TAI P E I B AN K C o. , Ltd. ANNUAL REPORT 2004
TAIPEIBANK and Fubon Commercial Bank have been officially merged into Taipei Fubon Commercial Bank on January 1, 2005.
1. Spokesperson Name：TienHsia Chang Title：Chief Financial Officer Tel：（886）227716699 Email：[email protected]
Acting Spokesperson Name：Daniel Chen Title：Chief Strategy Officer Tel：（886）227716699 Email：[email protected]
2. Contact Information – Corporate Headquarters and Branches Please see page 17 3. Stock Registration Agent Name：Fubon Securities Co., Ltd. Address：2Fl., No.17, Hsuchang St.,Taipei, Taiwan, R.O.C. Website：www.fbs.com.tw Tel：（886）223810131 4. Credit Rating Institution Name：Taiwan Ratings Corporation Address：23Fl., No.100, Sec.2, Roosevelt Rd., Taipei, Taiwan, R.O.C. Tel：（886）22368 8277 5. Certified Public Accountants for Fiscal Year 2004 CPAs：Ray Chang, Terence Huang Company：Deloitte & Touche Address：12Fl., No.156, Sec.3, Minsheng E. Rd., Taipei, Taiwan, R.O.C. Website：www.deloitte.com.tw Tel：（886）225459988 6. Exchange Houses where Overseas Securities are Listed：None 7. Website www.taipeifubon.com.tw
TABLE OF CONTENTS Item
I. Message to Shareholders
II. Corporate Profile
1. Introduction 2. Organizational Structure
III. Business Operations 1. Business Information 2. Business Strategies and Business Plans for 2005 3. Research & Development Plans 4. Employees Structure
8 8 10 12 13
IV. Special Notes
1. Dividend Policy and Status of Execution 2.Implementation of the Internal Controls System
V. Headquarters and Branches of Tapei Fubon Commercial Bank
Appendix：Annual Financial Reports for 2004 and 2003
I. Message to Shareholders Over the past year, the international economy remained strong despite the sharp rise in international crude oil prices, the rise in US interest rates and China’s economic macro control measures. Taiwan benefited by seeing an expansion in international trade. Other measures, including a loose monetary policy and an expansion of public works projects, helped to boost the economy. Through Fubon Financial Holding Company’s abundant resource, the Bank outperformed on the field of cross selling and innovative service, reaching pretax profits for the year of NT$5.5 billion, representing growth of 18.07% over 2003. Meanwhile, the Bank’s leaders and entire workforce accomplished a formidable mission last year, in achieving the merger of TAIPEIBANK and Fubon Commercial Bank. The two banks, now renamed as “Taipei Fubon Commercial Bank,” were successfully merged on January 1, 2005. This marks the first successful merger between a governmentowned bank and a private bank, hence establishing a model for future M&A between public and private sector banks. TAIPEIBANK and Fubon Commercial Bank have very different strengths and historical backgrounds. TAIPEIBANK expertized in corporate banking and government banking, Fubon Commercial Bank focusd on wealth management and consumer banking. Through mutual support and further cooperation, the merger effectively offers better back up and support to each side. The organizational structure and information systems of both banks have been integrated efficiently and effectively. Meanwhile, the merger synergy realized gradually. TAIPEIBANK’s total fee income of wealth management business grew 38.47% over 2003. Meanwhile, new mortgage and credit loan launched boosted consumer banking business, generating growth of 7.74% over 2003, credit loans in particular grew 33.23%. In corporate banking, TAIPEIBANK has worked to develop financial technology for special projects, such as the NeihuLine MassRapid Transit Project Financing project, which won the runnerup among 107 competing projects at the Asian Banking Awards 2004. While pursuing growth in business operations and increased profits, TAIPEIBANK has maintained an emphasis on asset quality control. It’s non performing loan（NPL）ratio has always been much lower than the industry average. In fact, at the end of 2004, the Bank’s NPL ratio fell to an historical low of 1.65%. The coverage ratio reached as high as 58.35%, establishing a solid business foundation for future growth. Meanwhile, in order to correspond with Taiwan’s 2006 implementation of the Basel II, TAIPEIBANK has accordingly already set up an even more rational risk management mechanism. Satisfied with the Bank’s operations and asset quality, on December 22, 2004, Taiwan Ratings Corporation announced a hike in TAIPEIBANK’s longterm credit rating from
“twAA” to “twAA.” Its shortterm credit rating was maintained at “twA1,” and the bank was given a “stable” outlook. This reflects TAIPEIBANK’s superior profitability and asset quality compared with its industry counterparts. After completion of the merger with Fubon Commercial Bank on January 1, 2005. The Bank will undergo a capital reduction of NT$10 billion. This will not pose any negative effect to the bank’s capital health. Rather, maintaining the same level of profits, the Bank’s ROE and EPS will effectively improve, providing a positive impact on the Bank’s operations after the merger. The Financial Supervisory Commission of the Executive Yuan has approved the capital reduction, which will be completed during 2005. Taipei Fubon Commercial Bank expects an exceptional performance in its first postmerger year, anticipating growth from economies of scale in terms of customer numbers and credit approvals as well as reduced operating costs. In step with our business strategy, the Bank began structural reorganization at the beginning of March 2005 in order to streamline all operations, including corporate banking, consumer banking, wealth management, financial banking and credit card business. This is enabling the Bank to continue to develop new products and deepen customers relationship, increase service quality, broaden business scope and strengthen international competitiveness. Bolstered by synergy with other subsidiaries of Fubon financial holding company, the Bank will fully boast a comprehensive crossselling and integrated partnership. Taipei Fubon Commercial Bank is also actively pursuing business opportunities in the Greater China, using our Hong Kong affiliate Fubon Bank (Hong Kong) as a springboard to achieve our goal as the best Asian Regional Bank. We would like to extend our sincerest gratitude to all our shareholders, and we look forward to your continued support and advise. The combined staff of Taipei Fubon Commercial Bank will continue to strive for excellence and to improve our performance.
II. Corporate Profile 1.Introduction （1）Establishment Date and Basis： TAIPEIBANK was established on Apr. 21, 1969 by Ministry of Finance Order (57) Tsai Tzu No. 7864 （2）History
TAIPEIBANK was established in coordination with national financial policy on Apr. 21, 1969 with capital provided by the the Taipei City Government, to regulate local finances, support municipal construction, and act as agent for the municipal treasury. Its name at that time was “City Bank of Taipei,” and its business territory was limited to the city. Since at the time of its establishmen, was a financial institution owned by the city government and did not have the status of a corporation, the bank was reorganized as a company limited by shares on July 1, 1984. On Jan. 1, 1993, the Bank’s name was changed to TAIPEIBANK Co., Ltd. in line with the establishment of its corporate identity system. With the government’s implementation of financial liberalization, the following year TAIPEIBANK expanded its business operations outside The City for the first time with the establishment of the Kaohsiung Branch. On Jan. 20, 1995 permission was granted for a change from a regional bank to a national bank and for expansion of the business territory to the entire country. In 1997, in line with the policy of privatization of government banks, shares were offered for subscription by employees and the general public; this resulted in a further capital increase of NT$2 billion through cash injection. TAIPEIBANK shares were formally listed on the Taiwan Stock Exchange on July 23, 1997. To carry through with the policy of privatization of government enterprises, the Bank's main shareholder, the The City Government, released shares on Nov. 30, 1999 and actively solicited buyers for them. As a result, the Bank was formally reorganized as a private enterprise. TAIPEIBANK became a subsidiary of the Fubon Financial Holding Co（Fubon FHC）. on Dec. 23, 2002 in order that longterm development, at the same time, the bank stopped all trades in the Taiwan Stock Exchange. The Bank began operating under the Fubon FHC umbrella on December 23, 2002. At the beginning it has maintained operations alongside Fubon Commercial Bank as an independent entity. However, in order to preserve the brand position and strengths of both parties, as well as minimizing potential repercussions, Fubon FHC then decide to merge two banks through actively integration of information systems, workflow, organization and staff. After two years of intensive preparation, TAIPEIBANK and Fubon Commercial Bank were officially merged into Taipei Fubon Commercial Bank on Jan. 1, 2005. The integration of two banks marked the first and only successful fullscale merger of operations between a large governmentowned bank and an accomplished private bank in Taiwan. The move will not
only help Fubon FHC expand its earnings potential but also achieve a milestone in Taiwan financial merge history.
2. Organizational Structure （1）ORGANIZATION CHART
Legal Affairs Dept.
Dec 31, 2004
Information Tech. Dept. Planning Dept. Human Resource Dept. Secretarial Dept. Secretariat Int’l Admin. Dept. Auditing Department
Corporate Banking Admin. Dept. Corporate Banking Group
Board of Directors
Commercial Banking Dept. Corporate Finance Dept.
Consumer Banking Dept.
Local Branches/ MiniBranches
Consumer Banking Group Supervisors
Asset / Liability & Risk Management Committee
Consumer Banking Operations Dept.
Credit Consideration Committee
Financial Services Dept. Financial Services Group Financial Services Operations Dept.
Human Affairs Appraisal Committee
Remedial Management Dept. Trust Property Consideration Committee
Treasury Dept. Trust Dept.
NPL / Loans for Collection Consideration Committee
Public Treasury Dept.
Offshore Banking Branch
（2） Board Members and Supervisors Representing Date Title Name Education & Background Term Organization Elected Fubon Financial Ph.D. Massachusetts Institute Chairman ChiYuan Lin 12/23/02 3 yrs Holding Co. of Technology Graduate School of Law , University of Georgetown , Vice Fubon Financial USA Daniel Tsai 12/23/02 3 yrs Chairman Holding Co. Chairman, Fubon Insurance Vice Chairman, TAIPEIBANK Managing Fubon Financial MBA, University of Detroit 12/23/02 3 yrs Jesse Y. Ding Director Holding Co. Mercy, USA MBA, Mankato State University, USA Fubon Financial Director SushDer Lee Commissioner, Dept. of 12/23/02 3 yrs Holding Co. Finance, The City Government Graduate School of Finance, Fubon Financial New York University, USA Director Richard Tsai 12/23/02 3 yrs Holding Co. Chairman, Fubon Life Insurance Graduate School of Finance, Fubon Financial Director Victor Kung New York University, USA 12/23/02 3 yrs Holding Co. CFO, Fubon Financial Fubon Financial Dept. of Law, National Director O. Rex Her 12/23/02 3 yrs Holding Co. Taiwan University MBA, National Chiao Tung Till the Fubon Financial University expiration of Director ChinChyuan Lai 09/01/04 Holding Co. the current term Dept. of Business, National Till the Fubon Financial Taiwan University expiration of Director Tien Hsia Chang 05/26/04 Holding Co. the current term Feng Chia University Fubon Financial Chairman, Fubon Securities 12/23/02 Director Kungliang Yeh 3 yrs Holding Co. Fubon Financial Ph.D. South California Holding Co. University Dept. of Mathermatics, Fubon Financial Tamkang University Supervisor Wang, ChuanHsi Holding Co. Chairman,Fubon Direct. Supervisor
Dept. of Law, National Fubon Financial Taiwan University Supervisor PengYuan Cheng Holding Co. President, Fubon Life Insurance
Till the expiration of 09/01/03 the current term 12/23/02
（3） 10% or More Shareholdings of Institutional Shareholder Representatives, Directors, Supervisors & Top 10 Shareholders Institutional Shareholders Fubon Financial Holding Company
Top 10 Shareholder whose total investments account for more than 10% of total shares Taipei City Government、 Ming Tong Co.,
III. Business Operations 1. Business Information （1） Breakdown of Total Revenues Items Wealth Management Loans Others Total
2004 19.40 33.87 46.73 100.00
Unit：﹪ 2003 24.76 35.31 39.93 100.00
（2） Business Performance （A） Wealth Management At the end of 2004, the Bank’s total deposits decreased by 5.64% from 2003 levels. To achieve lower funding cost, the Bank actively increase demand deposits. The deposits, excluding government deposits, grew by 6.64% over 2003. However, postal deposit and fixed deposits decreased from 2003 levels. In order to develop wealth management business, the Bank has appointed portfolio management consultant to tailer customer investments attributes according to customers’ tax liability and risk endurance. In the field of product offering, the Bank actively introduced mutual funds, structure notes, insurance product, New Taiwan Dollar and foreign currency consolidated deposits and RP. At the end of 2004, total fee income on trust products grew by 38.47%. The Bank seeks to provide tailormade products for its customers. To offer distinct service, the Bank divided customers into Platinum and Normal customers based on their asset size and are served by PA and PB, respectively. To provide best financial service and concise with Fubon CIS, we remodeled our branches and build more Platinum banking center. To comply with government policy and provide security transaction environment, the Bank had been upgraded to accept IC card transactions. At the end of 2004, 82.25% of the Bank ATMs had been upgraded to accept IC card transaction. At the end of 2004, the Bank issued 1,965,967 Bank Cards, representing growth of 11.29% over 2003. Of those cards, IC Cards in circulation stand at 14.26% of the total. The Bank also actively pursued physical and virtual automated banking technologies and internet banking services. It promoted and strengthened automated services while opening an web ATM network. The Bank is one of only a few financial institutions to offer this kind of network, which provides clients with new channels for balance inquiries and cash transfers, increasing convenience and service efficiency for clients. At the end of 2004, the Bank and Fubon Commercial Bank had an aggregate 1,042 ATMs, representing growth of 50.38%, effectively raised the Bank’s competitiveness. Postmerger, the combined bank shares 121 branches, becoming the private domestic bank with the widest branch network in Taipei and takes the highest market share in Taipei area.
