ANNUAL REPORT 2008

Transcription

ANNUAL REPORT 2008

E.SUN FINANCIAL HOLDING COMPANY, LTD.
ANNUAL REPORT 2008
E.SUN FHC 2884
ANNUAL REPORT 2008E
10546 14F,No.117&1F,No.115,Sec.3,Minsheng E.Rd.,Taipei,Taiwan
TEL:(02)2175-1313
http://www.esunfhc.com.tw
http://www.esunfhc.com.tw
http://newmops.twse.com.tw
Date Printed：2009.3.30
E.SUN of Taiwan, as E.SUN of the World.
Service Network of E.SUN FHC
E.SUN Spokesman
Deputy Spokesman
Position: President
Position: S.E.V.P.
Name: Joseph N. C. Huang
Name: Suka Chen
Telephone: +886 2 2175 1313
email: [email protected]
Telephone: +886 2 2175 1313
email: [email protected]
E.SUN Financial Holding Company, Ltd and subsidiaries
Name
Address
Telephone
Website
E.SUN Financial Holding Company, Ltd.
14F, No.117 & 1F, No.115, Sec.3, Minsheng E. Rd., Songshan District, Taipei, Taiwan
+886 2 2175 1313 www.esunfhc.com.tw
E.SUN Commercial Bank, Ltd.
No.117, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan
+886 2 2175 1313 www.esunbank.com.tw
E.SUN Securities Co., Ltd.
3-5F, No.77, Section 1, Wuchang St., Jhong Jheng District, Taipei, Taiwan
+886 2 2382 1313 www.esunsec.com.tw
E.SUN Insurance Brokers Co., Ltd.
12F, No.115, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan
+886 2 2545 6613 www.esunins.com.tw
E.SUN Venture Capital Co., Ltd.
4F, No.117, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan
+886 2 2719 6613
Stock Transfer and Service Contact
Name: Stock Service Department, General Affairs Division, E.SUN FHC
Address: No.115, Sec. 3, Minsheng E. Rd., Songshan District Taipei ,
Taiwan, R.O.C.
Website: www.esunfhc.com.tw
Telephone: +886 2 2719 1313
Rating Agency
Name: Moody's Investors Service Inc.
Address: 7 World Trade Center 250 Greenwich Street, New York, NY 10007, U.S.A.
Telehone: 1 212 553 0300
Auditing Certified Public Accountant
Certified Public Accountant：Chang Ryh Yan, Chen Li Chi
Accounting Firm: Deloitte Taiwan
Address: 12th FL., No. 156, Sec. 3, MinSheng East Road, Songshan District,
Taipei, Taiwan, R.O. C.
Website: www.deloitte.com.tw
Telephone: +886 2 2545 9988
Information of Overseas Depositary Receipt
Global Depositary Recipt
Place of Trading: Luxembourg Stock Exchange
Website: http://www.bourse.lu
Head Office Business Division
International Banking Division/OBU
Trust Division
Credit Card Division
Nanching East Road Branch
Chengjhong Branch
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Headquarters
Brokerage HQ
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phone
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E.SUN BANK
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Headquarters
+886 2 2545 6613
Headquarters
+886 2 2719 6613
+886 4 2485 1313
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1 626 810 2400
852 3405 6168
Ho Chi Minh City Representative Office (84)8 911 1313
Dali Branch
Caotun Branch
Changhua Branch
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Douliou Branch
Chiayi Branch
East Chiayi Branch
Puzih Branch
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Hualien Branch
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Penghu Branch
Los Angeles Branch
Hong Kong Branch
In this ever changing financial environment so full of uncertainties
We will quickly, accurately and forcefully adjust our pace
We will pursue success through stability, stress change,
maintain our ideals and embrace hope
We are preparing to welcome a new rainbow.
Yes, We Can！
E.SUN FHC　7th
E.SUN FHC ANNUAL REPORT 2008
Harmony of Hearts and Music.
Dino Rosin
Violin and Saxophone
Crystal, 1995 22x13x68cm / 38x20x70cm
Possession of E.SUN Bank
2
CONTENTS
I. Letter to the Shareholders
II. Corporate Profile
1. Introduction
2. Organization Chart
3. Corporate Structure of E.SUN Financial Holding Company, Ltd.
4. Directors and Supervisors
5. Executive Officers
6. Shares and Dividend
III. Business Operation
1. Business Scope
2. Business Plan
3. Cross-Selling Synergy
4. Human Resource
5. Corporate Responsibility and Ethical Behavior
IV. Risk Management
1. FHC's Risk Management Framework
2. Risk Management Strategies Procedures-Applicable for all Subsidiaries
3. Crisis handling mechanism
4. E.SUN's Future R&D Projects and Anticipated R&D Expenses
5. E.SUN's R&D Investment Projects and State of Implementation
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4
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28
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V. Corporate Governance
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32
VI. Special Notes
34
35
35
36
1. Corporate Governance and State of Implementation
1. Representation of Consolidated Financial Statements of Affiliated Enterprises
2. Affiliation Report
3. Internal Control
VII. Financial Statements
37
I. Letter to the Shareholders
Dear Shareholders,
Volatility in the world’s economy and financial
long/short rating of Baa2/Prime-2. The core
In addition, the future is full of uncertainty. The
Baa1/Prime-2 with National long/short rating stands
triggered an epic tsunami that caused a serious blow
outlook to FHC and Bank. Meanwhile, E.SUN
effects with regards to industrial development and
Fitch on April, 2008.
system in 2008 far exceeded anyone’s expectations.
subsidiary, E.SUN’s Bank’s rating, is maintained at
subprime crisis that started in the United States
at Aa3.tw/TW-1. All agencies assigned a stable
to the world’s financial industry and had ripple
Securities was also upgraded to A(twn)/F1(twn) by
economic growth. As we face this challenging
economic and financial environment, E.SUN will
closely monitor global developments. It is not only
preparing for any contingency, but also striving to
create value and enhance its core competitiveness.
E.SUN pursues effective growth in all areas of
operations. It continues to strengthen its foundation
in corporate banking, consumer banking and wealth
management operations, while also looking to foster
d e v e l o p m e n t i n i t s t r e a s u r y, c r e d i t c a r d a n d
Under the impact of the Financial crisis,
securities businesses. Each area of business boost a
NT$1,025 million, equivalent to Earning per share
customer needs. At the same time, integrated
the Capital Adquency Ratio for FHC is 120.49%.
team to successfully carry out its work and provide
E.SUN Bank, E.SUN Securities, E.SUN Venture
services. E.SUN looks to provide service to an even
end of 2008, E.SUN FHC had total assets of
motion the potential to generate even stronger
Consolidated net income for E.SUN FHC in 2008 is
comprehensive product line that is aimed at meeting
of NT$0.3 and Return on equity of 2.12%,besides,
marketing helps to maximize the ability of E.SUN’s
Presently, E.SUN FHC’s subsidiaries include
customers with the most appropriate financial
Capital, and E.SUN Insurance Brokers. As of the
larger pool of outstanding customer, setting in
NT$829.4 billion, a rise of 7.41% from the year
business performance.
earlier. The NPL ratio of E.SUN Bank at the end of
the year was only 0.90%, enabling the Bank to
continue to boost the best asset quality of any bank
on Taiwan. Deposits at E.SUN Bank stood at
NT$690 billion, with 11.02% annual growth, while
outstanding loans amounted to NT$531.8 billion,
with 3.86% annual growth. The Bank posted a net
profit for the year of NT$782 million. E.SUN
Securities registered a net loss of NT$52 million,
E.SUN Venture Capital a net profit of NT$18.34
million, and E.SUN Insurance Brokers a net profit
of NT$68.55 million.
The rating agency Moody’s shows its confidence
in E.SUN’s growth scale and keeping good asset
1
quality in long-term by confirming E.SUN’s global
E.SUN FHC’s subsidiary E.SUN Bank has
established a comprehensive physical branch
network throughout the cities and counties of
Taiwan. More and more securities counters have
been established in these branches, gradually
fostering synergy. Combined with its corporate
banking electronic network, Internet bank, ATMs,
WebATM, Call center, and insurance telemarketing
center, E.SUN is gradually benefiting from the
leverage effect, strengthening its contact with
customers and opportunities to provide service. At
the same time, E.SUN is strengthening brand name
loyalty, generating even more value from its
network and continuing to grow.
In the face of the challenges presented by the
financial tsunami, E.SUN continues to abide by its
foremost principle that risk considerations are
foremost in all operations. E.SUN examines and
adjusts risk control processes as appropriate. It
combines research and analysis provided by its
Customer Risk & Value Division with a risk
appetite mechanism it has created, as well as
customer credit grading models for each product
line in producing risk grades and risk pricing, and
in calculating risk-adjusted return on capital. It
effectively divides customer groups in order to be
Heritage of leadership and knowledge.
players advanced skills and concepts on how to
management system. At the same time, E.SUN
continues to hold blood drives and environmental
customers, and remains aware of the latest
at fulfilling its responsibility as a corporate citizen.
maximizing the use and effects of its advanced risk
prevent injury, thereby nurturing future stars. E.SUN
analyzes its interaction and transactions with
protection activities. All of these activities are aimed
marketing developments. The information derived
is used in developing new products that are
promoted through joint marketing and directed at
specific customer segments.
While the macroeconomic environment appears
forbidding, E.SUN seeks to turn crisis into
opportunity. At this crucial moment in time, E.SUN
wants to fulfill its ambition. It has every intention to
E.SUN is aware of its corporate social
emerge more successful than ever. We deeply
for society and is devoted to being a world-class
regulatory agencies and the public. In 2008, E.SUN
E.SUN World Card cardholders to engage in public
honor for quality on Taiwan. It was also selected by
portion of the spending went to the Golden Seed
best corporate governance in Taiwan. E.SUN won
10 E.SUN libraries in elementary schools located
Global Views Monthly for the third time. With these
to have access to books sows the seeds of hope and
continue to take advantage of its organizational
environment in Taiwan to enable baseball to
and E.SUN itself. It intends to make every effort to
baseball, E.SUN holds the E.SUN Cup Baseball
sectors for their long-term support. We would like to
responsibility. It has long been committed to caring
appreciate the encouragement and expectations of
corporate citizen. In 2008, it continued to invite its
won its second National Quality Award, the highest
service through making charges on their cards. A
Hong Kong’s The Asset magazine as displaying the
Project, which is responsible for so far establishing
the Corporate Social Responsibility Award from
in remote areas of Taiwan. Enabling these children
honors, however, comes responsibility. E.SUN will
fosters knowledge. In order to bolster the
structure to create even greater value for customers
flourish and generate enthusiasm for youth
express its gratitude to shareholders and various
Tournament and also sponsors the E.SUN National
extend to you our best wishes!
Youth Baseball Pitcher and Catcher Training
Camp. These initiatives combine the efforts of
able to engage in differentiated pricing. E.SUN is
Chairman
President
E.SUN and other sectors in jointly promoting the
development of baseball here and teaching young
2
II. Corporate Profile
Blossom Lively and Leap High.
3
1. Introduction
Sunrise Breaks Dark after Dawn.
(1)E.SUN FHC
The passage of the Financial Holding Company Law
in 2001 opened a new page and opportunities for the
financial services industry, while setting in motion a new
competitive situation within the marketplace. In order to
integrate its operations, foster development, maximize
joint marketing possibilities, reduce operational costs,
and pursue synergy, E.SUN Bank engaged in a share
swap with E.SUN Bills Finance and E.SUN Securities.
This paved the way for the establishment of E.SUN FHC
on January 28, 2002. On October 7, 2002, E.SUN
Venture Capital was created, followed by E.SUN
Insurance Brokers on July 30, 2003. On September 16 of
the same year, E.SUN Securities Investment Trust
became part of the Group through a share swap, rounding
out the establishment of a comprehensive financial
services blueprint.
With a view to the most appropriate allocation of the
FHC’s resources and to seek to increase overall
operational results, along with the view that the it had
achieved its designated mission, E.SUN Bills Finance
was merged into E.SUN Bank on December 25, 2006.
Meanwhile, on July 17, 2008, E.SUN signed an
agreement with Schroders to sell a 100% stake in E.SUN
Securities Investment Trust Co. to that company. The deal
was settled on September 30. The business cooperation
will help expand the products and services of E.SUN’s
wealth management fund platform, and will create a winwin-win situation for E.SUN, Schroders, and customers.
Presently, the FHC’s core company is E.SUN Bank.
Other key subsidiaries include those involved in
securities, venture capital and insurance broking. E.SUN
is gradually carrying out its three-pronged strategic
development policy, focusing on organic growth,
strategic alliances, and Mergers & Acquisitions. E.SUN
embraces innovative concepts and ways of thinking,
new organic structures, fresh strategies and forwardlooking methods to motor forward. It has created a
comprehensive financial services network that provides
customers with diversified services.
A. Establish date: 2002.1.28
B. History:
(2)Core subsidiary- E.SUN Bank
E.SUN Bank serves as the key component of the
FHC. Its founder, present Chairman Huang Yung-jen,
and a group of banking professionals decided to found
and operate the best bank on Taiwan. Preparations to
open the Bank began in 1990 upon the implementation
of banking liberalization here, and E.SUN commenced
operations on February 21, 1992. E.SUN quickly set
the benchmark for service quality in the industry.
E.SUN FHC was born on January 28, 2002, marketing
the beginning of a new era for E.SUN. E.SUN Bank
became part of E.SUN FHC via a share swap.
In 2004, E.SUN acquired the assets, liabilities and
operations (excluding trust business) of Kaohsiung
Business Bank through an auction held via the
government’s resolution trust mechanism. The
acquisition of KBB helped to broaden E.SUN’s
domestic and foreign branch network. Coupled with
banking policy incentives, E.SUN has expanded its
number of local and foreign branches to 120, and is
working toward reaching 125. This will provide
customers with even more convenience. In 2004,
E.SUN FHC entered into a strategic alliance with
Prudential Plc.(UK) This paved the way to begin
bancassurance operations and expand the diversity of
wealth management products.
4
E.SUN is the only Financial Institution Awarded with Three National
Quality Awards(Including one personal award for chairman Yung-Jen
Huang).
(3) E.SUN Securities
E.SUN Securities is constantly striving to improve
teams. Amid the effort to develop operations, each unit
operational procedures and human resources. In
stable long-term operations. E.SUN will continue to
service efficiency and quality, as well as enhance
addition to its own branch network and cross-selling
counters it has set up in E.SUN bank branches, E.SUN
boasts an impressive virtual network, providing
continues to emphasize risk controls in the pursuit of
spare no effort in serving as the most trustworthy
brokerage.
convenient services through A+ Network Trading
(4) E.SUN Insurance Brokers
Internet, voice activation system, or mobile phones. The
established in July 2003. Since its founding, it has
outstanding analysis, and it promotes e-invoice services
Taiwan’s number one brand name in bancassurance.
Platform, through which orders can be placed via the
brokerage has an excellent research team that provides
as one way to protect the environment and conserve
energy. E.SUN offers investors with a secure, rapid,
convenient and reliable investment environment. It has
plans to continue to develop and enhance electronic
services in the future, further introducing innovations.
This will help it to enhance its relationship with existing
customers and expand its pool of outstanding clients.
The brokerage will continue to serve as the best advisor
for customers in asset allocation and personal finance.
E.SUN Securities plays a leading role as a futures
trading introducing broker and plans to continue to
expand its operations in the spot futures market. The
Subsidiary E.SUN Insurance Brokers was
embraced the vision and objective of becoming
E.SUN entered into a strategic alliance with Prudential
Plc in 2004, jointly developing products that meet the
needs of E.SUN’s clientele. In 2006, it introduced new
ways of thinking in providing service. It established a
Financial Planning Advisors (FPA) system to be able to
deliver customer-driven services. E.SUN provides
coverage planning on an individual basis based on the
abilities of customers to shoulder risk. In addition, the
Company has established a telemarketing and over-thecounter marketing network to promote products. The
integration of resources from the FHC helps to
maximize synergy and create customer satisfaction.
Company is continuing to enhance its trading platform.
( 5 ) E . S U N Ve n t u r e C a p i t a l
underwriting team works to integrate the resources of
in unlisted companies that display development
planning. It also carefully evaluates various
advisory services and financial planning services for
Meanwhile, the Company’s highly experienced
FHC units and assist its corporate customers in financial
underwriting projects. E.SUN’s dealing operations seek
to generate greater profits and asset quality, as well as
strengthen integration of various investment research
5
E.SUN FHC was awarded as the best corporate
governance in Taiwan.
Subsidiary E.SUN Venture Capital directly invests
potential. It also provides operational management
invested companies. E.SUN Venture Capital combines
the resources of the FHC to provide enterprises with
comprehensive financial services.
E.SUN FHC Receives CSR Honorable Award from global view magazine and commonwealth magazine.
C. E.SUN’s Glory
＊2006
—E.SUN won five awards from the Taiwan Academy of
Banking and Finance,
including:
—Best Image Promotion Award (E.SUN Love and
Compassion Series)
—Best Employee Training Award (E.SUN Training for
New Employees)
—Best Risk Management Award (Mortgage Risk Realtime Management System)
—Best Product Design Award (The E.SUN Diamond
Project—Promoting SMEs)
—Best Electronic Banking Award (E.SUN WebATM
Transaction Platform)
—E.SUN FHC received Corporate Social Responsibility
Award (Global Views Monthly)
—E.SUN Bank received awards in consumer protection
evaluation in banking industry(Financial Supervisory
Commission)
—E.SUN Bank received Best Corporate Employer
Award (Cheers)
—E.SUN Bank received First Place for Providing Loans
to SMEs (Financial Supervisory Commission)
—E.SUN Bank received SME Credit Guarantee Partner
Award(MOEA, Credit Guarantee Fund)
—E.SUN Bank awards as Asia’s Best Mortgage Bank
(The Asian Banker magazine)
In this rapidly changing, complex and uncertain
environment, E.SUN will work even harder to establish
s y s t e m s , cu l t i v a t e h u m a n r e s o u r c e s a n d d e v e l o p
information systems – the three pillars providing the
foundation for future operations. E.SUN will spare no
effort in risk management and corporate governance, taking
every measure possible to serve as a model for financial
services on Taiwan and to become the best performing and
most respected enterprise.
E.SUN is committed to top-notch operations and
balanced development. E.SUN’s excellence is derived from
the joint efforts of its management team and all employees,
helping the organization to be widely respected by
regulators and the public. However, with honors comes
responsibility. Over the past three years, E.SUN has won
numerous awards from various sectors, including
＊2009
honorable award (Global View magazine)
award(Commonwealth magazine)
＊2008
—E.SUN Bank received National Quality Award
(Executive Yuan)
—E.SUN FHC awarded as Best corporate governance
corporate in Taiwan(The Asset magazine)
—E.SUN FHC pass the certificant of corporate
governance(TCCA)
—E.SUN Bank received Best Risk Management
award(Taiwan Academy of Banking and Finance)
—E.SUN FHC recived the 3rd Corporate Social
Responsibility Award in 3 consecutive years (Global
View Magazine)
Award(Commonwealth magazine)
—E.SUN Bank awarded as Excellence in employee
engagement(The Asian Banker magazine)
—E.SUN Bank received awards for Providing Loans to
SMEs(Financial Supervisory Commission)
Award(MOEA, Credit Guanrantee Fund)
＊2007
Award in 2 consecutive years (Global View Magazine)
—E.SUN FHC received the Best Corporate Goverance in
Financial sector in Taiwan(The Asset Magazine)
—E.SUN Bank received innovation award in HR Award
(Bureau of labor institute, The Executive Yuan)
—E.SUN Bank received the innovation award in Asia
pacific region(IBM)
Award(MOEA, Credit Guanrantee Fund)
6
2. Organization Chart
Shareholders' Meeting
Board of Directors
Chairman
Directors,Independent Directors
Audit Committee
Corporate Governance & Nomination Committee
Compensation Committee
Board Strategy Development Committee
President
Auditing Division
Headquarter Division
General Auditor
Asset & Liability
Management
Committee
President
Total Quality
Management
Committee
CBO
Strategy
Development
Committee
CSO
Human Resource
Development
Committee
CHO
Investment
Management
Committee
CFO
Risk
Management
Committee
CRO
Information
Technology Strategy
Committee
CIO
3. Corporate Structure of E.SUN Financial
Holding Company, Ltd.
100%
E.SUN
Securities Co., Ltd.
100%
E.SUN
Investment Consulting Co., Ltd.
7
E.SUN
Insurance Brokers Co., Ltd.
E.SUN
Commercial Bank,Ltd.
E.SUN
Venture Capital Co., Ltd.
4. Directors and Independent Directors
Execution is the Key in Strategy
Implementation.
(1) Directors and Supervisors
Representative
Date of
First
Elected
Date of
Term
Election
Shareholding
when elected
Shareholding
when elected
Shareholding
when elected
Shareholdings of the Shareholding under
spouse and minors
other’s name
Shares
Shares
Share
holdings
Shares
Share
holdings
Share
Shares holdings
Education
(Experience)
Current
position with
other company
Devision chiefs, directors or
supervisors are spouse or
within the 2nd degree of
consanguinity of each other
Position
Name Relation
ship
Chairman
Yung-Jen huang
2008.6.13
3
2001.12.10
7,341
0.222
7,635
0.215
1,871
0.053
0
0
Department of
Cooperative Economics at
National ChungHsing
University
Director
Representative of E.SUN
Volunteer & Social
2005.6.10
welfare Foundation
Joseph Huang
3
2008.6.13
7,518
0.228
7,819
0.221
2,139
0.060
0
0
MBA of the City University
of New York, 16 year in
Financial Industry
President of E.SUN FHC, Director
of E.SUN Bank, Chairman of
E.SUN Venture Capital
None
None
None
Director
Representative of
E.SUN Foundation
Wu-Lin Duh
2008.6.13
3
2001.12.10
6,803
0.206
7,075
0.200
3,001
0.085
0
0
EMBA of National Cheng
Kung University, 37 years
in Financial Industry
President and Managing Director of
E.SUN Bank
None
None
None
Director
Representative of Hsin
Tung Yang Co., Ltd.
Jackson Mai
2008.6.13
3
2001.12.10
30,648
0.928
31,874
0.899
22,836
0.644
0
0
Kai-Nan
Commercial & Technical
High School
President and Managing Director of
E.SUN Bank
Chairman of Hsin Tung Yang Co., Ltd.,
Managing Director of E.SUN Bank
None
None
None
Director
Representative of Allcan
Investment Co.,Ltd.
Chiu-Hsung Huang
2008.6.13
3
2001.12.10
50,277
1.522
52,289
1.475
22,534
0.636
0
0
PhD of Business
Administration at Dela
Salle University
CPA
Chairman of Allcan Investment
Co.,Ltd. Managing Director of
E.SUN Bank
None
None
None
PhD of Department of
Accounting at University of
Minnesota
Professor of Department of Accounting at
National Taiwan University, Independent
Directors of Chang Type Industrial Co., Ltd.,
Supervisor of Fareastone
Telecommunication Co., Ltd.
None
None
None
None
None
None
Independent Director
Chen –En Ko
2008.6.13
3
2004.6.11
0
0
0
0
0
0
0
0
Chairman of E.SUN FHC &
E.SUN Bank
SEVP Joe
Brother
Huang
Chi-Jen Lee
2008.6.13
3
2006.6.9
0
0
0
0
0
0
0
0
MBA, University of Illinois,
USA
Professor of management at National
Taiwan University; Independent Directors
of Aver Media Technologies and Go-In
Engineering Co., Ltd.
Jen-Jen Chang Lin
2008.6.13
3
2007.6.15
0
0
0
0
0
0
0
0
Master of University of
Michigan
Chairman of Financial Information
Services Co Ltd.. Independent
director of E.SUN Bank
None
None
None
Hsin-I Lin
2008.6.13
3
2008.6.13
0
0
0
0
0
0
0
0
Bachelor of Department of
Mechanical Engineering,
National Cheng-Kung
University
Independent director of E.SUN
Bank and Xin-I property.
Independent director and managing
director of Nan Ya Plastic
None
None
None
Director
Representie of Ron
–Yuan Investment
Co.,Ltd. Chai-Kuo Chen
2008.6.13
3
2004.6.1
96,018
2.907
132,672
3.743
8,613
0.243
0
0
MBA, UCLA
Vice Chairman and Director of
Nien Hsing Textile Co.,Ltd.
Director of E.SUN Bank
None
None
None
Director
Representie of Shang Li
Car Co.,Ltd.
Jian-LI Wu
2008.6.13
3
2005.6.10
16,000
0.484
16,640
0.469
0
0
0
0
Chung Jung High School
Chairman of Shang Li Car Co.,Ltd.
None
None
None
0
EMBA of Department of
Information Management at
Nation Taiwan University,
33 years in Financial Industry
Duty President of E.SUN FHC and
E.SUN Bank
None
None
None
0
Master of Department of
Agricultural Economics at
National Taiwan University,
20years in Financail Industry
SEVP,Wealth Management Division
of ESUN Bank, Director of E.SUN
Bank, E.SUN Securities and E.SUN
Venture Capital; Chairman of
E.SUNInsurance Broker
None
None
None
Director
Director
Representie of Shan
Meng Investment
Co.,Ltd.Heng-Hwa Yang
Representie of Sunlit
Transportation Co., Ltd.
Suka Chen
2008.6.13
2008.6.13
3
2001.12.10
3
2003.6.10
8,252
10,000
0.250
0.303
8,582
10,400
0.242
0.293
2,184
772
0.062
0.022
0
0
Position
2009.2.28 Unit:1,000 shares ; %
Shareholding when elected
Note: For institutional director, the term ｀shareholding of the spouse and minors’ refer to the representative of the institution.
(2) Major shareholders of the Institutional Shareholders
Institutional Shareholders
Major shareholders of the Institutional Shareholders
E.SUN Volunteer & Social Welfare Foundation
Not applied
E.SUN Foundation
Not applied
Hsin Tung Yang Co., Ltd.
Shih-Lai Mai, Jackson Mai
Allcan Investment Co., Ltd
2008.12.31
Virgin Island (U.K.) Comewell Asset Management Company.
Virgin Islands (U.K.)All Can International Investment Ltd
Ron-Yuan Inverstment Co.,Ltd.
Chia Tien Sha Investment Co.,Ltd.
Shang Li Car Co.,Ltd
Sunny Investment Co.,Ltd., Yinrich Investment Co.,Ltd.
Shan Meng Investment Co.,Ltd
Shu-Huei Fu, Jian-Yi Fu
Sunlit Transportation Co., Ltd
Sunny Investment Co.,Ltd.
8
5. Executive Officers
Teamwork is the key towards success.
2009.2.28 Unit:1,000shares ; %
2008.12.31
Position
9
Name
Date of
Taking Office
Shares Held
Shares Held by Spouse Shares Held Using
and Children Under 18 Names of Others
Shares
Ratio
Shares
Ratio
Shares Ratio
Education
(Experience)
Previous Position
Current position
Held at other
company
Director of ESUN Bank
President of ESUN Ventrue
Capital
Managers who are
spouses or within the
second degree of
consanguinity
Position Name Relationship
President & Chief Strategy
Officer
Joseph N.C. Huang 2008.7.16
2,003
0.057
136
0.004
0
0
MBA of the City University of New York,
Chief Brand Officer
Wu-lin Duh
2002.1.28
2,565
0.072
436
0.012
0
0
EMBA of National Cheng Kung University, President and Managing
None None None
Chief Information Officer &
Chief Risk Officer
Heng-Hwa Yang
2002.1.28
1,879
0.053
306
0.009
0
0
EMBA of Department of Information
Management at Nation Taiwan University, Deputy President and
None None None
Chief Financial Officer
Magi Chen
2004.2.13
232
0.007
0
0
0
0
EMBA, University of Tennessee,
Knoxville,30 years in Financial Industry
None None None
Chief Human Resource
Officer
J.C. Wong
2002.1.28
812
0.023
414
0.012
0
0
Master of Agricultural Management at
SEVP,Human Resource Division of
National Chung Hsing University,20 years E.SUN Bank,Director of E.SUN
Securities
None None None
Chief Accounting Officer
Kuan –Her Wu
2002.1.28
150
0.004
0
0
0
0
Department of Accountancy at National
Chung Hsing University, 33 years in
Financail Industry
EVP, Accounting Division of E.SUN
Bank; Supervisior of E.SUN
Venture Capital
None None None
Chief Marketing Officer
Shuei-Ping Wan
2005.7.1
300
0.008
301
0.008
0
0
MBA at National Taiwan University,17
years in Financial Industry
EVP, Head quarter Division of
E.SUN BANK
None None None
None None None
SEVP, Treasury Division of
E.SUN Bank
None None None
Deputy President
Jiaw-Hwang Shy
2002.1.28
448
0.013
482
0.014
0
0
Department of Business Administration at
Chairman of E.SUN Securities
National Chung Hsing,36 years in
Co., Ltd
Financial Industry
Senior Executive Vice
President
Tung-Long Kuo
2004.2.13
637
0.018
37
0.001
0
0
Department of Public Administration at
Head of Corporate Banking of
National Chung Hsing University,38 years E.SUN Bank
None None None
President
Joe Huang
2004.2.13
2,186
0.062
1,764
0.050
0
0
Department of English at Tamkang
University,21 years in Financial Industry
Head of Consumer Banking
Division of E.SUNBank
None None None
President
Suka Chen
2002.1.28
731
0.021
41
0.001
0
0
Master of Department of Agricultural
Economics at National Taiwan
University,20years in Financail Industry
EVP,Wealth Management Division of ESUN
Bank, Director of E.SUN Bank, E.SUN
Securities and E.SUN Venture Capital;
Chairman of E.SUNInsurance Broker
None None None
General Auditor
Wei-Chin Chien
2006.2.16
533
0.015
6
0.0002
0
0
General Auditors, E.SUN
Bank
None None None
Executive Vice President
Scott Chou
2002.1.28
931
0.026
186
0.005
0
0
EVP, General Affairs Division
of E.SUN Bank
None None None
Mao-Cin Chen
2005.7.1
522
0.015
4
0.0001
0
0
EVP, Corporate Banking
Division of E.SUN Bank
Director of E.SUN VC
None None None
Jih-Hsiung Tseng
2005.7.1
1,747
0.049
1,060
0.030
0
0
Department of Business Administration at
Newport Internaitional University,30 years
Department of Civil Engineering at
National Taiper Institute of Technology,29
years in Financial Industry
Master of Department of Economics at
National Taiwan University,17 years in
Financial Industry
Department of Soil and WaterConservation
at National ChungHsing University,26 years EVP, Information Technology
Division of E.SUN Bank;
None None None
6. Shares and Dividend
(1) Impact on business performance and earnings per share of stock dividend
payment proposed at the most recent shareholders’ meeting
Year
Item
2008
Capital collected-beginning of the period (NT$1,000)
33,033,000
0
Cash dividend per share(NT$)
Stock dividend and
cash dividend of
the year
0.3
Capitalized retained earnings-stock dividend(share)
0
Capitalized additional paid-in capital-stock dividend(share)
1,621,108
Operating revenue (loss)(NT$1,000)
(59%)
Operating revenue (loss)increase(decrease)from last year(%)
1,025,003
Net Income(loss)(NT$1,000)
(69%)
Net Income(loss) increase (decrease) from last year(%)
Change of
Business
Performance
0.30
Earnings(loss) per share(NT$)
Earning(loss) per share increase (decrease) from last year(%)
(70%)
Annualized return on Investment(the reverse of Annualized Price / Earning ratio)
2.15%
Retained earnings are capitalized with cash dividend
distributed
Projected Earnings
per Share and
Price/Earnings ratio
Additional paid-in capital is not capitalized
Projected annualized return on Investment
2.15%
Projected Earnings per share
-
-
-
-
a.The Company should explain the hypothesis made for each forecast or projected data.
b.The projected Earnings per Share for the retained earnings capitalized and with cash dividend
distributed=﹝Net Income-interest accrual from cash dividend*×(1-tax rate)﹞/﹝total stock
shares issued at the year end stock dividend distributed for the capitalized retained earnings**﹞
Interest accrual from cash dividend*=Capitalized retained earnings×annual loan Interest rate
Stock dividend distributed for the capitalized retained earnings**：The sotck shares increased from
the stock dividend distributed the year before for the capitalized retained earnings.
Additional paid-in capital is not capitalized and
Capitalized retained earnings-cash dividend distributed
0.30
c.Price/Earning Ratio=Average Market Closing Share Price / Earnings per Share of
Current Fiscal Year
Information applied in the table above：
Ⅰ.The auditing financial statements of 2008.
Ⅱ.The tax rate that is used to calculate the projected data is 25%.The annual loan
interest rate of 2008 is based on the averge loan interest rate 3.20% of E.SUN
Bank, respectively.
(2) Employee Bonuses and Director & Supervisor Compensation
Statement of profit Allocation 2008
Unit: NT$
Category of Profit
Amount
2008 Pre-tax Profit
3,155,144,578
Amount
Category of Allocation
Provision of Legal Surplus
329,381,018
Business Tax Benefit
138,665,601
Provision of Special Surplus
683,801,025
Undistributed Profits
871,237,757
Shareholders’ Bonus (Cash dividend of NT$0.4 per share)
1,321,320,000
Shareholders’ Bonus (Stock dividend of NT$0.4 per share)
1,321,320,000
Director and Supervisor Compensation
27,527,500
Employee Cash Bonus
2,902,500
Employee Stock Bonus
79,680,000
Undistributed Profits
Total
4,165,047,936
399,115,893
Total
$4,165,047,936
(3) Share Repurchase
Term of the program
Purpose
Period or the program
Price range
Types and amount of shares been repurchased
Total monetary amount of share repurchase
Group’s capital adequency ratio before program
Group’s capital adequency ratio after program
Total amount of shares been transferred or cancelled
Total amount of shares accumulated
Accumulated shareholdings (%)
The execution process of transfer repurchase shares to employee
Limitation of failure to fully transfer within 3 years
First time
Employee
97/10/15~97/12/05
6.00~14.00
42,000,000 unit of common shares
NTD 336,818,905
104.67% ( 2007.12.31)
120.49% (2008.12.31)
0
42,000,000 unit
1.18%
In-process
None
(4) Capital Utilization Plans
a. Up to the quarter prior to the printing of the annual report, any issuance or private placement of securities that has yet to
be completed: None.
b. Programs completed in the most recent three years with beneficial results yet to assert themselves: None
c. Investors exercised their put rights on E.SUN’s first ECB issued in 2006 to the amount of US$2.67 million. E.SUN
redeemed the bonds per conditions of issuance.
d. In 2008, E.SUN issued US$200 million worth of ECB (with equivalent to NT$ 6,083,600 thousands) for operating funding.
At the end of 2008, US$ 50,200 thousand of ECB has been converted to common shares, which will enhance E.SUN
FHC’s capital adquency ratio by 3.79%.
10
III. Business Operation
A Colorful Grand View Ahead.
11
1.Business Scope
Trust is the Force Behind Our Progress.
E.SUN Bank serves as the core of E.SUN FHC.
venture capital, investment in foreign financial
Combined with securities, Insurance brokers and
institutions as approved by regulatory agencies,
Venture capital, E.SUN provides customers with a
investment in other financial-related businesses as
comprehensive array of financial services. E.SUN
designated by regulatory agencies, management of
pursues balanced and stable development in each
the aforementioned invested businesses, and
area of operations. The following are descriptions
investment in other businesses sanctioned by
of the operational scope, business plans, industry
regulators.
status, research and development, and long- and
(2) Composition of Operations
short-term business development projects for the
Unit: NT$1,000
FHC and each subsidiary.
Scope of Operations
Year
Item
2008
Amount
2007
%
a.FHC
Interest Income
(1) Primary Operations
E.SUN FHC’s expertise rests in investment and
Fee Income
4,001,340
13.53
Others
1,343,156
4.54
29,566,815
100.00
management. Its subsidiaries engage in a wide
24,222,319
Amount
%
81.93 22,321,8544 80.24
4,650,415 16.72
845,261
range of financial businesses including banking,
Total
credit cards, trust, insurance, securities, futures,
Note1: E.SUN FHC consolidated financial figures
Note2: Others are net revenue exclude interest income and fee income.
3.04
27,817,530 100.00
12
b.Bank
(1)Primary Operations
i. Commercial Bank Operations
E.SUN Bank provides the following services:
Accepts all types of deposits, engages in lending,
discounting of bills/checks, domestic remittances,
commercial acceptances, issuance of domestic
letters of credit, domestic guarantees, custodian
services and warehousing, rental of safe deposit
Professional team aiming at corporate success.
boxes and credit card operations.
ii. Foreign Exchange Operations
(2)Composition of Operations
These operations include import and export
negotiation, general inward and outward
remittance, foreign currency deposits, foreign
currency loans, foreign currency guarantees, and
exchange of foreign cash and travelers checks.
i i i . I n v e s t m e n t a n d Tr e a s u r y O p e r a t i o n s
Operations include investment in securities, shortterm bills broking, dealing, trading of financial
derivatives, wealth management, and trust
operations approved under the law.
iv. Agency Operations and Others
Serves as an agent in issuance of debentures,
collection and payment of various bills,
underwriting securities, agent for the sale of gold
ingots as well as gold and silver coins, agent for
services of the National Treasury, providing fiscal
advisory services, and dealing of corporate bonds
and debentures.
13
Unit: NT$1,000
2008
Year
Item
Interest Income
Fee Income
Others
Total
Amount
2007
%
Amount
%
23,946,475
84.62
21,968,789
81.90
3,436,918
12.14
3,994,541
14.89
916,597
3.24
859,970
3.21
28,299,990
100.00
26,823,300
100.00
Note: Others are net revenue exclude interest income and fee income
c.Securities
i. Brokerege
Acts as a broker for customers in the trading of
securities, futures, options, and carries out
settlement. Also provides margin trading and
stock loan services, and provides an electronic
trading platform, meeting the investment and
trading needs of customers.
ii. Dealing
E.SUN trades securities in stock market and
business unit under its own account
stop shopping services to meet the needs of its
iii. Underwriting
Assists companies in public issuances of stock to
raise capital and underwrites cash capital
customers.
ii. Non-life/Property Insurance
E.SUN presently cooperates with Tokyo Marine
increases and convertible bonds for public
Newa Insurance Co., Ltd., offering a range of
companies and firms listed on the Taiwan Stock
outstanding products, including compulsory
Exchange and the over-the-counter market. It also
automobile and motorcycle insurance, residential
offers comprehensive corporate financial
fire insurance, typhoon insurance, earthquake
planning services.
insurance, and malpractice insurance. E.SUN
iv. Bonds
product line has consistently provided the
E.SUN engages in outright bond trading and repo
trading. The Company serves as a government
related investment information and advisory
services.
