E.Sun Financial Holding Co., Ltd. - Capital/Financing Update 2014

OFFERING MEMORANDUM

US$178,200,000

E.Sun Financial Holding Company, Ltd.

(incorporated as a company limited by shares in Taiwan, the Republic of China)

ZERO COUPON CONVERTIBLE BONDS DUE 2004

The US$178,200,000 Zero Coupon Convertible Bonds Due 2004 (the ‘‘Bonds,’’ which include the Optional Bonds referred to below) will be issued by E.Sun Financial Holding Company, Ltd. (referred to in this Offering Memorandum as the ‘‘Company’’ or ‘‘E.Sun Financial’’), incorporated as a company limited by shares in Taiwan, the Republic of China. Except during certain Closed Periods, each Bond will, at the option of the holder and subject to our right to elect to pay converting holders cash in lieu of shares as described in the Cash Settlement Option referred to herein, be convertible into our shares, par value of NT$10 per share (the ‘‘Shares’’), on or after November 24, 2003 up to and including December 12, 2004. The initial Conversion Price of the Bonds will be NT$19.716 per Share.

Our Shares are listed on the Taiwan Stock Exchange, and application will be made to list the Shares issuable upon conversion of the Bonds on the Taiwan Stock Exchange. On June 20, 2003, the closing price of our Shares was NT$16.40 (US$0.47) per Share.

Unless previously redeemed, repurchased and cancelled, or converted, the Bonds will be redeemed at 100% of their principal amount in US dollars on December 27, 2004. We may, at our option at any time on or after June 27, 2004 and prior to November 27, 2004, redeem the Bonds, in whole or from time to time in part (being US$1,000 in principal amount or an integral multiple thereof), at 100% of their principal amount, if the Closing Price of the Shares, translated into US dollars at the Prevailing Rate, for at least 20 out of 30 consecutive Trading Days immediately preceding the date of our redemption notice, is at least 115% of the Conversion Price then in effect, translated into US dollars at a fixed exchange rate of NT$34.661 = US$1.00. We may, at our option at any time, redeem, in whole but not in part, the Bonds at 100% of their principal amount if at least 90% of the principal amount of the Bonds has already been redeemed, repurchased and cancelled, or converted. We may at any time redeem the Bonds, in whole but not in part, at 100% of their principal amount in the event of certain changes in ROC taxation that would require us to gross up for payment of interest, if any, or premium, if any, at a rate greater than 20% or to gross up for the payment of principal. Until and unless previously redeemed, repurchased and cancelled, or converted, each holder of the Bonds has the right, at such holder’s option, to require us to redeem all or a portion (being US$1,000 in principal amount or an integral multiple thereof) of such holder’s Bonds at 100% of their principal amount on June 27, 2004. In addition, each holder of the Bonds has the right to require us to redeem such holder’s Bonds in the event that our Shares cease to be listed on the Taiwan Stock Exchange or in the event of a Change of Control.

See ‘‘Risk Factors’’ for certain considerations relevant to an investment in the Bonds.

Application has been made to list the Bonds on the Luxembourg Stock Exchange.

ISSUE PRICE 101%

The Bonds and the Shares issuable upon conversion of the Bonds have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), and are being offered and sold only outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act (‘‘Regulation S’’). For a description of certain restrictions on resale or transfer, see ‘‘Transfer Restrictions’’ and ‘‘Plan of Distribution.’’ The Initial Purchaser named in this Offering Memorandum has exercised the option granted by us to purchase an additional US$19,800,000 principal amount of the Bonds (the ‘‘Optional Bonds’’).

The Bonds will be represented by beneficial interests in a global certificate (the ‘‘Global Certificate’’) in registered form, which will be registered in the name of a nominee for, and shall be deposited on or about June 27, 2003 (the ‘‘Closing Date’’) with Deutsche Bank AG London, as common depositary (‘‘Common Depositary’’) for Euroclear Bank S.A./N.V., as operator of the Euroclear System (‘‘Euroclear’’), and Clearstream Banking, socie´te´ anonyme (‘‘Clearstream’’). Transfers of interests on the Bonds (and Shares issuable upon conversion of the Bonds) will be subject to certain restrictions on transfer for a period of 40 days after the later of the commencement of this Offering and the latest closing date for this Offering. Beneficial interests in the Bonds will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream and their participants. Except as described herein, individual definitive certificates for the Bonds will not be issued in exchange for interests in the Bonds.

Sole Bookrunner

MORGAN STANLEY

June 23, 2003

The purpose of this offering memorandum (‘‘Offering Memorandum’’) is to give information about the Company and the Bonds. Having made all reasonable inquiries, we confirm that this Offering Memorandum is true and accurate in all material respects and is not misleading and that the opinions and intentions expressed herein are honestly held and for which we accept responsibility accordingly. Notwithstanding the foregoing, certain market and industry data used in this Offering Memorandum were obtained from publicly available information and industry publications, such as Bloomberg, L.P., Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System, Taiwan Stock Exchange, Chinese Securities Association and National Credit Card Center of the ROC, and we take responsibility for correctly reproducing such information only. Certain information provided herein with respect to the Republic of China (‘‘ROC’’) and its political status and economy has been derived from governmental and other public sources, including the Bureau of Monetary Affairs of the Ministry of Finance, and with respect to such information, we accept responsibility only for extracting such information from such sources.

No person has been or is authorized to give any information or to make any representation concerning the Company, its subsidiaries and affiliates, the Bonds or the Shares issuable upon conversion of the Bonds, other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorized by us or the purchaser of the Bonds under the purchase agreement dated June 9, 2003 (the ‘‘Initial Purchaser’’). Neither the delivery of this Offering Memorandum nor any offering, sale or delivery made in connection with the issue of the Bonds shall, under any circumstance, constitute a representation that there has been no change or development in the affairs of the Company, its subsidiaries and affiliates or any of them since the date hereof or create any implication that the information contained herein is correct as of any date subsequent to the date hereof.

No representation or warranty, express or implied, is made or given by the Initial Purchaser as to the accuracy, completeness or sufficiency of the information contained in this Offering Memorandum, and nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise, representation or warranty by the Initial Purchaser. This Offering Memorandum is not intended to provide the basis of any credit or other evaluation and it should not be considered as a recommendation by either us or the Initial Purchaser that any recipient of this Offering Memorandum should purchase the Bonds. Each potential investor in the Bonds should determine for itself the relevance of the information contained in this Offering Memorandum and its investment in the Bonds should be based upon such investigations as it deems necessary.