（B） Consumer Banking At the end of 2004, the outstanding balance of mortgages and consumer loans grew 2.43% and 33.23% over 2003, respectively. Loan business outperformed than 2003 since the Bank emphasized risk control as it pursued to control a high level of profitability and actively lanched many new consumer loan products during the year. In mortgages, the Bank aggressively bid government policy loan . For example, in June 2004, it obtained the right to provide mortgages to Taipei City government employees and teachers. Since these types of loans can be arranged in various combinations as index mortgages, they can effectively increase the scale of our mortgage business. As the economy continued to boost, interest rate inclined to rise. The Bank introduced “balance” mortgage loans that combined fixed and floating interest rates, thus allowing borrowers the convenience of managing the risk of interest rate fluctuations through the flexible matching of interest rates within the loan amount. The Bank introduced a number of innovative mortgages products in 2004, with all of them receiving a warm reception. Products included “Blessed Home Mortgages” for firsttime home buyers, “101 Mortgages” which satisfied all consumer needs for home purchase, renovation and financing, and “Cash Advantage Loans” and “Reversion Financing Loans,” providing more financial flexibility. In consumer loan market, facing serious competition and variety of product offerings, the Bank launched different kinds of tailermade products for target customers according to market segmentation. New products include “super prime personal loans” , “second mortgages” and “unsecured loan integration”. （C） Corporate Banking The Bank exerted its best efforts in developing project financing technologies. Its “NeihuLine MassRapid Transit Project Financing” was a runner up at the Asian Banking Awards 2004, among 107 competing projects. In recent years, the Bank focuses on planning customized financial products and stressing marketing in order to provide more comprehensive financial services. Besides providing the suitable financial service for core corporate customers, the Bank also designs appropriate structure financial products and derivatives to avoid interest and exchange risks In addition, joint with SMBCG fund, the Bank promoted “Batch Credit Guarantee”、“Fast Get Profit” and “Gold Satisfaction Project” loans to our small and medium enterprises. In 2004, loan business for large enterprises and SMEs increase by 10.46% and 12.65%, respectively. At the end of December 2004, our New York, Los Angeles and Hong Kong branches had total assets of US$705.85 million, while OffshoreBanking Units (OBU) had total assets of US$1,804.28 million. The bank has 1,950 correspond banks spread all over the world. Banking services in Greater China market become more and more important. The Bank will use Hong Kong affiliate, Fubon Bank(Hong Kong), as a spring board to develop Greater China market. In 2004, the Bank executed several business partnerships with Fubon Bank(Hong Kong). In particular, the “Hong KongTaiwan
Rapid Remittance” program was launched at the end of the year which provide clients much better remittance services. （D） Treasury Due to rapid changes in the financial market and the constant introduction of new financial products, the Bank continues to develop and promote new financial derivatives so as to provide the customers with a complete line of products and customerized financial planning services. The Bank applied for approval 16 new licenses in 2004, including the industryleading “NT Dollar Credit Default Swap” and “NT Dollar CreditLinked Product.” The Bank also is developing new products to further satisfy diversified customer needs. In addition, we have set up “Derivative Product Development Department” to in charge of developing derivative products and position management to fulfill our clients’ needs. （E） Trust At the end of 2004, securities investment trust funds under custodianship grew 16.68% increase over the end of 2003. The amount of investment of nondiscretionary trust finds in domestic and overseas securities grew 24.16% over a year earlier. （F） Government Treasury Services In 2004, the bank accepted bills payments in 3.42 million instances. In addition to its tax collection stations, the bank has commissioned 744 tax collection stations at 41 other financial institutions to collect various types of Taipei City taxes. The amount of tax collected on behalf of the city in 2004 totalled NT$27.75 billions. （G） Public Welfare Lottery In 2004, total public welfare lottery sales grew by 7.75% over 2003, with computerized tickets accounting for 86.66% of total sales. In addition to current lottery products, the Bank developed diversified products and increase sale volume through Ecommerce.
2. Business Strategies and Business Plans for 2005 （1） Business Strategy （A）Grow corporate and consumer loans. （B）Grow credit card portfolio. （C）Realize potential in wealth management business. （D）Grow other feebased business. （E） Realize cost savings. （F） Improve operating efficiency. （G）Prudent credit and market risk control. （H）Develop Greater China business together with Fubon Bank(Hong Kong).
（2） Business Plans （A） Wealth Management 1) Continue to cross sell products including banking, as well as insurance and asset management merchandises and deliver comprehensive financial services. 2) Build up Wealth Management RM System and offer tailormade financial recommendations. 3) Speed up the switch move on IC ATM Card and promote the combinedfunction of IC ATM Card and Visa Debit. 4) Renovate the branches to unify the brand image and embellish the distribution channels’ appearance. （B） Consumer Banking 1) Innovate consumeroriented loan products under the guideline, “decentralization, segmentation and timeliness”. 2) Enforce the marketing function by offering extensive training session, deploying more branch sales force and simplifying the workflow. 3) Exercise the CRM technology to shoot the target customers precisely by fully tapping the data warehouse resources. 4) Review the customers’ business status and loan quality regularly and adjust pricing and loan approval policy timely. （C） Corporate Banking 1)Develop capital market and investment banking services apart from traditional loan business. 2)Further explore SME business through “Small and Medium Business Credit Guarantee Fund”. 3) Upgrade trade finance products and offer Epayment services over Greater China Area. 4) Improve the operation efficiency through digitized application process. （D） Credit Card Business 1) Keep on focusing acquisition by issuing affinity card and cobranded card. 2) Strengthen platinum cards market penetration through market campaigns. 3) Initiate ore usage promotional programs to promote client loyalty. 4)Systematize the collection process to follow up customers’ liquidity more efficiently. （E） Treasury 1) Adopt more flexible trade strategies to control market risk. 2) Gradually strengthen salesoriented operations and raise the percentage of handling fee income. 3) Improve capital efficiency and lower costs.
（F） Trust 1) Promote and develop collective investment trust funds business. 2) Further penetrate trust business including personal trusts, as well as securities trusts, real estate trusts, charitable trusts, employees benefit trusts and pension trusts. 3) Exploit the securitization business. （G） Government Treasury Services 1) Strive to explore government treasury services to all levels of government institutions. 2) Install more IT technology to streamline the process. 3) Collect taxes and fees through convenience stores channel.
（H） Lottery Business Boost sales by installing compressive valueadded products.
3. Research ＆ Development Plans （1）R&D Spending for the Past Two Years Item R＆D Spending R＆D Reports
（2）Research and Development Plans （A） Strengthening the Marketing Management System Besides using data warehouse systems to grasp client profiles and trading habits as a reference for marketing decision, the Bank completed the construction of marketing management system in 2004. This system will initiate, administer and execute marketing activities more independently. Able to hone in on client trading behavior, it will rapidly provide clients with relevant products and services to satisfy their financial needs. Due to the operation of the marketing management system, the Bank’s marketing model takes client needs as its guiding principle. Not only does it speed up marketing responses, improve response rates and improve client loyalty, it also increases the Bank’s income and profit. （B） Chip Credit Card According to the regulations of Visa International and MasterCard International, new credit cards in Taiwan will be issued in the form of chip cards from January 2006. Meanwhile, the chip card migration steering committee of the Bankers Association of the ROC has resolved that in order to accelerate the installation of the chip card terminals, the IRF for credit cards (the ratio between the issuing banks and acquiring banks) will be lowered by 0.0442%for 4 year to subsidize the acquiring banks, the transaction fee rate allocated to the issuing banks will be cut
to 1.5058%, down from the existing 1.55%, so as to subsidize the acquiring banks. In July 2003, a project management office(PMO) for the chip card migration was established to push for the smooth conversion to credit chip cards. The PMO is backed by an NT$60 million fund, to be shared by member banks according to the value of the customer transaction. Our bank plans to install the related systems in 2005 and then adopt the marketing strategy to issue credit chipcards at a proper time.
4. Employees Structure Year
As on April 8,2005 4,520
Average age (years)
Graduate or higher
Senior high school
Below senior high
Staff Number of employees
IV. Special Notes 1. Dividend Policy and Status of Execution （1）Dividend Policy The board of directors authorized by the shareholders amended the Bank’s Articles of Incorporation on Sept. 8, 2004. This amendment provides that the following should be appropriated from the annual net income, less any deficit: 1) 30% as legal reserve; 2) 1% to 5% of the remaining earnings as employee bonus; 3) Dividends to shareholders of all or part of the remainder and unappropriated earnings generated in prior years as determined by the board of directors. Under the Company Law, legal reserve should be appropriated until the reserve equals the paidin capital. This reserve should only be used to reduce or offset a deficit. When the reserve reaches 50% of the Bank’s paidin capital, up to 50% thereof may be declared as stock dividend. （2）Status of Execution In 2004, the board of directors resolved the appropriation of the 2003 Cash dividends as follows: Total Cash dividends Cash Dividend Per Share ＄2,688,703,033 ＄1.1501
（3）The influence of dividend allocation to financial business and earnings per share： None. （4）The board of directors approved the earnings distribution proposal for 2004： Statement of Earning Distribution Unit: NTD Amount
Items of Earning： Net Earning of Fiscal Year 2004 4,436,402,833 Accumulated Earning 123,803,955 Total 4,560,206,788 Items of Distribution： Legal Reserve 1,330,920,850 Employees’ Bonus 248,438,559 Directors’ and Supervisors’ Bonus 62,109,640 Cash Dividend Distribution 2,794,933,784 Undistributed Earning 123,803,955 Total 4,560,206,788 Note1：All the above bonus are distributed by the latest fiscal year’s earnings. Note2：According to “the Article of Incorporation” before Sep. 8, 2004, the shareholders’ bonus was 90%; employees’ bonus was 8%: Directors and supervisors’ bonus was 2%.
2. Implementation of the Internal Controls System
Statement of Internal Controls On behalf of Taipei Fubon Commercial Bank we affirm that during the period of Jan. 1, 2004 through Dec. 31, 2004 Taipei Fubon Commercial Bank did in fact conform to the Implementation Regulations for Banks’ Internal Control Systems and Auditing Systems in establishing an internal control system and implementing risk management, and that the Bank was audited by an unbiased and independent unit which submitted reports regularly to the Bank’s directors and supervisors. Careful assessment reveals that the Bank’s various units did in fact effectively implement internal controls and observe the relevant laws and regulations during this year. This Statement is submitted to Bureau of Monetary, Financial Supervisory Commission, R.O.C.
V. Headquarters and Branches of Taipei Fubon Commercial Bank Headquarters Address and Telephone Number Headquarters：169,Jen Ai Road,Sec.4,The City,Taiwan 10686,R.O.C
Business Department： 50, Sec.2, Chungshan N.Road, The City, Taiwan 10419, 886(2)25425656 R.O.C. Trust Department： 3F,138, Min Sheng E. Rd., Sec. 3, The City, Taiwan 10596, 886(2)27186888 R.O.C. Securities Department（Dealer and Underwriter）：15F, 169, Jen Ai Road, 886(2)27716699 Sec.4, The City, Taiwan 10686, R.O.C.
Branches Address and Telephone Number Code Branch Name Address 22F, 169, Jenai Road, Sec.4, The City, 0121806 Foreign Department Taiwan 10686, R.O.C.
0125608 Offshore Banking Branch
19F, 169, Jenai Road, Sec.4, The City, Taiwan 10686, R.O.C.
0122032 Changan E. Road Branch
36, Sec.1, Changan E. Road, The City, Taiwan 10442, R.O.C.
0122205 Chengtung Branch
90, Sec.2, Nanking E. Road, The City, Taiwan 10406, R.O.C.
0122216 Nungan Branch
369, Sungchiang Road, The City, Taiwan 886(2)25031451 10482, R.O.C.
0122607 ChuHsuBu Branch
261, Sec. 3 Nanking E. Road, The City, Taiwan 10550, R.O.C.
0123006 Shihlin Branch
288, Chungcheng Road, The City, Taiwan 886(2)28317444 11162, R.O.C.
0123017 Shihtung Branch
360, Sec. 6, Chungshan N. Road, The City, 886(2)28735757 Taiwan 11152, R.O.C.
0123028 Rueiguang Branch
392, Rueiguang Road, The City, Taiwan 11492, R.O.C.
0123039 Yuhcheng Branch
126, Sec.6, Chunghsiao E. Road, The City, 886(2)26511212 Taiwan 11576, R.O.C.
0123040 Fukang Branch
310, Sec.4, Chengteh Road, The City, Taiwan 11168, R.O.C.
0123051 Chunghsiao Branch
107, Sec.4, Chunghsiao E. Road, The City, 886(2)27417880 Taiwan 10690, R.O.C.
0123062 Chengteh Branch
142, Sec.2, Chengteh Road, The City, Taiwan 10359, R.O.C.
0123073 Lungchiang Branch
28, Sec.3, Nanking E. Road, The City, Taiwan 10489, R.O.C.
Branches Address and Telephone Number Code Branch Name Address 69, Sec.2, Yenping N. Road, The City, 0123109 Yenping Branch Taiwan 10346, R.O.C.
0123202 Mucha Branch
92, Sec.3, Mucha Road, The City, Taiwan 886(2)29391035 11648, R.O.C.
0123213 Muhsin Branch
212, Sec.3, Muhsin Road, The City, Taiwan 11660, R.O.C.
0123305 Lungshan Branch
161, Hsining S. Road, The City, Taiwan 10844, R.O.C.
0123408 Pate Branch
178, Sec.3, Pate Road, The City, Taiwan 886(2)25776467 10555, R.O.C.
0123419 Yungchuen Branch
151,Fude Street, The City, Taiwan 11078, 886(2)27592921 R.O.C.
0123420 Yungchi Branch
185,Yungchi Road, The City, Taiwan 11063, R.O.C.
0123501 Chungshan Branch
162, Sec.2, Chungshan N. Road, The City, 886(2)25963171 Taiwan 10452, R.O.C.
0123604 Peitou Branch
2, Sec.1, Chungyang N. Road, The City, Taiwan 11263, R.O.C.
0123615 Shihpai Branch
216, Wenlin N. Road, The City, Taiwan 11287, R.O.C.
0123707 Taan Branch
37, Sec.4, Jenai Road, The City, Taiwan 10685, R.O.C.
0123800 Tatung Branch
175, Sec.3, Chungking N. Road, The City, 886(2)25929282 Taiwan 10369, R.O.C.
0123903 Kuting Branch
100, Sec.3, Roosevelt Road, The City, Taiwan 10088, R.O.C.
0124003 Shuangyuan Branch
19, Tungyuan Street, The City, Taiwan 10864, R.O.C.
0124014 Wanhua Branch
482, Wanta Road, The City, Taiwan 10872, R.O.C.
0124106 Chiencheng Branch
22, Nanking W. Road, The City, Taiwan 886(2)25554161 10352, R.O.C.
0124117 Shihfu Branch
1, Shihfu Road, The City,Taiwan 11008,R.O.C.
0124209 Nankang Branch
195, Sanchung Road, The City, Taiwan 11501, R.O.C.
0124302 Chingmei Branch
64, Chingwen Street, The City, Taiwan 11670, R.O.C.
0124313 Hsinglung Branch
69, Sec.3, Hsinglung Road, The City,
Branches Address and Telephone Number Branch Name Address Taiwan 11694, R.O.C.
0124405 Neihu Branch
6, Lane 174,Sec.3, Chengkung Road, The 886(2)27961820 City, Taiwan 11460, R.O.C.
0124427 Wende Branch
42, Wende Road, The City, Taiwan 11475, 886(2)26582620 R.O.C.
0124508 Tunhua Branch
201, Tunhua N. Road, The City, Taiwan 10508, R.O.C.
0124542 Minsheng Branch
1631, Sec.5, Minsheng E. Road, The City, 886(2)27640853 Taiwan 10573, R.O.C.
0124601 Hsinyi Branch
299, Sec.4, Hsinyi Road, The City, Taiwan 886(2)27006381 10681, R.O.C.
0124612 Juangjing Branch
286, Juangjing Road, The City, Taiwan 11049, R.O.C.
The World Trade Center 13F, 333, Sec.1, Keelung Road, The City, 886(2)27252916 Branch Taiwan 11012, R.O.C.
0124704 Sungchiang Branch
200, Sungchiang Road, The City, Taiwan 886(2)25434282 10467, R.O.C.
0124807 Hoping Branch
236, Sec.2, Fuhsing S. Road, The City, Taiwan 10663, R.O.C.
0124900 Yenchi Branch
387, Sec.4, Jenai Road, The City, Taiwan 886(2)27527600 10693, R.O.C.
0125000 Chengchung Branch
7, Qingdao W. Road, The City, Taiwan 10041, R.O.C.
