Far Eastern International Bank Financial Statements for the Years Ended December 31, 2006 and 2007 and Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Far Eastern International Bank We have audited the accompanying balance sheets of the Far Eastern International Bank (the “Bank”) as of December 31, 2006 and 2007, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank’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 Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 Bank as of December 31, 2006 and 2007, and the results of its operations and its cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards and accounting principles generally accepted in the Republic of China. As stated in Note 3 to the financial statements, effective January 1, 2006, the Bank adopted the newly released Statements of Financial Accounting Standards (“Standards”) No. 34 - “Accounting for Financial Instruments” and No. 36 - “Disclosure and Presentation of Financial Instruments” as well as the revisions of previously released Standards. As stated in Note 2 to the financial statements, our audits also comprehended the translation of the 2007 New Taiwan dollar amounts into U.S. dollar amounts at the rate of NT$32.443 to US$1.00, the average of the buying and selling exchange rates quoted by the Bank of Taiwan on December 31, 2007. Such U.S. dollar amounts are presented solely for the convenience of readers.

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Under Regulations Governing the Preparation of Financial Reports by Public Banks, we have also audited the consolidated financial statements of the Bank as of and for the years ended December 31, 2006 and 2007, on which we have issued a modified unqualified opinion and an unqualified opinion respectively, in our report dated March 10, 2008. March 10, 2008

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. For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

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FAR EASTERN INTERNATIONAL BANK BALANCE SHEETS DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan or U.S. Dollars, Except Par Value) 2006 2007 2006 2007 ASSETS Notes NT$ NT$ US$ LIABILITIES AND SHAREHOLDERS’ EQUITY Notes NT$ NT$ US$ CASH AND CASH EQUIVALENTS 4 $ 5,006,818 $ 2,496,964 $ 76,965 LIABILITIES Due to banks and the Central Bank 16 $ 9,812,863 $ 17,775,322 $ 547,894 DUE FROM BANKS AND THE CENTRAL BANK 5, 26, 27 57,540,831 73,725,173 2,272,452 Financial liabilities measured at fair value through profit or loss 2, 3, 6,26, 29 3,130,876 2,666,625 82,194 FINANCIAL ASSETS MEASURED AT FAIR VALUE Bonds sold under repurchase agreements 2, 28 5,118,156 1,726,186 53,207 THROUGH PROFIT OR LOSS 2, 3, 6, 26, 29 10,593,247 10,780,933 332,304 Payables 2, 17, 26 7,214,974 5,188,249 159,919 Deposits and remittances 18, 26 266,312,727 281,370,449 8,672,763 RECEIVABLES, NET 2, 7, 8, 22, 26 23,561,750 21,373,741 658,809 Bank debentures 2, 19, 29 31,587,701 31,436,230 968,968 Other financial liabilities 20, 29 280,629 185,169 5,707 LOANS AND DISCOUNTS, NET 2, 8, 26 223,152,864 223,085,628 6,876,233 Other liabilities 21 745,827 734,761 22,648 AVAILABLE-FOR-SALE FINANCIAL ASSETS 2, 3, 9, 26, 27, 29 12,625,273 6,961,599 214,579 Total liabilities 324,203,753 341,082,991 10,513,300 HELD-TO-MATURITY FINANCIAL ASSETS 2, 10, 27, 29 305,878 - - SHAREHOLDERS’ EQUITY 2, 3, 19, 23 Capital stock, NT$10.00 dollar par value, INVESTMENTS ACCOUNTED FOR BY THE Authorized - 2,000,000 thousand shares in 2006 EQUITY METHOD 2, 7, 11 4,252,059 3,239,789 99,861 and 2,500,000 thousand shares in 2007 Issued and outstanding - 1,878,053 thousand DEBT INSTRUMENT INVESTMENT WITH NO ACTIVE shares in 2006 and 1,879,780 thousand shares in MARKET 2, 12, 29 923,289 9,914,841 305,608 2007 18,780,526 18,797,803 579,410 Capital surplus OTHER FINANCIAL ASSETS 2, 8, 13, 29 432,489 182,295 5,619 Additional paid-in capital in excess of par 913,793 922,760 28,442 Treasury stock transaction 101,531 101,531 3,130 PROPERTIES 2, 14 Total capital surplus 1,015,324 1,024,291 31,572

Cost Accumulated deficit Land 1,151,904 1,151,904 35,505 Legal reserve 1,596,516 1,596,516 49,210 Buildings and improvements 958,271 963,951 29,712 Accumulated deficit (1,617,625 ) (2,397,716 ) (73,906 ) Computer equipment 903,338 1,081,835 33,346 Total accumulated deficit (21,109 ) (801,200 ) (24,696 ) Transportation equipment 24,470 22,009 678 Others Miscellaneous equipment 1,177,369 1,197,945 36,925 Cumulative translation adjustments 12,640 11,947 368

Total cost 4,215,352 4,417,644 136,166 Unrealized valuation loss on available-for-sale Less: Accumulated depreciation 1,744,416 1,943,320 59,899 financial assets (25,919 ) (213,365 ) (6,576 ) 2,470,936 2,474,324 76,267 Total others (13,279 ) (201,418 ) (6,208 ) Prepayments for properties 38,822 19,826 611

Total shareholders’ equity 19,761,462 18,819,476 580,078 Net properties 2,509,758 2,494,150 76,878

CONTINGENT LIABILITIES AND COMMITMENTS 2, 26, 28, 29 OTHER ASSETS 2, 15, 22, 26, 28 3,060,959 5,647,354 174,070 TOTAL $ 343,965,215 $ 359,902,467 $ 11,093,378 TOTAL $ 343,965,215 $ 359,902,467 $ 11,093,378 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 10, 2008)

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FAR EASTERN INTERNATIONAL BANK STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan or U.S. Dollars, Except Loss Per Share) 2006 2007 Notes NT$ NT$ US$ INTEREST INCOME 2, 26, 29 $ 11,421,698 $ 11,569,231 $ 356,602 INTEREST COST 26, 29 6,294,510 7,255,976 223,653 NET INTEREST INCOME 5,127,188 4,313,255 132,949 OTHER NONINTEREST NET INCOME

Service fees income 2 2,245,079 2,264,502 69,799 Service charges 26 493,288 524,756 16,175 Net service fees income 1,751,791 1,739,746 53,624 Net gain on financial assets and liabilities measured at

fair value through profit or loss

2, 6, 26, 29 1,259,512 1,481,217 45,656 Net gain on available-for-sale financial assets 2 16,015 7,583 234 Net gain on held-to-maturity financial assets 2 153,874 - - Investment income accounted for by the equity method 2,11 63,757 518,322 15,976 Foreign exchange loss 2 (274,266 ) (128,596 ) (3,964 ) Loss on asset impairment 2, 12, 13, 15 (36,022 ) (86,461 ) (2,665 ) Others 103,042 53,746 1,657

Total other noninterest net income 3,037,703 3,585,557 110,518

NET PROFIT 8,164,891 7,898,812 243,467 PROVISION FOR POSSIBLE LOSSES 2, 8 6,173,857 4,746,094 146,290 OPERATING EXPENSES 2, 21, 24, 26

Personnel expense 2,135,496 2,105,708 64,905 Depreciation and amortization 242,379 240,747 7,421 Others 1,821,537 1,977,220 60,944

Total operating expenses 4,199,412 4,323,675 133,270

NET LOSS BEFORE INCOME TAX AND

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

(2,208,378 ) (1,170,957 ) (36,093 ) INCOME TAX BENEFIT 2, 22 496,144 390,866 12,048 NET LOSS BEFORE CUMULATIVE EFFECT OF

CHANGES IN ACCOUNTING PRINCIPLES

(1,712,234 ) (780,091 ) (24,045 ) CUMULATIVE EFFECT OF CHANGES IN

ACCOUNTING PRINCIPLES (NET OF APPLICABLE INCOME TAX BENEFIT OF NT$571 THOUSAND)

2, 3, 22 41,775 - - NET LOSS $ (1,670,459 ) $ (780,091 ) $ (24,045 )

(Continued)

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FAR EASTERN INTERNATIONAL BANK STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan or U.S. Dollars, Except Loss Per Share) 2006 (NT$) 2007 (NT$) 2007 (US$) Loss Loss Loss Before Before Before Income Net Income Net Income Net Notes Tax Loss Tax Loss Tax Loss BASIC LOSS PER SHARE 25

Net loss before cumulative effect of changes in accounting principles

$ (1.17 ) $ (0.91 ) $ (0.62 ) $ (0.42 ) $ (0.02 ) $ (0.01 )

Cumulative effect of changes in accounting principles 0.02 0.02 - - - - Total basic loss per share $ (1.15 ) $ (0.89 ) $ (0.62) $ (0.42 ) $ (0.02 ) $ (0.01)

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 10, 2008) (Concluded)

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FAR EASTERN INTERNATIONAL BANK STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan Dollars, Except Par Value and Dividend Per Share) Retained Earnings (Accumulated Deficit) Other Equity (Note 23) Unrealized Unappropriated Cumulative Valuation Loss on Capital Stock (NT$10 Par Value) (Notes 19 and 23) Capital Surplus (Notes 19 and 23) Earnings Translation Available-for-sale Total Authorized Issued and Outstanding Additional Treasury Stock (Accumulated Adjustments Financial Assets Shareholders' Shares Shares Amount Paid-in Capital Transaction Legal Reserve Deficit) (Note 2) (Notes 2 and 3 ) Equity BALANCE, JANUARY 1, 2006 2,000,000,000 1,791,249,890 $ 17,912,499 $ 1,095,783 $101,531 $ 1,174,310 $ 1,470,289 $ 10,106 $ - $ 21,764,518 Appropriation of prior year's earnings

Legal reserve - - - - - 422,206 (422,206 ) - - - Bonus to employees - cash - - - - - - (17,914 ) - - (17,914 ) Bonus to employees - stock - 4,180,047 41,801 - - - (41,801 ) - - - Remuneration to directors and supervisors - - - - - - (19,905 ) - - (19,905 ) Cash dividends - NT$0.1533 per share - - - - - - (274,689 ) - - (274,689 ) Stock dividends - NT$0.3578 per share - 64,094,041 640,940 - - - (640,940 ) - - -

Balance after the appropriations 2,000,000,000 1,859,523,978 18,595,240 1,095,783 101,531 1,596,516 52,834 10,106 - 21,452,010 Capital surplus transferred to common stock - NT$0.1022 per

share - 18,312,584 183,126 (183,126 ) - - - - - - Conversion of bonds into common stock - 215,969 2,160 1,136 - - - - - 3,296 Translation adjustments on offshore banking unit and oversea

branch - - - - - - - 2,577 - 2,577 Translation adjustments on foreign-currency long-term equity

investments - - - - - - - (43 ) - (43 ) Change in unrealized valuation gain or loss on available-for-sale

financial assets - - - - - - - - (26,745 ) (26,745 ) Change in unrealized valuation gain or loss on available-for-sale

financial assets from equity investments recognized by the equity method - - - - - - - - 826 826

Net loss in 2006 - - - - - - (1,670,459 ) - - (1,670,459 ) BALANCE, DECEMBER 31, 2006 2,000,000,000 1,878,052,531 18,780,526 913,793 101,531 1,596,516 (1,617,625 ) 12,640 (25,919 ) 19,761,462 Increase in authorized common stock 500,000,000 - - - - - - - - - Conversion of bonds into common stock - 1,727,756 17,277 8,967 - - - - - 26,244 Translation adjustments on offshore banking unit and oversea

branch - - - - - - - (660 ) - (660 ) Translation adjustments on foreign-currency long-term equity

investments - - - - - - - (33 ) - (33 ) Change in unrealized valuation gain or loss on available-for-sale

financial assets - - - - - - - - (147,172 ) (147,172 ) Change in unrealized valuation gain or loss on available-for-sale

financial assets from equity investments recognized by the equity method - - - - - - - - (40,274 ) (40,274 )

Net loss in 2007 - - - - - - (780,091 ) - - (780,091 ) BALANCE, DECEMBER 31, 2007 2,500,000,000 1,879,780,287 $ 18,797,803 $ 922,760 $101,531 $ 1,596,516 $ (2,397,716 ) $ 11,947 $ (213,365 ) $ 18,819,476 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 10, 2008)

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FAR EASTERN INTERNATIONAL BANK STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan or U.S. Dollars) 2006 2007 NT$ NT$ US$ CASH FLOWS FROM OPERATING ACTIVITIES

Net loss before cumulative effect of changes in accounting principles

$ (1,712,234 ) $ (780,091 ) $ (24,045 )

Adjustment Provision for possible losses 6,173,857 4,746,094 146,290 Recovery of written-off credits 1,625,927 686,523 21,161 Depreciation and amortization 242,379 240,747 7,421 Amortization of premium on bond investments 136,626 126,220 3,891 Net valuation gain on financial assets and

liabilities measured at fair value through profit or loss

(412,711 ) (204,564 ) (6,305 ) Investment income accounted for by the equity

method

(63,757 ) (518,322 ) (15,976 ) Cash dividends received from investments

accounted for by the equity method

123,549 94,992 2,928 Net loss (gain) on disposal of properties 373 (292 ) (9 ) Net loss on disposal of collaterals assumed 27,191 8,734 269 Loss on asset impairment 36,022 86,461 2,665 Provision for retirement benefits 25,791 25,025 771 Pension payment (4,001 ) (14,180 ) (437 ) Increase in financial assets measured at fair value

through profit or loss

(2,120,623 ) (955,336 ) (29,447 ) Decrease in receivables 1,503,758 425,827 13,125 Increase in deferred income tax assets (527,073 ) (404,789 ) (12,477 ) Increase in financial liabilities measured at fair

value through profit or loss

741,246 507,963 15,657 Increase (decrease) in payables 1,170,154 (1,205,256 ) (37,150 )

Net cash provided by operating activities 6,966,474 2,865,756 88,332

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in due from banks and the Central Bank (39,778,114 ) (16,116,411 ) (496,761 ) Increase in loans and discounts (13,880,150 ) (2,905,594 ) (89,560 ) Decrease (increase) in available-for-sale financial

assets

(3,770,345 ) 5,394,218 166,268 Decrease in held-to-maturity financial assets 16,182,782 300,488 9,262 Proceeds of the disposal of investments accounted

for by the equity method

- 45,293 1,396 Increase in debt instrument investments with no

active market

(391,039 ) (9,169,974 ) (282,649 ) Decrease in other financial assets 506,846 39,630 1,222 Acquisition of properties (121,695 ) (223,258 ) (6,882 ) Proceeds of the disposal of properties 684 378 12

(Continued)

