China Development Financial Holding Corporation and Subsidiaries
Consolidated Financial Statements for the Years Ended December 31, 2009 and 2008 and Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders China Development Financial Holding Corporation
We have audited the accompanying consolidated balance sheets of China Development Financial Holding Corporation (the “Corporation”) and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. However, we did not audit the financial statements of Taiwan International Securities Corporation, an equity-method investee of both the Corporation and subsidiaries, which reflect the investments that were 2.04% (NT$5,883,366 thousand) and 1.96% (NT$5,677,095 thousand) of the consolidated assets as of December 31, 2009 and 2008, respectively. On this equity-method investment, there were a gain of NT$228,149 thousand and a loss of NT$692,251 thousand, which were 3.45% and 9.20%, respectively, of the consolidated income (loss) before income tax for the years ended December 31, 2009 and 2008, respectively. This investee’s statements were audited by other auditors whose report has been furnished to us, and our report, insofar as it relates to the amounts included for Taiwan International Securities Corporation, is based solely on the report of the other auditors.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants, the Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.
- 1 - In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Development Financial Holding Corporation and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports by Public Banks, Criteria Governing the Preparation of Financial Reports by Securities Firms, Criteria Governing the Preparation of Financial Reports by Futures Commission Merchants, related rules governing the preparation of financial reports by managed futures enterprises, requirements of the Business Accounting law and Guidelines Governing Business Accounting relevant to financial accounting standards, and accounting principles generally accepted in the Republic of China.
April 28, 2010
Notice to Readers
The accompanying consolidated financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. 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 auditors’ report and consolidated financial statements shall prevail.
- 2 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Except Par Value)
Percentage Percentage Increase Increase 2009 2008 (Decrease) 2009 2008 (Decrease) ASSETS Amount Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount Amount %
CASH AND CASH EQUIVALENTS (Notes 2, 5 and 40) $ 8,886,524 $ 13,595,022 (35 ) LIABILITIES Call loans from banks (Notes 22 and 40) $ 4,702,740 $ 7,214,988 (35 ) DUE FROM THE CENTRAL BANK AND OTHER BANKS (Notes 6, 40 and 41) 37,427,390 21,550,305 74 Commercial paper payable, net (Note 23) 2,901,243 2,342,125 24 Financial liabilities at fair value through profit or loss (Notes 2, 7 and 24) 13,810,008 27,051,671 (49 ) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 2, 7, Securities sold under repurchase agreements (Notes 2, 7, 8, 13, 25 and 40) 21,686,484 26,614,375 (19 ) 8, 40 and 41) 31,616,497 32,275,678 (2 ) Payables (Notes 2, 26 and 37) 10,555,531 9,288,509 14 Customers’ equity accounts - futures (Notes 2 and 40) 2,271,874 2,341,911 (3 ) SECURITIES PURCHASED UNDER RESELL AGREEMENTS (Notes 2, 9 and 40) 2,849,762 3,116,003 (9 ) Deposits and remittances (Notes 27 and 40) 20,406,443 18,813,158 8 Short-term loans (Notes 28 and 40) 4,959,553 3,780,850 31 RECEIVABLES, NET (Notes 2, 10, 40 and 41) 12,775,130 7,650,590 67 Bank debentures payable (Note 29) 28,780,769 31,708,902 (9 ) Bonds payable (Note 30) 20,000,000 20,000,000 - ACQUIRED LOANS (Notes 2, 11 and 41) 4,479,049 4,732,620 (5 ) Long-term loans (Notes 31 and 40) 6,278,141 6,476,004 (3 ) Other financial liabilities (Notes 2, 32 and 40) DISCOUNTS AND LOANS, NET (Notes 2, 12, 14 and 40) 64,519,126 78,783,537 (18 ) Structured products - host contracts 17,014,060 16,343,610 4 Other 867,095 986,383 (12 ) AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 2, 13 and 41) 51,821,747 43,989,740 18 Total other financial liabilities 17,881,155 17,329,993 3 Other liabilities (Notes 2, 21, 33 and 37) 2,020,850 1,918,083 5 INVESTMENTS UNDER THE EQUITY METHOD (Notes 2 and 15) 12,492,428 12,515,673 - Total liabilities 156,254,791 174,880,569 (11 ) FINANCIAL ASSETS CARRIED AT COST (Notes 2, 16 and 41) 41,614,084 46,774,319 (11 ) STOCKHOLDERS’ EQUITY OTHER FINANCIAL ASSETS (Notes 2, 17 and 40) 4,582,256 4,382,318 5 Parent company (Notes 2, 34 and 35) Stock - authorized 20,000,000 thousand shares PROPERTIES (Notes 2, 18 and 41) Common stock - NT$10 par value, issued and outstanding - 11,217,205 Cost thousand shares in 2009 and 11,230,917 thousand shares in 2008 112,172,050 112,309,170 - Land 2,241,408 2,340,033 (4 ) Capital surplus Buildings and facilities 2,398,126 2,523,215 (5 ) Issue of shares in excess of par value 8,553,408 9,040,938 (5 ) Computer equipment 614,587 599,690 2 From equity-method investments 141,064 79,188 78 Transportation equipment 21,538 21,401 1 Total capital surplus 8,694,472 9,120,126 (5 ) Other equipment 189,288 203,039 (7 ) Retained earnings Leasehold improvements 108,042 127,504 (15 ) Legal reserve - 2,704,240 (100 ) Leased assets 160,837 345,658 (53 ) Special reserve - 3,874,710 (100 ) Total cost 5,733,826 6,160,540 (7 ) Unappropriated earnings (deficit) 7,268,902 (7,056,025 ) 203 Accumulated depreciation (1,574,527 ) (1,637,387 ) (4 ) Total retained earnings 7,268,902 (477,075 ) 1,624 4,159,299 4,523,153 (8) Other Accumulated impairment (60,000 ) (91,346 ) (34 ) Cumulative translation adjustments (222,172 ) 402,015 (155 ) Prepayments for properties 32,863 18,028 82 Unrealized gain (loss) on financial instruments 9,331,986 (2,036,667 ) 558 Unrealized loss on cash flow hedge (144,916 ) (447,943 ) (68 ) Net properties 4,132,162 4,449,835 (7 ) Net loss not recognized as pension cost (22,840 ) (1,650 ) 1,284 Treasury stock - 673,160 thousand shares in 2009 and 557,320 thousand OTHER ASSETS, NET (Notes 2, 19, 20, 21, 33, 40 and 41) 10,936,740 15,298,073 (29) shares in 2008 (5,924,036) (5,232,850 ) 13 Total 3,018,022 (7,317,095 ) 141 131,153,446 113,635,126 15 Minority interest 724,658 598,018 21
Total stockholders’ equity 131,878,104 114,233,144 15
TOTAL $ 288,132,895 $ 289,113,713 -TOTAL $ 288,132,895 $ 289,113,713 -
SECURITIES LOANED TO CUSTOMERS (Notes 2 and 39) $ 983,115 $ 500,937 SECURITIES DEPOSITED BY CUSTOMERS (Notes 2 and 39) $ 13,488,124 $ 4,578,329
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated April 28, 2010)
- 3 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)
Percentage Increase 2009 2008 (Decrease) Amount Amount %
INTEREST REVENUES (Notes 2, 40 and 45) $ 3,414,806 $ 6,113,466 (44)
INTEREST EXPENSES (Notes 2, 40 and 45) (1,800,766) (3,524,601) (49)
INTEREST PROFIT, NET 1,614,040 2,588,865 (38)
NONINTEREST PROFITS AND GAINS (LOSSES), NET Service fee and commission, net (Notes 2, 40 and 45) 1,683,291 1,410,533 19 Gain (loss) on financial assets and liabilities at fair value through profit or loss, net (Notes 2, 7 and 45) 1,833,000 (7,953,779) 123 Realized gain on available-for-sale financial assets, net (Note 2) 4,685,329 4,821,236 (3) Investment income (loss) recognized under the equity method, net (Notes 2 and 15) 451,882 (817,319) 155 Foreign exchange gain (loss), net (Note 2) 926,362 (922,972) 200 Loss on asset impairment (Notes 2 and 13) (2,516,462) (5,214,890) (52) Gain on real estate investments (Note 2) 41,484 192,699 (78) Gain on financial assets carried at cost, net (Note 2) 2,191,658 3,272,419 (33) Gain on sale of acquired loans, net 327,745 419,969 (22) Revenue from stock brokering (Note 2) 135,095 140,006 (4) Others (Note 40) 448,620 610,441 (27)
Total noninterest profits and gains (losses), net 10,208,004 (4,041,657) 353
NET PROFIT (LOSS) 11,822,044 (1,452,792) 914
REVERSAL OF ALLOWANCE (ALLOWANCE) FOR BAD DEBTS AND LOSSES ON GUARANTEES, NET (Notes 2 and 12) 527,247 (891,690) 159
OPERATING EXPENSES (Notes 33, 36 and 40) Personnel expenses (3,846,153) (2,981,286) 29 Depreciation and amortization (254,652) (296,077) (14) Other operating and administrative expenses (1,626,253) (1,903,269) (15)
Total operating expenses (5,727,058) (5,180,632) 11 (Continued)
- 4 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)
Percentage Increase 2009 2008 (Decrease) Amount Amount %
INCOME (LOSS) BEFORE INCOME TAX $ 6,622,233 (7,525,114) 188
INCOME TAX BENEFIT (Notes 2 and 37) 672,793 436,509 54
CONSOLIDATED NET INCOME (LOSS) $ 7,295,026 $ (7,088,605) 203
ATTRIBUTED TO: Stockholders of parent company $ 7,268,902 $ (7,056,025) 203 Minority interest 26,124 (32,580) 180
Total consolidated net income (loss) $ 7,295,026 $ (7,088,605) 203
2009 2008 Before After Before After Income Income Income Income Tax Tax Tax Tax
EARNINGS (LOSS) PER SHARE - COMMON STOCK (NEW TAIWAN DOLLARS; Note 38) $ 0.71 $ 0.69 $ (0.65) $ (0.64)
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated April 28, 2010) (Concluded)
- 5 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)
Retained Earnings (Note 34) Unrealized Unrealized Issued and Outstanding Unappropriated Cumulative Gains or Losses Gains or Losses Common Stock (Note 34) Capital Surplus Earnings Translation on Financial on Cash Flow Net Loss not Treasury Stock (Notes 2 and 35) Shares (In (Notes 2 (Accumulated Adjustments Instruments Hedge (Notes 2 Recognized as Shares (In Minority Thousands) Amount and 34) Legal Reserve Special Reserve Deficit) Subtotal (Note 2) (Note 2) and 45) Pension Cost Thousands) Amount Interest Total
BALANCE, JANUARY 1, 2008 10,962,063 $ 109,620,627 $ 9,164,428 $ 1,943,086 $ 2,361,914 $ 7,611,533 $ 11,916,533 $ 186,114 $ 13,277,452 $ (298,636 ) $ (2,396 ) 207,890 $ (2,587,020 ) $ 1,050,527 $ 142,327,629
Appropriation of 2007 earnings Special reserve retransfer to unappropriated earnings ----(2,361,914)2,361,914------Legal and special reserve - - - 761,154 3,874,710 (4,635,864 ) ------Cash dividends - NT$0.2 per share - - - - - (2,150,834 ) (2,150,834 ) ------(2,150,834 ) Stock dividends - NT$0.25 per share 268,854 2,688,543 - - - (2,688,543 ) (2,688,543 ) ------Preferred dividends -----(393,206)(393,206 ) ------(393,206 ) Employee bonus - cash - - - - - (65,000 ) (65,000 ) ------(65,000 ) Remuneration to directors and supervisors - - - - - (40,000 ) (40,000 ) ------(40,000 )
Balance after appropriation 11,230,917 112,309,170 9,164,428 2,704,240 3,874,710 - 6,578,950 186,114 13,277,452 (298,636 ) (2,396 ) 207,890 (2,587,020 ) 1,050,527 139,678,589
Translation adjustments on investments of equity-method investees ------215,901 ------215,901
Capital surplus recognized under the equity-method - - (44,302 ) ------(44,302 )
Unrealized loss on available-for-sale financial instruments recognized under the equity method ------(15,314,119 ) - - - - - (15,314,119 )
Purchase of treasury stock ------349,430 (2,645,830 ) - (2,645,830 )
Unrealized gain on cash flow hedge recognized under the equity-method ------83,212 - - - - 83,212
Unrealized loss on cash flow hedge ------(232,519)--- - (232,519 )
Net loss not recognized as pension cost ------746 - - - 746
Effect of changes in minority interest ------(419,929 ) (419,929 )
Consolidated net loss for the year ended December 31, 2008 - - - - - (7,056,025 ) (7,056,025 ) ------(32,580 ) (7,088,605 )
BALANCE, DECEMBER 31, 2008 11,230,917 112,309,170 9,120,126 2,704,240 3,874,710 (7,056,025 ) (477,075 ) 402,015 (2,036,667 ) (447,943 ) (1,650 ) 557,320 (5,232,850 ) 598,018 114,233,144
Offset of the 2008 deficit - - (477,075 ) (2,704,240 ) (3,874,710 ) 7,056,025 477,075 ------
Balance after offset of deficit 11,230,917 112,309,170 8,643,051 - - - - 402,015 (2,036,667 ) (447,943 ) (1,650 ) 557,320 (5,232,850 ) 598,018 114,233,144
Translation adjustments on investments of equity-method investees ------(624,187 ) ------(624,187 )
Unrealized gain on available-for-sale financial instruments recognized under the equity method ------11,368,653 - - - - - 11,368,653
Capital surplus recognized under the equity-method - - (4,863 ) ------(4,863 )
Unrealized gain on cash flow hedge recognized under the equity-method ------183,193 - - - - 183,193
Unrealized gain on cash flow hedge ------119,834 - - - - 119,834
Purchase of treasury stock ------129,552(772,022) - (772,022 )
Retirement of treasury stock (13,712 ) (137,120 ) 56,284 ------(13,712 ) 80,836 - -
Net loss not recognized as pension cost ------(21,190)-- - (21,190 )
Effect of changes in minority interest ------100,516 100,516
Consolidated net income for the year ended December 31, 2009 - - - - - 7,268,902 7,268,902 ------26,124 7,295,026
BALANCE, DECEMBER 31, 2009 11,217,205 $ 112,172,050 $ 8,694,472 $ - $ - $ 7,268,902 $ 7,268,902 $ (222,172 ) $ 9,331,986 $ (144,916 ) $ (22,840 ) 673,160 $ (5,924,036 ) $ 724,658 $ 131,878,104
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated April 28, 2010)
- 6 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars)
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES Consolidated net income (loss) $ 7,295,026 $ (7,088,605) Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities Realized gain on available-for-sale financial assets, net (3,874,178) (3,562,849) Loss on asset impairment 2,516,462 5,214,890 Realized gain on financial assets carried at cost, net (1,645,357) (2,609,741) Allowance (reversal of allowance) for bad debts and losses on guarantees, net (527,247) 891,690 Investment loss (income) recognized under the equity method, net (447,624) 823,624 Changes in deferred income tax (298,202) (566,894) Depreciation and amortization 254,652 296,077 Pension benefit payments charged against reserve (217,260) (334,835) Provision of allowance for pension expenses 185,360 267,736 Gain (loss) on sale of properties (130,753) 7,952 Gain on disposal of collaterals (75,054) (183,418) Cash dividends received from equity-method investees 69,518 830,739 Provision (reversal of provision ) for trading loss reserve 68,906 (14,243) Gain on real estate investments (41,484) (192,699) Others 3,430 39,487 Net changes in operating assets and liabilities Financial assets for trading purposes 507,209 13,578,302 Securities purchased under resell agreements 116,238 (768,132) Receivables, net (5,107,447) 9,042,631 Acquired loans 116,235 233,748 Financial liabilities for trading purposes (8,381,917) 15,317,569 Securities sold under repurchase agreements 831,778 (2,382,610) Payables 1,380,658 (7,828,072) Customers’ equity accounts - futures (70,037) (521,918) Debit/credit items for consigned trading (513,278) 363,247
Net cash provided by (used in) operating activities (7,984,366) 20,853,676
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of available-for-sale financial assets 21,592,034 34,227,389 Decrease (increase) in due from the Central Bank and other banks (15,877,085) 7,463,406 Decrease in discounts and loans 14,744,288 3,672,667 Acquisition of available-for-sale financial assets (11,251,461) (11,589,758) Proceeds from disposal of financial assets carried at cost 7,167,321 6,044,455 Acquisition of financial assets carried at cost (5,003,317) (9,706,092) Increase in other assets (1,404,864) (4,037,440) Decrease in restricted assets 667,520 5,099,321 Proceeds from disposal of properties 381,878 1,823 (Continued)
- 7 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars)
2009 2008
Proceeds of capital return on investments $ 363,382 $ 941,491 Proceeds from disposal of collateral 296,546 1,203,018 Proceeds from disposal of investments under the equity method 233,186 628 Acquisition of debt instruments with no active market (216,529) (419,674) Capital return on financial assets carried at cost 244,237 244,532 Decrease in securities purchased under resell agreements 150,003 1,054,081 Proceeds from disposal of real estate investment 129,048 700,961 Acquisition of properties (69,214) (212,739) Acquisition of investments under the equity method (60,000) (503,851) Decrease in other financial assets 393 507,050 Acquisition of real estate investment - (1,016,680) Proceeds from disposal of debt instruments with no active market - 65,720 Others (2,019) (50,855)
Net cash provided by investing activities 12,085,347 33,689,453
CASH FLOWS FROM FINANCING ACTIVITIES Decrease in securities sold under repurchase agreements (5,737,011) (20,376,293) Increase (decrease) in bank debentures payable (2,928,133) 7,208,902 Decrease in call loans from banks (2,512,248) (31,219,148) Increase in deposits and remittances 1,593,285 5,034,792 Increase (decrease) in short-term loans 1,178,931 (3,066,465) Increase (decrease) in other financial liabilities 854,189 (5,309,526) Purchase of treasury stock (783,894) (2,563,321) Increase (decrease) in commercial paper payable 559,118 (3,273,166) Increase (decrease) in long-term loans (197,863) 392,756 Increase (decrease) in other liabilities (89,275) 222,670 Increase (decrease) in financial liabilities designated at fair value through profit or loss (89,138) 1,045,411 Payment of common dividends - (2,240,126) Decrease in bonds payable - (1,200,000) Payment of preferred dividends - (393,206) Payment of remuneration to directors and supervisors and employee bonus - (180,258)
Net cash used in financing activities (8,152,039) (55,916,978) (Continued)
- 8 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars)
2009 2008
DECREASE IN CASH AND CASH EQUIVALENTS $ (4,051,058) $ (1,373,849)
EFFECT OF EXCHANGE RATE CHANGES (300,357) 48,899
EFFECT OF DECREASE IN CONSOLIDATED SUBSIDIARIES (357,083) (543,374)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 13,595,022 15,463,346
CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,886,524 $ 13,595,022
SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 1,890,819 $ 3,192,463 Income tax paid $ 302,851 $ 426,379
NONCASH INVESTING AND FINANCING ACTIVITIES Payable for remuneration to directors and supervisors and employee bonuses $ - $ 2,102 Payable for purchase of treasury stock $ - $ 82,509
PARTLY CASH-BASED FROM INVESTMENT ACTIVITIES Acquisition of properties $ - $ 55,836 Less: Other accounts payable - 9,525 Cash paid $ - $ 46,311
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated April 28, 2010) (Concluded)
- 9 - CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
China Development Financial Holding Corporation (the “Corporation”) was established by China Development Industrial Bank (CDIB) through a share swap on December 28, 2001 made under the Financial Holding Company Act and related regulations. CDIB became a wholly owned subsidiary of the Corporation after the share swap.
The Corporation acquired First Taiwan Securities Corporation (“First Taiwan”) and Grand Cathay Securities Corporation (“Grand Cathay”) through a share swap on November 8, 2002. The effective date of the merger between Grand Cathay and First Taiwan was December 31, 2003. Grand Cathay was the survivor company after the merger.
The Corporation invests in and manages the businesses of finance-related institutions and investees.
The Corporation’s shares have been listed on the Taiwan Stock Exchange (TSE).
CDIB was incorporated under the Company Law and relevant regulations and started operations on May 14, 1959. Effective January 1, 1999, CDIB was converted from a trust corporation into an industrial bank under government approval. As of December 31, 2009, CDIB had three local branches in Taichung, Kaohsiung, Taoyuan and an offshore banking unit (OBU).
Under the Banking Law and relevant regulations, CDIB engages in industrial banking operations - certain deposit-taking, lending, investment, bank debentures issuing, securities underwriting, domestic exchange, guarantees, letter of credit issuing, receivables acquisition, government bonds purchasing, trust operations, offshore banking, derivative financial instruments and other activities under the authority approval. CDIB receives deposits and conducts foreign-currency transactions only with its investees, debtors, insurance companies, juridical persons and government institutions; CDIB’s Trust Department engages in (1) trust business planning, managing and operating, and (2) custodianship of nondiscretionary trust funds in overseas securities and mutual funds. These operations are regulated under the Banking Law and the Trust Law.
Grand Cathay was established on November 22, 1988. It merged with BT Yuen Foong Securities Co. in 1991 and acquired the operating assets and business operations of Pan Hsin Securities Corporation in April 1996, Ta Cheng Securities Corporation in October 1996, San Tzon Securities Corporation in November 2002, First Taiwan Securities Corporation in August 2003, and HongFu Securities Corporation in October 2006.
Grand Cathay mainly engages in underwriting, dealing (securities, short-term bills and futures), brokerage of domestic and foreign securities (including stock loans and financing purchases of securities), securities registration and transfer, futures trading assistance, and rendering derivative financial services as approved by the related authorities.
As of December 31, 2009, besides the head office, Grand Cathay had twenty-two branches.
For more information on the organization and business of the consolidated entities, please refer to Tables 9 and 10 (attached).
- 10 - As of December 31, 2009 and 2008, the Corporation and subsidiaries had 1,988 and 2,064 employees, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, Regulations Governing the Preparation of Financial Reports by Public Banks, Criteria Governing the Preparation of Financial Reports by Securities Firms, Criteria Governing the Preparation of Financial Reporting by Futures Commission Merchants, related rules governing the preparation of financial statements by managed futures enterprises, requirements of the Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China (ROC GAAP). In preparing consolidated financial statements in conformity with these criteria and principles, the Corporation and subsidiaries are required to make certain estimates and assumptions that could affect the amounts of the allowance for credit losses, reserve for losses on guarantees, depreciation for fixed assets, asset impairment, pension, litigation for income tax returns, unsettled lawsuit, bonuses to employees, directors and supervisors and financial instruments obligations. 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 GAAP. 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 accountants’ audit report and consolidated financial statements shall prevail.
The significant accounting policies of the Corporation and subsidiaries are summarized as follows:
Basis of Consolidation
The consolidated entities included in the consolidated financial statements for the years ended December 31, 2009 and 2008 included 38 and 45 companies, respectively (please refer to the attached Tables 9 and 10 for details).
All significant intercompany accounts and transactions have been eliminated from the consolidation (please refer to the attached Table 15 for details).
Current and Noncurrent Assets and Liabilities
The operating cycle in the banking industry cannot be reasonably identified; thus, accounts included in the consolidated financial statements of CDIB were not classified as current or noncurrent. Nevertheless, these accounts were properly categorized according to the nature of each account and sequenced according to their liquidity.
Except as stated in the preceding paragraph, unrestricted cash and cash equivalents and other assets to be converted into cash or consumed within one year are classified as current. Properties and other noncurrent assets are classified as noncurrent. Liabilities to be liquidated or settled within one year are classified as current. All other liabilities are classified as noncurrent.
The banking industry accounts, however, make up a large portion of the consolidated financial statements. Thus, all the consolidated accounts were categorized according to the nature of each account and sequenced by their liquidity rather than classified as current or noncurrent assets/liabilities.
- 11 - Cash Equivalents
Commercial paper with original maturities of up to three months are classified as cash equivalents. The carrying amounts are similar to fair values.
Bases of Fair Values
The bases of fair values are as follows: (a) listed and GreTai securities market (the over-the-counter, or OTC, securities exchange of the Republic of China) (OTC) stocks - closing prices on the balance sheet date; (b) open-end-funds, net asset values on the balance sheet date; (c) domestic bonds - year-end reference price published by the OTC exchange; (d) overseas bonds - Bloomberg reference prices on the balance sheet date; (e) financial instruments with no active market - the fair value is estimated through evaluation.
Financial Instruments at Fair Value through Profit or Loss
Financial instruments at fair value through profit or loss mainly include financial assets and financial liabilities used for trading purposes and designated at fair value through profit or loss. A financial asset or liability is recognized when the entity becomes a party to the contractual provisions of the instrument. A previously recognized financial asset is derecognized when the entity losses controls over the contractual right. A financial liability is derecognized when it is extinguished, canceled or expired. These instruments are recorded at fair value on acquisition date and any fair value changes are recognized as current income or loss on subsequent evaluation. Cash dividend received after investment (including those received in the year the investment was made) is recognized as income. The acquisition or sale of financial assets is recorded on the trade date.
Derivatives not subjected to hedge accounting will be classified as financial assets or financial liabilities for trading purposes at their fair values.
Financial liabilities designated at fair value through profit or loss was evaluated at fair value in order to eliminate or significantly reduce accounting inconsistency. And the unrealized gains or losses were recognized in the current year.
Some derivative financial instruments used in the years ended December 31, 2009 and 2008 did not qualify for hedge accounting. To prevent accounting measurement mismatches between the hedged items and hedging instruments, the Corporation and subsidiaries designated bank debentures as financial liabilities at fair value through profit or loss. Moreover, the Corporation and subsidiaries designated the whole hybrid instrument as financial liabilities at fair value through profit or loss because the contract size of embedded derivatives were not separately isolated from the hybrid instruments.
Securities Purchased and Sold Under Resell and Repurchase Agreements
For securities purchased under resell agreements, the payment to a counter-party is treated as a financing transaction. For securities sold under repurchase agreements, the payment by a counter-party and the related interest revenue or interest expense are recognized on the accrual basis.
Leasing - Lessor
For direct financing capital leases, the cost of lease assets and imputed interest are recorded as lease payment receivable. Imputed interest is recognized as unrealized interest revenue, which is amortized using the interest rate method and credited to interest revenue.
For operating leases, the contracted rentals are recognized as income when earned.
- 12 - Acquired Loans
For China Development Asset Management Corporation (CDAMC) and its subsidiaries, the initial cost of acquired loans is the purchase price. The cost recovery method is used to recognize gain or loss on acquired loans. Upon the recovery of an acquired loan, any surplus obtained from the consideration received on recovery against the consideration paid on acquisition of the loan will be recognized as income from recoveries of acquired loans.
The aggregate purchase price and all necessary handling charges on acquisition are the total cost of the acquired loans, and the fair value of each individual loan is used as the basis for cost allocation. All marketing and related operating expenses, including bidding fees and legal payments, are expensed when incurred.
Marketing and handling expenses for the acquired loans are expensed as they are incurred from the acquisition date to the resell date. If the debtor fails to repay the debt, the related expenses incurred for the provisional seizure or provisional disposition executed by the court - including the expenses for applying for auction permission, the judge’s expenses for collateral auction, and appraisal expenses - are accounted for as operating expenses.
Margin Loans and Stock Loans
“Receivable amount for margin loans” of Grand Cathay refers to the margin loans extended to the customers to buy securities. The securities bought by the customers are held as pledges on the loan provided and such securities are recorded as “securities deposited by customers” using memo entries.
Grand Cathay refinances customer loans from securities finance companies, and the related amount is recorded as “refinancing borrowings” and is pledged with the underlying securities bought by the customers.
Grand Cathay provides financing to customers for the short sale of pledged securities from margin loans or short sale of securities borrowed from securities finance companies. The proceeds from short sale of securities borrowed by customers, net of commissions and securities transaction tax, are retained by Grand Cathay and recorded as “deposit payable for securities financing.” In addition, the Securities and Futures Bureau (SFB), Financial Supervisory Commission, Executive Yuan, ROC requires that customers should make a guarantee deposit to Grand Cathay or provide securities in lieu of cash deposit, which are recorded as “securities financing guarantee deposit.”
Under a directive issued by the SFB, the unpaid balance of a customer loan, net of the proceeds from the sale of the related collateral securities, is recorded as a nonperforming loan. The entire unpaid balance of the customer loan is recorded as other receivable or nonperforming loan if Grand Cathay cannot sell the pledged securities.
Guarantee Deposits Received on Futures Contracts and Customers’ Equity Accounts - Futures
Grand Cathay Futures Corp. (GCFC) receive margin deposits from its customers (debited to “guarantee deposits received on futures contracts” credited to “customers’ equity accounts - futures”) for futures transactions as required by the regulations. Margin deposit balances are calculated daily by marking to market the open positions of each customer and determining the required margin levels. The debit balance of “customers’ equity accounts - futures” which results from losses on futures transactions in excess of the margin deposit, is recorded as “accounts receivable - futures guarantee deposits.” Customer’s equity accounts - futures cannot be offset unless these accounts pertain to the same customers.
When customers short sell call options, the underlying securities can be used as margin deposits. GCFC records these transactions using memo entries.
- 13 - Nonperforming Loans
Under the “Regulations of the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” issued by the Financial Supervisory Commission under the Executive Yuan, loans and other credits extended by the Bank and the related accrued interest approved by the board of directors are classified as nonperforming when the loan is overdue.
Nonperforming loans reclassified from loans are classified as discounts and loans; those reclassified from guarantees, acceptance, and accounts receivable - factoring are classified as other financial assets.
Allowance for Credit Losses and Reserve for Losses on Guarantees
To determine the allowance for credit losses and reserve for losses on guarantees, CDIB evaluates the losses on particular loans and the overall credit portfolio, considering the balances of discounts and loans, accounts, interest and other receivables, as well as guarantees and acceptances as of the balance sheet date.
Provisions for the allowance for losses on loans are based on the risk of loss on particular loans and the risk of loss on the overall loans portfolio (excluding particular loans). The risk of loss on particular loans is evaluated on the basis of its borrowers’/clients’ financial condition, delinquency record on interest payments and value of collaterals provided to estimate level of collectibility. The reclassification of receivables and the determination of the amount of provision are based on the regulations issued by the Ministry of Finance (MOF).
The MOF regulations also require that credit assets be classified as assets that require special mention, assets that are substandard, assets with doubtful collectivity, and assets on which there is loss, and the minimum allowance for credit losses and provision for losses on guarantees for these assets should be 2%, 10%, 50% and 100% of outstanding credits, respectively.
CDIB evaluates the possibility of collection and value of collaterals to write off the bad debts after an approval of the board of directors. Collections of bad debts written off are recognized as reversal of allowance for credit losses.
Write-offs of loans falling under MOF guidelines may be offset against the recorded allowance for credit losses if this offset is approved by the board of directors.
CDAMC and its subsidiaries evaluate possible loss on the basis of the balances of acquired loans as of the balance sheet dates and recognizes a related allowance, if necessary.
For CDC Finance and Leasing Corporation (CDC), the allowance for doubtful accounts is provided on the basis of the collectibility of lease receivables.
For Grand Cathay and its subsidiaries, the allowance for doubtful accounts is provided on the basis of a review of the collectibility of accounts receivable, other receivables and nonperforming receivables.
Available-for-sale Financial Assets
Available-for-sale financial assets are carried at fair value. Unrealized gains or losses on available-for-sale financial assets are reported in equity attributed to the Corporation’s stockholders. On disposal of an available-for-sale financial asset, the accumulated, unrealized gain or loss in equity attributable to the Corporation’s stockholders is transferred to net profit and loss for the year. The Corporation and its subsidiaries uses trade date accounting in recording available-for-sale portfolio transactions.
The basis for recognition, derecognition and fair value measurement of available-for-sale financial assets is the same as financial instruments at fair value through profit or loss.
- 14 - Cash dividends are recognized on the ex-dividend date, except for dividends distributed from the pre-acquisition profit, which are treated as a reduction of investment cost. Stock dividends are not recognized as investment income but are recorded as an increase in the number of shares. The total number of shares subsequent to the increase is used for recalculation of cost per share. The difference between the initial cost of a debt instrument and its maturity amount is amortized using the effective interest method, with the amortized interest recognized in profit or loss.
Financial Asset Securitization
Under the Regulations for Financial Asset Securitization, CDIB entrusted its enterprise loan rights to a commissioned organization for issuance of the related beneficiary certificates. Thus, CDIB derecognized the loans and forfeited the control over contractual rights - except for subordinated retained interests for credit enhancement, which were reclassified as available-for-sale financial assets - on the loans that have been surrendered and transferred to a special-purpose trustee.
For loans and retained interests, quoted market prices are not available. Thus, CDIB estimates fair value at the present value of expected future cash flows using management’s key assumptions on credit losses and discount rates as well as the related risks.
The subordinated seller certificates of CDIB, for which quoted market prices are not available, are accounted for as available-for-sale financial assets. Their retained interest is estimated at the present value of expected future cash flows on the balance sheet date. The resulting gains and losses are recorded as adjustments to stockholders’ equity.
Investments Under the Equity Method
Equity investments are accounted for by investments under the equity method if the Corporation and subsidiaries have significant influence over the investees. The carrying value of the investment under the equity method includes the investment cost, a proportionate share in the investees’ net income or loss and changes in the net worth during the same reporting period as that of the Corporation and subsidiaries, and a reduction of the carrying value of the investment when cash dividend is received. The difference between the investment cost and net equity investment is amortized over 15 years. However, under the revised Statement of Financial Accounting Standards (SFAS) No. 5, “Long-term Investments under Equity Method” since January 1, 2006, goodwill no longer needs to be amortized. When the Corporation and subsidiaries subscribe for additional shares of stock issued by an equity-method investee at a percentage not equal to the Corporation’s current equity, the increase in the Corporation’s equity in the investee’s net assets is credited to capital surplus. If the additional subscription results in a decrease in the Corporation’s equity in the investee’s net assets, the decrease is debited to capital surplus. If capital surplus is not enough for debiting purposes, the difference is debited to unappropriated retained earnings.
When the Corporation and subsidiaries’ share in the losses of an investee on which the Corporation and subsidiaries have significant influence equals its investment in that investee plus any advances made to the investee, the Corporation and subsidiaries discontinue applying the equity method. The Corporation and subsidiaries continue to recognize its share in losses of the investee (accounted for as other liabilities in the balance sheet) if (a) the Corporation and subsidiaries commit to provide further financial support to the investee or (b) the losses of the investee are considered temporary and sufficient evidence shows imminent return to profitability.
Stock dividends received from investees are accounted for as an increase in the number of shares held and not as income. Cost per share was recomputed based on the new number of shares.
Financial Assets Carried at Cost
Financial assets carried at cost are mainly equity instruments with fair value that cannot be reliably measured. These include unlisted stocks, emerging stocks, restricted stocks and overseas partnership funds, which are recognized at their original cost.
- 15 -
Stock dividends received from investees are accounted for as an increase in the number of shares held and not as income.
Debt Instruments with No Active Market
Debt instruments with no active market are those with no quoted market prices in an active market and with fair values that cannot be reliably measured. These debt instruments are received in fixed or determined amounts and carried at amortized cost. On initial bond recognition, these assets are stated at their fair values together with the acquisition or issue costs. The disposal, impairment or amortization of the debt instruments is recognized as net gain or loss in the income statement.
Properties and Leased Assets
Properties and leased assets are stated at cost less accumulated depreciation and accumulated impairment. Major renewals and betterments are capitalized; maintenance and repairs are expensed currently. Upon sale or other disposal of properties and assets leased to others, their cost and related accumulated depreciation and impairment are removed from the accounts. Any resulting gain or loss is credited or charged to current revenue and income or expense and loss.
Transportation equipment under capital leases are stated at the lower of the present value of lease payments or fair value of the leased assets and credit lease payable. The implied interest included in each lease payment is recorded as current interest expense.
Depreciation is calculated using the straight-line method over service lives initially estimated as follows: buildings and facilities, 3 to 55 years; computer equipment, 3 to 5 years; transportation equipment, 3 to 5 years; other equipment, 1 to 10 years; leasehold improvements, the shorter of the lease term or 1 to 15 years; and leased assets, 2 to 55 years. If assets are still being used beyond their initially estimated service lives, further depreciation is calculated using newly estimated service lives.
Collaterals Assumed
Collaterals assumed (included in other assets), are recorded at cost, which includes the price and the expenditure that place the collateral in a position to be sold, and are evaluated at their fair value of the end of year. An impairment loss is recognized when the cost of collaterals exceeds the fair value.
Debit/Credit Items for Consigned Trading
Based on the Criteria Governing the Preparation of Financial Reports by Securities Firms, debit/credit items for consigned trades are netted out, and the remaining balance (debit or credit) is presented in the balance sheets.
Other Assets
Computer software and system development are amortized using the straight-line method over 3 years. Intangible assets represent costs to acquire business operation rights and eligibility rights to trade on or through the Stock Exchange of Hong Kong Limited. Those rights are stated at cost. Nonoperating assets are stated at the lower of net present value or book value and recorded as other assets, and the resulting loss is recognized.
Real estate investments are recorded at acquisition cost and the related expenses. Major additions and improvements to real estate investment are capitalized, while repairs and maintenance are expensed currently.
The cost and accumulated impairment are removed from the accounts when an item of real estate is disposed of. The gains (losses) on the disposal of real estate are credited or charged to current income.
- 16 -
Asset Impairment a. Available-for-sale financial assets
If an available-for-sale financial asset is determined to be impaired, the accumulative unrealized loss previously recognized in equity attributable to the Corporation’s stockholders is recognized as impairment loss and reported in the income statement. For equity investments, loss reversal is adjusted to the equity attributable to the Corporation’s stockholders. For debt investments, loss reversal is credited to current income. b. Financial assets carried at cost
The impairment loss is recognized if there is sufficient objective evidence of asset impairment. In addition, this impairment loss cannot be reversed. c. Investments under the equity method, properties and other assets
If an asset is impaired, then the Corporation must calculate the recoverable amount of the asset or the cash-generating unit. Goodwill is tested for impairment annually regardless of whether there is any indication of impairment. An impairment loss should be recognized whenever the recoverable amount of the asset or the cash-generating unit is below the carrying amount of an asset, and this impairment loss either is charged to accumulated impairment or reduces the carrying amount of an asset directly. After the recognition of an impairment loss, the depreciation (amortization) charged to the assets should be adjusted in future years at the revised asset carrying amount (net of accumulated impairment), less its salvage value, on a systematic basis over its remaining service life. If asset impairment loss (excluding goodwill) is reversed, the increase in the carrying amount resulting from reversal is credited to current income and debited to accumulated impairment or is used to increase the carrying amount of the asset. However, loss reversal should not be more than the carrying amount (net of depreciation) had the impairment not been recognized.
Goodwill is tested for impairment annually, or more frequently if events or changes in circumstance indicate goodwill impairment. Impairment is recorded if the book value exceeds value in use. The increase in the recoverable amount of goodwill in the year following the recognition of an impairment loss is likely to be an increase in internally generated goodwill rather than the reversal of the impairment loss recognized for the acquired goodwill. Thus, reversal of impairment loss on goodwill is prohibited.
For long-term equity investments on which the Corporation and subsidiaries have significant influence but over which it has no control, the carrying amount (including goodwill) of each investment is compared with its own recoverable amount for the purpose of impairment testing.
Default Reserve
Under the regulations of the Securities and Futures Bureau (SFB), Grand Cathay will provide monthly a default reserve equal to 0.0028% of the total consigned trades until the accumulated reserve reaches $200,000 thousand. This reserve is used only to offset actual losses resulting from customers’ default or other losses as approved by the SFB.
Under the regulations of the SFB, GCFC provides monthly for default reserve equal to 2% of the commission revenue from futures transactions until the accumulated reserve reaches $400,000 thousand. However, this provision was not required from July 1, 1999 to June 30, 2003. This reserve is used only to offset actual losses resulting from defaults on transactions or other losses approved by the SFB.
- 17 - Trading Loss Reserve
Under the regulations issued by the SFB, Grand Cathay recognizes the trading loss reserve every month. This reserve is provided monthly and is equal to 10% of the net gain on sale of securities until it reaches $200,000 thousand. It should be used only to offset actual losses on the sale of securities.
Under the Rules Governing Futures Commission Merchants, the futures commission merchant engaging in futures proprietary business should set aside 10% of the realized net profit of each month as reserve for trading losses.
The reserve for trading losses referred to in the preceding paragraph should not be used for purposes other than covering the trading loss in excess of trading profit. When the accumulated trading loss reserve reaches 200,000 thousand, no additional reserve for trading loss is required to be set aside.
Reserve for Bad Debts
Under the regulations of the SFB, GCFC provided monthly a reserve for bad debts at 3% of the total operating income from July 1, 1999 to June 30, 2003, which was recognized as other liabilities.
Pension
The Corporation and subsidiaries have two types of pension plans: Defined benefit and defined contribution.
Under the defined benefit plan, pension expense is determined on the basis of actuarial calculations. Under the defined contribution pension plan based on the Labor Pension Act, which took effect on July 1, 2005, the Corporation and subsidiaries’ monthly contributions to the employees’ individual pension accounts are recorded as pension expense in the current year.
Interest and Service Fee Revenue Recognition
Interest revenue is recognized on the accrual basis and according to the effective interest rate and the period of the contract. For nonperforming loans and other credits extended by CDIB, interest revenue is recognized upon collection.
Service fees, underwriting commissions, stock transaction agent fees and futures trading commissions and fees are recorded as income upon receipt and substantial completion of activities involved in the earnings process.
Income Tax
The inter-period income tax allocation is used, in which tax effects of loss carryforwards, deductible temporary differences, unused investment tax credits and credited to adjustments to stockholders’ equity are recognized as deferred income tax assets and those of taxable temporary differences and debited to adjustments to stockholders’ equity are recognized as deferred income tax liabilities. A valuation allowance is provided for deferred income tax assets that are not certain to be realized. A deferred tax asset or liability - except those of CDIB - is classified as current or noncurrent according to the classification of the related asset or liability. But if a deferred asset or liability cannot be related to an asset or a liability in the financial statements, it is classified as current or noncurrent depending on the expected realization date of the temporary difference.
Tax credits for technology, research and development expenditure, personnel training expenditure and equity investments acquisition are accounted for by the flow-through method.
- 18 - The Corporation and its eligible subsidiaries (collectively, the “Group”) use the linked-tax system in the filing of tax returns. The accounting treatment applied by the Group to the income tax is to adjust in the Corporation’s and its subsidiaries’ book by prorated share the difference between the combined current/deferred taxes and the total of each Group member’s current/deferred taxes. Related affiliation payables and receivables are recorded in each book of the Group members’ books.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
Income tax (10%) on unappropriated earnings generated since 1998 is recorded as income tax in the year when the stockholders resolve the distribution of the earnings.
Since 2006, based on the “Basic Income Tax Act,” if the basic tax is greater than the amount of regular income tax, the income tax payable should be the basic tax. The incremental tax payable is recorded as current income tax expense.
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. If only possible loss is involved, this loss is not recorded but a footnote disclosure of the circumstances giving rise to the possible loss is made.
Foreign-currency Transactions
On the balance sheet date, foreign-currency monetary assets and liabilities are reported using the prevailing rates, and realized or unrealized exchange differences are recognized in the income statement. Foreign-currency nonmonetary assets and liabilities based on the fair value method are stated at the prevailing rates. The resulting differences are recognized as adjustments to stockholders’ equity if fair value changes are included in stockholders’ equity or are recognized as current income or loss if fair value changes are included in current income or loss. The investments carried at cost are stated at historical rates on the trade date.
Foreign-currency equity investments are accounted for under the equity method according to the stockholders’ equity of the investee’s financial statements after conversion from other currency. The difference in foreign exchange is recognized as cumulative translation adjustments under stockholders’ equity.
For CDIB, foreign-currency transactions are recorded in the respective currencies in which they are denominated. Foreign-currency gains or losses are recorded in New Taiwan dollars using rates in effect at the time of the transactions.
Hedge Accounting
The Corporation and CDIB use derivatives instruments primarily as cash flow hedge as risk management tools for hedging interest rate and foreign exchange rate fluctuations as well as any credit risk arising on on-balance sheet liabilities.
To qualify as a hedge, a derivative must effectively reduce any risk inherent in the hedged item from adverse fluctuations of interest and exchange rates and of market values. Changes in the fair value of the derivative must highly correlated with changes in the fair value of the hedged item over the life of the hedged contract. At the start of the hedge, there must be formal designation and documentation of the hedging relationship, the Corporation and CDIB’s risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged items, overall risk management objectives and strategies and how the entity will assess the hedging instrument effectiveness.
- 19 - A cash flow value hedge that meets all of the hedge accounting criteria is accounted for as follows:
a. The portion of the gains or losses from remeasuring the hedging instrument is charged to stockholders’ equity. The amount recognized under stockholders’ equity is recognized as gain or loss in the same period or periods during which the hedged forecast transaction or an asset or liability arising from the hedged forecast transaction affects gain or loss. However, if all or a portion of a loss recognized under stockholders’ equity is not expected to be recovered in the future, the amount that is not expected to be recovered is reclassified into current loss.
b. The Corporation and CDIB engage in cash flow hedge mainly to hedge the risk of cash flow losses resulting from fluctuation of interest rate or foreign exchange rate.
Treasury Stock
Capital shares acquired as treasury stock are carried at cost and presented as a separate deduction to arrive at stockholders’ equity.
If treasury stock is retired, capital surplus and common stock are debited according to the ratio of retired treasury stock to total issued stock. If the carrying value of the treasury stock being retired is higher than the sum of its aggregate par value and its equity in paid-in capital from issuance of capital stock, the difference is debited to capital surplus from treasury stock transactions. If this surplus is insufficient for debiting, the difference is debited to unappropriated earnings. If the carrying value of the treasury stock being retired is less than the sum of its aggregate par value and its equity in paid-in capital from issuance of capital stock, the difference is credited to capital surplus from treasury stock transaction.
Reclassifications
Certain 2008 accounts have been reclassified to be consistent with the 2009 consolidated financial statement presentation.
3. ACCOUNTING CHANGES
Accounting for Bonuses to Employees, Directors and Supervisors
In March 2007, the Accounting Research and Development Foundation issued Interpretation 2007-052, which requires companies to recognize as compensation expenses bonuses paid to employees, directors and supervisors beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. This accounting change had no significant effect on the 2008 consolidated financial statements.
Accounting for Financial Instruments
The Corporation’s subsidiaries adopted the newly amended ROC Statement of Financial Accounting Standards (SFAS), No. 34 - “Financial Instruments: Recognition and Measurement,” which was announced on October 17, 2008. The amendments to SFAS No. 34 mainly deal with the reclassification of financial assets at fair value through profit or loss that are held for trading. Please refer to Note 45 for more information on this reclassification. The effects of this accounting change were as follows:
Year Ended December 31 2009 2008
Increase (decrease) in income before income tax $ (416,672) $ 226,448 Increase (decrease) in consolidated net income $ (416,672) $ 226,448 Increase (decrease) in earnings per share after income tax (NT$) $ (0.04) $ 0.02
- 20 - 4. ELIMINATION OF SIGNIFICANT INTERCOMPANY TRANSACTIONS
Please refer to Table 15 (attached).
5. CASH AND CASH EQUIVALENTS
December 31 2009 2008
Cash in banks $ 5,248,406 $ 10,779,684 Due from other banks 1,393,336 607,170 Commercial paper: 2009 - 0.18%-0.21% annual interest rates, last maturity date is in January 2010; 2008 - 0.70%-1.00% annual interest rates, last maturity date is in January 2009 1,191,978 2,162,570 Notes and checks in clearing 1,039,797 40,926 Cash on hand 7,107 4,672 Negotiable certificate of deposit: 0.15% annual interest rate, last maturity date is in March 2010 5,900 -
$ 8,886,524 $ 13,595,022
6. DUE FROM THE CENTRAL BANK AND OTHER BANKS
December 31 2009 2008
Due from the Central Bank $ 32,363,185 $ 14,169,465 Call loans to banks 5,064,205 7,380,840
$ 37,427,390 $ 21,550,305
Statutory deposit reserves placed in the Central Bank of the ROC are determined at prescribed rates based on the monthly average balances of customers’ New Taiwan dollar deposits. As of December 31, 2009 and 2008, these reserves included $1,051,877 thousand and $898,778 thousand, respectively, that were subject to withdrawal restrictions.
To comply with the Central Bank’s clearing system requirements for real-time gross settlement (RTGS), CDIB pledged negotiable certificates of deposit aggregating $4,900,000 thousand and $6,700,000 thousand as of December 31, 2009 and 2008, respectively, as collateral for day-term overdraft. The pledged amount may be adjusted anytime.
In addition, under a directive issued by the Central Bank of the ROC, separate foreign-currency deposit reserves are determined at prescribed rates based on balances of foreign-currency deposits. These reserves may be withdrawn anytime and are noninterest earnings. As of December 31, 2009, the balance of foreign-currency deposit reserves was $9,609 thousand. As of December 31, 2008, the balance of foreign-currency deposit reserves was $9,858 thousand.
