merged into t aipei fubon commercial bank on january 1, 2005...tel ：（ 886 ） 2 6602 7500 e mail...

TAIPEIBANK and Fubon Commercial Bank have been officially

merged into Taipei Fubon Commercial Bank on January 1, 2005.

1. Spokesperson Name：TienHsia Chang Title：Chief Financial Officer Tel：（886）266027500 Email：[email protected]

Acting Spokesperson Name：Jeff Chu Title：：Senior VP,Planning Dept. Tel：（886）266027501 Email：[email protected]

2. Contact Information – Corporate Headquarters and Branches Please see page 22

3. Stock Registration Agent Name：Fubon Securities Co., Ltd. Address：2F,17, Hsuchang St.,Taipei, Taiwan, R.O.C. Website：www.fbs.com.tw Tel：（886）223810131

4. Credit Rating Institution Name Address Tel

Taiwan Ratings Corporation

49F. Taipei 101 Tower, No.7, Sec. 5, Xinyi Rd., Taipei city 110, Taiwan (R.O.C.)

(886)28722 5800

Standard & Poor’s Ratings Service

36F., Edinburgh Tower, The Landmark, 15 Queen’s Rd, Central Hong Kong

85225333523

Moody’s Investors Service

Room 1813,18F., No. 333, Sec.1, Keelung Rd., Taipei City 110, Taiwan (R.O.C.)

(886)22757 7125

5. Certified Public Accountants for Fiscal Year 2007 CPAs：Jessie Wu, Ray Chang Company：Deloitte & Touche Address：12F., No. 156, Sec. 3, Minsheng E. Rd., Taipei City 105, Taiwan (R.O.C.) Website：www.deloitte.com.tw Tel：（886）225459988

6. Exchange Houses where Overseas Securities are Listed：None

7. Website：www.taipeifubon.com.tw

CONTENTS

I. Message to Shareholders 1

II. Corporate Profile 4 1. Introduction 4 2. Organizational Structure 6

III. Business Operations 9 1. Business Information 9 2. Business Strategies and Business Plans for 2008 14 3. Research & Development Plans 18 4. Employees Profile 18

IV. Special Notes 19 1. Dividend Policy and Implementation Status 19 2.Implementation of the Internal Controls System 20

V. Headquarters and Branches 23

Appendix：Annual Financial Reports for 2007 and 2006

30

1

I.Message to Shareholders he year 2007 was beset by upheavals such as the U.S. subprime mortgage crisis and

recordsetting oil and rawmaterial prices that shook the growth of the global economy,

whose health was somewhat maintained by the often reported steady, robust economies

in China and India. A relative success story, Taiwan achieved a remarkable growth of 5.46% in

the year, as both export and import values hit record highs. In addition, despite the fluctuations of

the stock market and the steppedup pressure of stagflation, overall profits of domestic enterprises

grew and employment increased, which, along with governmental stimulus measures, enabled

private consumption and investments to advance 2.93% and 5.07%, respectively.

Capitalizing on the abundant resources of the Fubon Financial Holding Co. (FFH), the bank

performed well with crossselling, product and service innovation, and joint marketing. In terms

of corporate banking and with the strategy of actively soliciting major corporate clients, the Bank

extended NT$109.2 billion in domestic syndicated loans, achieving a market share of 12.37%,

ranking first place. Outstanding corporate loans stood at NT$324.5 billion at the end of 2007, up

24.18% from a year earlier; while wealthmanagement fee income jumped 83% to NT$6.6 billion

in the year, boosting the share of overall net management fee income to total net income to

27.18%, up 3.19 percentage points. With the credit and cash card debts storm gradually subsiding,

the bank took aggressive credit cardissuance and promotional strategies, issuing 100,000 new

credit cards to boost the card consumption total by 5% in 2007. Thanks to the active cooperation

with real estate agencies and other realty firms, the Bank’s extension of new mortgage loans grew

8.86%, helping to strengthen its business expansion and get out of the shadow of the credit and

cash card debts storm.

Backed by its successful experience in issuing the national publicwelfare lottery, the Bank again

won the exclusive franchise to issue the “sports lottery” amid harsh competition. Besides helping

the bank to diversify its business, the Bank’s winning the sports lottery franchise also can help the

firm to generate revenues to fund various charities, including subsidizing the annuity program,

reserves for the national healthinsurance program, and job creation programs for the

underprivileged.

The Bank’s board of directors approved the adoption of the “copresident” system on Nov. 28,

2007, and further approved by Financial Supervisory Commission on Jan. 15, 2008;

therefore,Chaoyang Kao, and Jerry Harn, both senior executive vice president, were promoted to

the president, with Kao serving as the president of retail banking, in charge of the “consumer

T

2

banking group” and the “financial services group”, and Harn as the president for institutional

banking, responsible for the “corporate banking group”, the “financial markets group” and the

“government banking”. The Bank is confident that better performance will be reached through the

mutual cooperation of the copresidents.

The Bank carefully controls its asset quality while pursuing business growth and profits. With its

nonperforming loan (NPL) ratios and coverage ratios reaching the outstanding levels of 1.19%

and 67.32%, respectively, the bank succeeds in strengthening its business and development.

Owing to satisfactory business performance and asset quality, Taiwan Ratings Corp. announced

on November 13, 2007 that it maintained the bank’s longterm rating of “twAA+”,shortterm

rating of “twA1+”, and future outlook of “stable”,reflecting the bank’s superior profitmaking

ability and asset quality.

Looking ahead in 2008, under the spreading effect of the subprime mortgage crisis and the

pressure of stagflation, the global economic growth may slow somewhat. Local banks will face

strong competition from various international financial institutions in the wake of theiracquiring

domestic banks. Amid the rigorous financial market situation, the bank will focus on the

improvement of various business flows and the establishment of performanceoriented

management system, with the aim of pushing various businesses, developing new products,

deepening client relationship, enhancing service quality, expanding business scale, strengthening

international competitiveness, and fully manifesting crossselling function and integration

synergy via cooperation with other subsidiaries of the financial holding firm. Moreover, The Bank

will attempt to make the most of the emerging business opportunities in Greater China, in addition

to exploring the Chinese market by working with the Fubon Bank ( Hong Kong), aiming to

position itself as the firstclass financial institution in Asia. With the continued support and care

from our shareholders, board directors/supervisors, and clients, the Bank will spare no efforst to

better its performance and contribute more to Fubon Financial Holding, so as to live up to its

obligations to its shareholders and as an upstanding corporate member of society.

The Bank’s 2007 business report, 2008 business plan, and the latest credit ratings report are summarized as follows:

1. Business Report for 2007 The bank’s outstanding deposits balance amounted to NT$816,152 million at the end of December 2007, 5.21% more than the previous year while the outstanding loans balance reached NT$662,359 million, up 7.17%. However, the bank raked in net interest income of NT$17,181 million in 2007, down 3.69%, with net fee income leaping 17.54% to NT$7,268

3

million and total net income advancing 3.75% to NT$26,741 million. Baddebt expense plunged 31.47% to NT$10,302 million and operating expense grew 6.36% to NT$12,389 million. Aftertax net profit hit NT$3,353 million, or NT$0.85 per share, for largescale increase of NT$2,914 million over the previous year.

2. Summary of Business Plan for 2008

(A)Corporate Banking Business: Actively tap the Greater Chinese market, offer clients segmented and differentiated services, and strengthen customer relationship management.

(B) Consumer Banking Business: Consistently monitor the returns on different product lines, and further develop new functions and added value of existing products, and adjust the strategies of customer segments, pricing, and loans accordingly so as to fit in with market changes.

(C) CreditCard Business: Put segmented marketing into practice, analyze customers of each segment so as to effectively differentiate market, and launch various marketing activities timely according to market changes, so as to stimulate clients’ consumption potential and enhance bank’s profitability.

(D)Wealth Management Business: Provide diversified wealthmanagement products to satisfy the needs of various clients for allround wealthmanagement services, and strengthen the overall training for servicing manners, so as to upgrade service quality.

(E) Financial Market Business: Actively develop new financial products, adopt flexible trading strategy, and develop into regional financial trading center.

(F) Government Treasury Business: Expand the scope of governmenttreasury business, extend financialbusiness opportunities, simplify business flow, cut down operating costs, and enhance the addedvalue of governmenttreasury business.

(G)Sports Lottery Business: Achieve the primary goal of “ontime launch and stable operation” for the sportslottery business in the first year.

3. Credit Rating

Rating Date

Credit Rating Institution

Longterm Credit Ratings

Shortterm Credit Ratings

Credit Worthiness

Outlook

09/05/2007 Moody’s A2 P1 C Stable

13/11/2007 Taiwan Ratings Corporation

twAA+ twA1+ Stable

13/11/2007 S&P A A2 C+ Stable

4

II. Corporate Profile 1.Introduction

（1）Establishment Date and Basis：

TAIPEIBANK was established on Apr. 21, 1969 by Ministry of Finance Order (57) Tsai

Tzu No. 7864

（2）History

n TAIPEIBANK was established in coordination with national financial policy on Apr.

21, 1969 with capital provided by the the Taipei City Government, to regulate local

finances, support municipal construction, and act as agent for the municipal treasury.

Its name at that time was “City Bank of Taipei,” and its business territory was limited

to the city. Since at the time of its establishmen, was a financial institution owned by

the city government and did not have the status of a corporation, the bank was

reorganized as a company limited by shares on July 1, 1984.

n On Jan. 1, 1993, the Bank’s name was changed to TAIPEIBANK Co., Ltd. in line with

the establishment of its corporate identity system. With the government’s

implementation of financial liberalization, the following year TAIPEIBANK

expanded its business operations outside The City for the first time with the

establishment of the Kaohsiung Branch. On Jan. 20, 1995 permission was granted for

a change from a regional bank to a national bank and for expansion of the business

territory to the entire country. In 1997, in line with the policy of privatization of

government banks, shares were offered for subscription by employees and the general

public; this resulted in a further capital increase of NT$2 billion through cash

injection. TAIPEIBANK shares were formally listed on the Taiwan Stock Exchange

on July 23, 1997. To carry through with the policy of privatization of government

enterprises, the Bank's main shareholder, the The City Government, released shares on

5

Nov. 30, 1999 and actively solicited buyers for them. As a result, the Bank was

formally reorganized as a private enterprise. TAIPEIBANK became a subsidiary of

the Fubon Financial Holding Co（Fubon FHC）. on Dec. 23, 2002 in order that

longterm development, at the same time, the bank stopped all trades in the Taiwan

Stock Exchange.

n The Bank began operating under the Fubon FHC umbrella on December 23, 2002. At

the beginning it has maintained operations alongside Fubon Commercial Bank as an

independent entity. However, in order to preserve the brand position and strengths of

both parties, as well as minimizing potential repercussions, Fubon FHC then decide to

merge two banks through actively integration of information systems, workflow ,

organization and staff.

n After two years of intensive preparation, TAIPEIBANK and Fubon Commercial Bank

were officially merged into Taipei Fubon Commercial Bank on Jan. 1, 2005. The

integration of two banks marked the first and only successful fullscale merger of

operations between a large governmentowned bank and an accomplished private

bank in Taiwan. The move will not only help Fubon FHC expand its earnings

potential but also achieve a milestone in Taiwan financial merge history.

n The bank completed merger with Fubon Bills Finance, a 100%owned subsidiary of

the bank, on December 25, 2006, to achieve synergy between the bank and financial

holding firm, integrating bankingrelated businesses under the financial holding firm,

and reducing overlapping billsrelated business between the bank and Fubon Bills

Finance.

6

2.Organizational Structure (1) ORGANIZATION

7

（2）Board Members and Supervisors

Title Name Representing Organization

Background & Education Date Elected

Term

Chairman Daniel Tsai Fubon Financial Holding Co.

Chairman, Fubon Insurance Graduate School of Law , University of Georgetown

02/10/06 3 yrs

Vice Chairman

Richard Tsai Fubon Financial Holding Co.

Chairman, Fubon Securities Graduate School of Finance, New York University

02/10/06 3 yrs

Director Jerry Harn Fubon Financial Holding Co.

Executive VP,Chinatrust Commercial Bank MBA ,The Ohio State University

02/10/06 3 yrs

Director ChaoYang Kao Fubon Financial Holding Co.

Manager, Taiwan SmallMedium Commercial Bank Law Department, National Taiwan University

02/10/06 3 yrs

Director Peihua Liang Fubon Financial Holding Co.

Vice President, Far Eastern International Bank Instructor, Dept. of Industrial Engineering, Chung Yuan Christian University Graduate Institute of Operations research, Case Western Reserve University

11/23/06 Till the expiration of the current term

Director SuGin Huang Fubon Financial Holding Co.

Deputy Commissioner, Dept. of Finance, Taipei City Government National Taichung Junior Commercial College

02/10/06 3 yrs

Director HoMou Wu Fubon Financial Holding Co.

Professor,Dept. of International Business,Economics, National Taiwan University Ph.D., Stanford University

02/10/06 3 yrs

Director JuWei Zeng Fubon Financial Holding Co

Perfessor & Chairperson, Dept. of Public Finance ,National Chengchi University Ph .D.,Oklahoma State University

02/10/06 3 yrs

Director Tien Hsia Chang Fubon Financial Holding Co.

Graduate Institute of Finance, National Taiwan University

02/10/06 3 yrs

Director KungLiang Yeh Fubon Financial Holding Co.

Chairman, Fubon Securities Executive Vice President, Grand Cathay Securities Graduate Institute of Finance (EMBA), National Taiwan University


Director David Chang Fubon Financial Holding Co.

President, Fubon Securities Head of Investment Banking and Branch Manager of Goldman Sachs(Asia) L.L.C.Taipei MBA, Columbia University


Director Michael Yong Fubon Financial

Senior Adviser / Financial Market Group, Bank SinoPac

08/07/07 Till the expiration

8

Title Name Representing Organization

Background & Education Date Elected

Term

Holding Co. Executive Director and Head of Options desk Hong Kong Bachelor in Electrical Engineering, National University of Singapore

of the current term

Director Patrick Chang Fubon Financial Holding Co.

Senior Vice President, The Hongkong and Shanghai Banking Corporation MBA,The University of Chicago


Director Victor Kung Fubon Financial Holding Co.

President, Fubon Financial Holding . Executive Vice President, Walden International Investment Group MA－Economics Graduate School of Arts and Science, New York University MBA－Finance Stern School, New York University


Director John Kuang Fubon Financial Holding Co.

CoHead of Wholesale banking / Head of Global Markets, Standard Chartered Bank, Taipei President / Fixed Income Division, Polaris Securities B.S in International Trade from the Business Administration Dept., National Taiwan Universtity


Supervisor Yophy Huang Fubon Financial Holding Co.

Associate professor,National Taipei College of Business Ph.D., Economics , Indiana University

02/10/06 3 yrs

Supervisor BangRen Liu Fubon Financial Holding Co.

Executive Vice President, TaipeiFubon Commercial Bank B.S in Dept.of Accountancy & Statistics, National Cheng Kung University


Supervisor RueyChang Hu Fubon Financial Holding Co.

Executive Vice President, Fubon Commercial Bank. B.S in Dept. of Business, National Taiwan University

02/10/06 3 yrs

（3） Major Shareholder of Major Institutional Shareholder

Institutional Shareholders Major Shareholder of Major Institutional Shareholder

Fubon Financial Holding Company Taipei City Government、Ming Tong Co.、Dao ying Co.

9

III. Business Operations 1. Business Information （1）Breakdown of Total Revenues

Unit：﹪

Note： WMB：Wealth Management Business LB ：Loans Business CCB ：Credit Card Business OB ：Others Business

（2）Business Performance

Wealth Management

♦ With allround assets allocation as its main business appeal, the bank focused on the installation of core assets for longterm investments and the pushing of Systematic Investment Plan(SIP) in mutualfund and centralized custodian businesses in 2007, enabling it to score phenomenal growth in overseas mutualfund sale and custodian funds.

♦ In centralized custodian business, the bank offered three centralized custodian accounts consisting of nine investment packages with different levels of risks for priority pushing in 2007, so as to highlight the importance of assets allocation.

♦ Owing to the longterm cultivationof wealthmanagement business, dedication to pushing the concept of core investments, continuous ascension of global stock markets to new highs, and the introduction of innovative derivatives, the Bank achieved phenomenal growth in selling overseas structured notes in 2007, with those linking up with overseas mutualfund investment portfolio boasting the largest growth. The growth of the structured notes underscores the effort of the

30.71

19.51

42.4 42.31

9.97

16.1 16.92

22.08

0

10

20

30

40

50

2007 30.71 42.4 9.97 16.92

2006 19.51 42.31 16.1 22.08

WMB LB CCB OB

10

bank to push assets allocation and the business spirit highlighting investment products with diversified risks.

♦ The bank’s total deposits hit NT$816.1 billion at the end of 2007, up 5.21% over a year earlier. The growth is attributed to the various deposit projects and was achieved amid major capital outflow in Taiwan, caused by hectic overseas investment activities and the wide interest spread between the N.T. dollar and the U.S. dollar.

Consumer Banking ♦ The consumerbanking business group has consolidated its business strength and

laid a solid growth foundation, along with the improvement in product innovation and enhancement in service quality after one year of adjustment in 2007 , as a result, it has beengradually walking out of the shadow of the consumerbanking storm and ready to capture the the recovering consumerbanking market.

♦ In order to alleviate the repayment burden of clients following the continuous interest hikes by the Central Bank of the Republic of China, the bank rolled out “Fubon UChoice MortgageSinglestep Interest Rate program,” it fixes the spread added to the base index rate for the length of the mortgage, which enables clients to save on interest payment in the long run. In addition, in order to tap quality housingloan clients by better utilizing the bank’s vast client pool, the bank offered the bank’s wealthmanagement clients “fortunemaking housing mortgage program,” to augment services for existing clients. Thanks to the hectic realty trading and aggressiveness of the bank in tapping business opportunities, the outstanding housing mortgage of the bank grew 8.86% in 2007. For unsecured loans, the bank focused on the employees of our corporate clients and salarytransfer accounts, via the pushing of salesmen and databasebased marketing, so as to expand the scale of unsecured loan assets. The bank also rolled out “interiordécor loan program” for housingloan clients, as well as “salarybased unsecured loans” for young clients.

♦ Despite the largescale contraction of the creditcard market resulting from the impact of the creditcard storm, the bank racked up relatively good performance in creditcard business, not only in the launch of various new products but also in common consumption and installmentrepayment consumption. The bank’s card spending value hit NT$119.6 billion in 2007, including consumption amount which grew 4.9%, higher than the market average of 2.4%. Monthly percard consumption reached NT$4,377, much higher than the market average of NT$3,369, underscoring the high contribution of card holders but also their strong consumption power. In the future, the bank will continue analyzing the value of clients in various segments, so as to launchvarious marketing activities timely to stimulate clients’ consumption potential and enhance the bank’s profitmaking capability.

♦ In 2007, the bank presented avariety ofnew products todifferent customer segments basing on their purchasing preference, whichsuccessfully carved out the niche markets and effectively raised the overall cards issued. Thesenew products are listed below

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Issuance month

Kinds of credit cards Service contents

Jan. Cobrand card with Dream Mall

Providing people in southern Taiwan with best financial instrument for leisure and shopping, as well as acquiringbank service, so as to increase fee income.

Feb. 「Mobile PayPass」 Launch of “Mobile PayPass,” in cooperation with Taiwan Mobile and MasterCard.

Combining the functions of credit card and mobile phone, ushering in the new current of mobilepayment service.

July World Card Providing quality golfing and aviation services, to meet the demands of toplevel client groups.

August Issuance of “Taipei City affinity EASYCARD”, in cooperation with Taipei City government

Servicing quality public functionaries and satisfying the related needs of the public.

Nov. Business Card For businessmen who travel frequently around Greater China.

Nov. “Miffy Cobrand EASYCARD”

Providing the cutest/most popular cobrand EASYCARD on the market.

Corporate Banking

♦ To demonstrate a brand new look and scale for its operation, Fubon Financial Holding launched the “Project One” program on Jan. 1, 2006, carrying out organizational restructuring and reengineering for the corporate banking business under the principle of “one firm, one goal, and one team.” After one year of effort, the management synergy has been gradually manifested.

♦ To boost its profitmaking capability, the bank carried out a number of new product development programs, including postdated check factoring for emerging enterprises, financing for commercial properties, dividend paying, tierrate foreigncurrency deposits, Fubon business network, electronic L/C (letter of credit) issuance for China Steel, electronic negotiation for Taiwan Formosa Plastics, insurancebased factoring, and cooperative platform for PRC factoring. For the sake of strengthening the quality of loan assets, the bank installed “creditrisk model and creditrating mechanism,” “advanced corporatebanking creditextension examination system,” “database for industrial investigative reports,” and “mortgage management system.” In addition, in order to enhance overall operating efficacy, the bank successively consolidated forex operatingcenter branches, centralized international currency conversion and remittance operations, installed marketing management system, and revised various contracts and documents.

♦ The bank was approved by the Vietnamese government on Oct. 19, 2007 to set up a branch in Ho Chi Minh City, aiming to better serve Taiwanese businesses in the country.

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♦ Major Changes for Corporate Banking Business in 2007

Unit：$100 M. Business items 2007 2006 Change

value Change (%)

Market shares

Volume of L/C issuance for import (US$)

25.36 21.16 4.20 19.86﹪ Market share rose to 3.47%, from 3.12%, ranking 10 th place, up one notch

Volume of negotiation for export L/C (US$)

17.12 14.97 2.15 14.33﹪ Market share advanced to 2.6%, up from 2.54%, ranking eighth place, up one notch

Volume of factoring and invoice assignment operations (NT$)

1,898 492 1,406 285.77﹪ Market share jumped to 9.6%, up from 2.99%, ranking fifth place, up one notch

Volume of domestic syndicated loans (NT$)

1,092 916 176 19.23﹪ Market share advanced to 12.37%, up from 9.78%, ranking first place, up two notches

Average loans (NT$) 3,245 2,613 632 24.18﹪ _ Net interest income (NT$) 68.80 57.15 11.65 20.38﹪ _ Net fee income (NT$) 11.11 10.23 0.88 8.60﹪ _ Total net income (NT$) 89.16 74.80 14.36 19.21﹪ _

Treasury

♦ NTdollar interest rates picked up on the CBC’s intensified effort in sterilized intervention, leading to increased market fluctuation at the same time. In order to enhance operating performance and profitmaking capability, the bank actively reviewed and analyzed operating strategy, major economic indicators, and possible market happenings in setting trading positions, which was supplemented with transactions in spread and bond options to decrease risk and cost. Major profit sources for fixedyield NTdollar investment businesses include interest differential of yielding transactions for bonds and capital gains from bond transactions. As profits from conditioned bond transactions are determined by the stability of client sources and the interest levels of transactions with repurchase agreement, effort must be made to increase client sources and reduce fund costs, so as to obtain stable income from the interest differential of yielding transactions for bonds.

♦ As the NTdollar yieldrate curve flattens, profits from interest differential shrink, necessitating the effort to raise the ratio of capital gains and increase income from offering bondlinked deposits to corporate clients. With the U.S. dollar interest rates having dropped from peak level due to the subprime mortgage crisis, plus rise in fund cost, interest differential of U.S. dollar investment position shrank. As a result, the income of foreigncurrency fixedyield investment business mainly came from the interest differential of structured products.

♦ Regarding FX transactions, in addition to the enhanced share of brokerage income, the bank endeavored to raise the share of trading profit at certain risk by grasping the trend of exchangerate swings, as well as simplify operating flow and integrate trading systems, so as to effectively cut operating costs and human errors.

♦ For bond option and bondlinked deposit, the bank will disintegrate related

13

products and engage in such transactions from the role of a market maker, while focusing on transactions in such derivatives as interest cap, floor, and swap options and structured IRD (interest rate derivatives).

♦ In view of the huge influence of interestrate hedging positions on the interestrate derivatives market, owing to the growing prevalence of transactions in interestrate options, the bank took part in the option market, so as to closely monitor the market status and tap business opportunities.

♦ The bank will engage in riskhedging trading for convertible bonds in an even more open and active manner, following the opening up of trading in riskhedging instruments by the regulator. Meanwhile, further increase in lowerrisk fee income from convertible bonds is expected to lower the profit risks related to convertible bonds.

Trust

♦ Along with increasing realty transactions, the need for shareholding transfer for corporate mergers, and enhanced trading security for virtual channels, the bank actively pushed tradingsecurity trust business in 2007 to strengthen the mutual trust of trading parties, manage transactionrelated cash flow, and assure the obtaining of properties/objects by the buyers. Tradingsecurity trust involves the custody of specific documents, contracts, money, securities, or other assets basing on the requirements of individual cases,, which will be handed over to specific parties following the fulfillment of specific conditions.

