SinoPac Securities Corporation
(Formerly National Securities Corporation)
Financial Statements as of December 31, 2002 and 2001
Together with Independent Auditors’ Report
Readers are advised that the original version of these financial statements is in Chinese.
If there is any conflict between these financial statements and the Chinese version or any
difference in the interpretation of the two versions, the Chinese-language financial
statements shall prevail.
English Translation of a Report Originally Issued in Chinese
Independent Auditors’ Report
January 28, 2003
The Board of Directors and the Stockholders
SinoPac Securities Corporation (Formerly National Securities Corporation)
We have audited the accompanying balance sheets of SinoPac Securities Corporation (the
“Corporation”, formerly National Securities Corporation) as of December 31, 2002 and
2001, and the related statements of income, changes in stockholders’ equity and cash
flows for the years then ended. These financial statements are the responsibility of the
Corporation’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the Regulations for Audit of Financial
Statements by Certified Public Accountants and generally accepted auditing standards in
the Republic of China. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Corporation as of December 31, 2002 and 2001 and
the results of its operations and cash flows for the years then ended in conformity with
Criteria Governing the Preparation of Financial Reports by Securities Firms, Criteria
Governing the Preparation of Financial Reports by Futures Firms and generally accepted
accounting principles in the Republic of China.
-1-
As disclosed in Notes 1 and 2 to the financial statements, SinoPac Holdings was
incorporated by an exchange of shares involving the Corporation, Bank SinoPac and
SinoPac Securities Co., Ltd. (“SinoPac Securities”) on May 9, 2002. On July 22, 2002, the
Corporation combined with SinoPac Securities under the approval by the Corporation’s
Board of Directors. This business combination was regarded as a reorganization of
entities under common control since the Corporation and SinoPac Securities were both
wholly owned subsidiaries of SinoPac Holdings. Thus, the assets and liabilities of
SinoPac Securities were recorded by the Corporation at their book values, and the 2001
financial statements were restated for all periods presented.
T N Soong & Co
An Associate Member Firm of Deloitte Touche Tohmatsu
Taipei, Taiwan
The Republic of China
Notice to Readers
The accompanying 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 financial statements
are those generally accepted and applied in the Republic of China.
-2-
English Translation of Financial Statements Originally Issued in Chinese
SINOPAC SECURITIES CORPORATION
(Formerly National Securities Corporation)
BALANCE SHEETS
December 31, 2002 and 2001
(In Thousands of New Taiwan Dollars, Except Par Value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 2, 3, and 25)
Short-term investments - net (Notes 2, 4 and 26)
Operating securities - dealing (Notes 2, 5 and 26)
Operating securities - underwriting (Notes 2 and 5)
Operating securities - hedging (Notes 2 and 5)
Bonds purchased under resale agreements (Notes 2, 6 and 25)
Margin loans receivable (Note 2)
Loan from refinanced margin (Note 2)
Refinancing deposits receivable (Note 2)
Margin deposits - futures and options (Notes 2, 25, 28 and 29)
Premiums paid for long options - nonhedging (Notes 2 and 28)
Notes and accounts receivable - net of allowance for bad debt of $25,759 in 2002 and
$1,294 in 2001 (Notes 2, 5 and 25)
Pledged time deposits - current (Note 26)
Deferred income tax assets - current (Notes 2 and 18)
Deferred loss for warrant (Note 2)
Prepaid expenses (Note 25)
Other receivables - net of allowance for bad debt of $452,220 in 2001 (Notes 2, 18 and 25)
Other current assets
Total Current Assets
LONG-TERM EQUITY INVESTMENTS (Notes 2 and 7)
PROPERTIES (Notes 2, 8, 25 and 26)
Cost
Land
Buildings
Equipment
Leasehold improvements
Less - accumulated depreciation
(
Advance payments on equipment
Properties - Net
OTHER ASSETS
Refundable deposits (Notes 9, 25 and 27)
Prepaid pension fund - noncurrent (Notes 2 and 24)
Pledged time deposits - noncurrent (Note 26)
Deferred income tax assets - noncurrent (Notes 2 and 18)
Properties leased to others (Notes 2, 10 and 26)
Deferred charges (Note 2)
Accounts receivable in dunning process - net of allowance for bad debt of $442,907 in
2002 and $382,977 in 2001 (Note 2)
Long-term notes receivable - net of allowance for bad debt of $25,000 in 2002 (Notes 2 and 5)
Total Other Assets
TOTAL ASSETS
2002
Amount
%
$ 1,562,732
4,832,164
15,872,797
1,023,400
141,013
1,522,124
12,089,479
20,108
26,122
117,793
12,188
3
10
32
2
3
25
-
122,443
3,333,400
75,179
19,521
692,112
8,007
41,470,582
2001 (Restated Notes 1 and 2)
Amount
%
$
550,315
2,761,600
11,861,803
968,421
174,688
8,601,442
11,053,855
10,294
18,009
-
1
6
24
2
17
22
-
7
2
84
204,366
4,546,600
168,067
46
30,070
423,058
5,040
41,377,674
1
9
1
83
2,847,933
6
2,402,290
5
1,494,384
760,855
1,074,733
479,687
3,809,659
1,149,108 ) (
2,660,551
89,192
2,749,743
3
2
2
1
8
2) (
6
6
1,494,384
760,855
1,045,220
485,491
3,785,950
952,496 ) (
2,833,454
29,345
2,862,799
3
2
2
1
8
2)
6
6
1,392,521
163,744
340,125
167,181
3
1
-
1,604,235
132,910
696,500
49,042
342,929
213,438
3
1
1
1
2,830
2,066,401
4
17,761
3,056,815
6
$ 49,134,659
100
$ 49,699,578
100
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Bank loans (Notes 11, 25 and 26)
Commercial paper issued (Notes 12 and 26)
Bonds sold under repurchase agreements (Notes 2, 13 and 25)
Warrant liabilities (Notes 2 and 14)
Repurchase of warrants issued (Notes 2 and 15)
Deposits on short sales (Note 2)
Short sale proceeds payable (Note 2)
Premiums received from short options (Notes 2 and 28)
Notes and accounts payable
Withholding items
Other payables (Notes 2, 18 and 25)
Current portion of long-term liabilities (Note 16)
Other current liabilities
Total Current Liabilities
LONG-TERM LIABILITIES
Bonds issued (Note 16)
Long-term loans (Notes 17 and 26)
Total Long-term Liabilities
OTHER LIABILITIES
Reserve for default accounts (Note 2)
Reserve for trading loss (Note 2)
Reserve for bad debt (Note 2)
Accrued pension liabilities (Notes 2 and 24)
Deferred income tax liabilities - noncurrent (Notes 2 and 18)
Miscellaneous
Total Other Liabilities
SECURITIES BROKERAGE ACCOUNTS - NET (Notes 2 and 20)
Total Liabilities
STOCKHOLDERS’ EQUITY (Notes 2, 7, 18, 21 and 22)
Capital stock - $10 par value
Authorized - 1,900,000 thousand shares in 2002 and 1,950,000 thousand shares in 2001
Issued - 1,526,902 thousand shares in 2002 and 1,593,955 thousand shares in 2001
Capital surplus:
Additional paid-in capital
Treasury stock transactions
Gain on disposal of properties
Share in capital surplus of investee companies
Capital surplus from business combination
Retained earnings:
Legal reserve
Special reserve
Unappropriated earnings
Cumulative translation adjustments
Treasury stock - 33,330 thousand shares in 2002 and 81,720 thousand shares in 2001
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of the financial statements.
(With T N Soong & Co report dated January 28, 2003)
-3-
2002
Amount
$ 4,008,000
2,617,979
14,542,269
81,950
(
45,346 )
1,461,859
1,838,645
1,669
585,612
29,650
1,189,241
1,000,000
24,468
27,335,996
%
8
5
30
3
4
1
3
2
56
2001 (Restated Notes 1 and 2)
Amount
%
$ 1,260,000
1,848,244
18,008,430
182,000
(
39,327 )
1,506,987
1,761,928
171,582
125,182
1,042,012
186,795
26,053,833
3
4
36
3
4
2
52
-
-
1,000,000
1,956,660
2,956,660
2
4
6
200,000
19,183
139,138
24,493
2,053
384,867
1
1
237,452
14,097
56,326
13,853
2,053
323,781
1
1
91,486
-
80,301
-
27,812,349
57
29,414,575
59
15,269,020
31
15,939,549
32
584,747
11,663
228
1,725,359
1
4
584,747
2,000
228
773,040
1
2
829,716
2
749,377
2
1,659,432
3
1,499,041
3
1,487,514
3
1,444,804
3
103,280
109,527
(
348,649 ) ( 1 ) (
817,310 ) ( 2 )
21,322,310
43
20,285,003
41
$ 49,134,659
100
$ 49,699,578
100
English Translation of Financial Statements Originally Issued in Chinese
SINOPAC SECURITIES CORPORATION
(Formerly National Securities Corporation)
STATEMENTS OF INCOME
For the Years Ended December 31, 2002 and 2001
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
%
2001 (Restated Notes 1 and 2)
Amount
%
$ 2,532,651
202,592
39
3
$ 2,135,466
157,033
34
2
308,649
774,108
102,219
305,752
74,916
1,581,056
24,073
5
12
2
5
1
25
-
424,244
738,105
103,421
43,033
67,240
1,646,986
40,711
7
12
2
1
1
26
1
-
-
39,863
-
3,801
25,041
487,097
6,421,955
8
100
226,595
7,449
603,411
6,233,557
4
10
100
164,769
5,137
439
16,878
142,371
437,165
763
3
2
7
-
133,506
4,958
252
15,890
171,222
735,519
631
2
3
12
-
2,146
-
-
-
5,300
1,138
3,370,965
293,183
4,440,254
52
5
69
1,149
3,294,934
307,602
4,665,663
53
5
75
2002
Amount
REVENUES (Note 2)
Commissions and fees (Note 25):
Brokerage
Underwriting
Gain on sales of securities (Note 2):
Dealing
Underwriting
Stock affairs agent fees (Note 25)
Gain on warrants issued (Note 2)
Commissions and fees - futures (Note 25)
Interest income (Notes 2, 25 and 28)
Dividend income
Gain from futures transactions - hedging
(Notes 2 and 28)
Gain from futures transactions - non-hedging
(Notes 2 and 28)
Reversal of trading loss reserve (Note 2)
Other operating income
Nonoperating income (Notes 2 and 25)
Total Revenues
COSTS AND EXPENSES
Commissions and fees:
Brokerage
Dealing
Refinancing
Expenses for security underwriting
Loss on sale of securities - hedging (Note 2)
Interest expense (Notes 2, 25 and 28)
Expense related to issuance of warrants
Provision for decline in market value of
operating securities (Note 2)
Losses from options transactions non-hedging (Notes 2 and 28)
Exchange clearing expenses - futures
Operating expenses (Notes 25 and 27)
Nonoperating expenses (Note 25)
Total Costs and Expenses
(Forward)
-4-
English Translation of Financial Statements Originally Issued in Chinese
%
2001 (Restated Notes 1 and 2)
Amount
%
$ 1,981,701
31
$ 1,567,894
25
352,417
6
230,193
4
$ 1,629,284
25
$ 1,337,701
21
2002
Amount
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 2 and 18)
NET INCOME
2002
Income
Before
Income
Net
Tax
Income
PRIMARY EARNINGS PER SHARE (Note 19)
$ 1.34
$ 1.10
2001
Income
Before
Income
Net
Tax
Income
$ 1.02
The accompanying notes are an integral part of the financial statements.