Unit: NT$1,000
Year
warrant issuance and other derivatives research
vi.Other operations approved by supervisory
Life and Health
Insurance
Total
Unit: NT$1,000
Amount
67.32
64,015
55.73
41,197
23.51
42,903
37.35
14,482
8.26
7,397
6.44
1,602
0.91
552
0.48
100.00 114,867
100.00
175,267
Amount
%
2007
%
Amount
%
Fee Income
386,060
57.60
504,033
48.46
Interest Income
245,600
36.65
300,521
28.89
Gain from Securities
Trading
18,355
2.74
183,406
17.63
Other Operating Income
20,082
3.01
52,102
5.02
670,097
100.00
1,040,062
100.00
Total
117,986
Property Insurance
2008
Year
%
Accident Insurance
and Other
2007
Amount
Life
Investment-linked
Insurance Insurance
agencies.
Item
2008
Item
v. Financial Product
bond dealer and provides customers with bond-
coverage that its customers need.
d.Insurance Brokers
e. Venture capital
i. Engages in capital investment in enterprises with
vast potential in Taiwan and overseas.
ii. Provides corporate operations, management and
consulting services
i. Life Insurance
Unit: NT$1,000
The Company primarily markets and sells
insurance products of its strategic partner
Prudential UK, such as life insurance, medical
i n s u r a n c e, s a v i n g s i n s u r a n c e, a n n u i t y
insurance,injury insurance, investment-oriented
insurance and structured policies, providing one-
Year
Item
Investment Income
Interest and Other operating Income
Total
2008
Amount
40,134
1,602
2007
%
Amount
96.16 216,382
3.84
6,491
%
97.09
2.91
41,736 100.00 222,873 100.00
14
2.Business Plan
strongest. It will accurately and efficiently allocate
sales and marketing resources to focus on
enhancing its relationship and business with its top
customers, creating the foundation for sustained
profitability.
(3)Product Innovation and research
E.SUN continues to develop systems and create
new procedures that meet the varied needs of each
c u s t o m e r s e g m e n t . Va r i o u s d e p a r t m e n t s a r e
responsible for examining product and service
A Convention of Wisdom and Consensus.
a.FHC
(1) Success through stability
Amid the epic financial tsunami, E.SUN will
face a new environment in the future. The FHC’s
most important strategy now is to pursue success
through stability. Stability is the process, while
success is the objective. “Pursue” refers not only
to strategy, methods and wisdom, but through
appropriate change. Given the volatility displayed
in the broader environment, E.SUN will rapidly
and accurately adjust its direction. It is committed
to maintaining its core competitiveness and
maximizing joint marketing among FHC units to
enhance customer value. At this critical juncture in
time, E.SUN is determined to move ahead in a
stable and steady manner to emerge as a winner.
(2) Pursuit of Outstanding Clientele
Given the massive changes in the broad
environment and the significant economic
downturn, each of E.SUN’s subsidiaries must
emphasize their advantages, while shuttering
weaker areas of business. Foremost consideration
is given to liquidity and safety. E.SUN must place
increasing focus on its core operations and on
keeping its VIP clients. Only by becoming
stronger will it have the opportunity to become the
15
needs among customers, as well as researching the
products and services provided by main
competitors in the marketplace. At the same time,
E.SUN works to enhance its banking transaction
services, better integrate its marketing network,
create innovative Internet banking applications,
and establish a comprehensive financial services
network. Only by differentiating itself from its
counterparts can E.SUN create further distance
between itself and its competitors. This is a key
element in enabling E.SUN to stand out from the
crowd.
(4)Enhancing Risk Management and Corporate
Governance
E.SUN’s foremost consideration in business
development is controlling risk. It continues to
establish a risk appetite mechanism, enabling clear
risk amounts, controls and capital planning to be
set forth in the strategic development of each area
of business. Subsidiary E.SUN Bank in 2008
again won the Best Risk Management Award from
the Taiwan Academy of Banking and Finance,
which highlights the Bank’s outstanding abilities
in carrying out comprehensive risk management.
E.SUN has elected four independent directors in
order to strengthen corporate governance,
oversight and management. This number of
independent directors is above regulatory
requirements. In addition to establishing the
Auditing Committee, special function committees
such as the Corporate Governance and
Nominations Committee, the Compensation
Committee and the Board Strategy Development
Committee have be set up. E.SUN’s organic
statute stipulates that independent directors serve
as the conveners and participate in these
committees, thereby strengthening the function of
the board. E.SUN believes that being a model in
corporate governance is an important link in
fulfilling its social responsibility and being a
world class corporate citizen.
b.Bank
E.SUN’s internet banking for corporate-A Trustworthy Partner for Your
Company.
to meet the needs of customers, reduce operational
costs for the Bank, and raise network value. It
continues to provide a diverse range of products and
services to boost customer satisfaction, maximize the
benefits of joint marketing and raise customer value.
E.SUN is aggressively developing new products and
network value and expand its deposit base. It will
and depth of its services. It is also using its
focuses on having profits support growth and
d i ff e r e n t i a t e d s e r v i c e s t o c u s t o m e r s . E . S U N
risk controls and develop new pools of outstanding
mechanisms and maintains appropriate controls on
way for stable and balanced development.
the objective of emphasizing quality and quantity.
Bank’s two foremost objectives will be to enhance
transaction services, and strengthening the breadth
continue to implement a business strategy that
databanks to their best effect to provide
raising service quality. The Bank will emphasize
continues to implement risk management
customers. Together, these measures will pave the
operational processes and lending quality to achieve
Looking ahead to 2009, subsidiary E.SUN
(1) Corporate banking operations
E.SUN’s corporate banking operations are
carried out in tandem with government policy
calling for increased lending to SME enterprises.
E.SUN works together with the Credit Guarantee
Fund and promotes self-liquidating financing in an
effort to reduce credit risks. E.SUN sees itself as
E.SUN Sh@re Accounts-The Innovation of Wealth Management.
the best partner for SMEs. It integrates the
(3) Wealth Management
various product lines offers a comprehensive range
professional account executives, strengthen its range
customers. E.SUN markets itself as a specialist in
and produce outstanding market research. It provides
pillar of support for SMEs.
At appropriate times, account executives offer
resources of the FHC and through combining
E.SUN continues to cultivate a pool of
of products and services, meeting the needs of
of personal finance products, provide tax planning
SME banking, and it is committed to being the best
customers with top-notch after-sales services as well.
(2) Consumer Banking
customers with suggestions on the adjustment of
physical branch network, Internet bank and call
trust products. This helps to cement the relationship
network. In addition, it is developing electronic
customer satisfaction and value. E.SUN is
E.SUN continues to expand and integrate its
asset portfolios, introducing a range of insurance and
center to create a comprehensive financial services
E.SUN maintains with its customers, and generate
banking applications in a wide array of operations
aggressively working to expand its domestic fund
16
custodian operations, and custodian business for
foreign investors purchasing local securities and
those trading on behalf of customers. It will
(5) Internet Financial Transaction Services
E.SUN provides comprehensive solutions
t h r o u g h t h e u s e o f i t s AT M c a r d , i n c l u d i n g
combine its five major product lines and take
WebATM real-time payment, deduction upon
expand its trust clientele.
satisfies the needs in transactions between
advantage of network resources to effectively
(4) Credit Cards
Despite the credit card and cash card crisis
and the financial tsunami, E.SUN had 2.47
million cards in force at the end of 2008, with
1 . 5 3 m i l l i o n c a r d s i n f o r c e . To t a l c a r d
consumption for the year is NT$78.5 billion, and
the revolving balance stood at NT$20.0 billion.
All of these numbers grew from the previous
year. Meanwhile, E.SUN’s NPL ratio stood at
1.66% and its gross charge off ratio was 7.1%,
pointing to a continued strong asset quality.
E.SUN will continue to make the best use of
information, seek to increase “wallet share” and
encourage greater amounts charged using its
cards. It is constantly developing new products,
networks and activities, and engages in joint
product marketing initiatives to boost customer
value. It also holds activities marketed to
specific client segments to boost usage of cards,
spending and Internet cash register services. This
businesses and customers and between
individuals. E.SUN offers an electronic bank and
WebATM platforms. Thanks to the constant
introduction of innovative services and
aggressive marketing, over 40% of all trading of
E.SUN’s fund products are carried out over the
Internet. E.SUN’s WebATM has an over 16%
market share for all interbank fund transfers, and
over 50% of transactions originate from accounts
at other banks. This is effectively reducing
operational costs for E.SUN and boosting
income, not to mention increasing opportunities
for E.SUN to interact with clients from other
banks. In the future, E.SUN will continue to
develop applications and services that create
further opportunities for interaction between the
Bank and customers, and generate profit and
value for each.
i n c r e a s e m a r k e t v i s i b i l i t y, r a i s e a m o u n t s
changed, and create an image as a travel &
leisure brand name. E.SUN adopts various risk
control and management models that provide
early warning signals, management of credit in
arrears, and collection-related information.
These systems maximize operational
performance.
E.SUN Chien-Ming Wang Gift Cards Invite the Huge Wave on Internet Community.
c.Securities
(1)E.SUN Securities is establishing corss-selling
and marketing counters with other FHC
subsidiaries to provide rapid and convenient
services, maximizing the effect of the FHC’s
network.
(2)The Company is strengthening the performance
of its electronic platform and expanding its
marketing network.
(3)E.SUN’s core strategy is to establish a high
E.SUN's lucky titanium card has become women's favorite one!
17
quality, high performance research team that
drives its brokerage and dealing operations,
(2)Information Development: E.SUN continues to
the market. This will foster a leveraging effect
customer relationship management and bolster
(4)E.SUN is looking to balance the ability of each
based on trust and helps develop business
as well as raise its visibility and influence in
enhance information systems, strengthen
in the area of asset management.
after-sales service. This builds relationships
product line to generate profits. It wants to
opportunities.
increase the amount of fixed income as a
proportion of total income in order to stabilize
its profit base.
(5)E.SUN is strengthening its risk control system
and cultivating risk control management
expertise to enhance its ability manage assets
and performance.
(6)The Company is working to integrate resources
in order to reduce costs and improve its bottom
line.
d.Insurance Broker
dedicated to cultivating highly trained
professionals well-versed in all product lines.
These employees will provide outstanding
insurance services.
(4)Network Expansion:
The Company is integrating FHC resources in
order to expand its insurances sales network
and best leverage itself.
E.SUN Insurance Broker
Company Provides Customers
Convenient Services of Online
Insurance Policies Subscription.
e . Ve n t u r e C a p i t a l
E.SUN Insurance Brokers embraces the
(1)E.SUN Venture Capital directly invests in
responsibility. It provides customers with lifelong
potential. It also provides operational
principles of professionalism, service and
insurance services. The company strives to generate
customer value. E.SUN Insurance Brokers
continues to enhance its products, information,
human resources, systems and operational
procedures to provide customers with outstanding
unlisted companies that display development
management advisory services and financial
planning services for invested companies.
E.SUN Venture Capital combines the resources
of the FHC to provide enterprises with
comprehensive financial services.
insurance planning services, and to boost business
(2)T h e C o m p a n y i s s t r e n g t h e n i n g i t s
(1)Product Selection: E.SUN cooperates with
industry and is working to play an
volume.
insurance companies, developing special
products that meet the needs of the market.
E.SUN Insurance Broker
Company Provides
Professional Services to
Valuable Customers.
(3)Cultivating Human Resources: E.SUN is
understanding of trends in the high-tech
intermediary role in financing, technology and
human resources.
18
3.Cross-selling Synergy
Cross-Selling is a Vehicle of Wisdom for E.SUN’s Development.
(1) Integrating FHC Resources
E.SUN offers five major product lines under
its corporate and retail banking umbrellas,
namely corporate banking, consumer banking,
wealth management, treasury, and credit cards,
providing customers with across-the-board
financial services. In addition, the Bank works
with E.SUN Securities, E.SUN Insurance
Brokers and other subsidiaries in joint
marketing initiatives, maximizing benefits for
the FHC and providing customers with
comprehensive services.
(2) Customer Relationship Management
E.SUN continues to strengthen its ability to
manage customer relationships, bolster the
functions of teller transaction systems, enhance
its ability to divide customers in various
segments, and provide differentiated services.
This enables branch employees to
systematically assist customers as they enter
branches and address their potential banking
needs, thereby providing the most appropriate
product marketing and services. In addition,
E.SUN is hastening implementation of a
marketing report management system to
effectively manage the joint marketing
opportunities developed by each business unit.
This will help to boost customer satisfaction.
19
(3) Customer-driven Integrated Marketing
E.SUN has introduced a new customerdriven integrated marketing team. The
objective behind the establishment of this
matrix-style organization is to refocus the
specialized division of labor with regards to
each product line so more focus is placed on
customer service and enhancing value. The
integrated marketing team employs
technological innovations to enable customers
to enjoy brand new financial services, helping
to create a win-win situation for customers and
E.SUN.
(4) Enhance cross-selling synergy
E.SUN has integrated its various product
lines to meet the comprehensive financial needs
of various customer segments. Cross-marketing
initiatives, whether they are related to demand
deposits, personal finance, mortgage loans or
salary accounts, have proven quite successful.
E.SUN Bank and E.SUN Securities have jointly
introduced the ESA Investment Account
product that has helped to generate securities
transaction handling fee income and spark
growth in NT dollar denominated demand
deposits. Insurance brokering operations also
take advantage of joint sales points at branches,
which is also effectively increasing handling
fee income.
4.Human Resource
Win ! Win ! Win ! Yes, We Can !
core competitiveness rests in having a pool of
three pillars that will ensure sustainable operations
outstanding and highly trained employees that have
for E.SUN. Being people-oriented, cultivating
broad perspectives and are highly innovative.
professional expertise in employees, and
These workers, along with E.SUN’s strategic
strengthening employee skills are crucial to the
manpower resources and outstanding managers,
success of FHC joint marketing initiatives and
create a solid long-term foundation for the
f o s t e r i n g s y n e rg y. I n 2 0 0 8 , t h e F H C a n d i t s
C o m p a n y. S e e k i n g s u c c e s s t h r o u g h s t a b l e
subsidiaries held a total of 141 internal workshops.
operations requires a clear strategic blueprint and
In addition, employees were also selected to attend
highly talented human resources. E.SUN looks
458 workshops held by outside institutions. Each
forward to continuing to pass the torch of
employee on average participated in 4.05 training
knowledge to its employees, helping them to
courses.
accumulate intellectual capital and enabling E.SUN
In light of the major changes in the international
Highly qualified human resources are one of the
grow stronger.
banking environment, we deeply believe that our
Build up high-efficiency team.
Step by step,to reach the top.
E.SUN received many awards in HR.
20
1.E.SUN FHC and its subsidiaries
Year
Item
No. of Employees
Average Age
Average Years of Service
Master's
Educational
Bachelor's
Background(%)
College
High School
(Vocational)
Number of
Professional
License
(2007)
Bank
Insurance
Securities
Others
4. E.SUN Insurance Broker
2009.3.30
2008
2007
4,730
4,769
4,383
31.5
31.4
31.1
5.3
5.0
4.6
18.2
18.3
17.8
68.1
67.8
65.9
12.5
12.7
14.9
1.2
1.2
1.4
11,106
11,150
8,960
3,605
3,618
2,990
3,145
3,196
2,920
207
213
Year
Item
No. of Employees
Average Age
Master's
Educational
Bachelor's
Background(%)
College
High School
(Vocational)
Number of
Professional
License
(2007)
2009.3.30
2008
2007
4,249
4,286
3,956
31.5
31.4
31.1
5.4
5.1
4.7
18.8
18.9
18.2
67.4
67.1
65.6
12.6
12.7
14.8
1.2
1.3
1.4
10,608
8,519
Insurance
3,321
3,337
2,823
Securities
2,474
2,502
2,271
179
185
129
Others
3. E.SUN Securities
Year
Item
No. of Employees
Average Age
Master's
Educational
Bachelor's
Background(%)
College
High School
(Vocational)
Number of
Professional
License
(2006)
21
2009.3.30
2008
2007
356
363
296
31.4
31.4
31.8
4
3.7
3.6
9.8
10.2
7.4
75.0
74.7
70.6
13.5
13.5
19.6
1.7
1.6
2.4
Bank
360
376
262
Insurance
130
129
75
Securities
646
668
557
17
17
18
Others
Average Age
2009.3.30
2008
2007
84
78
68
27.5
27.5
26.9
1.6
1.6
0.9
Educational Master's
Background(%) Bachelor's
7.1
5.1
5.9
89.3
91.0
89.7
Number of
Professional
License
(2007)
College
3.6
3.9
4.4
Bank
101
101
65
Insurance
148
146
71
Securities
10
11
16
1
1
2
2008
2007
Others
5. E.SUN Venture Capital
10,580
Bank
No. of Employees
167
2. E.SUN Bank
Year
Item
Year
Item
No. of Employees
2009.3.30
8
8
9
34.6
34.3
30.2
3.9
3.6
2.4
Educational Master's
Background(%) Bachelor's
87.5
87.5
80
12.5
12.5
20
10
10
4
Insurance
0
0
1
Securities
1
1
2
Others
0
0
0
Average Age
Number of
Professional
License
(2007)
Bank
5.Corporate Responsibility and Ethical Behavior
E.SUN FHC Receives CSR Honorable Award from global view magazine and commonwealth magazine.
E.SUN has long devoted considerable resources to
and Chien-Yang Elementary School), Chiayi County
betterment and promotion of youth baseball, making
and Liumei Primary School), Tainan County (Songlin
every effort to realize its vision of becoming a world-
class corporate citizen. E.SUN feels that enhancing
corporate governance is also important to fulfilling its
(Shuang Si Primary School, Wungang Primary School,
Elementary School), Kaohsiung County (Fuan Primary
School), and Pingtung County (Wugo Primary School).
E.SUN produced the E.SUN Green Policy white
corporate responsibility. E.SUN continues to expand
p a p e r, w h i c h e x h i b i t s i t s c o m m i t m e n t a n d
customer value.
to include environmental protection considerations in
the content of its products and services, hoping to raise
E.SUN has been carrying out its Golden Seed
Project over the past few years in a move to establish
E.SUN libraries in elementary schools located in
remote areas of Taiwan. The long-term initiative is
aimed at improving hardware facilities and providing a
better environment in which to read and study. E.SUN
also donates books and provides assistance to ensure
the long-term upkeep of the libraries. It hopes that this
systematic program will held to reduce the
development gap between urban and rural areas, and
will provide resources and an environment to
encourage reading and learning in rural areas. Having
greater access to books will also enable the children to
read more, expanding their horizons and leading to new
opportunities. Over the past year, 10 E.SUN libraries
have been established, and E.SUN has a goal of
creating a total of 100 libraries over the course of the
program. The libraries created over the past year are
located in Taichung County (Don Shan Primary
School), Changhua County (Ching Shui Elementary
School), Yunlin County (Baochang Elementary School
social welfare, environmental protection, academic
determination to environmental protection. It continues
its lending activities and it encourages energy
conservation. The Bank holds any number of
environmental protection activities. In 2008, E.SUN
cooperated with National Chung Hsing University’s
Hsinhua Forest Station in kicking off a six-year project
to plant trees. Over this period, 10,000 trees will be
planted on the grounds of the forest station in an effort
to reduce carbon. At the same time, the activity seeks
to educate the public about the importance of planting
trees and the benefit this has on our environment.
E.SUN has responded to the Earth Day activity to turn
off lights for one hour. On Mid-Autumn Festival, it
called for people to participate in an event to switch off
lights in order to better see the moon, and it also
participated in International Car Free Day on
September 22. E.SUN has initiated activities on
Taiwan to clean refuse from mountains and advocates
other activities to cut carbon emissions. Environmental
protection and conservation must be applied in the
everyday workplace. As a result, E.SUN is gradually
replacing its current light fixtures and is reducing
22
E.SUN’s One Tree One Life Initiative Contributes to
the Reduction of Global Warming Effect.
Wang Chien-Ming Affinity Card contributes to Taiwan
Junior Baseball development.
unnecessarily display lighting. It is also reducing the
Students and teachers explore trends and developments in
Taiwan and is turning off lights in non-business offices
management, treasury operations and integrated
illumination of its signboards at branches throughout
for one hour over lunchtime. E.SUN is turning up airconditioning settings during the summertime to reduce
energy usage. Even subtle changes in office machinery
and daily habits are helping E.SUN to promote a more
the banking industry, financial information and risk
marketing, and customer service and human resources.
This activity fosters interaction between the academic and
financial sectors.
E.SUN also devotes attention to arts and culture,
environmentally friendly way of life. In 2008, E.SUN’s
holding a variety of educational, cultural and artistic
NT$72.04 million, accounting for 0.25% of the
eve of Mother’s Day at the Chunghsing Concert Hall in
environmental protection expenditures stood at
Company’s total revenues.
Another important goal for E.SUN is to foster the
development of baseball on Taiwan. E.SUN began this
initiative in 2007, devoting resources to support the
development of youth baseball activities. It established
the E.SUN Youth Baseball Fund Special Account. The
fund is used to help stage the E.SUN Cup National
Tournament, the E.SUN Sports Injuries Prevention
Project, the E.SUN Youth Baseball Pitcher & Catcher
Training Camp, and the Baseball Assistance Project for
activities throughout the year. It sponsored concerts on the
Taichung and the National Tainan Living Art Center,
where the E.SUN Choir, the Taiwan Brass Quintet,
Taichung Municipal Hui Wen Elementary School and the
Tainan Municipal Chongsyue Elementary School
performed. The performers played melodies enjoyed by
mothers and sang of their love for mothers. They
expressed their deepest gratitude for the mothers of
Taiwan and sought to promote warmth and harmony
within society.
ESUN not only emphasizes business development,
Remote Areas. It has provided baseball gear worth
discipline and legal compliance, but also has consistently
Shih Senior High School and Hualien Physical
2008, it was selected by Hong Kong’s The Asset
NT$100,000 each to the baseball teams at National Tung
Experimental Senior High School. E.SUN will continue
to be involved in setting the foundation for youth
baseball to flourish here, helping to nurture more and
more baseball stars and generate more interest in the
sport.
E.SUN also encourages academic excellence. It
provides scholarships to enable outstanding students to
complete their studies. To this point, E.SUN has provided
scholarships to a total of 27 students participating in the
manager training scholarship program, which is now in
its fourth year. E.SUN held the University Instructor
Banking Seminar for the third straight year, providing
23
E.SUN’s Scholarship helps to cultivate outstanding
students.
both theoretical and practical training to participants.
sought to enhance corporate governance. In 2007 and
magazine as having the best corporate governance in
Taiwan’s financial industry. It also won corporate
governance certification from the Taiwan Corporate
Governance Association. E.SUN has won the Corporate
Social Responsibility Award from Global Views Monthly
for three consecutive years for its tangible initiatives to
pay back society. Furthermore, in 2008 it again won the
National Quality Award, becoming the only company on
Taiwan to have won the award three times. These honors
reflect E.SUN’s commitment to quality, as well as its
responsibility to customers, shareholders and society, and
reflect another link in the effort to be the best performing
and most respected enterprise.
IV. Risk Management
The Wave of Mountains and Peaks.
24
1. FHC’s Risk Management Framework
The primary objectives of E.SUN FHC’s risk
operations risk and other risks. The Risk
management are to ensure the safety of assets,
Management Committee also is required to provide
provide customer service, and create shareholder
risk reports on a regular basis to the quasi Audit
value. All operations are carried out with risk
Committee and the board of directors. At the same
considerations being the foremost concern.
time, E.SUN is working to comply with the
Operations are to stress safety and liquidity first,
framework set forth in the Basel II Accord. In
then profitability and then growth. All should take
addition to accurately calculating risk-based capital
into account the interests of the public.
charges under Pillar I, paving the way for
appropriate capital and asset risk allocation, E.SUN
(1) FHC’s Risk Management Framework
E.SUN has established an independent Risk
Management Committee that is responsible for
establishing risk management policies,
implementing the policies and ensuring compliance
with international standards, thereby providing
is striving to comply with Pillar II qualitative and
quantitative standards and establish a risk
sensitivity management framework. The FHC’s risk
management organizational framework is shown in
the following diagram.
proper management of credit risk, market risk,
Board of Directors
Risk Management Committee
President
Chief Risk Officer
Chief of
Credit Risk
Chief of
Market Risk
Chief of
Liquidity Risk
Chief of
Operating Risk
E.SUN Bank
The FHC’s Risk Management Organizational Framework.
25
E.SUN
Securities
Other
Subsidiaries
2. Risk Measurement and Control Methods, and Exposure-related
Quantitative Information – Applicable to All Subsidiaries
c.E.SUN is to abide by regulations stipulated by
regulators regarding the guarantee of short-term
bills of a single enterprise and group of affiliates.
d.E.SUN sets limits on the amount of lending it
provides to a specific industry and acts in
accordance with rules set by regulatory agencies in
this regard.
B.Market Risk Management
E.SUN Bank received the award as Best risk management by Taiwan
Academy of Banking and Finance.
compliance policies and acts in accordance with
related regulations set forth by regulatory institutions.
At the same time, it uses the Basel II Accord risk
management framework as reference in instituting
risk controls and managing risk. This raises E.SUN’s
overall ability to monitor risk.
I. Routine Disclosures
(1)Strategies and Procedures
A.Credit Risk Management
appropriate capital utilization and suitable liquidity.
b.E.S U N a v o i d s r i s k a s s o c i a t e d w i t h o v e rconcentration of funds in a single or small group of
fiscal tools or trading counterparties.
c.The Fund Utilization Committee meets daily to
decide on trading strategies for that day and to
remain abreast of any risks associated with price
volatility.
d.E.SUN assesses risk positions on a regular basis.
Information regarding such is used in deciding
trading strategies.
C. Operations Risk Management
a.The objective of risk management for each
(1) E.SUN believes that the fundamental way to avoid
regulations set forth by regulators and internal
operational systems, cultivate risk awareness
Internal guidelines will be adjusted at
stresses legal compliance, and have a well-rounded
subsidiary is to be in compliance with
internal operations risk is to establish strong
credit and trading risk control mechanisms.
among employees, promote a corporate culture that
appropriate times based on local and overseas
internal controls and auditing system. E.SUN
sectors.
employees of subsidiaries, and enhance operational
restrictions are placed on the risk position of any
risk posed by external events, customer behavior,
operational status are also factors taken into
amendments. This enables the Company to respond
developments in the banking and economic
b.According to rules set forth by regulators,
The Company has established internal risk
a.E.SUN manages assets and liabilities to ensure
makes every effort to provide training to the
procedures and auditing. E.SUN remains alert to
single financial institution. Credit rating and
technological innovations and regulatory
consideration.
appropriately as soon as possible.
26
(2)Related Risk Management Systems Organization
(4)Hedging and Risk Mitigation Policies; Strategies and
and Framework – Applicable to All Subsidiaries
Processes to Monitor the Continued Effectiveness of
The E.SUN FHC Risk Management Policies and
Risk Avoidance and Risk Mitigation Tools–Applicable
Guiding Principles require each subsidiary to set
to All Subsidiaries. E.SUN FHC and its subsidiaries
forth risk management standards and rules. Each
seek collateral, third-party guarantees and trade credit
subsidiary must establish a credit screening
derivative products to hedge against risk. E.SUN will
committee, an asset and liabilities management
also use a trading counterparty's deposits to offset that
committee, and a risk management department and
party's liabilities. It also engages in asset securitization
auditing department that carry out pricing of daily
to transfer risk. E.SUN has set up internal risk control
positions, tabulate the level of risk exposure and
mechanisms and also complies with rules and systems
monitor external events. Meanwhile, each
set by regulatory agencies. E.SUN will adjust its
subsidiary is required to continue to enhance its
measures as appropriate based on the developments in
customer value and risk analysis technology, along
the domestic and foreign economic and banking
with internal controls system. This helps the FHC
environment. These measures ensure the continued
to recognize the accuracy of risk assessment and to
effectiveness of risk avoidance and risk mitigation
ensure that management methods conform to
tools.
international standards.
(3)Scope and Feature of Risk Reporting and
M e a s u r e m e n t S y s t e m s–A p p l i c a b l e t o a l l
Subsidiaries:
Legal Changes on the FHC's Financial Operations, and
Countermeasures: None
(6) Impact of Technological and Industrial Changes on
A.Credit Risk: Measures include the amount of
the FHC's Financial Operations, and Countermeasures:
credit extended to a single enterprise of single
Technological and industrial changes not only
group of affiliates; controls on risk-based assets;
inevitably influence the structural allocation of social
total risk exposure to a single company; limits
resources, the method of utilizing capital and financial
on liabilities with trading counterparties; and
management tools, but also trigger fundamental
limits on trading of interest rate financial
conceptual changes in financial operations with respect
derivatives.
to performance management, risk management and
B.Market Risk: Mechanisms have been established
to tabulate the fair value and trading profits/
losses of business-related assets and financial
derivatives.
C.Operations Risk: Measures are adopted to
determine whether business operations comply
even strategic management. As a result, E.SUN
encourages each subsidiary to monitor technological
and industrial trends, apply the advice of world-class
consultants, and strive to ensure that overall business
knowledge and skills adhere to global standards.
(7)Impact of Changes in the FHC's and Subsidiaries'
with guidelines and whether the suggestions for
Image on the Company, and Countermeasures:
improvement provided in the course of internal
A.E.SUN has made every effort to be a model in terms
audits are being carried out.
27
(5) Impact of Important Domestic or Foreign Policy and
of corporate governance. Transparency is provided
for transactions carried out by affiliated parties in
A.Concentration of Operations E.SUN remains
order to avoid conflicts of interest. At the same
sensitive to any changes in the financial industry.
time, the Company emphasizes protecting the
It stays abreast of macroeconomic and industrial
interests of shareholder. E.SUN has won
corporate governance certification by the Taiwan
Corporate Governance Association.
B.E.SUN stresses corporate governance, risk
management, employee education, training and
welfare, and tangible social welfare initiatives.
E.SUN again won the National Quality Award in
2008. The company is highly respected by
c u s t o m e r s, s h a r e h o l d e r s, t h e p u b l i c a n d
regulators.
C.Subsidiary E.SUN Bank in 2008 won the Best
Academy of Banking and Finance for its acrosst h e-b o a r d r i s k m a n a g e m e n t c o n t r o l s a n d
mechanisms.
(8)A n t i c i p a t e d B e n e f i t s a n d P o s s i b l e R i s k s
Associated with Mergers and Acquisitions,and
Countermeasures: None
(9)Risks from Concentration of Operations, and
Countermeasures:
adjusts its business development strategies as
appropriate.
B.Concentration of Counterparties The Bank sets
upper limits of risk exposure for recipients of
loans and investment, as well as individual
conglomerates, and it strictly adheres to these
l i m i t s. I t a c t s i n a c c o r d a n c e w i t h p o s tdisbursement management regulations to
regularly review the suitability of credit terms
and assess the possibility of systemic risk.
(10)Impact of the Transfer of Stakes Held by Directors,
Risk Management Award from the Taiwan
trends, as well as the direction of prices. It
Supervisors or Major Shareholders Holding Stakes
Over 1%, Possible Risks and Countermeasures:
As of the end of 2008, no directors, supervisors or
major shareholders with a stake of over 1%
transferred stakes to another party.
(11)Influence of Changes in Ownership of the FHC,
Possible Risks and Countermeasures: None
(12)Litigious or Non-litigious Incidents: None
(13)Other Major Risks and Countermeasures: None
3.Crisis Handling Mechanism
E.SUN FHC and each subsidiary comply with
addition, drills and examination measures are
standard operating procedures and rules set forth in
carried out regularly to ensure that they are
Guidelines on Crisis Management. Each unit has
effective. This contingency planning ensures the
established a crisis handling task force and
stable operations of each unit and helps the FHC of
emergency contact person who will be responsible
achieving its objectives of sustainable operations
for responding to and providing reports on any
and of fulfilling its responsibility to society.
irregular internal, local or international events. In
28
4. E.SUN’s Future R&D Projects and Anticipated R&D Expens
Innovation is the key factor to being able to
E.SUN emphasizes the ability to utilize
operate effectively in the future, especially in today’s
information to foster innovation and provide service to
rapidly changing environment. E.SUN focuses on
customers. In addition to face-to-face contact, E.SUN
generating customer value, adopting strategies that
has established a highly innovative call bank and
set it apart from counterparts, and working to hold a
Internet bank. Initiatives in this regard include a
competitive advantage in the marketplace. E.SUN
technologically advanced call center, a corporate
systematically seeks to strengthen the foundation for
Internet bank, and a consumer Internet bank. These
innovative operations. In addition to having access to
provide a total solution to customer banking needs,
the latest market- and business-related information,
offering efficient and convenient services. In 2008,
E.SUN is constantly evaluating and introducing new
E.SUN Bank’s R&D expenditures and budget
products to the market. In May 2008, E.SUN
introduced the Employee Proposal System, which
seeks to pool the wisdom and creative abilities of all
E.SUN employees. Employees are encouraged to
provide suggestions related to products, procedures,
organic structure, sales & marketing, brand name and
operational streamlining. These measures are then
evaluated by the Innovation Task Force, with the best
ones put into action or amended as appropriate,
improving hardware, software, professionalism,
efficiency, and value for the Company. Even if some
suggestions are not suited to be employed at the
accounted for 1.61% of total revenues.
In an effort to expand its service network,
subsidiary E.SUN Securities has developed an
advanced electronic trading platform. It is also
developing new products and improving trading and
service quality. E.SUN Securities will continue to plan
related R&D projects and devote funds to these
initiatives. In 2008, E.SUN Securities’ R&D
expenditures and budget comprised 7.8% of total
revenues.
Research expenditures for the last 3 years
Unit NT$1,000
present stage, they can serve as reference in the
future. This initiative is creating a large database of
creative and well thought-out ideas. As of the end of
2008, over 500 suggestions had been submitted by
294 employees.
29
E.SUN Bank
E.SUN Securities
2008
2007
2006
455,980
323,001
288,917
52,022
49,329
45,012
5. E.SUN’s R&D Investment Projects and State of Implementation
(1)Creating an Integrated Marketing Database
These models also help E.SUN when it designs
Platform for Event-Based Marketing (EBM)
both standardized and customization products,
In the initial phase of E.SUN’s EBM project,
E.SUN Bank’s database resources, such as credit
card and transaction customers' transactions
enabling E.SUN to provide better quality service.
(3)Integrating Banking Research Resources
E.SUN FHC and its subsidiaries coordinate
research efforts and integrate various research
This will pave the way to better design products
resources to analyze the banking and industrial
meeting customer needs and will enable business
environment on Taiwan and overseas. Senior
departments to divide customers into various
analysts head up expert research teams in the
segments, facilitating marketing efforts. This will
pursuit of in-depth and insightful research. In
create a win-win situation for customers and
addition, E.SUN has set up a research report
E.SUN.
scoring and evaluation system in order to look at
(2)Establishing a Customer Risk and Value
the accuracy of various research reports over the
Model (CRV)
long term. This assists departments in deciding
Unders tan d in g cu sto mer s, p r o v id in g the
on the general direction of investments as well as
services and care that customers require, and
s p e c i f i c i n v e s t m e n t t a rg e t s . T h e s e e x p e r t
forging a strong partnership relationship with
consulting teams help provide the top-quality
customers are keys to creating value for
research required by customers.
customers and E.SUN. E.SUN aims to provide
(4)Enhancing E.SUN’s Network
the personal finance products that customers
record and basic infomation, will be integrated.
E.SUN’s subsidiaries continue to enhance their
require at every stage in their life. E.SUN FHC
physical networks. E.SUN Bank serves as the
and a renowned international consulting company
core subsidiary, and efforts are made to combine
have cooperated in introducing international
the resources of the bank, along with the
know-how, providing international analytical
securities, venture capital and insurance broker
models and experience to E.SUN. These methods
subsidiaries. E.SUN is also making every effort
are adjusted to Taiwan and the local banking
to enhance its electronic network, such as
environment. The models analyze the existing
expanding the number of ATMs and CDMs in
transaction behavior of customers and serve as a
use. It has established a comprehensive electronic
basis to develop appropriate and effective models
financial transaction platform, Internet bank,
for Taiwan. Use of these models is then extended
Web-ATM, CMS payment mechanism, call
to all major areas of business. These models
center, and securities trading platform. These
include corporate product solutions, credit
applications provide outstanding services to
scoring, risk alarms, and management statistics.
E.SUN’s over 3.7 million loyal customers.
30
V. Corporate Governance
Living and striving.
31
Corporate Governance and State of Implementation
Item
State of Operation
Discrepancy with Listed
Company Corporate
Governance Enforcement
Rulesand reasons for such.
(1)Shareholders can filed opinions via the Stock Affairs Department,
after which qualified persons will address them.
(2)Any shareholder holding in excess of 10% of the Company’s
stock is legally required to declare his/her holdings to the
Company.
(3)Risk management committee has been set up to oversee the
execution of risk management policy and culture. In addition,
E.SUN risk management rules has been established.
No difference
2.Duties of Board of Directors
(1)State of Company designating of independent director.
(2)State of regularly evaluating independence of cerifying
accountant
(1)Four independent directors had been elected in AGM meeting on
13th of June, 2008. The Company has formulated guidelines
delineating the responsibilities of independent directors to serve
as a basis for these individuals in carrying out their jobs.
(2)Audit committee evaluate the independence of certifying account
regularly.
No difference
3.State of establishing avenues of communication with
interested parties.
The Bank’s customers can express their opinions through customer
service units. Employee disputes will be handled by Human
Resource departments. This ensures smooth communication
channels for interested parties.
No difference
4. Disclosure of information
(1)The FHC has set up website for the disclosure of
financial information and its corporate governance
practices.
(2)Any other methods adopted by the Bank for the
disclosure information (e.g., establishing Englishversion website, appointing persons responsible
for gathering and disclosing Bank information,
implementing a spokesperson system, and placing the
record of analyst meeting on its website).
(1)
a.Disclose status of Financail information, Business operation and
Corporate governance in the website (http://www.esunfhc.com.tw/info)
b.Information disclosed include financial information, business operation,
resolutions by board, material for analyst meeting, internal control and
contact information.
(2)
a.The Bank has already set up English and Chinese websites. Designated
persons are responsible for collecting and posting information on those
sites.
b.The Bank has mandated an individual with full knowledge of financial
and operational information and department coordination ability as
spokesperson.
c.The records of the analyst meeting had been uploaded to E.SUN’s
website.
No difference
5.The status of establishment and operation of functional
committees, such as Audit committee.
(1) Audit Committee
a. Rules of Audit committee organization has been established.
b. The committee is compose with all independent directors, the
committee has the following main objectives in its work:
1.Ensuring the Company’s financial statements are in proper
form.
2.Selecting (dismissing) certified Public Accountant(CPA),and to
verifying CPA's independence and monitoring performance.
3.Ensuring effective implementation of the Company’s internal
controls.
4.Ensuring Company compliance with related rules and
regulations
5. Control the internal risk within the company
(2) Corporate governance and nomination committee.
a. Rules of Corporate governance and nomination committee
organization has been established.
b.An independent director is the convener and chairman of this
committee, which assists the board of directors in the following
tasks:
1.To ensure the integrity of corporate governance units and
systems.
2.To seek out, screen and nominate candidates for board directors.
3.To establish and develop an organizational framework for the
board of directors, ensuring the proper formation of the board.
4.To screen or nominate candidates for president and chief
auditor.