- 21 - 7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31 2009 2008
Financial assets
For trading purposes Operating securities (Note 8) $ 18,188,027 $ 11,475,695 Interest rate swap contracts 5,129,340 14,645,764 Government bonds 2,241,534 1,824,977 Listed and OTC stocks 1,998,787 597,982 Premiums paid on option contracts 1,084,728 470,238 Futures trading margin 672,773 630,253 Convertible (exchangeable) corporate bonds 557,894 629,799 Futures contracts 507,045 811,220 Cross-currency swap contracts 488,566 257,324 Currency swap contracts 394,260 865,599 Mutual funds 234,205 - Nondeliverable forward contracts 63,802 1,126 Forward exchange contracts 36,284 26,389 Depositary receipts 9,630 - Commodity option contracts 4,016 - Asset swap contracts 3,679 6,134 Structured - note contracts 1,927 1,391 Credit default swap contracts - 31,787
$ 31,616,497 $ 32,275,678
Financial liabilities
For trading purposes Interest rate swap contracts $ 4,960,791 $ 13,929,306 Credit default swap contracts 2,272,917 6,734,980 Premiums received on option contracts 1,076,771 1,068,408 Cross-currency swap contracts 648,730 390,772 Currency swap contracts 357,623 299,884 Liabilities for issuance of call (put) warrants, net (Note 24) 148,871 50,905 Asset swap contracts 78,842 265,830 Nondeliverable forward contracts 64,419 - Forward exchange contracts 51,173 60,774 Structured - note contracts 7,113 18,107 Commodity option contracts 4,016 - Borrowed securities payable - 4,825 Financial liabilities designated at fair value through profit or loss Bank debentures payable 4,138,742 4,227,880
$ 13,810,008 $ 27,051,671
- 22 - As of December 31, 2009 and 2008, bank debentures designated at fair value through profit or loss that were issued by CDIB were as follows:
Bank Debenture December 31 Method of Paying Interest Number 2009 2008 Issuance Period Principals and Interests Rate
No. 940101 $ 1,500,000 $ 1,500,000 May 8, 2006 - May 8, 2011 Principal due on maturity; interest 1.93% payable annually No. 940201 1,500,000 1,500,000 May 17, 2006 - May 17, 2013 Principal due on maturity; interest 2.00% payable annually No. 940301 1,050,000 1,050,000 May 18, 2006 - May 18, 2016 Principal due on maturity; interest 2.15% payable annually 4,050,000 4,050,000 Valuation adjustments 88,742 177,880
$ 4,138,742 $ 4,227,880
The contract (nominal) amounts of the Corporation and subsidiaries’ outstanding derivative financial instruments as of December 31, 2009 and 2008 are summarized as follows:
Contract Amount December 31 2009 2008
Interest rate swap contracts $ 489,666,090 $ 617,854,561 Currency swap contracts 68,645,944 33,888,011 Interest rate swap option contracts 34,264,000 37,631,100 Cross-currency swap contracts 30,353,125 17,393,760 Nondeliverable forward contracts 15,249,810 197,160 Credit default swap contracts 10,283,971 11,466,863 Interest rate option contracts 7,504,000 4,110,000 Forward exchange contracts 7,329,713 3,677,512 Asset swap option contracts 7,169,400 13,999,500 Interest rate futures contracts 5,902,112 17,912,357 Asset swap contracts 2,274,100 6,533,200 Bond option contracts 2,125,583 2,861,865 Stock index futures contracts 1,408,950 1,261,552 Credit-linked notes contracts - options 560,500 475,000 Credit-linked notes contracts 560,500 475,000 Commodity option contracts 364,662 - Equity-linked notes contracts - options 89,711 12,000 Equity-linked notes contracts 89,711 6,000 Stock index future option contracts 86,891 711,049 Currency option contracts 64,060 1,889,897 Principal-guaranteed financial instruments - options 63,861 70,028 Principal-guaranteed financial instruments 60,668 64,053
For the years ended December 31, 2009 and 2008, the Corporation and subsidiaries’ net gains on the financial assets for trading purposes were $19,875,746 thousand and $23,357,818 thousand, respectively, the net losses on the financial liabilities for trading purposes were $18,131,884 thousand and $31,066,187 thousand, respectively; and the net gains and losses on the financial liabilities designated at fair value through loss or profit were $89,138 thousand and $245,410 thousand, respectively.
- 23 - As of December 31, 2009 and 2008, a part of the financial liabilities for trading purposes held by CDIB, the credit default swap (CDS) contracts, had nominal amounts of US$253,755,848 ($8,127,800 thousand, using the exchange rate of December 31, 2009) and US$257,447,804 ($8,459,735 thousand, using the exchange rate of December 31, 2008), respectively. These CDS contracts, which were linked to collateralized debt obligations on subprime mortgage loans and were classified as at fair value through profit or loss, had fair values of (a) US$68,208,972 ($2,184,734 thousand, using the exchange rate of December 31, 2009), which was deducted from a refundable deposit of US$177,705,820 ($5,691,917 thousand, using the exchange rate of December 31, 2009) and (b) US$203,305,195 ($6,680,609 thousand, using the exchange rate of December 31, 2008), which was deducted from a refundable deposit of US$28,037,401 ($921,309 thousand, using the exchange rate of December 31, 2008) as of December 31, 2009 and 2008, respectively. In addition, the Bank recognized valuation losses of US$14,572,196 ($466,747 thousand, using the exchange rate of December 31, 2009) and US$148,165,914 ($4,868,732 thousand, using the exchange rate of December 31, 2008) on the financial liabilities for trading purposes for the years ended December 31, 2009 and 2008, respectively.
As of December 31, 2009 and 2008, the costs of subprime-mortgage loan-related structured notes held by Grand Cathay’s subsidiaries were $156,126 thousand and $158,223 thousand, respectively, and the fair values of these notes were $10 thousand. Losses on the valuation of the foregoing securities were $156,116 thousand and $158,213 thousand as of December 31, 2009 and 2008, respectively.
As of December 31, 2009 and 2008, part of the financial assets for trading purposes of CDIB and its subsidiaries with aggregate carrying values of $0 thousand and $1,253,064 thousand, respectively, had been sold under repurchase agreements (recognized as securities sold under repurchase agreements).
As of December 31, 2009 and 2008, part of the government bonds of Grand Cathay and its subsidiaries amounting to $105,698 thousand and $145,671 thousand (with face values of $102,200 thousand and $141,700 thousand, respectively), respectively, been pledged with the Central Bank as government bond bidding, with GreTai Securities Market as settlement reserve for electronic bond trading system, with Land Bank as guarantee deposits and with UBS Bank as guarantee deposit for interest rate swap contracts.
8. OPERATING SECURITIES
December 31 2009 2008
Dealing
Corporate bonds $ 6,189,474 $ 5,096,367 OTC convertible corporate bonds 2,969,942 1,315,293 Listed stocks 2,829,091 586,027 Government bonds 1,597,312 2,647,553 Overseas convertible corporate bonds 720,507 93,430 Collateralized loan obligations 387,158 491,786 OTC stocks 377,774 9,120 Mortgage backed securities 339,834 548,622 OTC exchangeable corporate bonds 141,605 57,491 Listed depositary receipts 65,844 - Exchange-traded funds (ETF) 44,765 20,051 Collateralized debt obligations 389 776 Others 34 5 15,663,729 10,866,521 (Continued)
- 24 -
December 31 2009 2008
Underwriting
Listed stocks $ 688,666 $ 10,713 OTC convertible corporate bonds 311,090 - Listed depositary receipts 98,842 - OTC stocks 6,150 - Others 42,000 - 1,146,748 10,713 Hedge positions
OTC convertible corporate bonds - credit-linked notes 556,199 453,413 Listed stocks - call warrants 533,848 130,400 OTC stocks - call warrants 203,960 5,478 OTC exchangeable corporate bonds - credit-linked notes 52,575 - Listed stock - equity-linked notes 21,306 5,240 Listed call warrants - call warrants 3,838 2,441 Listed depositary receipts - call warrants 3,522 - OTC stocks - equity-linked notes 1,708 - OTC call warrants - call warrants 594 65 OTC convertible corporate bonds - call warrants - 1,424 1,377,550 598,461
$ 18,188,027 $ 11,475,695 (Concluded)
Year Ended December 31 Gain (Loss) on Sale of Securities 2009 2008
Grand Cathay and its subsidiaries
Dealing Trading on the Taiwan Stock Exchange $ 354,602 $ (833,728) Trading on GreTai Securities Market 314,429 (968,951)
$ 669,031 $ (1,802,679)
Underwriting Trading on the Taiwan Stock Exchange $ 204,519 $ (130,943) Trading on GreTai Securities Market 6,848 (10,925)
$ 211,367 $ (141,868)
Hedging Trading on the Taiwan Stock Exchange $ 239,983 $ (284,619) Trading on GreTai Securities Market 63,554 (47,684)
$ 303,537 $ (332,303)
As of December 31, 2009 and 2008, some of Grand Cathay and its subsidiaries’ foregoing securities, operating securities - underwriting and securities purchased under agreements to resell, with face values of $12,317,556 thousand and $11,415,515 thousand, respectively, had been sold for $12,998,727 thousand and $12,189,607 thousand, respectively (recognized as securities sold under repurchase agreements).
- 25 - 9. SECURITIES PURCHASED UNDER RESELL AGREEMENTS
December 31 2009 2008
Government bonds $ 2,849,762 $ 3,116,003
The securities purchased as of December 31, 2009 were contracted to be resold for $2,849,941 thousand before January 2010.
The securities purchased as of December 31, 2008 under resell agreements had been resold for $3,119,224 thousand between January 2009 and February 2009.
10. RECEIVABLES
December 31 2009 2008
Receivables amount for margin loans, refinancing margin and refinancing deposits receivable $ 7,229,326 $ 2,957,145 Lease receivables 1,917,804 2,321,719 Receivables on securities sold 1,578,888 1,040,463 Interest receivables 568,553 753,447 Interest receivables on interest rate swap contracts 479,517 - Receivables on collateral allocation 335,074 - Income tax receivables 308,846 296,001 Trust property receivables 261,004 379,315 Account receivables 178,329 21,293 Receivables buyout 96,865 183,847 Others 537,690 527,927 13,491,896 8,481,157 Less: Allowance for bad debts (716,766) (830,567)
$ 12,775,130 $ 7,650,590
11. ACQUIRED LOANS
December 31 2009 2008 Note
Chung Hwa Growth 3 Assets Management Corp. (CHG3) $ 4,856,649 $ 3,452,751 a, g Chung Hwa Growth 4 Assets Management Corp. (CHG4) 343,091 427,045 b China Development Asset Management Corp. 118,319 171,619 c Chung Hwa Growth 1 Assets Management Corp. (CHG1) - 1,228,855 d, g Chung Hwa Growth 2 Assets Management Corp. (CHG2) - 230,716 e, g Development Industrial Bank Asset Management - 1,000 f Corporation (DIBAMC) 5,318,059 5,511,986 Less: Allowance for bad debts (839,010) (779,366)
$ 4,479,049 $ 4,732,620
- 26 - a. The nonperforming loans were purchased from Taiwan Cooperative Bank, Cathay United Bank, Chinfon Bank, Jih Sun International Bank, China United Trust & Investment Corporation, DBS Bank, Grand Bills Finance Corp. and Standard Chartered Bank.
b. The nonperforming loans were purchased from the Taichung Commercial Bank.
c. The nonperforming loans were purchased from First Commercial Bank, Cosmos Bank, Union Bank of Taiwan, Chang Hwa Commercial Bank, Bank of Kaohsiung and Yi Shing Vehicle Finance Company.
d. The nonperforming loans were purchased from the Cathay United Bank, Chinfon Bank and Jih Sun International Bank.
e. The nonperforming loans were purchased from China United Trust & Investment Corporation, DBS Bank and Grand Bills Finance Corp.
f. The nonperforming loans were purchased from the Enterprise Bank of Hualine.
g. On September 1, 2009, CHG1 and CHG2 merged with CHG3, with the last company as the survivor entity.
12. DISCOUNTS AND LOANS
December 31 2009 2008
Short-term unsecured loans $ 960,902 $ 963,739 Short-term secured loans 10,000 11,564 Medium-term unsecured loans 27,329,844 36,235,967 Medium-term secured loans 28,856,795 32,898,022 Long-term unsecured loans 5,722,547 6,535,206 Long-term secured loans 1,949,696 2,113,083 Loans reclassified to nonperforming loans 800,656 1,259,309 65,630,440 80,016,890 Less: Allowance for bad debts (1,111,314) (1,233,353)
$ 64,519,126 $ 78,783,537
The nonperforming loans above were no longer generating interest revenue. For the years ended December 31, 2009 and 2008, the unrecorded interest revenues accrued on average lending rate from nonperforming loans were $29,672 thousand and $37,018 thousand, respectively.
For the years ended December 31, 2009 and 2008, CDIB carried out legal procedures required before writing off certain credits.
- 27 - The allowances for credit losses on loans were as follows:
Year Ended December 31, 2009 For Loss on the Overall Loan Portfolio For Loss on (Excluding Particular Particular Loans Loans) Total
Balance, beginning of year $ 470,315 $ 763,038 $ 1,233,353 Reversal (325,844) (154,033) (479,877) Write-off (200,697) - (200,697) Recovery of written-off credits 560,926 - 560,926 Effect of exchange rate changes - (2,391) (2,391)
Balance, end of year $ 504,700 $ 606,614 $ 1,111,314
Year Ended December 31, 2008 For Loss on the Overall Loan Portfolio For Loss on (Excluding Loans Listed Particular Particular on Loans Loans) Subsidiaries Total
Balance, beginning of year $ 1,375,592 $ 814,090 $ 16,931 $ 2,206,613 Provision (reversal) 625,263 (52,875) (16,931) 555,457 Write-off (1,925,586) - - (1,925,586) Recovery of written-off credits 270,512 - - 270,512 Reversal of written-off credits 124,534 - - 124,534 Effect of exchange rate changes - 1,823 - 1,823
Balance, end of year $ 470,315 $ 763,038 $ - $ 1,233,353
13. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31 2009 2008
Listed and OTC stocks $ 25,316,796 $ 14,101,619 Government bonds 16,786,911 16,448,422 Beneficiary certificates 6,245,115 9,563,472 Corporate bonds 3,109,968 301,086 Bank debentures 253,037 3,575,141 Depositary receipts 109,920 -
$ 51,821,747 $ 43,989,740
- 28 - As of December 31, 2009, government bonds had an aggregate value of $143,596 thousand and $53,581 thousand, with a face value of $134,000 thousand and $50,000 thousand, respectively, which had been provided as a deposit for business operations and indemnity reserves. As of December 31, 2008, government bonds had an aggregate value of $131,370 thousand and $53,678 thousand, with a face value of $124,000 thousand and $50,000 thousand, respectively, which had been provided as a deposit for business operations and indemnity reserves.
As of December 31, 2009 and 2008, a part of the available-for-sale financial assets held by CDIB, the beneficiary certificates, which had an original cost of $573,270 thousand and $880,957 thousand, respectively, and were linked to the CDO of subprime mortgage loans, had a fair value of $413,306 thousand and $566,345 thousand, respectively. As of December 31, 2009 and 2008, CDIB had recognized a valuation gain of $186 thousand and $8,630 thousand, respectively, and an impairment loss of $160,150 thousand and $323,242 thousand, respectively.
As of December 31, 2009 and 2008, a part of available-for-sale financial assets held by CDIB, bank debentures, which were a structured investment vehicle had an original costs of $1,601,500 thousand and $1,643,000 thousand, respectively, the fair values were both $0. As of December 31, 2008, CDIB had recognized an impairment loss in full on these debentures.
As of December 31, 2009 and 2008, the available-for-sale financial assets with an aggregate carrying value of $8,687,757 thousand and $13,171,704 thousand, respectively, which had been sold under repurchase agreements (recognized as securities sold under repurchase agreements).
14. FINANCIAL ASSET SECURITIZATION
a. When financial asset securitization commodities became due in August 2008, CDIB received the full payment on the subordinated certificates.
b. Asset characteristic, gain (loss) recognized and key economic assumptions used in measuring retained interests
In August 2005, CDIB sold part of its enterprise loans under securitization transactions. CDIB entrusted these loans to Yuanta Bank, which will issue the related beneficiary certificates. The terms and key economic assumptions used in measuring retained interests were as follows:
Enterprise Loans under Terms Securitization
Date of issuance August 10, 2005 Carrying amount of enterprise loans $ 5,100,000 Gain (loss) on securitization -
c. Cash flows were as follows:
The table below summarizes certain cash receipts and payments on the securitization trust:
Year Ended December 31, 2008
Cash flow-in from early reimbursement of corporate loans $ 700,000 Current cash reserve (25,199) Service fee received 1,162
- 29 - 15. INVESTMENTS UNDER THE EQUITY METHOD
As of December 31, 2009 and 2008, investments under the equity method amounted to $12,492,428 thousand and $12,515,673 thousand, respectively. The investment income and loss recognized under the equity method amounted to $451,882 thousand and $817,319 thousand for the years ended December 31, 2009 and 2008, respectively. These amounts were based on the (a) unaudited financial statements as of December 31, 2009 of Sino-Scan Venture Fund, Tenor Electronics Co., Ltd., CDIB Australia Investment Inc., CDIB Bioventures, Inc. and CDIB France Co. (b) unaudited financial statements as of December 31, 2008 of Sino-Scan Venture Fund, Tenor Electronics Co., J-Three Investment (HK) Limited, Pacifictech Microelectronics Co., Ltd. and Grand Cathay Managed Futures Corp. Management believes that had the financial statements of these investees been audited, there would have been no significant effect on the consolidated financial statements.
China Development Global Information Corporation, in which CDIB had an equity-method investment, had been liquidated on July 24, 2009. The cancellation of the status as registered entities of Tenor Electronics Co. and Sino-Scan Venture Fund, in which CDIB and its subsidiaries had equity-method investments, was approved by the relevant authorities for cancellation on April 28, 2008 and July 31, 2008, respectively. As of December 31, 2009, these investees were undergoing liquidation.
Sino-Philippine Asset Management Inc. and CDIB Biotech Venture Management, Inc. in which CDIB had equity-method investments, was liquidated on March 27, 2009 and August 10, 2009, respectively. On June 11, 2009, the dissolution of CDIB Australia Investment Inc., in which CDIB also had an equity-method investment, was approved by the board of directors, and this investee was liquidated on January 22, 2010. On April 20, 2008 and June 30, 2009, the dissolution of CDIB Biotech USA Investment Co. Ltd. and CDIB Bioventures, Inc., respectively, was approved by the board of directors. As of December 31, 2009, these investees were undergoing liquidation.
North America Venture Fund, L.P. and CDIB North America Venture Management L.D.C. had been liquidated on September 24, 2009 and September 29, 2009, respectively. On May 20, 2009, the dissolution of CDIB France Co. was approved by the board of directors and had been liquidated on February 26, 2010.
Grand Cathay Managed Futures Corp, an equity method investee of Grand Cathay, had been liquidated on July 17, 2009. Grand Cathay Securities (Hong Kong) Nominees Limited, an equity method investee of Grand Cathay’s subsidiaries, had been liquidated in December 2009.
As of December 31, 2009 and 2008, the Corporation and subsidiaries held 48.47% of TISC’s outstanding common shares with the book value amounted to $5,883,366 thousand and $5,677,095 thousand, respectively. Under the Regulations Governing the Preparation of Financial Reports by Financial Holding Companies, the Corporation and subsidiaries should adopt the equity method to recognize the gain or loss on the investment in TISC and regard TISC as part of the consolidated entities. However, since the Corporation and subsidiaries have not been able to exercise virtual control over TISC, under the approval of authority, the Corporation and subsidiaries do not have to include TISC in the consolidated entities as of December 31, 2009 and 2008.
- 30 - 16. FINANCIAL ASSETS CARRIED AT COST
December 31 2009 2008
Unlisted stocks - common stock $ 18,705,487 $ 22,450,189 Unlisted foreign partnership fund 9,710,206 9,385,316 Restricted stock 6,387,383 6,722,891 Emergency stocks - common stock 5,714,694 7,457,678 Unlisted stocks - preferred stock 898,618 617,543 Others 197,696 140,702
$ 41,614,084 $ 46,774,319
The investments in financial assets above held by the Corporation and subsidiaries were evaluated under the cost method because of the lack of active market prices and reliable evaluation of their fair value.
CDIB and its subsidiaries signed an agreement with Coller Partners 403, L.P. and Formosa Healthcare Investments, L.P. on January 10, 2006 to sell part of their investments in the biotechnology industry (recognized as available-for-sale financial assets and financial assets carried at cost). The selling price was US$88,697,425 ($2,919,919 thousand, using the exchange rate on the trade date). CDIB recognized $519,849 thousand as gain, with the selling price amounted to US$83,728,080 ($2,756,328 thousand, using the exchange rate on the trade date). For its subsidiaries, a $34,752 thousand loss was recognized on a selling price of US$4,969,345 ($163,591 thousand, using the exchange rate on the trade date). As of December 31, 2008, the selling price mentioned above was fully recovered by CDIB and its subsidiaries.
As of December 31, 2009 and 2008, CDIB had provided financial assets carried at cost, with book values of $295,572 thousand, as collaterals for the borrowings of Eastern Power and Electric Co., Ltd.
17. OTHER FINANCIAL ASSETS
December 31 2009 2008
Guarantee deposits received on futures contracts $ 2,367,779 $ 2,363,303 Debt instruments with no active market 2,198,670 2,001,062 Derivative financial assets for hedging - IRS contract 15,807 7,895 Security borrowing collateral price - 5,284 Security borrowing margin - 4,774
$ 4,582,256 $ 4,382,318
- 31 - 18. PROPERTIES
December 31 2009 2008
Cost $ 5,733,826 $ 6,160,540 Less: Accumulated depreciation Buildings and facilities 847,048 848,039 Computer equipment 441,468 394,843 Transportation equipment 15,207 12,815 Other equipment 151,188 150,347 Leasehold improvements 77,841 80,757 Leased assets 41,775 150,586 1,574,527 1,637,387 4,159,299 4,523,153 Accumulated impairment (60,000) (91,346) Prepayments for acquisition of properties 32,863 18,028
Properties, net $ 4,132,162 $ 4,449,835
Some sections of the main office building were for its own use; some were leased to third parties under an operating lease (Note 19).
19. OTHER ASSETS
December 31 2009 2008
Restricted assets (Notes 20 and 41) $ 3,566,820 $ 4,384,681 Refundable deposits 3,267,669 6,569,205 Collaterals assumed, net of accumulated impairment losses of $164,148 thousand and $194,235 thousand for decline in value as of December 31, 2009 and 2008, respectively 1,580,033 1,641,666 Deposits for operating bonds (Note 41) 620,000 645,000 Land and buildings leased, net of accumulated impairment losses of $0 thousand and $56,996 thousand for decline in value as of December 31, 2009 and 2008, respectively 556,429 745,840 Investment in real estate, net of accumulated depreciation 470,855 558,419 Clearing and settlement funds 279,170 285,083 Debit items for consigned trading, net (Note 21) 151,941 - Land and buildings not in use, net of accumulated impairment losses of $105,129 thousand for decline in value as of December 31, 2009 and 2008 137,316 140,347 Prepaid expenses 62,974 68,946 Others 243,533 258,886
$ 10,936,740 $ 15,298,073
- 32 - 20. RESTRICTED ASSETS
December 31 2009 2008
Restricted demand deposits $ 2,121,557 $ 2,865,161 Pledged time deposits - 0.15%-1.005% and 0.4%-1.85% annual interest rates in 2009 and 2008, respectively 1,015,449 1,033,837 Checking accounts - restricted for agent’s stock transfer purposes 416,418 449,236 Impound accounts 13,393 36,442 Others 3 5
$ 3,566,820 $ 4,384,681
The above restricted demand deposits refer to amounts received from clients by Grand Cathay Securities (Hong Kong) Limited (GCHK) for the securities brokerage business
December 31 2009 2008
China - Hong Kong (USD: 2009 - $49,553 thousand; 2008 - $70,278 thousand) $ 1,585,465 $ 2,305,546 China - Hong Kong (HKD: 2009 - $69,812 thousand; 2008 - $95,855 thousand) 288,045 405,755 China - Hong Kong (EUR: 2009 - €2,016 thousand; 2008 - €178 thousand) 92,673 8,209 China - Hong Kong (AUD: 2009 - $1,316 thousand; 2008 - $3,884 thousand) 37,771 88,262 China - Hong Kong (JPY: 2009 - ￥82,701 thousand; 2008 - ￥75,123 thousand) 28,595 27,252 China - Hong Kong (SGD: 2009 - $8 thousand; 2008 - $10 thousand) 174 222 China - Hong Kong (NZD: $34 thousand) - 643 China - Hong Kong (GBP) - 1
$ 2,032,723 $ 2,835,890
21. DEBIT/CREDIT ITEMS FOR CONSIGNED TRADING
December 31 2009 2008
Debit items for consigned trading Receivable securities sold through consignment $ 9,279,340 $ 1,370,475 Receivable securities purchased for customers 8,765,320 2,612,341 Receivable accounts for settlement 4,729,541 7,975,928 Settlement price 479,591 - Receivable price of securities purchased for customers 15,288 1,536,694 Cash in bank - settlement 3,960 1,868 Margin trading 95 - Securities sold for customers - 1,165,088 23,273,135 14,662,394 (Continued)
- 33 -
December 31 2009 2008
Credit items for consigned trading Securities deliverable sold for customers $ 9,279,339 $ 2,535,563 Securities deliverable purchased for customers 8,765,320 2,612,342 Settlement accounts payable 5,066,689 8,426,410 Price payable of securities sold for customers 9,846 1,367,398 Settlement price - 81,925 Margin trading - 93 23,121,194 15,023,731
Debit (credit) items for consigned trading, net (recognized as other assets (liabilities) $ 151,941 $ (361,337) (Concluded)
22. CALL LOANS FROM BANKS
The balances as of December 31, 2009 and 2008 were due in January 2010 and January 2009, respectively. The annual interest rates for these loans ranged from 0.1133% to 3.9925% and 0.30% to 2.51667% on December 31, 2009 and 2008, respectively.
23. COMMERCIAL PAPER PAYABLE
December 31 2009 2008 Last Due Day Amount Last Due Day Amount
Commercial paper payable: Between January $ 2,903,000 Between January $ 2,345,000 2009: 0.2%-2.0604% and March of and March of annual interest rates; 2008: 2010 2009 1.46%-3.6% annual interest rates Less: Unamortized discount (1,757) (2,875)
$ 2,901,243 $ 2,342,125
As of December 31, 2009, Shanghai Commercial & Savings Bank, Mega International Commercial Bank, Dah Chung Bills Finance Corporation, China Bills Finance Corporation, International Bills Finance Corporation, Taishin Bills Finance Corporation, Grand Bills Finance Corp., and Union Bills Finance Corporation guaranteed the above commercial paper. However, some commercial paper issued by the Corporation and subsidiaries, which amounted to $699,583 thousand, had no guarantee.
As of December 31, 2008, International Bills finance Corporation, Chinatrust Commercial Bank, China Bills Finance Corporation, Taishin Bills Finance Corporation, Union Bills Finance Corporation, Union Bank of Taiwan, Far Eastern International Bank and Grand Bills Finance Corp. had guaranteed all commercial paper issued by the Corporation and subsidiaries as of December 31, 2008.
- 34 - 24. LIABILITIES FOR ISSUANCE OF CALL (PUT) WARRANTS, NET
Grand Cathay and its subsidiaries
December 31, 2009
Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
Call warrant
No. 44 April 03, 2009 Taiwan Tea Corporation Nine months 20,000,000 $0.540 $ 10,800 $ 21.30 $ 25.76 407.00 No. B2 June 26, 2009 Asia Optical Co., Inc. Six months 20,000,000 0.660 13,200 78.30 65.31 26.37 No. B3 June 29, 2009 Yulon Motor Co., Ltd. Six months 20,000,000 1.950 39,000 49.05 39.41 43.84 No. B4 July 02, 2009 Lien Hwa Industrial Corporation Six months 20,000,000 0.910 18,200 22.80 16.71 71.59 No. B5 July 02, 2009 Shinkong Synthetic Fiber Corporation Six months 20,000,000 1.050 21,000 13.20 10.09 9.15 No. B6 July 02, 2009 Tainan Spinning Co., Ltd. Six months 20,000,000 1.160 23,200 16.50 15.53 212.50 No. B7 July 02, 2009 Shihlin Electric & Engineering Corp. Six months 20,000,000 0.800 16,000 56.85 46.72 58.93 No. B8 July 02, 2009 Yieh Phui Enterprise Co., Ltd. Six months 20,000,000 0.620 12,400 17.62 13.41 40.47 No. B9 July 02, 2009 Ta Chen Stainless Pipe Co., Ltd. Six months 20,000,000 1.420 28,400 35.55 28.29 156.25 No. C1 July 02, 2009 Sanyang Industry Co., Ltd. Six months 20,000,000 0.930 18,600 23.32 17.25 230.00 No. C2 July 02, 2009 Opto Tech Corporation Six months 20,000,000 1.870 37,400 39.20 33.35 1,430.00 No. C3 July 02, 2009 Silicon Integrated Systems Corp. Six months 20,000,000 0.800 16,000 15.45 26.46 82.67 No. C4 July 02, 2009 Elite Semiconductor Memory Six months 20,000,000 1.270 25,400 71.55 59.01 45.28 Technology Inc. No. C5 July 02, 2009 Young Fast Optoelectronics Co., Ltd. Six months 20,000,000 0.450 9,000 462.00 394.80 70.30 No. C6 July 03, 2009 Tong Yang Industry Co., Ltd. Six months 20,000,000 0.900 18,000 50.70 37.13 2.72 No. C7 July 03, 2009 Bes Engineering Co. Six months 20,000,000 0.600 12,000 12.64 10.50 434.50 No. C8 July 03, 2009 Chicony Electronics Co. Ltd. Six months 20,000,000 1.620 32,400 102.15 73.71 13.38 No. C9 July 03, 2009 President Chain Store Corporation Six months 20,000,000 1.100 22,000 127.05 81.67 152.20 No. D1 July 03, 2009 Lite-On It Corporation Six months 20,000,000 2.100 42,000 31.27 27.69 7.12 No. D2 July 08, 2009 Pihsiang Machinery Mfg. Co., Ltd. Six months 15,000,000 1.100 16,500 93.30 72.36 11.23 No. D3 July 08, 2009 Quanta Computer Inc. Six months 20,000,000 1.250 25,000 88.50 63.46 11.41 No. D4 July 08, 2009 Formosa Petrochemical Corp. Six months 20,000,000 0.870 17,400 115.35 86.25 68.67 No. D5 July 16, 2009 Waterland Financial Holdings Six months 20,000,000 1.200 24,000 14.34 11.14 33.55 No. D6 July 16, 2009 Sinyi Realty Inc. Six months 15,000,000 1.400 21,000 82.65 67.43 34.06 No. D7 July 22, 2009 Yuen Foong Yu Paper Mfg. Co., Ltd. Six months 20,000,000 1.100 22,000 15.67 12.69 9.59 No. D8 July 22, 2009 Htc Corporation Six months 10,000,000 5.500 55,000 735.00 500.94 1,832.50 No. D9 July 24, 2009 Young Fast Optoelectronics Co., Ltd. Six months 20,000,000 0.380 7,600 477.10 477.10 31.95 No. E1 July 24, 2009 Ta Chong Bank Ltd. Six months 20,000,000 0.720 14,400 8.86 7.01 16.67 No. E2 July 24, 2009 Shining Building Business Co., Ltd. Six months 20,000,000 1.050 21,000 57.60 42.44 35.43 No. E3 July 24, 2009 Formosa Advanced Technologies Co., Six months 15,000,000 0.880 13,200 48.60 39.16 5.11 Ltd. No. E4 July 24, 2009 Darfon Electronics Corp. Six months 20,000,000 1.500 30,000 69.30 55.17 32.71 No. E5 July 24, 2009 Richtek Technology Corp. Six months 10,000,000 3.100 31,000 399.00 330.00 12.92 No. E6 August 03, 2009 Asia Cement Corporation Six months 10,000,000 2.300 23,000 52.65 37.60 37.61 No. E7 August 03, 2009 Gigabyte Technology Co., Ltd. Six months 12,000,000 1.200 14,400 34.27 25.73 5.31 No. E8 August 03, 2009 Mediatek Inc. Six months 20,000,000 0.540 10,800 546.94 546.94 12.68 No. E9 August 11, 2009 Unimicron Technology Corp. Six months 10,000,000 1.700 17,000 49.50 40.83 6.82 No. F1 August 14, 2009 Kinpo Electronics, Inc. Six months 15,000,000 0.980 14,700 10.01 10.01 25.00 No. F2 August 14, 2009 Taiwan Glass Ind. Corp. Six months 10,000,000 1.300 13,000 33.45 24.12 8.34 No. F3 August 14, 2009 Micro-Star International Co., Ltd. Six months 12,000,000 1.200 14,400 33.30 24.48 35.17 No. F4 August 14, 2009 Realtek Semiconductor Corp. Six months 12,000,000 0.900 10,800 112.35 79.83 5.22 No. F5 August 14, 2009 Yuanta Financial Holdings Six months 12,000,000 1.150 13,800 33.22 25.29 24.48 No. F6 August 17, 2009 Nan Ya Plastics Corporation Six months 10,000,000 2.250 22,500 65.88 52.27 8.07 No. F7 August 17, 2009 Mitac International Corp. Six months 10,000,000 1.650 16,500 22.20 16.14 10.09 No. F8 August 17, 2009 Ite Tech. Inc. Six months 15,000,000 0.900 13,500 110.85 78.89 14.80 No. F9 August 17, 2009 Gintech Energy Corporation Six months 15,000,000 1.250 18,750 77.55 55.70 2.46 No. G1 August 20, 2009 Uni-President Enterprises Corp. Six months 10,000,000 1.900 19,000 48.07 37.69 11.81 No. G2 August 21, 2009 Lite-On Technology Corp. Six months 15,000,000 0.860 12,900 52.12 41.66 6.24 No. G3 August 21, 2009 Advanced Semiconductor Six months 15,000,000 1.350 20,250 36.37 27.90 10.09 Engineering, Inc. No. G4 August 21, 2009 CSBC Corporation, Taiwan Six months 15,000,000 1.900 28,500 48.07 34.56 22.50 No. G6 August 25, 2009 Lee Chang Yung Chemical Industry Six months 10,000,000 2.250 22,500 53.70 40.71 16.34 Corp. No. G7 August 25, 2009 Ali Corporation Six months 16,000,000 0.700 11,200 88.35 71.58 6.92 No. G8 August 27, 2009 Formosa Plastics Corporation Six months 15,000,000 1.100 16,500 90.00 65.56 15.84 No. G9 August 27, 2009 Far Eastern New Century Corporation Six months 15,000,000 0.700 10,500 48.60 38.90 11.59 No. H1 August 27, 2009 Rungnapa Lertsuwank Six months 15,000,000 0.550 8,250 7.65 6.37 36.53 No. H2 August 31, 2009 China Steel Corporation Six months 12,000,000 1.550 18,600 40.16 33.14 21.15 No. H3 August 31, 2009 Wistron Corporation Six months 10,000,000 1.600 16,000 84.10 68.09 22.58 No. H4 August 31, 2009 Global Unichip Corp. Six months 10,000,000 1.380 13,800 207.00 188.13 15.41 No. H5 August 31, 2009 Innolux Display Corporation Six months 12,000,000 0.950 11,400 55.80 46.06 9.78 No. H6 September 01, 2009 Yageo Corporation Six months 10,000,000 0.840 8,400 10.02 10.02 5.97 No. H7 September 01, 2009 Macronix International Co., Ltd. Six months 10,000,000 0.850 8,500 23.47 20.91 20.80 No. H8 September 01, 2009 Altek Corporation Six months 10,000,000 1.450 14,500 73.30 62.26 8.93 No. H9 September 01, 2009 Compal Communications Inc. Six months 10,000,000 0.800 8,000 39.48 35.86 4.50 No. J1 September 02, 2009 Amtran Technology Co., Ltd. Six months 10,000,000 1.650 16,500 34.22 28.90 3.70 No. J2 September 04, 2009 Cathay Real Estate Development Co., Six months 10,000,000 0.820 8,200 19.05 15.32 23.57 Ltd. No. J3 September 04, 2009 Cheng Shin Rubber Ind., Co., Ltd. Six months 10,000,000 0.780 7,800 103.35 81.90 18.85 No. J4 September 08, 2009 Compal Electronics, Inc. Six months 10,000,000 1.600 16,000 56.25 44.61 13.04 No. J5 September 08, 2009 Asustek Computer Inc. Six months 10,000,000 2.400 24,000 84.45 66.78 20.60 No. J6 September 08, 2009 Cheng Uei Precision Industry Co., Six months 10,000,000 0.850 8,500 90.02 69.41 7.56 Ltd. No. K1 September 09, 2009 Epistar Corporation Six months 10,000,000 1.320 13,200 151.50 105.86 5.36 No. K2 September 09, 2009 King Yuan Electronics Co., Ltd. Six months 12,000,000 0.800 9,600 17.08 13.89 7.24 No. K3 September 09, 2009 Hung Poo Real Estate Development Six months 10,000,000 1.220 12,200 70.27 55.43 14.08 Co., Ltd. No. K4 September 10, 2009 Taiwan Semiconductor Manufacturing Six months 10,000,000 1.420 14,200 86.80 68.86 25.29 Co., Ltd. (Continued)
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Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
No. K5 September 10, 2009 Synnex Technology International Six months 10,000,000 $1.500 $ 15,000 $ 91.28 $ 74.92 13.76 Corp. No. K6 September 10, 2009 Chunghwa Telecom Co., Ltd. Six months 10,000,000 0.900 9,000 73.84 62.65 41.03 No. K7 September 10, 2009 Evergreen International Storage & Six months 12,000,000 0.750 9,000 43.50 33.35 23.83 Transport No. K8 September 14, 2009 Hon Hai Precision Ind. Co., Ltd. Six months 15,000,000 1.500 22,500 173.60 148.35 10.67 No. L1 September 14, 2009 Wintek Corporation Six months 12,000,000 1.600 19,200 35.25 26.80 6.14 No. L2 September 14, 2009 First Financial Holding Co. Ltd. Six months 10,000,000 1.100 11,000 29.85 23.23 35.45 No. L3 September 14, 2009 Pan-International Industrial Corp. Six months 10,000,000 1.200 12,000 58.80 49.34 5.11 No. L5 September 16, 2009 Universal Scientific Industrial Co., Six months 10,000,000 1.800 18,000 19.81 15.46 4.04 Ltd. No. L6 September 16, 2009 Foxconn Technology Co., Ltd. Six months 10,000,000 1.250 12,500 127.54 98.44 4.32 No. L7 September 17, 2009 Greatwall Ent Six months 10,000,000 0.900 9,000 50.54 39.08 22.71 No. L8 September 17, 2009 Elitegroup Computer Systems Co., Six months 20,000,000 0.360 7,200 18.27 14.74 8.47 Ltd. No. L9 September 22, 2009 Upc Technology Corporation Six months 10,000,000 0.820 8,200 21.77 16.82 9.06 No. M1 September 22, 2009 Waterland Financial Holdings Six months 12,000,000 0.780 9,360 13.31 13.31 61.18 No. M3 September 22, 2009 Sinopac Financial Holdings Company Six months 15,000,000 0.740 11,100 17.15 13.89 14.66 Limited No. M4 September 22, 2009 Global Mixed-Mode Technology Inc. Six months 10,000,000 2.100 21,000 243.00 173.94 7.54 No. M5 September 24, 2009 China Synthetic Rubber Corporation Six months 10,000,000 0.850 8,500 46.41 36.19 12.00 No. M6 September 24, 2009 Goldsun Development & Construction Six months 10,000,000 0.920 9,200 23.03 18.56 38.82 Co., Ltd. No. M7 September 24, 2009 Zinwell Corporation Six months 10,000,000 1.850 18,500 95.25 72.05 19.90 No. M8 September 24, 2009 Kinsus Interconnect Technology Corp. Six months 10,000,000 1.120 11,200 131.25 105.57 20.38 No. M9 September 24, 2009 Pou Chen Corporation Six months 12,000,000 1.100 13,200 28.91 23.89 8.04 No. N1 September 24, 2009 Ruentex Development Co., Ltd. Six months 12,000,000 0.660 7,920 42.28 35.68 5.23 No. N2 September 29, 2009 Taiwan Glass Ind. Corp. Nine months 10,000,000 0.850 8,500 34.79 29.15 10.92 No. N3 September 29, 2009 The Ambassador Hotel, Ltd. Six months 12,000,000 0.700 8,400 46.34 37.41 7.79 No. N4 September 29, 2009 Inventec Appliances Corp. Six months 10,000,000 0.750 7,500 43.82 34.21 9.27 No. N5 September 29, 2009 Wpg Holdings Limited Six months 10,000,000 1.000 10,000 61.74 52.35 8.31 No. N6 October 01, 2009 Radium Life Tech. Co., Ltd. Six months 10,000,000 0.720 7,200 40.35 31.11 14.54 No. N7 October 01, 2009 Huaku Development Co., Ltd. Six months 10,000,000 1.200 12,000 114.10 91.69 15.36 No. N8 October 01, 2009 Largan Precision Co., Ltd. Six months 15,000,000 0.550 8,250 633.00 464.60 13.58 No. N9 October 02, 2009 Nankang Rubber Tire Corp., Ltd. Six months 10,000,000 0.920 9,200 48.16 38.23 6.80 No. AA October 02, 2009 Formosan Rubber Group Inc. Six months 15,000,000 0.480 7,200 30.00 25.67 5.19 No. AB October 02, 2009 United Microelectronics Corp. Six months 15,000,000 1.100 16,500 22.40 16.43 9.05 No. AC October 02, 2009 Sunplus Technology Co., Ltd. Six months 10,000,000 0.600 6,000 34.72 29.53 6.47 No. AD October 02, 2009 Unity Opto Technology Co., Ltd. Six months 12,000,000 0.570 6,840 82.35 69.06 11.56 No. AE October 02, 2009 Formosa Epitaxy Incorporation Six months 12,000,000 0.650 7,800 77.55 63.83 15.74 No. AF October 02, 2009 Ju Teng International Holdings Six months 15,000,000 1.050 15,750 68.25 48.21 25.71 Limited No. AG October 02, 2009 Want Want China Holdings Limited Six months 15,000,000 1.220 18,300 32.77 26.68 15.64 No. AH October 05, 2009 Sunrex Technology Corporation Six months 10,000,000 0.800 8,000 52.95 41.72 13.34 No. AI October 05, 2009 Cyntec Co., Ltd. Six months 10,000,000 0.720 7,200 103.95 84.36 6.04 No. AJ October 05, 2009 T. Join Transportation Co., Ltd. Six months 12,000,000 0.500 6,000 31.57 26.85 16.39 No. AK October 05, 2009 TXC Corporation Six months 10,000,000 1.140 11,400 64.12 50.28 5.17 No. AL October 07, 2009 First Steamship Co., Ltd. Six months 10,000,000 1.000 10,000 57.89 49.50 8.62 No. AM October 07, 2009 Chroma Ate Inc. Six months 10,000,000 0.940 9,400 99.45 72.74 6.67 No. AN October 07, 2009 Transcend Information, Inc. Six months 10,000,000 1.800 18,000 161.70 127.05 12.90 No. AP October 07, 2009 Elan Microelectronics Corp. Six months 12,000,000 0.760 9,120 68.25 54.15 7.09 No. AQ October 07, 2009 Lite-On Semiconductor Corp. Six months 12,000,000 0.550 6,600 37.57 28.62 16.10 No. AR October 07, 2009 Hannstar Board Corp. Six months 10,000,000 0.740 7,400 45.37 34.96 10.90 No. AS October 07, 2009 Forhouse Corporation Six months 10,000,000 0.820 8,200 56.40 42.24 6.64 No. AT October 09, 2009 Wei Chuan Foods Corp. Six months 10,000,000 1.150 11,500 67.35 49.97 16.77 No. AU October 09, 2009 China Metal Products Co., Ltd. Six months 10,000,000 1.000 10,000 56.70 46.62 8.02 No. AV October 09, 2009 Tung Ho Steel Enterprise Corp. Six months 10,000,000 0.750 7,500 51.75 39.85 21.66 No. AW October 09, 2009 United Microelectronics Corp. Six months 12,000,000 1.450 17,400 23.10 19.53 26.46 No. AX October 09, 2009 Ralink Technology Corp. Six months 10,000,000 1.220 12,200 144.00 122.10 7.97 No. AY October 09, 2009 Ton Yi Industrial Corp. Six months 10,000,000 0.680 6,800 16.66 13.17 20.42 No. AZ October 12, 2009 Everlight Electronics Co., Ltd. Six months 10,000,000 1.180 11,800 150.00 116.97 8.28 No. BA October 12, 2009 Ruentex Industries Limited Six months 10,000,000 1.150 11,500 73.12 55.83 7.28 No. BB October 22, 2009 China Petrochemical Development Six months 15,000,000 0.720 10,800 18.07 13.66 12.40 Corporation No. BC October 22, 2009 Tong Yang Industry Co., Ltd. Six months 10,000,000 1.200 12,000 76.20 55.23 6.46 No. BD October 22, 2009 U-Ming Marine Transport Corp. Six months 10,000,000 1.650 16,500 88.48 68.70 11.71 No. BE October 22, 2009 Mitac Technology Corp. Six months 12,000,000 0.680 8,160 48.00 37.38 12.75 No. BF October 27, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 1.000 10,000 9,968.92 8071.39 19.73 Weighted Stock Index No. BG October 27, 2009 Evergreen Marine Corp. (Taiwan) Ltd. Six months 10,000,000 0.900 9,000 24.01 18.89 11.90 No. BH October 27, 2009 Chang Hwa Commercial Bank, Ltd. Six months 10,000,000 1.600 16,000 21.35 16.53 9.90 No. BI October 27, 2009 Powertech Technology Inc. Six months 10,000,000 1.100 11,000 133.05 100.32 7.19 No. BJ October 28, 2009 Shinkong Textile Co., Ltd. Six months 10,000,000 1.350 13,500 49.14 33.99 6.38 No. BK October 28, 2009 Delta Electronics, Inc. Six months 10,000,000 1.750 17,500 132.02 103.79 9.39 No. BL October 28, 2009 Mediatek Inc. Six months 15,000,000 0.490 7,350 658.70 558.61 7.75 No. BM October 28, 2009 Lite-On It Corporation Six months 10,000,000 1.650 16,500 37.59 29.29 5.48 No. BP November 04, 2009 Gigabyte Technology Co., Ltd. Six months 10,000,000 1.850 18,500 41.65 32.23 9.33 No. BQ November 04, 2009 Advanced Semiconductor Six months 10,000,000 1.380 13,800 38.64 33.45 12.44 Engineering, Inc. No. BR November 06, 2009 Hon Hai Precision Ind. Co., Ltd. Six months 20,000,000 1.780 35,600 178.20 140.19 6.98 No. BS November 06, 2009 Htc Corporation Six months 10,000,000 4.400 44,000 476.00 395.73 10.10 No. BT November 06, 2009 Au Optronics Corp. Six months 12,000,000 0.660 7,920 41.72 35.82 7.05 No. BW November 11, 2009 Opto Tech Corporation Six months 12,000,000 1.560 18,720 34.51 30.55 10.21 No. BY November 12, 2009 Taiwan Navigation Co., Ltd. Six months 10,000,000 0.960 9,600 64.40 52.99 13.71 No. BZ November 12, 2009 Compal Communications Inc. Six months 10,000,000 1.200 12,000 62.51 48.13 9.04 No. CA November 12, 2009 Ruentex Development Co., Ltd. Six months 12,000,000 0.800 9,600 56.14 46.09 10.27 No. CC November 13, 2009 Nan Ya Plastics Corporation Six months 15,000,000 0.640 9,600 85.50 66.36 17.67 No. CD November 13, 2009 Sincere Navigation Corporation Six months 12,000,000 0.890 10,680 59.47 48.21 15.18 No. CE November 13, 2009 Mega Financial Holding Co., Ltd. Six months 10,000,000 1.270 12,700 29.92 22.08 21.02 No. CF November 13, 2009 Innolux Display Corporation Six months 15,000,000 0.710 10,650 70.50 52.21 10.78 No. CG November 13, 2009 Far Eastern Department Stores Ltd. Six months 10,000,000 2.000 20,000 54.15 41.80 10.43 No. CH November 16, 2009 Clevo Co. Six months 10,000,000 0.900 9,000 66.22 56.41 11.06 (Continued)
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Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