(With T N Soong & Co report dated January 28, 2003)
-5-
$ 0.87
English Translation of Financial Statements Originally Issued in Chinese
SINOPAC SECURITIES CORPORATION
(Formerly National Securities Corporation)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2002 and 2001
(In Thousands of New Taiwan Dollars, Except Par Value)
CAPITAL STOCK $10 PAR VALUE
Authorized
Issued
Shares (In
Shares (In
Thousand)
Amount
Thousand)
Amount
BALANCE, JANUARY 1, 2001
(RESTATED - Notes 1 and 2)
Issuance of capital stock on March 16, 2001
Appropriations of prior year’s earnings
Legal reserve
Special reserve
Capitalization of capital surplus
Capitalization of stock dividends
Bonus to employees
Cash dividends
Remuneration to directors and
supervisors
Reversal of special reserve
appropriated for cumulative
translation adjustment
Special reserve for unrealized loss on
long-term investment
Subtotal
Recognized capital surplus under equity
method
Reversal of unrealized loss on market
value decline of long-term equity
investments
Changes in cumulative translation
adjustments
Acquisition of treasury stock 54,468
thousand shares
Net income for 2001
BALANCE, DECEMBER 31, 2001
Reversal of gain on disposal of properties
to unappropriated earnings
Appropriations of prior year’s earnings
Legal reserve
Special reserve
Cash dividends
Bonus to employees
Remuneration to directors and
supervisors
Reversal of special reserve
for unrealized loss on long-term
investment
Subtotal
Additional
Paid-in
Capital
(Note 21)
1,950,000
$ 19,500,000
1,347,398
$ 13,473,980
$ 1,578,450
-
-
85,106
851,060
-
-
-
99,370
60,282
1,799
-
993,703
602,816
17,990
-
-
-
-
-
-
-
-
1,950,000
19,500,000
-
CAPITAL SURPLUS
Share in
Capital
Capital
Surplus
Gain on Surplus of
from
Disposal of Investee
Business
Properties Companies Combination
(Note 2)
(Note 2)
(Note 2)
$
2,000
$
-
$
773,040
Treasury
Stock
Transactions
(Note 22)
$
UNREALIZED
LOSS ON
MARKET
VALUE
DECLINE OF
LONG-TERM
CUMULATIVE
EQUITY
TRANSLATION TREASURY
TOTAL
INVESTMENTS ADJUSTMENTS
STOCK STOCKHOLDERS‘
(Note 2)
(Notes 2 and 7)
(Note 22)
EQUITY
RETAINED EARNINGS (Notes 2, 18 and 22)
Legal
Special
Unappropriated
Reserve
Reserve
Earnings
Total
Total
-
$ 2,353,490
$ 594,096
$ 1,195,973
$ 1,679,907
$ 3,469,976
-
-
-
-
-
155,281
-
310,563
-
(
(
-
( $ 286 )
$ 45,808
( $ 248,110 )
$ 19,094,858
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,593,955
15,939,549
584,747
2,000
-
773,040
-
1,359,787
749,377
286
1,499,041
-
-
-
-
-
228
-
-
228
-
-
-
-
-
-
-
228
-
-
-
-
-
-
-
-
-
-
-
-
-
-
286
-
-
286
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
63,719
-
63,719
-
-
-
-
-
-
-
-
-
-
-
-
1,337,701
1,337,701
-
-
( 569,200 )
-
1,950,000
19,500,000
1,593,955
15,939,549
584,747
2,000
228
773,040
-
1,360,015
749,377
1,499,041
1,444,804
3,693,222
-
109,527
( 817,310 )
-
-
-
-
-
-
-
-
-
-
2,000
2,000
-
-
-
-
-
-
-
-
-
-
-
-
-
133,971
-
267,940
-
(
(
(
(
133,971 )
267,940 )
887,883 )
109,296 )
(
(
887,883 )
109,296 )
-
-
-
(
(
887,883 )
109,296 )
-
-
-
-
-
-
-
-
-
-
-
-
(
48,000 )
(
48,000 )
-
-
-
(
48,000 )
1,950,000
19,500,000
1,593,955
15,939,549
584,747
-
228
773,040
-
1,358,015
883,348
-
109,527
(Forward)
-6-
(
993,703 )
-
(
2,000 )
(
(
993,703 )
-
2,000 )
(
(
(
(
(
155,281 )
310,563 )
602,816 )
45,993 )
441,646 )
(
(
(
602,816 )
45,993 )
441,646 )
(
24,000 )
(
24,000 )
7,781 )
286 )
1,766,695
7,781
(
-
286 )
107,103
286
-
2,355,521
2,650,043
-
-
-
851,060
-
-
-
(
(
28,003 )
441,646 )
-
-
-
(
24,000 )
-
-
-
( 286 )
45,808
-
( 248,110 )
( 817,310 )
19,452,269
(
569,200 )
1,337,701
20,285,003
-
19,239,824
English Translation of Financial Statements Originally Issued in Chinese
Capital increase and surplus arising
from business combination with
SinoPac Securities Co., Ltd.
Subtotal
Recognized unappropriated earnings
under equity method
Change in cumulative translation
adjustments
Reissuance of treasury stock to
employees - (48,390) thousand shares
Net income for 2002
BALANCE, DECEMBER 31, 2002
CAPITAL STOCK $10 PAR VALUE
Authorized
Issued
Shares (In
Shares (In
Thousand)
Amount
Thousand)
Amount
Additional
Paid-in
Capital
(Note 21)
(
$
50,000 ) ( $ 500,000 ) ( $ 67,053 ) ( $ 670,529 )
1,900,000
19,000,000
1,526,902
15,269,020
584,747
CAPITAL SURPLUS
Share in
Capital
Capital
Surplus
Gain on Surplus of
from
Disposal of Investee
Business
Properties Companies Combination
(Note 2)
(Note 2)
(Note 2)
$
-
$
228
$
952,319
1,725,359
Treasury
Stocks
Transactions
(Note 22)
$
-
RETAINED EARNINGS (Notes 2, 18 and 22)
Legal
Special
Unappropriated
Reserve
Reserve
Earnings
Total
Total
$
952,319
2,310,334
( $ 53,632 ) ( $ 107,263 )
829,716
1,659,432
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,663
-
11,663
-
-
-
1,900,000
$ 19,000,000
1,526,902
$ 15,269,020
228
$ 1,725,359
$ 11,663
$ 2,321,997
$ 829,716
$ 1,659,432
$
584,747
$
-
$
The accompanying notes are an integral part of the financial statements.
(With T N Soong & Co report dated January 28, 2003)
-7-
UNREALIZED
LOSS ON
MARKET
VALUE
DECLINE OF
LONG-TERM
CUMULATIVE
EQUITY
TRANSLATION TREASURY
TOTAL
INVESTMENTS ADJUSTMENTS
STOCK STOCKHOLDERS‘
(Note 2)
(Notes 2 and 7)
(Note 22)
EQUITY
($
(
(
120,895 )
120,895 )
8,490 )
($
(
(
12,385 )
1,629,284
$ 1,487,514
281,790 )
2,368,253
$
8,490 )
-
(
$
109,527
-
-
-
12,385 )
1,629,284
$ 3,976,662
-
$
(
6,247 )
-
-
-
$103,280
$
( 817,310 )
$
19,239,824
-
(
8,490 )
-
(
6,247 )
468,661
( $ 348,649 )
467,939
1,629,284
$ 21,322,310
English Translation of Financial Statements Originally Issued in Chinese
SINOPAC SECURITIES CORPORATION
(Formerly National Securities Corporation)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002 and 2001
(In Thousands of New Taiwan Dollars)
2001
(Restated Notes 1
and 2)
2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Provision for bad debt
Provisions (reversals of allowance) for decline in market values of:
Short-term investments
Operating securities
Loss on disposal of assets
Unrealized loss from futures and options transactions
Gain on warrants issued
Equity in net income of investee companies
Cash dividends received from equity-accounted investees
Loss (gain) on sale of short-term investments
Loss on sale of properties
Deferred income tax
Provisions (reversals of reserves) for:
Default accounts
Trading losses
Increase in prepaid pension fund
Changes in operating assets and liabilities
Operating securities - dealing
Operating securities - underwriting
Operating securities - hedging
Bonds purchased under resale agreements
Margin loans receivable
Loan from refinanced margin
Warrant liabilities
Repurchase of warrants issued
Refinancing deposits receivable
Notes and accounts receivable
Margin deposits - futures and options
Prepaid expenses
Other receivables
Other current assets
Accounts receivable in dunning process
(Forward)
-8-
(
(
(
(
$ 1,629,284
$ 1,337,701
342,817
119,245
326,903
107,861
2,146
317
485
305,752 )
121,080 )
26,864
2,240
13,389
166,423
(
(
(
(
(
37,452 ) (
5,086
44,687 ) (
( 4,009,921 )
(
54,979 )
31,529
7,079,318
( 1,035,624 )
(
20,108 )
368,800
(
169,071 )
(
15,828 )
81,781
(
110,788 )
10,549
(
54,336 )
(
2,967 )
(
22,433 )
(
(
(
(
(
(
30,189 )
226,595 )
309
43,033 )
51,941 )
18,557 )
2,299
80,047
35,820 )
12,592
21,685 )
7,989,259
198,648
136,975 )
5,457,213 )
4,542,310 )
7,023
390,850
217,058 )
4,464 )
173,112 )
4,998
28,220
187,065
1,780
5,976
English Translation of Financial Statements Originally Issued in Chinese
2001
(Restated Notes 1
and 2)
2002
Bonds sold under repurchase agreements
Deposits on short sales
Short sale proceeds payable
Notes and accounts payable
Withholding items
Other payables
Other current liabilities
Securities brokerage accounts - net
Net Cash Provided by (Used in) Operating Activities
( $ 3,466,161 ) ( $ 2,006,073 )
(
45,128 )
208,581
76,718
588,399
414,031
125,067
(
95,533 )
54,790
146,371 (
116,807 )
13,481
177,880
11,185
344,020
930,211 (
901,564 )
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in pledged time deposits
Increase in short-term investments
Additions to properties
Proceeds from sale of properties
Increase in long-term equity investments
Decrease (increase) in refundable deposits
Increase in deferred charges
Net Cash Used in Investing Activities
1,909,700
( 2,282,523 )
(
168,588 )
10,961
(
366,164 )
206,714
(
36,778 )
(
726,678 )
1,510,300
( 1,902,131 )
(
162,977 )
4,217
(
725,416 )
(
80,655 )
(
64,816 )
( 1,421,478 )
(
(
(
(
(
(
CASH FLOWS FROM FINANCING ACTIVITIES
Remuneration paid to directors and supervisors
Cash dividends paid to stockholders
Bonus paid to employees
Proceeds from issuance of capital stock
Proceeds from reissuance of treasury stock to employees
Proceeds from bank loans
Proceeds from (repayments of) commercial paper issued
Cash paid for acquisition of treasury stock
Proceeds from (repayments of) long-term loans
Increase in other liabilities - miscellaneous
Net Cash Provided by Financing Activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
48,000 )
887,883 )
108,439 )
292,131
2,748,000
769,735
( 1,956,660 )
808,884
1,012,417
24,000 )
441,646 )
28,003 )
851,060
802,000
( 1,232,537 )
(
569,200 )
1,431,660
1,953
791,287
( 1,531,755 )
550,315
2,082,070
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 1,562,732
$ 550,315
SUPPLEMENTARY INFORMATION
Interest paid
Income tax paid
$ 725,713
$ 125,236
$ 1,057,190
$ 223,351
(Forward)
-9-
English Translation of Financial Statements Originally Issued in Chinese
2002
NONCASH INVESTING AND FINANCING ACTIVITIES
Reclassification of bonds issued to current portion of long-term
liabilities
Receivables from sale of short-term investments
Reissuance of treasury stock to employees, with payment received in
prior year
$ 1,000,000
$ 209,719
$
$
-
$ 175,808
$
-
The accompanying notes are an integral part of the financial statements.
(With T N Soong & Co report dated January 28, 2003)
- 10 -
2001
(Restated Notes 1
and 2)
English Translation of Financial Statements Originally Issued in Chinese
SINOPAC SECURITIES CORPORATION
(Formerly National Securities Corporation)
NOTES TO FINANCIAL STATEMENTS
(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Stated Otherwise)
1. GENERAL
National Securities Corporation (the “Corporation”) was established on October 11,
1988 and started operations on November 8, 1988. It engages in transactions
involving marketable securities such as: (a) underwriting, dealing (securities and
futures) and brokerage; (b) financing customers’ acquisition and short-sales; (c)
trading foreign securities on behalf of customers; and (d) assistance activities in
futures trading. Its shares have been listed on the ROC Over-The-Counter Securities
Exchange (the “ROC OTC”) since December 1994. Effective May 9, 2002, the
Corporation’s shares ceased to be traded over the ROC OTC because of the
incorporation of the Corporation into SinoPac Holdings through a share swap. Thus,
the Corporation was renamed as SinoPac Securities Corporation in June 2002.