♦ In 2007, the bank successfully completed a number of cases via cooperation between the trust department and financing units, in addition to planning and carrying out according to the needs of individual cases, money trust for major land transactions and trust for shareholding transfer among major shareholders. The bank will endeavor to increase the undertaking of tradingsecurity trust business, as well as formulate tailormade trust contracts to meet the diversified needs of clients.

Government Treasury Services

♦ In addition to its own business units, the bank has entrusted 33 peers in establishing 846 outlets for the surrogate collection of various taxes and fees in Taipei city. Meanwhile, for further enhancing the quality of governmenttreasury services, the bank entrusted convenience stores for surrogate fee collection for various public units of Taipei city, including Neihu Vocational High School, Taipei City Public Functionaries Training Center, Taipei City Market Administration Office, the Department of Urban Development, and the Department of Environmental Protection. Meanwhile, the bank carried out eoperation for surrogate collection entrusted with peers, including Mega Bank, First Bank, Chang Hua Bank, Hwatai Bank, and First Capital Commercial Bank. In addition, it simplified operating flow for the surrogate fee collection for Taipei city utilities, added various online services, and continued promoting barcode documents and file transmission among government units and schools in the city, in the hope of providing citizens convenient governmenttreasury services and saving on manpower, resources, and expenses.

♦ To diversify financing sources for the government, in addition to various project loans associated with the government’s policy, the bank offered various loans to

14

finance the Taipei city government’s major construction projects, as well as actively took part in open biddings or negotiations for providing loans to municipal governments and centralgovernment agencies, via the governmenttreasury channel and the experience of surrogate feecollection for Taipei city government, so as to expand the scale of the bank’s governmentloan business.

Lottery

♦ Designated by the Ministry of Finance (MOF) as the issuing institution for the publicwelfare lottery (MOF, No. 90736803, April 25, 2001), the bank operated the lottery from 2001 through 2006, which was then taken over by Chinatrust Holding Co., Ltd. for another sevenyear franchise from Jan. 1, 2007.

♦ Sports Lottery ：Based on the designation of the MOF (MOF, No. 09603514142, Oct. 2, 2007), TaipeiFubon Bank was approved to issue the sports lottery, with the franchise scheduled to expire at the end of December 2013.

2. Business Strategies and Business Plans for 2008 （1）Business Strategies

♦ Enhance corporate and consumerbanking lending. ♦ Tap wealthmanagement business potential. ♦ Enhance profit margin for financial operations. ♦ Boost various servicefee revenue. ♦ Realize various cost savings. ♦ Maximize operating efficiency. ♦ Optimize risk management. ♦ Upgrade cooperation with Fubon Bank (Hong Kong) to tap greaterChinese market.

（2）Business Plans

Wealth Management

♦ Offer customized structured products, in response to investment trend and the needs of clients.

♦ Enhance the competitiveness of the bank’s wealthmanagement structured products and strengthen product design and service quality, so as to augment customer satisfaction and the bank’s market share.

♦ Reinforce ebank information service for structured products.

♦ Enhance the business share of mutual fundlinked structured products and the share of products featuring continuous yields.

♦ Launch dollaraveraging business for collective management accounts.

♦ Promote mutualfund preferential programs via online channel.

♦ Strengthen the function of wealthmanagement planning system, assist wealth management specialists offering clients investment products tailored to their risk

15

taking capability and wealthmanagement goals and carrying out on their own initiative the evaluation and monitoring of the nature of investment targets, so as to help clients control risks.

♦ In line with the establishment of private banking, and after obtaining the approval of the regulator to introduce private equity funds, alternative investment product division proposed tocooperate with Fubon Asset Management and offshore mutualfund companies to provide more choices to highassets clients in the fulfillment of of their investment portfolio.

♦ Consolidate the data concerning sales of the mutual funds offered by the bank, according to investment types and categories, client types, and etc., so as tooffer relevant information from different angles for use in analysis and marketing.

♦ Upgrade the bank’s status in the automated financial service market via effectively enhancing service quality and expanding branch network, aiming to be the foremost brand.

♦ Establish and promote ecommerce, so as to enhance customer satisfaction.

♦ Following the formulation of qualityservice operation manual and the introduction of customerreception technology and politeness training via the assistance of Taiwan User Friendly Services and Technologies Co., Ltd., the bank entrusts the latter again this year to carry out the plan for further enhancing the service quality, with the major goal of developing “a bank with touching services,” in the hope of strengthening the customer satisfaction and theirloyalty to the bank via the effective utilization of group activities so as to create even higher service value.

♦ Continue to promote singlepremium products, especially investmenttype insurance contracts, and enhance the business share of installmentpayment products so as to increase continuous insurance income. In addition, improve the expertise and service capability of wealthmanagement specialists, and utilize professional systems to analyze client needs, so as to provide clients with plans, including insurance policies, home protection, educational funds, and retirement.

♦ Provide diversified savings products to solicit new depositors and plan various savings marketing programs, so as to increase savings.

♦ Actively promote salarytransfer business to increase the bank’s quality clients.

♦ Encourage youngsters to build money saving habit and wealthmanagement concept by offering colored passbooks as birthday gifts.

Consumer Banking ♦ Consistently monitor the returns onproduct lines, and develop new product

functions and addedvalue , in addition to timely adjusting client, pricing, and creditextension strategies so as tofit in with market changes accordingly—aiming to attract potential clients and retain existing ones.

♦ Take advantage of the financial platform of Fubon Financial Holding and expand asset scale via product packaging and client referral.

♦ Achieve diversification of business sources via expansion and management of real

16

and virtual channels.

♦ Utilize scientific riskmanagement mechanism to effectively control assets quality and strengthen debtcollection efficacy.

♦ Further develop the potential held within the existing client groups of Fubon Financial Holding by analyzing exiting database and organizing phonemarketing teams, and further tap quality clients by offering attractive programs to expand the scale of assets.

♦ Put segmented marketing into practice, develop segmentedmarket products by utilizing database, and effectively explore new clients, and enhance contribution from existing clients.

♦ Enhance the benefits for topnotch card and businesscard holders, so as to attract quality clients and effectively carry out market segmentation.

♦ Develop and enhance handlingfee revenue and overall profit sources.

♦ Set up client credit evaluation and consumerbehavior analyzing system, review creditevaluation principle and product pricing to properly adjust according to market changes—aiming to enhance creditevaluation quality and develop precise product marketing strategies.

♦ Strengthen management of creditcard assets, actively clear bad debts by outsourcing debtcollection, and adjust program for utilization of debtcollection vehicles and debtcollection strategy according to peer practices and debt negotiation mechanisms promoted by the government.

Corporate Banking

♦ Offer clients segmented, differentiated services according to client orientation and strengthen customer relationship management.

♦ Actively tap the greater Chinese market.

♦ Boost the share of fee income and nonlending income so as to adjust the income structure.

♦ Reinforce business transaction and foreigntrade financing so as to lower creditextension risk and improve assets structure.

♦ Push regional eplatform business, expand cashmanagement business, and enhance client loyalty.

♦ Continue carrying out channel integration and augment operating efficiency and personnel training, so as to enhance the economy of scale for assets and personnel productivity, andelevate overall management efficacy and business performance.

♦ Continue improving the effectiveness and performance of the newly developed risk model and rating system according to the result of trial use.

♦ Continue improving the system, norm, and operating procedure of credit extension, and actively improve staff expertise.

17

Treasury

♦ Financial marketing a. Strive for dealings with major foreign investors and hedgefund managers via

cooperation with FINI (foreign institutional investors).

b. Enhance the capability of marketing staffers to promote highmargin products via internal training or recruitment of experienced talents.

♦ Trading a. Further enhance traders’ quotation and negotiation skills to increase profits. b. Cultivate derivatives talents and gradually develop inhouse R&D capability

for structured interestrate products.

♦ Investment a. Diversify the client structure for bonds with repurchase agreement so as to

expand fund sources and cut fund cost. b. Strengthen asset allocation and look for optimal investment portfolio so as to

achieve steady investment returns.

♦ Develop Hong Kong trading platform a. Develop the Hong Kong trading office into a regional center and strive to

fully tap the business opportunities in Greater China in compliance with related laws and regulations.

b. Attract domestic and foreign talents, capitalizing on Hong Kong’s advantageous status as a regional financial center.

Trust

♦ Promote trusts for constructionfinancing, MRT (mass rapid transit) system jointdevelopment, urbanrenewal, with various collaterals, and nonperforming loans.

♦ Promote trusts for corporate assets management, money, securities, realty, publicwelfare, employeewelfare, and pensionfund.

♦ Promote REITs and AssetBacked Securities.

Government Treasury Services

♦ Expand business scope for governmenttreasury business to broaden financial business opportunities.

♦ Expand tax and fee collection services via convenience stores to raise the bank’s servicefee income.

♦ Simplify business flow and cut operating costs to enhance addedvalue for governmenttreasury business.

18

3.Research ＆ Development Plans （1）R&D Expenditure in the Last Two Years

Item Unit 2007 2006 R＆D Expenditure NT$1,000 5,000

（2）Research and Development Plan In order to reinforce corporatebanking risk management capability, the bank has spent NT$5 million since 2007 instituting a defaultprobability risk model, so as to effectively differentiate the various riskinclination or degrees of risk within clients, and enhance riskmanagement capability via the use of precise information in creditextension screening, creditextension price setting, creditline management, and investmentportfolio management. As of the end of March 2008, the Bank had completed TCRI (Taiwan Corporate Credit Risk Index) for listed companies, and is studying the institution of similar model for companies without having gone public.

4. Employees Profile

Year 2006 2007 As on February 29,2008

Staff 5,908 6,067 6,190

Workers 132 125 127 Number of employees

Total 6,040 6,192 6,317

Average age (years) 33.03 33.36 34.33

Average seniority（years） 7.29 6.95 6.91

Graduate or higher 8.18％ 9.79％ 9.71％

College/University 81.31％ 80.67％ 79.45％

Senior high school 10.07％ 9.14％ 9.47％ Education level

Below senior high 0.44％ 0.40％ 1.37％

19

IV. Special Notes

1.Dividend Policy and Implementation Status （1）Dividend Policy

♦ After yearly budget settlements, aftertax profits, if they exist, will be first used to make up deficits from the previous year, with 30% of the balance being set aside for legal reserves. Of the remainder, less than 5% will be appropriated as employee bonuses, while the remainder will be incorporated into the accumulated retained earnings of past years. The board of directors will then make a proposal for payout of dividends, which will be submitted to the shareholders’ meeting for final ratification.

♦ Measures for the bonus payout will be formulated by the board of directors.

♦ Before legal reserves equal paidin capital and when the capital/riskbased assets ratio meets the requirements of the Banking Law, the ceiling for the payout of cash earnings should comply with the stipulations of the Banking Law and the requirements of the regulator.

（2）Implementation Status

In 2007, the board of directors resolved the appropriation of the 2006 Cash dividends as follows:

Total Cash dividends Cash Dividend Per Share NTD＄300,000,000 NTD＄0.08

（3）The influence of dividend allocation to financial business and earnings per share：N/A

（4）The board of directors approved the earnings distribution proposal for 2007

Statement of Earning Distribution Unit: NTD

Item Amount Items of Earning： Net Earning of Fiscal Year 2007 3,353,574,238 Accumulated Earning 4,771,237

Total 3,358,345,475 Items of Distribution： Legal Reserve 1,006,072,271 Employees’ Bonus 23,475,020 Directors’ and Supervisors’ Bonus Cash Dividend Distribution 2,328,000,000 Undistributed Earning 798,184

Total 3,358,345,475

20

2. Implementation of the Internal Controls System

23

Headquarters and Branches

Headquarters Address and Telephone Number Headquarter 169, Jen Ai Road,Sec.4,Taipei City,Taiwan 10686,R.O.C

886(2)27716699

Business Departmen 50, Sec.2, Chungshan N.Road, Taipei City, Taiwan 10419, R.O.C.

886(2)25425656

Lottery Department 10F, 50, Sec.2, Chungshan N.Road, Taipei City, Taiwan 10419, R.O.C.

886(2)66085885

Government Banking Department B1, 1, Shihfu Road, Taipei City,Taiwan 11008,R.O.C.

886(2)27209001

Trust Department 3F,138, Min Sheng E. Rd., Sec. 3, Taipei City, Taiwan 10596, R.O.C.

886(2)27186888

Securities Department（Dealer and Underwrite） 18F, 169, Jen Ai Road, Sec.4, Taipei City, Taiwan 10686, R.O.C.

886(2)27716699

Branches Address and Telephone Number Code Branch Name Address Tel.

0125608 Offshore Banking Branch

19F, 169, Jenai Road, Sec.4, Taipei City, Taiwan 10686, R.O.C.

886(2)27716699

0122032 Changan E. Road Branch

36, Sec.1, Changan E. Road, Taipei City, Taiwan 10442, R.O.C.

886(2)25212481

0122205 Chengtung Branch 90, Sec.2, Nanking E. Road, Taipei City, Taiwan 10406, R.O.C.

886(2)25116388

0122216 Nungan Branch 369, Sungchiang Road, Taipei City, Taiwan 10482, R.O.C.

886(2)25031451

0123006 Shihlin Branch 288, Chungcheng Road, Taipei City, Taiwan 11162, R.O.C.

886(2)28317444

0123017 Shihtung Branch 360, Sec. 6, Chungshan N. Road, Taipei City, Taiwan 11152, R.O.C.

886(2)28735757

0123028 Rueiguang Branch 392, Rueiguang Road, Taipei City, Taiwan 11492, R.O.C.

886(2)26562989

0123039 Yuhcheng Branch 122, Sec.6, Chunghsiao E. Road, Taipei City, Taiwan 11576, R.O.C.

886(2)26511212

0123040 Fukang Branch 310, Sec.4, Chengteh Road, Taipei City, Taiwan 11168, R.O.C.

886(2)28836712

0123051 Chunghsiao Branch 107, Sec.4, Chunghsiao E. Road, Taipei City, Taiwan 10690, R.O.C.

886(2)27417880

0123062 Chengteh Branch 142, Sec.2, Chengteh Road, Taipei City, Taiwan 10359, R.O.C.

886(2)25536553

0123073 Lungchiang Branch 28, Sec.3, Nanking E. Road, Taipei City, Taiwan 10489, R.O.C.

886(2)25073817

0123109 Yenping Branch 69, Sec.2, Yenping N. Road, Taipei City, Taiwan 10346, R.O.C.

886(2)25552170

0123202 Mucha Branch 92, Sec.3, Mucha Road, Taipei City, Taiwan 11648, R.O.C.

886(2)29391035

0123213 Muhsin Branch 236, Sec.3, Muhsin Road, Taipei City, Taiwan 11660, R.O.C.

886(2)29383791

24


0123305 Lungshan Branch 161, Hsining S. Road, Taipei City, Taiwan 10844, R.O.C.

886(2)23718720

0123408 Pate Branch 178, Sec.3, Pate Road, Taipei City, Taiwan 10555, R.O.C.

886(2)25776467

0123419 Yungchuen Branch 151,Fude Street, Taipei City, Taiwan 11078, R.O.C.

886(2)27592921

0123420 Yungchi Branch 199,Yungchi Road, Taipei City, Taiwan 11063, R.O.C.

886(2)27628700

0123501 Chungshan Branch 162, Sec.2, Chungshan N. Road, Taipei City, Taiwan 10452, R.O.C.

886(2)25963171

0123604 Peitou Branch 2, Sec.1, Chungyang N. Road, Taipei City, Taiwan 11263, R.O.C.

886(2)28915533

0123615 Shihpai Branch 216, Wenlin N. Road, Taipei City, Taiwan 11287, R.O.C.

886(2)28271616

0123707 Taan Branch 37, Sec.4, Jenai Road, Taipei City, Taiwan 10685, R.O.C.

886(2)27312333

0123800 Tatung Branch 186, Sec.3, Chungking N. Road, Taipei City, Taiwan 10369, R.O.C.

886(2)25929282

0123903 Kuting Branch 100, Sec.3, Roosevelt Road, Taipei City, Taiwan 10088, R.O.C.

886(2)23650381

0124003 Shuangyuan Branch 19, Tungyuan Street, Taipei City, Taiwan 10864, R.O.C.

886(2)23030374

0124014 Wanhua Branch 482, Wanta Road, Taipei City, Taiwan 10872, R.O.C.

886(2)23325901

0124106 Chiencheng Branch 22, Nanking W. Road, Taipei City, Taiwan 10352, R.O.C.

886(2)25554161

0124117 Shihfu Branch 1, Shihfu Road, Taipei City,Taiwan 11008,R.O.C.

886(2)27298999

0124209 Nankang Branch 195, Sanchung Road, Taipei City, Taiwan 11501, R.O.C.

886(2)26551177

0124302 Chingmei Branch 64, Chingwen Street, Taipei City, Taiwan 11670, R.O.C.

886(2)29352636

0124313 Hsinglung Branch 69, Sec.3, Hsinglung Road, Taipei City, Taiwan 11694, R.O.C.

886(2)86639889

0124405 Neihu Branch 6, Lane 174,Sec.3, Chengkung Road, Taipei City, Taiwan 11460, R.O.C.

886(2)27961820

0124427 Wende Branch 42, Wende Road, Taipei City, Taiwan 11475, R.O.C.

886(2)26582620

0124508 Tunhua Branch 201, Tunhua N. Road, Taipei City, Taiwan 10508, R.O.C.

886(2)27131660

0124542 Minsheng Branch 1631, Sec.5, Minsheng E. Road, Taipei City, Taiwan 10573, R.O.C.

886(2)27640853

0124601 Hsinyi Branch 299, Sec.4, Hsinyi Road, Taipei City, Taiwan 10681, R.O.C.

886(2)27006381

0124612 Juangjing Branch 286, Juangjing Road, Taipei City, Taiwan 11049, R.O.C.

886(2)27226206

0124623 The World Trade 13F, 333, Sec.1, Keelung Road, Taipei e 886(2)27252916

25


Center Branch City, Taiwan 11012, R.O.C. 0124704 Sungchiang Branch 200, Sungchiang Road, Taipei City,

Taiwan 10467, R.O.C. 886(2)25434282

0124807 Hoping Branch 236, Sec.2, Fuhsing S. Road, Taipei City, Taiwan 10663, R.O.C.

886(2)27022421

0124900 Yenchi Branch 389, Sec.4, Jenai Road, Taipei City, Taiwan 10693, R.O.C.

886(2)27527600

0125000 Chengchung Branch 7, Qingdao W. Road, Taipei City, Taiwan 10041, R.O.C.

886(2)23615481

0125103 Nanmen Branch 17,Chinhua Street, Taipei City, Taiwan 10092, R.O.C.

886(2)23971640

0125206 Fuhsing Branch 234, Fuhsing N. Road, Taipei City, Taiwan 10480, R.O.C.

886(2)25023530

0125309 Hsisung Branch 751, Sec.4, Nanking E. Road, Taipei City, Taiwan 10550, R.O.C.

886(2)27170037

0125402 Changan Branch 82, Sungchiang Road, Taipei City, Taiwan 10456, R.O.C.

886(2)25519797

0125505 Kueilin Branch 52, Kueilin Road, Taipei City, Taiwan 10849, R.O.C.

886(2)23026226

0125701 Tunho Branch 77, Sec.2, Tunhua S. Road, Taipei City, Taiwan 10682, R.O.C.

886(2)27012409

0125804 Tungmen Branch 61, Sec.2, Jenai Road, Taipei City, Taiwan 10062, R.O.C.

886(2)23512081

0125907 Chunglun Branch 6, Fuhsing N. Road, Taipei City, Taiwan 10492, R.O.C.

886(2)27418257

0126007 Keelung Road Branch

21, Sec.2, Keelung Road, Taipei City, Taiwan 11052, R.O.C.

886(2)27373677

0126100 Chinhua Branch 178, Sec.1, Hoping E. Road, Taipei City, Taiwan 10645, R.O.C.

886(2)23698566

0126203 Sungnan Branch 412, Sec.5, Chunghsiao E. Road, Taipei City, Taiwan 11061, R.O.C.

886(2)27255111

0126214 Huaisheng Branch 215, Sec.3, Chunghsiao E. Road, Taipei City, Taiwan 10655, R.O.C.

886(2)27818380

0126306 Minchuan Branch 37, Sec.3, Minchuan E. Road, Taipei City, Taiwan 10476, R.O.C.

886(2)25166786

0126409 Chilin Branch 146, Chilin Road, Taipei City, Taiwan 10459, R.O.C.

886(2)25681248

0126502 Shetzu Branch 225, Sec.5, Yengping N. Road, Taipei City, Taiwan 11171, R.O.C.

886(2)28168585

0126605 Kangtu Branch 358, Chungshan 2nd Road, Kaohsiung City, Taiwan 80242, R.O.C.

886(7)3356226

0126683 Hsihu Branch 240, Sec.1, Neihu Road, Taipei City, Taiwan 11493, R.O.C.

886(2)87511788

0126694 ChinCheng Branch 46,Sec.3, Chincheng Road,Tucheng City, Taipei County, Taiwan 23680, R.O.C.

886(2)22631678

0126708 Wanlung Branch 136, Sec.6, Roosevelt Road, Taipei City, 886(2)29339956

26


Taiwan 11674, R.O.C. 0126719 Chungkang Branch 160, Sec.1, Taichungkang Road,

Taichung City, Taiwan 40354, R.O.C. 886(4)23207711

0126720 Hsinchuang Branch 227, Hsintai Road, Hsinchuang City, Taipei County, Taiwan 24242, R.O.C.

886(2)29903366

0126731 Taoyuan Branch 33, Chunghua Road, Taoyuan City, Taoyuan County, Taiwan 33065, R.O.C.

886(3)3367171

0126742 Anping Branch 279, Sec.2, Minsheng Road, Tainan City, Taiwan 70054, R.O.C.

886(6)2265265

0126775 Puchien Branch 143, Sec.2, Chungshan Road, Panchiao City, Taipei County, Taiwan 22067, R.O.C

886(2)89535118

0126786 Peichungli Branch 268, Yuanhua Road, Chungli City, Taoyuan County, Taiwan 32085, R.O.C.

886(3)4256699

0126797 Sanchung Branch 36, Sec.2, Chunghsiao Road, Sanchung City, Taipei County, Taiwan 24162, R.O.C.

886(2)89836868

0126801 Fengyuan Branch 139, Hsiangyang Road, Fengyuan City, Taichung County, Taiwan 42080, R.O.C.

886(4)25220088

0126812 Shuangho Branch 696, Chingping Road, Chungho City, Taipei County, Taiwan 23559, R.O.C.

886(2)22438877

0126823 Kushan Branch 387, Huarong Road, Kushan District, Kaohsiung City, Taiwan 80454, R.O.C.

886(7)5523111

0126845 Fengcheng Branch 126, Minsheng Road, Hsinchu City, Taiwan 30043, R.O.C.

886(3)5343888

0126856 Changhua Branch 349, Sec.2, Chungshan Road, Changhua City, Changhua County, Taiwan 50065, R.O.C.

886(4)7261333

0126867 Tunghu Branch 25, Tunghu Road, Taipei City, Taiwan 11487, R.O.C.

886(2)26336677

0126878 Yungho Branch 407, Deho Road, Yungho City, Taipei County, Taiwan 23451, R.O.C.

886(2)86601616

0126890 Taipei 101 Branch 5F, 45, Shihfu Road, Taipei City, Taiwan 11001, R.O.C.

886(2)81018585

0127015 Shuanglien Branch 13, Sec.1, Minsheng E.Road, Taipei City, Taiwan 10451, R.O.C.

886(2)25115511

0127026 Nanking East Road Branch

139, Sec.2, Nanking E.Road, Taipei City, Taiwan 10485, R.O.C.

