first commercial bank

2007

2007

封面及封面裡等.indd 1 2008/6/10 11:35:25 AM

1 HighlightsandHistory

2 MessagetoOurShareholders

8 OrganizationChart

9 BoardofDirectorsandSupervisors

10 ExecutiveOfficers

11 BankingOperations

14 BusinessPlansfor2008

16 MarketAnalysis

18 CorporateGovernance

20 RiskManagementOverview

23 CorporateResponsibilityandEthicalBehavior

24 SignificantFinancialInformation

26 ReportofIndependentAccountants

27 BalanceSheets

28 StatementsofIncome

29 StatementsofChangesinStockholders'Equity

30 StatementsofCashFlows

32 NotestoFinancialStatements

70 DomesticOfficesAppointedtoConduct

InternationalBusiness

72 BusinessNetwork

First Commercial Bank30,Chung-KingS.Road,Sec.1

Taipei100-05,TaiwanTel:886-2-2348-1111Fax:886-2-2361-0036

http://www.firstbank.com.twe-mail:[email protected]

SpokespersonMr.Po-ChiaoChou

ExecutiveVicePresident

Auditor ReportPricewaterhouseCoopers

Tel:886-2-2729-6666

Rating AgencyTaiwanRatingsCorp.Tel:886-2-8722-5800

Contents

OverseasBranches ElSalvadorBranch 63aAv.SurYAlamedaRoosevelt Lobby2-3CTROFinancieroGigante SanSalvador,ElSalvador,C.A. Tel:503-2211-2121 Fax:503-2211-2130

GuamBranch 330,HernanCortesAve. Hagatna,Guam96910U.S.A. P.O.Box2461,Hagatna96932,Guam Tel:1-671-472-6864 Fax:1-671-477-8921

HoChiMinhCityBranch 2Fl.,88,DongKhoiStreet,District1 HoChiMinhCity,Vietnam Tel:84-8823-8111 Fax:84-8822-1747

HongKongBranch 6/F,TheHongKongClubBuilding 3A,ChaterRoad,Central,HongKong Tel:852-2868-9008 Fax:852-2526-2900

LondonBranch BowmanHouse,29,WilsonStreet LondonEC2M2SJ,U.K. Tel:44-20-7417-0000 Fax:44-20-7417-0011

LosAngelesBranch 600,WilshireBlvd.,Suite800 LosAngeles,CA90017,U.S.A Tel:1-213-362-0200 Fax:1-213-362-0244

NewYorkAgency 34Fl.,750,ThirdAvenue NewYork,N.Y.10017,U.S.A. Tel:1-212-599-6868 Fax:1-212-599-6133

PalauBranch P.O.Box1605,P.D.C.Building MADALAII Koror,Palau96940 Tel:680-488-6297 Fax:680-488-6295

PhnomPenhBranch 66,NorodomBlvd., SangkatCheychomnoas,KhanDaunPenh

PhnomPenh,Cambodia Tel:855-23-210-026 Fax:855-23-210-029

SingaporeBranch #01-02ONGBuilding 76,ShentonWay Singapore079119 Tel:65-6221-5755 Fax:65-6225-1905

TokyoBranch 13Fl.,AIGBuilding 1-3Marunouchi,1-Chome,Chiyoda-Ku Tokyo100-0005,Japan Tel:81-3-3213-2588 Fax:81-3-3213-5377

TorontoBranch TransamericaTower,Suite1803 5000,YongeStreet TorontoONM2N7E9,Canada Tel:1-416-250-8788 Fax:1-416-250-8081

VancouverBranch Suite100-5611,CooneyRoad Richmond,BCV6X3J6,Canada Tel:1-604-207-9600 Fax:1-604-207-9638

OverseasRepresentativeOffices BangkokRepresentativeOffice 9Fl.,SathornCityTower 175,SouthSathornRoad Tungmahamek,Sathorn Bangkok10120,Thailand Tel:66-2-679-5291 Fax:66-2-679-5295

HanoiRepresentativeOffice 13Fl.,Suite1303B,198TranQuangKhai Hanoi,Vietnam Tel:84-4936-2111 Fax:84-4936-2112

ShanghaiRepresentativeOffice 11Fl.,ChinaInsuranceBuilding,Unit05-07 166,PudongLuJiaZuiEastRoad Shanghai200120,China Tel:86-21-6888-6868 Fax:86-21-6888-6363

SubsidiaryFirstCommercialBank(USA) MainOffice&AlhambraBranch 200E.MainStreet Alhambra,CA91801,U.S.A. Tel:1-626-300-6000 Fax:1-626-300-5972

ArcadiaBranch 1309S.BaldwinAve. Arcadia,CA91007,U.S.A. Tel:1-626-254-1828 Fax:1-626-254-1883

ArtesiaBranch 17808,PioneerBlvd.#108 Artesia,CA90701,U.S.A. Tel:1-562-207-9858 Fax:1-562-207-9862

CityofIndustryBranch 18725E.GaleAve.#150 CityofIndustry,CA91748,U.S.A. Tel:1-626-964-1888 Fax:1-626-964-0066

IrvineBranch 4250,BarrancaParkway,SuiteE Irvine,CA92604,U.S.A. Tel:1-949-654-2888 Fax:1-949-654-2899

SiliconValleyBranch 1141S.DeAnzaBlvd. SanJose,CA95129,U.S.A. Tel:1-408-253-4666 Fax:1-408-253-4672

Overseas Network

封面及封面裡等.indd 2 2008/6/10 11:35:34 AM

�

■ �899 SavingsBankofTaiwanestablished■ �9�2 MergedwithCommercialandIndustrial

BankofTaiwan(est.�9�0)■ �923 MergedwithChia-IBank(est.�905)and

Hsin-KaoBank(est.�9�6)■ �945 ReversionofTaiwanfromJapanese

Governance■ �949 TheBankwasrenamedFirstCommercial

BankofTaiwan■ �967 TheBankstartedinternationalbusiness■ �976 TheBank'snamewasshortenedtoFirst

CommercialBank

■ �998 TheBankwasprivatized■ �999 CentennialAnniversary■ 2003 FirstFinancialHoldingCo.established;

TheBanktransformedtobeawhollyownedsubsidiaryofFFHC

■ 2004 Anewcorporatestructurecreatedduetotheorganizationalreshaping

■ 2006 Awarded"BankoftheYear2006"forTaiwanbyTheBanker,ISO2700�CertificatefromBSi

■ 2007 ContinuedwinninggloryandhonorawardsfromTheBanker(UK),Asiamoney(HK)andFSC(Taiwan)

�2.3�.2007 �2.3�.2006 �2.3�.2007(inmillions) NTD NTD USD

MajorfinancialdataatyearendTotalassets �,626,348 �,574,022 50,066Billsdiscountedandloans �,07�,�7� 972,045 32,975Depositsandremittances �,260,�75 �,2�9,889 38,794Commonstock 46,909 46,2�6 �,444Stockholders'equity 89,742 87,�25 2,763

OperatingresultsTotalrevenues 64,�55 56,009 �,975Totalexpenses 48,483 42,3�5 �,493Pre-taxincome �5,672 �3,694 482Incometax (3,646) (3,339) (��2)Cumulativeeffectofachangeinaccountingprinciple - 563 -Netincome �2,026 �0,9�8 370

Capitaladequacyratio �0.80% ��.00%

WorldrankTheBanker-bytier�capital(�2/06) 234 224TheBanker-bytotalassets(�2/06) �99 20�

DistributionnetworkDomesticfull/mini/sub-branches �87/3/5 �82/6/9Overseasbranches/rep.offices/OBU �3/3/� �2/3/�

FirstCommercialBank(USA) �mainofficeand �mainofficeand 6branches 5branches

Numberofemployees 7,087 7,074

*NT$32.484:US$�.00

HistoryFirstCommercialBankhasgrownstronglyandsteadilywithTaiwan'seconomicdevelopmentoverthelast�00years,andconsistentlyadheredtothecorporatephilosophyof"CustomerFirst,ServiceForemost".

TheBankiscommittedtotransformintoaglobalfinancialinstitutionthatisnotonlyhighlyrecognizedbyemployees,butalsoisfriendly,reliableandsoundfromcustomers'perspective.

Highlights

Highlights and History �

Message to Our Shareholders

Michael C. S. Chang Chairman of the Board

Business Report for 2007

Globaleconomicgrowthin2007,restrainedbythesubprimeloancrisisintheUnitedStatesandthehighlevelofinternationalrawmaterialsprices,droppedtoabout3.8%;atthesametime,theriskofinflationconstantlyincreased,butfortunatelywaskeptundercontrol.InTaiwan,thesteadydissipationofthecloudsofthecash-andcredit-cardcrisisandthesteadilyimprovingemploymentsituationbroughtonaresurgenceindomesticdemand;andtheforeigntrade,stimulatedbystrongdemandinChinaandEurope,performedwell.Withtheeconomywarmingupbothathomeandoverseas,Taiwan'soveralleconomicgrowthfortheyearreached5.7%.Inthisenvironment,theamountofloansoutstandingfrommajorfinancialinstitutionsattheendof2007recordedasmallincreaseof2.25%comparedwithayearearlier;and,thankstovigorouseffortstowriteoffbaddebtsandallocatereserves,theNPLratioofTaiwanesebanksfelltoanewlowof�.84%attheendoftheyear,whileNPLcoverageratiorosetoanewhighof64.82%.

Interestratesshowedamoderaterisingtrendinthedomesticmarketin2007causedbytheCentralBank'scontinuousrateincreases.Theinterbankovernightrateroseto2.08%attheendofDecemberandtheaveragefortheyearwas�.96%,0.4%higherthan2006.Fundsinthemonetarymarketremainedloose,however,andwithfiercecompetitionamongbanks,thespreadbetweendepositandloanratesslippedfrom�.77%attheendof2006to�.74%attheendof2007.Thecontinuouscontractionintheinterest-ratespreadhadanadverseimpactonthebanks'traditionaldepositandloanbusiness.Withthealleviationofpressurefromthewrite-offofcarddebtandtheallocationofincreasedreserves,andwiththebanks'vigorouseffortstopromotethewealthmanage-mentbusinessanddevelopbusinessopportunitiesintheGreaterChinaarea,bankingoperationsreturnedtoprofitability.Thepre-taxprofitsofTaiwan'sbanksreachedatotalofNT$38,753millionin2007,theirreturnonequity(ROE)improvedfrom-0.43%in2006to2.2�%in2007,andtheirreturnonassets(ROA)rosefrom-0.03%to0.�4%atthesametime.

Overview of Financial

Industry of Taiwan

Message to Our Shareholders2

Message to Our Shareholders 3

Chin-Yun WuPresident

Organizational Restructuring TheBankmovedtostrengthenthepromotionofkeybusinessesin2007bysettingupthenewInternationalBusinessBUtohandletheinternationalbankingbusinessandbusinessintheGreaterChinaarea.WealsoaddedtheCorporateBankingBusinessMarketingDivisionundertheCorporateBankingBUforthepurposeofexpandingloanstobusinessgroupsandlargeenterprises,aswellasdomesticsyndicatedloans.Inaddition,theConsumerBankingBUwasmergedintothePersonalBankingBUinordertointegratetheoperationandpromotionofthepersonalbankingbusiness,realizethesynergiesavailablewiththemergedunit,andprovidecustomerswithamorecompleterangeofservices.

Performance of Operating StrategiesTheBankpinpointedfournewprofitenginesin2007:GreaterChinaBusiness,DomesticandInternationalSyndicatedLoans,FinancialProductMarketing,andWealthManagement.TheGreaterChinaBusinessandDomesticandInternationalSyndicatedLoansbothfocusontheemergingeconomyintheMainlandChina,wheretheBankintendstotakeadvantageofthebusinessopportunitiesbydevelopingloanstoTaiwanesecompaniesintheGreaterChinaarea,andtoescapefromthecutthroatcompetitionforloansinTaiwananddiversifyloanriskbypromotingdomesticandinternationalsyndicatedloans.FinancialProductMarketingandWealthManagementaredesignedtosatisfythedemandofcorporateandpersonalclientsfordiversifiedfinancialproductsandtoprovideafullrangeoffinancialplanningservices.Thiswillincreasefeeincomeandcementcustomerloyaltybybuildinguplong-termcooperativerelationships.ResultsofimplementationoftheBank'soperatingstrategyaredescribedbelow:

TheBank'soperationsrecordedanoutstandingperformancein2007,withbefore-taxincomeincreasing�4.45%fromthepreviousyeartoNT$�5,672millionandEPSreachingNT$3.34.Netinterestincomegrewbyastable7.66%toNT$2�,94�million,andincomefromwealthmanagementsoared87.23%fortheyeartoNT$4,486million.TheBank

Reinforcement of the

business base and

enhancement of service

quality

No.�"LoanPromotionProgram

toSMEsbyTaiwaneseBanks"byFSC

"BestDomesticProviderinTaiwanforLocalCurrencyProducts-

StructuredInterest-rateProducts"byAsiamoney

alsowonthefirstplaceinthe"LoanPromotionProgramtoSMEsbyTaiwaneseBanks"organizedbytheFinancialSupervisoryCommission.Furthermore,theBankwasnamed"BankoftheYear2007"forTaiwanbyTheBanker magazineofEnglandforthesecondyearinarow.

TheBankworksconstantlytobringmoreconvenientservicestocustomersbyreinforcingourdomesticandinternationalbranchnetwork.InTaiwan,theWan-HuaMiniBranchwasupgradedtoafullbranchin2007;overseas,theTorontoBranchopenedforbusiness,andapplicationsweresubmittedtoestablishbranchesinBrisbaneandMacauandtoupgradetheHanoiRepresentativeOfficeintoabranch.Thiscomprehensivenetworkofdomesticandoverseasbranchesenablesourcustomerstoreceivecompleteandimmediateservices.TocopewiththedevelopmentofintensiveeconomicandtradedealingsacrosstheTaiwanStraits,theBankhasvigorouslypromotedtheloanandwealthmanagementbusinessintheGreaterChinaareathroughthecomprehensivefinancialservicesnetworkformedbyourHongKongBranch,ShanghaiRepresentativeOffice,OffshoreBankingUnit,anddomesticbranches,integratingandexpandingourcross-straitsmarketingteamandsparingnoefforttoexpandbusinessintheGreaterChinaarea.

TheBankwontheawardof"BestDomesticProviderinTaiwanforLocalCurrencyProducts-StructuredInterest-rateProducts"fromAsiamoneymagazinein2007,evidencingitsstrongcapabilityforproductdevelopment.TheBankconstantlyintroducesnewproductstomeettheneedsofcustomers,suchasinaugurating"e-bankingfordomesticL/Cs",receivingpermissiontoraisetheceilingon"singletransactionofonlinecorporatefundtransfer",undertaking"smallstart-uploanstowomen",andintroducing"easyhomeloans".AnditwasmandatedastheArrangertounderwrite"BNPParibasthree-yearordinarycorporatebondsdenominatedinAustraliandollars"inthenameofFirstBankforthefirsttime,issued�3"structured-productplacements",andco-marketedREITSsecuritizedproductlike"Top�Horse-REITS".

TocopewiththeriskmanagementrequirementsofBaselII,in2007theBankworkedontheinstallationofriskmodelsdesignedtoenhanceriskmanagementandcontrolthedifferenttypesofrisk.Thiseffortincluded"homeloanmodel"optimization,the"smallcreditloan(personalandbatch)model","cardgradingmodelforcreditcardbehavior","creditevaluationforspecialcorporatefinancing",and"geographicinformationsystemforcollateralmanagement".AttheendoftheyeartheBank'sNPLratiostoodat�.50%anditsNPLcoverageratioat53.84%,indicatinggoodassetqualityandagreatlyimprovedriskcontrolperformance.

TheBanksignedamemorandumofunderstandingforcooperationwiththeSumitomoMitsuiBankingCorp.,Japan'ssecond-largestbank,in2007.Allianceswithforeignbanks,theintroductionofadvancedinternationalfinancialtechnology,andtheimplementationofwidespreadcooperationandexchangeareusedtostrengthentheBank'scompetitiveness.

Inresponsetotherapidchangestakingplaceindomesticandinternationaleconomicandfinancialconditions,andtomeettheneedsofbusinessdevelopment,in2007theBankdirecteditsresearchmainlyinthedirectionofforecastingandanalysisofeconomic,financial,andindustrialconditions,thepotentialimpactofchangesindomesticandoverseasfinancialregulations,andstrategies.TheresultsofthisresearchhavebeendisseminatedtorelatedorganizationsandtoalltheBank'semployeesviavideoandtheInternet.

Continuous domestic

and overseas branch

deployment, and

development of cross-

straits business

Development of new

financial products and

inauguration of new

businesses

Strengthening of Risk

Control

Establishment of

cooperative relations

with foreign banks


Market research

Budget Implementation, Growth and Profitability TheaveragedepositswereNT$�,230,�0�million,atargetof�02.45%andanincrease

ofNT$85,977millionover2006oragrowthof7.5�%. TheaverageloanswereNT$99�,�36million,atargetof�02.9�%andanincreaseof

NT$97,636millionfrom2006oragrowthof�0.93%. Thesaleofnon-discretionarymoneytrust,includingdomesticandoffshorefunds,

collectivemanagementaccountplusforeignsecuritiesreachedNT$350,�50million,anachievementof�55%andanincreaseofNT$��0,37�millionover2006,agrowthof46.03%.

CustodyoffundsamountedtoNT$326,200million,reachedatargetof�30%,anincreaseofNT$49,626millionoragrowthof�7.94%.DiscretionaryinvestmentcustodianassetswereNT$�25,768million,atargetof�32%andanincreaseofNT$45,729millionover2006,agrowthof57.�3%.

RevenuesandexpensestotaledrespectivelyNT$64,�55millionandNT$48,483million,yieldingapre-taxincomeofNT$�5,672million.

Business Plans for 2008 TheincreasedpossibilityofaslowdowninglobalandTaiwaneseeconomicgrowthin2008willunlikelymakeanysubstantialstrengtheningofthedomesticdemandforloans,andthetakeoverofdomesticbanksbyforeignfinancialinstitutionswillboostcompetitioninthebankingindustrytothewhite-hotlevel.Tocopewiththechallengeofintensecompetitionthatexiststoday,theBankwillcontinuepromotingbusinessintheGreaterChinaarea,thedomesticandinternationalsyndicatedloanbusiness,thewealthmanagementbusiness,andthefinancialproductmarketingbusiness.Atthesametime,theBankwillstrivetoheightenitse-bankingratioand,throughitswidespreadbranchnetwork,toestablishanoverallmarketingwebthatwillbreakthroughtheconfinesoftimeandspaceandallowcustomerstoenjoytheBank'srapidandconsiderateservicesanytime,anyplace.RespondingtotherapidchangesthataretakingplaceintheoperatingenvironmentandconformingtotherequirementsofBaselII,theBankwillboostinvestmentinitsriskmanagementsystemandthetrainingofitspersonnelsoastoimproveperformanceinriskmanagementandinternalcontrols;thiswillassuregoodassetqualityandformabasisforproduct-pricingstrategy.Insum,theBankwilluseforward-lookingoperatingprinciplestoadvancetowardthevisionof"movingbeyondcompetitionandcreatingaddedvalue"andachievethetargetsofNT$�,326,506millioninaveragedepositsandNT$�,�00,2��millioninaverageoutstandingloans.

Future Development StrategiesTheBankwillcontinuepromotingbusinessintheGreaterChinaarea,thedomestic

andinternationalsyndicatedloanbusiness,thewealthmanagementbusiness,and thefinancialproductmarketingbusinessasitsmainprofitengines.Sincee-bankingisaccessibleinallplacesandofferstheadvantageofreducing

redundantmanpowercosts,theBankwillboostitstransactionsbye-banking.TheBankwillmakefulluseoftheadvantageprovidedbyitsbranchnetworktocarry

outtheintegratedmarketingandcross-marketingofproductssoastoboostthepenetrationofitscommodities;atthesametime,itwillutilizetheresourcesoftheentitiesofFirstFinancialHoldingCo.toreinforceitsproductlineandboostitsprofits.


Economic Outlook and

Business Targets

FurthercooperationwithotherbankswillbepursuedandstrategicallianceswillbeusedtoshortenthetimeofproductdevelopmentandenhancetheBank'scompetitivepositionintheindustry.

UseofHongKongasanoutpostandaspringboardforthedevelopmentofcross-straitsbusinessopportunities,anddevotionoffulleffortstothedevelopmentofwealthmanagement,andprovidingconsolidatedfinancingforoffshorecompaniesintheGreaterChinaarea,soastosatisfyneedsofTaiwanesebusinessesandpersonalwealthmanagement.

ContinuedreadjustmentanddeploymentofdomesticandoverseasbranchunitssoastoserveasamodelforTaiwan'sbankingindustryandastheidealfinancialpartnerforTaiwanesecompaniesallovertheworld.

TheBankwillboostthebusinessvolumeandmarketshareofallofitskeyproducts,especiallysyndicatedloans,foreigntradefinance,wealthmanagement,andTMU;

itwillalsoincreasefeesincome,diversifyprofitsources,andassureoperatingstability.ContinuedestablishmentoftheBaselIIriskmanagementmechanismsoasto

maintainthequalityoftheBank'sassets. Optimizationofworkingprocessessoastoreleaseback-officepersonnel,and

strengtheningofprofessionaltrainingtoenablethemtoswitchtofront-officesalesjobs.

Thoroughmonitoringofexpense-budgetimplementationandavoidanceofunnecessarywasteandcostssoastoloweroperatingcostsbank-wide.

HeighteningoftheratioofdemanddepositsandstrengthenedsaleofinvestmentproductssoastolowercapitalcoststhroughouttheBank.

ReinforcementoftheriskmanagementmechanismandmaintenanceofalowNPLratioandhighcoverageratio.

Influence of the External EnvironmentsInterestincomeisstillthemainsourceofprofitforTaiwanesebanks;butbecauseofthesmallscaleandlargenumberofthesebanks,andtheextremelyhighrateofsimilarityamongtheproductsandservicestheyoffer,pricecompetitionhasbroughtonacontinuouscontractionofthespreadbetweendepositandloaninterestrates.Allofthebanksarecopingwiththissituationbyreadjustingtheirincomestructureinanefforttoboostprofitlevels.InresponsetotheacquisitionofTaiwanesebanksoverthepastyearbyforeignfinancialinstitutionsseekingentryintotheGreaterChinamarketandTaiwan'swealthmanagementbusiness,theBankwillworkconstantlytodevelopitsownwealthmanagementbusinessandincreaseitsnon-interestincome,andwillstrengthenitsfinancialproductinnovationandmarketingabilitiessoastobreakawayfromthehighproductsimilarityinthedomesticfinancialmarketandenhancetheBank'scompetitiveniche.

Theimplementationofnewandrevisedlawsandregulationsoverthepastyear,includingthe"RegulationsGoverningFinancialDerivativesActivities","TrustEnterpriseAct",and"Self-disciplinaryRulesforBanksEngagingintheMarketingofWealthManagementandFinancialDerivativeProducts",increasedconstraintsonmoralhazardforbankemployeesandprohibitedbanksfromacquiringotherbanksbyimpropermeans,thushavingapositiveeffectonoperationsinthebankingindustry.TheFinancialSupervisoryCommissionalsoraisedthethresholdfordealinginderivativeproductsandopeneddealinginthemoneytrustandsecuritiestrustbusinessestosecuritiescompanies,

The Sector Environment


The Regulatory

Environment

whichwillconstituteablowtothebankingindustry.Inaddition,theimplementationofthe"ConsumerInsolvencyAct"onApril��,2008mayhaveadirectimpactontheconsumerbankingbusiness.Facedwithallthesechangesintheexternalregulatoryenvironment,theBankwilladoptproactivemeasurestoalleviatetheirimpactonitsoperations.

WhiletheslowdownineconomicgrowthathomeandoverseasdoesnotfavortherevitalizationofcorporateinvestmentwillingnessinTaiwan,someofthemanufacturersthatmovedawayfromTaiwaninearliertimeshavebeenreturningtoinvestintheislandandthisfactor,plusthe"LoanPromotionProgramtoSMEsbyTaiwaneseBanks"implementedbytheFinancialSupervisoryCommissionforthreeyears,shouldbringaboutthemaintenanceofsteadygrowthincorporateloans.Thereisnotlikelytobeanysignificantroomforgrowthinconstructionfinancingandhomeloans,however,becauseoftheweaknessinTaiwan'srealestatemarketandthemoreconservativeattitudeofbankstowardtheextensionofloans.Insum,thescaleofloansinTaiwan'sbankingindustryasawholewillcontinuetoexpandatamoderatepacethisyear.And,withthecoolingofstockmarketactivityinTaiwanandoverseas,thesecuritiesandinsuranceindustriesaremovingintothewealthmanagementmarketandthiswillpossiblyweakenthegrowthinthebanks'feesincomefromthewealthmanagementbusiness.

Credit-rating Results

InthisnewyeartheBankwillfocusonthefivecorebusinessesofdomesticandinternationalsyndicatedloans,businessintheGreaterChinaarea,wealthmanagement,financialproductmarketing,ande-banking,andwillstrengthenintegrationandcross-marketingtoachievethetargetsofa20%offeeincometonetrevenuesanda30%ofoverseasbranchincometotheBank'stotalincome.Inaddition,theBankwillalsofurtherimproveitsassetqualityandstrengthenriskmanagementcapabilitieswiththeaimofcontinuingtoincreasetheBank'sprofitabilityandexpandassetscaleandmarketsharein2008.OurobjectiveistobecomeamodelforTaiwan'sbankingindustryandthemostcompetitiveinternationalbankservingChinesecommunities,andtocontinuecreatingsustainablevaluethatissharedbyourshareholders,customers,andemployeesalike.


The Macroeconomic

Environment

RatingInstitution PublishedDate LT ST OutlookTaiwanRatingsCo. June7,2007 twAA- twA-�+ Stable

Fitch June7,2007 BBB+ F2 Positive

Moody's October24,2007 A3 P-� Stable

Standard&Poor's May8,2007 BBB+ A-2 Stable

Organization Chart

Supervisors

GeneralMeetingof

Shareholders

Chairmanof

theBoard

InternationalBusinessBU

OverseasBusinessDivision

InternationalBusinessDivision

RegionalCenter

AccountingDivision

ITApplicationDivision

ITOperationDivision

CentralizationOperationDivision

HumanResourceDivision

RiskManagementDivision

FinancialMarketsBusinessAdmin.Division

SpecialAssetManagementDivision

CreditApprovalDivision

CreditAnalysisDivision

TreasuryDivision

TradingDivision

OperationPlanning&ServiceDivision

PersonalBankingBU

Corp.BankingBusinessAdmin.Division

CreditCardDivision

ConsumerBankingBusinessAdmin.Division

TrustDivision

PersonalBankingBusinessAdmin.Division

Corp.BankingBusinessMarketingDivision

OperationManagementBU

FinancialMarketsBU

RiskManagementCenter

GeneralAdministration

Center

InformationTechnologyCenter

ChiefAuditor

President

December2007

Organization Chart8

CorporateBankingBU

RiskManagementCommittee

President'sOffice

BusinessPlanning&Admin.Division

AuditingDivision

DomesticBranchesOverseasBranches&OBU

BoardofDirectors

GeneralAffairDivision

Board of Directors and Supervisors

Title Name DateofFirstAppointment EducationandCareerBackground OtherCurrentPosition

ChairmanoftheBoard

MichaelC.S.Chang Jan.�6'06 ■M.S.PublicFinance,NationalChengchiUniversityPracticingCPA;StandingSupervisor,FCB;Chairman,FranklinTempletonFirstTaiwanSITE;Chairman,BankofOverseasChinese;Chairman,TaiwanBusinessBank

Chairman,FirstFinancialHoldingCo.,Ltd.("FFHC");Chairman,FirstCommercialBank(USA);Director,TaiwanAssetManagementCorp.;Supervisor,TaiwanStockExchangeCorp.;Director,NationalCreditCardCenterofR.O.C.

ManagingDirector

Hsien-ChuanHuang July�3'06 ■LL.M.,MeijiUniversity,JapanChiefAuditor,FCB;Chairman,NationalInvestmentTrustCo.,Ltd.

DirectorandPresident,FFHC;Chairman,First-AvivaLifeInsuranceCo.,Ltd.;Director,TaiwanAssetManagementCorp.

ManagingDirector

Teng-LungHsieh July�3'06 ■NationalTaichungInstituteofCommerceGeneralAuditor,BankofTaiwan

Director,FFHC;EVP,BankofTaiwan

ManagingDirector

Hsien-FengLee July�3'06 ■Ph.D.,BieldfeldUniversity,GermanyAdvisoryCommitteeConsultantofCouncilforEconomicPlanningandDevelopment;Director,FarmersBankofChina

Director,FFHC;AssociateProfessorofDept.ofEconomics,NationalTaiwanUniversity

ManagingDirector

Tien-YuanChen Oct.22'97 ■B.A.,TamkangUniversityChairman,TaiwanCoca-ColaCo.,Ltd.

Director,FFHC;Chairman,GoldenGardenInvestmentCo.,Ltd.;Chairman,GoldenGateMotorCo.,Ltd.;Chairman,TaitekPaperIndustriesCo.,Ltd.