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FAR EASTERN INTERNATIONAL BANK STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan or U.S. Dollars) 2006 2007 NT$ NT$ US$

Proceeds of the disposal of collaterals assumed $ 726,419 $ 47,206 $ 1,455 Increase in other assets (643,716 ) (2,455,443 ) (75,685 )

Net cash used in investing activities (41,168,328 ) (25,043,467 ) (771,922 )

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in due to banks and the Central Bank

(7,041,712 ) 7,962,459 245,429

Increase (decrease) in bonds sold under repurchase agreements

2,703,638 (3,391,970 ) (104,552 )

Increase in deposits and remittances 38,259,849 15,057,722 464,129 Issuance of bank debentures 2,000,000 5,000,000 154,116 Repayment of bank debentures - (5,000,000 ) (154,116 ) Decrease in other financial liabilities (9,493 ) (7,594 ) (234 ) Increase (decrease) in other liabilities (29,873 ) 25,209 777 Bonus to employees and remuneration to directors

and supervisors

(37,819 ) - - Cash dividends (274,689 ) - -

Net cash provided by financing activities 35,569,901 19,645,826 605,549

EFFECTS OF EXCHANGE RATE CHANGES (18,937 ) 22,031 679 NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS

1,349,110 (2,509,854 ) (77,362 ) CASH AND CASH EQUIVALENTS, BEGINNING

OF YEAR

3,657,708 5,006,818 154,327 CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,006,818 $ 2,496,964 $ 76,965 SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid $ 6,073,893 $ 7,019,512 $ 216,364 Income tax paid $ 86,730 $ 99,272 $ 3,060

NONCASH INVESTING AND FINANCING

ACTIVITIES

Conversion of bonds into common stock $ 3,296 $ 26,244 $ 809 Receivable from capital return of equity investment

(Note 11)

$ - $ 1,350,000 $ 41,611 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 10, 2008) (Concluded)

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FAR EASTERN INTERNATIONAL BANK NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006 AND 2007 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) 1. ORGANIZATION AND OPERATIONS Far Eastern International Bank (“the Bank”) obtained its license on January 11, 1992 and commenced

business on April 11, 1992. The Bank engages in (a) accepting deposits and extending loans and guarantees; (b) issuing letters of credit, handling domestic and foreign remittances and accepting commercial drafts; (c) investing in securities and acting as an agent for trading government bonds, corporate bonds and bank debentures; (d) conducting other relevant businesses which authorized by the Central Competent Authority.

The operations of the Bank’s Trust Department include pecuniary trust, securities trust, real estate trust,

creditor’s right of money or guarantee trust, movable property trust and ground right trust and related operations. These operations are regulated under the Banking Act and Trust Enterprise Act.

As of December 31, 2007, the Bank’s operating units include Business Department, International Banking

Department, Trust Department, Credit Card Department, Offshore Banking Unit (OBU), and 35 domestic branches, as well as an overseas branch in Hong Kong.

The Bank’s shares have been listed on the Taiwan Stock Exchange. As of December 31, 2006 and 2007, the Bank had 2,312 and 2,327 employees, respectively. 2. SIGNIFICANT ACCOUNTING POLICIES The Bank’s financial statements have been prepared in conformity with the Regulations Governing the

Preparation of Financial Reports by Public Banks, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the Republic of China. Under these regulations, law and principles, certain estimates and assumptions have been used to determine fair value of certain financial instruments, allowance for possible losses, depreciation, impairment and pension. Actual results may differ from these estimates.

Since the operating cycle could not be reasonably identified in the banking industry, accounts included in

the Bank’s financial statements were not classified as current or non-current. Nevertheless, accounts were properly categorized according to the nature of each account and sequenced by their liquidity. Please refer to Note 29 for maturity analysis of assets and liabilities.

For readers’ convenience, the accompanying financial statements have been translated into English from the

original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail.

The translation of the 2007 New Taiwan dollar amounts into U.S. dollar amounts is at the rate of

NT$32.443 to US$1.00, the average of the buying and selling exchange rates quoted by the Bank of Taiwan on December 31, 2007.

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The Bank’s significant accounting policies are summarized as follows: Financial Instruments Measured at Fair Value Through Profit or Loss Financial instruments at fair value through profit or loss (FVTPL) are financial assets and liabilities that are

held for trading or those that are designated on initial recognition as measured at fair value through profit or loss (FVTPL). On each balance sheet date after the initial recognition, financial assets and liabilities at FVTPL are remeasured at fair value, with changes in fair value recognized as gain or loss in the year these changes arising. Acquisition and disposal of financial assets are recognized and derecognized on a trade date basis, except government bonds, for which the settlement date basis is used. Costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately as expense.

A derivative instrument that does not meet the criteria for hedge accounting is classified as a financial asset

or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

Fair values of financial assets and financial liabilities at the balance sheet date are determined as follows:

Publicly traded stocks - at closing prices; open-end mutual funds - at net asset values; bonds - at prices quoted by the Taiwan GreTai Securities Market.

Securities Purchased/Sold Under Resell/Repurchase Agreements Securities purchased under resell agreements and securities sold under repurchase agreements are generally

treated as collateralized financing transactions. Available-for-sale Financial Assets Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly

attributable to the acquisition. The difference between the initial cost of a debt instrument and its maturity amount is amortized using the effective interest method. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized under equity until the financial assets are disposed of, at which time, the cumulative gain or loss previously recognized in equity is included in profit or loss for the year. Purchases or sales of financial assets are recognized and derecognized on a settlement date basis.

Any subsequent decrease in impairment loss on an equity instrument classified as available for sale is

recognized directly under equity. If the fair value of a debt instrument classified as available-for-sale subsequently increases as a result of an event that occurred after the impairment loss was recognized, the decrease in impairment loss is recognized as gain.

Non-accrual Loans Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with

Nonperforming/Non-accrued Loans” issued by the Banking Bureau in the Financial Supervisory Commission of the Executive Yuan, overdue loans and other credits extended by the Bank and the related accrued interest are classified as non-accrual loans upon approval by the Board of Managing Directors.

Non-accrual loans arising from loans are classified as loans and discounts; and the ones arising from

guarantees, acceptances, accounts receivable - factoring and credit card receivables are classified as other financial assets.

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Allowance for Possible Losses In determining the allowance for possible losses, the Bank evaluates the risks on particular loans and overall

credit portfolio and considers the balances and general collectibility of loans, discounts, receivables and other financial assets as of the balance sheet date.

The Bank evaluates possible losses on the basis of borrowers’ financial situation, ability to pay principal and

interest and the values of collaterals in accordance with “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrual Loans” (the “Regulations”). The Regulations require that loans be classified according to levels of collectibility and that provisions be made for outstanding credits at specific percentages.

The Bank writes off uncollectible loans and receivables upon the approvals of the Bank’s Board of

Directors or Managing Directors. The subsequent collections of written-off loans are recorded as the increase of allowance for possible losses.

Held-to-maturity Financial Assets Held-to-maturity financial assets are initially measured at fair value plus transaction costs that are directly

attributable to the acquisition. At each balance sheet date, held-to-maturity financial assets are measured at amortized cost using the effective interest method. Profit or loss is recognized when the financial assets are impaired, or amortized. The acquisition and disposal of financial assets are accounted for on a settlement date basis.

The impairment loss is reversed if an increase in the investment’s recoverable amount is due to an event that

occurred after the impairment loss was recognized; however, the adjusted carrying amount of the investment may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the investment in prior years.

Investments Accounted for by the Equity Method Investments in which the Bank holds 20 percent or more of the investees’ voting shares are accounted for by

the equity method. The investments are stated at cost plus (or minus) a proportionate share in net earnings (losses) of the investee. For the investment discount arising from acquisitions before January 1, 2006, the unamortized amount continues to be amortized over 5 years.

Cash dividends received are treated as a reduction of carrying amounts. Stock dividends are recorded as

an increase in the number of shares. The cost per share will be recalculated on the basis of the new number of shares held. Cost of shares sold are calculated at moving-average cost.

Financial Assets Carried at Cost Investments in equity instruments with no quoted market prices in an active market and with fair value that

cannot be reliably measured, such as non-publicly traded stocks, are carried at their original cost. An impairment loss is recognized when there is objective evidence that the asset is impaired. A reversal of this impairment loss is not allowed under any circumstances.

Debt Instrument Investments with No Active Market These instruments are carried at amortized cost. The accounting treatment for such debt instrument

investments is similar to that for held-to-maturity financial assets, except for the absence of restriction on the timing of their disposal. An impairment loss is recognized when there is objective evidence that the investment is impaired.

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Properties Properties are stated at cost less accumulated depreciation and accumulated impairment losses. Major

additions and improvements to properties are capitalized, while cost of repairs and maintenance are expensed currently.

Depreciation is provided on a straight-line basis over estimated useful lives as follows: buildings and

improvements, 5 to 55 years; computer equipment, 3 to 7 years; transportation equipment, 3 to 7 years; and miscellaneous equipment, 3 to 20 years. Properties still in use beyond their original estimated useful lives are further depreciated over their newly estimated useful lives.

Upon disposal of properties, the related cost, accumulated depreciation and accumulated impairment losses

of an item of properties are derecognized. Any gain or loss is included in net profit in the year of disposal. The reversal of an impairment loss is recognized under earnings. However, the adjusted carrying amount

may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the properties in prior years.

Collaterals Assumed Collaterals assumed are carried at cost and evaluated at the recoverable amount. If the recoverable amount of collaterals assumed is estimated less than its carrying amount, an impairment

loss is recognized and charged to earnings. The reversal of an impairment loss is recognized under earnings. However, the adjusted carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

Bank Debentures Issuance costs of convertible bonds are recorded as deferred charges and are amortized over the issuance

period. The conversion of bonds into common shares is accounted for using the book value method, whereby the

difference between the book value of the bonds (net of any unamortized issuance costs) and the par value of the common shares issued is recorded as capital surplus.

Pension Cost Pension cost under the defined benefit plan is determined by actuarial valuations. Unrecognized net

transition obligations and unrecognized prior service cost are amortized over 26 and 23 years, respectively. Under the defined contribution plan, the Bank makes monthly contributions to employees’ individual

pension accounts at a specific percentage of salaries and wages. Such payments are recognized as pension costs.

Income Tax The Bank applies intra-year and inter-year allocations for its income tax, whereby deferred income tax

assets and liabilities are recognized for the tax effects of temporary differences, unused loss carryforward and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. An additional tax at 10% of unappropriated earnings is provided for as income tax in the year the

shareholders approve to retain the earnings.

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Income tax credits for research and development expenditures, and personnel training expenditures are

recognized when the expenses occurred. The ROC government enacted the Alternative Minimum Tax Act (“AMT Act”), which became effect on

January 1, 2006. The Bank has considered the impact of the AMT Act in the determination of its tax liabilities.

Foreign-currency Transactions The functional currencies of the overseas branches and offshore business units are local currencies and U.S.

dollars, respectively. The assets and liabilities are recorded in their respective currencies. Gains and losses resulting from the settlement of foreign-currency transactions at prevailing rates are translated into the functional currency of the unit. The values of the net assets are recalculated into New Taiwan Dollars at the end of each month at prevailing exchange rates. Exchange differences arising from the translation are recognized as “cumulative translation adjustment” in shareholders’ equity.

The Bank’s other business units maintains their accounts at the currencies in which transactions are

denominated. Foreign-currency income and expenses are converted into New Taiwan dollars (NT dollars) at the prevailing exchange rates. Exchange differences arising from the settlement of foreign-currency assets and liabilities are recognized as gain or loss. At the balance sheet date, forward exchange contracts used for trading purposes, the foreign-currency amounts of the contracts multiplied by the difference between the forward contract rates and the forward rates available until the maturity of the contracts are recognized under income. Other foreign-currency assets and liabilities are revalued at prevailing exchange rates, and the exchange differences are recognized as gain or loss.

If the functional currency of an equity-method investee is a foreign currency, the translation adjustments of

the investee’s financial statements into the reporting currency of the Bank are reported as a separate component of shareholders’ equity.

Hedge Accounting The Bank uses derivatives primarily as a risk management tool for hedging against risks to financial assets

and liabilities due to adverse market changes in interest and exchange rates. Changes in the fair value of the derivative must be highly correlated with changes in the fair value of the underlying hedged item over the life of the derivative contract. At the start of the hedge, there must be a formal designation and documentation of the hedging relationship between the hedging instrument and the hedged item, the risk management objective and strategy for undertaking the hedge, and how the entity will assess the hedging instrument’s effectiveness.

If the hedges qualify as fair value hedges, the effect of changes in fair value of hedged items will be offset

by the gain or loss recognized from remeasuring the hedging instrument at fair value (for a derivative hedging instrument), and the carrying amount of the hedged item is adjusted through the corresponding gain or loss on the hedging instrument.

Interest Income and Service Fees Income Interest income on discounts and loans are recorded on the accrual basis. For non-accrual loans, interest

income is recognized only when collection on these obligations is made. Under the regulations of the Banking Bureau under the Financial Supervisory Commission governed by the Executive Yuan, the interest income on credits covered by agreements that extend their maturity is recorded as deferred income and recognized upon collection.

Service fees income are recognized as cash receipts and the related services have been substantially

completed.

- 14 -

Contingencies A loss should be recognized when it is probable that an asset has been impaired or a liability has been

incurred and the amount of loss can be reasonably estimated. If the loss is possible, but the amount of loss cannot be reasonably estimated, the related information should be disclosed in the financial statements.

Impairment of Assets If the recoverable amount of an asset (mainly properties, collaterals assumed, and investments accounted for

by the equity method) is estimated less than its carrying amount, an impairment loss is charged to earnings. If an impairment loss subsequently reserves, the carrying amount of the asset is increased accordingly, however the adjusted carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES Adoption of New and Revised Standards SFAS No. 37 - “Accounting for Intangible Assets” and SFAS No. 38 - “Accounting for Noncurrent Assets Held for Sale and Discontinued Operations” On January 1, 2007, the Bank adopted the newly released Statements of Financial Accounting Standards

(“Standards” or SFAS) No. 37 - “Accounting for Intangible Assets” and No. 38 - “Accounting for Noncurrent Assets Held for Sale and Discontinued Operations” and related amendments of previously released Standards. These accounting changes had no effect on the Bank’s financial statements for 2007.

SFAS No. 34 - “Financial Instruments: Recognition and Measurement” and SFAS No. 36 - “Financial Instruments: Disclosure and Presentation” On January 1, 2006, the Bank adopted the newly released SFAS No. 34 - “Financial Instruments:

Recognition and Measurement” and SFAS No. 36 - “Financial Instruments: Disclosure and Presentation” and related amendments of previously released standards.