The distribution of this Offering Memorandum and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Memorandum comes are required by us and the Initial Purchaser to inform themselves about and to observe any such restrictions. This Offering Memorandum does not constitute an offer of, or any invitation by or on behalf of the Company or the Initial Purchaser to subscribe for or purchase, any of the Bonds or the Shares issuable upon conversion of the Bonds and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorized or is unlawful. No action is being taken to permit a public offering of the Bonds or the Shares issuable upon conversion of the Bonds or the distribution of this document in any jurisdiction where action would be required for such purposes.

There are restrictions on the offer and sale of the Bonds and/or the Shares issuable upon conversion of the Bonds and on the circulation of documents relating thereto in certain jurisdictions, including the United States, the United Kingdom, Singapore, Hong Kong and Taiwan, and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Bonds and distribution of this Offering Memorandum, see ‘‘Plan of Distribution.’’

In making an investment decision, investors must rely on their own examination of the Company and the terms of this offering, including the merits and risks involved. See ‘‘Risk Factors’’ for a discussion of certain factors to be considered in connection with an investment in the Bonds.

Each person receiving this Offering Memorandum acknowledges that such person has not relied on the Initial Purchaser or any person affiliated with the Initial Purchaser, the Trustee or the Agents in connection with its investigation of the accuracy of such information or its investment decision. Prospective investors in the Bonds are hereby notified that the seller of any Bonds may be relying on the exemption from the registration requirements of Section 5 of the Securities Act provided by Regulation S.

Each person receiving this Offering Memorandum acknowledges that (i) this Offering Memorandum does not contain all of the information that would be included in an offering memorandum for this offering were this offering registered under the Securities Act and (ii) the financial statements included herein have been prepared in accordance with generally accepted accounting principles in the ROC, or ROC GAAP, which differ in many significant respects from accounting principles generally accepted in the United States, and thus are not comparable to the financial statements of a United States company. See ‘‘Summary of Material Differences Between ROC GAAP and US GAAP.’’

Statements contained in this Offering Memorandum as to the contents of any contract or other document referred to in this Offering Memorandum may not set forth all of the terms and conditions of such contracts or other documents.

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		Page		Page
Summary . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	1	Transactions with Related Parties . . . . . . . . .	142
Summary Financial and Other Data . .	. . . . .	11	Description of the Bonds . . . . . . . . . . . . . . . .	144
Risk Factors . . . . . . . . . . . . . . . . . . . . . .	. . . . .	18	The Global Certificate . . . . . . . . . . . . . . . . . .	169
Use of Proceeds . . . . . . . . . . . . . . . . . .	. . . . .	32	Description of the Shares . . . . . . . . . . . . . . . .	171
Exchange Rates . . . . . . . . . . . . . . . . . . .	. . . . .	33	Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	175
Dividends . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	34	Plan of Distribution . . . . . . . . . . . . . . . . . . . .	177
Capitalization . . . . . . . . . . . . . . . . . . . .	. . . . .	35	Transfer Restrictions . . . . . . . . . . . . . . . . . . .	180
Market Price Information . . . . . . . . . .	. . . . .	36	Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . .	182
Selected Financial and Other Data . . .	. . . . .	37	Independent Accountants . . . . . . . . . . . . . . . .	182
Management’s Discussion and			Where You Can Find More Information . . .	182
Analysis of Financial Condition and			General Information . . . . . . . . . . . . . . . . . . . .	183
Results of Operations . . . . . . . . . . . .	. . . . .	42	Summary of Material Differences
Description of Assets and			Between ROC GAAP and US GAAP . . . .	185
Liabilities of E.Sun Bank . . . . . . . . .	. . . . .	61	Index to Financial Statements . . . . . . . . . . . .	F-1
Business . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . .	82	Appendix A — The Securities Market
Regulation of the			of the ROC . . . . . . . . . . . .	A-1
Taiwan Financial Services Industry	. . . . .	114	Appendix B — Foreign Investment and
Directors, Management and Organization . .		136	Exchange Controls
Share Ownership . . . . . . . . . . . . . . . . . .	. . . . .	141	in the ROC . . . . . . . . . . . .	B-1

PRESENTATION OF INFORMATION

The terms ‘‘E.Sun Financial’’ and ‘‘Company’’ refer to E.Sun Financial Holding Company, Ltd. and the terms ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to E.Sun Financial Holding Company, Ltd. and its subsidiaries, unless the context otherwise requires. The terms ‘‘E.Sun Bank,’’ ‘‘E.Sun Bills Finance,’’ and ‘‘E.Sun Securities,’’ refer to E.Sun Commercial Bank, Ltd., E.Sun Bills Finance Corporation, and E.Sun Securities Co., Ltd., respectively, as well as their respective subsidiaries, if applicable, unless the context otherwise requires.

In this Offering Memorandum, ‘‘ROC’’ refers to the Republic of China, ‘‘Taiwan’’ refers to the island of Taiwan and other areas under the effective control of the government of the Republic of China, and the ‘‘ROC Company Law’’ refers to the Company Law of the ROC. The ‘‘Securities and Futures Commission’’ refers to the ROC Securities and Futures Commission and ‘‘MOF’’ or the ‘‘Ministry of Finance’’ refers to the ROC Ministry of Finance.

We publish our financial statements in New Taiwan dollars, the lawful currency of the ROC. All references to ‘‘United States dollars,’’ ‘‘US dollars’’ and ‘‘US$’’ are to United States dollars, and all references to ‘‘New Taiwan dollars,’’ ‘‘NT dollars’’ and ‘‘NT$’’ are to New Taiwan dollars.

Unless otherwise specified, where financial information has been translated from NT dollars into US dollars, it has been translated, for your convenience only, at the rate of NT$34.70 = US$1.00, the noon buying rate of the U.S. Federal Reserve Bank of New York on December 31, 2002. The noon buying rate of the U.S. Federal Reserve Bank of New York on June 20, 2003 was NT$34.59 = US$1.00. See ‘‘Exchange Rates.’’ Such translation amounts are unaudited, and it should not be construed that the NT dollar amounts have been, or could have been, converted into US dollars at that or any other rate.