1. Ownership structure and shareholders’ equity of FHC
(1)The manner in which the FHC handles shareholders’
proposals or disputes
(2)The ability of the FHC to identify its controlling
shareholders and the ultimate person or persons behind
such shareholders
(3)The ways the FHC establishes firewalls and risk
management mechanisms with respect to its affiliates
No difference
(3) Compensation committee
a.Rules of Compensation committee organization has been
established.
b.An independent director is the convener and chairman of this
committee, which assists the board of directors in the following
tasks:
1.To assist the board in planning and evaluating the salary level
for the chairman, and to set a salary framework for high-ranking
managers at the level of vice president and above.
2.To ensure that no director, high-ranking manager or interested
party sets his or her own salary.
(4) Board Strategy development committee
a.Rules of Board Strategy development committee organization has
been established.
b.The chairman is the convener and chairman of this committee
with following tasks:
1.Convenes meetings regarding the Company’s strategic
development goals and report to the board of directors.
2.Report to the board of directors on any other important strategic
matters that could impact the Company’s future development.
32
Item
State of Operation
Discrepancy with Listed
Company Corporate
Governance Enforcement
Rulesand reasons for such.
6.Please describe the state of the FHC’s corporate governance and any differences and reasons therein with Regulations for FHC Corporate
Governance:
The FHC fully complies with Regulations for Bank Corporate Governance in the establishment of related corporate governance systems.
7.Other information that may help to better understand the state of the FHC’s corporate governance (such as continued education by directors and
supervisors, attendance of directors and supervisors at board meetings, the implementation of risk management policies and risk measurement
standards, the implementation of policies to protect consumers or customers, the abstention from voting by directors on proposals involving their
own interests, and the purchase of liability insurance for the Bank’s directors and supervisors):
(1)Enacted Guidelines for Minutes of Board Meetings to improve supervision and management of such meetings and to provide a regulatory basis to
abide by in holding meetings.
(2)The FHC periodically asks directors and supervisors to take various courses, such as training courses held by the Corporate Governance
Association in Taiwan, the Securities & Futures Institute and the Taiwan Academy of Banking and Finance. Courses include “FHC Law, The
Banking Law and Corporate Governance,” “Banking Institution Corporate Governance,” “Corporate Governance Series of Seminars,” “Corporate
M&A and the Legal Liability of Directors and Supervisors,” and “Corporate Governance and Risk Management.”
(3)The FHC has established as Risk Management Department to draft and carry out risk control policies. The scope of risk reports and measurement
systems cover the following:
a.Credit Risk
The FHC has instituted limits on loans and risk exposure to any single enterprise, group of related companies or a single industry. It has clear
regulations on limits of the trading of financial derivatives on margin. E.SUN conforms to rules set under the Basel Capital Accord, enabling it
to maintain outstanding credit quality.
b.Market Risk
Trading of all financial derivative products is carried out according to procedures and guidelines set out by the FHC, the guidelines place limits
on trading, investment and financing. Different controls and standards have been drawn up for types of derivatives products.
c.Operational Risk
The FHC controls operational risks based on rules set forth under the Basel Capital Accord. It examines operations both at specified and
unspecified times to determine the compliance of regulations. It will also monitor whether suggestions made during internal audits are acted
upon.
(4)E.SUN has always emphasized customer service quality. It provides consumers complain channel and has implemented a number of consumer
protection policies.
(5) In order to round out the company’s corporate governance mechanism and reduce risk exposed to directors and key staff members of the
company, E.SUN FHC has taken out liability insurance for directors, supervisors and key staff members. Those insured include past, present and
future directors and key employees of E.SUN FHC and the FHC’s subsidiaries, as well as managerial and supervisory personnel. The policies
include liability insurance for these individuals, corporate compensation insurance, corporate securities claims liability coverage, and corporate
employment practice liability coverage.
(6) Employee disputes will be handled by human resource departments. This ensures smooth communication channels for interested parties. E.SUN
holds knowledge sharing meetings in different region every year to disclose company’s goal, policy and other employee-related information. In
addition, employee welfare committee is set up to take care all employees.
(7) To encourage shareholders participating corporate governance, regulation of AGM is conducted, in addition, stock affair department provide a
communication channel for shareholders to express their opinions. Disclose status of Financail information and Business operation within the
website
8. Please describe the results of any corporate governance self-appraisals by the Company or appraisal reports commissioned by the Company, any
shortcomings or suggestions presented in the reports and measures to rectify such:
In 2008, E.SUN FHC was awarded as the first place in corporate governance in Taiwan by The Asset magazine (HK), besides, E.SUN FHC also
received the certificant of corporate governance by Taiwan corporate governance association.
＊To Inquire Corporate Governance Guidelines and Related Rules
1. Http://www.esunfhc.com.tw/info/
2. Http://mops.tse.com.tw/server-java/t100sb04_1?colorchg=1&step=0&TYPEK=sii&
3. Other Information related to Corporate Governance Initiatives
Please refer to 7(3) from the above table.
33
VI. Special Notes
The silver snows create an awe-inspiring vista.
34
1. Representation of Consolidated Financial Statements of Affiliated Enterprises
Representation of Consolidated F inancial Statem ents of Affiliated
Enterprises
The Company and its affiliated enterprises defined by “Criteria Governing
P r e p a r a t i o n o f A ff i l i a t i o n R e p o r t s , C o n s o l i d a t e d B u s i n e s s R e p o r t s a n d C o n s o l i d a t e d
Financial Statements of Affiliated Enterprises” in 2008 are the same with those
defined by Article 7 of Statement Financial Accounting Standard. A consolidated
fi n a n ci a l s t a t e m e n t o f t h e p a r e n t c o m p a n y a n d a ffi l i a t e d e n t e rp ri se s h a s a l re a d y b een
re l e a se d a n d t h e r e f o r e t h e r e i s no n e e d t o se p a ra t e l y p ro d u c e a c o n so l i d a t e d fi n a n c ial
st a t e m e n t f o r a ff i l i a t e d e n t e r p r i se s.
C o m p a n y Na m e : E. S U N F i n a nc i a l H o l d i n g Co m p a n y, Lt d .
Chairman
February 20,2009
2. Affiliation Report: Please refer to section 7 of Financial Statements.
35
3. Internal Control
(1)Representation on Internal Control
E.SUN FINANCIAL H O LD IN G C O M PAN Y, LTD .
Representation on Internal C ontrol
To F i n a n c i a l S u p e r v i s o r y C o m m i s s i o n , E x e c u t i v e Yu a n
Feb 27, 2009
O n b e h a l f o f E . S U N F i n a n c i a l H o l d i n g C o m p a n y, L t d . , w e h e r e b y c e r t i f y t h a t t h e c o m p a n y
indeed complies with the “Enforcement Regulations for Financial Holding Company Internal
A u d i t C o n t r o l S y s t e m ” a n d t h e c o m p a n y ’s i n t e r n a l c o n t r o l s y s t e m a n d r i s k m a n a g e m e n t
mechanism for the fiscal year of 2008 have been implemented and audited by the independent
i n t e rn a l a u d i t o r s , a n d t h e i n t e r n a l a u d i t r e p o r t s a r e p e r i o d i ca l l y p r es e n t e d t o t h e c o m p an y ’s b o ar d
of directors and supervisors.
Under due assessment, the internal controls and legal compliance of each department during
2 0 0 8 a re e ff e c t i v e l y i n p l a c e . T h i s r e p r es e n t a t i o n w i l l b e a m a j o r p ar t o f o u r a n n u al r e p o r t an d
p ro s p e c t u s , a n d w i l l a l s o b e r e l e a s e d t o t h e p u b l i c. T h e ex i s t e n ce o f d i s c r ep a n ci es o r o m i s s i o n s i n
t h e c o n t e n t o f t h i s r e p r e s e n t a t i o n w o u l d c o n s t i t u t e v i o l at i o n s o f A r t i c l e s 2 0 , 3 2 , 1 7 1 an d 1 7 4 o f
t h e S e c u r i t i e s a n d F u t u r e s E x c h a n g e Ac t a n d en t ai l r e l e v an t l e g al r es p o n s i b i l i t y.
Sincerely yours,
Chairman
President
General Auditor
Compliance Officer
(2)Disclosure of any commissioned internal control review reports carried out by
certified public accountants : None
36
VII. Financial Statements
The morning light illuminates the world.
37
CONTENTS
1.Condensed Financial Statements 2004 to 2008
(1) Condensed Balance Sheet
(2) Condensed Balance Sheet(Consolidated)
(3) Condensed Income Statement
(4) Condensed Income Statement(Consolidated)
(5) CPAs' Auditing Opinion from 2004 to 2008
2.Financial analysis from 2004 to 2008
3.Capital adequacy Ratio from 2004 to 2008
4.One of the KPIs of E.SUN Financial Holding Company
39
39
41
43
44
45
46
47
47
5.Financial holding company and its subsidiaries should disclose the detail of
and year to date before the printing of annual report
6.Audit Committee' Report
7.Independent Auditors' Report
8.Financial Statements 2008
9.Notes to Consoidated Financial Statements
impact when encounter financial difficulties for the latest complete financial year
47
48
49
51
57
38
1.Condensed Financial Statements 2004 to 2008
(1)Condensed Balance Sheet
Unit:NT$1,000
Financial data 2005-2008
Year
Item
2008
2007
2006
2005
Cash and cash equivalenvs、due from the central
bank and call loans to banks
7,246,319
8,903,288
12,136,436
4,003,158
Financial assets at fair value through profit or loss
303,324
485,318
854,736
0
Receivables
507,706
411,695
408,123
647,499
50,886,052
51,970,577
46,045,985
44,629,600
12,690
12,690
12,690
40,000
432
594
756
891
2,021
2,106
2,192
0
822,205
818,016
818,642
4,670
59,780,749
62,604,284
60,279,560
49,325,818
4,967,559
8,988,783
9,413,820
0
375,316
266,912
251,535
371,273
5,500,000
5,500,000
5,000,000
5,000,000
7,641
6,725
10,329
4,337
0
0
0
200,000
188,032
0
36,007
19,940
11,038,548
14,762,420
14,711,691
5,595,550
Note 1
16,114,170
14,711,691
8,904,343
Capital Stock
35,443,511
33,033,000
33,033,000
30,270,000
Capital Surplus
10,407,577
9,883,176
9,883,176
7,607,644
3,881,743
5,609,490
2,315,680
5,931,050
Note 1
4,257,740
2,315,680
2,622,257
(985,106)
(683,802)
336,013
(78,426)
48,742,201
47,841,864
45,567,869
43,730,268
Note 1
47,841,864
45,567,869
40,421,475
Equity investments under the equity method
Other financial assets
Properties
Intangible assets
Other assets
Total assets
Financial liabilities at fair value through profit or loss
Payables
Corporate bonds payable
Accrued pension cost
Other borrowings
Other liabilities
Total liabilities
Retained earnings
Before distribution
After distribution
Before distribution
After distribution
Equity adjustments
Total stockholders' equity
Before distribution
After distribution
Note 1: E
arnings distribution of the year(ended December 31)2008 shall be resolved in the shareholders' meeting.
39
Unit:NT$1,000
Year
Item
2004
1,024,775
Current assets
Long-term equity investments
Before distribution
1,689,566
After distribution
4,999,467
400,000
Long-term debts
1,041
29,306,096
Capital Stock
7,607,644
Capital Surplus
Before distribution
5,548,506
After distribution
2,238,605
Cumulative translation adjustments
(13,152)
Unrealized loss on long-term equity investments
(89,856)
44,449,845
Total asset
Total liabilities
Total stockholders'
equity
Accrued pension liabilities
Retained earnings
43,423,341
1,729
Other assets
Current liabilities
Financial data 2004
Before distribution
2,090,607
After distribution
5,400,508
Before distribution
42,359,238
After distribution
39,049,337
40
(2) Condensed Balance Sheet(Consolidated)
Unit : NT$1,000
Year
Item
2008
Cash and cash equivalenvs、due from the central bank
and call loans to banks
Securities purchased under resell agreements
Receivables
2007
2006
2005
100,544,324
40,630,262
52,842,974
50,924,698
74,377,362
99,729,801
76,707,267
78,999,011
353,252
295,975
4,241,999
5,446,257
32,607,482
32,626,300
34,340,268
36,822,878
532,944,978
514,648,763
439,171,905
367,998,648
Available-for-sale financial assets
42,884,680
38,078,612
44,271,276
51,556,027
Held-to-maturity financial assets
14,241,499
14,389,915
14,642,940
15,657,046
Discounts and loans
-
130,259
-
-
9,194,423
9,026,992
5,081,346
7,122,983
13,283,041
12,914,521
11,771,149
10,649,355
4,039,733
3,936,018
3,825,398
3,662,701
4,996,188
5,774,566
6,892,748
6,680,096
829,466,962
772,181,984
693,789,270
635,519,700
21,168,220
32,516,451
29,746,974
40,449,556
-
1,773,679
913,482
1,149,110
31,443,604
39,498,399
41,544,149
25,766,317
Securities sold under repurchase agreements
23,161,468
17,631,985
23,134,616
58,729,182
10,261,151
8,478,831
14,598,548
11,518,178
658,990,601
589,441,331
506,263,564
423,933,719
32,800,000
31,100,000
27,300,000
24,700,000
-
300,000
940,000
1,330,000
2,369,094
2,967,194
2,791,235
2,761,318
530,623
632,250
987,092
1,441,862
Equity investments under the equity method
Properties
Goodwill and Intangible assets
Other assets
Total assets
Due to the central bank and other banks
Commercial paper issued,net
Payables
Deposits and remittances
Bonds payable
Other borrowings
Other financial liabilities
Other liabilities
780,724,761
724,340,120
648,219,660
591,779,242
Capital Stock
35,443,511
33,033,000
33,033,000
30,270,000
Total
Capital Surplus
10,407,577
9,883,176
9,883,176
7,607,644
equity of parent
Retained earnings
3,881,743
5,609,490
2,315,680
5,931,050
Note 1
4,257,740
2,315,680
2,649,757
(990,630)
( 683,802)
336,013
(78,426)
Total liabilities
stockholders'
company
Equity adjustments
Minority interest
Total stockholders'
equity
Before distribution
After distribution
Before distribution
After distribution
-
-
1,741
10,190
48,742,201
47,841,864
45,569,610
43,740,458
Note 1
46,490,114
45,569,610
40,459,165
Note 1: E
arnings distribution of the year(ended December 31)2008 shall be resolved in the shareholders' meeting.
41
Unit:NT$1,000
Year
Item
Financial data 2004
2004
Cash and cash equivalenvs、due from the central bank and call loans to banks
40,529,252
106,673,130
6,433,954
Receivables
33,261,751
Prepaid expenses
314,814
Discounts and loans
275,359,584
14,738,019
9,458,241
Goodwill
4,661,587
Other assets
6,797,447
Total assets
498,227,779
Due to the central bank and other banks
26,518,711
Short-term debts
100,000
Commercial paper issued,net
419,551
330,040,478
Current portion of long-term liabilities
54,213,579
838,000
Stock warrants issued liabilities, net
6,775
Payables
6,886,405
Advances
590,396
Bonds payable
29,600,000
5,000,000
long-term debts
400,000
Other liabilities
1,254,646
Total liabilities
455,868,541
Capital Stock
29,306,096
Capital Surplus
Total stockholders'
equity of parent
7,607,644
Retained earnings
Before distribution
5,548,506
After distribution
2,238,605
Unrealized loss on long-term equity investments
(89,856)
(13,152)
Treasury stock
Minority interest
Total stockholders'
equity
Properties
0
0
Before distribution
42,359,238
After distribution
39,049,337
42
(3) Condensed Income Statement
Unit:NT$1,000 Except Earnings Per Share
Year
Item
2008
2007
2006
2005
Income from equity investments under
the equity method
950,646
3,097,206
496,520
4,560,450
Other revenues and gains
618,457
594,654
687,253
58,617
Loss from equity investments under the
equity method
(63,663)
-
(301,049)
(18,144)
Operating expenses
(125,584)
(68,591)
(97,029)
(46,121)
Other expenses and losses
(217,367)
(468,125)
(373,877)
(30,518)
Income before income tax
1,162,489
3,155,144
411,818
4,524,284
Net income
1,025,003
3,293,810
422,608
4,656,349
Earnings per share (before income tax)
0.34
0.96
0.13
1.46
Earnings per share (after income tax)
0.30
1.00
0.13
1.50
Unit:NT$1,000 Except Earnings Per Share
Year
Item
Operating revenues
Operating costs
Gross profit
Operating expenses
Operating income
Interest income
Interest expenses
43
Financial data 2004
2004
4,836,862
54,317
4,782,545
49,663
4,732,882
102,973
19,858
4,723,164
Net income
4,836,437
Basic earnings per share (Before distribution)
1.94
Basic earnings per share (After distribution)
1.84
Diluted earnings per share(Before distribution)
1.78
Diluted earnings per share(After distribution)
1.68
(4) Condensed Income Statement(Consolidated)
Unit:NT$1,000 Except Earnings(Losses)Per Share
Year
Item
2008
2007
2006
2005
9,579,922
9,526,349
9,869,248
11,214,030
Total net revenues and gains other than interest
4,584,388
4,715,331
3,666,080
2,916,324
Bad-debt expenses
3,536,372
2,174,707
5,157,369
24,206
Operating expenses
9,006,830
8,122,942
7,985,269
8,402,678
Consolidated income before cumulative effect of changes in
accounting principles
1,621,108
3,944,031
392,690
5,703,470
Consolidated income after cumulative effect of changes in
accounting principles
1,025,003
3,293,810
350,557
4,660,690
0
0
72,026
0
Attributablr to parent compant
1,025,003
3,293,810
442,608
4,656,349
Attributablr to minority interest
0
0
(25)
4,341
0.30
1.00
0.13
1.50
Cumulative effect of changes in accounting principles (After income tax)
Consolidated net income
attributablr to
Basic earnings per share
Net interest
Note : Bad-debt expenses for bad-debt loan 2005 only.
44
Unit:NT$1,000 Except Earnings(Losses)Per Share
Year
Item
Financial data 2004
2004
Operating revenues
19,178,306
Operating costs
11,977,594
Operating income
Nonoperating income and gains
7,200,712
34,501
Nonoperating espenses and loss
1,253,724
Net of subsidiaries' pre-tax income before share swap
1,253,724
5,981,489
Income tax espenses
1,145,052
4,836,437
1.94
Diluted earnings per share
1.84
Operating revenues
1.78
Operating costs
1.68
(5)CPAs' Auditing Opinion from 2004 to 2008
Chen Li Chi, CPA, and Chang Ryh Yan, CPA, of Deloitte & Touche had examined the Financial Statement
of E.SUN Financial Holding Company for the years of 2004, ended on December 31, and issued modified
unqualified opinion reports; Chang Ryh Yan, CPA, and Way Yung Do, CPA, of Deloitte & Touche had
examined the Financial Statement of E.SUN Financial Holding Company for the years of 2005, ended on
December 31, and issued modified unqualified opinion reports ; Wu Mei Hui, CPA, and Way Yung Do, CPA,
of Deloitte & Touche had examined the Financial Statement of E.SUN Financial Holding Company for the
years of 2006, ended on December 31, and issued modified unqualified opinion reports; Chen Li Chi, CPA,
and Wu Mei Hui, CPA, of Deloitte & Touche had examined the Financial Statement of E.SUN Financial
Holding Company for the years of 2007, each ended on December 31, and issued modified unqualified opinion
reports;Chen Li Chi, CPA, and Chang Ryh Yan, CPA, of Deloitte & Touche had examined the Financial
Statement of E.SUN Financial Holding Company for the years of 2008, ended on December 31, and issued
modified unqualified opinion reports.
45
2.Financial analysis from 2004 to 2008
Item
Year
Total assets turnover (Times) (Note 1)
Operating
ratio
Profitability
ratio
Financial
structure(%)
Ratio of loans to deposits(E.SUN Commercial Bank)
Ratio of
growing
Liquidity
Operating
Scale(Note7)
2006
2005
2004
0.02
0.05
0.01
0.09
0.12
80.51
86.38
85.11
86.31
83.75
0.90
0.89
0.99
0.79
0.88
270.09
735.51
2,588.84
3,887.31
7,082.61
Average net income per employee (Note 2) (Note 1)
214.93
751.50
102.08
1,244.64
1,704.17
Ratio of return on total assets(%)(Note1)
1.94
5.52
0.94
9.97
12.34
Ratio of return on stockholders' equity(%)(Note1)
2.12
7.05
0.95
10.82
13.99
79.58
102.17
83.05
101.88
99.99
Basic earnings(losses)per share (Before distribution) (Note 1)
0.30
1.00
0.13
1.54
1.94
Basic earnings(losses)per share(After distribution) (Note 1)
0.30
0.97
0.13
1.50
1.84
Ratio of debt to assets (Note3)
18.47
23.58
24.41
11.34
4.70
Ratio of debt to net worth (Note3)
22.65
30.86
32.29
12.80
4.94
104.40
108.63
101.05
102.06
102.42
Profit margin ratio(%)(Note1)
Double Leverage Ratio
none
none
none
none
none
Operating leverage ratio (Note 1)
100.01
100.01
192.39
100.68
101.95
Financial leverage ratio (Note 1)
118.68
104.21
129.17
100.60
100.42
Ratio of assets growing (Note1)
(4.51)
3.86
22.21
10.97
29.98
Ratio of income growing (Note 1)
(63.16)
666.15
(90.92)
(3.72)
6.79
Cash flow ratio (Note4)
289.89
44.44
32.82
11.21
173.62
Cash flow adequacy ratio(Note4)
38.99
34.67
36.25
5.94
40.37
316.46
Note 5
Note 5
Note 5
Note 5
Market share of assets(%)
3.39
3.60
3.61
3.42
3.35
Market share of equity(%)
2.98
3.11
3.14
3.04
3.56
Market share of deposit (%)(E.SUN Commercial Bank)
2.91
3.21
2.83
2.43
1.73
Market share of assets loans(%)(E.SUN Commercial Bank)
2.90
2.87
2.51
2.15
1.74
50,046,909
57,429,411
41,628,778
26,888,514
29,358,324
Cash flow content ratio
endorsements or other transactions of all subsidiaries with the same
individual, the same related party or enterprise according to article 46 of
Financial Holding Company Law(NT$ thousand)
Analyses for
2007
Average revenue per employee (Note 2) (Note 1)
NPL ratio(E.SUN Commercial Bank)
According to Article 41 of Financial Holding Company Law
Leverage
ratio
2008
Note 1:Due to operating income increased 20%, comparing to that of 2008.
Note 2:Employees is to include E.SUN Financial Holding Company, Ltd.and Subsidiaries.
Note 3:Due to financial liabilities at fair value through profit or loss decreased 20%, comparing to that of 2008.
Note 4:Due to Net cash provided by operating activities increased 20%, comparing to that of 2008.
Note 5:Net cash provided by operating activities 、Net cash provided by investing activities or Net cash provided by operating activities is minus,not to analyze.
Note 6:Formula:
1.Operating ratio
(1)2005-2008 Total assets turnover=Net revenues/Total assets
2004 Total assets turnover=Operating income/Total assets
(2) Ratio of loans to deposits=Total loans/Total deposits
(3) NPL ratio=Nonperforming loans/Total loans
(4) 2005-2008 Average revenue per employee=Net revenues/employee
2004 Average revenue per employee=Operating income/employee
(5) Average net income per employee=Income after income tax/employee
2.Profitability ratio
(1) Ratio of return on total assets=[Income after income tax+interest expensesx(1–tax rate)]/Average assets
(2) Ratio of return on stockholders'equity=Income after income tax/Average stockholders'equity
(3)2005-2008 Profit margin ratio=Income after income tax/Net revenues
2004 Profit margin ratio=Income after income tax/Operating income
(4) Basic earnings per share=(Income after income tax–Dividends for preferred stocks)/Average issued shares
3. Financial structure
(1) Ratio of debt to assets=Total liabilities/Total assets
(2) Ratio of debt to net worth=Total liabilities/Total stockholders'equity
(3) Double Leverage Ratio=Equity investment for subsidiaries/Total stockholders'equity
4.Leverage ratio:
(1)2005-2008 Operating leverage ratio=(Net revenues–Variable expenses) / Income before income tax
2004 Operating leverage ratio=(Net operating revenues–varible operating expenses) / Operating income
(2)2005-2008 Financial leverage ratio=(Income before income tax+interest expenses)/Income before income tax
2004 Financial leverage ratio=Operating income / (Operating income–interest expenses)
5. Ratio of growing:
(1) Ratio of assets growing =( Total assets–Last year total assets)/Last year total assets
(2) Ratio of income growing =(income before income tax–Last year income before income tax)/Last year income before income tax
6. Analyses for Liquidity ( 2005-2008 is to include E.SUN Financial Holding Company, Ltd., 2004 is to include E.SUN Financial Holding Company, Ltd.and Subsidiaries)
(1)Cash flow ratio=Net cash provided by operating activities/(Due to the bank+
Commercial paper issued+Financial liabilities at fair value through profit of loss
+Securities purchased under resell agreements+Current portion of Payables)
(2)Cash flow adequacy ratio=Net cash provided by operating activities(from 2004 to 2008)/from 2004 to 2008(capital expenditure+Cash dividends)
(3)Cash flow content ratio=Net cash provided by operating activities/Net cash provided by investing activities
7. Operating Scale
(1)Market share of assets=Total assets/Total assets of all Financial Holding Co., Ltd.
(2) Market share of equity=Total stockholders’equity/Total stockholders’equity of all Financial Holding Co., Ltd.
(3) Market share of deposit (%)(bank)=Total deposits/Total deposits held by all financial institutions which are qualified in deposit and loan business
(4) Market share of assets loans(%)(bank)=Total loans/Total loans granted by all financial institutions which are qualified in deposit and loan business
46
3.Capital adequacy Ratio from 2004 to 2008
Year
Item
2008
Subsidiaries´
Capital
adequacy
Ratio
calculated
by regulation
(%)
Qualified
capital
of
2007
2006
2005
2004
E.SUN Commercial Bank
10.56
11.42
10.79
10.46
11.51
836.16
550.33
491.30
514.57
835.20
-
-
-
-
15.39
99.74
98.27
98.46
99.64
99.69
85.16
87.48
86.88
92.26
86.44
-
95.89
96.81
94.44
88.35
54,793,876
55,853,819
52,645,260
45,905,548
35,800,391
2,685,422
2,699,591
2,397,349
2,381,921
2,376,116
E.SUN Bills Finance Corp.
E.SUN Securities Investment Trust Co., Ltd.
-
-
-
-
5,320,988
1,221,173
1,270,831
1,346,993
1,026,130
1,021,077
209,900
203,625
150,496
139,703
143,222
-
383,481
379,612
329,517
417,562
Net Group qualified capital (NT$ thousand)
52,911,643
44,169,802
46,915,974
42,328,200
36,142,247
41,504,878
39,139,309
39,044,901
35,120,519
24,875,991
481,742
735,806
731,942
694,337
426,743
-
-
-
-
2,766,558
612,171
646,598
684,059
514,922
512,125
123,235
116,390
86,612
75,714
82,841
subsidiaries
(NT$
thousand)
Legal
requirement
of
subsidiaries´
capital (NT$
thousand)
E.SUN Securities Investment Trust Co., Ltd .
Legal requirement of group capital (NT$ thousand)
Group Capital Adequacy Ratio (%) (note 2)
-
199,950
196,051
174,456
236,306
43,915,499
42,199,645
42,516,770
36,587,723
29,908,215
120.49
104.67
110.35
115.69
120.84
Note 1 : Group Capital Adequacy Ratio=Net Group qualified capital ÷Legal requirement of group capital.
Note 2 : Financial data 2005 and 2006,E.SUN Commercial Bank's amount is for E.SUN Commercial Bank and E.SUN Bills Finance Corp.consolidated .
Note 3 : Capital adequacy ratio is one of the KPIs of E.SUN Financial Holding Company.
4.One of the KPIs of E.SUN Financial Holding Company.
: Capital adequacy ratio.
5.Financial holding company and its subsidiaries should disclose the
detail of impact when encounter financial difficulties for the latest
complete financial year and year to date before the printing of
annual report
: None.
47
6.Audit Committees’ Report
48
7.Independent Auditors’ Report
49
50
8.Financial Statements 2008
(1)CONSOLIDATED BALANCE SHEETS
E.SUN FINANCIAL HOLDING COMPANY, LTD. AND SUBSIDIARIES
DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Par Value)
ASSETS
CASH AND CASH EQUIVALENTS (Notes 2 and 4)
$
Amount
11,573,928
$ 8,959,151
DUE FROM THE CENTRAL BANK AND CALL LOANS TO
OTHER BANKS (Note 5 and 34)
88,970,396
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS, NET (Notes 2,6,33 and 34)
74,377,362
99,729,801
32,607,482
295,975
32,626,300
SECURITIES PURCHASED UNDER RESELL AGREEMENTS
(Notes 2 and 7)
RECEIVABLES, NET (Notes 2, 8, 33 and 34)
DISCOUNTS AND LOANS, NET (Notes 2, 9 and 33)
AVA I L A B L E - F O R - S A L E F I N A N C I A L A S S E T S , N E T ( N o t e s 2 ,
10, 11, 33 and 34)
HELD-TO-MATURITY FINANCIAL ASSETS, NET (Notes 2, 12 and 34)
EQUITY INVESTMENTS UNDER THE EQUITY METHOD, NET
(Notes 2 and 13)
GOODWILL AND INTANGIBLE ASSETS, NET (Notes 2, 3 and
16)
Total other assets, net
TOTAL
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated February 20, 2009)
532,944,978
42,884,680
-
9,194,423
PROPERTIES, NET (Notes 2, 15 and 33)
OTHER ASSETS, NET (Notes 2, 17 and 30)
Idle assets, net
Rentable assets, net
Refundable deposits
Operation deposits and settlement funds
Deferred income tax assets, net
Others
353,252
14,241,499
OTHER FINANCIAL ASSETS, NET (Notes 2 and 14 and 34)
51
2007
2008
Amount
31,671,111
514,648,763
38,078,612
14,389,915
130,259
9,026,992
13,283,041
12,914,521
4,039,733
3,936,018
241,396
1,863,607
2,172,352
449,412
2,584
266,837
470,650
1,945,068
2,454,129
426,948
247,062
230,709
4,996,188
$ 829,466,962
5,774,566
$ 772,181,984
Percentage
Increase
(Decrease)
%
29
181
(25)
19
4
13
(1)
(100)
2
3
3
(49)
(4)
(11)
5
(99)
16
(13)
7
LIABILITIES AND STOCKHOLDERS'EQUITY
DUE TO THE CENTRAL BANK AND OTHER BANKS (Note 18)
COMMERCIAL PAPER ISSUED, NET (Note 19)
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT
OR LOSS (Notes 2, 6 and 23)
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
(Notes 2, 6, 10, 20 and 33)
PAYABLES (Notes2, 21 and 33)
DEPOSITS AND REMITTANCES (Notes 22 and 33)
BONDS PAYABLE (Notes 2 and 23)
OTHER FINANCIAL LIABILITIES (Note 25 and 33)
OTHER LIABILITIES (Notes 2, 26)
Total liabilities
STOCKHOLDERS' EQUITY OF PARENT COMPANY
Capital stock
Common stock - NT$10.00 par value, authorized 5,000,000
thousand shares; issued and outstanding 3,544,351
thousand shares in 2008 and 3,303,300 thousand shares
in 2007
Capital surplus
Additional paid-in capital in excess of par value
From treasury stock transactions
Total capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Equity adjustments
Unrealized valuation losses on financial instruments
Treasury stock - 42,000 thousand shares
Net loss not recognized as pension cost
Total equity adjustments
Amount
$ 21,168,220
-
31,443,604
23,161,468
%
$ 32,516,451
(35)
1,773,679 (100)
(20)
39,498,399
17,631,985
31
2,369,094
21
8,478,831
12
589,441,331
5
31,100,000
300,000 (100)
(20)
2,967,194
10,261,151
658,990,601
32,800,000
530,623
632,250
(16)
780,724,761
724,340,120
35,443,511
33,033,000
7
7,182,990
3,224,587
10,407,577
6,658,589
3,224,587
9,883,176
8
-
1,773,823
683,801
1,424,119
3,881,743
1,444,442
4,165,048
5,609,490
23
-
(11,318)
(636,969)
(336,819)
(5,524)
(990,630)
(8,906)
(670,728)
(4,168)
(683,802)
48,742,201
47,841,864
8
5
(66)
(31)
27
(5)
33
45
2
CONTINGENCIES AND COMMITMENTS (Notes 2 and 35)
TOTAL
Percentage
Increase
(Decrease)
OTHER BORROWINGS (Note 24)
2007
2008
Amount
$ 829,466,962
$ 772,181,984
7
52
(2) CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Per Share Amounts)
Amount
$ 24,222,319
$ 22,321,854
9
(12,795,505)
14
9,526,349
1
3,241,232
1,805,682
(701,259)
(296,278)
5,359
242,896
(220,940)
280,465
163,969
94,406
(31,144)
4,584,388
3,870,070
605,632
129,450
8,111
(40,379)
139,111
(119,458)
87,299
117,836
(82,341)
4,715,331
(16)
198
(642)
(3,753)
113
75
85
221
(20)
(62)
14,164,310
(3,536,372)
14,241,680
(2,174,707)
(1)
63
INTEREST REVENUE (Notes 2 and 33)
INTEREST EXPENSE (Notes 2 and 33)
Percentage
Increase
(Decrease)
2007
2008
Amount
(14,642,397)
9,579,922
NET INTEREST
%
NET REVENUES AND GAINS OTHER THAN INTEREST
Service fee and commissions income, net (Notes 2, 28 and 33)
Gains on financial assets and liabilities at fair value through profit or loss (Note 2)
Realized gains (losses) on available-for-sale financial assets (Note 2)
Realized gains (losses) on held-to-maturity financial assets (Note 2)
Gains (losses) from equity investments under the equity method, net (Notes 2 and 13)
Foreign exchange gains, net (Note 2)
Impairment losses on assets (Notes 2, 10, 12, 14 and 17)
Gains on financial assets carried at cost, net (Note 2)
Gains on stock investment , net
Rental income, net (Note 33)
Other noninterest losses, net
Total net revenues and gains other than interest
TOTAL NET REVENUES
ALLOWANCE FOR BAD-DEBT EXPENSES (Notes 2 and 9)
OPERATING EXPENSES (Notes 2, 3, 27, 29 and 33)
Personnel
Depreciation and amortization
General and administrative
Total operating expenses
CONSOLIDATED INCOME BEFORE INCOME TAX
(4,102,991)
(934,512)
(3 ,969,327)
(9,006,830)
1,621,108
(3,775,201)
(832,576)
(3,515,165)
(8,122,942)
3,944,031
9
12
13
11
(59)
(596,105)
(650,221)
(8)
CONSOLIDATED NET INCOME
$ 1,025,003
$ 3,293,810
(69)
ATTRIBUTABLE TO:
Parent company
$ 1,025,003
$ 3,293,810
(69)
INCOME TAX EXPENSE (Notes 2 and 30)
2008
EARNINGS PER SHARE (Note 31)
53
(3)
Before
Income
Tax
$
$
0.34 $
0.20 $
2007
After
Income
Tax
0.30
0.19
Before
Income
Tax
$
$
0.92
0.85
After
Income
Tax
$
$
0.96
0.88
(3) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of New Taiwan Dollars)
Stockholders' Equity of Parent Company
Issued and Outstanding Capital
Stock (Note 32)
BALANCE, JANUARY 1, 2007
Appropriation of prior year's earnings
Legal reserve
3,303,300
Common Stock (Notes 2 and 32)
$33,033,000 $ 9,883,176 $ 1,402,182
9,883,176
-
-
-
-
Effect of decrease in consolidated subsidiaries
-
-
-
Consolidated net income in 2007
-
-
-
Change in cumulative translation adjustments
-
-
-
Change in unrealized valuation losses on financial
instruments
-
Reversal of special reserve
Change in net loss not recognized as pension cost
BALANCE, DECEMBER 31, 2007
Legal reserve
Special reserve
Dividend
Cash
Stock
Remuneration to directors and supervisors
Bonus to employees - 7,968 thousand issued shares
and $2,902 thousand in cash
-
Change in unrealized valuation gains on financial
instruments
Acquisition of treasury stock - 42,000 thousand shares
33,033,000
-
9,883,176
792,812
(78,426)
78,426
-
-
-
-
-
-
-
3,293,810
-
-
-
-
(4,609)
-
-
-
3,544,351
34,434,000
1,009,511
-
9,883,176
524,401
-
-
683,801
-
-
-
-
1,444,442
-
-
(42,260)
1,321,320
79,680
$ (4,297)
-
132,132
-
78,426
329,381
-
$ 835,072
42,260
-
100,951
1,444,442
-
3,443,400
Convertible bonds converted to capital stock
-
7,968
Balance after appropriation
Consolidated net income in 2008
3,303,300
$ 78,426
Unappropriated
Earnings
-
4,165,048
(329,381)
(683,801)
(1,321,320)
(1,321,320)
(27,528)
-
-
(82,582)
1,773,823
683,801
399,116
-
-
1,025,003
(4,297)
(8,906)
(8,906)
(2,412)
-
-
-
-
-
-
-
-
-
-
-
$35,443,511 $10,407,577
$1,773,823
$ 683,801
-
(1,018,825)
(670,728)
-
-
-
-
-
348,097
-
-
$ 348,097
-
-
-
(670,728)
33,759
-
$1,424,119 $ (11,318) $ (636,969)
Net Loss Not
Recognized as
Pension Cost
(Note 2)
Treasury Stock
(Notes 2 and 32)
$
-
-
-
(336,819)
$ (336,819)
$ (7,787)
(7,787)
-
3,619
(4,168)
-
$ 1,741
-
1,741
-
(1,741)
-
-
-
-
-
-
(4,168)
(1,356)
$ (5,524)
Total
Stockholders'
Equity
Minority
Interest
-
-
-
-
-
-
-
-
$
-
$ 45,569,610
45,569,610
(1,741)
3,293,810
-
3,303,300
Special
Reserve
Legal Reserve
33,033,000
-
Cumulative
Translation
Adjustments
(Note 2)
Retained Earnings (Notes 2 and 32)
Capital Surplus
Shares (in
Thousands)
Equity Adjustments
Unrealized
Valuation Gains
(Losses) on
Financial
Instruments
(Notes 2)
(4,609)
(1,018,825)
3,619
47,841,864
(1,321,320)
(27,528)
(2,902)
46,490,114
1,533,912
1,025,003
(2,412)
33,759
(336,819)
(1,356)
$ 48,742,201
54
(4) CONSOLIDATED STATEMENTS OF CASH FLOWS
2008
CASH FLOWS FROM OPERATING ACTIVITIES
Depreciation and amortization expenses
Impairment losses on assets
Allowance for bad-debt expenses
Provision of reserve for losses
Recovery of written-off credits and reserve for guarantees
Realized gains on the sale of financial assets designated at fair value through profit or loss
Realized losses (gains) on the sale of available-for-sale financial assets
Losses (gains) from equity investments under the equity method, net
Realized losses (gains) on the sale of held-to-maturity financial assets
Losses on the sale of debt instruments with no active market
Losses (gains) on the sale of properties, rentable assets, idle assets and foreclosed collaterals, net
Realized gains on the sale of financial assets carried at cost
Gains on the sale of stock investments
Amortization of premium or discount on bonds
Deferred income tax
Losses (gains) on valuation of financial instruments
Others
Net changes in operating assets and liabilities
Held-for-trading financial assets
Held-for-trading financial liabilities
Receivables
Other assets
Payables
Other liabilities
Net cash provided by (used in) operating activities
17,237,391
2,102,272
(2,006,602)
(54,174)
1,778,172
(128,401)
25,926,272
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in due from the Central Bank and call loans to other banks
Decrease (increase) in securities purchased under resell agreements
Increase in discounts and loans
Decrease (increase) in financial assets designated at fair value through profit or loss
Acquisition of available-for-sale financial assets
Proceeds of the sale of available-for-sale financial assets
Acquisition of held-to-maturity financial assets
Proceeds of the sale of and return of principal on held-to-maturity financial assets
Acquisition of financial assets carried at cost
Proceeds of the sale of and return of principal on financial assets carried at cost
Acquisition of debt instruments with no active market
Proceeds of the sale of and return of principal on debt instruments with no active market
Return of principal on equity investments under the equity method
Cash arising from the sale of entire share capital of E.SUN Securities Investment Trust Corp. September 30, 2008
Acquisition of properties and intangible assets
Proceeds of the sale of properties
Proceeds of the sale of rentable assets, idle assets and foreclosed collaterals
Decrease (increase) in other financial assets
Decrease (increase) in other assets
Net cash provided by financing activities
EFFECTS OF CHANGES IN CONSOLIDATED SUBSIDIARIES
217,506
(1,101,422)
58,292
8,738
(287,976)
434,300
(74,227,533)
Net cash used in investing activities
EFFECTS OF EXCHANGE RATE CHANGES
(57,299,285)
(57,277)
(20,211,043)
10,094,538
(33,597,541)
27,718,858
(1,670,011)
1,333,064
(221,711)
48,261
(1,225,332)
1,399,324
131,184
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in due to the Central Bank and other banks
Increase (decrease) in commercial paper issued
Decrease in other borrowings
Increase (decrease) in financial liabilities designated at fair value through profit or loss
Increase (decrease) in securities sold under repurchase agreements
Increase in deposits and remittances
Decrease in other financial liabilities
Proceeds of the issuance of bank debentures
Repayment of bank debentures
Proceeds of the issuance of corporate bonds
Cash dividends paid
Bonus to employees and remuneration to directors and supervisors
Acquisition of treasury stock
Increase (decrease) in other liabilities
$ 1,025,003
934,512
220,940
3,536,372
37,166
356,821
(668,198)
769,714
(5,359)
296,278
51,136
(18,171)
(1,456)
(163,969)
220,339
262,649
227,763
(83,926)
(11,348,231)
(1,773,679)
(300,000)
(10,160,647)
5,529,483
69,549,270
(598,100)
2,600,000
(900,000)
(1,321,320)
(31,230)
(336,819)
(595)
50,908,132
7,906
2,614,777
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid
Income tax paid
NONCASH INVESTING AND FINANCING ACTIVITIES
55
8,959,151
$ 11,573,928
$ 14,492,357
$
517,827
$
1,533,912
2007
$ 3,293,810
832,576
119,458
2,174,707
10,722
355,808
(236,459)
(102,623)
40,379
(8,111)
129,784
1,898
(32,916)
467,503
310,861
(229,600)
(72,878)
(20,192,227)
(1,063,394)
(556,644)
(4,826)
(6,087,761)
79,133
(20,770,800)
5,374,912
3,946,024
(76,411,966)
(3,687,117)
(13,666,896)
18,847,247
(329,429)
373,281
(359,284)
67,556
(6,818,082)
3,053,688
(1,334,967)
1,175
120,838
399
(417,013)
(71,239,634)
2,769,477
969,928
(250,000)
128,449
(5,502,631)
83,177,767
(6,884)
3,700,000
(400,000)
500,000
17
85,086,123
117,997
(31,486)
(6,837,800)
15,796,951
$ 8,959,151
$ 12,135,253
$
500,131
$
-
The sale by E.SUN Financial Holding Company, Ltd. of its entire holding in E.SUN Securities Investment Trust Corp. (ESSIT) in September 2008
is summarized as follows (Note 1):
2008
ESSIT’s net equity as of September 30, 2008
Gains on the sale of stock investments
Proceeds of the sale of entired share capital of ESSIT
ESSIT’s cash, September 30, 2008
Cash arising from the sale of the entire holding in E.SUN Securities Investment Trust Corp.