The Bank categorized its financial assets and financial liabilities upon initial adoption of these newly

released SFASs. The adjustments arised from the carrying amounts of the financial instruments categorized as financial assets or financial liabilities at fair value through profit or loss and derivatives designated for fair value hedges were included in the cumulative effect of changes in accounting principles, and the adjustments arised from the carrying amounts of those categorized as available-for-sale financial assets were recognized as adjustments to shareholders’ equity.

The effects of the above accounting changes were summarized as follows: Cumulative Effect of

Changes in Accounting Principles (Net of Income Tax)

Shareholders’ Equity Adjustments (Net of Income Tax)

Financial assets measured at fair value through profit or loss $ 414,991 $ - Available-for-sale financial assets - 4,362 Financial liabilities at fair value through profit or loss (373,216 ) - $ 41,775 $ 4,362

- 15 -

Recent Accounting Pronouncements In March 2007, the Accounting Research and Development Foundation issued an interpretation that requires

companies to recognize the bonuses paid to employees and the remuneration to directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses are currently recorded as appropriations from earnings.

4. CASH AND CASH EQUIVALENTS December 31 2006 2007 NT$ NT$ US$ Cash on hand $ 1,523,797 $ 1,492,997 $ 46,019 Notes and checks in clearing 1,834,183 327,545 10,096 Deposits due from other banks 1,648,838 676,422 20,850 $ 5,006,818 $ 2,496,964 $ 76,965 5. DUE FROM BANKS AND THE CENTRAL BANK December 31 2006 2007 NT$ NT$ US$ Due from the Central Bank - certificates of deposit (Note 27) $ 30,000,000 $ 43,200,000 $ 1,331,566 Call loans to banks 18,853,965 17,862,867 550,592 New Taiwan dollar deposit reserve - Type A 2,790,875 5,290,180 163,061 New Taiwan dollar deposit reserve - Type B 5,665,294 5,902,122 181,923 Financial Information Service Co., Ltd. account 203,968 204,664 6,308 Foreign-currency deposit reserve 26,729 1,265,340 39,002 $ 57,540,831 $ 73,725,173 $ 2,272,452 The deposit reserves are required by law and determined at a prescribed percentage of the average of deposit

balances within a month. The Type B reserve cannot be withdrawn and is adjusted on the basis of monthly recomputations of the reserve. The Type A and foreign-currency deposit reserves can be withdrawn but earn no interest.

6. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2006 2007 NT$ NT$ US$ Financial assets held for trading Convertible corporate bonds $ 7,385,459 $ 8,762,024 $ 270,074 Convertible bond option contracts 1,200,742 556,975 17,168 Listed and OTC stocks 510,227 448,291 13,818

(Continued)

- 16 -

December 31 2006 2007 NT$ NT$ US$ Currency option contracts $ 518,644 $ 225,425 $ 6,948 Mutual funds 239,820 194,297 5,989 Foreign currency swap contracts 176,673 185,365 5,714 Credit default swap contracts - 185,105 5,706 Convertible bonds asset swap contracts 5 92,091 2,839 Forward exchange contracts 82,367 30,125 928 Government bonds 444,247 - - Others 35,063 101,235 3,120 $ 10,593,247 $ 10,780,933 $ 332,304 Financial liabilities held for trading Convertible bond option contracts $ 2,515,786 $ 2,010,051 $ 61,956 Currency option contracts 495,850 225,425 6,948 Foreign currency swap contracts 64,202 170,070 5,242 Credit default swap contracts - 161,694 4,984 Convertible bonds asset swap contracts 39,938 39,255 1,210 Others 15,100 60,130 1,854 $ 3,130,876 $ 2,666,625 $ 82,194

(Concluded) The Bank entered into derivative transactions mainly to accommodate customers’ needs, and manage

exposures due to exchange rate and interest rate fluctuations. The Bank’s strategy is to hedge most of the market risk exposures by utilizing the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item.

Net valuation gain on financial assets and liabilities at fair value through profit or loss for the years ended

December 31, 2006 and 2007 were NT$412,711 thousand and NT$204,564 thousand, respectively. Net disposal gains on financial assets and liabilities at fair value through profit or loss for the years ended December 31, 2006 and 2007 were NT$846,801 thousand and NT$1,276,653 thousand, respectively.

Outstanding derivative contract (nominal) amounts as of December 31, 2006 and 2007 were as follows: 2006 2007 NT$ NT$ US$ Foreign currency swap contracts $ 25,595,550 $ 43,241,821 $ 1,332,855 Convertible bond option contracts 16,648,300 23,503,700 724,461 Credit default swap contracts 3,731,074 17,296,552 533,137 Convertible bonds asset swap contracts 10,905,369 16,387,558 505,118 Currency option contracts 22,404,740 13,837,001 426,502 Interest rate swap contracts 26,800,000 8,300,000 255,833 Interest rate option contracts - 5,000,000 154,116 Forward exchange contracts 6,198,753 3,218,112 99,193 Cross-currency swap contracts 3,139,788 3,124,915 96,320 Non-delivery forward - 1,949,090 60,077 Bond option contracts 900,000 - - Government bond futures contracts 60,000 - -

- 17 -

7. RECEIVABLES, NET December 31 2006 2007 NT$ NT$ US$ Credit card $ 15,753,448 $ 13,473,844 $ 415,308 Factoring 3,997,851 3,491,245 107,612 Related parties (Notes 11 and 26) 704,944 1,350,000 41,612 Due from spot exchange trading 123,755 977,744 30,137 Interest 950,889 820,909 25,303 Acceptances 1,435,298 613,830 18,920 Proceeds from disposal of collaterals assumed - 297,317 9,164 Court to distribute 226,452 74,783 2,305 Proceeds from disposal of securities 315,413 54,102 1,668 Others 282,782 390,671 12,042 23,790,832 21,544,445 664,071 Less: Allowance for possible losses (Note 8) 229,082 170,704 5,262 $ 23,561,750 $ 21,373,741 $ 658,809 8. LOANS AND DISCOUNTS, NET December 31 2006 2007 NT$ NT$ US$ Negotiations, discount and overdraft $ 826,348 $ 530,995 $ 16,367 Short-term loans 44,653,717 46,836,246 1,443,647 Medium-term loans 61,392,986 62,472,440 1,925,606 Long-term loans 115,338,012 111,522,207 3,437,482 Non-accrual loans 3,049,731 4,392,136 135,380 225,260,794 225,754,024 6,958,482 Less: Allowance for possible losses 2,107,930 2,668,396 82,249 $ 223,152,864 $ 223,085,628 $ 6,876,233 As of December 31, 2006 and 2007, the balances of non-accrual loans were NT$3,049,731 thousand and

NT$4,392,136 thousand, respectively. The unrecognized interest revenue on non-accrual loans amounted to NT$102,499 thousand and NT$102,062 thousand for the years ended December 31, 2006 and 2007, respectively.

- 18 -

Movements of allowances for possible losses on receivables, loans and discounts and other financial assets were as follows:

NT$ Receivables

and Other Financial Loans and Discounts

Assets Specific Risk General Risk Total Balance, January 1, 2006 $ 1,561,713 $ 1,457,363 $ 528,711 $ 3,547,787 Provision (reversal of provision) for loan losses 4,517,091 1,782,809 (48,575 ) 6,251,325 Amounts written-off (6,618,990 ) (2,354,625 ) - (8,973,615 ) Amounts recovered 847,234 778,693 - 1,625,927 Amounts sold - (33,645 ) - (33,645 ) Effects of exchange rate change - - (2,801 ) (2,801 ) Balance, December 31, 2006 307,048 1,630,595 477,335 2,414,978 Provision (reversal of provision) for loan losses 2,413,999 2,361,293 (29,198 ) 4,746,094 Amounts written-off (2,680,266 ) (2,229,522 ) - (4,909,788 ) Amounts recovered 173,549 512,974 - 686,523 Amounts sold (4,781 ) (55,235) - (60,016 ) Effects of exchange rate change - - 154 154 Balance, December 31, 2007 $ 209,549 $ 2,220,105 $ 448,291 $ 2,877,945 In 2006 and 2007, the Bank had not written off credits for which legal proceeding had not been initiated. 9. AVAILABLE-FOR-SALE FINANCIAL ASSETS December 31 2006 2007 Ending Ending Ending Balance Interest Rate Maturity Date Balance Balance Interest Rate Maturity Date NT$ NT$ US$ Government bond $ 12,625,273 1.75%-7.75% September 2008-

September 2016 $ 6,961,599 $ 214,579 1.75%-7.75% September 2008-

March 2017 Related information of pledge is shown in Note 27. 10. HELD-TO-MATURITY FINANCIAL ASSETS December 31 2006 2007 Ending Ending Ending Balance Interest Rate Maturity Date Balance Balance Interest Rate Maturity Date NT$ NT$ US$ Government bond $ 305,878 2.500%-6.375% January 2007 -

October 2007 $ - $ - - -

Related information of pledge is shown in Note 27.

- 19 -

11. EQUITY INVESTMENTS RECOGNIZED BY THE EQUITY METHOD December 31 2006 2007 % of % of Owner- Owner- NT$ ship NT$ US$ ship Far Eastern Asset Management Co., Ltd. $ 2,699,658 100.00 $ 1,737,031 $ 53,541 100.00 Dah Chung Bills Finance Corp. 1,257,378 22.56 1,214,187 37,425 22.06 Far Eastern Life Insurance Agency Co., Ltd. 105,014 100.00 141,326 4,356 100.00 Far Eastern Alliance Asset Management Co., Ltd. 157,297 60.00 127,642 3,935 60.00 Far Eastern Property Insurance Agency Co., Ltd. 12,965 100.00 15,444 476 100.00 Far Eastern International Finance Corp. 4,192 100.00 4,159 128 100.00 Far Eastern Technical Consultants Co., Ltd. 15,555 30.00 - - - $ 4,252,059 $ 3,239,789 $ 99,861 In March 2007, the Bank sold 2,165 thousand shares of Dah Chung Bills Finance Corp. to Far Eastern Asset

Management Co., Ltd. for NT$28,448 thousand. There was no gain or loss on this sale. In September 2007, the Bank sold 1,500 thousand shares of Far Eastern Technical Consultants Co., Ltd. to

Yuan Ding Co., Ltd. for NT$16,845 thousand. There was no gain or loss on this sale. In December 2007, Far Eastern Asset Management Co., Ltd. made a capital return to the Bank. The Bank

decreased its holding in Far Eastern Asset Management Co., Ltd. by 135,000 thousand shares and the refund had not been received as of December 31, 2007.

Investment income (loss) recognized by the equity method was as follows: December 31 2006 2007 NT$ NT$ US$ Far Eastern Asset Management Co., Ltd. $ (55,764 ) $ 388,248 $ 11,967 Far Eastern Life Insurance Agency Co., Ltd. 63,254 93,478 2,881 Dah Chung Bills Finance Corp. 77,636 55,214 1,702 Far Eastern Property Insurance Agency Co., Ltd. 8,483 9,747 300 Far Eastern Technical Consultants Co., Ltd. 3,551 1,290 40 Far Eastern Alliance Asset Management Co., Ltd. (33,403 ) (29,655 ) (914 ) $ 63,757 $ 518,322 $ 15,976 The carrying value of the investments as of December 31, 2006 and 2007 and investment income (loss) in

the years then ended was based on their audited financial statements, except those of Far Eastern International Finance Corp. The Bank believes that, there is no material effect on the Bank’s financial statements.

All accounts of the subsidiaries were included in the consolidated financial statements for the years ended

December 31, 2006 and 2007.

- 20 -

12. DEBT INSTRUMENT INVESTMENTS WITH NO ACTIVE MARKET December 31 2006 2007 NT$ NT$ US$ Credit link note $ - $ 4,493,356 $ 138,500 Convertible bonds 754,964 3,872,451 119,361 Foreign government bonds - 1,592,783 49,095 Floating rate notes 330,350 221,065 6,814 1,085,314 10,179,655 313,770 Less: Accumulated impairment 162,025 264,814 8,162 $ 923,289 $ 9,914,841 $ 305,608 Since the assessment of recoverable values, the Bank recognized an impairment loss of NT$16,160

thousand and NT$153,369 thousand for the years ended December 31, 2006 and 2007, respectively. 13. OTHER FINANCIAL ASSETS December 31 2006 2007 NT$ NT$ US$ Non-accrual loans $ 155,933 $ 77,179 $ 2,379 Less: Allowance for possible losses (Note 8) 77,966 38,845 1,197 77,967 38,334 1,182 Financial assets carried at cost 103,846 103,846 3,201 Derivative instruments held for hedging 250,663 40,099 1,236 Remittance purchased 13 16 - $ 432,489 $ 182,295 $ 5,619 Financial assets carried at cost were as follows: December 31 2006 2007 % of % of Owner- Owner- NT$ ship NT$ US$ ship Domestic unquoted common stock ERA Communications Co., Ltd. $ 50,006 1.76 $ 50,006 $ 1,541 1.76 Financial Information Service Co., Ltd. 45,500 1.14 45,500 1,402 1.14 An Feng Enterprise Co., Ltd. 3,000 10.00 3,000 93 10.00 Mondex Taiwan Co., Ltd. 2,467 3.35 2,467 76 3.35 Sunshine Asset Management Co., Ltd. 2,073 3.46 2,073 64 3.46 Taipei Forex Inc. 800 0.40 800 25 0.40 $ 103,846 $ 103,846 $ 3,201 In May 2006, the Bank sold 49,708 thousand shares of Far Eastern International Leasing Corp. at NT$12.52

per share, resulting a gain of NT$96,974 thousand. In June 2006, the Bank sold 4,653 thousand shares of Cheng I Food Co., Ltd. at NT$12.50 per share,

resulting a gain of NT$11,632 thousand.

- 21 -

In June 2006, the Bank transferred its debt from ERA Communications Co., Ltd. into 501 thousand common shares of ERA Communications Co., Ltd.

