FUHWA FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS

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FUHWA FINANCIAL HOLDING CO., LTD.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007 and 2006

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Independent Auditors' Report

The Board of Directors

Fuhwa Financial Holding Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of Fuhwa Financial Holding Co., Ltd. (the Company) and its subsidiaries as of March 31, 2007 and 2006, and the related consolidated statements of income and consolidated cash flows for the three-month periods ended March 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our review.

Our review, which was made in accordance with Republic of China Statement on Auditing Standards No. 36, "The Review of Financial Statements", consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to in the first paragraph in order for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Financial Holding Companies, the Business Entity Accounting Act, the Regulation on Business Entity Accounting Handling, and Republic of China generally accepted accounting principles.

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March 3 2007 March 3 2006 Moving average % Assets

Cash and cash equivalents (notes (4) and (25)) $ 6,605,780 4,756,785 39 Due from Central Bank and placement to other banks (note (5)) 59,951,846 32,609,915 84 Financial assets at fair value through profit or loss, net (notes (3) and (6)) 30,665,724 28,069,293 9 Bills and bonds purchased under agreements to resell (notes (7), (25) and

(26)) 5,731,550 3,144,049 82

Accounts receivable, net (notes (8), (9), (21), (25) and (26)) 50,622,302 41,188,720 23

Margin loans (notes (9) and (25)) 226,192,540 225,060,241 1

Available-for sale financial assets, net (notes (3), (10), (25) and (26)) 20,394,200 19,127,109 7 Held-to-maturity financial assets, net (notes (11) and (26)) 6,612,663 6,152,473 7 Other financial assets, net (notes (3), (9) and (12)) 6,017,783 7,382,828 (18) Property and equipment, net (notes (26) and (27)) 6,150,035 5,438,047 13 Goodwill and intangible assets (notes (3), (13) and (27)) 2,120,527 2,212,875 (4)

Other assets (notes (14), (25) and (26)) 5,036,016 6,875,009 (27)

Deferred income tax assets (note (21)) 2,234,476 1,456,613 53

Total assets $ 428,335,442 383,473,957 12 March 3 2007 March 3 2006 Moving average % Liabilities and Stockholders' Equity

Deposits by Central Bank and other banks (note (26)) $ 22,653,491 30,604,686 (26) Commercial paper payable, net (notes (15) and (26)) 23,363,865 19,401,206 20 Financial liabilities at fair value through profit or loss (notes (3), (6) and

(18)) 4,097,065 4,151,358 (1)

Bills and bonds sold under agreements to repurchase (notes (16), (25) and

(26)) 27,764,659 27,263,979 2

Notes and accounts payable (notes (8), (21), (25) and (27)) 14,731,513 11,605,444 27 Deposits and remittances (notes (17) and (25)) 269,082,205 231,044,304 16

Bonds payable (notes (18) and (26)) 12,607,524 8,513,117 48

Other borrowings (notes (19) and (26)) 14,810,457 9,365,000 58

Accrued pension liabilities (note (20)) 290,779 343,685 (15)

Reserves for operations and liabilities 513,428 499,677 3

Other liabilities 1,050,863 535,419 96

Total liabilities 390,965,849 343,327,875 14

Stockholders' Equity (notes (3), (10) and (22)):

Common stock, par value $10, authorized and issued 5,000,000 thousand shares and 3,161,762 thousand shares at on March 31, 2007 and 2006,

respectively 31,617,616 31,617,616

-Capital surplus 8,286,205 8,553,292 (3)

Retained earnings:

Legal reserve - 591,428

Special reserve - 95,561

Unappropriated accumulated deficit (2,511,381) (584,050) 330

(2,511,381) 102,939 (2,540)

Equity adjustments:

Cumulative foreign currency translation adjustments (53,067) (58,788) (10) Unrealized gain on available-for-sale financial assets 36,404 33,066 10

Treasury stock - (73,779)

Net loss from unrecognized pension cost (39,660) (59,292) (33)

(56,323) (158,793) (65)

Minority interest 33,476 31,028 8

Total stockholders' equity 37,369,593 40,146,082 (7)

Commitments and contingent liabilities (notes (8), (9), (21) and (27))

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Less: Interest expense (notes (6), (8), (18) and (25)) 1,637,837 1,311,335 25

Net interest income 1,818,794 1,912,367 (5)

Other non-interest income, net

Fees and commission income, net (note (25)) 909,010 848,891 7

Gain on financial instruments at fair value through profit or loss (notes (3) and (6)) 369,875 97,444 280 Realized gain (loss) on available-for-sale financial assets (notes (3) and (10)) 769 (1,736) 144

Investment income under the equity method - 326 -

Foreign exchange income, net (note (18)) 89,684 161,570 (44)

Impairment loss on assets (note (12)) (493) (30,453) 98

Other non-interest income, net (notes (25) and (28)) 72,276 155,582 (54)

Other bad debt expense (note (9)) (89,033) (671,945) 87

1,352,088 559,679 142

Net revenue 3,170,882 2,472,046 28

Bad debt expenses for margin loans (note (9)) 240,000 338,094 (29)

Operating expenses

Personnel expenses (notes (20) and (28)) 1,165,209 1,016,892 15

Depreciation and amortization expenses (notes (13) and (28)) 195,941 165,743 18

Other general and administrative expenses 633,132 540,333 17

1,994,282 1,722,968 16

Income from continuing operations before income tax 936,600 410,984 128

Income tax expense (note (21)) 151,542 229,178 (34)

Income before cumulative effect of changes in accounting principle (note (3)) 785,058 181,806 332 Cumulative effect of changes in accounting principle, net of income tax of $18,567 for the

three-month period ended March 31, 2006 (notes (3) and (21)) - 165,588

-Comprehensive net income $ 785,058 347,394 126

Attribution of comprehensive net income:

Stockholders of parent company $ 785,601 347,884 126

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Cash flows from operating activities:

Comprehensive net income $ 785,058 347,394

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 213,597 192,545

Allowance for bad debts 329,033 1,010,039

Reversal of reserve for guarantee liabilities - (78,356)

Amortization of premiums, provision for effect of exchange rate, and increase in accrued interest

premium on redeeming bonds payable 11,743 (6,306)

Realized loss (gain) on available-for-sale financial assets (769) 1,736

Amortization of available-for-sale financial assets (6,335) (8,815)

Loss on impairment of financial assets carried at cost 493 30,453

Loss (gain) on disposal of financial assets carried at cost 17,800 (13,996)

Loss on disposal of long-term investments under equity method - 1,371

Gain on investments under equity method - (326)

Cash dividends from long-term investments under equity method - 6,848

Loss on disposal of property and equipment and other assets, net 18,826 6,938

Changes in operating assets and liabilities:

Financial assets at fair value through profit or loss (2,012,270) 1,870,170

Accounts receivable, net 617,361 (1,401,949)

Other financial assets, net 379,648 (48,372)

Deferred income tax assets 674 88,404

Financial liabilities at fair value through profit or loss (107,477) 118,165

Other notes and accounts payable (2,778,005) (4,762,360)

Accrued pension liabilities 1,928 (2,830)

Reserves for operations and liabilities 12,955 (55,504)

Net cash used in operating activities (2,515,740) (2,704,751)

Cash flows from investing activities:

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Increase (decrease) in deposits and remittances 3,352,859 (9,869,119)

Increase in bonds payable - 5,000,000

Decrease in other borrowings (1,882,685) (5,584,794)

Increase (decrease) in other liabilities 17,233 (157,173)

Net cash provided by financing activities 5,503,044 495,324

Effects of exchange rate 6,428 (10,054)

Net increase (decrease) in cash and cash equivalents 190,952 (1,960,129)

Cash and cash equivalents at beginning of period 6,414,828 6,716,914

Cash and cash equivalents at end of period $ 6,605,780 4,756,785

Supplemental disclosure of cash flow information:

Cash payments of interest $ 1,711,958 921,250

Cash payments of income tax $ 49,545 79,301

Investing and financing activities not affecting cash flows:

Changes in cumulative foreign currency translation adjustments by subsidiaries $ (6,165) 7,818

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March 31, 2007 and 2006

(expressed in thousands of New Taiwan dollars, unless otherwise specified)

(1) Organization and Business Scope

Fuhwa Financial Holding Co., Ltd. (the Company) was incorporated in February 2002 pursuant to the Financial Holding Company Act. In connection with the formation of the Company, the shares of Fuhwa Securities Finance Co., Ltd. (Fuhwa Securities Finance) and Fuhwa Securities Co., Ltd. (Fuhwa Securities) were exchanged for shares of the Company. The regulatory procedure for the share exchange was completed on the exchange date of February 4, 2002, and the Company was listed on the Taiwan Stock Exchange on the same date.

On May 24, 2002, the shareholders' meetings of the Company and Asia Pacific Bank agreed that shares of Asia Pacific Bank would be exchanged for shares in the Company, and Asia Pacific Bank became a wholly owned subsidiary of the Company on August 1, 2002. Furthermore, Asia Pacific Bank was authorized to be renamed Fuhwa Commercial Bank (Fuhwa Bank) on September 17, 2002.

Since 2002, the Company has acquired Fuhwa Futures Co., Ltd. (Fuhwa Futures), Fuhwa Capital Management Co., Ltd. (originally named Fuhwa Cheng Ching Capital Management Co., Ltd. and renamed Fuhwa Capital Management in November 2002), Fuhwa Securities Investment Trust Co., Ltd. (originally named Asia Pacific Securities Investment Trust and renamed Fuhwa Securities Investment Trust in September 2002), Fuhwa Venture Capital Co., Ltd. (Fuhwa Venture Capital), Fuhwa Asset Management Co., Ltd. (Fuhwa Asset Management), and Fuhwa Finance Consulting Co., Ltd. (Fuhwa Finance Consulting) one after another in order to boost the competitive ability of the Company, follow government policies, and face the changes and developments in the prospective market. These companies became subsidiaries of the Company.

On December 28, 2006, the shareholders' meeting of the Company agreed that shares of Yuanta Core Pacific Securities Co., Ltd. would be exchanged for shares of the Company, and Yuanta Core Pacific Securities Co., Ltd. became a wholly owned subsidiary of the Company on April 2, 2007.

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The name, type of business, and percentage of shareholdings of subsidiaries invested in by the Company and its subsidiaries are as follows:

The Company's indirect and d

Name of

investor Name subsidiary of Nature of business March 2007 31, March 2006 31,

The Company Fuhwa Bank Commercial banking 100 100

″ Fuhwa Securities Securities brokerage 100 100 ″ Fuhwa Securities

Finance

Securities financing and refinancing to securities firms and related business

100 100

″ Fuhwa Asset Management

Providing monetary debt management services for financial institutions

100 100

″ Fuhwa Venture

Capital Venture capital investments 100 100

″ Fuhwa Futures Futures brokerage and futures-related services

100 100

″ Fuhwa Securities Investment Trust

Raising and management of securities investment trust funds

100 100

″ Fuhwa Capital Management

Securities investment consulting and issuance of related publications

99 99

″ Fuhwa Finance Consulting

Operation and management of corporation and investment consulting services

100 100

Fuhwa Bank Fuhwa Lease Co., Ltd.

Purchase, sale and lease of various real estate and movable property

99 99

Fuhwa Bank and Fuhwa Asset Management

Fuhwa Property Insurance Agency Co., Ltd.

Property insurance agency 100 100

″ Fuhwa Life Insurance Agency Co., Ltd.

Life insurance agency 100 100

Fuhwa Securities Fuhwa Holding (BVI) Co., Ltd.

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The Company's indirect and d

Name of

investor

Name of

subsidiary Nature of business

March 31, 2007 March 31, 2006 Fuhwa Securities and Fuhwa Futures Fuhwa Futures Management Co., Ltd.

Futures management business 100 100

Fuhwa Holding (BVI) Co., Ltd. Fuhwa Securities (H.K.) Co., Ltd. Securities services 100 100 ″ Fuhwa Investment Management (BVI) Co., Ltd. Consulting services - 100 Fuhwa Venture Capital Fuhwa I Venture Capital Co., Ltd.

Venture capital investments 97 97 Fuhwa Capital Management and Fuhwa Futures Management were approved to dissolve on October 31 and December 25, 2006, respectively, by the local authorities. Fuhwa Capital Management and Fuhwa Futures Management had their registration cancelled on November 30, 2006, and January 1, 2007, respectively, and are already in liquidation. Fuhwa Securities (H.K.) was in liquidation before the year-end of 2005. Fuhwa Investment Management (BVI) completed the dissolution process on November 21, 2006.

For the first quarter of 2007 and 2006, the subsidiaries of the Company did not hold any securities issued by the Company nor issue any corporate bonds.

For the first quarter of 2007, the subsidiaries of the Company did not issue any new shares.

During the first quarter of 2006, the issuance of new shares by the Company's subsidiaries was as follows:

On January 17, 2006, Fuhwa Securities' board of directors decided to increase capital for cash in the amount of $1,500,000 by issuing an additional 150,000 thousand new shares at $10 per share, resulting in total authorized and issued capital of $10,402,938. The date of capital increase was designated as March 31, 2006, and the related registration was completed on May 2, 2006.

The Consolidated Company had approximately 4,704 and 4,877 employees on March 31, 2007 and 2006, respectively.

(2) Summary of Significant Accounting Policies

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The consolidated financial statements were prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Financial Holding Companies, the Business Entity Accounting Act, the Regulation on Business Entity Accounting Handling, and Republic of China generally accepted accounting principles. Historical cost is the basis of measurement in the consolidated financial statements except as otherwise stated.

A summary of significant accounting policies and principles is as follows: 1) Principles of Consolidation

According to the Guidelines Governing the Preparation of Financial Reports by Financial Holding Companies, a financial holding company should prepare consolidated financial statements. The consolidated entities of the consolidated financial statements should be in accordance with ROC SFAS No. 7 "Consolidated Financial Statements". All inter-company transactions have been eliminated in the consolidated financial statements. The material transactions between the subsidiaries are disclosed in Note 29(5).

2) Foreign Currency Transactions

Except for accounts in the Offshore Banking Unit of Fuhwa Bank, the Company's overseas affiliates, and overseas long-term equity investments under the equity method that are maintained in US dollars, accounts in all other subsidiaries are maintained in New Taiwan dollars. Those transactions denominated in foreign currencies are recorded in their original foreign currencies, and all income and expense accounts denominated in original foreign currencies are translated into New Taiwan dollars at the exchange rate assigned on that date.