Under its stockholders’ approval on November 19, 2001, the Corporation incorporated
SinoPac Holdings together with Bank SinoPac and SinoPac Securities Co., Ltd. (the
“SinoPac Securities”). For this incorporation, the Corporation, SinoPac Bank and
SinoPac Securities exchanged one share each for 1.0098971566, 1.0267130836 and
0.7968960296 shares of SinoPac Holdings, respectively.
Under its Board of Directors’ approval on May 9, 2002, the Corporation merged with
SinoPac Securities on July 22, 2002, with the Corporation as the surviving entity. This
approval was made under Article No. 15 of the ROC Financial Holding Company Act.
The Corporation issued one share for every 1.2672884782 shares of SinoPac Securities
to carry out this merger.
As of December 31, 2002, the Corporation’s organization comprised its head office and
49 branches including 7 former branches of SinoPac Securities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation’s significant accounting policies, which conform to Criteria
Governing the Preparation of Financial Reports by Securities Firms, Criteria
Governing the Preparation of Financial Reports by Futures Firms and generally
accepted accounting principles in the Republic of China, are summarized as follows:
Business combination
The merger of the Corporation and SinoPac Securities described in Note 1 was
regarded as a reorganization of entities under common control since the Corporation
and the SinoPac Securities were both wholly owned subsidiaries of SinoPac Holdings.
Accordingly, the assets and liabilities of SinoPac Securities were recorded by the
Corporation at their book values and the historical financial statements were restated
for all periods presented.
- 11 -
The assets and liabilities of SinoPac Securities as of July 21, 2002 and the calculation of
the capital surplus from the merger were as follows:
Amounts
(Book
Value)
Cash
Operating securities - net
Bonds purchased under resale agreements
Margin loans receivable
Pledged time deposits - current
Other current assets
Long-term equity investment
Properties - net
Other assets
Securities brokerage accounts - net
Current liabilities
Other liabilities
Net assets acquired
Common stock issued
$
24,197
1,050,294
971,850
2,760,524
2,899,500
273,206
805,037
203,010
484,557
67,484
( 5,946,456 )
(
132,252 )
3,460,951
( 2,508,632 )
Capital surplus from business combination
$ 952,319
The results of operations of the mergered businesses were as follows:
2002
Corporation
Revenues
Costs and expenses
Income before income
tax
January 1 to July 21
SinoPac
Securities Adjustment
$ 4,163,253
2,803,119
$ 1,064,757 ( $
874,726 (
$ 1,360,134
$ 190,031
Subtotal
292 ) $ 5,227,718
292 )
3,677,553
$
-
$ 1,550,165
July 22 to
December 31
Total
$ 1,194,237
762,701
$ 6,421,955
4,440,254
$ 431,536
$ 1,981,701
2001
Corporation
SinoPac
Securities
Adjustment
Total
Revenues
Costs and expenses
$ 4,864,326
3,301,651
$ 1,369,231
1,364,012
$
-
$ 6,233,557
4,665,663
Income before income tax
$ 1,562,675
$
$
-
$ 1,567,894
5,219
The adjustments pertained to transactions between the Corporation and SinoPac
Securities before July 22, 2002.
Cash equivalents
Cash equivalents consist of commercial paper with maturities of three months or less.
Commercial paper is stated at cost. Cost of commercial paper sold is determined by
the specific identification method.
- 12 -
Short-term investments
Short-term investments, including investments in short-term negotiable instruments
and in open-end mutual funds, are stated at cost. The investments in open-end
mutual funds are carried at the lower of aggregate cost or market value. The market
value is represented by the net asset value of the funds. The costs of the funds sold
are determined by the weighted-average method. The interest earned on short-term
negotiable instruments is charged to financial income.
Operating securities
Stocks, except for Emerging Stocks, held by the Corporation's Dealing and
Underwriting departments, are stated at the lower of aggregate cost or market value.
Emerging Stock is stated at cost. The aggregate market value of the stocks, except
that of Emerging Stocks, is based on closing price on the balance sheet date. The cost
of stocks sold is determined by the moving-average method.
Bonds are stated at the lower of cost or market value. The market value is based on
the reference price on the balance sheet date published by the ROC OTC. The cost of
bonds sold is determined by the moving-average method.
Allowance for loss is provided for the excess of the total cost of the securities over
their market value. Any recovery of the market values of the securities to the extent
of their original carrying values is recognized as income. The allowance is adjusted
when the market value subsequently recovers.
Bonds purchased under resale agreements
and bonds sold under repurchase agreements
Bonds purchased under resale agreements and bonds sold under repurchase
agreements are accounted for as assets and liabilities, respectively, and the related
interest income and expense are accounted for on the basis of the contracted spread.
Warrant liabilities and operating securities - hedging
The amount received for the issuance of warrants is presented as “warrant liabilities”.
The amount paid for the repurchase of warrants issued is presented as “repurchase of
warrants issued”, a contra-account of “warrants liabilities”. Warrants liability and
warrants repurchased are marked to market. The gain/loss, presented as “gain/loss
on warrants issued”, is recognized for the difference between the carrying values and
the market values of both the warrant liabilities and warrants repurchased. However,
the loss on revaluation of warrants liabilities is deferred to the extent of the unrealized
gain on the related hedge securities, while the excess of the loss on revaluation of
warrants liabilities over the unrealized gain on hedge securities is charged to current
income.
The repurchase cost of warrants issued is calculated using the
moving-average method, with the related gain or loss accounted for as “gain/loss on
warrants issued”.
- 13 -
Securities held as hedges for warrants issued are stated at purchase cost or at the
lower of cost or market value on the date of being transferred to hedge position.
These securities are stated at the lower of cost or market value based on individual
warrants issued. The loss from decline in market value of such securities is charged
to income.
Margin loans and stock loans
Margin loans pertain to the provision of funds to customers for them to buy securities.
Margin loans receivable represent the amount given to customers. The securities
bought by customers are used to secure these loans and are recorded through memo
entries as “collateral securities”. The collateral securities are returned when the loans
are repaid.
The refinancing of margin loans with securities finance companies are recorded as
“refinancing borrowings”, which are secured by securities bought by customers.
The collateral securities are disposed of by the Corporation when their market values
fall below a pre-agreed level and the customer fails to maintain to such level. If the
proceeds from the disposal of collateral security cannot cover the balance of the loan
and the customer cannot timely settle the deficiency, the balance of the margin loan is
reclassified under “accounts receivable in dunning process”. If a collateral security
cannot be sold in the open market, the balance of the loan is reclassified under “other
receivables” or “accounts receivable in dunning process”, with appropriate allowance
for bad debt recognized on the basis of the estimated amount collectible.
Stock loans represent securities lent to customers for short sales. The deposits
received from customers on securities lent are credited to “deposits on short sale”.
The securities sold short are recorded through memo entries as “stock loans”. The
proceeds from sales of securities lent to customers less any dealer's commission,
financing charges and securities exchange tax are recorded under “short sales
proceeds payable”. When the customers return the stock certificates to the
Corporation, the Corporation gives back to customers the deposits received and the
proceeds from sales of securities.
The margin deposited by securities firms to securities finance companies are recorded
as “loan from refinanced margin”. The refinancing securities delivered to the
Corporation are recorded through memo entries as “refinancing stock loans”. A
portion of the proceeds from the short-sale of securities borrowed from securities
finance companies is retained by the securities finance companies as collateral and is
recorded as “refinancing deposits receivable”.
Allowance for bad debts
Allowance for bad debts is provided on the basis of a review of the estimated
collectibility of notes and accounts receivables, other receivables and accounts
receivable in the dunning process. After providing this allowance, the Corporation
sets aside an additional amount as bad-debt reserve to save 3% on the value-added
tax.
- 14 -
Long-term equity investments
Investments in stock of companies in which the Corporation exercises significant
influence on their operating and financial policy decisions are accounted for by the
equity method. The investments are initially stated at cost and subsequently
adjusted for its proportionate share in the net income or net loss and in the net
changes in the capital surplus accounts of the investee companies. The equity in net
income or net loss is recognized as investment income or loss. Cash dividends
received are accounted for as reduction in the carrying value of the investments. The
excess of investment cost over the Corporation’s proportionate equity in the net assets
of the investees at the time the equity method is first applied is amortized over five
years.
Other long-term stock investments are accounted for by the cost method. The
carrying amount is reduced to reflect other than temporary decline in value, with the
related provisions for losses charged to income.
Costs of investments sold are determined by the weighted-average method.
Consolidated financial statements will be prepared if the total assets or total operating
revenues of the Corporation’s direct or indirect subsidiaries are more than 10% of
those of the Corporation. If the total assets or operating revenues of each subsidiary
are equal to or less than 10% of those of the Corporation but the total assets or
operating revenues of these subsidiaries are collectively more than 30% of those of the
Corporation, the consolidated financial statements should be prepared for those
subsidiaries whose total assets or operating revenues are more than 3%.
Properties
Properties are stated at cost less accumulated depreciation. Major renewals and
betterments are capitalized. Ordinary repairs and maintenance are charged to
expense.
Depreciation is calculated by the straight line method. Related expense is equal to
cost less the salvage value of one year divided by the estimated life of an asset.
The initial estimate of the service lives of properties is as follows: Buildings, 40 to 60
years; equipment, 3 to 15 years, and leasehold improvements, 5 years. If a property
is still in use beyond its estimated service life, its residual value is written off over its
newly estimated service life.
Upon sale or other disposal of properties, the related cost and accumulated
depreciation are removed from the accounts, and any gain or loss is credited or
charged to nonoperating income. Before 2000, gain (less applicable income tax)
generated was reclassified as capital surplus at year-end.
Pension and severance benefits
The Corporation recognizes pension and severance benefit on the basis of actuarial
calculations.
- 15 -
Properties leased to others
These properties are depreciated using the straight-line method over service lives of
50 years to 55 years.
Deferred charges
Deferred charges, which include amounts paid for acquiring operating rights, and
computer software as well as network construction and decoration or renovations, are
capitalized and amortized over five years.
Securities brokerage accounts
These accounts pertain to open brokerage transactions. Under Criteria Governing
the Preparation of Financial Reports by Securities Firms, the following unsettled
brokerage transactions are recorded as: (i) debit accounts (such as cash in bank settlement, accounts receivable - customers' purchases, net exchange clearing
receivable, margin transaction, and accounts receivable - settlement) and (ii) credit
accounts (such as accounts payable - customers' sales, net exchange clearing payable,
margin transaction, and accounts payable - settlement). The foregoing are presented
in the financial statements at net amounts.
Income tax
The Corporation uses the inter period income tax allocation method. Deferred tax
liabilities are recognized for the tax effects of taxable temporary differences and
deferred tax assets are recognized for the tax effects of deductible temporary
differences, unused operating loss carried forwards and unused tax credits.
Valuation allowance is provided for deferred tax assets that are not certain to be
realized. Deferred tax assets and liabilities are classified as current or noncurrent on
the basis of the classification of the related assets or liabilities for financial reporting.
A deferred tax asset or liability that is not related to an asset or liability for financial
reporting is classified according to the expected realization date of the temporary
difference.
Adjustments of prior year’s tax liabilities are added to or deducted from the current
year's income tax expense.
Income taxes (10%) on undistributed earnings are recorded as expense when
stockholders resolve to retain the earnings.
Reserve for default accounts
As required by the Rules Governing Securities Firms, for securities traded for
customers’ accounts, the Corporation should allocate monthly 0.0028% of the
transaction price of the traded securities as a reserve for default accounts. When the
accumulated reserve for default accounts reaches $200,000, allocation will be
suspended. This reserve should be used only for covering the losses caused by
breach of contracts for trading on customers’ accounts or for other purposes approved
by the Securities & Futures Commission.
- 16 -
Reserve for trading losses
An amount equivalent to 10% of the net gain from sale of securities and futures is
recognized monthly as reserve for trading losses under the Rules Governing Securities
Firms and Rules Governing Future Firms. This reserve is recognized until its
accumulated balance reaches $200,000. This reserve can be used only to offset actual
loss from securities and futures dealings.
