I. Jih Sun Financial Holding Co., Ltd.
1. Coverage of business
Jih Sun Financial Holdings
Primary business activities
The company is a financial holding company whose activities are restricted to the investment and the management of invested businesses. The company's businesses cover the following:
(1) Permitted business investments:
  A. Banking
B. Notes and bonds finance
C. Credit card
D. Trust
E. Insurance
F. Securities
G. Futures
H. Venture capital
I. Foreign financial institutions approved by the authority
J. Other finance related businesses recognized by the authority
K. Other finance related businesses the company is permitted to invest
(2) The management of invested businesses listed under (1).
(3) The company permitted to invest in businesses other than those listed under (1) upon the approval of the authority, but the company must not be involved in the operations of the businesses.
(4) Other businesses approved by the authority
The company has a total of three subsidiaries, namely Jih Sun Securities Co. Ltd, Jih Sun International Commercial Bank, and Jih Sun International Insurance Agency Co. Ltd. The principal activities of each subsidiary are described as follows:
II. Jih Sun Securities Co. Ltd
1. Primary businesses
A. Securities brokerage
B. Proprietary trading of securities
C. Securities underwriting
D. Futures commission merchant (H401011)
E. Futures brokerage (H408011)
F. Other businesses permitted by the authority
2. Revenue contribution
Unit: NTD thousands
2007
2006
Amount
%
Amount
%
Brokerage
5,784,575
66.82
4,007,204
73.32
Proprietary trading
934,050
10.79
966,586
17.69
Underwriting
391,242
4.52
257,700
4.72
Warrants
599,880
6.93
169,187
3.10
Futures
946,982
10.94
64,748
1.17
Total
8,656,729
100.00
5,465,425
100.00

3. New financial products and services currently under development
A. Brokerage business
Our goal is to adapt to the international investment environment and respond to the growing demand for diverse and globalized investments in Taiwan. Pure brokerages have become insufficient to the needs of customers. Being a member of the financial holding company, Jih Sun Securities Co. Ltd should complement the group's One-Stop Shopping advantage to a greater extent. It therefore continues its proactive efforts to integrate investment trust, banking, and insurance while expanding its customer base through the development of custom made financial products, competitive design capabilities, and a multinational, diverse product line. We shall provide the most comprehensive and professional financial services for more efficient utilization of our capital, as well as higher revenue contribution from brokerage customers.
B. International business
a. Planned service extension to the Korean market (manual order processing).
b. Enhance our electronic trading platform. The trading of U.S. Stocks over the Internet is scheduled to be completed by HTS Hong Kong in March 2008; the eAgent mutual funds platform (for single subscription and annuity) is also scheduled to be completed in March 2008
c. Added the e-statement service for more convenience and higher customer satisfaction. The company continues to provide custom made products tailored to customers' needs for overseas investments, and the support to their finance planning.
C. Wealth management business
Future businesses will be focused on custom tailored products and the establishment of electronic trading platforms while developing new financial products and services. For customization, we will first enhance our securities' Customer Relationship Management (CRM) system, gaining a deep understanding of customers' status before integrating resources from financial consultation, new financial products, futures brokerage, investment trusts etc for the development of custom made products that are tailored for specific segments. We can either passively meet the needs of customers or take the initiative to create new demands to provide differentiated and specialized services. As for our electronic trading platform, we are actively adding in functionalities for proxy inquiries, quotes, trading, and after sales services etc. over the Internet. Information on wealth management products is being consolidated into the electronic trading platform to meet customers' needs.
D. Fixed income business
Goals: to increase trading profits and fee income. Trading profits: increase profits from the trading of government bonds, interest rate derivatives, and convertible bonds. Fee income: increase fee income from the underwriting of corporate bonds and the primary market of financial debts.
E. New financial products
Other than participating in the trading and market making activities that will soon be permitted by the authority, we will also issue equity-linked debts to the public and offer more diverse products to customers.
F. Underwriting business
Besides researching and designing innovative financial products in line with the deregulation, we will expand our TDR customer base and introduce products such as TCB that are relevant to them, and succeed in the role of a capital market agent for overseas Taiwanese enterprises by focusing on our Financial Consultation.
G. E-Commerce business
Corporate version of the AP electronic trade software: the trading of financial products is becoming more specialized each day with increasing significance from corporate participants. Corporations have their own information sources and their trading and bookkeeping methods are different from individual investors in general. Therefore we shall develop a corporate version of electronic trading platform based on the needs of corporations. Integrated market quotation and sub-brokerage ordering: under the wave of globalization, interactions between regional economies are becoming more active than ever. Since growth in Asia and the emerging markets remains the center of attention, we shall include quotations from markets such as Korea, Thailand, Singapore, Shenzhen, Shanghai, Japan, USA, and develop proxy ordering functions for foreign securities as regulation permits.
 