0125103 Nanmen Branch
5, Sec.1, Roosevelt Road, The City, Taiwan 10092, R.O.C.
0125206 Fuhsing Branch
234, Fuhsing N. Road, The City, Taiwan 886(2)25023530 10480, R.O.C.
0125309 Hsisung Branch
751, Sec.4, Nanking E. Road, The City, Taiwan 10550, R.O.C.
0125402 Changan Branch
82, Sungchiang Road, The City, Taiwan 10456, R.O.C.
0125505 Kueilin Branch
52, Kueilin Road, The City, Taiwan 10849, 886(2)23026226 R.O.C.
0125701 Tunho Branch
77, Sec.2, Tunhua S. Road, The City, Taiwan 10682, R.O.C.
0125804 Tungmen Branch
69, Sec.2, Jenai Road, The City, Taiwan 10062, R.O.C.
0125907 Chunglun Branch
6, Fuhsing N. Road, The City, Taiwan 10492, R.O.C.
Branches Address and Telephone Number Code Branch Name Address 21, Sec.2, Keelung Road, The City, 0126007 Keelung Road Branch Taiwan 11052, R.O.C.
0126100 Chinhua Branch
178, Sec.1, Hoping E. Road, The City, Taiwan 10645, R.O.C.
0126203 Sungnan Branch
412, Sec.5, Chunghsiao E. Road, The City, 886(2)27255111 Taiwan 11061, R.O.C.
0126214 Huaisheng Branch
215, Sec.3, Chunghsiao E. Road, The City, 886(2)27818380 Taiwan 10655, R.O.C.
0126306 Minchuan Branch
37, Sec.3, Minchuan E. Road, The City, Taiwan 10476, R.O.C.
0126409 Chilin Branch
146, Chilin Road, The City, Taiwan 10459, 886(2)25681248 R.O.C.
0126502 Shetzu Branch
225, Sec.5, Yengping N. Road, The City, 886(2)28168585 Taiwan 11171, R.O.C.
0126605 Kaohsiung Branch
358, Chungshan 2nd Road, Kaohsiung City, Taiwan 80242, R.O.C.
0126683 Hsihu Branch
240, Sec.1, Neihu Road, The City, Taiwan 886(2)87511788 11493, R.O.C.
0126694 Haishan Branch
208, Sec.3, Chungyang Road, Tucheng 886(2)22677877 City, The County, Taiwan 23680, R.O.C.
0126708 Wanlung Branch
136, Sec.6, Roosevelt Road, The City, Taiwan 11674, R.O.C.
0126719 Chungkang Branch
160, Sec.1, Taichungkang Road, Taichung 886(4)23207711 City, Taiwan 40354, R.O.C.
0126720 Hsinchuang Branch
227, Hsintai Road, Hsinchuang City, The 886(2)29903366 County, Taiwan 24242, R.O.C.
0126731 Taoyuan Branch
33, Chunghua Road, Taoyuan City, Taoyuan County, Taiwan 33065, R.O.C.
0126742 Chengkung Branch
515, Chengkung Road, Tainan City, Taiwan 70057, R.O.C.
0126764 Sunglung Branch
1761,Sec.1, Keelung Road, The City, Taiwan 10072, R.O.C.
0126775 Houpu Branch
55, Sec.1, Nanya S.Road, Panchiao City, 886(2)29693388 The County, Taiwan 22060, R.O.C.
0126786 Hsinming Branch
582, Chungcheng Road, Chungli City, Taoyuan County, Taiwan 32047, R.O.C.
0126797 Sanchung Branch
36, Sec.2, Chunghsiao Road, Sanchung 886(2)89836868 City, The County, Taiwan 24162, R.O.C.
0126801 Fengyuan Branch
139, Hsiangyang Road, Fengyuan City,
Branches Address and Telephone Number Branch Name Address Taichung County, Taiwan 42080, R.O.C.
0126812 Shuangho Branch
696, Chingping Road, Chungho City, The 886(2)22438877 County, Taiwan 23559, R.O.C.
0126823 Kushan Branch
387, Huarong Road, Kushan District, Kaohsiung City, Taiwan 80454, R.O.C.
0126845 Fengcheng Branch
126, Minsheng Road, Hsinchu City, Taiwan 30043, R.O.C.
0126856 Changhua Branch
349, Sec.2, Chungshan Road, Changhua City, Changhua County, Taiwan 50065, R.O.C.
0126878 Yungho Branch
407, Deho Road, Yungho City, The County, Taiwan 23451, R.O.C.
0126890 The 101 Branch
5Fl., 45, Shihfu Road, The City, Taiwan 11001, R.O.C.
0127015 Shuanglien Branch
13, Sec.1, Minsheng E.Road, The City, Taiwan 10451, R.O.C.
Nanking East Road Branch
139, Sec.2, Nanking E.Road, The City, Taiwan 10485, R.O.C.
0127037 Tunpei Branch
138, Sec.3, Minsheng E.Road, The City, Taiwan 10596, R.O.C.
0127048 Jenai Branch
237, Sec.1, Chienkuo S.Road, The City, Taiwan 10657, R.O.C.
0127059 Hsinhsing Branch
1, Liouhe 1st Road, Kaohsiung City, Taiwan 80055, R.O.C.
0127060 Chungcheng Branch
476, Chungcheng Road, Taoyuan City, Taoyuan County, Taiwan 33047, R.O.C.
0127071 Taichung Branch
196, Sec.2, Liuchuan W. Road., Taichung 886(4)22221911 City, Taiwan 40357, R.O.C.
0127093 Sungshan Branch
421, Sungshan Road, The City, Taiwan 11083, R.O.C.
0127107 Tucheng Branch
100, Sec.1, Chungyang Road, Tucheng 886(2)22709898 City, The County, Taiwan 23664, R.O.C.
0127118 Tainan Branch
1666, Chungshan Road, Tainan City, Taiwan 70043, R.O.C.
0127129 Fengshan Branch
223, Tzeyu Road, Fengshan City, 886(7)7482088 Kaohsiung County, Taiwan 83074, R.O.C.
0127130 Chungli Branch
119, Sec.2, Chungpei Road, Chungli City, 886(3)4595766 Taoyuan County, Taiwan 32097, R.O.C.
0127152 Anho Branch
B1, 169, Sec.4, Jenai Road, The City,
Branches Address and Telephone Number Branch Name Address Taiwan 10686, R.O.C.
0127163 Chengyi Branch
279, Chengyi N. Road,Sanchung City, The 886(2)29806688 County, Taiwan 24146, R.O.C.
0127174 Tanan Branch
968, Sec.1, Chiehshou Road, Pate City, Taoyuan County, Taiwan 33442, R.O.C.
0127185 Chiayi Branch
395, Jenai Road, Chiayi City, Taiwan 60045, R.O.C.
0127196 Lingya Branch
39, Chunghua 4th Road, Kaohsiung City, 886(7)3318822 Taiwan 80245, R.O.C.
0127211 Panchiao Branch
266, Sec.1, Wenhua Road, Panchiao City, 886(2)22549999 The County, Taiwan 22041, R.O.C.
0127222 Pei Taichung Branch
333, Sec.4, Wenhsin Road, Taichung City, 886(4)22426222 Taiwan 40666, R.O.C.
0127233 Sanmin Branch
48, Tashuen 2nd Road, Sanmin District, Kaohsiung City, Taiwan 80787, R.O.C.
0127244 Chienkuo Branch
196, Sec.2, Chienkuo N. Road., The City, 886(2)25151775 Taiwan 10483, R.O.C.
0127255 Hsinchu Branch
141, Chungcheng Road, Hsinchu City, Taiwan 30051, R.O.C.
0127266 Hsintien Branch
266, Sec.2, Peihsin Road, Hsintien City, The County, Taiwan 23143, R.O.C.
0127277 Tienmu Branch
36, Tienmu E. Road, The City, Taiwan 11153, R.O.C.
0127288 Hsichih Branch
175, Sec.1, Tatong Road, Hsichih City, The County, Taiwan 22145, R.O.C.
0127299 Huanbei Branch
392, Huanpei Road, Chungli City, Taoyuan County, Taiwan 32070, R.O.C.
0127303 Yungkang Branch
856, Dawan Road, Yungkang City, Tainan 886(6)2736099 County, Taiwan 71070, R.O.C.
0127314 Hsiangyang Branch
9, Hsiangyang Road, The City, Taiwan 10046, R.O.C.
0127336 Wuku Branch
445, Huacheng Road, Hsinchuang City, The County, Taiwan 24253, R.O.C.
0127347 Hsinying Branch
301, Minchi Road, Hsinying City, Tainan 886(6)6569889 County, Taiwan 73047, R.O.C.
0127358 Pingtung Branch
459, Hoping Road, Pingtung City, 886(8)7336899 Pingtung County, Taiwan 90064, R.O.C.
0127369 Chienchen Branch
289, Paotai Road, Chienchen District, Kaohsiung City, Taiwan 80643, R.O.C.
Branches Address and Telephone Number Code Branch Name Address 108, Sec.1, Tunhua S. Road, The City, 0127370 Tunnan Branch Taiwan 10557, R.O.C.
0127381 Paosheng Branch
3, Paosheng Road, Yungho City, The County, Taiwan 23444, R.O.C.
0127392 Yuanlin Branch
596, Chukuang Road, Yuanlin City, 886(4)8369189 Changhua County, Taiwan 51052, R.O.C.
0127406 Luotung Branch
286, Hsintung Road, Luotung Town, Ilan 886(3)9566611 County, Taiwan 26541, R.O.C.
0127417 Juihu Branch
62, Juihu Street, The City, Taiwan 11494, 886(2)26591088 R.O.C.
0126753 Chientan MiniBranch
116, Sec.4, Chengteh Road, The City, Taiwan 11167, R.O.C.
0126834 Kaiyuan MiniBranch
536, Chunghua Road, Yungkang City, Tainan County, Taiwan 71079, R.O.C.
0126867 Tunghu MiniBranch
25, Tunghu Road, The City, Taiwan 11487, R.O.C.
0126889 Wuchia MiniBranch
493, Wuchia 2nd Road, Fengshan City, 886(7)8223111 Kaohsiung County, Taiwan 83091, R.O.C.
0127428 Chiho MiniBranch
1721, Sec.2, Keelung Road, The City, Taiwan 10675, R.O.C.
0127439 Nanchang MiniBranch
65, Sec.1, Hoping W. Road, The City, Taiwan 10078, R.O.C.
0122043 Kuting Accounting Office
4Fl., 8, Sec.1, Roosevelt Road, The City, 886(2)23926508 Taiwan 10074, R.O.C.
Nankang Accounting Office
0124416 Neihu Accounting Office
2Fl., 360, Sec.1, Nankang Road, The City, 886(2)27831442 Taiwan 11579, R.O.C. 992, Sec.6, Minchuan E. Road, The City, 886(2)27915130 Taiwan 11466, R.O.C. (0021212)
Los Angeles Branch
14TH FLOOR, 100 WALL STREET NEW YORK,NY 10005 U.S.A
New York Agency
33RD FLOOR,SUITE #3300 700 SOUTH (0021213) FLOWER STREET LOS ANGELES 2369151 CA90017 U.S.A
Hong Kong Branch
34TH FLOOR 9 QUEEN’S ROAD, CENTRAL HONG KONG
London Representative Office
1 BEAUFORT GARDENS
LONDON NW4 3QN,U.K
Appendix Annual Financial Report for 2004 and 2003
INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders TAIPEIBANK Co., Ltd. We have audited the accompanying balance sheets of TAIPEIBANK Co., Ltd. (the “Bank”) as of December 31, 2004 and 2003 and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are responsibility of the Bank’s management. Our responsibility is to express an opinion on these statements based on our audits. We conducted our audits in accordance with the Rules Governing the Auditing and Certification of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TAIPEIBANK Co., Ltd. as of December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in conformity with Criteria Governing the Preparation of Financial Reports by Public Banks (effective January 1, 2004), Criteria Governing the Preparation of Financial Reports by Securities Issuers (applicable for 2003) and accounting principles generally accepted in the Republic of China. As described in Note 3, sales and purchases of bonds and shortterm bills under agreements to repurchase or to resell were treated as outright sales or purchases in 2003. In 2004, under the Criteria Governing the Preparation of Financial Reports by Public Banks effective January 1, 2004, the repurchase/resell transactions are treated as financing. January 28, 2005 Notice to Readers The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chineselanguage auditors’ report and financial statements shall prevail.