Foreign-currency transactions
Foreign-currency transactions are recorded in New Taiwan dollars at the rates of
exchange in effect when the transactions occur. Gain or losses resulting from the
application of different foreign exchange rates when cash in foreign currency is
converted into New Taiwan dollars, or when foreign-currency receivables or payable
are settled, are credited or charged to income in the year of conversion or settlement.
At year-end, the balances of foreign-currency assets and liabilities are restated at the
prevailing exchange rates, and the resulting differences are recorded as follows:
a. Equity-accounted long-term stock investments - as cumulative translation
adjustment under stockholders’ equity.
b. Other assets and liabilities - credited or charged to current income.
Interest rate swap
The notional amounts of the interest rate swap agreements, entered into by the
Corporation to profit from short-term fluctuation in interest rates or hedge its interest
rate exposures, are recognized through memo entries since the agreements do not
require the actual settlement of these amounts. The change in present value of
expected future net cash flows under agreements entered into to profit from
short-term fluctuation in interest rates is recognized as interest income or expenses.
The net interest receivable or payable as of the balance sheet dates and those received
or paid at the settlement dates on agreements that are entered into to hedge interest
rate exposures are reported as interest income or expenses. The interest income and
interest expense are netted out by purpose, and the result is recognized in the income
statement.
Futures
Initial margin on futures contracts and margin deposits maintained to reflect the
fluctuation of market price of futures contracts are recognized as margin deposits futures. Gains or losses arising from daily marking to market of the carrying
amounts of the futures contracts, from taking opposite trade positions, and from
settlement of futures contracts are recognized as either gains or losses from futures
transactions - non-hedging or gains or losses from futures transactions - hedging
depending on the transaction purpose.
- 17 -
Options
Premiums received form short options or paid for long options for trading purposes
are recognized as liabilities and assets. The margin deposited on short options is
recognized as margin deposits - options. Gains or losses arising from daily marking
to market the carrying amounts of the options, taking opposite positions on options
and settlement of options, are recognized as gains or losses from transactions on
options - nonhedging.
Revenue recognition
Revenue from rendering services, such as brokerage and underwriting commissions
and fees, stock affairs agent fees and future commissions and fees, etc., is recognized
according to the stage of completion as of the balance sheet date.
Interest income is accrued on a time basis by referring to the principal outstanding
and the effective interest rate.
Dividend income from equity securities is recognized on ex-dividend dates or on the
dates when the stockholders declare dividend distribution.
Reclassifications
Certain 2001 accounts have been reclassified to conform to the 2002 presentation.
3. CASH AND CASH EQUIVALENTS
2002
Cash
Petty cash and cash on hand
Demand deposits
Checking accounts
Time deposits
Cash equivalents - commercial paper, due in January
2003, discount rates at 1.40%-1.45% for 2002; due in
January 2002, discount rates at 2.3% for 2001
4. SHORT-TERM INVESTMENTS
Open-end mutual funds
Short-term negotiable instruments
$
1,595
44,792
21,565
1,245,000
2001
$
1,803
337,115
16,338
185,000
249,780
10,059
$ 1,562,732
$ 550,315
2002
2001
$ 4,832,164
-
$ 2,729,543
32,057
$ 4,832,164
$ 2,761,600
The short-term negotiable instruments were pledged as guarantee for commercial
paper issued (Note 26).
- 18 -
The net asset values of the open-end mutual funds on the last transaction days in
December 2002 and 2001 were $4,854,630 and $2,755,954, respectively.
5. OPERATING SECURITIES
2002
2001
$ 5,732,419
$ 4,621,632
5,466,325
3,017,405
1,152,422
12,351,166
1,577,780
1,465,917
453,230
24,704
1,856,605
9,495,642
1,042,806
1,155,612
140,134
27,609
$ 15,872,797
$ 11,861,803
$
392,630
565,784
64,986
1,023,400
-
$
486,074
492,932
57
979,063
10,642
$ 1,023,400
$
968,421
Stocks held for warrants
Less - allowance for decline in market value
$
153,800
12,787
$
174,688
-
Net amount
$
141,013
$
174,688
Dealing department
Bonds
Issued by the government (interest rates at 2.25%
to 7.75% in 2002 and 3.50% to 7.75% in 2001)
Issued by corporations (interest rates at 2.20% to
7.36% in 2002 and 2.68% to 7.36% in 2001)
Issued by banks (interest rates at 3.55% to 6.04% in
2002 and 3.55% to 7.35% in 2001)
Subtotal
Listed stocks and convertible bonds
Stocks and convertible bonds traded over-the-counter
Emerging stock
Taiwan Innovative Growing Entrepreneurs
Net amount
Underwriting department
Listed stocks
Over-the-counter stocks and convertible bonds
Others
Less - allowance for decline in market value
Net amount
Securities for hedging purposes
The aggregate market values of securities based on the closing prices and reference
prices as of December 31, 2002 and 2001 were as follows:
2002
2001
Dealing department - bonds
Dealing department - listed and over-the-counter stocks
and convertible bonds
Dealing department - Taiwan Innovative Growing
Entrepreneurs
Underwriting department - listed and over-the-counter
stocks and convertible bonds
Securities for hedging purposes
- 19 -
$ 12,646,782
$ 9,781,400
2,824,808
2,182,558
20,345
37,836
1,067,137
141,013
1,817,812
188,649
The unsecured corporate bonds issued by Chien Shing Stainless Steel Co., Ltd. were
not redeemed when they matured on September 19, 2002. The Corporation received
a promissory note of $50,000 for the portion of the bonds which it presented as current
asset ($25,000) and as noncurrent asset ($25,000) based on their maturity dates. Also,
the entire amount of the notes was provided with an allowance for losses.
6. BONDS PURCHASED UNDER RESALE AGREEMENTS
2002
Government bonds (interest rates at 1.15%-1.35%
in 2002 and 1.725%-2.850% in 2001)
Bank bonds (interest rates at 1.4% in 2002)
Convertible bonds (interest rates at 4.25%-6.75% in 2002
and 5.15%-6.75% in 2001)
$
2001
988,124
100,000
$ 8,211,542
-
434,000
389,900
$ 1,522,124
$ 8,601,442
The bonds outstanding as of December 31, 2002 will be resold for $1,539,587 by
September 3, 2003 under resale agreements.
7. LONG-TERM EQUITY
INVESTMENTS
Investees
2002
Carrying
Value
2001
% of
Shareholdings
% of
Shareholdings
Carrying
Value
Equity method
SinoPac Securities (Cayman) Holdings
Limited (SinoPac Securities
Cayman) (Formerly NSC (Cayman)
Holdings Ltd.)
SinoPac Asset Management Corp.
(B.V.I.)
SinoPac Futures Corporation
(Formerly National Futures Corp.)
SinoPac Capital Management
Corporation (Formerly Wan Sheng
Securities Investment Consulting
Co., Ltd.)
SinoPac Futures Co., Ltd.
$ 815,315
100.00
$ 785,349
100.00
581,856
100.00
497,103
100.00
397,700
88.37
394,960
88.37
198,939
193,826
2,187,636
100.00
99.97
222,692
200,642
2,100,746
99.46
99.97
90,000
80,000
8.70
10.00
-
Cost method
Stocks other than listed and traded
over-the-counter
Hua VI Venture Capital Corp.
Honpang Venture Capital Corp.
(Forward)
- 20 -
-
2002
Investees
China Power Venture Capital Co.,
Ltd.
Shengtung Venture Capital
Corporation
Communicator II Venture
Holding Ltd.
Top Taiwan III Venture Capital
Co., Ltd.
Parawin Venture Capital Corp.
Fu-Ban Securities Finance Co.,
Ltd.
Global Securities Finance Co.,
Ltd.
Chiachen Chiayi Venture Capital
Corporation
Taiwan Securities Central
Depository Co., Ltd.
Taiwan Future Exchange Co., Ltd.
Cumulative translation adjustments
Carrying
Value
$
2001
% of
Shareholdings
% of
Shareholdings
Carrying
Value
70,000
7.00
65,000
10.00
65,000
55,000
9.82
-
50,000
50,000
5.00
5.00
50,000
-
5.00
-
29,037
0.47
29,037
0.47
23,562
0.35
23,562
0.35
20,000
10.00
-
12,858
11,560
557,017
2,744,653
103,280
0.63
0.56
12,858
11,560
192,017
2,292,763
109,527
$ 2,847,933
$
-
10.00
-
0.63
0.56
$ 2,402,290
The Corporation acquired all of the 113 thousand shares of SinoPac Capital
Management Corporation from some related parties (Hong Yue Investment Co., etc)
in December 2002. As a result, the Corporation’s ownership interest in SinoPac
Capital Management Corporation arose from 99.46% to 100.00%. This acquisition
was made at arm’s length.
Under the approval of its stockholders, SinoPac Futures Co., Ltd. started dissolution
proceedings on September 2, 2002. The dissolution process was still not completed
as of December 31, 2002. Most of the assets and liabilities of SinoPac Futures Co. Ltd.
are financial instruments with carrying values approximating their fair values. Thus,
no significant loss is expected.
The aggregate par value of the outstanding capital stock of SinoPac Securities Cayman
was US$22,100 thousand as of December 31, 2002. SinoPac Securities Cayman was
incorporated to coordinate and control the Corporation’s foreign investments.
The aggregate par value of the outstanding capital stock of SinoPac Asset
Management Corp. (B.V.I.) was US$16,000 thousand as of December 31, 2002. The
investee’s core business is related to securities transactions.
- 21 -
As of December 31, 2002 and 2001, the carrying values of long-term investments
accounted for by the equity method were calculated on the basis of audited financial
statements for the same periods.
Although the Corporation’s individual direct or indirect shareholdings in SinoPac
Securities (Cayman) Holdings Limited, SinoPac Asset Management Corp. (B.V.I.),
SinoPac Future Corporation, SinoPac Capital Management Corporation and SinoPac
Futures Co., Ltd. exceed 50%, no consolidated financial statements have been
prepared because (a) the total assets or operating revenues of each of the subsidiaries
are less than 10% of those of the Corporation; and (b) the total assets or operating
revenues of these subsidiaries are collectively less than 30% of those of the
Corporation.
8. ACCUMULATED DEPRECIATION
The details of accumulated depreciation are as follows:
2002
Buildings
Equipment
Leasehold improvements
$
9. REFUNDABLE DEPOSITS
Operation bond
Settlement/clearing fund
Guarantee deposits on issuance of warrants
Rental deposits (Notes 25 and 27)
Over-the-counter securities exchange deposits
Deposits for golf club membership
Computer linkage deposits
Others
55,022
715,084
379,002
2001
$
39,883
586,282
326,331
$ 1,149,108
$ 952,496
2002
2001
$ 890,000
306,653
60,000
60,880
26,000
25,000
17,500
6,488
$ 1,004,995
404,935
80,000
61,275
10,300
25,000
11,500
6,230
$ 1,392,521
$ 1,604,235
The Corporation, as required by Rules Governing Securities Firms, deposited cash,
government bonds or financial bonds in government-designated banks as legal
deposits (operation bond). The deposits are made upon completion of corporate
registration or upon setting up a branch office.
The settlement/clearing fund represents cash deposited by a corporation that engages
in securities trading (both for the account of its customers and for its own account) on
stock exchanges. The deposit is required under Rules Governing Securities Firms.
- 22 -
10. PROPERTIES LEASED TO OTHERS
Land
Building - net of accumulated depreciation of $26,350 in
2002 and $23,546 in 2001
2002
2001
$ 204,854
$ 204,854
135,271
138,075
$ 340,125
$ 342,929
Under renewable agreements, the Corporation leases the Taiwan Development &
Trust Building to SinoPac Futures Corporation (formerly National Futures Corp.) and
SinoPac Capital Management Corporation (formerly Wan Sheng Securities Investment
Consulting Co., Ltd.). It also leased a building located on Guan-Qan Road to Taiwan
Knowledge Base Co., Ltd. (TKB). The monthly rents are: (i) SinoPac Futures
Corporation - $335 (starting from January 16, 2002), (ii) SinoPac Capital Management
Corporation - $225 (starting from January 12, 2002), and (iii) TKB - $651 (starting from
May 1, 2002).