The Company's overseas affiliates and overseas long-term equity investments under the equity method, and the Offshore Banking Unit of Fuhwa Bank included in the consolidated financial statements use their local currencies as their functional currencies. Foreign financial statements are translated into New Taiwan dollars. The resulting translation differences are accounted for as translation adjustments, and are included in the consolidated financial statements as a component of stockholders' equity. Assets and liabilities are translated at the current exchange rate prevailing at the balance sheet date. Stockholders' equity is translated at the historical rate with the exception of the beginning retained earnings in New Taiwan dollars, which are brought forward. Dividends are translated at the exchange rate prevailing at the declaration date. Income statement accounts are translated at the average exchange rate of the year involved. The foreign currency translation from financial statements of the Company's overseas subsidiaries are recorded as cumulative foreign currency translation adjustments under the statement of stockholders' equity and will be recognized as gain or loss only upon the sale or liquidation of the company.

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3) Cash Equivalents

The Consolidated Company considers cash in banks and short-term investments that are readily convertible to cash and for which interest rate fluctuations have little or no effect on the value to be cash equivalents.

4) Deposit Reserve

Deposit reserve is calculated based on the monthly average balance of the various deposit accounts, using specific reserve ratios as promulgated by the CBC. The deposit reserve-demand account is placed with the CBC and is subject to change only when the monthly reserve requirement is adjusted.

5) Financial Assets at Fair Value through Profit or Loss

Starting from January 1, 2006, the Consolidated Company accounts for financial assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 34, "Financial Instruments: Recognition and Measurement". The Consolidated Company recognizes the purchases or sales of stocks, funds and beneficiary certificates using trade date accounting and of other financial assets using settlement date accounting. These financial instruments are initially recognized at fair value, including acquisition or issuance cost.

Financial assets whose changes in fair value are recognized in profit or loss include debt, equity and derivative instruments held or issued by the Consolidated Company. These financial assets can be classified into two subcategories: financial asset held for trading purposes and financial assets that are designated on initial recognition as ones to be measured at fair value, with fair value changes recognized in profit or loss. Financial assets held for trading purposes are acquired or held principally for the purpose of selling or repurchasing them in the short term.

Financial instruments with fair value changes recognized in profit or loss should be measured at fair value. The fair value of an asset is the amount at which the asset could be purchased or sold in a current arm's-length transaction between willing parties. A quoted market price, if available, in an active market is the best evidence of fair value; however if a quoted market price is not available, fair value should be estimated using the best information available in the circumstances or estimated using pricing models. Estimation of fair value is usually based on recent trading prices of such financial instruments and supplemented by related valuation techniques available.

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Financial assets at fair value through profit or loss which the Company classified on January 1, 2006, in compliance with SFAS No. 34, "Financial Instruments: Recognition and Measurement", cannot be reclassified again thereafter. Similarly, those that do not belong to financial assets at fair value through profit or loss cannot be reclassified to this category either. In accordance with explanatory letter Ji-Mi-Zih No. 296 issued in 2006 by the Accounting Research and Development Foundation, after adopting ROC Statement of Financial Accounting Standards No. 34 "Financial Instruments: Recognition and Measurement", businesses should classify financial assets held for trading purposes as financial assets held for trading purposes if financial assets held for trading purposes are provided as collateral for loans or refundable deposits.

6) Derivative Financial Instruments

Derivative financial instruments are foreign exchange forward contracts, currency swaps, interest rate swaps, currency and interest rate swaps, options, structured notes, stock warrant liabilities, and margin deposits for futures contracts, which are entered into by the Consolidated Company in foreign exchange, interest rate and capital markets. Derivative financial instruments are for trading purposes except those accounted for under hedge accounting. Trading purposes include market creation, customer services and other relevant activities.

Derivative financial instruments held for trading purposes are evaluated at fair value. Changes in fair value are recorded as current period income or loss. Fair value is the amount at which the asset could be purchased or sold in a current arm's-length transaction between willing parties. A quoted market price, if available, in an active market is the best evidence of fair value; however if a quoted market price is not available, fair value should be estimated using the best information available in the circumstances or using pricing models. Estimation of fair value is usually based on recent trading prices of similar financial instruments and supplemented by related valuation techniques available.

Derivative financial instruments measured at fair value whose offsetting right has legal effect and are intended to be settled by net balance should be recorded as financial assets and liabilities at their net value.

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7) Bonds Purchased under Agreements to Resell and Bonds Sold under Agreements to Repurchase Bonds purchased under agreements to resell and bonds sold under agreements to repurchase are the sale or purchase of a bond coupled with an agreement to repurchase or resell the same or substantially identical bond at a stated price. Such transactions are treated as collateral for financing transactions. Transactions involving bonds sold under agreements to repurchase are based on the actual obtained amount, and recorded as liabilities for bonds sold under agreements to repurchase. Transactions involving investment in bonds purchased under agreements to resell are based on the actual borrowed amount, and recorded as investment in bonds purchased under agreements to resell. Bonds treated as collateral for financing transactions are still recorded as financial assets and are not affected by the temporary repurchase or resell under the agreements. The difference between the selling and purchase prices during the holding period for investment in bonds purchased under agreements to resell and liabilities for bonds sold under agreements to purchase is treated as interest expense or interest income.

8) Accounts Receivable-Pecuniary and Securities Financing, and Allowance for Bad Debts

According to the Rules Governing Securities Finance Enterprises (RGSFE), margin loans primarily represent pecuniary financing to investors or refinancing to securities firms. Such loans are secured by the securities purchased by the investors, and the Consolidated Company records these securities at par value under the memorandum accounts "securities held for collateral" and "liability for holding collateral securities", and they are not included in the balance sheets. According to Article 10 of the RGSFE, margin loan investors must pay a certain percentage of the related stock market price themselves.

Short sale stock loans represent securities financing affected by lending securities in custody that are received from margin loans, guarantee effects or borrowed securities, to investors. When the securities are lent to investors, the Consolidated Company records the par value of the securities lent under the memorandum account "short sale stock loans". Additionally, according to Article 10 of the RGSFE, the investors need to deposit an amount equal to a certain percentage of the proceeds from short sale stock financing as collateral with the Consolidated Company. The proceeds are accounted for as "other liabilities-stock deposits". The Consolidated Company deals with these securities at par value under the memorandum account "guarantee effects". The proceeds from sale of securities loaned, less any dealer's commission, financing commission and securities exchange tax, are held by the Consolidated Company as collateral and recorded under "accounts payable-short sale proceeds payable".

In accordance with the rules, when the securities financed by borrowers terminate trading, are delisted from the stock market, or are the securities of the borrowers' credit accounts which are unable to be disposed of, these margin loans will be recorded as accounts receivable-other receivables or other assets-overdue receivables according to the results of negotiation or collection. When the maintenance of secured accounts is less than the regulatory standard and the borrower does not pay a portion of the remaining loans after offsetting the proceeds from disposal of securities, the related margin loans shall be recorded as overdue receivables.