- September 30, 2008
$
356,325
163,969
520,294
(302,788)
$
217,506
56
9.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1.ORGANIZATION AND OPERATIONS
57
E.SUN Financial Holding Company, Ltd. (ESFHC)
wa s e s ta blis h e d b y E .SU N C o m m e r c i a l Bank,
Ltd. (“E.SUN Bank”), E.SUN Bills Finance Corp.
(“E.SUN Bills”) and E.SUN Securities Corp. (“E.SUN
Securities”) through a share swap on January 28, 2002
based on the Financial Holding Companies Law and
related regulations in the Republic of China (ROC).
The ESFHC’s shares have been listed on the Taiwan
Stock Exchange (TSE) since January 28, 2002. After
the share swap, E.SUN Bank, E.SUN Bills and E.SUN
Securities became wholly owned subsidiaries of
ESFHC.
E.SUN Securities Investment Trust Corp. (ESSIT)
became a wholly owned subsidiary of ESFHC through
a share swap on September 16, 2003. To follow its
overall growth strategy and operations, increase the
efficiency of working capital, and develop further
its core business, ESFHC sold its entire holding in
ESSIT to Schroder International Holdings Limited on
September 30, 2008.
ESFHC invests in and manages financial
institutions.
E.SUN Bank engages in commercial banking activities
permitted by the Banking Law. The operations of E.SUN
Bank’s Trust Department consist of planning, managing
and operating the trust business. These operations are
regulated under the Banking Law and Trust Law of the
ROC. As of December 31, 2008, E.SUN Bank had a
business department, international banking department,
trust department, credit card business division, an
offshore banking unit (OBU), 2 overseas branches (Los
Angeles and Hong Kong) and 116 domestic branches.
To i n t e g r a t e r e s o u r c e s , e n h a n c e o p e r a t i n g
effectiveness, strengthen E.SUN Bank’s equity
structure, and ensure its long-term development, the
stockholders of E.SUN Bank and E.SUN Bills resolved
on August 25, 2006 to have a merger with each other,
with E.SUN Bank as the survivor equity. The Financial
Supervisory Commission approved this merger on
November 10, 2006.
E.SUN Securities engages in underwriting, dealing
and brokerage of securities.
ESSIT issues beneficiary certificates to raise
securities investment trust funds and uses these funds to
invest in securities and related products.
E.SUN Venture Capital Corp. (ESVC) engages in
venture capital investments.
E.SUN Insurance Broker Co., Ltd. (ESIB) is a life
and property insurance broker.
The above consolidated entities are hereinafter
referred to collectively as the “Company.” Please
see Table 5 (attached) for more information on the
consolidated entities.
As of December 31, 2008 and 2007, ESFHC and its
subsidiaries had 4,769 and 4,383 employees, respectively.
2.SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying consolidated financial statements
have been prepared in conformity with the Guidelines
Governing the Preparation of Financial Reports by
Financial Holding Companies, Guidelines Governing
the Preparation of Financial Reports by Public Banks,
Guidelines Governing the Preparation of Financial
Reports by Securities Firms, Business Accounting
Law, Guidelines Governing Business Accounting and
accounting principles generally accepted in the ROC.
In preparing consolidated financial statements,
ESFHC and its subsidiaries are required to make certain
estimates and assumptions that could affect the valuation
of financial instruments, the amounts of allowance for
possible losses, reserve for losses on guarantees, property
depreciation, amortization on intangible asset, pension,
income tax, impairment loss on assets, accrued litigation
loss, bonus to employees and remuneration to directors
and supervisors. Actual results could differ from these
estimates.
For the convenience of readers, the accompanying
consolidated financial statements have been translated
into English from the original Chinese version prepared
and used in the ROC. If there is any conflict between the
English version and the original Chinese version or any
difference in the interpretation of the two versions, the
Chinese-language consolidated financial statements shall
prevail.
The Company’s significant accounting policies are
summarized as follows:
Consolidation
ESFHC’s consolidated financial statements as
of and for the years ended December 31, 2008 and
2007 included the accounts of ESFHC, E.SUN Bank,
E.SUN Securities and subsidiary (E.SUN Securities
Investment Consulting Corp.), ESSIT, ESVC and ESIB.
On August 16, 2007, the board of directors of E.SUN
Finance & Leasing Corp. (ESFL) resolved to liquidate
ESFL and this liquidation was completed in September
2008. Thus, ESFL’s accounts were excluded from the
consolidated financial statements as of and for the years
ended December 31, 2008 and 2007. Because ESFL was a
minor subsidiary, the ESFHC’s management believed that
this exclusion would not have a significant effect on the
consolidated financial statements as of and for the year
ended December 31, 2007.
ESFHC sold its entire holding in ESSIT on September
Current and Noncurrent Assets and Liabilities
Since the operating cycle in the financial holding
and banking industry cannot be reasonably identified,
accounts included in the financial statements of
ESFHC and E.SUN Bank are not classified as current
or noncurrent. Nevertheless, these accounts are
properly categorized according to the nature of each
account and sequenced by their liquidity.
Except for the matter stated in the preceding
paragraph, cash and cash equivalents or assets to be
converted or consumed within one year are classified
as current. Obligations to be liquidated or settled
within one year are classified as current. All other
assets and liabilities are classified as noncurrent.
The consolidated financial statements, however, do
not show the classification of current or noncurrent
assets/liabilities because the financial holding
and banking industry accounts for the major parts
of the consolidated accounts. Thus, accounts in
the consolidated financial statements are instead
categorized by nature and sequenced by their liquidity.
Please refer to Note 37 for the maturity analysis of
assets and liabilities.
Cash Equivalents
Cash equivalents are highly liquid investments with
maturities of up to three months.
Basis of Fair Value
Fair value are determined as follows: (a) shortterm bills - reference prices published by Reuters;
(b) listed stocks and GreTai Securities Market (the
“GTSM”) stocks - closing prices as of the balance
sheet date; (c) beneficiary certificates (open-end funds)
- net asset values as of the balance sheet date; (d) bonds
- period-end reference prices published by the GTSM;
(e) securities which is unlisted and not traded in GTSM
with quoted market prices or trading records - quoted
market prices or trading prices; and (f) for the financial
instruments without active markets - fair value estimates
based on valuation techniques.
Financial Instruments at Fair Value Through Profit
or Loss
Financial instruments at fair value through profit or
loss are financial assets or liabilities that are designated
on initial recognition as those to be measured at fair
values with fair value changes recognized in profit
or loss or financial assets or liabilities classified as
held for trading. These instruments are required to be
recognized at fair value plus direct acquisition costs and
to be measured at fair value through profit or loss on the
balance sheet date. The Company uses settlement date
accounting when recording related transactions, except
for stocks, beneficiary certificates and derivatives, for
which trade date accounting is used.
Financial instruments used in derivative transactions
that do not qualify for hedge accounting treatment
are classified as financial assets or liabilities held for
trading. If the fair value of a derivative is a positive
number, the derivative is carried as an asset and if the
fair value is a negative number, the derivative is carried
as a liability.
Applying the fair value option eliminates accounting
measurement mismatch for items that naturally offset
each other or eliminates the burden of separating
embedded derivatives that are not considered to be
closely related to the host contract pertaining to a hybrid
instrument.
The Company did not adopt hedge accounting in
2008 and 2007. If the hedged items are not designated
as financial assets or liabilities at fair value through
profit or loss (FVTPL), accounting measurement
mismatches on these items will occur as a result of
differences in measurement attributes. Thus, the
Company designated debt instruments and bank
debentures issued as financial assets and liabilities at
FVTPL. Moreover, the Company designated a hybrid
instrument as financial assets and liabilities at FVTPL
because embedded derivatives are not separated from
the host contract in a hybrid instrument.
30, 2008. Thus, ESFHC’s consolidated financial
statements as of and for the year ended December
31, 2008 included the gains or losses of ESSIT in
the nine months ended September 30, 2008. The
financial statements of E.SUN Bank, E.SUN Securities
and subsidiary, ESVC and ESIB as of and for the
year ended December 31, 2008, and the financial
statements of ESSIT as of and for the nine months
ended September 30, 2008 as well as the financial
statements of all the above subsidiaries of ESFHC as
of and for the year ended December 31, 2007 had been
audited by independent auditors different from those
of ESFHC. All significant intercompany transactions
and balances have been eliminated for consolidation
purposes.
E.SUN Bank’s financial statements included the
accounts of the Head Office, OBU, and all branches.
All interoffice transactions and balances have been
eliminated.
Securities Purchased/Sold Under Resell/
Repurchase Agreements
58
and securities sold under repurchase agreements
are generally treated as collateralized financing
transactions. Interest earned on resell agreements
or interest incurred on repurchase agreements is
recognized as interest revenue or interest expense over
the life of each agreement.
Purchase on Margin and Short Sale
E.SUN Securities recognizes margin loans as loans
to customers for purchases on margin while providing
financing to investors who buy stocks. Margin loans
made by E.SUN Securities are generally collateralized by
securities in the client’s account. These collateralized
securities are not entered in E.SUN Securities’ books,
but recorded using memorandum entries. After the
security investors settle the margin loan, these pledged
securities are returned to investors.
E.SUN Securities requires a deposit from security
investors for short sale services while providing short
sale services to investors. This deposit is recorded
as deposit on short-sale transactions. The amount
collected from selling of short sale securities (net of
securities transaction tax, brokerage fee and handling
fee) is kept by E.SUN Securities as collateral and
recorded as payable for short-sale transactions. The
securities lent to clients as short sale are recorded
using memorandum entries. The deposit on short-sale
transactions and payable for short sale are returned to
security investors after investors settle the short-sale
transactions.
Overdue Loans
Under Ministry of Finance (MOF) guidelines,
E.SUN Bank classifies loans and other credits
(including accrued interest) overdue for at least six
months as overdue loans.
Overdue loans (except other credits) resulting from
loans are classified as discounts and loans, and the
remaining are classified as other financial assets.
Allowance for Possible Losses and Reserve for
Losses on Guarantees
E.SUN Bank makes provisions for bad debts and
losses on guarantees based on the evaluation of loans,
overdue loans, bills, discounts, receivables, guarantees
and acceptances for their specific or general risks.
Debts and guarantees with specific risks are
evaluated internally for their collaterals, collectibility
and customers’ overall credits. Under MOF
guidelines, E.SUN Bank makes 100%, 50%, 10%
and 2% provisions for credits deemed uncollectible,
highly uncollectible, substandard and special mention,
respectively, as minimum provisions for possible
losses.
Under the regulation (88) Tai-Tsai-Tseng (7) No.
91625, E.SUN Securities should provide 3% of annual
primary business transactions from July 1, 1999 to
write off credits or to use as allowance for bad-debt
59
expenses. However, this allowance requirement was
terminated on July 1, 2003.
Under MOF guidelines, credits deemed uncollectible
may be written off if the write-off is approved by the
board of directors.
Available-for-sale Financial Assets
Available-for-sale financial assets are initially
recognized at fair value plus direct acquisition costs.
When subsequently measured at fair value, the changes
in fair value are excluded from earnings and reported
as a separate component of stockholders’ equity. The
accumulated gains or losses are recognized in earnings
when the financial asset is derecognized from the
balance sheet. The Company uses settlement date
accounting when recording related transactions, except
for stocks and beneficiary certificates, for which trade
date accounting is used.
Cash dividends received within a year of asset
acquisition are recognized as reduction of the original
investment cost and are subsequently recognized as
investment income on the ex-dividend date. Stock
dividends are recorded as an increase in the number of
shares held and do not affect investment income. The
cost per share is recalculated based on the new number
of shares. Any difference between the initial carrying
amount of a debt security and its amount on maturity
is amortized and then recognized as earnings using the
effective interest method.
Financial Asset Securitization
Under the Financial Asset Securitization Act, E.SUN
Bank securitized part of its bonds and entrusted those
bonds to a trustee for the issuance of beneficiary
securities. Except for beneficiary securities being
retained for credit enhancement and reclassified
as available-for-sale financial assets, E.SUN Bank
de-recognizes the bonds from the balance sheet
and recognizes gain or loss because the control of
contractual rights on these bonds has been surrendered
and transferred to a trustee. The gain or loss on the sale
of the bonds is the difference between the proceeds and
carrying amount of the bonds, and this carrying amount
should be allocated at the ratio of the retained right and
the part sold to their fair values on the date of the sale.
Since quoted market prices are not available for retained
interests, E.SUN Bank estimates fair value using management’s
key assumptions on bond credit loss rate and discount
rates commensurate to the risks involved. The fair
value is the expected future cash flows, and the changes
in fair value are reported as a separate component of
stockholders’ equity.
Held-to-maturity Financial Assets
Held-to-maturity financial assets are carried at
amortized cost using the effective interest method.
These financial assets are initially recognized at fair
value plus direct acquisition costs. Gains or losses are
recognized at the time of de-recognition, impairment
or amortization. The Company uses settlement date
accounting when recording transactions.
Equity Investments under Equity Method
Other Financial Assets
Investments in equity instruments with no quoted
market price in an active market and with fair value
that cannot be reliably measured, are measured
(including unlisted stocks and emerging stocks) at
cost. The accounting treatment for dividends on
these instruments is the same as that for dividends
on available-for-sale financial assets, except for the
recognition of cash dividends upon the declaration
by an investees’ stockholders under an approved
resolution.
Debt instruments with no active market are those
with no quoted market prices in an active market and
with predetermined amounts. These instruments are
carried at amortized cost. The accounting treatment
for debt instruments with no active market is similar to
that for held-to-maturity financial assets. In addition,
in contrast to held-to-maturity financial assets, debt
instruments with no active market can be sold anytime.
Properties, Rentable Assets and Idle Assets
Properties, rentable assets and idle assets are
stated at cost less accumulated depreciation and
accumulated impairment. The cost of betterments and
major renewals that extend the useful life of an item
of property and equipment is capitalized. The cost
of repairs and maintenance is charged to expense as
incurred.
Depreciation is calculated by the straightline method over service lives estimated as
follows: buildings, 5 to 50 years; computers, 3 to
8 years; transportation equipment, 5 to 8 years; and
Goodwill and Intangible Assets
Intangible assets are recorded at acquisition cost.
Computer software and operating rights are amortized
by the straight-line method over their service lives
estimated at three to five years. The carrying value
of goodwill is based on the amortized cost, net of
accumulated impairment.
Operation Deposits
Under the Regulations Governing Securities Firms
and Regulations Governing Futures Commission
Merchants, securities firms should place in governmentdesignated banks guarantee deposits based on their
respective type of business operations after registration.
Investments in shares of companies in which the
Company exercises significant influence on their operating
and financial policy decisions are accounted for by the
equity method. Under the equity method, the investments
are carried at cost on the acquisition date and subsequently
adjusted for the Company’s proportionate share in the
net income or loss of the investees. The proportionate
share in the net income or loss is recognized as current
income or loss, and any cash dividends received are
reflected as a reduction of the carrying values of
the investments. Capital increase of investees that
results in the increase of the Company’s equity in the
investees’ net assets is credited to capital surplus, and
any decrease is charged to such capital surplus. If
capital surplus is not enough for charging purposes, the
difference is charged to unappropriated earnings.
For equity-method investments, stock dividends
received are recognized only as increases in the number
of shares held, and not as income. Cost of equity
investments under the equity method sold is determined
by the weighted-average method.
miscellaneous equipment, 5 to 10 years; rentable
assets, 50 years, and idle assets, 50 years. If an asset
reaches its residual value but is still in use, it is further
depreciated over its newly estimated service life.
The cost, accumulated depreciation and accumulated
impairment are removed from the accounts when an
item of property is disposed of or retired, and any gain
or loss is credited or charged to current income.
Settlement Funds
Under Article 132 of the Securities Exchange Law,
Article 10 of the Regulations Governing Securities
Firms and Article 3 of the GreTai Securities Market
Regulations Governing Bond Payment Settlement
Reserves for the Electronic Bond Trading System,
securities firms that broker marketable securities and
trade securities for their own purposes should deposit
settlement funds to the Taiwan Stock Exchange and the
Over-the-Counter exchange before and after the start of
business operation.
Brokerage Accounts, Net
Under the Guidelines Governing the Preparation of
Financial Reports by Securities Firms, the brokerage
accounts, net are recorded as brokerage accounts - debit
(including bank deposits - settlement account, brokerage
securities receivable, exchange clearance, credit
transactions and settlements receivable) and brokerage
accounts - credit (including brokerage securities
payable, exchange clearances, credit transactions and
settlements payable). As a result, brokerage accounts debits are offset against brokerage accounts - credit and
recorded as brokerage accounts, net.
Foreclosed Collaterals
Foreclosed collaterals (part of other assets - others)
are recorded at the lower of cost or net fair value as of
the balance sheet date.
Asset Impairment
a. Available-for-sale financial assets
If an available-for-sale financial asset is determined
to be impaired, a loss is recognized. If the impairment
loss on equity securities decreases, this loss is reversed
60
to the extent of the decrease and recorded as an
adjustment to stockholders’ equity; for debt securities,
this loss is recognized as earnings.
b. Held-to-maturity financial assets and debt
instruments with no active market
If a held-to-maturity financial asset or debt
instrument with no active market is determined to be
impaired, a loss is recognized. If the impairment loss
decreases, the previously recognized impairment loss
is reversed. However, the reversal should not result in
the carrying amount of financial assets exceeding the
amortized cost that would have been determined had no
impairment loss been recognized.
c.
Financial assets carried at cost
If there is objective evidence that a financial asset
carried at cost is impaired, an impairment loss is
recognized. However, impairment loss reversal is
prohibited.
d. Equity investments under the equity method,
properties, goodwill, intangible assets, and other assets
The Company tests assets (mainly properties, idle
assets, rentable assets, goodwill, intangible assets
and equity investments under the equity method) and
cash-generating units (CGUs) for impairment on each
balance sheet date. If impairment is determined, the
Company estimates the recoverable amounts of assets
or CGUs. An impairment loss should be recognized
whenever the recoverable amount of the assets or the
CGU is below the carrying amount.
If asset impairment loss (excluding goodwill) is
reversed, the increase in the carrying amount resulting
from reversal is credited to current income. However,
loss reversal should not be more than the carrying
amount (net of depreciation or amortization) had the
impairment loss not been recognized.
Goodwill is tested for impairment annually, or more
frequently if events indicate goodwill impairment.
Impairment loss is recorded if the book value exceeds
value in use. No recording of a subsequent recovery in fair
value of goodwill is allowed.
Corporate Bonds Payable
The net carrying amount of overseas convertible
bonds at the date of conversion is credited to the
appropriate capital accounts (capital stock equal to par
value, with the balance credited to capital surplus) upon
bond conversion.
Reserve for Losses on Breach of Purchase
Commitment
Securities firms engaging in brokerage trading of
marketable securities are required to provide 0.0028%
of the monthly transaction volume as the default loss
provision (part of other liabilities) until the balance
of this provision reaches $200,000 thousand. This
61
provision may only be used to offset default loss or
other loss approved by the Securities and Futures
Bureau (SFB) of the ROC.
Reserve for Losses on the Sale of Bonds
Under the regulations of the SFB, reserve for
losses on the sale of bonds (part of other liabilities) is
computed at 10% of net gain on the sale of bonds until
the balance of the reserve reaches the amounts required
under relevant regulations. This reserve should only be
used to offset actual losses on the sale of bonds.
Pension Costs
The Company has two types of pension plans:
Defined benefit and defined contribution.
For the defined benefit plan, the Company
recognizes pension costs based on actuarial calculations,
and unrecognized net transitional asset or obligation
is amortized over 15 to 31 years. For the defined
contribution plan, the Company recognizes pension
costs based on the Company’s contributions to the
employees’ individual pension accounts during the
employees’ service periods.
When a defined benefit plan is amended, the prior
service costs should be amortized on a straight-line
basis over the average period from the plan effective
or amendment date until the benefits become vested.
When the benefits are vested immediately following
changes in the defined benefit plan, the Company
should recognize the prior service cost as expense
immediately.
Treasury Stock
Shares reacquired as treasury stock are carried at cost
and presented as a deduction to arrive at stockholders'
equity. When the treasury shares are reissued to the
employees, the difference between the reissue price and
acquisition cost will be credited or debited to “capital
surplus - treasury stock” If this capital surplus is not
enough for ”debiting purposes, the shortfall is charged
to unappropriated retained earnings.
Recognition of Revenue
Interest revenue is recorded on an accrual basis.
Under MOF regulations, no interest revenue is
recognized on loans and other credits extended by the
Company that are classified as overdue loans. The
interest revenue on those loans is recognized upon
collection of the loans and credits.
The unpaid interest on rescheduled loans should be
recorded as deferred revenue, and the paid interest is
recognized as interest revenue.
Service fees are recorded when a major part of the
earnings process is completed and revenue is realized.
Other operating revenue is recorded on an accrual
basis when a major part of the earnings process is
completed.
Income Tax
Contingencies
A loss is recognized when it is probable that an
asset has been impaired or a liability has been incurred
and the amount of loss can be reasonably estimated. A
footnote disclosure is made for a situation that might
result in a loss if loss is possible but the amount of
loss cannot be reasonably estimated.
Foreign Currency Transactions
Foreign-currency transactions of ESFHC and
ESIB are recorded in New Taiwan dollars at the
rates of exchange in effect when the transactions
occur. Losses or gains resulting from the application
of prevailing exchange rates when foreign-currency
assets and liabilities are settled, are credited or
charged to income in the period of settlement. The
period-end balances of foreign-currency monetary
assets and liabilities are restated at the prevailing
exchange rates, and the resulting differences are
recorded as credits or charges to current income.
E.SUN Bank records foreign-currency transactions
in the respective currencies in which these are
denominated. Every month-end, foreign currency
income and expenses are translated into New Taiwan
dollars at the closing exchange rates announced by the
Central Bank of China (CBC). On balance sheet date,
monetary assets and liabilities denominated in foreign
currencies are reported using the CBC closing exchange
rates, and exchange differences are recognized in the
income statement.
Unrealized exchange differences on nonmonetary
financial assets (investments in equity instruments) are
a component of the change in their entire fair value. For
a nonmonetary financial assets and liabilities classified
as financial instruments measured at fair value through
profit or loss, unrealized exchange differences are
recognized in the income statement. For nonmonetary
financial instruments that are classified as availablefor-sale, unrealized exchange differences are recorded
directly under stockholders’ equity until the asset is
sold or becomes impaired. Nonmonetary financial
instruments that are classified as carried at cost are
recognized at the exchange rate on the transaction date.
E.SUN Bank translates overseas branches’ financial
statements at the following rates: Asset and liabilities the CBC closing exchange rates on balance sheet date;
and income and expenses - the average exchange rate
in the year. Translation difference net of income tax is
recorded as “cumulative translation adjustments” under
stockholders’ equity.
Provision for income tax is based on inter-period
and intra-period tax allocation. The tax effects
of deductible temporary differences, unused tax
credits, operating loss carryforwards and debit of
stockholders’ equity adjustments are recognized
as deferred income tax assets, and those of taxable
temporary differences and credit of stockholders’
equity adjustments are recognized as deferred income
tax liabilities. Valuation allowance is provided for
deferred income tax assets that are not certain to be
realized.
ESFHC and its subsidiaries elected to file a
consolidated tax return from 2003. The difference
between consolidated income tax payable and the
sum of income tax payable of the entities included
in the consolidated tax return is considered as a tax
consolidation adjustment which is shown on ESFHC’s
income tax expense or benefit. Any distribution of
cash payments and receipts among the consolidated
group members is recorded as receivable or payable.
Income tax on interest in short-term negotiable
instruments or special-purpose trust beneficiary
securities, which is levied separately, and any
adjustment of income taxes of prior years are added
to or deducted from the current year’s income tax
expense.
Tax credits for personnel training and stock
investments are recognized in the current period.
According to the Income Tax Law, income taxes
(10%) on undistributed earnings generated annually
since 1998 are recorded as expense in the year when
the stockholders resolve to retain the earnings.
Reclassifications
Certain accounts for the year ended December 31,
2007 had been reclassified to be consistent with the
presentation of the consolidated financial statements for
the year ended December 31, 2008.
3. ACCOUNTING CHANGES
Effective January 1, 2008, under an explanation
issued by the Accounting Research and Development
Foundation of the ROC, the Company should recognize
bonus to employees and remuneration to directors
and supervisors as compensation expenses. These
bonus and remuneration were previously recorded as
appropriations from earnings. This accounting change
decreased the Company’s consolidated net income in the
year ended December 31, 2008 by $32,835 thousand and
basic earnings per share after income tax by NT$0.01.
Effective January 1, 2007, the Company adopted the
newly released ROC Statement of Financial Accounting
Standards (“Statement”) No. 37 - “Accounting for
Intangible Assets” and related revisions of previously
released Statements. The Company’s management
believes this change had no significant effect on the
consolidated financial statements.
62
4.CASH AND CASH EQUIVALENTS
December 31
2007
2008
Cash on hand
Checks for clearing
Due from banks
Cash equivalents - earnings ratio is 1.95%-1.98%
$ 5,644,606
4,146,969
1,782,353
-
$ 5,295,590
2,382,162
1,097,214
184,185
$ 8,959,151
$ 11,573,928
5.DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS
December 31
2007
2008
Deposit reserves - account A
Deposit reserves - account B
Reserves for deposits - foreign currency deposits
Deposits in the Central Bank
Call loans to banks
Deposits in the Central Bank - other
$
$ 10,164,082
16,609,105
98,322
53,700,000
7,581,740
817,147
8,120,297
15,066,938
812,100
6,841,257
830,519
$ 31,671,111
$ 88,970,396
As required by law, the deposit reserves are calculated by applying the prescribed rates to the average monthly
balances of various types of deposit accounts held by E.SUN Bank. The deposit reserves - account B is subject to
withdrawal restrictions, but deposit reserves - account A and foreign-currency deposit reserves may be withdrawn
anytime.
6.FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31
2008
Treasury bills
Commercial paper
Negotiable certificates of deposit
Interest rate swap contracts
Bank debentures
Currency swap contracts
Convertible corporate bonds
Operating securities - dealing department
Beneficiary certificates
Cross-currency swap contracts
Currency option contracts
Government bonds
Overseas bonds
Non-deliverable forward contracts
Credit default swap contracts
Corporate bonds
Forward contracts
Foreign-currency margin contracts
Forward commodity contracts
Listed stock - domestic
Futures exchange margins
Operating securities - underwriting department
Bank acceptances
Operating securities - hedge
Total return swap contracts
63
$
11,712,460
10,687,757
8,815,462
3,333,205
1,112,074
920,209
770,149
731,543
727,597
641,915
619,596
422,893
420,149
246,859
89,687
60,140
40,250
37,057
21,091
20,600
18,650
18,000
8,758
41,476,101
2007
$
1,965,026
12,213,708
35,097,731
1,099,759
98,281
374,229
1,069,588
1,834,104
323,111
275,516
1,016,273
736,778
165,363
162,109
60,680
122,893
72,476
10,460
295,777
23,922
13,616
27,135
21,886
2,401
57,082,822
December 31
Financial assets designated at fair value through profit or loss
Bank debentures
Corporate bonds
Structured products
Sold equity securities with interest receivable
Separate trading of registered interest and principal of securities
Overseas certificates of deposit
Overseas bonds
2008
16,908,298
12,773,164
3,017,708
202,091
32,901,261
$
20,292,346
17,007,089
3,010,684
122,192
1,147,698
942,361
124,609
42,646,979
$
74,377,362
$
99,729,801
Forward contracts
Stock warrants issued liabilities
Financial liabilities designated at fair value through profit or loss
$
3,343,197
695,827
516,840
466,315
207,379
127,332
29,148
21,091
608
5,407,737
$
877,117
201,489
381,250
418,640
66,099
32,365
4,766
10,460
969
2,474
1,995,629
Bank debentures (Note 23)
Structured products
Corporate bonds payable (Note 23)
$
12,079,765
9,181,216
4,774,886
26,035,867
31,443,604
$
2007
21,259,323
7,578,892
8,664,555
37,502,770
$ 39,498,399
As of December 31, 2008 and 2007, some of the securities which amounted to $6,830,100 thousand and
$5,788,200 thousand (face value), respectively, had been sold under repurchase agreements.
E.SUN Bank engages in derivative transactions mainly to accommodate customers’ needs, manage its exposure
positions and hedge its exchange rate and interest rate exposures as well as its credit risks as a bond holder.
The contract (nominal) amounts of derivative transactions by ESFHC as of December 31, 2008 and 2007 were
as follows:
December 31
2007
2008
$
34,740,440
26,083,200
9,045,624
$
17,346,456
12,993,600
7,568,772
64
The contract (nominal) amounts of derivative transactions by E.SUN Bank as of December 31, 2008 and 2007
were as follows:
December 31
2007
2008
$
Forward contracts
Total return swap contracts
Commodity option contracts
234,935,065
50,645,033
33,946,691
17,810,654
15,015,759
6,499,979
2,594,539
469,181
247,017
-
$
127,135,548
43,273,301
37,131,266
22,674,076
12,607,952
13,214,822
3,015,264
992,222
246,882
324,840
38,526
Information of stock warrants issued by E.SUN Securities was as follows:
December 31, 2007
Less : Repurchase of stock warrants
$
20,000
17,526
2,474
$
a.The stock warrants issued by E.SUN Securities were summarized as follows:
Price at
Issuance
(in New
Taiwan
Dollars)
Stock Warrants
E.SUN 08
$1.985
E.SUN 09
0.590
E.SUN 10
1.885
Less : Gains on changes
in market value of stock
warrants liabilities
Issures of
Underlying Securities
China Steel Corp.
Media Tek Inc.
Chi Mei Optoelectronics Corp.
Market
Price
(in New
Taiwan
Dollars)
$0.28
0.04
0.68
December 31, 2007
Unit Issued Issued Amount
20,000,000
20,000,000
20,000,000
Market value
$
$
Gains on
Changes in
Market Value
of Stock
Warrants
Liabilities
in 2007
39,700
11,800
37,700
(69,200)
$
$
34,100
11,000
24,100
69,200
20,000
The information of stock warrants was summarized as follows:
Stock Warrants
E.SUN 08-10
65
Type
American style,
issued out of
the money
and with reset
agreement
Expiry Date
Six months after
listed
Exercise Date
From listed date to
expiry date
Settlements
Cash or securities
chosen by E.SUN
Securities
b.Details of repurchase of stock warrants issued were as follows:
December 31, 2007
E.SUN 08
E.SUN 09
E.SUN 10
Less : Losses on changes in market value of stock warrants
repurchased
Units
Repurchase
Amounts
19,299,000
$19,236
16,959,000
17,233
14,760,000
5,016
(23,959)
$17,526
Market value
c. Gains (losses) on stock warrants issued were as follows::
2008
$
2007
447,800
2,400
$
69,200
(44,071)
(23,959)
(433,951)
-
Gains on stock warrants issued, net
$
Gains on changes in market value
Gains on expiry of warrants
Stock warrants repurchased
Losses from disposal
Losses from changes in market value
$
16,249
1,170
As of December 31, 2008 and 2007, there were no unsettled futures contracts and TAIEX option contracts held
by E.SUN Securities. The futures exchange margins receivable held by E.SUN Securities as of December 31,
2008 and 2007 were $2,040 thousand and $11,142 thousand, respectively.
7.SECURITIES PURCHASED UNDER RESELL AGREEMENTS
Securities acquired under resell agreements amounted to $353,252 thousand and $295,975 thousand as of
December 31, 2008 and 2007, respectively, and will be sold for $353,365 thousand and $296,388 thousand.
8.RECEIVABLES, NET
December 31
2008
Credit cards
Accrued interest
Margin loans receivable
Acceptances
Receivables on overdue securities
Accounts receivable
Tax refundable
Accrued income
Others
$
Less:Allowance for possible losses
$
27,092,733
2,221,461
1,687,220
750,481
494,857
448,565
427,817
100,950
338,363
33,562,447
954,965
32,607,482
2007
$
$
24,201,582
2,386,014
4,088,588
1,227,243
279,632
323,885
100,233
376,448
32,983,625
357,325
32,626,300
66
The changes in allowance for credit losses are summarized below:
December 31
Balance, January 1
Effects of changes in consolidated subsidiary
Provisions
Write-offs
Recovery of written-off credits
Effects of exchange rate changes
2008
2007
$
$
408,634
(38,792)
1,621,917
(1,725,994)
91,555
5
357,325
1,880,965
(1,423,367)
122,400
17,642
Balance, December 31
$
$
954,965
9.DISCOUNTS AND LOANS, NET
357,325
December 31
2008
Loans
Short-term
Medium-term
Long-term
Overdue loans
Bills negotiated and discounts
2007
$ 100,956,493
104,811,265
306,296,148
3,897,226
1,157,676
517,118,808
2,470,045
$ 514,648,763
$
93,512,386
129,963,895
308,346,338
3,679,605
1,010,035
536,512,259
3,567,281
$ 532,944,978
Less : Allowance for possible losses
As of December 31, 2008 and 2007, the loan and credit balances, for which accrual of interest revenues was
discontinued, amounted to $3,679,605 thousand and $3,897,226 thousand, respectively. The unrecognized interest
revenues on these loans and credits amounted to $132,289 thousand and $132,636 thousand in 2008 and 2007,
respectively.
In 2008 and 2007, the Company carried out legal procedures required before writing off certain credits.
The details of and changes in allowance for credit losses are summarized below:
2008
Specific Risk
Balance, January 1
Provisions
Write-offs
$
$
1,958,393
1,123,750
(817,592)
234,421
-
General Risk
$
511,652
531,504
25,153
$
2,470,045
1,655,254
(817,592)
234,421
25,153
$ 1,068,309
$
3,567,281
2,498,972
Total
2007
Specific Risk
Balance, January 1
Provisions (reversal)
Write-offs
67
$ 1,519,867
1,157,077
(982,804)
264,253
$ 1,958,393
General Risk
Total
$
997,874
(485,107)
(1,115)
$ 2,517,741
671,970
(982,804)
264,253
(1,115)
$
511,652
$ 2,470,045
The details of allowance for bad-debt expenses in 2008 and 2007 were as follows:
2008
1,655,254
1,880,965
153
$ 3,536,372
Provisions for possible losses on discounts and loans
Provisions for possible losses on receivables
Provisions (reversal) of reserve for guarantees
2007
$ 671,970
1,621,917
(119,180)
$ 2,174,707
$
10.AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET
December 31
2008
$
$
26,450,843
5,934,364
5,096,380
4,270,565
1,003,338
129,190
42,884,680
$
21,359,024
4,640,663
5,244,857
3,260,416
2,274,827
258,618
688,288
351,919
$ 38,078,612
Government bonds
Corporate bonds
Beneficiary securities under securitization
Bank debentures
Listed stock
Separate trading of registered interest and principal of
securities
Overseas bonds
2007
The Company recognized an impairment loss of $185,529 thousand and $45,152 thousand on available-for-sale
financial assets in 2008 and 2007, respectively.