No. CI November 16, 2009 Quanta Computer Inc. Six months 10,000,000 $1.200 $ 12,000 $ 91.70 $ 75.27 11.90 No. CJ November 18, 2009 Cathay Financial Holding Co., Ltd. Six months 12,000,000 0.900 10,800 56.42 46.60 17.52 No. CK November 18, 2009 Green Energy Technology Inc Six months 12,000,000 1.080 12,960 83.16 66.76 14.56 No. CL November 18, 2009 Chinese Maritime Transport Ltd. Six months 12,000,000 0.970 11,640 113.54 102.93 16.27 No. CM November 20, 2009 China Life Insurance Company, Ltd. Six months 10,000,000 1.080 10,800 127.40 101.37 12.07 No. CN November 20, 2009 Faraday Technology Corp. Six months 10,000,000 1.450 14,500 32.62 27.00 7.81 No. CP November 20, 2009 Young Optics Inc. Six months 12,000,000 1.550 18,600 80.50 62.92 5.05 No. CQ November 20, 2009 Oriental Union Chemical Corp., Six months 10,000,000 1.950 19,500 188.50 188.50 3.03 No. CR November 25, 2009 Gemtek Technology Co., Ltd. Six months 15,000,000 0.660 9,900 35.98 26.41 8.39 No. CS November 25, 2009 Yuen Foong Yu Paper Mfg. Co., Ltd. Six months 12,000,000 1.400 16,800 15.96 12.92 9.81 No. CT November 25, 2009 Shin Zu Shing Co., Ltd. Six months 12,000,000 1.450 17,400 81.20 61.26 10.05 No. CU November 27, 2009 Asia Cement Corporation Six months 12,000,000 0.800 9,600 19.95 15.29 10.61 No. CV November 27, 2009 Fubon Financial Holding Co., Ltd. Six months 10,000,000 2.000 20,000 229.50 163.63 7.98 No. CY December 04, 2009 Novatek Microelectronics Corp. Six months 10,000,000 1.350 13,500 48.51 40.56 24.71 No. CZ December 04, 2009 Radiant Opto-Electronics Corp. Six months 10,000,000 2.450 24,500 45.12 39.01 8.05 No. DA December 04, 2009 Teco Electric & Machinery Co., Ltd. Six months 10,000,000 1.000 10,000 132.58 105.45 6.22 No. DB December 04, 2009 Acbel Polytech Inc. Six months 10,000,000 0.950 9,500 62.51 50.17 8.95 No. DC December 09, 2009 Lite-On It Corporation Six months 10,000,000 1.500 15,000 19.25 14.99 10.94 No. DD December 09, 2009 Uni-President Enterprises Corp. Six months 10,000,000 1.460 14,600 33.04 32.37 11.67 No. DE December 09, 2009 Huang Hsiang Construction Six months 10,000,000 1.880 18,800 42.56 35.04 10.49 Corporation No. DG December 15, 2009 Amtran Technology Co., Ltd. Six months 10,000,000 1.820 18,200 55.44 44.56 14.83 No. DH December 15, 2009 Waterland Financial Holdings Six months 10,000,000 0.960 9,600 84.84 63.31 5.08 No. DJ December 16, 2009 Wistron Corporation Six months 10,000,000 0.960 9,600 51.66 39.37 6.30 No. DK December 16, 2009 Taiwan Cooperative Bank Six months 10,000,000 1.150 11,500 14.21 10.88 9.81 No. DL December 16, 2009 Zyxel Communications Corporation Six months 10,000,000 1.400 14,000 79.94 62.86 8.63 No. DM December 16, 2009 Yageo Corporation Six months 10,000,000 1.060 10,600 27.58 21.28 12.72 No. DN December 21, 2009 Inventec Corporation Six months 10,000,000 0.620 6,200 40.88 31.74 8.72 No. DP December 23, 2009 Au Optronics Corp. Six months 10,000,000 0.960 9,600 15.22 13.69 10.73 No. DQ December 23, 2009 Holy Stone Enterprise Co., Ltd. Six months 10,000,000 0.980 9,800 27.82 22.17 9.41 No. DR December 23, 2009 Darfon Electronics Corp. Six months 10,000,000 0.810 8,100 57.45 42.73 12.32 No. DS December 23, 2009 Advantech Co., Ltd. Six months 10,000,000 0.850 8,500 60.75 52.50 11.41 No. DT December 23, 2009 Hon Hai Precision Ind. Co., Ltd. Six months 10,000,000 1.450 14,500 71.40 55.03 6.95 No. DU December 25, 2009 Micro-Star International Co., Ltd. Six months 10,000,000 1.120 11,200 13.66 13.66 10.40 No. DV December 25, 2009 Unity Opto Technology Co., Ltd. Six months 10,000,000 1.600 16,000 102.62 102.62 8.98 No. DW December 28, 2009 Largan Precision Co., Ltd. Six months 10,000,000 1.370 13,700 206.50 206.50 11.06 No. DX December 28, 2009 Innolux Display Corporation Six months 10,000,000 1.030 10,300 28.42 28.42 10.24 No. DY December 28, 2009 Green Energy Technology Inc. Six months 10,000,000 0.770 7,700 89.46 89.46 8.26 No. DZ December 28, 2009 Standard Foods Corporation Six months 12,000,000 0.440 5,280 576.80 576.80 9.57 No. EA December 28, 2009 Usi Corporation Six months 12,000,000 0.420 5,040 64.68 64.68 11.30 No. EB December 28, 2009 China Petrochemical Development Six months 10,000,000 0.860 8,600 114.80 114.80 9.65 Corporation No. EC December 29, 2009 Walsin Lihwa Corporation Six months 10,000,000 0.820 8,200 56.28 56.28 10.78 No. ED December 29, 2009 Cathay Real Estate Development Co., Six months 10,000,000 0.840 8,400 29.17 29.17 12.08 Ltd. No. EE December 29, 2009 Mega Financial Holding Co., Ltd. Six months 15,000,000 0.520 7,800 18.30 18.30 11.92 No. EF December 29, 2009 Shining Building Business Co., Ltd. Six months 10,000,000 1.430 14,300 16.73 16.73 8.36 No. EG December 29, 2009 Ton Yi Industrial Corp. Six months 12,000,000 0.610 7,320 19.95 19.95 10.82 No. EH December 29, 2009 Taiwan Semiconductor Co., Ltd. Six months 10,000,000 0.960 9,600 25.90 25.90 9.64 No. EI December 29, 2009 Ene Technology Inc. Six months 10,000,000 0.680 6,800 55.72 55.72 10.94 No. EJ December 29, 2009 Chipbond Technology Corporation Six months 15,000,000 0.460 6,900 17.01 17.01 13.32 No. RC July 06, 2009 Taiflex Scientific Co., Ltd. Six months 9,000,000 1.120 10,080 26.47 21.36 3.74 No. RD July 06, 2009 E-Ton Solar Tech. Co., Ltd. Six months 15,000,000 1.600 24,000 93.00 71.91 19.47 No. RE July 13, 2009 Vanguard International Six months 12,000,000 1.550 18,600 39.15 33.66 70.95 Semiconductor Co. No. RF July 13, 2009 Wafer Works Corp. Six months 12,000,000 2.000 24,000 51.00 44.88 3.43 No. RG July 27, 2009 A-Data Technology Co., Ltd. Six months 10,000,000 1.100 11,000 139.20 78.88 9.70 No. RH July 27, 2009 Microlife Corporation Six months 10,000,000 2.280 22,800 24.00 17.33 44.72 No. RJ July 27, 2009 Gloria Material Technology Corp Six months 15,000,000 0.700 10,500 101.40 70.37 64.78 No. RK August 26, 2009 Prime Electronics & Satellitics Inc. Six months 15,000,000 0.720 10,800 103.50 95.19 6.61 No. RL August 26, 2009 Youngtek Electronics Corporation Six months 12,000,000 0.550 6,600 59.70 47.29 8.96 No. RM September 11, 2009 Kenmec Mechanical Engineering Co., Six months 10,000,000 1.020 10,200 25.27 19.72 11.48 Ltd. No. RN September 11, 2009 Quanta Storage Inc. Six months 12,000,000 0.550 6,600 53.25 41.80 10.81 No. RP September 11, 2009 Firich Enterprises Co., Ltd. Six months 12,000,000 0.880 10,560 102.75 84.07 11.74 No. RQ September 25, 2009 St.Shine Optical Co., Ltd. Six months 12,000,000 0.650 7,800 41.92 32.8 15.05 No. RR September 25, 2009 Dynapack International Technology Six months 12,000,000 0.720 8,640 96.60 76.36 29.29 Corporation No. RS September 25, 2009 C-Media Electronics Inc. Six months 12,000,000 1.100 13,200 127.95 86.77 9.90 No. RT September 30, 2009 Taiwan Semiconductor Co., Ltd. Six months 8,000,000 1.650 13,200 245.25 210.31 16.05 No. RU September 30, 2009 Netronix, Inc. Six months 10,000,000 1.200 12,000 154.70 125.93 16.62 No. RV September 30, 2009 P-Two Industries Inc. Six months 6,000,000 0.700 4,200 87.30 68.60 6.12 No. RW October 01, 2009 Longwell Company Six months 10,000,000 0.750 7,500 39.67 33.87 12.76 No. RX October 06, 2009 Alcor Micro, Corp. Six months 10,000,000 0.920 9,200 129.00 99.96 3.51 No. RY October 06, 2009 Hu Lane Associate Inc. Six months 10,000,000 1.250 12,500 87.45 68.52 7.94 No. RZ October 06, 2009 Advanced Power Electronics Corp. Six months 12,000,000 0.560 6,720 78.45 59.61 12.44 No. SA October 06, 2009 Taiwan Chi Cheng Enterprise Co., Six months 12,000,000 0.680 8,160 97.65 74.46 8.09 Ltd. No. SB October 08, 2009 Celxpert Energy Corporation Six months 10,000,000 0.740 7,400 105.15 85.62 23.27 No. SC October 08, 2009 Mag. Layers Scientific-Technics Co., Six months 10,000,000 0.660 6,600 46.95 37.74 5.11 Ltd. No. SD October 23, 2009 Pacific Hospital Supply Co., Ltd. Six months 10,000,000 0.800 8,000 45.60 30.53 7.78 No. SE October 23, 2009 Simplo Technology Co., Ltd. Six months 10,000,000 1.150 11,500 76.80 56.98 14.16 No. SF October 23, 2009 Avy Precision Technology Inc. Six months 8,000,000 1.000 8,000 93.80 76.45 4.64 No. SG October 23, 2009 Phison Electronics Corp. Six months 8,000,000 0.920 7,360 105.98 84.26 6.86 No. SH October 23, 2009 Tty Biopharm Company Limited Six months 10,000,000 2.100 21,000 249.20 185.35 7.06 No. SJ October 29, 2009 Wei Mon Industry Co., Ltd. Six months 10,000,000 2.300 23,000 219.80 176.00 3.99 No. SK October 29, 2009 Chinese Gamer International Six months 10,000,000 2.800 28,000 368.25 288.13 7.11 Corporation No. SL November 5, 2009 Soft-World International Corporation Six months 10,000,000 1.250 12,500 153.75 114.54 9.13 No. SM November 5, 2009 Anpec Electronics Corporation Six months 8,000,000 1.250 10,000 34.95 27.09 11.27 (Continued)
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Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
No. SN November 5, 2009 Motech Industries Inc. Six months 12,000,000 $0.550 $ 6,600 $ 685.50 $ 549.90 16.96 No. SP November 17, 2009 E-Ton Solar Tech. Co., Ltd. Six months 10,000,000 2.240 22,400 235.20 207.00 6.48 No. SQ November 17, 2009 Coretronic Corporation Six months 10,000,000 0.920 9,200 48.23 48.23 4.76 No. SR November 17, 2009 Solar Applied Materials Technology Six months 10,000,000 1.440 14,400 151.20 127.36 4.28 Corp. No. SS November 23, 2009 Tung Thih Electronic Co., Ltd. Six months 15,000,000 0.950 14,250 109.90 93.78 10.87 No. ST November 23, 2009 Sino-American Silicon Products Inc. Six months 15,000,000 0.950 14,250 57.26 44.83 6.58 No. SU November 26, 2009 Wafer Works Corp. Six months 12,000,000 1.140 13,680 114.75 82.89 7.76 No. SV November 26, 2009 Syncmold Enterprise Corp. Six months 12,000,000 1.650 19,800 183.00 133.38 7.54 No. SW November 26, 2009 Pixart Imaging Inc. Six months 12,000,000 1.070 12,840 111.30 88.28 6.62 No. SX November 26, 2009 Efun Technology Co., Ltd. Six months 12,000,000 1.540 18,480 79.80 64.35 9.97 No. SY December 03, 2009 Syncmold Enterprise Corp. Six months 12,000,000 0.620 7,440 106.68 100.32 13.41 No. SZ December 03, 2009 Pixart Imaging Inc. Six months 20,000,000 0.410 8,200 347.20 279.83 6.14 No. TA December 03, 2009 Efun Technology Co., Ltd. Six months 10,000,000 1.680 16,800 93.00 73.32 3.96 No. TB December 03, 2009 Vanguard International Six months 12,000,000 0.860 10,320 18.76 15.23 6.01 Semiconductor Co. No. TC December 11, 2009 Chinese Gamer International Six months 10,000,000 0.710 7,100 596.40 452.61 6.52 Corporation No. TE December 11, 2009 Taiwan Chinsan Electronic Industrial Six months 10,000,000 1.100 11,000 77.28 62.96 8.47 Co., Ltd. No. TF December 11, 2009 Advanced Wireless Semiconductor Six months 10,000,000 1.230 12,300 58.10 43.64 4.50 Company No. TG December 18, 2009 Alltop Technology Co., Ltd. Six months 8,000,000 1.070 8,560 134.55 105.69 8.14 No. TH December 18, 2009 Chipbond Technology Corporation Six months 10,000,000 1.570 15,700 38.71 34.13 9.80 No. TJ December 18, 2009 Systex Corporation Six months 12,000,000 1.030 12,360 68.60 58.65 9.34 No. TK December 22, 2009 Userjoy Technology Co., Ltd. Six months 10,000,000 3.550 35,500 369.75 310.50 6.71 No. TL December 22, 2009 Gloria Material Technology Corp. Six months 10,000,000 0.960 9,600 27.22 21.45 9.97 No. TM December 24, 2009 Advanced Ceramic X Corporation Six months 10,000,000 2.100 21,000 222.00 187.45 7.12 No. TN December 24, 2009 Ardentec Corporation Six months 10,000,000 1.300 13,000 28.42 22.25 7.70
Put warrant
No. G5 August 21, 2009 Csbc Corporation, Taiwan Six months 15,000,000 0.500 7,500 16.02 24.04 38.25 No. J7 September 08, 2009 Asia Cement Corporation Six months 10,000,000 0.610 6,100 21.18 30.77 21.63 No. J8 September 08, 2009 Nan Ya Plastics Corporation Six months 10,000,000 0.770 7,700 26.85 40.97 388.67 No. J9 September 08, 2009 Lite-On It Corporation Six months 10,000,000 0.430 4,300 13.52 21.62 214.00 No. K9 September 14, 2009 Hon Hai Precision Ind. Co., Ltd. Six months 10,000,000 0.800 8,000 74.40 103.20 378.75 No. L4 September 14, 2009 Innolux Display Corporation Six months 10,000,000 0.580 5,800 24.30 31.36 158.17 No. M2 September 22, 2009 Waterland Financial Holdings Six months 12,000,000 0.330 3,960 6.24 8.20 43.33 No. BN November 04, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 0.990 9,900 5,492.19 7262.49 17.24 Weighted Stock Index No. BU November 06, 2009 Au Optronics Corp. Six months 12,000,000 0.450 5,400 20.86 26.48 110.86 No. BV November 06, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 0.780 7,800 5,563.09 7132.63 45.49 Weighted Stock Index No. BX November 11, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 1.600 16,000 7,900.00 7900.00 17.24 Weighted Stock Index No. CB November 12, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 1.180 11,800 7,600.00 7600.00 23.07 Weighted Stock Index No. CW November 27, 2009 Lite-On It Corporation Six months 10,000,000 0.750 7,500 20.79 27.81 8.45 No. CX November 27, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 5.300 53,000 7,400.00 7400.00 26.24 Weighted Stock Index No. DF December 09, 2009 Taiwan Stock Exchange Capitalization Six months 10,000,000 4.330 43,300 7,300.00 7300.00 26.67 Weighted Stock Index No. DI December 15, 2009 Ruentex Industries Limited Six months 10,000,000 0.620 6,200 40.46 49.55 8.85 3,806,970 Less: Gain on change in fair value of call (put) warrant liabilities (41,470 ) 3,765,500 Less: Repurchase of issued call (put) warrant liabilities (3,616,629 )
Market value $ 148,871 (Concluded)
December 31, 2008
Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
Call warrant
No. ET April 10, 2008 CMC Magnetics Corporation Nine months 20,000,000 $0.826 $ 16,520 $ 15.15 $ 12.60 14.36 No. EX April 25, 2008 Mediatek Inc. Nine months 20,000,000 0.596 11,920 585.00 469.61 220.50 No. FH May 16, 2008 Au Optronics Corp. Nine months 20,000,000 1.014 20,280 70.61 62.89 247.00 No. GB June 25, 2008 Innolux Display Corporation Six months 20,000,000 0.915 18,300 74.10 53.63 242.50 No. GC June 27, 2008 Asia Cement Corporation Six months 20,000,000 1.293 25,860 60.51 42.68 569.00 No. GD June 27, 2008 Radiant Opto-Electronics Corp. Six months 20,000,000 0.646 12,920 56.02 37.76 205.00 No. GE July 02, 2008 Wintek Corporation Six months 20,000,000 1.114 22,280 27.45 22.61 321.00 No. GF July 03, 2008 Sintek Photronic Corp. Six months 20,000,000 0.815 16,300 17.32 19.70 211.50 No. GG July 04, 2008 Cathay Financial Holding Co., Ltd. Six months 20,000,000 0.795 15,900 81.12 66.24 365.00 No. GH July 07, 2008 Advanced Semiconductor Six months 20,000,000 0.696 13,920 34.38 26.97 14.75 Engineering, Inc. No. GI July 08, 2008 Mitac International Corp. Six months 20,000,000 0.646 12,920 27.82 20.36 235.00 No. GJ July 08, 2008 Sincere Navigation Corporation Six months 20,000,000 0.716 14,320 74.76 51.35 300.00 No. GK July 09, 2008 Shin Kong Financial Holding Co., Six months 20,000,000 0.497 9,940 26.60 18.77 178.00 Ltd. No. GL July 09, 2008 Chunghwa Picture Tubes, Ltd. Six months 20,000,000 0.994 19,880 10.93 8.36 111.33 No. GM July 10, 2008 Mosel Vitelic Inc. Six months 20,000,000 0.616 12,320 29.75 25.29 8.59 (Continued)
- 38 -
Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
No. GN July 10, 2008 Hon Hai Precision Ind. Co., Ltd. Six months 20,000,000 $1.591 $ 31,820 $ 180.05 $ 132.79 642.00 No. GP July 11, 2008 Inotera Memories, Inc. Six months 20,000,000 0.905 18,100 20.15 17.25 403.00 No. GQ July 11, 2008 Lien Hwa Industrial Corporation Six months 20,000,000 0.994 19,880 23.87 17.65 14.50 No. GR July 15, 2008 Chi Mei Optoelectronics Corporation Six months 20,000,000 0.835 16,700 36.98 29.76 108.00 No. GS July 15, 2008 Cheng Uei Precision Industry Co., Six months 20,000,000 0.855 17,100 83.16 59.17 360.00 Ltd. No. GT July 15, 2008 Gintech Energy Corporation Nine months 20,000,000 0.497 9,940 298.20 236.78 73.20 No. GU July 16, 2008 Au Optronics Corp. Six months 20,000,000 1.173 23,460 55.02 40.07 123.50 No. GV July 16, 2008 Taiwan Business Bank Six months 20,000,000 0.686 13,720 13.74 11.96 21.94 No. GW July 17, 2008 Taishin Financial Holding Co., Ltd. Six months 20,000,000 0.726 14,520 14.70 12.73 289.00 No. GX July 17, 2008 Mediatek Inc. Six months 20,000,000 0.397 7,940 376.60 376.60 55.13 No. GY July 17, 2008 Pan-International Industrial Corp. Six months 20,000,000 0.736 14,720 64.05 51.55 230.00 No. GZ July 18, 2008 Farglory Land Development Co., Ltd. Six months 20,000,000 1.044 20,880 115.22 96.21 239.50 No. HA July 18, 2008 Mitac Technology Corp. Six months 20,000,000 0.537 10,740 24.92 18.51 285.00 No. HB July 22, 2008 Formosa International Hotels Six months 20,000,000 0.745 14,900 599.20 504.17 40.75 Corporation No. HC July 22, 2008 Largan Precision Co., Ltd. Six months 20,000,000 0.656 13,120 550.20 439.51 203.50 No. HD July 23, 2008 Faraday Technology Corp. Six months 20,000,000 0.895 17,900 79.80 63.23 260.50 No. HE July 23, 2008 Ability Enterprise Co., Ltd. Six months 20,000,000 0.875 17,500 45.01 35.33 58.86 No. HF July 24, 2008 Prince Housing & Development Corp. Seven months 20,000,000 1.512 30,240 23.80 16.49 23.75 No. HG July 24, 2008 Htc Corporation Seven months 20,000,000 0.795 15,900 689.50 561.78 163.50 No. HH July 24, 2008 Kinsus Interconnect Technology Corp. Seven months 20,000,000 1.014 20,280 85.96 60.89 308.00 No. HI July 25, 2008 Ruentex Development Co., Ltd. Seven months 20,000,000 0.895 17,900 40.39 28.88 348.00 No. HJ July 25, 2008 Cathay Real Estate Development Co., Seven months 20,000,000 0.497 9,940 20.31 15.90 145.00 Ltd. No. HK July 25, 2008 China Hi-Ment Corporation Seven months 20,000,000 0.815 16,300 69.44 52.80 43.29 No. HL July 31, 2008 Paragon Technologies Co., Ltd. Six months 20,000,000 1.890 37,800 196.50 156.30 279.50 No. HM July 31, 2008 China Airlines Ltd. Six months 20,000,000 0.656 13,120 14.91 12.25 19.05 No. HN July 31, 2008 Pou Chen Corporation Six months 20,000,000 0.676 13,520 33.81 25.33 293.00 No. HP August 01, 2008 Compal Communications Inc. Six months 20,000,000 1.153 23,060 51.52 36.47 177.00 No. HQ August 01, 2008 Evergreen Marine Corp. (Taiwan) Ltd. Six months 20,000,000 0.547 10,940 28.00 22.66 154.50 No. HR August 04, 2008 Yuanta Financial Holdings Six months 20,000,000 1.144 22,880 25.20 20.16 147.00 No. HS August 05, 2008 Realtek Semiconductor Corp. Six months 20,000,000 0.974 19,480 96.46 84.89 316.50 No. HT August 05, 2008 Nankang Rubber Tire Corp., Ltd. Six months 20,000,000 0.746 14,920 35.28 30.27 276.00 No. HU August 07, 2008 Novatek Microelectronics Corp. Six months 20,000,000 0.875 17,500 85.40 80.04 311.00 No. HV August 07, 2008 Gemtek Technology Co., Ltd. Six months 20,000,000 0.994 19,880 85.26 74.53 460.00 No. HW August 07, 2008 Global Unichip Corp. Six months 20,000,000 0.437 8,740 288.40 266.51 116.00 No. HX August 07, 2008 Qisda Corporation Six months 20,000,000 1.253 25,060 22.96 20.52 325.00 No. HY August 08, 2008 Richtek Technology Corp. Six months 20,000,000 0.437 8,740 373.10 313.38 131.00 No. HZ August 08, 2008 Silitech Technology Corporation Six months 20,000,000 1.323 26,460 124.32 105.23 391.00 No. JA August 08, 2008 Tsrc Corporation Six months 20,000,000 1.193 23,860 55.23 45.67 245.00 No. JB August 12, 2008 United Microelectronics Corp. Six months 20,000,000 0.805 16,100 18.62 15.18 185.75 No. JC August 12, 2008 Shih Wei Navigation Co., Ltd. Six months 20,000,000 0.845 16,900 70.70 60.50 348.00 No. JD August 13, 2008 Unimicron Technology Corp. Six months 20,000,000 1.094 21,880 49.00 38.07 272.00 No. JE August 13, 2008 Lite-On Technology Corp. Six months 20,000,000 0.855 17,100 39.83 33.52 85.80 No. JF August 15, 2008 Innolux Display Corporation Six months 20,000,000 0.865 17,300 58.65 58.65 48.50 No. JG August 18, 2008 Giant Manufacturing Co., Ltd. Six months 20,000,000 1.243 24,860 118.30 95.16 72.90 No. JH August 20, 2008 Greatwall Ent Six months 20,000,000 1.014 20,280 44.38 40.83 63.00 No. JI August 22, 2008 Ta Chen Stainless Pipe Co., Ltd. Six months 20,000,000 0.795 15,900 36.82 30.30 242.00 No. JJ August 29, 2008 Formosa Plastics Corporation Six months 20,000,000 1.293 25,860 78.26 67.48 218.00 No. JK August 29, 2008 Taishin Financial Holding Co., Ltd. Six months 20,000,000 0.676 13,520 13.59 9.57 144.50 No. JL August 29, 2008 Green Energy Technology Inc. Six months 20,000,000 0.447 8,940 295.40 230.42 48.00 No. JM September 04, 2008 Inotera Memories, Inc. Six months 20,000,000 0.636 12,720 14.07 12.31 31.00 No. JN September 08, 2008 Uni-President Enterprises Corp. Six months 20,000,000 0.716 14,320 41.44 33.58 27.52 No. JP September 08, 2008 Mitac International Corp. Six months 20,000,000 1.014 20,280 21.07 17.31 195.83 No. JQ September 11, 2008 Chunghwa Picture Tubes, Ltd. Six months 20,000,000 0.756 15,120 7.63 5.71 167.00 No. JR September 12, 2008 Sinopac Financial Holdings Company Six months 20,000,000 1.223 24,460 14.07 10.53 102.14 Limited No. JU September 18, 2008 Au Optronics Corp. Nine months 20,000,000 1.233 24,660 46.48 43.44 98.80 No. JV September 23, 2008 Taishin Financial Holding Co., Ltd. Six months 20,000,000 0.895 17,900 9.87 7.99 38.53 No. JW September 25, 2008 Epistar Corporation Six months 20,000,000 1.313 26,260 63.21 52.22 98.67 No. JX September 26, 2008 Taiwan Fertilizer Co., Ltd. Six months 20,000,000 1.034 20,680 94.78 60.03 11.11 No. JY September 30, 2008 Yageo Corporation Six months 20,000,000 0.915 18,300 9.78 8.22 138.00 No. JZ October 02, 2008 Acer Incorporated Six months 20,000,000 1.452 29,040 74.48 57.07 50.12 No. KA October 03, 2008 Pou Chen Corporation Six months 20,000,000 1.144 22,880 26.46 18.01 25.26 No. KB October 03, 2008 Ralink Technology Corp. Six months 20,000,000 1.691 33,820 147.00 116.11 58.42 No. KC October 03, 2008 Lite-On It Corporation Six months 20,000,000 1.233 24,660 25.20 18.05 16.92 No. KD October 09, 2008 Hon Hai Precision Ind. Co., Ltd. Six months 20,000,000 1.263 25,260 119.86 103.60 160.50 No. KE October 15, 2008 Asustek Computer Inc. Six months 20,000,000 1.333 26,660 72.38 61.77 147.20 No. KF October 15, 2008 Cathay Financial Holding Co., Ltd. Six months 20,000,000 0.925 18,500 54.32 41.88 14.90 No. KG October 15, 2008 Asia Cement Corporation Six months 20,000,000 0.716 14,320 34.45 26.31 6.32 No. KH October 16, 2008 Micro-Star International Co., Ltd. Six months 20,000,000 0.945 18,900 19.46 15.21 6.62 No. KI October 16, 2008 King Yuan Electronics Co., Ltd. Six months 20,000,000 1.144 22,880 12.78 10.93 60.00 No. KJ October 17, 2008 Tung Ho Steel Enterprise Corp. Six months 20,000,000 1.591 31,820 30.03 23.49 10.60 No. KK October 17, 2008 Tripod Technology Corporation Six months 20,000,000 1.412 28,240 69.51 54.66 58.45 No. KL October 17, 2008 Teco Electric & Machinery Co., Ltd. Six months 20,000,000 1.144 22,880 13.65 10.84 8.78 No. KM October 21, 2008 Chang Hwa Commercial Bank, Ltd. Six months 20,000,000 0.766 15,320 16.94 13.32 8.65 No. KN October 21, 2008 Advanced Semiconductor Six months 20,000,000 0.915 18,300 19.60 14.19 14.05 Engineering, Inc. No. KP October 21, 2008 Powertech Technology Inc. Six months 20,000,000 1.621 32,420 72.38 51.45 6.83 No. KQ October 23, 2008 Chi Mei Optoelectronics Corporation Six months 20,000,000 0.497 9,940 22.12 13.61 18.00 No. KR October 23, 2008 Chunghwa Telecom Co., Ltd. Six months 20,000,000 0.855 17,100 68.98 53.26 14.66 No. KS October 23, 2008 HTC Corporation Six months 20,000,000 0.716 14,320 588.00 391.33 12.58 No. KT October 24, 2008 Greatwall Ent Six months 20,000,000 1.442 28,840 31.57 22.02 4.55 No. KU October 24, 2008 Mediatek Inc. Nine months 20,000,000 0.567 11,340 420.00 338.07 14.70 No. KV October 29, 2008 Foxconn Technology Co., Ltd. Six months 20,000,000 1.094 21,880 99.68 97.06 10.72 No. KW October 29, 2008 Sinopac Financial Holdings Company Six months 20,000,000 0.746 14,920 8.42 8.42 9.05 Limited No. KX October 30, 2008 Au Optronics Corp. Six months 20,000,000 0.716 14,320 29.75 26.37 7.37 No. KY October 30, 2008 Gintech Energy Corporation Six months 20,000,000 1.512 30,240 146.30 142.50 61.00 No. KZ November 06, 2008 Yulon Motor Co., Ltd. Six months 20,000,000 0.955 19,100 19.88 14.98 8.10 (Continued)
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Ex-right Issue Exercise Exercise Units Price Price Price Leverage Warrant Name Issue Date Underlying Stock Duration Issued (Dollars) Amount (Dollars) (Dollars) Ratio
No. LA November 06, 2008 Yuanta Financial Holdings Six months 20,000,000 $1.024 $ 20,480 $ 19.88 $ 14.99 7.14 No. LB November 06, 2008 Innolux Display Corporation Six months 20,000,000 0.766 15,320 35.28 25.32 6.22 No. LC November 06, 2008 Qisda Corporation Six months 20,000,0001.233 24,660 12.06 8.6313.83 No. LD November 13, 2008 Taiwan Semiconductor Manufacturing Six months 20,000,000 1.323 26,460 60.76 42.08 7.22 Co., Ltd. No. LE November 13, 2008 United Microelectronics Corp. Six months 20,000,000 1.074 21,480 11.34 9.16 15.48 No. LF November 13, 2008 Chunghwa Picture Tubes, Ltd. Six months 20,000,000 0.378 7,560 4.50 2.88 4.51 No. LG November 13, 2008 Sincere Navigation Corporation Six months 20,000,000 0.815 16,300 35.00 28.87 5.26 No. LH November 14, 2008 Everlight Electronics Co., Ltd. Six months 20,000,000 0.736 14,720 58.59 41.30 5.02 No. LI November 14, 2008 Catcher Technology Co., Ltd. Six months 20,000,000 1.094 21,880 87.92 57.63 6.72 No. LJ November 14, 2008 First Financial Holding Co. Ltd. Six months 20,000,000 1.114 22,280 21.28 16.84 5.83 No. LK November 19, 2008 Hon Hai Precision Ind. Co., Ltd. Six months 20,000,000 0.915 18,300 79.52 67.10 7.38 No. LL November 19, 2008 Ruentex Development Co., Ltd. Six months 20,000,000 1.144 22,880 24.00 19.28 7.98 No. LM November 21, 2008 Shih Wei Navigation Co., Ltd. Six months 20,000,000 0.557 11,140 45.92 43.11 9.41 No. LN November 21, 2008 Universal Scientific Industrial Co., Six months 20,000,000 0.537 10,740 8.77 8.33 5.64 Ltd. No. LP November 21, 2008 Kinsus Interconnect Technology Corp. Six months 20,000,000 0.905 18,100 38.29 36.87 7.70 No. LQ November 25, 2008 Formosa Petrochemical Corp. Six months 20,000,000 0.965 19,300 96.60 76.89 11.49 No. LR November 25, 2008 Walsin Lihwa Corporation Six months 20,000,000 0.766 15,320 7.84 7.79 9.09 No. LS November 25, 2008 Compal Electronics, Inc. Six months 20,000,000 1.114 22,280 21.49 21.06 11.06 No. LT November 27, 2008 Gigabyte Technology Co., Ltd. Six months 20,000,000 0.945 18,900 14.98 13.05 6.96 No. LU November 27, 2008 Tripod Technology Corporation Six months 20,000,000 1.054 21,080 38.92 38.92 8.04 No. LV November 27, 2008 Goldsun Development & Construction Six months 20,000,000 0.875 17,500 12.51 10.80 9.13 Co., Ltd. No. LW November 28, 2008 Evergreen International Storage & Six months 20,000,000 0.746 14,920 25.97 19.95 7.66 Transport No. LX November 28, 2008 Cathay Real Estate Development Co., Six months 20,000,000 0.656 13,120 9.75 7.96 5.11 Ltd. No. LY November 28, 2008 Fubon Financial Holding Co., Ltd. Six months 20,000,000 0.646 12,920 28.98 22.71 5.49 No. LZ December 01, 2008 E.Sun Financial Holding Company, Six months 20,000,000 0.666 13,320 12.18 10.35 10.65 Ltd. No. MA December 01, 2008 Ton Yi Industrial Corp. Six months 20,000,000 0.965 19,300 15.26 11.64 7.83 No. MB December 01, 2008 Gemtek Technology Co., Ltd. Six months 20,000,000 1.233 24,660 48.65 37.89 3.65 No. MC December 11, 2008 Ability Enterprise Co., Ltd. Six months 20,000,000 0.766 15,320 29.26 25.08 8.08 No. MD December 11, 2008 Silitech Technology Corporation Six months 20,000,000 0.766 15,320 68.25 54.56 11.17 No. ME December 11, 2008 Nankang Rubber Tire Corp., Ltd. Six months 20,000,000 0.547 10,940 19.74 18.24 9.20 No. MF December 11, 2008 Highwealth Construction Corp. Six months 20,000,000 1.243 24,860 21.15 18.06 7.34 No. MG December 12, 2008 King Yuan Electronics Co., Ltd. Six months 20,000,000 0.636 12,720 10.65 8.97 8.18 No. MH December 12, 2008 Faraday Technology Corp. Six months 20,000,000 0.577 11,540 39.20 30.65 5.66 No. MI December 12, 2008 ZyXEL Communications Corporation Six months 20,000,000 0.656 13,120 23.17 20.64 7.28 No. MJ December 12, 2008 Radiant Opto-Electronics Corp. Six months 20,000,000 0.805 16,100 31.72 26.69 9.53 No. MK December 17, 2008 Asia Optical Co., Inc. Six months 20,000,000 0.656 13,120 54.90 48.63 7.41 No. ML December 17, 2008 Pan-International Industrial Corp. Six months 20,000,000 0.915 18,300 35.25 25.59 4.84 No. MM December 17, 2008 Wintek Corporation Six months 20,000,000 0.577 11,540 9.66 7.56 5.10 No. MN December 17, 2008 Tatung Co. Six months 20,000,000 1.044 20,880 9.21 7.67 5.75 No. MP December 18, 2008 Yageo Corporation Six months 20,000,000 0.746 14,920 6.18 4.84 6.09 No. MQ December 18, 2008 Zinwell Corporation Six months 20,000,000 0.636 12,720 47.40 36.99 4.28 No. MR December 18, 2008 Ralink Technology Corp. Six months 20,000,000 1.273 25,460 105.45 87.75 5.35 No. MS December 19, 2008 Teco Electric & Machinery Co., Ltd. Six months 20,000,000 0.935 18,700 16.05 11.76 5.87 No. MT December 19, 2008 Shin Zu Shing Co., Ltd. Six months 20,000,000 1.412 28,240 129.00 102.57 5.86 No. PG May 14, 2008 Macroblock, Inc. Nine months 20,000,000 0.596 11,920 399.00 304.06 74.70 No. PK July 14, 2008 A-Data Technology Co., Ltd. Six months 20,000,000 0.895 17,900 44.80 32.45 284.00 No. PL July 21, 2008 Etron Technology, Inc. Six months 20,000,000 1.094 21,880 22.68 17.01 372.50 No. PM July 21, 2008 Rich Development Co., Ltd. Six months 20,000,000 1.044 20,880 23.02 19.23 265.50 No. PN July 29, 2008 Kenmec Mechanical Engineering Co., Seven months 20,000,000 0.696 13,920 54.32 41.53 32.36 Ltd. No. PP July 29, 2008 PixArt Imaging Inc. Seven months 20,000,000 0.447 8,940 343.70 221.32 114.00 No. PQ August 11, 2008 Alcor Micro, Corp. Six months 10,000,000 1.412 14,120 96.60 72.57 317.50 No. PR August 11, 2008 Advanced Analog Technology Inc Six months 12,000,000 1.870 22,440 135.80 105.80 451.50 No. PS August 21, 2008 Vanguard International Six months 20,000,000 1.253 25,060 21.91 17.39 372.50 Semiconductor Co. No. PT September 1, 2008 Simplo Technology Co., Ltd. Six months 12,000,000 1.810 21,720 178.50 135.99 88.22 No. PU October 06, 2008 PixArt Imaging Inc. Six months 20,000,000 1.522 30,440 174.00 123.70 7.17 No. PV October 20, 2008 Dynapack International Technology Six months 20,000,000 1.044 20,880 99.26 86.19 21.10 Corporation No. PW November 10, 2008 Vanguard International Six months 20,000,000 1.213 24,260 12.40 9.55 10.64 Semiconductor Co. No. PX November 17, 2008 Motech Industries Inc. Six months 20,000,000 1.273 25,460 99.00 68.69 3.60 No. PY November 17, 2008 Phison Electronics Corp. Six months 20,000,000 0.935 18,700 69.60 50.06 3.22 No. PZ December 8, 2008 Sino-American Silicon Products Inc. Six months 20,000,000 0.915 18,300 73.95 71.22 5.34 No. QA December 15, 2008 Chipbond Technology Corporation Six months 20,000,000 0.696 13,920 12.00 10.73 7.62 No. QB December 15, 2008 Youngtek Electronics Corporation Six months 20,000,000 0.636 12,720 51.37 46.78 8.36 No. QC December 15, 2008 Taiwan Surface Mounting Technology Six months 20,000,000 0.766 15,320 32.70 28.78 7.42 Corp. No. QD December 15, 2008 Gloria Material Technology Corp. Six months 20,000,000 0.955 19,100 16.65 14.56 8.36 No. QE December 23, 2008 Simplo Technology Co., Ltd. Six months 20,000,000 1.492 29,840 126.15 90.66 5.80
Put warrant
No. JS September 16, 2008 Taishin Financial Holding Co., Ltd. Six months 20,000,000 0.497 9,940 5.45 6.16 5.67 No. JT September 17, 2008 Hon Hai Precision Ind. Co., Ltd. Six months 20,000,000 1.213 24,260 79.45 111.14 1.42 3,094,920 Less: Gain on change in fair value of call (put) warrant liabilities (1,666,620 ) 1,428,300 Less: Repurchase of issued call (put) warrant liabilities (1,377,395 )
Market value $ 50,905 (Concluded)
The warrants can be exercised either by delivering the underlying stocks or paying in cash.
- 40 - Repurchase of issued call (put) warrants
December 31 2009 2008 Warrant Name Units Amount Units Amount
Call warrant
No. ET - $ - 18,314,000 $ 4,702 No. EX - - 11,072,000 1,705 No. FH - - 8,571,000 2,099 No. GB - - 13,588,000 6,102 No. GC - - 9,737,000 4,463 No. GD - - 18,699,000 3,634 No. GE - - 17,343,000 8,163 No. GF - - 10,415,000 5,186 No. GG - - 18,965,000 10,683 No. GH - - 19,084,000 9,301 No. GI - - 12,240,000 4,030 No. GJ - - 11,560,000 2,416 No. GK - - 17,474,000 4,653 No. GL - - 19,860,000 8,924 No. GM - - 16,888,000 7,418 No. GN - - 18,000 16 No. GP - - 2,665,000 138 No. GQ - - 18,782,000 11,162 No. GR - - 18,474,000 5,276 No. GS - - 13,250,000 5,796 No. GT - - 10,549,000 2,244 No. GU - - 18,974,000 10,620 No. GV - - 17,990,000 3,888 No. GW - - 14,585,000 5,918 No. GX - - 18,481,000 4,399 No. GY - - 16,122,000 6,924 No. GZ - - 17,378,000 12,527 No. HA - - 18,537,000 6,323 No. HB - - 19,448,000 10,542 No. HC - - 19,304,000 7,987 No. HD - - 19,764,000 12,176 No. HE - - 19,492,000 9,613 No. HF - - 19,669,000 16,424 No. HG - - 7,774,000 893 No. HH - - 17,288,000 8,015 No. HI - - 17,852,000 10,412 No. HJ - - 17,930,000 4,483 No. HK - - 19,552,000 9,918 No. HL - - 15,724,000 14,405 No. HM - - 12,971,000 4,941 No. HN - - 17,438,000 6,566 No. HP - - 12,202,000 6,111 No. HQ - - 18,907,000 4,384 No. HR - - 16,676,000 6,534 No. HS - - 19,398,000 8,259 (Continued)
- 41 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. HT - $ - 9,470,000 $ 2,608 No. HU - - 19,063,000 10,752 No. HV - - 17,944,000 6,130 No. HW - - 19,931,000 5,297 No. HX - - 15,274,000 11,077 No. HY - - 18,954,000 3,942 No. HZ - - 19,512,000 11,061 No. JA - - 17,939,000 12,620 No. JB - - 15,988,000 5,407 No. JC - - 11,196,000 2,697 No. JD - - 19,628,000 11,068 No. JE - - 19,796,000 7,271 No. JF - - 17,916,000 8,085 No. JG - - 19,753,000 7,530 No. JH - - 18,951,000 8,977 No. JI - - 16,474,000 8,789 No. JJ - - 18,190,000 5,317 No. JK - - 4,224,000 1,033 No. JL - - 17,039,000 3,063 No. JM - - 3,000 1 No. JN - - 15,787,000 6,838 No. JP - - 18,567,000 9,321 No. JQ - - 18,135,000 5,257 No. JR - - 14,514,000 4,519 No. JU - - 18,258,000 8,106 No. JV - - 11,751,000 5,282 No. JW - - 19,520,000 10,610 No. JX - - 17,890,000 9,562 No. JY - - 15,103,000 8,650 No. JZ - - 19,902,000 11,793 No. KA - - 18,776,000 12,415 No. KB - - 17,904,000 22,959 No. KC - - 19,138,000 12,055 No. KD - - 4,912,000 532 No. KE - - 19,806,000 9,268 No. KF - - 16,577,000 8,396 No. KG - - 19,543,000 14,723 No. KH - - 18,888,000 19,271 No. KI - - 13,123,000 5,565 No. KJ - - 18,649,000 24,111 No. KK - - 18,717,000 14,253 No. KL - - 19,364,000 20,811 No. KM - - 19,935,000 16,193 No. KN - - 19,699,000 10,097 No. KP - - 18,115,000 25,608 No. KQ - - 11,824,000 2,059 No. KR - - 19,111,000 17,240 No. KS - - 12,670,000 4,144 (Continued)
- 42 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. KT - $ - 19,773,000 $ 48,967 No. KU - - 18,709,000 4,248 No. KV - - 19,830,000 13,240 No. KW - - 19,659,000 15,344 No. KX - - 19,835,000 10,017 No. KY - - 18,770,000 11,387 No. KZ - - 19,448,000 19,724 No. LA - - 19,688,000 18,037 No. LB - - 19,726,000 12,494 No. LC - - 18,552,000 12,873 No. LD - - 19,941,000 24,141 No. LE - - 19,597,000 14,287 No. LF - - 18,010,000 9,095 No. LG - - 19,864,000 17,376 No. LH - - 19,677,000 16,603 No. LI - - 19,783,000 19,687 No. LJ - - 19,984,000 25,050 No. LK - - 19,036,000 17,698 No. LL - - 19,197,000 20,707 No. LM - - 19,106,000 9,189 No. LN - - 17,688,000 11,145 No. LP - - 19,960,000 17,276 No. LQ - - 19,895,000 16,405 No. LR - - 19,365,000 14,624 No. LS - - 19,964,000 21,957 No. LT - - 19,958,000 18,213 No. LU - - 19,797,000 19,962 No. LV - - 19,218,000 14,360 No. LW - - 19,787,000 12,965 No. LX - - 19,583,000 13,306 No. LY - - 19,655,000 13,955 No. LZ - - 19,805,000 12,042 No. MA - - 19,899,000 17,124 No. MB - - 19,810,000 31,218 No. MC - - 19,881,000 13,171 No. MD - - 19,970,000 13,508 No. ME - - 19,864,000 9,662 No. MF - - 20,000,000 23,640 No. MG - - 19,916,000 12,035 No. MH - - 19,996,000 11,108 No. MI - - 19,958,000 12,414 No. MJ - - 19,971,000 13,753 No. MK - - 20,000,000 12,756 No. ML - - 19,987,000 18,229 No. MM - - 19,988,000 11,256 No. MN - - 20,000,000 21,062 No. MP - - 19,990,000 14,687 No. MQ - - 19,985,000 13,044 (Continued)
- 43 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. MR - $ - 19,968,000 $ 25,344 No. MS - - 20,000,000 18,479 No. MT - - 20,000,000 28,153 No. PG - - 9,315,000 1,145 No. PK - - 17,520,000 10,955 No. PL - - 19,316,000 15,054 No. PM - - 13,532,000 8,479 No. PN - - 14,798,000 6,635 No. PP - - 13,143,000 2,757 No. PQ - - 9,728,000 10,409 No. PR - - 8,127,000 5,302 No. PS - - 8,800,000 2,449 No. PT - - 9,368,000 4,332 No. PU - - 19,749,000 22,195 No. PV - - 19,578,000 12,080 No. PW - - 19,955,000 14,315 No. PX - - 19,907,000 28,833 No. PY - - 19,729,000 26,557 No. PZ - - 19,894,000 19,698 No. QA - - 19,859,000 13,517 No. QB - - 19,784,000 11,396 No. QC - - 19,900,000 14,290 No. QD - - 19,950,000 17,794 No. QE - - 19,949,000 29,757 No. 44 9,521,000 2,347 - - No. B2 19,868,000 10,911 - - No. B3 19,990,000 38,909 - - No. B4 19,700,000 16,678 - - No. B5 19,977,000 20,666 - - No. B6 19,977,000 22,221 - - No. B7 19,966,000 15,831 - - No. B8 19,960,000 12,409 - - No. B9 19,586,000 26,257 - - No. C1 19,955,000 17,865 - - No. C2 15,370,000 18,196 - - No. C3 19,968,000 15,901 - - No. C4 20,000,000 24,666 - - No. C5 19,919,000 9,381 - - No. C6 19,999,000 19,566 - - No. C7 19,552,000 10,397 - - No. C8 19,794,000 32,944 - - No. C9 19,254,000 20,364 - - No. D1 19,772,000 65,128 - - No. D2 14,988,000 17,376 - - No. D3 19,523,000 25,792 - - No. D4 19,913,000 16,785 - - (Continued)
- 44 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. D5 15,470,000 $ 14,876 - $ - No. D6 14,902,000 18,316 - - No. D7 17,109,000 24,197 - - No. D8 9,331,000 30,740 - - No. D9 19,729,000 7,514 - - No. E1 15,331,000 10,772 - - No. E2 19,097,000 16,758 - - No. E3 14,248,000 12,652 - - No. E4 19,706,000 28,291 - - No. E5 9,855,000 28,299 - - No. E6 9,319,000 12,309 - - No. E7 10,929,000 23,268 - - No. E8 19,816,000 10,665 - - No. E9 9,321,000 19,377 - - No. F1 14,800,000 13,581 - - No. F2 9,405,000 16,298 - - No. F3 11,352,000 11,273 - - No. F4 11,865,000 11,442 - - No. F5 11,697,000 13,138 - - No. F6 9,760,000 28,564 - - No. F7 9,096,000 14,363 - - No. F8 14,962,000 13,187 - - No. F9 14,560,000 27,904 - - No. G1 7,098,000 12,856 - - No. G2 14,845,000 13,922 - - No. G3 14,960,000 20,366 - - No. G4 13,795,000 25,620 - - No. G6 9,832,000 20,364 - - No. G7 15,994,000 11,610 - - No. G8 13,523,000 14,415 - - No. G9 14,870,000 10,893 - - No. H1 14,065,000 6,644 - - No. H2 11,631,000 15,966 - - No. H3 5,345,000 7,229 - - No. H4 8,681,000 11,334 - - No. H5 11,338,000 11,167 - - No. H6 10,000,000 9,526 - - No. H7 9,044,000 7,074 - - No. H8 9,898,000 14,042 - - No. H9 9,909,000 10,351 - - No. J1 9,990,000 18,724 - - No. J2 9,890,000 8,063 - - No. J3 9,920,000 7,377 - - (Continued)
- 45 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. J4 9,902,000 $ 15,753 - $ - No. J5 9,383,000 17,013 - - No. J6 9,315,000 7,683 - - No. K1 9,868,000 13,985 - - No. K2 10,431,000 8,478 - - No. K3 9,825,000 11,954 - - No. K4 8,372,000 11,147 - - No. K5 9,762,000 14,637 - - No. K6 9,832,000 7,700 - - No. K7 11,819,000 8,427 - - No. K8 14,304,000 19,562 - - No. L1 11,967,000 19,256 - - No. L2 9,978,000 10,038 - - No. L3 9,948,000 12,696 - - No. L5 9,997,000 22,080 - - No. L6 9,883,000 13,389 - - No. L7 8,595,000 6,211 - - No. L8 19,092,000 6,463 - - No. L9 9,738,000 8,083 - - No. M1 11,365,000 8,814 - - No. M3 14,820,000 11,059 - - No. M4 9,351,000 17,714 - - No. M5 9,785,000 8,290 - - No. M6 9,704,000 8,790 - - No. M7 9,888,000 17,179 - - No. M8 9,637,000 10,765 - - No. M9 11,528,000 13,715 - - No. N1 11,406,000 10,921 - - No. N2 9,612,000 8,082 - - No. N3 10,521,000 9,234 - - No. N4 8,150,000 6,105 - - No. N5 9,910,000 10,293 - - No. N6 8,411,000 4,872 - - No. N7 9,945,000 11,660 - - No. N8 14,989,000 7,230 - - No. N9 9,168,000 8,609 - - No. AA 14,693,000 9,102 - - No. AB 13,654,000 13,544 - - No. AC 9,986,000 6,589 - - No. AD 11,886,000 6,488 - - No. AE 11,995,000 7,695 - - No. AF 14,845,000 15,232 - - No. AG 14,765,000 18,064 - - (Continued)
- 46 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. AH 9,830,000 $ 7,710 - $ - No. AI 9,979,000 7,333 - - No. AJ 11,980,000 5,925 - - No. AK 9,828,000 11,827 - - No. AL 9,841,000 10,229 - - No. AM 9,492,000 9,242 - - No. AN 8,849,000 10,287 - - No. AP 10,478,000 7,760 - - No. AQ 10,894,000 5,693 - - No. AR 9,940,000 6,918 - - No. AS 9,864,000 8,192 - - No. AT 9,733,000 9,801 - - No. AU 9,003,000 9,997 - - No. AV 9,410,000 6,868 - - No. AW 11,911,000 15,869 - - No. AX 9,819,000 11,889 - - No. AY 8,817,000 5,786 - - No. AZ 9,972,000 11,035 - - No. BA 7,925,000 10,655 - - No. BB 14,624,000 10,357 - - No. BC 8,029,000 12,741 - - No. BD 9,493,000 15,161 - - No. BE 11,990,000 8,109 - - No. BF 9,993,000 9,991 - - No. BG 9,920,000 8,928 - - No. BH 9,975,000 15,960 - - No. BI 9,990,000 10,938 - - No. BJ 8,280,000 11,069 - - No. BK 9,959,000 17,170 - - No. BL 14,982,000 7,344 - - No. BM 7,235,000 16,292 - - No. BP 9,922,000 17,853 - - No. BQ 9,990,000 13,532 - - No. BR 19,989,000 35,624 - - No. BS 9,487,000 39,550 - - No. BT 11,921,000 8,000 - - No. BW 11,649,000 18,336 - - No. BY 9,984,000 9,454 - - No. BZ 9,718,000 11,672 - - No. CA 11,900,000 9,522 - - No. CC 14,867,000 9,419 - - No. CD 11,725,000 10,208 - - No. CE 10,000,000 12,493 - - (Continued)
- 47 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. CF 14,985,000 $ 10,605 - $ - No. CG 9,989,000 19,890 - - No. CH 9,990,000 8,971 - - No. CI 9,941,000 11,941 - - No. CJ 11,990,000 10,746 - - No. CK 11,922,000 12,861 - - No. CL 11,532,000 11,123 - - No. CM 9,404,000 10,048 - - No. CN 9,990,000 14,481 - - No. CP 11,928,000 19,432 - - No. CQ 9,861,000 20,106 - - No. CR 14,990,000 9,855 - - No. CS 11,389,000 16,167 - - No. CT 11,196,000 15,988 - - No. CU 11,910,000 9,522 - - No. CV 9,951,000 19,875 - - No. CY 9,929,000 13,375 - - No. CZ 9,900,000 24,252 - - No. DA 9,978,000 10,100 - - No. DB 10,000,000 9,506 - - No. DC 9,990,000 14,886 - - No. DD 8,366,000 12,024 - - No. DE 10,000,000 18,765 - - No. DG 9,992,000 18,185 - - No. DH 9,720,000 9,421 - - No. DJ 9,970,000 9,571 - - No. DK 9,796,000 11,266 - - No. DL 10,000,000 14,000 - - No. DM 9,960,000 10,544 - - No. DN 9,965,000 6,179 - - No. DP 9,979,000 9,583 - - No. DQ 10,000,000 9,800 - - No. DR 9,990,000 8,091 - - No. DS 9,970,000 8,475 - - No. DT 10,000,000 14,500 - - No. DU 10,000,000 11,200 - - No. DV 10,000,000 16,000 - - No. DW 10,000,000 13,700 - - No. DX 10,000,000 10,300 - - No. DY 10,000,000 7,700 - - No. DZ 12,000,000 5,280 - - No. EA 12,000,000 5,040 - - No. EB 10,000,000 8,600 - - No. EC 10,000,000 8,200 - - No. ED 10,000,000 8,400 - - (Continued)
- 48 -
December 31 2009 2008 Warrant Name Units Amount Units Amount
No. EE 15,000,000 $ 7,800 - $ - No. EF 10,000,000 14,300 - - No. EG 12,000,000 7,320 - - No. EH 10,000,000 9,600 - - No. EI 10,000,000 6,800 - - No. EJ 15,000,000 6,900 - - No. RC 8,884,000 20,772 - - No. RD 14,932,000 23,748 - - No. RE 11,584,000 15,425 - - No. RF 11,929,000 29,715 - - No. RG 4,580,000 5,076 - - No. RH 9,166,000 14,711 - - No. RJ 13,950,000 8,216 - - No. RK 14,890,000 11,347 - - No. RL 11,431,000 7,003 - - No. RM 3,410,000 2,666 - - No. RN 11,644,000 6,038 - - No. RP 11,757,000 10,343 - - No. RQ 11,079,000 6,818 - - No. RR 11,512,000 8,029 - - No. RS 11,610,000 12,006 - - No. RT 7,859,000 12,556 - - No. RU 9,925,000 11,073 - - No. RV 5,425,000 4,657 - - No. RW 9,699,000 7,112 - - No. RX 9,912,000 12,735 - - No. RY 9,459,000 13,954 - - No. RZ 11,617,000 6,429 - - No. SA 11,895,000 8,285 - - No. SB 9,943,000 7,249 - - No. SC 10,000,000 7,415 - - No. SD 9,597,000 7,673 - - No. SE 9,718,000 11,175 - - No. SF 7,704,000 7,917 - - No. SG 7,901,000 7,491 - - No. SH 10,000,000 21,072 - - No. SJ 9,989,000 24,294 - - No. SK 9,964,000 27,918 - - No. SL 9,459,000 12,032 - - No. SM 7,281,000 8,948 - - No. SN 11,933,000 6,564 - - No. SP 9,737,000 21,930 - - No. SQ 9,953,000 10,822 - - No. SR 9,728,000 15,593 - - No. SS 14,140,000 13,525 - - (Continued)
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December 31 2009 2008 Warrant Name Units Amount Units Amount
No. ST 14,968,000 $ 14,297 - $ - No. SU 11,980,000 13,657 - - No. SV 11,679,000 19,337 - - No. SW 11,940,000 12,812 - - No. SX 11,935,000 18,385 - - No. SY 11,849,000 7,345 - - No. SZ 19,849,000 8,140 - - No. TA 3,291,000 8,259 - - No. TB 11,996,000 10,365 - - No. TC 9,889,000 7,017 - - No. TE 8,929,000 10,281 - - No. TF 9,700,000 12,600 - - No. TG 7,883,000 8,436 - - No. TH 9,900,000 15,549 - - No. TJ 11,979,000 12,338 - - No. TK 9,884,000 35,125 - - No. TL 10,000,000 9,600 - - No. TM 10,000,000 21,000 - - No. TN 9,953,000 12,939 - -
Put warrant
No. JS - - 15,425,000 10,243 No. JT - - 18,693,000 31,874 No. G5 14,965,000 7,420 - - No. J7 9,993,000 6,095 - - No. J8 8,957,000 4,691 - - No. J9 9,977,000 3,861 - - No. K9 9,918,000 7,733 - - No. L4 9,932,000 4,747 - - No. M2 11,999,000 3,956 - - No. BN 10,000,000 9,900 - - No. BU 11,550,000 5,032 - - No. BV 9,990,000 7,792 - - No. BX 7,822,000 11,786 - - No. CB 9,854,000 11,577 - - No. CW 10,000,000 7,500 - - No. CX 9,588,000 50,462 - - No. DF 9,987,000 43,244 - - No. DI 10,000,000 6,200 - - 3,644,341 - 1,919,819 Less: Loss on change in fair value of call (put) warrants repurchased (27,712) (542,424)
$ 3,616,629 $ 1,377,395 (Concluded)
- 50 - 25. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
December 31 2009 2008
Government bonds $ 13,818,229 $ 20,477,598 Corporate bonds 5,698,436 4,400,316 Convertible corporate bonds 1,502,293 410,466 Collateralized loan obligations 350,724 486,580 Mortgage backed securities 281,720 789,398 Exchangeable corporate bonds 35,082 50,017
$ 21,686,484 $ 26,614,375
The securities sold as of December 31, 2009 were contracted to be repurchased for $21,689,656 thousand between January and March 2010.