TAIPEIBANK CO., LTD. BALANCE SHEETS DECEMBER 31, 2004 AND 2003 (In Thousands of New Taiwan Dollars and Shares, Except Par Value)
ASSETS CASH AND CASH EQUIVALENTS (Notes 2 and 4) DUE FROM CENTRAL BANK OF CHINA AND BANKS (Notes 2 and 5)
2004 Amount $ 14,270,170
2 $ 10,565,939
RECEIVABLES, NET (Notes 2 and 7)
BONDS AND SHORTTERM BILLS PURCHASED UNDER AGREEMENTS TO RESELL (Note 2)
SECURITIES PURCHASED, NET (Notes 2 and 6)
LIABILITIES Due to Central Bank of China Due to banks (Note 11) Payables (Note 12) Bonds and shortterm bills sold under agreements to repurchase (Note 2) Advances Deposits and remittances (Note 13) Bank debentures (Note 14) Borrowed funds Longterm liabilities (Notes 2 and 15) Other liabilities (Notes 2 and 16) Total liabilities
BILLS, DISCOUNTS AND LOANS, NET (Notes 2 and 8) LONGTERM INVESTMENTS (Notes 2 and 9) Investments in shares of stock accounted by the equity method Investments in shares of stock accounted by the cost method Investments in bonds
173,729 3,411,543 8,155,963
Advances on acquisitions of equipment
4,904,528 3,828,278 1,854,620 149,504 484,394 11,221,324 2,305,690 8,915,634 112,074
1 1 2 1 1
4,801,358 3,636,672 1,543,740 157,338 510,660 10,649,768 2,086,360 8,563,408
1 1 1
Net property and equipment
OTHER ASSETS, NET (Notes 2 and 10)
100 $ 692,895,352
Longterm investment, net OTHER FINANCIAL ASSETS (Note 2) PROPERTY AND EQUIPMENT (Note 2) Land Buildings and improvements Computers and peripheral equipment Transportation and communication equipment Miscellaneous equipment Less accumulated depreciation
LIABILITIES AND SHAREHOLDERS’ EQUITY
SHAREHOLDERS’ EQUITY Capital stock $10 par value Authorized and issued 2,337,745 shares Capital surplus: Paidin capital in excess of par value Donation Total capital surplus Retained earnings: Legal reserve Special reserve Unappropriated earnings Total retained earnings Cumulative translation adjustments Total shareholders’ equity
370,700 25,795,257 16,605,744 12,367,104 1,310,264 492,385,416 36,500,000 16,739,118 1,616,136 1,630,311
$ 869,023 4 18,802,051 2 14,151,435 2 1,060,544 75 521,756,562 6 29,300,000 3 54,962,880 1,721,206 1,102,205
3 2 76 4 8
6,799,200 305 6,799,505
6,799,200 305 6,799,505
14,524,511 1,285,676 4,560,207 20,370,394 15,651
2 1 3
13,244,176 1,285,676 4,391,587 18,921,439 71,050
2 1 3
100 $ 692,895,352
CONTINGENCIES AND COMMITMENTS (Notes 2 and 24)
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 28, 2005)
TAIPEIBANK CO., LTD. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In Thousands of New Taiwan Dollars, Except Earning Per Share) 2004 Amount OPERATING INCOME Interest (Note 2) $ 13,816,860 Service fees (Note 2) 5,874,521 Sales of silver coins Securities brokerage commissions 735 Net gain on trading of securities purchased 2,345,021 Income from longterm equity investments under the equity method, net (Notes 2 and 9) 135,256 Foreign exchange gain, net (Note 2) 341,505 Income from longterm equity investments, net 119,886 Net gain on derivative financial instrument (Notes 2 and 27) 194,464
61 $ 14,907,081 26 5,106,645 8 36,220 10 3,540,480
60 21 14
152,886 148,030 559,558
1 1 2
7,435,369 2,461,146 3,306
3,430,699 (393,930 )
14 (2 )
OPERATING EXPENSES (Note 19)
NONOPERATING INCOME AND GAINS
NONOPERATING EXPENSES AND LOSSES
INCOME BEFORE INCOME TAX
INCOME TAX (Notes 2 and 18)
19 $ 4,267,783
Total operating income OPERATING COSTS Interest (Note 2) Service charges Securities brokerage commissions Provisions (reversal) for losses (Notes 2 and 8) Provision for bad debt expense Others Total operating costs GROSS PROFIT
Pretax EARNINGS PER SHARE (Note 20)
2004 After Tax
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 28, 2005)
2003 After Tax
TAIPEIBANK CO., LTD. STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In Thousands of New Taiwan Dollars, Except Par Value)
Capital Surplus (Notes 2 and 17) Capital Stock Authorized Paidin and Issued ($10 Par Capital in Value) Shares (Thousand s) BALANCE, JANUARY 1, 2003
BALANCE, DECEMBER 31, 2003
Par Value Donation
$ 6,799,200 305
Reserve $ 6,799,505 11,735,581
$ 2,337,745 23,377,452
$ 6,799,200 305
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 28, 2005)
$ 6,799,505 14,524,511
$ 1,285,676 5,139,017
Appropriations of earnings: Legal reserve Bonus to employees Remuneration to directors and supervisors Cash dividends Cumulative translation adjustments Net income in 2004 BALANCE, DECEMBER 31, 2004
$ 2,337,745 23,377,452
Appropriations of earnings: Legal reserve Bonus to employees Remuneration to directors and supervisors Cash dividends Cumulative translation adjustments Net income in 2003
Retained Earnings (Notes 2 and 17) Unappropriate Legal Special d Total $ 18,160,274
(1,508,595) (280,530 ) (70,132 ) (3,155,956) 4,267,783
(280,530 ) (70,132 ) (3,155,956 ) 4,267,783
(1,280,335) (238,996 ) (59,749 ) (2,688,703) 4,436,403
(238,996 ) (59,749 ) (2,688,703 ) 4,436,403
$ 1,285,676 4,560,207
Cumulative Translation Adjustment s
Total Shareholders (Notes 2 ’ and 17)
(55,399) $ 15,651
Equity $ 48,423,497
(280,530 ) (70,132 ) (3,155,956 ) (15,216 ) 4,267,783 49,169,446
(238,996 ) (59,749 ) (2,688,703 ) (55,399 ) 4,436,403 $ 50,563,002
TAIPEIBANK CO., LTD. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (In Thousands of New Taiwan Dollars) 2004
CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,436,403 $ 4,267,783 Depreciation and amortization 501,826 431,483 Amortization of deferred employee pension expense 809,219 882,780 Gain on sale of investments in shares of stock (99,269 ) (548,449 ) Loss (gain) on disposal of asset 4,436 (40,448 ) Equity in net loss (gain) of investee companies and cash (1,150 ) (127,846 ) dividends received Amortization of bonds’ premiums or discounts (1,028 ) 17,693 Provision (reversal of allowance) for losses on securities 490,425 (229,961 ) Provisions for losses 72,946 3,036,769 Collection of loan receivable writtenoff in prior years 777,319 191,805 Deferred income tax 113,734 (40,384 ) Changes in operating assets and liabilities Securities purchased for trading purposes (29,658,521) (34,274,704) Receivables (1,701,936 ) (257,680 ) Prepayments 129,580 89,721 Payables 2,454,309 379,619 Advances 249,720 (183,971 ) Accrued pension liability (211,806 ) (202,674 ) Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Decrease in securities purchased for investing purposes Increase in bonds and shortterm bills purchased under agreements to resell Decrease (increase) in loans, bills and discounts Decrease in due from Central Bank of China and banks Proceeds from disposal of investments in shares of stock Return of capital from investee Acquisition of property and equipment Proceeds from disposal of asset Increase in investment of stocks Increase in investments of bonds Decrease (increase) in other financial assets Increase in intangible assets Redemption of investments in bonds Increase in other assets Net cash provided by investing activities
(6,010,116 ) 53,867,913 32,769,374 227,200 1,050 (819,381 ) 501,557 (2,999,991 ) (7,154,935 ) (465,098 ) (171,311 ) (448,289 )
(6,536,449 ) 5,637,235 965,829 (315,793 ) 145,518 100,595 (238,481 ) 1,000,000 (75,635 )
2004 CASH FLOWS FROM FINANCING ACTIVITIES Decrease in due to Central Bank of China Increase (decrease) in due to banks Increase in bonds and shortterm bills sold under agreements to repurchase Increase (decrease) in deposits and remittances Increase (decrease) in borrowed funds Proceeds from bonds issued Increase in longterm liabilities Increase in other liabilities Payment of cash dividends Bonus to employees and remuneration to directors and supervisors Net cash provided by (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD
SUPPLEMENTAL INFORMATION Interest paid Income tax paid
NONCASH INVESTING ACTIVITIES Transfer of longterm investments in shares of stock to securities purchased Transfer of securities purchased to longterm investments in bonds
$ $ (498,323 ) (159,469 ) 6,993,206 (5,762,709 )
12,367,104 (29,371,146) 13,722,274 (38,223,762) 11,649,775 7,200,000 9,300,000 106,736 273,938 472,936 20,433 (2,688,703 ) (3,155,956 ) (298,745 )
(43,940,697) 25,537,624 (69,252 )
$ 7,464,464 $ 517,732
$ 8,170,963 $ 833,479
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated January 28, 2005)
TAIPEIBANK CO., LTD. NOTES TO FINANCIAL STATEMENTS (Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Stated)
1. ORGANIZATION AND OPERATIONS The Bank started as a financial institution for the The City Government (TCG) in 1969. On July 1, 1984, it was reorganized into a limited liability corporation and was renamed City Bank of The Co., Ltd. The Bank was subsequently renamed TAIPEIBANK Co., Ltd. on January 1, 1993. The Bank was privatized on November 30, 1999, through the sale of its shares of stock to the public, with the holdings of the TCG reduced to less than 50% of the Bank’s outstanding capital stock. On October 4, 2002, the extraordinary shareholders’ meeting resolved the acquisition proposal made by the Fubon Finance Holding Company (FFH) which the Bank became a wholly owned subsidiary of FFH. This acquisition was made through a share swap at the ratio of 1.1461 shares of Fubon Financial Holdings for every share of the Bank’s stock. The board of directors designated December 23, 2002 as the effective date of the share swap, as well as the date that the Bank’s stocks were delisted from the Taiwan Stock Exchange. To fully harness the synergy of two diversified business operations and strive for the goal on cost reduction, a decision was reached by the board of directors from the Bank and Fubon Bank Co., Ltd (a wholly owned subsidiary of FFH) on September 8, 2004 for the merger. At January 1, 2005, with the Bank as the surviving entity, the Bank will swap shares with Fubon Bank at ratio of 0.675:1, resulting in issuance of 1,475,372,270 shares of common stock by the Bank. A capital reduction of NT$10 billion will be expected following this merger. The Bank is engaged in the following: (a) all commercial banking operations authorized under the Banking Law; (b) trust operations; (c) handling of the public welfare lottery operations and (d) other authorized operations. In addition to the foregoing activities, the Bank continues to handle certain functions for the TCG that primarily include the acceptance of the payments for taxes, fines and other fees as well as payments of principal and interest on bonds issued by the TCG. The Bank has its head office in The City, and as of December 31, 2004, its four major operating departments and Banking, Trust, Lottery, and Public Treasury departments, with 85 branches (including one offshore banking unit (OBU), and 3 overseas branches), as well as 1 overseas representative office. The operations of the Bank’s Trust Department consist of: (1) planning, managing and operating of trust business; and (2) custodianship of nondiscretionary trust fund in domestic and overseas securities and mutual funds. The foregoing operations are regulated under the Banking Law. The number of employees of the Bank as of December 31, 2004 and 2003 was 2,506 and 3,205, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Bank’s financial statements were prepared in conformity with Criteria Governing the Preparation of Financial Reports by Public Banks (effective January 1, 2004), Criteria Governing the Preparation of Financial Reports by Securities Issuers (applicable for 2003) and accounting principles generally accepted in the Republic of China (ROC). These principles require the Bank to estimate significant accounts such as allowance for credit losses, depreciation, pension, losses upon suspended lawsuit and provision for losses on guarantees. Because circumstances are inherently uncertain, the estimates may vary from the actual amounts. Significant accounting policies of the Bank are summarized below: Basis of Financial Statements The accompanying financial statements include the accounts of the head office, the OBU and all branches and representative offices. All interoffice balances and transactions have been eliminated. Translation of the Financial Statements The financial statements of foreign branches and the OBU are translated into New Taiwan dollars using the following exchange rates: Assets and liabilities current rates; accumulated earnings historical rates; income and expenses weighted average rate for the period. The resulting translation adjustments are reported as “cumulative translation adjustments” in the balance sheets. Foreign Currency Transactions The transactions of the Bank that are denominated in currencies other than the functional currency of the overseas operating unit (the “foreign currency”) are recorded in their respective functional currencies at the exchange rates prevailing on the transaction date. Gains or losses, resulting from the application of different foreign exchange rates towards settlements of foreign currency assets and liabilities, are either credited or charged to income in the period which they occurred. At the end of each month, the balances of the foreign currencydenominated assets and liabilities (other than those on forward contracts) are adjusted using the prevailing exchange rates published by the Central Bank of China or the local foreign exchange market, with the related gains and losses reflected in income. Securities Purchased Securities purchased are stated at cost less allowance for losses on decline in market value below carrying value, which is charged to current income. The allowance is reversed when the market value recovers, and this reversal is recognized as income. Market prices are determined as follows: (a) listed stocks average daily closing prices for the last month of the accounting period; (b) overthecounter (OTC) stocks and convertible bonds average daily closing prices for the last month of the accounting period published by the GreTai Securities Market (the OTC securities exchange); (c) beneficiary certificates (openend fund), net asset values as of the balance sheet dates; (d) shortterm bills dealing price on the balance sheet date; and (e) domestic bonds reference prices on the balance sheet day published by the OTC exchange. When securities purchased are reclassified as heldtomaturity investments, the values of the
securities are recorded at lower of the aggregated cost or market value with losses being recognized immediately. Costs of securities sold are determined using the weightedaverage method, except for costs of shortterm bills which are determined using the specific identification method. Sales and purchases of bonds and shortterm bills under agreements to repurchase or to resell are treated as financing (refer to Note 3). Nonperforming Loans Pursuant to “The Rules for Bank Asset Evaluation, Loss Reserve Provision, and Disposal of Overdue Loans and Bad Debts” (the “Rules”) issued by the MOF, the balances of loans and other credits extended by the Bank and the related accrued interest are classified as nonperforming when the loan is six months overdue. Accrual of interest is suspended and realizability is evaluated. Allowance for Possible Losses and Reserve for Losses on Guarantees In determining the allowance for credit losses and provision for losses on guarantees, the Bank assesses the collectibility on the balances of loans, discounts and bills purchased, accounts, interest, acceptances and other receivables, and nonperforming loans, as well as guarantees as of the balance sheet dates. Pursuant to “The Rules for Bank Asset Evaluation, Loss Reserve Provision, and Disposal of Overdue Loans, Nonaccrual Loans and Bad Debts” issued by the Ministry of Finance (MOF), the Bank evaluates the collectibility of its loan portfolio based on its clients’ financial positions, their payment histories and timeliness of repayments on principles and interests. Debts and guarantees with specific risks are evaluated internally for their collaterals, collectibility and customers’ overall credit. The Bank makes full provisions for credits deemed uncollectible and makes provisions of at least 50% of credits for the credits with high uncollectibility in accordance with guidelines issued by the MOF. Loans or credits deemed uncollectible are written off against the allowance for credit losses only if the writeoffs are approved under a resolution issued by the Board of Directors. Investments in Shares of Stock Investments in companies wherein the Bank exercises significant influence on their operating and financial policy decisions are accounted for by the equity method. Under the equity method, the investments are carried at cost on the acquisition date and subsequently adjusted for the Bank’s equity in the investees’ net income or loss. Any cash dividends received are accounted for as reduction in the carrying values of the investments. When the investment is acquired or when the equity method is first adopted, the difference between the investment cost and the Bank’s equity in the investee’s net asset is amortized over 10 years. Other investments in shares of stocks with no quoted market price are accounted for at cost. The carrying amount of the investment is reduced to reflect a decline of market values other than temporary below carrying values, with the related losses charged to current income. Other investments in shares of stock with quoted market price are stated at the lower of cost or
market. The reduction of the carrying value of an investment to reflect a lower market value and its writeup due to the subsequent recovery in market value are charged or credited to stockholders’ equity, respectively. Cash dividends received after the acquisition year are recorded as investment income. For both equitymethod and costmethod investments, stock dividends received are accounted for only as increases in the number of shares held. Costs of investments sold are determined using the weightedaverage method. For the listed and overthecounter stock investments reclassified from longterm investments to securities purchased, when the market value is lower than the carrying amount, a realized loss for market value decline is recognized and the related cost is recorded at market value. Investments in Bonds Investments in bonds are stated at cost. Premium or discount is amortized (as a charge or credit to interest income) using the straightline method over the remaining terms of the bonds. Property and Equipment Property and equipment are stated at cost. Major renewals, additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation is calculated using the straightline method over service lives estimated as follows (plus one year to represent estimated residual value): Buildings and improvements, 60 years; computers and peripheral equipments, 3 to 15 years; transportation and communication equipments, 3 to 10 years; and miscellaneous equipments, 3 to 20 years. Property and equipment that have reached their full residual value but are still in use, are depreciated over their newly estimated lives. The cost and accumulated depreciation are removed from the accounts when an item of property is disposed of, and any gain or loss is credited or charged to nonoperating income or expenses. Collaterals Assumed Collaterals assumed (part of other assets) are recorded cost of acquisition and revalued at the lower of cost or net realizable value on the balance sheet date. Operating Leases The Bank has operating lease agreements on the office spaces used by its branches. The imputed interest on lease deposits (included as part of other financial assets), computed using the interest rate on oneyear time deposit, is charged to business expenses rent and credited to interest income. Pension As part of its privatization on November 30, 1999, the Bank fully paid its entire pension obligations to all employees under relevant regulations. The portion of the payments made pertaining to unfunded and unaccrued pension obligations deferred as other assets in accordance
with the directive from the Executive Yuan. The amount deferred is being amortized over five years starting December 1999. Pension costs on defined benefit plans are determined based on actuarial calculations. Unrecognized net transition obligation is amortized over the average remaining service years of employees. Interest Revenue and Service Fees Interest revenue on loans is recorded using the accrual method. No interest revenue is recognized in the accompanying financial statements on loans and other credits extended by the Bank that are classified as nonperforming loans. The interest revenue on those loans/credits is recognized upon collection. Under the regulations of the Ministry of Finance, the interest revenue on credits covered by agreements that extend their maturity recorded as deferred revenue (included as other liabilities) and recognized as revenue upon collection. Service fees are recorded as income upon receipt and substantial completion of activities involved in the earnings process. Income Tax Deferred tax assets are recognized for the tax effects of deductible temporary differences, loss carryforwards, and unused investment credits, and deferred tax liabilities are recognized for the tax effect of taxable temporary differences. Valuation allowance is provided for deferred tax assets that are not expected to be realized. Income tax credits for eligible equipment or technology acquired, expenses of personnel training, R&D expenditures and investments in shares of stock are recognized in the period which those acquisitions or expenses occured. Income tax on interest from shortterm negotiable instruments, which is levied separately, and any adjustments of income taxes of prior years are added to or deducted from the current year’s tax provision. Income taxes (10%) on unappropriated earnings are recorded as income tax in the year when the shareholders have resolved that the earnings shall be retained. The Bank, Fubon Financial Holding and its subsidiaries selected the linked tax system for income tax filings since 2003. Under the related rules, the accounting procedure is reasonable and applied systematically on a consistent basis. The related contributions or payments are accrued as receivables or payables, respectively. Foreign Exchange Forwards Foreign exchange forward contracts used in the Bank’s trading activities are accounted for as follows: Foreigncurrency assets and liabilities on forward exchange contracts for trading purposes are recorded at contracted forward rates on the contract starting dates. Gains or losses arising from
the differences between the contracted forward rates and spot rates on settlement are credited or charged to current income. For contracts outstanding as of the balance sheet dates, the gains or losses arising from the differences between the contracted forward rates and the forward rates available for the remaining maturities of the contracts are credited or charged to related receivables or payables as of the balance sheet dates. Nondelivery forward contracts do not involve exchanges of principal upon settlement. Gains or losses arising from the differences between the contracted interest rates and actual interest rates upon settlement or as of the balance sheet dates are credited or charged to current income. Foreign Currency Swaps Foreigncurrency swap contracts are used to support the Bank’s need for various foreign currencies. Amounts exchanged at the contract dates are recorded at their spot rates where the amounts that will be exchanged at the settlement dates are recorded at the forward rates. Gains or losses arise from the differences between spot rates and contracted rates are amortized using the straightline method over the term of the contract and are credited or charged to interest income or expense. On balance sheet dates, the balances of the receivables and payables under the contracts are netted out, and the resulting amount is classified either as an asset or a liability. Crosscurrency Swap Crosscurrency swap contracts, which are used for trading purposes, are recorded at their spot rates on the contract dates. The net interest received or paid is either recognized as interest income or expense. On the balance sheet dates, the forward currency receivables or payables on crosscurrency swap are restated at the prevailing spots rates and the resulting differences credited or charged to current income. Beginning of year 2003, the values of crosscurrency swap contracts are marked to market on balance sheet date. Asset Swaps Asset swap contracts for nontrading purpose involve in the exchange of interest payments on fixedrate bonds and stock conversion rights of convertible bonds for floatingrate interest. On each settlement date/balance sheet date, gains or losses on the differences between these rates are recorded as adjustments to interest income associated with the bonds being hedged. Interest Rate Futures Margin deposits paid by the Bank on futures contracts for trading purpose are recognized as assets. Both unrealized gain or loss arising from changes in market value of future contracts on the balance sheet dates, and realized gain or loss calculated on contract settlement date or from early settlement, are recognized as current income or loss. Options The amounts received from options written and amounts paid on options bought for trading purposes are recognized as liability and asset, respectively. The outstanding contracts are marked to market on the balance sheet dates with any gain or loss arising from the revaluation shown as “net gain or loss on derivative financial instruments.” The gains or losses from the exercise of the options are charged to the current period.