886(2)25155518

0127037 Tunpei Branch 138, Sec.3, Minsheng E.Road, Taipei City, Taiwan 10596, R.O.C.

886(2)27185151

0127048 Jenai Branch 237, Sec.1, Chienkuo S.Road, Taipei City, Taiwan 10657, R.O.C.

886(2)23258878

0127059 Kaohsiung Branch 1, Liouhe 1st Road, Kaohsiung City, Taiwan 80055, R.O.C.

886(7)2391515

0127060 Chungcheng Branch 476, Chungcheng Road, Taoyuan City, Taoyuan County, Taiwan 33047, R.O.C.

886(3)3350335

27


0127071 Taichung Branch 196, Sec.2, Liuchuan W. Road., Taichung City, Taiwan 40357, R.O.C.

886(4)22221911

0127093 Sungshan Branch 421, Sungshan Road, Taipei City, Taiwan 11083, R.O.C.

886(2)27281199

0127107 Tucheng Branch 100, Sec.1, Chungyang Road, Tucheng City, Taipei County, Taiwan 23664, R.O.C.

886(2)22709898

0127118 Tainan Branch 1666, Chungshan Road, Tainan City, Taiwan 70043, R.O.C.

886(6)2290266

0127129 Fengshan Branch 223, Tzeyu Road, Fengshan City, Kaohsiung County, Taiwan 83074, R.O.C.

886(7)7482088

0127130 Chungli Branch 119, Sec.2, Chungpei Road, Chungli City, Taoyuan County, Taiwan 32097, R.O.C.

886(3)4595766

0127152 Anho Branch B1, 169, Sec.4, Jenai Road, Taipei City, Taiwan 10686, R.O.C.

886(2)27787717

0127163 Chengyi Branch 279, Chengyi N. Road,Sanchung City, Taipei County, Taiwan 24146, R.O.C.

886(2)29806688

0127174 Tanan Branch 968, Sec.1, Chiehshou Road, Pate City, Taoyuan County, Taiwan 33442, R.O.C.

886(3)3616565

0127185 Chiayi Branch 395, Jenai Road, Chiayi City, Taiwan 60045, R.O.C.

886(5)2231688

0127196 Lingya Branch 39, Chunghua 4th Road, Kaohsiung City, Taiwan 80245, R.O.C.

886(7)3318822

0127211 Panchiao Branch 266, Sec.1, Wenhua Road, Panchiao City, Taipei County, Taiwan 22041, R.O.C.

886(2)22549999

0127222 Pei Taichung Branch

333, Sec.4, Wenhsin Road, Taichung City, Taiwan 40666, R.O.C.

886(4)22426222

0127233 Sanmin Branch 530, Tashuen 2nd Road, Sanmin District, Kaohsiung City, Taiwan 80787, R.O.C.

886(7)3871299

0127244 Chienkuo Branch 196, Sec.2, Chienkuo N. Road., Taipei City, Taiwan 10483, R.O.C.

886(2)25151775

0127255 Hsinchu Branch 141, Chungcheng Road, Hsinchu City, Taiwan 30051, R.O.C.

886(3)5278988

0127266 Hsintien Branch 266, Sec.2, Peihsin Road, Hsintien City, Taipei County, Taiwan 23143, R.O.C.

886(2)29129977

0127277 Tienmu Branch 36, Tienmu E. Road, Taipei City, Taiwan 11153, R.O.C.

886(2)28763232

0127288 Hsichih Branch 175, Sec.1, Tatong Road, Hsichih City, Taipei County, Taiwan 22145, R.O.C.

886(2)26411689

0127303 Yungkang Branch 856, Dawan Road, Yungkang City, Tainan County, Taiwan 71070, R.O.C.

886(6)2736099

0127314 Hsiangyang Branch 9, Hsiangyang Road, Taipei City, Taiwan 10046, R.O.C.

886(2)23885889

28


0127336 Wuku Branch 445, Huacheng Road, Hsinchuang City, Taipei County, Taiwan 24253, R.O.C.

886(2)85213399

0127347 Hsinying Branch 301, Minchi Road, Hsinying City, Tainan County, Taiwan 73047, R.O.C.

886(6)6569889

0127358 Pingtung Branch 459, Hoping Road, Pingtung City, Pingtung County, Taiwan 90064, R.O.C.

886(8)7336899

0127369 Chienchen Branch 289, Paotai Road, Chienchen District, Kaohsiung City, Taiwan 80643, R.O.C.

886(7)7170055

0127370 Tunnan Branch 108, Sec.1, Tunhua S. Road, Taipei City, Taiwan 10557, R.O.C.

886(2)87719898

0127381 Paosheng Branch 3, Paosheng Road, Yungho City, Taipei County, Taiwan 23444, R.O.C.

886(2)89230888

0127392 Yuanlin Branch 596, Chukuang Road, Yuanlin City, Changhua County, Taiwan 51052, R.O.C.

886(4)8369189

0127406 Luotung Branch 286, Hsintung Road, Luotung Town, Ilan County, Taiwan 26541, R.O.C.

886(3)9566611

0127417 Juihu Branch 62, Juihu Street, Taipei City, Taiwan 11494, R.O.C.

886(2)26591088

0127462 Chupei Branch 263, Kuangming 6th Rd., Chupei City, Hsinchu County, Taiwan, R.O.C.

886(3)5586199

0127473 Nan Taichung Branch

272, Sec.1, Wenhsin Road, Taichung City, Taiwan, R.O.C.

886(4)36009868

0127484 Poai Branch 450, Poai 2nd Rd., Kaohsing City, Taiwan, R.O.C.

886(7)8628668

0127495 Luchou Branch 71, Sanmin Rd., Luchou City, Taipei County, Taiwan, R.O.C.

886(2)82821799

0127509 Huachiang Branch 110, Sec.2, Shuang 10th Rd., Panchiao City, Taipei County, Taiwan, R.O.C

886(2)22530598

0126764 Sunglung MiniBranch

1761,Sec.1, Keelung Road, Taipei City, Taiwan 10072, R.O.C.

886(2)27473399

0126889 Kangshan MiniBranch

178, Chungshan N.Road,Kangshan Town, Kaohsiung County, Taiwan 83091, R.O.C

886(7)6213969

0127428 Chiho MiniBranch 1721, Sec.2, Keelung Road, Taipei City, Taiwan 10675, R.O.C.

886(2)66388988

0127439 Nanchang MiniBranch

65, Sec.1, Hoping W. Road, Taipei City, Taiwan 10078, R.O.C.

886(2)66305678

0127451 HuaLien MiniBranch

256, Linsen Road, Hualien City, Taiwan 97050, R.O.C.

886(3)8353838

0127510 Tachih MiniBranch 602, Mingshui Rd., Taipei City, Taiwan, R.O.C

886(2)85093878

New York Branch 100 WALL STREET 14 TH FLOOR NEW YORK, NY 10005 USA

(0021212) 9689888

Los Angeles Branch 700 S3. FLOWER STREET SUITE 3300 LOS ANGELES CA 90017 USA

(0021213) 2369151

Hong Kong Branch 18/F CENTRAL TOEWR 28 QUEEN’S （002852）

29


ROAD CENTRAL H.K. 28227700

30

Appendix

Annual Financial Reports for 2007 and 2006

31

The Board of Directors and Stockholders TAIPEI FUBON COMMERCIAL BANK Co., Ltd.

We have audited the accompanying balance sheets of TAIPEI FUBON COMMERCIAL BANK Co., Ltd. (the “Bank”), as of December 31, 2007 and 2006, and the related statements of income, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit and Certification 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 TAIPEI FUBON COMMERCIAL BANK Co., Ltd. as of December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended, in conformity with the Criteria Governing the Preparation of Financial Reports by Public Banks, Criteria Governing the Preparation of Financial Reports by Futures Commission Merchants, 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 accompanying financial statements, effective January 1, 2006, the Bank adopted the Statements of Financial Accounting Standards (“Statements”) No. 34 “Accounting for Financial Instruments”, No. 36 “Disclosure and Presentation of Financial Instruments” and other standards amended for harmonizing with those two standards.

INDEPENDENT AUDITORS’ REPORT

32

We have also audited the consolidated financial statements of the Bank and its subsidiaries as of and for the years ended December 31, 2007 and 2006, on with we have issued an unqualified and a modified unqualified opinion thereon, respectively.

February 27, 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 Chineselanguage auditors’ report and financial statements shall prevail.

33

TAIPEI FUBON COMMERCIAL BANK CO., LTD.

BALANCE SHEETS DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars and Shares, Except Par Value)

2007 2006 2007 2006 ASSETS Amount Amount % LIABILITIES AND STOCKHOLDERS’ EQUITY Amount Amount %

CASH AND CASH EQUIVALENTS (Note 4) $ 15,059,774 $ 19,244,303 (22) DUE TO THE CENTRAL BANK OF CHINA AND OTHER BANKS (Note 17) $ 59,806,880 $ 66,801,543 (10)

DUE FROM THE CENTRAL BANK OF CHINA AND OTHER BANKS (Note 5) 205,109,450 239,834,761 (14) BORROWED FUNDS 11,803,415 6,029,171 96

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 2, 3, 6 and 32) 20,642,620 27,409,369 (25) (Notes 2, 3 and 6) 7,604,838 4,315,206 76

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Note 2) 29,943 (100) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Notes 2 and 32) 58,747,528 56,056,537 5

RECEIVABLES, NET (Notes 2 and 7) 64,326,705 56,284,747 14 PAYABLES (Notes 2, 18 and 26) 25,836,669 33,082,159 (22)

RECEIVABLES RELATED PARTIES (Note 29) 1,971,834 6,518,229 (70) DEPOSITS AND REMITTANCES (Note 19) 817,128,646 775,913,572 5

DISCOUNTS AND LOANS, NET (Notes 2 and 8) 657,051,262 611,022,779 8 BANK DEBENTURES (Note 20) 38,760,256 63,331,217 (39)

AVAILABLEFORSALE FINANCIAL ASSETS, NET (Notes 2, 3, 9, 31 and 32) 85,559,042 75,181,582 14 OTHER FINANCIAL LIABILITIES (Notes 2, 3 and 21) 2,814,179 3,952,027 (29)

HELDTOMATURITY INVESTMENTS, NET (Notes 2, 10, 31 and 32) 5,883,418 4,808,219 22 OTHER LIABILITIES (Notes 2 and 22) 2,143,835 3,171,461 (32)

EQUITY INVESTMENTS EQUITY METHOD (Notes 2 and 11) 1,110,570 721,054 54 Total liabilities 1,024,646,246 1,012,652,893 1

OTHER FINANCIAL ASSETS, NET STOCKHOLDERS' EQUITY Unquoted equity instruments (Notes 2 and 12) 1,473,183 1,712,885 (14) Capital stock, NT$10.00 par value Debt instruments with no active market (Notes 2 and 13) 24,682,377 23,574,368 5 Authorized and issued: 3,962,716 thousand shares 39,627,167 39,627,167 Others (Notes 2, 3 and 14) 1,769,602 2,100,244 (16) Capital surplus

Additional paidin capital issue of shares in excess of par value 3,986,083 3,986,083 Other financial assets, net 27,925,162 27,387,497 2 Donated capital 305 305

Others 17,948,824 17,948,824 PROPERTIES (Notes 2 and 15) Total capital surplus 21,935,212 21,935,212 Cost Retained earnings Land 6,930,174 6,930,174 Legal reserve 8,814,811 8,682,875 2 Buildings 5,402,222 5,402,222 Special reserve 1,285,676 1,285,676 Machinery and computer equipment 3,556,215 3,334,774 7 Unappropriated 3,358,345 439,785 664 Transportation equipment 210,569 225,708 (7) Total retained earnings 13,458,832 10,408,336 29 Office and other equipment 2,076,250 1,883,352 10 Others Total cost 18,175,430 17,776,230 2 Cumulative translation adjustments 13,298 48,762 (73)

Less: Accumulated depreciation 5,243,461 4,757,554 10 Unrealized gains on financial instruments 298,980 788,505 (62) 12,931,969 13,018,676 (1) Unrealized losses on cashflow hedge (239,058) (528,900) (55)

Construction in progress and prepayment for equipment 329,141 385,273 (15) Total others 73,220 308,367 (76)

Net properties 13,261,110 13,403,949 (1) Total stockholders' equity 75,094,431 72,279,082 4

INTANGIBLE ASSETS (Notes 2 and 3) 651,951 693,655 (6)

OTHER ASSETS (Notes 2, 16 and 26) 1,187,779 2,391,888 (50)

TOTAL $ 1,099,740,677 $ 1,084,931,975 1 TOTAL $ 1,099,740,677 $ 1,084,931,975 1

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated February 27, 2008)

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STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

2007 2006 Amount Amount %

NET INTEREST Interest revenues (Note 2) $37,040,654 $41,132,549 (10 ) Interest expenses 19,859,484 23,293,291 (15 )

Total net interest 17,181,170 17,839,258 (4 )

NET REVENUES OTHER THAN INTEREST Commissions and fee revenues, net (Notes 2 and 24) 7,268,451 6,184,070 18 Gains (losses) on financial assets and liabilities at fair value through profit or loss (Notes 6 and 25) 580,804 586,467 (1 )

Realized gain from availableforsale financial assets 1,322,939 822,167 61 Income from equity investments equity method, net (Note 11) 544,652 355,580 53

Foreign exchange gains (losses), net (Note 2) 322,875 (364,072) 189 Impairment losses on assets (Notes 2, 9 10 and 12) (921,643) (35,612) 2,488 Other noninterest net revenues (Note 2) 441,320 385,029 15

Total net revenues other than interest 9,559,398 7,933,629 20

TOTAL NET REVENUES 26,740,568 25,772,887 4

PROVISION FOR BAD DEBTS (Note 8) 10,302,780 15,034,045 (31 )

OPERATING EXPENSES Personnel expenses (Notes 2, 27 and 29) 5,847,510 5,400,831 8 Depreciation and amortization (Note 27) 1,036,197 941,723 10 Others (Note 2) 5,505,612 5,305,709 4

Total operating expenses 12,389,319 11,648,263 6

INCOME (LOSS) BEFORE INCOME TAX 4,048,469 (909,421) 545

INCOME TAX (EXPENSE) BENEFIT (Notes 2 and 26) (694,895) 894,877 (178 )

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES 3,353,574 (14,544) 23,158

CUMULATIVE EFFECT OF ACCOUNTING CHANGES (NET OF TAX EXPENSE $104,153) 454,329 (100 )

NET INCOME $ 3,353,574 $ 439,785 663 (Continued)

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STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

2007 2006 Pretax After Tax Pretax After Tax

EARNINGS (LOSS) PER SHARE (Note 28) Basic $ 1.02 $ 0.85 $(0.09) $ 0.11


(With Deloitte & Touche audit report dated February 27, 2008) (Concluded)

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STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars, Except Amounts Per Share)

Unrealized Gains or Losses on Financial Instruments

(Notes 2 and 11) Capital Surplus (Notes 2 and 23) Unrealized Unrealized

Issued and Outstanding Paidin Cumulative Gains or Gains and Capital Stock Capital in Retained Earnings (Notes 2 and 23) Translation Losses on Losses on Other Total

Shares (Thousands) Amount

Excess of Par Value Donation Others Total Legal Reserve Special Reserve

Unappropriated Earnings Total

Adjustments (Note 2)

Financial Instruments

Cashflow Hedge

Adjustments (Note 2)

Stockholders’ Equity

BALANCE, JANUARY 1, 2006 2,813,117 $28,131,175 $ 6,799,200 $305 $17,948,824 $24,748,329 $15,855,432 $ 1,285,676 $ 5,158,199 $22,299,307 $ 64,752 $ $ $ (345,647 ) $74,897,916

Effect of the adoption of Statement of Financial Accounting Standards No. 34 594,743 (623,460 ) 345,647 316,930

Appropriation of the 2005 earnings: Legal reserve 1,510,318 (1,510,318 ) Bonus to employees (35,241 ) (35,241 ) (35,241 ) Cash dividends NT$1.28 per share (3,612,640 ) (3,612,640 ) (3,612,640 )

Capital surplus transferred to common stock 281,312 2,813,117 (2,813,117 ) (2,813,117 )

Legal reserve transferred to common stock 868,287 8,682,875 (8,682,875 ) (8,682,875 )

Changes in unrealized gains or losses on availableforsale financial assets 193,762 193,762

Changes in unrealized gains or losses on cashflow hedge 94,560 94,560

Cumulative translation adjustments (15,990 ) (15,990 )

Net income for the year ended December 31, 2006 439,785 439,785 439,785

BALANCE, DECEMBER 31, 2006 3,962,716 39,627,167 3,986,083 305 17,948,824 21,935,212 8,682,875 1,285,676 439,785 10,408,336 48,762 788,505 (528,900 ) 72,279,082

Appropriation of the 2006 earnings: Legal reserve 131,936 (131,936 ) Bonus to employees (3,078 ) (3,078 ) (3,078 ) Cash dividends NT$0.08 per share (300,000 ) (300,000 ) (300,000 )

Changes in unrealized gains or losses on availableforsale financial assets (489,525 ) (489,525 )

Changes in unrealized gains or losses on cashflow hedge 289,842 289,842

Changes in cumulative translation adjustments (35,464 ) (35,464 )

Net income for the year ended December 31, 2007 3,353,574 3,353,574 3,353,574

BALANCE, DECEMBER 31, 2007 3,962,716 $39,627,167 $ 3,986,083 $305 $17,948,824 $21,935,212 $ 8,814,811 $ 1,285,676 $ 3,358,345 $13,458,832 $ 13,298 $298,980 $ (239,058 ) $ $75,094,431


(With Deloitte & Touche audit report dated February 27, 2008)

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TAIPEI FUBON COMMERCIAL BANK CO., LTD. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars)

2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,353,574 $ 439,785 Cumulative effect of accounting changes (454,329) Provision for bad debts 10,302,780 15,034,045 Collection of loans and receivables written off in prior years 1,163,808 839,969 Depreciation and amortization 1,036,197 941,723 Reversal of the allowance for credit and trading losses (67,827) (50,843) Unrealized gains on financial assets and liabilities at fair value through profit or loss (770,566) (285,003)

Losses (gains) on disposal of nonperforming loans 1,530 (89,925) Gains on disposal of properties and equipment (82,048) (49,413) Income from equity investment equity method, net (544,652) (355,580) Cash dividends received from equity investments equity method 163,668 780,586

Realized gains on availableforsale financial assets (961,552) (420,211) Deferred income tax 173,366 (1,137,995) Amortization on premium (discount) of financial assets 285,737 386,832 Prepaid pension 62,361 83,949 Impairment losses on assets 921,643 35,612 Losses on disposal of unquoted equity investments 23,800 Gains on disposal of debt instruments with no active market (59,838) (1,488) Net changes in operating assets and liabilities Heldfortrading financial assets 9,040,500 15,435,482 Receivables (7,009,938) (12,356,574) Payables (7,248,568) 7,821,658 Heldfortrading financial liabilities 786,448 2,456,201 Net cash provided by operating activities 10,570,423 29,054,481

CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in due from the Central Bank of China and other banks 34,725,311 (75,501,696)

Acquisition of financial assets designated at fair value through profit or loss (2,500,000)

Proceeds of the disposal of financial assets at fair value through profit or loss 1,000,000

Decrease in securities purchased under agreements to resell 29,943 1,670,057 Net increase in discounts and loans (57,697,935) (77,934,250) Proceeds of the sale of nonperforming loans 4,442,547 1,091,205 (Increase) decrease in availableforsale financial assets (10,460,327) 41,679,170 Acquisition of heldtomaturity financial assets (1,814,065) (1,370,205) Proceeds on the maturity of heldtomaturity financial assets 49,794 1,000,000 Proceeds of the liquidation or capital decrease of equitymethod investees 34,012 71,153

Proceeds of the disposal of unquoted equity instruments 116,200 Acquisition of debt instruments with no active market (7,086,288) (1,134,625)

(Continued)

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STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars)

2007 2006

Disposal of debt instruments with no active market $ 6,104,776 $ 5,147,020 Acquisition of properties (799,969) (800,896) Proceeds of the disposal of properties 695 1,244,766 Decrease in other financial assets 55,152 1,065,165 Proceeds of the sale of collaterals assumed 13,490 Decrease (increase) in other assets 18,158 (215,476)

Net cash used in investing activities (31,281,996) (106,475,122)

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in due to the Central bank of China and other banks (6,994,663) 2,312,891

Increase in borrowed funds 5,774,244 2,207,928 Increase (decrease) in securities sold under repurchase agreements 2,690,991 (7,943,062)

Increase in deposits and remittances 41,215,074 77,575,581 Payment of bank debentures matured (25,500,000) (500,000) Proceeds of bank debentures issuance 550,000 (Decrease) increase in other financial liabilities, net (63,802) 1,020,697 (Decrease) increase in other liabilities, net (810,303) 366,833 Cash dividends (300,000) (3,612,640)

Net cash provided by financing activities 16,561,541 71,428,228

NET INCREASE IN CASH AND CASH EQUIVALENTS DUE TO THE MERGER WITH FUBON BILLS 5,701,026

EFFECTS OF EXCHANGE RATE CHANGES (34,498) 28,618

NET DECREASE IN CASH AND CASH EQUIVALENTS (4,184,530) (262,769)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 19,244,303 19,507,072

CASH AND CASH EQUIVALENTS, END OF YEAR $ 15,059,773 $ 19,244,303

SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 19,524,884 $ 22,848,592 Income tax paid $ 625,008 $ 1,008,029

NONCASH INVESTING AND FINANCING ACTIVES Employee payables $ 3,078 $ 35,238

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated February 27, 2008) (Concluded)

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NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

TAIPEI FUBON COMMERCIAL BANK Co., Ltd. (the “Bank”) started as a financial institution under the Taipei City Government (TCG) in 1969. On July 1, 1984, it was reorganized into a limited liability corporation and was renamed City Bank of Taipei Co., Ltd. The Bank was subsequently renamed TAIPEIBANK Co., Ltd. (“TAIPEIBANK”) on January 1, 1993. The Bank was privatized on November 30, 1999 through the sale of its shares of stock to the public, with the holdings of the TCG reduced to less than 50% of the Bank’s outstanding capital stock. In their special meeting on October 4, 2002, the stockholders approved the share swap, which resulted in the Bank’s becoming a wholly owned subsidiary of the Fubon Financial Holdings Company (FFH). The board of directors designated December 23, 2002 as the effective date of the share swap and the date when the Bank’s stocks were delisted from the Taiwan Stock Exchange.

To fully harness the synergy of two diversified business operations and reduce operating costs, the boards of directors of the Bank and Fubon Bank Co., Ltd. (“Fubon Bank,” a wholly owned subsidiary of FFH) decided on January 1, 2005 to combine these two entities. On January 1, 2005, the Bank acquired the assets and liabilities of Fubon Bank through a share swap and renamed as Taipei Fubon Commercial Bank Co., Ltd.

On September 20, 2006, the boards of directors of the Bank and Fubon Bills Finance Co., Ltd. (FBFC) decided to merge the Bank and FBFC to strengthen the operating synergy and lower operating cost. The Bank, the survivor entity, set December 25, 2006 as the effective merger date.

The Bank engages in the following: (a) all commercial banking operations authorized under the Banking Law; (b) trust operations; (c) handling of the lottery operations; (d) futures trading assistance and (e) other authorized operations. In addition to carrying out the foregoing activities, the Bank continues to handle certain functions for the TCG, which primarily include the acceptance of payments of taxes, fines and other fees as well as payments of principal and interest on bonds issued by the TCG.

The Bank has its head office in Taipei City, and as of December 31, 2007, its 4 major operating departments were Banking, Trust, Lottery, and Public Treasury departments, with 128 branches (including one offshore banking unit (OBU) and 3 overseas branches).

The operations of the Bank’s Trust Department are (1) planning, managing and operating a trust business; and (2) custodianship of nondiscretionary trust fund in domestic and overseas securities and mutual funds. These operations are regulated under the Banking Law.

The Bank was granted the right to run the Taiwan Sports Lottery from 2008 to 2013 by an announcement of Ministry of Finance (MOF).

As of December 31, 2007 and 2006, the Bank had 6,259 and 6,092 employees, respectively.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Bank’s financial statements were prepared in conformity with the Criteria Governing the Preparation of Financial Reports by Public Banks, Criteria Governing the Preparation of Financial Reports by Futures Commission Merchants, requirements of the Business Accounting Law, Guidelines Governing Business Accounting and accounting principles generally accepted in the Republic of China (ROC). In determining the fair value of certain financial instruments, allowance for credit losses, depreciation, assets impairment, pension, income tax, losses upon suspended lawsuit and provision for losses on guarantees, the Bank needs to make estimates based on judgment and available information. The estimates were usually made under uncertain conditions, actual results could differ from those estimates.

Since the operating cycle could not be reasonably identified in the banking industry accounts included in Bank’s financial statements were not classified as current or noncurrent. Nevertheless, accounts wee properly categorized according to the nature of each account, and sequenced by their liquidity. Please refer to Note 33 for the maturity analysis of assets and liabilities.

The Bank’s significant accounting policies are summarized as follows:

Basis of Financial Statement Preparation The accompanying financial statements include the accounts of the head office, the OBU and all branches and representative offices. All interoffice balances and transactions have been eliminated.

Translation of Foreigncurrency Financial Statements The financial statements of foreign branches and the OBU are translated into New Taiwan dollars at the following exchange rates:

a. Assets and liabilities at exchange rates prevailing on the balance sheet date; b. Stockholders’ equity at historical exchange rates; c. Retained earning at the beginning balance not remitted at the translated beginning balance;

and d. Income and expenses at average exchange rates for the year. e. Exchange differences arising from the translation of the financial statements of foreign

operations are recognized as a separate component of stockholders’ equity.