As of December 31, 2008 and 2007, the available-for-sale financial assets amounted $14,490,400 thousand and
$10,731,100 thousand (face value), respectively, had been sold under repurchase agreements.
11.FINANCIAL ASSET SECURITIZATION
E.SUN Bank entered into four trust contracts with The Hong Kong and Shanghai Banking Corporation Limited
(HSBC, the trustee) and transferred E.SUN Bank’s rights and risks on bond holdings. These contracts amounted
to $10,060,287 thousand and $18,340,853 thousand in the fourth quarter of 2005 and $8,960,000 thousand
and $18,164,571 thousand in the second quarter of 2007 to the trustee in accordance with the Financial Asset
Securitization Act. Upon the transfer, the trustee acquired the bondholder’s rights from E.SUN Bank, and the
trustee issued beneficiary securities named E.SUN CBO 2005-1, E.SUN CBO 2005-2, E.SUN CBO 2007-1 and
E.SUN CBO 2007-2 to general investors and turned over to E.SUN Bank the funds raised on securities issuance
along with the retained beneficiary securities (E.SUN CBO 2005-1 is Type D; E.SUN CBO 2005-2 is Type C) and
the sold equity securities with interest receivable.
The issuance period for E.SUN CBO 2005-1, amounting to $10,050,000 thousand, is between October 19, 2005
and July 20, 2012. Interest is payable quarterly. The beneficiary securities are categorized as follows:
Type of Beneficial Security
Repayment Priority
A
B
C
D
First
Second
Third
Fourth/remainder
Issued Amount
Interest Rate
$8,750,000
800,000
450,000
50,000
1.825%
2.050%
1.925%
None
68
The issuance period for E.SUN CBO 2005-2, amounting to $18,341,000 thousand, is between December 28,
2005 and September 20, 2014. The beneficiary securities are categorized as follows:
Repayment Priority
A1
A2
A3
B
C
First
First
First
Second
Third/remainder
Issued Amount
Interest Rate
Percentage to Total Amount Issued
$2,500,000
6,215,000
5,774,349
1,908,281
1,943,370
0%
0%
0%
0%
None
95.36
90.08
83.60
82.03
The issuance period for E.SUN CBO 2007-1, amounting to $9,000,000 thousand, is between May 16, 2007 and
March 15, 2047. The beneficial securities are categorized as follows:
Repayment Priority
A1
B1
B2
B3
First
Second
Third
Fourth/remainder
Issued Amount
Interest Rate
$4,000,000
2.10%
4,400,000
2.45%
560,000
3.10%
40,000 12% and residual
100
100
100
100
The issuance period for E.SUN CBO 2007-2, amounting to $19,650,000 thousand, is between June 22, 2007
and February 10, 2016. Interest is payable quarterly. The beneficial securities are categorized as follows:
Repayment Priority
A1
A2
B
C
D
First
Second
Third
Fourth
Fifth
Issued Amount
Interest Rate
$8,800,000
5,940,000
1,720,000
990,000
2,200,000
None
None
3.0%
4.0%
Residual
95.63
83.65
100.00
100.00
100.00
E.SUN Bank is the servicer of E.SUN CBO 2005-1, E.SUN CBO 2005-2 and E.SUN CBO 2007-1. Future
service income on these contracts is expected to cover all service costs; thus, no service asset or service liability
is recognized. E.SUN Bank’s retained beneficiary securities ensure that E.SUN Bank will retain its liquidity after
the investor collects its income based on the trust contract. If the security issuers cannot disburse funds upon
security maturity, the investors and the trustee have no right of recourse on the E.SUN Bank’s other assets. In
addition, the investors’ rights take precedence over the rights on the retained beneficiary securities. The value of
the retained beneficiary securities will be affected by the credit risk of the bond issuers, interest rate risk, etc.
a.Key assumptions used in measuring retained interests:
E.SUN CBO 2005-1
December 31
2007
2008
Projected advance reimbursement rate
Projected credit loss rate
Discount rate for residual cash flows
69
0%
0%
2.619%
0%
0%
2.993%
E.SUN CBO 2005-2
December 31
2008
2007
0%
2%
1.234%
0%
2%
2.545%
All the bond issuers or guarantors in the asset pool of E.SUN CBO 2005-1 have attained the credit rating of twA
or above, and during the past nine years, debtors with credit above twBBB never breached the contracts according
to the Taiwan Ratings 2006 and 2007 research. Thus, the Company’s projected credit loss rate will be zero.
b.Sensitivity analysis:
As of December 31, 2008 and 2007, respectively, the key assumptions and the sensitivity of the current fair
value of residual cash flows to the immediate 10% and 20% adverse changes in these assumptions were as follows:
E.SUN CBO 2005-1
December 31
2007
2008
$ 55,625
0%
-
$ 53,582
0%
-
$ 4,462,786
2%
(127,170)
(252,815)
$ 4,283,388
2%
(120,565)
(230,634)
Carrying amount of retained interests
Projected credit loss rate (annual)
Impact on fair value of 10% adverse change
Impact on fair value of 20% adverse change
E.SUN CBO 2005-2
December 31
2008
2007
c.As of December 31, 2007, there had been no credit loss on the securitized bonds; thus, the expected static pool
credit loss rate is equal to projected credit loss rate.
d.Cash flows
Cash flows resulting from the securitization were as follows:
Proceeds of the
sale of bonds
Service income
E.SUN CBO 2005-1
2007
2008
$
1,868
$
1,995
E.SUN CBO 2005-2
2007
2008
$
3,375
$
E.SUN CBO 2007-1
2007
2008
3,668
$
1,765
$ 8,960,000
1,219
E.SUN CBO
2007-2
2007
$ 18,164,571
-
12.HELD-TO-MATURITY FINANCIAL ASSETS, NET
2008
Government bonds
Corporate bonds
Bank debentures
Beneficial securities under securitization
December 31
2007
$ 6,803,021
3,638,741
2,974,113
825,624
$ 6,908,187
4,449,878
1,946,701
1,085,149
$ 14,241,499
$ 14,389,915
The Company recognized an impairment loss of $63,079 thousand and $28,733 thousand on held-to-maturity
financial assets in 2008 and 2007, respectively.
13.EQUITY INVESTMENTS UNDER THE EQUITY METHOD, NET
E.SUN Finance & Leasing Corp.
December 31, 2007
Carrying Value
% of Ownership
$ 130,259
98.99
70
In June 2008, E.SUN Finance & Leasing Co. began to undergo liquidation, which was completed in September 2008.
The financial statements as of and for the year ended December 31, 2007 of E.SUN Finance & Leasing Co. on which
the calculation of investment carrying value and the related income was based had been audited, but this investee’s
financial statements as of and for the nine months ended September 30, 2008 need not be audited because of its liquidation
in September 2008. The investment carrying value as of September 30, 2008 was based on the liquidation results. On this
investment, there was a net gain of $5,359 thousand and a net loss of $40,379 thousand for the years ended December 31,
2008 and 2007, respectively.
14.OTHER FINANCIAL ASSETS, NET
Debt instruments with no active market
Excess reserve trust assets for E.SUN CBO 2005-1
Restricted certificates of deposit
Others
December 31
2008
$ 6,799,795
$
1,677,874
570,746
65,548
80,460
$ 9,194,423
$
2007
6,933,668
1,463,390
549,255
80,679
9,026,992
Financial assets carried at cost were unlisted common stocks with no quoted market prices in an active market
and with the fair value that cannot be reliably measured. Thus, these assets are measured at cost. The impairment
loss recognized in 2008 and 2007 was $6,953 thousand and $23,455 thousand, respectively.
The details of debt instruments with no active market were as follows:
Beneficiary securities under securitization
Corporate bonds
Bank debentures
Credit-linked products - host contract
Preferred stock
$
$
December 31
2008
4,647,051
$
1,868,118
163,870
100,000
20,756
6,799,795
$
2007
4,699,412
1,802,862
319,394
100,000
12,000
6,933,668
15.PROPERTIES, NET
Cost
Land
Buildings
Computers
Transportation equipment
Miscellaneous equipment
2008
$
Less: Accumulated depreciation
Buildings
Computers
Transportation equipment
Miscellaneous equipment
7,258,549
5,422,079
2,793,735
453,915
1,405,458
17,333,736
$
1,080,001
2,041,042
231,749
793,535
4,146,327
13,187,409
95,632
Prepayments
71
December 31
$
13,283,041
2007
6,938,835
5,017,058
2,659,179
387,920
1,231,793
16,234,785
853,606
1,751,601
190,505
649,114
3,444,826
12,789,959
124,562
$
12,914,521
16.GOODWILL AND INTANGIBLE ASSETS, NET
2008
Goodwill
Computer software
Deferred pension cost
Business operation rights
$
December 31
2007
3,662,701
374,845
2,187
-
$
3,662,701
260,559
2,258
10,500
$ 4,039,733
$
3,936,018
17.OTHER ASSETS, NET
Refundable deposits
Rentable assets, net (less accumulated depreciation amounting to $57,511 thousand in 2008
and $49,932 thousand in 2007 and less accumulated impairment amounting to $121,641
thousand in 2008 and $152,747 thousand in 2007)
Operation deposits and settlement funds
Idle assets, net (less accumulated depreciation amounting to $6,522 thousand in 2008 and
$19,663 thousand in 2007 and less accumulated impairment amounting to $41,439
thousand in 2008 and $45,331 thousand in 2007)
Prepaid expenses
Securities brokerage accounts, net
Deferred charges, net
Deferred income tax assets, net
Foreclosed collaterals, net
2008
$
December 31
2007
2,172,352
$ 2,454,129
1,863,607
449,412
241,396
229,746
29,750
7,341
2,584
-
1,945,068
426,948
470,650
174,668
45,768
7,873
247,062
2,400
$
4,996,188
$
In testing assets for impairment, the Company defined each branch or operating unit as a cash-generating
unit (CGU), except for rentable assets and idle assets using net fair value as recoverable amount. Goodwill was
allocated to branches or operating units (CGUs with allocated goodwill) resulting from the acquisition of the
Kaohsiung Business Bank Co., Ltd. The recoverable amount of a CGU was determined at its value in use. The
Company estimates the next five years’ cash flows of a CGU as a going-concern entity on the basis of each CGU’s
operations or business cycle, etc., and this estimate is used to determine the value in use of each CGU. The
discount rates for future cash flows of CGUs with allocated goodwill were 9.67% and 11.68% as of December 31,
2008 and 2007, respectively. No impairment losses were incurred after the testing assets for impairment.
5,774,566
There were no indications that the value in use of rentable assets, idle assets and foreclosed collaterals
significantly exceeded net fair value, the net fair value should be used as the recoverable amount. Thus, the
Company designated real estate appraisal firms and the Company’s appraisal center to valuate these assets. As a
result, the Company recognized a net reversal of impairment losses of $34,703 thousand and on impairment loss
of $12,249 thousand in 2008 and 2007, respectively.
The Company recognized an impairment loss of $82 thousand and $9,869 thousand on refundable deposits in
2008 and 2007, respectively.
72
18.DUE TO THE CENTRAL BANK AND OTHER BANKS
2008
Deposits from Chunghwa Post Co., Ltd.
Call loans from banks
Due to banks
Bank overdraft
Due to the Central Bank
$
December 31
2007
12,565,901
5,955,280
2,399,181
198,308
49,550
$
12,744,789
17,387,111
1,793,142
501,413
89,996
$ 21,168,220
$
32,516,451
19.COMMERCIAL PAPER ISSUED, NET
The face value of commercial paper issued was $1,775,000 thousand and the annual discount rate was
1.78%-2.43% as of December 31, 2007. These commercial papers were guaranteed and accepted by financial
institutions.
20.SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Securities sold under repurchase agreements amounted $23,161,468 thousand and $17,631,985 thousand as
of December 31, 2008 and 2007, respectively, would be repurchased for $23,193,042 thousand and $17,667,459
thousand.
21.PAYABLES
2008
Checks for clearing
Accrued interest
Acceptances
Accrued expenses
Collections payable
Tax payable
Guaranteed price deposits received from securities borrowers
Deposits received from securities borrowers
Others
$
December 31
2007
4,146,969
2,702,460
749,342
656,769
484,529
292,589
151,115
136,844
940,534
$
2,382,162
2,558,382
1,232,773
525,554
283,420
312,471
152,858
140,115
891,096
$ 10,261,151
$
8,478,831
22.DEPOSITS AND REMITTANCES
Deposits:
Checking
Demand
Savings - demand
Time
Savings - time
Remittances
73
2008
$
December 31
7,636,697
93,898,216
137,574,047
189,607,328
14,407,300
215,766,864
100,149
$ 658,990,601
$
2007
7,416,274
78,663,560
131,585,967
167,038,540
10,898,900
193,715,311
122,779
$ 589,441,331
23.BONDS PAYABLE
2008
Bank debentures
ESFHC's unsecured corporate bonds - first issue in 2005
ESFHC's unsecured corporate bonds - first issue in 2007
December 31
2007
$ 27,300,000
5,000,000
500,000
$ 25,600,000
5,000,000
500,000
$ 32,800,000
$ 31,100,000
2007
2008
Subordinated bonds issued on August 6, 2001; 4.2% interest, payable annually; principal
repayable in five installments starting in the third year from the issue date and final
installment due at the end of the seventh year.
Two types of bonds issued on October 9, 2003; interest rate at 3.8% for the first year, 5.0%
minus six months’ London Interbank Offered Rate for U.S. dollars (6M LIBOR) for the
second to the fifth year and 180 days’ interest rate for commercial paper (stated below)
starting from October 9, 2005 for types A and B bonds, with all interest rates not to fall below
0% and interest payable semiannually; principal due on the maturity date (5 years after the
issue date).
Subordinated bonds issued on September 16, 2004; 2.95% interest, payable semiannually;
principal repayable on maturity date (5.5 years after the issue date).
Subordinated bonds issued on December 17, 2004; 2.80% interest, payable semiannually;
principal repayable on maturity date (5.5 years after the issue date).
Bonds issued on June 24, 2005; 2.75% interest, payable annually; principal repayable on
maturity date (10 years after the issue date).
Subordinated bonds issued on October 11, 2005; interest rate at the one-year time savings
deposit floating rate of Chunghwa Post Co., Ltd. plus 0.425%, payable quarterly; principal
repayable on maturity (7 years after the issue date).
Subordinated bonds issued on October 19, 2005; 2.725% interest, payable annually; principal
repayable on maturity date (7 years after the issue date).
Subordinated bonds issued on November 4, 2005; interest rate at the one-year time savings
deposit floating rate of Chunghwa Post Co., Ltd. plus 0.4%, payable annually; principal
repayable on maturity (7 years after the issue date).
Two types of subordinated bonds issued on August 24, 2006; interest rate at (a) 90 days’ interest
rate for commercial paper plus 0.25% for type A bond; and (b) 2.60% interest for type B
bond; interest payable annually for both bond types; principal repayable on maturity (7 years
after the issue date).
Two types of subordinated bonds issued on June 29, 2007; interest rate at (a) the one-year time
savings deposit floating rate of Bank of Taiwan plus 0.5% for type A bond; and (b) 90 days’
interest rate for commercial paper plus 0.39% for type B bond; interest payable annually for
both bond types; principal repayable on maturity (7 years after the issue date).
Subordinated bonds issued on February 15, 2008; 3.10% interest, payable annually; principal
Subordinated bonds issued on October 24, 2008; 3.15% interest, payable annually; principal
$
-
$
400,000
-
500,000
1,300,000
3,700,000
5,000,000
2,000,000
1,400,000
1,600,000
1,300,000
3,700,000
5,000,000
2,000,000
1,400,000
1,600,000
6,000,000
6,000,000
3,700,000
2,300,000
300,000
3,700,000
-
$
On December 15, 2005, ESFHC made a first issue of unsecured subordinated corporate bonds with aggregate
face value of $5,000,000 thousand and par value of $10,000 thousand. The bond will mature in seven years, and
principal is repayable on maturity. Interest is payable quarterly at the floating rate for the one-year time savings
deposit of Chunghwa Post Co., Ltd. plus 0.4%.
On December 13, 2007, ESFHC made a first issue of unsecured subordinated corporate bonds with aggregate
face value of $500,000 thousand and par value of $10,000 thousand. The bond will mature in seven years, and
principal is repayable on maturity. Interest is payable annually at 90 days’ interest rate for commercial paper
(started below) plus 0.6%.
December 31
Details of bank debentures issued by E.SUN Bank were as follows:
27,300,000
$
25,600,000
(Concluded)
74
The details of corporate bonds designated at fair value through profit or loss were as follows:
2008
ESFHC overseas unsecured convertible bonds in 2008
ESFHC overseas unsecured convertible bonds in 2006
a.Redemption method
ESFHC will redeem the Bonds on the maturity date at
a price equal to 100% of the outstanding principal
amount unless the Bonds had been previously redeemed,
repurchased and canceled or converted.
1)Redemption at the option of ESFHC
a)At any time on or after March 17, 2008 and prior
to February 17, 2009, ESFHC may redeem all the
Bonds at one time or make piecemeal redemptions
at 100% of the principal amount if the closing
price of the shares, translated into U.S. dollars at
the prevailing rate on the issue date, for at least 20
out of 30 consecutive trading days immediately
preceding the date of such notice of redemption, is
at least 130% of the conversion price then in effect,
translated into U.S. dollars at the fixed exchange
rate.
b)ESFHC may redeem all the Bonds at one time, i.e.,
not piecemeal, at 100% of the principal at any time
if at least 90% of the principal of the Bonds had
already been redeemed, repurchased and canceled
or converted.
c)ESFHC may redeem all the Bonds at one time,
i.e., not piecemeal, at 100% of the principal at any
time if any changes in the ROC taxation would
require ESFHC to gross up payment of interest or
premium.
2)Redemption at the options of holders
a)Each holder of the Bonds has the right to require
ESFHC to redeem, all or part of the Bonds only on
March 17, 2008 at 100% of the principal unless the
Bonds had been previously redeemed, repurchased
and canceled or converted.
75
2007
$
4,556,616
4,556,616
218,270
$
8,565,515
8,565,515
99,040
$
4,774,886
$
8,664,555
Valuation adjustment
On March 17, 2006, ESFHC issued US$400,000
thousand zero coupon overseas convertible bonds
(the "Bonds") with par of US$100,000 or an integral
multiple thereof. The terms of the Bonds are as
follows:
December 31
b)Each holder has the right to require ESFHC to buy
all or a portion of the holder’s Bonds at 100% of
the principal amount (a) if the shares cease to be
listed or admitted for trading on the Taiwan Stock
Exchange for at least five consecutive trading
days or (b) there is change of control over ESFHC
(including but not limited to a change of half of the
members of ESFHC’s board of directors.)
b.Maturity date
The maturity period is three years after the issuance.
The Bonds were issued on March 17, 2006; thus, their
maturity is on March 17, 2009.
c.Pledged
Negative.
d.Conversion period
The bondholder can convert the Bonds to ESFHC’s
stock for the period starting on or after March 27, 2006 up to
March 7, 2009. The holders of the Bonds, however, will not
be able to effect conversions into shares during any closed
period. A closed period means (i) 60 days before the date of
any general stockholders’ meetings; (ii) 30 days before the
date of any special stockholders’ meetings; (iii) the period
from the date following the third trading day before the date
of ESFHC’s notification to the Taiwan Stock Exchange of
the record date for the determination of stockholders entitled
to the receipt of dividends, subscription of new shares due
to capital increase or appropriation of other benefits and
bonuses; and (iv) such other periods during which ESFHC
may be required to close its stock transfer books under the
ROC laws and regulations.
e.Conversion price
1)The initial conversion price is (i) NT$21.21 with
respect to any conversion from March 27, 2006 to
March 31, 2006 per share and (ii) NT$24.36 with
respect to any conversion after April 2, 2006 to
March 7, 2009 per share. The conversion price
in U.S. dollars is based on the exchange rate of
US$1=NT$32.434. The conversion price is subject
to adjustment based on certain terms of the related
As of December 31, 2008, all of the Bonds had
been converted or redeemed.
On July 24, 2008, ESFHC issued US$200,000
thousand worth of overseas convertible bonds
(the “Bonds”) with par of US$100,000 or an
integral multiple thereof. Interest is payable
semiannually at 2.3% from July 24, 2008 to July
24, 2013 and at 0% after July 24, 2013. The
terms of the Bonds are as follows:
a.Redemption method
ESFHC will redeem the Bonds on the maturity date at
a price equal to 100% of the outstanding principal
amount unless the Bonds had been previously redeemed,
repurchased and canceled or converted.
1)Redemption at the option of ESFHC
ESFHC may redeem all the Bonds at one time,
i.e., not piecemeal, at 100% of the principal plus
a premium (the “Early Redemption Amount”) at
any time if any changes in the ROC tax laws or
regulations would require ESFHC to gross up the
payment of interest or premium.
2)Redemption at the options of holders
a)Each holder of the Bonds has the right to require
ESFHC to redeem all or part of the Bonds only on
July 24, 2013 at 110% of the principal unless the
Bonds had been previously redeemed, repurchased
and canceled or converted.
b)Each holder has the right to require ESFHC to buy
all or a portion of the holder’s Bonds at the Early
Redemption Amount if (a) the shares cease to be
listed or admitted for trading on the Taiwan Stock
Exchange for at least five consecutive trading
days ; (b) there is a change of control over ESFHC
(including but not limited to a change of half of
the members of ESFHC’s board of directors.) ; (c)
ESFHC fails to maintain an issuer rating at or above
at least one of the following levels: (i) BBB- rating
by Standard & Poor’s Corp.; (ii) Baa3 rating by
Moody’s Investors Service; (iii) BBB- rating by Fitch
Inc.; (iv) twBBB- rating by Taiwan Ratings Corp.;
(v) BBB- (twn) rating by Fitch International’s Taiwan
subsidiary; or (vi) Baa3.tw rating by Moody’s Credit
Rating Co., Ltd., and this failure continues for 60
consecutive days; or (d) the capital adequacy ratio of
ESFHC, E.SUN Bank or E.SUN Securities decreases
to a level that is below the minimum standard set
by the relevant regulatory authorities and remains at
such a level for 60 consecutive days.
b.Maturity date
The maturity period is 10 years after Bond issuance.
Since Bonds were issued on July 24, 2008, their maturity is
on July 24, 2018.
c.Pledged
indenture. The adjusted conversion price is
NT$23.82 per share because of subscription of new
share due to capital increase in 2006.
2)If the average closing price of the shares for 20
consecutive trading days immediately prior to
January 1, 2007 and January 1, 2008, respectively
(each, a “Reset Date”), converted into U.S.
dollars at the prevailing rate on the Reset Date,
is less than the conversion price then in effect
converted into U.S. dollars at the fixed exchange
rate, the conversion price may be adjusted at the
option and within the sale discretion of ESFHC.
The conversion price adjustment should only be
downward and should not be less than 80% of the
initial conversion price (NT$24.36 but adjusted to
reflect any adjustments which may have occurred
prior to the Reset Date pursuant to the related
indenture).
Negative.
d.Conversion period
The bondholder can convert the Bonds to ESFHC’s stock
for the period starting on or after August 24, 2008 up to
July 14, 2018. The holders of the Bonds, however, will not
be able to effect conversions into shares during any closed
period. A closed period means (i) 60 days before the date of
any general stockholders’ meetings; (ii) 30 days before the
date of any special stockholders’ meetings; (iii) the period
from the date following the third trading day before the date
of ESFHC’s notification to the Taiwan Stock Exchange of
the record date for the determination of stockholders entitled
to the receipt of dividends, subscription of new shares due
to capital increase or appropriation of other benefits and
bonuses; and (iv) such other periods during which ESFHC
may be required to close its stock transfer books under the
ROC laws and regulations.
e.Conversion price
1)For bond conversions, the conversion prices are (i)
NT$16.16 per share for any conversion from August
24, 2008 to September 22, 2008 (the “First Tranche
Conversion Price”) and (ii) NT$19.00 per share for
any conversion from September 23, 2008 to July
14, 2018 (the “Second Tranche Conversion Price”).
The conversion price in U.S. dollars is based on
the exchange rate of US$1.000=NT$30.406. The
conversion price is subject to adjustment based on
certain terms of the related indenture. However, in
August 2008, there was an adjustment of conversion
prices for the First and Second Trabche to NT$15.12
76
and NT$17.78, respectively, per share because of the
issuance of new shares due to ESFCH’s capital increase
in August 2008.
2)If the average closing price of the shares for 20
consecutive trading days immediately prior to each
anniversary of the issue date (“Reset Date”), converted
into U.S. dollars at the prevailing rate on the Reset
Date, is less than the conversion price then in effect
converted into U.S. dollars at the fixed exchange rate,
the conversion price will be adjusted. The conversion
price adjustment should only be downward and should
not be less than 80% of the Second Tranche Conversion
Price.
As of December 31, 2008, the Bonds with an aggregate
par of US$50,200 thousand had been converted.
To e n h a n c e i t s l o n g - t e r m c o m p e t i t i v e n e s s a n d
strengthen its capability to meet the challenges of
Taiwan’s financial holding industry, ESFHC enter ed
into an investor agreement with Morgan Stanley Apollo
Holdings (Cayman) Ltd. and Morgan Stanley Apollo
Holdings 2 (Cayman) Ltd. (jointly, the “MS”) on July 10,
2008. Under regulatory approvals, ESFHC granted MS
the right to appoint an ESFHC director. As of February
20, 2009, the date of the accompanying independent
auditors’ report, MS had not decided whether it would
exercise this right.
The details of bank debentures issued by E.SUN Bank
originally designated at fair value through profit or loss
were as follows:
Five types of bonds issued on August 23, 2002; 6% interest rate minus a floating
interest rate (stated below), payable semiannually; principal due on the maturity date
(5.5 years after the issue date).
Eight types of bonds issued on October 9, 2003; interest rate at (a) 5.15% minus 6M
LIBOR for types C to E bonds; and (b) 4.22% minus 90 days’ interest rate for
commercial paper for types F to H bonds, with all interest rates not to fall below 0%
and interest payable semiannually; principal due on the maturity date (5 years after
the issue date).
Seven types of bonds issued on October 16, 2003; interest rate at (a) two times of the
five years’ NT$ interest rate swap (IRS) minus the two years’ NT$ IRS for types A
to D bonds; and (b) two times of the five years’ NT$ IRS minus the two years’ NT$
IRS and plus 0.75% for types E and F bonds; and (c) 3% for the first year and two
times of the five years’ NT$ IRS minus the two years’ NT$ IRS and plus 0.4% for
the second to the fifth year for the type G bond, with all interest rates not to fall
below 0% and interest payable semiannually; principal due on the maturity date (5
years after the issue date).
Five types of bonds issued on October 29, 2003; interest rates at (a) three months’
London Interbank Offered Rate for U.S. dollars (3M LIBOR) plus 1.2% if 3M
LIBOR is less than 1% or 4.7% minus 3M LIBOR if 3M LIBOR is more than or
equal to 1% for type A bond; (b) 2.5 times of the five years’ NT$ IRS minus two
years’ NT$ IRS and plus 0.45%, with limit of 3.75%, for types B and C bonds; and
(c) 2.5 times of the five years’ NT$ IRS minus the two years’ NT$ IRS and plus
0.4%, with limit of 3.7%, for types D and E bonds, with all interest rates not to fall
below 0% and interest payable semiannually for type A bond and quarterly for other
bond types; principal due on the maturity date (5 years after the issue date).
Ten types of secured bonds issued on December 22, 2003; interest rates at (a) 6M
LIBOR for type A bond, 6M LIBOR + 0.0001% for type B bond, 6M LIBOR +
0.0002% for type C bond, 6M LIBOR + 0.0003% for type D bond, 6M LIBOR
+ 0.0004% for type E bond, 6M LIBOR + 0.001% for type F bond, 6M LIBOR
+ 0.002% for type G bond, 6M LIBOR + 0.003% for type H bond, 6M LIBOR +
0.004% for type I bond, 6M LIBOR + 0.005% for type J bond if 6M LIBOR is less
than 1.05%; (b) 3.5% if 6M LIBOR is between 1.05% and 2% for types A to J
bonds; and (c) 4.52% minus 6M LIBOR if 6M LIBOR is more than 2% for types A
to J bonds, with all interest rates not to fall below 0%; interest payable semiannually
for all bond types; principal repayable on the maturity date (5 years after the issue
date).
77
December 31
2008
2007
$
-
$ 2,000,000
-
1,500,000
-
1,800,000
-
1,200,000
-
3,000,000
$ 2,000,000 $ 2,000,000
2,000,000
Seven types of bonds issued on February 27, 2004; interest rates at (a) 6M LIBOR if
6M LIBOR is less than 1.05%, or 3.6% if 6M LIBOR is between 1.05% and 2%, or
4.52% minus 6M LIBOR if 6M LIBOR is more than 2% for types A to D bonds;
and (b) 6M LIBOR if 6M LIBOR is less than 1.05%, or 3.50% if 6M LIBOR is
between 1.05% and 2%, or 4.5% minus 6M LIBOR if 6M LIBOR is more than
2% for types E to G bonds with all interest rates not to fall below 0% and interest
payable quarterly for all bond types; principal repayable on the maturity date (5
years after the issue date).
Eight types of secured bonds issued on February 20, 2004; interest rates at (a) 6M
LIBOR for type A bond, 6M LIBOR + 0.001% for type B bond, 6M LIBOR +
0.002% for type C bond, 6M LIBOR + 0.003% for type D bond, 6M LIBOR +
0.004% for type E bond, 6M LIBOR + 0.005% for type F bond, 6M LIBOR +
0.006% for type G bond, 6M LIBOR + 0.007% for type H bond if 6M LIBOR is
less than 1.05%; (b) 3.8% if 6M LIBOR is between 1.05% and 2.00% for types
A to H bonds; and (c) 5% minus 6M LIBOR if 6M LIBOR is more than 2% for
types A to H bonds, with all interest rates not to fall below 0% and interest payable
semiannually for all bond types; principal repayable on the maturity date (5 years
Three types of bonds issued on February 27, 2004; interest rates at 3.03% if 6M LIBOR
is less than or equal to 2.5%, or 5.2% minus 6M LIBOR if 6M LIBOR is more than
2.5%, with all interest rates not to fall below 0% and interest payable quarterly for
all bond types; principal repayable on the maturity date (7 years after the issue date).
Eight types of bonds issued on March 18, 2004; interest rates at (a) 6M LIBOR if 6M
LIBOR is less than 1.05%, or 3.50% if 6M LIBOR is between 1.05% and 2.00%, or
4.5% minus 6M LIBOR if 6M LIBOR is more than 2% for types A and B bonds; (b)
6M LIBOR if 6M LIBOR is less than 1.05%, or 3.40% if 6M LIBOR is between
1.05% and 2.00%, or 4.4% minus 6M LIBOR if 6M LIBOR is more than 2% for
types C to E bonds; (c) 2.5 times of the five years’ NT$ IRS minus the two years’
NT$ IRS and plus 0.5% if the five years’ NT$ IRS minus the two years’ NT$ IRS
is less than or equal to 1.2%, or 2% if the five years’ NT$ IRS minus the two years’
NT$ IRS is more than 1.2% for types F and G bonds; and (d) 2 times of the five
years’ NT$ IRS minus the two years’ NT$ IRS and plus 1.75% if the five years’
NT$ IRS minus the two years’ NT$ IRS is less than or equal to 1.2%, or 2.65% if
the five years’ NT$ IRS minus the two years’ NT$ IRS is more than 1.2% in the first
and second years, and 3 times of the five years’ NT$ IRS minus the two years’ NT$
IRS if the five years’ NT$ IRS minus the two years’ NT$ IRS is less than or equal to
1.2%, or 2.1% if the five years’ NT$ IRS minus the two years’ NT$ IRS is more than
1.2% in the third to fifth year for type H bond, with all interest rates not to fall below
0% and interest payable quarterly for all bond types; principal repayable on the
maturity date (5 years after the issue date).
Five bond types issued on May 10, 2004; interest rates at (a) (6M LIBOR plus
0.5001%) × n/N for type A bond; (b) (6M LIBOR plus 0.5002%) × n/N for type B
bond; (c) (6M LIBOR plus 0.5003%) × n/N for type C bond; (d) (6M LIBOR plus
0.5004%) × n/N for type D bond, with 6M LIBOR for types A to D bonds between
1% and 2% in the first year, between 1% and 2.25% in the second year, between
1.05% and 3.00% in the third year, between 1.05% and 3.50% in the fourth year,
between 1.1% and 4.0% in the fifth year, between 1.10% and 4.25% in the sixth
year, between 1.1% and 4.5% in the seventh year, “n” means the total days of 6M
LIBOR between the foregoing interest rate range in each interest-bearing period, “N
” means total days of each interest-bearing period; and (e) 1.15 times of the ten
years’ US$ Constant Maturity Swap (CMS) minus the two years’ US$ CMS with
interest rates not to fall below 0% for type E bond; interest payable quarterly for all
bond types; principal repayable on the maturity date (7 years after the issue date).
December 31
2008
2007
2,000,000
1,000,000
1,000,000
2,000,000
2,000,000
2,300,000
2,300,000
78
December 31
2008
2007
Three types of bonds issued on May 19, 2004, interest rates at (a) 3% if 6M LIBOR
is less than or equal to 2.5%, or 5.3% minus 6M LIBOR if 6M LIBOR is more than
2.5% for type A bond; (b) 6M LIBOR if 6M LIBOR is less than 1.1%, or 3.82%
if 6M LIBOR is between 1.1% and 2.5%, or 5% minus 6M LIBOR if 6M LIBOR
is more than 2.5% for type B bond; and (c) 6M LIBOR if 6M LIBOR is less than
1.1%, or 4% if 6M LIBOR is between 1.1% and 2.0%, or 5.1% minus 6M LIBOR
if 6M LIBOR is more than 2%; with all interest rates not to fall below 0% and
interest payable semiannually for all bond types; principal repayable on the maturity
date (7 years after the issue date).
Five types of bonds issued on June 1, 2004; interest rates at (a) 6M LIBOR if 6M
LIBOR is less than 1.1%, or 3.5% if 6M LIBOR is between 1.1% and 2.5%, or
5.15% minus 6M LIBOR if 6M LIBOR is more than 2.5% for type A bond; (b) 6M
LIBOR if 6M LIBOR is less than 1.1%, or 4% if 6M LIBOR is between 1.1% and
3.5%, or 5.5% minus 6M LIBOR if 6M LIBOR is more than 3.5% for types B and
C bonds; and (c) 6M LIBOR if 6M LIBOR is less than 1.1%, or 4% if 6M LIBOR is
between 1.1% and 3.5%, or 6.05% minus 6M LIBOR if 6M LIBOR is more than
3.5%, with all interest rates not to fall below 0% and interest payable semiannually
for all bond types; principal repayable on the maturity date (5 years after the issue
date).
Bonds issued on June 1, 2004; interest rate at 6M LIBOR if 6M LIBOR is less than
0.9%, or 4% if 6M LIBOR is between 0.9% and 3.5%, or 5.5% minus 6M LIBOR
if 6M LIBOR is more than 3.5%, with all interest rates not to fall below 0% and
interest payable semiannually; principal repayable on the maturity date (7 years
900,000
$
900,000 $
1,300,000
1,300,000
500,000
12,000,000
79,765
Valuation adjustment
500,000
21,500,000
(240,677)
$ 12,079,765 $ 21,259,323
Financial liabilities designated at fair value through profit or loss
Commercial paper interest rates for 90 days, 180 days and floating interest rates were based on the average
interest rate quoted by Hong Kong’s Moneyline Telerate and Reuters.
To increase its capital adequacy ratio and strengthen its capital structure, E.SUN Bank proposed the issuance
of domestic subordinated bank debentures with aggregate face value of $5,000,000 thousand. The issuance was
approved by the Financial Supervisory Commission on September 8, 2008. On February 20, 2009, E.SUN Bank
issued $1,000,000 thousand worth of subordinated bank debentures with 2.10% interest. The bank debentures
amounting to $3,700,000 thousand had not yet been issued.
24.OTHER BORROWINGS
December 31,
2007
Unsecured debts - interest rate at 2.53%
79
$
300,000
25.OTHER FINANCIAL LIABILITIES
December 31
2007
2008
Credit-linked structured products - host contract
Appropriations for loans
Guarantee deposits received
$
2,050,000
223,343
95,751
$
2,550,000
249,588
167,606
$
2,369,094
$
2,967,194
26.OTHER LIABILITIES
December 31
2007
2008
Advances
Reserve for land revaluation increment tax
Reserve for losses on the sale of bonds
Reserve for losses on guarantees
Other
Credit-linked structured products refer to money deposited in accordance with the structured-product contracts,
valued in New Taiwan dollars, between E.SUN Bank and other parties, in which credit risks on certain bonds will
be transferred to the counter parties. When the bond issuers face certain situations as described in the contract,
E.SUN Bank can make repayments by giving the bonds to the counter parties. The interest rate for this product is
from 2.18% to 2.40%, and product maturity is in November 2010.
$
$
361,455
58,203
21,706
11,496
77,763
530,623
$
489,325
58,203
370
11,334
73,018
$
632,250
27.PENSION PLAN
The Company has pension plans for all regular
employees. Upon retirement, an employee will receive
the Company’s contributions before the Labor
Standards Act (the “LSA”), which were credited to
his/her account, plus earnings thereof and an amount
calculated on the basis of length of service after
the LSA effective date, and monthly average basic
pay of the year before retirement. E.SUN Bank
amended the defined benefit plan in 2005. Upon
retirement, an employee will receive an amount
calculated on the basis of service years.
ESFHC makes monthly contributions, equal
to 5.54% of salaries, to a pension fund. The fund
is deposited in the Central Trust of China (which
merged with the Bank of Taiwan in July 2007)
in the name of the workers’ fund administration
committee, which manages the fund.
E.SUN Bank makes monthly contributions, equal
to 5.54% of salaries (rate of monthly contributions
was changed to 2.42% of salaries in April 2007), to
a pension fund. The fund is deposited in the Central
Trust of China (which merged with the Bank of
Taiwan in July 2007) in the name of the employees’
fund administration committee, which manages
the fund. The difference between the foregoing
contributions and the pension costs based on actuarial
calculations for E.SUN Bank is deposited in a
financial institution in the name of the employees’
pension fund administration committee.