Director Chin-YunWu July�3'06 ■TatungInstituteofCommerceandTechnologySVP&GeneralManagerofCorporateBankingDept.andRegionalCenter,FCB;EVP,FCB

President,FCB;Director,First-AvivaLifeInsuranceCo.,Ltd.;Director,CDIB&PartnersInvestmentHoldingCorp.;Director,FinancialInformationServiceCo.,Ltd.

Director Chau-JungKuo June2�'02 ■Ph.D.,inEconomics,NationalChengchiUniversityCouncilMemberofCouncilforEconomicPlanningandDevelopment,ExecutiveYuan

ProfessorofDept.ofFinance,NationalSunYat-SenUniversity;DeanofCollegeofFinanceandBanking,NationalKaohsiungFirstUniversityofScienceandTechnology

Director Yih-CherngYang July�9'00 ■MBA,NationalTaiwanUniversityManagingDirectorandStandingSupervisor,ChinaBillsFinanceCorp.

President,SmallBusinessIntegratedAssistanceCenter

Director Jen-HuiHsu July8'03 ■Ph.D.UniversityofSouthernCaliforniaCommissionerofNationalTreasuryAgency,MOF;AssociateProfessorandChairofDept.ofEconomics,ShihHsinUniversity

ProfessorofDept.ofPublicPolicyandManagement,ShihHsinUniversity;ChiefofFinanceBureau,TaipeiCountyGovernment

Director Ruei-ChunChang Feb.�2'04 ■Ph.D.,NationalChiaoTungUniversityProfessorofDept.ofComputer&InformationScience,NationalChiaoTungUniversity

ChiefTechnologyAuditor,AcerProductionValueLab.

Director Chin-YuanKung Dec.23'05 ■NationalTaipeiInstituteofTechnologyDirector,TaiwanBusinessBank

Director,FFHC;Supervisor,DracoGroup

Director AlbertK.C.Ting July�3'06 ■MBA,MassachusettsInstituteofTechnologyViceChairman,CXTechnologyCorp.

Director,FFHC;Chairman,CXTechnologyCorp.;Chairman,AlexanderLeedRisksServiceInc.;Chairman,FreshfieldsInternationalCorp.

Director Chieh-ShinSung Apr.6'05 ■TsoyinSeniorHighSchoolAssociate,FCB;Chairman,IndustrialUnionofFCB

SeniorAssociateofBusinessDivision,FCB

StandingSupervisor

Yung-SunWu Sep.�6'04 ■B.A.,SoochowUniversityProfessorandHeadofTheManagementScienceGraduateInstitute,NationalChiaoTungUniversity;Supervisor,ChinaUnitedTrust&InvestmentCorp.;Supervisor,FFHC

Advisor,TaiwanFuhbicCorp.

Supervisor Lung-ChengPan July�9'00 ■M.A.,TheGraduateInstituteofManagementSciences,TamkangUniversityDirectorofBureauofMonetaryAffairs,MOF

EVP,CentralDepositsInsuranceCorp.

Supervisor Li-ShuLee July�3'06 ■B.A.,NationalChungHsingUniversityChiefofStatisticsOffice,ExaminationYuan;DeputyDirectorGeneralofDept.ofStatistics,MOF

Supervisor,FFHC;DirectorGeneralofDept.ofStatistics,MOF

Supervisor LynetteL.T.Chou July�3'06 ■Ph.D.,UniversityofHouston,C.T.BauerCollegeofBusiness,U.S.A.ChairandAssociateProfessorofDept.ofAccounting,NationalChengchiUniversity

Supervisor,FFHC;ProfessorofDept.ofAccountingandDeanofStudentAffairs,NationalChengchiUniversity

Supervisor Kao-ChenChuang Feb.�4'07 ■B.A.NationalChengchiUniversityManagerofSungChiangBranchandHsinChuangBranch,BankofTaiwan

Supervisor,FFHC;SVP&GeneralManagerofCreditAnalysisOffice,BankofTaiwan

Board of Directors and Supervisors 9

February29,2008

Executive Officers

February29,2008

Executive Officers�0

Title Name DateofFirstAppointment EducationandCareerBackground OtherCurrentPosition

President Chin-YunWu May�'06 ■TatungInstituteofCommerceandTechnologySVP&GeneralManagerofCorporateBankingDept.andRegionalCenter,FCB;EVP,FCB

Director,CDIB&Partners InvestmentHoldingCorp.;Director,Financial InformationServiceCo.,Ltd.;Director,First-AvivaLifeInsuranceCo.,Ltd.

EVPof

Corporate

BankingBU

Jin-DerChiang Jan.8'04 ■M.A.,TamkangUniversityVP&GeneralManagerofSingaporeBranch,FCB;SVP&GeneralManagerofInformationTechnologyDept.andSavingsDept.,FCB

Director,NationalInvestmentTrustCo.,Ltd.;Supervisor,FCBLeasingCo.,Ltd.;Director,TaiwanFinancialAssetServiceCorp.

EVPofInternationalBusinessBU

Tzuoo-YauLin Aug.�7'07 ■B.A.,TamkangUniversityEVPofOperationManagementCenter,FCB;CEO,FirstCommercialBank(USA)

Director,FirstCommercialBank(USA);ChiefofInternationalBusinessDivision,FCB

EVPofPersonal

BankingBU

Shwu-MeiShiue Mar.�7'06 ■B.A.,NationalTaiwanUniversitySVP&GeneralManagerofTreasuryDept.andPersonalBankingDept.,FCB

Director,NationalInvestmentTrustCo.,Ltd.

EVPofOperation

ManagementBU

Ying-HsiungLin Jan.8'04 ■B.A.,NationalTaiwanUniversitySVP&GeneralManagerofCreditCardDept.,PersonalBankingDept.andBusinessDevelopmentDept.,FCB

Director,EastAsiaRealEstateManagementCo.,Ltd.

EVPofFinancial

MarketsBU

Tay-PyngYang June22'07 ■B.A.,FengChiaUniversityVP&ChiefofOverseasBusinessDivision,FCB;SVP&ChiefofTradingDivision,FCB

Supervisor,TaipeiForeignExchangeCo.,Ltd.

EVPofRisk

ManagementCenter

JeffChen Dec.�4'07 ■B.A.,FengChiaUniversityVP&DeputyChiefandSVP&ChiefofResearchDivision,FCB

Supervisor,FCBLeasingCo.,Ltd.;Advisor&HeadofRiskManagementDept.,FFHC

EVPofGeneral

AdministrationCenter

Po-ChiaoChou Sep.�6'04 ■B.A.,NationalChengKungUniversityVP&GeneralManagerofAccountingDept.andGeneralAffairDept.,FCB;SVP&GeneralManagerofGeneralAffairDivision,FCB

Supervisor,TangEngIronWorksCo.,Ltd.;Supervisor,NationalInvestmentTrustCo.,Ltd.;Advisor&HeadofAdministrationManagementDept.,FFHC

EVPofInformationTechnology

Center

JasonKo Sep.�6'04 ■M.A.,GeorgeWashingtonUniversitySVP&GeneralManager,InformationTechnologyDivision,FCB

Advisor&HeadofInformationTechnologyDept.,FFHC

ChiefAuditor Wen-ChangTu Aug.�7'07 ■LL.B.,SoochowUniversitySVP&GeneralManagerofCorporateBankingDept.andCreditApprovalDivision,FCB

Supervisor,FirstTaisecSecuritiesInc.;Advisor&HeadofAuditingDept.,FFHC

Banking Operations

�.Receiveallkindsofdeposits. 2.Issuefinancialbonds. 3.Extendloans. 4.Discountbillsandnotes. 5.Investinsecurities. 6.Engageindomesticremittances. 7.Engageinacceptanceofcommercialdrafts. 8.Issuelocallettersofcredit. 9.Guaranteetheissuanceofcorporatebonds. �0.Engageindomesticguaranteebusiness. ��.Actascollectingandpayingagent. �2.Actasagenttosellgovernmentbonds,treasury

bills,corporatebondsandstocks. �3.Actassecuritiesunderwriter. �4.Engageinsecuritiestradingonitsownaccount. �5.Engageinrentalsafedepositbox. �6.Engageinagencyservicesrelatedtothe

businesslistedonbusinesslicenseorapprovedbythecompetentauthorities.

�7.Engageincreditcardbusiness. �8.Actasagenttosellgoldbullions,goldandsilver

coins. �9.Purchaseandsaleofgoldbullions,goldand

silvercoins. 20.Engageinimportandexportofforeigntrade,

outwardandinwardremittances,foreigncurrencydeposits,foreigncurrencyloansandguaranteebusiness.

2�.Purchaseandsaleofforeigncurrencycashandtraveler'schecks.

22.Engageinderivativefinancialproductsbusinessapprovedbythecompetentauthorities.

23.Engageintrustbusinessasregulated. 24.Handletheinvestmentinforeignsecuritiesunder

non-discretionarytrustofmoneyservice. 25.Handletheinvestmentindomesticsecurities

investmenttrustfundsundernon-discretionarytrustofmoneyservice.

26.Purchaseandsaleofgovernmentbonds. 27.Actasbroker,dealer,registrar,andunderwriter

forshort-termdebtinstruments. 28.Providefinancialconsultationservicefor

financing.

29.Actasagenttosellcharitylotteryticketsapprovedbythecompetentauthorities.

30.Engageinforeignexchangemargintrading. 3�.Purchaseandsaleofcorporatebondsand

financialbonds. 32.Engageinwealthmanagementbusiness.

■Trust Business Line �.TrustBusiness ● Trustofmoney ● Trustofloansandrelatedsecurityinterests ● Trustofsecurities ● Trustofrealestate ● Trustofsuperficies ●Handlingdiscretionaryinvestmentbusiness

bymeansoftrust 2.Affiliatedbusiness ● Actasagentforissuance,transfer,registra-

tionofsecurities,andfordistributionandpaymentofdividendsandbonuses.

● Provideconsultationservicesforsecuritiesissuanceandsubscription.

●Provideregistrationforsecurities. ● Actastrusteeforissuanceofbondsand

engageinagencyservicesrelatedtothebusiness.

●Providecustodyservices. ●Actascustodianofsecuritiesinvestmenttrust

funds. ●Provideconsultationservicesinconnection

withinvestments,financialmanagementandrealestatedevelopment.

●Handlefulldiscretionaryinvestmentbusinessonaconsignmentbasis.

●Otherrelatedbusinessapprovedbythecom-petentauthorities.

Scope of Operations

■Banking Business Line

Banking Operations ��

Main Figures for Business Operations2007 2006

NT$,000 % NT$,000 %Depositsatyearend

CurrentDeposits

Checkingdeposits 35,708,975 2.6 40,892,�20 3.�Demanddeposits 236,880,94� �6.9 220,035,�08 �6.5Savingsdeposits 356,3�0,04� 25.5 355,455,943 26.6Subtotal 628,899,957 45.0 6�6,383,�7� 46.2

TimeDeposits

Timedeposits 3�8,08�,857 22.7 286,375,7�8 2�.4Timesavingsdeposits 3��,926,427 22.3 3�6,054,502 23.7Subtotal 630,008,284 45.0 602,430,220 45.�

Others

Duetootherbanks 28,975,063 2.� 34,444,007 2.6Overdraftsfromotherbanks 3,644,768 0.2 2,�34,070 0.2Callloansfromotherbanks �07,234,6�0 7.7 80,�73,203 6.0Subtotal �39,854,44� �0.0 ��6,75�,280 8.7

Total �,398,762,682 �00.0 �,335,564,67� �00.0LoansatyearendCorporate 565,392,574 53.2 52�,929,360 54.�Consumer 309,09�,544 29.� 284,8�0,402 29.5Domesticbranchesinforeigncurrencies 45,323,387 4.3 43,2�0,�58 4.5Foreignbranches �39,646,�57 �3.� ��0,626,698 ��.5Import-exportnegotiations 3,72�,�29 0.3 3,758,83� 0.4Total �,063,�74,79� �00.0 964,335,449 �00.0Foreign Trade and Payment(US$,000)

FXbuyExportnegotiationsandcollections ��,�70,532 4.4 6,672,75� 3.7Inwardremittances ��5,�53,329 45.6 82,495,2�6 46.2Subtotal �26,323,86� 50.0 89,�67,967 49.9

FXsellImportL/Csandcollections �0,��2,780 4.0 5,932,269 3.3Outwardremittances ��6,4�2,202 46.0 83,443,252 46.7Subtotal �26,524,982 50.0 89,375,52� 50.�

Total 252,848,843 �00.0 �78,543,488 �00.0Total Revenues

Interestincome 48,572,750 75.7 42,937,557 76.7Feesandcommissions 7,959,923 �2.4 5,568,8�9 9.9Gainsonfinancialassetsandliabilities 2,7�2,525 4.2 �,902,266 3.4Incomefromequityinvestmentsaccountedforundertheequitymethod 239,953 0.4 405,�22 0.7

Foreignexchangegains 297,499 0.5 882,604 �.6Othernon-interestincome 4,37�,855 6.8 4,3�2,58� 7.7Total 64,�54,505 �00.0 56,008,949 �00.0Total Expenses

Interestexpenses 26,63�,34� 54.9 22,556,8�� 53.3Feesandcommissions �,075,996 2.2 �,073,596 2.5Provisionforcreditlosses 6,06�,505 �2.5 4,735,859 ��.2Businessandadministrativeexpenses �4,200,��8 29.3 �3,585,526 32.�Othernon-interestexpensesandlosses 5�3,638 �.� 363,270 0.9Total 48,482,598 �00.0 42,3�5,062 �00.0

Banking Operations�2

NT$,000 2007 2006

TrustBusiness

Balanceatyearend

Custodyoffundsanddiscretionaryinvestmentassets 45�,968,233 356,6�2,280Domestictrustassets 82,0�9,9�3 74,385,826Foreigntrustassets �79,4�2,350 �28,�97,552Trusteeaccounts 54,744,587 45,288,25�Familywealthtrustassets �,682,�3� �,662,703Corporateemployees'savingsplantrustassets 904,82� 995,399Realestatetrustassets 4,794,259 2,676,294Securitiestrustassets �4,679,�50 34,968,533Securitizationtrusteeassets 37,608,487 -Projecttrustassets 90�,985 789,755Collectivemanagementaccounts 3,479,570 3,809,58�

Transactionvolume Registrarforissuanceofsecurities 8�2,747,888 9�4,092,789

InvestmentBusinessBillsoutrightbuy/sell(OB/OS) �,090,726 27,40�Billsrepurchase/resale(RP/RS) 774,402 -Billsunderwriting 2,867,500 3,337,500CreditCardBusinessNumberofactivecards 23�,�35 229,097Transactionvolume 20,602,765 �8,697,659Revolvingbalanceofcreditcards �,990,089 2,609,�62WealthManagementBusinessDeposits 396,786,343 288,625,43�Mutualfunds �3�,075,936 95,732,9�4Bonds/bills 6,602,692 �0,�43,�48Derivative financial instruments 34,428,9�2 �9,586,936Insuranceproducts �6,760,404 �0,284,694

Banking Operations �3

Business Plans for 2008�4

Business Plans for 2008

Corporate Banking BU Development into the best financial advisor for Taiwanese businesses

and one of the top five lead banks in the local syndicated loan business

■Provisionofprofessionalfinancialplanningandarrangementofsyndicatedloansforclients.

■Enhancementofinformationapplicationanddevelopmentcapability.■Continuedoptimizationofoperationalandserviceprocedures,andupgradingof

operationalquality.■ Understandingofcustomerneedsandreinforcementofcorporatee-bankingplatform.■ Equalemphasisonriskandprofit,andmaintenanceofcontinuousprofitgrowthbank-

wide.

International Business BU

Development into the best financial partner for Taiwanese companies

worldwide in handling the international business operations

■ Establishmentofmarketingteamofforeigntradebusinesstoleveragejointmarketingabilities,enhancebusinessskills,andbolstermarketingstrength.

■Vigorouspromotionofthecorporatee-bankingservices;integrationofthedomesticandoversease-bankingnetworkfunctionandcomputerizedinformationsystemtofacilitatetheglobalfundtransferandmanagement.

■Strengtheningofproductdevelopmenttobreakoutofthecurrentoperatingmold,andfacilitatedistanceservicesbypromotionofthee-bankingnetworkservices.

■Expansionofservicestosatisfythelarge-scalefinancingneedsofTaiwanesebusinessesintheGreaterChinaandotheroverseasareas,andstrivingformoreoverseasbusinessopportunities.

■ Adoptionoflocallyappropriateoperatingstrategiesforoverseasbranches.■ IntegrationandreinforcementofbusinesspromotionperformanceintheGreaterChina

area.■Continueddevelopmentofoverseasoperatingbasestomeetmarketdemand.■Activationofinternationalfinancialprofessionals.

Establishment of a leading market position for the "First Wealth Manage-

ment" brand

■ StronglyholdingoftheBank'sdomesticmarketposition,andexpansionofitswealthmanagementbase.

■ Introductionofnewproductstoreplacetheoldonesinresponsetomarkettrends.■Useoftheteamadvantagetostrengthenmarketingpower.■Reinforcementofe-bankingandintegrationofthee-bankingplatform.■ExpansionofbusinessopportunitiesintheGreaterChinaandoverseasmarkets.

Operation

Management BU

Building up of an outstanding service platform and development into

Taiwan's most convenient and reliable bank

■Establishmentof"SMART"proceduresbysimplifyingworkingprocesses.■Centralizationanddigitizationofoperationssoastoreducetheworkloadsofbranches.■Maintenanceofhighservicequalitythroughqualityevaluationofdifferentservices.■Holdingofinspirationalactivitiestoexpandthescaleofdepositsandadjustthedeposit

structure.■Establishmentofaco-marketingmechanismtoencourageallemployeestorealizetheir

fullco-marketingpotential.

Financial Markets BU Introduction of adaptable financial products to make the Bank a champion in the financial market

■ Increaseofprofitsfromsecuritiesinvestmentbysharingtheinvestmentandresearchresourcesofthefinancialholdinggroup.

■Developmentofaderivativeproductsystemmoduletoenhanceproduct-developmentcapabilitiesandimproveprofitmargins.

■Combiningofbusinessunitsintoabranchnetworkandrealizationofthesynergiesofchannelintegrationthroughgroup-widejointmarketing.

■Selectionofqualifieddealersandreinforcementofbranchstaff'sknowledgeregardingfinancialproductsthroughsimulatedtradingworkshops.

■Establishmentofabank-widefinancialtradingsystemplatformandboostingofefficiencyinthebank-widefinancialproductmanagementmechanism.

Personal Banking BU

Business Plans for 2008 �5

Business Plans for 2008

Corporate Banking BU Development into the best financial advisor for Taiwanese businesses

and one of the top five lead banks in the local syndicated loan business

■Provisionofprofessionalfinancialplanningandarrangementofsyndicatedloansforclients.

■Enhancementofinformationapplicationanddevelopmentcapability.■Continuedoptimizationofoperationalandserviceprocedures,andupgradingof

operationalquality.■ Understandingofcustomerneedsandreinforcementofcorporatee-bankingplatform.■ Equalemphasisonriskandprofit,andmaintenanceofcontinuousprofitgrowthbank-

wide.

International Business BU

Development into the best financial partner for Taiwanese companies

worldwide in handling the international business operations

■ Establishmentofmarketingteamofforeigntradebusinesstoleveragejointmarketingabilities,enhancebusinessskills,andbolstermarketingstrength.

■Vigorouspromotionofthecorporatee-bankingservices;integrationofthedomesticandoversease-bankingnetworkfunctionandcomputerizedinformationsystemtofacilitatetheglobalfundtransferandmanagement.

■Strengtheningofproductdevelopmenttobreakoutofthecurrentoperatingmold,andfacilitatedistanceservicesbypromotionofthee-bankingnetworkservices.

■Expansionofservicestosatisfythelarge-scalefinancingneedsofTaiwanesebusinessesintheGreaterChinaandotheroverseasareas,andstrivingformoreoverseasbusinessopportunities.

■ Adoptionoflocallyappropriateoperatingstrategiesforoverseasbranches.■ IntegrationandreinforcementofbusinesspromotionperformanceintheGreaterChina

area.■Continueddevelopmentofoverseasoperatingbasestomeetmarketdemand.■Activationofinternationalfinancialprofessionals.

Establishment of a leading market position for the "First Wealth Manage-

ment" brand

■ StronglyholdingoftheBank'sdomesticmarketposition,andexpansionofitswealthmanagementbase.

■ Introductionofnewproductstoreplacetheoldonesinresponsetomarkettrends.■Useoftheteamadvantagetostrengthenmarketingpower.■Reinforcementofe-bankingandintegrationofthee-bankingplatform.■ExpansionofbusinessopportunitiesintheGreaterChinaandoverseasmarkets.

Operation

Management BU

Building up of an outstanding service platform and development into

Taiwan's most convenient and reliable bank

■Establishmentof"SMART"proceduresbysimplifyingworkingprocesses.■Centralizationanddigitizationofoperationssoastoreducetheworkloadsofbranches.■Maintenanceofhighservicequalitythroughqualityevaluationofdifferentservices.■Holdingofinspirationalactivitiestoexpandthescaleofdepositsandadjustthedeposit

structure.■Establishmentofaco-marketingmechanismtoencourageallemployeestorealizetheir

fullco-marketingpotential.

Financial Markets BU Introduction of adaptable financial products to make the Bank a champion in the financial market

■ Increaseofprofitsfromsecuritiesinvestmentbysharingtheinvestmentandresearchresourcesofthefinancialholdinggroup.

■Developmentofaderivativeproductsystemmoduletoenhanceproduct-developmentcapabilitiesandimproveprofitmargins.

■Combiningofbusinessunitsintoabranchnetworkandrealizationofthesynergiesofchannelintegrationthroughgroup-widejointmarketing.

■Selectionofqualifieddealersandreinforcementofbranchstaff'sknowledgeregardingfinancialproductsthroughsimulatedtradingworkshops.

■Establishmentofabank-widefinancialtradingsystemplatformandboostingofefficiencyinthebank-widefinancialproductmanagementmechanism.

Personal Banking BU

Market Analysis�6

Multinational Network TheinternationalizationoftheBank'sbusinessisdevelopingrapidlyfollowingtheoutwardexpansionoftheisland'seconomicstrength.Inadditiontooperating�90branchesinTaiwan,theBanknowoperates22overseasbusinessunitsinmajor international financial centers such as London, New York, Tokyo, Hong Kong, and Singapore,aswellasSoutheastAsiancountrieswithdevelopmentpotentialinrecentyears. The profit from these overseas branches exceeded 20% of the Bank's overall profit in2007.

Future Market Supply, Demand and GrowthThe excessively competitive situation among local banks will be difficult to change in theshortterm;and,giventhehighsimilarityofproductsofferedbythedifferentbanks,the extent of price-cutting competition among them is becoming fiercer. At the same time, foreignbankshavebeenaggressivelyacquiringsmallandmedium-sizedTaiwanesebanks;thishasgreatlyincreasedthenumberoftheirbranches,thusstrengtheningtheirdirect-marketingcapabilities.TheyhavealsosetaboutdevelopingtheirworldwidefundtransferringservicesforTaiwaneseenterprisesaswellastheirwealthmanagementservicesfortop-of-the-pyramidindividuals.Withtheirpowerfulmarketingcapabilitiesforfinancial products, this will surely erode the current customer and business bases of Taiwanesebanks.

The Demand Side Althoughthecash-andcredit-cardcrisishasweakenedthedemandforconsumerbanking business, its impact on financial demand by top-of the-pyramid individuals has beenlimited.Inaddition,thelowlevelofdomesticinterestrateshasresultedinstrongdemand for the flow-out of funds to offshore in search of higher returns. This indicates that thereisstillpotentialforthedevelopmentofthewealthmanagementbusinessinTaiwan;furthermore, in the financial industry, Taiwanese banks have a natural advantage intheir service platforms for financial-management products. Wealth management, therefore, willremainakeydirectionofbusinessdevelopmentforbanksinTaiwan.

Incorporatebanking,theglobaldeploymentstrategiesadoptedbymostdomesticmanufacturersasameansofstrengtheningtheircompetitivenessarepromptingbanksto follow them by providing the financial products and services arising from this trend. Inaddition,inviewofthedevelopmentofthetelecommunicationsservices,shippingandwarehousing,biotechnology,softwaredesign,digitalcontent,andothercreativeindustriesproceedingatarapidpaceinrecentyears,banksmustbreakoutoftheirtraditionalloanmodelanddevelopnewtypesofbusinessopportunitiesbydesigninganewloanstructurethat can accommodate to the needs of the flow of funds and goods.

Competitive Advantages, Favorable and Unfavorable Factors for Develop- ment Prospects, and Responsive MeasuresTheBankenjoysthecompetitiveadvantagesofawidespreadnetworkofbusinesslocations,alargecustomerbase,andacentury-longheritageofstableoperation.Inthefaceoftherapidlychangesoftheexternaloperatingenvironment,however,theBankislikelytoconfrontthefollowingcircumstances:

Market Analysis

The Supply Side

Market Analysis �7

Favorable Factors ■Awidespreadbranchnetworkandlargecustomerbase,favoringexpansionofmarketsharefortheBank'sproducts.

■ Acorporatecultureofsustainableoperationandacentury-oldbrandthatcustomerstrust.

■ Asolidlevelofcapital,andabundantliquidity.■ GoodassetqualityandalowNPLratio.■ Ariskmanagementsystemthatisconstantlybeingimprovedandaproductpricing

policythatconformstothenatureofgradedrisk.■ Implementinginternalorganizationalrestructuringtimelytorespondasnecessaryto

changesoftheexternalenvironment.■ Anextentofinternationalizationthatleadstheindustry.■ Aleadingpositioninwealthmanagement,agrowingratioofincomefromfeesand

commissions,andacontinuouslyimprovingstructureofoperatingincome.

Unfavorable Factors ■ Weakeningdomesticandinternationaleconomies.■ Acontractionofprofitabilitycausedbyintensecompetitioninthedomesticbanking

industry.■ LimitedaccesstothemarketofMainlandChinaforTaiwanesebanks,causedbythe

lackofacross-straitsfinancialsupervisoryplatform.

Responsive Measures ■ UseofthemarketingsynergiesoftheFirstFinancialHoldingCompanytoexpandthescopeofproductco-marketing.

■ Strengtheningofthecompetitivenessofwealthmanagementanddeepeningofthebankinginsurancebusiness.

■ Vigorousdevelopmentofthedomesticandinternationalsyndicatedloanbusinesssoastodiversifycreditrisk.■ DevelopmentofbusinessintheGreaterChinaareaandexpansionofbusinessto

satisfydemandfromTaiwanesecompanies.■ StronglyholdingthemarketsharesofloanstoSMEs,foreigntradefinance,andtrust

businessessoastomaintaincoreprofitability.■ Enhancementoffinancialproductdevelopmentcapabilityandheighteningoffees

incomefromfinancialmarketing.■ Increaseofprofitsourcesthroughstrategicallianceswithdomesticandforeignfinancial

institutions.■ Introductionofnewriskmanagementsystemsandreinforcementofriskcontrol

techniques.

�8

Corporate Governance

DeficiencywiththeCorporate Item Operation GovernanceBest-PracticePrinciples forBanks,andtheReasonsA.OwnershipStructureand Shareholders'Equity�.Thehandlingofshareholders' �.TheBank'ssoleshareholderis fullycompliant suggestionsanddisputes FirstFinancialHoldingCo.;2.Updatingthedetailsofmajorshare- communicationchannelsareopen. holdersofcontrollingstakeinthe 2.TheBankisownedbyasingle bank shareholder,andthestructureis3.Riskassessmentandfirewalls quitesimple. establishedagainsttheoperations 3.Thesubjectmattersaregovernedby withtheaffiliates the"RuleforPersonnel,Information andBusinessExchangesbetween FirstCommercialBankandits InvesteeCompanies".B.OrganizationandResponsibilities oftheBoardofDirectors�.Establishingindependentdirector(s) �.None �.subjecttotheimplementationof2.Evaluatingtheindependenceofthe 2.WhentheBankemploysCPAsto relevantlawsandregulations CPAsperiodically auditfinancialconditionandtaxfiling 2.fullycompliant eachyear,itwillseekindependent statementfromtheauditorand submitthecommissioningofthe auditortotheBoardofDirectors forapproval.C.OrganizationandResponsibilities ofSupervisors�.Establishingindependentsupervisors �.Itisnotrequiredfollowingtherevisedfullycompliant2.Communicationswithsupervisorsby regulation. bankemployees,andbyshareholders 2.TheBankhasonestandingsuper- visor,representingallsupervisors to work in the office, and designates staffmembertohandletherelated contactmatters.Thecommunications withthestandingsupervisororother supervisorsbybankemployeesand theinterestedpartiesareopen.D.CommunicationswithInterested Parties fullycompliant

�.Toprotecttheinterestsofcustomers,theBankhasestablishedthe"Con-sumerProtectionPrinciplesandImplementationGuidelinesforFirstCommercialBank"andhassetupacustomerfeedbackhotlineandexternalwebsite,providingforopencommunicationwiththeinterestedparties.

2.TheBank'sinternalwebsitecontainsadiscussionforumandbank-widevideoconferencesareheldregularly,providingforopencommunicationwithemployees.