Foreigncurrency Transactions Nonderivative foreigncurrency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange differences arising from settlement of foreigncurrency assets and liabilities are recognized as gain or loss.

At the balance sheet date, foreigncurrency monetary assets and liabilities are revalued at prevailing exchange rates, and the exchange differences are recognized as gain or loss.

At the balance sheet date, foreigncurrency nonmonetary assets (such as equity instruments) and liabilities that are measured at fair value are revalued at prevailing exchange rates, with the exchange differences treated as follows: a. Recognized in stockholders’ equity if the changes in fair value are recognized in stockholders’

equity; b. Recognized as gain or loss if the changes in fair value are recognized as gain or loss.

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Foreigncurrency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange rates at trade dates.

Fair Values Determination Fair values are determined as follows: (a) listed stocks and GreTai Securities Market (GTSM, the overthecounter securities exchange) stocks closing prices as of the balance sheet date; (b) beneficiary certificates (openend fundx) net asset values as of the balance sheet date; (c) bonds periodend reference prices published by the GTSM or Bloomberg; (d) investment with no active market based on information provided by the counterparties.

Financial Instruments at Fair Value Through Profit or Loss Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (FVTPL) include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. The Bank recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to a financial instrument contract. A financial asset is derecognized when the Bank lose its contractual rights to the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged or canceled or expires.

Financial instruments at FVTPL are initially measured at fair value. At each balance sheet date after initial recognition, financial assets or financial liabilities at FVTPL are remeasured at fair value, with changes in fair value recognized directly as gain or loss in the year in which they arise. On the derecognition of a financial asset or a financial liability, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized as gain or loss. The Bank uses trade date accounting when recording transaction.

A derivative 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.

Financial asset and financial liabilities that give rise to offsetting changes in fair values may be designated as financial instruments at fair value through profit or loss to eliminate inconsistencies in measuring these instruments. Thus, under the Bank’s risk management policies and investment strategies, financial assets, financial liabilities or their combination will be designated as financial instruments at fair value through profit or loss.

Repurchase and Resell Transactions Securities purchased under resell agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions. Interest earned on resell agreements and interest incurred on repurchase agreements is recognized as interest income or interest expense over the life of each agreement.

Availableforsale Financial Assets Availableforsale financial assets are carried at fair value. Unrealized gains or losses on availableforsale financial assets are reported in equity attribute to the Bank’s stockholders. On disposal of an availableforsale financial asset, the accumulated, unrealized gain or loss in equity attributable to the Bank’s stockholders is transferred to net profit and loss for the period. The Bank uses trade date accounting when recording availableforsale portfolio transactions.

The recognition, derecognition and the fair value bases of availableforsale financial assets are similar to those of financial assets at fair value through profit or loss.

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Dividend income from equity securities is recognized on exdividend dates. Cash dividends received within a year after investment acquisition are recognized as a reduction of the carrying value of the investments and are subsequently recognized as income. Stock dividends received are accounted for only as increases in the number of the shares and are not recognized as income. The effective interest rate method of amortization and accretion is used, the straight line method is used if there is no significant difference. If an availableforsale financial asset is determined to be impaired, the accumulative unrealized loss previously recognized in equity attributable to the Bank’s stockholders is recognized as impairment loss and reported in income statement. For equity investments, loss reversal is adjusted to the equity attributable to the Bank stockholders. For debt investments, loss reversal is credited to current income.

Nonperforming Loans Under “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” (the “Regulations”) issued by the Ministry of Finance, the balances of loans and other credits extended by the Bank and the related accrued interest are classified as nonperforming when the loan is overdue and shall be authorized by a resolution passed by the board of directors. Nonperforming loans reclassified from loans are recognized as discounts and loans; otherwise, are recognized as other financial assets.

Allowance for Possible Losses and Reserve for Losses on Guarantees In determining the allowance for credit losses and provision for losses on guarantees, the Bank assesses the collectibility of discounts and loans, bills purchased, accounts receivables, interest receivables, acceptances and other receivables, and nonperforming loans as well as guarantees as of the balance sheet dates. Under the Regulations issued by the Ministry of Finance, the Bank evaluates the collectibility of its loan portfolio on the basis of its clients’ financial position, their payment histories and timeliness of repayments of principals and interests.

The Bank evaluates credit losses on the basis of the estimated collectibility. In accordance with the Regulations stated above, the loan assets divided into different classes subject to assets that require special mentioned, assets that are substandard, assets that are doubtful, and assets for which there is loss. The minimum allowance for credit losses and provision for losses on guarantees for the aforementioned classes should be 2%, 10%, 50% and 100% of outstanding credits, respectively. Certain loans as defined under Banking Bureau guidelines and approved by the board of directors for writeoff are offset against the allowance for credit losses. The repayments of loans written off are recorded as a reversal of this allowance.

Heldtomaturity Financial Assets Heldtomaturity financial assets are carried at amortized cost, which are valued by interest method. On initial recognition, the costs of the financial assets are valued at their fair value plus the acquisition costs. The net gain or loss on heldtomaturity financial assets is derecognized upon asset disposal, impairment or amortization. The Bank uses trade date accounting when recording transactions.

If a heldtomaturity financial asset is determined to be impaired, the impairment loss is recognized and reported in the income statement. Loss reversal is credited to current income and should not be more than the carrying amount had the impairment loss not been recognized.

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Equity Investments Equity Method Equity investments are accounted for by the equity method if the Bank has significant influence over the investees. Under this method, investments are stated at cost plus (or minus) a proportionate share in the investees’ net earnings (losses) or changes in net worth. Cash dividends received are accounted for as a reduction of the carrying values of the investments. Starting January 1, 2006, goodwill is no longer amortized and is instead tested annually for impairment. Before January 1, 2006, any difference between the acquisition cost and the equity in the investee’s net assets, or goodwill, was amortized over five years.

Stock dividends received are accounted for only as increases in the number of shares held and are not recognized as income.

Costs of investments sold are determined using the movingaverage method.

Intangible Assets Computer software is amortized on a straightline basis over five years.

Properties Properties are stated at cost less accumulated depreciation. Major renewals, additions and improvements are capitalized, while repairs and maintenance are expensed as incurred.

Depreciation is calculated using the straightline method over service lives estimated as follows: buildings and improvements, 5 to 60 years; computers and peripheral equipment, 3 to 15 years; transportation and communication equipment, 3 to 10 years; and miscellaneous equipment, 3 to 20 years. For assets still in use beyond their original estimated service lives, further depreciation is calculated on the basis of newly estimated salvage value.

The cost and accumulated depreciation are removed from the accounts when property is disposed of, and any gain or loss is credited or charged to other noninterest net revenues.

Other Financial Assets Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value that cannot be reliably measured, are measured at cost. If there is objective evidence that a financial asset is impaired, an impairment loss is recognized and reversal of impairment loss is prohibited.

Debt instruments with no quoted market prices in an active market and with fair values that cannot be reliably measured are carried at amortized cost. The accounting treatment of these instruments is similar to that of heldtomaturity investments except for the absence of any prohibition on the sale these debt instruments.

Operating Leases The Bank has operating lease agreements on the office spaces used by its branches. The imputed interest on lease deposits (included in other financial assets), computed using the interest rate on oneyear time deposits, is charged to business expenses rent and credited to interest income.

Unrealized Sale and Leaseback Gain or Loss Sale and leaseback happen when the Bank sells an asset and then leases it back. The related unrealized gains or losses are deferred and amortized over the lease period.

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Reserve for Losses on Defaults and Trading Loss Reserve The reserve for trading losses should be used only to cover a trading loss in excess of trading profit. When the accumulated trading loss reserve reaches $200,000 thousand, no additional reserve for trading loss is required to be set aside.

Under the regulations of the Securities and Futures Bureau, the Bank should recognize monthly a trading loss reserve at 10% of net gain on sales of securities and record this reserve as a liability account.

Under the Rules Governing Futures Commission Merchants, a futures commission merchant engaging in futures proprietary business should set aside 10% of the net profit realized each month as reserve for trading losses.

The reserve for trading losses referred to in the preceding paragraph should not be used for purposes other than covering the trading loss in excess of trading profit. When the accumulated trading loss reserve reaches the amount of required minimum working capital, no additional reserve for trading loss is required to be set aside.

Interest Revenue and Service Fees Interest revenue on loans is recorded by the accrual method. No interest revenue is recognized in the accompanying financial statements on loans and other credits extended by the Bank that are classified as nonperforming loans. The interest revenue on these loans/credits is recognized upon collection.

Under the Ministry of Finance regulations, the interest revenue on credits covered by agreements that extend their repayment periods is recorded as deferred revenue (included in other liabilities) and recognized as revenue upon collection.

Service fees are recorded as revenue upon receipt and substantial completion of activities involved in the earnings process.

Pension The Bank has two types of pension plans: Defined benefit and defined contribution.

Pension expense under defined benefit pension plan is determined on the basis of actuarial calculations. Unrecognized net transition obligation is amortized over the average remaining service years of employees. Under the defined contribution pension plan, which is based on the Labor Pension Act, is expensed during the period when the employees rendered their services.

Income Tax Interperiod income tax allocation is applied, in which tax effects of deductible temporary differences unused loss carryforward and unused investment tax credits are recognized as deferred income tax assets, and those of taxable temporary differences are recognized as deferred income tax liabilities. Valuation allowance is provided for deferred tax assets that are not certain to be realized.

Income tax credits for certain acquisitions of equipment, personnel training expenditures and equity investments are recognized as reduction of current income.

Interest income from shortterm bills has been taxed separately and recorded as tax expenses. The adjustment of prior year’s income tax was included in the current income tax.

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The effect of which higher between regular income tax and basic tax had been considered in current income tax. Income taxes (10%) on unappropriated earnings after January 1, 1998 is recorded as income tax in the year when the stockholders resolve to retain these earnings. The Bank, FFH and its subsidiaries have used the linkedtax system for income tax filings since 2003. Under the related rules, the accounting procedure is applied systematically on a consistent basis. The related contributions or payments are accrued as receivables or payables, respectively.

Hedge Accounting Nontrading derivatives, which are used primarily as a risk management tool for hedging interest rate, exchange rate and credit risks arising on onbalance sheet liabilities, are accounted for on the same basis as that used for the underlying hedged items.

To qualify as a hedge, a derivative must effectively reduce any risk inherent in the hedged item from changes in interest rates, exchange rates and market values. Changes in the fair value of the derivative must be highly correlated with changes in the fair value of the hedged item over the life of the hedge contract. At the inception of the hedge, there must be a formal designation and documentation of the hedging relationship, the Bank’s risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged items, overall risk management objectives and strategies and how the entity will assess the hedging instrument’s effectiveness.

A fair value hedge that meets all hedge accounting criteria is accounted for as follows: a. The gain or loss from remeasuring the hedging instrument at fair value (for a derivative

hedging instrument) or the foreigncurrency component of its carrying amount (for a nonderivative hedging instrument) is recognized immediately as gain or loss; and

b. The carrying amount of the hedged item is adjusted through profit or loss for the corresponding gain or loss attributable to the hedged risk.

A cash flow hedge that meets all hedge accounting criteria is accounted for as follows:

The unrealized gain or loss from the hedging instrument was recognized as equity when the hedge took effect. If a hedge of a forecast transaction results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognized as equity should be reclassified into gain or loss. The Bank uses the fair value hedge to hedge the exposure to changes in fair value of a recognized asset or liability or a previously unrecognized firm commitment to buy or sell an asset or liability at a fixed interest rate. The cash flow hedge is a hedge of the exposure to cash flow changes that are attributable to the floating interest rate associated with a recognized asset or liability.

Asset Impairment SFAS No. 35 requires the impairment review on equity investments equity method, properties, intangible assets to be made on each balance sheet date. If asset are deemed impaired, the Bank must calculate the recoverable amount of the asset or the cashgenerating unit. An impairment loss should be recognized whenever the recoverable amount of the asset or the cash generating unit is below the carrying amount, and this impairment loss is charged to accumulated impairment. After the recognition of an impairment loss, the depreciation (amortization) charged to the assets should be adjusted in the future periods at the revised asset carrying amount (net of accumulated impairment), less its salvage value, on a systematic basis over its remaining service life. If asset impairment loss (excluding goodwill) is reversed, the increase in the carrying amount resulting from reversal is credited to current income. However, loss reversal should not be more than the carrying amount (net of depreciation) had the impairment not been recognized.

46

Contingencies A loss is 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 amount of the loss cannot be reasonably estimated or the loss is possible, the related information is disclosed in the financial statements.

Reclassifications Certain accounts of the 2006 financial statement have been reclassified to be consistent with the presentation of the 2007 financial statements.

3. ACCOUNTING CHANGES Effective January 1, 2007, the Bank adopted the newly released Statement of Financial Accounting Standard No. 37 “Accounting for Intangible Assets” and other standards amended for harmonizing with this standard. The Bank reassessed the service lives of and amortization method on recognized intangible asset.

Effective January 1, 2006, the Bank adopted the Statement of Financial Accounting Standard No. 34 “Accounting for Financial Instruments”, No. 36 “Disclosure and Presentation of Financial Instruments” and other standards amended for harmonizing with those two standards.

The Bank properly reclassifies the financial assets and financial liabilities when adopting aforementioned new accounting standards and related amendments to existing standards. The effects of the financial assets and liabilities at fair value through profit or loss and derivative of fair value hedge are included in cumulative effect of accounting changes. The effects of the fair value change of availableforsale financial assets are included in stockholders’ equity adjustments.

The effect of adoption of the above SFASs were summarized as follows:

Cumulative Effect of

Accounting Changes, After Tax

Stockholders’ Equity

Adjustments, After Tax

Financial assets at fair value through profit or loss $ 1,463,707 $ Financial liabilities at fair value through profit or loss (1,011,565) Availableforsale financial assets (including the stockholders’ equity adjustments amounting to $320,241 thousand of Fubon Bills Finance Co., Ltd.) 594,743 Derivative financial assets hedge 23,451 302,904 Derivative financial liabilities hedge (including the stockholders’ equity adjustments amounting to $88,655 thousand of Fubon Bills Finance Co., Ltd.) (21,264) (926,364)

$ 454,329 $ (28,717)

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4. CASH AND CASH EQUIVALENTS December 31

2007 2006

Cash on hand $ 7,315,430 $ 7,718,569 Due from other banks 5,721,840 2,620,400 Notes and checks for clearing 2,022,504 8,905,334

$ 15,059,774 $ 19,244,303

5. DUE FROM THE CENTRAL BANK OF CHINA AND OTHER BANKS December 31

2007 2006

Call loans to banks $ 67,710,468 $ 44,192,418 Deposit reserve checking account 3,923,646 8,324,799 Required deposit reserve 19,405,206 18,800,599 Deposit reserve foreigncurrency deposits 5,692,821 104,480 Time deposits in the Central Bank of China 107,750,000 167,740,000 Due from the Central Bank of China 27,035 63,483 Others 600,274 608,982

$205,109,450 $239,834,761

Under a directive issued by the Central Bank of the ROC, NTDdenominated deposit reserves are determined monthly at prescribed rates based on the average balances of customers’ NTDdenominated deposits. These required deposit reserves are subject to withdrawal restrictions.

In addition, the foreigncurrency deposit reserves are determined at prescribed rates based on the balances of additional foreigncurrency deposits. These reserves may be withdrawn momentarily and are noninterest earning.

6. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31

2007 2006 Heldfortrading financial assets

Commercial paper $ 6,630,798 $ 3,820,571 Convertible bonds 1,793,685 2,443,396 Listed stocks and beneficiary certificates 566,502 3,923,002 Treasury bills 491,297 198,278 Corporate bonds 297,631 296,441 Beneficiary certificates of securitization 249,291 283,338 Government bonds 147,368 8,062,123 Warrants 13,178 Negotiable certificate of deposit 1,997

10,191,747 19,027,149 (Continued)

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December 31 2007 2006

Derivatives Interest rate swap contracts $ 4,104,061 $ 2,931,483 Currency swap contracts 1,505,683 374,381 Forward contracts 1,234,875 556,903 Option contracts 1,068,227 202,892 Crosscurrency swap contracts 19,473 120,653 Nondeliverable cross currency swap contracts 14,730 Stock price swap contract 11,844 9,387 Fixed rate commercial paper interest rate swap 6,850 2,579 Forward rate agreements 264 1,476 Credit default swap 77 295

7,966,084 4,200,049 18,157,831 23,227,198

Designation at fair value through profit or loss financial assets

Bank debentures 1,603,998 1,500,959 Convertible bonds asset swap contracts 880,791 1,646,184 Corporate bonds 1,035,028

2,484,789 4,182,171

$ 20,642,620 $ 27,409,369 Heldfortrading financial liabilities

Derivatives Interest rate swap contracts $ 4,133,160 $ 3,045,172 Currency swap contracts 1,507,153 4,411 Forward contracts 1,074,823 898,526 Option contracts 805,468 268,614 Crosscurrency swap contracts 38,321 92,702 Fixed rate commercial paper interest rate swap 25,592 3,607 Future contracts 17,601 Others 2,720 2,174

$ 7,604,838 $ 4,315,206 (Concluded)

The Bank engages in derivative transactions mainly for accommodating customers’ needs and managing its exposure positions and satisfying the need for different currencies.

Some interest rate swap contracts which belongs to trading purpose derivatives are used to offset most market and credit risks. In order to eliminate measurement anomalies for items that provide a natural offset of each other, the Bank also designates corresponding financial assets as financial assets at fair value through profit or loss.

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The contract (notional) amounts of the Bank outstanding derivative financial instruments as of December 31, 2007 and 2006 are summarized as follows:

December 31 2007 2006

Interest rate swap contracts $ 974,134,833 $817,061,015 Currency swap contracts 292,643,144 283,006,333 Forward contracts 142,433,047 30,093,851 Option contracts 156,312,128 29,156,676 Futures contracts 8,657,273 Crosscurrency swap contracts 12,468,659 20,790,912 Nondeliverable cross currency swap contracts 2,436,428 Fixed rate commercial paper interest rate swap 6,215,000 5,785,000 Credit default swaps 3,000,000 3,000,000 Forward rate agreements 4,248,400 14,000,000 Stock price swap contract 219,917 832,575

The net gain on heldfortrading financial assets and liabilities for the years ended December 31, 2007 and 2006, respectively were $530,507 thousand and $550,480 thousand. The net gain on financial assets designated at fair value through profit or loss for the years ended December 31, 2007 and 2006 were $50,297 thousand and $35,987 thousand, respectively.

7. RECEIVABLES, NET December 31

2007 2006

Credit card receivables $ 29,149,789 $ 34,423,153 Accounts receivable factoring 24,005,000 9,520,046 Interest receivable 4,670,521 4,742,103 Acceptances 4,160,777 4,572,722 Accounts receivable 1,028,478 1,229,647 Custodial collections receivable 833,279 836,759 Accrued income 473,597 915,824 Others 1,002,544 1,154,846

65,323,985 57,395,100 Less allowance for credit losses 997,280 1,110,353

$ 64,326,705 $ 56,284,747

8. DISCOUNTS AND LOANS, NET December 31

2007 2006

Discount and overdraft $ 3,966,014 $ 5,330,475 Shortterm loans 98,516,211 111,561,734 Shortterm secured loans 40,019,508 43,560,182 Mediumterm loans 143,576,207 118,429,258 Mediumterm secured loans 68,827,901 63,901,971 Longterm loans 58,795,869 55,757,024 Longterm secured loans 238,071,370 205,962,651

(Continued)

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December 31 2007 2006

Import and export negotiation $ 2,861,371 $ 2,941,631 Nonperforming loan transferred from loans 7,724,847 10,582,500

662,359,298 618,027,426 Less allowance for credit losses 5,308,036 7,004,647

$ 657,051,262 $ 611,022,779 (Concluded)

The Bank has not accrued any interest on the entire balance of the nonperforming loans shown above. The unrecognized interest revenues on nonaccrual interest loans amount to $272,088 thousand and $398,291 thousand for the years ended December 31, 2007 and 2006, respectively. For the years ended December 31, 2007 and 2006, the Bank had not written off credits for which legal proceedings had not been initiated.

The details of and changes in allowance for credit losses on receivables, discounts and loans, bills and other financial assets are summarized below:

For the Year Ended December 31, 2007 Other

General Specific Financial Risk Risk Subtotal Receivables Assets Total

Balance, January 1, 2007 $ 2,073,870 $ 4,930,777 $ 7,004,647 $ 1,110,353 $ 378,487 $ 8,493,487 Provisions (reversal) for bad debt (150,657 ) 6,658,427 6,507,770 258,592 3,536,418 10,302,780 Writeoff (8,935,199 ) (8,935,199 ) (377,045 ) (4,029,333 ) (13,341,577 ) Recovery of writtenoff credits 732,356 732,356 3,908 427,544 1,163,808 Effects of exchange rate changes (1,538 ) (1,538 ) 1,472 (66 )

Balance, December 31, 2007 $ 1,923,213 $ 3,384,823 $ 5,308,036 $ 997,280 $ 313,116 $ 6,618,432

For the Year Ended December 31, 2006 Other

General Specific Financial Risk Risk Subtotal Receivables Assets Total

Balance, January 1, 2006 $ 195,357 $ 9,463,050 $ 9,658,407 $ 1,027,210 $ 1,033,185 $ 11,718,802 Provisions for bad debt 1,878,513 5,823,632 7,702,145 86,089 7,245,811 15,034,045 Writeoff (10,794,066 ) (10,794,066 ) (1,294 ) (8,301,868 ) (19,097,228 ) Recovery of writtenoff credits 438,610 438,610 401,359 839,969 Effects of exchange rate changes (449 ) (449 ) (1,652 ) (2,101 )

Balance, December 31, 2006 $ 2,073,870 $ 4,930,777 $ 7,004,647 $ 1,110,353 $ 378,487 $ 8,493,487

9. AVAILABLEFORSALE FINANCIAL ASSETS, NET December 31

2007 2006

Bond investments government bonds $ 54,767,167 $ 38,902,459 Bond investments corporate bonds 15,238,982 13,822,708 Bond investments financial bonds 9,466,482 10,375,110 Listed stocks and beneficiary certificates 3,914,910 5,062,239 Negotiable certificates of deposits 1,657,935 6,275,092 Asset securitization 367,308 417,474 Structured investment vehicle 324,840 326,500

85,737,624 75,181,582 Less: Allowance for credit losses 178,582

$ 85,559,042 $ 75,181,582

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For 2007, the Bank recognized net asset value impairment on structured investment vehicles of $174,439 thousand and on overseas bond investments of $4,143 thousand.

10. HELDTOMATURITY FINANCIAL ASSETS, NET

December 31 2007 2006

Bank debentures $ 4,256,190 $ 4,258,986 Corporate bonds 1,490,796 499,439 Collateralized debt obligation 727,812 Negotiable certificates of deposits 97,452 Commercial papers 49,794

6,572,250 4,808,219 Less allowance for credit losses 688,832

$ 5,883,418 $ 4,808,219

For 2007, the Bank recognized a price impairment of $688,832 thousand on the counterparties’ collateralized debt obligations.

11. EQUITY INVESTMENTS EQUITY METHOD

December 31 2007 2006

Amount % Amount %

TAIPEIFUBON BANK Life Insurance Agency Co., Ltd. $ 641,800 100.00 $ 211,536 100.00

Fubon Leasing Co., Ltd. 395,719 100.00 449,379 100.00 Fubon Real Estate Management Co., Ltd. 54,273 30.00 51,718 30.00 Fubon Venture Capital Co., Ltd. 11,751 5.00 Fubon Insurance Agent Co., Ltd. 7,027 100.00 8,421 100.00

$ 1,110,570 $ 721,054

Income (loss) from equity investments for the years ended December 31, 2007 and 2006, respectively were summarized as follows:

For the Years Ended December 31

2007 2006

TAIPEIFUBON BANK Life Insurance Agency Co., Ltd. $ 586,892 $ 159,808 Fubon Venture Capital Co., Ltd. 4,325 Fubon Real Estate Management Co., Ltd. 4,139 7,538 Fubon Insurance Agent Co., Ltd. 2,956 4,802 Fubon Leasing Co., Ltd. (53,660) 2,132 Fubon Bills Finance Co., Ltd. 172,700 Fubonbank Insurance Agent Co., Ltd. 8,600

$ 544,652 $ 355,580

52

The investees’ financial statements for 2007 and 2006, which were used as basis for calculating income from the equitymethod investments, had all been audited, except those of Fubon Venture Capital Co., Ltd. (FVCCL) financial statements for 2007 and 2006, respectively. Had FVCCL’s financial statement been audited, there would have been no significant effect on the Bank’s financial statements.