In May 2006, according to the requirement of Government, the Bank exchanged its NT$207 million

nonperforming loan with 207 thousand common stock shares of Sunshine Asset Management Co., Ltd. In June 2006, Mondex Taiwan Co., Ltd. reduced its capital to offset its deficit, and the Bank recognized

investment loss of NT$3,933 thousand. 14. PROPERTIES Accumulated depreciation were as follows: December 31 2006 2007 NT$ NT$ US$ Buildings and improvements $ 315,033 $ 348,764 $ 10,750 Computer equipment 551,047 641,980 19,788 Transportation equipment 23,720 21,666 668 Miscellaneous equipment 854,616 930,910 28,693 $ 1,744,416 $ 1,943,320 $ 59,899 As of December 31, 2006 and 2007, properties were insured for NT$1,912,717 thousand and NT$1,315,950

thousand, respectively. 15. OTHER ASSETS December 31 2006 2007 NT$ NT$ US$ Collaterals assumed $ 464,961 $ 22,035 $ 679 Less: Accumulated impairment 171,335 1,700 52 293,626 20,335 627 Guarantee deposits for financial instruments agreement 781,071 3,091,493 95,290 Deferred income tax (Note 22) 1,137,012 1,543,256 47,568 Refundable deposits 505,252 682,317 21,031 Deferred charges 174,248 165,402 5,098 Prepaid expenses 117,003 134,581 4,148 Others 52,747 9,970 308 $ 3,060,959 $ 5,647,354 $ 174,070 In 2006 and 2007, the Bank recognized and reversed an impairment loss of NT$15,929 thousand and

NT$66,908 thousand for other assets, respectively.

- 22 -

16. DUE TO BANKS AND THE CENTRAL BANK December 31 2006 2007 NT$ NT$ US$ Due to banks $ 5,496,749 $ 8,972,903 $ 276,574 Call loans from banks 4,214,351 8,665,605 267,103 Due to the Central Bank 56,372 95,136 2,932 Overdraft 45,391 41,678 1,285 $ 9,812,863 $ 17,775,322 $ 547,894 17. PAYABLES December 31 2006 2007 NT$ NT$ US$ Accrued interest $ 1,465,784 $ 1,702,248 $ 52,469 Factoring 1,110,998 1,520,015 46,852 Acceptances 1,435,298 613,830 18,920 Accrued expenses 635,629 467,384 14,406 Checks for clearing 1,834,183 327,545 10,096 Collection on fund sold 190,231 133,395 4,112 Securities transaction 234,675 98,812 3,046 Others 308,176 325,020 10,018 $ 7,214,974 $ 5,188,249 $ 159,919 18. DEPOSITS AND REMITTANCES December 31 2006 2007 NT$ NT$ US$ Checking deposit $ 3,408,850 $ 2,720,292 $ 83,848 Demand deposit 18,725,826 19,533,525 602,088 Demand savings 32,135,957 31,258,705 963,496 Time savings 83,926,722 82,308,014 2,537,004 Negotiable certificates of deposit 30,477,000 28,883,000 890,269 Time deposit 97,592,865 116,595,508 3,593,857 Remittances 45,507 71,405 2,201 $ 266,312,727 $ 281,370,449 $ 8,672,763

- 23 -

19. BANK DEBENTURES December 31 2006 2007 NT$ NT$ US$ a. Bank debentures $ 30,987,120 $ 30,864,422 $ 951,343 b. Convertible bonds 600,581 571,808 17,625 $ 31,587,701 $ 31,436,230 $ 968,968 a. Bank debentures December 31 Item The Issuing Period Note 2006 2007 NT$ NT$ US$ Subordinated bank debentures - five year maturity; 1st of first issue in 2002

2002.06.28-2007.06.28 Interest payable on June 28 each year; floating interest rate plus 1.75% with associated press 90 days in secondary market

$ 2,000,000 $ - $ -

Subordinated bank debentures - five year maturity; 2nd of first issue in 2002

2002.07.31-2007.07.31 Interest payable on January 31 and July 31 each year; floating interest rate

3,000,000 - -

Senior bank debentures - five year maturity; first issue in 2003

2003.02.11-2008.02.11 Interest payable on February 11 and August 11 each year; floating interest rate at 4.6% minus 6 months’ LIBOR

2,000,000 2,000,000 61,647

Senior bank debentures - five year maturity; second issue in 2003

2003.07.18-2008.07.18 Interest payable on July 18 each year; fixed interest rate at 1.42%

1,500,000 1,500,000 46,235

Senior bank debentures - five year maturity; third issue in 2003

2003.09.05-2008.09.05 Interest payable on March 5 and September 5 each year; floating interest rate

700,000 700,000 21,575

Senior bank debentures - five year maturity; fourth issue in 2003

2003.10.17-2008.10.17 A.B.D.E.F. coupons: Interest payable quarterly; C.G.H.I. coupons: Interest payable on October 17 each year; fixed interest rate at 2.20%-2.25%

2,100,000 2,100,000 64,728

Senior bank debentures - five and half year maturity; fourth issue in 2003

2003.10.17-2009.04.17 Interest payable on April 17 and October 17 each year; floating interest rate

700,000 700,000 21,576

Senior bank debentures - five year maturity; first issue in 2004

2004.03.25-2009.03.25 A.B.C.D.E.F. coupons: Interest payable quarterly; G coupon: Interest payable half a year; floating interest rate

1,800,000 1,800,000 55,482

Senior bank debentures - five year maturity; second issue in 2004

2004.05.14-2009.05.14 Interest payable on May 14 and November 14 each year; floating interest rate

1,200,000 1,200,000 36,988

Senior bank debentures - five year maturity; third issue in 2004

2004.07.07-2009.07.07 A.B.C.D. coupons: Interest payable quarterly; floating interest rate; E.F.G.H.I.J.K. coupons: Interest payable quarterly; fixed interest rate at 2.50%-2.52%

3,000,000 3,000,000 92,470

Senior bank debentures - five year maturity; fourth issue in 2004

2004.12.22-2009.12.22 Interest payable on December 22 each year; fixed interest rate at 2.25%

3,000,000

3,000,000

92,470

Senior bank debentures - five year maturity; first issue in 2005

2005.03.30-2010.03.30 Interest payable quarterly; fixed interest rate at 2.00%-2.05%

2,000,000 2,000,000 61,647

Senior bank debentures - five year maturity; second issue in 2005

2005.04.11-2010.04.11 Interest payable quarterly; fixed interest rate at 2.09%-2.10%

1,000,000 1,000,000 30,823

Senior bank debentures - five year maturity; third issue in 2005

2005.05.05-2010.05.05 Interest payable on May 5 each year; fixed interest rate at 2.02%

2,000,000 2,000,000 61,647

(Continued)

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December 31 Item The Issuing Period Note 2006 2007 NT$ NT$ US$ Senior bank debentures - ten year maturity; fourth issue in 2005

2005.08.26-2015.08.26 Interest payable on August 26 each year; fixed interest rate at 2.30%

$ 3,000,000 $ 3,000,000 $ 92,470

Subordinated bank debentures - seven year maturity; first issue in 2006

2006.12.27-2013.12.27 Interest payable on December 27 each year; floating interest rate at plus 0.45% with Associated Press 90 days

2,000,000 2,000,000 61,647

Subordinated bank debentures - seven year maturity; first issue in 2007

2007.02.13-2014.02.13 A coupons: Interest payable on February 13 each year; floating interest rate

- 2,000,000 61,647

B coupons: Interest payable on February 13 each year; fixed interest rate at 2.55%

Subordinated bank debentures - seven year maturity; second issue in 2007

2007.03.12-2014.03.12 Interest payable on March 12 each year; floating interest rate

- 1,000,000 30,823

Subordinated bank debentures - five and half year maturity; third issue in 2007

2007.09.26-2013.03.26 Interest payable on September 26 each year; floating interest rate

-

2,000,000

61,647

Total bank debentures 31,000,000 31,000,000 955,522 Less: Unrealized valuation gain 12,880 135,578 4,179 $ 30,987,120 $ 30,864,422 $ 951,343

(Concluded) Related information of hedging is shown in Note 29. b. Convertible bonds On July 31, 2003, the Bank issued Euro convertible bonds with an aggregate face value of US$110,000

thousand. As of December 31, 2006 and 2007, the outstanding balances of these bonds were NT$600,581 thousand (US$18,425 thousand) and NT$571,808 thousand (US$17,625 thousand), respectively.

Issue terms of the convertible bonds are as follows: 1) Aggregate issue size: US$110,000 thousand (including an additional issue amounting to

US$10,000 thousand) 2) Issue denomination: US$1,000. 3) Issue price: 100% of par (the par value is also the bond issue price). 4) Issue period: Five years. 5) Coupon rate: 0% per annum. 6) Conversion securities: The bonds will be converted into newly issued common stocks of the

Bank. 7) Conversion period: Unless the bonds are previously redeemed, purchased, converted or canceled

during the closed period (as defined in the trust deed), bondholders have the right to require the Bank to redeem all or any portion of the bonds between January 27, 2004 and July 16, 2008.

- 25 -

8) Conversion price: The initial conversion price was set at NT$17.52. The conversion price is subject to adjustment based on certain terms of the related indenture. The number of common stocks to be delivered upon bond conversion will be determined by dividing the principal amount of the bonds by the conversion price at the fixed exchange rate of NT$34.404=US$1.00, the rate in effect on the conversion date. The conversion price was reset from NT$17.52 to NT$15.93 on July 17, 2005.

9) Redemption at the bondholders’ options: Bondholders have the right to require the Bank to

redeem all or any portion of the bonds in any of following situation: a) After two years from the issue date; b) If the common stocks of the Bank officially cease to be listed on the Taiwan Stock Exchange

(TSE) for a period of at least five consecutive trading days; c) There is a change of control (as defined in the trust deed, such as the changes in the majority

directors of the Bank) of the Bank. 10) Redemption at the Bank’s options: The Bank has the right to redeem all or any portion of the

bonds in any of following situation: a) Between August 15, 2005 and July 30, 2008, if the closing price (translated into U.S. dollars at

the prevailing rate) of the Bank’s common shares reaches 130% of the conversion price (translated into U.S. dollars at a pre-determined exchange rate set on the pricing date) for 30 consecutive trading days, the Bank may redeem the bonds in whole or in part at an early redemption price.

b) When over 90% of the bonds had been redeemed, bought back or converted, the Bank may

redeem the remaining bonds in whole, not in part at an early redemption price any time. c) The Bank could redeem the bonds if it were required to pay any additional amounts due to

changes in tax laws of the Republic of China. 11) Redemption method: Unless previously redeemed, purchased and canceled or converted, the bonds

would be redeemed on the maturity date at 100% of the par value. 12) Trading spot: The bonds were listed on the Luxembourg Stock Exchange. Between January 27, 2004 and December 31, 2006, bonds amounting to US$92,375 thousand had been

converted into 185,395 thousand common shares, resulting in a capital surplus of NT$1,105,887 thousand. 20. OTHER FINANCIAL LIABILITIES December 31 2006 2007 NT$ NT$ US$ Derivative instruments held for hedging (Note 30) $ 263,543 $ 175,677 $ 5,415 Appropriated loan funds 17,086 9,492 292 $ 280,629 $ 185,169 $ 5,707

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21. PENSION PLAN The Bank had set up pension plans for all regular employees according to the Labor Pension Act (the

“LPA”), which took effect on July 1, 2005 and the Labor Standards Law. Under the Labor Standards Law, the Bank recognized its pension liabilities based on the actuarial report,

and contributes an amount equal to 2% of monthly salaries and wages to a pension fund. The fund is administered by a pension fund monitoring committee and deposited in the Bank of Taiwan (the Central Trust of China merged with the Bank of Taiwan in July 2007, with the Bank of Taiwan as the survivor entity) in the committee’s name.

The pension plan under the LPA is a defined contribution plan. Based on the LPA, the Bank makes

monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Such pension costs were NT$71,530 thousand and NT$77,059 thousand for the years ended December 31, 2006 and 2007, respectively.

Other defined benefit pension information is summarized as follows: a. Net pension cost December 31 2006 2007 NT$ NT$ US$ Service cost $ 34,201 $ 28,256 $ 871 Interest cost 18,046 21,367 659 Amortization 3,792 6,077 187 Projected return on plan assets (4,168 ) (4,966 ) (153 ) Net pension cost $ 51,871 $ 50,734 $ 1,564 b. Reconciliation of funded status of the plan and accrued pension cost was as follows: December 31 2006 2007 NT$ NT$ US$ Benefit obligation Vested benefit obligation $ (16,461 ) $ (42,189 ) $ (1,300 ) Non-vested benefit obligation (496,562 ) (417,111 ) (12,857 ) Accumulated benefit obligation (513,023 ) (459,300 ) (14,157 ) Additional benefit based on futures salaries (266,745 ) (200,908 ) (6,193 ) Projected benefit obligation (779,768 ) (660,208 ) (20,350 ) Fair value of plan assets 170,128 186,277 5,742 Funded status (609,640 ) (473,931 ) (14,608 ) Unrecognized net transitional obligation 10,196 9,517 293 Unrecognized prior service cost 7,789 7,294 225 Unrecognized net loss 195,646 50,268 1,549 Accrued pension cost $ (396,009 ) $ (406,852 ) $ (12,541 ) Vested benefit $ 16,461 $ 45,192 $ 1,393

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c. Actuarial assumptions for pension obligation 2006 2007 Discount rate used in determining present values 2.75% 3.00% Future salary increase rate 2.50% 2.50% Expected rate of return on plan asset 2.75% 3.00% d. Summary of changes in the pension fund 2006 2007 NT$ NT$ US$ Balance, beginning of year $ 140,295 $ 170,128 $ 5,244 Contributions 26,080 25,711 793 Interest income 3,753 4,842 149 Payment during the year - (14,404 ) (444 ) Balance, end of year $ 170,128 $ 186,277 $ 5,742 22. INCOME TAX EXPENSE a. The reconciliation of income tax expense based on income before income tax at statutory rate and

income tax expense was as follows: 2006 2007 NT$ NT$ US$ Tax on pretax income at statutory income tax rate (25%) $ (541,793 ) $ (292,739 ) $ (9,023 ) Tax effects of offshore business unit (56,661 ) (31,412 ) (968 ) Tax effect on adjusting items: Permanent differences (100,846 ) (598,135 ) (18,436 ) Temporary differences (53,901 ) (94,620 ) (2,917 ) Loss carryforward for future 753,201 1,016,906 31,344 Current income tax payable - - - Tax separately levied on interest from short-term bills 31,539 - - Adjustments for prior years’ tax (2,066 ) 13,923 429 Current income tax expense $ 29,473 $ 13,923 $ 429 b. Income tax benefit was as follows: Current income tax expense $ 29,473 $ 13,923 $ 429 Deferred income tax expense (benefit) Temporary differences 50,164 102,351 3,155 Loss carryforwards (867,542 ) (545,628 ) (16,818 ) Investment tax credits (6,039 ) (6,631 ) (204 ) Provision for allowance of valuation loss 297,800 45,119 1,390 (525,617 ) (404,789 ) (12,477 ) Income tax benefit $ (496,144 ) $ (390,866 ) $ (12,048 ) Cumulative effect of changes in accounting principles - income tax benefit $ (571 ) $ - $ -

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c. Deferred income tax assets (calculated at 25% tax rate) was as follows: December 31 2006 2007 NT$ NT$ US$ Unused loss carryforwards $ 1,402,427 $ 1,810,555 $ 55,807 Unused investment tax credits 6,039 12,670 391 Amortization of premium on bonds investment 47,035 47,035 1,450 Provision for pension cost over limit 65,961 68,225 2,103 Unrealized loss on impairment of assets 46,571 4,162 128 Unrealized gain on derivatives (123,755 ) (184,382 ) (5,683 ) Others 234 109 3 1,444,512 1,758,374 54,199 Less: Valuation allowance 307,500 215,118 6,631 $ 1,137,012 $ 1,543,256 $ 47,568 d. Information about integrated income tax was as follows: December 31 2006 2007 NT$ NT$ US$ Period-end balance of imputation credits account $ 8,514 $ 48,332 $ 1,490 In 2006 and 2007, no creditable ratio for distribution of earnings was estimated due to a deficit status. Under the Income Tax Law, the creditable tax ratio allocated to shareholders of the Bank is based on the

balance of the imputation credits account (ICA) as of the date of dividend ex-right. There were no unappropriated earnings generated before 1998.

e. As of December 31, 2007, the Bank had unused loss carryforwards, with expiry years as follows: Unused Amount Expiry Year $ 34,576 (assessed) 2010 759,073 (assessed) 2011 1,016,906 (estimated) 2012 $ 1,810,555 f. The Bank’s income tax returns as of 2004 had been assessed by the tax authorities. For the Bank’s

income tax returns from 2000 to 2003, the tax authorities denied the premium on bond investments amounting to NT$188,139 which had been amortized and debited to interest income. The Bank appealed the authorities to reconsider their decision and recognized the effect on related accounts amounting to NT$47,035 thousand.