Corporate Governance�8

DeficiencywiththeCorporate Item Operation GovernanceBest-PracticePrinciples forBanks,andtheReasons

�.Settingupawebsite �.Annualreport,majorfinancialstate- fullycompliant2.Useofothermethods mentsandcorporategovernance arepublicizedontheBank'swebsite. 2.TheBankhassetupanEnglish website,whereAnnualReportand monthly financial information, etc. are available.Aspokespersonsystem hasalsobeenestablished;Mr.Po- ChiaoChou,EVPisappointed spokesperson.F. OperationStatusoftheNomination None subjecttotheimplementationoforRemunerationCommittee relevantlawsandregulationsG.DescriptionoftheBank'sCorporateGovernance(includingitsdeficiencywiththeCorporateGovernanceBest-

PracticePrinciplesforBanks,andthereasons):Allaredisclosedasabove.H.PleasedescribethesystemsandmeasuresadoptedbytheBankinregardtosocialresponsibility(includinghuman

rights,employeerights,environmentalprotection,communityparticipation,supplierrelations,monitoring,andmaterialrelationshiprights),anditsimplementationofsocialresponsibility:

TheBankhasrequitedthesocietyinrecentyearswithsponsoringnumerousculturalandsportsactivities.Ithasalsoprovidedlargescholarshipstoencouragelearning,andhasheldnumerousqualitylecturesaswellasartperformances.TogetherwithFirstFinancialHoldingCo.,theBanksponsoredacharityfairforthepublicinteresttodemonstrateitscorporatesocialresponsibility.Theseactivitieswillcontinuetobeorganizedinthefuture.

I.OtherInformation ■ Continuingeducationofdirectorsandsupervisors: Inadditiontoofferingopportunitiesofadvancededucationinaccordancewiththeindividualwishesofdirectors

andsupervisors,theBankalsoprovidestherelevantinformationofcontinuingeducationprogramsfortheirreference.

■ AttendanceofdirectorsandsupervisorsattheBoardmeetings: Theypreparedwelltoattendthemeetings,andprovidedsufficientandvaluableopinionsatappropriatetimes. ■ Abstainingfromthemeetingsinvolvingdirector'sorsupervisor'sowninterest:Theyexercisedahighdegreeofself-disciplinetowithdrawfromtheproposaldiscussion,inordertoavoidthe

conflictofinterestasregulatedbythe"GuidelinefortheBoardofDirectorsMeetingsofFirstCommercialBank". ■ Riskcontrolpolicyandimplementation: TheBankhasestablishedariskmanagementpolicyandhassetupamechanismforriskidentification,risk

assessment,riskoversightandriskcontrolviaamanagementsystemwithanintegratedframework.TheRiskManagementCommitteeisinchargeofriskreview,riskoversightandcoordinationofallriskrelatedbusinessactivities.Theprimarygoalofaconsolidatedriskmanagementsystem,adoptingarisk-centricapproachbusinessoperatingpolicy,istoachievebusinesstargetsinordertomaximizeshareholderreturns.

■ Consumer-protectionpolicy: TheBankhassetupthe"ConsumerProtectionPrinciplesandImplementationGuidelinesforFirstCommercial

Bank"toassurethatconsumerinterestsareprotected.

E.DisclosureofInformation

Corporate Governance �9

Risk Governance TheBank'sriskmanagementprogramisestablishedbasedonitsriskmanagementstrategyandbusinessoperatingobjectivesasapprovedbytheBoardofDirectors,andinaccordancewiththe"RiskManagementPoliciesandGuidingPrinciplesfortheFirstFinancialHoldingCompany",BaselII,andtherelevantregulationsofthecompetentauthoritiesofTaiwan.ThePolicyistobetimelyadjustedinresponsetoeconomicchangeandindustrycycle,andinviewoftheBank'sloanportfolio,assetqualityanditsbusinesspromotionstrategy,etc.bythegovernedlaws;anditsadjustmenthastobeapprovedbytheBoardofDirectorsorreportedtothetopexecutivesforapproval.TheBoardofDirectorsisthehighestlevelofriskmanagementoversight.TheRiskManagementCommitteeisinchargeofriskreview,riskoversight,reportingandcoordinationofallriskrelatedbusinessactivities.TheTopExecutivesoverseetheimplementationoftheriskmanagementprogramasapprovedbytheBoardofDirectors.TheRiskManagementCenterconsistsoffourDivisionsandsixRegionalCentersandisresponsiblefortheassessmentandmonitoringofcreditrisk,marketrisk,operationalriskandintegratedrisk.

Risk Management Overview

Risk Management Overview20

TheMethodologyforCalculatingCapitalRequirements:StandardizedApproachThecreditexposuresafterriskmitigationandminimumcapitalrequirements

bythestandardizedapproachasofDecember3�,2007

Typeofrisk Creditexposuresafterriskmitigation

Minimumcapitalrequirements(inNT$,000)

Sovereigns 354,338,3�2 77,7�8Non-centralgovernmentpublicsectorentities 22,�86,4�3 358,885Banks(includingmultilateraldevelopmentbanks) �43,453,679 6,753,576Corporates (including securities firms and insurance co.) 570,494,063 4�,092,507Regulatoryretailportfolios �57,�58,363 9,358,833Residentialproperty 3�4,788,205 ��,470,365Equityinvestments 5,�36,593 �,6�3,397Otherassets 53,088,220 2,843,360Total �,620,643,848 73,568,64�

Credit Risk Process■ ToconformtotheimplementationofBaselII,variousinternalandexternalmodelingtechniques

fortheratingofcreditriskaregraduallydevelopedandfurtherintroducedtotheprocessesofcreditanalysisandloansreview,aswellaslinkedwithwarningmechanismemployedforthepost-creditcontrol,soastoestablishacompletecreditriskmanagementprocess.

■Thecreditlimitsfortheconglomerate,industry,countryandstockslistedonTSEorOTCetc.havebeenprescribed,soastocontrolloansconcentrationrisk.

■ Tooperateefficientlyontheprocessofriskmanagement,theBanksetsuprelatedinternalauditingandcontrolsystem.

Risk Reporting and Assessment■RiskManagementReport:Toavoidtheexcessiveconcentrationofcreditriskandmonitorthe

changesincreditratingoftheloanassets,theBankconformstothelimitsfor"oneperson","arelatedperson"and"arelatedenterprise".Inaddition,thecreditriskanalysisreportsincludingcreditrating,assetquality,NPLratioandcreditconcentrationetc.aresubmittedtotheRiskManagementCommitteeortheBoardofDirectorsfortheirreviewsperiodically.

■Measurementsystem:Wedevelopedtheriskmodulestoevaluatetheriskofborrowersontheproductsofcorporatebanking,creditloansandmortgages,whicharefurtherputintosystemtoperformstresstestinordertoquantifycreditriskwithintheBank'srisktolerance.

Risk-hedging Strategy■Periodicmonitoringandreportingofconcentrationriskbygroup,businesstype,countryand

stockslistedonTSEorOTC.Accordingtothemarketconditions,thecomplexityofbusinessesandriskmanagementstrategies,weevaluateandadjusttherisklimits.

■Accordingtoborrower'screditorthetypeofcreditlimittorequestpropercollateralorguaranteeinordertolowercreditrisk.

2�Risk Management OverviewRisk Management Overview 2�

Market Risk Strategy

UnderthemarketriskappetiteapprovedbytheBoardofDirectors,theBanksetsrisklimitsandmanagement,scheduledreportingprocess,theinternalauditingsystem,independentmonitoringandmanagementunits,andhigh-levelcommitteeorganizations.Process■Appropriatemarketriskmanagementindexesandquotasareestablishedandupdatedona

scheduledbasisinresponsetochangesandtrendsinthemarket.■Riskmanagementmethodsareestablishedfordifferentareasofbusiness,andtherecognition,

measurement,monitoring,andcontrolofmarketriskareincludedwithintherulesofoperatingprocedure.

■MarketriskmanagementdepartmentreportsthecurrentstatusandresultsofmarketriskmanagementtotheBoardofDirectorsorthetopexecutivesonascheduledbasis.

Risk Reporting and Assessment■Assetsandderivativeproductsonoroffthebalancesheetareatriskofpotentiallossescaused

byunfavorablechangesinmarketprices.The"marketprice"referredtoencompassesinterestrate,equity,foreignexchangerate,andcommodityprice,etc.

■ Therisk-measuringtoolsofVaRandGreekareemployedtoevaluateriskexposure.■ Themarketriskreportswillthemselvespresenttheextentofriskexposure,andbeusedas

referencesbythemanagementexecutivestotimelyadjusttheriskcontrolpolicy.Risk-hedging Thetradingpositionsoffinancialproductsdealtwithcustomerswillbeproperlyhedgedorsquared,andsomewillbeheldasriskassetswithinadequaterisktolerance.Thehedgingfinancialderivativesprimarilyencompassinterestrateswaps,cross-currencyswaps,options,andinterestcapsorfloors,etc.Thefixed-rateloanassetsconductedbyoverseasbrancheswillbeutilizedinterestrateswapstomitigatethefairvaluerisk.

TheMethodologyforCalculatingCapitalRequirements:StandardizedApproachTheminimumcapitalrequirementsformarketriskasofDecember3�,2007

Typeofrisk Minimumcapitalrequirements(inNT$,000)

Interestraterisk 2,503,806Equitypositionrisk 352,�27Foreignexchangerisk 2,�78,340Commoditiesrisk -Total 5,034,273

Strategy and Process ■ A"riskappetite"instructionmanualhasbeencompiledtoserveasabasisfortheestablishment

oftheBank'sriskcontrolmechanism.■ Employeesatdifferentlevelsaredirectlychargedwiththemanagementofriskwithintheirown

scopeofresponsibility,andarerequiredtoobservetheinternalcontrolandauditingsystemstogetherwithrelatedrules.

■ Methodsofmanagementaredifferentiatedasriskrecognition,assessment,monitoring,reporting,andcountermeasures,andareexercisedinlinewiththeintroductionofmanagementtoolssuchasLossDataCollection(LDC),RiskandControlSelf-Assessment(RCSA),ControlSelf-Assessment(CSA)andKeyRiskIndicators(KRI).

Operational Risk

System Organization and StructureTheBankemploysacentralizedmanagementframeworkwiththreelinesofdefense,eachwithitsdefinedauthorityandreportingthreshold:■Unitsbank-wide:Allunitsshouldconductregularcontrolofbusinessactivitiesandcarryout

operationalriskmanagementwithinthescopeoftheirrespectivedutiesandresponsibilities.■Headquarter'sriskmanagementunit:ThisunitisresponsibleforestablishingtheBank'srisk

managementsystem,planningofmanagementtoolsandprocedures,andimplementationofexposuremonitoringandreportingbank-wide.

■Auditingunit:Thisunitisresponsibleforauditingtheeffectivenessofthemanagementframeworkandprocedures.

Risk Reporting and Assessment■Standardizedoperatingmethodsareusedforriskrecognitionandassessmentsothat

managerscaneasilyobservetheriskprofileandconstantlymonitorpotentialrisks.■ IfaunitdiscoversamajorriskexposurethatthreatenstheBank'sfinancialorbusiness

situation,itmustreportimmediatelytotheauditingunitandthebusinessmanagementunit,andriskmanagementunitinvolvedmustreporttothechiefauditorandthetopexecutives.Iftheincidentinvolvesaregulatoryviolation,areportmustalsobesubmittedtothecomplianceunit.

■ Theheadquarter'sriskmanagementunitdisclosesthestatusofbank-wideexposuremonitoringonaregularbasis,compilesbank-wideoperationalriskdata,andreportstothetopexecutives,theRiskManagementCommittee,ortheBoardofDirectors.

Risk Hedging■ Totransferormitigatetheoperationalrisk,insurancepolicywillbeprimarilyemployed.■Toreducetheriskofpotentiallossesfromastoppageofoperationscausedbyfire, explosion,typhoon,earthquake,robbery,bank-run,laborstrike,orothermajorincidents,the

Bankhasestablishedthecontingencyandbusinessnon-interruptionguidelinesincludingtherulesforimplementation.

■ TheimplementationmeasurefordealingwiththeoperationcrisishasbeensetupandwillbereportedtotheRiskManagementCommitteeandthetopexecutivesfromtimetotime.

Risk Management Overview22

Year Operating profit Minimumcapitalrequirements(inNT$,000)

2007 32,285,5882006 28,099,5�62005 26,392,689Total 86,777,793 4,338,890

TheMethodologyforCalculatingCapitalRequirements:BasicIndicatorApproachTheminimumcapitalrequirementsforoperationalriskasofDecember3�,2007

System Organization and StructureTheBankemploysacentralizedmanagementframeworkwiththreelinesofdefense,eachwithitsdefinedauthorityandreportingthreshold:■Unitsbank-wide:Allunitsshouldconductregularcontrolofbusinessactivitiesandcarryout

operationalriskmanagementwithinthescopeoftheirrespectivedutiesandresponsibilities.■Headquarter'sriskmanagementunit:ThisunitisresponsibleforestablishingtheBank'srisk

managementsystem,planningofmanagementtoolsandprocedures,andimplementationofexposuremonitoringandreportingbank-wide.

■Auditingunit:Thisunitisresponsibleforauditingtheeffectivenessofthemanagementframeworkandprocedures.

Risk Reporting and Assessment■Standardizedoperatingmethodsareusedforriskrecognitionandassessmentsothat

managerscaneasilyobservetheriskprofileandconstantlymonitorpotentialrisks.■ IfaunitdiscoversamajorriskexposurethatthreatenstheBank'sfinancialorbusiness

situation,itmustreportimmediatelytotheauditingunitandthebusinessmanagementunit,andriskmanagementunitinvolvedmustreporttothechiefauditorandthetopexecutives.Iftheincidentinvolvesaregulatoryviolation,areportmustalsobesubmittedtothecomplianceunit.

■ Theheadquarter'sriskmanagementunitdisclosesthestatusofbank-wideexposuremonitoringonaregularbasis,compilesbank-wideoperationalriskdata,andreportstothetopexecutives,theRiskManagementCommittee,ortheBoardofDirectors.

Risk Hedging■ Totransferormitigatetheoperationalrisk,insurancepolicywillbeprimarilyemployed.■Toreducetheriskofpotentiallossesfromastoppageofoperationscausedbyfire, explosion,typhoon,earthquake,robbery,bank-run,laborstrike,orothermajorincidents,the

Bankhasestablishedthecontingencyandbusinessnon-interruptionguidelinesincludingtherulesforimplementation.

■ TheimplementationmeasurefordealingwiththeoperationcrisishasbeensetupandwillbereportedtotheRiskManagementCommitteeandthetopexecutivesfromtimetotime.

■ TheFirstEducationFoundation Targetedatfosteringsocialharmony,theFoundation

hassparednoeffortstoenrichartsandcultureandcarryoutpublic-benefitactivities.

InMarch2007,itheldtheNew Year Celebration ConcertattheTaipeiInternationalConventionCenter.

InJune,itheldtheDuanwu Festival ConcertattheTainanMunicipalCulturalCenter.

InOctober,itorganizedtheGolden Autumn ConcertagainattheTaipeiInternationalConventionCenter.

InAprilandSeptember,itheldtwohistoricsitetoursnamedas A Century of Cijin Beauties and The Small-town Glories of Lugang,respectivelytoenhancethequalityoflifeandeducationofTaiwan'speople.

■ 2007CustomerScholarshipProgram TheBankpaidbacktosocietyandburnishedits

corporateimagebyofferingscholarshipofNT$2.5millionto250outstandingstudentsindomesticcollegesanduniversities.

■ CommunityInvolvement InNovember2007,allemployeeswereurgedto

getoutsideandtakepartinmountainclimbingandcleanupactivitiessoastogivethenatureacleanspaceinwhichtolive.

■ ADrivetoRescueBananaFarmers TheBankprovidedrelieftobananafarmersby

purchasingmorethan37metrictonsofbananasonJuly25tosharewithemployeesandcustomersoftheBank's�88branchesthroughoutTaiwan.

Corporate Responsibility and Ethical Behavior

Corporate Responsibility and Ethical Behavior 23

TheBankhasalwaysbeengivingstrongsupporttopublic-benefitactivities,fulfillingitscorporateresponsibility,andpayingbacktosociety:

Year Operating profit Minimumcapitalrequirements(inNT$,000)

2007 32,285,5882006 28,099,5�62005 26,392,689Total 86,777,793 4,338,890

24 Financial Information

Significant Financial Information Condensed balance sheets

NT$,000 �2.3�.2007 �2.3�.2006 �2.3�.2005 �2.3�.2004 �2.3�.2003

Cashandcashequivalents,duefrom CentralBankandotherbanks �65,��7,649 �78,988,�34 �57,635,062 �64,558,��2 �64,45�,494

Marketableandtradingsecurities - - - 3�2,279,207 27�,553,432

Financialassetsatfairvaluethroughprofitorloss 37,20�,578 42,794,967 37,4�8,248 - -

Investmentsinbillsandbondsunderresaleagreements - 50�,6�6 - - -

Receivables 2�,875,760 2�,295,485 22,449,783 3�,078,586 38,�72,807

Billsdiscountedandloans(billspurchased) �,07�,�7�,454 972,044,580 890,59�,804 84�,739,��2 860,0�5,753

Available-for-salefinancialassets 6�,258,309 82,635,7�3 87,3�6,092 - -Held-to-maturityfinancialassets 2�7,897,599 2�3,747,427 235,942,624 - -

Equityinvestmentsaccountedforundertheequitymethod 2,362,249 2,368,858 2,23�,�30 - -

Long-termequityinvestments - - - 63,322,645 56,974,837Otherfinancialassets ��,680,795 �8,037,044 22,274,750 - -Properties,plantsandequipments 23,60�,360 23,386,589 23,848,5�5 24,�36,348 25,427,654Intangibleassets 4�7,230 369,867 203,767 �64,952 �83,375Othersassets �3,764,2�� 7,852,�6� 2�,�35,6�2 24,932,464 25,727,965Totalassets �,626,348,�94 �,574,022,44� �,50�,047,387 �,462,2��,426 �,442,507,3�7DuetoCentralBankandotherbanks �40,3�5,847 ��6,955,966 �44,77�,206 �02,�29,745 �24,�49,358

Financialliabilitiesatfairvaluethroughprofitorloss 5�,376,�64 5�,8��,768 36,064,034 - -

Billsandbondspayableunderrepurchaseagreements �2,207,��3 �5,24�,566 �5,395,�50 �8,397,06� -

Payables 39,087,947 50,027,772 46,675,896 47,4�0,489 53,086,792Depositsandremittances �,260,�75,302 �,2�9,888,559 �,�44,64�,85� �,�52,808,272 �,�37,�52,238FundsborrowedfromCentralBank

andotherbanks,financialbondspayable

22,926,66� 22,�8�,525 24,233,�68 59,494,54� 55,476,965

Accruedpensionliabilities �,553,653 �,439,88� �,374,209 �,�98,8�2 934,664Otherfinancialliabilities 54�,8�4 534,0�� 2,2�5,649 - -Otherliabilities 8,422,�06 8,8�5,973 8,833,224 �3,�54,600 �3,806,�05Totalliabilities �,536,606,607 �,486,897,02� �,424,204,387 �,394,593,520 �,384,606,�22Commonstock 46,909,240 46,2�6,000 46,2�6,000 46,2�6,000 46,2�6,000Additionalpaid-incapital 8,660,326 8,660,326 8,660,326 8,660,326 2�,966,945Retainedearnings 24,6�6,798 20,2�6,598 �6,23�,462 9,967,095 (�3,306,6�9)Unrealizedrevaluationincrements 5,298,�24 5,527,�77 5,533,543 2,595,838 2,7�7,000

Unrealizedgains/lossesonfinancialinstruments 3,94�,376 6,252,298 - - -

Cumulativetranslationadjustments 3�5,723 253,02� 20�,669 �78,647 307,869Totalstockholders'equity 89,74�,587 87,�25,420 76,843,000 67,6�7,906 57,90�,�95Totalliabilitiesandstockholders'equity �,626,348,�94 �,574,022,44� �,50�,047,387 �,462,2��,426 �,442,507,3�7

25Financial Information

Financial ratios (%) 2007 2006 2005 2004 2003

FinancialstructureDebtratio(totalliabilitiestototalassets) 94.48 94.46 94.88 95.38 95.99Fixedassetstonetworth 26.30 26.84 3�.04 35.70 43.92SolvencyLiquidityreserveratio 23.36 27.20 3�.22 30.50 28.�3OperatingperformanceLoanstodeposits 85.00 79.68 77.8� 73.02 75.63NPLratio �.50 �.57 �.72 �.27 �.46Totalassetsturnover(times) 0.02 0.02 0.02 0.03 0.03ProfitabilityROA(netincometoaveragetotalassets) 0.75 0.7� 0.69 0.69 (0.97)ROE(netincometoaverageshareholders'equity) �3.60 �3.32 �4.�5 �5.88 (23.�0)Profitmarginratio 33.47 34.�0 32.23 20.92 (28.�6)CashflowsCashflowadequacyratio 539.9� 683.67 648.25 589.0� 5�6.64Capitaladequacyratio �0.80 ��.00 �0.24 �0.35 9.00MarketshareAssets 5.46 5.49 5.30 6.04 6.30Networth 4.76 4.82 4.47 4.43 3.63Deposits 5.49 5.45 5.4� 6.00 6.34Loans 5.72 5.4� 5.�8 5.55 6.�6

NT$,000 2007 2006 2005

Netinterestincome 2�,94�,409 20,380,746 �9,6��,679Netnon-interestincome �3,992,�2� ��,634,526 �2,094,469Provisionforcreditlosses (6,06�,505) (4,735,859) (4,320,502)Operatingexpenses (�4,200,��8) (�3,585,526) (�3,784,5��)Incomefromcontinuingoperationsbeforeincometax �5,67�,907 �3,693,887 �3,60�,�35Incomefromcontinuingoperationsafterincometax �2,025,840 �0,354,367 �0,2�8,955

Cumulativeeffectofachangeinaccountingprinciple - 563,�69 -

Netincome �2,025,840 �0,9�7,536 �0,2�8,955

Earningspershare($) 2.56 2.33 2.�8

NT$,000 2004 2003Operatingincome 47,638,006 47,259,028Operatingexpenses (36,�38,034) (66,806,779)Operatingprofit(loss) ��,499,972 (�9,547,75�)Non-operatingincome(loss) 502,569 662,868Income(loss)beforeincometax �2,002,54� (�8,884,883)Netincome(loss) 9,967,095 (�3,306,6�9)Earnings(losses)pershare($) 2.�2 (2.84)

Condensed statements of income

Report of Independent Accountants26

Report of Independent Accountants

To:FirstCommercialBankCo.,Ltd.

WehaveauditedtheaccompanyingbalancesheetsofFirstCommercialBankCo.,Ltd.(theBank)asofDecember3�,2007and2006,andtherelatedstatementsofincome,ofchangesinstockholders'equityandofcashflowsfortheyearsthenended.ThesefinancialstatementsaretheresponsibilityoftheBank'smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.

Weconductedourauditsinaccordancewiththe"RulesGoverningAuditofFinancialStatementsofFinancialInstitutionsbyCertifiedPublicAccountants"andgenerallyacceptedauditingstandardsintheRepublicofChina.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforouropinion.

Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,thefinancialpositionofFirstCommercialBankCo.,Ltd.asofDecember3�,2007and2006,andtheresultsofitsoperationsanditscashflowsfortheyearsthenendedinconformitywiththe"GuidelinesGoverningthePreparationofFinancialReportsbyPublicBanks","BusinessEntityAccountingAct","RegulationonBusinessEntityAccountingHandling"andgenerallyacceptedaccountingprinciplesintheRepublicofChina.

AsdescribedinNote2tothefinancialstatements,FirstCommercialBankCo.,Ltd.hasadoptedtheStatementsofFinancialAccountingStandardsNo.34"FinancialInstruments:RecognitionandMeasurement"andNo.36"FinancialInstruments:DisclosureandPresentation"andnewlyamendedarticlesofotherrelevantstandards,effectivefromJanuary�,2006.

March�2,2008

27Financial Statements

Balance SheetsasofDecember3�,2007and2006

NT$,000 Note 2007 2006AssetsCashandcashequivalents 3(�) $�9,899,202 $38,02�,90�DuefromCentralBankandotherbanks 3(2),4 �45,2�8,447 �40,966,233Financialassetsatfairvaluethroughprofitorloss-net 3(3) 37,20�,578 42,794,967Investmentsinbillsandbondsunderresaleagreements 3(4) - 50�,6�6Receivables-net 3(5) 2�,875,760 2�,295,485Billsdiscountedandloans-net 3(6),4 �,07�,�7�,454 972,044,580Available-for-salefinancialassets-net 3(7),5 6�,258,309 82,635,7�3Held-to-maturityfinancialassets-net 3(8) 2�7,897,599 2�3,747,427Equityinvestmentsaccountedforundertheequitymethod-net 3(9) 2,362,249 2,368,858Otherfinancialassets-net 3(�0) ��,680,795 �8,037,044Properties,plantsandequipments 3(��),(26) CostLand �6,523,3�7 �6,407,5�2Buildings 8,892,899 8,294,574Machineryandequipments 3,07�,�3� 3,�26,688Transportationequipments 9�5,699 892,894Otherequipments �,794,085 �,792,063Leaseholdimprovements 642,608 6��,605Subtotal 3�,839,739 3�,�25,336Less:Accumulateddepreciation (8,409,322) (7,824,9�0)Constructioninprogressandprepaymentsforequipments �70,943 86,�63Properties,plantsandequipments-net 23,60�,360 23,386,589Intangibleassets-net 4�7,230 369,867Otherassets-net 3(�2),(29),5 �3,764,2�� 7,852,�6�Totalassets $�,626,348,�94 $�,574,022,44�LiabilitiesandStockholders'EquityLiabilitiesDuetoCentralBankandotherbanks 3(�3) $�40,3�5,847 $��6,955,966FundsborrowedfromCentralBankandotherbanks �26,66� �83,046Financialliabilitiesatfairvaluethroughprofitorloss 3(�4),(�8) 5�,376,�64 5�,8��,768Billsandbondspayableunderrepurchaseagreements 3(�5) �2,207,��3 �5,24�,566Payables 3(�6) 39,087,947 50,027,772Depositsandremittances 3(�7),4 �,260,�75,302 �,2�9,888,559Financialbondspayable 3(�8) 22,800,000 2�,998,479Accruedpensionliabilities 3(�9) �,553,653 �,439,88�Otherfinancialliabilities 3(20) 54�,8�4 534,0��Otherliabilities 3(2�) 8,422,�06 8,8�5,973Totalliabilities �,536,606,607 �,486,897,02�Stockholders'EquityCommonstock 3(22) 46,909,240 46,2�6,000Additionalpaid-incapital 3(23) 8,660,326 8,660,326RetainedearningsLegalreserve 3(24) 9,33�,076 6,055,8�5Unappropriatedearnings 3(25),(29) �5,285,722 �4,�60,783Otherstockholders'equityUnrealizedrevaluationincrements 3(26) 5,298,�24 5,527,�77Cumulativetranslationadjustments 3(9) 3�5,723 253,02�Unrealizedgains/lossesonfinancialinstruments 3(7) 3,94�,376 6,252,298Totalstockholders'equity 89,74�,587 87,�25,420Totalliabilitiesandstockholders'equity $�,626,348,�94 $�,574,022,44�*NT$32.484:US$�.00

28 Financial Statements

Statements of Income fortheyearsendedDecember3�,2007and2006

NT$,000 Note 2007 2006Interestincome $48,572,750 $42,937,557Less:Interestexpenses (26,63�,34�) (22,556,8��)Netinterestincome 2�,94�,409 20,380,746Netnon-interestincomeNetservicefeeandcommissionincome 6,883,927 4,495,223Gainsorlossesonfinancialassetsandfinancialliabilities atfairvaluethroughprofitorloss 3(3),(�4) �,94�,995 �,522,730Realizedgainsorlossesonavailable-for-salefinancialassets 759,975 37�,637Realizedgainsorlossesonheld-to-maturityfinancialassets �0,555 7,899Incomefromequityinvestmentsaccountedforunderthe equitymethod 3(9) 239,953 405,�22Foreignexchangegainsorlosses 297,499 882,604Impairmentlosses 3(8),(�2) (�76,392) (2�,739)Othernon-interestincomeorlosses 3(27) 4,034,609 3,97�,050Netrevenues 35,933,530 32,0�5,272Provisionforcreditlosses 3(6) (6,06�,505) (4,735,859)Operatingexpenses 3(28)

Personnelexpenses (9,07�,802) (8,692,�65)Depreciationandamortizationexpenses (�,�25,496) (�,�38,383)Otherbusinessandadministrativeexpenses (4,002,820) (3,754,978)Incomefromcontinuingoperationsbeforeincometax �5,67�,907 �3,693,887

Incometaxexpense 3(29) (3,646,067) (3,339,520)Incomefromcontinuingoperationsafterincometax �2,025,840 �0,354,367

Cumulativeeffectofachangeinaccountingprinciple 2 - 563,�69Netincome $�2,025,840 $�0,9�7,536

Beforetax Aftertax Beforetax AftertaxEarningspercommonshare(indollars) 3(30)

Incomefromcontinuingoperations $3.34 $2.56 $2.92 $2.2�Cumulativeeffectofachangeinaccountingprinciple - - 0.�2 0.�2Netincome $3.34 $2.56 $3.04 $2.33

29Financial Statements

Statements of Changes in Stockholders' EquityfortheyearsendedDecember3�,2007and2006