11. BANK LOANS
The balances of the loans as of December 31, 2002 and 2001 were due from January 2,
2003 to February 27, 2003 and from January 2 to 28, 2002, respectively. The annual
interests on these loans ranged from 1.6% to 2.1% and from 3.00% to 4.15%,
respectively.
12. COMMERCIAL PAPER ISSUED
These instruments were guaranteed by financial institutions.
The amounts
outstanding as of December 31, 2002 and 2001 were due from January 6, 2003 to
March 7, 2003 (discount rates from 1.07% to 2.00%) and from January 2 to 29, 2002
(discount rates from 2.02% to 2.90%), respectively.
13. BONDS SOLD UNDER REPURCHASE AGREEMENTS
Bonds
Issued by the government (interest rates at 1.05%
to 1.90% in 2002 and 1.700% to 2.125% in 2001)
Issued by corporations (interest rates at 1.15% to
1.70% in 2002 and 2.2% to 5.4% in 2001)
Issued by banks (interest rates at 1.05% to 1.50%
in 2002 and 1.75% to 2.90% in 2001)
Convertible bonds (interest rates at 1.35% to 1.90% in
2002 and 2.90% to 5.45% in 2001)
- 23 -
2002
2001
$ 7,014,395
$ 12,907,811
5,464,214
2,693,973
1,368,960
1,928,646
694,700
478,000
$ 14,542,269
$ 18,008,430
The bonds outstanding as of December 31, 2002 will be repurchased for $14,554,274 by
May 23, 2003.
14. WARRANT LIABILITIES
Date of
Issuance
National Securities - 11
SinoPac Securities - 01
SinoPac Securities - 02
2002
Underlying
Securities
Units
Issued
January 7,
2002
United
19,000,000
Microelectronics
Corp.
October 22,
Compal Electronics, 20,000,000
2002
Inc.
November 15, Uni-president
20,000,000
2002
Enterprises Corp.
Price at
Issuance
(in New
Taiwan
Dollars)
Amount
$ 11.20
$ 212,800
54.26
4.60
5.30
106,000
55.50
7.00
2.50
50,000
12.10
4.80
Less: Gain on change in
market value of
warrants liabilities as
of December 31, 2002
(
Market value
Strike
Price
(in New Leverage
Taiwan
at
Dollars) Issuance
286,850 )
$ 81,950
2001
Date of
Issuance
National Securities - 09
SinoPac Securities - 01
National Securities - 10
April 16,
2001
June 18,
2001
October 29,
2001
Underlying
Securities
Units
Issued
Winbond Electronic 18,500,000
Co.
Yageo Corp.
20,000,000
E.Sun Financial
Holding
Company Ltd.
Less: Gain on change in
market value of
warrants liabilities as of
December 31, 2001
20,000,000
Price at
Issuance
(in New
Taiwan
Dollars)
Amount
Strike
Price
(in New Leverage
Taiwan
at
Dollars) Issuance
10.90
$ 201,650
37.35
3.70
8.36
167,200
35.97
3.91
1.10
22,000
19.20
11.60
( 208,850 )
$ 182,000
The warrants are American-type warrants which expire one year after their respective
issue dates. At its option, the Corporation can exercise a warrant either by issuing
the underlying securities or paying in cash.
The market values of warrant liabilities were calculated using their closing prices on
December 31, 2002 and 2001.
- 24 -
15. REPURCHASE OF
WARRANTS ISSUED
National Securities - 09
SinoPac Securities - 01
National Securities - 10
National Securities - 11
SinoPac Securities - 01
SinoPac Securities - 02
Loss on change in market value
of warrants repurchased
2002
Units
Repurchased
430,000
17,396,000
643,000
(
Market value
2001
Units
Amount Repurchased
Amount
$
$
1,409
92,950
1,370
72,000
7,978,000
5,957,000
-
50,383 )
(
$ 45,346
318
41,528
6,283
8,802 )
$ 39,327
The market values of warrants repurchased were calculated using the closing price of
the warrants as at December 31, 2002 and 2001.
16. BONDS ISSUED
Issuance of three-year unsecured bonds (May 18, 2000 May 18, 2003) with annual simple interest rate of 5.7%
payable annually. The face value will be repaid in full
on maturity date.
Less - current portion
2002
2001
$ 1,000,000
1,000,000
$ 1,000,000
-
$
$ 1,000,000
17. LONG-TERM LOANS
-
2002
Annual interest rate of 2.338% to 3.880% in 2001
$
2001
-
$ 1,956,660
The Corporation entered into a $2,450,000 Notes Issuance Facility (NIF) and loans
contract with a syndicate led by Bank SinoPac on February 1, 2000. The NIF contract
is valid up to February 1, 2003. The contract requires the maintenance of certain
financial indicators during the effective period of the agreement.
On June 27, 2000, the Corporation entered into another three-year loan contract with a
syndicate led by Citibank. The maximum credit under this loan contract was initially
$4,300,000, which was reduced to $2,200,000 on September 27, 2001. The contract
was terminated by the Corporation on November 27, 2002 under the terms of the
contract. The contract required the maintenance of certain financial indicators during
the effective period of the agreement.
As of December 31, 2002 and 2001, the Corporation was in compliance with the
financial terms of the foregoing contracts.
- 25 -
18. INCOME TAX
a. The reconciliation between income tax expense on income before income tax at
statutory rate of 25% and current year’s income tax expense is as follows:
Income tax expense on income before income tax at
statutory rate of 25%
Permanent differences:
Tax-exempt securities transaction gain
Tax-exempt futures transaction loss (gain)
Costs and expenses related to tax-exempt
securities transactions
Provision (reversal of reverses) for decline in
value of marketable securities
Interest on short-term negotiable instruments
subject to separate taxation
Equity in net loss (income) of domestic investee
companies
Provision for trading loss
Gain on warrants issued
Premium from issuance of warrants
Cash dividend received
Others
Deferred income tax benefit
Current year’s income tax expense
Withholding tax and provisional payment of tax
Investment tax credit -employees’ training expenses
Income tax (10%) on undistributed surplus earnings
Income tax payable for prior years
Income tax payable
(
2002
2001
$ 495,425
$ 391,964
206,369 ) (
375 (
28,394
13,132
(
(
(
(
(
205,778 )
9,966 )
46,382
(
61,996 )
735 ) (
7,605 )
532
1,271
117,201 )
96,513
6,018 )
3,466
308,785
166,423 )
142,362
101,838 )
43,307
433,742
$ 517,573
(
(
(
(
(
(
17,020 )
3,148
60,474 )
85,367
10,142 )
11,982
165,862
80,047 )
85,815
173,721 )
538 )
21,922
522,958
$ 456,436
The income tax payables as of December 31, 2002 and 2001 were presented in the
balance sheets as liabilities of $548,328 and $480,309 (included in other payables),
and income tax refund receivables of $30,755 and $23,873 (included in other
receivables), respectively.
- 26 -
b. The composition of income tax expense is as follow:
2002
Current year's income tax expense
Timing difference:
Reversal of allowance for bad debt
Amortization (provision) of employees’ benefits
Premium from issuance of warrants
Provision for default accounts
Pension expense due to difference in calculation
for accounting and tax purposes
Equity in net income of foreign investees
Prior years’ losses carried forward
Others
Income tax (10%) on undistributed surplus earnings
Investment tax credit - employees’ training expenses
Interest on short-term negotiable instruments subject
to separate taxation and others
Prior years’ adjustment
2001
$ 142,362
67,044
1,088
19,700
9,363
7,708
30,802
30,718
308,785
43,307
-
85,815
136,152
2,327 )
61,833 )
9,241
(
(
5,755
4,037 )
30,718 )
75
138,123
21,922
538 )
(
(
(
463
138 )
(
Income tax expense
$
10,784
59,902
$ 352,417
$ 230,193
2002
2001
c. Deferred income tax assets (liabilities)
Current
Allowance for bad debt
Premium on warrants issued
Loss on disposal of properties not yet approved
by the tax authorities
Prior years’ loss carried forward
Employee benefits expense in excess of limit
$ 125,214
$ 192,258
(
54,225 ) (
34,525 )
Deferred income tax assets - net
Noncurrent
Reserve for default accounts
Prior years’ loss carried forward
Cumulative equity in net income of foreign
investees
Pension expense due to difference in calculation
for accounting and tax purposes
Employee benefits expense in excess of limit
Deferred income tax assets (liabilities) - net
3,102
1,088
3,102
6,144
1,088
$
75,179
$ 168,067
$
50,000
-
$
(
36,894 ) (
6,092 )
(
38,701 ) (
1,102
30,993 )
2,190
($
24,493 )
The deferred income taxes were calculated using 25% as the tax rate.
- 27 -
59,363
24,574
$
49,042
d. The information on the Integrated Income Tax System is as follows:
2002
Balance of stockholders’ imputed tax credit
The Corporation
SinoPac Securities
$
97,437
2001
$ 229,291
$
4,059
The actual creditable tax ratio of the Corporation for 2001 was 19.70%. The
estimated creditable tax ratio of the Corporation as of December 31, 2002 was
6.55%. The actual creditable tax ratio of SinoPac Securities for 2001 was 34.43%.
The unappropriated earnings of the Corporation and SinoPac Securities as of
December 31, 2002 did not include any earnings generated before December 31,
1997.
The amount of the income tax credit to be distributed to domestic stockholders is
calculated on the basis of the balance of the Imputation Credit Account (ICA) on
the date of the earnings distribution.
The ratio of the ICA balance to
undistributed earnings on the actual date of the distribution of the dividend in
2003 may differ from the estimated ratio since additional taxes paid by the
Corporation after December 31, 2002 will increase the ICA balance.
e. The income tax returns of the Corporation through 1998 have been examined by
the tax authorities. The tax authorities disallowed as deduction against the
Corporation’s income tax obligations from 1994 to 1998 on items such as operating
expenses and interest expenses allocated to the dealing department and tax
withheld from bond interest income. The Corporation has filed an appeal for
reconsideration of the assessments. The Corporation, however, accrued all
amounts assessed by the tax authorities as additional income tax expense.
The income tax returns of SinoPac Securities through 1999 have been examined by
the tax authorities. The tax authorities disallowed as deduction against SinoPac
Securities’ income tax obligations on tax withheld from bond interest income.
SinoPac Securities has also filed an appeal for reconsideration of the assessment.
SinoPac Securities, however, accrued all amounts assessed by the tax authorities as
additional income tax expense.
- 28 -
19. EARNINGS PER SHARE
The numerator and denominator for calculating earnings per share (EPS) were as
follows:
Amounts (Numerator)
EPS
Income
Income
Before
Shares
Before
Income
Net
(Denominator) Income
Net
Tax
Income
(In Thousand)
Tax
Income
2002
Net income
Primary EPS
Net income for common
Stockholders
$ 1,981,701
$ 1,629,284
$ 1,981,701
$ 1,629,284
$ 1,567,894
$ 1,337,701
$ 1,567,894
$ 1,337,701
1,476,206
$ 1.34
$ 1.10
1,533,716
$ 1.02
$ 0.87
2001
Net income
Primary EPS
Net income for common
stockholders
20. SECURITIES BROKERAGE ACCOUNTS - NET
Debit account
Cash in bank - settlement
Accounts receivable - customers’ purchases
Net exchange clearing receivable
Accounts receivable - settlement
2002
$
Credit account
Accounts payable - customers’ sales
Accounts payable - settlement
Net exchange clearing payable
Margin transaction
Securities brokerage accounts - net
($
2001
46,081
2,553,341
1,248,834
3,848,256
$
19,456
7,660,510
881,830
2,496,234
11,058,030
2,276,844
1,379,497
273,681
9,720
3,939,742
8,072,206
3,064,161
1,964
11,138,331
91,486 ) ( $
80,301 )
21. STOCKHOLDERS' EQUITY
In view of the Corporation’s plan to expand and diversify its operations overseas, it
plans to distribute dividends in the form of shares of stock at 70% and in cash at 30%.
The Corporation could adjust the cash dividends if cash is needed in its operations.
- 29 -
The Articles of Incorporation of the Corporation and SinoPac Securities both provide
that the following must be appropriated from the annual net income less any prior
years’ deficits:
a. 10% as legal reserve
b. 20% as special reserve
The remainder from the above appropriations can be distributed according to the
resolutions of the board of directors and the stockholders at their meetings. For the
Corporation and SinoPac Securities, however, at least 1% and 10% should be
employees’ bonus, respectively.