Our financial statements are prepared using accounting principles, procedures and reporting practices generally accepted in the Republic of China (‘‘ROC GAAP’’) and are not intended to present the financial condition, results of operations and cash flows in accordance with accounting principles and practices generally accepted in any country or jurisdiction, including the United States, other than those in the ROC. The material differences between ROC GAAP and generally accepted accounting principles in the United States (‘‘US GAAP’’), as applicable to us, are discussed under the caption ‘‘Summary of Material Differences Between ROC GAAP and US GAAP.’’ Certain financial amounts presented herein may not correspond directly to our financial statements, included elsewhere herein, or may not add up due to rounding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 in this Offering Memorandum. Our forward-looking statements contain information regarding, among other things, our financial condition, future expansion plans and business strategy. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that these expectations and projections are reasonable, such forwardlooking statements are inherently subject to risks, uncertainties and assumptions, including, among other things:

. the intense competition in and other risks relating to the Taiwan financial services industry;
. statements regarding our future loan growth and asset quality;
. regulations (including the risk of deregulation and of new and untested regulations) to which our businesses in Taiwan are subject;
. general economic, political and social conditions and developments in Taiwan and other jurisdictions in which we operate our businesses;
. the amount of new and renewal business and market acceptance of our new financial products and services;
. the impact of mergers and acquisitions in the financial services industry, competing demands for our capital and the risk of undisclosed liabilities;
. the amount of dividends received from subsidiaries;
. legal proceedings; and
. other risks identified in ‘‘Risk Factors.’’

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, and the risks, uncertainties and assumptions discussed in ‘‘Risk Factors’’ and elsewhere in this Offering Memorandum, any forwardlooking events discussed in this Offering Memorandum might not occur, and our actual results could differ materially from those anticipated in those forward-looking statements.

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

We are a company limited by shares incorporated under the ROC Company Law and regulated as a financial holding company under the ROC Financial Holding Company Act. All of our directors, supervisors and executive officers and certain of the experts named in this Offering Memorandum are residents of the ROC, and a significant portion of our assets and the assets of these persons are located in the ROC. As a result, it may not be possible for you to effect service of process upon us or these persons outside of the ROC, or to enforce against any of them judgments obtained in courts outside of the ROC. Our ROC counsel has advised us that any final judgment obtained against us in any court other than the courts of the ROC in respect of any legal suit or proceeding arising out of or relating to the Bonds or the Shares to be delivered upon conversion of the Bonds will be enforced by the courts of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought is satisfied with the following:

. the court rendering the judgment has jurisdiction over the subject matter according to the laws of the ROC;
. the judgment is not contrary to the public order or good morals of the ROC;
. the judgment is a final judgment for which the period for appeal has expired or from which no appeal can be taken;
. if the judgment was rendered by default by the court rendering the judgment, process was served on us within the jurisdiction of such court, or process was served on us with judicial assistance of the ROC; and
. judgments of the courts of the ROC are recognized and enforceable in the jurisdiction of the court rendering the judgment on a reciprocal basis.

Judgments obtained in certain United States courts have been confirmed to be recognized and enforceable in the courts of the ROC on a reciprocal basis.

A party seeking to enforce a foreign judgment in the ROC would, except under limited circumstances, be required to obtain foreign exchange approval from the Central Bank of China for the remittance out of the ROC of any amounts recovered in respect of the judgment denominated in a currency other than NT dollars. See ‘‘Appendix B — Foreign Investment and Exchange Controls in the ROC.’’

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SUMMARY

You should read the following summary together with the more detailed information regarding the Company, the Bonds, our Shares and our consolidated financial statements and notes to those statements appearing elsewhere in this Offering Memorandum.

E.Sun Financial Holding Company, Ltd.

We believe we are one of the leading financial holding companies in Taiwan in terms of asset quality and customer service. We have built a strong brand name that is widely recognized in Taiwan and have cultivated a unique corporate culture that distinguishes us from many of our peer companies. We are focused on providing a wide range of high-quality, competitive, innovative financial services to our customers. Through our flagship company, E.Sun Bank, we believe we have been able to deliver strong financial performance while maintaining a prudent credit risk management policy.

We provide a broad range of financial services to individual and corporate customers through our three principal subsidiaries:

. E.Sun Bank. E.Sun Bank is the core operating entity of our company, representing approximately 93.9% of our total assets as of March 31, 2003. E.Sun Bank was founded as one of the 16 new banks (the ‘‘New Banks’’) to receive banking licenses during the liberalization of the Taiwan financial services industry in the early 1990s. E.Sun Bank offers a broad range of banking services and financial products to its consumer and corporate customers, including commercial banking and wealth management. It has an extensive distribution and customer service network consisting of 52 branches (including 8 sub-branches), 2 overseas branches and 172 ATMs as well as 983 customer sales representatives. As of March 31, 2003, E.Sun Bank was the sixth largest credit card issuer in Taiwan in terms of the number of credit cards in force with 1.74 million, representing a market share of 5.25%.
. E.Sun Bills Finance. E.Sun Bills Finance acts as a broker or dealer for fixed-income securities such as government bonds, financial debentures and short-term bills. E.Sun Bills Finance also offers underwriting services for commercial paper and acts as a surety for its customers by issuing guarantees for commercial paper.
. E.Sun Securities. E.Sun Securities provides a broad range of brokerage and securities products and services primarily to individuals as well as to corporations and institutions. E.Sun Securities’ products and services include securities brokerage, margin trading, underwriting and financial products. In addition, E.Sun Securities engages in proprietary trading of equity and fixed-income securities.

Our goal is to become a leading financial institution in Taiwan renowned for superior customer service, strong asset quality, reliable operations, professionalism and integrity. We have chosen ‘‘E.Sun,’’ or ‘‘Yushan’’ in Chinese, the highest mountain in Taiwan to represent our aspiration for excellence. We also place a strong emphasis on cultivating a corporate culture that encourages teamwork, leadership and the hiring of talented and well-qualified people.

We were formed on January 28, 2002 pursuant to the ROC Financial Holding Company Act. The ROC Financial Holding Company Act permits financial institutions to be reorganized under a single financial holding company structure so that the ownership of different operating companies can be consolidated. Our Shares are listed on the Taiwan Stock Exchange and trade under the symbol ‘‘2884.’’ As of June 20, 2003, our market capitalization, based on the closing price of NT$16.40 (US$0.47) per Share on the Taiwan Stock Exchange, was NT$40.5 billion.

Competitive Strengths

Our competitive strengths include the following:

Strong brand recognition

We believe that a key to our success and growth has been our strong brand recognition. We believe the E.Sun brand is associated with professional and sound management and high-quality customer service. We believe the E.Sun brand is widely recognized in Taiwan even though E.Sun Bank is smaller in terms of total assets and has a relatively shorter operating history as compared to the other leading banks in Taiwan. In 1999, E.Sun Bank was awarded the ‘‘#1 Corporate Image Award’’ by Commonwealth Magazine among all domestic banks in Taiwan. We believe that we have been successful in building a strong brand due to E.Sun Bank’s focus on maintaining high standards of customer service. Since the founding of E.Sun Bank in 1992, customer service has been a key principle of our corporate culture. Our reputation for customer service has been recognized by the industry. In 2001, E.Sun Bank was awarded the National Quality Award, presented by the Executive Yuan of the ROC. In 1999 and 2000, E.Sun Bank was ranked first among all Taiwan banks for service quality in the annual survey conducted by Taiwan’s Businessweekly.