RetainedEarnings OtherStockholders'Equity

NT$,000Common

stock

Additionalpaid-incapital

Legalreserve

Unappropriatedearnings

Unrealizedrevaluationincrements

Cumulativetranslation

adjustments

Unrealizedgains/

lossesonfinancial

instruments TotalFortheyearendedDec.3�,2006Balance,January�,2006 $46,2�6,000 $8,660,326$2,990,�28 $�3,24�,334 $5,533,543 $20�,669 $- $76,843,000Earningsdistributionfor2005 Legalreserve - - 3,065,687 (3,065,687) - - - -

Employeebonus - - - (500,729) - - - (500,729)

Cashdividends - - - (6,43�,67�) - - - (6,43�,67�)

Netincomefor2006 - - - �0,9�7,536 - - - �0,9�7,536Changesofunrealizedgainsorlossesonavailable-for-salefinancialassets - - - - - - 6,252,298 6,252,298Reversalofrevaluationincrementsduetolanddisposal - - - - (6,366) - - (6,366)Changesofcumulativetranslationadjustments - - - - - 5�,352 - 5�,352Balance,December3�,2006 $46,2�6,000 $8,660,326 $6,055,8�5 $�4,�60,783 $5,527,�77 $253,02� $6,252,298 $87,�25,420

FortheyearendedDec.3�,2007Balance,January�,2007 $46,2�6,000 $8,660,326 $6,055,8�5 $�4,�60,783 $5,527,�77 $253,02� $6,252,298 $87,�25,420Earningsdistributionfor2006 Legalreserve - - 3,275,26� (3,275,26�) - - - -Employeebonus - - - (567,82�) - - - (567,82�)Cashdividends - - - (6,364,579) - - - (6,364,579)Stockdividends 693,240 - - (693,240) - - - -Netincomefor2007 - - - �2,025,840 - - - �2,025,840Changesofunrealizedgainsorlossesonavailable-for-sale financialassets - - - - - - (2,3�0,922) (2,3�0,922)Reversalofrevaluationincrementsduetolanddisposal - - - - (229,053) - - (229,053)Changesofcumulativetranslationadjustments - - - - - 62,702 - 62,702Balance,December3�,2007 $46,909,240 $8,660,326 $9,33�,076 $�5,285,722 $5,298,�24 $3�5,723 $3,94�,376 $89,74�,587

30 Financial Statements

Statements of Cash FlowsfortheyearsendedDecember3�,2007and2006

NT$,000 2007 2006

Cashflowsfromoperatingactivities

Netincome $�2,025,840 $�0,9�7,536

Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities

Depreciation-properties,plantsandequipments 920,543 994,260

Depreciation-non-operatingassets 32,222 33,408

Amortization 204,953 �44,�23

Provisionforcreditlosses 6,06�,505 4,735,859

Gainfromequityinvestmentsaccountedforundertheequitymethod (239,953) (405,�22)

(Gain)Lossondisposalofproperties,plantsandequipments (363,934) 8,224

Gainonsaleofnon-operatingassets (4�,032) -

(Gain)Lossonsaleofforeclosedassets (24,7�2) �9,045

Impairmentlosses �76,392 2�,739

Reversalofallowanceforcreditlossestootherincome (7,337) (3,286)

Changesinassets

Decrease(Increase)infinancialassetsatfairvaluethroughprofitorloss-net 5,593,389 (5,376,7�9)

(Increase)Decreaseinreceivables (�,040,275) 394,��3

Cashdividendsundertheequitymethod 24�,0�2 267,78�

(Increase)Decreaseinbillspurchased (�0,399) 4,707

(Decrease)Increaseinotherassets �5�,8�0 (6�7,932)

Deferredincometaxassets 3,�99,677 3,067,�42

Changesinliabilities

(Decrease)Increaseinfinancialliabilitiesatfairvaluethroughprofitorloss (435,604) �5,747,734

(Decrease)Increaseinpayables (�0,939,825) 3,35�,876

Increaseinaccruedpensionliabilities ��3,772 65,672

(Decrease)Increaseinotherliabilities (260,299) 245,393

Netcashprovidedbyoperatingactivities �5,357,745 33,6�5,553

Cashflowsfrominvestingactivities

IncreaseinduefromCentralBankandotherbanks (4,252,2�4) (2�,367,604)

Decrease(Increase)ininvestmentsinbillsandbondsunderresaleagreements 50�,6�6 (50�,6�6)

Increaseinbillsdiscountedandloans (�04,736,47�) (84,983,�46)

Decreaseinavailable-for-salefinancialassets �9,066,482 ��,�79,0�8

(Increase)Decreaseinheld-to-maturityfinancialassets (4,262,677) 22,�95,�97

Decreaseinotherfinancialassets-net 6,366,648 3,986,658

Proceedsfromsaleofproperties,plantsandequipments 270 8�,353

Purchaseofproperties,plantsandequipments (563,272) (539,243)

Increaseinintangibleassets (25�,430) (304,635)

Increaseinnon-operatingassets (2,0�5) (2,350)

Decreaseinforeclosedassets 42,206 50,557

Decreaseinrefundabledeposits 8�,694 �6�,873

Netcashusedininvestingactivities (88,009,�63) (70,043,938)

3�Financial Statements

NT$,000 2007 2006

Cashflowsfromfinancingactivities

Increase(Decrease)induetoCentralBankandotherbanks $23,359,88� ($27,8�5,240)

DecreaseinfundsborrowedfromCentralBankandotherbanks (56,385) (50,�22)

Decreaseinbillsandbondspayableunderrepurchaseagreements (3,034,453) (�53,584)

Increaseindepositsandremittances 40,286,743 75,246,708

Increase(Decrease)infinancialbondspayable 80�,52� (�,99�,429)

Increase(Decrease)inotherfinancialliabilities 38,932 (�,640,377)

Increase(Decrease)inguaranteedepositsreceived �3,60� (259,056)

Decreaseinappropriatedloanfund (3�,�29) (4�,26�)

Employeebonuspaid (567,82�) (500,729)

Cashdividendspaidtostockholders (6,364,579) (6,43�,67�)

Netcashprovidedbyfinancingactivities 54,446,3�� 36,363,239

Neteffectofforeignexchangeratechangesoncashandcashequivalents 82,408 50,6�4

Decreaseincashandcashequivalents (�8,�22,699) (�4,532)

Cashandcashequivalentsatbeginningofyear 38,02�,90� 38,036,433

Cashandcashequivalentsatendofyear $�9,899,202 $38,02�,90�

Supplementaldisclosuresofcashflowinformation:

Cashpaidforinterestduringtheyear $26,974,474 $22,796,54�

Cashpaidforincometaxduringtheyear $�,222,545 $�,207,930

Notes to Financial Statements 32

�.SummaryofSignificantAccountingPoliciesThefinancialstatementsarepreparedinconformitywiththe"GuidelinesGoverningthePreparationofFinancialReportsbyPublicBanks","BusinessEntityAccountingAct","RegulationonBusinessEntityAccountingHandling"andgenerallyacceptedaccountingprinciplesintheRepublicofChina.Duetothecharacteristicsofthebankingindustry,itsbusinesscyclecannotbeclearlydefined.Hence,theaccountsontheaccompanyingfinancialstatementsarenotclassifiedintocurrentandnon-currentitems.Nevertheless,accountsareproperlycategorizedaccordingtothenatureofeachaccount,andsequencedbytheirliquidity.SignificantaccountingpoliciesoftheBankaresummarizedbelow:(�)PrinciplesforpreparationoffinancialstatementsTheaccompanyingfinancialstatementsincludeheadofficeaccount,branchaccountandoffshorebankingbranchaccount.Allinter-officeaccountshavebeeneliminated.

TheBankadoptstheStatementofFinancialAccountingStandardNo.28,"FinancialStatementDisclosureStan-dardsforBanks,"wherebyassetsandliabilitiesarenotrequiredtobeclassifiedundercurrentornon-currentcategories.(2)Financialassetsandfinancialliabilitiesatfair valuethroughprofitorlossEquitysecurities,beneficiarycertificatesandderivativefinancialinstrumentsareaccountedforusingtradedateaccounting,anddebtsecuritiesareaccountedforusingsettlementdateaccounting.Financialinstrumentsareinitiallyrecognizedatfairvalue.

Financialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossshallbemeasuredatfairvaluewithchangesinfairvaluerecognizedasgainsorlossesinthecurrentperiod.ForstockslistedonTSEorOTCandclosed-endfunds,fairvalueisdeterminedbasedontheclosingpriceatthebalancesheetdate.Foropen-endfunds,fairvalueisdeterminedbasedonthenetassetvalueofthegivenfundatthebalancesheetdate.Forbeneficiarysecurities,fairvalueisdeterminedbasedonthediscountedvalueofexpectedfuturecashflowsatthebalancesheetdateorthemarketpriceprovidedbyBloomberg,Reutersorcounterparties.Forbondinvestments,fairvalueisdeterminedbasedonthelatesttransactionpriceofAutomaticOrderMatchingandExecutionSysteminOTC.Forothers,fairvalueisdeterminedbasedonthediscountedvalueofexpectedfuturecashflowsatthebalancesheetdateorthemarketpriceprovidedbyBloomberg,Reutersorcounterparties.Forderivativefinancialinstrumentsheld

fortradingpurpose,fairvalueisdeterminedbasedonaquotedmarketpriceinanactivemarketatthebalancesheetdate.Ifaquotedmarketpriceinanactivemarketisnotavailable,fairvalueisdeterminedbyapplyingothervaluationtechniques,suchasdis-countedcashflowanalysisoroptionpricingmodels.

Criteriatodesignatefinancialassetsandfinancialliabilitiesasatfairvaluethroughprofitorlossareasfollows:＊Hybrid(combined)instruments;＊Thedesignationcaneliminateorsignificantlyreduce ameasurementorrecognitioninconsistency;or＊Thedesignationisincompliancewithadocumented

riskmanagementorinvestmentstrategyoftheBanktoevaluatetheperformanceofassetsorliabilitiesbasedonafairvaluebasis.

(3)Billsandbondsunderrepurchaseorresaleagree-ments

Billsandbondsunderresaleorrepurchaseagreementsareaccountedforunderthefinancingmethod.Billsandbondssoldunderrepurchaseagreementsarerecordedas"Billsandbondspayableunderrepurchaseagreements"atthesaledate.Billsandbondsinvestedunderresaleagreementsarerecordedas"Investmentsinbillsandbondsunderresaleagreements"atthepurchasedate.Thedifferencebetweenthecostandtherepurchasepriceisrecordedasinterestexpensesovertheperiodbetweenthesaledateandtherepurchasedate.Thedifferencebetweenthecostandtheresalepriceisrecordedasinterestincomeovertheperiodbetweenthepurchasedateandtheresaledate.(4)BillsdiscountedandloansBillsdiscountedandloans(includingnon-performingloans)arerecordedattheamountsofprincipaloutstanding.Interestincomeisrecognizedonanaccrualbasisexceptforinterestonnon-performingloans.

Allnon-performingloansunderwhichthereisnoprincipalpaymentafterthelapseofsixfullmonths,lawsuithasbeenfiledagainstborrowerandguarantor(s)orthecollateralsareexecutedshallbetransferredtonon-accrualloansaccountitem.Interestshallceasetobeaccruedfornon-performingloansthataretransferredtonon-accrualloansaccountitem.Theceasedinterestreceivablewillberecognizedaftercashisreceived.

Whenthereispostponementormodificationofthecredittermsforthedebtors,theBankagreestoreceivepartialinterestandtheremaininginterestwillceasetobeaccruedandberecognizedaftercashisreceived.

Notes to Financial Statements (ExpressedinThousandsofNewTaiwandollars,UnlessOtherwiseIndicated)


(5)AllowanceforcreditlossesTheBankshallclassifycreditassetsofonandoffbalancesheetanddeterminetheallowanceforcreditlossesbyevaluatingtherecoverabilityoftheoutstandingbalancesofvariousloansatthebalancesheetdateaccordingto"GuidanceforCreditAssetsRiskAssessment"and"StandardforRiskClassificationofCreditAssets".Astonon-creditassets,theBankevaluatesthepossiblerisksbythecharacteristicsofassetsinaccordancewith"GuidanceforNon-CreditAssetsRiskAssessment"andgenerallyacceptedaccountingprinciples.

Accordingtotheamended"RegulationsGoverningtheProceduresforBankingInstitutionstoEvaluateAssetsandDealwithNon-performing/Non-accrualLoans"oftheMOF,creditassetsareclassifiedintofivecategories:(�)normal(2)specialattention(3)substandard(4)doubtfuland(5)unrecoverable.Exceptthatthenormalloansareclassifiedundercategory�,theabnormalloansshallbeevaluatedbasedonthestatusoftheloancollateralandthelengthoftimeoverdue.Theallowanceforcreditlossesforabnormalloansisprovidedat2%,�0%,50%,and�00%onloansclassifiedundercategories2,3,4,and5,respectively.Furthermore,theadditionalreserveisprovidedforspecificloansasneedediftheaforementionedallowanceisinsufficientaccordingtotherecoverability.

UpontheapprovaloftheBoardofDirectorsandthenoticetothesupervisorsoftheBank,theoverdueloansarewrittenoffinaccordancewiththeguidelineofthe"RegulationsGoverningtheProceduresforBankingInstitutionstoEvaluateAssetsandDealwithNon-performing/Non-accrualLoans".(6)Available-for-salefinancialassetsEquitysecuritiesareaccountedforusingtradedateaccounting.Debtsecuritiesareaccountedforusingsettlementdateaccounting.Suchfinancialinstrumentsareinitiallyrecognizedatfairvalueplustheacquisitionorissuancecost.

Available-for-salefinancialassetsaremeasuredatfairvaluewithchangesinfairvaluerecognizedinanadjustmentaccountinthestockholders'equity.Whenthefinancialassetisderecognized,thecumulativegainorlossthatwaspreviouslyrecognizedinequityisrecognizedinprofitorlossintheincomestatement.ForstockslistedonTSEorOTCandclosed-endfunds,fairvalueisdeterminedbasedontheclosingpriceatthebalancesheetdate.Foropen-endfunds,fairvalueisdeterminedbasedonthenetassetvalueofthegivenfundatthebalancesheetdate.Forbeneficiarysecurities,fairvalueisdeterminedbasedonthediscountedvalueofexpectedfuturecashflowsatthebalancesheetdateorthemarketpriceprovidedbyBloombergorReuters.Forbondinvestments,fairvalue

isdeterminedbasedonthelatesttransactionpriceofAutomaticOrderMatchingandExecutionSysteminOTC;forothers,fairvalueisdeterminedbasedondiscountedvalueofexpectedfuturecashflowsatthebalancesheetdateorthemarketpriceprovidedbyBloombergorReuters.

Animpairmentlossisrecognizedwhenthereisobjectiveevidenceofimpairment.Inthesubsequentperiod,iftheamountoftheimpairmentlossdecreasesduetoaneventoccurringaftertheimpairmentwasoriginallyrecognized,forequityinstruments,thedecreaseshallberecognizedasanadjustmentaccountinthestockholders'equity;andfordebtinstruments,thepreviouslyrecognizedimpairmentlossisreversedthroughprofitorloss.(7)Held-to-maturityfinancialassetsHeld-to-maturityfinancialassetsareaccountedforusingsettlementdateaccountingandareinitiallyrecognizedatfairvalueplustheacquisitionorissuancecost.Gainsandlossesarerecognizedintheincomestatementwhentheinvestmentsarederecognized.

Held-to-maturityfinancialassetsaremeasuredatamortizedcostusingtheinterestmethodatthebalancesheetdate.

Animpairmentlossisrecognizedwhenthereisobjectiveevidenceofimpairment.Inthesubsequentperiod,iftheamountoftheimpairmentlossdecreasesduetoaneventoccurringaftertheimpairmentwasoriginallyrecognized,thepreviouslyrecognizedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountsshallnotexceedtheamortizedcostthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedinprioryears.(8)Equity investmentsaccountedforundertheequity

methodLong-termequityinvestmentsthattheBankownsatleast20%oftheinvestees'votingstockinterestsorexercisessignificantinfluenceovertheinvesteesareaccountedforundertheequitymethod.Thecarryingamountofsuchequityinvestmentsareevaluatedpursuanttotheinvestmentcostsplusorminusthenetincomeorlossandchangesinstockholders'equityoftheinvesteerecognizedproportionallyaccordingtothepercentageoftheinvestee'sownershipheldbytheBank.Thecashdividendsreceivedfrominvesteesarerecordedasdeductionoftheinvestmentcost.Whenthereissufficientevidencetoindicatethatthefairvalueoftheinvestmentisimpairedandtheprobabilityoftherecoveryisremote,thelossoninvestmentsisrecognizedinthecurrentperiod.Forthestockdividendsreceivedfrominvestees,theinvestmentamountwillnotbeincreasedandtheinvestmentincomewillnotberecognized.Amemorandumentrywillbemadeto


recordtheadditionalsharesreceived.Whenequityinvestmentsaredisposedof,thecostiscalculatedundertheweightedaveragemethod.

EffectivefromJanuary�,2006,foraninvesteecompanyaccountedforundertheequitymethod,iftheBankdoesnothavecontrolinterestsbutcanexercisesignificantinfluenceovertheinvestee,investmentlossesarerecognizedtotheextentthatthebalanceoftheinvestmentplusadvancestotheinvesteeisreducedtozero,unlesstheBankguaranteesthedebtsofinvesteecompanyorhasacommitmentorintentiontoprovidefinancialsupporttotheinvesteecompanyandthenrecognizestheinvestmentlossproportionallyaccordingtothepercentageoftheinvestee'sownershipheldbytheBankcontinuously.However,iftheBankhascontrolinterestsovertheinvesteecompany,theinvestmentlossesinexcessoftheinvestee'sstockholders'equity'sbalanceshallbefullyrecognized,unlessotherstockholdersoftheinvesteecompanyhavetheobligationandabilitytoprovideadditionalcapitaltotakethelosses.Whentheinvesteecompanybeginstomakeaprofitinthesubsequentperiods,theearningsareattributedtotheBankuntiltheoriginallyrecognizedexcesslossesarefullyrecovered.

Thecumulativetranslationadjustmentresultedfromthefinancialstatementtranslationofforeignequityinvestmentsaccountedforundertheequitymethodisrecognizedproportionallyinthestockholders'equityaccountbasedonthepercentageoftheinvestees'ownershipheldbytheBank.(9)Otherfinancialassetsandfinancialliabilities�)Financialassetsmeasuredatcost Long-terminvestmentsinequitysecurities,whichare

notlistedonTSEorOTC,areaccountedforusingtradedateaccounting.Suchfinancialinstrumentsareinitiallyrecognizedatfairvalueplustheacquisitionorissuancecostandaresubsequentlycarriedatcostatthebalancesheetdate.

Forfinancialassetsmeasuredatcost,animpairmentlossshallberecognizedifthereisobjectiveevidenceofimpairment.Theimpairmentlossshallnotbereversed.

2)BondinvestmentswithnoactivemarketBondinvestmentswithnoactivemarketareaccountedforusingsettlementdateaccounting.Suchfinancialinstrumentsareinitiallyrecognizedatfairvalueplusacquisitionorissuancecost.Gainsorlossesarerecognizedintheincomestatementwhentheinvestmentsarederecognized.

Bondinvestmentswithnoactivemarketshallbesubsequentlymeasuredatamortizedcostusingtheinterestmethod.

Animpairmentlossisrecognizedwhenthereisobjectiveevidenceofimpairment.Inthesub-sequentperiod,iftheamountoftheimpairmentlossdecreasesduetoaneventoccurringaftertheimpairmentwasoriginallyrecognized,thepreviouslyrecognizedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountsshallnotexceedtheamortizedcostthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedinprioryears.

3) Derivativefinancialassetsandfinancialliabilitiesforhedging

Derivativefinancialassetsandfinancialliabilitiesheldforhedgingaredesignatedaseffectivehedginginstrumentsunderhedgeaccountingandaremeasuredatfairvalue.

(�0)Derivative financial instruments forhedging - fairvaluehedge

Whenallthecriteriaoffairvaluehedgeaccountingaremet,itrecognizestheoffsettingeffectsongainsorlossesofchangesinthefairvaluesofthehedginginstrumentandthehedgeditem.TheBankonlyhasfairvaluehedgecurrently.Theaccountingtreatmentforhedginginstrumentsisthatthegainorlossfrommeasuringthehedginginstrumentatfairvalueshallberecognizedimmediatelyinthestatementofincome.Theaccountingtreatmentforhedgeditemsisthatthegainorlossattributabletothehedgedriskshalladjustthecarryingamountofthehedgeditemandberecognizedimmediatelyinthestatementofincome.(��)Properties,plantsandequipments /Non-operating

assetsProperties,plantsandequipments/non-operatingassetsarestatedatcostexceptforrevaluationincrementaspermittedundertherelevantregulations.Depreciationisprovidedonastraight-linebasisovertheestimatedservicelivesoftheassetsplusanadditionalyearassalvagevalue,exceptforleaseholdimprovements,whicharedepreciatedovertheleasingperiodsoftheleaseagreementor5years.Theservicelivesofmajorproperties,plantsandequipmentsrangefrom3to55years.

Majorrenewalsandimprovements,whichareincurredtoincreasethefutureeconomicbenefitsoftheassets,arecapitalizedanddepreciated.Routinemaintenanceandrepairsarechargedtoexpensesasincurred.Whenassetsaresoldorabandoned,thecostandaccumulateddepreciationareremovedfromtherespectiveassetaccountsandtherelatedgainorlossonthedisposalofproperty,plantandequipmentisrecordedas"othernon-interestincomeorlosses".


Rentaloridleassetsareclassifiedunderotherassets-non-operatingassets.Depreciationforcurrentperiodisrecognizedas"othernon-interestincomeorlosses"andvaluedatthelowerofcarryingamountorrecoverableamountasofthebalancesheetdate.(�2)IntangibleassetsIntangibleassets,mainlycomprisingcomputersoftwarecosts,areinitiallyrecordedatcostandamortizedover3yearsunderthestraight-linemethod.(�3)OtherassetsOtherassetsaremainlycomprisedofnon-operatingassets,foreclosedassets,refundabledeposits,tempo-rarypaymentsandsuspenseaccounts,prepayments,andotherassetstobeadjusted,andsoon.

Foreclosedassetsarerecordedatacquisitioncostsandarerevaluedatnetrealizablevalueasofthebalancesheetdate.Iftheforeclosedassetsareimpaired,animpairmentlossisrecognizedinthecurrentperiod.Inthesubsequentperiod,ifthenetrealizablevalueincreases,thepreviouslyrecognizedimpairmentlossisreversedtotheextentthatthecarryingamounts,afterthereversal,shallnotexceedthecarryingamountsthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognizedfortheassetsintheprioryears.(�4)PensionplanUnderthedefinedbenefitpensionplan,netpensioncostsarerecognizedinaccordancewiththeactuarialcalculations.Netpensioncostsincludeservicecost,interestcost,expectedreturnonplanassets,andamortizationofunrecognizednettransitionobligationandgainsorlossesonplanassets.Underthedefinedcontributionpensionplan,netpensioncostsarerecognizedasincurredonanaccrualbasis.(�5)OtherLiabilitiesOtherliabilitiesaremainlycomprisedofestimatedlandrevaluationincrementtaxaccrual,guaranteedepositsreceived,advancedreceipts,temporaryreceiptsandsuspenseaccounts,othercarryforwardaccounts,reserveforguaranteesandreserveforsecuritiestradinglosses,andsoon.

Reserveforguaranteesisdeterminedbasedontheestimatedlossesarisingfromdefaultpossibilityoftheendingbalancesofacceptancesreceivable,guaranteesreceivable,andlettersofcreditreceivable,netofthemargindepositsreceivedfromcustomers.

Asrequiredbythe"RulesGoverningSecuritiesFirms",theBankhastosetaside�0%oftheexcessofmonthlygainsoverlossesfromtradingsecuritiesasthereserveforsecuritiestradinglosses.Suchreservecanbeonlyusedtooffsetlossesovergainsarisingfromtheaforesaidsecuritiestrading.Whentheaccumulatedreservereaches$200,000,nofurtherreserveprovisionisrequired.

(�6) Foreigncurrencytransactionsandtranslationsofforeigncurrencyfinancialstatements

TheBank'sforeigncurrencytransactionsarerecordedinNewTaiwandollarsatthespotratesofthetransactiondates.Theexchangedifferencesbetweenactualpaymentsorreceiptsandrecordedtransactionamountsarerecognizedasforeignexchangegainsorlossesinthecurrentperiod.AssetsandliabilitiesdenominatedinforeigncurrenciesarerevaluedusingthespotforeignexchangeratesnotifiedbytheCentralBankatthebalancesheetdate.Fortheforeigncurrencydenominatedlong-termequityinvestments,therelatedforeignexchangegainsorlossesarerecognizedasthecumulativetranslationadjustmentinthestockholders'equity.Theexchangedifferencesresultingfromtheotherassetsandliabilitiesofforeigncurrenciesareincludedinthecurrentincomeorexpense.

WhenthefinancialstatementsofforeignoperationunitsaretranslatedintoNewTaiwandollars,allassetandliabilityaccountsaretranslatedusingthespotforeignexchangerateatthebalancesheetdate,andtheshareholders'equityaccountsaretranslatedatthehistoricalforeignexchangerateexceptthatthebeginningretainedearningsarestatedatthetranslatedcarryingamountoftheendingretainedearningsintheprioryear.Thetranslationdifferencesarerecordedasthecumulativetranslationadjustmentinthestockholders'equity.(�7)ImpairmentlossesAnimpairmentlossshallberecognizedwhenchangesincircumstancesoreventsindicatethatanasset'srecoverableamountislessthanitscarryingamount.Therecoverableamountofanassetisthehigherofitsfairvalue,netofsellingexpense,anditsvalueinuse.Thefairvalue,netofsellingexpense,istheamountobtainablefromthesaleofanassetinanarm'slengthtransactionbetweenknowledgeableandwillingparties,lessthecostsofdisposal.Thevalueinuseisthepresentvalueofthefuturecashflowsexpectedtobederivedfromanasset.

Ifthereisanindicationthatanimpairmentlossrecognizedinthepriorperiodsforanassetmaynolongerexistormayhavedecreased,theimpairmentlossrecognizedcouldbereversed,andsuchareversalshallnotexceedtheimpairmentlossrecognizedinthepriorperiods.(�8)RecognitionofinterestandfeeincomeInterestincomeonloansisrecognizedusingtheinterestmethodonanaccrualbasis.However,interestincomearisingfromloanswhichmeetanyofthefollowingcriteriaisrecognizedoncashbasiswhencashisreceived:＊Reclassifiedasnon-accrualloans.

36 Notes to Financial Statements

＊Interestfromrestructuredloansthatareagreedtoextendtheirmaturitiesisnotrecognizedasinterestincomebutrecordedonthememoaccounts.Handlingfeeisrecognizedwhencashisreceived,or

theearningprocessissubstantiallycompleted.(�9)IncometaxAccordingtotheStatementofFinancialAccountingStandardsNo.22"AccountingforIncomeTaxes",theBankisrequiredtoapplytheinter-periodandintra-periodincometaxallocations.Undertheinter-periodincometaxallocation,theincometaxeffectsofdeductibletemporarydifferences,losscarryforwards,andincometaxcreditsarerecognizedasdeferredincometaxassetsorliabilities.Valuationallowanceisprovidedagainstdeferredincometaxassetsifitismorelikelythannotthatthedeferredincometaxassetswillnotberealized.The�0%surtaxonundistributedcurrentearningscalculatedpursuanttotheIncomeTaxLawisrecordedasincometaxexpenseintheyearwhentheearningsdistributionisapprovedbytheshareholders'meeting.Theadjustmentforover-orunder-provisionofpreviousyears'incometaxisincludedinthecurrentyear'sincometax.

PursuanttotheExplanatoryLetterTai-Tsai-ShuiNo.09�0458039oftheMOFdatedFebruary�2,2003topromulgatethe"CriteriaforProfit-seekingEnterprisesinFilingConsolidatedProfit-seekingEnterpriseIncomeTaxReturnsAccordingtoArticle49oftheFinancialHoldingCompanyActandArticle40oftheBusinessMergersandAcquisitionsLaw",ifafinancialholdingcompanyholdsatleast90%oftheissuedcapitalstockofitsdomesticsubsidiariesfortwelvemonthsinafiscaltaxableyear,startingfromsuchafiscaltaxableyear,thefinancialholdingcompanymayelecttohaveitselfasthetaxpayertofiletheconsolidatedprofit-seekingenterpriseincometaxreturns.Accordingly,theBank'sparentcompany,FirstFinancialHoldingCo.hasdecidedtofileconsolidatedincometaxreturnusingalinkedtaxsystem2004toincludetheBankandtheassociatedentitiesincludingFirstTaisecSecuritiesInc.,NationalInvestmentTrustCo.,Ltd.(NITC),FirstFinancialAssetManagementCo.,Ltd.(FFAM),FirstVentureCapitalCo.,Ltd.(FVC),FirstFinancialManagementConsultingCo.,Ltd.(FFMC)andFirstP&CInsuranceAgencyCo.,Ltd.(FPCIA).

TheaccountingtreatmentfortheBankincludingitsparentcompanyandassociatedentitiestoadoptthelinkedtaxsystemtofiletheconsolidatedincometaxreturnisincompliancewiththeExplanatoryNote(92)No.240oftheAccountingResearchDevelopmentFoundationdatedOctober3,2003.

