directors’ responsibilities, Directors
and Supervisors On-going Education Policies, and a robust internal audit/control
policy that were consistent with the principles of sound corporate governance. 7.
Other material information relevant to the understanding of The Company’s actual
corporate governance (such as employees’ rights, care to employees, investor relationship,
relationship with suppliers, stakeholders’ rights, the continuing education of
Directors and Supervisors, the execution of risk management policies and risk
evaluation standards, the execution client policies, The Company’s purchase of
liabilities insurance on behalf of its Directors and Supervisors etc) : | 1. | The
Company sees itself as a citizen of the society and was eager to participate
in any charity events. In 2007, Jih Sun Financial Holdings sponsored “A
Night at the Palace Museum” organized by the National Palace Museum, Taiwan Think
Tank, Friends of R.O.C Police and other charity groups. In 2008, other than continuing its support to the cultural events organized
by The National Palace Museum, Jih Sun Financial Holdings commenced a “Jih Sun
Ambassador” project which encouraged its employees to voluntarily donate part
of their “annual travel subsidies” to “Northern Region Children’s Home” as an
act of care and assistance to disadvantaged children. Further more, as an effort
to protect our environment against global warming, we have also spared our public
holidays to participate in the recycling and garbage reclassification at
“Tzu Zhi Wan Hua Environmental Protection Center”. Not only did we fulfill
part of our obligations as citizens, through these sponsorships we intend to rally
more strength from the Taiwanese society to help those who needed, and create
a prosperous and respectful society. We also wish that more corporations
may join us to the care for minority groups and the sponsorship of artistic and
cultural events, and do our part to raise our quality of life. | | 2. | Continuing education of Directors and Supervisors: Directors and Supervisors of
the company have complied with policies and the minimum hour requirements, and
completed on-job training programs in 2008. | | 3. | Execution
of risk management policies and risk evaluation standards: for all participation in any business activities, The Company demands
the effective identification, evaluation, supervision, and control of various
risks as well as keeping the potential risks within manageable levels to achieve
its goal of rationalized risk and return. Please refer to P.139 ~ P.147
of this annual report. | | 4. |
Execution of client policies: The Company has established “Jih Sun Financial Holding Co., Ltd. Customer Information Confidentiality
Measures” to protect the interest of its customers. | | 5.
| Purchase of
liability insurances on behalf of Directors and Supervisors: the company purchases
liability insurances on behalf of Directors and Supervisors in compliance with
Sections 39 and 49 of the Corporate Governance Principles for TSE/GTSM Listed
Companies. The insurances cover the duration of service for each Director and
Supervisor. |
8. If
there were evaluations on corporate governance, whether self-assessed or delegated
to other professional institutions, all evaluation results including major issues,
advice, and rectification progresses must be disclosed: Not applicable. |
| Note
1:For requirements on Directors’ and Supervisors’ continuing education, please
refer to “Guidelines for Promoting Continuing Education to Directors and Supervisors
of Public Listed Companies”published
by Taiwan Stock Exchange. Note
2: Must state the progress of corporate governance in risk management policies,
risk evaluation standards, and consumer or client protection policies. Note
3: The company’s self-evaluation report mentioned here refer to the evaluation
of corporate governance measures performed and commented by the company itself.
and a progress report on the company’s performance and operations with regards
to the corporate governance measures. |

◎ Annual
Report

◎
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