III. Jih Sun International Commercial Bank
1.The bank currently engages in the following primary businesses:
A. Checking account deposits
B. Current account deposits
C. Fixed deposits
D. Issuance of financial debts
E. Short-term, mid-term, and long-term loans
F. Bill discounting
G. Investing in government bonds, short-term notes, corporate bonds, financial debts and equity shares
H. Exchange of local and foreign currencies
I. Commercial bill acceptance
J. Issuance of local and overseas letters of credit
K. Guarantee of corporate bond issuance
L. Provides local and overseas guarantees
M. Collections and payments on behalf
N. Sale and underwriting of government bonds, treasury bills, corporate bonds, and equity shares
O. Storage, depository, and servicing related to the above-mentioned businesses
P.
Other businesses permitted by the central authority
2. Percentages of business assets and (or) revenues as a percentage of total assets and (or) revenues:
 
Unit: NTD thousands
2007
2006
Amount
%
Amount
%
Wealth Management
2,378,539
40
1,479,945
21
Consumer Banking
2,419,348
41
3,510,247
51
Corporate Banking
1,369,769
23
1,638,173
24
Investment Management
(87,905)
-1
(134,475)
-2
Others
(130,842)
-2
419,499
6
Subtotal
5,948,910
100
6,913,389
100
Amortization of losses from the sale of NPL
(611)
-
(11,779,582)
-
Net revenue
5,948,298
-
(4,866,193)
-

Note:
1. For consistency with the disclosure under the income statement, this table presents the weights of each business segment as a percentage of net revenue.
2. The weights of net revenue from each business segment are presented as percentages of net revenue before deducting the amortization of losses from the sale of NPL.
3. Financial products and services planned for the future
 A. Corporate banking business
(A) Continue our growth in syndication loans. In 2007, we were the lead arranger of 8 syndication loans; contracted value amounted to NT$13.8 billion and generated fees income totaling NT$15.02 million. By structuring syndication cases, the bank is able to introduce niche cash management services such as TMU, factoring, AR/AP etc. It is our goal to strengthen our relationship with customers, grow our brand awareness to be customers' best partner, and eventually become customers' main banker.
(B)Promote our corporate electronic banking services by upgrading our corporate banking platform. Besides fund transfers, we should also track a company's cash flow records. By combining cash flow and information flow, we can gain insights into the operations of the main industry participants; based on which we shall provide AR services that integrates the upstream and downstream of a supply chain.
B. Consumer banking business

Mortgage loan remains our main contributor. The total outstanding balance in the Consumer Banking segment increased marginally by NT$1.04 billion compared to the previous year (2006); however mortgage loans in 2007 have grown substantially by NT$11.16 billion, achieving a growth rate of 17.4% while the outstanding balances of personal and car loans have greatly reduced. Revenue contribution of mortgage loans increased from 45.7% in the previous year to 63.4% in the current year; but due to the reduced volumes of high margin products, contribution to the revenue dropped by 22%.

Unit: NTD thousands
2007
2006
Growth rate
Amount
%
Amount
%
Interest income
3.463.128
93.8%
4.285.700
95.0%
-20.8%
Fees income
54.579
1.5%
115.593
2.6%
-64.8%
Other operating income
173.173
4.7%
110.064
2.4%
119.3%
Total
3.690.880
100.0%
4.511.356
100.0%
-22.1%
C. Credit card business

On top of the 5~7 times fuel points available with fuel purchases from any gas stations across the nation that came with the introduction of "Jih Sun GOGO Petrol" in 2006, we have repackaged the GOGO Card and All Pass card to associate driving, parking and other benefits.