Experienced and professional senior management team

Our senior management team is experienced, with a proven track record of sound management in the financial services industry. Our senior management team is led by our Chairman, Mr. Yung-Jen Huang, the founder of E.Sun Bank and a banker recognized in Taiwan for experience and achievement. In 1995, our Chairman was honored with the ‘‘Eminent Corporate Leadership Prize’’ for his professional management achievements and contributions to the community. In 2001, he was presented with the prestigious ‘‘Lee, Quo-Ding Management Prize’’, followed by ‘‘The National Quality Prize’’ in 2002. Our 20 member senior management team has an average of more than 25 years of experience in the financial services industry in Taiwan, and includes experts in credit evaluation, risk management, consumer banking products, information and technology and marketing. Our senior management team is committed to maximizing shareholder value and our performance targets seek to meet this primary objective. In addition, many members of our senior management team have worked together at E.Sun Bank, which we believe will facilitate the integration of our subsidiaries under our financial holding company structure.

Sound financial structure and asset quality

In order to achieve and maintain strong asset quality, we have established a comprehensive risk management process and a diligent risk monitoring program for the holding company and operating subsidiaries. In addition, we have taken a number of measures to strengthen our credit approval process, including centralization of decision making and employee training. Our asset quality is reflected in E.Sun Bank’s non-performing loan (‘‘NPL’’) ratio, which in 2000, 2001 and 2002 was among the lowest NPL ratios of the New Banks. As of March 31, 2003, E.Sun Bank had the lowest NPL ratio of any domestic commercial bank in Taiwan, with an NPL ratio of 1.36% compared to the ROC industry average NPL ratio of 6.11%, as reported to MOF. Consistent with its prudent credit risk management policy, E.Sun Bank has adopted a conservative NPL write-off policy. In 2002, E.Sun Bank wrote off NT$8.9 billion of NPLs in order to improve its asset quality. E.Sun Bank has attained one of the highest credit ratings among the New Banks with a long-term bank deposit rating of ‘‘Baa2’’ from Moody’s Investors Service, Inc. in 2002. In addition, E.Sun Bills Finance also maintained strong asset quality with no NPLs in 2002.

Distinctive and cohesive culture

interlinked. As a result, we believe we have one of the lowest attrition rates in the industry, with an approximate average annual attrition rate of 5% for the past three years. Since we believe that customer satisfaction is best promoted by satisfied employees, we believe our corporate culture has been an important factor in our ability to maintain a high degree of customer satisfaction.

Multi-product relationships with consumer banking customers

We have developed multi-product relationships with our customers. E.Sun Bank provides a wide range of banking products and services to its consumer banking customers. For example, many of our credit card customers are also customers for our deposit and mortgage products. E.Sun Bank’s wealth management customers are also customers of brokerage services offered by E.Sun Securities. In addition, we believe that the financial holding company structure provides opportunities for cross-selling products and services. With recruitment of specialists and retraining, relationship managers are being shifted from a traditional, singleproduct focus to a multi-product focus. In addition, we believe our multi-product relationships with consumer banking customers can provide an efficient method to increase our revenues per customer.

Strategy

Our goal is to become one of the leading financial holding companies in Taiwan. We intend to pursue this goal through the following strategies:

. continue to build brand recognition and enhance customer satisfaction;
. capture the benefits of operating as an integrated financial holding company;
. maintain and improve strong risk management; and
. continue to expand the scope of E.Sun Financial.

E.Sun Commercial Bank, Ltd.

E.Sun Bank was formed when its current Chairman Mr. Yung-Jen Huang brought together a group of financial professionals with the goal of forming and managing a first-class professional bank. E.Sun Bank commenced its operations on February 21, 1992 as one of the New Banks that were organized after the ROC government’s liberalization of the financial industry. Ten years later, E.Sun Bank is the core operating entity of E.Sun Financial, which was formed on January 28, 2002 after the promulgation of the ROC Financial Holding Company Act. E.Sun Bank is a full-service commercial bank with operations in consumer banking, corporate banking, wealth management, treasury and cash management. E.Sun Bank has increased its number of business units at home and abroad. As of March 31, 2003, E.Sun Bank operated 52 branches (including 8 sub-branches) in Taiwan and 2 overseas branches. E.Sun Bank believes that the establishment of E.Sun Financial will further promote the integration of business units and personnel and other resources within the E.Sun Financial group and thereby provide customers with more comprehensive and high-quality financial products and services.

Competitive Strengths

E.Sun Bank’s competitive strengths include the following:

High-quality consumer banking franchise

approximately 158,000 cash cards in force as of March 31, 2003, making E.Sun Bank the fifth largest issuer of cash cards in Taiwan. E.Sun Bank’s distribution network is centered around the populous and affluent Taipei metropolitan area. We believe that E.Sun Bank provides a strong foundation for our future growth, particularly as a platform for cross-selling opportunities.

Superior asset quality and risk management

E.Sun Bank has been able to maintain superior asset quality through a comprehensive risk management process, diligent risk monitoring and diversification of its loan portfolio. E.Sun Bank’s asset quality is reflected in its NPL ratio, which in 2000, 2001 and 2002 was among the lowest NPL ratios of the New Banks. As of March 31, 2003, E.Sun Bank had the lowest NPL ratio of any domestic commercial bank in Taiwan with an NPL ratio of 1.36%, compared to the ROC industry average NPL ratio of 6.11%, as reported to MOF. Consistent with its prudent credit risk management policy, E.Sun Bank has adopted a conservative NPL write-off policy. In 2002, E.Sun Bank wrote off NT$8.9 billion of NPLs in order to improve its asset quality. E.Sun Bank has also been successful in diversifying its loan portfolio. As of March 31, 2003, no loan exposure to a single customer or single customer group exceeded 2.97%. Moreover, E.Sun Bank has reduced its exposure to the real estate sector from 27.9% in 2000, which represented E.Sun Bank’s largest exposure to a single industry in that year, to 13.1% and 11.9% in 2002 and the first quarter of 2003, respectively.

A track record of innovations

E.Sun Bank believes that its track record of product innovations has enabled it to maintain and attract new customers in a very competitive market. For example, E.Sun Bank successfully launched eCoin, an Internet-based deposit and payment system. The eCoin services provide customers with an online payment alternative to online credit card payment by enabling customers to make small online payments for products, content or services through a virtual bank account opened online with E.Sun Bank. E.Sun Bank was the first bank in Taiwan to obtain MOF approval for micropayment services. In March 2003, E.Sun Bank was among the first banks in Taiwan to begin offering adjustable rate mortgage loans with an interest rate cap, which provides customers with the advantage of electing to pay the negotiated maximum interest rate if the adjustable rate exceeds the cap. In addition, E.Sun Bank was among the first banks in Taiwan to issue inverse floater bank debentures.