The securities sold as of December 31, 2008 under repurchase agreements had been repurchased for $26,636,978 thousand between January 2009 and March 2009.
26. PAYABLES
December 31 2009 2008
Payables for securities transactions $ 2,176,597 $ 5,157 Accrued expenses 1,800,908 922,898 Payables for securities purchased 1,420,637 4,237,781 Payables for notes and checks in clearing 1,039,797 40,926 Income tax payable 896,612 1,563,492 Deposits payable for securities financing 873,771 500,301 Interest payable 784,105 879,992 Securities financing guarantee deposit 744,940 445,298 Interest payable on interest rate swap contracts 429,696 - Others 388,468 692,664
$ 10,555,531 $ 9,288,509
27. DEPOSITS AND REMITTANCES
December 31 2009 2008
Time deposits $ 14,178,830 $ 9,850,014 Demand deposits 3,155,859 1,727,665 Foreign-currency time deposits 1,549,637 6,028,228 Foreign-currency demand deposits 1,351,170 1,101,133 Others 170,947 106,118
$ 20,406,443 $ 18,813,158
- 51 - 28. SHORT-TERM LOANS
December 31 2009 2008 Maturity Date Interest Rate Amount Maturity Date Interest Rate Amount
First Commercial Bank 2010.01-12 0.9-2.045 $ 776,300 2009.01-12 2.41-2.86 $ 371,500 Ta Chong Bank 2010.01 1.07 639,800 - - - Taiwan Shin Kong Commercial Bank 2010.01 0.92-1.06 619,900 2009.01 4.21 9,215 Taishin International Bank 2010.01-03 0.85-1.2 545,378 2009.06 2.98 700,000 Chang Hwa Commercial Bank 2010.01 0.97 500,000 2009.01 1.95-2.38 900,000 Cathay United Bank 2010.01 0.8 500,000 - - - Bank of Kaohsiung 2010.02-05 0.8-2.1 227,300 2009.01-04 2.15-3.75 381,600 Mega International Commercial Bank 2010.02-07 2.03 206,000 2009.01-06 2.23-3.33 220,709 Bank of Panhsin 2010.01 0.9876 191,940 2009.08 2.87 23,200 E.Sun Commercial Bank 2010.01-03 0.85-0.9 178,000 2009.01 2.38 500,000 Far Eastern International Bank 2010.01 1.05-1.95 160,760 2009.01-02 2.79-3.45 463,000 Taiwan Cooperative Bank 2010.01 1.05-2.02 136,400 2009.04 3.51 119,369 Hua Nan Commercial Bank 2010.01 0.75 135,000 - - - Chinfon Commercial Bank 2010.01 1.2 79,975 - - - Sunny Bank 2010.07 1.95-2.16 30,000 2009.02 2.66 68,500 Yuanta Commercial Bank 2010.02 1.9 20,000 2009.08 3.51 5,700 The Shanghai Commercial & Savings Bank 2010.12 2.1 9,600 - - - Union Bank of Taiwan 2010.04 2.5 3,200 - - - EnTie Commercial Bank - - - 2009.06 3.99 18,057
$ 4,959,553 $ 3,780,850
29. BANK DEBENTURES PAYABLE
December 31 Name 2009 2008 Issue Period Repayment Period Interest Rate Note
No. 950201 $ 2,000,000 $ 2,000,000 Nov. 29, 2006 - Principal due on maturity; 2.1100% Nov. 29, 2011 interest payable annually No. 920601 1,500,000 1,500,000 Mar. 31, 2004 - Principal due on maturity; 1.15 * (USD CMS 30Y - USD Note 2 Mar. 31, 2014 interest payable CMS 2Y) (Note 1) quarterly No. 950101 1,100,000 1,100,000 Oct. 30, 2006 - Principal due on maturity; 2.0900% Oct. 30, 2011 interest payable annually No. 920401 - 1,000,000 Feb. 27, 2004 - Principal due on maturity; 1) If 6M LIBOR<1.05%, MAX Note 2 Feb. 27, 2009 interest payable (6M LIBOR, 0) quarterly 2) If 1.05%<=6M LIBOR<=2.0%, 3.50% 3) If 2.00%<6M LIBOR, MAX (4.50% - 6M LIBOR, 0) No. 920701 1,000,000 1,000,000 Mar. 31, 2004 - Principal due on maturity; 1.15 * (USD CMS 30Y - USD Note 2 Mar. 31, 2014 interest payable CMS 2Y) (Note 1) quarterly No. 920901 1,000,000 1,000,000 Apr. 29, 2004 - Principal due on maturity; 1.15* (USD CMS 30Y - USD Note 2 Apr. 29, 2014 interest payable CMS 2Y) (Note 1) quarterly No. 930701 1,000,000 1,000,000 Jan. 27, 2005 - Principal due on maturity; 2.2500% Jan. 27, 2012 interest payable quarterly No. 920301 - 500,000 Feb. 12, 2004 - Principal due on maturity; 1) If 180 day CP<=0.80%, Note 2 Feb. 12, 2009 interest payable MAX (180 day CP, 0) semiannually 2) If 0.80%<180 day CP<1.70%, 2.80% 3) If 1.70%<=180 day CP, MAX (3.45% - 180 day CP, 0) No. 920501 - 500,000 Mar. 18, 2004 - Principal due on maturity; 1) If 180 day CP<=0.90%, Note 2 Mar. 18, 2009 interest payable MAX (180 day CP, 0) semiannually 2) If 0.90%<180 day CP<1.50%, 3.00% 3) If 1.50%<=180 day CP, MAX (3.45% - 180 day CP, 0) No. 930101 - 500,000 June 23, 2004 - Principal due on maturity; MAX (5.9% - 6M LIBOR, 0) June 23, 2009 interest payable quarterly (Continued)
- 52 -
December 31 Name 2009 2008 Issue Period Repayment Period Interest Rate Note
No. 920201 $ 500,000 $ 500,000 Jan. 6, 2004 - Principal due on maturity; 1) If 6M LIBOR<1.0%, MAX Note 2 Jan. 6, 2010 interest payable (6M LIBOR, 0) semiannually 2) If 1.0%<=6M LIBOR<=2.0%, 4.0% 3) If 2.0%<6M LIBOR, MAX (5.0% - 6M LIBOR, 0) No. 930201 500,000 500,000 June 23, 2004 - Principal due on maturity; MAX (6.1% - 6M LIBOR, 0) June 23, 2010 interest payable quarterly No. 930401 - 500,000 July 5, 2004 - Principal due on maturity; MAX (4.4% - 90 day TWD CP, July 5, 2009 interest payable 0) quarterly No. 950301 3,200,000 3,200,000 Feb. 5, 2007 - Principal due on maturity; 2.1100% Feb. 5, 2012 interest payable annually No. 950401 3,700,000 3,700,000 Mar. 20, 2007 - Principal due on maturity; 2.1000% Mar. 20, 2012 interest payable annually No. 960101 2,750,000 2,750,000 Jan. 9, 2008 - Principal due on maturity 0% Dec. 13, 2017 No. 960201 1,100,000 1,100,000 Jan. 9, 2008 - Principal due on maturity; 90 day TWD CP + 0.3% Dec. 13, 2012 interest quarterly No. 960301 9,000,000 9,000,000 Jan. 30, 2008 - Principal due on maturity; 3.00% Jan. 30, 2015 interest payable annually No. 960401 1,000,000 1,000,000 Jan. 31, 2008 - Principal due on maturity; 3.10% Apr. 30, 2015 interest payable annually, the last payment for three months Issued 29,350,000 32,350,000 amount Unamortized (569,231 ) (641,098 ) discount
Net amount $ 28,780,769 $ 31,708,902 (Concluded)
Note 1: CMS 30Y represents the 30-year USD-ISDA swap interest rate. CMS 2Y represents the 2-year USD-ISDA swap interest rate.
Note 2: Hedged items of the CDIB’s cash flow hedge.
30. CORPORATE BONDS PAYABLE
December 31 2009 2008
1st Debenture Bonds in 2005 - the Corporation $ 8,000,000 $ 8,000,000 1st Debenture Bonds in 2006 - the Corporation 6,000,000 6,000,000 1st Debenture Bonds in 2008 - the Corporation 6,000,000 6,000,000 20,000,000 20,000,000 Deduct: Maturity within one year (8,000,000) -
$ 12,000,000 $ 20,000,000
- 53 - In September 2005, the Corporation issued $8,000,000 thousand debenture bonds with par value of $10,000 thousand. The bond terms were as follows: a. Issue period: Five years. b. Issue coupon/interest rates:
Bond A: 2.05% fixed annual interest rate. Bond B: 2.0396% fixed annual interest rate. c. Method of paying principals and interests:
Bond A: Principal due on maturity; simple interest payable annually. Bond B: Principal due on maturity; compound interest semiannually; interest payable annually. d. Pledged: Negative.
The bonds will mature in September 2010.
In February 2007, the Corporation issued $6,000,000 thousand debenture bonds with par value of $1,000 thousand. The bond terms were as follows: a. Issue period: Five years. b. Issue coupon/interest rate: 2.2% fixed annual interest rate. c. Method of paying principal and interests: Principal due on maturity; simple interest payable annually. d. Pledged: Negative.
The bonds will mature in February 2012.
In June 2008, the Corporation issued $6,000,000 thousand debenture bonds with par value of $1,000 thousand. The bond terms were as follows: a. Issue period:
Bond A and Bond B: Five years. Bond C and Bond D: Seven years. b. Issue coupon/interest rate:
Bond A: 2.89% fixed annual interest rate. Bond B: Indicator rate plus 0.28% Bond C: 3.40% fixed annual interest rate. Bond D: Indicator rate plus 0.70%
The indicator rate is the fixing rate of the 90-day short-term bills in the secondary market quoted by the Reuters at 11:00 a.m., two working days prior to the date of accruing interest as of issue date (shown on page 6165).
If the rate is not available, the average rate of the last working day before the above first day will be used instead.
- 54 - c. Method of playing principal and interest: Principal due on maturity; Both Bond A and Bond C were issued at par, interest payable annually. The interests period for Bond B and Bond D start every three months from the issue date; interest payable annually and principal repayable on the due date.
d. Pledged: Negative.
The interest rates on the above bonds were 0.774%-3.40% and 1.463%-3.400% for the years ended December 31, 2009 and 2008, respectively. Bond A and Bond B will mature in June 2013; Bond C and Bond D will mature in June 2015.
In December 2003, Grand Cathay made a fourth issue of debentures with an aggregate face value of $3,000,000 thousand. The offering terms were as follows:
a. Bonds A-F: Total face value - $1,800,000 thousand; interest rate - 1.9%; maturity - four years from the issue date; interest payable annually and the principal repayable on the due date;
b. Bonds G, H and J: Total face value - $900,000 thousand; interest rate - 2.0%; maturity - five years from the issue date; interest payable annually and the principal repayable on the due date; and
c. Bond I: Total face value - $300,000 thousand; interest rate - 4.10% less 90 days’ commercial paper interest rate, but not less than 0%; interest payable quarterly and principal repayable on the due date.
The aforementioned corporate bonds expired in December 2008.
31. LONG-TERM LOANS
December 31 2009 2008
Industrial Bank of Taiwan: Interest payable monthly; the principal is repayable when notes are collected; floating interest rates; maturity in December 2012 and December 2010 $ 3,000,000 $ 3,000,000 En Tie Commercial Bank: Interest payable quarterly; repayable in quarterly installments since January 7, 2010; floating interest rates; maturity in July 2011 400,000 1,283,333 Ta Chong Bank: 2009 - interest payable monthly; the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 171,000 171,000 First Commercial Bank: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 171,000 171,000 (Continued)
- 55 -
December 31 2009 2008
Chinatrust Commercial Bank: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected, 2.4863%-3.2875% annual interest rates; maturity in March 2012 $ 171,000 $ 171,000 Taiwan Cooperative Bank: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 171,000 171,000 Chang Hwa Commercial Bank: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 171,000 171,000 King’s Town Bank: 2009 - interest payable monthly; the principal is repayable 20% in the first year, 30% in the second year and 50% in the third year; the principal is repayable at 70% of the selling price of collaterals assumed; 3.12% annual interest rates; maturity in June 2012 108,520 - Bank of Taiwan: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 95,000 95,000 Taiwan Business Bank: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 95,000 95,000 Bank of Kaohsiung: 2009 - interest payable monthly, the principal is repayable when notes are collected; 1.7928%-1.8457% annual interest rates; maturity in March 2012 2008 - interest payable monthly; the principal is repayable when notes are collected; 2.4863%-3.2875% annual interest rates; maturity in March 2012 95,000 95,000 Executive Yuan Development Fund: Repayable quarterly installments; annual interest rates - 0% in 2009 and 0.175%-0.9% in 2008; maturity in January 2013 29,856 52,822 (Continued)
- 56 -
December 31 2009 2008
Note issuance facility: 2009 - 1.091%-1.197% annual interest rates; 2008 - 2.357% annual interest rates $ 1,599,765 $ 999,849
$ 6,278,141 $6,476,004 (Concluded) As of December 31, 2009 and 2008, the unused credit lines of the Corporation and its subsidiaries were $203,245 thousand and $363,701 thousand, respectively.
The Corporation entered into a note issuance facility (NIF) transaction with the International Bills Finance Corporation on July 25, 2008. The credit line was $2,000,000 thousand. The NIF contract took effect on the contract date and has a term of three years. The Corporation may use the credit line until July 2011. The contract requires the maintenance of certain capital adequacy ratio (CAR), double leverage ratio (DLR) and credit ratings. As of December 31, 2009 and 2008, the Corporation was in compliance with the CAR, DLR and credit rating requirements.
32. OTHER FINANCIAL LIABILITIES
December 31 2009 2008
Structured products - host contracts $ 17,014,060 $ 16,343,610 Structured - note contracts - credit-linked notes 556,022 460,751 Derivative financial liabilities for hedging - IRS contracts (Note 45) 160,723 455,838 Structured - note contracts - equity-linked notes 89,690 5,977 Structured - note contracts - principal-guaranteed notes 60,660 63,817
$ 17,881,155 $ 17,329,993
33. PENSION PLAN
The Corporation and subsidiaries have defined benefit pension plans for all formal employees based on the Labor Standards Act. Benefit payments are based on service periods and basic salaries and wages at the time of retirement.
Under the defined benefit plan, CDIB has made monthly contributions at 13% of salaries and wages to a pension fund. In February 2006, CDIB changed the contribution rate from 13.0% to 4.5% and then further adjusted the contribution rate from 4.5% to 3.14% in November 2008. The fund is managed by the Employees’ Pension Reserve Supervisory Committee and deposited in the Bank of Taiwan in the committee’s name.
Grand Cathay contributes monthly an amount equal to 5.7% of management and nonmanagement salaries to a pension fund for management and to the employees’ pension fund for nonmanagement personnel. The employees’ pension fund is deposited in the Bank of Taiwan by the Employees’ Pension Reserve Supervisory Committee. According to the 2005 actuarial report, the balances of management and employees’ pension funds are sufficient to support the future pension claim. As approved by the Department of Labor in July 2006, Grand Cathay suspended its contributions to the two funds from March 2006 to June 2008. In July 2008, Grand Cathay resumed contributing monthly amounts equal to 2% of management and nonmanagement salaries to the two funds.
- 57 - GCFC and Grand Cathay Investment Services Corporation (GCIS) contribute monthly amounts equal to 4.89% and 6.00%, respectively, of monthly salaries and wages to the employees’ pension funds deposited in the Bank of Taiwan by their respective Employees’ Pension Reserve Supervisory Committees. As approved by the Department of Labor in August 2006, GCFC suspended their contributions to the fund also in August 2006. As approved by the Department of Labor in July 2006, GCIS had suspended its contribution to the fund since June 2006.
The changes in the defined benefit pension funds of the Corporation and subsidiaries are summarized below:
Years Ended December 31 2009 2008 Grand Grand Cathay Cathay The CDIB and Its and Its The CDIB and Its and Its Corporation Subsidiaries Subsidiaries Corporation Subsidiaries Subsidiaries Employees’ pension fund - Bank of Taiwan
Balance, January 1 $ 7,219 $ 399,895 $ 274,831 $ 4,636 $ 412,471 $ 269,565 Contributions 1,391 12,913 6,366 2,405 20,131 2,821 Benefit payments - (40,737) (4,866) - (47,741 ) (7,348) Interest income 52 2,460 1,809 178 15,034 9,793
Balance, December 31 $ 8,662 $ 374,531 $ 278,140 $ 7,219 $ 399,895 $ 274,831
Years Ended December 31 2009 2008 Grand Cathay Grand Cathay and Its and Its Subsidiaries Subsidiaries Pension fund
Balance, January 1 $ 71,285 $75,704 Contributions 1,036 459 Benefit payments (24,554) (6,659) Interest income 529 1,781
Balance, December 31 $ 48,296 $71,285
Year Ended December 31, 2009 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Service cost $ 3,662 $ 12,427 $ 5,574 Interest cost 612 16,796 6,503 Actual return on plan assets (41) (3,620) (2,337) Loss on plan assets (198) (7,455) (6,400) Curtailment or settlement loss - 59,636 - Amortization (37) 6,669 990 Limited adjustments of prepaid pension cost (SFAS No. 18) - - 10,632
Net pension cost $3,998 $ 84,453 $14,962
- 58 -
Year Ended December 31, 2008 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Service cost $ 4,644 $ 17,471 $ 6,298 Interest cost 703 19,167 7,376 Actual return on plan assets (177) (13,927) (11,565) Gain on plan assets 3 2,387 2,077 Curtailment or settlement loss 14,439 126,541 - Amortization 179 8,692 864
Net pension cost $ 19,791 $ 160,331 $5,050
The pension contributions of CDIB and its subsidiaries were $103,869 thousand in 2009 and $180,128 thousand in 2008.
The reconciliation of the funded status of the plan and accrued pension cost as of December 31, 2009 and 2008 were as follows:
Year Ended December 31, 2009 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Benefit obligation Vested benefit obligation $ (1,430) $ (122,751) $(15,206) Non-vested benefit obligation (10,894) (297,326) (201,297) Accumulated benefit obligation (12,324) (420,077) (216,503) Additional benefits based on future salaries (2,618) (148,151) (74,821) Projected benefit obligation (14,942) (568,228) (291,324) Fair value of plan assets 8,747 368,213 326,436 Funded status (6,195) (200,015) 35,112 Unrecognized net transitional obligation 1,465 20,563 11,695 Unamortized prior service cost - 26,357 - Unamortized net loss (gain) (16,800) 112,640 22,224 Unadditional minimum prepaid pension (pension liabilities) (21,530) (40,455) 69,031 Additional minimum pension liabilities - (30,552) (1,507) Limited adjustments of prepaid pension cost (SFAS No. 18) - - (10,632)
Accrued pension cost (accounted as other liabilities) $ (21,530) $ (71,007) $ -
Prepaid pension cost (accounted as other assets) $-$- $56,892 Vested benefits, end of year, were: $ (1,575) $ (137,754) $(17,713)
- 59 -
Year Ended December 31, 2008 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Benefit obligation Vested benefit obligation $ (2,678) $ (101,437) $(17,716) Non-vested benefit obligation (14,251) (335,560) (174,351) Accumulated benefit obligation (16,929) (436,997) (192,067) Additional benefits based on future salaries (5,340) (182,936) (68,040) Projected benefit obligation (22,269) (619,933) (260,107) Fair value of plan assets 7,349 392,945 346,116 Funded status (14,920) (226,988) 86,009 Unrecognized net transitional obligation 1,628 27,539 12,759 Unamortized prior service cost - 34,052 - Unamortized net loss (gain) (5,597) 81,642 (32,750) Unadditional minimum prepaid pension (pension liabilities) (18,889) (83,755) 66,018 Additional minimum pension liabilities - - (1,679) Accrued pension cost (accounted as other liabilities) $ (18,889) $ (83,755) $ -
Prepaid pension cost (accounted as other assets) $-$- $64,339 Vested benefits, end of year, were: $ (3,105) $ (114,034) $(20,986)
Actuarial assumptions were as follows:
Year Ended December 31, 2009 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Discount rates used in determining present values 2.50% 2.00%-2.50% 2.50% Future salary increase rates 2.50% 2.00%-4.50% 2.00% Expected rates of return on plan assets 2.50% 2.00%-2.50% 2.50%
Year Ended December 31, 2008 Grand Cathay The CDIB and Its and Its Corporation Subsidiaries Subsidiaries
Discount rates used in determining present values 2.75% 2.50%-2.75% 2.50% Future salary increase rates 2.50% 2.00%-4.50% 2.00% Expected rates of return on plan assets 2.75% 2.50%-2.75% 2.50%
Under the Labor Pension Act, the Corporation and its subsidiaries also have a defined contribution pension plan for some employees. From July 1, 2005, the Corporation and its subsidiaries have made contributions at 6% of monthly wages and salaries to the employees’ individual pension fund accounts. For years ended December 31, 2009 and 2008, the Corporation and its subsidiaries’ defined contribution pension costs were $81,491 thousand and $87,608 thousand, respectively.
CDIB Capital Investment I Limited (formerly CDIB Capital Limited), GCHK and GCIS have defined contribution pension plans, and they recognize their contributions as pension expenses.
- 60 - 34. STOCKHOLDERS’ EQUITY
a. Capital
The Corporation’s capital stock comprised 20,000,000 thousand authorized shares (book value of $200,000,000 thousand), with 11,230,917 thousand common shares (book value of $112,309,170 thousand) issued at their par value of NT$10.00. On July 27, 2009, the Corporation’s board of directors resolved to reduce capital and retire treasury stocks amounting to $137,120 thousand, which had been bought back to maintain the Corporation’s credit and equity, and set August 6, 2009 as the record date of the capital reduction. After the retirement, the Corporation’s capital stock comprised 20,000,000 thousand authorized shares (book value of $200,000,000 thousand), of which 11,217,205 thousand common shares (book value of $112,172,050 thousand) had been issued at their par value of NT$10.00.
b. Capital surplus
Under the Company Law, capital surplus from issuance of stock in excess of par value and donation may be transferred to common stock with the approval of stockholders. The SFB regulations stipulate that capital surplus arising from issuance of shares in excess of par value may be transferred to capital only once in the year after this surplus arises, and the amount transferred should be within certain limits. Capital surplus from long-term equity investments accounted for by the equity method may not be distributed for any purpose.
Under the Financial Holding Company Act and related directives issued by the SFB, the distribution of the ex-conversion unappropriated earnings that are generated by financial institutions and become part of capital surplus of the financial holding company through stock conversion, is exempted from the appropriation restrictions of the Securities and Exchange Law. If the capital surplus was obtained by a financial holding company through a share swap comes from its subsidiaries’ unappropriated earnings net of legal reserve and special reserve, the surplus is excluded from the appropriation restrictions of the Securities and Exchange Law.
c. Appropriation of earnings
The provisions of the Corporation’s Articles of Incorporation are summarized as follows:
The sequence of earnings appropriation is to cover previous years’ accumulated losses and related taxes if any, 10% legal reserve on the current year’s net income, a special reserve defined by laws. Employees bonus will be appropriated at least 1% of the remainder and remuneration to directors and supervisors will be 1% at most. The board of directors has its discretion to propose the appropriation of the final remainder of the earnings given the unappropriated earnings at the beginning of the period. The stockholders have the final authority to approve the appropriation of earnings. In addition, subsidiaries’ qualified employees are eligible to stock bonus when appropriated.
The appropriation amount of the aforesaid remuneration to directors and supervisors is resolved by the Corporation’s stockholders.
For the years ended December 31, 2009 and 2008, the bonus to employees was $66,000 thousand and $0 thousand, respectively, and the remuneration to directors and supervisors was $40,000 thousand and $0 thousand, respectively. The bonus to employees and remuneration to directors and supervisors will be appropriated at least 1% of net income (net of the bonus and remuneration) less 10% legal reserve and 1% at most are estimated accrued based on the basis of past experience. Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders’ resolution as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price
- 61 - (after considering the effect of cash and stock dividends) of the shares of the day preceding the stockholders’ meeting.
To continuously expand the Corporation’s operations and increase its profitability as well as comply with the Company Law and relevant regulations, the Corporation adopts the residual dividend policy. The Corporation decides the conditions for time and amount of dividend allocation based on regulations and the Corporation’s Articles of Incorporation. Taking the Corporation’s business plan into account, the Corporation would pay dividends in the form of stock. In any case the cash dividends should not be less than 10% of total dividends distributed. The dividend distribution policy may be modified, as needed, under the resolutions passed at stockholders’ meetings.
Under a directive issued by the SFB, whenever the components of stockholders’ equity - unrealized losses on financial instruments and cumulative translation adjustment but not treasury stock - have debit balances, a special reserve equal to the total debit balance should be appropriated from the current year’s earnings and unappropriated earnings generated in the prior years. The special reserve so appropriated, except the portion that is reversible because of the reduction of the total debit balance, is not available for appropriation.
Under the Company Law, legal reserve should be appropriated until the reserve equals the Corporation’s capital. This reserve may be used to offset a deficit. When the reserve has reached 50 percent of the capital and the Corporation is experiencing deficit, the exceeding amount may be transferred to dividend and bonus or, when the Corporation is making profit and the reserve has reached 25 percent of the capital, up to 50 percent thereof may be transferred to capital.
Under the Integrated Income Tax System, resident stockholders are allowed tax credits, based on the balance of the Imputation Credit Account (ICA) on the dividend distribution date, for the income tax paid by the Corporation on earnings generated since 1998.
The appropriation of earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of that year.
On April 28, 2008, the board of directors resolved the appropriation of the 2007 earnings. The appropriation was as follows:
2007 Earnings appropriation
Legal reserve $ 761,154 Special reserve 3,874,710 Preferred dividends (Note) 393,206 Cash dividends (NT$0.2 per share) 2,150,834 Stock dividends (NT$0.25 per share) 2,688,543 Remuneration to directors and supervisors 40,000 Cash bonus to employees 65,000
$ 9,973,447
Note: Calculated at the annual 5.2% compound rate of the issue value of the stock.
The appropriations of the 2007 earnings had been resolved by the Corporation’s stockholders on June 13, 2008.
- 62 - In their meeting on June 19, 2009, the Corporation’s stockholders resolved to cancel the entire 2008 deficit by making these offsets: (a) offset of the 2008 after-tax loss of $7,056,025 thousand against the special reserve of $3,874,710 thousand made from the previous year’s unappropriated earnings; and (b) offset of the remaining loss of $3,181,315 thousand against legal reserve of $2,704,240 thousand and against capital surplus - issue of stock in excess of par of $477,075 thousand.
As of the audit report, the Corporation’s board of directors has not resolved the appropriation of the 2009 earnings.
Information on the appropriation of the deficit can be accessed through the Market Observation Post System on the Web site of the Taiwan Stock Exchange (http://emops.tse.com.tw).
35. TREASURY STOCK
Share Share Shares at Increase Decrease Shares at Beginning During the During the End of of Year (In Year (In Year (In Year (In Reason for Repurchase Thousands) Thousands) Thousands) Thousands)
Year ended December 31, 2009
Held by the Corporation Stock conversion 557,320 115,840 - 673,160 Maintain company credit and equity - 13,712 (13,712) -
557,320 129,552 (13,712) 673,160
Year ended December 31, 2008
Held by the Corporation Stock conversion 207,890 349,430 - 557,320
On October 29, 2007, the board of directors resolved to buy back the Corporation’s 236,000 thousand shares between October 30 and December 29, 2007 under the regulations of Article 28-2 of the Securities and Exchange Law. The buyback purpose was to transfer shares to the Corporation’s employees; the buyback price was set at NT$11.00 to NT$19.00 per share. The Corporation bought shares whether the market price is lower than the setting price or not. The Corporation repurchased 207,890 shares at the average price of NT$12.44 per share.
On August 25, 2008, the board of directors resolved to buy back the Corporation’s 150,000 thousand shares between August 26 and October 24, 2008 under the regulations of Article 28-2 of the Securities and Exchange Law. The buyback purpose was to transfer shares to the Corporation’s employees; the buyback price was set at NT$10.00 to NT$15.00 per share. The Corporation bought shares whether the market price is lower than the setting price or not. The Corporation repurchased 150,000 shares at the average price of NT$8.96 per share.
On October 27, 2008, the board of directors resolved to buy back the Corporation’s 523,000 thousand shares between October 28 and December 26, 2008 under the regulations of Article 28-2 of the Securities and Exchange Law. The buyback purpose was to transfer shares to the Corporation’s employees; the buyback price was set at NT$3.82 to NT$12.29 per share. The Corporation bought shares whether the market price is lower than the setting price or not. The Corporation repurchased 187,924 shares at the average price of NT$6.49 per share.
- 63 - On December 29, 2008, the board of directors resolved to buy back the Corporation’s 163,000 thousand shares between December 30, 2008 and February 27, 2009 under the regulations of Article 28-2 of the Securities and Exchange Law. The buyback purpose was to transfer shares to the Corporation’s employees; the buyback price was set at NT$4.76 to NT$10.47 per share. The Corporation bought shares whether the market price is lower than the setting price or not. The Corporation had repurchased 127,346 thousand shares at the average price of $6.08 per share.
On March 2, 2009, the board of directors resolved to buy back the Corporation’s 100,000 thousand shares between March 3, 2009 and April 24, 2009 under the regulations of Article 28-2 of the Securities and Exchange Law. The buyback purpose was to maintain the Corporation’s credit and equity; the buyback price was set at NT$3.93 to NT$10.00 per share. The Corporation bought shares whether the market price was lower than the setting price or not. The Corporation had repurchased 13,712 thousand shares at the average price of NT$5.90 per share and set August 6, 2009 as the record date of the capital reduction, and retire all above stocks.
Under the Securities and Exchange Law, the Corporation should not acquire treasury stock in excess of 10% of its total shares outstanding. In addition, the Corporation should not spend more than the aggregate amount of the retained earnings, paid-in capital in excess of par value, and realized capital surplus arising from gains on disposal of properties and donated capital. The Corporation should not use treasury stock to secure any of its obligations and to exercise any stockholders’ rights on those stocks.
36. PERSONNEL, DEPRECIATION AND AMORTIZATION EXPENSES
Years Ended December 31 2009 2008
Personnel expenses Salaries and wages $ 3,278,393 $ 2,449,694 Pension 185,360 267,736 Employee insurance 128,912 129,888 Others 253,488 133,968 Depreciation and amortization 254,652 296,077
37. INCOME TAX
Under a directive issued by the Ministry of Finance, a financial holding company and its domestic subsidiaries holding over 90% of shares issued by the financial holding company for 12 months within the same tax year may choose to adopt the linked-tax system for income tax filings. Thus, the Corporation adopted the linked-tax system for income tax filing with its eligible subsidiaries, CDIB and Grand Cathay, starting with the 2003 tax returns.
The principle adopted by the Corporation and its subsidiaries for the allocation of the linked-tax system is to reduce their income tax liabilities and to maximize their synergy. The accounting treatment applied to the income tax is to adjust in each their books the difference between the combined current/deferred taxes and the total of each of current/deferred taxes of each of the Corporation and its subsidiaries by prorated share, with related affiliation payables and receivables recorded in each their books.
- 64 - The Corporation and subsidiaries’ income tax expenses (benefits) were as follows:
Years Ended December 31 2009 2008
The Corporation $ 175,811 $ (44,451) CDIB and its subsidiaries (648,142) 14,755 Grand Cathay and its subsidiaries (200,462) (406,813)
$ (672,793) $(436,509) a. The income tax benefits of the Corporation were as follows:
Years Ended December 31 2009 2008
Prior year’s adjustments $ 311,211 $(23,953) Effect of linked-tax system (135,126) (20,416) Deferred income taxes (274) (82)
Income tax expenses (benefits) $ 175,811 $ (44,451) b. The income tax expenses (benefits) of CDIB and its subsidiaries were as follows:
Years Ended December 31 2009 2008
Current payables $ 267,781 $106,245 Effect of linked-tax system (499,842) (230,093) Prior year’s adjustments (240,292) 15,120 Deferred income taxes (211,204) (339,750) Tax on unappropriated earnings (10%) 28,053 454,141 Separate taxes 7,362 9,092
Income tax expenses (benefits) $ (648,142) $ 14,755 c. The income tax benefits of Grand Cathay and its subsidiaries were as follows:
Year Ended December 31 2009 2008
Current payables $ 141,483 $223,281 Prior year’s adjustments (259,145) (73,082) Deferred income taxes (86,724) (227,062) Tax on unappropriated earnings (10%) 3,174 - Separate taxes 1,377 7,060 Effect of linked-tax system (627) (337,010)
Income tax benefit $ (200,462) $(406,813) d. For the years ended December 31, 2009 and 2008, the major source of the Corporation’s total operating revenue was investment income recognized under the equity method, which was tax-exempt. Therefore, the Corporation had no income taxes payable.
- 65 - e. The reconciliation of tax on pretax income at statutory rate and current income tax payable of CDIB and its subsidiaries were as follows:
Years Ended December 31 2009 2008
Tax on pretax income at 25% statutory rate $ 48,403 $146,036 Add (deduct) tax effects of: Permanent difference 30,599 (145,868) Temporary difference (30,628) 66,729 Basic income taxes 253,625 1,520 Loss carryforwards (34,218) 37,828
Current payables $ 267,781 $106,245 f. The reconciliation of tax on pretax income (loss) at statutory rate and current income tax payable of Grand Cathay and its subsidiaries were as follows:
Years Ended December 31 2009 2008
Tax on pretax income (loss) at 25% statutory rate $ 633,736 $(418,634) Add (deduct) tax effects of: Permanent difference (521,619) 404,318 Temporary difference 29,866 239,353 Loss carryforwards (500) (1,756)
Current payables $ 141,483 $223,281 g. Net deferred tax liabilities consisted of:
December 31 2009 2008
Deferred tax assets (liabilities) Unrealized gain on financial instruments - available-for-sale $ (876,586) $ - Loss carryforwards 687,480 591,181 Allowance for doubtful accounts 278,523 350,190 Investment tax credits 179,081 27,442 Overseas investment income recognized under the equity method (132,745) (159,784) Default reserve 49,191 59,886 Unrealized gain on issuance of derivative financial instruments (12,259) (97,353) Others 173,432 261,735 346,117 1,033,297 Less: Allowances for deferred tax assets (971,914) (1,080,711)
Deferred tax liabilities, net (recognized as other liabilities) $ (625,797) $ (47,414)
In January 2009, the Legislative Yuan passed the amendment of Article 39 of the Income Tax Law, which extends the operating losses carryforward period from five years to ten years.
In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a profit-seeking enterprise’s income tax rate from 25% to 20%, effective 2010. The Corporation and subsidiaries recalculated their deferred tax assets and liabilities in accordance with the amended Article and recorded the resulting difference as a deferred income tax benefit or expense.
- 66 -
As of December 31, 2009 and 2008, deductible income taxes of the Corporation and subsidiaries were as follows:
Remaining Regulatory Basis of Tax Credits Item Tax Credit Expiry Year
December 31, 2009
Income Tax Act Loss carryforwards $ 687,480 2014-2019 Statute for Upgrading Industries Equity investment 179,081 2011-2012 Personnel training 1,412 2013
December 31, 2008
Income Tax Act Loss carryforwards 591,181 2013-2018 Statute for Upgrading Industries Equity investment 27,442 2009
The Corporation’s income tax returns through 2005 had been examined by the tax authorities. The Corporation disagreed with the tax authorities’ assessment of its 2002 to 2005 tax returns and thus filed tax appeals.
The balance of the imputation credit account was $519,284 thousand both generated as of December 31, 2009 and 2008. The ratio of imputed tax credit to earnings of 2009 was estimated at 0.54%. The Corporation was in deficit in 2008. Thus, there will be no appropriation of earnings and the imputed tax credits will be accumulated until earnings are generated in the future and the ratio of imputed tax credit to earnings will be calculated accordingly. The actual ratio of imputed tax credit may differ from the projected ratio of imputed tax credit since this ratio is computed on the date the dividend is actually paid or distributed.
CDIB’s income tax returns through 2005 had been examined by the tax authorities. CDIB negotiated with the tax authorities the tax withheld from bond interest income earned by prior bondholders, and both parties agreed that the tax authorities would rebate 65% of the withholding tax. However, CDIB disagreed with the tax authorities’ assessments of its 2004 and 2005 tax returns and thus filed tax appeals.
Income tax returns of China Venture Management Inc., R.O.C. Strategic Company Ltd., CDIB Strategic Venture Fund Ltd., R.O.C. Venture Company Ltd., CDIB Equity Inc., CDIB Knowledge-Based Economy Capital Co., Ltd., China Development Asset Management Corp., CHG3, Qing-Xin Xin Industrial Corp. and Cheng-Xi I Asset Management Corp. through 2007 had been examined by the tax authorities. Income tax returns of CDC Financial & Leasing Corporation, CHG4 and DIBAMC through 2006 had been examined by the tax authorities.
CDIB’s imputation credit account balances were $770,251 thousand and $530,018 thousand as of December 31, 2009 and 2008, respectively. The ratio of imputed tax credit to earnings of 2009 was estimated at 12.82%. CDIB was in deficit in 2008. Thus, there will be no appropriation of earnings and the imputed tax credits will be accumulated until earnings are generated in the future and the ratio of imputed tax credit to earnings will be calculated accordingly. The actual ratio of imputed tax credit may differ from the projected ratio of imputed tax credit since this ratio is computed on the date the dividend is actually paid or distributed.
As of December 31, 2009 and 2008, CDIB and its subsidiaries had unappropriated earnings of $38,978 thousand and $59,635 thousand, respectively, before January 1, 1998.
- 67 - As of December 31, 2009 and 2008, the balances of the CDIB’s subsidiaries’ imputation credit accounts were as follows:
December 31 Corporation 2009 2008
CDAMC and its subsidiaries $ 1,094,907 $ 979,392 CDC Finance & Leasing Corporation 136,217 136,126 CDIB Knowledge-Based Economy Capital Co., Ltd. 22,854 2,321 CDIB Strategic Venture Fund, Ltd. 12,975 3,334 R.O.C. Strategic Company Ltd. 8,759 5,306 CDIB Equity Inc. 4,400 12,911 R.O.C. Venture Company Ltd. 4,085 3,132 China Venture Management Inc. 2,480 17,772
The income tax returns of Grand Cathay through 2005 had been examined by the tax authorities. Grand Cathay disagreed with the tax authorities’ rejection of the allocation of interest expense on dealing transactions and the claim on the deductibility of loss on warrants issued. As a result, Grand Cathay filed tax appeals.
The income tax returns of Grand Cathay Futures Corp. (GCFC) and Grand Cathay Investment Services Corporation (GCIS) through 2007 had been examined by the tax authorities.
The Grand Cathay’s imputation credit account balances were $353,083 thousand and $200,777 thousand as of December 31, 2009 and 2008, respectively.
The ratio of imputed tax credit to earnings of 2009 was 12.98%. Grand Cathay was in deficit in 2008. Thus, there will be no appropriation of earnings and the imputed tax credits will be accumulated until earnings are appropriated in the future and the ratio of imputed tax credit to earnings will be calculated accordingly. The actual ratio of imputed tax credit may differ from the projected ratio of imputed tax credit since this ratio is computed on the date the dividend is actually paid or distributed.
As of December 31, 2009 and 2008, the balances as of Grand Cathay’s subsidiaries’ imputation credit accounts were as follows:
December 31 2009 2008
GCFC $ 33,162 $22,161 GCIS 45 2,366
As of December 31, 2009 and 2008, Grand Cathay and its subsidiaries had unappropriated retained earnings of $1,870 thousand and 15,604 thousand, respectively before January 1, 1998.
Under the International Business Companies Ordinance of the Cayman Islands, Grand Cathay Holding Limited is exempt from income tax, capital gains tax and stamp taxes.
Grand Cathay Securities (Hong Kong) Limited had no taxable income and tax effects of subsidiaries’ loss carryforwards are recognized as deferred tax assets with 100% valuation allowance.
Under the Integrated Income Tax system, effective January 1, 1998, ROC resident stockholders are allowed a tax credit for the income tax paid or payable by the Corporation and subsidiaries on earnings generated since 1998. An imputation credit account (ICA) is maintained by the Corporation and subsidiaries for such income tax and the tax credit allocated to the stockholder. The maximum credit available for allocation to each stockholder cannot exceed the balance shown in the ICA on the date of dividend distribution.
- 68 -
38. EARNINGS (LOSS) PER SHARE
The numerators and denominators used in calculating earnings (loss) per share (E/LPS) were as follows:
Weighted Average Outstanding Common Shares E/LPS (In Dollars) Numerator (Amounts) Denominator Before After Before After (Shares in Income Income Income Tax Income Tax Thousands) Tax Tax
Year ended December 31, 2009
Net consolidated income of common stockholders of the parent company $ 7,444,713 $ 7,268,902 10,556,557 $ 0.71 $ 0.69
Year ended December 31, 2008
Net consolidated loss of common stockholders of the parent company $ (7,100,476) $ (7,056,025) 10,966,080 $ (0.65) $ (0.64)
Note: The effect of free shares has been retroactively adjusted when calculating E/LPS.
39. SECURITIES LOANED TO CUSTOMERS AND SECURITIES DEPOSITED BY CUSTOMERS
December 31 2009 2008 Shares Market Shares Market (Thousands) Value (Thousands) Value
Securities loaned to customers 20,940 $983,115 17,391 $500,937 Securities deposited by customers as collateral 434,964 $ 13,488,124 337,829 $ 4,578,329
Market values were based on the closing prices of the last trading day in December of 2009 and 2008.