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23. SHAREHOLDERS’ EQUITY The Bank’s Articles of Incorporation provide that the annual net income (less accumulated losses, if any)

must be appropriated as follows: a. 30% as legal reserve; b. Special reserve at a percentage based on the relevant law or regulations; and c. Portion to be retained on the basis of operational needs. d. Any remainder: % Bonus to shareholders 92 Remuneration to directors and supervisors 2 Bonus to employees 6 100 The dividend policy of the Bank is to distribute at least 10% of the appropriated earnings as cash dividends.

This policy will be evaluated and adjusted in the future after taking into account factors such as the level of future operations and investment requirements. The Banking Law provides that cash dividends and bonuses may not exceed 15% of paid-in capital if the legal reserve has not equaled the paid-in capital.

The shareholders resolved the 2006’s appropriation of loss on June 20, 2007. After the offset of a deficit

of NT$1,670,459 thousand against the unappropriated retained earnings of NT$52,834 thousand, the remaining deficit was NT$1,617,625 thousand.

In the meetings on June 27, 2006, the shareholders approved the appropriation of the earnings in 2005 as

follows, and decided to capitalize additional paid-in capital of NT$183,126 thousand by distributing stock dividends.

2005

Earnings Dividends Per Share

Appropriation (in Dollars) NT$ NT$ Legal reserve $ 422,206 $ - Cash dividends (Note) 274,689 0.1533 Stock dividends (Note) 640,940 0.3578 Remuneration to directors and supervisors 19,905 - Bonus to employees - cash 17,914 - Bonus to employees - stock 41,801 - $ 1,417,455 $ 0.5111 Note: There were differences between the expected outstanding shares and actual outstanding shares on

the ex-dividend and ex-rights dates. The shareholders’ cash dividends and stock dividends per share in 2005 increased from NT$0.15 to NT$0.1533 and from NT$0.35 to NT$0.3578, respectively. The capital surplus per share increased from NT$0.1 to NT$0.1022.

Under the Company Law, legal reserve should be appropriated until the reserve equals the Bank’s paid-in

capital. This reserve should only be used to offset a deficit. When the reserve exceeds 50% of the Bank’s paid-in capital, the excess may be distributed as dividends and bonus; and if the Bank has no deficit, the excess portion that is over 25% of the Bank’s paid-in capital may be transferred to capital.

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Under the Integrated Income Tax System, which took effect on January 1, 1998, ROC-resident shareholders

will be allocated a tax credit for the income tax paid by the Bank on earnings generated since 1998, which is maintained in the imputation credits account (ICA). The allocation of income tax credits is based on a creditable tax ratio, which is determined on the dividend ex-right date by dividing the ICA balance by the amount of unappropriated earnings.

The Bank’s foreign shareholders are not entitled to the foregoing tax credits, except those related to 10%

income taxes on unappropriated earnings actually paid by the Bank. If dividends distributed to foreign shareholders attribute to the income with 10% income tax being paid by the Bank in prior years, the tax can be used to reduce the final withholding tax on their dividends.

Capital Surplus Under the Company Law, capital surplus can only be used to offset a deficit. However, the capital surplus

from share issue in excess of par value (including treasury stock transaction) may be capitalized by issuing stock to shareholders at the same percentage of ownership if the Bank isn’t in a deficit position. Capitalized amount is limited to a certain percentage of the Bank’s paid-in capital and once a year. Capital surplus resulting from an equity-method investee’s surplus may not be used for any purpose.

24. PERSONNEL, DEPRECIATION AND AMORTIZATION EXPENSES December 31 2006 2007 NT$ NT$ US$ Personnel expenses Salary and bonus $ 1,752,041 $ 1,706,021 $ 52,585 Insurance 128,463 131,251 4,046 Pension 123,401 127,793 3,939 Others 131,591 140,643 4,335 Subtotal $ 2,135,496 $ 2,105,708 $ 64,905 Depreciation $ 240,369 $ 238,747 $ 7,359 Amortization $ 2,010 $ 2,000 $ 62 25. BASIC LOSS PER SHARE The numerators and denominators used in calculating basic loss per share (EPS) were as follows: EPS (NT Dollars) NT$ (Numerator) Thousands Before After Before After Shares Income Income Income Tax Income Tax (Denominator) Tax Tax 2006 Basic EPS Net loss $ (2,167,174 ) $ (1,670,459 ) 1,877,883 $ (1.15 ) $ (0.89 ) 2007 Basic EPS Net loss $(1,170,957) $ (780,091 ) 1,879,044 $ (0.62 ) $ (0.42 )

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Because the Bank had a deficit in 2006 and 2007, the conversion of the convertible bonds would result in an anti-diluted EPS and hence no diluted EPS was calculated.

26. RELATED PARTY TRANSACTIONS The Bank had business transactions with the following related parties: Related Party Relationship with the Bank Far Eastern Asset Management Co., Ltd. Subsidiary Yuan Long Stainless Steel Co., Ltd. Equity-method investee Far Eastern Electronic Toll Collection Co., Ltd. Common chairman Far Eastern Textile Ltd. Common chairman Asia Cement Corporation Common chairman Far Eastern Department Store Corp. Common chairman Yuan Ding Co., Ltd. Common chairman Far Eastern Geant Ltd. Common chairman Bai Ding Investment Co., Ltd. Common chairman U-Ming Marine Transport (Singapore) Pte Ltd. Common chairman U-Ming Marine Transport Corp. Chairman of the Bank is its director Everest Corp. Chairman is second-degree relative with the chairman of

the Bank Dah Chung Bills Finance Corp. Equity-method investee Yuan Ding Leasing Co., Ltd. The Bank’s director Oriental Securities Corp. Same chairman with the major shareholder of Oriental

Securities Corp. Far Eastern General Construction Inc. Same chairman with the major shareholder of Far

Eastern General Construction Corp. Other Bank’s supervisors and managers and relatives of the

Bank’s chairman The significant transactions and account balances with the above parties (except those disclosed in other

notes) are summarized as follows: a. Call loans from banks Related Party Balance Interest Rate Interest NT$ NT$ Dah Chung Bills Finance Corp. 2006 $ 1,100,000 1.445%-1.695% $ 16,273 2007 $ 1,500,000 2.06%-2.10% $ 24,772

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b. Loans

Maximum Ending

Difference of Terms of the Transactions

with Non-related

Category Related Party and Volume Balance Balance Normal Overdue Collateral Parties NT$ NT$ NT$ 2006 Consumer loan 4 Subjects $ 4,393 $ 3,906 $ 3,906 - - None Loans for personal house mortgage

3 Subjects 25,323 23,670 23,670 - Real estate None

Others Yuan Long Stainless Steel Co., Ltd. 1,082,090 1,082,090 1,082,090 - Real estate and plant and property

Note

Asia Cement Corporation 500,000 500,000 500,000 - Listed stock Note Far Eastern Textile Ltd. 835,758 452,220 452,220 - Plant and property Note Far Eastern Geant Ltd. 150,000 150,000 150,000 - Real estate Note U-Ming Marine Transport Corp. 45,000 45,000 45,000 - Listed stock Note Everest Corp. 35,279 32,742 32,742 - Real estate Note Total $ 2,289,628 $ 2,289,628 2007 Consumer loan 2 Subjects $ 3,424 $ 2,170 $ 2,170 - - None Loans for personal house mortgage

4 Subjects 36,784 35,052 35,052 - Real estate None

Others Yuan Long Stainless Steel Co., Ltd. 1,722,858 1,722,858 1,722,858 - Real estate and plant and property

Note

Asia Cement Corporation 500,000 500,000 500,000 - Listed stock Note Far Eastern Department Store Corp. 500,000 300,000 300,000 - Listed stock Note Bai Ding Investment Co., Ltd. 275,000 115,000 115,000 - Unlisted stock Note Everest Corp. 50,000 50,000 50,000 - Listed stock Note Far Eastern Textile Ltd. 537,362 16,712 16,712 - Plant and property Note Total $ 2,741,792 $ 2,741,792 Note: Not superior than third parties. c. Guarantees

Maximum Year-end Allowance

for Related Party Balance Balance Guarantees Interest Rate Collateral NT$ NT$ NT$ 2006 Everest Corp. $ 200,000 $ 200,000 $ - 0.55% Real estate 2007 Everest Corp. $ 200,467 $ 100,467 $ - 0.55%-0.70% Real estate Yuan Long Stainless Steel Co., Ltd. 30,000 30,000

-

0.30% Real estate and plant and property

Total $ 130,467 $ - d. Letters of credit issued December 31 Related Party 2006 2007 NT$ NT$ US$ Everest Corp. $ 2,297 $ 54,893 $ 1,692 Yuan Long Stainless Steel Co., Ltd. 287,892 34,616 1,067 $ 290,189 $ 89,509 $ 2,759

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e. Bills and bonds - buy and sell Buy Sell Trading Available- Trading Available- Related Party Purposes for-sale Purposes for-sale NT$ NT$ NT$ NT$ Dah Chung Bills Finance Corp. 2006 $ 788,107 $ 2,200,074 $ 639,045 $ 1,773,524 2007 $ 398,798 $ 1,593,724 $ 149,759 $ 2,046,628 f. Derivatives financial instruments - convertible bonds for asset swap contract.

Contract Nominal Valuation

Benefit Balance Sheet Related Party Period Amount (Loss) Account Balance NT$ NT$ NT$ 2006 Dah Chung Bills Finance Corp. 2006.05.08-

2009.11.07 $ 763,000 $ (3,183 ) Financial assets at fair value through

profit or loss $ 57

Financial liabilities at fair value through profit or loss

3,240

2007 Dah Chung Bills Finance Corp. 2006.09.15-

2010.03.26 770,000 3,216 Financial assets at fair value through

profit or loss 5,308

Financial liabilities at fair value through profit or loss

2,092

g. Deposits December 31 Related Party 2006 2007 Interest Interest NT$ Rate NT$ US$ Rate U-Ming Marine Transport (Singapore)

$ 8,716,854 2%-5.8% $ 14,237,180 $ 438,837 1.75%- 5.716%

Others (each balance didn’t exceed 5% of total deposits)

15,178,864

0%-7.25% 22,899,985

705,853

0%-7.25%

Total balances $ 23,895,718 $ 37,137,165 $ 1,144,690 h. Operating expenses - rental Years Ended December 31 2006 2007 NT$ % NT$ US$ % Rental expense - Yuan Ding Co., Ltd. $ 79,093 2 $ 80,338 $ 2,476 2 Expense from providing agency service for stock affairs - Oriental Securities Corp. 9,712 - 8,988 277 - Rental expense - Far Eastern Geant Ltd. 6,268 - 6,830 211 - Rental expense - Far Eastern General Construction Inc. 692 - 424 13 - $ 95,765 2 $ 96,580 $ 2,977 2

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i. In June 2004, the Bank signed a contract with Far Eastern Asset Management Co., Ltd. (FEAMC) for

the latter to manage part of the Bank’s delinquent credit and collaterals. The Bank should pay management and service fees based on the contract. The management fee, calculated at a percentage of the credit rights balance, was paid on the contract date and amortized over the average credit recovery period. The monthly service fee is calculated at a percentage of the recovering balance of the credit. In February 2007, the Bank ended its contract with FEAMC. The transactions with FEAMC for 2006 and 2007, are summarized as follows:

Years Ended December 31 2006 2007 NT$ NT$ US$ Service fees $ 63,630 $ 17,110 $ 527 Operating expenses 14,525 908 28 December 31 2006 2007 NT$ NT$ US$ Other assets - deferred expenses $ 908 $ - $ - Accrued expenses 6,894 - - j. In January 2005, the Bank signed a contract with Far Eastern Electronic Toll Collection Co., Ltd.

(FETC) to launch a co-brand credit card in connection with the electronic toll collection system to be used on freeways. The Bank paid NT$4,520 thousand and NT$4,185 thousand in 2006 and 2007, respectively, to FETC calculated base on ETC cards issued and recorded under operating expenses.

k. Sale of nonperforming loans In July 2007, the Bank sold its unsecured nonperforming loans to Far Eastern Asset Management Co.,

Ltd. (FEAMC) for NT$438,000 thousand. The total balance of the nonperforming loans was NT$557,799 thousand, with a carrying value of NT$506,799 thousand.

In December 2006, the Bank sold its secured loans to FEAMC for NT$492,000 thousand. The total

balance and carrying value of the nonperforming loans were NT$622,863 thousand and NT$589,218 thousand, respectively. The last payment portion of NT$393,600 thousand as of December 31, 2006, was received in January 2007.

l. Sale of collaterals assumed In November 2006, the Bank sold collaterals assumed, with a carrying value of NT$422,236 thousand

to FEAMC through a public auction by NT$386,225 thousand. The last payment portion of NT$311,344 thousand as of December 31, 2006, was received in March 2007.