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9) Loans and Allowance for Doubtful Accounts

Credit terms are decided by the term to maturity of loans. The loan period of short-term loans is within one year, the loan period of medium-term loans is one to seven years, and the loan period of long-term loans is more than seven years. Loans with pledged assets, and qualified guarantees are recorded as secured loans.

All loans are recorded initially as the actual amount lent out and reported at their outstanding principal balances net of any provisions for doubtful accounts. An allowance for doubtful accounts is determined by an evaluation of the collectibility of loans and age of receivables (including nonperforming loans and overdue receivables and interest receivables) and advance accounts. Doubtful accounts are written off when the recovery possibility is remote.

The Company records principal or interest overdue over three months as overdue accounts. Interest overdue over six months is categorized as overdue before June 30, 2005. When principal or interest has not been paid for over expiration date, the said principal and interest will be transferred to nonperforming loans in six months. When this event occurs, interest will not be calculated and booked to the memo account accordingly.

In accordance with SFC Ruling Tai-Tsai-Rong No. 88733168, banks should provide 3% of operating revenue as allowance for bad debts to write off default accounts from July 1, 1999, and for the following four years. Moreover, in accordance with SFC Ruling Wa-Chung-Yi-Yi No. 09200114870, the aforementioned provision is still valid until the ratio of overdue accounts is lower than 1%. The aforementioned allowance is recognized as operating cost for bad and doubtful accounts of loans, and charged to current operations.

10) Available-for-sale Financial Assets

Starting from January 1, 2006, the Consolidated Company adopted SFAS No. 34 "Financial Instruments: Recognition and Measurement". The Consolidated Company recognizes the purchase or sale of stocks, funds and beneficiary certificates by using trade date accounting and of other financial assets by using settlement date accounting. These financial instruments are initially recognized at fair value. The amount recognized includes acquisition or issuance cost.

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11) Held-to-maturity Financial Assets

Starting from January 1, 2006, the Consolidated Company adopted SFAS No. 34 "Financial Instruments: Recognition and Measurement". The Bank recognizes the purchase or sale of the financial assets by using settlement date accounting. These financial instruments are initially recognized at fair value. The amount recognized includes acquisition or issuance cost.

Amortized cost and interest income or interest expense of held-to-maturity financial assets is evaluated using the effective interest rate. Held-to-maturity financial assets are recorded at amortized cost. If there is objective evidence that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount of the financial asset that exceeds the amortized cost that would have been determined if no impairment loss had been recognized.

12) Long-term Investments under Equity Method

Long-term investments are accounted for under the equity method when the percentage of ownership exceeds 20%, or is less than 20% but the Consolidated Company has significant influence over the investee.

When the Consolidated Company disposes of long-term investment accounted for under the equity method, the difference between the cost and the selling price at the disposal date is recorded in gain (loss) on disposal of long-term equity investment. If there is any capital reserve arising from long-term investment under the equity method, such capital reserve is recognized as current income or loss by the percentage of disposal.

13) Other Financial Assets-Other Investments

Financial assets carried at cost include un-listed stocks. The Consolidated Company has no significant influence over the investee. Those financial assets are recorded at cost as their fair values are not measurable. If there is an indication of impairment, impairment loss should be recognized, and this recognized amount is non-reversible.

Bond investments in a non-active market are recorded at amortized cost, and are those that do not have public quotes in an active market. If there is objective evidence that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount of the financial asset that exceeds the amortized cost that would have been determined if no impairment loss had been recognized.

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14) Other Financial Assets-Futures Trading Margins and Other Liabilities-Payable to Customers In order to engage in futures transactions, futures traders deposit margins are valued at market price daily, and the spreads are treated as payable to customers. The margins and spreads cannot offset each other unless the client has the same types of accounts. If a debit balance occurs, it shall be recorded as futures deposits receivable, and the Consolidated Company shall claim the receivables from the futures traders.

15) Property, Equipment, Non-operating Assets and Related Depreciation

Fixed assets are stated at cost, and major purchases, renewals and improvements are capitalized. Interest expense on acquisition of assets is capitalized and is categorized in related asset accounts. Apart from land, depreciation of fixed assets is calculated on a straight-line basis over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the terms of the leases or useful lives of such improvements. Gains or losses on the disposal of fixed assets are recorded as other non-interest income or losses.

Property and equipment under operating leases have been reclassified as non-operating assets- other assets and recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the lease assets, and is recorded as other non-interest losses. Idle assets that are not utilized for operating or any other purpose are transferred as non-operating assets- other assets, and are stated at their net realizable value.

Securities foreclosed are recorded under non-operating assets-other assets, and are stated at their net realizable value. Any difference from the original value of the loans and advances is recognized as bad debts.

Useful lives for depreciation, which is calculated using the straight-line method, are as follows:

Buildings 3 to 55 years

Machinery and equipment 3 to 5 years

Computer equipment 1 to 8 years

Transportation equipment 2 to 5 years

Other facilities 1 to 20 years

16) Intangible Assets

From January 1, 2007, the Consolidated Company started applying SFAS No. 37 "Intangible Assets". The Consolidated Company recognizes intangible assets at cost. Afterward, the amount recognized includes cost plus appreciation from capital re-evaluation less accumulated amortization and accumulated impairment losses.

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Intangible assets include goodwill and operating rights, and costs of computer software. Goodwill was carried forward from the acquisition of The Credit Cooperative of Douliou, The Credit Cooperative of Taidong, The Tainan Seventh Credit Cooperative and The Tainan Sixth Credit Cooperative and was recognized as the purchase price less the market value of tangible assets obtained. Goodwill previously was amortized over 10 years using the straight-line method. The difference between the cost of investing in Fuhwa Investment Trust by the Company and the pro-rata share of the investee's net assets was recognized as goodwill, and it was previously amortized over 20 years using the straight-line method. Starting in 2006, in accordance with the newly revised SFAS No. 1 "Conceptual Framework for Financial Accounting and Preparation of Financial Statements" and SFAS No. 5 "Long-Term Investments under Equity Method," goodwill shall not be amortized. The goodwill should also be assessed for impairment annually.

Operating rights are recognized as the actual payment amount in excess of the book value of the net assets of the acquired securities firms, and they will be amortized on a straight-line basis over 10 years. Computer software will be amortized on a straight-line basis from three to five years. 17) Deferred Charges

Deferred charges have material amounts and have prospective economic benefits. Such deferred charges include corporate bond and convertible bond issuance expense, costs of leasehold improvements, and expense for enterprise resource planning system installation and telephone installation. The corporate bond issuance expense was amortized over the issuance period. The convertible bond issuance expense was amortized over the period between the issuance date and the expiration date of the repurchase agreement. The other accounts are amortized over the prospective benefit periods, from three to five years. Under the circumstances where bondholders redeemed or the Company repurchased convertible bonds from the market before the expiration dates, the remaining deferred charges would be reversed as of the redemption date or the purchase date.

Starting from January 1, 2006, the accounting for bond issuance expense should be in accordance with ROC SFAS No. 34 "Financial Instruments: Recognition and Measurement"

18) Asset Impairment

The Consolidated Company adopted Statement of Financial Accounting Standards No. 35 (SFAS 35) "Impairment of Assets". In accordance with SFAS No. 35, the Consolidated Company assesses at each balance sheet date whether there is any indication that an asset other than goodwill may have been impaired. If any such indication exists, the Consolidated Company estimates the recoverable amount of the asset, and recognizes impairment loss for an asset whose carrying value is higher than the recoverable amount. The Consolidated Company assesses the cash-generating unit to which goodwill is allocated on an annual basis and recognizes an impairment loss on the carrying value in excess of the recoverable amount.