According to Article No.15 of the ROC Financial Holding Company Act, the board of
directors (on behalf of the stockholders) of the Corporation and SinoPac Securities
approved on May 9, 2002 the appropriation and distribution of the earnings in prior
years.
The Corporation’s earnings in prior years were appropriated and distributed as
follows:
a.
b.
c.
d.
e.
Legal reserve of $133,018
Special reserve of $266,035
Cash bonus to employees of $108,630
Remuneration to directors and supervisors of $48,000
Cash dividends of $880,350.
Except for cash bonus to employees of $191, the earnings appropriation and
distributions had been paid.
The earnings in prior years of SinoPac Securities were appropriated and distributed as
follows:
a.
b.
c.
d.
Legal reserve of $953
Special reserve of $1,905
Cash bonus to employees of $666
Cash dividends of $7,533.
Except for cash bonus to employees, others had been paid.
The earnings appropriation and distribution of 2002 have not been approved by the
board of directors and its stockholders as of the independent auditors’ report date.
Please access the Market Information System on the website of the Taiwan Stock
Exchange for the information on bonus to employees and remuneration to directors
and supervisors.
Had the bonus to employees and remuneration to directors and supervisors been
expensed in 2001 instead of being accounted for as earnings distributions, the pro
forma primary EPS of net income of 2001 would have decreased from $0.87 to $0.77.
- 30 -
Under the Company Law, the appropriation for legal reserve must be made until the
reserve equals the aggregate par value of the Corporation's outstanding capital stock.
The reserve may be used to offset a deficit; also, when the reserve has reached 50% of
aggregate par value of the Corporation's outstanding capital stock, up to 50% of the
reserve may be distributed as stock dividend.
Under the Rules Governing Securities Firms, a special reserve must be provided every
year at an amount equivalent to 20% of net income until the reserve equals the
aggregate par value of the Corporation's outstanding capital stock. The reserve may
be used to offset a deficit; also, when the reserve has reached 50% of aggregate par
value of the Corporation's outstanding capital stock, up to 50% of the reserve may be
distributed as stock dividend.
Under the regulations of the Securities and Futures Commission, whenever the
stockholders’ equity contains components (except for treasury stock) showing debit
balance, a special reserve equal to the total debit balance should be appropriated from
the current year’s earnings and unappropriated earnings generated in prior years.
The amount appropriated is reversed to the extent of any reduction in the total debit
balance.
Under the Company Law, capital surplus, except for the Corporation’s equity in the
capital surplus reported by investees, can only be used to offset a deficit. However,
the other components of capital surplus (such as the additional paid-in capital in
excess of par value, capital surplus from business combination and treasury stock
reissuance) can be capitalized.
Noncorporate ROC resident stockholders are entitled to tax credits upon distribution
of earnings generated starting from January 1, 1998. The tax credit is calculated on
the basis of the ratio of the balance of the Imputation Credit Account on the dividend
distribution date to the prior year’s unappropriated earnings.
22. TREASURY STOCK (COMMON STOCK)
Cause
Changes in Treasury Stock (Thousand Shares)
Beginning
Ending
Balance
Acquisition
Disposal
Balance
2002
Stock shares re-issued to
Employees
81,720
-
48,390
33,330
27,252
54,468
-
81,720
2001
Stock shares re-issued to
Employees
- 31 -
The Securities and Exchange Law limits the number of shares of stock that the
Corporation issued and then reacquired to within 10% of the total shares issued. It
also limits the total reacquisition cost of those shares to within the combined total of
the balances of the retained earnings, additional paid-in capital in excess of par value
and realized capital surplus. In addition, the Corporation (as holder of the treasury
stocks) cannot use the treasury stocks as security for any obligation. Further, the
Corporation cannot exercise the right of a stockholder with respect to the treasury
shares. These restrictions apply until the Corporation reissues the treasury shares.
The 33,330 thousand shares of treasury stocks as of December 31, 2002 had been
reacquired before the incorporation of SinoPac Holdings. Those shares were
exchanged for 33,660 thousand shares of SinoPac Holdings.
In January 2002, the Corporation reissued to its employees 28,390 thousand shares at
$8.83 per share. In September 2002, the Corporation reissued to its employees 20,198
thousand shares of SinoPac Holdings (equivalent to 20,000 thousand shares of the
Corporation) at $10.826 per share. The proceeds, net of securities transaction tax,
were $249,932 in January 2002 and $218,007 in September 2002.
The total cost of treasury stock of these two reissuances was $468,661. The first
reissuance resulted in the reduction of $12,385 in unappropriated earnings, and the
second reissuance resulted in the recognition of capital surplus of $11,663 from
treasury stock transactions.
23. CUSTOMERS’ COLLATERAL
2002
SECURITIES AND STOCK
Shares in
Market
LOANS
Thousands
Value
Collateral securities
Stock loans
Refinancing stock loans
959,082
81,934
1,051
$ 17,617,629
1,844,956
24,986
2001
Shares in
Thousands
764,601
48,314
280
Market
Value
$ 19,959,914
2,302,133
10,979
The aggregate market values were based on the closing prices on the last transaction
days in December 31, 2002 and 2001.
24. PENSION AND SEVERANCE BENEFITS
The Corporation has pension and severance plans for all its regular employees. The
following employees are entitled to receive retirement benefits: (i) those who have
served either 25 years or over 15 years and are 55 years old; and (ii) those hired on or
before May 19, 1997 and with more than 20 service years. In addition, employees
hired on or before March 15, 1996 and have served at least five years are eligible to
receive severance benefits. The pension and severance benefits are based on the
average six months’ salary or wage before retirement or termination.
- 32 -
The Corporation makes monthly contributions equal to 6% of basic salaries and wages
(net of bonuses and benefits) to a pension fund. The fund is administered by the
employee’s pension plan committee and deposited in the committee’s name. An
employee’s pension plan supervisors committee administers the fund.
For those employees merged from SinoPac Securities, their pension plan, which
follows Labor Standards Law, is still applicable.
a. Pension cost
2002
Service costs
Interest costs
Expected return on plan assets
Amortization
2001
$ 41,779
$ 42,901
10,404
14,537
( 14,921 ) ( 21,094 )
(
182 ) (
107 )
Pension cost
$ 37,080
$ 36,237
b. Reconciliation of pension fund contribution and prepaid pension fund is as
follows:
Vested benefit obligation
Non-vested benefit obligation
Accumulated benefit obligation
Effects of changes in employees’ future salary levels
Projected benefit obligation
Fair value of plan assets
Pension fund contribution
Unrecognized net transitional assets
Unamortization balance of pension loss
Prepaid pension fund
2002
2001
( $ 220,723 )
( 62,944 )
( 283,667 )
( 22,549 )
( 306,216 )
424,338
118,122
(
1,699 )
47,321
( $ 183,473 )
( 50,817 )
( 234,290 )
( 36,209 )
( 270,499 )
359,591
89,092
(
1,008 )
30,973
$ 163,744
$ 119,057
Pension assets and liabilities were shown in the accompanying balance sheets as
follows: (i) as of December 31, 2002 - prepaid pension fund of $163,744 and (ii) as
of December 31, 2001 - prepaid pension fund for the Corporation of $132,910 and
accrued pension liabilities of $13,853 for SinoPac Securities.
c. Vested benefits
- 33 -
2002
2001
$ 230,027
$ 183,865
d. Actuarial assumptions of pension obligation are as follows:
2002
Discount rate
Incremental rate of employees’ future salaries
level
Expected rate of return on plan assets
2001
The
SinoPac
Corporation Securities
3.5%
4.0%
5.0%
1.5%
3.5%
2.0%
4.0%
4.0%
5.0%
2002
2001
e. Summary of changes in the pension fund:
Balance, beginning of years
Contributions
Interest income
Contributions to related party
Payments
$ 359,591
$ 304,638
64,740
57,922
12,683
15,012
(
2,155 ) (
3,022 )
( 10,521 ) ( 14,959 )
Balance, end of years
$ 424,338
$ 359,591
25. RELATED-PARTY TRANSACTIONS
a. The Corporation has had significant transactions with the following related
parties:
Related Party
Relationship to the Corporation
Hong Yue Finance Corp.
National Electric Appliance Co., Ltd.
Hong Yue Investment Co.
SinoPac Futures Corporation
(formerly National Futures Corp.)
SinoPac Capital Management
Corporation (formerly Wan Sheng
Securities Investment Consulting
Co., Ltd.)
SinoPac Futures Co., Ltd.
NITC Asset Management (Asia) Ltd.
SinoPac Holdings
Bank SinoPac
SinoPac Leasing Corp.
Ruentex Industries Limited
Director
Director
Director
Subsidiary
Subsidiary
Subsidiary
The Corporation can exercise significant
Influence
Parent company (after May 9, 2002)
A wholly owned subsidiary of SinoPac
Holdings (since May 9, 2002)
Subsidiary of Bank SinoPac
Supervisor of Bank SinoPac
(Forward)
- 34 -
Related Party
Relationship to the Corporation
National Investment Trust Company The major stockholder of its board of
Limited (NITC)
directors (the “BOD”) is the same as
one of the BOD of the Corporation
Mr. Min-Houng Hong
The Chairman of the BOD of SinoPac
Holdings
Ms. Yu-Mein Hong
Relative of Mr. Min-Houng Hong
b. In addition to the information disclosed in other notes, significant transactions and
account balances with the foregoing parties are summarized as follows:
1) Bond transactions
The Corporation had bond transactions with its related parties, as follows:
a) Bonds purchased under resale agreements
Balance of Bonds
Purchased Under Resale
Interest
Agreements as of
Income
December 31
for the
Face
Year Ended
Amount
Cost
December 31
2002
Bank SinoPac
$
-
$
-
$
553
2001
Bank SinoPac
Ruentex Industries Limited
- 35 -
$ 172,900
100,000
$ 200,188
100,000
$ 5,528
2,887
$ 272,900
$ 300,188
$ 8,415
b) Bonds sold under repurchase agreements
Balance of Bonds
Sold Under
Interest
Repurchase Agreements
Expense
as of December 31
for the
Face
Year Ended
Amount
Cost
December 31
2002
Mutual funds managed by NITC
SinoPac Holdings
National Electronic Appliance
Co., Ltd.
Hong Yue Finance Corp.
SinoPac Futures Co., Ltd.
NITC Asset Management (Asia)
Ltd.
Others
$ 1,672,200
424,000
$ 1,678,576
470,000
$
31,199
88
33,500
6,000
-
36,000
6,000
-
4
4
488
-
-
381
67
$ 2,135,700
$ 2,190,576
$
32,231
$ 1,718,000
5,000
3,000
500
-
$ 1,795,603
4,635
3,001
629
-
$
46,381
149
27
159
548
1,432
$ 1,726,500
$ 1,803,868
$
48,696
2001
Mutual funds managed by NITC
SinoPac Future Co., Ltd.
Hong Yue Finance Corp.
Mr. Min-Houng Hong
Ms. Yu-Mein Hong
Others
2002
Amount
2001
Amount
%
%
As of December 31
2) Bank deposit
Bank SinoPac
$
68,058
4
$
5,282
1
$
6,723
5
$
8,079
4
237
169
-
260
-
7,129
5
8,339
4
3) Notes and accounts receivable
SinoPac Futures Corporation commissions
Bank SinoPac - commissions from
mortgage
NITC - stock affairs agent fees
$
- 36 -
$
2002
Amount
2001
Amount
%
%
4) Margin deposits - futures and
options
SinoPac Futures Corporation
SinoPac Futures Co., Ltd.
$ 117,793
-
100
-
$
18,009
100
$ 117,793
100
$
18,009
100
5) Other receivables
Bank SinoPac - interests and others
Others
$
3,414
85
1
-
$
1,115
-
1
-
$
3,499
1
$
1,115
1
In 2002, the Corporation sold equipment to SinoPac Futures Corporation and
SinoPac Holdings for $2,500 (loss of $2,265) and $6,371 (gain of $113),
respectively. Receivables had been collected as of the end of 2002.
2002
Amount
2001
Amount
%
%
6) Prepaid expenses
National Electric Appliance Co., Ltd.