The amounts received by the Bank on options written and amounts paid on options bought for nontrading purposes are recognized as liability and asset, respectively. Gains or losses from the exercise of the option contracts are charged to income or as adjustment to carrying amounts of the items hedged. Forward rate Agreements Forward rate agreements, which are entered into for accommodating clients’ need or minimizing Bank’s exposures, are not recognized as assets or liabilities since such agreements do not require the exchange of notional amounts on the contract dates. On the settlement date or balance sheet dates, any gains or losses resulting from the differences between contracted rate and market rate are credited or charged to income. Interest Rate Swaps The Bank enters into interest rate swap agreements for trading purposes. Interest rate swaps do not involve exchanges of the notional principals, which are recorded on the contract dates using memorandum entries. The interest received or paid at each settlement date is recognized as interest income or expense. The outstanding agreements for trading purposes are marked to market on balance sheet dates. For swaps entered into for hedging purposes, the net interest on each settlement is recorded as an adjustment to interest income or expense associated with the item being hedged. Credit Default Swaps Credit default swaps involve paying premium to transfer credit risk of denominated entities to third party. Such transactions are recorded by memorandum entries at the contract dates. The premium paid or accrued by the Bank for a credit default swap contract on each settlement or balance sheet date is recorded as current expense. Contingencies A loss is recognized when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If the amount of loss cannot be reasonably estimated and the loss is possible, the circumstances that might give rise to the loss are disclosed in notes of the financial statements. Reclassifications Certain accounts for the years ended December 31, 2003 have been reclassified to conform to the comparative period of 2004 classifications.
3. ACCOUNTING CHANGES Under a directive issued by the MOF, the accounting treatment for sales and purchases of bonds and shortterm bills under agreements to repurchase or to resell were treated as outright sales or purchases. Effective January 1, 2004, the accounting treatment of the aforementioned transactions are reclassified as financing under the “Criteria Governing the Preparation of Financial Reports by Public Banks”. For the year ended December 31, 2004, the effect of this
accounting change resulted in an increase of income before income tax by $130,621. With high volumes of transaction on repurchase and resell of bonds and bills executed by the Bank on daily basis and several updates on the Bank’s accounting systems, calculation for the cumulative effects of change in accounting principle was unable to carried out as tracing historic trading data is deemed difficult. On the basis of foregoing reasons, neither the cumulative effect of change in accounting principle, nor the pro forma information was disclosed.
4. CASH AND CASH EQUIVALENTS December 31 2004 2003 $ 6,108,339 $ 4,568,645 4,233,937 3,847,209 3,927,894 2,150,085 $ 14,270,170 $ 10,565,939
Cash on hand Checks for clearing Due from Banks deposits
5. DUE FROM CENTRAL BANK OF CHINA AND BANKS
Call loans Deposit reserve checking account Required deposit reserve Reserves for deposit foreigncurrency deposits Deposit in Central Bank of China Others
December 31 2004 2003 $ 33,642,181 $ 55,805,177 3,302,023 10,340,647 11,464,320 10,881,431 41,299 50,997 82,396 4,206,663 600,686 617,364 $ 49,132,905 $ 81,902,279
The required deposit reserve are determined monthly at prescribed rates for daily average balances of customers’ New Taiwan dollardenominated deposits and are subject to withdrawal restrictions. The reserves checking account and foreigncurrency deposit reserves may be withdrawn anytime and are noninterest earning.
6. SECURITIES PURCHASED, NET December 31 2004 2003 $ 186,950,623 $ 144,416,935 16,076,900 29,055,702 8,961,174 4,743,534 5,831,044 5,423,318 3,158,027 5,944,559 3,150,000 3,150,000 1,208,286 1,911,935 13,398 10,346,918 12,113,761 235,682,972 206,773,142 607,170 126,318 $ 235,075,802 $ 206,646,824
Negotiable certificates of deposits Commercial paper Government bonds Stocks and beneficiary certificates Treasury notes Bank debentures Corporate bonds Acceptance Foreign investments Less allowance for decline in value
As of December 31, 2004, some of the foregoing securities purchased, which amounted to $7,331,390, had been sold under agreements to repurchase.
7. RECEIVABLES, NET
Accrued interest Acceptances Accrued income Accounts receivable Accounts receivable sales of nonperforming loans Refundable income tax Others Less allowance for possible losses
December 31 2004 2003 $ 2,707,269 $ 2,062,756 2,242,185 1,522,652 967,487 748,160 897,689 1,582,778 406,875 19,349 251,430 1,193,057 568,013 8,433,911 6,735,789 217,012 258,746 $ 8,216,899 $ 6,477,043
8. BILLS, DISCOUNTS AND LOANS, NET December 31 2004 2003 $ 7,854,293 $ 28,150,332 29,291,120 24,280,576 24,870,070 35,919,283 54,605,930 51,241,992 38,922,139 32,532,585 35,905,692 33,052,096 124,855,153 163,684,936
Discount and overdraft Shortterm loan Shortterm secured loan Mediumterm loan Mediumterm secured loan Longterm loan Longterm secured loan
Bill purchased and discount, import and export bills Overdue loans Less allowance for possible losses
December 31 2004 2003 $ 1,633,627 $ 1,912,295 4,762,420 8,236,407 322,700,444 379,010,502 2,825,240 3,974,448 $ 319,875,204 $ 375,036,054
The Bank has not accrued any interest on the entire balance of the overdue loans shown above. The unrecognized interest revenue on the above loans amounted to $223,356 and $569,985 for the years ended December 31, 2004 and 2003, respectively. For the years ended December 31, 2004 and 2003, no loans were written off without executing the required legal proceedings were executed against defaulted borrowers. The changes in allowance for possible losses on loans, bills and discounts (including receivables shown in Note 7) are summarized below:
Balance, January 1, 2004 Provisions (reversal) Writeoff Recovery of writtenoff credits Effects of exchange rate changes Balance, December 31, 2004
For the Years Ended December 31, 2004 Specific General Total Risk Risk $ 3,000,118 $ 1,233,076 $ 4,233,194 (18,237 ) 35,247 17,010 (1,977,543) (1,977,543) 777,319 777,319 (7,728 ) (7,728 ) $ 1,773,929 $ 1,268,323 $ 3,042,252
Balance, January 1, 2003 Provisions Writeoff Recovery of writtenoff credits Effects of exchange rate changes Reclassifications Balance, December 31, 2003
For the Years Ended December 31, 2003 Specific General Total Risk Risk $ 2,749,764 $ 739,614 $ 3,489,378 2,937,237 493,462 3,430,699 (2,871,937) (2,871,937) 191,805 191,805 (4,754 ) (4,754 ) (1,997 ) (1,997 ) $ 3,000,118 $ 1,233,076 $ 4,233,194
9. LONGTERM INVESTMENTS December 31 2004 2003 Percentage Percentage Carrying of Owner Carrying of Owner Value ship Value ship Investment in shares of stock Equity method unlisted TAIPEIBANK Life Insurance Agency Company Ltd. Cost method Listed Chunghwa Telecom Co., Ltd. Formosa Petrochemical Corp. China Steel Corporation Formosa Chemicals & Fiber Corporation Mega Financial Holding Co., Ltd. Waterland Financial Holdings Others Unlisted Taiwan Asset Management Co. P.K. Venture Capital Investment Corp. Taiwan Financial Asset Service Co. Financial Information Service Co., Ltd. Shang Yang Venture Capital Corp. The Smart Card Corp. Modex Taiwan Inc. Others
Investment in bonds Domestic Foreign
876,917 715,671 508,628 424,290 388,710 85,775 2,999,991
0.15 0.15 0.15 0.15 0.16
100,000 75,000 50,000 45,500 40,000 25,000 25,000 51,052 411,552 $ 3,411,543
0.57 5.00 2.94 1.14 4.28 5.00 0.47
100,000 75,000 50,000 45,500 40,000 25,000 25,000 52,102 412,602 $ 841,843
0.57 5.00 2.94 1.14 4.28 5.00 6.47
$ 6,744,432 1,411,531 $ 8,155,963
The decision to reclassify investments in Waterland Financial holding form longterm investments to securities purchased was approved by the board of directors on June 28, 2004. The market value of the listed stocks, based on the average daily closing price in December 2004 and 2003, were $3,019,228 and $631,957, respectively. The gain from equitymethod investments were as follows: December 31 2004 2003 TAIPEIBANK Life Insurance Agency Company Ltd. Fuh Hua R.E.M.C.
135,256 $ 135,256 $
149,329 3,557 152,886
The carrying value of the equitymethod investments and the related equity in their net income were calculated on the basis of audited financial statements. Consolidated financial statements was not prepared as the individual assets and incomes of the investee was less than 10% of the Bank’s total asset or income and their combined assets and incomes were less than 30% of the Bank’s total assets or income. As of December 31, 2004, some of the foregoing bonds purchased under agreements to resell, which amounted to $3,744,432, had been sold under agreements to repurchase.
10. OTHER ASSETS, NET
Prepaid pension Deferred income tax assets (Note 18) Collateral assumed Deferred employee pension (Note 21) Others
December 31 2004 2003 419,628 $ 57,879 171,613 2,259 39,737 809,219 111,012 122,555 590,778 $ 1,143,124
11. DUE TO BANKS December 31 2004 2003 $ 24,753,184 $ 18,142,204 870,232 285,001 171,841 374,846 $ 25,795,257 $ 18,802,051
Call loans Overdrafts Deposits
12. PAYABLES December 31 2004 2003 $ 4,231,053 $ 3,841,188 2,604,150 2,320,733 2,287,477 1,544,512 1,926,329 1,389,285 408,543 502,324 5,148,192 4,553,393 $ 16,605,744 $ 14,151,435
Checks for clearing Accrued interest Acceptances Accrued expenses and taxes Accounts and notes Others
13. DEPOSITS AND REMITTANCES December 31 2004 2003 Deposits Savings Time Checking Demand Negotiable certificates of deposit Remittances
$ 285,633,166 $ 285,201,715 97,680,932 116,286,795 55,583,082 71,146,059 51,791,830 47,226,501 1,512,200 1,746,000 184,206 149,492 $ 492,385,416 $ 521,756,562
14. BANK DEBENTURES To maintain its capital adequacy ratio and the medium to longterm capital supply, the Bank applied to the Bureau of Monetary Affairs of the Ministry of Finance for approval on issuance of bank debentures. The authorized amount was NT$60,000 million.