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27. PLEDGED ASSETS December 31 2006 2007 NT$ NT$ US$ Due from banks and the Central Bank - certificates of deposit $ 4,100,000 $ 4,700,000 $ 144,869 Available-for-sale financial assets- government bonds 116,600 181,000 5,579 Held-to-maturity financial assets- government bonds 21,500 - - $ 4,238,100 $ 4,881,000 $ 150,448 Government bonds have been pledged for the trust fund reserve deposited and the guarantee on the

provisional seizure of the debtor’s property. The certificates of deposits issued by the Central Bank have been pledged as collaterals for the intraday overdraft in the Central Bank’s real-time gross settlement system. The credit line for intraday overdraft and guarantee amounts can be changed any time.

28. SIGNIFICANT COMMITMENTS AND CONTINGENCIES In addition to Note 29, the Bank’s regular contingency liabilities and commitments as of December 31,

2007 are summarized as follows: a. Bonds with a total value of NT$1,726,186 thousand had been sold under repurchase agreements and

should be repurchased by NT$1,727,196 thousand before January 9, 2008. b. Part of the Bank’s office premises are held under operating leases (the refundable deposit amounts to

NT$67,896 thousand) and the leasing arrangements will expire between 2008 and 2016. Minimum rentals for the next five years are summarized as follows, excluding imputed interest: Year NT$ US$ 2008 $ 271,933 $ 8,382 2009 160,723 4,954 2010 134,259 4,138 2011 82,412 2,540 2012 35,768 1,102 c. Balance sheet of trust accounts and trust asset list are as follows:

Balance Sheets of Trust Accounts

2006 2007 2006 2007 Assets NT$ NT$ US$ Liabilities NT$ NT$ US$ Bank deposits $ 307,107 $ 528,627 $ 16,294 Payables $ 4 $ 292 $ 9 Short-term investments 31,272,201 41,097,709 1,266,767 Income tax payable 2 7 - Accounts receivable 152 5,296 163 Trust capital 33,442,291 46,895,603 1,445,477 Real estate, net 519,857 473,217 14,586 Reserve and deficit (1,342,980 ) (4,791,053 ) (147,676 ) Total $ 32,099,317 $ 42,104,849 $ 1,297,810 Total $ 32,099,317 $ 42,104,849 $ 1,297,810

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Income Statement of Trust Accounts

2006 2007 NT$ NT$ US$ Trust revenue

Interest $ 769 $ 3,245 $ 100 Cash dividend 732,070 1,000,954 30,853 Gains on property transactions 844,245 2,326,907 71,723 Unrealized investment gain 423,714 1,104,542 34,045

2,000,798 4,435,648 136,721 Trust expenses

Management 15,974 29,347 905 Supervisor - 181 6 Taxes 66 299 9 Service charges 10 758 23 Unrealized investment loss 47 37,349 1,151 Loss on property transactions 536 417,263 12,861

16,633 485,197 14,955 Income before tax 1,984,165 3,950,451 121,766 Income tax 23,519 22,478 693 Net income $ 1,960,646 $ 3,927,973 $ 121,073

Trust Asset List

2006 2007 Investment Portfolio NT$ NT$ US$ Bank deposits $ 307,107 $ 528,627 $ 16,294 Short-term investments

Funds 28,336,780 37,119,470 1,144,144 Bonds 10,696 10,664 329 Common stocks 2,924,725 3,967,575 122,294

Accounts receivable 152 5,296 163 Real estate, net

Land 441,325 376,850 11,616 Building 78,532 96,367 2,970

Total $ 32,099,317 $ 42,104,849 $ 1,297,810

As of December 31, 2006 and 2007, short-term investments - funds amounting to NT$409,346 thousand

and NT$422,502 thousand were investments in overseas securities through Non-Discretionary Money Trust of the Offshore Banking Unit (OBU) and recognized on the OBU’s balance sheet.

29. FINANCIAL INSTRUMENTS a. Methods and assumptions used to estimate the fair values of financial instruments were as follows: 1) The carrying amounts of the following short-term financial instruments approximate their fair value

because of their short maturities: cash and cash equivalents, due from the Central Bank and other banks, receivables excluding income tax receivables, due to the Central Bank and other banks, payables excluding income tax payables, bonds sold under repurchase agreements.

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2) The fair values of financial assets measured at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and hedging derivative financial instruments are based on their quoted prices in an active market. For those instruments with no quoted market price, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price financial instruments.

Fair values of derivative financial instruments are estimated based on the pricing system provided

by Reuters and calculated by individual contract. 3) Discounts, loans and deposits are interest-earning assets and interest-bearing liabilities. Since

most of them are floating-rate assets or liabilities, their carrying amounts approximate their fair values. The fair value of non-accrual accounts is based on their carrying amount, net of allowance for possible losses.

4) Financial assets carried at cost are investments in unquoted shares, which have no quoted prices in

an active market and entail an unreasonably high cost to determine their fair values. Thus, no fair value of these assets is presented.

b. Fair values of financial assets and liabilities based on quoted market prices or valuation techniques were

as follows: Quoted Market Prices Valuation Technique December 31 December 31 2006 2007 2006 2007 Financial assets Financial assets measured at fair value through profit or loss $ 8,579,753 $ 9,405,200 $ 2,013,494 $ 1,375,733 Available-for-sale financial assets 12,625,273 6,961,599 - - Held-to-maturity financial assets 305,493 - - - Other financial assets - hedging derivative financial instruments - - 250,663 40,099 Financial liabilities Financial liabilities measured at fair value through profit or loss - - 3,130,876 2,666,625 Other financial liabilities - hedging derivative financial instruments - - 263,543 175,677 c. In addition to the fair values of financial assets and liabilities using quoted market prices or valuation

techniques, other fair values of financial instruments were as follows: December 31 2006 2007 Carrying

Amount Estimated Fair Value

Carrying Amount

Estimated Fair Value

Financial assets Loans and discounts $ 223,152,864 $ 223,152,864 $ 223,085,628 $ 223,085,628 Bond investments with no active market 923,289 923,289 9,914,841 9,914,841 Other financial assets - financial assets carried at cost 103,846 - 103,846 - Other financial assets - remittances purchased 13 13 16 16 Other financial assets - non-accrual loans 77,967 77,967 38,334 38,334 Financial liabilities Deposits and remittances 266,312,727 266,312,727 281,370,449 281,370,449 Bank debentures 31,587,701 31,587,701 31,436,230 31,436,230 Other financial liabilities - appropriated loan funds 17,086 17,086 9,492 9,492

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d. Valuation gains arising from changes in fair value of financial instruments determined using valuation technique were NT$65,373 thousand and NT$636,827 thousand for the years ended December 31, 2006 and 2007, respectively.

e. Interest income arising from financial assets other than those measured at fair value through profit or

loss were NT$11,222,594 thousand in 2006 and NT$11,551,228 thousand in 2007. Interest expenses arising from financial liabilities other than those measured at fair value through profit or loss were NT$6,294,510 thousand in 2006 and NT$7,255,976 thousand in 2007.

f. Financial risks 1) Market risk a) Interest rate sensitivity analysis The fair values of bonds, bills, loans and other similar financial instruments the Bank engaged

in will fluctuate as market interest rates change. Following is the analysis of fluctuations of interest rate-sensitive instruments had the market interest rate increased by 1%:

Duration of Less

than One Month

Duration of One

to Three Month

Duration of over

Three to Six Month

Duration of over Six Months to One Year Total

As of December 31, 2006 NTD (in million dollars) $ (2 ) $ 172 $ (115 ) $ (105 ) $ (50 ) USD (in thousand dollars) $ 1,968 $ (742 ) $ (364 ) $ (123 ) $ 739 As of December 31, 2007 NTD (in million dollars) $ 50 $ (51 ) $ (22 ) $ (69 ) $ (92 ) USD (in thousand dollars) $ (656 ) $ (264 ) $ 190 $ 124 $ (606 ) b) Net positions on foreign currencies (in thousands dollars) December 31 2006 2007 U.S. dollars $ 35,147 $ 32,889 Yen 1,583 51,236 2) Credit risk a) Maximum credit exposure The Bank is exposed to credit risk if counter-parties or other parties default on the contracts.

To manage the risk, the Bank makes credit commitments and issues financial guarantees and standby letters of credit only after careful evaluation of customers’ creditworthiness. As of December 31, 2006 and 2007, about 70.03% and 65.87% of total loans granted, and about 32.95% and 33.41% of the aggregate guarantees were secured, respectively. Collaterals, mostly in the form of cash, marketable securities and other assets, may be required depending on the evaluation result. If the customers break the contracts, the Bank will execute its right on the collaterals to decrease its credit risk.

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The Bank’s maximum credit exposure of commitments and guarantees held by the Bank were as follows (values of collaterals were not considered):

Maximum Credit Exposure December 31 Items 2006 2007 NT$ NT$ US$ Unused portion of credit card lines $ 86,893,241 $ 99,323,854 $ 3,061,488 Financial guarantees and standby L/C 26,957,652 25,019,009 771,168 Irrevocable loan commitments 12,262,755 12,268,749 378,163 b) Significant concentration of credit risk The concentration of credit risk exists when counter-parties of financial transactions are

individuals or groups engaging in similar activities or activities in the same region. The similarity would cause their ability to meet contractual obligations affected by similar changes in economic or other conditions. To manage this risk, the Bank maintains a diversified portfolio, limits its exposure to any single geographic region, country or industry and closely monitors its exposure. The Bank’s mainly significant credit risk concentrations as of December 31, 2006 and 2007 are summarized as follows:

December 31 Credit Risk Profile by Industry Sector 2006 2007 NT$ NT$ US$ Manufacturing $ 40,253,786 $ 35,709,290 $ 1,100,678 Finance, insurance and construction 14,089,860 21,364,594 658,527 Wholesale and retail 6,769,356 7,727,168 238,177 $ 61,113,002 $ 64,801,052 $ 1,997,382 3) Liquidity risk As of December 31, 2006 and 2007, the liquidity reserve ratios were 21.62% and 29.72%,

respectively. The Bank has sufficient paid-in capital and working capital to fulfill all contract obligations. The possibility of the Bank’s derivative financial instruments not being liquidated quickly with minimal loss in value is low. Also, the Bank can enter into derivative financial contracts at reasonable market terms. Thus, the Bank does not expect significant cash flow demands to settle these contracts.

The management policy of the Bank is to match the contractual maturity profile with the interest

rates for its assets and liabilities. Because of uncertainties of transactions, however, the maturities and the interest rate can not fully match, resulting in gaps that may potentially give rise to gain or loss.

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The maturity analysis of assets and liabilities was as follows: December 31, 2006 Due Between Due within One One Year and Due After Year Seven Years Seven Years Total NT$ NT$ NT$ NT$ Assets Cash and cash equivalents $ 5,006,818 $ - $ - $ 5,006,818 Due from banks and the Central Bank 57,540,831 - - 57,540,831 Financial assets measured at fair value through profit or loss 2,035,564 8,557,683 - 10,593,247 Receivables 23,790,832 - - 23,790,832 Loans and discounts 59,999,771 51,375,247 113,885,776 225,260,794 Available-for-sale financial assets - 4,941,633 7,683,640 12,625,273 Held-to-maturity financial assets 305,878 - - 305,878 Bond investments with no active market 95,186 990,128 - 1,085,314 Other financial assets 19,068 331,412 56,129 406,609 148,793,948 66,196,103 121,625,545 336,615,596 Liabilities Due to banks and the Central Bank 9,812,863 - - 9,812,863 Financial liabilities measured at fair value through profit or loss 1,400,112 1,730,764 - 3,130,876 Bonds sold under repurchase agreements 5,118,156 - - 5,118,156 Payables 7,214,974 - - 7,214,974 Deposits and remittances 255,482,158 10,830,569 - 266,312,727 Bank debentures 2,976,989 23,554,583 5,056,129 31,587,701 Other financial liabilities 42,066 238,563 - 280,629 282,047,318 36,354,479 5,056,129 323,457,926 $ (133,253,370 ) $ 29,841,624 $ 116,569,416 $ 13,157,670 December 31, 2007 Due Between Due within One One Year and Due After Year Seven Years Seven Years Total NT$ NT$ NT$ NT$ Assets Cash and cash equivalents $ 2,496,964 $ - $ - $ 2,496,964 Due from banks and the Central Bank 73,725,173 - - 73,725,173 Financial assets measured at fair value through profit or loss 1,712,970 9,067,963 - 10,780,933 Receivables 21,544,445 - - 21,544,445 Loans and discounts 64,763,159 54,292,696 106,698,169 225,754,024 Available-for-sale financial assets 1,598,060 3,479,476 1,884,063 6,961,599 Bond investments with no active market 2,528,858 7,650,797 - 10,179,655 Other financial assets 98,793 18,501 - 117,294 168,468,422 74,509,433 108,582,232 351,560,087 Liabilities Due to banks and the Central Bank 17,775,322 - - 17,775,322 Financial liabilities measured at fair value through profit or loss 1,095,807 1,570,818 - 2,666,625 Bonds sold under repurchase agreements 1,726,186 - - 1,726,186 Payables 5,188,249 - - 5,188,249 Deposits and remittances 272,672,707 8,697,742 - 281,370,449 Bank debentures 6,859,672 21,623,755 2,952,803 31,436,230 Other financial liabilities 41,327 96,645 47,197 185,169 305,359,270 31,988,960 3,000,000 340,348,230 $ (136,890,848 ) $ 42,520,473 $ 105,582,232 $ 11,211,857

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4) Cash flow risk of the interest rate change Cash flow risk is the risk to future cash flows of interest-earning assets and interest-bearing

liabilities caused by interest rate fluctuations. The Bank uses interest rate swap contracts to manage the risk.

The following maturity analysis of interest earning assets and interest bearing liabilities is based on

the remaining maturity period from the balance sheet date to maturity dates specified under agreements or, if there are no specified maturity dates, to expected dates of collection.