E.SUN Securities and ESSIT (before September
30, 2008) make monthly contributions, equal to 4%
and 6% of salaries (rate of monthly contributions of
ESSIT was changed to 2% of salaries in July 2008),
to a pension fund, respectively. The fund is managed
by the workers’ fund administration committee and
deposited in its name in the Central Trust of China
80
(which merged with the Bank of Taiwan in July 2007).
The Labor Pension Act (the “Act”) took effect on
July 1, 2005. A new defined contribution pension
plan is stipulated by this Act. Employees may choose
the pension mechanism under the LSA or under this
Act. For those employees who were subject to the
LSA before the enforcement of this Act, still work
for the same business entity after the enforcement
of this Act, and choose to be subject to the pension
mechanism under this Act, their service year before
the enforcement of this Act will be retained. Under
the Act, the rate of an employer’s monthly contribution
a.
Net pension cost
2007
2008
Service cost
Interest cost
Actual return on plan assets
Amortization
$
33,009
29,164
119,897
(137,075)
$
35,386
25,192
90,519
(105,649)
Net pension cost
$
44,995
$
45,448
b.
Reconciliation of the plan funded status to balance sheet amounts
Benefit obligation:
Vested benefit obligation
Non-vested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized transitional net asset
Unamortized prior service cost
Unamortized net pension gains or losses
Additional minimum pension
c.
d.
81
to the Labor Pension Fund should be at least 6% of
the employee’s monthly wages. On the other hand,
the Company has continued to make monthly pension
contributions for the employees who chose the defined
benefit plan under the LSA.
Pension expenses recognized by the Company were
$181,131 thousand and $166,322 thousand ($136,136
thousand and $120,874 thousand were recognized under
the Act, respectively) in 2008 and 2007, respectively.
Other information in 2008 and 2007 on the defined
benefit plan is as follows:
2008
December 31
2007
$
(113,030)
(559,618)
(672,648)
(381,233)
(1,053,881)
842,269
(211,612)
(10,036)
94,411
154,637
(7,710)
$
(124,923)
(544,415)
(669,338)
(394,588)
(1,063,926)
943,421
(120,505)
(2,175)
104,215
45,541
(6,425)
Prepaid pension (accrued pension cost)
$
19,690
$
20,651
Vested benefits
$
(130,073)
$
(130,225)
Actuarial assumptions
Discount rate
Rate of increase in compensation
Expected long-term rate of return on plan assets
2.50%
2.00%-2.50%
2.50%
2.75%
2.00%-3.00%
2.75%
2008
2007
Summary of pension fund contributions and payments
Contributions
Payment of benefits
$
$
42,597
23,208
$
$
79,317
14,993
28.SERVICE FEE AND COMMISSIONS INCOME, NET
2007
2008
Service fee and commission income
Service charge and commission expenses
$
$
4,001,340
(760,108)
3,241,232
$
4,650,415
(780,345)
3,870,070
$
29.PERSONNEL, DEPRECIATION AND AMORTIZATION EXPENSES
2008
$
2007
3,458,534
233,007
181,131
230,319
793,005
141,507
$
3,162,522
219,038
166,322
227,319
730,611
101,965
Personnel expenses
Salaries
Insurance
Pension
Other
Depreciation expenses
Amortization expenses
30.INCOME TAX
Under Article 49 of the Financial Holding Company Law, a financial holding company (FHC) can elect to
file consolidated income tax returns for the regular corporate income tax as well as the 10% income tax on
undistributed earnings for FHC and its domestic subsidiaries if the FHC held more than 90% of the subsidiaries’
outstanding shares for the entire tax year. ESFHC is qualified in the regulations.
ESFHC and its subsidiaries started to file consolidated tax returns since 2003.
a. Income tax was calculated as follows:
Income tax expense - current before tax credits
Net changes in deferred income tax:
Goodwill
Unrealized foreign exchange gain
Unrealized gain or loss on financial instruments
Expense for convertible bond issuance
Impairments losses on assets
Allowance for possible losses on loans and receivables and reserve
for losses on guarantees
Tax credits
Loss carryforwards
Others
Valuation allowance
Tax on unappropriated earnings (10%)
Adjustment of prior year’s tax
Tax effect on consolidated tax returns
Income tax expense
2007
2008
$
283,830
305,871
60,207
7,252
2,473
2,348
(5,214)
(219,108)
(2,439)
(1,839)
4,036
3,230
155,458
$
596,105
$
448,099
305,871
5,045
25,333
11,574
(1,694)
7,330
(3,997)
35,239
(1,142)
(2,625)
38,842
7,970
(225,624)
$
650,221
82
b. A reconciliation of income tax expense - current before tax credits and income tax expense on income before income tax is shown
below:
2008
2007
Income tax expense on income before income tax at statutory rate (25%)
Permanent differences
Temporary differences
Tax under the alternative Minimum Tax Act
$
405,267
250,021
(371,986)
528
$
985,998
(322,886)
(315,520)
100,507
Income tax expense - current before tax credits
$
283,830
$
448,099
c. Net deferred income tax assets were as follows:
2008
Deferred income tax assets (liabilities)
Loss carryforwards
Impairment losses on assets
Unrealized gain or loss on financial instruments
Allowance for possible losses on loans and receivables and reserve
for losses on guarantees
Expenses for convertible bond issuance
Unrealized foreign exchange gain
Goodwill
Others
$
Less : Valuation allowance
Net deferred income tax assets
$
December 31
771,711
20,093
18,806
769
(106,864)
(711,762)
20,643
13,396
10,812
2,584
$
2007
663,731
21,758
7,114
769
2,473
(46,657)
(405,891)
16,416
259,713
12,651
247,062
$
Loss carryforwards not yet expired as of December 31, 2008 are summarized as follows:
Expiration
Amount
2016
2018
$ 2,455,798
631,049
As of December 31, 2008, the Company’s tax credits for personnel training expenses amounted to $3,245
thousand. These credits are valid until 2012.
d. Imputed tax credit was summarized as follows:
Balance of ICA
December 31, 2008
December 31, 2007
Estimated creditable tax ratio for distributing
the 2008 earnings
Actual creditable tax ratio for distributing the
2007 earnings
83
ESFHC
$ 135,754
257,619
13.26%
6.77%
E.SUN
Bank
$ 175,462
285,528
25.37%
8.02%
E.SUN
Securities
$
3,391
3,731
3.63%
ESIB
$
23
0.04%
ESVC
$ 8,674
4,711
33.33%
2.80%
The actual creditable tax ratio may differ from the estimated creditable tax ratio since this ratio is computed on
the date the dividend is actually paid or distributed.
e. The unappropriated earnings generated before January 1, 1998 were as follows:
December 31, 2008 and 2007
$
E.SUN
Securities
E.SUN
Bank
ESFHC
-
$ 91,777
$
-
ESIB
$
ESVC
-
$
-
f. The years for which income tax returns had been examined by the tax authorities as of December 31, 2008
were as follows:
ESFHC
E.SUN
Bank
E.SUN
Securities
2003
2003
2003
None
ESVC
2003
g.For E.SUN Bank’s income tax returns of 1994 to 2001
(except 1996 and 1999), the tax authorities denied the
creditability of 10% withholding tax on interest revenue
on bonds pertaining to periods when those bonds, totaling
$290,044 thousand, were held by other investors. E.SUN
Bank had accrued liabilities and written off assets that
were related to the foregoing withholding taxes as
part of income tax expense in 2001. In August 2002,
the Supreme Administrative Court decided that the
Taipei National Tax Administration should review the
withholding tax issue again.
In 2003, the Taipei National Tax Administration decided
to rebate 65% of the foregoing withholding taxes. E.SUN
Bank accepted this decision and thus recognized a tax
refund receivable in 2003. As of December 31, 2008,
ESIB
E.SUN Bank had received a tax refund of $87,828 thousand
on the 1994, 1995, 1997 and 1998 tax returns.
The tax authorities examined E.SUN Bank’s over-distribution
of the stockholders’ imputed tax credit amounting to
$20,585 thousand in their assessment of the 2001 and 2002
stockholders’ imputed tax credit returns because of foregoing
withholding taxes. The Bank filed an application for the
refund of overpaid tax and also initiated an administrative
litigation. In addition, E.SUN Bank did not accrue the
related liabilities because the possibility of a positive result
on E.SUN Bank’s application and administrative litigation is
high.
h.The main effective income tax rates for 2008 and 2007 were
about 25%.
31.EARNINGS PER SHARE
The numerators and denominators used in calculating earnings per share were summarized as follows:
Amounts (Numerator)
Before
Income Tax
2008
Effect of diluted common shares:
Overseas convertible bonds
Bonus to employees
Shares
(Denominator
in Thousands)
After
Income Tax
$ 1,162, 489
$ 1,025,003
3,465,761
(452,977)
-
(339,733)
-
76,626
3,761
$
709, 512
$
685,270
3,546,148
Earnings Per Share
(New Taiwan Dollar)
Before
Income Tax
After
Income Tax
$0.34
$0 . 30
$0.20
$0 . 19
84
Amounts (Numerator)
2007
Before
Income Tax
Shares
(Denominator
in Thousands)
After
Income Tax
Effect of diluted common shares:
Overseas convertible bonds
$ 3,155,144
$ 3,293,810
3,443,400
82,127
61,595
378,988
$ 3,237,271
$ 3,355,405
3,822,388
Earnings Per Share
(New Taiwan Dollar)
Before
Income Tax
After
Income Tax
$0.92
$0.96
$0.85
$0.88
Effective January 1, 2008, under an explanation issued by the Accounting Research and Development
Foundation of the ROC, the Company should recognize bonus to employees and remuneration to directors and
supervisors as compensation expenses. These bonus and remuneration were previously recorded as appropriations
from earnings. If the bonus is in the form of cash or shares, the Company should presume that the entire amount
of the bonus will be settled in shares and the resulting potential shares should be included in the weighted average
number of shares outstanding used in the calculation of diluted earnings per share(EPS), if the shares have a
dilutive effect. The number of shares is estimated by dividing the entire amount of the bonus by the closing price
of the shares on the balance sheet date. The dilutive effect of the potential shares needs to be included in the
calculation of diluted EPS until the stockholders resolve the number of shares to be distributed to employees in the
following year.
The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for
the distribution of employee stock bonuses from the 2007 earnings and stock dividends. This adjustment caused
the basic and diluted after income tax EPS for 2007 to decrease from NT$1.00 to NT$0.96 and from NT$0.92 to
NT$0.88, respectively.
32.STOCKHOLDERS' EQUITY
a.Capital stock
On June 13, 2008, stockholders’ meeting of
ESFHC resolved to use $1,401,000 thousand from the
unappropriated earnings as stock bonus to stockholders
amounting to $1,321,320 thousand and stock bonus to
employees amounting to $79,680 thousand, or a total
of 140,100 thousand shares. These appropriations were
approved by the Financial Supervisory Commission (FSC)
and Ministry of Economic Affairs. As of December 31,
2008, the paid-in capital of ESFHC was $35,443,511
thousand.
To dispose of ESFHC’s shares held by E.SUN Bank,
ESFHC issued 6,800 thousand units of Global Depositary
Shares (GDS) (one unit represents 25 common shares),
which equaled 170,000 thousand common shares, at
US$14.5 dollars per share, on the Luxembourg Stock
Exchange on September 27, 2004.
The GDS holders are entitled to present their GDSs
for cancellation and receive the corresponding number of
underlying common shares, and the common shares can
be traded in the domestic stock exchange market. As of
December 31, 2008, the GDS holders had canceled 9,141
thousand units (equaled 228,539 thousand shares), ESFHC
85
issued 116 thousand units (equaled 2,901 thousand shares)
because of stock dividend distribution, and the deposit agents
reissued 2,239 thousand units (equaled 55,992 thousand
shares). Therefore, the outstanding GDSs were 14 thousand
units, which equaled 354 thousand shares, or 0.01% of
ESFHC’s total outstanding common shares.
b.Capital surplus
Under the related regulations, capital surplus may only
be used to offset a deficit. However, capital surplus arising
from issuance of shares in excess of par value (issuance
in excess of common stock par value, capital surplus from
issuance of common stock for combination and treasury stock
transactions) and donation may be transferred to common
stock on the basis of the percentage of shares held by the
stockholders. Any capital surplus transferred to common
stock should be within a certain percentage prescribed by law.
Capital surplus from equity investments under equity
method can not be distributed for any purpose.
Under the Financial Holding Company Law and related
directives issued by the Securities and Futures Bureau (SFB),
the distribution of the unappropriated earnings that are
generated by financial institutions (the subsidiaries) before
conversion to ESFHC and become part of capital surplus of
the financial holding company after conversion, is exempted
from the appropriation restriction of the Securities and
Exchange Law.
The subsidiaries’ unappropriated retained earnings
before stock conversion amounted to $2,919,727
thousand, which was already stated as ESFHC’s capital
surplus as of its establishment date. In 2002, the
stockholders resolved to increase ESFHC’s capital by
$1,800,000 thousand through the issuance of stock dividends
from capital surplus.
The capital surplus as of December 31, 2008 came from
treasury stock transactions and the issuance of shares in
excess of par value. Capital surplus sources and uses were as
follows:
Sources
From subsidiaries
Capital surplus (mainly paid-in capital in excess of par value)
Legal reserve
Special reserve
Corporate bonds converted into capital stock
In 2003
In 2004
In 2006
In 2008
Treasury stock transactions recognized from subsidiaries
Transferring of shares to employees by subsidiary
Cash dividends from ESFHC received by subsidiaries
Uses
Remuneration to directors and supervisors and bonus to employees by subsidiaries
Issuance of ESFHC's stock dividends in 2002
Offset of deficit in 2003
c.Appropriation of earnings and dividend policy
When ESFHC appropriates its earnings, legal reserve
should be appropriated from the annual net income less
any accumulated deficit. A special reserve may then be
appropriated. Any remainder should be appropriated as
follows:
1) 96% as dividends.
2) 1% as remuneration to directors (knows as
remuneration to directors and supervisors before the
revision of ESFHC’s Articles of Incorporation on June 13,
2008).
Total capital stock of subsidiaries in excess of ESFHC's issuance
Balance on January 28, 2002
From ESSIT which became a 100% subsidiary of ESFHC in 2003 through a share
swap
Legal reserve
$413,733
2,776,834
109,230
2,919,727
6,219,524
600,000
6,819,524
4,350
7,861
6,831,735
9,005
2,613,625
2,252,133
524,401
3,015,943
483
208,161
15,455,486
(156,458)
(1,800,000)
(3,091,451)
$ 10,407,577
3) 3% as bonus to employees.
U n d e r E S F H C ’s A r t i c l e s o f I n c o r p o r a t i o n , t h e
stockholders may decide not to declare any dividends or
declare only a portion of distributable earnings as dividends.
Under ESFHC’s dividend policy, the issuance of stock
dividends takes precedence over the payment of cash
dividends to strengthen ESFHC’s financial structure. This
policy is also intended to improve the ESFHC’s capital
adequacy ratio and keep it at a level higher than the ratio
set under relevant regulations. However, when dividends
are declared, cash dividends must be at least 10% of total
86
dividends declared, unless the resulting cash dividend per
share falls below NT$0.10 dollar.
For the year ended December 31, 2008, the bonus
to employees of $32,835 thousand and remuneration
to directors of $10,945 thousand representing 3% and
1%, respectively, of the appropriation of earnings, were
accrued on the basis of past experiences. If the bonus
and remuneration approved by the ESFHC’s stockholders
differ from the Board of Directors’ proposal, this change
should be treated as a revision of the accounting estimate,
and the related accrued expenses should be adjusted
in the year of the stockholders’ approval of the bonus
and remuneration. If the stockholders resolve to issue
shares for bonus to employees, the number of shares is
determined by dividing the amount of the bonus by the
closing price (after considering the effect of cash and
stock dividends ) of the shares, which is the day before the
stockholders’ meeting.
Under the Company Law, legal reserve should be
appropriated until the reserve equals ESFHC’s paidin capital. This reserve should only be used to offset a
deficit. When the reserve exceeds 50% of ESFHC’s paid-
in capital, the excess may be distributed as follows: (a)
if ESFHC has no earnings, the excess may be declared as
dividends or bonus; and (b) if ESFHC has no deficit, only the
excess portion that is over 25% of ESFHC’s paid-in capital
may be declared as stock dividends.
Under an SFB directive, a special reserve is appropriated
from the balance of the retained earnings at an amount that
is equal to the debit balance of accounts in the stockholders’
equity section (such as unrealized gain or loss on financial
instruments and cumulative translation adjustments, except
treasury stocks). The balance of the special reserve is
adjusted to reflect any changes in the debit balance of the
related accounts.
Appropriations of earnings should be resolved by the
stockholders in the following year and reflected in the
financial statements of that year.
On June 13, 2008 and June 15, 2007, the stockholders
of ESFHC resolved the appropriation of earnings in 2007
and 2006, which were resolved by the ESFHC’s Board
of Directors on March 3, 2008 and February 14, 2007, as
follows:
Appropriation of Earnings
2007
Legal reserve
Special reserve
Dividend
Cash
Stock
Bonus to employees
Cash
Stock
$
Dividend Per Share (NT$)
2006
329,381
683,801
$
42,260
-
1,321,320
1,321,320
27,528
-
2,902
79,680
-
2007
$
2006
0.4
0.4
$
-
Had the remuneration to directors and supervisors and bonus to employees been recognized as expenses, the
basic EPS (after income tax) for 2007 would have decreased from NT$0.96 to NT$0.93.
As of February 20, 2009, the date of the accompanying auditors’ report, the board of directors had not resolved
the appropriation of the 2008 earnings.
Information on the appropriation of earnings or deficit offsetting can be accessed through the Web site of the
Taiwan Stock Exchange (http://emops.tse.com.tw).
Under the integrated income tax system, certain stockholders are allowed tax credits for the income tax paid by
the Company.
d.Treasury stock
Reason for redemption
Beginning
of the Year
Increase
End of
the Year
Year ended December 31, 2008
87
Reissuance to employees (Note)
-
42,000
42,00 0
Note: Shares in thousands.
To conform to government policies and give more incentives to employees, ESFHC’s board of directors resolved
to buy back its shares on October 8, 2008 in accordance with the Securities Exchange Law and Regulations
Governing Share Repurchase by Exchange-Listed and OTC-Listed Company. The purpose of the share repurchase
is to transfer shares to employees.
The Securities and Exchange Law provides for the following:
a. The total number of shares that can be held in treasury stock is limited to 10% of the number of total
outstanding shares.
b. The maximum cost of reacquiring treasury shares is limited to the sum of the balances of the retained
earnings, paid-in capital in excess
of par value and capital surplus which are realized;
c. Using treasury shares to secure any obligations or commitment of ESFHC is prohibited;
d. ESFHC is prohibited from exercising the rights of the stockholder with respect to the treasury shares.
33.RELATED-PARTY TRANSACTIONS
Related Party
E.SUN Foundation and E.SUN Volunteer & Social Welfare
Foundation
E.SUN Finance & Leasing Co.
Fu Bon Securities Finance Co. and Bank-Pro E-Service Technology
Co., Ltd.
Financial Information Service Co., Ltd.
Mutual funds managed by ESSIT
Chiu-Hsiung Huang
Joseph N.C. Huang
Heng-Hwa Yang
Joe Huang
J.C. Wang
Kuan-Her Wu
Wu-Tzung Lee
Wen-Yuh Chen
Jing-Hu Hsieh
Hao-Wei Tsai
Rong-Huel Chang
Bruce Lee
Shih-Hui Lin
I-Shun Chou
Cheng-Jen Liu
Jia-Tie Huang
Yin-Hung Liu
Yin-Sung Liu
Others
In addition to Table 7 and those mentioned in other notes, the significant related-party transactions are
a. Related parties
Relationship with the Company
One third of the funds are donated by E.SUN Bank
Equity-method investee of E.SUN Bank (until its liquidation in
September 2008)
E.SUN Bank is a director
E.SUN Bank is a supervisor (from June 2007)
Mutual funds managed by ESSIT (until September 2008)
Representative of a company that is a member of ESHFC’s board of
directors
President of ESFHC
Deputy president of ESFHC
Vice president of ESFHC
Vice president of ESFHC
Chief Accounting Officer of ESFHC
E.SUN Bank’s manager
ESFHC’s manager
Relative within the second degree of consanguinity of ESFHC’s
chairman
Relative within the second degree of consanguinity of ESFHC’s
chairman
ESFHC’s and subsidiaries’ chairman, president, directors,
supervisors, managers and their relatives
88
b.Significant transactions with related parties
1) Loans and deposits
December 31
Interest Rate (%)
Interest Revenue
(Expense)
-
1.62-4.32
0-9.99
$
11,703
$ (19,566)
-
1.84-4.08
0-9.65
$
14,051
$ (15,712)
% to Total
2008
Amount
Loans
Deposits
$ 532,020
$ 826,060
$ 478,456
$ 791,119
2007
Loans
Deposits
The interest rates shown above are similar to, or approximate, those offered to third parties. However, the interest
rates for deposits given to managers of E.SUN Bank are the same as the interest rates for a certain amount of
employees’ savings deposits.
Under the Banking Law, except for consumer loans and government loans, credits extended by E.SUN Bank to any
related party should be 100% secured, and the terms of credits extended to related parties should be similar to those
for third parties.
December 31
2008
Amount
2) Financial assets at fair value through profit or
loss - beneficiary certificates
3) Commissions receivable (part of receivables)
4) Available-for-sale financial assets - beneficiary
certificates
5) Securities sold under repurchase agreements
6) Interest payable (part of payables)
7) Guarantee deposits received (part of other
financial liabilities)
2007
% to Total
Amount
% to Total
$
$
-
-
$
$
110,140
4,418
-
$
-
-
$
248,193
-
$
$
-
-
$
$
435,183
122
2
-
$
-
-
$
26
-
8) Directors as credit guarantors
December 31
Amount
89
% to Total
Interest Rate (%)
Rate of Guarantee
Service Fee (%)
2008
$
155,307
-
2.72-4.02
-
2007
$
517,437
-
2.18-8.15
0.45-0.75
December 31
2008
Amount
9) Commissions (part of service fee and
commissions income, net)
10) Brokerage service fee (part of service fee and
commissions income, net)
11) Rental income
12) Donation (part of general and administrative
expenses) - E.SUN Volunteer & Social Welfare
Foundation
13) Others (part of general and administrative
expenses)
2007
% to Total
Amount
% to Total
$
30,802
1
$
49,449
1
$
$
3,294
59
-
$
$
2,099
101
-
$
4,647
-
$
79
-
$
4,773
-
$
478
-
The aforementioned donation is for E.SUN Volunteer & Social Welfare Foundation’s social welfare charity.
14) E.SUN Bank bought miscellaneous equipment from E.SUN Finance & Leasing Corp. for $381 thousand in 2007.
2008
2007
$ 15,098
15) Sales of securities
$ 25,027
The terms of the above transactions were similar to, or approximated, those for third parties.
c. Subsidiaries’ related-party transactions and balances that amounted to more than $100,000 thousand as of and
for the years ended December 31, 2008 and 2007
1) E.SUN Bank
December 31
2008
a) Loans
b) Deposits
Amount
% to Total
Interest Rate (%)
Interest Revenue
(Expense)
$
532,020
$ 8, 884,350
1
1.62-4.32
0-9.99
$
11,703
$ (211,663)
$
478,456
$ 10,523,636
2
1.84-4.08
0-9.65
$
14,051
$ (580,214)
2007
a) Loans
b) Deposits
Amount
c) Other receivable (part of receivables)
ESFHC
$
2008
112,026
December 31
% to Total
-
Amount
$
The other receivable were created because ESFHC filed consolidated corporate tax returns from 2003.
2007
104,438
% to Total
-
90
d) Purchases and sales of securities
2007
Purchases Amount
Sales Amount
Related Party
$
E.SUN Securities
e) Directors as credit guarantors
99,796
$
208,334
December 31
Amount
% to Total
Interest Rate (%)
Rate of Guarantee
Service Fee (%)
2008
$
155,307
-
2.72-4.02
-
2007
$
517,437
-
2.18-8.15
0.45-0.75
f)E.SUN Bank made currency swap contracts with ESFHC. The contract (nominal) amounts were $327,740 thousand as of December
31, 2008, and the valuation gain on the contracts was $12,240 thousand in 2008. Realized were a gain of $15,200 thousand in 2008
and a loss of $3,754 thousand in 2007.
The interest rates shown above are similar to, or approximate, those offered to third parties. However, the interest rates on deposits
given to managers of E.SUN Bank are the same as the interest rates on a certain amount of employees’ savings deposits.
Under the Banking Law, except for consumer loans and government loans, credits extended by E.SUN Bank to any related party should
be 100% secured, and the terms of credits extended to related parties should be similar to those extended to third parties.
2) E.SUN Securities
a) Deposits each amounting to more than $100,000 thousand in E.SUN Bank as of December 31, 2008 and 2007
December 31
2007
2008
Pledged time deposits
Operation deposits
$
$
223,000
355,000
$
$
340,000
b) Securities sold under repurchase agreements
December 31,2007
Funds managed by ESSIT
% to Total
Amount
Related Party
$
430,177
34
c) Bond transactions
91
Related Party
Sales
Amount
E.SUN Bank
$
2007
99,796
Purchases
Amount
$
208,334
d)E.SUN Securities entrusted to E.SUN Bank the deal settlement of securities and applied for a guarantee for overdraft amounting to
$3,000,000 thousand in both years. For this overdraft, E.SUN Securities provided time deposits and real estate to E.SUN Bank as
collaterals as of December 31, 2008 and 2007. Other financial institutions provided guarantee for the overdraft for both years. As of
December 31, 2008 and 2007, there was no overdraft amount
3) ESVC
2008
$
$
a) Deposits - E.SUN Bank
b) Available-for-sale financial assets - funds managed by ESSIT
December 31
93,548
-
$
$
2007
134,920
180,427
4) ESSIT
December 31,2007
$
5) ESIB
190,000
Time deposits - E.SUN Bank
December 31
2008
Deposits - E.SUN Bank
$
2007
105,700
$
132,596
d.Compensation of directors, supervisors and management personnel
2008
Salaries
Incentives
Special compensation
Bonus
December 31
2007
$
33,357
11,370
1,513
11,829
$
31,787
8,886
1,255
30,207
$
58,069
$
72,135
The compensation of directors, supervisors and management personnel for 2007 included the bonus and remuneration
appropriated from earnings for 2007, which were approved by stockholders on June 13, 2008.
34.PLEDGED ASSETS
In addition to those mentioned in other notes, the pledged assets of the Company are summarized as follows:
2008
Due from the Central Bank and call loans to other banks
Financial assets at fair value through profit or loss (securities at face value)
Receivables (bonds)
Available-for-sale financial assets (bonds and other securities at face value)
Held-to-maturity financial assets (face value)
Other financial assets (face value)
December 31
2007
$
1,000,000
4,000,000
400
394,000
2,120,000
65,548
$
2,124,929
3,700
531,110
5,300,000
-
$
7,579,948
$
7,959,739
92
As of December 31, 2008 and 2007, the
foregoing securities, with aggregate face value of
$5,000,000 thousand and $2,000,000 thousand,
respectively, had been provided as collaterals for
day-term overdraft to comply with the Central
Bank’s clearing system requirement for real-time
gross settlement (RTGS). The unused overdraft
amount at the end of the day may also be treated as
liquidity reserve.
As of December 31, 2008 and 2007, the abovementioned securities purchased amounting to
$2,120,000 thousand and $5,300,000 thousand,
respectively, had been provided to Mega International Commercial Bank as collaterals for issuing secured bank
debentures by E.SUN Bank. Other securities were placed with courts of justice for various collection cases on
overdue loans or were used as business reserve.
35.CONTINGENCIES AND COMMITMENTS
In addition to those mentioned in other notes, the commitments as of December 31, 2008 were as follows:
a.ESFHC
To help ESSIT in dealing with structured bonds, ESFHC committed to increase ESSIT’s capital in cash if ESSIT’s net worth is
lower than the par value of its stock when it compensates E.SUN Bank for the securitization of the structured bonds (E.SUN CBO
2005-2) at the end of the trust period. However, on July 17, 2008, ESFHC resolved to sell all shares of ESSIT. In order to improve the
process of the sale and increase the value of ESSIT, ESFHC agreed to undertake the contingent liability of ESSIT with E.SUN Bank and
compensate E.SUN Bank for any loss at the end of the trust period.
b.E.SUN Bank
1) Renewable operating lease agreements on premises occupied by E.SUN Bank’s branches, which will expire on various dates by July
2019. Rentals are calculated on the basis of the leased areas and are payable monthly, quarterly or semiannually. As of December 31, 2008,
refundable deposits on these leases totaled $906,940 thousand. Minimum annual rentals for the next five years are as follows:
Year
2009
2010
2011
2012
2013
Amount
$
434,201
340,174
233,210
171,981
96,382
Total rentals for January 2014 to December 2018 will aggregate $36,857 thousand. The present value of these rentals is $35,376
thousand, based on 1.39%, which is the annual fixed interest rate set by Chunghwa Post Co., Ltd. for its one-year time savings deposits on
the balance sheet date.
2) Agreements on the decoration of buildings and various purchases related to the improvements of existing premises occupied by
its branches amounted to approximately $291,966 thousand. As of December 31, 2008 the remaining unpaid amount was approximately
$200,935 thousand.
c.E.SUN Securities
E.SUN Securities leases certain properties under operating lease agreements expiring on various dates. Future minimum annual rentals
are as follows:
93
Year
Amount
2009
2010
2011
2012
2013
$
25,173
13,700
7,958
6,824
1,162
d.ESIB
ESIB entered into insurance agent contracts with various insurance companies. The contracts are summarized as follows:
Insurance Company Contract Date Commission Received
Billed and received
Prudential Insurance 2004.01.09
according to contract
terms
Contract Period
Effectively starts on January 9, 2004 and will expire on January
9, 2014. The contract may be updated according to the parties'
written notice when the contract expired.
Tokio Marine Newa 2005.10.15
Insurance
Billed and received
terms
Effectively starts on October 15, 2005 and will expire on October
15, 2014. The contract may be updated according to the parties'
written notice when the contract expired.
2007.10.19
Billed and received
terms
Effectively starts on October 19, 2007 and will expire on October
19, 2008. The contract is automatically extended for another year
if the parties do not terminate the contract in writing earlier than 30
days before the end of the contract.
Taian Insurance
36.E .SUN BANK'S AVERAGE AMOUNT AND AVERAGE INTEREST RATE OF INTEREST-EARNING ASSETS
AND INTEREST-BEARING LIABILITIES
Average balance was calculated by the daily average balances of interest-earning assets and interest-bearing
liabilities.
2008
Interest-earning assets
Average Balance
Cash and cash equivalents - due from banks
Call loans to banks
Due from the Central Bank
Held-for-trading financial assets - bonds
Held-for-trading financial assets - bills
Financial assets designated at fair value through
profit or loss - bonds and bills
Discounts and loans
Receivables of credit cards
Available-for-sale financial assets - bonds
Debt instruments with no active market
$
1,188,439
4,521,042
16,480,880
1,813,739
56,998,413
38,587,903
642,757
537,267,151
26,800,291
29,503,886
13,782,745
7,289,366
Average Rate (%)
1.31
2.19
1.54
1.33
2.18
2.97
1.56
3.25
8.45
2.78
2.20
2.50
2007
Average Balance
1,701,155
5,588,434
14,008,659
1,599,645
38,110,050
38,365,376
1,867,070
481,779,395
25,228,685
34,690,000
14,641,219
7,485,108
Average Rate (%)
$
2.48
4.34
1.49
1.55
2.02
2.97
1.22
3.24
8.42
3.00
2.77
3.77
Interest-bearing liabilities
Due to the Central Bank and other banks
25,261,764
(exclusive of financial liabilities designated at fair value through profit or loss bank debentures)
10,590,710
26,460,185
Demand deposits
77,880,720
Savings - demand deposits
130,972,363
Time deposits
197,998,539
Savings - time deposits
201,611,543
12,949,152
Bank debentures (inclusive of financial liabilities designated at fair value through profit or loss bank debentures)
46,189,757
2.81
2.38
1.65
0.38
0.57
2.61
2.53
2.13
2.30
20,217,278
11,331,090
28,012,312
65,756,437
126,893,221
173,304,280
164,875,632
20,599,221
43,556,712
4.27
1.84
1.63
0.54
0.57
2.90
2.27
1.90
1.69
94
37.FINANCIAL INSTRUMENTS
a.ESFHC
1)Fair value of financial instruments
December 31
2008
Financial assets
Financial assets - with fair values approximating
carrying amounts
2007
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
$
8,134,615
303,324
$
8,134,615
303,324
9,777,523
485,318
$ 9,777,523
485,318
24,979
8,988,783
5,500,000
24,979
8,988,783
5,588,931
$
Financial liabilities
Financial liabilities - with fair values approximating
carrying amounts
95
2) Methods and assumptions applied to estimate the
fair value of financial instruments are summarized as
follows:
a)The carrying amounts of short-term financial
instruments approximate their fair values because
of the short maturities of these instruments. Other
short-term financial assets are cash and cash
equivalents, receivables (except tax refundable)
and refundable deposits. Other short-term
financial liabilities are payables (except tax
payable).
b)For financial instruments at fair value through
profit or loss and corporate bonds payable, fair
value is best determined on the basis of quoted
market prices. If there are trade prices or prices
quoted by major market players, the latest trade
prices and quoted prices are used as the basis for
valuating the fair value; otherwise, ESFHC uses
other financial data and appropriate valuation
methodologies to determine fair value.
c)If equity investments under the equity method
and financial assets carried at cost both consist of
unlisted stock, these investments have no quoted
market prices in an active market and their fair
value cannot be reliably measured. Thus, the
Company does not disclose their fair value.
3)Financial risk information
a)Risk management
ESFHC established the Risk Management
Committee, whose convener is the general
125,795
4,967,559
5,500,000
125,795
4,967,559
5,546,437
manger and executive secretary is the chief risk
officer, to draw up the principles and policies of
risk management followed by each subsidiary, to
coordinate and monitor the enforcement of risk
management policies of each subsidiary and to
deliberate whether proposals brought up by each riskbased unit focusing on a variety of individual issues
are suitable for the Company. The committee also
supports decision making on several important issues,
such as asset allocation, designing and pricing of
new products, merging, joint venture and transfer of
ownership, from the point of view of risk management
to ensure that the Company has adequate capital to
achieve profit objectives under reasonable risk.
b)Market risk
ESFHC set up “The Market Risk Management
Policy of E.SUN Financial Holding Company” as the
guideline of management of market risk.
It monitors and controls the market risk of ESFHC
and subsidiaries, and set up risk limit of ESFHC and
subsidiaries, including VaRlimit, position-limit and
stop Loss limit. ESFHC also makes a risk evaluation
report, with covers the taking of risk exposure of
each risk-based unit and the adequacy of the current
risk management system to the board of directors
regularly.
c)Credit risk
To maintain good asset quality, ESFHC’s subsidiaries
have established independent credit review divisions
and set up fair credit approval processes. ESFHC
and subsidiaries also set up management policy
and requirements of counterparties’ credit rating,
default risk, settlement risk, and risk concentration
in products, industries, and affiliates.
d)Liquidity risk
ESFHC set up “The Liquidity Risk Management
Guideline of E.SUN Financial Holding Company”
as the guideline of management of liquidity risk.
It monitors and asks ESFHC and subsidiaries
to maintain appropriate liquidity, payment ability,
financial stability, and to improve urgent situation
handling ability.
ESFHC and subsidiaries also follow the requirements
of authorities, adopt numeral management, and
compile cash flow gap analysis report regularly.
Additionally, ESFHC and subsidiaries set up liquidity
risk management index, and implement and monitor
strictly.
b.E.SUN Bank
1) Fair value of financial instruments
December 31
2008
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
$ 132,413,462
72,690,441
42,606,239
532,944,978
14,241,499
7,495,793
$ 132,413,462
72,690,441
42,606,239
532,944,978
14,460,273
7,460,285
$ 70,417,631
97,181,827
37,638,457
514,648,763
14,389,915
7,551,602
$ 70,417,631
97,181,827
37,638,457
514,648,763
14,096,317
7,422,608
53,183,460
26,488,285
666,460,275
27,300,000
2,372,937
53,183,460
26,488,285
666,460,275
27,162,767
2,372,937
56,687,975
30,507,142
598,773,839
25,600,000
2,971,900
56,687,975
30,507,142
598,773,839
25,729,664
2,971,900
Financial assets
Financial assets - with fair value approximating carrying
amounts
Discounts and loans
Other financial assets (exclusive of financial assets
carried at cost)
2007
Financial liabilities - with fair value approximating
carrying amounts
Bank debentures
2)Methods and assumptions applied to estimate the fair
value of financial instruments are summarized as
follows:
a)T he carrying amounts of short-term financial
instruments approximate their fair values because of
the short maturities of these instruments. Other shortterm financial assets are cash and cash equivalents,
due from the Central Bank and call loans to other
banks, securities purchased under resell agreements,
receivables (except tax refundable) and refundable
deposits. Other short-term financial liabilities are due
to the Central Bank and other banks, securities sold
under repurchase agreements, payables (except tax
payable) and remittances.
b)For financial instruments at fair value through profit
or loss, available-for-sale financial assets, held-tomaturity financial assets and bank debentures, fair
value is best determined on the basis of quoted market
prices. However, in many instances where there are no
quoted market prices for E.SUN Bank’s various financial
instruments, fair values are based on estimates using other
financial data and appropriate valuation methodologies.
E.SUN Bank estimated the fair value of each forward
contract on the basis of the exchange rates quoted by
Reuters on each settlement date. Fair values of interest
rate swap contracts and cross-currency swap contracts
are calculated using the discounted cash flow method,
unless the fair values on these two types of contracts are
96
provided by counter-parties. Fair values of currency
option contracts are based on estimates using the
Black Scholes model, binomial method or Monte
Carlo simulation. Fair values of credit default swap
contracts are valuated using the discount spreads
method or modified Hull-White model. The fair value
of each futures contract is calculated using the prices
quoted by the futures exchange.
For valuation of debt instruments with no active
market, the fair value is determined on the basis
of the discounted cash flow method. E.SUN Bank
uses a discount rate approximating the rate of return
of financial instruments with similar terms and
characteristics, including the credit risk of the debtors,
the residual period during which the fixed interest rate
prescribed by contracts is accrued, the residual period
for principal repayments, and the type of currency
(New Taiwan dollar, U.S. dollar, etc.) to be used for
payments. As of December 31, 2008 and 2007, the
discount rate used was between 0.471% and 1.842%
and between 2.080% and 3.518%, respectively, for the
New Taiwan dollar and between 0.150% and 2.695%
and between 3.828% and 5.049% , respectively, for
the U.S. dollar.