Fubon Venture Capital Co., Ltd. was classified as an equitymethod investments, since the Bank, Fubon Life Insurance Co., Ltd. and Fubon Insurance Co., Ltd. had a 45% equity in Fubon Venture Capital Co., Ltd.

FVCCL was renamed TAIPEIFUBON BANK Life Insurance Agency Co., Ltd. after the approval of the Taipei City Government. And Fubon Bills Finance Co., Ltd., a subsidiary of the Bank, merged with the Bank on December 25, 2006.

As of December 31, 2007 and 2006, part of the unrealized gains on financial instruments, which amounted to $1,468 thousand and $3,027 thousand (included in stockholders’ equity as adjustments), respectively, resulted from valuation of availableforsale financial assets held by an equitymethod investee.

Fubon Leasing, Fubon Insurance Agent, Fubon Venture Capital Co., Ltd. and Fubon Insurance Agent Co., Ltd. were not included in the Bank’s consolidated financial statements because their combined total assets and revenues were not material to the Bank.

12. UNQUOTED EQUITY INSTRUMENTS

December 31 2007 2006

Domestic unlisted common stocks Taiwan High Speed Rail Co., Ltd. $ 500,000 $ 500,000 Taiwan Asset Management Co., Ltd. 300,000 300,000 Fubon Securities Finance Co., Ltd. 213,975 213,975 Taiwan Financial Asset Service Co., Ltd. 100,000 100,000 Financial Information Service Co., Ltd. 91,000 91,000 TaiMall Development Co., Ltd. 49,920 49,920 P.K. Venture Capital Investment Corp. 49,736 49,736 Apex Venture Capital Co., Ltd. 34,515 39,672 Ascentek Venture Capital Corp. 28,000 28,000 Taiwan Futures Exchange 25,250 25,250 Taipei Smart Card Corp. 25,000 25,000 Taiwan Aerospace Co., Ltd. 17,000 65,528 Pacific Venture Capital Co., Ltd. 12,300 20,501 Fubon Venture Capital Co., Ltd. 10,000 Taiwan Fixed Network Co., Ltd. 140,000 Others 26,487 54,303

$ 1,473,183 $ 1,712,885

Investments in equity instruments that do not have a quoted market prices in an active market, and whose fair values cannot be reliably measured are recognized at cost.

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For some financial assets carried at cost, impairment losses of $55,691 thousand for 2007 and $35,612 thousand for 2006 were recognized because of investees’ continued deficit and the low possibility of loss reversal. The related investees’ information is summarized as follows:


Investee 2007 2006

Taiwan Aerospace Co., Ltd. $ 48,528 $ Tnton Management Corp. 4,958 Primus Technology Fund 1,316 9,684 Pacific Venture Capital Co., Ltd. 889 Mondex Taiwan Inc. 664 P. K. Venture Capital Investment 25,264

$ 55,691 $ 35,612

13. MARKET DEBT INVESTMENTS WITH NO ACTIVE MARKET

December 31 2007 2006

Bank debenture $ 13,289,389 $ 16,524,502 Structured deposits 6,200,000 3,300,000 Collateralized debt obligation 3,571,793 2,016,634 Foreign government bonds 1,621,195 1,628,973 Corporate bonds 157,715 291,350

24,840,092 23,761,459 Less: Allowance for credit losses 157,715 187,091

$ 24,682,377 $ 23,574,368

14. OTHER FINANCIAL ASSETS

December 31 2007 2006

Guarantee deposits $ 1,702,310 $ 1,755,676 Nonperforming loans transferred from other than loans 313,115 378,487 Hedged derivative financial assets 47,340 322,830 Bills purchased 19,952 21,738

2,082,717 2,478,731 Allowance for nonperforming loans transferred from other than

loans 313,115 378,487

$ 1,769,602 $ 2,100,244

54

15. PROPERTY AND EQUIPMENT

December 31 2007 2006

Cost $ 18,175,430 $ 17,776,230 Accumulated depreciation Buildings and improvements 1,315,981 1,221,448 Office equipment 2,391,035 2,106,753 Transportation equipment 143,499 153,503 Other equipment 1,392,946 1,275,850

5,243,461 4,757,554 Construction in progress and prepayments for equipment 329,141 385,273

Net property and equipment $ 13,261,110 $ 13,403,949

16. OTHER ASSETS

December 31 2007 2006

Deferred income tax assets (Note 26) $ 405,612 $ 1,408,191 Prepaid pension 287,524 349,885 Prepaid expense 256,580 272,616 Others 238,063 361,196

$ 1,187,779 $ 2,391,888

17. DUE TO THE CENTRAL BANK OF CHINA AND OTHER BANKS

December 31 2007 2006

Call loans $ 39,233,672 $ 37,455,872 Redeposit from the directorate general of postal remittance 19,415,759 27,220,569 Due to the Central Bank 554,449 1,440,726 Overdrafts of bank 519,872 262,521 Due to banks 83,128 421,855

$ 59,806,880 $ 66,801,543

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18. PAYABLES December 31

2007 2006

Accounts and notes payable $ 9,266,533 $ 5,300,687 Accrued interest 4,645,082 4,310,482 Acceptances 4,177,883 4,591,875 Accrued expenses and taxes 3,729,561 3,958,894 Checks for clearing 2,022,504 8,905,334 Agency receipts 745,815 915,914 Salaries payable to employees of other organizations 339,109 390,851 Linkedtax payable 109,739 Lottery payable 3,126,759 Others 800,443 1,581,363

$ 25,836,669 $ 33,082,159

19. DEPOSITS AND REMITTANCES

December 31 2007 2006

Deposits Checking $ 30,537,765 $ 43,370,006 Demand 109,738,553 89,710,498 Savings 463,809,793 472,114,908 Time 210,955,605 169,723,438

Negotiable certificates of deposit 1,110,100 804,000 Outward remittances 976,830 190,722

$817,128,646 $775,913,572

20. BANK DEBENTURES

To maintain its capital adequacy ratio and the medium to longterm capital supply, the former TAIPEIBANK, Fubon Bank and Fubon Bills Finance Co., Ltd. applied to the Ministry of Finance for approval to issue bank debentures. The outstanding balances of bank debentures as of December 31, 2007 and 2006 are summarized as follows:

December 31 2007 2006

Financial liabilities cash flow hedge Former TAIPEIBANK Second dominant bank debentures issued in 2002; structured interest rate; maturity: June 2007 $ $ 9,500,000

Second dominant bank debentures issued in 2003; fixed 1.4% interest rate and structured interest rate; maturity: September 2008 or September 2010 800,000 800,000

Third dominant bank debentures issued in 2003; structured interest rate; maturity: January 2009 2,000,000 2,000,000

2,800,000 12,300,000 (Continued)

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December 31 2007 2006

Former Fubon Bank First subordinated bank debentures issued in 2002;structured interest rate; maturity: October 2007 $ $ 5,000,000

Second dominant bank debentures issued in 2002; structured interest rate; maturity: December 2007 5,000,000

First dominant bank debentures issued in 2003; structured interest rate; maturity: May 2010 5,800,000 5,800,000

Second dominant bank debentures issued in 2003; floating interest rate; maturity: June 2010 2,400,000 2,400,000

Third dominant bank debentures issued in 2003; floating interest rate; maturity: July 2010 500,000 500,000

Third dominant bank debentures issued in 2003; floating interest rate; maturity: August 2010 1,300,000 1,300,000

First dominant bank debentures issued in 2004; floating interest rate; maturity: February 2011 300,000 300,000

First dominant bank debentures issued in 2004; floating interest rate; maturity: March 2011 300,000 300,000

Second dominant bank debentures issued in 2004; structured interest rate; maturity: March 2011 300,000 300,000

Third dominant bank debentures issued in 2004; floating interest rate; maturity: March 2011 800,000 800,000

Fourth dominant bank debentures issued in 2004; structured interest rate; maturity: March 2011 1,500,000 1,500,000

13,200,000 23,200,000 Former Fubon Bills Finance Co., Ltd.

First dominant bank debentures issued in 2003; structured interest rate; maturity: April 2008 1,000,000 1,000,000

First dominant bank debentures issued in 2004; fixed 3.0% and 4.4%; maturity: May 2009 2,000,000 2,000,000

3,000,000 3,000,000 19,000,000 38,500,000

Financial liabilities fair value hedge Former TAIPEIBANK

First dominant bank debentures issued in 2003; structured interest rate; maturity: July 2013 5,000,000 5,000,000

Second dominant bank debentures issued in 2003; fixed 1.4% interest rate and structured interest rate; maturity: September 2008 or September 2010 3,200,000 3,200,000

Third dominant bank debentures issued in 2003; structured interest rate; maturity: January 2009 500,000 500,000

Fourth dominant bank debentures issued in 2003; structured interest rate; maturity: March 2011 900,000 1,900,000

Fifth dominant bank debentures issued in 2003; structured interest rate; maturity: March 2011 1,300,000 1,300,000

10,900,000 11,900,000 Former Fubon Bank

Fourth dominant bank debentures issued in 2003; floating interest rate; maturity: December 2008 2,000,000 2,000,000

Fifth dominant bank debentures issued in 2003; structured interest rate; maturity: December 2013 500,000 500,000

(Continued)

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December 31 2007 2006

Fifth dominant bank debentures issued in 2004; floating interest rate; maturity: March 2009 $ 300,000 $ 300,000

Fifth dominant bank debentures issued in 2004; floating interest rate; maturity: March 2011 3,100,000 3,100,000

Sixth dominant bank debentures issued in 2004; floating interest rate; maturity: June 2009 300,000 300,000

6,200,000 6,200,000 Valuation adjustments of bank debentures (689,744) (1,068,783)

16,410,256 17,031,217 Bank debentures Former TAIPEIBANK Third dominant bank debentures issued in 2002; structured interest rate; maturity: October 2007 5,000,000

Second dominant bank debentures issued in 2003; fixed 1.4% interest rate and structured interest rate; maturity: September 2008 and September 2010 300,000 300,000

300,000 5,300,000 Former Fubon Bills Finance Co., Ltd. First dominant bank debentures issued in 2005; fixed 2.1% or 1.95%; maturity: July 2012 or July 2007 2,500,000 2,500,000

Taipei Fubon Bank First dominant bank debentures issued in 2007; fixed 2.9% interest rate; maturity: June 2013 550,000

3,350,000 7,800,000

$ 38,760,256 $ 63,331,217 (Concluded)

21. OTHER FINANCIAL LIABILITIES December 31

2007 2006

Fund obtained from the government intended for specific types of loans

$ 1,251,526 $ 1,322,922

Hedged derivative financial liabilities 1,117,116 2,191,162 Guarantee deposit received 445,537 437,943

$ 2,814,179 $ 3,952,027

22. OTHER LIABILITIES December 31

2007 2006

Advance receipts $ 991,557 $ 1,842,406 Temporary receipt 676,601 1,070,403 Deferred revenue 77,154 95,711 Reserve for losses on guarantees 61,060 61,061 Reserve for losses on defaults and trading losses 15,729 93,585 Others 321,734 8,295

$ 2,143,835 $ 3,171,461

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23. STOCKHOLDERS’ EQUITY

a. Capital stock

On January 1, 2006, the Bank had $28,131,175 thousand in authorized capital divided into 2,813,117 thousand shares with an NT$10.00 par value. On May 24, 2006, the Bank’s board of directors resolved to transfer a legal reserve portion of $8,682,875 thousand and capital surplus of $2,813,117 thousand to capital and to issue 1,149,599 thousand shares. As of December 31, 2007, the Bank’s authorized and issued and outstanding capital stock amounted to $39,627,167 thousand, divided into 3,962,716 thousand shares.

b. Capital surplus

Under the Company Law and related regulations, capital surplus may only be used to offset a deficit. However, capital surplus arising from the issuance of stock in excess of par value, stock issuance to effect a merger, reissuance of treasury stock or donation may also be declared as stock dividend. Capital surplus arising from the issuance of stock in excess of par value can only be declared as stock dividend within specified limits and cannot be declared as stock dividend in the same year that the stock is issued for cash.

c. Earnings appropriation

Based on the Bank’s Articles of Incorporation, the following should be appropriated from annual net income, less any deficit:

1) 30% as legal reserve;

2) Less than 5% as bonus to employees of all or part of the remainder and unappropriated earnings generated in period years, as determined by the board of directors.

Based on a directive issued by the Securities and Futures Bureau, an amount equal to the net debit balance of certain stockholders’ equity accounts should be transferred from unappropriated earnings to a special reserve. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Appropriations of earnings should be resolved by the stockholders in, and given effect to in the financial statements of, the year following the year of earnings generation. Under the Financial Holdings Company Law, the Bank’s board of directors is allowed to carry out the functions of stockholders’ meetings as defined by the Company Law.

Under the Company Law, legal reserve should be appropriated until the reserve equals the Bank’s paidin capital. This reserve may only be used to reduce or offset deficit. When the reserve reaches 50% of the Bank’s paidin capital, up to 50% of the reserve may be capitalized. The Banking Law limits the appropriation of all dividends to 15% of the Bank’s paidin capital if the legal reserve equals the Bank’s paidin capital.

Under the Integrated Income Tax System, which took effect on January 1, 1998, local resident and corporate stockholders are allowed tax credits calculated on the basis of the ratio of creditable tax to unappropriated earnings on the date of dividend distribution.

59

In May 2007 and 2006, the board of directors which execute rights and functions of stockholders’ meeting resolved the appropriations of the 2006 and 2005 earnings, respectively, as follows:

Appropriations of Earnings Per Share (NT$) 2006 2005 2006 2005

Legal reserve $ 131,936 $ 1,510,318 Cash dividends 300,000 3,612,640 $0.08 $1.28 Bonus to employees cash 3,078 35,241

$ 435,014 $ 5,158,199

Had the above bonuses to employees had been paid entirely in cash and charged to the earnings of 2006 and 2005, the basic after income tax earnings per share in 2006 would have remained at NT$0.11 but would have decreased from NT$1.15 to NT$1.14 in 2005.

Information on the appropriations of the earnings of 2007 is available online on the Market Observation Post System website of the Taiwan Stock Exchange.

24. COMMISSION REVENUES, NET For the Years Ended

December 31 2007 2006

Commission revenue $ 9,509,554 $ 10,523,791 Commission expense (2,241,103) (4,339,721)

$ 7,268,451 $ 6,184,070

25. GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS


2007 2006

Disposal gain (loss) $ (301,732) $ 271,009 Revaluation gain 770,566 285,003 Dividend and bonus 111,970 30,455

$ 580,804 $ 586,467

26. INCOME TAX “Income Basic Tax Act” shall come into force on January 1, 2006. The amount of basic income of a profitseeking enterprise shall be the sum of the taxable income as calculated in accordance with the Income Tax Act and income exempted due to suspension of income tax and other relevant laws, and then multiplied by the tax rate (10%) prescribed by the Executive Yuan. The effect of which higher between regular income tax and basic tax had been considered in current income tax.

Since 1993, Fubon Financial Holdings Co., Ltd. adopted the linkedtax system for income tax filing with its eligible subsidiaries, including the Bank. Income tax information is as follows:

60

a. Reconciliation of tax on pretax income at statutory rate and current income tax payable


2007 2006

Tax on pretax income at 25% statutory rate $ 1,012,107 $ Add (deduct) tax effects of: Taxexempt income (835,324) (655,219) Permanent difference (209,770) (482,775) Temporary difference (471,799) (1,021,308) Loss carryforwards 504,786 2,159,302 Income basis tax 108,954 Tax on unappropriated earnings (10%) 785

Current income tax payable $ 109,739 $

b. Income tax expense (benefit)

Current income tax payable $ 109,739 $ Deferred income tax expense (benefit) 173,366 (1,137,995) Nondeductible tax of overseas branches 109,237 48,855 Separate taxes interest revenue on shortterm bills 46,964 236,700 Nondeductible withholding tax interest revenue on bonds 51,947 22,210 Adjustment of prior years’ tax 203,642 39,506 Income tax expense (benefit) 694,895 (790,724) Amortization of tax expense of cumulative effect of changes in accounting principles 104,153

Income tax expense (benefit) before cumulative effect of changes in accounting principles $ 694,895 $ (894,877)

c. Components of deferred income tax assets (included in “other assets”)

December 31 2007 2006

Deferred income tax assets: Loss carryforwards $ 249,062 $ 769,402 Financial assets impairment loss 238,370 7,960 Loss on derivative financial instruments available for sale financial assets and cash flow hedge 161,263 190,975

Temporary difference of overseas branches’ expense 11,471 Unrealized donation expense 58,190 76,439 Pension 32,615 17,471 Unrealized gain (loss) on financial instruments (353,160) (137,552) Credit loss in excess of tax limits 483,496 Others 7,801

$ 405,612 $ 1,408,191

The loss carryforward as of 2006 can be used to reduce the Bank’s taxable income until 2011.

61

Taxable income from all sources is subject to income tax. Foreign income taxes paid, to the extent of the domestic income tax applicable to the foreignsource income, are deductible against the domestic income tax liabilities.

d. The related information under the Integrated Income Tax System was as follows:

December 31 2007 2006

Balance of imputed tax credit account $ 351,158 $ 231,381

2007 2006 (Expected) (Actual)

The ratio of imputed tax credit to earnings Bank 10.48% 33.33%

Under the Integrated Income Tax System, stockholders (except those who are not residents of the ROC) are allowed a tax credit for the income tax paid by the Bank.

As of December 31, 2007 and 2006, the Bank had no unappropriatd retained earnings generated before January 1, 1998.

e. Income tax returns of the TAIPEIBANK Co., Ltd. (the Bank’s former name) and the former Fubon Bank through 2002 and those of the former Fubon Bills Finance Co., Ltd. through 2003 had been examined and cleared by the Taipei National Tax Administrative (TNTA). The Company disagreed with the tax authorities’ assessment of Fubon Bills Finance Co., Ltd’ 2004 tax return and had applied for a reexamination. On these returns, TNTA had decided to give a tax refund at 65% of tax paid on interest income earned by the Bank, and the Bank accepted this refund rate and accrued 35% of the withholding tax denied.

27. PERSONNEL EXPENSES, DEPRECIATION AND AMORTIZATION

For the Year Ended December 31 2007 2006

Included in Included in Included in Included in Branch General Branch General and And and and

Operating Adminis Operating Adminis Department trative Total Department trative Total

Personnel expenses Salaries and wages $ 2,377,520 $ 930,488 $ 3,308,008 $ 2,230,321 $ 818,914 $ 3,049,235 Pension 193,095 113,585 306,680 205,026 77,557 282,583 Others 913,023 1,319,799 2,232,822 1,013,298 1,055,715 2,069,013

$ 3,483,638 $ 2,363,872 $ 5,847,510 $ 3,448,645 $ 1,952,186 $ 5,400,831

Depreciation $ 372,631 $ 347,603 $ 720,234 $ 328,826 $ 346,939 $ 675,765 Amortization 131,841 184,122 315,963 92,729 173,229 265,958

$ 504,472 $ 531,725 $ 1,036,197 $ 421,555 $ 520,168 $ 941,723

62

28. EARNINGS (LOSSES) PER SHARE

The numerators and denominators used in computing earnings (losses) per shares (EPS) were summarized as follows:

Earnings (Losses) Per Share (NT$)

Amounts (Numerator) Shares Before After Before

Income Tax After

Income Tax (Denominator) (in housands)

Income Tax

Income Tax

Year ended December 31, 2007

Income for the year $ 4,048,469 $ 3,353,574 3,962,716 $ 1.02 $ 0.85

Year ended December 31, 2006

Loss before cumulative effect of change in accounting principle $ (909,421) $ (14,544) 3,962,716 $ (0.23) $

Cumulative effect of change in accounting principles 558,482 454,329 0.14 0.11

Income (loss) for the year $ (350,939) $ 439,785 $ (0.09) $ 0.11

29. PENSION PLAN

Under a defined benefit pension plan, the Bank makes monthly contributions to the employees’ pension fund. The fund is in the custody of the Pension Fund Supervising Committee and deposited in the Central Trust of China (the Central Trust of China merged with the Bank of Taiwan in July 2007, with the Bank of Taiwan as the survivor entity) on behalf of the committee’s name.

The Bank applied defined contribution plan regulated by Labor Pension Act after July 1, 2005. Under this Act, the Bank contributed 6% of the employee salaries to the Labor Insurance Administration, according to this Act, the contribution rate by the employer to the Labor Pension Fund per month shall not be less than 6% of the employee’s monthly wages. In the year of 2007 and 2006, the pension expense amount to $170,138 thousand and $148,432 thousand, respectively, which were contributed to personal pension accounts.

Other information of the defined benefit plan in 2006 and 2005 is as follows:

a. Net pension cost

2007 2006

Service cost $ 134,556 $ 145,517 Interest cost 45,391 54,301 Expected return on plan assets (64,504) (65,432) Amortization (2,958) (2,250)

Net pension cost $ 112,485 $ 132,136

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b. Reconciliation of the plan funded status to balance sheet amounts

December 31 2007 2006

Benefit obligation: Vested benefit obligation $ (365,916) $ (220,507) Nonvested benefit obligation (1,067,999) (741,329) Accumulated benefit obligation (1,433,915) (961,836) Additional benefits based on future salaries (541,906) (434,813) Projected benefit obligation (1,975,821) (1,396,649)

Fair value of plan assets 1,995,678 1,958,352 Funded status 19,857 561,703 Unrecognized transitional net asset (364 ) (486 ) Unamortized net pension gains or losses 268,031 (200,916)

Prepaid pension $ 287,524 $ 360,301

Vested benefits $ 450,929 $ 280,523

c. Actuarial assumptions Discount rate 2.75% 3.25% Rate of increase in compensation 2.50% 2.75% Expected longterm rate of return on plan assets 2.75% 3.25%

30. RELATEDPARTY TRANSACTIONS

The Bank’s related parties were as follows: a. Related parties

Related Party Relationship with the Bank

Fubon Financial Holdings Co., Ltd. (FFH) Parent company Taipei City Government (TCG) Major stockholder of parent company Fubon Insurance Co., Ltd. (“Fubon Insurance”) FFH’s subsidiary Fubon Life Insurance Co., Ltd. (“Fubon Life Insurance”)

FFH’s subsidiary

Fubon Securities Co., Ltd. (“Fubon Securities”) FFH’s subsidiary Fubon Bank (Hong Kong) Limited (formerly the International Bank of Asia Limited)

FFH’s subsidiary

Fubon Securities Investment Trust Co., Ltd. (“Fubon Securities Investment Trust”)

FFH’s subsidiary

Fubon Direct Marketing Consulting Co., Ltd. (“Fubon Direct Marketing Consulting”)

FFH’s subsidiary

Fubon Asset Management Co., Ltd. (“Fubon Asset Management”)

FFH’s subsidiary

Fubon Venture Capital Co., Ltd. FFH’s subsidiary Fubon Financial Holding Venture Co., Ltd. FFH’s subsidiary TAIPEIFUBON BANK Life Insurance Agency Co., Ltd. (“TAIPEIBANK Life Insurance Agency”)

Subsidiary

Fubon Bills Finance Co., Ltd. (FBFC) Subsidiary (merged with the BANK on December 25, 2006)

(Continued)

64

Related Party Relationship with the Bank

Fubon Leasing Co., Ltd. (“Fubon Leasing”) Subsidiary Fubonbank Insurance Agent Co., Ltd. (Liquidated in October 2006)

Subsidiary

Fubon Insurance Agent Co., Ltd. Subsidiary Fubon Real Estate Management Co., Ltd. Equitymethod investee TFN Media Co., Ltd. Major stockholder’s of parent company Taiwan Jantek Electronics Major stockholder’s of parent company Chung Hsing Land Development Co., Ltd. (CHLDC)

Major stockholder’s of parent company

Ming Tong Co., Ltd. Major stockholder’s of parent company Tao Yin Co., Ltd. Major stockholder’s of parent company Fuly General Insurance Agent Co., Ltd. FFH’s subsidiary’s equitymethod investee Fu Sheng Travel Service Co., Ltd. FFH’s subsidiary’s equitymethod investee Citi Fubon Life Insurance Company Hong Kong Limited

FFH’s subsidiary’s equitymethod investee

Fubon Media Technology Co., Ltd. FFH’s subsidiary’s equitymethod investee Fubon Securities (BVI) Co., Ltd. FFH’s subsidiary’s equitymethod investee Fubon Futures Co., Ltd. FFH’s subsidiary’s equitymethod investee Fubon Venture Capital Co., Ltd. FFH’s subsidiary’s equitymethod investee Sinostar Venture Capital Co., Ltd. FFH’s subsidiary’s equitymethod investee Fubon Securities Investment Consulting Co., Ltd. (Fubon Investment)