Sophisticated user of information technology

E.Sun Bank believes that it has a sophisticated and efficient information technology system that provides it with significant competitive advantages. E.Sun Bank utilizes sophisticated applications and software that allow it to strengthen the management of credit risk and market risk. As a part of the initiative to enhance risk management systems, E.Sun Bank is currently in the process of installing Kondor Plus, a part of the Reuters risk and trade management solutions. In addition, E.Sun Bank is working with Mercer Oliver Wyman, an international consulting firm, to implement a customer value and risk analysis management system to further leverage its relationships with customers by utilizing statistics, econometrics, computer modeling and industry expertise. In recognition of her information technology capabilities, Ms. Yvonne H. Yang, our Chief Risk Officer of the Risk Management Division and Chief Information Officer of the Information System Division was awarded the ‘‘Outstanding IT Award’’ by the President’s Office of the ROC in 1993.

Strategy

E.Sun Bank aims to become one of the top commercial banks in Taiwan. Elements of its strategies include the following:

. pursue customer-centric organizational restructuring;
. maintain the current high standards for asset quality through disciplined risk management;

. continue to expand the consumer banking franchise;
. expand the wealth management business; and
. enter the PRC financial services industry and global markets.

E.Sun Bills Finance Corporation

E.Sun Bills Finance was established in 1995 as one of the newly established bills finance companies in Taiwan. E.Sun Bills Finance is engaged in the business of underwriting, certifying, guaranteeing, investing and trading fixed-income securities. For the year ended December 31, 2002, E.Sun Bills Finance was ranked sixth with a market share of 6.06% in terms of trading volume for bills, and seventh with a market share of 4.81% in terms of underwriting volume of commercial paper.

Competitive Strengths

E.Sun Bills Finance’s competitive strengths include the following:

Strong asset quality through disciplined risk management

E.Sun Bills Finance maintains a strong asset quality through a comparative risk management process and diligent risk monitoring and remediation procedures. E.Sun Bills Finance has maintained a long-term rating of ‘‘twBBB-’’ and a short-term rating of ‘‘twA-3’’ from Taiwan Ratings Corporation. E.Sun Bills Finance believes that these ratings are based on its favorable asset quality compared to other local bills finance companies.

Strong brand recognition and corporate culture

The strong E.Sun brand recognition and unique E.Sun corporate culture distinguish E.Sun Bills Finance from other bills finance companies in Taiwan. E.Sun Bills Finance benefits from the strong E.Sun brand, which is widely recognized in Taiwan for its professional and sound management and high-quality customer service. E.Sun Bills Finance, as a member of the E.Sun Financial group, also shares the E.Sun culture with its high emphasis on customer service.

Highly skilled workforce

E.Sun Bills Finance has maintained a standard of high-quality professionalism through its intensive training program. E.Sun Bills Finance employees are trained through a combination of in-house programs as well as training programs conducted by external institutions. E.Sun Bills Finance also has a rotation system in place in which employees rotate through different divisions of E.Sun Bills Finance in order to broaden their professional skills. E.Sun Bills Finance believes that maintaining a high-quality professional workforce is the key to strengthening its operating capabilities in the highly competitive environment of the bills finance industry.

Seasoned management

E.Sun Bills Finance’s management has extensive experience in the bills finance industry. Prior to the formation of E.Sun Financial, E.Sun Bills Finance was a subsidiary E.Sun Bank, and as a result, the management of E.Sun Bills Finance enjoys a close working relationship with the management of E.Sun Bank. This close cooperation between the management of E.Sun Bank and E.Sun Bills Finance enables the cross-sharing of best practices and risk management techniques.

Strategy

E.Sun Bills Finance aims to be one of the leading bills finance companies in Taiwan. E.Sun Bills Finance’s strategy includes the following:

. cross-sell a diverse range of products;
. continue to improve risk management; and
. reduce cost and improve efficiency.

Corporate and Other Information

We were incorporated (Corporate Registration Number: 70796305) on January 28, 2002 under ROC law. Our principal executive offices are located at No. 77, Wuchang Street, Section 1, Taipei, Taiwan, ROC, and our telephone number is (886-2) 2389-1313. Our corporate website address is www.esunfhc.com.tw. The information on our website is not a part of this Offering Memorandum.

The Offering

Terms used in this summary and not otherwise defined shall have the meanings given to them in ‘‘Description of the Bonds.’’

Issuer . . . . . . . . . . . . . .	E.Sun Financial Holding Company, Ltd.
Offering. . . . . . . . . . . . .	US$178,200,000 aggregate principal amount of the Bonds (which include
	US$19,800,000 principal amount of Bonds pursuant to the exercise of the
	Initial Purchaser’s option granted by us) are being offered to non-U.S.
	persons outside the United States in reliance on Regulation S. We have not
	registered, and will not register, under the securities laws of the United
	States, the Bonds or any of the Shares issuable upon the conversion of the
	Bonds. See ‘‘Transfer Restrictions.’’
Initial Purchaser’s Option.	The Initial Purchaser has exercised the option to purchase an additional
	US$19,800,000 principal amount of the Bonds. See ‘‘Plan of Distribution.’’
Issue Price . . . . . . . . . . .	101% of principal amount.
Status . . . . . . . . . . . . . .	Direct, unconditional, unsubordinated and, subject to our negative pledge
	covenant, unsecured debt obligations ranking pari passu and without any
	preference or priority among themselves and, subject to our negative pledge
	covenant, with all our other present and future direct, unconditional,
	unsubordinated and unsecured obligations.
	Because we are a holding company and we conduct all of our operations
	through our subsidiaries, the Bonds will be effectively subordinated to the
	liabilities of these subsidiaries. As of March 31, 2003, our subsidiaries had
	aggregate liabilities of NT$279.8 billion, before consolidation adjustments,
	on a consolidated basis. See ‘‘Risk Factors — Risks Relating to the Bonds —
	The Bonds are structurally subordinated to the liabilities of our subsidiaries
	and not protected by restrictive covenants on our or our subsidiaries’
	additional indebtedness.’’
Interest . . . . . . . . . . . . .	No interest will accrue on the Bonds.
Closing Date . . . . . . . . .	June 27, 2003.
Maturity Date . . . . . . . . .	December 27, 2004.
Indenture . . . . . . . . . . . .	The Bonds will be issued under the Indenture, to be dated as of June 27,
	2003 (the ‘‘Indenture’’), between us and DB Trustees (Hong Kong) Limited,
	as trustee.
Conversion . . . . . . . . . . .	Subject to our right to elect to pay converting holders cash in lieu of Shares
	as described in the Cash Settlement Option referred to below, each holder of
	the Bonds has the right to convert any of its Bonds into Shares at any time
	during the Conversion Period referred to below.