EffectiveJanuary�,2006,inaccordancewiththeAlternativeMinimumTaxAct,theBankshouldcalculatethealternativeminimumtaxinadditiontotheregular

incometax.Iftheregularincometaxislowerthanthealternativeminimumtax,thedifferencesshouldbeaccruedasanincometaxexpenseadjustment.(20)FinancialassetssecuritizationtransactionAccordingtothe"FinancialAssetSecuritizationAct"andthe"TrustLaw",theBankentrustedtherightsofpersonalresidentialmortgageloansandrelatedrightsandobligationstoDeutscheBankAG.,TaipeiBranch(theTrustee)underspecialpurposetrust.TheTrusteeraisedfundsfortheBankbyissuingbeneficiarycertificates.BecausetheBanklostcontroloftransferredassetsundertheframeworkofsecuritizationtransaction,theBankderecognizedtheassetsfromloansandrecognizedservicingassets,recourseliabilities,andthegainonsecuritization.TheportionofsubordinatedbeneficiarycertificatesheldbytheBankforcreditenhancementwasrecordedasheld-to-maturityfinancialassets.

Thereisnomarketpricefortheretainedinterestsofthesubordinatedbeneficiarycertificates,sotheBankestimatedthefairvaluebasedontheexpectedprepaymentrate,expectedweightedaverageusefullives,expectedcreditlossrate,anddiscountrateofresidualcashflows.

InterestincomeisrecognizedwithrespecttothesubordinatedbeneficiarycertificateswhentheTrusteepaystheinterest.

Servicingassetsarerecordedasotherassetsandamortizedunderstraight-linemethodovertheperiodofservicelives.(2�)UseofestimatesInpreparingthefinancialstatementsinconformitywithgenerallyacceptedaccountingprinciples,themanagementisrequiredtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosuresofcontingentassetsandliabilitiesasofthedateofthefinancialstatements,andthereportedamountsofrevenuesandexpensesduringthereportingperiod.Therefore,actualresultscoulddifferfromthoseestimates.(22)ContingentlossDuetothedevelopmentofevents,itisprobablycon-firmedthatassetshavebeenimpairedorliabilitieshavebeenincurredatthebalancesheetdate.Wherevertheamountoflossescouldbereasonablyestimated,theamountshouldberecognizedaslossforthecurrentyear.Forthoselossamountcouldnotbereasonablyestimated,itshallbedisclosedinthenotetofinancialstatements.


Amount Earningspershare(indollars)

Incomebeforeincometax $ 387,930 $ 0.08Cumulativeeffectofachangeinaccountingprinciple(netofincometaxexpense) 563,�69 0.�2Netincome $ 95�,099 $ 0.20

3.SummaryofSignificantAccounts(�)Cashandcashequivalents December3�,2007 December3�,2006

Cashonhand $ 8,897,274 $ 8,953,504Checksforclearing 8,650,020 26,328,945Duefromotherbanks 2,35�,908 2,739,452Total $�9,899,202 $ 38,02�,90�

(2)DuefromCentralBankandotherbanksDecember3�,2007 December3�,2006

Reservefordeposits-accountA $ ��,284,808 $ ��,086,379Reservefordeposits-accountB 3�,55�,683 29,744,�79Reservefordeposits-foreigncurrency 7,240,65� �43,30�DepositswithCentralBank �,�00,000 2,�00,000Inter-bankclearingfund �,845,878 �,824,879DepositsofoverseasbrancheswithforeignCentralBanks 774,787 866,079Depositsofnationaltreasuryaccount 937,�90 862,475Callloansandoverdraftstootherbanks 90,483,450 94,338,94�Total $ �45,2�8,447 $ �40,966,233

2.ChangeinAccountingPolicyanditsImpact(�)EffectivefromJanuary�,2006,theBankadoptedtheStatementsofFinancialAccountingStandardsNo.34and

No.36toaccountforthefinancialinstruments.(2)Thechangeinaccountingprincipleforsuchfinancialinstrumentsresultedinacredittootherstockholders'equityof$6,252,298,andtheeffectsonnetincomefor2006wereasfollows:

TheBank'sreservefordepositsisrequiredbytheBankingLawandisdeterminedbyapplyingthereserveratiosetbytheCentralBanktothemonthlyaveragebalanceofeachkindofdeposits.ThereserveamountisdepositedinthereservedepositaccountattheCentralBank.Accordingtotheregulations,suchreservefordeposits-accountBcannotbewithdrawnexceptformonthlyadjustmentsofthereservefordeposits.

(3)Financialassetsatfairvaluethroughprofitorloss-netDecember3�,2007 December3�,2006

FinancialassetsfortradingpurposeStocks $ 2,�39,960 $ 2,340,269Bonds �,�29,703 6,920,2�7Beneficiarycertificates 445,000 �85,000Othermarketablesecurities 450,400 450,400Derivativefinancialinstruments 5,836,522 3,226,430Valuationadjustmentforfinancialassetsfortradingpurpose- non-derivativeinstruments �66,282 495,665Subtotal �0,�67,867 �3,6�7,98�FinancialassetsdesignatedasatfairvaluethroughprofitorlossBonds 26,636,068 28,275,660Valuationadjustmentforfinancialassetsdesignatedasatfairvalue throughprofitorloss 397,643 90�,326Subtotal 27,033,7�� 29,�76,986Total $ 37,20�,578 $ 42,794,967


For the years ended December 31, 2007 and 2006, the net gains on financial assets for trading purpose and the net realized and unrealized gains on financial assets designated as at fair value through profit or loss amounted to $�5,8�7,908and$�0,308,255,respectively.

Financial instruments designated as at fair value through profit or loss are to eliminate or significantly reduce ameasurementorrecognitioninconsistencyandtoevaluatetheperformanceofassetsonafairvaluebasis.

Types of derivative financial instruments held for trading purpose and related contract information were as follows:

December3�,2007 December3�,2006

Financialinstruments Contractamount(Notionalprincipal) Creditrisk Contractamount

(Notionalprincipal) Creditrisk

Tradingpurpose Foreignexchangecontracts (FXswapsandforwards) $�26,404,028 $723,820 $75,706,549 $ 623,245FXmargintrading 7,590,535 640,��7 4,83�,2�7 228,403Non-deliveryFXforwards �3,598,22� 79,833 8,547,�0� 74,462FXoptionswritten 26,550,366 - 6,240,980 -Interestrateswaptionswritten 46,000,000 - �2,000,000 -Bondoptionswritten �,536,493 - �,8�7,952 -FXoptionsheld 27,684,2�2 579,�43 7,673,�98 50,925Interestrateswaptionsheld 28,600,000 �52,�93 �,000,000 7,066Bondoptionsheld - - �63,250 �4Crosscurrencyswapcontracts 2�,�99,930 575,999 �6,654,376 2��,324Interestrateswapcontracts 464,�27,32� 3,044,695 253,063,43� �,9�0,887Futurestrading(note) 32,484 40,722 - �20,�04

note:AstheBankdidnothaveunsettledpositionsasofDecember3�,2006,thecreditriskamountwastheexcessmargindeposit.

(4) InvestmentsinbillsandbondsunderresaleagreementsDecember3�,2007 December3�,2006

Governmentbondsunderresaleagreement $ - $ 50�,6�6

AfterDecember3�,2006,theBankwasobligedtoselltheabovebondsatpurchasepriceplusamark-upbasedontheresaleagreements,andsuchresaleamountwas$50�,684.

(5)Receivables-netDecember3�,2007 December3�,2006

Acceptancesreceivable $7,925,8�0 $ 7,668,753Interestreceivable 5,580,78� 5,979,672Creditcardaccountreceivable 3,797,�75 4,�39,249Factoringreceivable 2,097,060 696,649Otherreceivables 2,7�3,03� 3,035,60�

22,��3,857 2�,5�9,924Less:allowancefordoubtfulaccounts (238,097) (224,439)Netamount $ 2�,875,760 $ 2�,295,485

AsofDecember3�,2007and2006,theBank'sreservesforguarantees,includingacceptancesreceivableandguaranteesreceivable,are$400,5�8and$450,5�8,respectively,andsuchreservesarerecordedunder"otherliabilities".


(6)Billsdiscountedandloans-netDecember3�,2007 December3�,2006

Billsdiscounted $ 7,577,875 $ 5,407,73�Overdrafts �,�46,939 998,330Short-termloans 3�7,�05,379 296,408,656Medium-termloans 3�9,48�,025 282,330,6�5Long-termloans 4�4,�42,444 375,6�9,�93Import-exportnegotiations 3,72�,�29 3,758,83�Non-accrualloans(transferredfromloans) �6,736,697 �5,555,942Subtotal �,079,9��,488 980,079,298Less:allowanceforcreditlosses (8,740,034) (8,034,7�8)Netamount $ �,07�,�7�,454 $ 972,044,580

AsofDecember3�,2007and2006,gainfromhedgeevaluationonloansis$230,637and$�87,907,respectively.The fair values of fixed-rate loans held by overseas branches may fluctuate with changes in interest rates. The Bank assessed that the risk might be significant, so it has hedged such risk by engaging in interest rate swap contracts.

AsofDecember3�,2007and2006,non-accrualloansandothercreditextensionswhereinterestaccrualshadbeenceasedare$�6,6�2,902and$�5,4�6,656,respectively.FortheyearsendedDecember3�,2007and2006,interestreceivablethatwasnotaccruedis$580,76�and$505,367,respectively.

ProperprosecutionsofclaimsagainstdebtorshavebeenmadebeforeanycreditextensionsandloanswerewrittenofffortheyearsendedDecember3�,2007and2006.

TheBank'sbusinesssegmenthasrevaluedtheallowancefordoubtfulreceivables,billspurchased,billsdiscounted,loansandnon-accrualloans(includingamountstransferredfromloansandnon-loans)byconsideringunrecoverablerisks for the specific loans and inherent risks for the overall loan portfolio. Movements in allowance for credit losses ofdoubtfulreceivables,billspurchased,billsdiscounted,loansandnon-accrualloans(includingamountstransferredfromloansandnon-loans)fortheyearsendedDecember3�,2007and2006areasfollows:

FortheyearendedDecember3�,2007Unrecoverable

risksforthespecificloans

Inherentrisksfortheoverallloanportfolio

Total

Beginningbalance $ 4,745,350 $ 3,576,326 $ 8,32�,676Provision 6,06�,505 - 6,06�,505Write-off (5,406,845) - (5,406,845)Foreignexchangetranslationdifferenceandothers (939,986) �,004,300 64,3�4Endingbalance $ 4,460,024 $ 4,580,626 $ 9,040,650

FortheyearendedDecember3�,2006Unrecoverable

risksforthespecificloans

Inherentrisksfortheoverallloanportfolio

Total

Beginningbalance $ 3,890,303 $ 4,5�0,834 $ 8,40�,�37Provision 4,735,859 - 4,735,859Write-off (4,82�,�84) - (4,82�,�84)Foreignexchangetranslationdifferenceandothers 940,372 (934,508) 5,864Endingbalance $ 4,745,350 $ 3,576,326 $ 8,32�,676


(7)Available-for-salefinancialassets-netDecember3�,2007 December3�,2006

Stocks $ 2,787,632 $ 2,962,490Bonds 53,302,704 72,766,379Short-termbills 974,024 443,6�6Beneficiarysecurities 252,573 2�0,930Valuationadjustmentforavailable-for-salefinancialassets 3,94�,376 6,252,298

$ 6�,258,309 $ 82,635,7�3

Please refer to Note 5 for details of available-for-sale financial assets pledged as collateral as of December 31, 2007 and2006.

(8)Held-to-maturityfinancialassets-netDecember3�,2007 December3�,2006

Certificatesofdepositpurchased $ �84,625,000 $ 207,070,000Bonds 29,090,67� 3,955,90�PreferredstocksofTaiwanHighSpeedRailCorporation 2,000,000 2,000,000Short-termbills �84,076 �90,53�Beneficiarysecurities �,273,672 -Others 836,685 530,995Subtotal 2�8,0�0,�04 2�3,747,427Less:accumulatedimpairmentlosses-others (��2,505) -

$ 2�7,897,599 $ 2�3,747,427

(9)Equityinvestmentsaccountedforundertheequitymethod-net �)Equityinvestments


Investeecompany AmountPercentageofownership

(%)Amount

Percentageofownership

(%)FirstCommercialBank(USA) $ �,53�,�0� �00 $ �,386,783 �00FCBLeasingCo.,Ltd. 66�,442 �00 687,779 �00FirstInsuranceAgencyCo.,Ltd. �59,349 �00 283,559 �00EastAsiaRealEstateManagementCo.,Ltd. �0,357 30 �0,737 30

$ 2,362,249 $ 2,368,858

2)InvestmentincomeandcumulativetranslationadjustmentsfromequityinvestmentsaccountedforundertheequitymethodfortheyearsendedDecember3�,2007and2006areasfollows:

FortheyearsendedDecember3�, 2007 2006

Investmentincome $ 239,953 $ 405,�22Cumulativetranslationadjustments (5,550) 386

3)Theinvestmentincomefromtheaboveequityinvestmentsaccountedforundertheequitymethodisbasedontheinvestees'auditedfinancialstatementsfortheyearsendedDecember3�,2007and2006.

(�0)Otherfinancialassets-netDecember3�,2007 December3�,2006

Bondinvestmentswithnoactivemarket $ 8,539,022 $ �4,866,599Financialassetscarriedatcost 2,943,587 3,04�,788Overduereceivablestransferredfromaccountsotherthanloans 20�,438 �38,509Billspurchased 58,378 47,979Derivativefinancialassetsheldforhedging 889 4,688Subtotal ��,743,3�4 �8,099,563Less:allowanceforbaddebts-overduereceivablestransferredfromaccountsotherthanloans (62,5�9) (62,5�9)

$ ��,680,795 $ �8,037,044

Notes to Financial Statements 4�

�)TheBank'sinvestmentsinunlistedstocks,ofwhichfairvaluecannotbemeasuredreliablyduetolackofquotedmarketprice,areaccountedforatcost.

2)Thefairvaluehedgeofderivativefinancialassetsandrelateddisclosureinformationwereasfollows: Fairvaluesoffixed-rateloansheldbyoverseasbranchesmayfluctuatewithchangesininterestrates.The

Bankassessedthattheriskmightbesignificant,soithashedgedsuchriskbyengagingininterestrateswapcontracts.

Designatedhedginginstruments

Hedgeditem DesignatedhedginginstrumentsFairvalue Fairvalue

December3�,2007 December3�,2006Fixed-rateloans Interestrateswapcontracts $889 $4,688

3)Thenatureofderivativefinancialinstrumentsheldforhedgingandrelatedcontractinformationwereasfollows: December3�,2007 December3�,2006

Financialinstruments Contractamount(Notionalprincipal) Creditrisk Contractamount

(Notionalprincipal) Creditrisk

Non-tradingpurpose: Interestrateswapcontracts $3,095,239 $889 $3,453,�43 $4,688

(��)Properties,plantsandequipments

December3�,2007

Cost Revaluationincrements

Accumulateddepreciation Bookvalue

Landandimprovements $ 7,�90,395 $ 9,332,922 ($ 2,438) $ �6,520,879Buildings 8,836,0�5 56,884 (3,344,063) 5,548,836Machineryandequipments 3,07�,�3� - (2,402,467) 668,664Transportationequipments 9�5,699 - (6�6,525) 299,�74Otherequipments �,794,085 - (�,524,�04) 269,98�Leaseholdimprovements 642,608 - (5�9,725) �22,883Constructioninprogressandprepaymentsforequipments �70,943 - - �70,943

$ 22,620,876 $ 9,389,806 ($8,409,322) $ 23,60�,360

December3�,2006

Cost Revaluationincrements

Accumulateddepreciation Bookvalue

Landandimprovements $ 7,045,283 $ 9,362,229 ($ 2,029) $ �6,405,483Buildings 8,237,690 56,884 (3,039,378) 5,255,�96Machineryandequipments 3,�26,688 - (2,322,8��) 803,877Transportationequipments 892,894 - (544,5�2) 348,382Otherequipments �,792,063 - (�,442,0�2) 350,05�Leaseholdimprovements 6��,605 - (474,�68) �37,437Constructioninprogressandprepaymentsforequipments 86,�63 - - 86,�63

$ 2�,792,386 $ 9,4�9,��3 ($7,824,9�0) $ 23,386,589

TheBankrevalueditsassetsinaccordancewiththerelevantregulations.AsofDecember3�,2007and2006,thebalancesoftherevaluationincrements(includingthosefornon-operatingassets)amountedto$�5,707,498and$�5,75�,926,respectively,andrelevantreserveforlandrevaluationincrementtaxrecordedasotherliabilitieswere$5,52�,000and$5,6�5,563,respectively.Thedifferencewasrecordedundercapitalandotherstockholders'equity.PleaserefertoNote3(26).

There is no interest capitalized on properties, plants and equipments purchased for the fiscal years ended December 3�,2007and2006.

AsofDecember3�,2007and2006,thereisnoproperty,plantandequipmentpledgedascollateral.


(�2)OtherassetsDecember3�,2007 December3�,2006

Non-operatingassetsCostLand $ 329,256 $ 468,3�6Buildings �,003,282 �,362,�24Others 298,047 295,938Subtotal �,630,585 2,�26,378Revaluationincrements 6,3�7,692 6,332,8�3Totalcostandrevaluationincrements 7,948,277 8,459,�9�Less:accumulateddepreciation (4�5,52�) (429,485)Netnon-operatingassets 7,532,756 8,029,706OtherassetsForeclosedassetsCost �85,6�0 207,656Less:accumulatedimpairmentlosses (�78,00�) (��8,786)Netforeclosedassets 7,609 88,870Deferredincometaxassets-net 4,6�2,383 7,8�2,060Prepaidincometax 602,409 550,994Otherprepayments 638,323 9�7,952Refundabledeposits 340,686 422,380Otherassetstobeadjusted 28,302 28,302Others �,743 �,897

$ �3,764,2�� $ �7,852,�6�

The Ministry of Finance approved the Bank's takeover of five credit departments of Farmers' and Fishermen's AssociationsinTaiwaneffectivefromSeptember�4,200�.TheacquiredassetstogetherwiththeindebtednessweretransferredtotheBank.TheRTCFundhaspartiallyreimbursedthelossessufferedbytheBank.Theremainingportionsofdisputedassetsandliabilities,undercurrentinvestigation,havebeentemporarilyrecordedin"otherassetstobeadjusted"and"otherliabilitiestobeadjusted",respectively.Uponsettlement,thebalancewill be transferred to appropriate accounts and any deficiency will be compensated by the RTC Fund.

Theimpairmentlossesofforeclosedassetsamountedto$63,887and$2�,739,respectively,fortheyearsendedDecember3�,2007and2006.

PleaserefertoNote5fordetailsofotherassetspledgedascollateralasofDecember3�,2007and2006.

(�3)DuetoCentralBankandotherbanksDecember3�,2007 December3�,2006

Callloansfromotherbanks $�07,234,6�0 $80,�73,20�TransferreddepositsfromTaiwanPostCo.,Ltd. 28,42�,6�0 33,699,8�0Overdraftsfromotherbanks 3,644,768 2,�34,070Duetootherbanks 553,453 744,�97DuetoCentralBank 46�,406 204,688Total $ �40,3�5,847 $ ��6,955,966

(�4)FinancialliabilitiesatfairvaluethroughprofitorlossDecember3�,2007 December3�,2006

Financialliabilitiesfortradingpurpose-derivativefinancialinstruments $ 5,936,828 $ 3,337,60�Financialliabilitiesdesignatedasatfairvaluethroughprofitorloss 46,300,000 49,300,000Valuationadjustmentforfinancialliabilitiesdesignatedasatfairvaluethroughprofitorloss (860,664) (825,833)Total $ 5�,376,�64 $ 5�,8��,768


Net realized and unrealized losses for the above financial liabilities were $13,875,913 and $8,785,525 for the yearsendedDecember3�,2007and2006,respectively.

Financial instruments designated as at fair value through profit or loss are to eliminate or significantly reduce ameasurementorrecognitioninconsistencyandtoevaluatetheperformanceofliabilitiesonafairvaluebasis.

Please refer to Note 3(3) for information of derivative financial instruments.

(�5)BillsandbondspayableunderrepurchaseagreementsDecember3�,2007 December3�,2006

Bondsunderrepurchaseagreements $ �2,207,��3 $ �5,24�,566

TheBankisobligedtorepurchasetheabovebillsandbondsatoriginalsalepriceplusamark-uppursuanttotherepurchaseagreements,andtherepurchaseagreementamountsforsuchbondswere$�2,256,�20and$�5,278,566,respectively,asofDecember3�,2007and2006.

(�6)PayablesDecember3�,2007 December3�,2006

Accountspayable $ �6,279,37� $ 27,437,�94Bankacceptances 8,�82,777 7,973,59�Interestpayable 4,783,550 4,393,274Accruedexpenses 2,524,932 2,�24,0�8Overseastrustfundspayable 2,406,989 �,338,434Importpayable �,944,5�3 3,�0�,858Otherpayables 2,965,8�5 3,659,403Total $ 39,087,947 $ 50,027,772

(�7)DepositsandremittancesDecember3�,2007 December3�,2006

Checkingdeposits $ 35,708,975 $ 40,892,�20Demanddeposits 236,880,94� 220,035,�08Timedeposits 309,598,657 277,276,5�8Negotiablecertificatesofdeposit 8,483,200 9,099,200Savingsdeposits 668,236,468 67�,5�0,446Outwardremittances 5�,828 85,�78Inwardremittances �,2�5,233 989,989Total $ �,260,�75,302 $ �,2�9,888,559

(�8)Financialbondspayable

OnJune22,200�,October3,2002,November�4,2003,June24,2005,andAugust�8,2006,theBoardofDirectors of the Bank resolved to issue senior and subordinated financial bonds with the quotas of $50, $30, $20,$20and$20billionNewTaiwandollars,respectively,tostrengthentheBank'scapitaladequacyratioandto finance medium- and long-term operating capital. The issuances of the financial bonds were approved by the MOF. The subordinated financial bonds take precedence over shareholders but rank junior to the other creditors intheeventofliquidation.Thedetailedtermsofeachissuancearelistedasfollows:

FirstIssue,200�Issuedate September�2,200�Issueamount NT$�0billiondollarsIssueprice AtparCouponrate 4%

InterestandrepaymenttermsInterestispaidannuallyandprincipalof20%,30%and50%isrepaidatthe5th,6th,and7thyear,respectively.

Maturityperiod 7years


FirsttoFourthIssues,2002Issuedate March4,July9,December�0,andDecember�9,2002Issueamount NT$20.5billiondollarsIssueprice Atpar

CouponratePartofinterestratesisfixedrates(3.2%~3.9%),andtherestiseitherfloatingratesorinversefloatingrateswiththeminimumyieldrateof0%.

InterestandrepaymenttermsForthefixedrates,interestispaidannually.Forthefloatingrates,interestispaideitherquarterlyorsemi-annually.Theprincipalistobepaidpursuanttofacevalueatmaturity.

Maturityperiod 5yearsto5yearsand7months

FirsttoNinthIssues,2003

IssuedateJanuary20,February25,May2,September�0,October27,

andNovember�3,2003Issueamount NT$24.8billiondollarsIssueprice Atpar

Couponrate

Part of interest rates is fixed rate (2.9% ~ 4.0%), and the rest is either floating rates or inverse floating rates with the minimum yieldrateof0%.InterestrateindexesareUSD6MLIBOR,90-daycommercialpaperratesorIRSrates.

InterestandrepaymenttermsFor the fixed rates, interest is paid annually. For the floatingrates,interestistobepaideitherquarterlyorsemi-annually.Theprincipalistobepaidpursuanttofacevalueatmaturity.

Maturityperiod 4yearsto8years

FirstIssue,2004Issuedate May25,2004Issueamount NT$4billiondollarsIssueprice Atpar

CouponratePart of interest rates is fixed rate of 4%, and the rest is floating ratewiththeminimumyieldrateof0.5%.InterestrateindexesareUSD6MLIBOR.

InterestandrepaymenttermsInterestispaidsemi-annually.Theprincipalistobepaidpursuanttofacevalueatmaturity.


FirstIssue,2006Issuedate April24,2006Issueamount NT$5billiondollarsIssueprice AtparCouponrate 2.24%

InterestandrepaymenttermsInterestispaidannually.Theprincipalistobepaidpursuanttofacevalueatmaturity.


SecondIssue(A~C),2006Issuedate July27,2006Issueamount NT$3billiondollarsIssueprice AtparCouponrate 2.45%,2.55%,2.75%


Maturityperiod 5yearsand6monthsto�0years


ThirdIssue,2006Issuedate December4,2006Issueamount NT$6billiondollarsIssueprice AtparCouponrate 2.6%


Maturityperiod �0years

Firstissue(A&B),2007Issuedate March9,2007Issueamount NT$5.5billiondollarsIssueprice Atpar

CouponrateInterest rate indexes +0.25%, fixed rate 2.4%. Interest rate indexesareaverageinterestrateofNTD90-daycommercialpaperinsecondarymarketprovidedbyReuters.

Interestandrepaymentterms

A:Interestisaccruedquarterlyandpaidannually.Simpleinterestisadopted.Theprincipalistobepaidpursuanttofacevalueatmaturity.

B:Interestispaidannually.Simpleinterestisadopted.Theprincipalistobepaidpursuanttofacevalueatmaturity.

Maturityperiod 7~�0years

Secondissue(A&B),2007Issuedate June25,2007Issueamount NT$5billiondollarsIssueprice Atpar






Thirdissue(A&B),2007Issuedate December24,2007Issueamount NT$3.5billiondollarsIssueprice Atpar





Maturityperiod A:7years,B:�0years


As of December 31, 2007 and 2006, interest rates of the above financial bonds ranged from 0% to 4% and 0% to 6.5�8%,respectively.

As of December 31, 2007 and 2006, the outstanding balances of the above mentioned financial bonds amounted to $69,100,000 and $71,300,000, respectively. In addition, among the above financial bonds, interest rate risk associated with the senior financial bonds with face value of $21.6 billion New Taiwan dollars and the subordinated financial bonds with face value of $24.7 billion New Taiwan dollars as well as the senior financial bonds with face value of $22.3 billion New Taiwan dollars and the subordinated financial bonds with face value of $27.0 billion New Taiwan dollars were designated as held for trading financial liabilities and hedged by interest rate swap contracts. As such interest rate swap contracts were valued at fair value with changes in fair value recognized as profit or loss, the financial bonds stated above were designated as financial liabilities at fair value through profit or loss in order to eliminate or significantly reduce a measurement or recognition inconsistency.

(�9)Accruedpensionliabilities �)TheBankhasadefinedbenefitpensionplansetupinaccordancewiththeLaborStandardsLaw,coveringall

regularemployeeswhoseservicesarepriortotheimplementationoftheLaborPensionActonJuly�,2005andthoseemployeeswhochoosecontinuouslytoapplytheLaborStandardsLawaftertheimplementationoftheLaborPensionAct.Thepaymentofpensionbenefitsisbasedonthelengthoftheserviceperiodandaveragemonthlycompensationinthelastsixmonthspriortoretirement.Underthedefinedbenefitplan,employeesaregrantedtwopointsforeachyearofserviceforthefirst�5yearsandaregrantedonepointforeachadditionalyearofservicefromthe�6thyear,butitissubjecttoamaximumof45points.TheBankmakescontributionmonthlybasedon�0%ofsalariesandsuchcontributionsaredepositedinthedesignatedpensionaccountattheTrustDepartmentofBankofTaiwanunderthenamesoftherespectivecompanies'independentretirementfundcommittees.TheBankrecognizednetpensioncostsof$663,374and$6�5,872fortheyearsendedDecember3�,2007and2006,respectively.AsofDecember3�,2007and2006,thebalancesofthepensionfunddepositedintheBankofTaiwanwere$3,846,�84and$3,278,437,respectively.

2)Actuarialassumptionsarelistedbelow:2007 2006

Discountrate 2.75% 2.50%Rateofincreaseinsalaries �.50% �.75%Expectedrateofreturnonplanassets 2.75% 2.50%

3)Fundedstatusofthepensionplan:December3�,2007 December3�,2006

BenefitobligationVestedbenefitobligation $ 3,838,488 $ 3,37�,666Non-vestedbenefitobligation �,484,095 �,363,285Accumulatedbenefitobligation 5,322,583 4,734,95�Effectoffuturesalaryincrements 778,�07 873,422Projectedbenefitobligation 6,�00,690 5,608,373Fairvalueofplanassets (3,846,�84) (3,372,036)Fundedstatus 2,254,506 2,236,337Unrecognizedgainonplanassets (700,853) (796,456)Accruedpensionliabilities $ �,553,653 $ �,439,88�Vestedbenefit $ 4,443,7�3 $ 3,893,58�

4)Netpensioncosts:December3�,2007 December3�,2006

Servicecost $ 592,87� $ 595,746Interestcost �39,047 �23,572Expectedreturnonplanassets (89,4�3) (75,400)Amortizationofunrecognizedgainonplanassets �4,837 �4,923Netpensioncosts $ 657,342 $ 658,84�


5)EffectiveJuly�,2005,theBankhasestablishedafundeddefinedcontributionpensionplan(the"NewPlan")undertheLaborPensionAct(the"Act").EmployeeshavetheoptiontobecoveredundertheNewPlan.And,theBankcontributesmonthlyanamountbasedon6%oftheemployees'monthlysalariesandwagestotheemployees'individualpensionaccountsattheBureauofLaborInsurance.Thebenefitsaccruedareportablewhentheemploymentisterminated.ThepensioncostsunderdefinedcontributionpensionplanfortheyearsendedDecember3�,2007and2006were$72,�73and$66,756,respectively.