FFH’s subsidiary’s equitymethod investee

FuSheng Properties Insurance Agent Co., Ltd. FFH’s subsidiary’s equitymethod investee FuSheng Life Assurance Agent Co., Ltd. FFH’s subsidiary’s equitymethod investee Fuly Life Assurance Agent Co., Ltd. Related party in substance TAIPEIBANK Charitable Foundation Donation amount over onethird foundation Fubon Securities Investment’s affiliate funds Related party in substance Fubon Technology Consulting Co., Ltd. Related party in substance Taiwan Cellular Co., Ltd. Related party in substance Taipei Smart Card Corp. Related party in substance Taiwan Fixed Network Co., Ltd. Related party in substance Fubon Art Foundation Related party in substance Fubon Charity Foundation Related party in substance Fubon Culture and Education Foundation Related party in substance Fubon Building Management Maintain Co., Ltd. (“Fubon Building Management”)

Related party in substance

Fubon Securities Finance Co., Ltd. Related party in substance Fubon Land Development Co., Ltd. (Fubon Land Development)

Related party in substance

FuAn Leasing Co., Ltd. Related party in substance Taiwan High Speed Rail Corporation Related party in substance Taiwan Customer Service Technology Co., Ltd. Related party in substance TransAsia Telecommunications Related party in substance Fubon Construction Co., Ltd. Related party in substance Cash Box Corporation Related party in substance Win TV Broadcasting Co., Ltd. Related party in substance Others Directors, supervisors, managers and their

relatives up to the second degree (Concluded)

65

b. Significant relatedparty transactions are summarized as follows:

For the Year Ended December 31, 2007 Highest % of the Interest

Ending Balance for Account Income Balance the Period Balance Rate (%) (Expense)

1) Loans $ 40,176,695 $ 64,854,054 6.11 1.6798.2005 $ 1,717,737

For the Year Ended December 31, 2007

Account Volume or Name Highest Ending Type of

Is the Transaction at Arm’s Length Commercial

Category of Related Party Balance Balance Normal Overdue Collaterals Term

Employees consuming loan

58 $ 21,514 $ 21,514 ü $ Credit None

Households mortgages 156 696,397 685,629 ü Land and buildings

None

Others: Department of Rapid Transit Systems, TCG 2,486,507 2,486,507 ü Public treasury

guarantees Public treasury guarantees

Hydraulic Engineering Office, Public Works Department, Taipei City

7,142,251 7,142,251 ü Public treasury


Taipei Water Department, Taipei City

111 4 ü Public treasury guarantees

Public treasury guarantees

New Construction Office, Public Works Department, Taipei City

194,283 77,461 ü Public treasury


Taipei Municipal Secured Small Loans Service

20,411 13,913 ü Public treasury guarantees


Taipei City Government 29,845,110 6,845,110 ü Public treasury guarantees


Department Of Urban Development Taipei City Government

4,505,478 3,432,314 ü Public treasury


Taiwan High Speed Rail Corporation 19,141,992 19,141,992 ü Approval by

contract Approval by contract

Fubon Land Development 800,000 330,000 ü Land None

$64,854,054 $40,176,695

For the Year Ended December 31, 2006 Highest % of the Interest

Ending Balance for Account Income Balance the Period Balance Rate (%) (Expense)

1) Loans $ 48,378,486 $ 64,458,257 7.92 1.358.13 $ 1,010,664





Employees consuming loan

58 $ 17,436 $ 17,436 ü $ Credit None

Households mortgages 134 518,309 511,592 ü Land and buildings

None

Others: Department of Rapid Transit Systems, TCG

2,544,841 2,486,507 ü Public treasury guarantees


Hydraulic Engineering Office, Public Works Department, Taipei City



Taipei Water Department, Taipei City



New Construction Office, Public Works Department, Taipei City



Taipei Municipal Secured Small Loans Service



Department Of Finance Taipei City Government



66





Taipei City Government $ 26,245,110 $ 14,245,110 ü Public treasury guarantees


Household of Taipei City Government employee

3,600,000 430,000 ü Public treasury guarantees


Department Of Urban Development Taipei City Government



Taiwan High Speed Rail Corporation

11,651,749 11,651,749 ü Approval by contract

Approval by contract

TFN Media Co., Ltd. 500,000 475,000 ü Land and buildings

None

Fubon Land Development 800,000 800,000 ü Construction land None Taiwan Fixed Network Co., Ltd.

2,500,000 2,500,000 ü Machinery and equipment

None

$ 64,458,257 $ 48,378,486

(Concluded) For the Year Ended December 31

2007 2006 % of the Interest % of the Interest

Ending Account Income Ending Account Income

Balance Balance Rate (%) (Expense) Balance Balance Rate (%) (Expense)

2) Deposits $ 34,899,929 4.27 04.89 $ (252,527 ) $ 37,698,717 4.86 07.25 $ (201,842 ) 3) Due from banks call loans $ 3.255.15 $ 19,095 $ 1,360,865 3.08 1.424.2 $ 2,032 4) Due to banks call loans $ 4.236.35 $ (17,556 ) $ 1.425.5 $ (2,276 ) 5) Due from banks deposits $ 22,826 0.40 $ $ 1,522 0.06 $ 6) Deposits from other banks $ 6,136 0.03 0.055.53 $ (402 ) $ 4,584 2.78 $ (172 ) 7) Guarantees $ 991,163 1.97 0.7750.85 $ 9,390 $ 911,218 3.31 0.7750.85 $ 233

Guarantees December 31, 2007

Related Party

The Highest Balance in Current Period

Ending Balance

Provision (Note) Rates

Type of Collaterals

Taiwan High Speed Rail Corporation $ 1,065,718 $ 991,163 $ 0.775%0.85% None

December 31, 2006

Related Party

The Highest Balance in Current Period

Ending Balance

Provision (Note) Rates

Type of Collaterals

Taiwan High Speed Rail Corporation $ 911,218 $ 911,218 $ 0.775%0.85% None

8) Securities For the Years Ended

December 31 Issuer Type 2007 2006

Fubon Securities Bonds purchased $ 614,707 $ 569,090 Bonds sold 1,004 98,077 Bonds purchased 1,505,747 Bonds sold 513,781

Fubon Life Insurance Bonds purchased 213,248 (Continued)

For the Years Ended

67

December 31 Issuer Type 2007 2006

Fubon Securities Investment Trust Bonds sold under agreements to repurchase

$ 2,525,928 $ 5,450,279

Fubon Securities Bonds sold under agreements to repurchase

2,353,162 210,000

Taiwan High Speed Rail Corporation Bonds sold under agreements to repurchase

195,600 540,000

Fubon Asset Management Bonds sold under agreements to repurchase

151,053 120,184

Fubon Life Insurance Bonds sold under agreements to repurchase

1,002,752 165,345

Fubon Insurance Bonds sold under agreements to repurchase

390,000 240,976

aiwan Fixed Network Co., Ltd. Bonds sold under agreements to repurchase

10,345 9,373

(Concluded)

Bond transaction is not from OTC Electronic Bond Trading System.

9) Fund transactions

Balance as of December 31 2007 2006

Units (in Units (in Fund Thousands) Amount Thousands) Amount

Fubon No. 1 REITs $ 57,680 $ 616,599 $ 57,680 $ 615,446 Fubon Fund 51,123 488,225 51,684 567,490

10) Service fees

For the years ended December 31, 2007 and 2006, the Bank received service fees of $58,860 thousand and $65,649 thousand respectively, from the TCG for its handling of the loans to government employees and teachers and mortgage loans to various individuals. For paying principals and interests on bonds on behalf of the TCG, the Bank received service fees of $12,509 thousand and $18,417 thousand for the years ended December 31, 2007 and 2006, respectively.

11) Derivative financial instruments December 31, 2007

Contract Revaluation (Notional) Gain or Loss Balance sheet

Related Party Derivative Instrument Contract Period Amount for the Period Account Balance

Fubon Life Insurance Forward contracts 2007.11.072008.01.22 $ 1,295,961 $ 25,806 Revaluation of held for trading financial assets $ 25,806 Fubon Bank (Hong Kong) Limited Forward contracts 2007.01.232008.07.07 732,306 (14,956) Revaluation of held for trading financial liabilities (14,956) Fubon Bank (Hong Kong) Limited Forward contracts 2007.07.202008.11.03 796,788 16,511 Revaluation of held for trading financial assets 16,511 Fubon Securities Interest rate swap contracts 2006.02.172012.07.18 8,900,000 (68,996) Revaluation of held for trading financial liabilities (68,996) Fubon Securities Interest rate swap contracts 2006.02.222012.10.09 10,660,000 62,459 Revaluation of held for trading financial assets 62,459 Fubon Life Insurance Interest rate swap contracts 2007.06.072017.06.07 500,000 791 Revaluation of held for trading financial assets 791 Fubon Life Insurance Currency swap contracts 2007.04.262008.07.12 2,616,882 (3,932) Revaluation of held for trading financial liabilities (3,932) Fubon Life Insurance Currency swap contracts 2007.04.262008.11.26 4,471,524 21,509 Revaluation of held for trading financial assets 21,509 Fubon Insurance Currency swap contracts 2007.12.182008.11.26 771,872 (1,871) Revaluation of held for trading financial liabilities (1,871) Fubon Insurance Currency swap contracts 2007.07.032008.12.15 856,005 5,235 Revaluation of held for trading financial assets 5,235 Fubon Bank (Hong Kong) Limited Option 2007.05.072009.07.15 9,639,692 29,782 Revaluation of held for trading financial assets 29,782 Fubon Bank (Hong Kong) Limited Option 2007.05.072009.08.13 672,413 (7,731) Revaluation of held for trading financial liabilities (7,731) Fubon Bank (Hong Kong) Limited Option 2007.05.072009.08.13 3,541,666 (14,805) Revaluation of held for trading financial liabilities (14,805) Taiwan High Speed Rail Corporation Forward contracts 2007.12.262008.01.18 649,680 (11,255) Revaluation of held for trading financial liabilities (11,255)

68

December 31, 2006 Contract Revaluation (Notional) Gain or Loss Balance sheet

Related Party Derivative Instrument Contract Period Amount for the Period Account Balance

Fubon Life Insurance Currency swap contracts 2006.06.062007.06.08 $ 7,470,440 $ (14,060) Revaluation of held for trading financial liabilities $ (14,060) Fubon Securities Investment Trust Currency swap contracts 2006.12.182007.01.29 649,300 (1,231) Revaluation of held for trading financial liabilities (1,231) Fubon Insurance Currency swap contracts 2006.11.172007.03.20 1,519,268 (2,835) Revaluation of held for trading financial liabilities (2,835) Fubon Securities Interest rate swap contracts 2004.02.192011.08.29 9,386,500 (32,013) Revaluation of held for trading financial liabilities (32,013) Fubon Securities Interest rate swap contracts 2006.02.172011.09.22 8,000,000 32,430 Revaluation of held for trading financial assets 32,430 Taiwan Fixed Network Co., Ltd. Interest rate swap contracts 2005.06.212007.06.23 500,000 (363) Revaluation of held for trading financial liabilities (363)

12)Lease Rental Revenue (Expense) for the

Year Ended Lease December 31

Name Type Payment Frequency Deposits Lease Term 2007 2006

TCG Lessor Rentals paid monthly $ 2,000 December 2009 $ (27,638 ) $ (18,916 ) Lessee Rentals received annual December 2007 184 184

Fubon Securities Lessor Rentals payable monthly July 2009 (4,412 ) (3,254 ) Lessee Rentals received monthly May 2012 44,189 35,734

Fubon Insurance Lessor Rentals payable monthly 2,505 September 2011 (115,148 ) (122,228 ) Fubon Life Insurance Lessor Rentals payable monthly 908 September 2011 (10,480 ) (5,077 ) CHLDC Lessor Rentals payable monthly December 2019 (136,968 ) (125,472 ) Ming Tong Co., Ltd. Lessor Rentals payable monthly 2,742 April 2011 (19,992 ) (19,536 ) Taiwan Cellular Co., Ltd. Lessor Rentals payable monthly 1,461 March 2012 (7,784 ) (4,465 ) Fubon Asset Management Lessee Rentals received monthly November 2008 11,892 11,071 Fubon Bank (Hong Kong) Limited Lessee Rentals received monthly December 2008 3,190 2,231 Fubon Direct Marketing Consulting Lessee Rentals received monthly April 2006 1,760

13) Insurance The Bank entered into several contracts with Fubon Insurance, as follows:

Insurance Insurance Insured Item/Insurance Type Insurance Period Amount Premium

For the year ended December 31, 2007

Cash on hand 4/20/20074/20/2008 $ 300,000 $ 850 Coffer duty insurance 4/20/20074/20/2008 150,000 762 Computer equipment 11/1/200611/1/2007 2,758,613 6,897

11/1/200711/1/2008 3,027,667 6,055 Commercial fire insurance 4/20/20074/20/2008 4,894,454 2,943 Public accident 4/20/20074/20/2008 168,000 800 Car insurance 1/1/200712/31/2007 60 Combined insurance for the bank 4/20/20074/20/2008 272,000 12,150 Motorcycle insurance 6/4/20076/4/2008 455 Fidelity insurance 1/1/20061/1/2007 1,500 669

For the year ended December 31, 2006

Cash on hand 4/20/20064/20/2007 300,000 850 Coffer duty insurance 4/20/20064/20/2007 150,000 773 Computer equipment 11/1/200511/1/2006 2,879,761 7,199

11/1/200611/1/2007 2,758,613 6,897 Commercial fire insurance 4/20/20064/20/2007 5,580,128 3,293 Public accident 4/20/20064/20/2007 168,000 863 Car insurance 12/31/200512/31/2006 583 Combined insurance for the bank 4/20/20064/20/2007 272,000 12,150 Motorcycle insurance 6/4/20066/4/2007 559 Fidelity insurance 1/1/20061/1/2007 1,000 632

69

14)Cooperation The Bank entered into a cooperation contract with Fubon Securities on brokerage services. Under this contract, the Bank paid allocation costs of $181,211 thousand and $153,703 thousand for the years ended December 31, 2007 and 2006, respectively.

The Bank signed contracts with Taiwan Customer Service Technology Co., Ltd. (TCST) and Fubon Direct Marketing Consulting Co., Ltd. (FDMC) for these two companies to handle the collection of installment payments by the Bank’s credit cardholders. For the year ended December 31, 2006, the Bank paid $8,380 thousand to TCST. For the years ended December 31, 2007 and 2006, the Bank paid $1,881 thousand and $47,254 thousand to FDMC, respectively.

15)Donation An allocation of 30% of the Lottery department’s net income is being made to a public welfare foundation to carry out its social welfare responsibilities, as required by relevant regulations. Thus, for the years ended December 31, 2007 and 2006, the Bank donated $40,000 thousand and $60,000 thousand, respectively, to the Taipeibank Charitable Foundation. And for the year ended December 31, 2007, the Bank donated $15,000 thousand Fubon Cultural & Educational Foundation and Fubon Charity Foundation.

16)Linkedtax system The Bank’s parent company Fubon Financial Holdings Company (FFH) uses the linkedtax system for filing income tax returns of FFH and eligible subsidiaries, which include the Bank.

The estimated income tax refund of $1,971,834 thousand and $2,112,306 thousand for the years ended December 31, 2007 and 2006, respectively, will be refunded by FFH to the Bank; the estimated income tax payment of $109,739 thousand for the year ended December 31, 2007.

17)Disposal of nonperforming loans

For the Year Ended December 31, 2007 (In Thousands of New Taiwan Dollars)

Related party: Fubon Asset Management Co., Ltd.

Disposal date: January 9, 2007

Contract Items Amount Carrying Amount

Price Allocation

Secured $ $ $ Enterprise Nonsecured House mortgage Car loans Secured Others Credit cards 1,303,109 51,166 Cash cards 394,630 15,494 Micro credit

General

Nonsecured

Others Total 1,697,739 66,660

70



Disposal date: March 23, 2006


Price Allocation

Secured $ $ $ Enterprise Nonsecured House mortgage 103,897 103,757 82,020 Car loans Secured Others Credit cards Cash cards Micro credit

General

Nonsecured

Others Total 103,897 103,757 82,020



Disposal date: April 20, 2006


Price Allocation

Secured $ $ $ Enterprise Nonsecured House mortgage 266,149 264,866 204,625 Car loans Secured Others Credit cards Cash cards Micro credit

General

Nonsecured

Others Total 266,149 264,866 204,625

71



Disposal date: July 17, 2006


Price Allocation

Secured $ $ $ Enterprise Nonsecured House mortgage Car loans Secured Others Credit cards 824,691 33,164 Cash cards Micro credit 639,468 25,716

General

Nonsecured

Others Total 1,464,159 58,880



Disposal date: November 3, 2006


Price Allocation

Secured $ $ $ Enterprise Nonsecured House mortgage Car loans Secured Others Credit cards 1,449,889 61,766 Cash cards 218,229 9,296 Micro credit 891,039 37,958

General

Nonsecured

Others Total 2,559,157 109,020

As of December 31, 2006, related receivables amounting to $4,405,923 thousand had had not been collected. The annual interest rates for these receivables is 1.64%, calculated quarterly. The related receivable had been collected in 2007.

72

18)Others 2007 2006

Service revenue Fubon Bank (Hong Kong) Limited $ 75,585 $ 28,102 Service revenue Fubon Life Assurance 54,741 51,515 Service revenue Fubon Insurance 22,938 10,812 Service revenue Fubon Securities Investment Trust 37,744 43,668 Service revenue Fubon Media Technology Co., Ltd. 14,608 13,498 Service revenue Fubon Securities 20,436 5,652 Service revenue Fubon Investment 9,800 Service revenue others 7,090 7,486 Other revenue Fubon Direct Marketing Consulting 946 5,731 Other revenue Fubon Asset Management 37,170 22,223 Other revenue others 28 Service expense Taipei Smart Card Corporation 81,252 27,000 Service expense Fubon Life Insurance 37,632 35,852 Service expense Fubon Securities 18,688 Service expense Fubon Direct Marketing Consulting 203,135 229,571 Service expense Fubon Insurance 42,553 85,105 Service expense Taiwan Cellular Co., Ltd. 17,008 17,915 Service expense others 16,719 9,263 Business expense Fubon Building Management 5,793 4,489 Business expense Fubon Insurance 2,523 Business expense Fubon Direct Marketing Consulting 5,481 Donation Fubon Charity Foundation 17,076 Donation Fubon Culture and Education Foundation 20,536 2,000 Donation Fubon Art Foundation 10,172 5,003 Donation others 964 Insurance expense Fubon Life Insurance 60,809 52,533 Insurance expense Fubon Insurance 27,373 26,701 Other operating expense Taiwan High Speed Rail Corporation 22,000 Other operating expense Fubon Media Technology Co., Ltd. 2,444 1,457 Other operating expense Fubon Building Management 10,675 12,246 Other operating expense Taiwan Fixed Network Co., Ltd. 66,957 51,278

Transaction between the Bank and related parties are at arms length commercial terms except for the preferential interest rates offered to employees for savings and loans of up to prescribed limits.

Under the Banking Law, except for consumer and government loans, credits extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

31. PLEDGED ASSETS As of December 31, 2007 and 2006, the following assets had been provided as refundable deposits:

December 31 2007 2006

Availableforsale financial assets $ 4,515,762 $ 5,690,580 Heldtomaturity investments 97,452

$ 4,613,214 $ 5,690,580

73

Investments in bonds and other financial assets had been placed with (a) courts of justice as part of the requirements for pursuing various collection cases on overdue loans, (b) the National Credit Card Center to secure the Bank’s potential obligations on credit card activities, (c) the Central Bank of China to secure the Bank’s potential obligations on its trust activities, and (d) foreign governments to secure the Bank’s potential obligations on its overseas operations.

Negotiable certificates of deposits amounted to $1,650,000 thousand dollars were provided as collateral for daytime overdraft, a requirement for joining the Central Bank of China’s clearing system for realtime gross settlement (RTGS), and the pledged amount is adjustable depending on the overdraft amount.

As of December 31, 2007 and 2006, the Bank’s obligations had not been secured.

32. CONTINGENCIES AND COMMITMENTS

As of December 31, 2007, in addition to those disclosed in Note 33, financial instruments, contingences and commitments of the Bank are summarized as follows:

a. Repurchase/resell agreements

Bills and bonds sold under repurchase agreements before September 18, 2006 $58,818,361

As of December 31, 2007, the Bank’s investments in financial assets at fair value through profit or loss and availableforsale financial assets, net, which amounted to $3,319,800 thousand and $50,017,200 thousand, respectively, had been sold under repurchase agreements.

b. The Bank has several operating lease agreements with both related parties and third parties, which cover office spaces. As of December 31, 2007, the related refundable lease deposits aggregated $399,446 thousand (part of “other financial assets”), including refundable deposits of $298,000 thousand. Under agreements with the lessors, the interest on these deposits serves as the Bank’s rental payments. The minimum future rentals were as follows: Fiscal Year Amount 2008.1.112.31 $ 907,749 2009.1.112.31 736,557 2010.1.112.31 486,030 2011.1.112.31 270,731 2012.1.112.31 139,515 Rentals from 2013 to 2015 amount to $48,554 thousand, the present value of which is about $41,953 thousand discounted at Taiwan Post’s oneyear time deposit rate of 2.62%.

c. As of December 31, 2007, construction and purchase contracts amounted to $439,295 thousand, of which $82,290 thousand was unpaid.

d. The Bank sold its Fubon Neihu building to Taiwan Land Bank Co., Ltd., the trust company of Fubon REIT II, and then leased the building back. The disposal gain of $297,232 thousand will be recognized over the threeyear lease period.

e. Under a pronouncement by the Ministry of Finance, the Bank became in charge of issuing tickets for the Taiwan Sports Lottery from 2008 to 2013. Each year, the Bank must issue Taiwan Sports Lottery tickets amounting to at least $4,000,000 thousand and profits must reach at least 80% of the amount stated in the Bank’s financial plan.

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f. Balance sheets and trust properties of trust accounts:

These items were managed by the Bank’s Trust Department. However, these items were not included in the Bank’s financial statements.

