CDF to launch restricted shares program contingent on challenging financial KPIs, aligning interest of the company and shareholders

The Board of Directors (BOD) of China Development Financial (hereafter “CDF”) approved the Employee Restricted Shares Program today. The Program aims to attract and retain talent, encourage employees to achieve challenging performance goals, and closely align the interests of the company, and its shareholders. The payout will vest over 3 years, depending on the achievement of 3 KPIs and their corresponding weights over a 3-year performance period. After obtaining approval at the general shareholders meeting, CDF will seek regulatory approval from the Securities and Futures Bureau.

The BOD also approved cash dividends of NTD 0.55 per share, equivalent to a dividend yield of 4.07% calculated based on the 4/26 closing price of NTD 13.5. The company remains committed to maintaining a stable dividend payout while increasing ROE.

The approval of the Program demonstrates CDF’s commitment and confidence regarding future development, with the ultimate goal of achieving steady long-term growth and creating profit for shareholders, while retaining top talent. A maximum of 112.5 mn new common shares will be issued under the Program equivalent to market value of NTD 1.35 bn. Maximum dilution to existing shareholders is 0.75%. The Program contains a high performance threshold, paying out at maximum only when CDF ranks among the top 4 for all three KPIs comparing with financial holding company peers. A payout of NTD 225mn will be made if one KPI meets the minimum threshold ranking of top 8. There will be zero payout for ranking of 9 and below. Considering the current ranking of CDF of 12-14 among peer holding companies in Taiwan, the payout only happens if the three KPI rankings substantially improves over three years. Furthermore, for the purpose of talent retention, the earned shares will vest over 3 years after the performance period, and will be kept under a custodial trust account prior to vesting.

The performance period is three years, from Jan. 1st, 2021 to Dec. 31st, 2023 and will not be fully vested until 2026. The following three KPIs have been selected after careful reviewing global practices from leading foreign financial companies:
(1) Total Shareholder Return (TSR), weight 34%: {(average daily closing price of 2023 – closing price of 2020) + dividends}/closing price of 2020
(2) Return On Common Equity (ROCE), weight 33%: 2021-2023 three-year average ROCE
(3) Earnings Per Share (EPS), weight 33%: 2021-2023 three-year average EPS

During late 2020 CDF put in place a new leadership team and launched its 5-year strategy during early 2021. We created several new roles including Chief Digital Officer, Chief Marketing Officer and Chief Data and Analystics officer in line with supporting our new strategy. The ABCDE Strategy consist of five parts: Accelerate Digital (A) designed to make CDF and its subsidiaries into leaders in digital, Become Employer of Choice (B), designed to achieve higher employee engagement and development; Customer Focus (C), designed to make us the most recommended financial services brand in the market; Drive Growth (D), designed to help us exceed industry benchmarks and; Execution Excellence (E), designed to deliver outstanding results for all our stakeholders.