(20)OtherfinancialliabilitiesDecember3�,2007 December3�,2006

Appropriatedloanfund $ 3�0,288 $ 34�,4�6Derivativefinancialliabilitiesforhedging 23�,526 �92,595Total $ 54�,8�4 $ 534,0��

�)Thefairvaluehedgeofderivativefinancialliabilitiesandrelateddisclosureinformationwereasfollows:Fairvaluesoffixed-rateloansheldbyoverseasbranchesmayfluctuatewithchangesininterestrates.TheBankassessedthattheriskmightbesignificant,soithashedgedsuchriskbyengagingininterestrateswapcontracts.

Designatedhedginginstruments

Hedgeditem DesignatedhedginginstrumentsFairvalue Fairvalue

December3�,2007 December3�,2006Fixed-rateloans Interestrateswapcontracts ($23�,526) ($�92,595)

2) Nature of derivative financial instruments held for hedging and related contract information were as follows:


Derivativefinancialinstruments Contractamount(Notionalprincipal) CreditRisk Contractamount

(Notionalprincipal) CreditRisk

Non-tradingpurpose:Interestrateswapcontracts $3,095,239 $ - $ 3,453,�43 $ -

(2�)OtherliabilitiesDecember3�,2007 December3�,2006

Reserveforlandrevaluationincrementtax $ 5,52�,000 $ 5,6�5,563Guaranteedepositsreceived �,�37,723 �,�24,�22Othercollectionsinadvance 972,6�6 �,067,067Reserveforlossesonguarantees 400,5�8 450,5�8Reserveforsecuritiestradinglosses 200,000 200,000Otherliabilitiestobeadjusted �,493 �,493Others �88,756 357,2�0Total $ 8,422,�06 $ 8,8�5,973

(22)Commonstock

AsofDecember3�,2006,theauthorizedandissuedcapitalstockswereboth$46,2�6,000.Totalissuedandoutstandingshareswereboth4,62�,600thousandshareswithaparvalueof$�0NewTaiwandollarspershare.

OnApril20,2007theBank'sBoardofDirectorsapprovedtoincreasecapitalandonJune22,2007theresolutionwasadoptedattheshareholders'meetingtodistributeunappropriatedearningsfortheyear2006instockdividendsforNT$693,240byissuinganadditional69,324thousandnewshares.TheBoardofDirectorssetAugust28,2007tobethedateforstockdistributionandcapitalincrease.TheabovecapitalincreasewasapprovedandevidencedbytheExplanatoryLetterJin-Guan-Jen(�)No.096003752�oftheFSCandtherelatedregistrationhasbeencompleted.AsofDecember3�,2007,theauthorizedandissuedcapitalstockswereboth$46,909,240.Totalissuedandoutstandingshareswereboth4,690,924thousandshareswithaparvalueof$�0NewTaiwandollarspershare.


(23)Additionalpaid-incapitalAdditionalpaid-incapitalmainlyincludescapitalinexcessofparvalueonissuanceofcommonstockanddonationincome.

TheCompanyLawrequiresthatadditionalpaid-incapital,resultingfrompricereceivedinexcessofparvalueoftheissuanceofcapitalstockanddonationincomereceived,shouldbeonlyusedtorecoverlossesortoincreasethecapitalstockoftheBanksubjecttoamaximumlimitof�0%oftheissuedcapitalstockperyearwhiletheBankhas no accumulated deficit.

(24)LegalreserveAccording to the Company Law, legal reserve can be only used to recover accumulated deficits or to increase capitalstockandshallnotbeusedforanyotherpurposes.Legalreservecanbeusedtoincreasecapitalstockif the balance of the legal reserve has reached fifty percent of the issued capital stock, but only half of the legal reservecanbecapitalized.

(25)Unappropriatedearnings �)AsstipulatedbytheBank'sArticlesofIncorporation,theannualnetincomeafterincometaxshouldbefirstused

tooffsetaccumulatedlosses,then30%ofitshouldbesetasideaslegalreserve.TheBankcanalsosetasideaspecialreserveforspecificbusinesspurposes.Theremainingearningsaretobedistributedasfollows:

＊ �%to8%asbonustoemployees. ＊ DividendandbonustoshareholdersasproposedbytheBoardofDirectorsandapprovedbytheshare-

holders'meeting.(TheBoardofDirectorsfunctionisinanactingcapacityofshareholders'meeting.) 2)Dividendpolicyforthenextthreeyears BankingindustryisafullydevelopedindustryandtheBank,operatingunderasolidfinancialbase,has maintainedastableincome.TheBankhassetupitsdividendpolicytobeprimarilyinformofcash dividendsandsupplementedbysharedividends,astoincreaseitscapitaladequacyratioandtoenhance itscompetitiveness. Ifthelegalreserveislessthanthecapitalorthecapitaladequacyratioisbelowthestatutoryratiostipulatedby

theBankingLaw,themaximumamountofcashdividenddistributionhastobesubjecttothestipulationssetoutbytheBankingLawandthegoverningauthorities.

3)Theappropriationofearningsfor2006and2005hadbeenapprovedbytheshareholders'meetingonJune22,2007andDecember�5,2006,respectively.Detailsoftheappropriationofearningsfor2006and2005aresummarizedasbelow:

Appropriationofearnings Earningspershare(indollars)2006 2005 2006 2005

Legalreserve $3,275,26� $ 3,065,687 $ - $ -Cashdividendsoncommonstock(note�) 6,364,579 6,43�,67� �.38 �.39Stockdividends 693,240 - 0.�5 -Employeesbonuses 567,82� 500,729 - -

$�0,900,90� $ 9,998,087 $ �.53 $ �.39

note�: Withrespecttoappropriationofearningsfor2005,theBoardofDirectorsonMay�9,2006resolvedtodistribute$�ofcashdividendspersharetotalingto$4,62�,600.However,theshareholders'meeting(TheBoardofDirectorsfunctionisinanactingcapacityofshareholders'meeting.)onDecember�5,2006resolvedtoadjustto$�.39ofcashdividendspersharetotalingto$6,43�,67�.

note2: Employeebonusesarepaidincash.Iftheemployeebonusesarerecognizedasexpensesintheyearofappropriation,theearningspercommonshareaftertaxin2006willbedecreasedfrom$2.33to$2.2�.

4)InformationontheappropriationoftheBank'searningsasresolvedbytheBoardofDirectorswillbepostedinthe"MarketObservationPostSystem"atthewebsiteoftheTaiwanStockExchange.

(26)Otherstockholders'equityTherevaluationincrementsoflandwilladjusttheoriginalsubjectassetaccounts,otherliabilityaccount-reserveforlandrevaluationincrementtaxandotherstockholders'equityaccount-unrealizedrevaluationincrements.Upondisposal,theBankwillreversethereserveforlandrevaluationincrementtaxandotherstockholders'equity-unrealizdrevaluationincrementsaccountsandrecognizethedisposalgainorloss.


(27)Othernon-interestincomeorlossesFortheyearsendedDecember3�,

2007 2006Recoveredbaddebtsandoverdueaccounts $ 3,0�9,443 $ 3,6�2,39�Profitfromfinancialassetscarriedatcost 477,377 36,7�7Netrentalincome 2�6,858 �97,468Profitfromsellingpropertiesandequipments 4�5,750 8,505Netotherincomeorlosses (94,8�9) ��5,969Total $ 4,034,609 $ 3,97�,050

(28)Personnel,depreciation,andamortizationexpensesPersonnel,depreciation,andamortizationexpensesincurredfortheyearsendedDecember3�,2007and2006aresummarizedasfollows:

FortheyearsendedDecember3�,2007 2006

Personnelexpenses $ 9,07�,802 $ 8,692,�65Salaries 7,844,592 7,554,684Laborandhealthinsuranceexpenses 307,938 302,734Pensionexpenses 735,547 682,628Others �83,725 �52,��9Depreciationexpenses 920,543 994,260Amortizationexpenses 204,953 �44,�23

(29)Incometax �)Thedetailsofincometaxexpenseareasfollows: FortheyearsendedDecember3�,

2007 2006Incometaxpayable-foreignbranchesandadjustmentforunderprovisionofprioryears'incometaxexpense $ �49,037 $ �04,836Netchangesindeferredincometaxassets 3,�99,677 3,067,�42Incometaxesleviedseparately 8,02� 9,563�0%surtaxleviedonundistributedearnings �,664 22,087TaxduetoAlternativeMinimumTaxAct 287,668 �35,892Incometaxexpense $ 3,646,067 $ 3,339,520

2)Deferredincometaxassets-net AsofDecember3�,2007and2006,theincometaxeffectsoftemporarydifferencesthatgaverisetothe

deferredtaxassetsorliabilitiesareasfollows:December3�,2007 December3�,2006

Amount Incometaxeffects Amount Incometax

effectsTemporarydifferencesAllowancefordoubtfulaccountsinexcessoftaxlimits $2,783,987 $695,997 $2,783,987 $695,997Allowanceforimpairmentlossesofforeclosedassets �78,00� 44,500 ��8,786 29,697Losscarryforwards 20,3�8,�53 5,079,538 32,356,920 8,089,230Others 449,�60 ��2,290 (�0�,727) (25,432)

$23,729,30� 5,932,325 $35,�57,966 8,789,492Investmenttaxcredits 28,3�6 47,306Overseasbranches ��,936 �07,570Deferredincometaxassets 6,072,577 8,944,368Allowancefordeferredincometaxassets (�,460,�94) (�,�32,308)Deferredincometaxassets-net $4,6�2,383 $7,8�2,060

3)AsofDecember3�,2007,thedetailsoftaxcreditsareasfollows:Itemfortaxcredits Amount Availableperiod(year)Personneltrainingcosts $ 28,3�6 2007~20��


4) According to the Income Tax Law, the losses could be carried forward for 5 years to deduct the future years' taxable income. As of December 31, 2007, the details of the losses available were as follows:

Year of losses Declared amount of losses Year of expiration Assessed by tax authorities2003 $ 20,318,153 2008 Assessed

5) Imputation credit account for shareholders and its related information December 31, 2007 December 31, 2006

Balances of imputation credit account for shareholders $ 161,840 $ 214,360Estimated imputation credit ratio for earnings distribution 1.06% 1.51%Actual imputation credit ratio for cash dividends distributed - 1.52%Actual imputation credit ratio for stock dividends distributed - 4.36%

6) The balances of unappropriated earnings are as follows:December 31, 2007 December 31, 2006

Derived from earnings after 1998 $ 15,285,722 $ 14,160,783

7) The tax authorities had assessed the Bank's income tax returns through 2003.

(30) Earnings per common shareFor the years ended December 31,

2007 2006 Before tax After tax Before tax After tax

Net income from continuing operations $ 15,671,907 $ 12,025,840 $ 13,693,887 $ 10,354,367Cumulative effect of a change in

accounting principle - - 563,169 563,169Net income $ 15,671,907 $ 12,025,840 $ 14,257,056 $ 10,917,536Earnings per share (in dollars)Outstanding common shares (in thousand

shares) 4,621,600 4,621,600 4,621,600 4,621,600Add: Earnings in 2006 transferred to capital 69,324 69,324 - -Weighted-average outstanding common

shares (in thousand shares) 4,690,924 4,690,924 4,621,600 4,621,600Net income from continuing operations $ 3.34 $ 2.56 $ 2.96 $ 2.24Cumulative effect of a change in

accounting principle - - 0.12 0.12Earnings per share (in dollars) $ 3.34 $ 2.56 $ 3.08 $ 2.36Weighted-average outstanding common

shares - after retroactive adjustments (in thousand shares) 4,690,924 4,690,924

Earnings per share - after retroactive adjustments (in dollars) $ 3.04 $ 2.33

(31) Capital adequacy ratioThe minimum capital adequacy ratio, a measure of the adequacy of a bank's capital expressed as a percentage of its risk weighted credit exposures, is 8% as required by the Banking Law and other relevant rules and regulations inorder to ensure a sound financial standing for banks. If the said ratio is less than the prescribed ratio, the bank's ability to distribute surplus profits may be restricted by the governing authority.

The capital adequacy ratio of the Bank was 10.80% and 11.00% as of December 31, 2007 and 2006, respectively.


(32)Financialassetsecuritizationtransactions �)Residentialmortgageloanssecuritization

(a)Productnatureandprofit(loss) OnMarch2,2004,2,026itemsofresidentialmortgageloanswiththecarryingamountof$4,572,697were

soldthroughsecuritizationtransactionandwereentrustedtothetrusteeunderaspecialpurposetrust(SPT)toissuebeneficiarycertificates.Onewasseniorbeneficiarycertificatesof$4,280,000,whichwereissuedatparvalueandwereclassifiedintothreeclassesofcertificateswithfloatingratesasfollows:

● Certificate A: The issue amount was $3,910,000 and the coupon rate was the adjustable rate mortgage (ARM)indexplus0.25%.

● Certificate B: The issue amount was $220,000 and the coupon rate was the adjustable rate mortgage (ARM)indexplus0.55%.

● Certificate C: The issue amount was $150,000 and the coupon rate was the adjustable rate mortgage (ARM)indexplus0.65%.

Theotherwasasubordinatedbeneficiarycertificateof$292,697issuedforacreditenhancementpurposewithnon-interestbearingandwaspurchasedbytheBank.Ifdebtorsareunabletopayofftheprincipalandrelatedinterestwhendue,theinvestorsandthetrusteehavenorecoursetotheBank'sassets.Therepaymentoftheprincipalwithrespecttoretainedinterestsissubordinatedtoinvestors,andthevalueoftheretainedinterestsisaffectedbythetransferreddebt'screditrisk,prepaymentrate,andinterestraterisk.

(b)Terminationofsecuritizationcontract

OnDecember�6,2005,theBoardofDirectorsoftheBankpassedtheresolutiontoredeemallresidentialmortgageloans.OnApril3,2006,theBankredeemedalloftheaforementionedbeneficiarycertificates(CertificateA,B,C,andD)andterminatedtherelatedcontracts.Thus,theBankdidnotdiscloseinformationaboutthemajorassumptionsformeasuringretainedinterests,sensitivityanalysisforcashflowsatfairvalue,andexpectedstaticpoollossrate.

(c)Cashflows

Thecashflowsreceivedfromandpaidtosecuritizationtrustsaresummarizedasfollows:

FortheyearendedDecember3�,2006

Proceedsfromsecuritization Servicingfeeincomereceived $�,008Proceedsfromothercashflowsofretainedinterests �2,32�Settingasideascashreserves(recordedunder"refundabledeposits") -Settingasideascashreservesofservicinginstitution 5,968Essentialreservesreceived 67,767

FortheyearendedDecember3�,2006,theBankhasrecognizedtheinterestincomeofsubordinatedbeneficiarycertificatesamountingto$�2,9�4.

2)Securitizationofcollateralizedbondobligations OnJuly�3,2006,theBankenteredintopurchasecontractswithInternationalCommercialBankofChina

(ICBC,sincerenamedMegaInternationalCommercialBank)andInternationalSecurityInvestmentTrustCorporation(ISIT)forthepurchaseofUSDbondsandNTDbondsrespectively.Subsequently,theBankimmediatelytook�9RMBSUSDbondspurchasedfromICBCand�3NTDbondspurchasedfromISITasunderlyingassetsforconfermentuponatrusteeinstitutiontoissueassetbackedcommercialpaper(ABCP)pursuanttothe"FinancialAssetSecuritizationAct".TheBankservesastheoriginatoroftheissuance.

Forcreditenhancement,ICBCservesasthesettlementinstitution,theimpairedassetsrecipientinstitution andtheinstitutionforpurchaseofsubordinatedbeneficialsecurities.TheliquidityreservefortheABCPis

appropriatedbyISIT.TheBankisnotresponsibleforthecreditriskoftheassetspoolortheriskofprovidingtheliquidityreserveandotherassociatedrisks.

Notes to Financial Statements


4.RelatedPartyTransactions(�)Detailsofrelatedparties

Nameofrelatedparties NatureofrelationshipFirstFinancialHoldingCo.,Ltd.(FFHC) ParentcompanyBankofTaiwan Thecompany'srepresentativeisadirectorofFFHCGoldenGardenInvestmentCo.,Ltd. Thecompany'srepresentativeisadirectorofFFHCShangZhenCo.,Ltd. Thecompany'srepresentativeisadirectorofFFHCFirstCommercialBank(USA) SubsidiaryoftheBankFCBLeasingCo.,Ltd.(FCBL) SubsidiaryoftheBankFirstInsuranceAgencyCo.,Ltd.(FIA) SubsidiaryoftheBankEastAsiaRealEstateManagementCo.,Ltd.(EAREM) InvesteeaccountedforundertheequitymethodTheFirstEducationFoundation OveronethirdoftotalfundisdonatedbytheBankFirstTaisecSecuritiesInc.(FTSI) SubsidiaryofFFHCNationalInvestmentTrustCo.,Ltd.(NITC) SubsidiaryofFFHCFirstFinancialAssetManagementCo.,Ltd. SubsidiaryofFFHCFirstVentureCapitalCo.,Ltd. SubsidiaryofFFHCFirstFinancialManagementConsultingCo.,Ltd. SubsidiaryofFFHCFirstP&CInsuranceAgencyCo.,Ltd. SubsidiaryofFFHCFirst-AvivaLifeInsuranceCo.,Ltd.(FALI) SubsidiaryofFFHC�3peopleincludingChao-ShunChang,etc. TheBank'sDirectors5peopleincludingYung-SunWu,etc. TheBank'sSupervisors243peopleincludingChin-YunWu,etc. TheBank'smanagers29peopleincludingBi-LienLu,etc. SpousesoftheBank'sdirectors,supervisors,chairman

andpresident,andrelativeswithinseconddegreeofkinshipoftheBank'schairmanandpresident

(2)RelatedpartytransactionswithanamountexceedingNT$�00million,exceptloans,aresetforthbelow: �)Duefromotherbanks

AsofandfortheyearendedDecember3�,2007Highestbalance

Endingbalance

Interestincome

Annualinterestrate(%)

BankofTaiwan $�0,�00,000 $ 305,000 $ �0,228 �.69~2.�0


Endingbalance

Interestincome


BankofTaiwan $5,6��,000 $ 3,6��,000 $ 2�,6�� .45~�.7� 2)Duetootherbanks


Endingbalance

Interestexpense


BankofTaiwan $3,000,000 $ - $ 623 �.69~3.20


Endingbalance

Interestexpense


BankofTaiwan $�0,000,000 $ - $ 3,089 �.45~�.66 3)Deposits


Endingbalance Percentageoftotaldeposits(%) Endingbalance Percentageof

totaldeposits(%)FFHC $2,425,420 0.�9 $ 5,�30,96� 0.42First-AvivaLifeInsuranceCo.,Ltd.(FALI) �,9�2,03� 0.�5 - -FirstVentureCapitalCo.,Ltd. 448,624 0.04 2�4,205 0.02FirstInsuranceAgencyCo,Ltd. �36,50� 0.0� 255,039 0.02Others(note) 960,574 0.08 953,009 0.08

$5,883,�50 0.47 $ 6,553,2�4 0.54

53

note:Termsandconditionsoftherelatedpartytransactionsarenotsignificantlydifferentfromthoseoftransactionswiththirdparties,exceptthatsavingsinterestrateappliedfortheBank'sdirectors,supervisorsandmanagersis�3.00%andeachoftheirdepositbalanceisbelow$480.

4)LoansDecember3�,2007

Numberofborrowersornameof

relatedparty

Maximumbalance

forcurrentperiod

Endingbalance

Statusofperformance

Collateral

Differencewiththirdparties

intransactiontermsNormalloans NPL

Consumerloans �0 $3,5�7 $3,202 $3,202 - None NoneResidentialmortgageloans 85 276,929 264,569 264,569 - Realestate None

Otherloans FCBL 3,302,000 3,2�9,500 3,2�9,500 -

Aircraftsandnotesreceivable

fromcustomers

None

Otherloans FTSI 260,000 260,000 260,000 -Guaranteed

byadomesticbank

None

Otherloans(note) 3 648 506 506 - Certificatesofdeposit None

December3�,2006Numberofborrowersornameof

relatedparty

Maximumbalance

forcurrentperiod

Endingbalance

Statusofperformance

Collateral

Differencewiththirdparties

intransactiontermsNormalloans NPL

Consumerloans 9 $2,047 $2,047 $2,047 - None NoneResidentialmortgageloans 9� 262,347 262,347 262,347 - Realestate None

Otherloans FCBL 2,967,500 2,967,500 2,967,500 -

Aircraftsandnotesreceivable

fromcustomers

None

Otherloans(note) 5 4,403 4,403 4,403 - Certificatesofdeposit None

note:Noneoftheendingbalancesofindividualborrowersexceeded�%ofthetotalendingbalance.Hence,thetransactionsarenotlistedindividuallyindetails.

5)GuaranteesDecember3�,2007

Maximumbalanceforcurrentperiod Endingbalance Reservefor

guarantees Feerate Collateral

FCBL $�,380,000 $�,380,000 $552 0.50% Aircrafts

December3�,2006Maximumbalanceforcurrentperiod Endingbalance Reservefor

guarantees Feerate Collateral

FCBL $�,675,000 $�,675,000 $670 0.22% Aircrafts

Notes to Financial Statements


6)Derivativetransactions December3�,2007

Titleofderivativeinstrumentcontract

Contractperiod Nominalprincipal

Gain(loss)onvaluationfor

currentperiod

Period-endbalance

Item Balance

FCBL Interestraterelatedcontracts

2005/8/�6~2008/7/�6 $49,500 ($20�)

Valuationadjustmentfortradingliabilities-

interestrate($93)

BankofTaiwanForeign

exchangecontracts

2007/��/26~2008/��/26 �62,420 2,�3�

Valuationadjustmentfortradingliabilities-foreignexchangerate

2,�3�

December3�,2006

Titleofderivativeinstrumentcontract

Contractperiod Nominalprincipal

Gain(loss)onvaluationfor

currentperiod

Period-endbalance

Item Balance

FCBL Interestraterelatedcontracts

2005/8/�6~2008/7/�6 $�02,000 $�08

Valuationadjustmentfortradingliabilities-

interestrate$�08

BankofTaiwanForeign

exchangecontracts

2006/�2/27~2007/�/4 ��5,�73 79�

Valuationadjustmentfortradingliabilities-foreignexchangerate

79�

5.PledgedAssetsAsofDecember3�,2007and2006,thecollateralizedassetsarelistedbelow:

December3�,2007 December3�,2006 PledgedPurposeAvailable-for-salefinancialassets-bonds $ �,525,000 $ �,224,400 Guaranteesdepositedwiththecourtfor

provisionalseizureandtrustfundreserves

Refundabledeposits 340,686 422,380

Guaranteesdepositedwiththecourtforprovisionalseizureanddepositsforthebuildingleasing

Total $ �,865,686 $ �,646,780

6.CommitmentsandContingentLiabilities(�)Majorcommitmentsandcontingentliabilities

December3�,2007 December3�,2006Unusedloancommitments $ 50,725,049 $ 43,570,0�6Unusedcreditcommitmentsforcreditcards 3�,233,884 30,548,342Unusedlettersofcreditissued 32,427,403 33,226,367Guarantees 29,�48,926 28,6�5,59�Collectionsreceivableforcustomers �43,406,�62 �49,784,5�0Collectionspayableforcustomers 5,�6�,936 4,383,87�Traveler'schecksconsignment-in 6�6,076 6�7,�52Guaranteednotespayable 2,579,876 6,224,469Trustassets 380,282,�87 292,882,370Customers'securitiesundercustody 693,439,�52 557,364,�82Book-entryforgovernmentbondsundermanagement �24,223,750 �08,88�,�50Depositoryforshort-termmarketablesecuritiesundermanagement 57,90�,�02 43,508,824

(2) DuetothecollapseoftheTungXinbuildingcausedbyanearthquakedisasterhappenedonSeptember2�,�999, the residents filed a legal claim of loss of personal properties against Hong Cheng Building Co., Ltd., Hong Ku ConstructionCo.,Ltd.,(includingtheirdirectorsandsupervisors)andtheBank.Asofthereportingdate,in

accordancewithCriminalSentence(92)Su-ZhiNo.2039ofTaipeiDistrictCourt,theBankprevailedinthecasebecausetherewasnoevidencefoundbetweenthecauseofcollapseandtheBank'smaintenanceconstructionswork.Inaddition,therelevantstaffoftheBankwerefoundtobeinnocentaswell.Withrespecttocivicresponsibility,theBank'ssurveyorbelievedthattherewasnoevidencefoundbetweenthecauseoftheaforesaideventandtheBank.TheBankisnotliableforcompensation.Therefore,noprovisionismadeforthecontingentliabilitiesintheBank's financial statements.


(3) The Bank rented office spaces under operating leases. As of December 31, 2007, the estimated future lease commitmentsfortheBankareasfollows:

Period Amount2008 $ 420,74�2009 372,84020�0 224,9�720�� 5�,468

20�2andthereafter 342,302 $ �,5�2,268

(4) Others AsofDecember3�,2007,theBankenteredintotheconstructioncontractsintheamountof$�40,000,$66,090

(includingsundryexpenses)ofwhichhadbeenpaidandrecordedin"constructioninprogressandprepaymentsforequipments"account.

7.SignificantLossesfromDisasters:None.

8.SignificantSubsequentEvents: AccordingtojointventureagreementsignedbetweenFFHCandAvivaInternationalHoldingsLimited,theBankand

First-AvivaLifeInsuranceCo.,Ltd.haveengagedintoanexclusivedistributionagreementon2January2008.

9.Others(�)Disclosureoffinancialinstruments 1) Fair value of financial instruments

December3�,2007

Non-derivativefinancialinstruments Bookvalue Quotedmarketprice Amountbyavaluationtechnique

AssetsFinancialassetswithbookvalueequalingfairvalue $ �87,392,473 $ - $�87,392,473Financialassetsatfairvaluethroughprofitorloss 3�,365,056 3,854,300 27,5�0,756Billsdiscountedandloans �,07�,�7�,454 - �,07�,�7�,454Available-for-salefinancialassets 6�,258,309 25,067,50� 36,�90,808Held-to-maturityfinancialassets 2�7,897,599 �3,976,366 203,662,426Otherfinancialassets-bondinvestmentswith noactivemarket 8,539,022 - 8,4�0,09�LiabilitiesFinancialliabilitieswithbookvalueequaling fairvalue �92,875,29� - �92,875,29�Financialliabilitiesatfairvaluethroughprofit orloss 45,439,336 - 45,439,336Depositsandremittances �,260,�75,302 - �,260,�75,302Financialbondspayable 22,800,000 - 22,800,000

DerivativefinancialinstrumentsAssetsNon-hedgeFXcontracts(swapsandforwards) $723,820 $- $723,820FXmargintrading 640,��7 - 640,��7Non-deliveryforwards 79,833 - 79,833FXoptionsheld 579,�43 - 579,�43Interestrateswaptionsheld �52,�93 - �52,�93Crosscurrencyswapscontracts(excludingthe notionalprincipal) 575,999 - 575,999Interestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 3,044,695 - 3,044,695Futurestrading 40,722 40,722 -

HedgeInterestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 889 - 889

(tobecontinued)


LiabilitiesNon-hedge

FXcontracts(swapsandforwards) 425,879 - 425,879FXmargintrading 8�,387 - 8�,387Non-deliveryforwards �26,466 - �26,466FXoptionswritten 584,666 - 584,666Interestrateswaptionswritten 2�3,834 - 2�3,834Bondoptionswritten 2,726 - 2,726Structurenotesoptionswritten - - -Crosscurrencyswapscontracts(excludingthe notionalprincipal) 632,553 - 632,553Interestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 3,869,3�7 - 3,869,3�7

HedgeInterestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 23�,526 - 23�,526

December3�,2006

Non-derivativefinancialinstruments Bookvalue Quotedmarketprice Amountbyavaluationtechnique

AssetsFinancialassetswithbookvalueequalingfairvalue $ 20�,255,594 $ - $20�,255,594Financialassetsatfairvaluethroughprofitorloss 39,568,537 3,630,206 35,938,33�Billsdiscountedandloans 972,044,580 - 972,044,580Available-for-salefinancialassets 82,635,7�3 23,456,576 59,�79,�37Held-to-maturityfinancialassets 2�3,747,427 3,296,38� 2�0,464,828Otherfinancialassets-bondinvestmentswith noactivemarket �4,866,599 - �4,768,069LiabilitiesFinancialliabilitieswithbookvalueequaling fairvalue �83,532,472 - �83,532,472Financialliabilitiesatfairvaluethroughprofit orloss 48,474,�67 - 48,474,�67Depositsandremittances �,2�9,888,559 - �,2�9,888,559Financialbondspayable 2�,998,479 - 2�,998,479

DerivativefinancialinstrumentsAssetsNon-hedgeFXcontracts(swapsandforwards) $623,245 $ - $623,245FXmargintrading 228,403 - 228,403Non-deliveryforwards 74,462 - 74,462FXoptionsheld 50,925 - 50,925Interestrateswaptionsheld 7,066 - 7,066Bondoptionsheld �4 - �4Crosscurrencyswapscontracts(excludingthe notionalprincipal) 2��,324 - 2��,324Interestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) �,9�0,887 - �,9�0,887Futuresmargindeposits �20,�04 �20,�04 -

HedgeInterestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 4,688 - 4,688(tobecontinued)


LiabilitiesNon-hedge

FXcontracts(swapsandforwards) 3�9,792 - 3�9,792FXmargintrading 22,298 - 22,298Non-deliveryforwards 6,537 - 6,537FXoptionswritten 6�,��9 - 6�,��9Interestrateswaptionswritten 65,307 - 65,307Bondoptionswritten 3,544 - 3,544Crosscurrencyswapscontracts(excludingthe notionalprincipal) 360,�46 - 360,�46Interestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) 2,498,858 - 2,498,858

HedgeInterestraterelatedcontracts(interestrateswaps andassetswapsexcludingtheprincipalofbonds) �92,595 - �92,595

2)Methods and assumptions used by the Bank to measure the fair value of financial instruments are summarized as follows:

(a)Cashandcashequivalents,duefromCentralBankandotherbanks,investmentinbondsunderresaleagree-ments,receivables(netofallowancefordoubtfulaccounts),refundabledeposits,billpurchased,duetoCentralBankandotherbanks,billsandbondspayableunderrepurchaseagreements,fundsborrowedfromCentralBankandotherbanks,payables,guaranteedepositsreceivedandsoon.Thefairvaluesoffinancialinstrumentslistedaboveareestimatedatcarryingamountsatbalancesheetdate,asthematuritydateisnearthebalancesheetdateorthefuturereceivableorpayableamountisclosetothecarryingamount.