Conversion Period . . . . . .	The period on or after November 24, 2003 up to and including December 12,
	2004. The holders of the Bonds, however, will not be able to effect
	conversions into Shares during any Closed Period. A Closed Period means
	(i) the 60-day period prior to the date of any of our general shareholders’
	meetings; (ii) the 30-day period prior to the date of any of our special
	shareholders’ meetings; (iii) the period from the date following the third
	Trading Day prior to the date of our notification to the Taiwan Stock
	Exchange of the record date for the determination of shareholders entitled to
	the receipt of dividends, subscription of new Shares due to capital increase
	or other benefits and bonuses to such record date; and (iv) such other periods
	during which we may be required to close our stock transfer books under
	ROC laws and regulations applicable from time to time.
Conversion Price. . . . . . .	The initial Conversion Price will be NT$19.716 per Share. The Conversion
	Price will be subject to adjustment for, among other things, subdivision,
	consolidation or reclassifications of Shares, bonus issues, rights issues,
	distributions of cash and stock dividends and other dilutive events. See
	‘‘Description of the Bonds — Conversion.’’
	In addition, the Conversion Price may be adjusted, at our option and within
	our sole discretion, in the event that the Closing Price of the Shares for
	certain periods is less than the Conversion Price then in effect. Any such
	adjustment to the Conversion Price will only be a downward adjustment and
	will be subject to certain limitations. For a discussion of our ability to adjust
	the Conversion Price, see ‘‘Description of the Bonds — Conversion —
	Standard Conversion Price Reset’’ and ‘‘— Special Conversion Price Reset.’’
Cash Settlement Option . .	In lieu of delivery of some or all of the Shares required to be delivered upon
	the valid exercise of a conversion right, we may elect to make a cash
	settlement payment in respect of all or any portion of a holder’s Bonds
	deposited for conversion (being US$1,000 in principal amount or an integral
	multiple thereof). See ‘‘Description of the Bonds — Conversion —
	Conversion Procedures — Cash Settlement Option.’’
Final Redemption . . . . . .	Unless previously redeemed, repurchased and cancelled, or converted, the
	Bonds will be redeemed at 100% of their principal amount in US dollars on
	December 27, 2004. See ‘‘Description of the Bonds — Redemption,
	Repurchase and Cancellation — Redemption at Maturity.’’
Early Redemption . . . . . .	The Bonds may be redeemed at 100% of their principal amount prior to
	December 27, 2004 under certain circumstances described below.
Redemption at the Option of	We may, at our option at any time on or after June 27, 2004 and prior to
the Company . . . . . . . .	November 27, 2004, redeem the Bonds, in whole or from time to time in part
	(being US$1,000 in principal amount or an integral multiple thereof), at
	100% of their principal amount, if the Closing Price of the Shares, translated
	into US dollars at the Prevailing Rate, for at least 20 out of 30 consecutive
	Trading Days immediately preceding the date of our redemption notice, is at
	least 115% of the Conversion Price then in effect, translated into US dollars
	at a fixed exchange rate of NT$34.661 = US$1.00. We may, at our option at
	any time, redeem, in whole but not in part, the Bonds at 100% of their
	principal amount if at least 90% of the principal amount of the Bonds has
	already been redeemed, repurchased and cancelled, or converted. See
	‘‘Description of the Bonds — Redemption, Repurchase and Cancellation —
	Redemption at the Option of the Company.’’

Tax Redemption . . . . . . . We may at any time redeem the Bonds, in whole but not in part, at 100% of their principal amount in the event of certain changes in ROC taxation that would require us to gross up for payment of interest, if any, or premium, if any, at a rate greater than 20% or to gross up for the payment of principal. See ‘‘Description of the Bonds — Redemption, Repurchase and Cancellation — Redemption for Taxation Reasons.’’

Redemption at the Option Until and unless previously redeemed, repurchased and cancelled, or of the Holder of the converted, each holder of the Bonds has the right, at such holder’s option, Bonds. . . . . . . . . . . . . to require us to redeem all or a portion (being US$1,000 in principal amount or an integral multiple thereof) of such holder’s Bonds at 100% of their principal amount on June 27, 2004. In addition, each holder of the Bonds has the right to require us to redeem such holder’s Bonds in whole, but not in part, at 100% of their principal amount in the event that our Shares cease to be listed on the Taiwan Stock Exchange for a period of at least five consecutive Trading Days. See ‘‘Description of the Bonds — Redemption, Repurchase and Cancellation — Redemption at the Option of the Holders.’’
Redemption at the Option of Until and unless the Bonds have been previously redeemed, repurchased and the Holder of the Bonds cancelled, or converted, each holder shall have the right, at such holder’s upon a Change option, to require us to repurchase all or a portion (being US$1,000 in of Control . . . . . . . . . . principal amount or an integral multiple thereof) of such holder’s Bonds at 100% of their principal amount on the Change of Control Put Date upon the occurrence of a Change of Control (each as defined herein). See ‘‘Description of the Bonds — Redemption, Repurchase and Cancellation — Redemption of the Bonds in the Event of Change of Control.’’
Form and Denomination of The Bonds will be issued in registered form, without coupons, in the the Bonds . . . . . . . . . . minimum denomination of US$1,000. The Bonds will be offered, sold and transferred in principal amount of US$1,000 or an integral multiple thereof.
The Bonds will be represented by a global certificate, which will be registered in the name of a nominee of, and be deposited on or about the Closing Date with Deutsche Bank AG London, as common depositary for Euroclear and Clearstream.
Transfer of the Bonds . . . All transfers of the Bonds and entries on the register of holders of the Bonds shall be made subject to the detailed provisions concerning transfer of the Bonds set forth in the Paying, Conversion and Transfer Agency Agreement, to be dated as of June 27, 2003 (the ‘‘Agency Agreement’’) among us, the Trustee, Deutsche Bank AG, Hong Kong Branch as the Registrar and as the Principal Agent and other paying, conversion and transfer agent appointed thereunder. In addition, transfers of interests in the Bonds and the Shares to be issued upon conversion of the Bonds will be subject to certain other restrictions. For a discussion of these restrictions, see ‘‘Description of the Bonds — Transfers of Bonds; Issue of Certificates’’, ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’
Governing Law . . . . . . . . The Indenture, the Agency Agreement, the Purchase Agreement and the Bonds will be governed by, and construed in accordance with, the laws of the State of New York.
Trustee . . . . . . . . . . . . . DB Trustees (Hong Kong) Limited.