911 three years, 3.2% interest rate; maturity: May 7, 2005 912 four or five years, inverse floating interest rate, maturity: June 10, 2006 or June 10, 2007 913 five years, inverse floating interest rate, maturity: October 1, 2007 921 ten years, inverse floating interest rate; maturity: July 31, 2013 922 five or seven years, 1.4% interest rate and inverse floating interest rate; maturity: September 1, 2008 or September 1, 2010 923 five years, inverse floating interest rate; maturity: January 8, 2009 924 Seven or ten years, inverse floating interest rate; maturity: March 19, 2011 or March 19, 2014 925 Seven years, inverse floating interest rate; maturity: March 19, 2011
December 31 2004 2003 $ 5,000,000 $ 5,000,000 10,000,000 5,000,000 5,000,000
10,000,000 5,000,000 5,000,000
1,300,000 $ 36,500,000 $ 29,300,000
15. LONGTERM LIABILITIES December 31 2004 2003 Fund obtained from government intended for specific types of loans $ 1,616,136 $ 1,509,400 Accrued pension cost 211,806 $ 1,616,136 $ 1,721,206
16. OTHER LIABILITIES December 31 2004 2003 $ 600,881 $ 92,844 597,839 692,556 72,883 36,396 23,735 6,058 20,255 71,253 314,718 203,098 $ 1,630,311 $ 1,102,205
Value of options sold Guarantee and marginal deposits Reserve for losses on guarantees Reserve for losses on contingency Deferred revenue Others
17. SHAREHOLDERS’ EQUITY The shareholders’ meeting approved the appropriations of 2003 and 2002 earnings in May 2004 and July 2003, respectively, as follows: Appropriations of Earnings 2003 2002 Legal reserve Cash dividends Remuneration to directors and supervisors Bonus to employees cash
$ 1,280,335 $ 1,508,595 2,688,703 3,155,956 59,749 70,132 238,996 280,530 $ 4,267,783 $ 5,015,213
Per Share (NT$) 2003 2002
Assuming the bonus to employee and remuneration to director and supervisors were recognized as an expense, the EPS of the bank for 2003 would decrease from $1.83 to $1.70. As of January 28, 2005, the auditor’s report date, the appropriation of earning in 2004 had not been resolved by the board of directors. Information on this appropriation can be accessed through the Market Observation on the website of the Taiwan Stock Exchange. Under the Company Law and related regulations, capital surplus may only be used to offset a deficit generally. However, capital surplus arising from the issue of stock in excess of par value, stock issuance to effect a merger, reissuance of treasury stock or donation may also be declared as stock dividend within specified limits in accordance with a guideline issued by the Securities and Futures Bureau. The board of directors amended the Bank’s Articles of Incorporation on December 23, 2002. This amendment provides that the following shall be appropriated from the annual net income, less any deficit: a. 30% as legal reserve; b. 10% as special reserve, if necessary for the Bank’s operation; c. 90% as dividends, 8% as bonus to employees and 2% as remuneration to directors and supervisors of all or part of the remainder and unappropriated earnings generated in prior years, as determined by the board of directors. Appropriations of earnings should be resolved by the shareholders in the following year and
given effect in the financial statements of that year. Under the Financial Holdings Company Law, the Bank’s board of directors takes the functions of shareholders as regulated by the Company Law. Under the Company Law, legal reserve should be appropriated until the reserve equals the Bank’s paidin capital. This reserve may only be used to reduce or offset a deficit. When the reserve reaches 50% of the Bank’s paidin capital, up to 50% may be capitalized. The Banking Law limits the appropriation of all dividends to 15% of the Bank’s paidin capital if the legal reserve equals the Bank’s paidin capital.
18. INCOME TAX Fubon Financial Holding Co., Ltd. adopted the linkedtax system for income tax filing with its qualified subsidiaries, including the Bank. Income tax information is as follows: a. Income tax expense
Current income tax payable Separate taxes on interest revenue on shortterm bills Deferred income tax expense Tax (10%) on unappropriated retained earnings Adjustment of prior years’ tax Income tax
For the Years Ended December 31 2004 2003 $ 555,205 $ 67,704 422,430 372,244 113,734 (40,384 ) 13,394 (3,200 ) (1,785 ) $ 1,088,169 $ 411,173
b. Reconciliation of tax on pretax income at statutory rate and current income tax payable December 31 2004 2003 Tax on pretax income at 25% statutory rate $ 1,381,133 $ 1,169,729 Add (deduct) tax effects of: Taxexempt income (277,759 ) (588,823 ) Permanent difference (427,637 ) (531,384 ) Temporary difference (120,532 ) 18,182 Current income tax payable $ 555,205 $ 67,704 c. Components of deferred income tax assets (included in “other assets”) as of December 31, 2004 and 2003. December 31 2004 2003 Deferred income tax assets: Unrealized donation $ 50,731 $ 30,347 Pension 40,293 Exceed for credit loss in tax limitation 98,535 Others 7,148 2,438 $ 57,879 $ 171,613
Taxable income from all sources is subject to income tax. Foreign income taxes paid, to the extent of the domestic income tax applicable to the foreignsource income, are tax deductions against the domestic income tax liabilities. d. Imputed tax credit
Balance of stockholders’ imputed tax credit
The ratio of imputed tax credit to earnings
December 31 2004 2003 340,051 $ 153,425
2004 （Projected) 10.45%
2003 (Actual) 6.02%
The actual creditable tax ratio to be used in distributing earnings generated as of December 31, 2004 will be determined on the date of dividend distribution. Thus, the expected creditable tax ratio may change depending on the ICA balance on the dividend distribution date. The balance unappropriated retained earnings prior to June 30, 1998 was $1,396,288 for both periods ended December 31, 2004 and 2003. The above amount included the amounts shown as special reserve amounting $1,285,676. e. Income tax returns through 2002 have been examined by the tax authority. The Bank has settled two lawsuits with the tax authority in regards to tax deduction of 10% of accrued bond interest in year 2000 and 2001, and received a tax refund in the amount of $27,877. The agreed upon tax deduction between two parties was at 65% of the tax paid on accrued bond interest. In light of the legal settlements, the Bank has accrued 35% of the tax paid on accrued bond interest in 2004 and 2003 or $9,454 as tax expense.
19. PERSONNEL, DEPRECIATION AND AMORTIZATION January 1 to December 31 2004 Included in Included in Branch General and and Operating Adminis Department tration Personnel Salaries Labor and health insurance Pension cost Others Depreciation Amortization Others
2003 Included in Included in Branch General and and Operating Adminis Department tration
$ 1,374,520 $ 393,681 $ 1,768,201 $ 1,905,042 $ 216,899 $ 2,121,941 126,533 32,990 159,523 170,266 16,366 186,632 1,543 867,251 868,794 466,249 25,717 491,966 833,185 269,245 1,102,430 1,066,186 89,599 1,155,785 2,335,781 1,563,167 3,898,948 3,607,743 348,581 3,956,324 165,778 184,628 350,406 269,698 55,104 324,802 58,730 92,689 151,419 89,257 17,424 106,681 1,716,559 227,139 1,943,698 1,907,808 15,789 1,923,597 $ 4,276,848 $ 2,067,623 $ 6,344,471 $ 5,874,506 $ 436,898 $ 6,311,404
20. EARNINGS PER SHARE
Year 2004 Year 2003
Earnings Per Share (NT$) Income Shares After Pretax After Tax (Thousands) Pretax Tax $ 5,524,572 $ 4,436,403 2,337,745 $ 2.36 $ 1.90 $ 4,678,956 $ 4,267,783 2,337,745 $ 2.00 $ 1.83
21. PENSION PLAN Upon the Bank’s privatization on November 30, 1999, the privatization rules required that the Bank pays its employees pension and other benefits totaling $6,384,810, of which $4,021,515 was neither funded nor accrued as of that date. This amount, pursuant to a directive issued by the Executive Yuan, is being amortized over five years starting December 1, 1999. Under a directive by the Labor Commission of the Executive Yuan and the resolution by the board of directors in January 2001, the Bank paid additional privatizationrelated benefits amounting to $306,966, which is also being amortized over the remaining years. This amount is fully amortized as of December 31, 2004. The pension benefits after November 30, 1999 are determined in accordance with the Labor Standard Law, with the years of service starting on December 1, 1999. The Bank makes monthly contributions to a pension fund. The monthly contribution was equal to 12.8% of salaries. Beginning on February 1, 2004, the monthly contribution is decreased to 9.5% of salaries. The fund is administered by a pension fund committee and deposited under the committee’s name in the Central Trust of China. Information on the pension plans were as follows: 2004 a. Net periodic pension cost (benefits) Service cost Interest cost Projected return on plan assets Amortization Gain from reduction and discharge Net periodic pension cost (benefits)
169,416 $ 25,894 (37,763 ) (5,365 ) (364,203 ) $ (212,021 ) $
2003 233,561 32,123 (34,528 ) (10,407 ) (95,228 ) 125,521
b. Reconciliation of the funded status of the plan and prepaid pension/accrued pension cost December 31 2004 2003 Benefit obligation: Vested benefit obligation $ (119,659 ) $ (317,196 ) Nonvested benefit obligation (303,043 ) (360,313 ) Accumulated benefit obligation (422,702 ) (677,509 ) Effects of increase in future salary level (201,543 ) (264,660 ) Projected benefit obligation (PBO) (624,245 ) (942,169 ) Fair value of plan assets 1,131,208 965,776 Unfunded PBO 506,963 23,607 Unrecognized net gain (87,335 ) (235,413 ) Prepaid pension (accrued pension cost) $ 419,628 $ (211,806 )
c. Vested benefits
d. Actuarial assumptions Discount rate Future salary incremental rate Projected return rate of pension plan assets
December 31 2004 2003 173,276 $ 449,847
3.5% 2.5% 3.5%
3.5% 2.5% 3.5%
22. RELATED PARTY TRANSACTIONS The Bank’s related parties are as follows: a. Related parties Name
Relationship to the Bank
Fubon Financial Holdings Co., Ltd. (FFH) The City Government (TCG) Fubon Bank Fubon Insurance Co., Ltd. Fubon Life Insurance Co., Ltd. Fubon Securities Co., Ltd. International Bank of Asia Limited Fubon Securities Investment Trust Co., Ltd. and its affiliate funds Fubon Direct Marketing Consulting Co., Ltd. Fubon Asset Management Co., Ltd. Fubon Venture Capital Consulting Co., Ltd. TAIPEIBANK Life Assurance Agent Co., Ltd. Fubon Bill Finance Co., Ltd. Fubon Leasing Co., Ltd. Fubon Construction Management Co., Ltd. Fubonbank Insurance Agent Co., Ltd. Fubon Insurance Agent Co., Ltd. Citibank Co., Ltd., The Branch TAIPEIBANK Charitable Citi Securities Co., Ltd. Fubon Technology Consulting Co., Ltd. Taiwan Cellular Co., Ltd. Chung Hsing Land Development Co., Ltd. (CHLDC) International Investment Trust Co., Ltd. Ming Tong Co., Ltd. Tao Yin Co., Ltd. Fubon Art Foundation Fubon Charity Foundation Kuang Hsin Printing Co., Ltd.
Parent company Major shareholder of parent company FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee FFH’s equitymethod investee The Bank’s equitymethod investee Fubon Bank’s equitymethod investee Fubon Bank’s equitymethod investee Fubon Bank’s equitymethod investee Fubon Bank’s equitymethod investee Fubon Bank’s equitymethod investee Related party in substance (Not related as of November 2004) Related party in substance Related party in substance (Not related as of November 2004) Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance (Continued)
Name Fubon Securities (BVI) Co., Ltd. Fubon Futures Co., Ltd. Fubon Venture Capital Co., Ltd. Sinostar Venture Capital Co., Ltd. Fubon Culture and Education Foundation Citi Fubon Life Insurance Company Hong Kong Limited Fubon Building Management Maintain Co., Ltd. Fubon Securities Finance Co., Ltd. Fubon Land Co., Ltd. Sinostar Capital Co., Ltd. FuAn Leasing Co., Ltd. Fubon Leisure and Entertainment Co., Ltd. Taiwan High Speed Rail Co., Ltd. Citi Insurance Agent Co., Ltd. Fubon Securities Investment Consulting Co., Ltd. FuSheng Properties Insurance Agent Co., Ltd. FuSheng Life Assurance Agent Co., Ltd. Others
Relationship to the Bank Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Related party in substance Directors, supervisors, managers and their relatives; equityaccounted investee
b. Significant related party transactions are summarized as follows: December 31, 2004 % of the Balance as of Account Balance Rate (%) December 31 1) Deposits TCG Others
$ 37,855,167 4,062,117 $ 41,917,284
8 1 9
$ 30,797,197 536,657 $ 31,333,854
0.9933.46 $ 1,161,914 1.610.31 6,197 $ 1,168,111
3) Due from banks call loans $ 7,956,369
2) Loans TCG Others
Interest Income (Expense) $ $
(278,555 ) (77,339 ) (355,894 )
4) Due to banks call loans
5) Borrowed funds
6) Bank debentures
7) Guarantees and acceptances $
December 31, 2003 % of the Balance as of Account December 31 Balance Rate (%) 1) Deposits TCG Others
2) Loans TCG Others
$ 53,388,548 1,418,122 $ 54,806,670
10 1 11
$ 99,445,401 574,888 $ 100,020,289
Interest Income (Expense) $ $
(242,458 ) (26,489 ) (268,947 )
0.993.64 $ 2,116,660 1.6010.30 24,493 $ 2,141,153
3) Due from banks call loans
4) Due to banks call loans
5) Borrowed funds
6) Guarantees and acceptances
Name Fubon Bills Finance
Citi Securities Fubon Bank
Type Bills purchased under agreements to resell Bills purchased Bills sold Bonds purchased Bonds sold Bonds purchased Bonds sold Bonds purchased Bonds sold Bills purchased Bonds purchased Bond sold
Amount for the Years Ended December 31 2004 2003 $ 3,397,941 $ 2,451,710 4,420,937 6,796,389 82,775,666 86,315,671 4,197,068 4,082,863 7,582,363 7,688,352 987,536 5,305,615 4,511,706
9,348,892 3,702,889 268,380 49,940 149,182
8) Fund transactions
Name Fubon OTC Fund Fubon Chi Hsiang I Fund
For the Years Ended December 31, 2004 Purchased During the Period Balances as of December 31 Units (in Units (in Disposal Thousands) Amount Thousands) Amount Gain (Loss) 319 $ 1,862 $ $ (507 ) 22,103 280,000 22,103 280,000 3,079
Name Fubon JuI Fund
For the Years Ended December 31, 2003 Purchased During the Period Balances as of December 31 Units (in Units (in Disposal Thousands) Amount Thousands) Amount Gain (Loss) 86,182 $ 1,300,000 $ $ 10,217
9) Service fees For the years ended December 31, 2004 and 2003, the Bank received service fees of $72,887 and $93,567, respectively, from the TCG for its handling of the loans to government employees and teachers and housing loans to various individuals. For paying principals and interests on bonds on behalf of the TCG, the Bank received service fees of $9,651 in 2004. For the year ended December 31, 2004, the Bank entered into a financial consultation contract with Taiwan High Speed Rail Co., Ltd. and received service fees of $31,711. In addition, the Bank contracted with Fubon Securities for providing analysis and consultation services related to the contract here mentioned for service expense of $19,077. For the year ended December 31, 2003, the Bank received a service fee of $1,728 from Fubon Securities Investment Trust for promoting its mutual funds. 10) Derivative financial instruments
Name Citi Bank
Fubon Securities (BVI)
Contract Amount for the Year Contract Ended as of December 31, December 31, The Gain and Loss for the Item 2004 2004 Year Ended December 31, 2004 a. Foreign currency swap $ 5,082,880 $ 635,360 Interest revenue $ 15,782 contract Interest expense 510 b. Interest rate swap contract 600,000 4,400,000 Reduction of interest expense 69,177 c. Crosscurrency swap 675,560 Interest income 6,612 Interest expense 1,781 a. Foreign currency swap contract b. Interest rate swap contract
4,528,163 Interest revenue Interest expense 800,000 Interest expense
1,900 3,502 2,356
Assets swap contract
873,620 Interest revenue
Name Citi Bank
Contract Amount for the Year Contract Ended as of December 31, December 31, The Gain and Loss for the Item 2003 2003 Year Ended December 31, 2003 a. Foreign currency swap $ 12,035,292 $ 5,269,690 Interest revenue $ 16,307 contract Interest expense 322 b. Interest rate swap contract 4,409,000 4,400,000 Reduction of interest expense 65,204 c. Forward rate agreement 674,860 Loss on derivative financial 490 instrument Foreign currency swap contract
TCG Fubon Bank Fubon Insurance CHLDC
TCG Fubon Securities Fubon Bank Fubon Life Insurance TAIPEIBANK Charitable Foundation TAIPEIBANK Life Assurance Agent Fubon Asset Management Co., Ltd.