(18)

19) Deposits by Banks, and Deposits and Remittances

Deposits by banks, and deposits and remittances are recorded at the contracted principal amount or the expected value on maturity.

20) Subordinate Financial Debentures

Financial debentures are issued and stated at face value, and the interest expenses are computed and recorded at face value multiplied by the stated interest rate every month. The annual fee paid to the Gretai Securities Market is recognized as operating expense.

21) Corporate Bonds Payable

The convertible bonds with put options are issued by the Consolidated Company, and the total amount of bonds is calculated based on the issuing price and recorded as liabilities before 2005 (including 2005). The premium, which is the spread between the issuing price and par value, is amortized using the straight-line method from the date of issuance to the expiry date of the put options. The redemption premium, which is the specified put price in excess of par value, is amortized using the interest method over the period from the issuance date of the bonds to the expiry date of the put option and is recognized as interest expense and redemption premium payable. If redemption occurs prior to the expiry date, the remaining redemption premium would be recognized as interest expense at once on the redemption date.

When bondholders exercise their conversion rights, the number of shares converted is calculated using the par value of the convertible bonds and conversion price at the conversion date. A common stock exchange certificate will be issued. The convertible bonds in excess of the par value of the convertible common stock, the related redemption premium payable, and the unamortized issuance cost is recognized as capital surplus-stock issuance premium.

Whenever corporate bonds are repurchased from the market before expiry, related gain or loss will be recorded in the current period.

Starting from January 1, 2006, the Consolidated Company adopted SFAS No. 34 "Financial Instruments: Recognition and Measurement". However, for the corporate bonds payable of the Consolidated Company issued before January 1, 2006, the original principle shall be followed. 22) Reserve for Operations and Liabilities-Reserve for Guarantee Liabilities

Reserve for guarantee liabilities is the estimated potential losses based on the ending balances of guarantees and acceptances. According to the abovementioned regulation, the Consolidated Company records reserve (reversal) for guarantee liabilities as other non-interest income, net, and reserve for operations and liabilities.

23) Reserve for Operations and Liabilities-Reserve for Default Losses

(19)

According to the Rules Governing Administration of Futures Firms (RGAFF), 2% of futures transaction trading value must be provided as a contract failure loss provision until the balance of such provision reaches the amount of minimum capital or the amount of the funds for management and operation. Such provision can only be used to offset contract losses or other losses as approved by the SFB.

24) Reserve for Operations and Liabilities-Reserve for Trading Losses

According to the RGASF, 10% of the monthly securities trading gains in excess of losses must be provided as a reserve by utilizing the total amount method until the accumulated balance of such provision reaches $200,000 thousand. Such reserve can only be used to offset a loss from trading securities.

According to the RGAFF, 10% of the monthly net income of the trading business must be provided as a reserve until the accumulated balance of such provision reaches the amount of minimum capital or the amount of the funds for management and operation. Such reserve can only be used to offset a loss from trading securities.

25) Reserve for Operations and Liabilities-Reserve for Bad Debt

In accordance with an SFB ruling, the subsidiaries of the Company that engage in securities, futures, and securities investment trust business must provide 3% of operating revenue as reserve for doubtful accounts. The reserve can be used to write off overdue debt; to write off allowance for devaluation, which is reserved for irregular significant loss caused by holding unprofitable company bonds or other types of investments; or for other situations approved by the SFB for the four consecutive years beginning July 1, 1999. If the aforementioned situations do not occur, the allowance provided is recorded as reserve for bad debt.

Effective on July 1, 2003, the abovementioned regulation did not apply to the Consolidated Company, and the balance of allowance for doubtful accounts or reserve for bad debt as of June 30, 2003, was required to be retained for writing off nonperforming loans or overdue receivables in the future.

26) Pension Plan

(20)

On July 1, 2005, the Labor Pension Act (the New System), which has a defined contribution scheme, became effective. Under the New System, the Company has an obligation to contribute no less than 6% of monthly paid salary to the pension accounts in the Labor Insurance Bureau individually owned by the Company's existing employees who choose to join the New System and employees hired after the effective date.

The ending date of the year is the measurement date of the actuarial report for the defined benefit plan. A minimum pension liability is recognized when the accumulated benefit obligation exceeds the fair value of retirement plan assets. Additionally, a profit (loss) was included in net periodic pension cost due to the changes to the pension plan since year 2002. The Company recognized the unrecognized net transition obligation and the prior service cost as net periodic pension cost in 2002. Fuhwa Securities Finance recognized the unrecognized net transition obligation and the prior service cost as net periodic pension cost in 1995. The unrecognized net transition obligation and gain/loss of the pension plan of Fuhwa Securities, Fuhwa Bank, Fuhwa Futures, Fuhwa Capital Management, Fuhwa Securities Investment, Fuhwa Lease, Fuhwa Life Insurance Agency, and Fuhwa Property Insurance Agency are amortized over 15 to 22 years, which is the average remaining service period, by using the straight-line method.

Minimum pension liability usually occurs due to the existence of unrecognized prior service cost and unrecognized transitional net assets or net benefit obligation. If the amount of minimum pension liability does not exceed the sum of unrecognized prior service cost and unrecognized transitional net assets or net benefit obligation, then the difference would be charged to the deferred pension cost account; otherwise, the difference shall be charged to the account "net loss not yet recognized as net pension cost". Deferred pension cost is classified as an intangible asset; net loss from unrecognized net pension cost is classified as a reduction of stockholders' equity. For employees subject to the New System, the Company is required to make monthly cash contributions to the employees' individual pension accounts in the Labor Insurance Bureau at the rate of 6% of the employees' monthly wages. The contributions are recognized as pension expenses in the current period.

Fuhwa Securities (H.K.) Co., Ltd. did not establish a pension plan. However, Fuhwa Securities (H.K.) Co., Ltd. appropriates a certain amount to a pension fund in accordance with Hong Kong regulations. The actual appropriations are recorded as pension expenses.

(21)

27) Treasury Stock

When the Consolidated Company buys back issued stock, it applies the provisions of Statement of Financial Accounting Standards (SFAS) No. 30, "Accounting for Treasury Stock", to debit the treasury stock account in the amount of cost paid. When the disposal price of treasury stock is greater than the cost, the difference is credited to capital surplus-treasury stock; otherwise, the cost in excess of the price is debited to capital surplus generated from the same type of treasury stock transactions. If the capital surplus-treasury stock account is insufficient to cover the cost in excess of the price, retained earnings should be debited for the remaining amount. The book value of each share of treasury stock is equal to its weighted-average cost and is calculated by each group according to the reason for purchase.

When treasury stock is retired, capital surplus and common stock are debited according to the ratio of retiring treasury stock to total issued stock. When the book value of the retiring treasury stock is higher than the sum of its par value and capital surplus, the difference is debited to capital surplus generated from the same type of treasury stock transactions. If the capital surplus-treasury stock account is insufficient to cover the difference, retained earnings should be debited for the remaining amount. When the book value of the retiring treasury stock is lower than the sum of its par value and capital surplus, the difference is credited to capital surplus generated from similar treasury stock transactions.