Balance Sheet of Trust Accounts For the Year Ended December 31, 2007

(In Thousands of New Taiwan Dollars)

Other Trust Business

Financial Assets and Real Estate Trust Plan Total

Trust assets

Bank deposits $ 18,241 $ 577,373 $ 595,614 Bonds 88,675,480 88,675,480 Stocks 7,585,326 7,585,326 Mutual funds 147,052,835 147,052,835 Receivables sale of securities 259 259 Real estate Land 496,400 2,848,385 3,344,785 Buildings 103,600 12,861 116,461 Construction in process 1,910,709 1,910,709

Net asset value of collective investment trust fund 4,152,691 4,152,691

Total trust assets $ 618,241 $ 252,815,919 $253,434,160

Trust liabilities

Payables $ 478 $ $ 478 Other liabilities 14,344 14,344 Trust capital 600,000 251,940,075 252,540,075 Reserves and cumulative earnings Net income 106 15,247,226 15,247,332 Cumulative earnings 3,313 (18,524,073) (18,520,760)


Total trust liabilities $ 618,241 $ 252,815,919 $253,434,160

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Trust Income Statement For the Year Ended December 31, 2007


Other Trust Service


Trust income Interest income $ 23 $ 2,744 $ 2,767 Rental income 26,145 26,145 Cash dividends 2,796,441 2,796,441 Realized capital income common stock 8,265 8,265 Realized capital income mutual fund 4,240,412 4,240,412 Gains from asset trading 11,671,945 11,671,945 Others Total trust income 26,168 18,719,807 18,745,975

Trust expense Trust administrative expenses 742 1,067,857 1,068,599 Supervision fee 240 240 Tax expenses 1,277 1,277 Commission and fees 370 370 Realized capital loss common stock 82,514 82,514 Income tax expenses 2,853 2,853 Losses from assets trading 2,318,747 2,318,747 Distribution of beneficiary certificates 23,218 23,218 Others 825 825 Total trust expenses 26,062 3,472,581 3,498,643

Income before income tax 106 15,247,226 15,247,332 Income tax expense

Net income $ 106 $ 15,247,226 $ 15,247,332

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Balance Sheet of Trust Accounts For the Year Ended December 31, 2006




Trust assets

Bank deposits $ 18,268 $ 2,203,270 $ 2,221,538 Bonds 75,266,532 75,266,532 Stocks 7,463,422 7,463,422 Mutual funds 96,274,445 96,274,445 Receivables sales of securities 37,168 37,168 Real estate Land 496,400 2,244,396 2,740,796 Buildings 103,600 12,142 115,742 Construction in process 142,755 142,755


Total trust assets $ 618,268 $ 188,007,663 $188,625,931

Trust liabilities

Payables $ 611 $ $ 611 Other liabilities 14,344 14,344 Trust capital 600,000 183,772,667 184,372,667 Reserves and cumulative earnings Net income (315 ) (63,942) (64,257) Cumulative earnings 3,628 (64,595) (60,967)

Collective investment trust fund 4,363,533 4,363,533

Total trust liabilities $ 618,268 $ 188,007,663 $188,625,931

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Trust Income Statement For the Year Ended December 31, 2006




Trust income Interest income $ 23 $ 1,603 $ 1,626 Rental income 26,065 26,065 Cash dividends 18,176 18,176 Realized capital income common stock 14,626 14,626 Realized capital income mutual fund 213 213 Others 224 224 Total trust income 26,088 34,842 60,930

Trust expense Trust administrative expenses 744 1,710 2,454 Supervision fee 50 50 Contractual fee 1,681 1,681 Tax expenses 1,226 255 1,481 Commission and fees 613 613 Realized capital loss common stock 73,851 73,851 Income tax expenses 20,111 20,111 Architecture agent commission 150 150 Architecture fee 280 280 Distribution of beneficiary certificates 23,338 23,338 Others 1,095 83 1,178 Total trust expenses 26,403 98,784 125,187

Income before income tax (315 ) (63,942) (64,257) Income tax expense

Net loss $ (315 ) $ (63,942) $ (64,257)

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Trust Properties of Trust Accounts December 31, 2007 and 2006



Investment Portfolio 2007 2006

Bank deposits $ 595,614 $ 2,221,538 Shortterm investments Mutual funds 147,052,835 96,274,445 Bonds 88,675,480 75,266,532 Stocks 7,585,326 7,463,422

243,313,641 179,004,399 Receivable sales of securities 259 37,168 Net asset value of collective investment rust fund 4,152,691 4,363,533 Real estate Land 3,344,785 2,740,796 Buildings 116,461 115,742 Construction in progress 1,910,709 142,755

5,371,955 2,999,293

Total $ 253,434,160 $ 188,625,931

33. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments

2007 2006 Carrying Amount Fair Value

Carrying Amount Fair Value

Financial assets

Other shortterm financial assets $ 284,253,626 $ 284,253,626 $ 319,529,688 $ 319,529,688 Financial assets at fair value through profit or loss 20,642,620 20,642,620 27,409,369 27,409,369 Availableforsale financial assets 85,559,042 85,559,042 75,181,582 75,181,582 Discounts and loans 657,051,262 657,051,262 611,022,779 611,022,779 Heldtomaturity investments 5,883,418 5,850,109 4,808,219 4,808,367 Equity investments equity method 1,110,570 1,110,570 721,054 721,054 Other financial assets 27,925,162 27,936,747 27,387,497 27,566,955

Financial liabilities

Other shortterm financial liability 155,625,062 155,625,062 161,753,157 161,753,157 Financial liabilities at fair value through profit or loss 7,604,838 7,604,838 4,315,206 4,315,206

Deposit and remittance 817,128,646 817,128,646 775,913,572 775,913,572 Bank debenture 38,760,256 38,757,407 63,331,217 63,381,028 Other financial liabilities 2,814,179 2,814,179 3,952,027 3,952,027

Effective January 1, 2006, the Bank adopted the Statements of Financial Accounting Standard No. 34 “Accounting for Financial Instruments” and No. 36 “Disclosure and Presentation of Financial Instruments” and other standards amended for harmonizing with those two standards. The amount of the cumulative effect resulting from the change to new accounting principles refer to Note 3.

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b. Methods and assumptions applied in estimating the fair values disclosures for financial instruments are as follows: 1) The carrying amounts of cash and cash equivalents, due from the Central Bank and other

banks, securities purchased under agreements to resell, receivables (exclude tax receivables), call loans and due to banks, payables, securities sold under agreements to repurchase, borrowed funds, and remittances approximate their fair values because of the short maturities of these instruments.

2) For financial assets at fair value through profit or loss, availableforsale financial assets, heldtomaturity investments and hedging derivative financial instruments, fair value is best determined using quoted market prices. However, in many instance, there are no quoted market price for the Bank’s various financial instruments. In case where quoted market prices are not available, fair values are based on estimates using available indirect data and appropriate valuation methodologies.

Debt investments with no active market and bank debenture are valued using prescribed valuation method.

3) Discounts and loans, deposits are interestearning assets or interestbearing liabilities or fair value hedge. Thus, their carrying amounts represent fair values.

4) The fair values of equity investment equity method and unquoted equity instruments are estimated at carrying amounts because they have no quoted prices in an active market.

5) If quoted price for derivatives is not available, fair values of forward contracts and interest rate swap contracts are based on estimates using present value techniques. Options’ fair value are based on estimates using the BlackScholes model.

6) Fair values of forward contracts are estimated using the forward rates provided by Reuters. Fair values of interest rate swap contracts and crosscurrency swap contracts are estimated using the market quotations provided by Bloomberg, but the fair value of parts of these contracts are provided by the counterparties.

7) Refundable deposits have no specified maturity date and thus its market value is estimated based on its carrying value in the balance sheet. The carrying value of the guarantee deposits received is the reasonable base for estimating market value for carrying value is the current payoff price.

c. Fair values of financial assets and financial liabilities determined based upon quoted market prices or estimates summarized as follows:

Quoted Market Prices Fair Value Based on Estimates December 31 December 31

2007 2006 2007 2006 Financial assets Financial assets at fair value through profit or loss $ 1,728,941 $ 17,689,512 $ 18,913,679 $ 9,719,857 Availableforsale financial assets 58,653,494 44,708,672 26,905,548 30,472,910 Heldtomaturity investments 5,850,109 4,808,367 Other financial assets 27,936,747 27,566,955 Financial liabilities Financial liabilities at fair value through profit or loss 7,604,838 4,351,206 Bank debentures 3,347,151 10,849,811 35,410,256 52,531,217 Other financial liabilities 2,814,179 3,952,027

For the years ended December 31, 2007 and 2006, valuation of financial assets and liabilities at fair value through profit or loss were gain amounting to $1,124,258 thousand and loss amounting to $15,004 thousand, respectively.

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In 2007 and 2006, for financial assets and liabilities other than those at fair value through profit or loss, interest revenues were $35,571,945 thousand and $40,943,514 thousand, respectively, and interest expenses were $17,759,563 thousand and $21,886,097 thousand, respectively.

On availableforsale financial assets, losses of $473,586 thousand in 2007 and $1,211,743 thousand in 2006 were charged to stockholders’ equity. In addition, $961,552 thousand and $420,211 thousand on these assets were deducted from stockholders’ equity and charged to current income of 2007 and 2006, respectively.

d. Financial risk information

1) Market risk The Bank engages into bonds, bills, loans and other similar financial instruments transactions. The values of those commodities will fluctuate with market interest rates on the balance sheet date. The interest rate sensitivity information is described in Note 36.

2) Credit risk The Bank is exposed to credit risk in the event of default on contracts by counterparties. To control this risk, the Bank makes credit commitments and issues financial guarantees and standby letters of credit only after careful evaluation of customers’ credit worthiness. On the basis of the result of the credit evaluation, the Bank may require collateral before drawings are made against the credit facilities. As of December 31, 2007 and 2006, the ratio of secured loans to total loans were 53.54% and 52.11%, respectively. The ratios of secured financial guarantees and standby letters of credits were from 0% to 50%, and the average for the years ended December 31, 2007 and 2006 were about 28.7% and 40.59%, respectively. Collaterals held vary but may include cash, inventories, marketable securities, and other properties. When the customers default, the Bank will, as required by circumstances, foreclose the collaterals or execute other rights arising out of the guarantees given. Since most of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash demands. The maximum potential amount of future payments represents the notional amounts that could be lost under the guarantees if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from collaterals held or pledged.

The maximum credit exposure of the offbalance sheet financial instruments are summarized as follows:

December 31 2007 2006

Credit card commitments for credit card $ 221,438,858 $228,050,486 Financial guarantees and standby letter of credit 67,379,932 55,168,298 Undrawn loan commitments 95,207,125 99,658,120

The credit risk amounts of counterparties presented above were offbalance sheet credit risk contracts with positive amounts on the balance sheet. Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to the Bank’s total credit exposure.

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The Bank maintains a diversified portfolio, limits its exposure to any one geographic region, country or individual creditor and monitors the exposure on a continuous basis. The Bank’s most significant concentrations of credit risk were summarized as follows:

December 31 2007 2006

Credit Risk Profile by Counterparty Carrying Amount

Maximum Credit Exposure

Carrying Amount

Maximum Credit Exposure

Manufacturing industry $ 95,383,735 $ 95,383,735 $ 93,629,708 $ 93,629,708 Real estate and leasing industry 32,434,124 32,434,124 30,443,930 30,443,930 Transportation, warehousing and telecom industries 32,010,952 32,010,952 14,161,713 14,161,713

$ 159,828,811 $ 159,828,811 $ 138,235,351 $ 138,235,351

3) Liquidity risk

As of December 31, 2007 and 2006, the liquidity reserve ratios were 18.48% and 26%, respectively. The Bank has sufficient capital and working capital to execute all contract obligations of contract and has no liquidity risk.

The management policy of the Bank is to match the contractual maturity profile of and interest rates for its assets and liabilities. As a result of uncertainties, however, the maturities and interest rates usually have no match, and the absence is this match may give rise to gain or loss.

The Bank applied appropriate way to group assets and liabilities. The maturity analysis of assets and liabilities was as follows:

Year Ended December 31, 2007

Due in Due Between

One Month and Due Between Three Months

Due Between Six Months and

Due Between One Year and Due After

One Month Three Months and Six Months One Year Seven Years Seven Years Total

Assets

Cash and cash equivalents $ 15,059,774 $ $ $ $ $ $ 15,059,774 Due from the Central Bank of China and other banks 152,239,450 13,120,000 17,695,000 22,055,000 205,109,450

Financial assets at fair value through profit or loss 14,417,638 2,151,855 499,417 3,426,553 147,157 20,642,620

Receivables 66,961,628 232,170 86,954 15,067 67,295,819 Discounts and loans 128,501,614 23,752,693 23,747,887 31,076,925 184,476,894 270,803,285 662,359,298 Availableforsale financial assets 11,086,515 1,350,661 6,083,892 60,411,673 6,626,301 85,559,042 Heldtomaturity investments 472,855 97,452 599,537 4,227,449 486,125 5,883,418 Debt investments with no active market 6,292,264 765,824 9,839,374 7,784,915 24,682,377 Hedged derivative financial assets 47,340 47,340

$ 377,180,104 $ 50,816,088 $ 49,769,635 $ 64,022,798 $ 259,149,887 $ 285,700,626 $ 1,086,639,138

Liabilities

Due to the Central Bank of China and other banks $ 41,340,271 $ 5,542,061 $ 5,030,198 $ 6,854,894 $ 1,039,456 $ $ 59,806,880

Borrowed funds 11,803,415 11,803,415 Financial liabilities at fair value through profit or loss 7,604,838 7,604,838

Bonds and shortterm bills sold under agreements to repurchase 55,055,203 2,896,242 607,257 188,826 58,747,528

Accounts payables 22,012,633 807,013 848,600 1,486,053 682,370 25,836,669 Deposits and remittances 490,169,945 72,872,241 77,503,413 118,018,499 42,229,062 16,335,486 817,128,646 Bank debentures 1,000,000 3,100,000 34,660,256 38,760,256 Hedged derivative financial liabilities 5,582 3,823 75,132 1,032,579 1,117,116

$ 627,991,887 $ 82,121,380 $ 84,989,468 $ 129,723,404 $ 79,643,723 $ 16,335,486 $ 1,020,805,348

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December 31, 2006 Due Between

Due in After One Year

and Due After One Year Seven Years Seven Years Total

Assets

Cash and cash equivalents $ 19,244,303 $ $ $ 19,244,303 Due from the Central Bank of China and other banks 239,834,761 239,834,761

Financial assets at fair value through profit or loss 12,201,733 15,218,314 27,420,047

Bonds and shortterm bills purchased under agreements to resell 29,943 29,943

Receivables 59,507,406 4,405,923 63,913,329 Discounts and loans 204,449,093 166,907,728 246,670,605 618,027,426 Availableforsale financial assets 10,805,875 60,824,238 3,551,469 75,181,582 Heldtomaturity investments 298,387 4,509,832 4,808,219 Debt investments with no active market 728,401 11,237,963 11,795,095 23,761,459 Other financial assets 280,293 1,816,027 3,924 2,100,244

$ 547,380,195 $ 264,920,025 $ 262,021,093 $ 1,074,321,313

Liabilities

Due to the Central Bank of China and other banks $ 66,801,543 $ $ $ 66,801,543

Borrowed funds 6,029,171 6,029,171 Financial liabilities at fair value through profit or loss 499,851 3,785,400 29,955 4,315,206

Bonds and shortterm bills sold under agreements to repurchase 56,056,537 56,056,537

Accounts payables 33,082,159 33,082,159 Deposits and remittances 726,591,762 49,321,810 775,913,572 Bank debentures 23,431,217 38,000,000 1,900,000 63,331,217 Other financial liabilities 2,324,549 1,627,478 3,952,027

$ 914,816,789 $ 92,734,688 $ 1,929,955 $ 1,009,481,432

4) Cash flow risk and fair value risk arising from interest rate fluctuations

Interest rate risk refers to a decline in the earnings and value of financial instruments due to adverse fluctuations of interest rates. Since this risk is considered material, the Bank enters into interest rate swap contracts to manage this risks.

e. Fair value hedge and cash flow hedge

1) Fair value hedge

The Bank enters into interest rate swap contracts to hedge the risk of interest rate fluctuations of the fixed rate loans and the bank debenture.

December 31 2007 2006

Hedged Items Hedging Instruments

Nominal Amount

Fair Value

Nominal Amount

Fair Value

Loans Interest rate swap contract $ 383,491 $ (5,582) $ 3,500,000 $ (11,107) Bank debentures Interest rate swap contract 23,600,000 (689,744) 22,900,000 (1,068,783) Availableforsale financial assets corporated bonds

Interest rate swap contract 1,248,685 (55,706)

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2) Cash flow hedge

The future cash flows on the floating rate debts taken by the Bank may fluctuate and lead to risk because of market interest rate changes. The risk is considered to be material to the Bank, and the Bank entered into interest rate swap contracts for hedging purposes.

Projected Period

Designated Hedging Instruments Projected Gain/Loss Financial Instrument December 31, 2007 Period of Recognized in

Designated as Nominal Cash Flow the Income Hedged Items Hedging Instruments Principal Fair Value Generation Statement

Bank debentures Interest rate swap contracts $ 19,600,000 $ (318,744) 20062013 20062013

Projected Period

Designated Hedging Instruments Projected Gain/Loss Financial Instrument December 31, 2006 Period of Recognized in

Designated as Nominal Cash Flow the Income Hedged Items Hedging Instruments Principal Fair Value Generation Statement

Bank debentures Interest rate swap contracts $ 36,000,000 $ (788,442) 20062013 20062013

For the Year Ended December 31

2007 2006

Stockholders’ equity adjustment, beginning of period $ (528,900) $ Transfer from stockholders’ equity to current gain or loss 1,668,843 75,369 Debit to stockholders’ equity in the current period (1,379,001) (604,269)

Stockholders’ equity adjustment, end of period $ (239,058) $ (528,900)

34. RISK CONTROL AND HEDGE STRATEGY

a. Risk management hierarchy

The Asset/Liability and Risk Management Committee, which is led by the general manager and supervised by the board of directors, coordinates each department’s highlevel managements’ involvement in risk management to examine the Bank’s overall asset status: credit risk, liquidity risk, capital adequacy and asset quality.

The Committee has set up a credit risk control panel, financial operation and risk control panel, funding panel and operating risk control panel, with members consisting of supervisors of the departments concerned. The panels were set up to enhance the Bank’s credit risk control, funding efficiency, financial operation market risk control and operation risk control. The panels meet monthly and whenever needed. For enhanced management of the credit exposures of various groups within the Bank as well as the credit cases involving big amounts, the credit audit committee has been established.

For enhanced independence of the Bank’s risk management, a chief risk officer was designated in March 2005 to monitor and evaluate corporate banking credit risk, consumer banking credit risk, finance transactions and investment market risk and be responsible for the buildup of a risk management hierarchy.

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The Bank’s risk management hierarchy is as follow:

b. Risk management missions and targets

The risk management missions of the Fubon Financial Holding Co., Ltd. and the Bank are to build up a solid risk management culture and environment; use Basel II risk management regulations as a benchmark to build up sound risk management system and control procedures; identify, monitor, evaluate, write off and do overall management of the risks faced by the Bank actively and efficiently to achieve optimal riskweighted return and to advance the Bank’s sound, steady development.

c. Risk management policy

To carry out its risk management mission, the Bank follows the risk management policy of Fubon Financial Holding Co., Ltd. and established related risk management procedures and principles for corporate banking, consumer banking, financial management and the financial market business.

The Bank set up asset/liability management regulations and related principles and risk indicators, including risk limit and risk stoploss point, taking into consideration the security of funding, liquidity and profitability.

The foregoing regulations and principles are updated periodically in light of business growth and the external economic and finance market environment.

Board of Directors

General Manager

Asset/liability and Risk Management Committee

Credit Risk Control Panel

Financial Operation and Risk Control

Panel

Funding Panel Operational Risk Control Panel

Chief Risk Officer

Operation Risk

Market risk Credit Risk Consumer Banking

Credit Risk Corporate Banking

Credit and Transaction Audit

Committee

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d. The methodology for evaluating and controlling risks and the risk exposure information are as follows:

1) General qualitative disclosure a) Strategy and procedure

i. Credit risk domain Credit risk strategy is based on the Bank’s overall risk management target and sound credit principles, using effective credit risk management mechanisms to identify, evaluate, manage and monitor credit risk and ensure that business operations are within a tolerablerisk range by interpreting and analyzing the credit information provided by the Joint Credit Information Center and the Taiwan Clearing System.

ii. Market risk domain

The Bank’s market risk strategy is based on its overall risk management target. The Bank identifies, evaluates, manages, monitors market risk and efficiently controls the risks on interest rates, exchange rates, equity securities prices and fund liquidity.

Following the established market risk management principles, the market risk management unit identifies, evaluates and controls the Bank’s market risk. It also provides management information and reports to supervisors concerned to help control the Bank’s overall market risk.

iii. Operating risk domain

Based on the Bank’s overall risk management target, the operation risk strategy is to identify, evaluate, control and monitor effectively and efficiently all the risks on all commodities, services, operations and systems and take suitable risk writeoff measures.

In 2004, the Bank established a new operating risk system, which included the setup of operating risk management policies. Each department established, for each industry, its main risk indicators and risk monitoring points, making operation risk monitoring point selfassessment and main risk indicators evaluation to identify and quantify existing or potential operating risks and take preventive measures immediately.

b) Related organization and hierarchy of risk management system Please refer to the risk management hierarchy chart shown in Note 33a.

c) The range and characteristics of the risk report and evaluation system i. Credit risk domain

Under its overall risk management policy, the Bank set up credit risk management principles and procedures as well as an integrated risk management system with Fubon Financial Holdings Co., Ltd. (FFH). In mid2005, the Bank initiated a Basel risk management project, with project members including prestigious international risk system firms, data warehousing system firms and risk management consulting firms. In the credit risk domain, Foundation IRB will be introduced to establish a quantified riskrating and risk data warehousing system, defaultforecasting and lossforecasting models, and a mechanism for asset portfolio risk management and risk pricing.

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ii. Market risk domain

Market risk comprises risks resulting from fluctuations of interest rates, exchange rates and stock prices. The Bank evaluates market risks and has set a suitable exposure limit and stoploss limit by using sensitivity analysis to help ensure that risks stay within a tolerable range. The Bank will coordinate with FFY to establish a management system that can use the Internal Model approach IMA in the market risk domain.

iii. Operation risk domain

The Bank has used standard operating risk management procedures. To enhance the identification and control of operating risks, the Bank has defined operating risks by level of severity and required all its branches and section centers to follow the operating risk management procedures.

d) Hedging strategy and procedures and effectiveness of hedge monitoring

i. Credit risk

In managing credit risks, the Bank uses a systematic credit rating technique and various risk management measures based on risk ratings, and reviews periodically the results of risk management measures. Lowerlevel units of the Bank reports to higherlevel units on the effectiveness of risk management policies.

ii. Market risk

Under certain regulations issued by the authorities, the Bank set up derivatives processing procedures, to regulate the trading, settling, risk management and internal auditing departments. The Bank classifies all transactions into hedging/nonhedging based on the transaction purpose and this classification cannot be changed arbitrarily. The asset/liability & risk management committee and the Bank’s independent risk management department will execute continuing monitoring and management to ensure the effectiveness of transaction handling.

iii. Operation risk

To manage operation risks, the Bank strengthens its internal control system, trains its employees in risk management, and buys some insurance to cover the transfer and writeoff of risks.

The amounts of writtenoff or transferred operation risks are included in the operation risk control report to monitor continually and effectively the outcome of the risk writeoff or transfer.

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35. AVERAGE AMOUNTS AND AVERAGE INTEREST RATES OF INTERESTEARNING ASSETS AND INTERESTBEARING LIABILITIES

Average balances were calculated at the daily average balance of interestearning assets and interestbearing liabilities.

For the Years Ended December 31 2007 2006

Average Average Average Average Balance Rate( %) Balance Rate( %)

Interestearning assets Cash due from banks deposits $ 1,657,638 5.33 $ 3,139,607 2.81 Due from the Central Bank of China and other banks 120,134,521 3.32 61,169,197 2.31 Financial assets at fair value through profit or loss 16,947,312 1.60 23,342,396 2.12 Securities purchased under agreement to resell 209,155 1.12 2,067,340 0.58 Accounts receivable factoring 7,581,897 6.09 1,245,067 7.36 Discounts and loans 670,353,746 3.77 599,394,436 4.00 Availableforsale financial assets 175,814,948 2.23 204,555,516 1.88 Heldtomaturity investments 5,435,386 2.41 4,403,550 1.84 Nonactive market debt instrument 26,303,718 4.97 23,965,047 5.78 Interestbearing liabilities Due to banks 71,520,137 3.90 63,143,394 3.03 Borrowed funds 15,733,672 5.21 4,008,879 4.96 Securities sold under agreement to repurchase 62,198,021 1.72 50,088,315 1.44 Demand deposits 90,561,150 0.63 78,394,484 0.61 Savings deposits 255,918,730 0.62 240,912,586 0.62 Time deposits 190,923,342 2.82 148,780,461 2.42 Timesavings deposits 223,828,812 2.26 220,118,682 1.97 Negotiable certificates of deposit 839,061 1.16 1,134,561 1.01 Public treasury savings 24,108,146 0.35 31,491,031 0.38 Bank debentures 57,355,342 1.92 59,605,479 1.80

36. ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES a. Asset quality

See Table 6.

b. Concentration of credit extensions December 31, 2007

(In Thousands of New Taiwan Dollars, %)

Rank (Note 1) Group Name (Note 2)

Credit Extensions

Balance (Note 3)

% of Net Asset Value

1 Continental Engineering Corporation Group (Note 4) 21,358,601 28.44

2 AUO Group 9,915,862 13.20 3 FCFC (Formosa Chemicals & Fibre Corporation) 8,843,373 11.78 4 Far Eastern Textile 6,855,919 9.13 5 Chi Mei Group 6,284,702 8.37 6 Hon Hai Group 6,217,588 8.28 7 USI Group 5,836,151 7.77 8 Tatung Group 5,416,161 7.21 9 Powerchip Semiconductor Corp. 4,934,831 6.57 10 Pacific Electric Wire & Cable Group 4,575,967 6.09

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December 31, 2006


Rank (Note 1) Group Name (Note 2)

Credit Extensions Balance (Note 3)

% of Net Asset Value

1 Continental Engineering Corporation Group (Note 4) 14,201,971 19.65

2 FCFC (Formosa Chemicals & Fibre Corporation) 10,811,116 14.96 3 Benq Corporation 10,341,745 14.31 4 Chi Mei Group 8,831,167 12.22 5 Tatung Group 7,790,683 10.78 6 Pacific Electric Wire & Cable Group 6,699,916 9.27 7 Far Eastern Textile 6,242,559 8.64 8 UmiPresident Group 4,573,569 6.33 9 Hon Hai Group 4,403,229 6.09 10 Evergreen Group 3,906,680 5.40

Note 1: Ranking top ten (excluded the government or state owned utilities) accounting to total credit consists of loans.