40. RELATED-PARTY TRANSACTIONS
The significant transactions and relationship with related parties (except those disclosed in other notes) are summarized below:
a. Related parties
Related Party Relationship with the Group
Grand Cathay Securities Corporation (“Grand Subsidiary of the Corporation Cathay”) Taiwan International Securities Corporation Equity-method investee of the Corporation (TISC) Bank of Taiwan Director of the Corporation KGI Securities Corporation (KGI) Director of the Corporation before June 15, 2007 Mega International Commercial Bank (“Mega Director of the Corporation Bank”) Chunghwa Post Co., Ltd. (“Chunghwa Post”) Supervisor of the Corporation (Continued)
- 69 -
Related Party Relationship with the Group
Chinatrust Commercial Bank (CCB) General manager of the Corporation and chairman of CCB’s parent company were second-degree relatives before May 1, 2009 Chinatrust Bills Finance Corporation (CBFC) Same as above (merged with CCB on April 26, 2008) Star Buck Power Corporation (SBP) Equity-method investee of CDIB Yeong Chin Machinery (YCM) Equity-method investee of CDIB before November 18,2009 Feng Hsin Iron & Steel Co., Ltd. (“Feng Hsin”) The representative is director of CDIB’s subsidiary Eternal Chemical Co., Ltd. (“Eternal Chemical”) Same as above Grand Cathay Futures Corp. (GCFC) Same ultimate parent company Shin Kong Life Insurance Co. (SKL) The representative is director of an investee under virtual control by CDIB Kuo Hua Life Insurance Ltd. (“Kuo Hua Life”) Same as above Cathay Life Insurance Co., Ltd. (“Cathay Life”) Same as above Fubon Life Insurance Co., Ltd. (“Fubon Life”) Same as above Others Related parties in substance (refer to Tables 9 and 10, attached); the Corporation’s managers; chairman of the Corporation and general manager’s second-degree relatives ; directors and supervisors; etc. (Concluded) b. Significant related-party transactions
1) Cash in banks (recognized as cash and cash equivalents)
Interest Income for the Year Ended December 31 December 31 Amount % Amount %
2009 $ 53,839 1 $ 2,750 - 2008 158,715 1 7,887 -
2) Due from other banks (recognized as cash and cash equivalents)
Interest Income for the Year Ended December 31 December 31 Amount % Amount %
2009 $ 15,893 - $ 1 - 2008 16,233 - 4 -
- 70 - 3) Call loans to banks (recognized as due from the Central Bank and other banks)
Interest Income for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009 $- - 0.095-0.25 $ 426 - 2008 - - 0.47-3.55 25,253 -
4) Operating securities - dealing (recognized as financial assets at fair value through profit or loss)
Interest Income Interest Income for the Year Ended for the Year Ended December 31, 2009 December 31, 2009 December 31, 2008 December 31, 2008 Amount % Amount % Amount % Amount %
Dealing
Collateralized loan obligations CCB $ - - $ 2,829 - $ 491,786 2 $ 15,062 - Listed stocks Others 22,551 ------
Hedging
Listed stocks Others 15,583 ------
5) Futures trading margin (recognized as financial assets at fair value through profit or loss)
December 31 2009 2008 Amount % Amount %
GCFC $ 459,022 1 $ 452,271 1
6) Guarantee deposits received on futures contracts (recognized as other financial assets)
December 31 2009 2008 Amount % Amount %
Grand Cathay $ 459,022 10 $ 452,271 10
7) Customers’ equity accounts - futures
December 31 2009 2008 Amount % Amount %
Grand Cathay $ 459,022 20 $ 452,271 19
- 71 - 8) Purchase and sale of bonds
Purchase of Sale of Bonds Bonds Year ended December 31, 2009
CCB $ 9,556,287 $ 7,407,784 Chunghwa Post 5,002,375 11,618,133 TISC 1,697,249 2,410,555 Bank of Taiwan 1,376,196 1,905,949 Mega Bank 659,575 713,191 SKL 104,448 4,489,846 Cathay Life - 1,126,776 Fubon Life - 1,297,847
Year ended December 31, 2008
CCB 58,631,686 63,014,113 CBFC 38,214,018 39,372,409 TISC 25,705,189 26,498,367 Chunghwa Post 9,876,450 17,796,335 Bank of Taiwan 2,683,250 3,762,303 Mega Bank 756,190 560,493 SKL 146,267 2,091,193 Kuo Hua Life - 449,211 Cathay Life - 400,000
9) Discounts and loans
Interest Income for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009 $ 896,339 1 0.693-2.07 $ 11,096 - 2008 1,171,900 1 2.010-5.920 30,655 1
(In Thousands of New Taiwan Dollars)
December 31, 2009 Is the Account Transaction Category Volume or Highest Ending at Arm’s Normal Overdue Type of Collateral Name of Balance Balance Length Related Party Commercial Term
Employees’ consumer loans 2 $ 1,910 $ 833 $ 833 $ - None Yes Others Feng Hsin 469,990 195,506 195,506 - None Yes Others Eternal 700,000 700,000 700,000 - None Yes Chemical Others YCM 1,000 - - - - Yes
- 72 - (In Thousands of New Taiwan Dollars)
December 31, 2008 Is the Account Transaction Category Volume or Highest Ending at Arm’s Normal Overdue Type of Collateral Name of Balance Balance Length Related Party Commercial Term
Employees’ consumer loans 4 $ 4,669 $ 1,910 $ 1,910 $ - None Yes Home mortgages - 4,441 - - - - Yes Others Feng Hsin 515,960 469,990 469,990 - Stock Yes Others Eternal 700,000 700,000 700,000 - None Yes Chemical Others YCM 11,761 - - - - Yes
December 31 2009 2008 Amount % Amount %
10) Administrative receivable (recognized as receivables, net) $ 62,361 - $ 137,920 2
11) Restricted assets (recognized as other assets)
Interest Income for the Year Ended December 31 December 31 Amount % Amount %
2009 $ 104,504 1 $ 1,469 - 2008 165,158 1 4,743 -
12) Securities sold under repurchase agreements
December 31 Amount %
2009 $ 5,551 - 2008 1,028,941 4
13) Deposits transferred from Chunghwa Post (recognized as call loans from banks)
Interest Expenses for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009 $ 2,300,490 49 1.21-2.83 $ 56,130 3 2008 2,265,298 31 1.68-2.83 58,506 2
- 73 - 14) Short-term loans
Interest Expenses Interest Expenses for the Year Ended for the Year Ended December 31, 2009 December 31, 2009 December 31, 2008 December 31, 2008 Amount % Amount % Amount % Amount %
Mega Bank $ 206,000 4 $ 3,977 - $ 220,709 6 $ 6,898 -
15) Deposits and remittances
Interest Expenses for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009
Kuo Hua Life $ 3,000,000 15 0.20-0.22 $ 2,756 - Others 539,552 3 0.0-6.5 26,218 1
2008
Kuo Hua Life - - 2.20 15,358 - Others 993,605 5 0-13 19,310 1
16) Long-term loans
Interest Expenses Interest Expenses for the Year Ended for the Year Ended December 31, 2009 December 31, 2009 December 31, 2008 December 31, 2008 Amount % Amount % Amount % Amount %
CCB $ 171,000 3 $ 1,393 - $ 171,000 3 $ 6,355 - Bank of Taiwan 95,000 2 1,906 - 95,000 1 3,217 -
17) Structured products - host contract (recognized as other financial liabilities)
Balance as of December 31 2009 2008 Amount % Amount %
Cathay Life $ 6,500,000 38 $ - - Fubon Life 3,300,000 19 - - SKL - - 6,400,000 39
- 74 - 18) Consulting service revenue (recognized as other noninterest profits and gains, net)
Year Ended December 31 Amount %
2009 $ 12,336 3 2008 54,992 9
19) The following assets had been pledged with a related party as collateral for short-term loans and credit lines for stock trade settlement:
a) Short-term loans
Pledged Assets Short-term Loans Carrying Unused Items Amount Credit Lines Credit Lines
December 31, 2009
Mega Bank Properties $ 636,509 $ - $ -
December 31, 2008
Mega Bank Properties 641,896 - -
b) Credit lines for stock trade settlement
Credit Lines for Stock Pledged Assets Trade Settlement Carrying Unused Items Amount Credit Lines Credit Lines
December 31, 2008
CCB Pledged time deposits $ 96,000 $ 96,000 $ 96,000
- 75 - 20) Outstanding derivative financial instruments
CDIB (In Thousands of New Taiwan Dollars)
December 31, 2009 Related Party Contract Valuation Balance Sheet Contract Type Contract Year Amount Gain (Loss) Account Balance
CCB Cross-currency swap November 13, 2007 - $ 981,010 $ 16,286 Financial assets for $ 55,937 contracts November 15, 2012 trading purposes CCB Interest rate swap September 27, 2006 - 16,480,880 26,612 Financial assets for 204,398 contracts March 6, 2014 trading purposes Financial liabilities 202,866 for trading purposes KGI Interest rate swap October 21, 2005 - 800,000 (1,666 ) Financial assets for 10,519 contracts May 31, 2011 trading purposes Financial liabilities 3,408 for trading purposes KGI Interest rate option August 2, 2005 - 1,000,000 (45 ) Financial assets for - contracts August 4, 2010 trading purposes Feng Hsin Interest rate swap July 22, 2005 - 55,556 109 Financial assets for 165 contracts May 31, 2010 trading purposes Grand Cathay Interest rate swap May 16, 2007 - 900,000 8,883 Financial liabilities 25,450 contracts June 4, 2012 for trading purposes Eternal Interest rate swap August 1, 2007 - 500,000 (6,026 ) Financial assets for 5,022 Chemical contracts June 29, 2010 trading purposes Eternal Forward exchange December 11, 2009 - 64,060 (486 ) Financial liabilities 486 Chemical contracts February 22, 2010 for trading purposes SKL Nondeliverable December 30, 2009 - 1,601,500 (6,520 ) Financial liabilities 6,520 forward contracts February 4, 2010 for trading purposes Fubon Life Interest rate swap September 1, 2009 - 3,300,000 29,286 Financial assets for 29,286 contracts December 24, 2014 trading purposes Cathay Life Currency swap December 2, 2009 - 1,601,500 (9,819 ) Financial liabilities 9,819 contract December 6, 2010 for trading purposes Cathay Life Interest rate swap August 10, 2009 - 6,500,000 7,723 Financial assets for 7,753 contracts December 19, 2011 trading purposes Financial liabilities 30 for trading purposes
- 76 - (In Thousands of New Taiwan Dollars)
December 31, 2008 Related Party Contract Valuation Balance Sheet Contract Type Contract Period Amount Gain (Loss) Account Balance
CCB Currency swap June 5, 2008 - $ 1,966,303 22,250 Financial assets for trading $ 28,751 contracts September 28, 2009 purposes Financial liabilities for 6,501 trading purposes CCB Cross-currency swap November 13, 2007 - 981,010 36,050 Financial assets for trading 39,652 contracts November 15, 2012 purposes CCB Interest rate swap September 27, 2006 - 13,299,000 (43,228 ) Financial assets for trading 266,877 contracts November 25, 2013 purposes Financial liabilities for 291,957 trading purposes CCB Interest rate swap September 4, 2008 - 3,000,000 76,699 Financial assets for trading 76,699 option contracts May 11, 2009 purposes KGI Interest rate swap October 21, 2005 - 1,300,000 10,842 Financial assets for trading 14,061 contracts May 31, 2011 purposes Financial liabilities for 5,664 trading purposes KGI Interest rate option August 2, 2005 - 1,000,000 (377 ) Financial assets for trading 45 contracts August 4, 2010 purposes SKL Interest rate swap November 7, 2006 - 6,400,000 (181,823 ) Financial liabilities for 17,736 contracts March 7, 2017 trading purposes Feng Hsin Interest rate swap July 22, 2005 - May 166,667 1,768 Financial assets for trading 167 contracts 31, 2010 purposes SBP Forward exchange January 11, 2007 - 356,447 (14,202 ) Financial liabilities for 15,468 contracts August 3, 2009 trading purposes Eternal Interest rate swap August 1, 2007 - June 500,000 7,718 Financial assets for trading 11,048 Chemical contracts 29, 2010 purposes
Grand Cathay
December 31 2009 2008 Contract Contract Amount Amount (Principal) (Principal)
Interest rate swap contracts
Mega Bank Exchange of floating-rate amounts for fixed-rate amounts $ 500,000 $ 500,000 Exchange of fixed-rate amounts for floating-rate amounts 500,000 500,000 CCB Exchange of floating-rate amounts for fixed-rate amounts - 300,000
Convertible corporate bond asset swap contracts
Mega Bank Asset swap IRS contracts 195,000 105,000 Long options 195,000 105,000
- 77 - 21) Compensation of directors, supervisors and management personnel:
Year Ended December 31 2009 2008
Salaries, incentives and special compensation $ 310,917 $ 534,599 Honorarium fee 13,787 12,779 Bonus 71,716 -
$ 396,420 $ 547,378
More information on the compensation of directors, supervisors and management personnel was shown in the Corporation’s annual report.
The terms of the transactions with related parties were similar to those for third parties, except for certain preferential interest rates for employees’ savings and loans.
In compliance with the Banking Law, except for consumer loans and government loans, credits extended by CDIB to any related party were fully secured, and the other terms of these credits extended to related parties were similar to those for third parties. c. Related-party transactions were at costs or prices of at least NT$100 million
The significant transactions and relationship of the Corporation’s subsidiaries with related parties were summarized below:
CDIB and its subsidiaries
Related Party Relationship with CDIB
China Development Financial Holding Corporation Parent company (CDFH) Bank of Taiwan Director of parent company Mega International Commercial Bank (“Mega Same as above Bank”) Chunghwa Post Co., Ltd. (“Chunghwa Post”) Supervisor of parent company Grand Cathay Securities Corporation (“Grand Same parent company Cathay”) KGI Securities Corporation (KGI) Director of parent company before June 15, 2007 Chinatrust Commercial Bank (CCB) Chairman of CDIB’s and CCB’s parent company were second-degree relatives before May 1, 2009 Chinatrust Bills Finance Corporation (CBFC) Same as above (been consolidated with CCB on April 26, 2008) Feng Hsin Iron & Steel Co., Ltd. (‘Feng Hsin”) The representative is director of CDIB’s subsidiary Eternal Chemical Co., Ltd. (“Eternal Chemical”) Same as above Taiwan International Securities Corporation Equity-method investee (TISC) Star Buck Power Corporation (SBP) Same as above CDIB Bioventures, Inc. CDIB’s subsidiary Shinkong Life Insurance Co. (SKL) The representative is director of investee under virtual control by CDIB Kuo Hua Life Insurance Ltd. (“Kuo Hua Life”) Same as above Cathay Life Insurance Co., Ltd. (“Cathay Life”) Same as above Fubon Life Insurance Co., Ltd. (“Fubon Life”) Same as above
- 78 -
1) Cash in banks (recognized as cash and cash equivalents)
Interest Income for the Year Ended December 31 December 31 Amount % Amount %
2008
CCB $ 145,121 3 $ 6,297 -
2) Purchase and sale of bonds
Purchase of Sale of Bonds Bonds
Year ended December 31, 2009
Grand Cathay $ 2,828,890 $ 3,201,307 CCB 1,056,942 1,061,940 Chunghwa Post 511,079 2,261,652 Mega Bank 102,206 49,716 TISC 99,879 298,283 Bank of Taiwan 48,896 350,664
Year ended December 31, 2008
Grand Cathay 12,040,592 13,693,046 CCB 5,494,255 4,230,441 CBFC 1,942,741 1,645,851 Chunghwa Post 894,009 1,090,973 TISC 746,631 1,147,938 Bank of Taiwan 395,126 248,925 SKL - 591,526
3) Receivables from affiliates (recognized as receivables, net)
December 31 2009 2008 Amount % Amount %
CDFH $ 1,096,506 18 $ 428,731 9
The receivables resulted from CDFH and CDIB’s adopting the linked-tax system in the filing of tax returns in 2003.
- 79 - 4) Discounts and loans
Interest Income for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009
Eternal Chemical $ 700,000 1 0.894-1.217 $ 7,723 - Feng Hsin 195,506 - 0.693-1.40 3,342 -
2008
Eternal Chemical 700,000 1 2.256-2.502 18,533 - Feng Hsin 469,990 1 2.01-5.92 11,644 -
(In Thousands of New Taiwan Dollars)
December 31, 2009 Is the Account Transaction Category Volume or Highest Ending at Arm’s Normal Overdue Type of Collateral Name of Balance Balance Length Related Party Commercial Term
Others Feng Hsin $ 469,990 $ 195,506 $ 195,506 $ - None Yes Others Eternal 700,000 700,000 700,000 - None Yes Chemical
(In Thousands of New Taiwan Dollars)
December 31, 2008 Is the Account Transaction Category Volume or Highest Ending at Arm’s Normal Overdue Type of Collateral Name of Balance Balance Length Related Party Commercial Term
Others Feng Hsin $ 515,960 $ 469,990 $ 469,990 $ - Stock Yes Others Eternal 700,000 700,000 700,000 - None Yes Chemical
5) Restricted assets (recognized as other assets)
Interest Income for the Year Ended Balance of December 31 December 31 Amount % Amount %
2009
Mega Bank $ 104,504 2 $ 328 -
- 80 - 6) Deposits transferred from Chunghwa Post (recognized as call loans from banks)
Interest Expense for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009 $ 2,300,490 49 1.21-2.83 $ 56,130 5 2008 2,265,298 31 1.68-2.83 58,506 2
7) Deposits and remittances
Interest Expense for the Year Ended December 31 Interest Rate December 31 Amount % (%) Amount %
2009
Kuo Hua Life $ 3,000,000 15 0.2-0.22 $ 2,756 - CDIB Bioventures, Inc. 298,704 1 0.15-1.15 2,538 -
2008
SKL 800,000 4 1.65-2.22 5,700 - CDFH 362,636 2 0-3.13 27,325 1
Interest Expenses Interest Expenses for the Year Ended for the Year Ended December 31, 2009 December 31, 2009 December 31, 2008 December 31, 2008 Amount % Amount % Amount % Amount %
8) Short-term loans
Mega Bank $ 206,000 17 $ 3,977 - $ 220,709 11 $ 6,898 -
9) Long-term loans
CCB 171,000 10 1,393 - 171,000 7 6,355 -
10) Securities sold under repurchase agreements
December 31 2009 2008 Amount % Amount %
Grand Cathay $ 200,130 2 $ 250,374 2 Kuo Hua Life - - 1,023,801 7
11) Payables to affiliates (recognized as payables)
December 31, 2009 Amount %
CDFH $ 234,365 5
The payables resulted from CDFH and CDIB’s adopting the linked-tax system in the filing of tax returns in 2003.
- 81 -
12) Structured products - host contract (recognized as other financial liabilities)
December 31 2009 2008 Amount % Amount %
Cathay Life $ 6,500,000 38 $ - - Fubon Life 3,300,000 19 - - SKL - - 6,400,000 39
13) Outstanding derivative financial instruments
(In Thousands of New Taiwan Dollars)
December 31, 2009 Related Party Contract Valuation Balance Sheet Contract Type Contract Year Amount Gain (Loss) Account Balance
CCB Cross-currency swap November 13, 2007 - $ 981,010 $ 16,286 Financial assets for $ 55,937 contracts November 15, 2012 trading purposes CCB Interest rate swap September 27, 2006 - 16,480,880 26,612 Financial assets for 204,398 contracts March 6, 2014 trading purposes Financial liabilities 202,866 for trading purposes KGI Interest rate swap October 21, 2005 - 800,000 (1,666 ) Financial assets for 10,519 contracts May 31, 2011 trading purposes Financial liabilities 3,408 for trading purposes KGI Interest rate option August 2, 2005 - 1,000,000 (45 ) Financial assets for - contracts August 4, 2010 trading purposes Grand Cathay Interest rate swap May 16, 2007 - 900,000 8,883 Financial liabilities 25,450 contracts June 4, 2012 for trading purposes Eternal Interest rate swap August 1, 2007 - 500,000 (6,026 ) Financial assets for 5,022 Chemical contracts June 29, 2010 trading purposes SKL Nondeliverable December 30, 2009 - 1,601,500 (6,520 ) Financial liabilities 6,520 forward contracts February 4, 2010 for trading purposes Fubon Life Interest rate swap September 1, 2009 - 3,300,000 29,286 Financial assets for 29,286 contracts September 24, 2014 trading purposes Cathay Life Currency swap December 2, 2009 - 1,601,500 (9,819 ) Financial liabilities 9,819 contract December 6, 2010 for trading purposes Cathay Life Interest rate swap August 10, 2009 - 6,500,000 7,723 Financial assets for 7,753 contracts December 19, 2011 trading purposes Financial liabilities 30 for trading purposes
- 82 - (In Thousands of New Taiwan Dollars)
December 31, 2008 Related Party Contract Valuation Balance Sheet Contract Type Contract Period Amount Gain (Loss) Account Balance
CCB Currency swap June 5, 2008 - $ 1,966,303 22,250 Financial assets for trading $ 28,751 contracts September 28, 2009 purposes Financial liabilities for 6,501 trading purposes CCB Cross-currency swap November 13, 2007 - 981,010 36,050 Financial assets for trading 39,652 contracts November 15, 2012 purposes CCB Interest rate swap September 27, 2006 - 13,299,000 (43,228 ) Financial assets for trading 266,877 contracts November 25, 2013 purposes Financial liabilities for 291,957 trading purposes CCB Interest rate swap September 4, 2008 - 3,000,000 76,699 Financial assets for trading 76,699 option contracts May 11, 2009 purposes KGI Interest rate swap October 21, 2005 - 1,300,000 10,842 Financial assets for trading 14,061 contracts May 31, 2011 purposes Financial liabilities for 5,664 trading purposes KGI Interest rate option August 2, 2005 - 1,000,000 (377 ) Financial assets for trading 45 contracts August 4, 2010 purposes SKL Interest rate swap November 7, 2006 - 6,400,000 (181,823 ) Financial liabilities for 17,736 contracts March 7, 2017 trading purposes Feng Hsin Interest rate swap July 22, 2005 - 166,667 1,768 Financial assets for trading 167 contracts May 31, 2010 purposes Grand Cathay Interest rate swap January 18, 2007 - 1,400,000 (37,845 ) Financial liabilities for 34,714 contracts June 4, 2012 trading purposes SBP Forward exchange January 11, 2007 - 356,447 (14,202 ) Financial liabilities for 15,468 contracts August 3, 2009 trading purposes Eternal Interest rate swap August 1, 2007 - 500,000 7,718 Financial assets for trading 11,048 Chemical contracts June 29, 2010 purposes
14) Compensation of directors, supervisors and management personnel:
Year Ended December 31 2009 2008
Salaries, incentives and special compensation $ 133,944 $ 236,251 Honorarium fee 6,277 5,711 Bonus 2,524 -
$ 142,745 $ 241,962
More information on the compensation of directors, supervisors and management personnel was shown in the Bank’s annual report.
- 83 - Grand Cathay and its subsidiaries
Related Party Relationship with the Corporation
China Development Financial Holding Corporation Parent company (CDFH) Grand Cathay Futures Corp. (GCFC) 99.59% subsidiary China Development Industrial Bank Inc. (CDIB) Same parent company Taiwan International Securities Corporation (TISC) Investee under equity method by CDFH Bank of Taiwan Director of CDFH Mega International Commercial Bank of China Same as above (“Mega Bank”) Chinatrust Commercial Bank (CCB) General manager of CDFH and chairman of CCB’s parent company were second - degree relatives before May 1, 2009 Chinatrust Bills Finance Corporation (CBFC) Same as above (been consolidated with CCB on April 26, 2008) Chunghwa Post Co., Ltd. (“Chunghwa Post”) Supervisor of CDFH Shin Kong Life Insurance Co. (SKL) The representative is director of investee under virtual control by CDIB Cathay Life Insurance Co., Ltd. (“Cathay Life”) Same as above Kuo Hua Life Insurance Ltd. (“Kuo Hua Life”) Same as above Fubon Life Insurance Co., Ltd. (“Fubon Life”) Same as above
1) Financial assets at fair value through profit or loss-current
a) Operating securities - dealing positions
Interest Income for the Year Ended December 31, 2008 December 31, 2008 Amount % Amount %
Dealing
Collateralized loan obligations CCB $ 491,786 4 $ 15,062 2
December 31 2009 2008 Amount % Amount %
b) Futures trading margin - GCFC $ 459,022 2 $ 452,271 3
2) Bonds purchased under resell agreements
December 31 2009 2008 Amount % Amount %
CDIB $ 200,130 7 $ 250,374 8
- 84 - 3) Guarantee deposits received on futures contracts
December 31 2009 2008 Amount % Amount %
Grand Cathay $ 459,022 19 $ 452,271 19
4) Other receivables - related parties
December 31, 2008 Amount %
CDFH $ 286,896 100
5) Customers’ equity accounts - futures
December 31 2009 2008 Amount % Amount %
Grand Cathay $ 459,022 19 $ 452,271 19
6) Other payable - related parties
December 31 2009 2008 Amount % Amount %
CDFH $ 613,703 100 $ 184,692 100
7) Purchase and sale of bonds
Purchase of Sale of Bonds Bonds
Year ended December 31, 2009
CCB $ 8,499,345 $ 6,345,844 Chunghwa Post 4,491,296 9,356,481 CDIB 3,201,307 2,828,890 TISC 1,597,370 2,112,272 Bank of Taiwan 1,327,300 1,555,285 Mega Bank 557,369 663,475 Shin Kong Life 104,448 4,489,846 Cathay Life - 1,126,776 Fubon Life - 1,297,847 (Continued)
- 85 -
Purchase of Sale of Bonds Bonds
Year ended December 31, 2008
CCB $ 53,137,431 $ 58,783,672 CBFC 36,271,277 37,726,558 TISC 24,958,558 25,350,429 CDIB 13,693,046 12,040,592 Chunghwa Post 8,982,441 16,705,362 Bank of Taiwan 2,288,124 3,513,378 Mega Bank 706,793 511,899 Shin Kong Life 146,267 1,499,667 Kuo Hua Life - 449,211 Cathay Life - 400,000 (Concluded)
8) The following assets had been pledged as collateral for related party’s short-term loans:
Pledged Assets Short-term Loans Carrying Unused Items Amount Credit Lines Credit Lines
December 31, 2009
Mega Bank Properties $ 636,509 $ - $ -
December 31, 2008
Mega Bank Properties 641,896 - -
9) Compensation of directions, supervisors and management personnel:
Year Ended December 31 2009 2008
Salaries, incentives and special compensation $ 49,875 $ 50,507 Other business expense 1,228 1,176 Bonus 160 -
$ 51,263 $ 51,683
- 86 - 10) Outstanding derivative financial instruments
December 31 2009 2008 Nominal Nominal Amount Amount a) Interest rate swap contracts
CDIB Exchange of floating-rate amounts for fixed-rate amounts $ 900,000 $ 900,000 Exchange of fixed-rate amounts for floating-rate amounts - 500,000 Mega Bank Exchange of floating-rate amounts for fixed-rate amounts 500,000 500,000 Exchange of fixed-rate amounts for floating-rate amounts 500,000 500,000 CCB Exchange of floating-rate amounts for fixed-rate amounts - 300,000
December 31 2009 2008 Contract Contract Amount Amount (Principal) (Principal)
b) Convertible corporate bond asset swap contracts
Mega Bank Asset swap IRS contracts $ 195,000 $ 105,000 Long options 195,000 105,000
41. PLEDGED ASSETS
The following assets had been (a) pledged to various financial institutions as guarantees and collaterals for short-term loans, commercial paper payable, long-term loans, overdraft, obtaining rights to use land in the Hsinchu Science Park, and credit lines for stock trade settlement; (b) pledged as a government bond for bidding and IRS contracts; (c) pledged with the court as collaterals for litigation, (d) required by the Central Bank for posting a bid bond and as a guarantee deposit for the bills business; (e) pledged with GreTai Securities Market for the settlement reserve for the electronic bond trading system; (f) pledged as guarantees for loans of investees; and (g) pledged as part of the requirements for filing a petition for tax reassessment. December 31 2009 2008
Properties, net $ 2,004,888 $2,022,559 Notes receivable from lease contracts 1,650,487 2,117,704 Collaterals assumed, net 1,201,852 1,201,852 Restricted assets - pledged time deposits 1,015,449 1,033,837 Deposits for operating bond 620,000 645,000 Financial assets carried at cost - stock 295,572 295,572 Accounts receivable - acquired loans 285,322 - Real estate investment, net 216,737 - Available-for-sale financial assets - government bonds (par value) 184,000 174,000 Financial assets at fair value through profit or loss - government bonds (par value) 102,200 141,700 Available-for-sale financial assets - stock 18,121 - Restricted assets - impound account 13,393 36,442
- 87 -
To comply with the Central Bank’s clearing system requirements for real-time gross settlement (RTGS), CDIB pledged negotiable certificates of deposit, excluding the above, aggregating $4,900,000 thousand and $6,700,000 thousand as of December 31, 2009 and 2008, respectively, as collaterals for day-term overdraft. The pledged amount may be adjusted anytime.
42. COMMITMENTS AND CONTINGENCIES
As of December 31, 2009, commitments and contingencies of the Corporation and subsidiaries are summarized as follows:
a. CDIB’s spot contracts with clients amounted to $1,969,156 thousand.
b. CDIB Capital Investment I Limited (formerly CDIB Capital Limited) is renting an office under an operating lease contract ending January 31, 2010. The new lease for CDIB Capital (Hong Kong) Corporation is valid until January 31, 2012. Based on the lease contract, the refundable deposits were $10,269 thousand as of December 31, 2009; future lease payments are as follows:
Year/Month Amount Payment Term
January 1 to December 31, 2010 $ 22,508 Monthly January 1 to December 31, 2011 21,759 Monthly January 2012 1,813 Monthly
c. Grand Cathay rents office premises occupied by its branches under operating lease agreements. The leases are effective for periods ranging from one year to five years until 2013 and are renewable upon prior consent of the lessors within six months before the expiry of the leases. As of December 31, 2009, refundable deposits amounted to $12,224 thousand. The aggregate future minimum rentals are summarized as follows:
Year Amount Payment Term
2010 $ 34,469 Monthly or quarterly 2011 24,363 Monthly or quarterly 2012 18,022 Monthly or quarterly 2013 9,786 Monthly or quarterly
GCHK rents office premises under operating lease agreements with terms of one to three years. The aggregate future minimum rentals are summarized as follows:
Year Amount Payment Term
2010 $ 31,103 Monthly or quarterly 2011 25,210 Monthly or quarterly 2012 2,101 Monthly or quarterly
d. From February to May of 2000, Grand Cathay bought securities under agreements to resell and government bonds from a clerk of the Bank of Taiwan (BOT), Chen Shou Pu, and his friend. The total purchase cost was $807,676 thousand. However, claiming that these securities had been stolen by BOT’s clerk, and the related transaction was therefore invalid, BOT sued Grand Cathay and the transaction dealers concerned in May 2002 and demanded compensation of $807,676 thousand. As of December 31, 2009, the lawsuit was pending with the Taipei District Court. Grand Cathay estimates the possibility of loss is low and did not accrue for any loss on this contingency.
- 88 - 43. CAPITAL ADEQUACY RATIO
a. Group's capital adequacy ratio
(NT$ Thousand; %)
Items December 31, 2009 December 31, 2008 % of % of Group’s Eligible Group’s Legal Group’s Eligible Group’s Legal Owner- Owner- Capital Capital Demand Capital Capital Demand Company ship ship The Corporation $ 134,153,446 $ 161,174,350 $ 116,635,126 $ 141,014,882 CDIB 100.00% 39,539,722 9,568,337 100.00% 28,468,747 11,486,265 Grand Cathay 100.00% 14,228,920 4,342,587 100.00% 13,099,449 2,753,352 TISC 42.90% 2,890,251 959,338 42.90% 2,762,526 969,245 Deduct items 160,663,772 160,663,772 140,949,321 140,949,321 Subtotal 30,148,567 (A) 15,380,840 (B) 20,016,527 (A) 15,274,423 (B) Group’s CAR (C)=(A)÷(B) 196.01 (C) 131.05 (C)
b. Financial holding companies’ net eligible capital
(In Thousands of New Taiwan Dollars)
December 31 Item 2009 2008 Common stock $ 112,172,050 $ 112,309,170 Noncumulative preferred stock and subordinate - noncumulative bonds which comply with tier I capital requirement - - Other preferred stock and subordinated bonds 3,000,000 3,000,000 Reserve for raising capital - - Capital surplus 8,694,472 9,120,126 Legal reserve - 2,704,240 Special reserve - 3,874,710 Retained earnings 7,268,902 (7,056,025) Equity adjustment 8,942,058 (2,084,245) Deduction: Goodwill - - Deferred assets - - Treasury stock (5,924,036) (5,232,850) Total $ 134,153,446 $ 116,635,126
The Group’s CARs were 196.01% and 131.05% as of December 31, 2009 and 2008, respectively. Since the Financial Holding Company Act and related regulations require the Group’s capital adequacy ratio (CAR) should be at least 100%, the Group’s CARs met its requirement.
The CARs of CDIB were 33.06% and 19.83% as of December 31, 2009 and 2008, respectively. The Banking Law and related regulations require that CDIB maintain a CAR of at least 8%. CDIB’s CARs met this requirement.
The CARs of Grand Cathay were 491.49% and 713.65% as of December 31, 2009 and 2008, respectively. Since the Rules Governing Securities Firms and related regulations require the CAR of Grand Cathay to be at least 200%, Grand Cathay’s CAR met this requirement.
The CARs of TISC were 452% and 428% as of December 31, 2009 and 2008. Under the Rules Governing Securities Firms and related regulations require the CAR of TISC to be at least 200%. TISC’s CAR met this requirement. The TISC group’s eligible capital, legal capital demand and CARs of TISC, however, had not been audited. Management believes that had CARs been audited, there would have been no significant effect on the consolidated financial statement as of and for the years ended December 31, 2009 and 2008, respectively.
- 89 - 44. CONSOLIDATED PROFITABILITY AND INDIVIDUAL PROFITABILITIES OF CDFH, CDIB AND GRAND CATHAY
Consolidated Profitability
(%)
December 31, December 31, Items 2009 2008 Before income tax 2.29 (2.30) Return on total assets After income tax 2.53 (2.17) Before income tax 5.38 (5.87) Return on net worth After income tax 5.93 (5.53) Profit margin 61.71 Note
Profitability of CDFH
(%)
December 31, December 31, Items 2009 2008 Before income tax 5.29 (4.20) Return on total assets After income tax 5.07 (4.27) Before income tax 6.08 (5.57) Return on net worth After income tax 5.94 (5.54) Profit margin 82.43 Note
Profitability of CDIB
(%)
December 31, December 31, Items 2009 2008 Before income tax 2.11 (1.41) Return on total assets After income tax 2.40 (1.36) Before income tax 4.10 (3.01) Return on net worth After income tax 4.67 (2.90) Profit margin 95.24 Note
Note: The profit margin could not be calculated because of the deficit in 2008.
Profitability of Grand Cathay
(%)
December 31, December 31, Items 2009 2008 Before income tax 6.72 (4.11) Return on total assets After income tax 7.29 (3.12) Before income tax 12.89 (9.28) Return on net worth After income tax 13.99 (7.04) Profit margin 37.90 (23.11)
- 90 - 45. FINANCIAL INSTRUMENTS
a. Fair values December 31 2009 2008 Carrying Carrying Amount Fair Value Amount Fair Value
Assets
Financial assets at fair value through profit or loss $ 31,616,497 $ 31,616,497 $ 32,275,678 $ 32,275,678 Available-for-sale financial assets 51,821,747 51,821,747 43,989,740 43,989,740 Discounts and loans 64,519,126 64,519,126 78,783,537 78,783,537 Investments under the equity method - listed and OTC stock 6,010,887 5,919,986 5,807,694 4,037,614 Other financial assets - with fair values approximating carrying amounts 78,576,865 78,576,865 66,608,015 66,608,015
Liabilities
Financial liabilities at fair value through profit or loss 13,810,008 13,810,008 27,051,671 27,051,671 Bank debentures payable 28,780,769 29,551,802 31,708,902 32,951,280 Corporate bonds payable 20,000,000 20,454,602 20,000,000 20,613,239 Other financial liabilities - with fair values approximating carrying amounts 90,757,494 90,757,494 93,126,112 93,126,112
b. Methods and assumptions applied in estimating the fair value for financial instruments were as follows:
1) The carrying amounts of cash and cash equivalents, due from the Central Bank and other banks, securities purchased under resell agreements, receivables, acquired loans, other financial assets, call loans from banks, payables, commercial paper payable, customers’ equity accounts futures, short-term loans, other financial liabilities, and securities sold under repurchase agreements, approximate their fair values because of the short maturities of these instruments.
2) For financial assets and liabilities at fair value through profit or loss, available-for-sale financial assets, investments under the equity method - listed and OTC stock, and hedging derivative financial instruments, fair value is determined at quoted market prices. When market prices of the Corporation and subsidiaries’ various financial instruments are not readily available, fair values are based on estimates using available indirect data and appropriate valuation methodologies. The information the Corporation and subsidiaries use for fair value estimation is consistent with that generally used in the market.
Fair values of derivatives instruments without quoted prices are based on estimates using discounted cash flow techniques, Black-Scholes model, Binomial pricing or Monte Carlo simulation, etc.
The fair values of forward exchange contracts are estimated on the basis of forward rates quoted by Reuters. Fair values of derivative interest rate products are estimated on the basis of market interest rates, quotations by Reuters through Bloomberg’s systems or the models mentioned above, except those of structured financial products, which are estimated on the basis of market quotations provided by the counter-party.
The fair value of debt instruments without an active market is based on their present value discounted at the interest rate used for other financial instruments in the market under comparable conditions and with similar characteristics and considerable return rates. The fair value was calculated in consideration of certain conditions and characteristics (including debtor’s credit conditions, remaining period of the contract, remaining years of principal repayments and currencies paid). For Grand Cathay and its subsidiaries, the discount rate for financial instruments is between 0.7324% and 2.9905%.
- 91 -
3) Discounts and loans, deposits and remittances are interest-earning assets and interest-bearing liabilities. In addition, most of these interest rates are floating. As a result, the carrying amounts are similar to fair values. Fair values of nonperforming loans are based on carrying amounts net of the allowance for credit losses.
4) Investment under the equity method-unlisted stocks and financial assets carried at cost both consist of unlisted stocks; these investments have no quoted market prices in an active market and their fair value cannot be reliably measured. Thus, the Corporation and subsidiaries do not disclose their fair value.
5) The fair values of deposits for operating bonds, clearing and settlement fund, guarantee deposits, and refundable deposits are estimated at their carrying amounts because these deposits do not have specific due dates.
6) Since long-term loans bear mainly floating interest, their carrying amount represents fair value. The fair value of low-interest, special-purpose long-term loans is also based on their carrying amounts.
7) The fair value of bank debentures payable and corporate bonds payable are derived by discounting the expected cash flows. The discount rate used is the rate of debentures and bonds that have similar characteristics as the debentures and bonds issued by the Corporation and subsidiaries. c. The methods and hypotheses applied to evaluate the fair value of financial instruments based upon both quoted market prices or estimates were summarized as follows:
Fair Value Based on Quoted Market Price Fair Value Based on Estimate December 31 December 31 2009 2008 2009 2008 Financial assets
Financial assets at fair value through profit or loss $ 23,376,083 $ 10,598,581 $ 8,240,414 $ 21,677,097 Available-for-sale financial assets 42,213,627 30,550,042 9,608,120 13,439,698
Financial liabilities
Financial liabilities at fair value through profit or loss 163,333 86,887 13,646,675 26,964,784 d. Valuation losses arising from changes in fair value of financial instruments based on estimates were $1,189,581 thousand and $5,215,185 thousand for the years ended December 31, 2009 and 2008, respectively. e. For the years ended December 31, 2009 and 2008, the interest revenues excluding those on financial assets at fair value through profit or loss were $2,865,339 thousand and $5,749,352 thousand, respectively; the related interest expenses excluding those for financial liabilities at fair value through profit or loss were $1,712,867 thousand and $3,444,412 thousand, respectively. Unrealized gain and loss on available-for-sale financial assets were $14,882,024 thousand and $13,286,225 thousand were charged to stockholders’ equity for the years ended December 31, 2009 and 2008, respectively. In addition, $3,842,079 thousand and $1,533,138 thousand were deducted from stockholders’ equity and charged to current income for the years ended December 31, 2009 and 2008, respectively.
- 92 - f. Net service fee of $1,683,291 thousand, consisted of revenues of $1,905,511 thousand and charges of $222,220 thousand for the years ended December 31, 2009. Net service fee of $1,410,533 thousand, consisted of revenues of $1,670,023 thousand and charges of $259,490 thousand for the years ended December 31, 2008. g. For the years ended December 31, 2009, the Corporation and subsidiaries recognized a realized gain of $656,584 thousand and a valuation gain of $1,176,416 thousand of financial assets and liabilities at fair value through profit or loss. For the years ended December 31, 2008, the Corporation and subsidiaries recognized a realized loss of $2,897,115 thousand and a valuation loss of $5,056,664 thousand of financial assets and liabilities at fair value through profit or loss. h. Financial risks
1) Market risk
CDIB
a) The average amount and average interest rate of interest-earning assets and interest-bearing liabilities:
The average balance of CDIB is calculated using the daily average balance of interest-earning assets and interest-bearing liabilities.
Year Ended December 31, 2009 Average Average Balance Rate (%) Interest-earning assets
Cash and cash equivalents - due from other banks $ 717,137 0.11 Due from the Central Bank and other banks 41,007,787 0.52 Financial assets at fair value through profit or loss - bonds 2,846,151 1.64 Securities purchased under resell agreements 606,924 0.07 Discounts and loans (Note) 70,615,000 1.93 Available-for-sale financial assets - bonds and beneficiary certificates 27,675,208 2.67
Interest-bearing liabilities
Deposits transferred from Chunghwa Post 2,331,677 1.41 Call loans from banks 21,038,025 0.36 Securities sold under repurchase agreements 11,039,685 0.17 Financial liabilities at fair value through profit or loss - bank debentures payable 4,050,000 2.01 Demand deposits 4,762,815 0.47 Time deposits 28,745,325 0.68 Bank debentures payable 30,159,589 2.39 Long-term loans 37,246 0.01 Other financial liabilities 8,513,870 0.53
- 93 -
Year Ended December 31, 2008 Average Average Balance Rate (%)
Interest-earning assets
Cash and cash equivalents - due from other banks $ 383,584 0.61 Due from the Central Bank and other banks 44,457,445 2.23 Financial assets at fair value through profit or loss - bonds 3,567,345 1.74 Securities purchased under resell agreements 1,868,714 1.74 Discounts and loans (Note) 78,479,381 3.46 Available-for-sale financial assets - bonds and beneficiary certificates 37,737,889 3.44
Interest-bearing liabilities
Deposits transferred from Chunghwa Post 2,264,445 2.58 Call loans from banks 27,884,509 2.61 Securities sold under repurchase agreements 22,024,387 1.77 Financial liabilities at fair value through profit or loss - bank debentures payable 4,050,000 2.02 Demand deposits 4,091,294 1.49 Time deposits 25,372,000 2.56 Bank debentures payable 36,290,437 2.32 Long-term loans 54,246 1.17 Other financial liabilities 20,060,564 1.65
Note: Excluding nonperforming loans. b) Interest rate sensitivity analysis
December 31, 2009 Analysis of Interest Rate-Sensitive Assets and Liabilities
(In Thousands of New Taiwan Dollars, %)
181 Days to Item 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 88,754,888 $ 3,647,027 $ 753,149 $ 22,515,331 $ 115,670,395 Interest rate-sensitive liabilities 30,547,646 4,176,841 290,500 27,888,742 62,903,729 Interest rate sensitivity gap 58,207,242 (529,814 ) 462,649 (5,373,411 ) 52,766,666 Net worth 134,981,325 Ratio of interest rate-sensitive assets to liabilities (%) 184 Ratio of interest rate-sensitive gap to net worth (%) 39
December 31, 2008 Analysis of Interest Rate-Sensitive Assets and Liabilities
(In Thousands of New Taiwan Dollars, %)
181 Days to Item 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 88,300,777 $ 5,614,218 $ 212,119 $ 16,423,057 $ 110,550,171 Interest rate-sensitive liabilities 34,957,257 2,703,090 437,000 25,227,880 63,325,227 Interest rate sensitivity gap 53,343,520 2,911,128 (224,881 ) (8,804,823 ) 47,224,944 Net worth 123,108,195 Ratio of interest rate-sensitive assets to liabilities (%) 175 Ratio of interest rate-sensitive gap to net worth (%) 38
- 94 - Note 1: The above amounts included only New Taiwan dollar amounts held in the domestic and overseas branches (i.e., excluding foreign currencies).
Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities are 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 (interest rate-sensitive assets and interest rate- sensitive liabilities are in New Taiwan dollars).
December 31, 2009 Analysis of Interest Rate-Sensitive Assets and Liabilities
(In Thousands of U.S. Dollars, %)
181 Days to Item 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 300,052 $ 16,817 $ - $ 85,296 $ 402,165 Interest rate-sensitive liabilities 364,424 53,153 - - 417,577 Interest rate sensitivity gap (64,372 ) (36,336 ) - 85,296 (15,412 ) Net worth (6,400 ) Ratio of interest rate-sensitive assets to liabilities (%) 96 Ratio of interest rate-sensitive gap to net worth (%) 241
December 31, 2008 Analysis of Interest Rate-Sensitive Assets and Liabilities
(In Thousands of U.S. Dollars, %)
181 Days to Item 1 to 90 Days 91 to 180 Days Over 1 Year Total 1 Year Interest rate-sensitive assets $ 430,789 $ 1,078 $ - $ 143,949 $ 575,816 Interest rate-sensitive liabilities 507,923 40,417 6,400 - 554,740 Interest rate sensitivity gap (77,134 ) (39,339 ) (6,400 ) 143,949 21,076 Net worth (30,518 ) Ratio of interest rate-sensitive assets to liabilities (%) 104 Ratio of interest rate-sensitive gap to net worth (%) (69 )
Note 1: The above amounts included only U.S. dollar amounts held in the domestic and overseas branches and OBU (i.e., excluding contingency assets and liabilities).
Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities are 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 (interest rate-sensitive assets and interest rate-sensitive liabilities are in U.S. dollars).
- 95 - c) Net positions in foreign currencies
The net positions (market risk) in foreign-currency transactions as of December 31, 2009 and 2008 were as follows:
December 31 2009 2008 Foreign-currency New Taiwan Dollar Foreign-currency New Taiwan Dollar Unit (In Thousands) Unit (In Thousands)
JPY $ 269,658 USD $ 1,185,697 USD 248,899 IDR 524,133 EUR 11,720 MYR 430,572 KRW 7,908 AUD 322,787 AUD 4,613 PLN 84,268
Note 1: Top five largest amounts after being converted into New Taiwan dollars.
Note 2: Absolute value of the net positions in foreign currencies.
Grand Cathay
Grand Cathay adopts Value at Risk (VaR) to monitor and measure the market risk of its financial instruments by using the Risk Metrics Company’s Risk Management System.
The VaR (99%, one day, calculated by the Monte Carlo Simulation method) is presented as follows:
Years Ended December 31 2009 2008 Years Years Average Highest Lowest Average Highest Lowest Values Values Values Values Values Values Type of market risk
Interest risk $ 8,266 $ 43,823 $ 2,310 $ 13,284 $ 76,202 $ 3,737 Equity risk 109,223 185,967 22,546 161,815 357,744 9,171 Foreign exchange risk 4 20 - - - -
As to the whole financial instruments of Grand Cathay, if the interest rate yield curves increases by 1bp, the fair value of the total interest related investments is estimated to decrease by $2,149 thousand. If the TAIEX index and targeted assets decrease by 1%, the fair value of the total equity investments is estimated to decrease by $52,443 thousand.
2) Credit risk
CDIB
Except for the following statement, CDIB’s maximum amount of credit risk exposure was equal to its book value.
The analyses of the maximum amount of credit risk exposure (excluding fair value of collaterals) result from off-balance-sheet commitments and guarantees were as follows:
CDIB had significant credit commitments. For the years ended December 31, 2009 and 2008, the terms of most of these credit commitments were between one year and seven years and interest rates ranged from 0.6911% to 5.79% and from 1.05444% to 7.28063%, respectively.
- 96 - CDIB had no irrevocable loan commitments. CDIB issued to third parties financial guarantees for customers’ performance of certain obligations. The maturity dates of commitments were not concentrated in a particular time.
The amounts of financial contracts with off-balance-sheet credit risks as of December 31, 2009 and 2008 were as follows:
December 31 2009 2008 Maximum Maximum Amount of Amount of Contract Credit Risk Contract Credit Risk Items Amount Exposure Amount Exposure
Off-balance-sheet commitments and guarantees $ 9,766,844 $ 9,766,844 $ 11,850,166 $ 11,850,166
Many credit commitments are expected to expire without being drawn upon; thus, the total commitment amounts do not necessarily represent future cash requirements. The maximum amount of credit risk exposure is a reference coefficient of customer credit risk. The total potential loss is equal to the above amounts, excluding the value of any collateral, if related commitments are completely drawn upon and the counter-parties default on contracts.
CDIB issues financial guarantees only after due care evaluation of customers’ creditworthiness. Collateralized loans amounted to about 46.95% and 43.77% of the total loans as of December 31, 2009 and 2008, respectively. Collateralized financial guarantees amounted to about 14.44% and 22.93% of the total financial guarantees as of December 31, 2009 and 2008, respectively. Collaterals held varied and included real estate, time deposits, marketable securities and other properties. If customers default, CDIB may foreclose the collaterals or execute other rights based on the guarantees given.
Concentrations of credit risk exist when changes in economic, industry or other conditions similarly affect groups of counter-parties whose aggregate credit exposure is material in relation to CDIB’s total credit exposure. CDIB maintains a diversified portfolio, does not limit its exposure to any one geographic region, country or individual creditor and monitors the exposure on a continuous basis. As of December 31, 2009 and 2008, CDIB’s most significant concentrations of credit risk were summarized as follows:
December 31 Credit Risk Profile by Counter-party 2009 2008
Private sector $ 65,028,621 $ 79,329,041 State-operated enterprises 573,980 650,516 Consumer 27,839 37,333
$ 65,630,440 $ 80,016,890
- 97 -
Credit Risk Profile by December 31, Credit Risk Profile by December 31, Industry Sector 2009 Industry Sector 2008
Electricity industry $ 30,405,299 Electricity industry $ 34,587,834 Chemistry 5,407,680 Chemistry 5,703,502 Transport and storage industry 4,077,773 Financial and insurance industry 5,260,967
$ 39,890,752 $ 45,552,303
Grand Cathay and its subsidiaries
Grand Cathay and its subsidiaries are exposed to credit risk in the event of default on contracts by counter-parties. The maximum credit exposure of the financial instruments held by Grand Cathay and its subsidiaries (exclude collateral) is equal to their carrying values.
3) Liquidity risk
CDIB
As of December 31, 2009 and 2008, the liquidity reserve ratios were 117.39% and 86.94%, respectively. CDIB has sufficient capital and working capital to execute all contract obligations and has no liquidity risk. The possibility of the derivative financial instruments held by CDIB failing to liquidate quickly is extremely low and the possibility of loss in value of these instruments is minimal.
The management policy of CDIB is to match the contractual maturity profile and interest rates for its assets and liabilities. Because of uncertainty, however, the maturities and interest rates of assets and liabilities usually did not fully match. Thus, the resulting gap may give rise to potential gain or loss.
CDIB grouped its assets and liabilities appropriately but financial assets or liabilities for trading purposes through profit or loss which belong to financial assets or liabilities at fair value through profit or loss are still expected to be disposed within a year according to market conditions. The maturity analysis of assets and liabilities was as follows:
(In Thousands of New Taiwan Dollars)
December 31, 2009 Due Between Due Between Due Between the Seventh Due Between Due in the First the Second and the Fourth and Month and the the Second and Due After the Month Third Months Sixth Months First Year Seventh Years Seventh Year Total Assets
Call loans to banks $ 5,064,205 $ - $ - $ - $ - $ - $ 5,064,205 Due from the Central Bank 14,663,185 9,400,000 8,300,000 - - - 32,363,185 Financial assets at fair value through profit or loss Government bonds - - - - 2,135,836 - 2,135,836 Asset swap contracts - 345 - - - - 345 Convertible (exchange) corporate bonds - 52,500 - - 170,685 - 223,185 Interest rate swap contracts 2,084 7,334 51,385 233,284 3,619,093 527,673 4,440,853 Premium paid on option contracts 2,738 - 24,667 266,820 206,848 - 501,073 Commodity option contracts 3,028 988 - - - - 4,016 Cross-currency swap contracts - - - 15,287 473,279 - 488,566 Discounts and loans 5,167,972 5,764,172 4,679,192 5,755,890 39,871,172 4,392,042 65,630,440 Available-for-sale financial assets Government bonds - - - 387,096 16,399,815 - 16,786,911 Beneficiary certificates 4,478 - - - 3,734,045 2,506,592 6,245,115 Bank debentures - - - - - 253,037 253,037 Corporate bonds - - 300,971 - 2,808,997 - 3,109,968 Derivative financial assets for hedging purpose 154 - - - - 15,653 15,807 Debt instruments with no active market - - - - 999,992 - 999,992 Total assets 24,907,844 15,225,339 13,356,215 6,658,377 70,419,762 7,694,997 138,262,534 (Continued)
- 98 - December 31, 2009 Due Between Due Between Due Between the Seventh Due Between Due in the First the Second and the Fourth and Month and the the Second and Due After the Month Third Months Sixth Months First Year Seventh Years Seventh Year Total
Liabilities
Call loans from banks $ 2,457,350 $ 498,857 $ 683,430 $ 1,063,103 $ - $ - $ 4,702,740 Securities sold under repurchase agreements 8,858,335 29,552 - - - - 8,887,887 Financial liabilities at fair value through profit or loss Bank debentures designated at fair value - - - - 4,138,742 - 4,138,742 Interest rate swap contracts - 14,433 74,370 141,612 3,376,261 658,078 4,264,754 Credit default swap contracts - - - 5,167 55,390 2,212,360 2,272,917 Cross-currency swap contracts - - - 9,899 638,831 - 648,730 Premium received on option contracts 7,611 5,097 5,229 33,438 278,288 - 329,663 Commodity option contracts 3,028 988 - - - - 4,016 Deposits and remittances 12,349,950 15,193,731 1,187,583 2,175,325 163,632 - 31,070,221 Bank debentures payable 500,000 - 500,000 - 25,600,000 2,180,769 28,780,769 Long-term loans 1,915 - - - 27,941 - 29,856 Other financial liabilities - structured products - - - - 17,014,060 - 17,014,060 Total liabilities 24,178,189 15,742,658 2,450,612 3,428,544 51,293,145 5,051,207 102,144,355
Liquidity gap, net $ 729,655 $ (517,319 ) $ 10,905,603 $ 3,229,833 $ 19,126,617 $ 2,643,790 $ 36,118,179 (Concluded)
(In Thousands of New Taiwan Dollars)
December 31, 2008 Due Between Due Between Due Between the Seventh Due Between Due in the First the Second and the Fourth and Month and the the Second and Due After the Month Third Months Sixth Months First Year Seventh Years Seventh Year Total
Assets
Call loans to banks $ 7,380,840 $ - $ - $ - $ - $ - $ 7,380,840 Due from the Central Bank 8,669,465 800,000 4,700,000 - - - 14,169,465 Financial assets at fair value through profit or loss Government bonds - - - - 1,572,530 106,776 1,679,306 Asset swap contracts - - - 269 1,855 - 2,124 Convertible (exchange) corporate bonds - 40,800 - 9,750 158,217 - 208,767 Interest rate swap contracts 200,134 408 50,859 48,884 9,078,426 4,381,987 13,760,698 Premium paid on option contracts 54,230 194,940 127,980 789 9,541 - 387,480 Credit default swap contracts - - - - 47 31,740 31,787 Cross-currency swap contracts - 21,346 - - 235,978 - 257,324 Securities purchased under resell agreements 150,003 - - - - - 150,003 Discounts and loans 2,958,837 7,807,268 7,260,234 4,091,578 51,209,628 6,689,345 80,016,890 Available-for-sale financial assets Government bonds 3,652,172 - - - 9,144,398 3,651,852 16,448,422 Beneficiary certificates 511,367 - - 100,334 4,014,652 4,937,119 9,563,472 Bank debentures - - - 198,614 - 3,376,527 3,575,141 Corporate bonds - - - 99,986 201,100 - 301,086 Derivative financial assets for hedging purposes - 4,781 - - 3,114 - 7,895 Debt instruments with no active market - - - - 999,992 - 999,992 Total assets 23,577,048 8,869,543 12,139,073 4,550,204 76,629,478 23,175,346 148,940,692
Liabilities
Call loans from banks 1,718,790 3,653,858 697,568 1,144,772 - - 7,214,988 Securities sold under repurchase agreements 12,419,961 2,255,181 - - - - 14,675,142 Financial liabilities at fair value through profit or loss Bank debentures designated at fair value - - - - 3,098,756 1,129,124 4,227,880 Interest rate swap contracts 236,534 1,185 56,243 33,465 8,427,324 4,261,009 13,015,760 Credit default swap contracts - 29,663 - - 24,708 6,680,609 6,734,980 Cross-currency swap contracts - - 29,199 - 361,573 - 390,772 Premium received on option contracts 117,854 42,456 240,629 111,651 460,472 - 973,062 Asset swap contracts - 905 - - - - 905 Deposits and remittances 8,217,583 16,456,930 5,354,594 577,000 110,000 - 30,716,107 Bank debentures payable - 2,000,000 500,000 500,000 26,600,000 2,108,902 31,708,902 Long-term loans 3,633 - 3,708 - 45,481 - 52,822 Derivative financial liabilities for hedging purposes - 2,329 - - 172,952 - 175,281 Other financial liabilities - structured products 1,000,000 197,160 246,450 - 14,400,000 500,000 16,343,610 Total liabilities 23,714,355 24,639,667 7,128,391 2,366,888 53,701,266 14,679,644 126,230,211
Liquidity gap, net $ (137,307 ) $ (15,770,124 ) $ 5,010,682 $ 2,183,316 $ 22,928,212 $ 8,495,702 $ 22,710,481
Grand Cathay and its subsidiaries
Grand Cathay and its subsidiaries have sufficient working capital to execute its financial instrument contracts so that the liquidity risk is minimal.