December 31, 2006 Due Between

One Month and Due Between Three Months

Due Between Six Months and Due After

Three Months and Six Months One Year One Year Total NT$ NT$ NT$ NT$ NT$ Assets Cash - deposit in other banks $ 1,432,977 $ - $ - $ - $ 1,432,977 Due from banks and the Central Bank 52,219,259 2,300,000 - - 54,519,259 Financial assets measured at fair value through profit or loss 444,248 17,545 35,160 8,490,106 8,987,059 Receivables 3,388,594 4,534,772 - 8,679,420 16,602,786 Loans and discounts (not including non - accrual loans) 127,911,394 94,112,959 179,955 6,755 222,211,063 Available-for-sale financial assets - - - 12,625,273 12,625,273 Held-to-maturity financial assets 50,051 - 255,827 - 305,878 Bond investments with no active market 10,186 80,000 5,000 990,128 1,085,314 Other financial assets - remittances purchased 13 - - - 13 Other assets - Guarantee deposits for financial instruments agreement 781,071 - - - 781,071 186,237,793 101,045,276 475,942 30,791,682 318,550,693 Liabilities Due to banks and the Central Bank 4,259,742 296,749 5,000,000 200,000 9,756,491 Bonds sold under repurchase agreements 5,118,156 - - - 5,118,156 Deposits and remittances 140,292,264 76,180,896 43,412,536 2,972,674 262,858,370 Bank debentures 13,700,000 700,000 - 16,600,000 31,000,000 Other financial liabilities - - - 17,086 17,086 163,370,162 77,177,645 48,412,536 19,789,760 308,750,103 Net liquidity gap $ 22,867,631 $ 23,867,631 $ (47,936,594 ) $ 11,001,922 $ 9,800,590 December 31, 2007 Due Between

One Month and Due Between Three Months

Due Between Six Months and Due After

Three Months and Six Months One Year One Year Total NT$ NT$ NT$ NT$ NT$ Assets Cash - deposit in other banks $ 533,822 $ - $ - $ - $ 533,822 Due from banks and the Central Bank 54,864,989 11,000,000 1,100,000 - 66,964,989 Financial assets measured at fair value through profit or loss 7,163 61,038 10,800 8,683,611 8,762,612 Receivables 3,106,645 3,592,199 - 7,427,424 14,126,268 Loans and discounts (not including non - accrual loans) 128,250,113 92,860,635 1,240 249,900 221,361,888 Available-for-sale financial assets - - 1,598,059 5,363,540 6,961,599 Bond investments with no active market - 144,886 2,059,542 7,975,227 10,179,655 Other financial assets - remittances purchased 16 - - - 16 Other assets - Guarantee deposits for financial instruments agreement 3,091,493 - - - 3,091,493 189,854,241 107,658,758 4,769,641 29,699,702 331,982,342 Liabilities Due to banks and the Central Bank 14,907,284 272,903 - 2,500,000 17,680,187 Bonds sold under repurchase agreements 1,726,186 - - - 1,726,186 Deposits and remittances 170,159,731 74,069,193 31,501,227 2,848,601 278,578,752 Bank debentures 13,000,000 700,000 3,600,000 13,700,000 31,000,000 Other financial liabilities 9,492 - - - 9,492 199,802,693 75,042,096 35,101,227 19,048,601 328,994,617 Net liquidity gap $ (9,948,452 ) $ 32,616,662 $ (30,331,586 ) $ 10,651,101 $ 2,987,725

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g. Fair value hedges The fair value of bank debentures issued by the Bank were exposed to the risk on interest rate

fluctuations. The Bank used interest rate swap contracts to hedge the risk. The terms of the interest rate swap contracts were as follows:

December 31, 2006 Nominal Hedged Items Hedging Instruments Amount Fair Value NT$ NT$ Bank debentures Interest rate swap contracts $ 23,500,000 $ (12,880 ) December 31, 2007 Nominal Hedged Items Hedging Instruments Amount Fair Value NT$ NT$ Bank debentures Interest rate swap contracts $ 21,200,000 $ (135,578 ) 30. MAJOR RISKS AND RISK MANAGEMENT STRATEGIES One of the features of the Bank’s organization and culture is their risk management orientation. The Bank

also uses various internal and external qualitative and quantitative performance measurements in planning its operating strategies.

The Bank has an independent risk management department, which manages and monitors risks. Under this

department there are Corporate Banking and Consumer Banking Teams to directly manage risk with regard to corporate banking, financial markets, as well as consumer banking and credit card business groups. Before presenting for review and evaluation, each business group’s lending guidelines, process, method, new product development, authorization, and etc. should be first reviewed by the Risk Management Dept. so as to achieve centralized control.

The Bank’s risk management includes credit risk management, market risk management, and operating risk

management, as follows: a. Credit risk management: The Bank has set the lines of authority for credit risk assessment. The authorized managers may

approve or reject credit applications within the limits of their authority and job functions. Credit applications with higher amounts should be first reviewed by the Credit Committee and the suggestion of the committee will be for reference to the authorized managers. The Bank has also set appropriate industry and business groups limits to diversify risk.

b. Market risk management: The Bank enters into financial derivative transactions for hedging. The main purpose of these

transactions is to have offset exposure position and thus minimize market and liquidity risk. Under the Bank’s “Authorization Guidelines for the Trading Room Business,” the Bank has set clear trading limits including position and stop-loss limits for treasury and traders to maintain the risk level within the Bank’s acceptable range.

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c. Operating risk management: To strengthen the Bank’s internal controls in order to prevent fraudulent activities, all units have

established “Self-Auditing” procedures. The internal audit department also does periodically general auditing and special auditing. In addition, the Bank has established a “Compliance Officer System” to ensure that the risk management policy is thoroughly implemented throughout the Bank.

31. CAPITAL ADEQUACY RATIO a. December 31, 2006

December 31, 2006 NT$ Net eligible capital 21,160,796 Total risk-weighted assets 238,091,170 Capital adequacy ratio 8.89% Ratio of tier 1 capital to risk-weighted assets 8.29% Ratio of tier 2 capital to risk-weighted assets 1.17% Ratio of tier 3 capital to risk-weighted assets - Ratio of common shareholders’ equity to total assets 5.75%

Note: Capital adequacy ratio = Eligible capital/Risk-based assets. Under the Banking Law and

related regulations issued by the Financial Supervisory Commission, Executive Yuan, the capital adequacy ratio should be computed on June 30 and December 31.

b. December 31, 2007

The Bank Consolidation NT$ NT$ Tier 1 capital 18,202,357 19,286,458 Tier 2 capital 4,156,151 5,155,157 Tier 3 capital - -

Eligible capital

Eligible capital 22,358,508 24,441,615 Standardised approach 229,431,001 232,636,286 Internal rating-based approach - - Credit risk Synthetic securitization - - Basic indicator approach 16,323,900 17,060,350 Standardised approach/alternative standardized approach - -

Operational risk

Advanced measurement approach - - Standardised approach 10,600,125 10,600,350 Market risk Internal models approach - -

Risk-weighted assets

Total risk-weighted assets 256,355,026 260,296,986 Capital adequacy ratio 8.72% 9.39% Ratio of tier 1 capital to risk-weighted assets 7.10% 7.41% Ratio of tier 2 capital to risk-weighted assets 1.62% 1.98% Ratio of tier 3 capital to risk-weighted assets - - Ratio of common shareholders’ equity to total assets 5.22% 5.20%

Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the

Capital Adequacy Ratio of Banks” and “Explanation of Methods for Calculating the Eligible Capital and Risk-weighted Assets of Banks”.

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Note 2: Formulas used were as follows: 1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital. 2) Total risk-weighted assets = Risk-weighted assets for credit risk + (Capital requirements

for operational risk and market risk) × 12.5. 3) Capital adequacy ratio = Eligible capital/Total risk-weighted assets. 4) Ratio of tier 1 capital to risk-weighted assets = Tier 1 capital/Total risk-weighted assets. 5) Ratio of tier 2 capital to risk-weighted assets = Tier 2 capital/Total risk-weighted assets. 6) Ratio of tier 3 capital to risk-weighted assets = Tier 3 capital/Total risk-weighted assets. 7) Ratio of common stock to total assets = common stock/Total assets. 32. AVERAGE AMOUNT AND AVERAGE INTEREST RATE OF INTEREST-EARNING ASSETS

AND INTEREST-BEARING LIABILITIES For the Year Ended For the Year Ended December 31, 2006 December 31, 2007 Average Average Average Average Balance Rate (%) Balance Rate (%) NT$ NT$ Interest-earning assets Cash and cash equivalents - deposit in other banks $ 1,343,454 2.15 $ 988,852 3.45 Due from banks and the Central Bank 34,106,822 2.07 54,775,102 2.27 Financial assets measured at fair value through profit or loss - government bonds 413,169 2.01 168,475 2.02 Notes and bonds purchased under resell agreements 257,390 1.49 - - Receivables - credit card revolving balances 16,418,468 13.56 11,431,195 12.16 Loans and discounts 219,927,988 3.82 231,675,916 3.68 Available-for-sale financial assets 6,412,249 2.04 8,771,541 1.92 Held-to-maturity financial assets 426,941 2.80 194,104 1.61 Bond investments with no active market 589,493 0.67 3,183,966 5.58 Interest-bearing liabilities Due to banks 13,803,856 3.54 8,996,920 2.43 Bonds sold under repurchase agreements 4,079,576 1.49 2,285,794 1.80 Demand deposit 49,059,921 0.73 50,235,543 0.72 Time deposit 174,262,214 2.24 191,357,508 2.61 Negotiable certificates of deposit 17,982,852 1.62 32,476,768 1.98 Bank debentures 29,026,882 1.85 31,813,159 1.85 Convertible Bonds payable 603,157 - 582,805 - The above average balances were calculated by the daily average of interest-earning assets and interest

bearing liabilities.

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33. ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES a. Loans assets quality December 31, 2006

Project/Date December 31, 2006

Amount Nonperforming

Loans Ratio (Note 3)

NT$ NT$ Nonperforming loans - Class A $ 3,744,764 1.663% Nonperforming loans - Class B 1,062,505 0.471% Total nonperforming loans 4,807,269 2.134% Amount of executed contracts on debts restructured not reported as

nonperforming loans 2,786,958 Amount of executed contracts on debts restructured not reported as

nonperforming receivables 4,062,402 Note 1: Nonperforming loans represent the amounts of nonperforming loans reported to the authorities

and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrued Loans”

Note 2: The definition of nonperforming loans - Class A and Class B are filled in accordance with

letter No. 0941000251 dated April 19, 2005. Note 3: The amounts of executed contracts on debts restructured that are not reported as

nonperforming loans or receivables are disclosed in accordance with letter No. 0951001270 dated April 25, 2006 of the Financial Supervisory Commission under the Executive Yuan.

December 31, 2007

Date December 31, 2007

Nonperforming Loans (Note 1) Loans

Ratio of Nonperforming Loans (Note 2)

Allowance for Possible Losses

Coverage Ratio

(Note 3) Business

NT$ NT$ NT$ Secured 986,281 35,866,044 2.75% 193,018 19.57% Corporate

Banking Unsecured 2,147,272 58,174,543 3.69% 1,571,078 73.17% Housing Mortgage (Note 4) 1,240,566 103,916,327 1.19% 318,490 25.67% Cash Card - - - - - Small Scale Credit Loan (Note 5) 1,065,280 16,776,111 6.35% 557,832 52.36%

Secured 62,197 8,923,996 0.70% 21,853 35.14%

Consumer Banking

Others (Note 6) Unsecured 29,496 2,097,003 1.41% 6,125 20.77% Total 5,531,092 225,754,024 2.45% 2,668,396 48.24%

Nonperforming

Receivables Accounts

Receivable

Ratio of Nonperforming

Receivables

Allowance for Possible Losses

Coverage Ratio

NT$ NT$ NT$ Credit Card 350,304 13,503,084 2.59% 191,029 54.53% Accounts Receivable Factored Without Recourse (Note 7) - 3,491,245 - 3,819 -

Note 1: Nonperforming loans represent the amounts of nonperforming loans reported to the authorities

and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrued Loans,” which took effect from July 1, 2005.

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Nonperforming credit cards receivables represent the amounts of nonperforming receivables reported to the authorities and disclosed to the public, as required by the Banking Bureau’s letter dated July 6, 2005 (Ref. No. 0944000378).

Note 2: Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loan balance. Ratio of nonperforming credit cards receivables: Nonperforming credit cards receivables ÷

Outstanding credit cards receivables balance. Note 3: Coverage ratio of loans: Allowance for possible losses for loans ÷ Nonperforming loans. Coverage ratio of credit cards receivables: Allowance for possible losses for credit cards

receivables ÷ Nonperforming credit cards receivables. Note 4: Housing mortgage is fully secured by the housing, which is purchased (owned) by the

borrower the spouse or the minor children of the borrowers and the rights on mortgage have been set to the finance institution, for the purpose of purchasing or decorating housing.

Note 5: Small scale credit loans, applied to the Banking Bureau’s letter dated December 19, 2005 (Ref.

No. 09440010950), are unsecured loans with small amounts exclusive of credit cards and cash cards.

Note 6: Other loans of consumers banking refer to secured or unsecured loans exclusive of housing

mortgage, cash card, small scale credit loans and credit card. Note 7: Required by the Banking Bureau’s letter dated July 19, 2005 (Ref. No. 0945000494), factoring

without recourse is disclosed as nonperforming receivables in three months after the factors or insurance companies reject indemnification.

b. Concentration of credit extensions December 31, 2007

Ranking (Note 1) Group Enterprise (Note 2)

Total Balances of Credit Extensions

(Note 3) NT$

Ratio of Credit Extensions to Net

Worth (%)

1 FAR EASTERN $3,823,854 20% 2 MOSEL 3,094,476 16% 3 SKFH 2,803,649 15% 4 USI 2,645,825 14% 5 CHINATRUST 2,420,759 13% 6 AUO 2,412,400 13% 7 YFY 2,270,680 12% 8 CHIMEI 2,053,807 11% 9 CEC 1,966,305 10%

10 WALSIN LIHWA 1,885,962 10% Note 1: The list of the Top 10 group enterprises was based on the total balances of credit extensions.

Government and state-owned enterprises have been excluded from the list. Note 2: “Group Enterprise” conforms to the definition of Article 6 in “Supplementary Provisions to the

Taiwan Stock Exchange Corporation Rules for Review of Securities Listings.”

