PJAM raised concerns toward Taishin FHC's capital increase and reduction of its subsidiaries

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Jan 01, 2019, 21:00 ET

TAIPEI, Taiwan, Jan. 1, 2019 /PRNewswire/ -- PJ Asset Management Company Limited ("PJAM") recently issued a letter to the board of directors of Taishin Financial Holding Company Limited ("Taishin FHC" or "Company"). The letter, which is reproduced below, details concerns regarding a series of capital increases and reductions of its subsidiaries (Taishin Asset Management and Taishin Venture Capital Investment). The original letter in Chinese can be found on PJAM's official website http://www.pjam.com.tw/.

The Board of Directors
Taishin Financial Holding Company

Dear Members of the Board,

PJAM and its affiliates currently own more than 5% of the outstanding shares of the Company.
According the Company's announcement on Market Observation Post System ("M.O.P.S.") on 22^nd November 2018, the boards of Taishin Asset Management and Taishin Venture Capital Investment approved a capital increase of NT$0.67 billion and NT$3.53 billion respectively. Yet according to the 2018Q3 financial report of Taishin FHC, Taishin Venture Capital Investment reported year-to-date losses of NT$0.6 billion with a sufficient NT$4.6 billion of capital and Taishin Asset Management reported no loss with NT$1 billion of capital. Subsequently on December 6^th, the boards approved a capital reduction of these two subsidiaries and the capital released to financial holding company (parent company) was then used as a NT$ 4.3 billion capital increase for another subsidiary- Taishin International Bank.
All the three subsidiaries mentioned above are 100% owned by Taishin FHC. Capital increase and reductions, in the amount of NT$4.2 billion in total, should be significant and important agenda items for the board of directors and consequently more information and detail should be disclosed in the approval process. The lack of detailed disclosure causes some concern regarding the intra-subsidiary capital planning process and FHC's long-term capital planning management.
Two new independent directors with finance and accounting specialties were elected to the Company's board in June 2018. This addition to the board should strengthen oversight and discipline on the management team's proposed finance and capital plans. PJAM is concerned that the independent directors did not raise any questions regarding these capital allocation proposals and approved the agenda items without reservations.
In summary, PJAM requests that the board of Taishin FHC provide a formal response to the concerns expressed herein. We also encourage the board to review the responsibilities of relevant personnel and administer enhanced supervision of the Company's strategic planning in order to ensure that long-term shareholder interests will be protected.