Note 2: Groups were regulated in Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings Article 6.

Note 3:Total credit consists of loans were totalized each credit (included import bill negotiated, export bill negotiated discounted, overdrafts, shortterm loans, shortterm secured loans, marginal receivables, mediumterm loans, mediumterm secured loans, longterm loans, longterm secured loans, and overdue receivables), exchange bills negotiated, accounts receivable without recourse factoring, acceptances receivable, and grantees issued.

Note 4: Include loans to Taiwan High Speed Rail Corporation.

c. Interest rate sensitivity information

Interest Rate Sensitivity (New Taiwan Dollars) December 31, 2007


Items 1 to 90 Days (Included)

91 to 180 Days (Included)

181 Days to One Year (Included)

Over One Year Total

Interest ratesensitive assets $ 597,325,000 $ 64,438,000 $ 65,112,000 $ 90,378,000 $ 817,253,000 Interest ratesensitive liabilities 347,664,000 357,335,000 40,268,000 47,362,000 792,629,000 Interest rate sensitivity gap 249,661,000 (292,897,000) 24,844,000 43,016,000 24,624,000 Net worth 73,256,000 Ratio of interest ratesensitive assets to liabilities 103.11% Ratio of the interest rate sensitivity gap to net worth 33.61%

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Interest Rate Sensitivity (New Taiwan Dollars) December 31, 2006





Over One Year Total

Interest ratesensitive assets $ 551,354,836 $ 111,405,002 $ 80,169,889 $ 80,679,273 $ 823,609,000 Interest ratesensitive liabilities 357,716,000 380,360,000 43,025,000 37,255,000 818,356,000 Interest rate sensitivity gap 193,638,836 (268,954,998) 37,144,889 43,424,273 5,253,000 Net worth 68,780,000 Ratio of interest ratesensitive assets to liabilities 100.64% Ratio of the interest rate sensitivity gap to net worth 7.64%

Note 1: The above amounts included only New Taiwan dollar amounts held by the Bank’s onshore branches (i.e., excluding foreign currency).

Note 2: Interest ratesensitive assets and liabilities refer to the revenues or costs of interestearning assets and interestbearing liabilities, which are affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest ratesensitive assets－Interest ratesensitive liabilities.

Note 4: Ratio of interest ratesensitive assets to liabilities = Interest ratesensitive assets/Interest ratesensitive liabilities.

Interest Rate Sensitivity (In U.S. Dollars) December 31, 2007

(In Thousands of U.S. Dollars, %)




Over One Year Total

Interest ratesensitive assets $ 4,075,892 $ 891,309 $ 182,240 $ 138,503 $ 5,287,944 Interest ratesensitive liabilities 4,850,332 291,868 186,113 87,503 5,415,816 Interest rate sensitivity gap (774,440) 599,441 (3,873) 51,000 (127,872) Net worth 60,305 Ratio of interest ratesensitive assets to liabilities 97.64% Ratio of the interest rate sensitivity gap to net worth (212.04%)

Interest Rate Sensitivity (In U.S. Dollars) December 31, 2006

(In Thousands of U.S. Dollars, %)




Over One Year Total

Interest ratesensitive assets $ 5,265,170 $ 817,245 $ 26,283 $ 95,249 $ 6,203,947 Interest ratesensitive liabilities 6,579,051 218,097 339,984 93,818 7,230,950 Interest rate sensitivity gap (1,313,881) 599,148 (313,701) 1,431 (1,027,003) Net worth 111,504 Ratio of interest ratesensitive assets to liabilities 85.80% Ratio of the interest rate sensitivity gap to net worth (921.05%)

Note 1: The above amounts include only U.S. dollar amounts held by the onshore branches, OBU and offshore branches of the Bank, exclude contingent assets and contingent liabilities.

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Note 2: Interest ratesensitive assets and interest ratesensitive liabilities refer to the revenues or costs of interestearning assets and interestbearing liabilities, which are affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest ratesensitive assets－Interest ratesensitive liabilities.

Note 4: Ratio of interest ratesensitive assets to liabilities = Interest ratesensitive assets/ Interest ratesensitive liabilities.

d. Profitability

(%)

Items 2007 2006 Before income tax 0.37 (0.03) Return on total assets After income tax 0.31 0.04 Before income tax 5.49 (0.48) Return on net worth After income tax 4.55 0.60

Profit margin 12.54 1.71

Note 1: Return on total assets = Income before (after) income tax/Average total assets

Note 2: Return on net worth = Income before (after) income tax/Average net worth

Note 3: Profit margin = Income after income tax/Total operating revenues

Note 4: Income before (after) income tax represents income for the years ended December 31, 2007 and 2006.

e. Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities December 31, 2007

(In Millions of New Taiwan Dollars)

The Amount for the Remaining Period to Maturity Total 130 Days 3190 Days 91180 Days 181365 Days Over 1 Year Main capital inflow on maturity $ 1,085,912 $ 274,158 $ 85,486 $ 74,296 $ 109,339 $ 542,633 Main capital outflow on maturity 1,398,055 188,487 135,616 115,946 494,010 463,996 Gap (312,143 ) 85,761 (50,130 ) (41,650 ) (384,671 ) 78,637

December 31, 2006

(In Millions of New Taiwan Dollars)

The Amount for the Remaining Period to Maturity Total 130 Days 3190 Days 91180 Days 181365 Days Over 1 Year Main capital inflow on maturity $ 1,067,925 $ 226,135 $ 128,012 $ 100,419 $ 61,767 $ 551,592 Main capital outflow on maturity 1,084,097 177,846 155,391 152,860 183,898 414,102 Gap (16,172 ) 48,289 (27,379 ) (52,441 ) (122,131 ) 137,490

Note: The above amounts included only New Taiwan dollar amounts held in the onshore branches of the Bank (i.e., excluding foreign currency).

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Maturity Analysis of Assets and Liabilities December 31, 2007

(In Thousands of U.S. Dollars) The Amount for the Remaining Period to Maturity Total 130 Days 3190 Days 91180 Days 181365 Days Over 1 Year

Capital inflow on maturity $ 13,138,581 $ 4,428,168 $ 2,966,162 $ 2,455,863 $ 2,167,422 $ 1,120,966 Capital outflow on maturity 12,784,763 5,250,661 2,721,901 1,960,748 2,176,752 674,701 Gap 353,818 (822,493) 244,261 495,115 (9,330) 446,265

December 31, 2006 (In Thousands of U.S. Dollars)

The Amount for the Remaining Period to Maturity Total 130 Days 3190 Days 91180 Days 181365 Days Over 1 Year Capital inflow on maturity $ 2,000,844 $ 625,935 $ 501,578 $ 485,275 $ 20,107 $ 367,949 Capital outflow on maturity 2,218,681 1,391,740 338,204 157,542 186,664 144,531 Gap (217,837) (765,805) 163,374 327,733 (166,557) 223,418

Note 1: The above amounts are book values held by the onshore branches and offshore banking unit of the Bank in U.S. dollars, without offbalance sheet amounts (for example, the issuance of negotiable certificates of deposits, bonds or stocks).

Note 2: If the overseas assets are at least 10% of the total assets, there should be additional disclosures.

37. STATEMENT OF CAPITAL ADEQUACY Statement of Capital Adequacy

Year Analysis

December 31, 2007

Tier 1 capital $ 69,428,703 Tier 2 capital Tier 3 capital

Eligible capital

Eligible Capital 69,428,703 Standardized approach 633,843,825 Internal rating based approach Credit risk Securitization 2,166,845 Basic indicator approach Standardized approach/alternative standardized approach

44,936,826 Operational risk

Advanced measurement approach Standardized approach 45,592,964 Market risk Internal models approach

Riskweighte d assets

Total risk weighted assets 726,540,460 Capital adequacy rate 9.56% Tier 1 risk based capital ratio 9.56% Tier 2 risk based capital ratio Tier 3 risk based capital ratio Ratios of common stockholders’ equity to total assets 3.60%

Note 1: The above tables was prepared in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks” and related calculation tables.

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Note 2: The formula:

1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital. 2) Total riskweighted asset = Riskweighted assets for credit risk + (Capital

requirements for operational risk + Capital requirement for market risk) x 12.5. 3) Ratio of capital adequacy = Eligible capital/Total riskweighted assets. 4) Tier 1 riskbased capital ratio = Tier 1 capital/Riskweighted assets. 5) Tier 2 riskbased capital ratio = Tier 2 capital/Riskweighted assets. 6) Tier 3 riskbased capital ratio = Tier 3 capital/Riskweighted assets. 7) Ratios of common stockholders, equity to total assets = Common stock/Total assets.

Consolidated Statement of Capital Adequacy

Year Analysis

December 31, 2007

Tier 1 capital $ 70,070,504 Tier 2 capital Tier 3 capital

Eligible capital

Eligible Capital 70,070,504 Standardized approach 633,958,106 Internal rating based approach Credit risk Securitization 2,166,845 Basic indicator approach Standardized approach/alternative standardized approach

44,936,826 Operational risk

Advanced measurement approach Standardized approach 45,657,702 Market risk Internal models approach

Riskweighte d assets

Total risk weighted assets 726,719,479 Capital adequacy rate 9.64% Tier 1 risk based capital ratio Tier 2 risk based capital ratio Tier 3 risk based capital ratio Ratios of common stockholders’ equity to total assets 3.60%

Note 1: The above table was prepared in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks” and related calculation tables.

Note 2: The formula:

1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital.

2) Total riskweighted asset = Riskweighted assets for credit risk + (Capital requirements for operational risk + Capital requirement for market risk) x 12.5.

3) Ratio of capital adequacy = Eligible capital/Total riskweighted assets.

4) Tier 1 riskbased capital ratio = Tier 1 capital/Riskweighted assets.


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7) Ratios of common stockholders, equity to total assets = Common stock/Total assets.

December 31, 2006

Net eligible capital $ 69,681,380 Total riskweighted assets 620,983,315 Capital adequacy ratios 11.22% Ratios of tier 1 capital to riskweighted assets 11.51% Ratios of tier 2 capital to riskweighted assets 0.43% Ratios of tier 3 capital to riskweighted assets Ratios of the deduction from capital to riskweighted assets (0.72%) Ratios of common stockholders’ equity to total assets 6.66%

38. ADDITIONAL DISCLOSURES

Following are the additional disclosures on significant transactions and investees required by the Securities and Futures Bureau:

a. Financing provided: Not applicable b. Endorsement/guarantee provided: Not applicable c. Marketable securities held: Table 1 (attached) d. Acquired and disposed of investee investment at costs or prices of at least NT$300 million or

10% of the issued capital: Table 2 (attached) e. Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued

capital: None f. Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued

capital: None g. Allowance for service fee to related parties amounting to at least NT$5 million: None h. Receivables from related parties amounting to at least NT$300 million or 10% of the issued

capital: Table 3 (attached) i. Sale of nonperforming loans: Table 4 (attached) j. Financial asset securitization: None. k. Other significant transactions which may affect the decision of financial statements users:

None l. The information of investees: Table 5 (attached)

39. SEGMENT INFORMATION

The Bank engages in banking activities as prescribed by Article 3 of the Banking Law rule 3 and does not need to disclose industry financial information. No single overseas units accounted for at least 10% of the Bank’s operating revenue or total assets; thus, no geographical information was disclosed.

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TABLE 1


MARKETABLE SECURITIES HELD DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

December 31, 2007

Holding Company Type and Issuer/Name of Marketable Securities

Relationsh ip with Holding Company

Financial Statement Account Shares/Units/ Par Value

(in Thousands) Carrying Value Percentage of

Ownership (%)

Market Value or Net Asset

Value

Note

Fubon Leasing Co., Ltd. Stock Pacific Resources Corporation Unquoted equity instruments 4,314 $ 4.21 Note 3 Primus Technology Fund Unquoted equity instruments 925 5.00 Note 4 YenTai Foreign Exchange Co., Ltd. Unquoted equity instruments 240 2,400 2.00 3,403 Note 1

Fubon Real Estate Beneficiary certificate Management Co., Ltd. Fubon Chi Hsiang I Beneficiary Affiliate Availableforsale financial assets 3,105 45,814 45,814 Note 2

Cathay II Beneficiary Availableforsale financial assets 800 8,000 8,000 Note 2 Cathay I Beneficiary Availableforsale financial assets 11,297 116,359 116,359 Note 2

TAIPEIFUBON BANK Life Beneficiary certificate Insurance Agency Co., Ltd. ABN AMRO SELECT Bond Fund Financial assets at fair value through profit or

loss 2,813 32,368 32,368 Note 2

Fubon Venture Capital Co., Stock Ltd. Radiantech Inc. Unquoted equity instruments 3,022 19,143 6.43 275,590 Note 1

Yin King Industrial Co., Ltd. Unquoted equity instruments 988 8,211 3.11 411,243 Note 1 Minton Optic Industry Co., Ltd. Unquoted equity instruments 2,246 29,465 3.57 794,783 Note 1 XAVi Technologies Corporation Unquoted equity instruments 1,142 14,849 2.28 253,121 Note 1 General Plastic Industrial Co., Ltd. Availableforsale financial assets 90 2,153 0.11 1,922 Note 2 Uniplus Electronics Co., Ltd. Availableforsale financial assets 2,365 29,524 0.95 13,952 Note 2 Loyalty Founder Enterprise Co., Ltd. Availableforsale financial assets 1,671 22,011 1.38 11,198 Note 2 Liton Technology Corp. Availableforsale financial assets 1,158 17,473 1.23 8,116 Note 2 Himax Technologies, Inc. Availableforsale financial assets 302 4,323 0.17 41,789 Note 2 Beneficiary certificates Fubon Chi Hsing I Beneficiary Financial assets at fair value through profit or

loss 4,248 62,695 62,695 Note 2

Note 1: Net asset values were based on the investees’ unaudited financial statements as of and for the year ended 2007. Note 2: Market prices were based on the net asset values or closing prices as of December 31, 2007. Note 3: Stop operating for a year. Note 4: Currently entered into liquidation.

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TABLE 2


MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF PAIDIN CAPITAL YEAR ENDED DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Beginning of Period Acquisition Disposal End of Period

Company

Type and Name/Issuer

of the Securities

Financial Report Account

Counter party

Relationshi p

Thousand Shares

Amount Thousand Shares

Amount Thousand Shares

Price Book Value Disposal Gains or Losses

Thousand Shares

Amount

Fubon Real Estate Management

Cathay I Beneficiary

Availableforsale financial assets

$ 11,297 $116,359 $ $ $ 11,297 $116,359

Co., Ltd. Chi Hsiang I Beneficiary

Availableforsale financial assets

10,748 156,434 7,643 112,005 111,600 405 3,105 45,814

Fubon Venture Capital Co., Ltd.

UTAC Availableforsale financial assets

4,992 62,976 4,992 105,829 62,976 42,853

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TABLE 3


RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Overdue Company Name Related Party Relationship

Receivable Ending Balance

Turnover Rate Amount Action Taken

Amounts Received in Subsequent

Period

Allowance for Bad Debts

TAIPEI FUBON COMMERCIAL BANK Co., Ltd.

Fubon Financial Holdings Co., Ltd.

Parent company $1,971,834 (Note)

Not applicable None Not applicable None None

Note: The receivable resulted from linkedtax receivable.

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TABLE 4


SALE OF NONPERFORMING LOANS DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars or U.S. Dollars)

Transaction Date Counter Parties (Note) Loans (Note) Carrying Value Selling Price Gain or Loss on

Disposal Attachment Relationship

January 9, 2007 Fubon Asset Management Co., Ltd. (Note)

Credit card $ $ 51,166 $ 51,166 FFH’s subsidiary

January 9, 2007 Fubon Asset Management Co., Ltd. (Note)

Cash card 15,494 15,494 FFH’s subsidiary

September 21, 2007 The Deutsche Bank Distressed Asset Group

Nonperforming loans US$3,123,569.02 US$1,124,250 US$(1,999,319.02)

Note: For details of the transactions, please refer to Note 30.

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TABLE 5

TAIPEI FUBON COMMERCIAL BANK CO., LTD. INFORMATION ON INVESTEES DECEMBER 31, 2007 (In Thousands of New Taiwan Dollars)

Consolidated Investment Investment as of December 31, 2007 Total Investor Company Investee Company Location Main Businesses and Products Shares

(Thousand)

Percentage of

Ownership

Carrying Amount

Net Income of the Investee Shares

(Thousand) Imitated Shares Shares

Percentage of

Ownership

Investment Gain (Loss) Note

TAIPEI FUBON Financialrelated COMMERCIAL BANK Co., Ltd.

Fubon Leasing Co., Ltd. Taipei Sales, maintenance and lease of machinery and equipment

61,608 100.00 $ 395,719 $ (53,660) 61,608 61,608 100.00 $ (53,660) Note 1

Fubonbank Insurance Agent Co., Ltd.

Taipei Property insurance agency 300 100.00 7,027 2,956 300 300 100.00 2,956 Note 1

TAIPEIFUBON BANK Life Insurance Agent Co., Ltd.

Taipei Life insurance agency 2,000 100.00 641,800 586,892 2,000 2,000 100.00 586,892 Note 1

Taipei Foreign Exchange Inc. Taipei Foreign exchange market maker 780 3.94 7,800 96,746 780 780 3.94 Note 2 Taiwan Futures Exchange Taipei Futures exchange and settlement 2,778 1.26 25,250 1,499,941 6,354 6,354 2.88 Note 2 Fubon Securities Finance Co., Ltd.

Taipei Securities financing 22,676 5.67 213,975 233,395 54,223 54,223 13.56 Note 2

Taiwan Asset Management Corporation

Taipei Evaluating, auctioning, and managing for financial institutions’ loan

30,000 1.70 300,000 137,876 30,000 30,000 1.70 Note 2

Taiwan Financial Asset Service Co., Ltd.

Taipei Auction 10,000 5.88 100,000 15,351 10,000 10,000 5.88 Note 2

Mondex Taiwan Inc. Taipei Information process services 197 3.35 1,804 2,348 395 395 6.69 Note 2 Financial Information Service Co., Ltd.

Taipei Planning and developing the information system of across banking institution and managing the information web system

9,100 2.28 91,000 837,287 9,100 9,100 2.28 Note 2

SunnyAsset Management Corporation

Taipei Purchasing for financial institutions’ loan assets

503 8.39 5,031 6,876 503 503 8.39 Note 2

Nonfinancial related Fubon Real Estate Management Co., Ltd.

Taipei Investigation, consultation, management and real estate evaluation of construction plans

4,529 30.00 54,273 13,803 12,556 12,556 83.17 4,139 Note 1

Fubon Venture Capital Co., Ltd. Taipei Venture capital Investment 1,000 5.00 11,751 21,485 9,800 9,800 49.00 4,325 Note 3 Taipei Rapid Transit Corporation Taipei Public transportation 13 100 764,304 13 13 Note 2 Taiwan Power Company Taipei Management of power facilities 374 3,252 (23,257,842) 374 374 Note 2 Taipei Smart Card Corporation Taipei Issue and research of IC card 2,500 5.00 25,000 98,262 2,500 2,500 5.00 Note 2 Taiwan High Speed Rail Corporation

Taipei Management of high speed rail 50,694 0.48 500,000 (29,367,032) 50,913 50,694 0.48 Note 2

Taiwan Aerospace Corp. Taipei Aerospace industry 1,700 1.25 17,000 174,241 1,700 1,700 1.25 Note 2 EHsin International Corp. Miaoli Import and export trade business 7,200 2.40 7,200 7,200 2.40 Synvision Technology Service Co.

Taipei Operating steam power paint symbiotic 814 0.33 814 814 0.33

TaiMall Development Company Taoyuan Operating department store 4,160 1.04 49,920 21,459 4,160 4,160 1.04 Note 2 Ascentek Venture Capital Corp. Kaohsiung Venture capital investment 2,800 4.28 28,000 120,338 2,800 2,800 4.28 Note 2 P.K. Venture Capital Investment Corp.

Taipei Venture capital investment 7,500 5.00 49,736 324,533 7,500 7,500 5.00 Note 2

Apex Venture Capital Co., Ltd. Taipei Venture capital investment 3,451 4.67 34,515 103,247 3,451 3,451 4.67 Note 2 HsuPang Venture Capital Co., Ltd.

Taipei Venture capital investment 8,500 Note 3

Pacific Venture Capital Co., Ltd. Taipei Venture capital investment 1,186 5.12 12,300 (10,135) 1,186 1,186 5.12 Note 2 Note 1: The investment gain (loss) was based on the investee’s audited financial statements for the year ended December 31, 2007. Note 2: The investment gain (loss) was based on the investee’s unaudited financial statements for the year ended December 31, 2007. Note 3: The impairment loss.

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TABLE 6 TAIPEI FUBON COMMERCIAL BANK CO., LTD.

OVERDUE LOANS AND RECEIVABLE DECEMBER 31, 2007 AND 2006 (In Thousands of New Taiwan Dollars, %)

December 31, 2007 December 31, 2006

Items Nonperforming Loan (NPL) (Note 1)

Total Loans NPL Ratio (Note 2)

Loan Loss Reserves (LLR)

Coverage Ratio (Note 3)

Nonperforming Loan (NPL) Total Loans NPL Ratio

Loan Loss Reserves (LLR)

Coverage Ratio

Secured $ $ 19,997,561 $ $ $ 24,922,710 $ Public treasury loan Unsecured 50,822,381 63,443,464

Secured 573,769 327 513,761 Finance loan Unsecured 1,416 1,416 Secured 2,413,844 126,286,613 1.91% 914,735 37.90% 2,735,508 118,177,425 2.31% 1,172,334 42.86% Corporate loan Unsecured 2,902,981 220,731,898 1.32% 2,473,168 85.19% 2,473,522 186,352,106 1.33% 1,570,486 63.49% Mortgage (Note 4) 1,689,749 208,934,639 0.81% 496,008 29.35% 2,181,608 180,663,194 1.21% 790,768 36.25% Cash card 172 399,444 0.04% 33,688 19,586.05% 29,210 1,051,622 2.78% 760,641 2,604.04% Micro credit (Note 5) 545,049 12,783,126 4.26% 1,299,141 238.35% 3,980,225 21,609,777 18.42% 2,650,864 66.60%

Secured 34,042 2,270,726 1.50% 17,594 51.68% 110,336 3,202,963 3.44% 42,711 38.71% Consumer loan

Other (Note 6) Unsecured 298,886 19,477,557 1.53% 72,286 24.19% 492,551 18,047,359 2.73% 15,428 3.13% Total 7,884,723 662,277,714 1.19% 5,308,306 67.32% 12,003,287 617,984,381 1.94% 7,004,648 58.36%

Overdue Receivable

Account Receivable Diliquency Ratio Allowance for

Credit Losses Coverage Ratio Overdue Receivable

Account Receivable Diliquency Ratio Allowance for

Credit Losses Coverage Ratio

Credit card $ 299,173 $ 29,467,634 1.02% $ 1,194,119 399.14% $ 377,884 $ 34,804,994 1.09% $ 794,119 210.15% Account receivable factoring with no recourse (Note 7) 24,005,000 9,520,046

Excluded NPL as a result of debt consultation and loan agreements (Note 8) 3,611,594 4,443,927

Excluded overdue receivables as a result of debt consultation and loan agreements (Note 8) 3,155,136 3,907,768

Note 1: For loans, overdue loans represent the amounts of reported overdue loans as defined in the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” issued by the Ministry of Finance. For credit cards, overdue receivables are under the Banking Bureau’s regulations dated July 6, 2005 (Ref. No. 0944000378).

Note 2: For loans: NPL ratio = NPL/Total loans. For credit cards: Delinquency ratio = Overdue receivable/Account receivable.

Note 3: For loans, Coverage ratio = LLR/NPL For credit cards, Coverage ratio = Allowance for credit losses/Overdue receivables.

Note 4: Household mortgage refers to loans granted for the purchase, construction or repair of the residence owned by the borrower or the borrower’s spouse or children and the residence is used to secure the loan fully. Note 5: Micro credits are under the Banking Bureau’s regulations dated December 19, 2005 (Ref. No. 09440010950). Note 6: Other consumer loans refer to secured or unsecured loans excluding mortgages, cash cards, micro credits, and credit cards. Note 7: Under the Banking Bureau’s requirements in its letter dated July 19, 2005 (Ref. No. 094000494), a provision for bad debt should be recognized once no compensation obtained from a factoring or insurance company for accounts

receivablefactoring with no recourse. Note 8: The disclosure of excluded NPLs and excluded overdue receivables resulting from debt consultation and loan agreement is based on the Banking Bureau’s requirement dated April 25, 2006 (Ref: 09510001270).

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