- 99 -
Some of the financial instruments such as collateralized loan obligation, unlisted and non-OTC stocks held by Grand Cathay have liquidity risk due to their not having active market or their trading volume is limited. However, Grand Cathay has sufficient working capital and does not expect to sell those investments in the near future so that significant cash demand is not expected.
4) Cash flow risk and fair value risk arising from interest rate fluctuations
CDIB
CDIB is exposed to earnings and value of financial instruments caused by interest rate fluctuations. The maturity analyses of the expected repricing date, maturity date and effective interest rate were summarized as follows:
a) Maturity analysis of the expected repricing date and maturity date
As of December 31, 2009 and 2008, the book value for the expected repricing date or maturity date (the date of the earlier) of the financial instruments held or issued by CDIB were as follows:
(In Thousands of New Taiwan Dollars)
December 31, 2009 Due Between Due Between Due Between the Seventh Due Between Due in the First the Second and the Fourth and Month and the the Second and Due After the Month Third Months Sixth Months First Year Seventh Years Seventh Year Total
Assets
Call loans to banks $ 5,064,205 $ - $ - $ - $ - $ - $ 5,064,205 Due from the Central Bank 14,663,185 9,400,000 8,300,000 - - - 32,363,185 Financial assets at fair value through profit or loss Government bonds - - - - 2,135,836 - 2,135,836 Asset swap contracts - 345 - - - - 345 Convertible (exchange) corporate bonds - 52,500 - - 170,685 - 223,185 Interest rate swap contracts 1,028,165 2,930,386 478,956 - 3,346 - 4,440,853 Premium paid on option contracts 2,738 - 24,667 41,042 432,626 - 501,073 Commodity option contracts 3,028 988 - - - - 4,016 Cross-currency swap contracts 488,566 - - - - - 488,566 Discounts and loans 10,438,288 19,777,035 3,645,390 4,553,468 25,063,100 2,153,159 65,630,440 Available-for-sale financial assets Government bonds - - - 387,096 16,399,815 - 16,786,911 Beneficiary certificates 4,478 - - - 3,734,045 2,506,592 6,245,115 Bank debentures - - - - - 253,037 253,037 Corporate bonds - - 300,971 - 2,808,997 - 3,109,968 Derivative financial assets for hedging purpose 4,433 11,374 - - - - 15,807 Debt instruments with no active market - - - - 999,992 - 999,992 Total assets 31,697,086 32,172,628 12,749,984 4,981,606 51,748,442 4,912,788 138,262,534
Liabilities
Call loans from banks 4,702,740 - - - - - 4,702,740 Securities sold under repurchase agreements 8,858,335 29,552 - - - - 8,887,887 Financial liabilities at fair value through profit or loss Bank debentures designated at fair value - - - - 4,138,742 - 4,138,742 Interest rate swap contracts 1,201,178 2,625,072 438,504 - - - 4,264,754 Credit default swap contracts 52,016 2,220,901 - - - - 2,272,917 Cross-currency swap contracts 648,730 - - - - - 648,730 Premium received on option contracts 7,611 5,097 5,229 33,438 278,288 - 329,663 Commodity option contracts 3,028 988 - - - - 4,016 Deposits and remittances 15,937,237 14,496,120 322,733 280,500 33,631 - 31,070,221 Bank debentures payable 4,000,000 1,600,000 - - 21,000,000 2,180,769 28,780,769 Long-term loans 2,939 - 2,220 1,197 23,500 - 29,856 Other financial liabilities - structured products - - - - 17,014,060 - 17,014,060 Total liabilities 35,413,814 20,977,730 768,686 315,135 42,488,221 2,180,769 102,144,355
Liquidity gap, net $ (3,716,728 ) $ 11,194,898 $ 11,981,298 $ 4,666,471 $ 9,260,221 $ 2,732,019 $ 36,118,179
- 100 -
(In Thousands of New Taiwan Dollars)
December 31, 2008 Due Between Due Between Due Between the Seventh Due Between Due in the First the Second and the Fourth and Month and the the Second and Due After the Month Third Months Sixth Months First Year Seventh Years Seventh Year Total
Assets
Call loans to banks $ 7,380,840 $ - $ - $ - $ - $ - $ 7,380,840 Due from the Central Bank 8,669,465 800,000 4,700,000 - - - 14,169,465 Financial assets at fair value through profit or loss Government bonds - - - - 1,572,530 106,776 1,679,306 Asset swap contracts - - - 269 1,855 - 2,124 Convertible (exchange) corporate bonds - 40,800 - 9,750 158,217 - 208,767 Interest rate swap contracts 13,760,698 - - - - - 13,760,698 Premium paid on option contracts 54,230 194,940 127,980 789 9,541 - 387,480 Credit default swap contracts 31,787 - - - - - 31,787 Cross-currency swap contracts 257,324 - - - - - 257,324 Securities purchased under resell agreements 150,003 - - - - - 150,003 Discounts and loans 10,109,002 20,092,776 5,153,132 4,556,544 37,892,878 2,212,558 80,016,890 Available-for-sale financial assets Government bonds 3,652,172 - - - 9,144,398 3,651,852 16,448,422 Beneficiary certificates 511,367 1,012,699 - 100,334 3,001,954 4,937,118 9,563,472 Bank debentures - - - 198,614 - 3,376,527 3,575,141 Corporate bonds - - - 99,986 201,100 - 301,086 Derivative financial assets for hedging purposes 7,895 - - - - - 7,895 Debt instruments with no active market - - - - 999,992 - 999,992 Total assets 44,584,783 22,141,215 9,981,112 4,966,286 52,982,465 14,284,831 148,940,692
Liabilities
Call loans from banks 3,928,988 3,286,000 - - - - 7,214,988 Securities sold under repurchase agreements 12,419,961 2,255,181 - - - - 14,675,142 Financial liabilities at fair value through profit or loss Bank debentures designated at fair value - - - - 3,098,756 1,129,124 4,227,880 Interest rate swap contracts 13,015,760 - - - - - 13,015,760 Credit default swap contracts 43,185 6,691,795 - - - - 6,734,980 Cross-currency swap contracts 390,772 - - - - - 390,772 Premium received on option contracts 117,854 42,456 240,629 111,651 460,472 - 973,062 Asset swap contract - 905 - - - - 905 Deposits and remittances 9,063,084 17,224,110 3,981,913 397,000 50,000 - 30,716,107 Bank debentures payable 4,500,000 4,100,000 - - 21,000,000 2,108,902 31,708,902 Long-term loans 3,633 - 3,708 - 45,481 - 52,822 Derivative financial liabilities for hedging purposes 175,281 - - - - - 175,281 Other financial liabilities - structured products 1,000,000 197,160 246,450 - 14,400,000 500,000 16,343,610 Total liabilities 44,658,518 33,797,607 4,472,700 508,651 39,054,709 3,738,026 126,230,211
Liquidity gap, net $ (73,735 ) $ (11,656,392 ) $ 5,508,412 $ 4,457,635 $ 13,927,756 $ 10,546,805 $ 22,710,481
- 101 - b) Effective interest rate
As of December 31, 2009 and 2008, the average effective interest rates for the financial instruments held or issued by CDIB and classified by foreign currency were as follows:
(%)
December 31, 2009 NTD USD JPY EUR AUD CAD GBP HKD SGD THB
Assets
Call loans to banks 0.15 0.26 ------Due from the Central Bank 0.60 ------Available-for-sale financial assets Government bonds 1.88 - - - 5.75 - - - - - Beneficiary certificates 1.74 6.19 ------Corporate bonds 1.64 ------Discounts and loans 1.67 1.98 1.98 ------Derivative financial assets for hedging purposes 1.76 ------
Liabilities
Call loans from banks - 0.28 ------Deposits and remittances 0.49 0.21 0.06 0.30 3.65 0.10 0.29 0.01 0.01 0.10 Bank debentures payable 2.39 ------Bank debentures designated at fair value 2.01 ------Securities sold under repurchase agreements 0.14 ------Deposits transferred from Chunghwa Post 1.21 ------
(%)
December 31, 2008 NTD USD JPY EUR AUD CAD GBP HKD SGD THB Assets
Call loans to banks 0.51 0.97 ------Due from the Central Bank 1.90 ------Securities purchased under resell agreements Government bonds 0.45 ------Available-for-sale financial assets Government bonds 2.24 ------Bank debentures 1.85 4.29 - 7.10 ------Beneficiary certificates 3.29 6.32 ------Corporate bonds 2.63 ------Discounts and loans 2.64 3.91 2.50 ------Derivative financial assets for hedging purposes 1.48 ------
Liabilities
Call loans from banks 0.45 1.92 ------Deposits and remittances 1.43 1.79 1.04 3.39 4.68 0.40 2.29 1.87 0.01 0.10 Bank debentures payable 2.13 ------Bank debentures designated at fair value 2.01 ------Securities sold under repurchase agreements 0.81 ------Long-term loans 0.47 ------Derivative financial liabilities for hedging purposes 1.69 ------Deposits transferred from Chunghwa Post 1.68 ------
Grand Cathay and its subsidiaries
For Grand Cathay and its subsidiaries, as of December 31, 2009, (a) financial assets and liabilities with fair value risk due to interest rate fluctuation were $11,248,717 thousand and $14,535,716 thousand, respectively; (b) financial assets with cash flow risk due to interest rate fluctuation were $421,040 thousand. As of December 31, 2008 (a) financial assets and liabilities with fair value risk due to interest rate fluctuation were $11,076,725 thousand and $12,198,822 thousand, respectively; (b) financial assets and liabilities with cash flow risk due to interest rate fluctuation were $1,070,424 thousand.
- 102 - i. Cash flow hedge
The Corporation
Interest rate risk is the risk to future cash flows of interest-earning assets and interest-bearing liabilities caused by interest rate fluctuations. Since this risk is considered material to the Corporation, the Corporation uses interest rate swap contracts to manage the risk.
Projected Period of Related Designated as Hedging Instrument Projected Gain/Loss Financial Instrument December 31, 2009 December 31, 2008 Period of Recognized in Designated as Hedging Nominal Nominal Cash Flow the Income Hedged Item Instrument Amount Fair Value Amount Fair Value Generation Statement
Floating rate - bonds payable Interest rate swap contracts $ 1,100,000 $ (45,886 ) $ 1,100,000 $ (67,755 ) 2008-2013 2008-2013 Floating rate - bonds payable Interest rate swap contracts 2,350,000 (114,837 ) 2,350,000 (212,802 ) 2008-2015 2008-2015
$ 3,450,000 $ (160,723 ) $ 3,450,000 $ (280,557 )
December 31 2009 2008
Amount of adjustment of stockholders’ equity in the current year $ 36,790 $ (280,986) Amount of deducted from stockholders’ equity and charged to current loss 83,044 48,467
CDIB
Interest rate risk is the risk to earnings and value of financial instruments due to interest rate fluctuations. Since this risk is considered material to CDIB, and CDIB enters into interest rate swap contracts to manage the risk.
Projected Period of Related Designated as Hedging Instrument Projected Gain/Loss Financial Instrument December 31, 2009 December 31, 2008 Period of Recognized in Designated as Hedging Nominal Nominal Cash Flow the Income Hedged Item Instrument Amount Fair Value Amount Fair Value Generation Statement
Floating rate - bank Interest rate swap $ 3,500,000 $ 15,653 $ 3,500,000 $ (172,952 ) 2004-2014 2004-2014 debentures payable contracts Floating rate - bank Interest rate swap 500,000 154 500,000 3,114 2004-2010 2004-2010 debentures payable contracts Floating rate - bank Interest rate swap - - 1,000,000 4,781 2004-2009 2004-2009 debentures payable contracts Floating rate - bank Interest rate swap - - 1,000,000 (2,329 ) 2004-2009 2004-2009 debentures payable contracts
$ 4,000,000 $ 15,807 $ 6,000,000 $ (167,386 )
December 31 2009 2008
Amount of adjustment of stockholders’ equity in the current year $ 216,584 $ 16,405 Amount of deducted from stockholders’ equity and charged to current loss (gain) (33,391) 66,806
- 103 - j. Account reclassifications
CDIB’s subsidiaries did not intend to sell the following financial assets held for trading within the short term because of economic instability and deterioration of the world’s financial markets in the third quarter of 2008. Thus, under the newly amended Statement of Financial Accounting Standards No. 34, “Financial Instruments: Recognition and Measurement,” CDIB’s subsidiaries reclassified its financial assets held for trading financial assets to available-for-sale financial assets. The fair values at the reclassification date were as follows:
Before After Reclassifications Reclassifications
Financial assets at fair value through profit or loss - held for trading $ 704,152 $ - Available-for-sale financial assets - 704,152
$ 704,152 $ 704,152
The carrying amounts and fair values of the reclassified financial assets as at December 31, 2009 and 2008 were as follows:
Year Ended December 31 2009 2008 Carrying Carrying Amount Fair Value Amount Fair Value
Available-for-sale financial assets $ 681,389 $ 681,389 $ 477,704 $ 477,704
The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized before December 31, 2009 and 2008, respectively) for the years ended December 31, 2009 and 2008 and the pro forma gains or losses assuming no reclassifications had been made were as follows:
Year Ended December 31 2009 2008 Gains Gains (Losses) Pro Forma (Losses) Pro Forma Recorded Gains Recorded Losses
Available-for-sale financial assets $ - $ 416,672 $ - $ (226,448) k. Derivative financial instruments of Grand Cathay and its subsidiaries
Grand Cathay
Fair values of derivative financial instruments such as warrants, futures and option contracts are quoted at market price, and others are determined using valuation techniques. The losses from the change in fair value using pricing model were $249,228 thousand and $595,526 thousand for the years ended December 31, 2009 and 2008, respectively.
- 104 - 1) Warrants
a) Objective and strategies
Grand Cathay issues warrants for trading purposes.
Grand Cathay holds underlying securities to hedge risks from the exercise of warrants and risks from changes in warrant positions held. Grand Cathay’s hedging strategy is to minimize the market value risks. The changes in market values of the underlying securities are highly correlated to that of the warrants, and Grand Cathay evaluates and adjusts the positions held periodically.
b) Credit risk
Grand Cathay is not exposed to credit risk because the premium is received upon warrant issuance.
c) Market risk
The risk factors include delta, gamma and vega values, which represent the sensitivity of warrants to the market for underlying securities, floating rate and the time value. It is possible for investors to exercise the warrant in exchange for the underlying securities or cash payment when the market value of underlying securities is higher (call warrants) or lower (put warrants) than the exercise price plus the issued price. For conservative purposes, Grand Cathay adopts a dynamic hedging strategy to manage the market risk and takes different positions on the underlying securities, convertible bonds, warrants or convertible certificates according to each index calculated by the hedging model.
Grand Cathay uses VaR (99%, 1D) to measure market risk of warrants, which represents the maximum loss that may be incurred in a day under the 99% confidence level of warrant, equity-linked notes contracts, principal - guaranteed notes contracts and related hedging securities.
December 31 Market Risk 2009 2008
VaR (99%, 1D) $ 3,071 $ 3,169
d) Leverage ratio of the instruments (see Note 24).
e) Fair value of derivative financial instruments
December 31 2009 2008 Carrying Fair Carrying Fair Amount Value Amount Value Assets
Operating securities - hedging positions $ 745,762 $ 745,762 $ 139,808 $ 139,808
Liabilities
Liabilities for issuance of call (put) warrants 3,765,500 3,765,500 1,428,300 1,428,300 Repurchase of issued call (put) warrants (3,616,629) (3,616,629) (1,377,395) (1,377,395) Borrowed securities payable - hedging positions - - 1,938 1,938
- 105 - f) Gain or loss on issuing call (put) warrants
Year Ended December 31 2009 2008
Gain (loss) on sale of securities - hedging positions $ 296,722 $ (268,009)
Gain on change in fair value of call (put) warrant liabilities $ 4,132,597 $ 5,039,961 Loss on change in fair value of repurchase of call (put) warrant (4,272,077) (4,771,590) Profit from expired call (put) warrants 7,447 11,972 Gain (loss) on exercising of call (put) warrants before maturity (97,294) 1,675
$ (229,327) $ 282,018
g) Liquidity risk
The premium of the warrants issued by Grand Cathay is collected in advance, and Grand Cathay establishes a hedging position with its own capital when the warrants are issued. The liquidity risk on the underlying securities held for hedging is low because the authorities have set the rules for market price and share distribution of these securities, and the probability that the securities cannot be sold for a reasonable price is quite low. Grand Cathay has to manage any cash demand arising from adjustment of hedge position for any changes due to adverse fluctuation of market prices of the underlying securities. However, Grand Cathay has sufficient working capital to pay for exercising of warrants, so the cash liquidity risk is low.
2) Futures and options contracts
a) Objectives and strategies
Grand Cathay uses index futures and option contracts for trading purposes, specifically to diversify investments, aggressively develop various services and heighten working capital efficiency.
b) Contract amount and fair value
Contract Amount/ Premium Paid Long/ Outstanding (Received) Fair Value Short Contract (Note 1) (Note 2) December 31, 2009
Futures contract TE futures contract Long 19 $ 25,340 $ 25,973 TX futures contract Short 445 (675,677) (726,541) MTX futures contract Long 3 1,227 1,230 XIF futures contract Long 19 17,870 18,016 XIF futures contract Short 14 (12,939) (13,271) GT futures contract Long 4 2,355 2,378 (Continued)
- 106 -
Contract Amount/ Premium Paid Long/ Outstanding (Received) Fair Value Short Contract (Note 1) (Note 2)
GT futures contract Short 1 $ (576) $ (601) TF futures contract Long 1 893 911 GDF futures contract Long 105 46,980 45,308 Options contract TEO options contract - call Long 5 23 49 TEO options contract - call Short 80 (503) (1,029) TEO options contract - put Long 111 421 112 TEO options contract - put Short 510 (13) (3) TFO options contract - call Long 28 79 114 TFO options contract - call Short 49 (188) (367) TFO options contract - put Long 45 217 114 TFO options contract - put Short 126 (150) (104) TXO options contract - call Long 4,513 35,934 72,893 TXO options contract - call Short 1,294 (5,582) (9,612) TXO options contract - put Long 3,323 13,671 2,342 TXO options contract - put Short 4,037 (29,084) (3,225) Equity options contract - call Long 138 452 320 Equity options contract - call Short 7 (13) (19) Equity options contract - put Long 89 276 55 Equity options contract - put Short 8 (47) (50) GTO options contract - call Long 30 33 162 GTO options contract - call Short 10 (15) (41) GTO options contract - put Long 10 8 - GTO options contract - put Short 13 (7) (1) XIO options contract - put Short 2,224 (175) (11)
December 31, 2008
Futures contract TE futures contract Long 35 23,720 24,241 TE futures contract Short 35 (22,715) (24,101) TX futures contract Long 308 296,018 279,212 TX futures contract Short 270 (240,248) (243,918) MTX futures contract Long 173 54,238 38,648 XIF futures contract Short 37 (20,554) (21,127) Options contract TEO options contract - call Short 101 (581) (587) TEO options contract - put Short 121 (519) (333) TFO options contract - call Long 210 3,197 235 TFO options contract - call Short 21 (140) (158) TFO options contract - put Short 20 (354) (316) TXO options contract - call Long 3,938 30,799 31,126 TXO options contract - call Short 4,052 (16,953) (23,213) TXO options contract - put Long 140 1,157 833 TXO options contract - put Short 712 (3,050) (1,745) (Continued)
- 107 -
Contract Amount/ Premium Paid Long/ Outstanding (Received) Fair Value Short Contract (Note 1) (Note 2)
Equity options contract - call Long 40 $ 350 $ 497 Equity options contract - put Long 2 20 25 Equity options contract - put Short 25 (148) (156) GTO options contract - call Short 48 (140) (194) GTO options contract - put Short 20 (38) (15) XIO options contract - call Long 55 277 270 XIO options contract - call Short 130 (758) (376) XIO options contract - put Long 50 281 268 XIO options contract - put Short 42 (202) (124) (Concluded)
Note 1: Contract amount is the original value for the futures contracts or the premium paid or received for the option contracts.
Note 2: Fair value is the closing price published by the Taiwan Futures Exchange.
December 31, 2008 Carrying Fair Amount Value Liabilities
Borrowed securities payable - hedging position $ 2,887 $ 2,887
Credit risks refer to counter-parties’ defaults on contracts. Grand Cathay has entered into contracts with the Taiwan Futures Exchange, and Grand Cathay has set up related control mechanism and is therefore not exposed to significant credit risks. c) Market risk
The guarantee deposits or the premiums of futures and options have been paid or received and additional margin will be paid if the balance of the trading margin account becomes lower than the maintenance margin. The working capital is enough to make payments. Market risk pertains to the fluctuation of market prices of futures and options. Grand Cathay has set up appropriate risk control management and an acceptable loss limit to monitor price fluctuations and holding positions. If the balance of the trading margin account of futures and options becomes lower than the maintenance margin, Grand Cathay will recognize the loss by either settling the deal or putting in deposits in addition to the initial margin.
Grand Cathay uses VaR (99% 1D) to measure market risk of futures and options, which represents the maximum loss that may be incurred in a day under the 99% confidence level of futures, options and related spot and hedging securities.
December 31 Market Risk 2009 2008
VaR (99%, 1D) $ 24,321 $ 6,905
- 108 - d) Liquidity risk
Since the guarantee deposits or the premiums of futures and options have been paid or received and additional margin will be paid if the balance of the trading margin account becomes lower than the maintenance margin, the working capital is good enough to make payments. The possibility that future contracts can not be sold at reasonable price is low, hence the liquidity risk is insignificant.
As of December 31, 2009 and 2008, the futures trading margin amounted to $459,022 thousand and $452,271 thousand, respectively.
As of December 31, 2009, the market value of long options and short options amounted to $76,161 thousand and $14,462 thousand, respectively.
As of December 31, 2008, the market value of long options and short options amounted to $33,254 thousand and $27,217 thousand, respectively.
e) Gain or loss from futures transactions
The net losses from futures transactions for the years ended December 31, 2009 and 2008 were $95,748 thousand and $114,100 thousand, respectively.
f) Gain or loss from option transactions
The net loss and gain from option transaction for the years ended December 31, 2009 and 2008 were $21,310 thousand and $445,150 thousand, respectively.
g) The gain and loss on sale of securities - hedging positions related to futures and options transactions for the years ended December 31, 2009 and 2008 were $480 thousand and $10,853 thousand, respectively.
3) Interest rate swap contracts
a) Objectives and strategies
Grand Cathay enters into interest rate swap (IRS) contracts for both trading and hedging purposes. IRS contracts for hedging purposes (non-hedge accounting) are to manage interest rate risks on bond investments and risk of cash flows on corporate bonds issued. Grand Cathay uses hedging instruments with highly negative correlation with the fair value or cash flow of the hedged items and periodically evaluates the effectiveness of these instruments.
- 109 - b) Outstanding IRS contracts were as follows:
2009 2008 Nominal Credit Nominal Credit Amount Fair Value Risk Amount Fair Value Risk For trading purposes
Exchange of fixed-rate amounts for floating-rate amounts $ 300,000 $ 25 $ 25 $ 4,700,000 $ 3,962 $ 3,962 29,459,060 (696,037 ) - 32,048,675 (913,546) - Counter-parties Domestic companies 16,200,000 20,100,000 Overseas companies (including foreign companies in Taiwan) 13,559,060 16,648,675 Exchange of floating-rate amounts for fixed-rate amounts 28,096,740 688,462 688,462 30,062,496 881,104 881,104 Counter-parties Domestic companies 20,400,000 21,088,000 Overseas companies (including foreign companies in Taiwan) 7,696,740 8,974,496
December 31 2009 2008 Carrying Carrying Assets Amount Fair Value Amount Fair Value
IRS contracts Guarantee deposits (included in financial assets for trading - noncurrent - government bonds) $ 73,743 $ 73,743 $ 113,910 $ 113,910
Grand Cathay reviews each counter-party’s assets, profitability, capital structure and industrial prospect to determine the client’s credit standing. The transactions are then made within each credit limit. Thus, the credit risk is insignificant. c) Market risk
Grand Cathay uses VaR (99%, 1D) to measure the market risk of IRS, which represents the maximum loss that may be incurred in a day under 99% confidence level of IRS.
December 31 Market Risk 2009 2008
VaR (99%, 1D) $ 1,619 $ 8,385 d) Liquidity risk
Grand Cathay uses IRS contracts, in which the nominal amounts are used solely as a basis for calculating the amounts receivable and payable under the contracts. Thus, the nominal amounts do not represent actual cash inflows or outflows; thus, no significant cash demand is expected. e) The net losses were $7,362sand and $124,786 thousand for the years ended December 31, 2009 and 2008, respectively.
- 110 - 4) Convertible corporate bond asset swap contracts
a) Objective and strategies
Grand Cathay enters into convertible corporate bond asset swap contracts in a dealing capacity, i.e., it provides them to clients to enhance the liquidity of the convertible corporate bonds as well as minimize the risk of the residual position from underwriting.
b) Nominal amount, fair value and credit risk were as follows:
December 31 2009 2008 Nominal Credit Nominal Credit Amount Fair Value Risk Amount Fair Value Risk
Asset swap IRS contracts $ 296,900 $ 3,334 $ 3,334 $ 174,000 $ 4,010 $ 4,010 1,927,200 (78,842 ) - 6,259,200 (264,925 ) - Long options 2,224,100 347,317 347,317 6,433,200 49,504 49,504 Short options 4,895,300 (732,646 ) - 7,466,300 (68,129 ) - Counter-parties Short options Domestic companies 4,641,800 7,043,300 Overseas companies (including foreign companies in Taiwan) 253,500 423,000
All the counter-parties to asset swap IRS contracts and long option contracts as of December 31, 2009 and 2008 were domestic companies.
Grand Cathay reviews each counter-party’s assets, profitability, capital structure and industrial prospect to determine the client’s credit standing. The transactions are then made within each credit limit. Thus, the credit risk is insignificant.
c) Market risk
The interest rate risk from asset swap contracts and the exposure of the other interest rate-related assets are used to evaluate market risk. In addition, Grand Cathay evaluates the theoretical price of options periodically.
Grand Cathay uses VaR (99%, 1D) to measure the market risk of convertible corporate bond asset swap contracts, which represents the maximum loss that may be incurred in a day under 99% confidence level of convertible corporate bond asset swap contracts, credit-linked notes contracts and related spot and hedging securities.
December 31 Market Risk 2009 2008
VaR (99%, 1D) $ 7,365 $ 2,823
d) Liquidity risk
Net interest, equal to the notional amount of the Asset swap IRS contracts multiplied by the difference in the interest rate bases received or paid upon each settlement date, is not material. The notional amounts are not exchanged on the final settlement date. Thus, the cash demand is not significant.
e) The losses on convertible corporate bond asset swap contracts were $435,165 thousand and $27,968 thousand for the years ended December 31, 2009 and 2008, respectively.
- 111 - 5) Structured-note contracts
a) Objectives
Grand Cathay issued structured-note contracts for trading purposes.
Structured-note contracts consist of equity-linked notes (ELN) contracts, principal guaranteed notes (PGN) contracts and credit-linked notes (CLN) contracts. These contracts have two components: Fixed-income instrument transactions and option transactions. Grand Cathay sells fixed-income instruments to the counter-parties and buys or sells related securities options. Grand Cathay sets up hedge accounts for structured-note contract transactions.
b) Nominal amount, fair value and credit risk are as follows:
December 31 2009 2008 Nominal Credit Nominal Credit Amount Fair Value Risk Amount Fair Value Risk
ELN Contract
Fixed-income instrument transactions $ 89,711 $ (89,690 ) $ - $ 6,000 $ (5,977 ) $ - Long options 89,711 1,879 1,879 6,000 907 907 Short options - - - 6,000 (182 ) -
PGN Contract
Fixed-income instrument transactions 60,668 (60,660 ) - 64,053 (63,817 ) - Short options 60,668 (144 ) - 64,053 (879 ) - Long options 3,193 48 48 5,975 484 484
CLN Contract
Fixed-income instrument transactions 560,500 (556,022 ) - 475,000 (460,751 ) - Short options 560,500 (6,969 ) - 475,000 (17,046 ) -
All the counter-parties to structured-note contracts were domestic companies as of December 31, 2009 and 2008.
December 31 2009 2008 Carrying Fair Carrying Fair Assets Amount Value Amount Value
Operating securities - hedging positions $ 631,788 $ 631,788 $ 458,653 $ 458,653 Guarantee deposits (included in refundable deposit) 22,000 22,000 18,000 18,000
Grand Cathay reviews each counter-party’s assets, profitability, capital structure and industrial prospect to determine the client’s credit standing. The transactions are then made within each client’s credit limit. Thus, the credit risk is insignificant.
c) Market risk
Grand Cathay uses VaR (99%, 1D) to measure the market risk of structured note contracts. VaR (99%, ID) of equity-linked notes contracts and principal-guaranteed notes contracts is described in Grand Cathay 1)c). VaR (99%, ID) of credit-linked notes contracts is described in Grand Cathay 3)c).
- 112 - d) Liquidity risk
The amount received from counter-parties for structured-notes transactions is used in investing fixed-income instruments and linked securities, and Grand Cathay will repay the principal and the fixed income to the counter-parties on contract maturity. Thus, no significant cash demand is expected.
e) For the years ended December 31, 2009 and 2008, the related losses on structured-note contracts were $18,568 thousand and $36,745 thousand, respectively; and the gain and loss on sale of securities - hedging were $6,335 thousand and $53,441 thousand, respectively.
6) Bond option contracts
a) Objectives and strategies
Grand Cathay uses bond options for trading purposes, specifically to manage its bond portfolio and to provide investors with diversified investment instruments. The option buyer pays premiums and entitles him/her the right to buy or sell bonds to the option seller with specific terms. If the option buyer requires the exercise of the option, the option seller is obligated to settle the transaction either on or before the maturity.
b) On December 31, 2009 and 2008, there were no outstanding bond option contract.
Grand Cathay reviews each counter-party’s assets, profitability, liquidity, capital structure and industrial prospect to determine its credit standing. The transactions are then made within each counter-party’s credit limits. In addition, the counter-parties are mainly banks, bond investment institutions, and securities and bills financial firms; thus, the credit risk is insignificant.
c) Market risk
The values of bond options are determined by the structures and fluctuations of the market interest rates. The interest rate risk from bond options and the exposure of other interest rate-related assets or liabilities are included in evaluating market risk. In addition, Grand Cathay has a market risk control mechanism through which it monitors the volume of outstanding contracts, analyzes interest rate sensitivities and durations, and assesses market values of options.
Grand Cathay uses VaR (99%, 1D) to measure the market risk of bond option contracts, which represents the maximum loss that may be incurred in a day under 99% confidence level of bond option contracts.
d) Liquidity risk
The bond option position held by Grand Cathay is under risk control management. Future cash demand is supported by sufficient working capital. Thus, the risk of cash flows is insignificant.
e) The loss and gain on bond option contracts were $1,175 thousand and $20,112 thousand for the years ended December 31, 2009 and 2008, respectively.
Grand Cathay Holding Limited (GCH)
Fair values of derivative financial instruments, except for futures and option contracts which are based on quoted market prices, are measured based on pricing model.
- 113 - 1) Futures and option contracts
a) Objectives and strategies
GCH uses futures and option contracts for trading purposes, specifically to diversify investments, aggressively develop various services, and enhance working capital efficiency. b) Contract amount and fair value
The contract amount and fair value on December 31, 2009 and 2008 were summarized as follows:
Long/ Outstanding Contract Fair Value Short Contract Amount (Note 1)
December 31, 2009
10-year Treasury Note - Future Short 100 $ (379,831) $ (369,335) MSCI Taiwan Index Short 65 (58,820) (61,466) 5-year U.S. Treasury Note - Short 50 (186,442) (182,955) Future
December 31, 2008
10-year Treasury Note - Future Short 100 (418,752) (412,460) 5-year U.S. Treasury Note - Short 15 (58,475) (58,575) Future MSCI Taiwan Index Short 2 (1,139) (1,144)
Note 1: Fair value is the closing price published by the futures exchange.
Credit risks refer to counter-parties’ defaults on contracts. GCH has entered into contracts with the Chicago Board of Trade and the Singapore Exchange of Trade, and GCH has set up related control mechanism, and is therefore not exposed to significant credit risks.
c) Market risk
Market risk pertains to the fluctuation of market prices of futures and options. GCH has set up appropriate risk control management and set up an acceptable loss limit to monitor price fluctuations and holding positions. If the balance of the trading margin account of futures and options becomes lower than the maintenance margin, GCH will recognize the loss by either settling the deal or putting in deposits in addition to the initial margin. Overall, the market risk is insignificant.
d) Liquidity risk
Since the guarantee deposits or the premiums of futures and options have been paid or received and additional margin will be paid if the balance of the trading margin account becomes lower than the maintenance margin, the working capital is good enough to make payments. The possibility that future contracts can not be sold at reasonable price is low, hence the liquidity risk is insignificant.
As of December 31, 2009 and 2008, the futures trading margin amounted to $213,751 thousand and $177,982 thousand, respectively.
- 114 - 2) Convertible corporate bond asset swap contracts
a) Objective
GCH enters into convertible corporate bond asset swap contracts in a dealing capacity, i.e., it provides them to clients to enhance the liquidity of the convertible corporate bonds as well as minimize the risk on the residual position from underwriting.
b) On December 31, 2009 and 2008, there was no outstanding asset, swap contract.
3) Overseas convertible corporate bond option contracts
a) Objective
GCH uses overseas convertible corporate bond option contracts for trading purposes and to enhance working capital efficiency. GCH enters into convertible corporate bond asset swap option and structured-note option contracts in a dealing capacity, it provides them to clients to enhance the liquidity of the convertible corporate bonds.
b) On December 31, 2009 and 2008, there was no outstanding overseas convertible corporate bond option contracts.
Grand Cathay Futures Corp. (GCFC)
There were no derivatives transactions for the years ended December 31, 2009 and 2008.
46. MARKET RISK CONTROL AND HEDGING STRATEGY
The Corporation
The Corporation documents its risk management policies, which are integrated into operation management, cultivates an organization culture that stresses risk management and takes the qualitative and quantitative results of risk management as a basis for setting operating strategies. The board of directors approves the documentation of both overall and specific risk management policies, including market risks, credit risks, operating risks, and liquidity risks.
The Corporation has established a committee to take charge of all risk management strategies. The Corporation has also established a risk management department to manage credit, market and operating risks and related matters. This department has to report periodically to the board of directors the results of the execution as well as enhancement of these risk management policies.
CDIB and Its Subsidiaries
CDIB documents its risk management policies, which are integrated into operations management, cultivates an organization culture that stresses risk management and takes the qualitative and quantitative results of risk management as a basis for setting operating strategies. The board of directors approves the documentation of both overall and specific risk management policies, including market, credit, operating, and liquidity risks.
CDIB has a risk management committee that takes charge of all risk management strategies. It also has a risk management department that takes charge of credit risks, market risks, operating risks and related affairs. The department has to report periodically to the board of directors the results of the execution of risk management policies and the enhancements of these policies.
- 115 - Grand Cathay and Its Subsidiaries
Grand Cathay has documented risk management policies, including overall principle for risk control and the risk management policies and framework of the parent company; China Development Financial Holding Corporation; Grand Cathay’s goals for risk management are to transfer or minimize the possibility of potential unfavorable factors.
Grand Cathay has set up Risk Management Department (RMD) to manage and monitor the various risks. RMD reports to the board of directors on a timely basis and holds risk management meetings to ensure that various risks are properly monitored.
The board of directors is responsible for supervising the practical operating situation to make sure Grand Cathay’s risk management policies and procedures are executed properly.
47. AVERAGE AMOUNT AND AVERAGE INTEREST RATE OF INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES
Please refer to Note 45 to the consolidated financial statements.
48. CAPITAL ADEQUACY RATIO OF CHINA DEVELOPMENT INDUSTRIAL BANK
(In Thousands of New Taiwan Dollars; %)
Year December 31, December 31, Items 2009 2008 Tier 1 capital $ 39,539,722 $ 28,468,747 Eligible Tier 2 capital - - capital Tier 3 capital - - Eligible capital 39,539,722 28,468,747 Standardized approach 83,838,217 101,627,756 Credit risk Internal rating-based approach NA NA Securitization 2,493,291 3,758,163 Basic indicator approach 10,358,725 17,621,688 Risk- Standardized approach/Alternative NA NA weighted Operational risk standardized approach assets Advanced measurement approach NA NA Standardized approach 22,913,985 20,570,700 Market risk Internal model approach NA NA Total risk-weighted assets 119,604,218 143,578,307 Capital adequacy ratio 33.06% 19.83% Ratio of Tier 1 capital to risk-weighted assets 33.06% 19.83% Ratio of Tier 2 capital to risk-weighted assets - - Ratio of Tier 3 capital to risk-weighted assets - - Ratio of common stockholders’ equity to total assets 31.99% 31.36% Leverage ratio 24.88% 15.02%
Note 1: The above table was filled in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks” and related calculation tables.
Note 2: CDIB should disclose the capital adequacy ratios of the current and previous periods in annual financial reports. For semiannual financial reports, CDIB should disclose the capital adequacy ratios of the current and previous periods, and of the previous year-end.
- 116 -
Note 3: The formulas used in calculating the above table entries were as follows:
1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital.
2) Total risk-weighted asset = Risk-weighted assets for credit risk + (Capital requirement for operational risk + Capital requirements for market risk) x 12.5.
3) Capital adequacy ratio = Eligible capital/Total risk-weighted assets.
4) Ratio of Tier 1 capital to risk-weighted assets = Tier 1 capital/Total risk-weighted assets.
5) Ratio of Tier 2 capital to risk-weighted assets = Tier 2 capital/Total risk-weighted assets.
6) Ratio of Tier 3 capital to risk-weighted assets = Tier 3 capital/Total risk-weighted assets.
7) Ratio of common stockholders’ equity to total assets = Common stock/Total assets.
8) Leverage ratio + Tier 1 capital/adjusted average assets (average assets - goodwill, unamortized losses on sale on nonperforming loans and the amount deducted from Tier 1 capital in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks”).
The Banking Law and related regulations require that CDIB maintains a capital adequacy ratio (CAR) of at least 8%. Thus, if CDIB’s CAR falls below 8%, the Ministry of Finance may impose certain restrictions on the level of the cash dividends that CDIB may declare or, in certain conditions, totally prohibit CDIB from declaring cash dividends.
49. LOAN ASSET QUALITY, CONCENTRATION OF CREDIT RISK EXTENSIONS, INTEREST RISK SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF CDIB
a. Asset quality
For the information on overdue loans and receivables, please refer to Table 7 (attached).
- 117 - b. Concentration of credit risk
December 31, 2009
(In Thousands of New Taiwan Dollars, %)
Top 10 Total Credit Percentage of Ranking Group (Industry Category) (Note 2) (Note 3) Net Worth (Note 1) 1 Formosa Plastics Group (012201 plastic sheets, pipe $8,338,160 6.20 manufacturing) 2 CHI MEI Group (012641 LCD and related 6,070,160 4.51 components manufacturing) 3 Tatung Group (012730 audio-visual electronic 3,656,232 2.72 products manufacturing) 4 Qisda Group (012641 LCD and related components 2,669,987 1.98 manufacturing) 5 Chinasteel Group (014920 mass rapid transportation) 2,075,164 1.54 6 Wal Sin Group (012611 IC manufacturing) 1,988,678 1.48 7 Foxconn Technology Group (012641 LCD and related 1,923,345 1.43 components manufacturing) 8 Evergreen Group (015101 air transportation) 1,749,490 1.30 9 PSC Group (012611 IC manufacturing) 1,713,816 1.27 10 E United Group (012413 steel rolling and extruding) 1,622,045 1.21
December 31, 2008
(In Thousands of New Taiwan Dollars, %)
Top 10 Total Credit Percentage of Ranking Group (Industry Category) (Note 2) (Note 3) Net Worth (Note 1) 1 Formosa Plastics Group (012201 plastic products $9,140,196 7.76 manufacturing) 2 CHI MEI Group (012641 LCD and related 6,887,240 5.85 components manufacturing) 3 PSC Group (012611 IC manufacturing) 4,258,870 3.62 4 Tatung Group (012730 audio-visual electronic 3,778,184 3.21 products manufacturing) 5 Qisda Group (012641 LCD and related components 3,504,197 2.98 manufacturing) 6 Chinasteel Group (014920 mass rapid transportation) 3,206,039 2.72 7 Wal Sin Group (012611 IC manufacturing) 3,014,240 2.56 8 Farglory Group (016700 real estate development) 2,065,000 1.75 9 Far Eastern Group (011111 textiles mills) 2,010,000 1.71 10 Evergreen Group (015101 air transportation) 1,834,220 1.56
Note 1: The list shows rankings of the top 10 borrowers by total amount of credit, endorsement or other transactions but excludes government-owned or state-run enterprises. If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China of the Directorate-General of Budget, Accounting and Statistics under the Executive Yuan.
- 118 -
Note 2: Under Article 6 of the “Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for the Review of Securities Listings”, “Group” refers to the entity that has a controlling or subordinate relationship with the counter-party that obtained loans from CDIB.
Note 3: Credit balance means the sum of all the loans (including import bills negotiated, discounted export bills negotiated, overdrafts, short-term secured and unsecured loans, marginal receivables, medium-term secured and unsecured loans, long-term secured and unsecured loans, and overdue receivables), exchange bills negotiated, accounts receivable factored without recourse, acceptances receivable, and guarantees issued. c. Interest rate sensitivity information:
Please refer to Note 45 to the consolidated financial statements. d. Profitability
Please refer to Note 44 to the consolidated financial statements. e. Maturity analysis of assets and liabilities
Maturity Analysis as of December 31, 2009
(In Thousands of New Taiwan Dollars)
Period Remaining until Due Date Total 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Cash inflow $ 269,179,888 $ 50,427,833 $ 32,727,927 $ 13,035,551 $ 19,850,394 $ 153,138,183 Cash outflow 277,692,782 42,175,458 18,537,917 7,533,362 8,719,707 200,726,338 Gap (8,512,894 ) 8,252,375 14,190,010 5,502,189 11,130,687 (47,588,155 )
Maturity Analysis as of December 31, 2008
(In Thousands of New Taiwan Dollars)
Period Remaining until Due Date Total 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Cash inflow $ 229,289,829 $ 31,146,562 $ 13,877,275 $ 14,593,757 $ 14,036,396 $ 155,635,839 Cash outflow 241,823,922 30,897,477 16,449,914 4,569,149 5,259,336 184,648,046 Gap (12,534,093 ) 249,085 (2,572,639 ) 10,024,608 8,777,060 (29,012,207 )
Note: The above amounts included only New Taiwan dollar amounts (i.e., excluding foreign currency) held in the head office and local branches.
Maturity Analysis as of December 31, 2009
(In Thousands of U.S. Dollars)
Period Remaining until Due Date Total 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Cash inflow $ 2,423,216 $ 809,257 $ 402,914 $ 114,984 $ 140,157 $ 955,904 Cash outflow 2,121,435 871,775 585,371 75,578 137,465 451,246 Gap 301,781 (62,518 ) (182,457 ) 39,406 2,692 504,658
Maturity Analysis as of December 31, 2008
(In Thousands of U.S. Dollars)
Period Remaining until Due Date Total 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Over 1 Year Cash inflow $ 1,644,634 $ 386,920 $ 221,961 $ 105,296 $ 62,807 $ 867,650 Cash outflow 1,422,132 481,816 515,588 162,044 65,695 196,989 Gap 222,502 (94,896 ) (293,627 ) (56,748 ) (2,888 ) 670,661
Note: The above amounts included only U.S. dollar amounts held in the head office and local branches and the OBU.
- 119 -
50. CDIB’S TRUST BUSINESS OPERATIONS UNDER THE TRUST LAW
a. The balance sheets and income statements of the trust accounts and trust property accounts were as follows:
Balance Sheets of Trust Accounts
(In Thousands of New Taiwan Dollars)
December 31 December 31 Assets 2009 2008 Liabilities 2009 2008
Bank deposits $ 95,725 $ 145,863 Payables $ 20,341 $ 27,293
Real estate, net 1,783,240 1,918,535 Other liabilities Beneficiary 320,900 601,500 Receivables - 495 Others 15,908 15,954 336,808 617,454 Financial assets carried at cost 2,272 2,272 Trust capital 3,507,749 3,375,178 Other assets 1,296,740 1,251,442 Reversal and cumulative deficit Accumulated deficit (215,060 ) (7,892 ) Appropriation of income (489,540 ) (451,851 ) Net income (loss) 17,679 (241,575 ) Total capital surplus and related earnings (686,921 ) (701,318 )
Total $ 3,177,977 $ 3,318,607 Total $ 3,177,977 $ 3,318,607
Income Statements of Trust Accounts
(In Thousands of New Taiwan Dollars)
Years Ended December 31 2009 2008
Trust income and gains Rental income $ 49,557 $49,611 Interest income 265 1,963 Other income - 20 Total trust income and gains 49,822 51,594 Trust expenses Trust administrative expenses 8,953 7,700 Depreciation expenses 8,114 8,114 Tax expenses 7,015 8,548 Interest expenses 1,879 32,328 Professional expenses 565 764 Realized investment loss - common stock - 229,920 Other expenses 5,617 5,795 Total trust expenses 32,143 293,169
Net income (loss) before income tax $ 17,679 $ (241,575)
The above income (loss) from trust operations were excluded from CDIB’s income.
- 120 - Trust Property Accounts
(In Thousands of New Taiwan Dollars)
December 31 Investment Portfolio 2009 2008
Bank deposits $ 95,725 $ 145,863 Real estate, net 1,783,240 1,918,535 Receivables - 495 Financial assets carried at cost 2,272 2,272 Payments for others 1,279,536 1,230,262 Other assets 17,204 21,180
$ 3,177,977 $3,318,607
b. Trust business operations under the Trust Law: Please refer to Note 1 to the consolidated financial statements.
51. DISCLOSURE REQUIRED UNDER ARTICLE 46 OF THE FINANCIAL HOLDING COMPANY ACT
Please refer to Table 11 (attached).
52. CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME OF THE CORPORATION AND ITS SUBSIDIARIES
Please refer to Table 12 (attached).
53. ALLOCATION OF REVENUE, COST AND EXPENSE RESULTING FROM COOPERATION AND RESOURCE SHARING BETWEEN THE CORPORATION AND SUBSIDIARIES
For the resource sharing between the Corporation and subsidiaries, please refer to Notes 40 and 42 to the consolidated financial statements.
54. CONTINGENCIES AND COMMITMENT, DISASTROUS DAMAGES AND SUBSEQUENT EVENTS OF SUBSIDIARIES
Please refer to Note 42 to the consolidated financial statements. Information on disaster damages: None.
55. SUBSIDIARIES’ ASSET QUALITY, MANAGEMENT, PROFITABILITY, LIQUIDITY AND SENSITIVITY TO MARKET RISK
Please refer to Note 49 to the consolidated financial statements.
- 121 - 56. SPECIFIC RISK FROM FUTURES DEALING
Grand Cathay pays margin deposits when entering into futures contracts. Grand Cathay evaluates the margin account based on the market price of outstanding futures contracts on a daily basis. If the margin is less than the maintenance level, Grand Cathay should either deposit an additional margin or settle the deal to recognize the loss.
As of December 31, 2009, there were 17,261 outstanding contracts for both futures and options. The excess margin was $459,022 thousand.
As of December 31, 2008, there were 10,585 outstanding contracts for both futures and options. The initial margin was $452,271 thousand.
57. RISKS UNIQUE TO FUTURES BROKERAGE SERVICES
The businesses of Grand Cathay Futures Corp. (GCFC) include acting as an agent for the trading of futures contracts and futures option contracts. When entering into contracts on behalf of customers, GCFC requires margin deposits. GCFC may incur losses when the losses on contracts exceed the balances of the margin deposits. To manage this risk, GCFC closely monitors the losses on contracts and the balance of the margin deposits and, when appropriate, makes margin calls.