- rental
Bank SinoPac - expenses of
syndication loans
$
2,556
13
218
1
2,774
14
$ 200,000
$
$
$
$
4,924
16
1,309
5
6,233
21
5
$ 300,000
24
5,798
996
1
-
$
560
760
-
6,794
1
$
1,320
-
$
7) Bank loans
Bank SinoPac
8) Other payables
SinoPac Futures Co., Ltd.
Bank SinoPac
The Corporation bought equipment from SinoPac Futures Co., Ltd. for $5,798,
which the Corporation had not yet paid as of the end of 2002.
- 37 -
2002
Amount
2001
Amount
%
%
For the years
9) Commissions and fees - brokerage
Mutual funds managed by NITC
Hong Yue Finance Corp.
Bank SinoPac
Others
$
58,111
132
212
2
-
$
53,415
196
1,866
118
3
-
$
58,455
2
$
55,595
3
$
1,982
1,653
1
1
$
11,071
-
7
-
$
3,635
2
$
11,071
7
$
1,217
1
$
1,625
2
$
73,892
99
$
53,866
80
10) Commissions and fees underwriting
NITC
Bank SinoPac
11) Stock affairs agent fees
NITC
12) Commissions and fees - futures
SinoPac Futures Corporation
The Corporation entered into a contract with SinoPac Futures Corporation to
assist the latter in futures trading. The Corporation receives commission
calculated on the basis of the trading volume.
2002
Amount
2001
Amount
%
%
13) Rental expense (included in
operating expenses)
Hong Yue Investment Co.
National Electric Appliance Co., Ltd.
Bank SinoPac
SinoPac Capital Management
Corporation
$
$
- 38 -
10,875
9,383
1,554
6
6
1
-
-
21,812
13
$
$
10,966
11,742
1,684
6
6
1
109
-
24,501
13
The Corporation has lease contracts with National Electric Appliance Co., Ltd.,
Hong Yue Investment Co., SinoPac Capital Management Corporation and
Bank SinoPac. The terms are as follows:
Lessor
National Electric Appliance
Co., Ltd.
Term
a. Po Ai Road Building
May 2002 - May 2007; annual rent of $7,623,
for the first year, subject to a yearly
adjustment based on price index.
b. Wu Tsang Street Building
September 2001 - September 2004; annual
rent of $864
Hong Yue Investment Co.
July 2000 - July 2003; annual rent of $10,830;
lease deposit of $2,708
SinoPac Capital Management July 1999 - July 2004; terminated in January
Corporation
2001; annual rent of $1,205, for the first year,
subject to a yearly adjustment for inflation at
2.14%; lease deposit of $180.
Bank SinoPac
July 1999 - July 2006; monthly rent of $130.
2002
Amount
2001
Amount
%
$ 22,404
4,018
16
3
2,700
169
2
-
$ 29,291
21
$
$ 53,144
44
$ 53,188
%
14) Nonoperating income
Rental - Bank SinoPac
- SinoPac Futures Corporation
- SinoPac Capital Management
Corporation
- SinoPac Holdings
Interest - Bank SinoPac
- Hong Yue Investment Co.
- Others
$
4,234
3
2,700
-
2
-
6,934
5
23
-
$ 42,013
135
9
11
-
23
$ 42,157
11
15) Nonoperating expense
Interest - Bank SinoPac
$
4,592
2
$
6,090
2
16) The Corporation bought computer equipment from SinoPac Leasing Corp. for
$518 in 2001.
All transactions with related parties were carried at arm’s length.
- 39 -
26. PLEDGED OR MORTGAGED ASSETS
The following assets were pledged to financial institutions as guarantee for
commercial paper issued and bank loans, long-term loans and a bank overdraft line
obtained, and to the tax authorities as guarantee on petitions for tax reassessment filed
as of the end of 2002 and 2001.
Time deposits
Properties - net
Properties leased to others - net
Operating securities - par value of bonds
Short-term investments - short-term negotiable
instruments
2002
2001
$ 3,333,400
1,747,073
340,125
-
$ 5,243,100
609,614
271,297
487,500
-
32,057
$ 5,420,598
$ 6,643,568
Time deposits of $1,130,000, a portion of properties with carrying values of $1,133,668
and a portion of properties leased to others with carrying values of $71,028 for the
year ended 2002 were pledged to Bank SinoPac. A time deposit of $1,140,000 for the
year ended 2001 was pledged to Bank SinoPac.
27. CONTINGENCIES AND COMMITMENTS
a. The Securities and Futures Institute (SFI), on behalf of the investors of Cheng-Yi
Food Co. (CYF) with respect to its Initial Public Offering (IPO), filed a civil case
with the District Court of Taipei against CYF, the major and sub-underwriters (the
Corporation being a sub-underwriter in the IPO) of CYF. The damages claimed
by SFI amounted to $71,018 plus 5% interest. The Corporation’s management
and legal counsel believe that the Corporation cannot be held liable for damages
incurred by the investors since its role as sub-underwriter to the CYF IPO is
limited only to the distribution of CYF shares and it has not advised CYF on
matters related to the IPO.
b. Mr. Chang sued the Corporation and its two former employees, Mr. Lin and Mr.
Huang, for embezzlement. Mr. Chang claimed damages of $32,872 plus 5%
interest. In the opinion of the Corporation’s legal counsel, the Corporation
should not have been involved in this case since the act of Mr. Lin and Mr. Huang
stipulated in the lawsuit is not connected to their work as employees of the
Corporation. Thus, the Corporation did not accrue any liability with respect to
this case.
- 40 -
c. Tai Sheng Investment Management Co., Ltd. (Tai Sheng), as fund manager of P.T.
Opportunities Fund (P.T. Fund), bought unsecured convertible bonds of Chinese
Automobile Company (the “CAC convertible bonds”) for US$985,062.5. When
CAC became bankrupt, Tai Sheng sued CAC, the major underwriter and
sub-underwriters for US$985,062.5 plus annual management fee of US$15,000.
The Corporation’s legal counsel believed that the Corporation cannot be held
liable for damages incurred by the investors since it was involved only in the
distribution of the securities. On January 22, 2003, the Court reached the verdict
in favor of the Corporation, thus, no liability was recognized in the accompanying
financial statements.
d. Taichung Commercial Bank (“the Bank”) sued Mr. Wu, a former employee of Wan
Sheng Securities (which was merged with the Corporation in 2000), for enabling
Kuangsan Enterprise Group (Kuangsan) to buy and sell securities illegally. The
Bank filed a civil case against Mr. Wu and the Corporation because of Kungsan’s
unlawful acts. The damages claimed amounted to $97,069 plus 5% interest. The
Corporation’s legal counsel believed that the lawsuit should be a disagreement
between the Bank and Kuangsan only since the act of Mr. Wu was not connected
to his work at Wan Sheng Securities. Thus, the Corporation should not be liable
for this case.
e. The one-to-five-year agreements on the lease of the head office and branch
premises can be renewed within six months before expiry. The deposits for these
leases amounted to $60,880 (Note 9) and are shown under refundable deposits.
Deposits will be refunded without interest when the leases expire. Rents for the
next five years are as follows:
Rent
Payable
Period
The first year (January 1, 2003 to December 31,
2003)
The second to fifth years (January 1, 2004 to
December 31, 2007)
Payment Frequency
$ 161,755 Monthly or quarterly
354,659 Monthly or quarterly
The lease expenses for the years ended December 31, 2002 and 2001 were $172,284
and $186,674, respectively.
28. FINANCIAL INSTRUMENTS
a. Warrants
1) The objective of issuing warrants and strategies to achieve this objective:
The Corporation issues warrants to earn premium from warrants issued.
However, the Corporation holds securities to hedge market risks related to
warrants issued. The changes in the market values of the underlying
securities result in changes in the fair value of the warrants issued. The
effectiveness of the hedging activities as well as the sufficiency of the hedging
security is closely monitored (see Notes 2, 5, 14 and 15).
- 41 -
2) Credit risk.
The Corporation is not exposed to credit risk because the premium has been
received upon the issuance of warrants.
3) Market risk
The market risk on warrants issued principally arose from the changes in
market prices of its underlying securities. The Corporation manages the
market risk by adopting dynamic hedging strategy and taking different
position of warrants and underlying securities.
4) Liquidity risk, risk to cash flows and the uncertainty as to the amount and
timing of future cash requirement.
The premium of the warrants issued by the Corporation has been collected in
advance, and the Corporation has established hedging position with its own
capital when the warrants are issued. The liquidity risk of the underlying
securities held for hedge is low because the authority has set the market price
and share distribution of the securities, and the probability that the securities
cannot be sold for a reasonable price is quite low. The Corporation has to
manage the cash demand arising from adjustment of hedge position whose
changes are due from fluctuation of market prices of the underlying securities.
The market liquidity is high, the risk to cash flows is low.
Warrants will expire in January 2003 and November 2003. Except for the cash
inflows and outflows arising from hedging, no additional cash is needed.
5) Leverage of the instrument. Please refer to Note 14.
b. Interest rate swap
1) The Corporation has entered into interest rate swap (IRS) contracts with
counter-parties to profit from short-term fluctuations in interest rates and to
hedge its interest rate exposures on fixed-rate net asset positions. These
swaps convert fixed-interest rate obligations to floating interest rate obligations.
It also periodically evaluates the effectiveness of these instruments.
2) The information on the outstanding IRS contracts is as follows:
December 31, 2002
Nominal
Fair
Credit
Amount
Value
Risk
December 31, 2001
Nominal
Fair
Credit
Amount
Value
Risk
For hedging purposes
$
$ 800,000 ( $ 1,320 )
$
-
For trading purposes
$ 1,200,000 ( $ 23,222 )
$
$
-
-
$
-
$
-
$ 10,720
-
$
-
The counter-parties to the foregoing swap contracts are reputable banks. The
Corporation does not expect significant exposure to credit risks.
- 42 -
3) Market risk
The Corporation has used Value-at-Risks (VAR), base on statistical analysis of
market data and foreign industrial standards, in evaluating market risks of the
IRS contracts held for trading purposes. As of December 31, 2002, the VAR
was $2,626.
No significant effect will result from interest rate fluctuations since interest rate
swaps are used to hedge the Corporation’s interest rate exposure; thus, market
risk are minimal.
4) Cash flows and demands
Net interest, equal to the notional amount of the interest rate swap 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. Therefore, the cash demand is not
significant.
5) The net amount recognized by the Corporation under the IRS contracts for
hedging purposes for the years ended December 31, 2002 and 2001 were
interest income of $507 and interest expense of $3,224, respectively. The net
amount recognized for trading purposes for the year ended December 31, 2002
was an interest expense of $54,925.
c. Stock index futures and options
1) The objective of stock index futures and options and strategies to achieve this
objective:
The Corporation uses stock index futures and options contracts for trading and
hedging purposes. The stock index futures and options contracts for trading
purposes increase the investment instruments, aggressively develop various
services and heighten working capital efficiency. It also uses stock index
futures and options contracts to hedge the market risks of listed securities.
The Corporation uses instruments with market value fluctuations that offset
the changes in the market value of the hedged instruments. The Corporation
periodically evaluates effectiveness of these instruments.
2) Notional amount, fair value and credit risk
December 31, 2002
Contract
Fair
Amount
Value
TAIEX futures
TAIEX options
Call options
Put options
- 43 -
$ 92,509
$ 91,624
11,969
1,849
12,188
1,669
There were no outstanding stock index futures and options contracts as of
December 31, 2001. The market value was based on the reference price by
each contract as of balance sheet dates published by the Taiwan Stock
Exchange Index (TAIEX). The Corporation entered into contracts with TAIEX;
thus, there are no significant credit risks.
3) Market risk
Market risk is the fluctuation in market prices of stock index futures and
options. The Corporation has appropriate risk control management and has
set up stop-loss points to monitor price fluctuation and holding position.
When the balance of the trading margin account is lower than the maintenance
margin, the Corporation will recognize a loss by either settling the deal or
putting in additional deposits to the initial margin. The market risk will
offset that of listed securities and the market risk to the Corporation, taken as a
whole, is not significant.
4) Liquidity risk, risk of cash flows and the uncertainty as to the amounts and
timing of future cash required.
Additional margin will be paid since the balance of the trading margin account
is lower than the maintenance margin. However, the demand on future cash
flows is not significant.