If there are trade prices or prices quoted by major
market players, the latest trade prices and quoted
prices are used as the basis for valuating the fair value
Quoted Market
Prices
Financial assets
Other financial assets (exclusive of financial assets
carried at cost)
of debt instruments with no active market and classified
as other financial assets; otherwise, E.SUN Bank uses the
foregoing discounted cash flow method to determine fair
value.
c)D iscounts and loans, and deposits are interest-earning
assets and interest-bearing liabilities. Thus, their carrying
amounts represent fair value. The fair value of overdue
loans is based on their carrying amount, net of allowance
for credit losses.
d)If equity investments under the equity method and
financial assets carried at cost both consist of unlisted
stock, these investments have no quoted market prices in
an active market and their fair value cannot be reliably
measured. Thus, E.SUN Bank does not disclose their fair
value.
e)O ther financial liabilities include guarantee deposits
received, appropriations for loans and credit-linked
structured products. They are interest-bearing liabilities
or items that can be transferred to other banks at any
time depending on the business situation or withdrawn
by providers. The carrying amounts of these liabilities
represent their fair values.
3)As of December 31, 2008 and 2007, respectively, fair
values of financial assets and liabilities determined using
quoted market prices or market prices estimated on the
basis of valuation method were as follows:
2008
$ 32,538,940
27,304,930
7,030,651
720,433
Bank debentures
97
December 31
2007
Estimated Market
Prices
Quoted Market
Prices
$ 40,151,501
15,301,309
7,429,622
6,739,852
$ 51,666,739
23,452,314
6,773,692
629,473
$ 45,515,088
14,186,143
7,322,625
6,793,135
-
30,507,142
25,729,664
Estimated Market
Prices
4)A valuation of financial instruments at estimated market
prices showed a loss of $162,594 thousand in 2008 and
a gain of $345,039 thousand in 2007.
5)For the years ended December 31, 2008 and 2007, the
adjustments of stockholders’ equity debited directly
-
26,488,285
27,162,767
from the available-for-sale financial assets amounted to
$675,538 thousand and $970,935 thousand, respectively,
and the losses recognized and deducted from these
adjustments of stockholders’ equity were to $780,553
thousand and $71,579 thousand, respectively.
6)Financial risk information
a) Risk management
E.SUN Bank established the Risk Management
Division to draw up the principles and policies of
risk management followed by each department,
to coordinate and monitor the enforcement of risk
management policies of each department and to
deliberate whether proposals brought up by each
risk-based unit focusing on a variety of individual
issues are suitable for E.SUN Bank. The division
also supports decision making on several important
issues, such as asset allocation, designing and pricing
of new products and transfer of ownership, from the point
of view of risk management to ensure that E.SUN Bank
has adequate capital to achieve profit objectives under
reasonable risk.
b) Market risk
E.SUN Bank evaluated the market risk of financial
instruments on the basis of value at risk (VaR). VaR is
the potential loss in market value of financial instruments
held by E.SUN Bank, which is measured within a set
confidence interval for a specified period. E.SUN Bank
estimated VaR on the basis of the changes in prices of
financial instruments in the past two years.
Net positions on foreign-currency transactions were as follows:
Net position on
foreign-currency
transactions
(market risk)
December 31, 2008
Currency
(76,308)
HKD
9,800
USD
(680,531)
JPY
3,069
EUR
14,043
CNY
$
NT$
(322,693)
321,185
(246,723)
141,911
67,351
Items
Unit: In Thousands of Dollars
December 31, 2007
HKD
NZD
JPY
USD
EUR
Currency
(309,547)
21,333 (1,807,703) 5,532 3,676
NT$
$ (1,289,063)
537,415
(524,064)
179,701
175,933
Note:The foreign currencies represent the top five currencies in E.SUN Bank's basket of international currencies.
c) Credit risk
E.SUN Bank is exposed to potential loss due to
defaults by counter-parties or issuers. Under normal
business operations, E.SUN Bank is a party to
transactions involving financial services with offbalance-sheet risks, such as issuing credit cards,
extending credit facilities and providing financial
guarantee and obligations under letters of credit
issued. Generally, these transactions are for one year.
As of December 31, 2008 and 2007, the interest
rates for loans were between 0.59% and 18.25%
and between 0.93% and 18.25%, respectively. The
highest interest rate for credit cards was 19.71% in
both years.
There was no concentration of maturity dates in one
particular period that would potentially result in
liquidity problems to E.SUN Bank.
E.SUN Bank evaluates the creditworthiness of credit
applications case by case, taking into account the
applicant’s credit history, credit rating and financial
condition. Collateral, mostly in the form of real estate,
cash, inventories, marketable securities and other
assets, may be required depending on the evaluation
result. About 65% of total loans granted were secured
in both years. As of December 31, 2008 and 2007,
about 18% and 11%, respectively, for both the aggregate
guarantees and letters of credit issued, were secured. If
the customers break a contract, E.SUN Bank will execute
its right on the collaterals and decrease its credit risk.
However, E.SUN Bank discloses the maximum credit
exposure without consideration of collateral fair value.
The maximum credit exposure of financial assets is the
carrying amounts of financial assets on the balance sheet
date.
The amounts of financial contracts with off-balance-sheet
credit risks as of December 31, 2008 and 2007 were as
follows:
December 31
Credit card commitments
Guarantees and letters of credit issued
2008
2007
$ 244,073,452
14,793,569
$ 217,111,564
17,785,048
98
The concentration of credit risk exists when counter-parties to financial transactions are individuals or groups engaged in similar
activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. Groups or industries and regions with outstanding loans that were 10% or more of total
outstanding loans were as follows:
December 31
2008
Credit Risk Profile by Group or Industry
Natural person
Manufacturing
Amount
$ 286,616,096
133,970,694
2007
%
Amount
53
25
$ 292,954,883
100,879,082
%
56
19
December 31
2008
Credit Risk Profile by Region
Domestic
North America
Asia
d)Liquidity risk
In December 2008 and 2007, the liquidity reserve ratio
was 16.95% and 13.78%, respectively. E.SUN Bank
has sufficient equity capital and working capital to
execute all contract obligations and had no liquidity
risk.
The contract or notional amount is used to calculate
the amounts to settle with the counter-parties, so it
is neither the actual amount delivered nor the cash
requirement for E.SUN Bank. Also, E.SUN Bank can
enter into derivative financial contracts at reasonable
99
Amount
$ 503,274,180
14,141,824
12,936,053
2007
%
Amount
93
3
2
$ 489,381,840
13,519,433
10,003,600
%
93
3
2
market terms. Thus, E.SUN Bank did not expect
significant cash flow demands to settle these contracts.
The management policy of E.SUN Bank is to match the
contractual maturity profile to the interest rates for its
assets and liabilities. Because of uncertainties, however,
the maturities did not fully match the interest rates,
resulting in gaps that may potentially give rise to gain or
loss.
E.SUN Bank applied appropriate ways to group assets
and liabilities. The maturity analysis of assets and
liabilities was as follows:
E.SUN Bank applied appropriate ways to group assets and liabilities. The maturity analysis of assets and liabilities was as follows:
December 31, 2008
Assets
Liabilities
Due to the Central Bank and
other banks
Financial liabilities at fair value
through profit or loss
Securities sold under repurchase
agreements
Payables
Bank debentures
Due after
Three Months
Up to
One Year
Due after
One Year
Up to
Seven Years
$ 11,572,247
60,321,437
13,622,141
353,252
323,822
61,107,424
4,631,754
492,070
$
19,148,959
11,116,416
27,738,510
38,555,538
163,610
-
$
9,500,000
20,346,654
68,494
52,569,158
6,331,571
335,836
1,278,365
$
25,664,649
3,383,927
193,317,896
30,177,512
11,253,257
5,725,358
$152,424,147
$ 96,723,033
$ 90,430,078
$269,522,599
5,906,839
655,480
8,396,921
10,000,000
15,907,397
5,059,406
5,540,907
76,924
314,092,225
97,372,256
509,700
625,270
$350,353,989 $113,789,336
14,605,901
1,302,126
1,481,219
174,933
236,113,737
950,000
$254,627,916
6,789,238
3,926,030
18,882,057
27,300,000
287,967
$ 57,185,292
Due after
Seven Years
$
Total
-
1,940,581
190,962,243
1,465,402
2,488,796
-
$ 11,572,247
88,970,396
72,690,441
353,252
31,514,753
536,512,259
42,606,239
14,241,499
7,495,793
Cash and cash equivalents
Due from the Central Bank and
call loans to other banks
Financial assets at fair value
Securities purchased under resell
agreements
Receivables
Discounts and loans
Available-for-sale financial
assets
Other financial assets (exclusive
of financial assets carried at
cost)
Due in
One Month
Due after
One Month
Up to
Three Months
$196,857,022 $ 805,956,879
$
-
21,168,220
26,488,285
22,448,022
9,718,794
666,460,275
27,300,000
2,372,937
$ 775,956,533
100
December 31, 2007
Due in
One Month
Assets
Due from the Central Bank and
call loans to other banks
agreements
Receivables
Discounts and loans
Available-for-sale financial
assets
Other financial assets (exclusive
of financial assets carried at
cost)
Liabilities
Due to the Central Bank and
other banks
agreements
Payables
Bank debentures
Due after
One Month
Up to
Three Months
$ 8,772,429
29,987,806
30,295,637
295,975
274,251
61,605,936
$
-
$ 131,232,713
$ 70,585,113
1,683,305
7,455,589
24,764,021
36,682,198
- 679 -
Due after
Three Months
Up to
One Year
Due after
One Year
Up to
Seven Years
$
$
-
24,706,199
110,351
58,605,833
1,036,036
194,904
1,185,666
$ 85,838,989
Due after
Seven Years
Total
-
-
28,389,692
3,471,227
168,871,214
32,275,979
10,809,277
6,208,283
6,334,710
191,353,627
4,326,442
3,385,734
156,974
$ 8,772,429
31,671,111
97,181,827
295,975
28,619,850
517,118,808
37,638,457
14,389,915
7,551,602
$ 250,025,672 $ 205,557,487
$ 743,239,974
-
$ 16,487,462 $ 1,624,200 $ 14,404,789 $
9,247,819
1,995,131
11,875,950
7,388,242
12,284,106
3,243,916
836,215 3,168,889
488,704
4,184,540
138,566
290,377,877
76,761,624
216,988,276
14,646,062
900,000
19,700,000
2,299,588
597,751
$ 331,566,153 $ 84,113,575 $ 241,253,839 $ 52,706,140
$
-
$
$
-
5,000,000
74,561
5,074,561
$ 32,516,451
30,507,142
16,364,237
7,980,699
598,773,839
25,600,000
2,971,900
$ 714,714,268
7) The gains (losses) on financial assets and liabilities at fair value through profit or loss in 2008 and 2007 were as follows:
2007
2008
Realized gains (losses)
Valuation gains (losses)
Realized gains (losses)
Valuation gains (losses)
101
$
3,941,550
2,142,491
6,084,041
(2,150,353)
(2,327,236)
(4,477,589)
$ 1,606,452
$
2,042,722
(478,725)
1,563,997
(1,482,106)
687,765
(794,341)
$
769,656
c.E.SUN Securities
1) Fair value of financial instruments
December 31
2008
2007
Liabilities
Short-term debts
Commercial paper issued
Accounts payable
$
$
7,527
$
32,490
$
32,490
130,344
1,834,104
13,616
21,886
92,886
32
340,000
86,948
17,264
130,344
1,834,104
13,616
21,886
92,886
32
340,000
86,948
17,264
19,690
713,446
300,000
1,773,679
42,060
1,267,748
300,000
1,773,679
42,060
1,267,748
2,040
11,142
11,142
20,000
(17,526)
20,000
(17,526)
626,621
731,543
18,000
50,130
223,000
355,000
94,412
18,315
626,621
731,543
18,000
50,130
223,000
355,000
94,412
18,315
19,690
713,446
7,527
Assets
Financial assets at fair value through profit or loss - current
Accounts receivable
Notes receivable
Restricted assets - current
Operation deposits
Settlement funds
Refundable deposits
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Nonderivative
Derivatives
Assets
Liabilities
Financial liabilities at fair value through profit or loss - current
Repurchase of stock warrants
2,040
2)Methods and assumptions applied to estimate the
fair value of financial instruments are summarized as
follows:
a)T he carrying amounts of short-term financial
instruments approximate their fair values because
of the short maturities of these instruments. The
method applies to cash and cash equivalents,
accounts receivable, notes receivable, accounts
payable, restricted assets - current, short-term debts,
commercial paper issued and securities sold under
repurchase agreements.
-
-
b)For beneficiary certificates, fair value is determined on
the basis of quoted market prices.
c)For operating securities, fair value is determined on the
listed securities’ closing prices or period-end reference
prices published by GTSM on the balance sheet date.
d)For operation deposits, settlement funds, and refundable
deposits, fair value is their carrying amount because
they have no specific maturity dates.
e)E merging stocks held by the dealing department,
nonncurrent available-for-sale assets and equity
investments under the equity method consist of unlisted
102
stocks. Since these investments have no quoted
market prices in an active market and their fair value
cannot be reliably measured, E.SUN Securities does
not disclose their fair value.
Quoted Market
Prices
Nonderivative
Assets
$
3)As of December 31, 2008 and 2007, respectively, fair
values of financial assets and liabilities determined using
quoted market prices or market prices estimated on the
basis of valuation method were as follows:
December 31
2008
2007
626,621
731,543
18,000
-
Liabilities
-
Quoted Market
Prices
Estimated
Fair Value
$
-
713,446
$
Estimated
Fair Value
130,344
1,834,104
13,616
21,866
$
-
1,267,748
-
Derivatives
Assets
2,040
Liabilities
Repurchase of stock warrants
103
4) Risk management policy and hedge strategy
The non-derivative financial instruments held by E.SUN
Securities mainly include cash and cash equivalents,
financial assets at fair value through profit or loss - stocks
and beneficiary certificates, borrowings, commercial paper
issued and securities sold under repurchase agreements.
These financial instruments are held to meet demands
for funds. E.SUN Securities also holds receivables and
payables arising from operating activities.
E.SUN Securities issues derivative financial instruments,
including futures contracts and options, to generate
reasonable profit.
E.SUN Securities’ major risks are cash flow risk arising
from interest rate fluctuation, credit risk and liquidity risk.
a) Cash flow risk arising from interest rate fluctuation
E.SUN Securities’ main cash flow risk arises
from interest rate fluctuation on time deposits,
borrowings and commercial paper issued with
floating rate. E.SUN Securities manages its interest
rate risk by integrating fix and floating interest rate.
b) Credit risk
-
-
11,142
-
20,000
(17,526)
-
-
E.SUN Securities only conducts business with
recognized and creditworthy third parties. Customers
are subject to credit verification procedures, and the
collection of accounts receivable are subsequently
assessed.
The futures and TAIEX options contracts entered into
by E.SUN Securities are all exchange traded and
can be settled before expiration without default.
Therefore, no significant credit risk is expected to
arise. Other financial assets (including cash and cash
equivalents) held by E.SUN Securities is exposed to
credit risk on counter-party defaults. The maximum
exposure to loss equals the carrying amount of
financial instruments.
Collateral would not be required because E.SUN
Securities only conducts business with recognized
third parties.
c)Liquidity risk
E.SUN Securities adjusts its liquidity position by using
tools such as borrowings, commercial paper issued,
and cash and cash equivalents to reach its objectives
2007
2008
Gains on futures contracts
Realized
Unrealized
$
Losses on futures contracts
Realized
Unrealized
$
$
$
Gains on option contracts
Realized
Unrealized
$
Losses on option contracts
Realized
Unrealized
$
$
$
cash flows depend on the amount and timing of the
stock warrants exercised.
Please refer to the related information in Note 6.
2) Futures and TAIEX options
The contracts entered into by E.SUN Securities are all
exchange traded and can be settled before expiration
without default. Therefore, no significant credit risk is
expected to arise.
The major risk associated with the futures and options
undertaken by E.SUN Securities is the market risk
arising from the fluctuations in the market prices
of the underlying assets. Losses will be incurred if
market index prices and the prices of the investment
index move in opposite directions. To control the risk
within a tolerable limit, a stop-loss mechanism has
been established. Hence, market risk is assessed to be
remote.
As premiums are paid before futures and option
contracts are bought, no funding requirement is
expected. In addition, the options written and
the outstanding futures contracts can be settled at
reasonable prices. Therefore, liquidity risk is assessed
to be remote.
To hedge the risk arising from proprietary trading
of stocks, E.SUN Securities has entered into stock
index futures and options. Margin deposits are paid
before the transactions take effect. E.SUN Securities
in the outstanding futures contracts is marked to
market daily, and its working capital is assessed to
be adequate to support the margin calls. Hence, no
cash flow risk or significant cash requirements are
expected.
The gains (losses) from the derivative transactions in
2008 and 2007 were summarized as follows:
such as financial stabilization and financial
flexibility.
The information of derivative financial instruments is
1) Stock warrants issued
As premiums from the stock warrants issued by E.SUN
Securities were all received, there is no credit risk.
E.SUN Securities is in a short position for the stock
warrants issued, which is in reverse to the investors’
position. As the investors may exercise their option
rights before expiration of the contracts because of the
fluctuations in the underlying securities’ fair values,
E.SUN Securities’ position is expected to be exposed
to market risk. To reduce the uncertainty, E.SUN
Securities mainly adopts delta and vega risk hedging
strategies which are summarized below.
a) Delta risk hedging strategy
The hedge instruments are mainly the underlying
securities. The dynamic hedging method is
adopted by referring to the delta risk value
calculated using E.SUN Securities’ risk model.
b) Vega risk hedging strategy
The hedge instruments are mainly the warrants
listed in the domestic market with the same
underlying securities. The strategy adopted
in vega hedge is primarily through buying the
significantly underpriced stock warrants with the
same underlying securities, of which the price
volatility will partly offset the price volatility of
the stock warrants issued by E.SUN Securities.
Future cash flows refer to the cash inflows or
outflows resulting from the settlements of stock
warrants by cash or securities when the warrants
are exercised. The amount and timing of future
691
691
(868)
(868)
$
3,924
3,924
$
$
$
490
490
$
(1,591)
(1,591)
$
$
$
-
(1,415)
(1,415)
1,452
1,452
(725)
(725)
104
38.A LLOCATION OF REVENUE, COST AND EXPENSE RESULTING FROM INTERCOMPANY SHARING OF
RESOURCES
Under cooperation arrangements, E.SUN Bank and E.SUN Securities shared some equipment and operating
sites; thus, related expenses were allocated as follows:
E.SUN Bank
E.SUN Securities
Allocation Method
Total
2008
Rental expense
Broadcasting and security
systems
Others
$ 2,160
176
1,607
$ 1,080
176
1,368
$ 3,240
352
2,975
$ 3,943
$ 2,624
$ 6,567
$ 9,976
$ 2,957
212
211
1,550
1,326
$ 12,933
423
2,876
E.SUN Bank - 2/3 and E.SUN Securities - 1/3
50% each
Cleaning expenses - E.SUN Bank - 24% and E.SUN
Securities - 76%
Utilities - 50% each, but for E.SUN Bank’s Chiayi
Branch - 2/3 and E.SUN Securities - 1/3
Building maintenance expenses - based on space
actually occupied
2007
Rental expense
Broadcasting and security
systems
Others
$ 11,738
$ 4,494
All branches, except Shilin Branch: E.SUN Bank
- 2/3 and E.SUN Securities - 1/3; and E.SUN
Bank's Shilin Branch - allocated by contract
50% each
Signboard, telephone and miscellaneous expenses based on actual incurrence
Cleaning expenses - 50% each, but for E.SUN
Bank's Chiayi Branch - 24% and E.SUN
Securities - 76%
Utilities - 50% each, but for E.SUN Bank's Chiayi
Branch - 2/3 and E.SUN Securities - 1/3
Building maintenance expenses - based on space
actually occupied
$ 16,232
Under cooperation arrangements, E.SUN Bank and ESIB shared some equipment and operating sites, personnel, and an internet service
system and provided cross-selling financial services starting in 2004. The service fees earned by E.SUN Bank were based on 10% of
the gross revenue derived from the insurance companies’ products sold by E.SUN Bank. In 2008 and 2007, ESIB should have paid
E.SUN Bank $17,445 thousand and $11,747 thousand, respectively; the unpaid amount was $3,497 thousand and $1,114 thousand on
December 31, 2008 and 2007, respectively.
E.SUN Bank had recognized $123 thousand and $2,632 thousand in cross-selling revenues from ESSIT in 2008 and 2007. E.SUN
Bank had not received $1,592 thousand on December 31, 2007.
The cross-selling transactions between E.SUN Bank and E.SUN Securities were as follow (the amounts below refer to E.SUN Bank):
2007
2008
105
Revenue
Expense
$
$
1,680
3,459
$
$
422
125
39. E . S U N F I N A N C I A L H O L D I N G C O M P A N Y, L T D . A N D S U B S I D I A R I E S ’ A S S E T Q U A L I T Y,
CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND
MATURITY ANALYSIS OF ASSETS AND LIABILITIES
a.E.SUN Bank’s asset quality
Table 8 (attached).
b.E.SUN Bank’s concentration of credit extensions
(In Thousands of New Taiwan Dollars, %)
December 31, 2008
Rank
(Note 1)
Group Enterprise Name
(Note 2)
Nan Ya Plastics Group
2
Total Amount
Percentage
of Credit
Endorsement of E.SUN
Bank's
or Other
Equity
Transactions
(Note 3)
Group Enterprise Name
(Note 2)
$ 6,962,631
15.32
Continental Engineering Group
CHIMEI Group
3
5,015,209
11.04
AUO Group
4
4,775,568
10.51
Continental Engineering Group
5
4,053,941
China Steel Group
6
Far Eastern Textile Group
7
Chong Hong Construction Group
8
Sinyi Realty Group
9
10
Total Amount
Percentage
of Credit
Endorsement of E.SUN
Bank's
or Other
Equity
Transactions
(Note 3)
$ 4,934,581
10.57
BenQ Group
4,537,882
9.72
Sinyi Realty Group
2,923,494
6.27
8.92
Far Eastern Textile Group
2,758,558
5.91
3,992,000
8.79
Nan Ya Plastics Group
2,612,547
5.60
3,664,795
8.07
Yulon Group
2,574,645
5.52
3,018,500
6.64
CHIMEI Group
2,570,251
5.51
2,975,793
6.55
Chong Hong Construction Group
2,466,240
5.29
Walsin Lihwa Group
2,154,043
4.74
Mega Financial Holding Group
2,393,000
5.13
Yulon Group
2,046,994
4.51
Chinatrust Financial Holding Group
2,055,825
4.41
1
December 31, 2007
Note 1:Ranked by the total amount of credit, endorsement or other transactions; list excludes government-owned or state-run
enterprises.
Note 2:Group enterprise refers to a group of corporate entities as defined by Article 6 of “Supplementary Provisions to the
Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.”
Note 3:Total amount of credit, endorsement or other transactions are the sum of various loans (including import and export
negotiations, discounted, overdrafts, unsecured and secured short-term loans, margin loans receivable, unsecured and
secured medium-term loans, unsecured and secured long-term loans and overdue loans), exchange bills negotiated,
factoring accounts receivable without recourse, acceptances and guarantees.
106
c.E.SUN Bank's interest rate sensitivity information
Interest Rate Sensitivity (New Taiwan Dollars)
December 31, 2008
Items
Interest rate-sensitive assets
Interest rate-sensitive liabilities
Interest rate sensitivity gap
(In Thousands of New Taiwan Dollars, %))
1 to 90 Days
91 to 180 Days
181 Days to One Year
Over One Year
Total
$ 559,528,704
$ 31,321,810
$ 16,245,299
$ 64,575,594
$ 671,671,407
307,187,721
258,755,003
87,082,683
29,259,069
682,284,476
252,340,983
(227,433,193)
(70,837,384)
35,316,525
(10,613,069)
Net worth
46,104,480
Ratio of interest rate-sensitive assets to liabilities
98.44
Ratio of interest rate sensitivity gap to net worth
(23.02)
Interest Rate Sensitivity (New Taiwan Dollars)
December 31, 2007
Items
1 to 90 Days
(In Thousands of New Taiwan Dollars, %))
91 to 180 Days
$541,429,440
$19,302,469
$17,594,337
$53,760,137
$632,086,383
311,774,830
237,438,494
54,878,875
41,677,110
645,769,309
229,654,610
(218,136,025)
(37,284,538)
12,083,027
(13,682,926)
Over One Year
Net worth
Total
45,658,694
97.88
(29.97)
Note 1:The above amounts included only New Taiwan dollar amounts held by the head office and branches of E.SUN Bank
(i.e., excluding foreign currency).
Note 2:Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing
liabilities that were affected by interest rate changes.
Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets － Interest rate-sensitive liabilities.
Note 4:Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities (in
New Taiwan dollars).
107
Interest Rate Sensitivity (U.S. Dollars)
December 31, 2008
Items
1 to 90 Days
91 to 180 Days
(In Thousands of U.S. Dollars, %)
Over 1 Year
Total
$ 2,713,565
$ 437,948
$150,441
$230,364
$ 3,532,318
2,901,286
434,538
169,919
-
3,505,743
(187,721)
3,410
(19,478)
230,364
26,575
Net worth
2,874
100.76
924.67
Interest Rate Sensitivity (U.S. Dollars)
December 31, 2007
Items
1 to 90 Days
91 to 180 Days
(In Thousands of U.S. Dollars, %)
$2,033,100
$793,750
$85,707
2,572,310
500,063
64,249
(539,210)
293,687
21,458
Over 1 Year
Total
$121,560
$3,034,117
-
3,136,622
121,560
(102,505)
Net worth
22,753
96.73
(450.51)
Note 1:The above amounts included only U.S. dollar amounts held by the head office, domestic branches, OBU and overseas
branches of E.SUN Bank and excluded contingent assets and contingent liabilities.
Note 2:Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing
liabilities that were affected by interest rate changes.
Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets － Interest rate-sensitive liabilities.
Note 4:Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities (in
U.S. dollars).
108
d.Profitability
1)E.SUN Financial Holding Company, Ltd. and subsidiaries
Items
Before income tax
Return on total assets
Return on equity
%
Year Ended December
31, 2008
0.20
Year Ended December
31, 2007
0.54
After income tax
0.13
0.45
Before income tax
3.36
8.44
After income tax
2.12
7.05
7.24
23.13
Net income ratio
2) E.SUN Financial Holding Company, Ltd.
%
Items
Before income tax
Return on equity
Year Ended December
31, 2008
1.90
Year Ended December
31, 2007
5.14
After income tax
1.68
5.36
Before income tax
2.41
6.76
After income tax
2.12
7.05
79.58
102.17
Net income ratio
3) E.SUN Bank
%
Items
Before income tax
Return on equity
Year Ended December
31, 2008
0.15
Year Ended December
31, 2007
0.46
After income tax
0.10
0.36
Before income tax
2.55
7.51
After income tax
1.68
5.91
6.02
20.03
Net income ratio
4) E.SUN Securities
%
Items
Return on equity
Net income ratio
109
Before income tax
Year Ended December
31, 2008
(0.40)
Year Ended December
31, 2007
4.65
After income tax
(0.89)
4.00
Before income tax
(0.69)
9.98
After income tax
(1.55)
8.59
(11.08)
32.74
5) E.SUN Insurance Broker Co., Ltd.
%
Year Ended December
31, 2008
Items
Return on equity
After income tax
28.61
30.48
Before income tax
45.09
46.91
After income tax
33.15
34.94
41.40
49.25
Net income ratio
Note 1:
Return on total assets = Income before (after) income tax/Average total assets
Note 3:
Net income ratio = Income after income tax/Total net revenues
Note 2:
Note 4:
40.91
38.90
Before income tax
Year Ended December
31, 2007
Return on equity = Income before (after) income tax/Average equity
Income before (after) income tax represents income for the years ended December 31, 2008 and 2007.
e.E.SUN Bank's maturity analysis of assets and liabilities
Maturity Analysis of Assets and Liabilities (New Taiwan Dollars)
December 31, 2008
Total
(In Millions of New Taiwan Dollars)
Remaining Period to Maturity
1-30 Days
31-90 Days
91-180 Days
181 Days - 1 Year
Over 1 Year
Main capital inflow on maturity
$748,464
$148,906
$59,057
$41,935
$44,253
$454,313
Main capital outflow on maturity
921,969
114,736
126,865
129,832
242,890
307,646
(173,505)
34,170
(67,808)
(87,897)
(198,637)
146,667
Gap
Maturity Analysis of Assets and Liabilities (New Taiwan Dollars)
December 31, 2007
Total
(In Millions of New Taiwan Dollars)
1-30 Days
31-90 Days
91-180 Days
181 Days - 1 Year
Over 1 Year
$692,859
$126,434
$38,432
$30,974
$52,880
$444,139
731,213
103,760
95,454
115,317
224,564
192,118
Gap
(38,354)
22,674
(57,022)
(84,343)
(171,684)
252,021
Note:The above amounts included only New Taiwan dollar amounts held by the head office and domestic branches of E.SUN Bank (i.e., excluding foreign
currency).
110
Maturity Analysis of Assets and Liabilities (U.S. Dollars)
December 31, 2008
Total
(In Thousands of U.S. Dollars)
1-30 Days
31-90 Days
91-180 Days
181 Days - 1 Year
Over 1 Year
$ 2,961,716
$778,487
$353,444
$240,446
$163,983
$1,425,356
3,118,602
1,507,141
689,890
471,539
201,391
248,641
Gap
(156,886)
(728,654)
(336,446)
(231,093)
(37,408)
1,176,715
Maturity Analysis of Assets and Liabilities (U.S. Dollars)
December 31, 2007
(In Thousands of U.S. Dollars)
Total
1-30 Days
31-90 Days
91-180 Days
181 Days - 1 Year
Over 1 Year
$4,447,109
$1,137,970
$583,239
$649,118
$135,877
$1,940,905
4,286,647
2,134,606
970,426
279,623
134,296
767,696
160,462
(996,636)
(387,187)
369,495
1,581
1,173,209
Gap
Note:The above amounts included only U.S. dollar amounts held by the head office, domestic branches and OBU of E.SUN Bank.
f.E.SUN Bank's operation and legal
risk
Matters Requiring Special Notation
Causes
Within the past year, a responsible person or professional employee violated the law in the course
of business, resulting in an indictment by a prosecutor
Within the past year, a fine was levied on the Bank for violations of the laws and regulations
Within the past year, misconduct occurred, resulting in the Financial Supervisory Commission
imposing strict corrective measures on the Bank
Within the past year, the individual loss or total loss from employee fraud, accidental and
material events, or failure to abide by the “Guidelines for Maintenance of Soundness of Financial
Institutions” exceeded NT$50 million dollars
Other
Note 1: The term “within the past year” means one year before the balance sheet date.
Summary and Amount
December
31, 2008
December 31,
2007
None
None
None
None
None
None
None
None
None
None
Note 2: T he term “a fine levied for violations of the laws and regulations within the past year” means a fine levied by the Banking Bureau, Securities and Futures
Bureau, Insurance Bureau or Examination Bureau.
111
40.E.SUN BANK’S INFORMATION REGARDING THE TRUST BUSINESS UNDER THE TRUST LAW
a. Trust-related items as shown in the following balance sheets, statements of income and trust property list
The trust-related items shown below were managed by E.SUN Bank’s Trust Department. However, these items were not included in the
Balance Sheet of Trust Accounts
Tr u st Asse ts
C a sh i n b an k s
Sh o r t - t e r m
i n v e st men ts
Land
Collective
i n v e st me n t
t r u st
fund account
Se c u r i t i e s u n d e r
c u st o d y
To t a l a sse ts
2008
2 0 07
$ 809,343
$ 407,263
77,305,712
727,537
91,016,937
276,637
39,521
98,768
19,981,270
$ 98,863,383
$ 91,799,605
2008
Trust Liabilities
Account payable on securities under
custody
$ 19,981,270
Trust capital
Cash
77,127,405
Securities
3,564,895
Real estates
727,537
Collective
investment trust fund account
39,521
Reserves and retained earnings
(accumulated deficit)
3,836,238
Net income (loss)
(6,413,483)
Total liabilities
$ 98,863,383
2007
$
-
89,929,403
2,519,119
276,637
98,768
(6,665,331)
5,641,009
$ 91,799,605
Investment Items
Cash in banks
Stocks
Mutual funds
Bonds
Unsettled beneficiary certificates
Collective investments
Land
Collective investment trust fund
account
Securities under custody
2008
2007
$ 809,343
3,393,112
73,838,286
72,424
150
1,740
727,537
39,521
19,981,270
$ 98,863,383
$ 407,263
3,132,724
87,621,951
255,868
154
6,240
276,637
98,768
$ 91,799,605
Statements of Income on Trust Accounts
Years Ended December 31, 2008 and 2007
Revenues
Interest
Cash dividend
Property gain
Realized capital gain
Realized capital gain - collective investments
Revenues from beneficiary certificates Expenses
Management fees
Supervisor fees
Insurance fees
Service charge
Realized capital loss - bonds
Property loss
Income tax
Other expenses
Realized capital loss - mutual funds
Realized capital loss - collective investments
Realized foreign exchange loss
Net income (loss)
b.Nature of trust business operations under the Trust Law: Note 1.
2008
$ 8,020
2,145,384
898,788
3,997
519
865
3,057,573
163,939
60
452
188
9,301,437
531
1,436
2,944
67
2
9,471,056
$(6,413,483)
Trust Property List
2007
$6,929
3,255,735
3,379,213
6,673
116
1,195
6,649,861
392,100
60
1,010
381
612,878
1,874
360
189
1,008,852
$5,641,009
112
41.E S F H C ’ S F I N A N C I A L S TAT E M E N T S A N D
C O N D E N S E D F I N A N C I A L S TAT E M E N T S O F
SUBSIDIARIES
Please see Table 9 (attached).
42.B USINESS SEGMENT FINANCIAL
INFORMATION
43.CAPITAL ADEQUACY RATIO
Under the Financial Holding Company Law
and related regulations, ESFHC should maintain
a consolidated capital adequacy ratio (CAR) of
at least 100%. If the ratio falls below 100%, the
appropriation of earnings as cash dividends or other
assets will be restricted, and the authorities may
discipline ESFHC, depending on the situation.
The Banking Law and related regulations require
that E.SUN Bank maintains both stand-alone and
consolidated CARs at a minimum of 8% each. If
E.SUN Bank’s CAR falls below 8%, the authorities
may impose certain restrictions on the amount of
cash dividends that E.SUN Bank may declare or,
in certain conditions, totally prohibit E.SUN Bank
from declaring cash dividends.
Under the rules governing securities firms and
related regulations, the CAR of a securities firm
should be at least 200% to ensure its stability as
well as maintain the health of the security markets.
If the ratio is below 200%, the authority may
impose certain restrictions on a firm’s operations.
The CARs of E.SUN Securities were 836.16% and
550.33% as of December 31, 2008 and 2007.
Please refer to other related information in Table
11.
44.D I S C L O S U R E R E Q U I R E D U N D E R A RT I C L E
46 OF THE FINANCIAL HOLDING COMPANY
ACT
45.ADDITIONAL DISCLOSURES
Following are the additional disclosures for
113
ESFHC and its investees:
a.Related information of significant transactions and investees:
1)F inancing provided: ESFHC and E.SUN Bank - not
applicable; investee - none.
2)Endorsement/guarantee provided: ESFHC and E.SUN Bank
- not applicable; investee - none.
3)M arketable securities held: ESFHC, E.SUN Bank and
E.SUN Securities - not applicable; investee - Table 1
(attached).
4)Marketable securities acquired and disposed of at costs or
prices of at least NT$300 million or 10% of the paid-in
capital (ESFHC and E.SUN Bank disclosed its investments
acquired or disposed of): E.SUN Securities - not applicable;
ESFHC and investee - Table 2 (attached).
5)A cquisition of individual real estate at costs of at least
NT$300 million or 10% of the paid-in capital: None.
6)Disposal of individual real estate at costs of at least NT$300
million or 10% of the paid-in capital: None.
7)Financial asset securitization by subsidiaries: Note 11 to the
8)Allowance of service fees to related parties amounting to at
least NT$5 million: None.
9)S ale of nonperforming loans by subsidiaries: Table 3
(attached).
10)R eceivables from related parties amounting to at least
NT$300 million or 10% of the paid-in capital: None.
11)T he related information and proportionate share in
investees: Table 4 (attached).
12)Derivative transactions: Notes 6 and 37 to the consolidated
financial statements.
13)O ther significant transactions which may affect the
decisions of users of financial reports: None.
b.Investment in Mainland China: None.
c.Business relationship and significant transactions among the
parent company and subsidiaries: Table 6 (attached).
46.SEGMENT INFORMATION
ESFHC and its subsidiaries engage in investing,
banking, securities and insurance. The revenues,
operating profits and identifiable assets related to
the Company’s banking operations represent more
than 90% of those of the Company’s operations.
Accordingly, no segment information is required to be
disclosed.
MARKETABLE SECURITIES HELD
DECEMBER 31, 2008
TABLE 1
Holding
Company
Name
E.SUN Venture
Capital Corp.
December 31, 2008
Financial Statement
Account
Stocks
E-Ton Solar Tech.
-
Formosa Advanced Technologies Co., Ltd.
-
Gallant Precision Machining Co., Ltd.
-
Ampire Co., Ltd.
Star World Technology Co., Ltd.
Gallant Precision Machining Co., Ltd.
Epistar Corp.
E-Ton Solar Tech.
Univacco Technology Inc.
Formosa Advanced Technologies Co., Ltd.
Optimer
Goodway Machine Corp.
Hi-Light Tek Co., Ltd.
Bank-Pro E-Service Technology Co., Ltd.
Epoch Chemtronics Corp.
Chunghwa Chemical Synthesis Biotech
Co., Ltd.
Sam Lam Technology Co., Ltd.
Etrend Technology Co., Ltd.
Progressive Optoelectronic Technology
Co., Ltd.
Beyond Innovation Technology Co., Ltd.
Super Link Electronics Co., Ltd. - common
stock
Super Link Electronics Co., Ltd. preferred stock
Applied Green Light, Inc. of Cayman
-
597
4
272
27
1
908
400
246
856
700
325
2,014
2,000
-
1,700
1,510
568
-
941
940
-
1,200
Joinsoon Electronics Mfg. Co., Ltd.
Solidlite Co., Ltd.
Dynamic Electronics Co., Ltd.
MOSA Industrial Corporation
Wisdem-Orgchem, Inc. (Cayman)
Exploit Technology Co., Ltd.
Mao Chia Metal Co., Ltd.
Wieson Technologies Co., Ltd.
Litek Opto-electronics Co., Ltd.
Tospom Corporation
Azure Ware (Cayman) Holding Inc.
Powerking Optoelectronic Co., Ltd.
Chuan Shih Industrial Co., Ltd.
Crowningtek Inc.
Chia Chang Co., Ltd.
Gloria Solar International Holding, Inc.
T.H.I. Group Ltd.
Aero Win Technology Corporation
Bay Zu Precision Co., Ltd.
Starchips Technology Inc.
Pai Lung Machinery Mill Co., Ltd.
Vactronics Technologies Inc.
Fuho Technology Co., Ltd.
Auria Solar Co., Ltd.
Mercury Electronic Industrial Co., Ltd.