(b)Billsdiscountedandloans(includingnon-performingloans):Consideringthenatureofthefinancialserviceindustry,whichisthemarketrate(marketprice)maker,theeffectiveinterestratesofloansaregenerallybasedonthebasicinterestrateortheinterestrateindexplus(minus)certainadjustment(point)(equivalenttofloatingrate)toreflectthemarketrate.Asaresult,itisreasonabletoassumethatbookvalue,afteradjust-mentsofreservesbasedonestimatedrecoverability,approximatesfairvalues.Fairvaluesformid-termandlong-termloanswithfixedratesshallbeestimatedusingtheirdiscountedvaluesofexpectedfuturecashflows.However,assuchloansaccountforonlyasmallportionofallloans,bookvaluewasusedtoestimatethefairvalue.

(c)Thefairvaluesofderivativefinancialinstrumentsareestimatedbasedontheamountsexpectedtoreceiveorpayunderthegivensituationthatthederivativecontractsareterminatedpursuanttocontracttermsatthebalancesheetdate.Ingeneral,suchanamountincludesunrealizedgainsorlossesonoutstandingderivativecontracts.TheBankadoptsthevaluationmodelthatisidenticaltothemarkettodeterminethefairvaluesofderivativefinancialinstruments.

(d)Whenthereisaquotedmarketpriceavailableinanactivemarketforavailable-for-salefinancialassetsandheld-to-maturityfinancialassets,thefairvalueisdeterminedusingthequotedmarketprice.Ifthereisnoquotedmarketpriceforreference,avaluationtechniquewillbeadoptedtomeasurethefairvalue.TheestimationandassumptionofthevaluationtechniqueusedbytheBankisconsistentwiththoseusedbythemarketparticipantsforfinancialinstrumentpricing.Thediscountrateusedisconsistentwiththeexpectedreturnrateofthefinancialinstrumentsthathavethesameconditionsandcharacteristics.Suchconditionsandcharacteristicsincludethedebtor'screditrating,theremainingperiodofthefixedinterestratecontracts,theremainingperiodforprincipalrepayment,thepaymentcurrency,etc.

(e)Depositsandremittances:Consideringthenatureofthefinancialserviceindustry,whichisthemarketrate(marketprice)maker,andthatdeposittransactionsusuallymaturewithinoneyear,abookvalueisareasonablebasistoestimatethefairvalue.Fairvaluesforlong-termfixedratedepositsshallbeestimatedusingtheirdiscountedvaluesofexpectedfuturecashflows.However,asthesedepositsaccountforonlyasmallportionofalldepositsandastheirmaturitiesarelessthanthreeyears,itisreasonabletoestimatethefairvaluebythebookvalue.


(f)Financialbondspayable:SincethecouponratesofthesubordinatedfinancialbondsissuedbytheBankapproximatethemarketrates,thefairvaluebasedonthediscountedvalueofexpectedfuturecashflowsapproximatesthebookvalue.

(g)Otherfinancialassets-bondinvestmentswithnoactivemarket:Ifthereisanactualtransactionpriceoraquotedmarketpriceforbondinvestmentswithnoactivemarket,thefairvalueofsuchbondinvestmentswillbedeterminedbythelatestactualtransactionpriceorquotedmarketprice.Moreover,ifthereisnoquotedmarketpriceforreference,avaluationtechniquewillbeadoptedtomeasurethefairvalue.ThevaluationtechniqueoftheBankisthediscountedvalueofexpectedfuturecashflows.

(h)Thefairvaluemeasurementisnotapplicabletoequityinvestmentsaccountedforundertheequitymethod.Inaddition,thereisnoquotedmarketpriceinanactivemarketfortheunlistedstocksunderthefinancialassetcarriedatcost,andtheirvariabilityintherangeofreasonablefairvalueestimatesisnotinsignificantandtheirprobabilityofthevariousestimateswithintherangecannotbereasonablyassessed,sothefairvalueoftheunlistedstocksisnotreliablymeasurable.Asaresult,informationofthebookvalueandthefairvaluewithrespecttothesefinancialassetsisnotdisclosed.

3)TheBankhasrecognized$600,490and$8�0,492ofcurrentnetgainsonchangesinfairvaluearisingfromvaluationtechniquesfortheyearsendedDecember3�,2007and2006,respectively.

4) As of December 31, 2007 and 2006, the Bank has financial assets with fair value risk arising from interest rate changesamountedto$66,572,825and$95,454,66�,respectively.

5) As of December 31, 2007 and 2006, the Bank has financial assets with cash flow risk arising from interest rate changesamountedto$�5,555,576and$�3,509,795,respectively.

6) For the years ended December 31, 2007 and 2006, the Bank has recognized interest income from the financial assets or financial liabilities not at fair value through profit or loss amounted to $48,572,750 and $42,937,557, respectively. The Bank has recognized interest expenses from the financial assets or financial liabilities not at fair value through profit or loss amounted to $26,631,341 and $22,556,811, respectively. The Bank has recognized the change in fair value of available-for-sale financial assets and has recorded it as an adjustment account in the stockholders'equityamountedto$3,94�,376and$6,252,298,respectively,andtheamountofthegainonfairvaluechange reclassified from the stockholders' equity into the statement of income was $759,975 and $371,637 for the yearsendedDecember3�,2007and2006,respectively.

7) Risk management and hedging strategy (including financial hedge)

(a)TheBankengagesinriskmanagementandhedgeundertheprinciplesofnotonlyservingcustomersbutalsoconformingtotheBankoperationalgoal,overallrisktolerancelimit,andlegalcompliancetoachieveriskdiversification,risktransfer,andriskavoidance,andtomaximizethebenefitsofcustomers,shareholders,andemployees.TheBankmainlyfacesthecreditrisk,marketrisk(includingtheinterestrate,foreignexchangerate,equitysecurities,andinstrumentrisk),operationalrisk,andliquidityriskregardlesswhethertheyareonoroffbalancesheets.

(b)TheBank'sBoardofDirectorshastheultimateapprovalrightinriskmanagement.Majormanagementriskitemsthatincludethebank-wideriskmanagementpolicy,risktolerancelimit,andauthoritymustbeapprovedbytheBoardofDirectors.UndertheBoardofDirectors,thereistheRiskManagementCommittee,whichisresponsibleforreviewing,supervising,reporting,andcoordinatingbank-wideriskmanagement.Besides,RiskManagementCenter,whichisindependentfrombusinessunits,iscomprisedofRegionalCenter,RiskManagementDivision,CreditApprovalDivision,SpecialAssetManagementDivisionandCreditAnalysisDivision,andisresponsibleforimplementingtheriskmanagementstrategyoftheBank.

(c)ThegoalofmarketriskmanagementoftheBankistoachieveoptimalriskposition,maintainproperliquidityposition,andmanageallmarketriskcentralizedbyconsideringtheeconomicenvironment,competitioncondition,marketvaluerisk,andimpactonnetinterestincome.Inordertoachievethisgoal,theBank'shedgeactivitiesconcentrateonrisktransferandriskmanagementofnetinterestincomeandmarketvaluerisk.TheBanksetsthestrategyoffairvaluehedgeofinterestrateexposureaccordingtothefundtransferpricingprinciple.TheBankprimarilyusesinterestrateswapstohedgefairvaluechanges,andalsohedgestheinterestrateexposureofpartialfixed-rateloansandfixed-rateliabilities.


8)Financalriskinformation (a)Marketrisk

TheBanksetsthespecifictradeperiod,positionlimit,andstoplosslimitforitsinvestmentsinmarketablesecuritiesaccordingtodifferentdegreesofriskforeachspecificproduct.TheBankmonitorsthoselimitationsbyvariousriskindicatorssuchasvalueatriskandDV0�,etc.Inaddition,theBankperiodicallyconductstherisksensitivityanalysisofbank-widepositions.

EachderivativefinancialinstrumenttransactionundertakenbytheBankhasbeensetGreeks,theopenaggregatepositionlimitandmaximumlosstoleranceamounttocontrolthemarketriskofderivativefinancialinstrumentswithintheBank'stolerance.Inaddition,theprofitandlossarisingfromfluctuationsinthemarketinterestrateorforeignexchangeratewillbesubstantiallyoffsetbytheprofitandlossfromhedgeditems,andthusthoseinstrumentswouldnotexposetheBanktothesignificantmarketrisk.

TheBankcalculatesthecapitalrequirementsoffinancialinstrumentsincompliancewiththeStandardizedApproach,andtheestimatedvaluesoftherisk-weightedassetsarestatedasfollows:

Typeofmarketrisk December3�,2007 December3�,2006Interestraterisk $ 822,738 $ 900,996Equitypositionrisk 352,�27 404,043Foreignexchangerisk 799,730 465,�4�

(b)Creditrisk

FinancialinstrumentsheldbytheBankmayincurlossesifcounterpartiesarenotabletofulfilltheirobligationsatthematuritydate.Inordertopreventinvestmentsfromsignificantcreditriskconcentration,theBanksetsuptheuppercredittolerancelimitsforinvestmentinstocksbyindustriesandconglomerates.Bondinvestmentsareprimarilycomposedofgovernmentbonds,financialbonds,andinvestment-gradecorporatebonds.Eachcorporatebondisreviewedindividuallytocontrolthecreditrisk.

CounterpartiesintheBank'sderivativefinancialinstrumenttransactionsareallfinancialinstitutionswithgoodcreditratings.TheBankcontrolscreditexposuresofitscounterpartiesbygivingdifferentrisklimitstodifferentcounterpartiesbasedontheircreditratings.

Thecreditriskamountsstatedbelowareforthosewithpositivefairvaluesasofthebalancesheetdateandthosecontractswithoff-balancesheetcommitmentsandguarantees.

ForallfinancialinstrumentsheldbytheBank,themaximumcreditexposuresareasfollows:

December3�,2007

Financialinstruments Bookvalue Maximumcreditexposure

Non-derivativefinancialinstrumentsFinancialassetsfortradingpurposeBonds $ �,�63,875 $ �,�63,875Beneficiarycertificates 426,098 426,098Othermarketablesecurities 444,836 444,836FinancialassetsdesignatedfortradingpurposeBonds 27,033,7�� 27,033,7��Billsdiscountedandloans �,07�,�7�,454 �,07�,�7�,454Available-for-salefinancialassetsBonds 52,973,9�� 52,973,9��Short-termbills 956,904 956,904Beneficiarysecurities 238,47� 238,47�Held-to-maturityfinancialassets 2�7,897,599 2�7,897,599Bondinvestmentswithnoactivemarket Bonds 4,45�,7�0 4,45�,7�0Beneficiarysecurities 4,087,3�2 4,087,3�2

(tobecontinued)


DerivativefinancialinstrumentsNon-hedgingpurposeFXcontracts(swapsandforwards) 723,820 723,820FXmargintrading 640,��7 640,��7Non-deliveryforwards 79,833 79,833FXoptionsheld 579,�43 579,�43Interestrateswaptionsheld �52,�93 �52,�93Crosscurrencyswapscontracts(excludingthenotionalprincipal) 575,999 575,999Interestraterelatedcontracts(interestrateswapsandasset swapsexcludingtheprincipalofbonds) 3,044,695 3,044,695Futurestrading 40,722 40,722HedgingpurposeInterestraterelatedcontracts(interestrateswapsandasset swapsexcludingtheprincipalofbonds) 889 889Unusedlettersofcreditissuedandguarantees - 6�,576,329

note:Themaximumcreditexposureofderivativeinstrumentsstatedisforthosewithpositivefairvalues.

December3�,2006

Financialinstruments Bookvalue Maximumcreditexposure

Non-derivativefinancialinstrumentsFinancialassetsfortradingpurposeBonds $ 7,086,877 $ 7,086,877Beneficiarycertificates 207,404 207,404Othermarketablesecurities 45�,056 45�,056FinancialassetsdesignatedfortradingpurposeBonds 29,�76,986 29,�76,986Billsdiscountedandloans 972,044,580 972,044,580Available-for-salefinancialassetsBonds 72,996,969 72,996,969Short-termbills 443,788 443,788Beneficiarysecurities 244,955 244,955Held-to-maturityfinancialassets 2�3,747,427 2�3,747,427Bondinvestmentswithnoactivemarket Bonds 8,73�,0�7 8,73�,0�7Beneficiarysecurities 6,�35,582 6,�35,582DerivativefinancialinstrumentsNon-hedgingpurposeFXcontracts(swapsandforwards) 623,245 623,245FXmargintrading 228,403 228,403Non-deliveryforwards 74,462 74,462FXoptionsheld 50,925 50,925Interestrateswaptionsheld 7,066 7,066Bondoptionsheld �4 �4Crosscurrencyswapscontracts(excludingthenotionalprincipal) 2��,324 2��,324Interestraterelatedcontracts(interestrateswapsandasset swapsexcludingtheprincipalofbonds) �,9�0,887 �,9�0,887Futuresmargindeposits(note�) �20,�04 �20,�04HedgingpurposeInterestraterelatedcontracts(interestrateswapsandasset swapsexcludingtheprincipalofbonds) 4,688 4,688Unusedlettersofcreditissuedandguarantees - 6�,84�,958

note�:ItistheexcessmargindepositsastheBankdidnothaveunsettledpositionsasofDecember3�,2006. note2:Themaximumcreditexposureofderivativeinstrumentsstatedisforthosewithpositivefairvalues.


Thecreditexposureamountsstatedaboveareforthosewithpositivefairvaluesasofthebalancesheetdateandthosecontractswithoff-balancesheetcommitmentsandguarantees.Therewillbeasignificantconcentrationofcreditriskwhenthecounterpartyofthefinancialinstrumentsishighlyconcentratedinasinglecustomeroragroupofcounterpartieswhoengagemostlyinsimilarbusinessactivitieswithsimilareconomicnature,andsuchbusinessactivitiesmaketheirabilitiestofulfillthecontractualobligationsinfluencedsimilarlybytheeconomicaffairsorothersituations.TheBankdoesnotengageintransactionsthatareconcentratedsignificantlyinasinglecustomerorcounterparty.However,theinformationonconcentrationsofcreditrisks,whichrepresentsupto5%oftheBank'sloans,billsdiscounted,andnon-accrualloans,isclassifiedbelowbycounterpartiesandregions:

December3�,2007

Loansbyindustries Bookvalue Maximumcreditexposure

Privateenterprises $ 474,653,�30 $ 474,653,�30State-ownedenterprises 35,563,328 35,563,328Governmentinstitutions 78,675,�43 78,675,�43Non-profitorganizations 3,8��,��8 3,8��,��8Privateindividual 344,925,964 344,925,964Others �,390,000 �,390,000Offshoreentities �40,892,805 �40,892,805Total $ �,079,9��,488 $ �,079,9��,488LoansbyregionsAsia $ �,002,232,97� $ �,002,232,97�Europe �9,434,432 �9,434,432NorthAmerica 54,4�5,695 54,4�5,695CentralAmerica �94,202 �94,202Oceania 3,634,�88 3,634,�88Total $ �,079,9��,488 $ �,079,9��,488

December3�,2006

Loansbyindustries Bookvalue Maximumcreditexposure

Privateenterprises $ 443,240,633 $ 443,240,633State-ownedenterprises 37,�53,336 37,�53,336Governmentinstitutions 64,640,838 64,640,838Non-profitorganizations 3,3�5,720 3,3�5,720Privateindividual 3�9,582,�22 3�9,582,�22Others 6�,286 6�,286Offshoreentities ��2,085,363 ��2,085,363Total $ 980,079,298 $ 980,079,298LoansbyregionsAsia $ 949,769,250 $ 949,769,250Europe 388,263 388,263NorthAmerica 24,80�,090 24,80�,090CentralAmerica 4,779,903 4,779,903Oceania 340,792 340,792Total $ 980,079,298 $ 980,079,298

(c)Liquidityrisk

StockstradedbytheBankarealllistedontheTaiwanStockExchangeortheOTCSecuritiesMarket.Thus,thesestockshavehighliquidityandareexpectedtobesoldatfairvaluepromptlywhenneeded.BondsthattheBankholdsareprimarygovernmentbondsandtheirliquidityiswithinanacceptablerange.Asaresult,theBankdoesnothavesignificantliquidityrisk.


ForthederivativefinancialinstrumentsheldbytheBank,allpositionshaveanactivemarketandhighliquidity(exceptforthosefinancialbondsissuedbytheBankandstructuredwithinterestrateswapcontracts,whichhavenoneedforfurtherswaps).Thus,thereisnosignificantconcernforliquidityrisk.

TheliquidreserveratiofortheBankis23.36%.Inaddition,theBank'scapitalandworkingcapitalaresufficienttofulfillallobligations.Thus,thereisnomaterialliquidityriskthattheBankmayfailtomeettheobligation.

(d)Cashflowriskandfairvalueriskarisingfromchangesininterestrates

Inordertostabilizethelong-termprofitabilityandmaintainthebusinessgrowth,theBanksetsacertainintervalforeachinterest-rate-sensitivityindicator.

AsofDecember3�,2007and2006,theeffectiveinterestratesofmaincurrenciesforfinancialinstruments(exceptfinancialassetsatfairvaluethroughprofitorloss)heldorissuedbytheBankareasfollows:

December3�,2007Financialinstruments NTD USD HKD SGD CAD JPY EUR AUDAvailable-for-salefinancialassetsGovernmentbonds 2.��% 4.94% 4.05% - - - 6.97% -Financialbonds 2.�5% 5.�7% 2.75% - - 2.55% 5.55% 6.84%Corporatebonds �.97% 4.8�% - 3.42% - - - -Short-termbills 2.3�% - - - 4.29% - - -Held-to-maturityfinancialassetsGovernmentbonds 2.25% 6.5�% - - - - - -Financialbonds 2.59% 4.47% - - - - 5.�0% -Corporatebonds 2.45% 4.73% - - - - - -Short-termbills - - - �.50% - - - -LoansandadvancesShort-termloans 3.�4% 6.09% - - - - - -Mid-termloans 2.94% 5.7�% - - - - - -Long-termloans 3.24% 5.87% - - - - - -Financialbondspayable 2.09% - - - - - - -Deposits �.25% 3.44% - - - - - -

December3�,2006Financialinstruments NTD USD HKD SGD CADAvailable-for-salefinancialassetsGovernmentbonds 2.22% 4.85% 4.23% - -Corporatebonds �.93% 5.88% - 3.23% -Short-termbills - 5.�6% - - 4.34%Held-to-maturityfinancialassetsGovernmentbonds - 4.92% - - -Corporatebonds 2.08% 5.3�% - - -LoansandadvancesShort-termloans 3.�0% 6.�5% - - -Mid-termloans 2.89% 5.72% - - -Long-termloans 3.��% 6.0�% - - -Financialbondspayable 3.53% - - - -Deposits �.�4% 3.25% - - -


(2)DisclosureinaccordancewiththeStatementofFinancialAccountingStandards(SFAS)No.28 �)Non-performingloansandoverdueaccounts

December3�,2007

AmountofNPLs Grossloans NPLratio

(%)

Allowancefordoubtfulaccounts

Coverageratio(%)

Corporatebanking Securedloans 6,847,902 266,208,074 2.57 �,96�,422 28.64Unsecuredloans 5,377,980 500,748,094 �.07 5,377,980 �00.00Consumerbanking Residentialmortgageloans 3,662,340 304,�39,574 �.20 �,063,093 29.03Cashcards 32 �70,070 0.02 �,078 3368.75Smallamountofcreditloans 272,074 6,027,2�7 4.5� 272,074 �00.00Others Securedloans ��,6�3 �,623,45� 0.72 2,752 23.70Unsecuredloans 6�,635 995,008 6.�9 6�,635 �00.00Grossloanbusiness �6,233,576 �,079,9��,488 �.50 8,740,034 53.84

Amountofoverdueaccounts

Balanceofaccounts

receivable

Overdueaccountratio(%)


Coverageratio(%)

Creditcardbusiness 24,029 3,797,�75 0.63 40,543 �68.73Factoringwithoutrecourse - 2,097,060 0.00 839 �00.00

December3�,2006

AmountofNPLs Grossloans NPLratio

(%)


Coverageratio(%)

Corporatebanking Securedloans 7,025,�33 237,772,487 2.95 2,230,859 3�.76Unsecuredloans 4,792,645 454,�04,823 �.06 4,792,645 �00.00Consumerbanking Residentialmortgageloans 3,�99,390 273,578,003 �.�7 627,823 �9.62Cashcards 2,530 342,599 0.74 �,949 77.04Smallamountofcreditloans 322,35� 8,528,277 3.78 322,35� �00.00OthersSecuredloans 6,�00 �,694,�� 0.36 �,685 27.62Unsecuredloans 57,406 4,058,998 �.4� 57,406 �00.00Grossloanbusiness �5,405,555 980,079,298 �.57 8,034,7�8 52.�5

Amountofoverdueaccounts

Balanceofaccounts

receivable

Overdueaccountratio(%)


Coverageratio(%)

Creditcardbusiness 65,955 4,�39,249 �.59 68,733 �04.2�Factoringwithoutrecourse - 696,649 0.00 23 �00.00

2) Profile of concentration of credit risk and credit extensions

December3�,2007

Ranking Nameofenterprisegroup Totaloutstandingloanamount

Totaloutstandingloanamount/networthofthecurrentyear(%)

� FormosaPlasticsGroup 25,262,�92 3�.502 CHIMEIGroup �2,330,807 �5.383 AUOptronicsCorp. ��,8�4,38� �4.734 ChinaAirlines 9,375,�05 ��.695 FarEasternGroup 8,722,532 �0.886 WalsinLihwa 6,327,738 7.897 ChinaSteel 4,587,764 5.728 FubonGroup 4,4�2,090 5.509 HotaiMotor 3,9�3,999 4.88

�0 PowerchipSemiconductorCorporation 3,733,337 4.66


December3�,2006

Ranking Nameofenterprisegroup Totaloutstandingloanamount

Totaloutstandingloanamount/networthofthecurrentyear(%)

� FormosaPlasticsGroup 24,9�2,�70 3�.072 AUOptronicsCorp. ��,62�,0�8 �4.493 CHIMEIGroup �0,223,353 �2.754 FarEasternGroup 7,823,0�5 9.765 ChinaAirlines 7,2�0,9�� 8.996 ChinaSteel 6,748,9�4 8.427 WalsinLihwa 5,609,769 7.008 KGTGroup 5,230,93� 6.529 HotaiMotor 3,990,000 4.98�0 TaTungGroup 3,�6�,�99 3.94

note:Rankingthetoptenenterprisegroupsotherthangovernmentandgovernmententerpriseaccordingtotheirtotaloutstandingloanamount.

3) Sensitivityanalysisofinterestrateforassetsandliabilities

(a)SensitivityanalysisofinterestrateforassetsandliabilitiesinNTD

December3�,2007�~90days 9�~�80days �8�days~�year Over�year Total

Interest-rate-sensitiveassets 903,66�,000 �03,294,000 62,62�,000 ��2,766,000 �,�82,342,000Interest-rate-sensitiveliabilities 340,205,000 564,990,000 �00,�57,000 47,573,000 �,052,925,000

Interest-rate-sensitivegap 563,456,000 (46�,696,000) (37,536,000) 65,�93,000 �29,4�7,000Totalstockholders'equity 89,74�,587Ratioofinterest-rate-sensitiveassetstointerest-rate-sensitiveliabilities(%) ��2.29Ratioofinterest-rate-sensitivegaptostockholders'equity(%) �44.2�

note:TheamountslistedaboverepresenttheitemsdenominatedinNTdollars(excludingforeigncurrency)forboth head office and domestic branches, excluding contingent assets and contingent liabilities.

(b)SensitivityanalysisofinterestrateforassetsandliabilitiesinUSD


Interest-rate-sensitiveassets 7,9��,625 2,0�7,4�� ,284,395 6�2,864 ��,826,295Interest-rate-sensitiveliabilities 7,635,908 2,747,759 �,�20,66� �96,530 ��,700,858Interest-rate-sensitivegap 275,7�7 (730,348) �63,734 4�6,334 �25,437Totalstockholders'equity 2,762,640Ratioofinterest-rate-sensitiveassetstointerest-rate-sensitiveliabilities(%) �0�.07Ratioofinterest-rate-sensitivegaptostockholders'equity(%) 4.54

note:Theamounts listedaboverepresent the itemsdenominated inU.S.dollars forheadoffice,domesticbranches,OBUandoverseasbranches,excludingcontingentassetsandcontingentliabilities.

(c)SensitivityanalysisofinterestrateforassetsandliabilitiesinNTD


Interest-rate-sensitiveassets 970,755,000 94,�89,000 52,337,000 52,30�,000 �,�69,582,000Interest-rate-sensitiveliabilities 343,�3�,000 554,�3�,000 86,��,000 58,��,000 �,04�,484,000Interest-rate-sensitivegap 627,624,000 (459,942,000) (33,774,000) (5,8�0,000) �28,098,000Totalstockholders'equity 87,�25,420Ratioofinterest-rate-sensitiveassetstointerest-rate-sensitiveliabilities(%) ��2.30Ratioofinterest-rate-sensitivegaptostockholders'equity(%) �47.03

note:TheamountslistedaboverepresenttheitemsdenominatedinNTdollars(excludingforeigncurrency)forboth head office and domestic branches, excluding contingent assets and contingent liabilities.


(d)SensitivityanalysisofinterestrateforassetsandliabilitiesinUSD


Interest-rate-sensitiveassets 6,093,994 �,300,�28 598,803 207,�5� 8,200,076Interest-rate-sensitiveliabilities 5,772,327 2,�73,840 53�,67� - 8,477,838Interest-rate-sensitivegap 32�,667 (873,7�2) 67,�32 207,�5� (277,762)Totalstockholders'equity 2,668,466Ratioofinterest-rate-sensitiveassetstointerest-rate-sensitiveliabilities(%) 96.72Ratioofinterest-rate-sensitivegaptostockholders'equity(%) -�0.4�

note:Theamounts listedaboverepresent the itemsdenominated inU.S.dollars forheadoffice,domesticbranches,OBUandoverseasbranches,excludingcontingentassetsandcontingentliabilities.

4) Profitability


Returnontotalassets(%)Beforetax 0.98 0.89Aftertax 0.75 0.7�

Returnonstockholders'equity(%)Beforetax �7.72 �6.70Aftertax �3.60 �3.32

Netprofitmarginratio(%) 33.47 34.�0

5)Structureanalysisoftimetomaturity

(a)StructureanalysisofNTDtimetomaturity

December3�,2007Total 0~30days 3�~90days 9�~�80days �8�days~�year Over�year

Primaryfundsinflowuponmaturity �,347,840,000 233,593,000 �02,6�7,000 �35,337,000 �42,495,000 733,798,000Primaryfundsoutflowuponmaturity �,462,�95,000 �85,306,000 2�5,037,000 �96,009,000 334,060,000 53�,783,000Gap (��4,355,000) 48,287,000 (��2,420,000) (60,672,000) (�9�,565,000) 202,0�5,000


Primaryfundsinflowuponmaturity �,335,359,000 326,6��,000 ��3,07�,000 �09,856,000 �58,654,000 627,�67,000Primaryfundsoutflowuponmaturity �,497,422,000 �74,429,000 202,�08,000 �92,949,000 296,655,000 63�,28�,000Gap (�62,063,000) �52,�82,000 (89,037,000) (83,093,000) (�38,00�,000) (4,��4,000)

note:Theamounts listedabove represent the fundsdenominated inNTdollarsonly (excluding foreigncurrency) forbothheadofficeanddomesticbranches,excludingcontingentassetsandcontingentliabilities.

