China Development Financial Holding Corporation and Subsidiaries
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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