D. Wealth management business

Main products of the Wealth Management segment in the current year were linkages bonds, mutual funds, insurance etc. With the expectation of a slowdown in the global economy in the coming year, it is the bank's intention to raise customers' awareness of proper asset allocation and product selection with the introduction of dynamic hedging investment during December this year. In order to provide better services and investment decisions, we expect to revise part of our existing mechanisms in 2008 to be implemented in the second half of 2008.

As for product performances, structured notes linkage of various types such as interest rate, index, commodity and share price-linked bonds ranked top among industry peers in terms of average net worth. A total of 26 products matured or terminated early in 2006 (same product in different currencies were counted as one).

For better integration of group resources, product development and marketing under Wealth Management have been consolidated into the Financial Planning Department during the year.

E. Trust business

In the Trust segment, the bank not only focuses on deeper penetration of existing businesses, but is actively seeking approval from the authority for new customized trust opportunities. We have recruited expert talents in the fields of real estate investment trust, trust of loans and related security interests, and securities trust to handle the businesses and operations of real estate investment trust and personal trust. As of the end of 2007, the values of real estates, trust of loans and related security interests, and securities held in trust amounted to NT$6.3 billion, NT$2.418 billion, and NT $3.068 billion, respectively.

Other than the "trust of funds dedicated to the investment of local and foreign securities and mutual funds", this department is also actively developing "trust in loans" such as "insurance trust", "real estate management trust", "specific funds trust" and "prepayment trust" etc encouraged by the authority, As of the end of 2007, total trust in loan amounted to more than NT$3.529 billion. For accessory businesses other than the underwriting, transfer, and registration of shares and the payment of stock, cash, and bonus dividends that exist since 2006, this department has been actively exploring businesses relating to the depository of foreign currencies during 2007.

F. Financial investment business

The main product for the past two years was the US equity-linked structured deposits; total unexpired amount is approximately NT$197 million.

G. Electronic banking business

Our main services in the Electronic Banking segment in the last two years were still the provision of NTD/foreign currency account enquiries and transactions, mutual fund ordering, on-line insurance, and credit card services. In order to provide more secure yet more convenient transaction services, we have permitted the transfers of funds to non-predetermined accounts since Jul 2007; transaction security is enhanced through the verification of chip-based ATM cards. For more complete and convenient transaction checking, we began delivering electronic statements since Sep 2007. A total of 2,194 customers have applied for electronic statements at the end of 2007. For more convenient credit card payments, the company joined the eBill network in Nov 2007. Using ID+Account as a security check, customers are able to make their credit card payments from current accounts under any financial institutions that are also a member of the eBill network.


IV. Jih Sun International Insurance Agency Co. Ltd

1.Primary businesses
  A. Fire insurance
B. Accident insurance
C. Vehicle insurance
D. Construction insurance
E. Credit insurance
F. Insurance of various liabilities
G. Insurance of other properties


2. Revenue contribution

Commission income of Jih Sun International Insurance Agency
Unit: NTD thousands
Business
Commission income
As a percentage oftotal
commission (%)
Fire insurance
10,916
85%
Accident insurance
1,128
8.9%
Insurance of other liabilities
348
2.7%
Vehicle insurance
441
3.4%
Total income (before tax)
12,835
100%

3.New products and services planned for the future
 

The long-awaited amendments to the current health insurance regulations governing all insurance companies were finally approved by the Legislative Yuan on Jun 14, 2007. For consumers, purchasing an additional option means additional protection, and sellers are willing to provide more protection if they have more variety of products to sell; therefore the amendments can be considered a great incentive for both consumers and sellers. However in view of intense competition based on price, we must be well prepared and informed of the characteristics and risks of health insurance before we join the competition to capitalize the business opportunity effectively.

The financial environment has been rapidly changing in recent years, and the financial market is growing towards greater diversity. As a result, customers are now exposed to more channels to receive information of various financial products and tools and insurance services. To respond to the growing market competition, we shall integrate all group channels to create the highest synergy in cross-selling; thereby expanding our sales coverage, providing comprehensive services, raising customers' satisfaction and ultimately win their loyalty to the group. Through the establishment of customer database and analyses of customers' data, we shall be able to package products across different segments through close collaboration between subsidiaries, establish sales platforms for project promotion and to satisfy customers' needs, and achieve solid returns from our integrated marketing efforts.


 

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