Rentals paid monthly (refundable June 2007 lease deposits aggregated to $3,400) Rentals paid monthly September 2006 Rentals paid monthly By end of 2009 Rentals paid monthly July 2005
Rental Revenue (Expense) for the Years Ended December 31 2004 2003 $
(15,399 ) $ (1,005 ) (3,742 ) (4,933 )
(12,312 ) (302 )
Rentals received yearly Rentals received monthly Rentals received monthly Rentals received monthly Rentals received monthly
December 2005 January 2009 September 2006 December 2004 May 2006
1,115 29,101 1,885 470 1,200
1,244 8,114 628 700
Rentals received monthly
Details received monthly
12) Insurance The Bank entered into several contracts with Fubon Insurance as follows:
Insured Object Cash on hand Coffer duty insurance Employee dishonesty and negligence coverage, etc. Computer equipments Commercial fire insurance
Insurance Period 1/1/20041/1/2005 1/1/20041/1/2005 1/1/20041/1/2005 12/31/200312/31/2004 12/31/200312/31/2004
Insurance Insurance Amount Premium $ 300,000 $ 1,285 30,000 363 270,500 3,895 642,646 2,011,224
13) Cooperation The Bank entered into a cooperation contract with Fubon Securities on brokerage services. Under this contract, the Bank paid the apportioned cost of $8,655 and $2,747 for the years ended December 31, 2004 and 2003, respectively. In addition, the Bank entered into a cooperation contract with Fubon Bank to copromote Fubon Bank’s credit cards. Under this contracts, the Bank received rewards, in accordance with $53,258 for the year ended December 31, 2004.
14) Donation Allocation of 30% of Lottery department’s net income was made to public foundation to fulfill social benefit activities, as required by the Regulation. For the years ended December 31, 2004 and 2003, the Bank donated $50,000 and $80,000 to TAIPEIBANK Charitable Foundation, respectively. 15) Refundable income tax The Bank’s parent company (FFH) adopted the linkedtax system for filing the income tax return and forwarded the refunds for 2003 in the amount of $97,878 to the Bank. As of December 31, 2004, the parent company has refunded the Bank in the amount of $78,529. The estimated income tax of $470,930 for year 2004 has been paid to the parent company. 16) Property transactions The Bank entered into a contract with Fubon Bank to transfer 270 automated teller machines to the Bank, with aggregate transfer prices of $115,847. The transfer has been completed as of December 31, 2004. 17) Disposal of nonperforming loan The Bank has sold its non performing loan amounted to $4,802,027 to Fubon Asset Management for the price of $465,007. Nonoperating loss at $3,643, after bad debt and provision of bad debt of $4,264,938 and advances of $68,439, was fully recognized in the current period. As of December 31, 2004, the receivable for the nonperforming loan was $406,875. The terms of the transactions with related parties are similar to those with unrelated parties, except for the preferential interest rates offered to employees for savings and loans of up to prescribed limits. In accordance with the Bank Law, with the expectance for consumer and government loans, credits extended by the Bank to any related party should be 100% secured and their terms should be similar to those for third parties.
23. PLEDGED ASSETS As of December 31, 2004 and 2003, the following assets had been provided as refundable deposits: December 31 2004 2003 Securities purchased Negotiated certificates of deposits $ 14,900,000 $ 10,000,000 Investments in bonds and others 1,661,275 845,344 Other financial assets 120,248 109,241 $ 16,681,523 $ 10,954,585
The above negotiable certificates of deposits were provided as collateral for the dayterm overdraft, a requirement for joining the Central Bank’s clearing system of Realtime Gross Settlement (RTGS), and the pledged amount is adjustable based on overdraft amount. Investments in bonds and other financial assets had been placed with the: (a) courts of justice as part of the requirements for pursuing various collection case on overdue loans, (b) National Credit Card Center to secure the Bank’s potential obligations on its credit card activities, and (c) Central Bank of China to secure its potential obligations on its trust activities. As of December 31, 2004 and 2003, the Bank had no secured obligation.
24. CONTINGENCIES AND COMMITMENTS AS OF DECEMBER 31, 2004 Commitments, in addition to those shown separately in Note 27 as December 31, 2004, are summarized as follows: a. Repurchase/resell agreements Bonds and shortterm bills sold under agreements to repurchase before February 2, 2005 Bonds and shortterm bills purchased under agreements to resell before February 25, 2005
$ 12,372,254 $6,014,189
b. The Bank has several operating lease agreements covering office spaces. As of December 31, 2004, the related refundable lease deposits aggregated to $583,504 (part of “other financial assets”). This amount included refundable deposits of $553,000. Under agreements with the lessor, the interest on these deposits serves as the Bank’s rental payments. The minimum future rentals as of December 31, 2004 were as follows: Fiscal Year 2005.1.112.31 2006.1.112.31 2007.1.112.31 2008.1.112.31 2009.1.112.31
Amount $ 376,579 296,785 203,068 96,905 42,718
The future minimum rent commitment from 2010 to 2011 is $34,998. The present value of these future rentals based on current annual interest rate is $33,161. c. As of December 31, 2004 construction and purchase contracts amounted to $509,425, of which the unpaid amount was $363,220. d. The Bank was appointed by the Ministry of Finance (MOF) to operate the publicbenefit lottery for five years, from January 1, 2002 to December 31, 2006, and handle the sales of tickets for the traditional lottery, quickwin lottery, and computerized lottery. The Bank will receive from the MOF a service fee based on the amount of tickets sold. The Bank contracted Lottery Technology Services Corp. in 2002 to establish and maintain the operation of the publicbenefit lottery agency for a monthly service fee. The contract will be expired on June 30, 2007.
e. The Bank engages in various Trustee activities. As of December 31, 2004 and 2003, the trust account were $49,039,188 and $39,497,185, respectively.
Assets Deposits Investment in mutual funds Investment in bonds
Balance Sheet of Trust Accounts December 31, 2004 Liabilities $ 760 Cash trust 36,145,136 12,893,292 $ 49,039,188
Property of Trust Accounts December 31, 2004 Investment Portfolio Amount Deposits $ 760 Mutual funds 36,145,136 Bonds 12,893,292 $ 49,039,188
25. AVERAGE AMOUNT AND AVERAGE INTEREST RATE OF INTERESTEARNING ASSETS AND INTERESTBEARING LIABILITIES Average balance is calculated by daily average balance of interestearning assets and interestbearing liabilities. For the Years Ended December 31 2004 2003 Average Average Average Average Balance Interestearning assets Cash due from banks of deposits Due from Central Bank of China and banks Securities purchased Bonds and shortterm bills purchased under agreements to resell Bills, discouns and loans Investments in bonds Interestbearing liabilities Due to banks public treasury savings Demand Savings Time Timesavings Negotiable certificates of deposit Bank debentures Borrowed funds Bonds and shortterm bills sold under agreements to repurchase
$ 2,076,290 55,485,021 243,887,346
0.49 1.34 1.37
$ 1,278,754 67,949,283 182,083,503
0.54 1.35 1.78
1,156,312 337,922,619 1,951,766
1.01 2.93 4.55
17,500,182 54,746,128 50,077,614 143,351,406 109,495,723 $ 144,041,128 1,640,864 35,450,546 36,853,671
1.37 0.57 0.14 0.82 1.28 1.38 0.54 0.82 1.30
16,622,720 56,716,135 42,563,470 133,370,459 117,576,818 $ 153,406,238 1,879,376 23,546,849 42,139,551
1.24 0.50 0.17 1.04 1.39 1.80 0.96 1.28 1.18
26. MATURITY ANALYSIS OF ASSETS AND LIABILITIES The maturity of assets and liabilities of the Bank is based on the remaining period from balance sheet dates. The remaining period to maturity is based on maturity dates specified under agreements, and, if there are no specified maturity dates, on the expected dates of collection.
Due in One Year Assets Cash and cash equivalents Due from Central Bank of China and banks Securities purchased Receivables Bonds and shortterm bills purchased under agreements to resell Bills discounts and loans Investments in bonds Liabilities Due to Central Bank of China Due to banks Payables Bonds and shortterm bills sold under agreements to repurchase Deposits and remittances Borrowed funds Bank debentures
$ 14,270,170 $ 49,132,905 235,682,972 8,433,911
Liabilities Due to Central Bank of China Due to banks Payables Deposits and remittances Borrowed funds Bank debentures
Total $ 14,270,170 49,132,905 235,682,972 8,433,911
6,010,116 6,010,116 85,383,510 91,262,577 146,054,357 322,700,444 6,891,724 1,264,239 8,155,963 $ 398,913,584 $ 98,154,301 $ 147,318,596 $ 644,386,481 $
370,700 $ 25,795,257 16,605,744
12,367,104 480,286,903 12,098,513 16,739,118 5,000,000 25,500,000 $ 557,164,826 $ 37,598,513 $
Due in One Year Assets Cash and cash equivalents Due from Central Bank of China and banks Securities purchased Receivables Bills, discounts and loans
December 31, 2004 Due Between One Year and Due After Seven Years Seven Years
$ 370,700 25,795,257 16,605,744 6,000,000 6,000,000 $
December 31, 2003 Due Between One Year and Due After Seven Years Seven Years
$ 10,565,939 $ $ $ 81,902,279 206,773,142 6,735,789 109,196,556 95,988,013 173,825,933 $ 415,173,705 $ 95,988,013 $ 173,825,933 $ $
12,367,104 492,385,416 16,739,118 36,500,000 600,763,339
869,023 $ $ 18,802,051 14,151,435 504,125,018 17,631,544 54,962,880 24,300,000 $ 592,910,407 $ 41,931,544 $
Total 10,565,939 81,902,279 206,773,142 6,735,789 379,010,502 684,987,651
$ 869,023 18,802,051 14,151,435 521,756,562 54,962,880 5,000,000 29,300,000 5,000,000 $ 639,841,951
27. FINANCIAL INSTRUMENTS a. Derivative financial instruments The Bank used forward exchange contracts, interest rate swap, foreigncurrency swap,
crosscurrency swap, forward rate agreement, interest rate future and foreign currency option contracts as hedge instruments for clients’ foreign currency and interest rates exposures which pertained primarily to import obligations, export receipts and their remittances. The Bank also uses interest rate swaps, assets swaps contracts, credit default swap, foreigncurrency option contracts as an enduser in connection with its risk management activities primarily as to hedge against its interest rate and exchange rate exposures on its foreigncurrency assets or liabilities. The Bank’s hedge strategy is to use instruments that offset the fluctuations in their fair values with the changes in the fair values of the underlying exposures. It also periodically evaluates the effectiveness of these instruments. Credit risk is the exposure to loss on counterparties’ default on transactions. Thus, the Bank reviews each of its customer’s credit history and credit rating before approving the financial instrument arrangement and the credit limit. An appropriate guarantee would be required from the customer if it is deemed to be necessary. If the customer is another bank, it will be evaluated on the basis of its world ranking and credit rating as well as providing a provision for bad debt expense. The contract (nominal) amounts, credit risks, and fair values of derivative transactions were as follows: December 31, 2004 Contract (Nominal) Amount Nontrading purposes Interest rate swap contract Assets swap contract Credit default swap Foreigncurrency option contract Long option Trading purposes Forward exchange contract Foreign currency swap contract Crosscurrency swap contract Interest rate swap contract Interest rate future contract Foreign currency option contract Long option Short option
$ 58,650,000 $ 2,859,075 1,500,000
$ 27,574,932 $ 34,410,248 3,302,000 143,767,312 32,692,975 32,883,390
December 31, 2003 Contract (Nominal) Amount
1,124,204 $ 15,191
198,463 $ 43,800,000 $ (166,750 ) 3,047,639 (2,630 )
133,268 $ 839,155 837,263
(528,596 ) $ 28,626,702 $ 669,675 35,492,843 (54,239 ) 2,206,375 5,915 35,386,000 679,960
271,100 (241,566 )
Credit Risk 1,304,513 $ 3,830 231
51,346 $ 117,055 14,897 216,176 76,025
Fair Value 268,092 (124,473 ) (3,643 )
(78,154 ) 103,637 14,897 (1,323 ) (778 ) 31,151 (28,044 )
The Bank’s calculation of the fair value of each forward contract is based on the forward rate for the remaining term quoted from Reuters or Telerate Information System. The fair value of individual asset swap contract is calculated based on the basis of the quotations from the Bloomberg Information System. The contract or notional amount is used to calculate the settlement amount of the counter parties, so it is neither the amount for actual delivery nor the cash requirement for the Bank. In addition, the Bank believes its ability to enter into derivative transactions at reasonable market terms. Based on the aforementioned reasons, the Bank doesn't expect significant cash flow requirements to settle these instruments.