When customers short sell call options, they can use the underlying securities as the margin deposits. As of December 31, 2009 and 2008, there were no underlying securities used as customers’ margin deposits.
58. FINANCIAL RATIOS OF FUTURES - DEALING SUBSIDIARY
The following financial ratios of Grand Cathay’s futures department and Grand Cathay Futures Corp. are in compliance with the requirements of the Rules Governing Futures Commission Merchants.
a. Grand Cathay’s futures department
December 31 2009 2008 Rule No. Formula Formula % Formula % Standard
17 Equities $1,792,774 $1,960,992 ＝71.68 ＝49.44 ≧1 Total liabilities minus customers’ equity $25,012 $39,666 accounts - futures, futures trading loss reserve and default reserve
17 Current assets $1,807,653 $2,000,533 ＝80.32 ＝54.85 ≧1 Current liabilities $22,506 $36,471
22 Equities $1,792,774 $1,960,992 ≧60% ＝448% ＝490% Capital stock $400,000 $400,000 ≧40%
22 Adjusted net capital $1,742,263 $1,929,799 ≧20% ＝Infinity ＝8,953% Client and proprietary account $0 $21,554 ≧15%
- 122 - b. Grand Cathay Futures Corp.
December 31 2009 2008 Rule No. Formula Formula % Formula % Standard
17 Equities $741,818 $727,879 ＝14.02 ＝11.12 ≧1 $52,921 $65,451 Total liabilities minus customers’ equity accounts - futures, futures trading loss reserve and default reserve
17 Current assets $2,960,636 $2,941,077 ＝1.23 ＝1.22 ≧1 Current liabilities $2,401,707 $2,409,761
22 Equities $741,818 $727,879 ≧60% ＝185% ＝182% Capital stock $400,000 $400,000 ≧40%
22 Adjusted net capital $715,110 $692,099 ≧20% ＝286% ＝300% Client and proprietary account $250,035 $230,585 ≧15%
59. THE RATIO OF TOTAL CONSIGNED TRADING AMOUNTS TO NET ASSETS OF GRAND CATHAY FUTURES CORP.
As of December 31, 2009 and 2008, the ratio of total consigned trading amounts to net assets of Grand Cathay Futures Corp.’s managed futures enterprise department were 0.676 and 0.13, respectively.
60. SPECIFIC RISK OF MANAGED FUTURES ENTERPRISES
Discretionary futures trading refers to a managed futures enterprise’s accepting commissions from clients, performing analyses and making judgments with regard to futures trading, and on the basis of those analyses and judgments, executing futures trading operations on behalf of, and with trading funds consigned by, the principal.
When commissioning trading to Grand Cathay Futures Corp.’s (GCFC) managed futures enterprise department, consignors should pay much attention to the leverage effect due to the low margin requirement of futures transactions. This effect may cause them great gains or losses, therefore the consignors had to prudently consider their own financial abilities and economic conditions whether they can afford to trade these transactions. Discretionary futures trading does not necessarily mean there is no risk, and the past trading performance of GCFC does not necessarily mean the minimum yield had been guaranteed. Except to exercise due care, GCFC is not responsible for the gain or loss of consignors. GCFC does not guarantee the minimum yield.
61. ADDITIONAL DISCLOSURES
a. Following are the additional disclosures required by the Securities and Futures Bureau for the Corporation and its subsidiaries:
1) Financing provided: Not applicable to the Corporation and CDIB. For other subsidiaries’ information, please refer to Table 1 (attached).
2) Collaterals/guarantees provided: Not applicable to the Corporation and CDIB. For other subsidiaries’ information, please refer to Table 2 (attached).
3) Marketable securities held: Not applicable to the Corporation, CDIB, Grand Cathay and its subsidiaries. For other subsidiaries’ information, please refer to Table 3 (attached).
- 123 -
4) Subsidiaries are acquired and disposed of, at cost or price of at least NT$300 million or 10% of the issued capital (subsidiaries acquired and disposed of marketable securities, at cost or price of at least NT$300 million or 10% of the issued capital): Grand Cathay and its subsidiaries are not covered by the disclosure required under the Criteria Governing the Preparation of Financial Reports by Securities Firms. For the Corporation, CDIB’s information: None, other subsidiaries’ information, please refer to Table 4 (attached).
5) Acquisition of individual real estate at cost of at least NT$300 million or 10% of the issued capital: For the Corporation and other subsidiaries’ information: None.
6) Disposal of individual real estate at price of at least NT$300 million or 10% of the issued capital: For the Corporation and other subsidiaries’ information: None.
7) Discount on service fees received from related parties amounting to NT$5 million: For the Corporation and other subsidiaries’ information: None.
8) Receivables from related parties amounting to NT$300 million or 10% of the issued capital: Please refer to Table 5 (attached).
9) Sold nonperforming loans: Please refer to Table 8 (attached).
10) For related information on the subsidiaries’ securitization products approved under the Regulation on Financial Asset Securitization or the Regulation on Real Estate Securitization: Please refer to Note 14 to the consolidated financial statements.
11) Other significant transactions which may affect the decisions of financial statement users: None.
12) The information of investees: Please refer to Table 6 (attached).
13) Derivative transactions of the Corporation and subsidiaries: Please refer to Notes 7 and 45 to the consolidated financial statements.
b. Subsidiaries investment in Mainland China: Please refer to Table 13 (attached).
c. Financial information sorted by business: Please refer to Table 14 (attached).
d. Business relationships and significant transactions among the Corporation and its subsidiaries: Please refer to Table 15 (attached).
62. DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU
Information on the foreign subsidiaries registered in the Cayman Islands of Grand Cathay Securities Corporation is as follows:
a. Balance sheet: Table 16 (attached).
b. Income statement: Table 17 (attached).
c. Securities held: Table 18 (attached).
d. Derivative instruments and related capital resources:
1) Derivative instruments: Note 45 to the consolidated financial statements.
- 124 - 2) Related capital resources: Working capital.
e. Asset management revenues, service and litigation matters:
1) There was no asset management revenue for the year ended December 31, 2009.
2) There were no litigation matters in the year ended December 31, 2009.
63. SEGMENT INFORMATION
a. Industry information
The industry information of the Corporation in 2009 and 2008 is as follows:
Year Ended December 31, 2009 Bank Security Other Adjustment/ Department Department Department Elimination Total
Revenue from each segment $ 2,513,693 $ 901,125 $ 465 $ (477 ) $ 3,414,806
Department income (losses) $ 5,038,614 $ 2,501,310 $ (1,372,113 ) $ 2,540 $ 6,170,351 Investment income under the equity method, net 451,882
Income before tax $ 6,622,233
Identifiable assets $ 230,707,799 $ 45,680,154 $ 1,674,280 $ (2,421,766 ) $ 275,640,467 Investments under the equity method 12,492,428
Total assets $ 288,132,895
Depreciation and amortization $ 139,247 $ 106,120 $ 9,285 Capital expenditure $ 35,874 $ 31,565 $ 1,775
Year Ended December 31, 2008 Bank Security Other Adjustment/ Department Department Department Elimination Total
Revenue from each segment $ 5,066,689 $ 1,056,920 $ 28,884 $ (39,027 ) $ 6,113,466
Department losses $ (3,555,123) $ (1,716,543) $ (1,373,555) $ (62,574 ) $ (6,707,795) Investment income under the equity method, net (817,319 )
Loss before tax $(7,525,114)
Identifiable assets $ 236,662,311 $ 40,684,911 $ 1,025,467 $ (1,774,649 ) $ 276,598,040 Investments under the equity method 12,515,673
Total assets $289,113,713
Depreciation and amortization $ 173,203 $ 112,154 $ 10,720 Capital expenditure $ 151,006 $ 46,311 $ 15,422
b. The Corporation and its subsidiaries had no single customer accounting for at least 10% of the total income of the Corporation nor did they have overseas operations. Thus, no geographic and major-customer information is required to be disclosed.
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CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
FINANCING PROVIDED YEAR ENDED DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Collateral Financing Limit Limit on Maximum for Each Interest Rate Transaction Financing Allowance for Financier’s Total No. Financier Counter-party Financial Statement Account Balance for the Ending Balance Nature Borrowing (%) Amount Reasons Bad Debt Item Value Financing Period Company (Note 2) (Note 2)
1 Development Industrial Bank Tung Zong Textile Co., Other accounts receivable - $ 21,500 $ - - (Note 1) $ - Working capital $ - - $ - $ 523,445 $ 523,445 Asset Management Corp. Ltd. others
2 Chung Hwa Growth 2 Asset Chung Hwa Growth 3 Other accounts receivable - 70,000 - 2.196-2.367 (Note 1) - Working capital - - - (Note 3) (Note 3) Management Corp. (Note 3) Asset Management related parties Corp.
Note 1: It is short-term and necessary.
Note 2: The limit is up to 40% of the financier’s net asset value.
Note 3: On September 1, 2009, Chung Hwa Growth 2 Asset Management Corporations merged with Chung Hwa Growth 3 Asset Management Corporation, with the last company as the survivor entity.
Note 4: Eliminated from the consolidation.
- 126 - TABLE 2
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
COLLATERALS/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Counter-party Ratio of Accumulated Limits on Each Carrying Value (As of Maximum Amount of Collateral Maximum Collaterals/Guarantee Counter-party’s Ending Balance Balance Sheet Date) of No. Balance for the Period to Net Asset Value of Collateral/Guarantee Provider Name Nature of Relationship Collateral/Guarantee (Note 3) Properties Guaranteed (Note 3) the Latest Financial Amounts Allowable (Note 2) Amounts (Note 1) by Collateral Statement
1 CDC Finance & Leasing CDC Financing & Subsidiary $1,204,965 $6,188 $ - $ - - $3,012,413 Corp Leasing (BVI) Corp.
Note 1: Up to 2 times of the guarantee provider’s net asset value.
Note 2: Up to 5 times of the guarantee provider’s net asset value.
Note 3: Refers to the collateral guarantee lines used.
Note 4: The remaining credit line with a bank was $416,390 thousand as of December 31, 2009.
- 127 - TABLE 3
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES HELD DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
R.O.C. Strategic Company Stocks Ltd. Donpon Precision, Inc. - Investment under the equity method 597,514 $ 6,665 0.80 $ 6,304 (Note 6) Gemtek Technology Co., Ltd. Director Available-for-sale financial assets 2,290,338 132,381 0.83 132,381 Teapo Electronic Corporation - Available-for-sale financial assets 1,118,396 5,704 0.31 5,704 Taiwan Nano Electro-Optical Technology Co., Ltd. - Available-for-sale financial assets 1,983,102 53,841 1.06 53,841 Contrel Technology Co., Ltd. - Available-for-sale financial assets 858,423 19,186 0.65 19,186 AVY Precision Technology Inc. - Available-for-sale financial assets 60,000 12,330 0.08 12,330 Utechzone Co., Ltd. - Available-for-sale financial assets 545,415 14,972 1.06 14,972 Everlight Electronics Co., Ltd. Director Available-for-sale financial assets 1,514,058 181,687 0.37 181,687 Ado Optronics Corporation - Available-for-sale financial assets 523,147 11,300 0.68 11,300 Jarllytec Co., Ltd. - Available-for-sale financial assets 90,846 5,342 0.18 5,342 ASUSTek Computer Inc. - Available-for-sale financial assets 780,000 48,204 0.02 48,204 Zinwell International Corporation - Available-for-sale financial assets 305,835 18,870 0.10 18,870 Wafer Works Corp. - Available-for-sale financial assets 140,348 8,182 0.05 8,182 Simula Technology, Inc. - Available-for-sale financial assets 27,232 2,320 0.09 2,320 Sitronix Technology Co., Ltd. - Available-for-sale financial assets 214,185 13,922 0.19 13,922 AV Tech Corporation - Available-for-sale financial assets 80,000 8,600 0.08 8,600 Wistron NeWeb Corporation - Available-for-sale financial assets 300,000 16,620 0.12 16,620 Advanced Semiconductor Engineering, Inc. - Available-for-sale financial assets 810,000 23,368 0.01 23,368 Wistron Corporation - Available-for-sale financial assets 180,000 11,178 0.01 11,178 Hiwin Technologies Corp. - Available-for-sale financial assets 105,000 4,394 0.05 4,394 Delta Electronics, Inc. - Available-for-sale financial assets 155,000 15,500 0.01 15,500 Acer Incorporated - Available-for-sale financial assets 480,000 46,176 0.02 46,176 Quanta Computer Inc. - Available-for-sale financial assets 250,000 17,400 0.01 17,400 Wintek Corporation - Available-for-sale financial assets 200,000 5,700 0.02 5,700 Chinese Gamer International Corporation - Available-for-sale financial assets 38,000 16,112 0.04 16,112 Siliconware Precision Industries Co., Ltd. - Available-for-sale financial assets 300,000 13,005 0.01 13,005 Hon Hai Precision Ind. Co., Ltd. - Available-for-sale financial assets 140,000 21,210 - 21,210 Taiwan Semiconductor Manufacturing Co., Ltd. - Available-for-sale financial assets 165,000 10,643 - 10,643 Victory Circuit Co., Ltd. - Available-for-sale financial assets 400,000 1,024 0.38 1,024 Pacifictech Microelectronics Co., Ltd. - preferred stock - Financial assets carried at cost 3,597,122 19,098 50.00 58,373 (Note 7) A-1 Evervision Electronics Co., Ltd. Director Financial assets carried at cost 2,365,964 29,296 2.46 28,724 Capital Excel Investment Limited - Financial assets carried at cost 1,000 39,217 10.00 38,635 New Pacific International Investments Limited - Financial assets carried at cost 780 38,574 10.00 38,388 Asia Pacific Telecom Co., Ltd. - Financial assets carried at cost 2,500,000 5,000 0.08 13,609 Liyitec Inc. Director Financial assets carried at cost 554,472 13,461 6.89 7,163 Pai Lung Machinery Mill Co., Ltd. - Financial assets carried at cost 750,000 16,500 1.74 5,458 Advance Multimedia Internet Technology Inc. - Financial assets carried at cost 152,493 1,830 0.29 1,677 Newmax Technology Co., Ltd. - Financial assets carried at cost 631,865 12,396 1.00 29,066 Pixim Inc. - Financial assets carried at cost 161,544 1,431 0.26 303 Yi King Industrial Co., Ltd. - Financial assets carried at cost 515,790 6,750 1.62 7,479 Azotek Co., Ltd. - Financial assets carried at cost 412,250 13,823 0.82 1,376 Simpal Electronics Co., Ltd. - Financial assets carried at cost 754,500 18,354 0.45 8,926 BOX Solutions Corp. Director Financial assets carried at cost 500,000 5,000 2.50 1,135 Beyond Innovation Technology Co., Ltd. Director Financial assets carried at cost 630,518 8,996 1.87 3,052 Greatland Electronics Taiwan Ltd. - Financial assets carried at cost 640,000 17,500 1.83 5,792 Browan Communications Inc. - Financial assets carried at cost 1,057,767 15,866 4.07 4,876 AMPAK Technology Inc. Director Financial assets carried at cost 463,170 10,000 1.08 3,402
(Continued)
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December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
R.O.C. Venture Company Ltd. Stocks Promise Technology, Inc. - Available-for-sale financial assets 339,776 $ 9,276 0.24 $ 9,276 Victory Circuit Co., Ltd. - Available-for-sale financial assets 400,000 1,024 0.38 1,024 Gemtek Technology Co., Ltd. - Available-for-sale financial assets 80,255 4,639 0.03 4,639 Elite Advanced Laser Corporation - Available-for-sale financial assets 461 21 - 21 Taiwan Nano Electro-Optical Technology Co., Ltd. - Available-for-sale financial assets 1,892,320 51,376 1.02 51,376 Chi Mei Optoelectronics Corporation - Available-for-sale financial assets 629,412 14,162 0.01 14,162 Qisda Corporation - Available-for-sale financial assets 864,000 17,323 0.04 17,323 Capxon International Electronic Co., Ltd. - Available-for-sale financial assets 5,156,193 5,105 0.61 5,105 AU Optronics Corp. - Available-for-sale financial assets 925,731 35,918 0.01 35,918 Utechzone Co., Ltd. - Available-for-sale financial assets 479,761 13,169 0.94 13,169 Ado Optronics Corporation - Available-for-sale financial assets 685,147 14,799 0.89 14,799 Jarllytec Co., Ltd. - Available-for-sale financial assets 454,230 26,709 0.91 26,709 Giga Solution Tech. Co., Ltd. Supervisor Available-for-sale financial assets 1,018,742 23,941 0.93 23,941 Simula Technology, Inc. - Available-for-sale financial assets 158,232 13,481 0.51 13,481 Beijing ORG-MC Metal Containers Co., Ltd. - Financial assets carried at cost - 39,555 0.99 29,754 Gemstone Communications, Inc. - Financial assets carried at cost 1,437,500 15,625 8.93 - Asia Pacific Telecom Co., Ltd. - Financial assets carried at cost 2,500,000 5,000 0.08 13,609 Truelight Corporation - Financial assets carried at cost 1,383,700 21,920 1.90 31,825 Star Technologies Inc. - Financial assets carried at cost 732,246 3,552 4.74 9,230 Evervision Electronics Co., Ltd. - Financial assets carried at cost 800,400 10,799 0.83 9,717 Pixim Inc. - Financial assets carried at cost 161,544 1,431 0.26 303 Clientron Corp. - Financial assets carried at cost 262,431 4,706 0.29 2,342 Liyitec Inc. - Financial assets carried at cost 117,825 2,860 1.46 1,522 Advanced Flexible Circuits Co., Ltd. Director Financial assets carried at cost 974,636 19,150 5.00 16,148 BOX Solutions Corp. - Financial assets carried at cost 1,000,000 10,000 5.00 2,270 Pai Lung Machinery Mill Co., Ltd. - Financial assets carried at cost 750,000 16,500 1.74 5,458 Beyond Innovation Technology Co., Ltd. - Financial assets carried at cost 630,454 8,995 1.87 3,052 Greatland Electronics Taiwan Ltd. - Financial assets carried at cost 640,000 17,500 1.83 5,792 Derbysoft Holdings Limited - preferred stock A - Financial assets carried at cost 2,000,000 6,567 2.89 988 (Note 7) AMPAK Technology Inc. - Financial assets carried at cost 463,170 10,000 1.08 3,402
CDIB Strategic Venture Fund, Stocks Ltd. Taiwan International Securities Corporation Supervisor Investment under the equity method 20,292,369 254,043 1.87 223,216 (Note 5) Tenor Electronics Co. - Investment under the equity method 2,500,000 4,987 8.65 5,093 (Note 6) Simula Technology, Inc. Director Available-for-sale financial assets 840,232 71,588 2.70 71,588 Victory Circuit co., Ltd. - Available-for-sale financial assets 400,000 1,024 0.38 1,024 Portwell Inc. - Available-for-sale financial assets 167,207 5,953 0.15 5,953 Elitegroup Computer Systems Co., Ltd. - Available-for-sale financial assets 1,228,423 18,733 0.10 18,733 Taiwan Nano Electro-Optical Technology Co., Ltd. - Available-for-sale financial assets 1,475,140 40,050 0.79 40,050 Advanced Semiconductor Engineering, Inc. - Available-for-sale financial assets 1,360,000 39,236 0.02 39,236 Ado Optronics Corporation Director Available-for-sale financial assets 977,147 21,106 1.27 21,106 United Microelectronics Corporation - Available-for-sale financial assets 1,828,750 31,455 0.01 31,455 ASUSTek Computer Inc. - Available-for-sale financial assets 65,000 4,017 - 4,017 Zinwell International Corporation - Available-for-sale financial assets 495,948 30,600 0.16 30,600 Wafer Works Corp. - Available-for-sale financial assets 224,558 13,092 0.08 13,092 Contrel Technology Co., Ltd. - Available-for-sale financial assets 296,525 6,627 0.23 6,627 Sitronix Technology Co., Ltd. - Available-for-sale financial assets 289,149 18,795 0.25 18,795 Hiwin Technologies Corp. - Available-for-sale financial assets 100,000 4,185 0.04 4,185 Delta Electronics, Inc. - Available-for-sale financial assets 70,000 7,000 - 7,000 Quanta Computer Inc. - Available-for-sale financial assets 135,000 9,396 - 9,396 Wintek Corporation - Available-for-sale financial assets 200,000 5,700 0.02 5,700 Chinese Gamer International Corporation - Available-for-sale financial assets 25,000 10,600 0.03 10,600 Wistron Corporation - Available-for-sale financial assets 100,000 6,210 0.01 6,210 (Continued)
- 129 -
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
AV Tech Corporation - Available-for-sale financial assets 100,000 $ 10,750 0.10 $ 10,750 Pacifictech Microelectronics Co., Ltd. - preferred stock Director Financial assets carried at cost 3,597,122 15,043 50.00 58,373 (Note 7) A-1 Pacifictech Microelectronics Co., Ltd. - preferred stock Director Financial assets carried at cost 1,220,981 16,085 12.50 14,593 (Note 7) A-2 Pixim Inc. - Financial assets carried at cost 161,544 1,431 0.26 303 Capital Excel Investment Limited - Financial assets carried at cost 1,000 39,217 10.00 38,635 New Pacific International Investments Limited - Financial assets carried at cost 780 38,574 10.00 38,388 Liyitec Inc. - Financial assets carried at cost 481,921 11,486 5.99 6,226 Newmax Technology Co., Ltd. Director Financial assets carried at cost 1,305,336 26,101 2.06 60,045 Yi King Industrial Co., Ltd. - Financial assets carried at cost 515,790 6,750 1.62 7,479 Gemstone Communications, Inc. - Financial assets carried at cost 370,000 5,550 2.30 - Azotek Co., Ltd. - Financial assets carried at cost 412,250 13,823 0.82 1,376 CANDO Corporation - Financial assets carried at cost 2,612,633 43,766 0.37 70,672 Pai Lung Machinery Mill Co., Ltd. - Financial assets carried at cost 750,000 16,500 1.74 5,458 Simpal Electronics Co., Ltd. - Financial assets carried at cost 1,509,000 36,707 0.91 17,852 Greatland Electronics Taiwan Ltd. - Financial assets carried at cost 1,280,000 35,000 3.66 11,584 Derbysoft Holdings Limited - preferred stock A Director Financial assets carried at cost 28,000,000 91,938 40.48 13,833 (Note 7) Derbysoft Holdings Limited - preferred stock B Director Financial assets carried at cost 4,643,469 15,297 6.17 2,110 (Note 7) AMPAK Technology Inc. - Financial assets carried at cost 463,170 10,000 1.08 3,402 Beijing ORG-MC Metal Containers Co., Ltd. - Financial assets carried at cost - 290,070 7.26 218,193
China Venture Management Stocks Inc. R.O.C. Strategic Company Ltd. Same chairman Investment under the equity method 8,346 48 0.01 119 (Note 5) R.O.C. Venture Company Ltd. Same chairman Investment under the equity method 1,216 65 - 13 (Note 5) Tenor Electronics Co. - Investment under the equity method 187,500 2,684 0.65 382 (Note 6) Promise Technology, Inc. - Available-for-sale financial assets 20,232 552 0.01 552 AVY Precision Technology Inc. - Available-for-sale financial assets 60,000 12,330 0.08 12,330 Chi Mei Optoelectronics Corporation - Available-for-sale financial assets 1,080,900 24,320 0.01 24,320 AU Optronics Corp. - Available-for-sale financial assets 925,731 35,918 0.01 35,918 Capxon International Electronic Co., Ltd. - Available-for-sale financial assets 472,500 468 0.06 468 Utechzone Co., Ltd. - Available-for-sale financial assets 161,600 4,436 0.32 4,436 Qisda Corporation - Available-for-sale financial assets 443,880 8,900 0.02 8,900 MediaTek Inc. - Available-for-sale financial assets 60,202 33,593 0.01 33,593 Taiwan Nano Electro-Optical Technology Co., Ltd. - Available-for-sale financial assets 200,000 5,430 0.11 5,430 ASUSTek Computer Inc. - Available-for-sale financial assets 545,000 33,681 0.01 33,681 Delta Electronics, Inc. - Available-for-sale financial assets 105,000 10,500 - 10,500 Acer Incorporated - Available-for-sale financial assets 340,000 32,708 0.01 32,708 Quanta Computer Inc. - Available-for-sale financial assets 290,000 20,184 0.01 20,184 Wintek Corporation - Available-for-sale financial assets 100,000 2,850 0.01 2,850 Chinese Gamer International Corporation - Available-for-sale financial assets 30,000 12,720 0.03 12,720 Wistron Corporation - Available-for-sale financial assets 180,000 11,178 0.01 11,178 Taiwan Semiconductor Manufacturing Co., Ltd. - Available-for-sale financial assets 476,000 30,702 - 30,702 Wistron NeWeb Corporation - Available-for-sale financial assets 380,000 21,052 0.15 21,052 Hon Hai Precision Ind. Co., Ltd. - Available-for-sale financial assets 120,000 18,180 - 18,180 Advanced Semiconductor Engineering, Inc. - Available-for-sale financial assets 475,000 13,704 0.01 13,704 Siliconware Precision Industries Co., Ltd. - Available-for-sale financial assets 300,000 13,005 0.01 13,005 Hi Share Electronics Co., Ltd. - Available-for-sale financial assets 134,000 4,462 0.32 4,462 Victory Circuit Co., Ltd. - Available-for-sale financial assets 400,000 1,024 0.38 1,024 China Technology Venture Company Limited Director Financial assets carried at cost 375 5,379 5.07 1,591 Advance Multimedia Internet Technology Inc. - Financial assets carried at cost 33,721 405 0.06 371 Progate Group Corporation - Financial assets carried at cost 27,274 325 0.08 153 MCM Stampling Co., Ltd. - Financial assets carried at cost 70,000 2,100 0.22 1,353 Pixim Inc. - Financial assets carried at cost 323,088 32 0.51 605 Luxon Technology Corporation - Financial assets carried at cost 368,231 37 0.36 16
Fund Newbury Ventures III, L.P. - Financial assets carried at cost - 18,887 - 9,644
(Continued)
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December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
CDIB Equity Inc. Stocks Career Technology (MFG) Co., Ltd. - Available-for-sale financial assets 257,881 $ 6,989 0.08 $ 6,989 Hua Jung Co., Ltd. Supervisor Available-for-sale financial assets 6,271 71 - 71 Powertech Industrial Co., Ltd. Director Available-for-sale financial assets 199,229 7,421 0.18 7,421 Transcend Information, Inc. Supervisor Available-for-sale financial assets 90,933 10,912 0.02 10,912 Aten International Co., Ltd. Director Available-for-sale financial assets 65,660 4,347 0.05 4,347 Chang Wah Electromaterials Inc. Director Available-for-sale financial assets 10,609 1,804 0.02 1,804 ASRock Inc. - Available-for-sale financial assets 54,022 8,508 0.05 8,508 Tong Hsing Electronic Industries, Ltd. - Available-for-sale financial assets 100,000 11,350 0.08 11,350 Kinik Company - Available-for-sale financial assets 35,700 1,408 0.03 1,408 Powercom Co., Ltd. Director Available-for-sale financial assets 54,753 1,506 0.03 1,506 Chi Cheng Enterprise Co., Ltd. - Available-for-sale financial assets 2,433,371 69,108 1.12 69,108 Win Semiconductors Corp. - Financial assets carried at cost 2,157,416 23,148 0.36 53,765 TransAsia Airways Supervisor Financial assets carried at cost 17,663 118 - 176 Kintin Optotronic Co., Ltd. - Financial assets carried at cost 454,602 11,250 1.28 3,264 EVA Technologies Co., Ltd. Director Financial assets carried at cost 744,058 12,060 1.78 11,273 Protech Wheel Industry Co., Ltd. - Financial assets carried at cost 82,000 812 0.12 738 Wells Tech Optical Co., Ltd. Supervisor Financial assets carried at cost 354,364 3,544 0.82 3,544 E-Com Technology Corp. - Financial assets carried at cost 567,500 10,000 3.29 5,865 TaiGen Biopharmaceuticas Holdings Limited - preferred - Financial assets carried at cost 1,700,000 17,000 1.18 16,771 (Note 7) stock Arcoa Communication Co., Ltd. - Financial assets carried at cost 783,000 7,493 0.58 8,393 iStor Networks, Inc. - preferred stock - Financial assets carried at cost 871,856 29,850 1.47 5,029 (Note 7) MaxTronic International Co., Ltd. - Financial assets carried at cost 280,479 20,175 2.70 3,076 Allied Biotech Corp. - Financial assets carried at cost 1,100,000 11,000 1.54 9,747 Initio Corporation - Financial assets carried at cost 315,000 1,800 0.79 11,555 Beyond Innovation Technology Co., Ltd. - Financial assets carried at cost 235,474 4,485 0.70 2,655 Luminous Town Electric Co., Ltd. - Financial assets carried at cost 1,384,958 13,608 2.16 13,296
Convertible corporate bond Celxpert Energy Corporation I - Financial assets at fair value through 100,000 12,000 - 12,000 profit or loss
CDIB Knowledge-Based Stocks Economy Capital Co., Ltd. Aten International Co., Ltd. - Available-for-sale financial assets 2,283,567 151,172 1.91 151,172 Professional Computer Tech. Limited - Available-for-sale financial assets 795,367 24,577 1.07 24,577 Her Chee Industrial Co., Ltd. - Available-for-sale financial assets 3,688,750 49,798 5.05 49,798 Taiwan Cogeneration Corporation - Available-for-sale financial assets 556,209 9,789 0.11 9,789 Chang Wah Electromaterials Inc. - Available-for-sale financial assets 1,123,143 190,934 1.78 190,934 Gallant Precision Machine Co., Ltd. - Available-for-sale financial assets 1,559,374 41,323 0.68 41,323 Anpec Electronics Corporation Director Available-for-sale financial assets 5,152,516 278,236 4.08 278,236 AV Tech Corporation - Available-for-sale financial assets 373,505 40,152 0.37 40,152 Yang An Electronics Corporation - Available-for-sale financial assets 6,120,536 226,154 4.53 226,154 ASUSTek Computer Inc. - Available-for-sale financial assets 1,341,784 82,922 0.03 82,922 Well Shin Technology Co., Ltd. - Available-for-sale financial assets 2,675,958 177,951 2.61 177,951 ASRock Inc. - Available-for-sale financial assets 424,462 66,853 0.37 66,853 Formosa Advanced Technologies Co., Ltd. - Available-for-sale financial assets 100,000 4,800 0.02 4,800 Sunspring Metal Corp. - Available-for-sale financial assets 400,000 13,980 0.24 13,980 Taihan Precision Technology Co., Ltd. - Available-for-sale financial assets 4,117,158 83,578 6.21 83,578 Goodway Machine Corp. Supervisor Available-for-sale financial assets 3,036,232 89,872 3.21 89,872 Shin Zu Shing Co., Ltd. - Available-for-sale financial assets 751,894 119,927 0.50 119,927 Tong Hsing Electronic Industries Ltd. - Available-for-sale financial assets 840,000 95,340 0.67 95,340 Wellpower Optronics Corporation - Available-for-sale financial assets 1,247,400 49,896 0.73 49,896 Taiwan IC Packaging Corporation - Available-for-sale financial assets 1,598,385 22,537 0.53 22,537 Inotera Memories, Inc. - Available-for-sale financial assets 9,078,900 244,676 0.23 244,676 (Continued)
- 131 -
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
Dynamic Electronics Co., Ltd. Director Available-for-sale financial assets 2,938,980 $ 113,592 1.12 $ 113,592 Aces Connectors Co., Ltd. Director Available-for-sale financial assets 2,325,651 298,846 2.45 298,846 Joinsoon Electronics Mfg. Co., Ltd. - Available-for-sale financial assets 258,790 6,987 0.36 6,987 San Chih Semiconductor Inc. Ltd. - Available-for-sale financial assets 400,000 31,160 0.42 31,160 K Laser Technology Inc. Director Available-for-sale financial assets 703,148 18,106 0.53 18,106 Neo Solar Power Corp. - Available-for-sale financial assets 100,000 8,080 0.05 8,080 Chipsip Technology Co., Ltd. - Financial assets carried at cost 719,756 3,760 2.05 13,849 Focus Media Holding Ltd. - Financial assets carried at cost 1,000,000 4,187 6.67 1,220 Top Green Technologies Inc. - Financial assets carried at cost 2,000,000 15,234 1.05 36,127 MaxTronic International Co., Ltd. - Financial assets carried at cost 631,079 41,433 6.07 6,920 Integrated Solutions Technology Inc. - Financial assets carried at cost 161,022 2,898 0.54 1,475 VIBO Telecommunication Inc. - Financial assets carried at cost 21,395,997 213,960 1.10 121,957 Allied Biotech Corp. - Financial assets carried at cost 2,750,000 27,500 3.84 24,367 Compliance Certification Services Inc. - Financial assets carried at cost 749,271 15,000 2.12 15,281 Macroblock, Inc. - Financial assets carried at cost 500,000 45,000 1.52 74,500 Capella Microsystems (Taiwan), Inc. - Financial assets carried at cost 1,072,828 94,578 3.97 195,948 Kintin Optotronic Co., Ltd. - Financial assets carried at cost 1,818,412 45,000 5.14 13,056 Tuntex Petronchemicals Inc. Supervisor Financial assets carried at cost 4,500,000 29,970 0.85 38,021 Yenyo Technology Co., Ltd. - Financial assets carried at cost 500,000 5,250 1.24 4,121 BCM Communication Co., Ltd. - Financial assets carried at cost 750,000 9,000 3.33 1,483 Jochu Technology Co., Ltd. - Financial assets carried at cost 3,479,327 93,664 4.82 192,115 AboMem Technology Corp. - Financial assets carried at cost 209,869 7,662 0.74 2,099 Alpha Imaging Technology Corp. Supervisor Financial assets carried at cost 372,875 49,050 0.70 21,494 Quanmax Inc. (formerly Kontron Asia Inc.) - Financial assets carried at cost 312,000 20,040 0.63 14,819 Dee Van Enterprise Co., Ltd. - Financial assets carried at cost 1,612,500 38,273 2.01 28,128 Uni-Lite Touchtek Corp. - Financial assets carried at cost 284,929 8,100 0.23 3,130 Global Mobile Corp. - Financial assets carried at cost 1,127,230 11,272 1.00 11,272 Delsolar Co., Ltd. - Financial assets carried at cost 2,754,975 145,195 1.10 135,727 Hotron Precision Electronic Industrial Co., Ltd. Director Financial assets carried at cost 1,155,000 48,017 2.26 32,373 LightHouse Technology Co., Ltd. - Financial assets carried at cost 1,574,634 44,400 1.59 72,843 ADDA Corporation Director Financial assets carried at cost 11,600,000 60,320 5.76 187,340 Allied Integrated Patterning Corp. Director Financial assets carried at cost 1,800,000 18,000 2.42 18,000 Integrated Digital Technologies, Inc. - Financial assets carried at cost 2,500,000 62,500 6.87 62,500 Crowningtek, Inc. - Financial assets carried at cost 480,000 3,031 2.74 2,494 Yobon Technologies, Inc. - Financial assets carried at cost 1,050,000 2,067 6.53 934 STL Technology Co., Ltd. Director Financial assets carried at cost 6,668,622 255,605 10.17 286,751 Solar PV Corporation - Financial assets carried at cost 4,000,000 78,216 3.60 77,372 Lotus Pharmaceutical Co., Ltd. - Financial assets carried at cost 310,697 2,900 0.86 9,772 Tera Autotech Corporation Inc. - Financial assets at fair value through 362,578 12,400 - 12,400 profit or loss
Convertible corporate bonds Everlight Electronics Co., Ltd. III - Financial assets at fair value through 1,000,000 128,400 - 128,400 profit or loss Epistar Corp. III - Financial assets at fair value through 200,000 23,300 - 23,300 profit or loss Hua Jung Co., Ltd. II - Financial assets at fair value through 475,000 63,009 - 63,009 profit or loss Celxpert Energy Corporation I - Financial assets at fair value through 900,000 108,000 - 108,000 profit or loss
Depositary receipt Sandmartin International Holdings Limited - Available-for-sale financial assets 12,000,000 109,920 1.81 109,920
(Continued)
- 132 -
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
CDIB Capital Investment I Stocks Limited (formerly CDIB Subicvest Inc. Subsidiary Investment under the equity method 15,739,600 US$ 2,507,466 100.00 US$ 2,507,466 Capital Limited) ASEM Capital Co., Ltd. Subsidiary Investment under the equity method 3,300,000 US$ 10,512,949 100.00 US$ 10,512,949 CDIB Asset Management Co., Ltd. Subsidiary Investment under the equity method 3,000,000 US$ 9,123,396 100.00 US$ 9,123,396 Samson Holding Ltd. - Available-for-sale financial assets 11,830,000 US$ 1,830,561 0.39 US$ 1,830,561 Da Chan Asia Ltd. - Available-for-sale financial assets 49,250,000 US$ 10,605,738 4.87 US$ 10,605,738 Skysoft Inc. - preferred stock Director Financial assets carried at cost 8,000,000 US$ 4,000,000 46.43 US$ 5,375,200 (Note 7) Rock Mobile (Cayman) Co. - Financial assets carried at cost 840,336 US$ 1,000,000 3.26 US$ 369,496 Touch Media International Holdings - preferred stock - Director Financial assets carried at cost 6,651,906 US$ 7,000,000 60.34 US$ 6,999,801 (Note 7) B-1
Funds Carlyle Asia Partners II, L.P. - Financial assets carried at cost - US$ 18,908,813 - US$ 16,741,071 Ripley Cable Holdings I, L.P. - Financial assets carried at cost - US$ 32,799,163 - US$ 67,815,298 Doughty Hanson & Co. V, Limited Partnership 2 - Financial assets carried at cost - US$ 10,016,090 - US$ 10,568,924
Options Great Team Backend Foundry Inc. - Financial assets carried at cost - US$ 1,179,672 - US$ 1,179,953 K Laser (China) Group Co., Ltd. - Financial assets carried at cost - US$ 1,388,000 - US$ 1,388,003 Dongsheng Chemphy Limited Director Financial assets carried at cost - US$ 1,890,359 - US$ -
Convertible corporate bonds Wilson Group Holding Limited - Debt instruments with no active - US$ 6,500,000 - US$ 9,054,036 market Great Team Backend Foundry Inc. - Debt instruments with no active - US$ 3,820,328 - US$ 3,820,015 market K Laser (China) Group Co., Ltd. - Debt instruments with no active - US$ 6,612,000 - US$ 6,612,002 market Dongsheng Chemphy Limited Director Debt instruments with no active - US$ 3,109,641 - US$ 5,000,000 market
Subicvest Inc. Stock SPEC Protertices, Inc. - Financial assets carried at cost 242,683 PHP 3,255,807 3.44 PHP 2,590,179
CDIB Global Market III Stocks Limited (formerly CDIB CDIB Venture Management (USA), Inc. Subsidiary Investment under the equity method 8,000,000 US$ 1,377,490 100.00 US$ 1,377,490 Capital (USA) Limited) CDIB North America Venture Management L.L.C. Subsidiary Investment under the equity method - US$ 253,537 80.00 US$ 253,537 WaveSplitter Technologies - Financial assets carried at cost 591,591 US$ 26,358 4.15 US$ 58,390 Sonics, Inc. - preferred stock - Financial assets carried at cost 114,359 US$ 333,334 14.74 US$ 333,334 (Note 7)
Funds American Major Industry Fund, L.L.C. Subsidiary Investment under the equity method 6,000,000 US$ 15,830,989 - US$ 15,830,989 North America Venture Fund II, L.P. - Investment under the equity method - US$ 3,017,305 - US$ 3,017,305 Crystal Internet Venture Fund II - Financial assets carried at cost - US$ 378,294 - US$ 665,889 Dynafund II, L.P. - Financial assets carried at cost - US$ 88,479 - US$ 155,435 GS Capital Partners VI Offshore, L.P. - Financial assets carried at cost - US$ 9,852,233 - US$ 8,470,460 Terra Firma Capital Partners III, L.P. - Financial assets carried at cost - US$ 10,344,725 - US$ 4,635,469 New Mountain Partners III, L.P. - Financial assets carried at cost - US$ 4,947,675 - US$ 4,312,564
CDIB North America Venture Fund Management, L.L.C. North America Venture Fund II, L.P. Subsidiary Investment under the equity method - US$ 81,585 - US$ 81,585 (Note 5)
American Major Industry Stock Fund, L.L.C. Bangchak Petroleum Public Company Ltd. - Available-for-sale financial assets 13,400,000 US$ 5,989,501 1.20 US$ 5,989,501
(Continued)
- 133 -
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
CDIB Global Markets II Stocks Limited (formerly CDIB Tai-I International Holding Limited - Available-for-sale financial assets 11,530,000 US$ 587,279 1.93 US$ 587,279 Capital (Korea) Limited) ARD Holdings, Inc. Director Financial assets carried at cost 4,744,484 US$ 38,410,750 12.26 US$ 30,271,347
Bond WeMade Entertainment Co., Ltd. - preferred stock Director Debt instruments with no active 630,000 US$ 12,771,574 50.00 US$ 11,341,201 (Note 7) market
Option WeMade Entertainment Co., Ltd. Director Financial assets carried at cost - US$ 1,714,182 - US$ 17,823,529
Funds Carlyle Japan International Partners II, L.P. - Financial assets carried at cost - US$ 2,568,690 - US$ 1,764,964 AIF Capital Asia III, L.P. - Financial assets carried at cost - US$ 7,156,221 - US$ 7,485,048 CJIP II Co-Incest, L.P. - Financial assets carried at cost - US$ 338,006 - US$ 222,709 Apax Eur VII-B, L.P. - Financial assets carried at cost - US$ 10,429,127 - US$ 7,431,429 Oak Hill Capital Partners III, L.P. - Financial assets carried at cost - US$ 3,486,351 - US$ 2,312,827 OCM Earopean Principal Opportunities Fund II (U.S.), - Financial assets carried at cost - US$ 5,043,342 - US$ 7,103,025 L.P. Clayton, Dubilier & Rice Fund VIII, L.P. - Financial assets carried at cost - US$ 2,813,483 - US$ 2,601,379 First Reserve Fund XII, L.P. - Financial assets carried at cost - US$ 3,740,898 - US$ 3,938,061 CX Partners Fund Alpha Limited - Financial assets carried at cost - US$ 2,057,307 - US$ 1,678,440 Carlyle Asia Partners III, L.P. - Financial assets carried at cost - US$ 3,176,945 - US$ 3,534,584
CDIB Europe Investment Co. Stocks CDIB France Co. Subsidiary Investment under the equity method 1,062,547 US$ 28,276 69.77 US$ 28,276 Surf-Communication Solutions Ltd. - preferred stock E - Financial assets carried at cost 341,744 US$ 115,892 1.34 US$ 115,892 (Note 7)
CDIB Biotech USA Stocks Investment Co., Ltd. Optimer Pharmaceuticals, Inc. - Available-for-sale financial assets 35,036 US$ 394,856 0.11 US$ 394,856 Antisoma Plc - Available-for-sale financial assets 405,487 US$ 216,068 0.06 US$ 216,068 PTC Therapeutics, Inc. - preferred stock - Financial assets carried at cost 153,847 US$ 125,003 1.17 US$ 380,944 (Note 7) Amphastar Pharmaceuticals, Inc. - Financial assets carried at cost 40,000 US$ 500,000 0.11 US$ 500,000 Confor MIS - preferred stock - Financial assets carried at cost 563,276 US$ 500,000 16.52 US$ 3,379,656 (Note 7)
CDIB Capital Investment III Stock Limited (formerly CDIB Optorun Co., Ltd. - Financial assets carried at cost 200 US$ 636,364 1.21 US$ 393,474 Technology Ventures Limited)
CDIB Capital Investment II Stocks Limited (formerly CDIB Nitto Denko Corp. - Available-for-sale financial assets 114,400 US$ 4,114,707 0.07 US$ 4,114,707 Capital (Japan) Limited) First Reit - Available-for-sale financial assets 7,100,000 US$ 4,127,024 2.58 US$ 4,127,024 Sandmartin International Holdings Limited - Available-for-sale financial assets 33,000,000 US$ 9,702,128 4.96 US$ 9,702,128
Fund MH Capital Partners II, L.P. - Financial assets carried at cost - US$ 553,172 - US$ 677,125
(Continued)
- 134 -
December 31, 2009 Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Note Holding Company Value/Units (Note 2) Ownership Asset Value (Note 3)
CDIB Global Markets I Stocks Limited (formerly CDIB Light Science Oncology, Inc. - Financial assets carried at cost 250,000 US$ 2,000,000 4.13 US$ 2,092,500 Capital (America) Limited) iWatt Inc. - preferred stock - Financial assets carried at cost 5,994,006 US$ 3,000,000 21.74 US$ 2,397,602 (Note 7) PTT Aromatics and Refining PCL - Available-for-sale financial assets 6,976,196 US$ 5,336,523 0.24 US$ 5,336,523 Thai Beverage PCL - Financial assets at fair value through 25,000,000 US$ 4,368,447 - US$ 4,368,447 profit or loss Asia Credit Public Company Limited - Financial assets at fair value through 6,900,000 US$ 2,256,187 - US$ 2,256,187 profit or loss Yorkey Optical International (CAYMAN) Ltd. - Financial assets at fair value through 2,466,000 US$ 505,602 - US$ 505,602 profit or loss
Funds KKR 2006 Fund L.P. - Financial assets carried at cost - US$ 23,494,034 - US$ 20,331,133 Adams Street Partners Offshore Company Limited - - Financial assets carried at cost - US$ 8,913,941 - US$ 5,716,593 Direct Co-Investment Fund, L.P. Thomas H Lee Paralle Fund VI, L.P. - Financial assets carried at cost - US$ 12,971,498 - US$ 17,074,159 Sun Capital Partners V, L.P. - Financial assets carried at cost - US$ 5,196,496 - US$ 2,787,602 Clayton, Dubilier & Rice Fund VII, L.P. - Financial assets carried at cost - US$ 8,384,068 - US$ 6,460,282 Silver Lake Partners III, L.P. - Financial assets carried at cost - US$ 8,983,620 - US$ 7,512,259 PAI Europe V, L.P. - Financial assets carried at cost - US$ 3,630,854 - US$ 2,195,119 Tenaya Capital V, L.P. - Financial assets carried at cost - US$ 3,850,179 - US$ 3,298,085 THL Equity Fund VI Investors (Ceridian), L.P. - Financial assets carried at cost - US$ 5,000,729 - US$ 5,000,004 Platinum Equity Capital Partners II, L.P. - Financial assets carried at cost - US$ 8,167,746 - US$ 6,458,609 THL Equity Fund VI Investors (Clear Channel), L.P. - Financial assets carried at cost - US$ 12,475,620 - US$ 7,508,846
CDIB Capital (International) Stock Corporation CDIB Capital (Hong Kong) Corporation Limited Subsidiary Investment under the equity method 1 US$ (78) 100 US$ (78)
China Development Asset Stocks Management Corp. Development Industrial Bank Asset Management Corp. Subsidiary Investment under the equity method 120,000,000 1,308,611 100.00 1,308,611 Chung Hwa Growth 3 Asset Management Corp. Subsidiary Investment under the equity method 517,195,000 5,449,333 100.00 5,449,333 (Note 8) Chung Hwa Growth 4 Asset Management Corp. Subsidiary Investment under the equity method 55,000,000 529,421 100.00 529,421 Pine Street Asset Management Corp. - Financial assets carried at cost 3,886,190 47,377 12.25 44,388 Waterland Securities Co., Ltd. - Financial assets carried at cost 8,849,911 8,672 1.07 95,712
Chung Hwa Growth 3 Assets Stocks Management Corp. Qing-XinXin Industrial Corp. Subsidiary Investment under the equity method 10,000,000 85,424 100.00 85,424 Cheng-Xi 1 Asset Management Corp. Subsidiary Investment under the equity method 6,800,000 90,962 100.00 90,962
Cheng-Xi 1 Asset Stocks Management Corp. Takumi Machinery Co., Ltd. - Financial assets carried at cost 1,250,000 15,000 6.48 27,856 China Fineblanking Technology Co., Ltd. - Investment under the equity method 2,584,410 59,231 6.80 59,231 (Note 5)
(Continued)
- 135 -
December 31, 2009 Note Relationship with the Holding Company Marketable Securities Type and Issuer Financial Statement Account Shares/Face Carrying Value Percentage of Market Value or Net Shares Provided Amount of Holding Company Limits Value/Units (Note 2) Ownership Asset Value (Note 3) of Guarantee Guarantee
CDC Finance & Leasing Corp. Stocks CDC Finance & Leasing (BVI) Corp. Subsidiary Investment under the equity method 1 $ 133,314 100.00 $ 133,314 - $ - - Hwahong Corporation - Investment under the equity method 23,750 2,784 19.00 2,784 - - First Financial Holding Co., Ltd. - Available-for-sale financial assets 912,907 5,860 0.01 18,121 912,907 10,000 Issuing commercial paper Core Pacific City Co., Ltd. - Financial assets carried at cost 6,000,000 37,200 0.45 37,200 - - - Nettrade Securities Corporation - Financial assets carried at cost 3,672,006 23,134 0.88 23,317 - - - Prosperity Venture Capital Corporation - Financial assets carried at cost 900,000 4,960 2.44 10,917 - - - Sun-fund Securities Corporation - Financial assets carried at cost 34,170 338 0.42 381 - - -
Note 1: CDIB and subsidiaries recognized the related income or loss of investees as required by regulations. For decline in value that was other than temporary, investment loss was recognized.
Note 2: The amounts were net of allowance for losses.
Note 3: Market prices of listed and OTC stocks were calculated at the closing prices of December 31, 2009. Net assets value of unlisted stocks, on which the Bank recognized its investment incomes in the current period, were calculated on the basis of audited financial statements of the same period of the holding company or the net assets values of the investees, market values of emerging stocks, the cost of acquiring an investee’s newly issued shares or book value of the investees. However, the net asset values of investees do not represent the value of unlisted stocks on the balance sheet date.
Note 4: No securities were treated as collaterals or warrants, except for those disclosed in the notes.
Note 5: The total stocks held by CDIB, parent company and subsidiaries exceed 20% of the investee’s outstanding shares. Thus, the investment is recognized under the equity method.
Note 6: The combined ownership of the investee from CDIB and its subsidiaries makes them the largest stockholder. Thus, the investment is recognized under the equity method.
Note 7: The market value or net worth of preferred stock is equal to the ratio of preferred shares held to the number of preferred shares outstanding multiplied by the total market value or total net worth of all of investee’s common and preferred shares.
Note 8: On September 1, 2009, Chung Hwa Growth 1 and 2 Asset Management Corp. merged with Chung Hwa Growth 3 Asset Management Corp., with the last company as the survivor entity.