(b)StructureanalysisofUSDtimetomaturity


Primaryfundsinflowuponmaturity 8,902,229 2,630,943 2,575,868 �,450,635 95�,53� �,293,252Primaryfundsoutflowuponmaturity 8,902,6�7 3,943,7�0 �,674,656 926,333 �,23�,553 �,�26,365

Gap (388) (�,3�2,767) 90�,2�2 524,302 (280,022) �66,887


Primaryfundsinflowuponmaturity 6,673,522 2,678,924 �,723,388 969,609 244,937 �,056,664Primaryfundsoutflowuponmaturity 6,679,3�4 3,5�3,985 �,032,897 70�,600 662,0�6 768,8�6

Gap (5,792) (835,06�) 690,49� 268,009 (4�7,079) 287,848

note:Theamounts listedaboverepresent the fundsdenominated inU.S.dollars forheadoffice,domesticbranches,OBUandoverseasbranches,excludingcontingentassetsandcontingentliabilities.

6)Averagevalueandaverageinterestratesofinterest-earningassetsandinterest-bearingliabilities

2007

Interest-earningassets Averagevalue

Averagerateofreturn(%)

DuefromCentralBank $56,6�9,772 0.96Duefromotherbanks(note) 87,855,287 5.�0Financialassetsatfairvaluethroughprofitorloss 32,�35,026 2.57Investmentsinbillsandbondsunderresaleagreements 4�,908 2.07Creditcardaccountreceivable 2,305,09� �4.25Billsdiscountedandloans 994,808,443 3.6�Available-for-salefinancialassets 62,932,030 2.89Held-to-maturityfinancialassets 2�7,623,78� 2.�9Otherfinancialassets �3,��4,23� 4.��Interest-bearingliabilitiesDuetoCentralBank $327,�98 -Duetootherbanks �25,395,683 4.4�Fundsborrowedfromotherbanks �50,687 0.94Financialbondspayable 69,�44,202 2.09Billsandbondspayableunderrepurchaseagreements ��,�80,2�� .42Deposits �,22�,297,034 �.63Negotiablecertificatesofdeposit 8,804,6�5 �.68

2006

Interest-earningassets Averagevalue

Averagerateofreturn(%)

DuefromCentralBank $47,74�,284 0.97Duefromotherbanks(note) 76,495,84� 4.64Financialassetsatfairvaluethroughprofitorloss 36,233,8�7 2.43Investmentsinbillsandbondsunderresaleagreements 76,332 �.53Creditcardaccountreceivable 3,�56,200 �7.30Billsdiscountedandloans 896,768,3�8 3.52Available-for-salefinancialassets 80,626,368 2.69Held-to-maturityfinancialassets 205,228,082 �.73Otherfinancialassets �7,49�,695 4.55Interest-bearingliabilitiesDuetoCentralBank $336,495 -Duetootherbanks ��9,803,557 3.88Fundsborrowedfromotherbanks 206,63� 0.75Financialbondspayable 63,896,667 2.32Billsandbondspayableunderrepurchaseagreements �4,002,753 �.�2Deposits �,�34,906,497 �.48Negotiablecertificatesofdeposit 9,702,9�8 �.45

note:Thisrepresentsduefromotherbanksunder"cashandcashequivalents",andcallloanstobanksandbankoverdraftsunder"duefromCentralBankandotherbanks".

(3)NetpositionformajorforeigncurrencytransactionsDecember3�,2007 December3�,2006

Currency(inthousands)

NTD(inthousands)

Currency(inthousands)

NTD(inthousands)

Netpositionformajorforeigncurrencytransactions(marketrisk)

USD $ 2�0,599 $ 6,84�,098 USD $97,253 $3,�75,3�0CAD 30,�24 999,029 JPY 3,680,36� �,099,�55EUR �2,742 609,898 GBP 7,304 467,889GBP 7,�67 464,8�� CAD �6,20� 455,805HKD 97,067 404,2�6 HKD 87,605 367,958

note�: Themajorforeigncurrenciesarethetop5currenciesbyposition,whichisexpressedinNewTaiwandollarsafterexchangerateconversion.

note2: Netpositionrepresentsanabsolutevalueofeachcurrency.


(4)Trustassetsandliabilities TheTrustDivisionoftheBankengagesinplanning,managementandoperatingoftrustbusinessundertheBanking

Law,TrustLawandtheTrustEnterpriseAct.Inaddition,itprovidescustomerswithmoneytrust,trustofsecurities,trustofrealestateandcustodianbusiness.

AsofDecember3�,2007and2006,theinvestmentdetailsoftrustassetsarelistedasfollows:BalanceSheetofTrustAccounts

December3�,2007Trustassets TrustliabilitiesCashandbankdeposits $2,025,925 Borrowings $-Bonds 55,820,82� Payables -Stocks 52,388,865 Otherliabilities -Mutualfunds 262,2��,358Beneficiarycertificates 264,477Realestate 4,09�,�7�Netassetsundercollective Trustcapital 380,�66,625managementaccounts 3,479,570 Accumulatedprofitandloss ��5,562Total $ 380,282,�87 Total $380,282,�87

PropertyListofTrustAccountsDecember3�,2007

Investmentitems BookvalueBonds $55,820,82�Stocks 52,388,865Mutualfunds 262,2��,358Beneficiarycertificates 264,477Realestate 4,09�,�7�Netassetsundercollectivemanagementaccounts 3,479,570Total $378,256,262

IncomeStatementofTrustAccountsFromJanuary�toDecember3�,2007

TrustrevenuesInterestincome $40,448Realizedgainonbonds 343,�70Realizedgainonmutualfunds �4,767,5�8Realizedgainonbeneficiarycertificates 3,5�0Realizedgainonstructurenotes 37Totaltrustrevenues �5,�54,683TrustexpensesManagementfee 3,053Custodianfee -Interestexpense 3,��0Handlingcharge(servicecharge) 27Realizedlossonbonds 96,825Realizedlossonmutualfunds �,625,8�9Realizedlossonstructurenotes 59�Otherexpenses 3,546Totaltrustexpenses �,732,97�Netincomebeforetax(netinvestmentincome) �3,42�,7�2Incometaxexpense (95)Netincomeaftertax $�3,42�,6�7


BalanceSheetofTrustAccountsDecember3�,2006

Trustassets TrustliabilitiesCashandbankdeposits $�,455,22� Borrowings $ -Bonds 46,8�6,652 Payables -Stocks 35,�30,3�3 Otherliabilities -Mutualfunds 203,267,323Beneficiarycertificates 224,958Realestate 2,�78,322 Netassetsundercollective Trustcapital 292,877,703managementaccounts 3,809,58� Accumulatedprofitandloss 4,667Total $292,882,370 Total $ 292,882,370

PropertyListofTrustAccountsDecember3�,2006

Investmentitems BookvalueBonds $ 46,8�6,652Stocks 35,�30,3�3Mutualfunds 203,267,323Beneficiarycertificates 224,958Realestate 2,�78,322Netassetsundercollectivemanagementaccounts 3,809,58�Total $ 29�,427,�49

IncomeStatementofTrustAccountsFromJanuary�toDecember3�,2006

TrustrevenuesInterestincome $98,65�Realizedgainonbonds 38,209Realizedgainonstocks 984Realizedgainonmutualfunds 7,356,500Realizedgainonbeneficiarycertificates 38Totaltrustrevenues 7,494,382TrustexpensesManagementfee 5,2�3Custodianfee 54Interestexpense 8,393Handlingcharge(servicecharge) 4�5Realizedlossonbonds �02,545Realizedlossonmutualfunds 949,826Otherexpenses �3,459Totaltrustexpenses �,079,905Netincomebeforetax(netinvestmentincome) 6,4�4,477Incometaxexpense (�0�)Netincomeaftertax $6,4�4,376


(5)CapitaladequacyratioDecember3�,2007 December3�,2006

CapitalTier�capital $76,�38,9�0 $75,2�5,�53Tier2capital 36,485,002 3�,902,�28Tier3capital - -Deductions - (8,373,�36)Totaleligiblecapital $��2,623,9�2 $98,744,�45Risk-weightedassetsCreditriskStandardizedapproach $926,��4,�47 $866,927,968Internalratings-basedapproach - -Securitization - -OperationalriskBasicindicatorapproach 54,236,�20 -Standardizedapproach/alternativestandardizedapproach - -Advancedmeasurementapproach - -Marketrisk Standardizedapproach 62,928,4�2 30,424,068Internalmodelapproach - -Totalrisk-weightedassets $�,043,278,679 $897,352,036Capitaladequacyratio �0.80% ��.00%Tier�ratio 7.30% 8.38%Tier2ratio 3.50% 3.56%Tier3ratio - -Ratioofcommonstocktototalassets 2.88% 2.94%

(6)Financialstatementspresentation Accordingtothe"GuidelinesGoverningthePreparationofFinancialReportsbyPublicBanks",certainaccountsof

2006financialstatementshavebeenreclassifiedtoconformtothepresentationofthe2007financialstatements.


InternationalBusinessDivision3&4Fl.30,ChungKingS.Rd.,Sec.�,Taipei�00-05,TaiwanTel:886-2-2348-��SWIFT:FCBKTWTP

BusinessDivision�&2Fl.30,ChungKingS.Rd.,Sec.�,Taipei�00-05,TaiwanTel:886-2-2348-��

An-HoBranch�84,HsinYiRd.,Sec.4,Taipei�06,TaiwanTel:886-2-2325-6000

Chang-ChunBranch�69,FuHsinN.Rd.,Taipei�05,TaiwanTel:886-2-27�9-2�32

Chang-HuaBranch48,HoPingRd.,ChangHuaCity,ChangHuaCounty500,TaiwanTel:886-4-723-2�6�

Chang-TaiBranch99,ChungHsinRd.,Sec.2,SanChungCity,TaipeiCounty24�,TaiwanTel:886-2-2988-4433

Cheng-TungBranch�03,NankingE.Rd.,Sec.3,Taipei�04,TaiwanTel:886-2-2506-288�

Chi-ChengBranch508,ChungChengRd.,HsinTienCity,TaipeiCounty23�,TaiwanTel:886-2-22�8-465�

Chia-YiBranch307,ChungShanRd.,ChiaYiCity600,TaiwanTel:886-5-227-2��0

Chien-ChengBranch40,ChengTehRd.,Sec.�,Taipei�02,TaiwanTel:886-2-2555-623�

Chien-KuoBranch�6�,MinShengE.Rd.,Sec.2,Taipei�04,TaiwanTel:886-2-2506-0��0

Chu-KoBranch6��,KwangFuRd.,Sec.�,Hsin-Chu300,TaiwanTel:886-3-563-7��

Chung-HoBranch�52,ChungShanRd.,Sec.2,ChungHoCity,TaipeiCounty235,TaiwanTel:886-2-2249-50��

Chung-KoBranch2Fl.26,KoYaRd.,TaYaShiang,TaichungCounty428,TaiwanTel:886-4-2565-9��

Chung-Hsiao-RoadBranch94,ChungHsiaoE.Rd.,Sec.2,Taipei�00,TaiwanTel:886-2-234�-6��

Chung-KangBranch60-7,TaichungKangRd.,Sec.2.Taichung407,TaiwanTel:886-4-23�3-6��

Chung-LiBranch�46,ChungChengRd.,ChungLiCity,TaoYuanCounty320,TaiwanTel:886-3-422-5��

Chung-LunBranch�88,NankingE.Rd.,Sec.5,Taipei�05,TaiwanTel:886-2-2760-6969

Chung-ShanBranch6�,ChungShanN.Rd.,Sec.2,Taipei�04,TaiwanTel:886-2-252�-��

Feng-YuanBranch423,ChungShanRd.,FengYuanCity,TaichungCounty420,TaiwanTel:886-4-2522-5��

Fu-HsingBranch36-�0,FuHsingS.Rd.,Sec.�,Taipei�04,TaiwanTel:886-2-2772-2345

Hsi-ChihBranch280,TaTungRd.,Sec.�,HsiChihCity,TaipeiCounty22�,TaiwanTel:886-2-2647-�688

Hsin-ChuBranch3,IngMingSt.,HsinChu300P.O.Box30,HsinChu,TaiwanTel:886-3-522-6��SWIFT:FCBKTWTP30�

Hsin-ChuangBranch3�6,ChungChengRd.,HsinChuangCity,TaipeiCounty243,TaiwanTel:886-2-2992-900�

Hsin-HsingBranch�7,ChungCheng4thRd.,Kaohsiung800,TaiwanTel:886-7-27�-9��

Hsin-TienBranch�34,ChungHsingRd.,Sec.3,Hsin-TienCity,TaipeiCounty23�,TaiwanTel:886-2-29�8-�835

Hsin-WeiBranch368,FuHsinS.Rd.,Sec.�,Taipei�06,TaiwanTel:886-2-2755-724�

Hsin-YiBranch�68,HsinYiRd.,Sec.2,Taipei�06,TaiwanTel:886-2-232�-68��

Jen-HoBranch376,JenAiRd.,Sec.4,Taipei�06,TaiwanTel:886-2-2755-6556

Kang-ShanBranch275,KangShanRd.,KangShanTown,KaohsiungCounty820,TaiwanTel:886-7-62�-2��

KaohsiungBranch28,MinChuan�stRd.,Kaohsiung802P.O.Box�6,Kaohsiung,TaiwanTel:886-7-335-08��SWIFT:FCBKTWTP70�

KeelungBranch�03,Hsiao3rdRd.,Keelung200,TaiwanTel:886-2-2427-9�2�

Domestic Offices Appointed to Conduct International Business

Domestic Offices Appointed to Conduct International Business70

Domestic Offices Appointed to Conduct International Business 7�

Ku-TingBranch95,RooseveltRd.,Sec.2,Taipei�06,TaiwanTel:886-2-2369-5222

Kwang-FuBranch�6,KwangFuN.Rd.,Taipei�05,TaiwanTel:886-2-2577-3323

Li-ShanBranch388,Nei-HuRd.,Sec.�,Taipei��4,TaiwanTel:886-2-8797-87��

Ling-YaBranch6�,WuFu3rdRd.,Kaohsiung80�,TaiwanTel:886-7-282-2��

Lu-KangBranch30�,ChungShanRd.,Lu-KangTown.ChangHuaCounty505,TaiwanTel:886-4-777-2��

Min-ChuanBranch365,FuHsinN.Rd.,Taipei�05,TaiwanTel:886-2-27�9-2009

Min-ShengBranch�34,MinShengE.Rd.,Sec.3,Taipei�05,TaiwanTel:886-2-27�3-85�2

Nan-TaichungBranch33,35,FuHsinRd.,Sec.4,Taichung40�,TaiwanTel:886-4-2223-��

Nanking-East-RoadBranch�25,NankingE.Rd.,Sec.2,Taipei�04,TaiwanTel:886-2-2506-2��

Nei-HuBranch�43,ChengKungRd.,Sec.3,Taipei��4,TaiwanTel:886-2-2793-23��

Pa-TehBranch3,TunHuaS.Rd.,Sec.�,Taipei�05,TaiwanTel:886-2-2579-36�6

Pan-ChiaoBranch�07,SzuChuanRd.,Sec.�,PanChiaoCity,TaipeiCounty220,TaiwanTel:886-2-296�-5�7�

Pei-TunBranch696,WenHsinRd.,Sec.4,Taichung406,TaiwanTel:886-4-2236-6��

Ping-TungBranch308,MingShengRd.,PingTungCity,PingTungCounty900,TaiwanTel:886-8-732-5��

Sha-LuBranch355,ChungShanRd.,ShaLuTown,TaichungCounty433,TaiwanTel:886-4-2662-�33�

Shih-LinBranch456,ChungChengRd.,Taipei��,TaiwanTel:886-2-2837-00��

Shih-MaoBranch65,TunHuaS.Rd.,Sec.2,Taipei�06,TaiwanTel:886-2-2784-98��

Sung-ChiangBranch309,SungChiangRd.,Taipei�04,TaiwanTel:886-2-250�-7�7�

Sung-ShanBranch760,Pa-TehRoad,Sec.4,Taipei�05,TaiwanTel:886-2-2767-4��

Ta-AnBranch48,KeeLungRd.,Sec.2,Taipei��0,TaiwanTel:886-2-2729-8��

Ta-ChiaBranch36�,363,ShunTienRd.,TaChiaTown,TaichungCounty437,TaiwanTel:886-4-2688-298�

Ta-Tao-ChengBranch63,TiHuaSt.,Sec.�,Taipei�03,TaiwanTel:886-2-2555-37��

Ta-TungBranch56,ChungKingN.Rd.,Sec.3,Taipei�03,TaiwanTel:886-2-259�-325�

TaichungBranch�44,TzuYuRd.,Sec.�,Taichung403P.O.Box7,Taichung,TaiwanTel:886-4-2223-36��SWIFT:FCBKTWTP40�

TainanBranch82,ChungYiRd.,Sec.2,Tainan700P.O.Box�0,Tainan,TaiwanTel:886-6-222-4�3�SWIFT:FCBKTWTP60�

Tao-YuanBranch55,MinTsuRd.,TaoYuanCity,TaoYuanCounty330,TaiwanTel:886-3-332-6��

Tun-HuaBranch267,TunHuaS.Rd.,Sec.2,Taipei�06,TaiwanTel:886-2-2736-27��

Tung-MenBranch2�6,TungMenSt.,HsinChu300,TaiwanTel:886-3-524-92��

Yen-ChiBranch289,ChungHsiaoE.Rd.,Sec.4,Taipei�06,TaiwanTel:886-2-273�-574�

Yuan-LinBranch26,Yu-YingRd.,YuanLinTown,ChangHuaCounty5�0,TaiwanTel:886-4-832-88��

Yuan-ShanBranch53,MinChuanW.Rd.,Taipei�04,TaiwanTel:886-2-2597-9234

Yun-HoBranch�6�,ChungChengRd.,Tainan700,TaiwanTel:886-6-223-��4�

Yung-ChunBranch400,ChungHsiaoE.Rd.,Sec.5,Taipei��0,TaiwanTel:886-2-2720-8696

Hua-Chiang Panchiao,Taipei■ Pan-Chiao Panchiao,Taipei Pu-Chien Panchiao,Taipei■ Chang-Tai Sanchung,Taipei Chung-Yang Sanchung,Taipei San-Chung-Pu Sanchung,Taipei Shu-Lin Shulin,Taipei Tai-San Taisan,Taipei Tu-Cheng Tucheng,Taipei Wu-Ku Wuku,Taipei Wu-KuInd.Zone Wuku,Taipei Ying-Ko Yingko,Taipei Shuang-Ho Yungho,Taipei Yung-Ho Yungho,Taipei■ Keelung Keelung Sao-Chuan-Tou Keelung I-Lan ILan Lo-Tung Lotung,ILan Su-Ao Suao,ILan Pei-Tao Taoyuan■ Tao-Yuan Taoyuan■ Chung-Li Chungli,Taoyuan Hsi-Li Chungli,Taoyuan Nei-Li Chungli,Taoyuan Ping-Cheng Chungli,Taoyuan Hui-Lung Kueishan,Taoyuan Lin-Kou Kueishan,Taoyuan Nan-Kan Luchu,Taoyuan Lung-Tan Lungtan,Taoyuan Ta-Nan Pateh,Taoyuan Ta-Hsi Tahsi,Taoyuan Ta-Yuan Tayuan,Taoyuan■ Chu-Ko Hsinchu Chu-Pei Hsinchu Chu-Tung Hsinchu■ Hsin-Chu Hsinchu Kuan-Hsi Hsinchu■ Tung-Men Hsinchu Chu-Nan Miaoli Miao-Li Miaoli Tou-Fen Miaoli Chin-Hua Taichung Ching-Shui Taichung■ Chung-Kang Taichung Chung-Ko Taichung■ Feng-Yuan Taichung■ Nan-Taichung Taichung Nan-Tun Taichung Pei-Taichung Taichung■ Pei-Tun Taichung■ Sha-Lu Taichung■ Ta-Chia Taichung Ta-Li Taichung Ta-Ya Taichung■ Taichung Taichung Tai-Ping Taichung Tung-Shih Taichung Nan-Tou Nantou Pu-Li Nantou Tsao-Tun Nantou■ Chang-Hua Changhua Ho-Mei Changhua Hsi-Hu Changhua■ Lu-Kang Changhua Pei-Dou Changhua

■ Yuan-Lin Changhua■ Chia-Yi Chiayi Hsin-Hsi Chiayi Hsing-Chia Chiayi Pu-Tzu Chiayi Hsi-Lo Yunlin Hu-Wei Yunlin Dou-Liu Yunlin Dou-Nan Yunlin Pei-Kang Yunlin An-Nan Tainan Chia-Li Tainan Chih-Kan Tainan Chin-Cheng Tainan Chu-Hsi Tainan Fu-Chiang Tainan Hsin-Hua Tainan Hsin-Ying Tainan Kuei-Jen Tainan Ma-Tou Tainan Nan-Hsi Tainan Nan-Science-Park Tainan Shan-Hua Tainan Shyue-Chia Tainan ■ Tainan Tainan Ta-Wan Tainan Yen-Shui Tainan ■ Yun-Ho Tainan Yung-Kang Tainan Chi-Hsien Kaohsiung Chi-Shan Kaohsiung Chien-Cheng Kaohsiung Ding-Tai Kaohsiung Feng-Shan Kaohsiung Hsiao-Kang Kaohsiung■ Hsin-Hsing Kaohsiung■ Kang-Shan Kaohsiung Kao-Ko Kaohsiung■ Kaohsiung Kaohsiung Lin-Yuan Kaohsiung■ Ling-Ya Kaohsiung Lu-Chu Kaohsiung Nan-Tzu Kaohsiung Shih-Chuan Kaohsiung Po-Ai Kaohsiung San-Min Kaohsiung Tso-Ying Kaohsiung Tzu-Beng Kaohsiung Wan-Nei Kaohsiung Wu-Chia Kaohsiung Wu-Fu Kaohsiung Yen-Cheng Kaohsiung Chao-Chou Pingtung Chang-Chih Pingtung Chien-Hsi Pingtung Heng-Chun Pingtung■ Ping-Tung Pingtung Tung-Kang Pingtung Wan-Luan Pingtung Hua-Lien Hualien Tai-Tung Taitung Peng-Hu Penghu

Business Network

■Officeappointedtoconductinternationalbusiness

■ BusinessDivision Taipei■ An-Ho Taipei■ Chang-Chun Taipei■ Cheng-Tung Taipei■ Chien-Cheng Taipei■ Chien-Kuo Taipei Chi-Lin Taipei Chien-Tan Taipei Ching-Mei Taipei■ Chung-Hsiao-Road Taipei■ Chung-Lun Taipei■ Chung-Shan Taipei■ Fu-Hsing Taipei Hsi-Men Taipei■ Hsin-Wei Taipei Hsin-Ya Taipei■ Hsin-Yi Taipei Hua-Shan Taipei Jen-Ai Taipei■ Jen-Ho Taipei Kang-Chian Taipei■ Ku-Ting Taipei■ Kwang-Fu Taipei■ Li-Shan Taipei■ Min-Chuan Taipei■ Min-Sheng Taipei Mu-Cha Taipei Nan-Kang Taipei■ Nanking-East-Road Taipei Nan-Men Taipei■ Nei-Hu Taipei■ Pa-Teh Taipei Pei-Tou Taipei■ Shih-Lin Taipei■ Shih-Mao Taipei■ Shih-Pai Taipei Shuang-Yuan Taipei■ Sung-Chiang Taipei■ Sung-Shan Taipei Sung-Mao Taipei■ Ta-An Taipei Ta-Chih Taipei■ Ta-Tao-Cheng Taipei■ Ta-Tung Taipei Tien-Mu Taipei■ Tun-Hua Taipei Tung-Hu Taipei Wan-Hua Taipei Wan-Lung Taipei■ Yen-Chi Taipei■ Yuan-Shan Taipei■ Yung-Chun Taipei■ Chung-Ho Chungho,Taipei Lien-Cheng Chungho,Taipei Dan-Shui Danshui,Taipei■ Hsi-Chih Hsichih,Taipei Dan-Feng Hsinchuang,Taipei■ Hsin-Chuang Hsinchuang,Taipei Tou-Chien Hsinchuang,Taipei■ Chi-Cheng Hsintien,Taipei■ Hsin-Tien Hsintien,Taipei Jui-Fang Juifang,Taipei Lu-Chou Luchou,Taipei

Name of Office Location

Business Network72

1 HighlightsandHistory

2 MessagetoOurShareholders

8 OrganizationChart

9 BoardofDirectorsandSupervisors

10 ExecutiveOfficers

11 BankingOperations

14 BusinessPlansfor2008

16 MarketAnalysis

18 CorporateGovernance

20 RiskManagementOverview

23 CorporateResponsibilityandEthicalBehavior

24 SignificantFinancialInformation

26 ReportofIndependentAccountants

27 BalanceSheets

28 StatementsofIncome

29 StatementsofChangesinStockholders'Equity

30 StatementsofCashFlows

32 NotestoFinancialStatements

70 DomesticOfficesAppointedtoConduct

InternationalBusiness

72 BusinessNetwork

First Commercial Bank30,Chung-KingS.Road,Sec.1

Taipei100-05,TaiwanTel:886-2-2348-1111Fax:886-2-2361-0036

http://www.firstbank.com.twe-mail:[email protected]

SpokespersonMr.Po-ChiaoChou

ExecutiveVicePresident

Auditor ReportPricewaterhouseCoopers

Tel:886-2-2729-6666

Rating AgencyTaiwanRatingsCorp.Tel:886-2-8722-5800

Contents

OverseasBranches ElSalvadorBranch 63aAv.SurYAlamedaRoosevelt Lobby2-3CTROFinancieroGigante SanSalvador,ElSalvador,C.A. Tel:503-2211-2121 Fax:503-2211-2130

GuamBranch 330,HernanCortesAve. Hagatna,Guam96910U.S.A. P.O.Box2461,Hagatna96932,Guam Tel:1-671-472-6864 Fax:1-671-477-8921

HoChiMinhCityBranch 2Fl.,88,DongKhoiStreet,District1 HoChiMinhCity,Vietnam Tel:84-8823-8111 Fax:84-8822-1747

HongKongBranch 6/F,TheHongKongClubBuilding 3A,ChaterRoad,Central,HongKong Tel:852-2868-9008 Fax:852-2526-2900

LondonBranch BowmanHouse,29,WilsonStreet LondonEC2M2SJ,U.K. Tel:44-20-7417-0000 Fax:44-20-7417-0011

LosAngelesBranch 600,WilshireBlvd.,Suite800 LosAngeles,CA90017,U.S.A Tel:1-213-362-0200 Fax:1-213-362-0244

NewYorkAgency 34Fl.,750,ThirdAvenue NewYork,N.Y.10017,U.S.A. Tel:1-212-599-6868 Fax:1-212-599-6133

PalauBranch P.O.Box1605,P.D.C.Building MADALAII Koror,Palau96940 Tel:680-488-6297 Fax:680-488-6295

PhnomPenhBranch 66,NorodomBlvd., SangkatCheychomnoas,KhanDaunPenh

PhnomPenh,Cambodia Tel:855-23-210-026 Fax:855-23-210-029

SingaporeBranch #01-02ONGBuilding 76,ShentonWay Singapore079119 Tel:65-6221-5755 Fax:65-6225-1905

TokyoBranch 13Fl.,AIGBuilding 1-3Marunouchi,1-Chome,Chiyoda-Ku Tokyo100-0005,Japan Tel:81-3-3213-2588 Fax:81-3-3213-5377

TorontoBranch TransamericaTower,Suite1803 5000,YongeStreet TorontoONM2N7E9,Canada Tel:1-416-250-8788 Fax:1-416-250-8081

VancouverBranch Suite100-5611,CooneyRoad Richmond,BCV6X3J6,Canada Tel:1-604-207-9600 Fax:1-604-207-9638

OverseasRepresentativeOffices BangkokRepresentativeOffice 9Fl.,SathornCityTower 175,SouthSathornRoad Tungmahamek,Sathorn Bangkok10120,Thailand Tel:66-2-679-5291 Fax:66-2-679-5295

HanoiRepresentativeOffice 13Fl.,Suite1303B,198TranQuangKhai Hanoi,Vietnam Tel:84-4936-2111 Fax:84-4936-2112

ShanghaiRepresentativeOffice 11Fl.,ChinaInsuranceBuilding,Unit05-07 166,PudongLuJiaZuiEastRoad Shanghai200120,China Tel:86-21-6888-6868 Fax:86-21-6888-6363

SubsidiaryFirstCommercialBank(USA) MainOffice&AlhambraBranch 200E.MainStreet Alhambra,CA91801,U.S.A. Tel:1-626-300-6000 Fax:1-626-300-5972

ArcadiaBranch 1309S.BaldwinAve. Arcadia,CA91007,U.S.A. Tel:1-626-254-1828 Fax:1-626-254-1883

ArtesiaBranch 17808,PioneerBlvd.#108 Artesia,CA90701,U.S.A. Tel:1-562-207-9858 Fax:1-562-207-9862

CityofIndustryBranch 18725E.GaleAve.#150 CityofIndustry,CA91748,U.S.A. Tel:1-626-964-1888 Fax:1-626-964-0066

IrvineBranch 4250,BarrancaParkway,SuiteE Irvine,CA92604,U.S.A. Tel:1-949-654-2888 Fax:1-949-654-2899

SiliconValleyBranch 1141S.DeAnzaBlvd. SanJose,CA95129,U.S.A. Tel:1-408-253-4666 Fax:1-408-253-4672

Overseas Network

封面及封面裡等.indd 2 2008/6/10 11:35:34 AM

2007

2007

封面及封面裡等.indd 1 2008/6/10 11:35:25 AM

first commercial bank

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