28) Revenue Recognition

Revenue from trading securities and rendering services, such as brokerage fees, underwriting commissions and futures commissions, is recognized on the trading date. Profit (loss) from futures contracts and option transactions is recognized through daily evaluation, reversing write-offs, or exercising contracts on the settlement date. Interest revenue and fees and commissions are recognized as income on an accrual basis.

The Consolidated Company engaged in installment sales transactions and calculated gross profit from installment sales based on the regular accounting method for sales. The regular accounting method for sales recognizes all the gross profit, which is the difference between current selling price of installment sales goods and their costs, immediately at the time of sale. When the selling price of goods sold under installment sales is higher than its current selling price, the difference is recorded as unrealized interest income at the time of sale and recognized periodically as realized interest income based on the interest method. The Consolidated Company set the current selling price equal to the cost of goods sold. The difference between the selling price and the cost of goods sold was recorded as unrealized interest income, and the realized portion was transferred to interest income-installment sales.

29) Income Tax

(22)

For the Company and its subsidiaries located in the R.O.C., the 10% surtax on undistributed earnings, computed according to the ROC Income Tax Act, is charged to current income tax expense in the year of earnings distribution following a resolution at the shareholders' meeting. In accordance with the Financial Holding Company Act, Article 49, the Consolidated Company has adopted the Company as the taxpayer to file a consolidated corporate income tax return and pay the 10% surtax on undistributed earnings from 2003. When the Consolidated Company prepared its financial statements for the year ended December 31, 2004, the Consolidated Company accounted for its income tax in conformity with SFAS No. 22, "Income Taxes". However, the Consolidated Company also adjusted the related income tax balance in a reasonable and systematic way to reflect the differences computed under filing a consolidated corporate income tax return with the Company as the taxpayer. The adjustments resulting from using the Company as the taxpayer to file a consolidated corporate income tax return are recorded under receivable from (payable to) related parties. However, Fuhwa Capital Management was approved to dissolve on October 31, 2006. According to the Income Tax Act, the declaration of income tax of Fuhwa Financial Consulting should be separately from the Company and would not be in accordance with the Financial Holding Company Act, Article 49.

30) Earnings per Share of Common Stock

Earnings per share are computed as net income divided by the weighted-average number of issued shares of common stock. The increase in number of issued shares resulting from issuance of stock dividends from retained earnings or capital surplus before the financial statement report date is adjusted retroactively.

The convertible bonds issued by the Consolidated Company are potential common shares. When the potential common shares have a dilutive effect on earnings per share, both basic earnings per share and diluted earnings per share are needed to be disclosed, otherwise only basic earnings per share is required to be disclosed. When calculating diluted earnings per share, the company has to convert potential common shares into ordinary common shares and has to consider the effect it brings to earnings and the number of shares issued.

(3) The Reason for and Effect of Accounting Changes

(23)

Starting from January 1, 2006, the Consolidated Company adopted ROC Statements of Financial Accounting Standards No. 34 "Financial Instruments: Recognition and Measurement", No. 36 "Financial Instruments: Disclosure and Presentation", recently revised No. 1 "Conceptual Framework for Financial Accounting and Preparation of Financial Statements" and No. 5 "Long-term Investments under Equity Method". The effect of adopting these accounting standards for the three-month period ended March 31, 2006, was as follows,

Items Character of changes in accounting principle Cumulative effect of changes in accounting

principle equity adjustment Stockholders'

Increase (decrease) in net income before the cumulative effect of changes in accounting principle

Financial assets and liabilities at fair value through profit or loss

Accounting policy for financial assets

$ 165,588 - (103,254)

Available-for-sale financial

assets Accounting policy for financial assets

- 8,461 15,174

Financial assets carried at

cost Accounting policy for financial assets - 2,856 - Goodwill No more amortization of - - 29,630 goodwill $ 165,588 11,317 (58,450)

(24)

2) The Consolidated Company's overseas long-term equity investments under the cost method are translated at the current exchange rate prevailing on the balance sheet date. If the translated amounts are less than the original costs, the translation differences are accounted for as translation adjustments and are included in the financial statements as a component of stockholders' equity. Starting from January 1, 2006, the Consolidated Company adopted ROC Statement of Financial Accounting Standards No. 34 "Financial Instruments: Recognition and Measurement". In accordance with SFAS No. 34, non-monetary financial assets denominated in foreign currencies should be re-measured at the historical exchange rates instead of being evaluated by using the cost method. The related cumulative translation adjustments recording the decrease in stockholders' equity should be reversed and entered as an adjustment to those assets. As a result, the Consolidated Company reversed the decrease in stockholders' equity by $2,856 thousand and increased financial assets carried at cost by $2,856 thousand. The changes did not affect the net income for the three-month period ended March 31, 2006.

3) Goodwill and the difference between the cost of investment and the Consolidated Company's share of the investee's net equity were previously amortized using the straight-line method over ten and twenty years, respectively, and were also recorded in the "investment income under equity method" account. Effective January 1, 2006, pursuant to the recently revised ROC Statements of Financial Accounting Standards No. 1 "Conceptual Framework for Financial Accounting and Preparation of Financial Statements" and No. 5 "Long-term Investments under Equity Method", investment premiums, representing goodwill, are no longer being amortized. As a result, net income before the cumulative effect of changes in accounting principle and basic earnings per share increased by $29,630 thousand and $0.01 (dollars), respectively, for the three-month period ended March 31, 2006.

(4) Cash and Cash Equivalents

March 31, 2007 March 31, 2006 Cash $ 2,263,617 1,931,498 Deposits in bank 1,377,514 1,582,844 Subtotal 3,641,131 3,514,342 Cash equivalents: Notes to be exchanged 2,964,649 1,242,443 Total $ 6,605,780 4,756,785

(25)

(5) Due from Central Bank and Placement to Other Banks

March 31, 2007 March 31, 2006 Deposit reserve:

Deposit reserve-checking account $ 2,497,168 3,363,933

Deposit reserve-demand account 6,998,410 6,158,656

Subtotal 9,495,578 9,522,589

Certificates of deposit 41,350,000 21,700,000

Placement to other banks 9,106,268 1,387,326

Total $ 59,951,846 32,609,915

(6) Financial Assets and Liabilities at Fair Value through Profit or Loss

March 31, 2007 March 31, 2006

Financial assets held for trading:

Equity instruments $ 3,013,438 429,427

Rate-related instruments 16,919,981 19,694,283

Beneficiary certificates 6,242,270 3,658,472

Derivative financial instruments 625,861 472,504

26,801,550 24,254,686

Designated financial assets at fair value through profit or loss:

Equity instruments 1,429,579 354,898

Beneficiary certificates 5,220 1,143,556

Hybrid financial instruments 2,429,375 2,316,153

3,864,174 3,814,607

Total $ 30,665,724 28,069,293

Financial liabilities held for trading:

Derivative financial instruments $ 604,101 686,310

Designated financial liabilities at fair value through profit or loss:

Rate-related instrument 3,492,964 3,465,048

(26)

For the three-month period ended March 31, 2007 and 2006, net gain (loss) on financial assets and liabilities at fair value through profit or loss were as follows:

2007 2006 Net gain (loss) on valuation and disposal of financial assets

held for trading:

Equity instruments $ 250,612 (26,948)

Rate-related instruments 2,549 95,429

Beneficiary certificates 60,207 56,557

Derivative financial instruments (4,807) (137,464)

308,561 (12,426)

Interest income 44,643 46,989

Total $ 353,204 34,563

2007 2006 Net gain (loss) on valuation and disposal of designated

financial assets at fair value through profit or loss:

Equity instruments $ 33,533

-Rate-related instruments - 4,099

Beneficiary certificates 7,651

-Hybrid financial instruments (3,748) 46,879

37,436 50,978

Interest income 50,749 51,705

Total $ 88,185 102,683

2007 2006 Net gain (loss) on valuation and disposal of financial liabilities

held for trading:

Derivative financial instruments $ 22,738 43,231

Interest expenses (9,267) (9,578)

Total $ 13,471 33,653

2007 2006 Net gain (loss) on valuation and disposal of designated

financial liabilities at fair value through profit or loss:

(27)

(7) Bonds Purchased Under Agreements to Resell

March 31, 2007

Amount Period to resell Interest rate (%)

Bills and bonds purchased under agreements to resell

$ 5,731,550 April 2~May 7

2007

1.64~1.75 March 31, 2006

Amount Period to resell Interest rate (%) Bills and bonds purchased under agreements

to resell

$ 3,144,049 April 3~Augu

25, 2006

1.40~1.85 (8) Accounts Receivable, Net

March 31, 2007 March 31, 2006 Receivable amount for margin loans $ 37,914,529 29,964,709

Credit card receivable 3,022,562 4,821,867

Interest receivable 1,786,653 1,622,399

Acceptance receivable 961,979 559,049

Tax refund receivable 515,906 491,788

Notes receivable 808,586 584,068

Accounts receivable 1,644,443 1,098,186

Factoring accounts receivable 4,167,163 2,546,121

Other receivable 899,470 325,212

51,721,291 42,013,399

Less: allowance for bad and doubtful accounts 1,098,989 824,679

$ 50,622,302 41,188,720 As of March 31, 2007 and 2006, the percentage of margin loans for listed stocks ranged from 20% to 60%. Interest rates for pecuniary financing to securities firms ranged from 3.00% to 3.40% and 3.40% to 5.00% per annum for the three-month periods ended March 31, 2007 and 2006, respectively. Interest rates for pecuniary financing to investors were 6.65% and 6.00% to 6.65% per annum for the three-month period March 31, 2007 and 2006, respectively.

(28)

The memorandum accounts for pecuniary and securities financing transactions recorded by face value were as follows:

Memorandum Account

March 31, 2007 March 31, 2006

Securities held for collateral $ 22,456,693 21,839,987

Short sale stock loans 751,880 591,800

$ 23,208,573 22,431,787

Liabilities for holding collateral securities $ 22,676,148 21,576,480

Guarantee effects 530,435 855,047

Securities borrowed 1,990 260

$ 23,208,573 22,431,787

The approximate market values of the above memorandum accounts were as follows:

Memorandum Account March 31, 2007 March 31, 2006

Securities held for collateral $ 64,508,938 48,627,509

Short sale stock loans 2,776,162 2,557,176

$ 67,285,100 51,184,685

Liabilities for holding collateral securities $ 66,773,796 50,615,891

Guarantee effects 498,966 567,421

Securities borrowed 12,338 1,373

$ 67,285,100 51,184,685

(9) Loans

March 31, 2007 March 31, 2006

Bills purchased and discounts $ 473,399 388,486

Short-term loans and overdrafts 23,695,750 22,448,316

Short-term secured loans and overdrafts 13,468,223 14,705,188

Medium-term loans 51,107,842 60,444,452

Medium-term secured loans 40,665,198 32,952,403

Long-term loans 8,515,518 4,432,337

Long-term secured loans 88,920,998 86,459,668

Account receivable financing 461,882 241,507

Nonperforming loans and overdue receivables 2,600,683 5,379,930

Subtotal 229,909,493 227,452,287

Less: allowance for bad and doubtful accounts 3,716,953 2,392,046

(29)

The Consolidated Company reserved allowance for bad debts from loans, advances to customers, and so on, especially for the risk of specific debts which cannot be collected entirely. The risk of specific debts is evaluated by the defaults on payments. To consolidate the Consolidated Company's financial structure, enhance the ability to accept risk, and reinforce the quality of assets, the Consolidated Company evaluated and reserved allowance for bad debts for expired loans and advances to customers this year.

The details of movement of allowance for bad and doubtful accounts in Fuhwa Bank were as follows: 2007 Specific provision General provision Total Beginning balance $ 4,078,827 1,313,653 5,392,480

Add: Provision for doubtful accounts 329,033 - 329,033

Reclassification for reserve for bad debt

- 16 16

Recoveries of doubtful accounts 148,049 2,301 150,350

Foreign exchange translation adjustment 172 6,095 6,267 Other 185,264 - 185,264 Less: Write-off 459,078 632 459,710 Ending balance $ 4,282,267 1,321,433 5,603,700 2006 Specific provision General provision Total Beginning balance $ 2,742,895 2,439,814 5,182,709

Add: provision for doubtful accounts 938,289 71,750 1,010,039

Reclassification for reserve for bad debt

- 305 305

Recoveries of doubtful accounts 136,300 4,875 141,175

Less: Write-off 955,610 60,000 1,015,610

Foreign exchange translation 1,007 - 1,007

adjustment

(30)

The components of allowance for bad and doubtful accounts in the Consolidated Company were as follows:

March 31, 2007 March 31, 2006

Loans (including non-performing loans) $ 3,716,953 2,392,046

Accounts receivables 1,098,989 824,679

Other financial assets-overdue receivables 787,758 2,100,886

Total $ 5,603,700 5,317,611

The components of bad debt expense were as follows:

March 31, 2007 March 31, 2006

Loans (including non-performing loans) $ 240,000 338,094

Accounts receivables 89,033 559,493

Other financial assets-overdue receivables - 112,452

Total $ 329,033 1,010,039

As of March 31, 2007 and 2006, the amounts of allowance for bad debt of Fuhwa Bank generated from 3% of operating revenue were $79,122 and $77,197, respectively.

As of March 31, 2007 and 2006, the amounts of interest receivable that were accrued from loans and advances were $2,600,683 and $5,379,930, respectively. As of March 31, 2007 and 2006, the amounts of interest receivable that were not accrued from loans and advances were $26,190 and $59,130, respectively.