Note 9: Eliminated from the consolidation.
(Concluded)
- 136 - TABLE 4
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL (THE BANK’S SUBSIDIARIES AMOUNTING TO NT$300 MILLION OR 10% OF THE ISSUED CAPITAL) YEAR ENDED DECEMBER 31, 2009 (In Thousand of New Taiwan Dollars, Unless Stated Otherwise)
Beginning Balance Acquisition (Note 1) Disposal Ending Balance Marketable Securities Type and Financial Statement Nature of Company Name Counter-Party Shares/Face Shares/Face Shares/Face Gain (Loss) on Shares/Face Name Account Relationship Amount Amount Amount Carrying Value Amount Value/Units Value/Units Value/Units Disposal Value/Units
CDIB Knowledge-Based Stocks Economy Capital Co., Ltd. Compal Electronics, Inc. Available-for-sale Compal Electronics, Inc. None 10,466,693 $ 300,177 52,233 $ - 10,518,926 $ 432,103 $ 300,177 $ 131,926 - $ - financial assets Kinsus Interconnect Technology Available-for-sale Kinsus Interconnect None 5,830,550 262,375 - - 5,830,550 516,087 262,375 253,712 - - Corp. financial assets Technology Corp.
Note 1: Stock dividends
- 137 - TABLE 5
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars)
Turnover Overdue Amounts Received Allowance for Bad Company Name Related Party Relationship Ending Balance Rate Amount Action Taken in Subsequent Year Debts
The Corporation Grand Cathay Securities Corporation Subsidiary $ 613,703 - $ - - $ - $ -
CDIB The Corporation Parent company 1,096,506 - - - - -
Note: Eliminated from the consolidation.
- 138 - TABLE 6
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
INFORMATION ON INVESTED ENTERPRISES DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars)
Balance as of December 31,2009 Consolidated Investment (Note 1) Total Investee Company Percentage Location Main Business Carrying Value Investment Virtual Shares Percentage Note (Note 1) of Present Shares (Note 3) Gain (Loss) (Note 2) Shares of Ownership Ownership
China Development Industrial Bank Taiwan Industrial bank 100.00 $ 134,583,593 $ 5,893,615 7,760,399,410 - 7,760,399,410 100.00
Grand Cathay Securities Corporation Taiwan Financial service 100.00 20,789,758 2,719,992 1,429,066,000 - 1,429,066,000 100.00
Taiwan International Securities Corporation Taiwan Financial service 42.90 5,290,421 203,219 524,841,893 - 524,841,893 48.47
Note 1: All present shares or virtual shares of the Corporation, directors, supervisors, the Corporation's managers, and affiliates should be included.
Note 2: a. Virtual shares are acquired under the hypothesis that equity-type securities and derivative financial instrument contracts are transferred to common shares. Based on the transaction terms or the holding purposes of the Corporation, the two types of investments are linked to the equity of investees, which are recognized as investments under the equity method, available-for-sale financial assets and financial assets carried at cost, to comply with Article 74 of the Securities and Exchange Act.
b. Equity-type securities are securities regulated by Article 11 of the Securities and Exchange Law Enforcement Rules, such as convertible bonds and warrants.
c. Financial instrument contracts are those defined under ROC Statement of Financial Accounting Standards - No. 34 - “Accounting for Financial Instruments,” such as stock options.
Note 3: Eliminated from the consolidation.
- 139 - TABLE 7
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
OVERDUE LOANS AND RECEIVABLES DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, %)
December 31, 2009 December 31, 2008 Nonperforming Loan Loss Loan Loss Item NPL Ratio Coverage Ratio Nonperforming Loan (NPL) Total Loans Reserves Total Loans NPL Ratio Reserves Coverage Ratio (Note 2) (Note 3) Loan (NPL) (Note 1) (LLR) (LLR) Corporate loan Secured $ 800,656 $ 31,617,147 2.53 $ 735,088 91.81 $ 1,184,297 $ 36,206,059 3.27 $ 691,135 58.36 Unsecured - 33,985,454 - 375,948 - 93,012 43,773,498 0.21 541,845 582.55 Consumer loan Mortgage (Note 4) ------907 - 9 - Cash card ------Micro credit (Note 5) - 27,839 - 278 - - 36,426 - 364 - Other (Note 6) Secured ------Unsecured Total 800,656 65,630,440 1.22 1,111,314 138.80 1,277,309 80,016,890 1.60 1,233,353 96.56 Overdue Account Delinquency Allowance for Overdue Account Delinquency Allowance for Coverage Ratio Coverage Ratio Receivable Receivable Ratio Credit Losses Receivable Receivable Ratio Credit Losses Credit card (Note 7) ------Account receivable - factored without recourse - 96,865 - 969 - - 183,847 - 1,838 - (Note 8)
Note 1: Overdue loans represent the amounts of overdue loans reported in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” issued by the Ministry of Finance.
Note 2: NPL ratio = NPL/Total loans.
Note 3: Coverage ratio = LLR/NPL
Note 4: Home mortgage refers to financing obtained to buy, build, or fix houses owned by the borrower or the borrower’s spouse or children, with the house used as loan collateral.
Note 5: Micro credit is covered by a Banking Bureau pronouncement dated December 19, 2005 (Ref. No. 09440010950) and is excluded from credit card and cash card loans.
Note 6: “Others” under consumer loans refers to secured or unsecured loans other than mortgage loans, cash cards, micro credit, and credit cards.
Note 7: CDIB does not engage in the credit card business.
Note 8: As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 0945000494), allowance for bad debt is recognized once no compensation is made by a factor or insurance company within three months for accounts receivable factored without recourse.
Note 9: CDIB had no disclosures to make as regards the Banking Bureau’s letter dated April 25, 2006 (Ref. No. 09510001270).
Note 10: CDIB had no disclosures to make as regards the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940)
- 140 - TABLE 8
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
SOLD NONPERFORMING LOANS YEAR ENDED DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars)
1. Summary of sold nonperforming loans of China Development Asset Management Corp. and its subsidiaries
Relationship of Transaction Date Counter Party Type of Loans Carrying Value (Note) Selling Price Disposal Gain (Loss) Other Condition Counter-party with the Subsidiaries
2009.02.19 A Real estate mortgages $936 $ 855 $ (81) - - 2009.02.19 B Real estate mortgages 11,211 8,645 (2,566) -- 2009.02.20 C Real estate mortgages 11,274 11,000 (274) - - 2009.03.16 D Real estate mortgages - 1,200 1,200 - - 2009.04.27 E Real estate mortgages 5,777 2,000 (3,777) - - 2009.05.20 F Real estate mortgages 188 400 212 - - 2009.05.21 G Real estate mortgages 1,428 1,100 (328) -- 2009.06.08 H Real estate mortgages 3,431 3,700 269 - - 2009.06.08 I Real estate mortgages 1,761 1,830 69 - - 2009.06.16 J Real estate mortgages 2,611 3,000 389 - - 2009.07.01 K Real estate mortgages 133 700 567 - - 2009.07.06 L Real estate mortgages 6,646 5,200 (1,446) - - 2009.07.06 M Real estate mortgages 196 2,000 1,804 -- 2009.07.13 N Real estate mortgages 1,277 1,900 623 - - 2009.07.13 O Real estate mortgages 3 1,260 1,257 - - 2009.07.13 P Real estate mortgages 2,790 1,540 (1,250) - - 2009.07.24 Q Real estate mortgages - 2,206 2,206 - - 2009.07.27 R Real estate mortgages 1,433 1,500 67 - - 2009.08.20 S Real estate mortgages 43,199 21,685 (21,514) - - 2009.08.24 T Real estate mortgages 1,005 1,300 295 - - 2009.08.27 U Real estate mortgages 23,475 25,000 1,525 - - 2009.09.23 V Real estate mortgages - 420 420 - - 2009.09.23 W Real estate mortgages 147 481 334 -- 2009.09.23 X Real estate mortgages - 169 169 - - 2009.10.13 Y Real estate mortgages 5,060 7,800 2,740 - - 2009.10.15 Z Real estate mortgages 2,338 2,500 162 - - 2009.11.06 AA Real estate mortgages 2,727 2,500 (227) - - 2009.11.23 AB Real estate mortgages 462 1,680 1,218 - - 2009.11.23 AC Real estate mortgages 4,888 5,000 112 - - 2009.11.26 AD Real estate mortgages 4,618 10,000 5,382 - - 2009.12.14 AE Real estate mortgages 7,704 8,000 296 - - 2009.12.18 AF Real estate mortgages 2,170 2,450 280 - - 2009.12.22 AG Real estate mortgages - 2,960 2,960 - - 2009.12.22 AH Real estate mortgages 164 2,300 2,136 - - 2009.12.22 AI Real estate mortgages 6,325 6,300 (25) - -
Note: Carrying value = Original amount - Allowance for bad debts.
2. Sale of nonperforming loans exceeding NT$1 billion (excluding related-party transactions): For CDIB and subsidiaries: None.
- 141 - TABLE 9
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
SUBSIDIARIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2009
Consolidated subsidiaries
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2009
The Corporation China Development Industrial Bank Taiwan Industrial bank 100.00 Grand Cathay Securities Corporation Taiwan Financial service 100.00
CDIB China Venture Management Inc. Taiwan Management company of 96.70 venture fund R.O.C. Strategic Company Ltd. Taiwan Venture fund 99.99 CDC Finance & Leasing Corp. Taiwan Leasing 52.66 R.O.C. Venture Company Ltd. Taiwan Venture fund 37.13 (Note) CDIB Equity Inc. Taiwan Management company of 100.00 venture fund CDIB Knowledge-Based Economy Capital Co., Ltd. Taiwan Venture fund 100.00 CDIB Strategic Venture Fund Ltd. Taiwan Venture fund 100.00 CDIB Global Markets III Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 (USA) Limited) CDIB Capital Investment I Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 Limited) Japan Venture Capital Corporation British Virgin Islands Venture fund 50.29 CDIB Global Markets II Limited (formerly CDIB Capital Malaysia Venture fund 100.00 (Korea) Limited) CDIB Europe Investment Co. Grand Cayman Venture fund 100.00 CDIB Capital Investment III Limited (formerly CDIB British Virgin Islands Venture fund 100.00 Technology Ventures Limited)
China Development Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions CDIB Capital Investment II Limited (formerly CDIB British Virgin Islands Venture fund 100.00 Capital (Japan) Limited) CDIB Global Markets I Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 (America) Limited) CDIB Capital (International) Corporation British Virgin Islands Management company of 100.00 venture fund
(Continued)
- 142 -
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2009
CDIB Global Markets III Limited American Major Industry Fund, L.L.C. Grand Cayman Venture fund 100.00 (formerly CDIB Capital (USA) CDIB Venture Management (USA), Inc. CA United States Management company of 100.00 Limited) venture fund CDIB North America Venture Management L.L.C. Delaware United States Management company of 80.00 venture fund
CDIB Capital Investment I Limited Subicvest Inc. Philippines Leasing 100.00 (formerly CDIB Capital Limited) ASEM Capital Co., Ltd. Korea Management company of 100.00 venture fund CDIB Asset Management Co., Ltd. British Virgin Islands Management company of 100.00 venture fund
CDC Finance & Leasing Corp. CDC Finance & Leasing (BVI) Corp. British Virgin Islands Leasing 100.00
China Development Asset Management Development Industrial Bank Asset Management Corp. Taiwan Trading and management of 100.00 Corp. nonperforming loans of financial institutions Chung Hwa Growth 3 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions Chung Hwa Growth 4 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions
Chung Hwa Growth 3 Asset Qing-Xin-Xin Industrial Corp. Taiwan House and building 100.00 Management Corp. development leasing Cheng-Xi 1 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions
CDIB Capital (International) Corporation CDIB Capital (Hong Kong) Corporation Hong Kong Management company of 100.00 venture fund
Grand Cathay Securities Corporation Grand Cathay Holding Limited Grand Cayman Holding company 100.00 Grand Cathay Futures Corp. Taiwan Futures 99.59 Grand Cathay Investment Services Corp. Taiwan Investment services 100.00
Grand Cathay Holding Limited Grand Cathay Securities (Hong Kong) Limited Hong Kong Securities 100.00
Grand Cathay Securities (Hong Kong) Grand Cathay Capital (Hong Kong) Limited Hong Kong Securities 100.00 Limited
(Continued)
- 143 - Unconsolidated subsidiaries
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2009
The Corporation and subsidiaries Taiwan International Securities Corporation (TISC) Taiwan Financial service 48.47 The Corporation and subsidiaries should adopt the equity method on TISC in conformity with the Criteria Governing the Preparation of Financial Reports by Financial Holding Companies and include TISC in the consolidated financial statements. But the Corporation and subsidiaries have not been able to exercise virtual control over TISC. Therefore, TISC was not included in the consolidated financial statements for the year ended December 31, 2009.
CDIB Sino-Scan Venture Fund Taiwan Venture fund - On December 31, 2009, investment in Sino-Scan Venture Fund of CDIB amounted to $44,319 thousand and Sino-Scan Venture Fund was in liquidating and was approbated by the relevant authorities for cancellation on July 31, 2008, therefore, Sino-Scan Venture Fund was not included in the consolidated financial statement. CDIB Biotech USA Investment Co., Ltd. British Virgin Islands Venture fund 50.00 On December 31, 2009, investment in CDIB Biotech USA Investment Co., Ltd. of CDIB amounted to $61,474 thousand and CDIB Biotech USA Investment Co., Ltd. was approbated to liquidate by the Board of Director on April 20, 2008, therefore, CDIB Biotech USA Investment Co., Ltd. was not included in the consolidated financial statement. CDIB Australia Investment Inc. Grand Cayman Venture fund 100.00 On December 31, 2009, investment in CDIB Australia Investment Inc. of CDIB amounted to $2,604 thousand and CDIB Australia Investment Inc. was approbated to liquidate by the Board of Director on June 11, 2009, and had been liquidated on January 22, 2010, therefore, CDIB Australia Investment Inc. was not included in the consolidated financial statement. (Continued)
- 144 -
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2009
CDIB Bioventures, Inc. Grand Cayman Venture fund 100.00 On December 31, 2009, investment in CDIB Bioventures, Inc. of CDIB amounted to $305,544 thousand (cash over total assets of 99.97%), and CIDB Bioventures, Inc. was approbated to liquidate by the Board of Director on June 30, 2009, therefore, CDIB Bioventures, Inc. was not included in the consolidated financial statement.
CDIB Europe Investment Co. CDIB France Co. Grand Cayman Venture fund 69.77 On December 31, 2009, CDIB Europe Investment Co. investment in CDIB France Co. amounted to $905 thousand and CDIB France Co. was approbated to liquidate by the Board of Director on May 20, 2009, and had been liquidated on February 26, 2010, therefore, CDIB France Co. was not included in the consolidated financial statement.
Note: The Company’s general manager is assigned by CDIB. Thus, CDIB has a controlling influence over the Company.
(Concluded)
- 145 - TABLE 10
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
SUBSIDIARIES INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008
Consolidated subsidiaries
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2008
The Corporation China Development Industrial Bank Taiwan Industrial bank 100.00 Grand Cathay Securities Corporation Taiwan Financial service 100.00
CDIB China Venture Management Inc. Taiwan Management company of 96.70 venture fund R.O.C. Strategic Company Ltd. Taiwan Venture fund 99.99 CDC Finance & Leasing Corp. Taiwan Leasing 52.66 R.O.C. Venture Company Ltd. Taiwan Venture fund 37.13 (Note) CDIB Equity Inc. Taiwan Management company of 100.00 venture fund China Development Global Information Corporation Taiwan Network and software 100.00 development services CDIB Knowledge-Based Economy Capital Co., Ltd. Taiwan Venture fund 100.00 CDIB Strategic Venture Fund Ltd. Taiwan Venture fund 100.00 CDIB Global Markets III Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 (USA) Limited) CDIB Capital Investment I Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 Limited) Japan Venture Capital Corporation British Virgin Islands Venture fund 50.29 CDIB Global Markets II Limited (formerly CDIB Capital Malaysia Venture fund 100.00 (Korea) Limited) CDIB Europe Investment Co. Grand Cayman Venture fund 100.00 CDIB Australia Investment Inc. Grand Cayman Venture fund 100.00 CDIB Bioventures, Inc. Grand Cayman Venture fund 100.00 CDIB Capital Investment III Limited (formerly CDIB British Virgin Islands Venture fund 100.00 Technology Ventures Limited) CDIB Biotech Venture Management, Inc. British Virgin Islands Fund management 100.00 China Development Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions CDIB Capital Investment II Limited (formerly CDIB British Virgin Islands Venture fund 100.00 Capital (Japan) Limited) CDIB Global Markets I Limited (formerly CDIB Capital British Virgin Islands Venture fund 100.00 (America) Limited)
(Continued)
- 146 -
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2008
CDIB Global Markets III Limited CDIB North America Venture Management L.D.C. Grand Cayman Fund management 100.00 (formerly CDIB Capital (USA) American Major Industry Fund, L.L.C. Grand Cayman Venture fund 100.00 Limited) CDIB Venture Management (USA), Inc. CA United States Management company of 100.00 venture fund CDIB North America Venture Management L.L.C. Delaware United States Management company of 80.00 venture fund
CDIB Capital Investment I Limited Subicvest Inc. Philippines Leasing 100.00 (formerly CDIB Capital Limited) ASEM Capital Co., Ltd. Korea Management company of 100.00 venture fund CDIB Asset Management Co., Ltd. British Virgin Islands Management company of 100.00 venture fund
CDIB Europe Investment Co. CDIB France Co. Grand Cayman Venture fund 69.77
CDC Finance & Leasing Corp. CDC Finance & Leasing (BVI) Corp. British Virgin Islands Leasing 100.00
China Development Asset Management Development Industrial Bank Asset Management Corp. Taiwan Trading and management of 100.00 Corp. nonperforming loans of financial institutions Chung Hwa Growth 1 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions Chung Hwa Growth 2 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions Chung Hwa Growth 3 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions Chung Hwa Growth 4 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions
Chung Hwa Growth 1 Asset Qing-Xin-Xin Industrial Corp. Taiwan House and building 100.00 Management Corp. development leasing Cheng-Xi 1 Asset Management Corp. Taiwan Trading and management of 100.00 nonperforming loans of financial institutions
Grand Cathay Securities Corporation Grand Cathay Holding Limited Grand Cayman Holding company 100.00 Grand Cathay Futures Corp. Taiwan Futures 99.59 Grand Cathay Investment Services Corp. Taiwan Investment services 100.00
Grand Cathay Holding Limited Grand Cathay Securities (Hong Kong) Limited Hong Kong Securities 100.00 Grand Cathay Securities (Hong Kong) Nominees Limited Hong Kong Custody of securities 100.00
Grand Cathay Securities (Hong Kong) Grand Cathay Capital (Hong Kong) Limited Hong Kong Securities 100.00 Limited
(Continued)
- 147 - Unconsolidated subsidiaries
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2008
The Corporation and subsidiaries Taiwan International Securities Corporation (TISC) Taiwan Financial service 48.47 The Corporation and subsidiaries should adopt the equity method on TISC in conformity with the Criteria Governing the Preparation of Financial Reports by Financial Holding Companies and include TISC in the consolidated financial statements. But the Corporation do not have substance controls over TISC. Therefore, TISC was not included in the consolidated financial statements for the year ended December 31, 2008.
CDIB Sino-Philippine Asset Management Inc. Philippine Fund management 60.00 On December 31, 2008, investment in Sino-Philippine Asset Management Inc. of CDIB amounted to $116 thousand and Sino-Philippine Asset Management Inc. was in approbated to liquidate by the Board of Director on June 19, 2006, therefore, Sino-Philippine Asset Management Inc. was not included in the consolidated financial statement. Sino-Scan Venture Fund Taiwan Venture fund 68.80 On December 31, 2008, investment in Sino-Scan Venture Fund of CDIB amounted to $99,359 thousand and Sino-Scan Venture Fund was in liquidating, and was approbated by the relevant authorities for cancellation on July 31, 2008, therefore, Sino-Scan Venture Fund was not included in the consolidated financial statement. CDIB Biotech USA Investment Co., Ltd. British Virgin Islands Venture fund 50.00 On December 31, 2008, investment in CDIB Biotech USA Investment Co., Ltd. of CDIB amounted to $63,429 thousand and CDIB Biotech USA Investment Co., Ltd. was approbated to liquidate by the Board of Director on April 20, 2008, therefore, CDIB Biotech USA Investment Co., Ltd. was not included in the consolidated financial statement.
CDIB Global Markets III Limited North America Venture Fund, L.P. Grand Cayman Fund 100.00 On December 31, 2008, CDIB Global Markets III (formerly CDIB Capital (USA) Limited investment in North America Venture Limited) Fund, L.P. amounted to $33,211 thousand and North America Venture Fund, L.P. was approbated to liquidate by the Board of Director on December 24, 2008, therefore, North America Venture Fund, L.P. was not included in the consolidated financial statement.
(Continued)
- 148 -
Percentage of Ownership Investor Company Subsidiaries Location Main Business and Products Note December 31, 2008
Grand Cathay Securities Corporation Grand Cathay Managed Futures Corp. Taiwan Futures 100.00 On November 30, 2008, Grand Cathay Managed Futures Corp. was dissolved and in liquidating; therefore, Grand Cathay Managed Futures Corp. was not included in the consolidated financial statements.
Note: The Company’s general manager is assigned by CDIB. Thus, CDIB has a controlling influence over the Company.
(Concluded)
- 149 - TABLE 11
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
DECLARATION OF SUBSIDIARIES’ CREDITS, ENDORSEMENTS OR OTHER TRANSACTIONS WITH THE SAME PERSON, RELATED PARTY OR AFFILIATE DECEMBER 31, 2009 (In Millions of New Taiwan Dollars)
China Development Industrial Bank (CDIB)
Total Amounts Ratio of Net of Credits, Assets Value Counter-party Endorsements of the and Other Corporation Transactions (%) 1. The same customer CDIB Global Markets II Limited (formerly CDIB Capital (Korea) Limited) $ 7,753 5.91 China Development Asset Management Corp. 6,244 4.76 Chi Mei Optoelectronics Corporation 6,070 4.63 Taiwan International Securities Corporation 5,655 4.31 CDIB Capital Investment I Limited (formerly CDIB Capital Limited) 5,536 4.22 CDIB Knowledge-Based Economy Capital Co., Ltd. 5,452 4.16 Taipower Corporation 5,442 4.15 CDIB Global Markets I Limited (formerly CDIB Capital (America) Limited) 4,275 3.26 Nan Ya Plastics Corporation 3,959 3.02 CDIB & Partners Investment Holding Corporation 3,666 2.80 Inotera Memories, Inc. 3,185 2.43 Total $ 57,237 43.65 2. The same group Formosa Plastics Group $ 12,118 9.24 Qisda Group 7,573 5.77 Chi Mei Group 6,070 4.63 Far Eastern Group 4,835 3.69 Tatung Group 3,905 2.98 Chinasteel Group 3,422 2.61 Foxconn Technology Group 3,070 2.34 Total $ 40,993 31.26
- 150 -
TABLE 12
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars)
China Development Financial Holding Corporation
1. Balance sheets
December 31 2009 2008
Cash and cash equivalents $ 73,629 $ 409,848 Receivables, net 1,092,648 553,958 Investments under the equity method 160,663,772 140,949,321 Properties, net 30,296 37,862 Others 477,707 23,799
Total assets $ 162,338,052 $ 141,974,788
Commercial paper payable, net $ 2,098,955 $ 1,198,882 Payables 2,002,683 1,140,441 Short-term loans 2,300,000 1,700,000 Bonds payable 20,000,000 20,000,000 Long-term loans 4,599,765 3,999,849 Other financial liabilities 160,723 280,557 Others 22,480 19,933 Total liabilities 31,184,606 28,339,662
Stockholders’ equity Capital - common stock 112,172,050 112,309,170 Capital surplus 8,694,472 9,120,126 Legal reserve - 2,704,240 Special reserve - 3,874,710 Retained earnings 7,268,902 (7,056,025) Treasury stocks (5,924,036) (5,232,850) Others 8,942,058 (2,084,245) Total stockholders’ equity 131,153,446 113,635,126
Total liabilities and stockholders’ equity $ 162,338,052 $ 141,974,788 (Continued)
- 151 -
2. Income statement
Year Ended December 31 2009 2008
REVENUES Investment income recognized under the equity method $ 8,816,826 $ - Others 1,218 33,869
Total revenues 8,818,044 33,869
EXPENSES AND LOSSES Operating expenses (746,956) (541,983) Investment loss recognized under the equity method - (5,726,921) Others (626,375) (865,441)
Total expenses and losses (1,373,331) (7,134,345)
INCOME (LOSS) BEFORE INCOME TAX 7,444,713 (7,100,476)
INCOME TAX BENEFIT( EXPENSE) (175,811) 44,451
NET INCOME (LOSS) $ 7,268,902 $ (7,056,025)
BASIC EARNINGS (LOSS) PER SHARE (IN DOLLARS) Before income tax $0.71 $(0.65) After income tax $0.69 $(0.64) (Continued)
- 152 -
3. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)
Retained Earnings Issued and Outstanding Stock Unappropriated Unrealized Unrealized Common Stock Earnings Cumulative Gains or Losses Gains or Losses Net Loss not Treasury Stock Shares (In Capital (Accumulated Translation on Financial on Cash Recognized as Shares (In Thousands) Amount Surplus Legal Reserve Special Reserve Deficit) Subtotal Adjustments Instruments Flow Hedge Pension Cost Thousands) Amount Total
BALANCE, JANUARY 1, 2008 10,962,063 $ 109,620,627 $ 9,164,428 $ 1,943,086 $ 2,361,914 $ 7,611,533 $ 11,916,533 $ 186,114 $ 13,277,452 $ (298,636 ) $ (2,396 ) 207,890 $ (2,587,020 ) $ 141,277,102
Appropriation of 2007 earnings Special reserve retransfer to unappropriated earnings - - - - (2,361,914 ) 2,361,914 ------Legal and special reserve - - - 761,154 3,874,710 (4,635,864 ) ------Cash dividends - $0.2 per share - - - - - (2,150,834 ) (2,150,834 ) ------(2,150,834 ) Stock dividends - $0.25 per share 268,854 2,688,543 - - - (2,688,543 ) (2,688,543 ) ------Preferred dividends - - - - - (393,206 ) (393,206 ) ------(393,206 ) Employee bonus - cash - - - - - (65,000 ) (65,000 ) ------(65,000 ) Remuneration to directors and supervisors - - - - - (40,000 ) (40,000 ) ------(40,000 )
Balance after appropriation 11,230,917 112,309,170 9,164,428 2,704,240 3,874,710 - 6,578,950 186,114 13,277,452 (298,636 ) (2,396 ) 207,890 (2,587,020 ) 138,628,062
Translation adjustments on investments of equity-method investees ------215,901 - - - - - 215,901
Capital surplus recognized under the equity-method - - (44,302 ) ------(44,302 )
Unrealized loss on available-for-sale financial assets recognized under the equity method ------(15,314,119 ) - - - - (15,314,119 )
Purchase of treasury stock ------349,430 (2,645,830 ) (2,645,830 )
Unrealized gain on cash flow hedge recognized under the equity-method ------83,212 - - - 83,212
Unrealized loss on cash flow hedge ------(232,519 ) - - - (232,519 )
Net loss not recognized as pension cost ------746-- 746
Consolidated net loss for the year ended December 31, 2008 - - - - - (7,056,025 ) (7,056,025 ) ------(7,056,025 )
BALANCE, DECEMBER 31, 2008 11,230,917 112,309,170 9,120,126 2,704,240 3,874,710 (7,056,025 ) (477,075 ) 402,015 (2,036,667 ) (447,943 ) (1,650 ) 557,320 (5,232,850 ) 113,635,126
Offset of the 2008 deficit - - (477,075 ) (2,704,240 ) (3,874,710 ) 7,056,025 477,075 ------
Balance after offset of deficit 11,230,917 112,309,170 8,643,051 - - - - 402,015 (2,036,667 ) (447,943 ) (1,650 ) 557,320 (5,232,850 ) 113,635,126
Translation adjustments on investments of equity-method investees ------(624,187 ) - - - - - (624,187 )
Unrealized gain on available-for-sale financial instruments recognized under the equity method ------11,368,653 - - - - 11,368,653
Capital surplus recognized under the equity-method - - (4,863 ) ------(4,863 )
Unrealized gain on cash flow hedge recognized under the equity-method ------183,193 - - - 183,193
Unrealized gain on cash flow hedge ------119,834 - - - 119,834
Purchase of treasury stock ------129,552 (772,022 ) (772,022 )
Retirement of treasury stock (13,712 ) (137,120 ) 56,284 ------(13,712 ) 80,836 -
Net loss not recognized as pension cost ------(21,190 ) - - (21,190 )
Consolidated net income for the year ended December 31, 2009 - - - - - 7,268,902 7,268,902 ------7,268,902
BALANCE, DECEMBER 31, 2009 11,217,205 $ 112,172,050 $ 8,694,472 $ - $ - $ 7,268,902 $ 7,268,902 $ (222,172 ) $ 9,331,986 $ (144,916 ) $ (22,840 ) 673,160 $ (5,924,036 ) $ 131,153,446 (Continued)
- 153 -
4. Statements of cash flows
Year Ended December 31 2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 7,268,902 $ (7,056,025) Adjustments to reconcile net income to net cash provided by (used in) operating activities Investment (income) loss recognized under the equity method (8,812,846) 5,730,427 Provision for pension expenses 10,499 26,331 Depreciation 9,285 10,720 Payment of pension benefits (9,020) (27,061) Changes in deferred tax assets (274) (82) Discards losses 56 31 Cash dividends received from the equity-method investees - 2,371,972 Preferred stock dividends - 393,206 Asset impairment - 262,088 Net changes in operating assets Receivables (538,690) (139,637) Prepayment 9,707 (10,794) Net changes in operating liabilities Payables 863,404 (139,150)
Net cash provided by (used in) operating activities (1,198,977) 1,422,026
CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other assets (463,341) 16,949 Acquisition of properties (1,775) (15,422)
Net cash provided by (used in) investing activities (465,116) 1,527
CASH FLOWS FROM FINANCING ACTIVITIES Increase in commercial paper 900,073 598,984 Acquisition of treasury stock (772,022) (2,563,321) Increase in short-term loans 600,000 1,100,000 Increase (decrease) in long-term loans 599,916 (151) Decrease in other liabilities (93) (720) Cash dividends paid - (2,150,834) Preferred stock dividends paid - (393,206) Employee dividends and remuneration to directors and supervisors paid - (105,000)
Net cash provided by (used in) financing activities 1,327,874 (3,514,248) (Continued)
- 154 -
Year Ended December 31 2009 2008
DECREASE IN CASH AND CASH EQUIVALENTS $ (336,219) $ (2,090,695)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 409,848 2,500,543
CASH AND CASH EQUIVALENTS, END OF YEAR $ 73,629 $ 409,848
SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 589,145 $ 509,020 Income tax paid $40 $ 3,108
NON CASH INVESTMENT AND FINANCING ACTIVITIES Payable for purchase of treasury stock $- $ 82,509 (Continued)
- 155 -
China Development Industrial Bank and its subsidiaries
1. Condensed consolidated balance sheets
December 31 2009 2008
Cash and cash equivalents, due from the Central Bank and other banks $ 42,667,810 $ 25,751,137 Financial assets at fair value through profit or loss 11,268,166 19,072,226 Securities purchased under resell agreements - 150,003 Receivables, net 5,991,993 4,587,216 Acquired loans 4,479,049 4,732,620 Loans and discounts, net 64,519,126 78,783,537 Available-for-sale financial assets 51,821,747 43,989,740 Investments under the equity method 6,229,214 6,306,785 Financial assets carried at cost 40,867,278 46,113,213 Other financial assets 2,066,817 1,983,957 Properties, net 1,227,779 1,487,775 Other assets, net 5,798,034 10,010,887
Total assets $ 236,937,013 $ 242,969,096
Call loans from banks $ 4,702,740 $ 7,214,988 Short-term loans 1,222,560 2,071,635 Commercial paper payable, net 702,292 1,143,243 Securities sold under repurchase agreements 8,887,887 14,675,142 Financial liabilities at fair value through profit or loss 12,132,037 25,704,017 Payables 4,909,823 3,197,679 Deposits and remittances 20,480,818 19,174,264 Bank debentures payable 28,780,769 31,708,902 Long-term loans 1,678,376 2,476,155 Other financial liabilities 17,014,060 16,518,891 Other liabilities 1,120,460 748,654 Total liabilities 101,631,822 124,633,570 Capital - common stock 77,603,994 77,603,994 Capital surplus 28,361,957 28,366,820 Retained earnings 19,404,297 13,512,746 Cumulative translation adjustments (130,448) 463,045 Unrealized gain (loss) on financial instruments 9,327,986 (2,038,709) Unrealized gain (loss) on cash flow hedge 15,807 (167,386) Total stockholders’ equity of CDIB 134,583,593 117,740,510 Minority interest 721,598 595,016 Total stockholders’ equity 135,305,191 118,335,526
Total liabilities and stockholders’ equity $ 236,937,013 $ 242,969,096 (Continued)
- 156 -
2. Condensed consolidated statements of income
Year Ended December 31 2009 2008
Interest revenues $ 2,513,693 $ 5,066,689 Interest expense (1,146,221) (2,612,839) Interest profit, net 1,367,472 2,453,850 Noninterest profits and gains (losses), net 6,090,277 (2,883,937) Net profit (loss) 7,457,749 (430,087) Reversal of allowance (allowance) for bad debts and losses on guarantees, net 527,247 (772,970) Operating expenses (2,715,521) (2,547,646) Income (loss)before income tax 5,269,475 (3,750,703) Income tax benefit (expense) 648,142 (14,755)
Consolidated net income (loss) $ 5,917,617 $ (3,765,458)
Attributed to Stockholders of the parent company $ 5,891,551 $ (3,732,691) Minority interest 26,066 (32,767)
$ 5,917,617 $ (3,765,458)
Basic earnings (loss) per share (in dollars) Before income tax $0.67 $(0.50) After income tax $0.76 $(0.48) (Continued)
- 157 -
Grand Cathay Securities Corporation and its subsidiaries
1. Condensed consolidated balance sheets
December 31 2009 2008
Current assets $ 40,565,946 $ 35,765,631 Funds and investments 1,906,503 1,798,363 Properties, net 2,874,087 2,924,198 Intangible assets 58,257 70,709 Other assets 1,096,213 1,224,442 Debit items for consigned trading, net 151,941 -
Total assets $ 46,652,947 $ 41,783,343
Current liabilities $ 25,268,375 $ 22,631,060 Other financial liabilities - noncurrent 144,697 297,974 Other liabilities 447,057 391,615 Credit items for consigned trading, net - 361,337 Total liabilities 25,860,129 23,681,986 Capital - common stock 14,290,660 14,290,660 Capital surplus 1,914,227 1,914,227 Retained earnings 4,553,181 1,833,665 Cumulative translation adjustments 29,237 59,817 Net loss not recognized as pension cost (1,480) (1,650) Unrealized gains on financial instruments 3,933 1,636 Total stockholders’ equity of GCSC 20,789,758 18,098,355 Minority interest 3,060 3,002 Total stockholders’ equity 20,792,818 18,101,357
Total liabilities and stockholders’ equity $ 46,652,947 $ 41,783,343 (Continued)
- 158 -
2. Condensed consolidated statements of income
Year Ended December 31 2009 2008
Operating revenues $ 7,818,197 $ 6,333,571 Operating expenses (5,299,085) (8,060,149) Operating income (loss) before income tax 2,519,112 (1,726,578) Income tax benefit 200,462 406,813
Consolidated net income (loss) $ 2,719,574 $ (1,319,765)
Attributed to Stockholders of the parent company $ 2,719,516 $ (1,319,952) Minority interest 58 187
$ 2,719,574 $ (1,319,765)
Basic earnings (loss) per share (in dollars) Before income tax $1.75 $(1.22) After income tax $1.90 $(0.92)
(Concluded)
- 159 -
TABLE 13
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
INFORMATION ON INVESTMENT IN MAINLAND CHINA DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Investment Flows Accumulated Accumulated Accumulated Outflow of Carrying Value Inward Outflow of % Ownership of Investee Total Amount of Investment from as of Remittance of Main Businesses and Products Investment Type Investment from Direct or Indirect Investment Gain Company Name Paid-in Capital Outflow Inflow Taiwan as of December 31, Earnings as of Taiwan as of Investment December 31, 2009 December 31, Jan. 1, 2009 2009 2009
Changshu Everbright Material Steel plate, galvanized steel plate, pre-painted steel plate US$ 130,000 Note 1 (c) US$ 2,523 $ - $ - US$ 2,523 1.32% $ - $ - $ 59,553 Technology Co., Ltd. thousand thousand thousand (Note 3)
Derbysoft (Shanghai) Co. Ltd. The next-generation electronic distribution channel operator US$ 5,000 Note 1 (c) US$ 3,000 - - US$ 3,000 43.37% - 98,505 - serving China’s hotel industry thousand thousand thousand (Note 4) Derbysoft (Shanghai) Co. Ltd. The next-generation electronic distribution channel operator US$ 5,000 Note 1 (c) - US$ 464 - US$ 464 6.17% - 15,221 - serving China’s hotel industry thousand thousand thousand (Note 4)
Beijing ORG-MC Metal Containers Co., Metal (SPTE) cans manufacture RMB 198,350 Note 1 (d) US$ 10,016 - - US$ 10,016 8.25% - 329,625 - Ltd. thousand thousand thousand
Jiangsi Solar PV Co., Ltd. Solar cell manufacture and sell US$ 43,680 Note 1 (c) US$ 2,400 - - US$ 2,400 3.60% - 78,216 - thousand thousand thousand
Touch Media International (Shanghai) Mobile interactive LCD equipment purchase, leasing, US$ 5,000 Note 1 (c) - US$ 302 - US$ 302 6.03% - 9,664 - Holdings maintenance and related consulting services thousand thousand thousand
Fujian Triplex Biological Sciences Co., Manufacture, sale and R&D medical diagnostic reagents and US$ 35,200 Note 1 (c) - US$ 2,400 - US$ 2,400 1.80% - 78,434 - Ltd. instruments thousand thousand thousand
Hon Chuang Enterprise (Suzhou) Co., Cap bottle, label, aluminum cap, static control material US$ 20,490 Note 1 (c) US$ 295 - - US$ 295 6.56% - 9,723 - Ltd. manufacture and sale. thousand thousand thousand
Suzhou Hon Xin Food Packing Co., Ltd. Cap bottle, label and PET bottle material manufacture and US$ 24,000 Note 1 (c) US$ 295 - - US$ 295 6.56% - 9,723 - sale, drink backfill generation of labor. thousand thousand thousand
Hon Chuang Food Packing (Jinan) Co., PET bottle material manufacture and sale, drink backfill US$ 15,000 Note 1 (c) US$ 295 - - US$ 295 6.56% - 9,723 - Ltd. generation of labor. thousand thousand thousand
Hon Chuang Food Packing (Taiyuan) Co., Cap bottle, label and PET bottle material manufacture and US$ 15,000 Note 1 (c) US$ 118 US$ 177 - US$ 295 6.56% - 9,723 - Ltd. sale, drink backfill generation of labor. thousand thousand thousand thousand
Hon Chuang Enterprise (Changsha) Co., Cap bottle, label and PET bottle material manufacture and US$ 18,500 Note 1 (c) US$ 295 - - US$ 295 6.56% - 9,723 - Ltd. sale, drink backfill generation of labor. thousand thousand thousand
Hon Chuang Food Packing (Qing Xin) Cap bottle, label and PET bottle material manufacture and US$ 10,000 Note 1 (c) - US$ 590 - US$ 590 6.56% - 19,447 - Co., Ltd. sale, drink backfill generation of labor. thousand thousand thousand
Accumulated Investment in Mainland Investment Amounts Authorized by China as of Upper Limit on Investment Investment Commission, MOEA December 31, 2009
US$23,170 thousand US$29,265 thousand $89,320,171
(Continued)
- 160 -
Note 1: The investment types are as follows:
a. Remittances through a third place b. Reinvested through a new founded company at a third place c. Reinvested through an investee company at a third place d. Direct investments e. Other
Note 2: The column “Investment Gain” should be:
a. Stated clearly if there were no gains or losses during preparation
b. Stated clearly the basis of income recognition which are:
1. Financial statement audited by an international CPA firm having a cooperative relation with CPA firms in Republic of China. 2. Financial statement audited by the CPA firm of parent company in Taiwan. 3. Other.
Note 3: Through its subsidiary, the Corporation invested in Changshu Everbright Material Technology Co., Ltd., on which the Corporation fully recognized an impairment loss in 2008.
Note 4: The ratios of investees’ preferred stock A or B held by subsidiaries was calculated by dividing the total number of held preferred shares by the number of preferred shares outstanding.
(Concluded)
- 161 -
TABLE 14
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION OF SEGMENTS YEAR ENDED DECEMBER 31, 2009 (In Thousands of New Taiwan Dollars)
Industry Bank Security Other Consolidated Items Department Department Department Interest profit (loss), net $ 1,367,949 $ 847,098 $ (601,007) $ 1,614,040 Noninterest profits and gains, net 6,070,160 3,959,045 178,799 10,208,004 Net profit (loss) 7,438,109 4,806,143 (422,208) 11,822,044 Reversal of allowance for bad debts and losses on guarantees, net 527,247 - - 527,247 Operating expenses (2,713,393) (2,309,962) (703,703) (5,727,058) Income (loss) before income tax 5,251,963 2,496,181 (1,125,911) 6,622,233 Income tax benefit (expense) 648,142 200,462 (175,811) 672,793 Net income (loss) 5,900,105 2,696,643 (1,301,722) 7,295,026
- 162 -
TABLE 15
CHINA DEVELOPMENT FINANCIAL HOLDING CORPORATION AND SUBSIDIARIES
BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS YEARS ENDED DECEMBER 31, 2009 AND 2008 (In Thousands of New Taiwan Dollars)
Year ended December 31, 2009
Content of Transaction (Note 5) Transaction Flow of Amount/Total No. Trader Company Related Party Transactions Consolidated (Note 1) Financial Statement Accounts Amounts Trading Terms (Note 2) Revenue or Total Consolidated Assets (Note 3)
0 China Development Financial Holding Corporation CDIB 1 Payables $ 1,096,506 Note 4 0.38% (“The Corporation”)
1 CDIB The Corporation 2 Receivables, net 1,096,506 Note 4 0.38%
0 The Corporation CDIB 1 Receivables, net 234,365 Note 4 0.08%
1 CDIB The Corporation 2 Payables 234,365 Note 4 0.08%
0 The Corporation Grand Cathay 1 Receivables, net 613,703 Note 4 0.21%
2 Grand Cathay The Corporation 2 Payables 613,703 Note 4 0.21%
1 CDIB Grand Cathay 3 Securities sold under repurchase agreements 200,130 Note 4 0.07%
2 Grand Cathay CDIB 3 Securities purchased under resell agreements 200,130 Note 4 0.07%
1 CDIB CDIB Knowledge-Based Economy Capital Co., Ltd. 1 Deposits and remittances 761,256 Note 4 0.26%
3 CDIB Knowledge-Based Economy Capital Co., Ltd. CDIB 2 Cash and cash equivalents 761,256 Note 4 0.26%
1 CDIB CDIB Global Markets II Limited (formerly CDIB 1 Deposits and remittances 4,721,370 Note 4 1.64% Capital (Korea) Limited)
4 CDIB Global Markets II Limited (formerly CDIB CDIB 2 Cash and cash equivalents 4,721,370 Note 4 1.64% Capital (Korea) Limited)
1 CDIB CDIB Capital Investment II Limited (formerly CDIB 1 Deposits and remittances 1,156,892 Note 4 0.40% Capital (Japan) Limited)
5 CDIB Capital Investment II Limited (formerly CDIB CDIB 2 Cash and cash equivalents 1,156,892 Note 4 0.40% Capital (Japan) Limited)
(Continued)
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Content of Transaction (Note 5) Transaction Flow of Amount/Total No. Trader Company Related Party Transactions Consolidated (Note 1) Financial Statement Accounts Amounts Trading Terms (Note 2) Revenue or Total Consolidated Assets (Note 3)
1 CDIB CDIB Global Markets I Limited (formerly CDIB 1 Deposits and remittances $ 383,280 Note 4 0.13% Capital (America) Limited)
6 CDIB Global Markets I Limited (formerly CDIB CDIB 2 Cash and cash equivalents 383,280 Note 4 0.13% Capital (America) Limited)
1 CDIB CDIB Global Markets III Limited and its subsidiaries 1 Deposits and remittances 1,651,435 Note 4 0.57% (formerly CDIB Capital (USA) Limited and its subsidiaries)
7 CDIB Global Markets III Limited and its subsidiaries CDIB 2 Cash and cash equivalents 1,651,435 Note 4 0.57% (formerly CDIB Capital (USA) Limited and its subsidiaries)
1 CDIB CDIB Capital Investment I Limited and its 1 Deposits and remittances 1,632,126 Note 4 0.57% subsidiaries (formerly CDIB Capital Limited and its subsidiaries)
8 CDIB Capital Investment I Limited and its CDIB 2 Cash and cash equivalents 1,632,126 Note 4 0.57% subsidiaries (formerly CDIB Capital Limited and its subsidiaries)
1 CDIB CDIB Europe Investment Co. 1 Deposits and remittances 206,756 Note 4 0.07%
9 CDIB Europe Investment Co. CDIB 2 Cash and cash equivalents 206,756 Note 4 0.07%
(Continued)
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Year ended December 31, 2008
Content of Transaction (Note 5) Transaction Flow of Amount/Total No. Trader Company Related Party Transactions Consolidated (Note 1) Financial Statement Accounts Amounts Trading Terms (Note 2) Revenue or Total Consolidated Assets (Note 3)
0 The Corporation CDIB 1 Payables $ 428,731 Note 4 0.15%
1 CDIB The Corporation 2 Receivables, net 428,731 Note 4 0.15%
0 The Corporation CDIB 1 Cash and cash equivalents 357,280 Note 4 0.12%
0 The Corporation CDIB 1 Other assets 3,816 Note 4 -
1 CDIB The Corporation 2 Deposits and remittances 361,096 Note 4 0.12%
0 The Corporation Grand Cathay 1 Payables 286,896 Note 4 0.10%
2 Grand Cathay The Corporation 2 Receivables, net 286,896 Note 4 0.10%
0 The Corporation Grand Cathay 1 Receivables, net 184,692 Note 4 0.06%
2 Grand Cathay The Corporation 2 Payable 184,692 Note 4 0.06%
1 CDIB Grand Cathay 3 Securities sold under repurchase agreements 250,374 Note 4 0.09%
2 Grand Cathay CDIB 3 Securities purchased under resell agreements 250,374 Note 4 0.09%
1 CDIB CDIB Global Markets II Limited (formerly CDIB 1 Deposits and remittances 5,382,494 Note 4 1.86% Capital (Korea) Limited)
3 CDIB Global Markets II Limited (formerly CDIB CDIB 2 Cash and cash equivalents 5,382,494 Note 4 1.86% Capital (Korea) Limited)
1 CDIB CDIB Global Markets II Limited (formerly CDIB 1 Interest expense 131,299 Note 4 9.04% Capital (Korea) Limited)
3 CDIB Global Markets II Limited (formerly CDIB CDIB 2 Interest income 131,299 Note 4 9.04% Capital (Korea) Limited)
1 CDIB CDIB Bioventures, Inc. 1 Deposits and remittances 298,815 Note 4 0.10%
4 CDIB Bioventures, Inc. CDIB 2 Cash and cash equivalents 298,815 Note 4 0.10%
(Continued)
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Content of Transaction (Note 5) Transaction Flow of Amount/Total No. Trader Company Related Party Transactions Consolidated (Note 1) Financial Statement Accounts Amounts Trading Terms (Note 2) Revenue or Total Consolidated Assets (Note 3)
1 CDIB CDIB Capital Investment II Limited (formerly CDIB 1 Deposits and remittances 958,605 Note 4 0.33% Capital (Japan) Limited)
5 CDIB Capital Investment II Limited (formerly CDIB CDIB 2 Cash and cash equivalents 958,605 Note 4 0.33% Capital (Japan) Limited)
1 CDIB CDIB Global Markets I Limited (formerly CDIB 1 Deposits and remittances 144,219 Note 4 0.05% Capital (America) Limited)
6 CDIB Global Markets I Limited (formerly CDIB CDIB 2 Cash and cash equivalents 144,219 Note 4 0.05% Capital (America) Limited)
1 CDIB CDIB Global Markets III Limited and its subsidiaries 1 Deposits and remittances 1,598,279 Note 4 0.55% (formerly CDIB Capital (USA) Limited and its subsidiaries)
7 CDIB Global Markets III Limited and its subsidiaries CDIB 2 Cash and cash equivalents 1,598,279 Note 4 0.55% (formerly CDIB Capital (USA) Limited and its subsidiaries)
1 CDIB CDIB Capital Investment I Limited and its 1 Deposits and remittances 2,619,183 Note 4 0.91% subsidiaries (formerly CDIB Capital Limited and its subsidiaries)
8 CDIB Capital Investment I Limited and its CDIB 2 Cash and cash equivalents 2,619,183 Note 4 0.91% subsidiaries (formerly CDIB Capital Limited and its subsidiaries)
1 CDIB CDIB Europe Investment Co. and its subsidiaries 1 Deposits and remittances 188,045 Note 4 0.07%
9 CDIB Europe Investment Co. and its subsidiaries CDIB 2 Cash and cash equivalents 188,045 Note 4 0.07%
1 CDIB CDIB Knowledge-Based Economy Capital Co., Ltd. 1 Deposits and remittances 214,101 Note 4 0.07%
10 CDIB Knowledge-Based Economy Capital Co., Ltd. CDIB 2 Cash and cash equivalents 214,101 Note 4 0.07%
1 CDIB China Development Asset Management Corp. and its 1 Receivable, net 262,169 Note 4 0.09% subsidiaries
11 China Development Asset Management Corp. and its CDIB 2 Payables 262,169 Note 4 0.09% subsidiaries
(Continued)
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Note 1: Business relationships between parent company and subsidiaries are marked out in No. column as follows: Parent company - 0; subsidiaries - numbered from 1 by company.
Note 2: Transaction flows are as follows: (1) from parent to subsidiary; (2) from subsidiary to parent; and (3) between subsidiaries.
Note 3: The ratio is calculated as follows: For asset and liability accounts - transaction amount in the ending period/Total consolidated assets; for income and expense accounts - Transaction amount in the midterm/Total consolidated revenue.
Note 4: The transaction criteria for related parties are similar to those for third parties.
Note 5: Transactions amount to at least NT$100 million.
(Concluded)
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