5) Gain (loss) from stock index futures and options transactions.
As of December 31, 2002 and 2001, margin deposits incurred for futures and
options transactions amounted to $117,793 and $18,009, respectively. The
market value of premium paid for long options amounted to $12,188, and that
for premium received on short options amounted to $1,669. The Corporation
incurred non-hedging gains of $3,801 and hedging gains of $39,863 for the
years ended December 31, 2002 and 2001, respectively, on stock index futures
transactions. The Corporation incurred non-hedging losses of $5,300 for the
year ended December 31, 2002 on its options transactions.
d. Fair values of financial instruments
2002
2001
Carrying
Value
Fair Value
$ 1,562,732
4,832,164
$ 1,562,732
4,854,630
15,872,797
1,023,400
141,013
15,945,165
1,132,123
141,013
Carrying
Value
Fair Value
Assets
Cash and cash equivalents
Short-term investments
Operating securities
Dealing
Underwriting
Hedging
(Forward)
- 44 -
$
550,315
2,761,600
11,861,803
968,421
174,688
$
550,315
2,788,011
12,141,928
1,817,869
188,649
2002
Bonds purchased under resale
agreements
Margin loans receivable
Loan from refinanced margin
Refinancing deposits
receivable
Margin deposits - futures and
options
Notes and accounts receivable
Pledged time deposits current
Other receivables
Long-term equity investments
Refundable deposits
Carrying
Value
2001
Fair Value
Carrying
Value
Fair Value
$ 1,522,124
12,089,479
20,108
$ 1,522,124
12,089,479
20,108
$ 8,601,442
11,053,855
-
$ 8,601,442
11,053,855
-
26,122
26,122
10,294
10,294
117,793
122,443
117,793
122,443
18,009
204,366
18,009
204,366
3,333,400
692,112
2,847,933
1,392,521
3,333,400
692,112
2,847,933
1,392,521
4,546,600
423,058
2,402,290
1,604,235
4,546,600
423,058
2,402,290
1,604,235
4,008,000
2,617,979
4,008,000
2,617,979
1,260,000
1,848,244
1,260,000
1,848,244
14,542,269
1,461,859
1,838,645
585,612
1,189,241
14,542,269
1,461,859
1,838,645
585,612
1,189,241
18,008,430
1,506,987
1,761,928
171,582
1,042,012
18,008,430
1,506,987
1,761,928
171,582
1,042,012
1,000,000
2,053
1,000,000
2,053
1,000,000
1,956,660
2,053
1,000,000
1,956,660
2,053
Liabilities
Bank loans
Commercial paper issued
Bonds sold under repurchase
agreements
Deposits on short sales
Short sales proceeds payable
Notes and accounts payable
Other payables
Current portion of long-term
liability
Bonds issued
Long-term loans
Other liabilities - other
The bases for fair values are as follows:
1) Short-term financial instruments - carrying value. Since the terms of these
instruments are very close to their maturity dates, the use of their carrying
values as fair values is reasonable. This evaluation applies to cash and cash
equivalents, notes and accounts receivable, margin loans receivable, loan from
refinancing margin, refinancing deposits receivable, margin deposits - futures
and options, pledged time deposits, other receivables, bonds purchased under
resale agreements, bonds sold under repurchase agreements, deposits on short
sales, short sales proceeds payable, notes and accounts payable, other payables,
bank loans, commercial papers issued and current portion of long-term
liability.
2) Investments in open-end mutual funds - based on the fund’s net assets values
on the last trading day in December; operating stocks except Emerging stocks based on the closing price of the last transaction day in December; Emerging
stocks - based on carrying value; operating bonds - based on the reference
prices published by R.O.C. Over-The-Counter Securities Exchange. Please
refer to Notes 2, 4 and 5.
- 45 -
3) Long-term equity investments with no readily available market value carrying value (if there is no impairment in value).
4) Refundable deposits and other liabilities - other - carrying values
5) Bonds issued - since the bonds bear fixed rate, the fair value of the bonds is
derived by discounting the expected cash flows. The discount rate used is the
rate of bonds that have similar characteristics as the bonds held by the
Corporation.
6) Long-term loans - carrying value, since the financing is obtained through
recurrently issuing commercial paper.
29. SPECIFIC RISK FROM FUTURES DEALING
The Corporation pays margin deposits on the starting dates of futures contracts. It
also pays the margin deposits for short options contracts. The margin account of the
Corporation is reevaluated on the basis of the market prices of the outstanding futures
and options contracts. The Corporation is required to put in additional margin
deposits when the margin account falls below an agreed level (the “maintenance
margin”). Otherwise, the counter-party closes out the position by selling the
contract.
There were 104 futures contracts and 4,111 options contracts outstanding as of
December 31, 2002, and margin deposits paid amounted to $117,793.
30. SEGMENT INFORMATION
The Corporation mainly engages in underwriting, dealing and brokering of
marketable securities, financing the acquisition and short-sales by customers, and
futures dealing. It is considered a single-industry business.
31. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFC for the Corporation and
its investees:
a. Financing provided: None;
b. Endorsement/guarantee provided: [Please see Table 1 (attached)];
c. Acquisition of individual real estates at costs of at least NT$100 million or 20% of
the paid-in capital: None;
d. Disposal of individual real estates at prices of at least NT$100 million or 20% of the
paid-in capital: None;
e. Total discount of commissions and fees to related parties amounting to at least
NT$5 million: None;
- 46 -
f.
Receivables from related parties amounting to at least NT$100 million or 20% of
the paid-in capital: None;
g. Names, locations, and related information of investees on which the Corporation
exercises significant influence [please see Table 2 (attached)];
h. Derivative financial transactions (please see Note 28).
- 47 -
TABLE 1
SINOPAC SECURITIES CORPORATION AND INVESTEES
(Formerly National Securities Corporation)
ENDORSEMENT/GUARANTEE PROVIDED TO OTHER PARTIES
For the Year Ended December 31, 2002
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
Counter-party
No.
0
Endorsement/Guarantee
Provider
SinoPac Securities
Corporation
Name
SinoPac Securities
(Asia) Ltd.
Limits on Each
Counter-party’s
Maximum
Endorsement/
Ending Balance
Balance for the Period
Nature of the Relationship
Guarantee
Amounts
100% indirect subsidiary of
the Corporation
$4,264,462
(Note 1)
$1,563,750 (US$45,000
thousand dollars)
None
Value of Collaterals
Property, Plant or
Equipment
None
Note 1: According to the Corporation’s rules, each counter-party’s endorsement and guarantee amounts are limited to 20% of the net worth of the Corporation.
- 48 -
Ratio of Accumulated
Maximum
Amount of Collateral to Net
Collateral/Guarantee
Equity of the Latest
Amounts Allowable
Financial Statement
None
$4,264,462 (Note 1)
TABLE 2
SINOPAC SECURITIES CORPORATION AND INVESTEES
(Formerly National Securities Corporation)
NAMES, LOCATIONS, AND RELATED INFORMATION ON INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE
For the Year Ended December 31, 2002
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Original Investment Amount
Investee Company
Location
Main Businesses and Products
Balance as of December 31, 2002
Percentage of
Ownership
Dec. 31, 2002
Dec. 31, 2001
Shares
$
$
353,480
35,348,000
88.37
$
397,700
Equity in Net
Income (Net
Loss) of the
Investees
$
$
8Fl., No. 2, Sec. 1, Chung Ching S. Rd., Taipei
Brokerage of futures contracts
SinoPac Securities (Cayman) Holdings Limited
(formerly NSC (Cayman) Holdings Ltd.)
3Fl., British American House, Dr. Roy’s Drive, George Town,
Grand Cayman, Cayman Islands, British West Indies
Investment holding company
733,226
733,226
22,100,000
100.00
888,395
SinoPac Capital Management Corporation (formerly 19Fl., No. 2, Sec. 1, Chung Ching S. Rd., Taipei
Wan Sheng Securities Investment Consulting Co.,
Ltd.)
Investment consulting
146,028
144,864
21,000,000
100.00
198,939
SinoPac Asset Management Corp. (B.V.I.)
Akara Bldg., 24 De Castro Street, Wickhams Cayl, Road Town,
Tortola, British Virgin Islands
Securities brokerage, investment
consulting, fund management and
securities business
524,857
524,857
16,000,000
100.00
612,056
SinoPac Future Co., Ltd.
5Fl., No. 132, Sec. 3, Nanking E. Rd., Taipei
Brokerage of futures contracts
199,940
199,940
19,994,000
99.97
193,826
SinoPac Securities (Europe) Ltd. (formerly NSC
Securities (Europe) Limited)
Ground Floor, 30-40 Eastcheap, London EC3M 1HD UK
European agent business
US$
1,514
thousand
US$
1,514
thousand
1,000,000
100.00
US$
1,269
thousand
( US$
82
thousand )
Grand subsidiary
SinoPac Securities (Asia) Ltd. (formerly NSC
Securities (Asia) Ltd.)
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Hong Kong stock brokerage
US$ 12,941
thousand
US$ 12,941
thousand
10,000
100.00
US$ 15,757
thousand
US$
1,200
thousand
Grand subsidiary
SinoPac Futures (Asia) Ltd. (formerly NSC Futures
(Asia) Ltd.)
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Futures and options brokerage business
US$
1,205
thousand
US$
1,205
thousand
10,000,000
100.00
US$
2,347
thousand
US$
23
thousand
Grand subsidiary
SinoPac Capital (Asia) Ltd. (formerly NSC Capital
(Asia) Ltd.)
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
IPO underwriting business
US$
3,862
thousand
US$
3,862
thousand
30,000,000
100.00
US$
3,920
thousand
US$
32
thousand
Grand subsidiary
NSC Asia Ltd.
Akara Bldg., 24 De Castro Street, Wickhams Cayl, Road Town,
Tortola, British Virgin Islands
Derivatives instruments business
US$
744
thousand
US$
744
thousand
1,000
100.00
US$
25
thousand
US$
21
thousand
Grand subsidiary
NITC Asset Management (Asia) Ltd.
46F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Asset management and investment
consulting
US$
158
thousand
US$
158
thousand
1,360,000
34.00
US$
452
thousand
US$
463
thousand
SinoPac Securities
(Cayman) Holdings
Limited exercises
significant influence
SinoPac Securities (U.S.A.) Ltd. (formerly NSC
Securities (U.S.A.) Ltd.)
1750 Montgomery St. Suite 110, San Francisco, CA 94111, U.S.A.
Collects and analyzes financial market
information
US$
1,848
thousand
US$
250
thousand
2,000
100.00
US$
1,311
thousand
( US$
368
thousand )
Grand subsidiary
SinoPac Securities (H.K.) Limited
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Securities brokerage, investment
consulting, fund management and
securities business
US$
3,205
thousand
US$
3,205
thousand
25,000,000
100.00
US$
3,155
thousand
US$
345
thousand
Grand subsidiary
SinoPac Asia Limited (formerly SP Asset
Management Corp, Ltd.)
Akara Bldg., 24 De Castro Street, Wickhams Cayl, Road Town,
Tortola, British Virgin Islands
Securities brokerage, investment
advisory and consulting
US$
6,000
thousand
US$
6,000
thousand
6,000,000
100.00
US$
8,141
thousand
US$
2,408
thousand
Grand subsidiary
SinoPac Securities (Asia) Nominees Ltd. (formerly
NSC Securities (Asia) Nominees Ltd.)
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Hong Kong stock trust business
HK$
2
HK$
2
2
100.00
HK$
2
-
Grand grand subsidiary
SinoPac (Asia) Nominees Ltd. (formerly NSC (Asia)
Nominees Ltd.)
11F, Cosco Tower, 183 Queen’s Road, Central, Hong Kong
Nominee trust account for oversea
stock holdings
HK$
2
HK$
2
2
100.00
HK$
2
-
Grand grand subsidiary
(
(
35,971
Note
SinoPac Futures Corporation (formerly National
Futures Corp.)
- 49 -
353,480
Carrying Value
Net Income
(Loss) of the
Investee
29,605 Subsidiary
38,456
38,456 Subsidiary
24,793 ) (
24,917 ) Subsidiary
84,752
84,752 Subsidiary
6,793 ) (
6,816 ) Subsidiary