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Note 3: Credit balance includes each item of loan (overdrafts, discounts, all kinds of loans, etc.), factoring, acceptance note receivables and guarantees.

c. Interest rate sensitivity Table 1

Interest Rate Sensitivity Analysis (in NTD thousand)

December 31, 2006

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year

Over One Year Total

Interest rate-sensitive assets $ 154,917,224 $ 97,830,002 $ 300,826 $ 30,000,159 $ 283,048,211 Interest rate-sensitive liabilities 134,794,391 62,486,946 45,263,552 19,789,759 262,334,648 Interest rate sensitivity gap 20,122,833 35,343,056 (44,962,726 ) 10,210,400 20,713,563 Net worth 19,023,110 Ratio of interest rate-sensitive assets to liabilities 107.90% Ratio of the interest-rate sensitivity gap to net worth 108.89%

December 31, 2007

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year

Over One Year Total

Interest rate-sensitive assets $ 162,785,679 $ 103,213,281 $ 2,755,099 $ 21,564,132 $ 290,318,191 Interest rate-sensitive liabilities 172,598,940 58,460,365 31,090,745 19,048,601 281,198,651 Interest rate sensitivity gap (9,813,261) 44,752,916 (28,335,646 ) 2,515,531 9,119,540 Net worth 18,725,963 Ratio of interest rate-sensitive assets to liabilities 103.24% Ratio of the interest-rate sensitivity gap to net worth 48.70%

Table 2

Interest Rate Sensitivity of Analysis (in USD thousand) December 31, 2006

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year

Over One Year Total

Interest rate-sensitive assets $ 984,105 $ 80,074 $ - $ 24,087 $ 1,088,266 Interest rate-sensitive liabilities 737,502 392,619 86,365 - 1,216,486 Interest rate sensitivity gap 246,603 (312,545 ) (86,365 ) 24,087 (128,220 ) Net worth 7,130 Ratio of interest rate-sensitive assets to liabilities 89.46% Ratio of the interest rate sensitivity gap to net worth (1,798.32% )

December 31, 2007

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year

Over One Year Total

Interest rate-sensitive assets $ 830,911 $ 128,731 $ 72,095 $ 234,424 $ 1,266,161 Interest rate-sensitive liabilities 752,038 482,399 111,554 - 1,345,991 Interest rate sensitivity gap 78,873 (353,668 ) (39,459 ) 234,424 (79,830 ) Net worth (57 ) Ratio of interest rate-sensitive assets to liabilities 94.07% Ratio of the interest rate sensitivity gap to net worth 140,052.63%

Note 1: Table 1 refers only to the New Taiwan dollar amounts held by the head office, local and

oversea branches (i.e., excluding foreign currencies). Note 2: Table 2 refers to the total U.S. dollar amounts held by the head office, local branches, OBU

and oversea branches, excluding contingent assets and liabilities. Note 3: Interest rate-sensitive assets and liabilities refer to interest-earning assets and interest-bearing

liabilities that would be affected by interest rate changes.

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Note 4: Interest rate sensitivity gap = Interest rate-sensitive assets － Interest rate-sensitive liabilities. Note 5: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest

rate-sensitive liabilities. d. Profitability

Items December 31, 2006

December 31, 2007

Before tax (0.67%) (0.33%) Return on total assets After tax (0.51%) (0.22%) Before tax (10.44%) (6.07%) Return on equity After tax (8.05%) (4.04%)

Net income ratio (20.46%) (9.88%) Note 1: Return on total assets = Income before (after) income tax/Average total assets. Note 2: Return on equity = Income before (after) income tax/Average equity. Note 3: Net income ratio = Income after income tax/Total net revenues. Note 4: Income before (after) income tax is the amounts of income accumulated from January to

December. e. Maturity analysis of assets and liabilities 1) New Taiwan dollar (thousand)

December 31, 2006

Amount for Remaining Period to Maturity

Total 1 to 30 Days From 31 Days

to 90 Days From 91 Days

to 180 Days From 181 Days

to 1 Year Over 1 Year

Main capital inflow on maturity $ 306,201,813 $ 58,745,384 $ 22,128,363 $ 11,378,095 $ 9,692,196 $ 204,257,775

Main capital outflow on maturity 273,865,646 78,987,652 31,803,719 34,438,626 85,887,221 42,748,428

Gap 32,336,167 (20,242,268 ) (9,675,356 ) (23,060,531 ) (76,195,025 ) 161,509,347

December 31, 2007

Amount for Remaining Period to Maturity Total

1 to 30 Days From 31 Days to 90 Days

From 91 Days to 180 Days

From 181 Days to 1 Year Over 1 Year

Main capital inflow on maturity $ 334,056,078 $ 80,750,323 $ 20,375,757 $ 21,498,345 $ 14,719,622 $ 196,712,031

Main capital outflow on maturity 330,670,878 64,385,121 48,254,993 39,928,729 84,305,764 93,796,271

Gap 3,385,200 16,365,202 (27,879,236 ) (18,430,384 ) (69,586,142 ) 102,915,760 Note: This table includes only the NT dollar amounts held by the head office and domestic

branches.

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2) U.S. dollar (thousand)

December 31, 2006

Amount for Remaining Period to Maturity Total 1 to 30 Days From 31 Days

to 90 Days From 91 Days

to 180 Days From 181 Days

to 1 Year Over 1 Year

Main capital inflow on maturity $ 1,145,096 $ 641,611 $ 158,137 $ 94,903 $ 59,007 $ 191,438

Main capital outflow on maturity 1,330,558 825,051 126,619 184,791 86,939 107,158

Gap (185,462 ) (183,440 ) 31,518 (89,888 ) (27,932 ) 84,280

December 31, 2007

Amount for Remaining Period to Maturity Total 1 to 30 Days From 31 Days

to 90 Days From 91 Days

to 180 Days From 181 Days

to 1 Year Over 1 Year

Main capital inflow on maturity $ 2,393,795 $ 865,330 $ 401,147 $ 314,680 $ 343,660 $ 468,978

Main capital outflow on maturity 2,392,800 1,204,361 400,753 332,655 240,853 214,178

Gap 995 (339,031) 394 (17,975 ) 102,807 254,800

Note: This table includes only the total U.S. dollar amounts held by the head office, domestic

branches and OBU. 34. ADDITIONAL DISCLOSURES a. Following are the additional disclosures required by the Securities and Futures Bureau for the Bank and

its investees: 1) Financings provided: None 2) Endorsement/guarantee provided: None 3) Marketable securities held: Table 1 (attached) 4) Marketable securities acquired and disposed of at cost or prices at least NT$300 million or 10% of

the paid-in capital: Table 2 (attached) 5)Acquisition of individual real estate at costs of at least NT$300 million or 10% of the paid-in capital:

None 6) Disposal of individual real estate at price of at least NT$300 million or 10% of the paid-in capital:

Table 3 (attached) 7) Service charge discounts on transactions with related parties in aggregated amount of at least NT$5

million: None 8)Receivables from related parties amounting to at least NT$300 million or 10% of the paid-in capital:

Table 4 (attached) 9) Sales of non-performing loans: Table 5 (attached) 10) Related information of investees on which the Bank exercises significant influence: Table 6

(attached) 11) Derivative transactions: Notes 6 and 29.

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b. Investments in Mainland China 1) Names of the investees in Mainland China, main businesses and products, paid-in capital, method of

investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China: None

2) Significant direct or indirect transactions with the investees, prices and terms of payment,

unrealized gain or loss: None

- 51 -

TABLE 1 FAR EASTERN INTERNATIONAL BANK AND INVESTEES MARKETABLE SECURITIES HELD DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

December 31, 2007

Holding Company Marketable Securities Type and Issuer Security Issuer’s

Relationship with Holding Company

Financial Statement Account Shares/Units (in Thousands)

Carrying Amount

Percentage of Ownership

Market Value or Net Asset

Value

Note

Far Eastern Asset Common stock Management Co., Ltd. Yuan Long Stainless Steel Co., Ltd. Equity-method investee Equity investment recognized by the equity

method $ 98,000 $ 1,514,523 49.00 $ 1,514,523 Note

Dah Chung Bills Finance Corp. Equity-method investee Equity investment recognized by the equity method

2,165 27,591 0.50 27,592 Note

Note: Net asset value was based on the investees’ audited financial statements for the same reporting period as that of the Bank.

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TABLE 2 FAR EASTERN INTERNATIONAL BANK AND INVESTEES MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COST OR PRICES AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Beginning Balance Acquisition Disposal Ending Balance

Holding Company Marketable Securities Type and Issuer

Financial Statement Account Counter-party Shares/

Units (in Thousands)

Amount Shares/

Units (in Thousands)

Amount Shares/

Units (in Thousands)

Amount Carrying Amount

Gain (Loss) on Disposal

Shares/ Units (in

Thousands) Amount

Common stock Far Eastern Asset Management

Co., Ltd. Dragon Steel Co., Ltd. Financial assets carried

at cost Yun Hong Investment Co., Ltd. 51,500 $ 613,281 - $ - 51,500 $ 798,250 $ 613,281 $ 182,574

(Note 1) - $ -

Yuan Long Stamless Steel Co., Ltd.

Equity investment recognized by the equity method

Asia Cement Corporation 200,000 3,259,751 - - 102,000 1,938,000 1,575,541 (Note 3)

356,645 (Note 2)

98,000 1,514,523 (Note 3)

Note 1: Net of tax payable of NT$2,395 thousand. Note 2: Net of tax payable of NT$5,814 thousand. Note 3: The amount included investment income recognized under the equity method for the year ended 2007.

- 53 -

TABLE 3 FAR EASTERN INTERNATIONAL BANK DISPOSAL OF INDIVIDUAL REAL ESTATE AT PRICE OF AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Company Name Type of Property Transaction Date

Original Acquisition

Date

Carrying Amount

Transaction Amount Proceeds Collection Status Gain (Loss)

on Disposal Counter-party Nature of Relationship Purpose of Disposal Price Reference Other

Terms

Far Eastern International Collaterals assumed Bank Co., Ltd. Land 2007.06.29 2003.06.27 $ 333,922

(Note) $ 330,352 2007.06.29 $ 33,035 $ (3,570 ) China Steel Chemical Corp. None Disposal of collaterals

assumed Appraisal report issued by professional organization

-

Note: Carrying value was stated at cost of NT$436,649 thousand less accumulated impairment of NT$102,727 thousand.

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TABLE 4 FAR EASTERN INTERNATIONAL BANK AND INVESTEES RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE PAID-IN CAPITAL DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Overdue Company Name Related Party Nature of Relationship Ending Balance Turnover Rate Amount Action Taken Amounts Received in Subsequent Year

Allowance for Bad Debt

Far Eastern International Bank Far Eastern Asset Management Co., Ltd. Subsidiary $1,350,000 - $ - - 2008.02.27

$1,350,000 (Note 11)

$ -

Far Eastern Asset Management Co., Ltd. Asia Cement Corporation Common Chairman 1,292,000 - - - 2008.02.25

$1,292,000 -

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TABLE 5 FAR EASTERN INTERNATIONAL BANK AND INVESTEES SALES OF NONPERFORMING LOANS YEAR ENDED DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name Transaction Date Counter-party Composition of Loan Carrying Amount Price Gain (Loss) on Disposal Other Terms Nature of Relationship

Far Eastern International Bank 2007.06.15 Dayspring Investments Ltd. (Singapore) Loans $ 93,122 $ 67,931 $ (25,191 ) None None Far Eastern International Bank 2007.07.30 Far Eastern Asset Management Co., Ltd. Loans 506,799 438,000 (68,799 ) Note 2 Subsidiary (Note 26) Far Eastern Asset Management Co., Ltd. 2007.08.31 Chen Han Construction Co., Ltd. Debt receivable purchased 237,702 331,623 93,921 None None Note 1: Carrying value was stated at initial amount less allowance for loans loss. Note 2: Far Eastern Asset Management Co., Ltd. (FEAMC) has an agreement with the Bank. If the claim amount is less than the selling price, the Bank will assume the loss of FEAMC. On the other hand, FEAMC should return the gain on

the claim to the Bank.

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TABLE 6 FAR EASTERN INTERNATIONAL BANK AND INVESTEES RELATED INFORMATION OF INVESTEES DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Consolidated Investment Total

Investee Company Location Main Businesses and Products

Percentage of

Ownership (%)

Carrying Amount Investment Income (Loss) Recognized Shares (in

Thousands) Shares (Pro forma) Shares (in Thousands)

Percentage of

Ownership (%)

Note

Financial business Far Eastern Alliance Asset Management Co.,

Ltd. 7F, No. 207 Dun Hwa South Road, Sec. 2,

Taipei, Taiwan Securities investment trust funds 60.00 $ 127,642 $ (29,655 ) 18,000 - 18,000 60.00 Note 1

Far Eastern Life Insurance Agency Co., Ltd. 2F, No. 38 Roosevelt Road, Sec. 1, Taipei,

Taiwan Life insurance agent 100.00 141,326 93,478 1,415 - 1,415 100.00 Note 1

Far Eastern Property Insurance Agency Co., Ltd. 6F-3, No. 189 Yan Ping South Road, Taipei,

Taiwan Property insurance agent 100.00 15,444 9,747 350 - 350 100.00 Note 1

Dah Chung Bills Finance Corp. 12F, No. 116 Nanking East Road, Sec. 2,

Taipei, Taiwan Underwriting, dealing and brokering of

short-term bills 22.06 1,214,187 55,214 97,689 - 97,689 22.57 Note 1

Far Eastern Asset Management Co., Ltd. 4F-1, No. 267 Dun Hwa South Road, Sec. 2,

Taipei, Taiwan Purchase, evaluation, auction and

management of creditor’s rights of financial institutions

100.00 1,737,031 388,248 120,000 - 120,000 100.00 Note 1

Far Eastern International Finance Corp. 11F., Lippo Leighton Tower, Room

A,103-109, Leighton Road Causeway Bay, HK

Asset management and investments 100.00 4,159 - 77,000 - 77,000 100.00 Note 2

Taipei Foreign Exchange Agency Co., Ltd. 8F., No. 400, Bade Road, Sec. 2, Taipei,

Taiwan Foreign exchange, cross - currency swap and

etc. 0.40 800 - 80 - 80 0.40

Sunshine Asset Management Co., Ltd. 15F., No. 218, Dun Hwa South Road, Sec.

2, Taipei, Taiwan Management of creditor’s rights, commercial

detective services 3.46 2,073 - 207 - 207 3.46

Financial Information Service Co., Ltd. No. 81, Kangning Road, Sec. 3, Taipei,

Taiwan Data processing service, electronic

information supply 1.14 45,500 - 4,550 - 4,550 1.14

Mondex Taiwan Co., Ltd. 9F., No. 333, Fusing North Road, Taipei,

Taiwan Electronics system service, data arrangement 3.35 2,467 - 197 - 197 3.35

Non-financial business An Feng Enterprise Co., Ltd. 3F., No. 139, Jhengjhou Road, Taipei,

Taiwan Cleanness, replacement and repairment of

ATM 10.00 3,000 - 300 - 300 10.00

ERA Communications Co., Ltd. 2F., No. 39, Rueihu Road, Taipei, Taiwan Knowledge industry.

Ex: TV show, news, broadcast 1.76 50,006 - 2,238 - 2,238 1.76

Note 1: The investment income (loss) was based on the investees’ audited financial statements for the same period as that of the Bank. Note 2: The investment income (loss) was based on the investees’ unaudited financial statements for the same period as that of the Bank.