(10) Available-for-sale Financial Assets

March 31, 2007

Cost after

amortization

Unrealized

(loss) gain Fair value

(31)

March 31, 2006

Cost after

amortization

Unrealized (loss)

gain Fair value

Equity instruments: Listed stocks $ 18,828 (7,274) 11,554 Rate-related instruments: Government bonds 9,512,762 6,138 9,518,900 Corporate bonds 9,036,408 24,209 9,060,617 Others: Beneficiary certificates 529,509 6,529 536,038 Total $ 19,097,507 29,602 19,127,109

For the three-month periods ended March 31, 2007 and 2006, the amounts of realized gain or loss on disposal were as follows:

2007 2006

Realized gain (loss) on disposal $ 769 (1,736)

For the three-month periods ended March 31, 2007 and 2006, the details of movement of unrealized gain (loss) on available-for-sale financial assets were as follows:

2007 2006

Beginning balance $ 15,551 $

-Add: Effect of first-time adoption of newly revised SFAS - 8,461

Changes in this period 21,622 22,869

Less: Transfer of gain (loss) in this period, net 769 (1,736)

Ending balance $ 36,404 33,066

(32)

(11) Held-to-maturity Financial Assets, Net

March 31, 2007 March 31, 2006

Financial debentures $ 6,601,247 6,149,169

Government bonds 11,416 3,304

$ 6,612,663 6,152,473

(12) Other Financial Assets

March 31, 2007 March 31, 2006

Financial assets carried at cost $ 3,005,677 2,936,383

Bond investments in non-active market:

Corporate bond - 178,800

Financial debentures 1,419,798 2,291,881

Redeemable certificates of deposit 165,324 162,147

Futures trading margins 1,359,811 1,678,563

Overdue receivables (allowance for bad debts of $787,758 and $2,100,886 was deducted for the three-month periods ended March 31, 2007 and 2006, respectively)

2,783 69,600

Other 64,390 65,454

Total $ 6,017,783 7,382,828

As of March 31, 2007 and 2006, the impairment amounts of the financial assets carried at cost were $493 and $30,453, respectively. The impairment was recorded as impairment loss.

(33)

For the three-month periods ended March 31, 2007 and 2006, the movement of the original cost, accumulated amortization, and accumulated impairment loss on intangible assets was as follows:

Goodwill: 2007 Beginning balance Increase in this period Ending balance Original cost $ 1,709,381 - 1,709,381

Less: Accumulated amortization 174,786 - 174,786

Accumulated impairment loss - -

-Book value $ 1,534,595 - 1,534,595 2006 Beginning balance Increase in this period Ending balance Original cost $ 1,709,381 - 1,709,381

Less: Accumulated amortization 174,786 - 174,786

Accumulated impairment loss - -

-Book value $ 1,534,595 - 1,534,595 Operating rights: 2007 Beginning balance Increase in this

period Ending balance

Original cost $ 770,570 - 770,570

Less: Accumulated amortization 351,781 19,664 371,445

Accumulated impairment loss - -

-Book value $ 418,789 (19,664) 399,125

2006 Beginning

balance

Increase in this

period Ending balance

Original cost $ 745,570 - 745,570

Less: Accumulated amortization 274,372 19,040 293,412

Accumulated impairment loss - -

(34)

Computer software:

2007 Beginning

balance

Increase in this

period Ending balance

Original cost $ 373,613 7,610 381,223

Less: Accumulated amortization 174,139 20,277 194,416

Accumulated impairment loss - -

-Book value $ 199,474 (12,667) 186,807

2006 Beginning

balance

Increase in this

period Ending balance

Original cost $ 336,734 11,831 348,565

Less: Accumulated amortization 103,265 19,178 122,443

Accumulated impairment loss - -

-Book value $ 233,469 (7,347) 226,122 (14) Other Assets March 31, 2007 March 31, 2006 Guarantee deposits $ 2,348,025 3,289,904 Nonoperating assets: Leased assets 1,376,081 1,392,671

Unused assets (devaluation allowance of $5,593 and $65,688 was deducted for the three-month periods ended March 31, 2007 and 2006, respectively)

188,048 460,939

Securities foreclosed (devaluation allowance of $17,000 and $43,587 was deducted for the three-month periods ended March 31, 2007 and 2006, respectively)

122,041 323,973

Deferred charges 158,431 317,639

Prepaid expenses 200,442 342,846

Deferred pension cost 18,908 22,623

Restricted long-term assets 550,144 606,614

Brokering transaction debit balance 29,953 26,985

Others 43,943 90,815

(35)

(15) Commercial Paper Payable, Net

March 31, 2007 March 31, 2006

Commercial paper $ 23,400,000 19,425,000

Less: unamortized discount on commercial paper 36,135 23,794

$ 23,363,865 19,401,206

The interest rates on commercial paper were 1.45% to 2.28% and 1.03% to 2.22% per annum for the three-month periods ended March 31, 2007 and 2006, respectively.

For the three-month period ended March 31, 2007, the acceptors of the abovementioned commercial paper were Cosmos Bank Co., Ltd., Hua Nan Commercial Bank Co., Ltd., The Shanghai Commercial & Savings Bank Ltd., Sunny Commercial Bank Co., Ltd., Ta Chong Commercial Bank Co., Ltd., China Bills Financial Co., Ltd., Chung Hsing Bills Finance Co., Ltd., Taiwan Finance Co., Ltd., Grand Bills Finance Co., Ltd., Chinatrust Bills Finance Co., Ltd., Hua Nan Bills Finance Co., Ltd., Far Eastern International Bank Co., Ltd., Mega Bills Finance Co., Ltd., International Bills Finance Co., Ltd., Taching Bills Finance Co., Ltd., Taishin Bills Finance Co., Ltd., Bank of Taiwan Co., Ltd. and Chang Hwa Commercial Bank Co., Ltd.

For the three-month period ended March 31, 2006, the acceptors of the abovementioned commercial paper were Industrial Bank of Taiwan Co., Ltd., Cosmos Bank Co., Ltd., Hua Nan Commercial Bank Co., Ltd., The Shanghai Commercial & Savings Bank Ltd., Sunny Commercial Bank Co., Ltd., China Bills Finance Co., Ltd., Chung Hsing Bills Finance Co., Ltd., E. Sun Bills Finance Co., Ltd., International Bills Finance Co., Ltd., Taiwan Finance Co., Ltd., Grand Bills Finance Co., Ltd., Chinatrust Bills Finance Co., Ltd., Fubon Bills Finance Co., Ltd., Hua Nan Bills Finance Co., Ltd., Great Chinese Bills Finance Co., Ltd., and Taishin Bills Finance Co., Ltd.

(16) Bills and Bonds Sold under Agreements to Repurchase

March 31, 2007 Amount Period to repurchase Interest rate (%) Bills and bonds sold under agreements to

repurchase $ 27,764,659 April 2~June 15, 2007 1.40~5.80 March 31, 2006 Amount Period to repurchase Interest rate (%) Bills and bonds sold under agreements to

repurchase

$ 27,263,979 April 3~August

25, 2006

(36)

(17) Deposits and Remittances

March 31, 2007 March 31, 2006

Checking deposits $ 2,110,138 1,560,577

Demand deposits 21,599,012 18,386,468

Time deposits 72,604,283 68,236,458

Demand savings deposits 71,335,309 59,398,569

Time savings deposits 101,421,887 83,449,148

Remittances 11,576 13,084

Total $ 269,082,205 231,044,304

As of March 31, 2007 and 2006, the time to maturity for the above time deposit and savings deposit accounts, except for demand savings deposits, was within three years.

(18) Bonds Payable

March 31, 2007 March 31, 2006

Subordinate financial debentures $ 11,200,000 6,400,000

Corporate bonds payable 725,000 1,450,000

Convertible bonds 682,524 663,117

Total $ 12,607,524 8,513,117

1) Subordinate Financial Debentures

Figure

Updating...

References

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