Awin Diamond Technology Corporation
Chipsip Technology Co., Ltd.
Innovation & Infinity Global Corporation
Unidisplay Inc.
Dano Tech Co., Ltd.
Well Technology Co., Ltd.
--
Debt instruments with no active
market
Debt instruments with no active
market
Funds
Schroder Global Bond Fund of Fund
-
3,489
-
300
-
through profit or loss - current
1,112
-
1,788
8
200
39
-
1,454
991
E.SUN Insurance Funds
Broker Co., Ltd. APEX Note on fin4castR Global Macro
Diversified Futures Index I
Schroder LOHAS Small and Mid Capital
Fund
Schroder New Era Bond Fund
MLIIF Global Allocation Fund A2-USD
JF Greater China Balance Fund
Pimco Funds: Global Investors Series plc
Total Return Bond
Fuh Hwa Bond Fund
Shin Kong Chi-Li Fund
-
Shares
(Thousands)
27
121
300
1,000
1,765
1,400
2,652
1,156
316
505
600
1,791
2,700
1,783
51
893
2,250
1,600
1,923
500
1,125
1,000
800
1,000
500
1,700
330
1,200
1,400
1,500
600
805
1,600
1,200
321
Percentage
of Ownership
Market Value or
Net Asset Value
Note
$ 2,519
0.03
1
2,614
0.03
2,832
0.13
2,268
78
2,564
793
114
13,571
8,640
97,695
18,488
5,040
3,250
28,001
20,005
0.82
0.01
0.12
1.37
0.09
0.87
0.96
2.00
2.41
7.89
3.07
19,472
272
6.07
4.28
1.22
25,388
11,750
2.79
10.00
12,000
40.00
Carrying
Value
8,756
6.77
30,571
15,369
35,785
19,776
56,000
10,103
18,000
25,600
25,110
45,800
2,074
16,363
20,250
19,200
99,996
30,000
29,407
13,000
16,000
22,500
11,000
23,800
11,400
30,000
16,800
20,250
32,801
29,400
28,800
36,001
14,144
2.74
6.38
1.11
1.75
2.07
0.83
1.90
2.99
4.97
10.61
0.25
4.32
5.79
10.33
2.06
1.00
2.56
2.00
1.86
8.33
1.41
5.31
1.21
0.57
5.69
14.72
2.04
2.92
1.23
2.82
1.39
$2,519
2,614
2,832
2,268
78
2,564
793
114
13,571
8,640
97,695
18,488
5,040
4,337
33,424
23,079
5,584
17,994
255
6,664
4,949
12,247
9,322
30,403
10,925
54,792
21,329
24,729
5,389
11,058
23,028
13,202
37,503
2,430
9,434
21,523
10,029
79,131
33,213
19,666
12,129
9,284
6,487
5,053
12,748
4,920
20,111
14,715
13,344
13,245
17,352
19,520
9,546
3,891
36,069
-
36,069
1
9,668
-
9,668
1
5,680
20,008
8,111
2,068
20,225
20,021
17,008
1
5,680
-
20,008
8,111
2,068
20,225
-
20,021
17,008
-
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
Relationship with the Holding
Company
Marketable Securities
Type and Issuer/Name
4
4
3
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
Note 1: Market value of the listed stocks was based on the closing price as of December 31, 2008. The market value of fund was based on the net asset value as of December 31, 2008.
Note 2: Unlisted company. The amounts are based on the investee’s latest unaudited or unreviewed financial statements.
Note 3: Unlisted company. The amounts are based on the investee’s latest audited or reviewed financial statements.
Note 4: The fair value is determined on the basis of the discounted cash flow method.
114
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR
10% OF THE PAID-IN CAPITAL
(ESFHC AND E.SUN BANK DISCLOSED ITS INVESTMENTS ACQUIRED OR DISPOSED OF)
YEAR ENDED DECEMBER 31, 2008
TABLE 2
Investor
Company
E.SUN Financial
Holding Company,
Ltd.
Financial
Statement
Account
Investee
Company
E.SUN Securities
Investment Trust
Co., Ltd.
Equity investments
under the equity
method
Relationship
Counter- Between the
party
ESFHC and
January 1, 2008
Shares
Counterparty (Thousand)
Schroder
International
Holdings
Limited
None
34,800
Acquisition
Carrying
Value
Shares
(Thousand)
$
-
$ 383,481
Disposal
Amount
Selling
Price
Shares
(Thousand)
-
34,800
$ 521,859
(Note 1)
December 31, 2008
Carrying
Value
$ 383,481
(Note 2)
Gain (Loss)
Shares
(Thousand)
$ 163,969
Carrying
Value
-
$
-
Note 1:Securities transaction tax amounting to $1,565 thousand was included.
Note 2:Including losses of $2,095 thousand from equity investments under the equity method, cash dividends of $25,061 thousand and net equity amounting to $356,325 thousand.
SALE OF NONPERFORMING LOANS
TABLE 3
1.Sale of nonperforming loans
E.SUN Finance & Leasing Co.
Trade Date
2008.05.30
Counterparty
New Luxury Management
Corporation
Selling
Price
Book Value
(Note)
Form of Nonperforming Loan
$ 2,577
Accounts receivable - installment
payments, capital lease, and accounts
receivable
Gain (Loss)
$ 1,731
$ (846)
Relationship
Between the
Counterparty and
E.SUN Bank
Terms
None
As shown in the sales
contract
Note: Book value includes assets amounting $17,188 thousand less an allowance of $14,611 thousand.
2.The sale of a batch of nonperforming loans over NT$1 billion (excluding those sold to related-parties): None.
E.SUN FINANCIAL HOLDING COMPANY, LTD.
PERCENTAGE SHARE IN INVESTEES AND RELATED INFORMATION
TABLE 4
Investor
Company
E.SUN Financial
Holding
Company, Ltd.
Investee Company
Location
E.SUN Securities Corp.
Taipei
Taipei
E.SUN Venture Capital Corp.
E.SUN Insurance Broker Co., Ltd.
E.SUN Securities Investment
Trust Co., Ltd.
Taipei
Taipei
Taipei
Main Businesses and
Products
Banking
Dealing, underwriting and
brokering securities
Investment
Insurance broker
Investing funds under full
discretionary authorization
from customers
Percentage
of
Ownership
Carrying
Value
100.00
100.00
$ 46,219,870
3,235,109
100.00
100.00
-
1,221,173
209,900
-
Investment
Gain
$ 702,303
(61,567)
15,837
68,536
161,874
The Proportionate Share of the Company and its
Affiliates in Investees (Note 1)
Shares
(Thousands)
Pro Forma
Shares
(Note 2)
3,120,000
306,000
-
115,500
11,300
-
-
Shares
(Thousands)
Total
Percentage of
Ownership
Note
3,120,000
306,000
100.00
100.00
3
3
115,500
11,300
-
100.00
100.00
-
3
3
3
Note 1:Shares or pro forma shares held by the Company, directors, supervisors, president, vice president and affiliates in accordance with the Company Law have been included.
Note 2:a. Pro forma shares are shares that are assumed to be obtained through buying equity-based securities or entering into equity-linked derivative contracts for purposes defined in Paragraph 2 of Article 36 and Article 37 of the
Financial Holding Company Act.
b. Equity-based securities are covered by Article 11 of “Securities and Exchange Law Enforcement Rules,” such as convertible bonds and warrants.
c. Derivative contracts are those conforming to the definition of derivatives in Statement of Financial Accounting Standards No. 34- “Accounting for Financial Instruments,” such as stock options.
Note 3:Consolidated financial statements do not include investment carrying amounts and gains (losses).
115
CONSOLIDATED ENTITIES
TABLE 5
Subsidiaries included in the consolidated financial statements:
Investor
Company
Percentage of Ownership
Main Bussinesses and Products
Location
Investee Company
December 31, 2008
Note
December 31, 2007
E.SUN Financial Holding
Company, Ltd.
Taipei
Banking
100.00
100.00
Taipei
Taipei
Taipei
Taipei
Dealing, underwriting and brokering securities
Investment
Insurance broker
Investing funds under full discretionary authorization from customers
100.00
100.00
100.00
-
100.00
100.00
100.00
100.00
E.SUN Securities Investment Consulting
Co., Ltd.
Taipei
Security consulting
100.00
100.00
1
Subsidiaries not included in the consolidated financial statements:
Investor
Company
E.SUN Finance & Leasing Co., Ltd.
Taipei
December 31, 2008
-
Leasing and sale of machinery and equipment
Note
December 31, 2007
E.SUN Commercial Bank,
Ltd.
Percentage of Ownership
Main Bussinesses and Products
Location
Investee Company
2
98.99
Note 1:ESFHC sold entire share capital of ESSIT on September 30, 2008. Thus, ESFHC’s consolidated financial statements as of and for the year ended December 31, 2008 included the gains or losses of ESSIT in the nine
months ended September 30, 2008 solely.
Note 2:On August 16, 2007, the board of directors of E.SUN Finance & Leasing Corp. (ESFL) resolved to liquidate ESFL and this liquidation was completed in September 2008. Because ESFL was a minor subsidiary, the
ESFHC’s management believed that this exclusion would not have a significant effect on the consolidated financial statements as of and for the year ended December 31, 2007.
BUSINESS RELATIONSHIP AND SIGNIFICANT TRANSACTIONS BETWEEN THE PARENT COMPANY AND SUBSIDIARIES
TABLE 6
2008
Description of Transactions (Notes 3 and 5)
Counter-party
No.
(Note 1)
Transaction Company
0
a
1
b
0
a
1
b
0
1
2
1
Transaction
Flow
(Note 2)
Financial Statement
Account
Amounts
Trading
Terms
Transaction Amount/Total
Consolidated Net
Revenue or Total
Consolidated Assets
(%)
$ 7,246,318
Note 4
0.87
7,246,318
Note 4
0.87
Interest revenue
174,037
Note 4
1.23
Interest expense
174,037
Note 4
1.23
a
Other payable
112,026
Note 4
0.01
b
Other receivable
112,026
Note 4
0.01
c
105,700
Note 4
0.01
c
105,700
Note 4
0.01
116
2007
Description of Transactions (Notes 3 and 5)
Counter-party
No.
(Note 1)
Transaction Company
0
a
1
b
0
a
1
b
3
1
4
1
2
1
Transaction
Flow
(Note 2)
Financial Statement
Account
Amounts
Trading
Terms
Transaction Amount/Total
Consolidated Net
Revenue or Total
Consolidated Assets
(%)
$ 8,903,288
Note 4
1.15
8,903,288
Note 4
1.15
Interest revenue
544,267
Note 4
3.82
Interest expense
544,267
Note 4
3.82
c
140,236
Note 4
0.02
c
140,236
Note 4
0.02
c
134,920
Note 4
0.02
c
134,920
Note 4
0.02
c
132,596
Note 4
0.02
c
132,596
Note 4
0.02
Note 1:The companies listed in Table 6 are indentified as follows:
a.Parent company: 0.
b.Subsidiaries are numbered sequentially from 1.
Note 2:Transaction flows are as follows:
a.From parent company to subsidiary.
b.Subsidiary to parent company.
c.Between subsidiaries.
Note 3:For calculating the percentages, asset or liability account is divided by the total consolidated assets and revenue or expense account is divided by the total consolidated net
revenue of the same period.
Note 4:The terms for the transactions between the Company and related parties are similar to those with unrelated parties.
Note 5:Referring to transactions exceeding NT$100 million.
117
RELATED-PARTY TRANSACTIONS
TABLE 7
Loans
December 31, 2008
Type
Account Volume or Name
Highest
Balance
in the Year
Ended
December 31,
2008 (Note)
Loans Classification
Ending
Balance
Normal
Loans
Collateral
Nonperforming
Loans
Consumer loans for employees
78
$ 232,616
$ 198,934
$ 198,934
Self-used housing mortgage loans
53
298,259
233,294
Other loans
Chiu-Hsiung Huang
35,000
Other loans
Joseph N. C. Huang
10,000
Other loans
Joseph N. C. Huang
Other loans
Heng-Hwa Yang
Other loans
Other loans
$
Differences
in Terms of
Transaction
Compared with
Those for Unrelated
Parties
Land and buildings as collateral
None
233,294
-
Land and buildings
None
20,000
20,000
-
Land and buildings
None
10,000
10,000
-
Land and buildings
None
5,000
4,947
4,947
-
Land and buildings
None
997
363
363
-
Land and buildings
None
Joe Huang
6,000
1,300
1,300
-
Land and buildings
None
J.C. Wang
1,948
1,834
1,834
-
Land and buildings
None
Other loans
Kuan-Her Wu
2,000
1,933
1,933
-
Land and buildings
None
Other loans
Wen-Yuh Chen
6,300
6,300
6,300
-
Land and buildings
None
Other loans
Hao-Wei Tsai
1,752
-
-
-
Land and buildings
None
Other loans
Rong Huel Chang
1,956
463
463
-
Land and buildings
None
Other loans
Bruce Lee
800
-
-
-
None
None
Other loans
Shih-Hui Lin
2,200
2,156
2,156
-
Land and buildings
None
Other loans
Yin-Sung Liu
8,000
6,445
6,445
-
Land and buildings
None
Other loans
Yin-Sung Liu
1,400
1,400
1,400
-
Land and buildings
None
Other loans
Yin-Hung Liu
35,000
35,000
35,000
-
Land and buildings
None
Other loans
I-Shun Chou
3,000
2,991
2,991
-
Land and buildings
None
Other loans
Cheng-Jen Liu
2,700
2,660
2,660
-
Land and buildings
None
Other loans
Jia-Tie Huang
2,000
2,000
2,000
-
Land and buildings
None
Other loans
Fubon Securities Finance Co., Ltd.
50,000
-
-
-
None
None
for part of the loans
-
118
December 31, 2007
Type
Consumer loans for employees
Account Volume or Name
72
Highest
Balance
in the Year
Ended
December 31,
2007 (Note)
$ 206,605
Loans Classification
Ending
Balance
$ 179,531
Normal
Loans
Nonperforming
Loans
$ 179,531
$
-
Self-used housing mortgage loans
51
Other loans
Chiu-Hsiung Huang
Other loans
Joe Huang
Other loans
Land and buildings as collateral
Differences
in Terms of
Transaction
Compared with
Those for Unrelated
Parties
None
for part of the loans
347,406
249,272
249,272
-
Land and buildings
None
61,000
35,000
35,000
-
Land and buildings
None
20
-
-
-
Land and buildings
None
Heng-Hwa Yang
1,000
997
997
-
Land and buildings
None
Other loans
J.C. Wang
2,000
1,948
1,948
-
Land and buildings
None
Other loans
Wu-Tzung Lee
700
-
-
-
Time deposits
None
Other loans
Wen-Yuh Chen
6,300
6,300
6,300
-
Land and buildings
None
Other loans
Jing-Hu Hsieh
1,700
1,700
1,700
-
Land and buildings
None
Other loans
Hao-Wei Tsai
1,773
1,752
1,752
-
Land and buildings
None
Other loans
Rong-Huel Chang
2,000
1,956
1,956
-
Land and buildings
None
Other loans
Fubon Securities Finance Co., Ltd.
1,930,000
-
-
-
None
None
Note: The sum of the respective highest balances of all accounts in the years ended December 31, 2008 and 2007.
119
Collateral
E.SUN COMMERCIAL BANK, LTD.
ASSET QUALITY - NONPERFORMING LOANS AND RECEIVABLES
TABLE 8
Period
Items
Corporate Banking
Consumer Banking
Loan
Secured
Unsecured
Housing mortgage (Note 4)
Cash card
Small scale credit loans (Note 5)
Other (Note 6) Secured
Unsecured
$ 686,417
1,605,071
1,163,567
9,193
1,162,038
90,324
117,417
4,834,027
Nonperforming
Receivables
(Note 1)
466,020
-
Loans
Ratio of
Nonperforming
Loans (Note 2)
$ 86,620,588
160,902,386
236,456,735
57,986
9,020,801
39,391,462
4,062,301
536,512,259
0.79
1.00
0.49
15.85
12.88
0.23
2.89
0.90
Ratio of
Receivables
Nonperforming
Receivables
(Note 2)
28,140,324
1.66
63,725
-
December 31, 2007
Allowance
for Possible
Losses
Coverage
Ratio
(Note 3)
44.97
95.33
35.93
100.00
100.00
24.11
100.00
73.80
Nonperforming
Loans
(Note 1)
$ 308,695
1,530,071
418,090
9,193
1,162,038
21,777
117,417
3,567,281
Allowance
for Possible
Losses
Coverage Ratio
(Note 3)
$ 682,441
850,554
1,241,988
12,963
1,534,297
145,727
108,884
4,576,854
Nonperforming
Receivables
(Note 1)
446,353
-
95.78
-
509,967
-
Loans
Ratio of
Nonperforming
Loans (Note 2)
$ 72,843,217
148,684,145
253,745,015
106,492
10,597,214
27,470,452
3,672,273
517,118,808
0.94
0.57
0.49
12.17
14.48
0.53
2.97
0.89
Ratio of
Receivables
Nonperforming
Receivables
(Note 2)
25,224,933
2.02
-
44,216
70,472
1,301,502
1,859,585
Allowance
for Possible
Losses
Coverage
Ratio
(Note 3)
$ 224,949
532,033
232,415
6,283
1,402,682
28,563
43,120
2,470,045
Allowance
for Possible
Losses
32.96
62.55
18.17
48.47
91.42
19.60
39.60
53.97
Coverage Ratio
(Note 3)
307,371
-
60.27
-
Note 1:Nonperforming loans are reported to the authorities and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal
with Nonperforming/ Non-accrued Loans.”
Nonperforming credit card receivables are reported to the authorities and disclosed to the public, as required by the Banking Bureau’s letter dated July 6, 2005 (Ref. No. 0944000378).
Note 2:Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loan balance.
Ratio of nonperforming receivables: Nonperforming receivables ÷ Outstanding receivables balance.
Note 3:Coverage ratio of loans: Allowance for possible losses for loans ÷ Nonperforming loans.
Coverage ratio of receivables: Allowance for possible losses for receivables ÷ Nonperforming receivables.
Note 4:The mortgage loan is for house purchase or renovation and is fully secured by housing that is purchased (owned) by the borrower, the spouse or the minor children of the borrowers.
Note 5:Based on the Banking Bureau’s letter dated December 19, 2005 (Ref. No. 09440010950), small scale credit loans are unsecured, involve small amounts and exclude credit cards and cash cards.
Note 6:Other consumers banking loans refer to secured or unsecured loans that exclude housing mortgage, cash cards, credit cards and small scale credit loans.
Note 7:As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 0945000494), factoring accounts receivable without recourse are reported as nonperforming receivables within
three months after the factors or insurance companies refuse to indemnify banks for any liabilities on these accounts.
Note 8:Amounts of executed contracts on negotiated debts that are not reported as nonperforming loans or receivables are reported in accordance with the Banking Bureau’s letter dated April 25, 2006
(Ref. No. 09510001270).
120
Credit cards
Factoring accounts receivable without recourse (Note 7)
Amounts of executed contracts on negotiated debts not reported as
nonperforming loans (Note 8)
Amounts of executed contracts on negotiated debts not reported as
nonperforming receivables (Note 8)
December 31, 2008
Nonperforming
Loans
(Note 1)
ESFHC’S FINANCIAL STATEMENTS AND CONDENSED FINANCIAL STATEMENTS OF SUBSIDIARIES
TABLE 9
1.ESFHC's Financial Statements
Balance Sheets
(In Thousands of New Taiwan Dollars, Except Par Value)
Assets
2008
Liabilities and Stockholder´s Equity
2007
2008
2007
$ 7,246,319
$ 8,903,288
Receivables
303,324
485,318
Payables
507,706
411,695
Accrued pension cost
Equity investments under the
equity method
Properties, net
50,886,052
51,970,577
Other liabilities
12,690
12,690
Total liabilities
432
$ 4,967,559
$ 8,988,783
375,316
266,912
5,500,000
5,500,000
7,641
6,725
188,032
11,038,548
14,762,420
35,443,511
33,033,000
10,407,577
9,883,176
3,881,743
5,609,490
(11,318)
(8,906)
-
594
Intangible assets
2,021
2,106
Other assets, net
822,205
818,016
Stockholder’s equity
Common stock - NT$10.00 par value,
authorized 5,000,000 thousand shares;
issued and outstanding 3,544,351
thousand shares in 2008 and
3,303,300 thousand shares in 2007
Capital surplus
Retained earnings
Unrealized valuation losses on
financial instruments
Treasury stock
(636,969)
(336,819)
(670,728)
-
Net loss not recognized as
pension cost
Total stockholders’ equity
Total
121
$ 59,780,749
$ 62,604,284
Total
(5,524)
-
48,742,201
47,841,864
$59,780,749
$ 62,604,284
Statements of Income
2008
2007
Revenues and gains
Income from equity investments under the equity method
$ 950,646
$ 3,097,206
Other revenues and gains
618,457
594,654
Total revenues and gains
1,569,103
3,691,860
Expenses and losses
Losses from equity investments under the equity method
(63,663)
-
(125,584)
(68,591)
Other expenses and losses
(217,367)
(468,125)
Total expenses and losses
(406,614)
(536,716)
1,162,489
3,155,144
Income tax benefit (expense)
(137,486)
138,666
$ 1,025,003
$ 3,293,810
2008
2007
Net income
Operating expenses
After
Before
After
Before
Income Tax Income Tax Income Tax Income Tax
Earnings per share
$ 0.34
$ 0.30$
$ 0.92
$ 0.96
$ 0.20
0.19
$ 0.85
$ 0.88
122
Statements of Changes in Stockholders' Equity
Years Ended December 31, 2008 And 2007
Issued and Outstanding
Capital Stock
Shares (in
Thousands)
BALANCE, JANUARY 1, 2007
Legal reserve
Reversal of special reserve
Net income in 2007
3,303,300
3,303,300
-
-
Change in unrealized valuation losses on financial instruments
-
Legal reserve
Special reserve
Dividend
Cash
Stock
Bonus to employees - 7,968 thousand issued shares and
$2,902 thousand in cash
Net income in 2008
Change in unrealized valuation gains on financial instruments
Acquisition of treasury stock - 42,000 thousand shares
123
3,303,300
132,132
7,968
Retained Earnings
Common
Stock
3,443,400
100,951
3,544,351
Capital
Surplus
Legal
Reserve
$33,033,000 $9,883,176
33,033,000 9,883,176
33,033,000 9,883,176
1,321,320
79,680
34,434,000
1,009,511
-
9,883,176
524,401
-
Unappropriated
Earnings
Special
Reserve
$1,402,182
42,260
1,444,442
1,444,442
329,381
1,773,823
-
$35,443,511 $10,407,577 $1,773,823
$78,426
78,426
(78,426)
683,801
683,801
$683,801
$835,072
(42,260)
792,812
78,426
3,293,810
4,165,048
(329,381)
(683,801)
(1,321,320)
(1,321,320)
(27,528)
(82,582)
399,116
1,025,003
$1,424,119
Equity Adjustments
Unrealized
Total
Valuation
Net Loss Not
Gains (Losses) Treasury Stock Recognized as Stockholders'
Equity
on Financial
Pension Cost
Instruments
Cumulative
Translation
Adjustments
$(4,297)
(4,297)
(4,609)
(8,906)
$348,097
348,097
(1,018,825)
(670,728)
$
-
-
-
-
-
-
-
(8,906)
(2,412)
$(11,318)
(670,728)
33,759
$(636,969)
(336,819)
$(336,819)
$(7,787)
(7,787)
3,619
(4,168)
(4,168)
(1,356)
$(5,524)
$45,567,869
45,567,869
3,293,810
(4,609)
(1,018,825)
3,619
47,841,864
(1,321,320)
(27,528)
(2,902)
46,490,114
1,533,912
1,025,003
(2,412)
33,759
(336,819)
(1,356)
$48,742,201
Statements of Cash Flows
2007
2008
Cash and cash equivalents, end of year
Supplementary cash flow information
Interest paid
Income tax paid
Noncash investing and financing activities
$ 1,025,003
(886,983)
1,482,561
162
26,568
(446,048)
191,069
(355)
(176,030)
418,170
(96,011)
24
108,404
1,646,534
520,294
520,294
(2,127,978)
(1,321,320)
(30,430)
(336,819)
(3,816,547)
(7,250)
(1,656,969)
8,903,288
$ 3,293,810
(3,097,206)
149,180
162
(55,619)
(39,044)
101
(3,572)
(487)
15,377
262,702
(4,000,000)
(4,000,000)
500,000
500,000
4,150
(3,233,148)
12,136,436
$ 7,246,319
$ 8,903,288
$162,472
$5,483
$ 132,087
$ 50,351
$1,533,912
Cash flows from operating activities
Net income
Income from equity investments under the equity method, net
Cash dividend from equity investments under the equity method
Depreciation expenses
Losses (gains) on valuation of financial instruments
Realized gains on financial liabilities designated at fair value through profit or loss
Deferred income tax
Other
Net changes in operating assets and liabilities
Receivables
Other assets
Payables
Net cash provided by operating activities
Cash flows from investing activities
Increase in equity investments under the equity method
Proceeds of the sale of equity investments under the equity method
Net cash provided by (used in) investing activities
Cash flows from financing activities
Decrease in financial liabilities designated at fair value through profit or loss
Cash dividends paid
Bonus to employees and remuneration to directors and supervisors
Proceeds of the issuance of corporate bonds
Acquisition of treasury stock
Net cash provided by (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
$
-
124
2.Subsidiaries' condensed balance sheets
Condensed Balance Sheets
Assets
2008
Due from the Central Bank and call
loans to other banks
Financial assets at fair value through
profit or loss, net
2007
$ 11,572,247
$ 8,772,429
88,970,396
31,671,111
72,690,441
agreements
353,252
Receivables, net
30,559,788
Discounts and loans, net
Available-for-sale financial assets, net
Equity investments under the equity
method, net
Other financial assets, net
Properties, net
Intangible assets
514,648,763
14,241,499
14,389,915
-
8,097,140
37,638,457
130,259
8,069,883
12,974,852
12,581,563
3,617,672
4,409,031
4,022,745
Other assets, net
295,975
28,262,525
532,944,978
42,606,239
Held-to-maturity financial assets,net
97,181,827
3,908,466
Liabilities and Stockholder´s
Equity
Liabilities
Due to the Central Bank and other
$ 32,516,451
26,488,285
30,507,142
agreements
22,448,022
16,364,237
666,460,275
598,773,839
2,372,937
2,971,900
Payables
Bank debentures
Other
Total liabilities
Capital stock
Unrealized valuation gains (losses)
on financial instruments
Total stockholder's equity
$ 761,960,204
9,718,794
27,300,000
474,846
7,980,699
25,600,000
582,972
776,431,379
715,297,240
31,200,000
31,200,000
8,345,894
8,891,591
Stockholder's equity
Retained earnings
$ 822,651,249
2007
$ 21,168,220
banks
Capital surplus
Total
2008
Total
7,321,485
(11,318)
(636,191)
7,321,485
(8,906)
(741,206)
46,219,870
46,662,964
$ 822,651,249
$ 761,960,204
2008
Assets
2007
$ 3,457,552
$ 6,328,059
Properties, net
307,463
326,766
488,135
459,540
Fund and investments
Other assets
76,427
Securities brokerage accounts, net 12,363
29,751
75,520
Current liability
24,193
Total liabilities
45,768
Stockholders’ equity
Other
Capital stock
Retained earnings
Total stockholders’ equity
Total
125
2008
2007
Liabilities
Current assets
Intangible assets
Equity
$ 4,371,691
$ 7,259,846
Total
$ 1,079,361
$ 3,763,485
1,136,582
3,810,170
3,060,000
3,060,000
3,235,109
3,449,676
$ 4,371,691
$ 7,259,846
57,221
175,109
46,685
389,676
2008
Assets
Intangible assets
Other assets
2008
2007
Liabilities
Current assets
Equity
2007
$ 243,793
-
135
2,542
$ 222,946
9,539
91
203
Current liability
Other
Total liabilities
$ 36,454
116
36,570
$ 29,063
91
29,154
Stockholders' equity
Capital stock
113,000
Retained earnings
Unrealized valuation losses on
$ 246,470
Total
$ 232,779
Total
102,899
(5,999)
113,000
209,900
90,863
(238)
203,625
$ 246,470
$ 232,779
$ 301,283
922,545
294
62
157
$ 504,477
788,459
21
61
177
$ 1,224,341
$ 1,293,195
2007
Liabilities
Current liability
Other
Total liabilities
$ 3,006
162
3,168
$ 22,219
145
22,364
Capital stock
Retained earnings
Unrealized valuation gains on
Total
2008
2008
Assets
Current assets
Properties, net
Intangible assets
Other assets
Equity
2007
Total
1,155,000
60,952
5,221
1,221,173
$ 1,224,341
1,000,000
200,115
70,716
1,270,831
$ 1,293,195
E.SUN Securities Investment Trust Corp.
December 31, 2007
Equity
Assets
Current assets
Properties, net
Intangible assets
Other assets
$340,298
5,576
1,100
52,926
Liabilities
Current liability
Other
Total liabilities
$ 8,499
7,920
16,419
Capital stock
Retained earnings
Total
$ 399,900
Total
348,000
35,481
383,481
$ 399,900
126
3.Subsidiaries' condensed income statements
Condensed Income Statements
2008
Items
2007
Net interest
Net revenues and gains other than interest
Total net revenues
Operating expenses
$ 9,375,272
3,623,824
12,999,096
(3,536,372)
(8,278,201)
$ 8,822,737
4,114,977
12,937,714
(2,174,707)
(7,473,608)
$ 1,184,523
$3,289,399
$ 781,963
$ 2,591,451
Net income
Earnings per share - before income tax
Earnings per share - after income tax
$ 0.38
$ 0.25
$1.09
$0.86
2008
Items
Revenues
Expenses
$ 696,537
(719,574)
$ 1,030,322
(699,727)
Income (losses) before income tax
$ (23,037)
$ 330,595
Net income (losses)
$ (51,801)
$ 284,657
Earnings (loss) per share - before income tax
Earnings (loss) per share - after income tax
127
2007
$ (0.08)
$ (0.17)
$ 1.08
$ 0.93
2008
Items
Operating income
Operating expenses
Nonoperating revenues and gains
Nonoperating expenses and losses
$ 167,336
(72,367)
4,281
(6,031)
2007
$ 114,867
(42,555)
12,019
(1,274)
$ 93,219
$ 83,057
Net income
$ 68,546
$ 61,870
$ 8.25
$ 6.07
$ 7.35
$ 5.48
2008
Items
2007
$ 41,736
(24,370)
$ 222,873
(27,513)
$ 17,366
$ 195,360
Net income
$ 18,337
$ 177,067
Revenues
Expenses
$ 0.15
$ 0.16
$ 1.69
$ 1.53
Year Ended December 31, 2007
Operating income
Operating expenses
Nonoperating revenues and gains
Nonoperating expenses and losses
$ 51,823
(42,235)
7,087
(8,688)
$ 7,987
Net income
$ 3,869
Income per share - before income tax
Income per share - after income tax
$ 0.23
$ 0.11
128
BUSINESS SEGMENT FINANCIAL INFORMATION
TABLE 10
2008
Business Segment
Items
Net interest (losses)
Securities
Banking
Others
Consolidated
$ 9,567,369
$ 201,626
$(189,073)
$9,579,922
3,586,043
250,216
748,129
4,584,388
Total net revenues
13,153,412
451,842
559,056
14,164,310
(3,536,372)
-
-
(3,536,372)
Operating expenses
(8,265,604)
(480,411)
(260,815)
(9,006,830)
1,351,436
(28,569)
298,241
1,621,108
Income tax expenses
(402,560)
(28,764)
(164,781)
(596,105)
948,876
(57,333)
133,460
1,025,003
Net income (losses)
2007
Business Segment
Items
Net interest (losses)
Others
Consolidated
$ 9,390,584
$ 210,080
$ (74,315)
$ 9,526,349
4,058,814
647,092
9,425
4,715,331
Total net revenues (losses)
13,449,398
857,172
(64,890)
14,241,680
(2,174,707)
-
-
(2,174,707)
Operating expenses
(7,470,608)
(531,130)
(121,204)
(8,122,942)
3,804,083
326,042
(186,094)
3,944,031
Income tax benefits (expenses)
(697,948)
(45,938)
93,665
(650,221)
Net income (losses)
3,106,135
280,104
(92,429)
3,293,810
129
Securities
Banking
CAPITAL ADEQUACY RATIO
TABLE 11
1.E.SUN Financial Holding Company, Ltd.’s Capital Adequacy Ratio
Unit: In Thousands of New Taiwan Dollars, %
December 31, 2008
Proportionate Share
December 31, 2007
Group's
Statutory Capital
Requirement
Group's Net Eligible
Capital
Group's Net Eligible
Capital
Proportionate Share
$ 52,240,180
$52,092,215
Group's
Statutory Capital
Requirement
$ 52,336,721
$ 53,344,859
100
54,793,876
41,504,878
100
55,853,819
39,139,309
100
2,685,422
481,742
100
2,699,591
735,806
-
100
100
Deduction
Total
-
100
383,481
199,950
1,221,173
612,171
100
1,270,831
646,598
209,900
123,235
100
203,625
116,390
(58,238,908)
(50,898,742)
(68,578,266)
(51,983,267)
52,911,643
43,915,499
44,169,802
42,199,645
-
120.49
Group capital adequacy ratio
104.67
Note 1:The above amounts are calculated under the “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies.”
Note 2:Group capital adequacy ratio = Group’s net eligible capital ÷ Group’s statutory capital requirement.
2.E.SUN Financial Holding Company, Ltd.'s Eligible Capital
Items
Unit: In Thousands of New Taiwan Dollars, %
December 31, 2008
December 31, 2007
$ 35,443,511
$ 33,033,000
Common stock
Qualified noncumulative perpetual preferred stocks and noncumulative subordinated debts
without maturity dates conformed with the terms of Bank's tier 1 capital
-
Other preferred stocks and subordinated debts
Capital collected in advance
Capital surplus
Legal reserve
Special reserve
-
3,500,000
4,500,000
-
-
10,407,577
9,883,176
1,444,442
1,773,823
683,801
Cumulative earnings (deficit)
1,424,119
Equity adjustments
(653,811)
Less: Goodwill
-
Less: Deferred assets
(2,021)
Less: Treasury stock
(336,819)
Total eligible capital
52,240,180
4,165,048
(683,802)
(5,143)
52,336,721
Note: The above amounts are calculated under the “Regulations Governing the Consolidated Capital Adequacy of Financial Holding Companies.”
130
3.E.SUN Commercial Bank, Ltd.'s Capital Adequacy Ratio
(Unit: In Thousands of New Taiwan Dollars, %)
Year
Items
December 31, 2008
Eligible Capital
Tier 1 capital
$ 40,407,211
Tier 2 capital
Tier 3 capital
Eligible Capital
Risk-weighted assets
Credit risk
Operational risk
Market risk
Risk-weighted assets
December 31, 2007
$ 41,067,955
14,386,665
-
-
54,793,876
55,853,819
Standardized approach
458,686,467
14,785,864
424,965,189
Internal ratings - based approach
-
-
Securitization
4,622,215
3,105,807
Basic indicator approach
24,659,738
25,549,112
Standardized approach/Alternative standardized approach
-
-
Advanced measurement approach
-
Standardized approach
Internal model approach
Capital adequacy ratio
30,842,550
35,621,250
-
-
518,810,970
489,241,358
10.56
11.42
Ratio of tier 1 capital to risk-weighted assets
7.79
8.40
2.77
3.02
-
-
3.79
4.09
Ratio of common stock to total assets
Note 1:Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and “Explanation of Methods for Calculating
the Eligible Capital and Risk -Weighted Assets of Banks”.
Note 2:Formulas used were as follows:
1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital.
2) Risk-weighted asset = Risk-weighted asset for credit risk + Capital requirements for operational risk and market risk x 12.5.
3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets.
4) Ratio of tier 1 capital to risk-weighted assets = Tier 1 capital ÷ Risk-weighted assets.
7) Ratio of common stock to total assets = Common stock ÷ Total assets.
131
DISCLOSURE REQUIRED UNDER ARTICLE 46 OF
THE FINANCIAL HOLDING COMPANY ACT
DECEMBER 31, 2008, and 2007
TABLE 12
December 31, 2008
Counter Party
Total Amounts of Credits,
Endorsement or Other
Transactions
1.Tai Power Co., Ltd.
Same person
$ 4,830,000
9.91
2.Taiwan High Speed Rail Corp.
Same person
4,053,941
8.32
3.Capital Securities Corp.
Same person
3,100,000
6.36
Name
Percentage of
ESFHC's Equity
Same affiliate
8,153,444
5.Chi Mei Corp. and related parties
Same affiliate
5,431,572
11.14
6.Far Eastern Textile Co., Ltd. and related parties
Same affiliate
5,183,869
10.64
7.AUO Co., Ltd. and related parties
Same affiliate
4,776,336
9.80
8.Mega Financial Holding Co., Ltd. and related parties
Same affiliate
4,319,045
8.86
9.CSC Group and related parties
Same affiliate
3,992,000
8.19
10.Chong Hong Construction Co., Ltd. and related parties
Same affiliate
3,192,089
6.55
11.Sinyi Realty Inc. and related parties
Same affiliate
3,014,613
6.18
4.Nan Ya Plastic Co., Ltd. and related parties
16.73
December 31, 2007
Counter Party
Total Amounts of Credits,
Endorsement or Other
Transactions
1.Tai Power Co., Ltd.
Same person
$7,125,000
14.89
2.Formosa Petrochemical Corporation
Same person
3,226,600
6.74
3.Chong Hong Construction Corp.
Same person
2,466,240
5.15
4.Mega Financial Holding Co., Ltd. and related parties
Same affiliate
7,717,600
16.13
10.38
Name
Percentage of
ESFHC's Equity
5.Far Eastern Textile Co., Ltd. and related parties
Same affiliate
4,966,831
6.Continental Engineering Corp. and related parties
Same affiliate
4,934,581
10.31
7.Qisda Corporation and related parties
Same affiliate
4,511,916
9.43
8.Nan Ya Plastic Co., Ltd. and related parties
Same affiliate
3,751,976
7.84
9.Chi Mei Optoelectronics Corp. and related parties
Same affiliate
2,982,577
6.23
10.Sinyi Realty Inc. and related parties
Same affiliate
2,973,855
6.22
11.Fubon Financial Holding Co., Ltd. and related parties
Same affiliate
2,798,707
5.85
12.China Development Financial Holding Corporation and related parties
Same affiliate
2,626,351
5.49
Same affiliate
2,576,805
5.39
14.SinoPac Financial Holding Co., Ltd. and related parties
Same affiliate
2,400,547
5.02
15.China Trust Financial Holding Co., Ltd. and related parties
Same affiliate
2,369,825
4.95
13.Yulon Motor Co., Ltd. and related parties
132
天下 2009、2008
遠見 2009∼2006
Chairman of the Board
March 30, 2009 Printed

ANNUAL REPORT 2008

Transcription

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