The gain and loss on the derivative transactions are as follows: 2004 Nontrading purposes Interest rate swap contract: Interest revenue (decrease) Interest expense (decrease) Assets swap contract: Interest revenue Foreign currency option contracts: Exchange gain(decrease) Credit default swap contract: Net gain (decrease) on derivative financial instrument Trading purposes Forward exchange contract: Exchange gain (decrease) Foreign currency swap contract: Interest revenue Interest expense Cross currency swap contract: Interest revenue Interest expense Net gain (decrease) on derivative financial instrument Exchange gain Foreign currency option contracts: Net gain on derivative financial instrument Interest rate swap contract: Interest revenue Interest expense Net gain on derivative financial instrument Forward rate agreement: Net gain (decrease) on derivative financial instrument Future contract: Net gain on derivative financial instrument
$ (81,332 ) $ (42,777 ) (1,098,879) (745,788 )
64,959 33,313 (61,049 )
33,676 12,983 3,495
1,251,605 $ 237,572 777,830 204,176 247,317 138,994 2,702
As of December 31, 2004 and 2003, the assets swap contracts involving convertible bonds with redemption premiums required the Bank to pay the redemption premium amounting to $1,936 and $70,045, respectively, if the issuers of the bond default on their obligation. b. Fair value of nonderivative financial instruments December 31, 2004 Carrying Fair Value Value
December 31, 2003 Carrying Fair Value Value
Assets Assets of which the fair value equals to the carrying value $ 398,822,382 $ 398,822,382 $ 474,844,312 $ 474,844,312 Securities purchased 235,075,802 235,075,802 206,646,824 206,647,252 Investments in shares of stock 3,585,272 3,604,509 1,014,422 1,217,138 Investments in bonds 8,155,963 8,184,421 deposits operating guarantee and deposits exchange clearing 130,248 128,497 119,241 132,520 Liabilities Liabilities of which the fair value equals to the carrying value
Methods and assumptions applied in estimating the fair value of nonderivative financial instruments are as follows: 1) The carrying values of cash and cash equivalents, due from Central Bank of China and banks, receivables, Bonds and shortterm bills purchased under agreements to resell, other financial assets, due to Central Bank of China, due to banks, remittances, borrowed funds, payables, Bonds and shortterm bills sold under agreements to repurchase, appropriated loan fund, accrued pension cost and guarantee deposit received approximate their fair values due to the short maturity of these instruments. 2) Loans, bills purchased, deposits and bank debentures issued are financial assets and liabilities with mainly floating interest. Thus, their carrying values are deemed to be equivalent to their current fair value. 3) Fair value of securities purchased, investments in shares of stock and investments in bonds are based on market prices or their carrying value if market price are unavailable. 4) Refundable deposits in the form of government bonds are based on market prices or on carrying values if market prices are demand unavailable. Only the fair values of financial instruments were listed above, thus, the total values listed above does not represent the fair value of the Bank as a whole. c. Financial instruments with offbalancesheet credit risks In its normal business operations, the Bank is a party to financial instruments involving offbalancesheet risks on credit cards and cash cards issued, commitments to provide financial guaranty and obligations under letters of credit issued. Generally, these transactions are for one year. For the years ended December 31, 2004 and 2003, the interest rates for loans range from 0.7% to 5.5% and 2.3% to 7.5%, respectively, and the highest interest rate for credit cards and cash cards are 19.71% and 18.25%, respectively. The Bank also provides guarantees on loans and letters of credit to assure performance of contracts by customers. There is no concentration of maturity dates in one period that would result in liquidity problem to the Bank. The contract amounts of financial instruments with offbalancesheet credit risks were as follows:
Credit line of credit cards Credit line of cash cards Guarantees on loan and letters of credit Irrevocable loan commitments
December 31 2004 2003 $ 2,336,650 $ 27,671 4,115,526 59,552,280 60,235,617 9,073,203 9,684,502
The total commitment amounts do not necessarily represent future cash requirements since most of the commitments are expected to expire without being drawn upon. The Bank is exposed to losses up to the total amount of the commitments, without taking into account the value of any collateral, if counterparties default. The Bank evaluates the credit worthiness of each loan application by taking into account the
credit history, credit rating and financial position of the applicant. Collateral, mostly in the form of real estate, cash, inventories and marketable securities, may be required depending on the result of the credit rating. As of December 31, 2004 and 2003, about 62% and 70%, respectively, of total loans granted and about 41% and 39% of aggregate amount of guarantees and letters of credit issued were secured. No collateral is required for credit card and cash card facilities; however, the credit status of each cardholder is closely monitored. Appropriate measures are adopted, depending on the results of the credit status monitoring, which include but not limit to amending the credit limit or, if necessary, canceling the facility. d. Information on concentrations of credit risks The concentration of credit risk refers to individual or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations as they are similarly affected by changes in economic or other conditions. The loans to The City Government (TCG) as of December 31, 2004 and 2003 aggregated to $30,797,197 and $99,445,401 which representing 10% and 26% of the Bank’s total outstanding loans, respectively. The TCG’s deposits in the Bank as of December 31, 2004 and 2003 aggregated to $37,855,167 and $53,388,548, respectively. The net position on foreigncurrency transactions as of December 31, 2004 and 2003 are US$30,097 and US$34,491, respectively.
28. MAJOR RISK EXPOSURE SITUATIONS, MANAGEMENT POLICY AND PRACTICE OF CREDIT RISK, MARKET RISK, LIQUIDITY RISK, OPERATING RISK AND LEGAL RISK a. Credit Risks 1) Asset quality Year December 31, 2004 $5,339,089 4,762,420 1.65% 1,382,409 0.43% 2,825,240 1,977,543
Items Overdue loans Nonperforming loans Overdue loans ratio Classified loans Ratios of classified loans to total loans Allowance for credit losses Writeoff amount of credits
December 31, 2003 $9,023,459 8,236,407 2.37% 2,732,612 0.72% 3,974,448 2,871,937
Note 1: Overdue loans disclosures regulated in directives No. 832292834 and No. 86656564 issued by the Ministry of Finance. Note 2: Overdue loans ratio: Overdue loans (including nonperforming loans)/(Outstanding loan balance + Nonperforming loans) Note 3: Classified loans were as follows:
a) Medium and longterm loans repayable in installments repayment on which is delinquent for more than three months but less than six months. b) Other loans (the repayment of) principal on which is overdue by less than three months but interest thereon is overdue by more than three months but less than six months would normally be required to be reported as an overdue loan. c) Loans exempted from such reporting, including loans for which an agreement has been reached to repay such loan in installments, loans for which a credit insurance fund will cover such repayment (as evidenced by a sufficient certificate of deposit or reserve), loans for which repayment has, by agreement, been extended and loans extended under other approved exempt loan programs. d) Supporting enterprise loans have not reached the deadline of reporting as overdue loans. Note 4: Writeoff amount of credits: Accumulated writeoff amounts of credits for the years ended December 31, 2004 and 2003. 2) Concentration of credit extensions: Items Credit extensions to interested parties Ratios of credit extensions to interested parties Ratios of credit extensions secured by pledged stocks Industry concentration (the biggest three industries of industry credit ratio)
December 31, 2004 $5,314,511
December 31, 2003 $4,426,631
Industry Percentage Industry Percentage Manufacturing 17.89% Government 31.26% institutions Government 13.68% Manufacturing 13.77% institutions Wholesale and 7.08% Wholesale and 5.64% retail sale retail sale
Note: a) Total credits including loans, bills discounts (including import and export negotiations), acceptances and guarantees. b) Ratios of credit extensions to interested parties: Credit extensions to interested parties ÷ Total credits. c) Ratios of credit extensions secured by pledged stocks: Credit extensions secured by pledged stocks ÷ Total credits d) Credit extension to interested parties is defined by the Banking Law. 3) Policy of provision on credit losses: Please refer to Note 2.
4) Concentrations of risk: Please refer to Notes 24 and 27. b. Market risk: 1) Average amount and average interest rate of interestearning assets and interestbearing liabilities: Please refer to Note 25. 2) Market risk sensitivity Items Ratio of interestrate sensitive assets to liabilities Ratio of interestrate sensitive gap to net worth
December 31, 2004 105.01% 47.42%
December 31, 2003 109.67% 87.96%
Note: a) Interestearning assets and interestbearing liabilities are the cost or revenue of market risk sensitivity assets and liabilities that would be affected by interest rate variability. b) Ratio of interestrate sensitive assets to liabilities = Interestrate sensitive assets/Interestrate sensitive liabilities (with maturities of less than one year in New Taiwan Dollars). c) Interestrate sensitive gap = Interestrate sensitive assets Interestrate sensitive liabilities. 3) The net positions of the main foreigncurrency transactions: Please refer to Note 27. c. Liquidity risk: 1) Profitability: For the Years Ended For the Years Ended December 31, 2004 December 31, 2003 Return on total assets 0.82% 0.69% Return on net worth 11.08% 9.59% Profit margin 19.43% 17.29% Note: a) Return on total assets = Income before income tax/Average total assets b) Return on net worth = Income before income tax/Average net worth c) Profit margin = Income after income tax/Total operating revenues Items
2) Maturity analysis of assets and liabilities: Amount for the Remaining Period Prior to the Maturity Date 181 Days to 3190 Days 91180 Days Over One Year One Year $ 606,859,000 $ 182,986,000 $ 74,972,000 $ 30,729,000 $ 59,864,000 $ 258,308,000 618,184,000 72,720,000 70,373,000 75,504,000 118,355,000 281,232,000 (11,325,000 ) 110,266,000 4,599,000 (44,775,000 ) (58,491,000 ) (22,924,000 ) (11,325,000 ) 110,266,000 114,865,000 70,090,000 11,599,000 (11,325,000 ) Total
Assets Liabilities GAP Accumulated gap
Note: The above amounts include only New Taiwan dollar amounts held in the onshore branch by the Bank (i.e. excludes foreign currency).
d. Operating risk and litigation risk Summary and Amount Within the past one year, a responsible The exclerk of Feng Yuan branch was person or professional employee, in the prosecuted by district attorney of Tai Chung course of business, violated the law, district court for fraud of $22,311 in 2002. resulting in an indictment by a prosecutor. On October 3, 2003, the court announced a guilty verdict and sentenced the exclerk to 34 months of imprisonment. Within the past one year, a fine was levied on the Bank for violations of the Banking None Law. Within the past one year, misconduct The Bank replied “In compliance with the occurred that resulted in the Ministry of conclusion of personnel matters arbitration Finance imposing strict corrective committee, the persons neglecting their duty measures. had reasonably explained and been proven unintentionally, therefore no administrative disciplinary action should be announced,” to MOF for the investigation of the financing project for one company purchasing land. However, MOF disagreed and sent the letter stating that “... lack of fair judgment.” After the committee reheld, the Bank announced the administrative disciplinary action on them and then MOF sent the letter to adopt the punishment. Within the past one year, the loss from one incident or the total losses from employee corruption, periodic events of a material nature, or failure to abide by the None “Guidelines for the Maintenance of Soundness of Financial Institutions” exceeded NT$50 million dollars. Others None Note: 1) The term “within the past one year” means the one year prior to the balance sheet date. 2) The term “a fine levied on the Bank for violations of the related regulations within the past one year” means a fine levied by Bureau of Monetary Affairs, Securities and Futures Bureau or Insurance Bureau
29. STATEMENT OF CAPITAL ADEQUACY Year Items Capital adequacy ratio (Note) Combined capital adequacy ratio (Note) Ratios of debt to net worth
December 31, 2004 13.10% 13.15% 1,197.16%
December 31, 2003 13.12% 13.17% 1,309.20%
Note: Capital adequacy ratio = Eligible capital/Riskbased assets. Pursuant to the Banking Law and related regulations No. 0090345106 issued by the Ministry of Finance, the capital adequacy ratio should be computed once half a year.
30. INFORMATION REGARDING BORROWERS, GUARANTERS AND COLLATERAL PROVIDERS AS INTEREST PARTIES
December 31, 2004
The Possibility of Loss (Note c)
Consumer loans (Note a.) 229 $ 65,764 Loans for employees’ family 211 459,934 mortgage Other borrowers (Note b.) 848 4,788,814 Guarantees 612 26,104,642 Collateral providers 86 159,173 Note: a. The consumer loans are regulated by Article 32 for the Banking Law. b. Except for consumer loans and loans for employees’ family mortgage, the credits that borrowers are interest parties. c. Disclosing the evaluation loss, if the possibility of loss is significant. d. The interest parties mentioned above is regulated by Article 331 of the Banking Law.
31. ADDITIONAL DISCLOSURES Following are the additional disclosures and information related to significant transactions and investees required by the Securities and Futures Bureau: a. Financing provided: Not applicable. b. Endorsement/guarantee provided: Not applicable. c. Marketable securities held: Please see Table 1 (attached). d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 10% of the issued capital: Please see Table 2 (attached). e. Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital: None. f. Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital: None. g. Total purchase from or sale to related parties amounting to at least NT$300 million: None. h. Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital: Please see Table 3. i. On sale of nonperforming loan to at least NT$5,000 million: None.
j. Significant transaction material to the fair representation of the financial statement: None. k. Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 4 (attached).
32. INDUSTRY/SEGMENT INFORMATION The Bank only engages its businesses in accordance with Banking Law No. 3; therefore, it is exempt from disclosing financial information of its business by industry segments. The Bank is further exempt from disclosing financial information by geographical segment as the revenue or the asset of it oversea business units are less than 10% of bank’s total revenue or total asset respectively. The City Government is considered as a major client to the Bank. For information in regards to disclosure of major client, please refer to Note 22 related party transactions.
TAIPEIBANK CO., LTD.
MARKETABLE SECURITIES HELD DECEMBER 31, 2004 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
December 31, 2004 Held Company Name
Marketable Securities Type and Name
TAIPEIBANK Life Insurance Beneficiary certificate Agency Company Ltd. ABN AMRO SELECT Bond Fund Bond Government Bond 874
Relationship with the Company
Financial Statement Account
Percentage of Ownership
Market Value or Net Asset Value (Note 1)
Note 1: Market values of the beneficiary certificate and government bond were based on net asset values in December 31, 2004 and the price as of December 31, 2004 published by the OTC exchange. Note 2: Pledged as operating deposits.
TAIPEIBANK CO., LTD. MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2004 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Company Name TAIPEIBANK Co., Ltd.
Marketable Securities Type and Name Chunghwa Telecom Co., Ltd.
Financial Statement Account
Longterm investment Formosa Petrochemical Corp. Longterm investment China Steel Corporation Longterm investment Formosa Chemicals & Fiber Longterm Corporation investment Mega Financial Holding Co., Longterm Ltd. investment
Beginning Balance Acquisition Disposal Ending Balance Nature of Shares Shares Shares Gain Shares Carrying Relationship (Thousan Amount (Thousan Amount (Thousan Amount (Loss) on (Thousan Amount Value d) d) d) Disposal d) $ 14,122 $876,917 $ $ $ 14,122 $876,917
TAIPEIBANK CO., LTD. RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL DECEMBER 31, 2004 (Amounts in Thousand of New Taiwan Dollars)
Overdue Company Name
TAIPEIBANK Co., Ltd. Fubon Assets (Note 1) Management
Equity accounted investeeof the Bank’s parent company
Note 1: The receivable comes from disposal of nonperforming loans to Fubon Assets Management on December 30, 2004.
Action Taken Not applicable
Amounts Received Allowance for Bad in Subsequent Debts Period $
TAIPEIBANK CO., LTD. NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2004 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
Original Investment Amount
Net Income Investment Percentage Gain Investor Company Investee Company Location Main Businesses and Products (Loss) of Note December December Shares of Carrying the (Loss) 31, 2004 31, 2003 (Thousand) Ownership Value Investee (%) TAIPEIBANK Co., Ltd. TAIPEIBANK Life Insurance Agency Company 2F, 50, Sec.2, Life insurance agent $ 20,000 $ 20,000 2,000 99.99 $ 173,729 $ 135,660 $ 135,256 Ltd. Chungshan N.Road, The City, Taiwan 10419, R.O.C.
Balance as of December 31, 2004