Listing. . . . . . . . . . . . . . Application has been made to admit and list the Bonds on the Luxembourg Stock Exchange. The Shares are listed on the Taiwan Stock Exchange, and application will be made to list the Shares issuable upon conversion of the Bonds on the Taiwan Stock Exchange. Lock-up . . . . . . . . . . . . . Each of the Company, E.Sun Bank and certain of our directors, supervisors and executive officers has agreed that it or he (as the case may be) will not, without the prior written consent of Morgan Stanley & Co. International Limited, during the period ending 90 days after the date of this Offering Memorandum, (i) offer, pledge, encumber, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, publicly announce an intention to do any of the foregoing, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise. The foregoing restrictions shall not apply to the (a) the sale of the Bonds to the Initial Purchaser pursuant to the Purchase Agreement and the issuance of Shares upon the conversion of the Bonds, (b) transactions relating to Shares or other securities acquired in open market transactions after the completion of this Offering and (c) the issuance and/or sale of Shares (including treasury shares) to the Company’s employees for consideration or in connection with the Company’s employee stock bonus plan.

Principal Agent. . . . . . . . Deutsche Bank AG, Hong Kong Branch. Registrar . . . . . . . . . . . . Deutsche Bank AG, Hong Kong Branch.

SUMMARY FINANCIAL AND OTHER DATA

The following summary financial and other data for E.Sun Financial, E.Sun Bank and E.Sun Bills Finance should be read in conjunction with the financial statements of such entities, and the related notes, included elsewhere in this Offering Memorandum and the section entitled ‘‘Selected Financial and Other Data’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’

The unaudited pro forma consolidated balance sheets and statements of income of E.Sun Financial as of and for the years ended December 31, 2001 and 2002 are included elsewhere in this Offering Memorandum. The audited consolidated financial statements of E.Sun Financial as of and for the period from its establishment on January 28, 2002 to December 31, 2002, the unaudited consolidated financial statements of E.Sun Financial as of and for the three months ended March 31, 2003, the audited unconsolidated financial statements of E.Sun Bank and E.Sun Bills Finance as of and for the years ended December 31, 2000, 2001 and 2002, the unaudited unconsolidated financial statements of E.Sun Bank as of and for the three months ended March 31, 2003, together with the independent accountants’ audit reports thereon, are included elsewhere in this Offering Memorandum.

Each of the financial statements of E.Sun Financial, E.Sun Bank and E.Sun Bills Finance has been prepared and presented in accordance with reporting requirements of the ‘‘Regulations Governing the Preparation of Financial Statements of Issuers of Securities’’ and other applicable ROC laws and regulations and in accordance with ROC GAAP, and such financial statements are not intended to present their financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in any country or jurisdiction, including the United States, other than those in the ROC.

The following summary financial data for E.Sun Financial, E.Sun Bank, E.Sun Bills Finance and E.Sun Securities have been derived from their respective financial statements without material adjustment. Solely for your convenience, these summary data are presented in a different format from the financial statements. Neither such data nor the format in which they are presented should be viewed as comparable to information prepared in accordance with US GAAP or generally accepted accounting principles elsewhere.

Summary Pro Forma Financial and Other Data Relating to E.Sun Financial

E.Sun Financial was formed through a share exchange among E.Sun Bank, E.Sun Bills Finance and E.Sun Securities on January 28, 2002. The exchange ratio was 1.0 share of E.Sun Financial for 1.0 share of E.Sun Bank; 1.0 share of E.Sun Financial for 1.10 shares of E.Sun Bills Finance; and 1.0 share of E.Sun Financial for 1.25 shares of E.Sun Securities. After the share exchange, E.Sun Bank, E.Sun Bills Finance and E.Sun Securities became wholly owned subsidiaries of E.Sun Financial.

The following table sets forth summary unaudited pro forma consolidated financial and other data of E.Sun Financial as of and for the years ended December 31, 2001 and 2002. The summary unaudited pro forma consolidated balance sheets and income statements have been prepared in accordance with ROC GAAP based on the assumption that E.Sun Financial was established on January 1, 2001 and that each of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities had been subsidiaries of E.Sun Financial since January 1, 2001. The unaudited pro forma consolidated balance sheets and income statements do not purport to be indicative of the results of operations or related effects on the financial positions of E.Sun Financial that would actually have been attained had E.Sun Financial been established on January 1, 2001 and the share exchanges by which E.Sun Bank, E.Sun Bills Finance and E.Sun Securities became wholly owned subsidiaries of E.Sun Financial had been completed on January 1, 2001. Furthermore, the unaudited pro forma consolidated financial data are based on historical financial data prepared in accordance with ROC GAAP and cannot be taken as indicative of the likely performance of E.Sun Financial in the future. The summary unaudited pro forma consolidated financial data reflect certain adjustments, including:

. elimination of intercompany transactions among E.Sun Bank, E.Sun Bills Finance and E.Sun Securities in 2001 and 2002 as if E.Sun Financial were incorporated on January 1, 2001 and these entities were wholly owned subsidiaries of E.Sun Financial;

. reversal of current income and cash dividends recognized by E.Sun Bank from E.Sun Bills Finance and E.Sun Securities under the assumption that E.Sun Financial would have recognized such amounts through the consolidation of these entities as wholly owned subsidiaries for 2001;
. reclassification of E.Sun Bank’s issuance of treasury stock, purchased from the public market, into employee bonus shares in 2001 as E.Sun Financial shares and that E.Sun Financial would have had to borrow the funds to purchase the shares from the market; and
. any other adjustments to account for the differences in the accounting policies of the operating subsidiaries.

These summary unaudited pro forma consolidated financial and other data of E.Sun Financial are based on and derived from the historical ROC GAAP financial statements of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities, together with the related notes, which (except for those of E.Sun Securities) are included elsewhere in this Offering Memorandum.

These summary unaudited pro forma consolidated financial and other data are presented for illustrative purposes only. This information is not necessarily indicative of the financial condition or results of operations of E.Sun Financial that might have occurred had the transactions occurred on January 1, 2001, nor is it necessarily indicative of any future financial condition or results of operations of E.Sun Financial.

Income Statement Data:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net other operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for loan guarantee, trading and credit loss . . . . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net non-operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet Data:
Total loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Return on average assets(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average net assets(5) . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense/total operating revenue . . . . . . . . . . . . . . . . . .
Net interest income/total operating revenue. . . . . . . . . . . . . . . . . .
Net fee income/total operating revenue. . . . . . . . . . . . . . . . . . . . .
Net assets/total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pro Forma(1)
As of and for the Year Ended December 31,
2001
2002
(in millions, except percentages)
(unaudited)
NT$ 14,728.7
NT$ 12,368.4
US$ 356.4
(9,267.5)
(5,706.2)
(164.4)
5,461.2
6,662.2
192.0
863.0
1,118.1
32.2
(212.6)
(320.7)
(9.2)
650.4
797.4
23.0
2,564.2
1,915.9
55.2
157.7
221.7
6.4
8,833.5
9,597.2
276.6
(2,497.8)
(9,614.6)
(277.1)
(3,273.3)
(4,130.6)
(119.0)
3,062.4
(4,148.0)
(119.5)
3.2
(71.8)
(2.1)
3,065.6
(4,219.8)
(121.6)
(1,008.5)
1,082.8
31.2
NT$ 2,057.1
NT$ (3,137.0)
US$ (90.4)
NT$179,345.2
NT$170,775.3
US$4,921.5
273,052.8
284,905.9
8,210.5
222,725.1
222,349.0
6,407.8
247,680.0
262,741.8
7,571.8
25,372.9
22,164.2
638.7
0.8%
(1.1%)
8.1%
(13.2%)
37.1%
43.0%
61.8%
69.4%
7.4%
8.3%
9.3%
7.8%

(1) The unaudited pro forma consolidated financial statements are based on the audited financial statements of E.Sun Financial, E.Sun Bank and E.Sun Bills Finance as of and for the years ended December 31, 2001 and 2002. On combining the three sets of financial information, E.Sun Financial made certain adjustments, where appropriate, in order to conform the different accounting policies and to eliminate certain intercompany transactions. The principal adjustments made are described in detail on page F-58 of this Offering Memorandum.

(2) Includes loans, discounts and bills purchased after the deduction of allowance for possible losses. (3) Includes deposits and remittances.

(4) For 2001, defined as annual net income divided by total assets as of December 31, 2001. For 2002, defined as annual net income divided by average assets as of December 31, 2001 and December 31, 2002.

(5) For 2001, defined as annual net income divided by net assets as of December 31, 2001. For 2002, defined as annual net income divided by average net assets as of December 31, 2001 and December 31, 2002.

Summary Financial and Other Data Relating to E.Sun Financial

The following table sets forth, as of and for the periods indicated, certain historical financial and other data of E.Sun Financial.

Income Statement Data:
Interest income . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . .
Fee income. . . . . . . . . . . . . . . . . . . . . . .
Fee expense . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . .
Net other operating income(2) . . . . . . . . . .
Total operating revenue . . . . . . . . . . . .
Provisions for loan and other loss . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . .
Net operating income. . . . . . . . . . . . . .
Net non-operating income (expense) . . . . .
Income before tax . . . . . . . . . . . . . . . . . .
Tax benefit (expense) . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . .
Less: net income of subsidiaries for the period
from January 1 to January 27, 2002 . . . .
Net income (loss) . . . . . . . . . . . . . . . .
Balance Sheet Data:
Total loans(3) . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . .
Deposits(4) . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . .
Treasury stock(5) . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . .
Other Data:
Earnings per share. . . . . . . . . . . . . . . . . .
Book value per share . . . . . . . . . . . . . . . .
Return on assets(6). . . . . . . . . . . . . . . . . .
Return on equity(7) . . . . . . . . . . . . . . . . .
Operating expense/total operating revenue .
Net interest income/total operating revenue.
Net fee income/total operating revenue. . . .
Double leverage ratio(8) . . . . . . . . . . . . . .
Group capital adequacy ratio(9) . . . . . . . . .
Consolidated shareholders’ equity/total assets

As of and for the Period from
January 28
(Date of Establishment)
to December 31,
As of and for the Period Ended March 31,
2002
2002(1)
2003
(in millions, except percentages and per share data)
NT$ 12,368.4
US$ 356.4
NT$ 3,126.1
NT$ 2,765.0
US$ 79.7
(5,719.5)
(164.8)
(1,711.8)
(1,120.0)
(32.3)
6,648.9
191.6
1,414.3
1,645.0
47.4
1,118.0
32.2
238.4
341.4
9.8
(320.7)
(9.2)
(48.7)
(119.7)
(3.4)
797.3
23.0
189.7
221.7
6.4
1,915.9
55.2
494.9
591.2
17.0
240.0
6.9
61.9
245.2
7.1
9,602.1
276.7
2,160.8
2,703.1
77.9
(9,614.6)
(277.1)
(494.2)
(47.6)
(1.4)
(3,974.2)
(114.5)
(808.1)
(1,062.2)
(30.6)
(3,986.7)
(114.9)
858.5
1,593.3
45.9
(58.4)
(1.7)
(9.7)
3.5
0.1
(4,045.1)
(116.6)
848.8
1,596.8
46.0
1,082.8
31.2
(156.1)
(435.0)
(12.5)
(2,962.3)
(85.4)
692.7
1,161.8
33.5
129.2
3.7
129.2
—
—
NT$ (3,091.5)
US$ (89.1)
NT$ 563.5
NT$ 1,161.8
US$ 33.5
NT$170,775.3
US$4,921.5
NT$175,242.0
NT$170,092.1
US$4,901.8
284,428.7
8,196.8
273,053.1
300,919.7
8,672.0
222,335.0
6,407.3
218,663.1
219,566.8
6,327.6
262,307.8
7,559.3
247,041.1
277,651.4
8,001.5
4,247.6
122.4
4,247.6
4,247.6
122.4
22,120.9
637.5
26,012.0
23,268.3
670.6
NT$ (1.46)
NT$ 0.27
NT$ 0.55
NT$ 10.43
NT$ 13.25
NT$ 10.97
(1.1%)
0.8%
1.5%
(14.0%)
8.7%
20.0%
(41.4%)
(37.4%)
(39.3%)
69.2%
65.5%
60.9%
8.3%
8.8%
8.2%
106.6%
100.0%
105.4%
108.8%
NA
NA
7.8%
9.5%
7.7%

(1) As of and for the period from January 28 (date of establishment) to March 31, 2002. (2) Includes investment income (loss) from long-term equity investments and bond investments (corporate bonds and bank debentures).
(3) Includes loans, discounts and bills purchased after the deduction of allowance for possible losses. (4) Includes deposits and remittances.
(5) Represents treasury stock relating to long-term equity investments of E.Sun Bank in E.Sun Financial as a result of the share exchange between E.Sun Bank and E.Sun Financial and treasury stock to be re-issued to employees. The carrying values of these treasury stocks, which were both held by E.Sun Bank, were NT$3,749.6 million and NT$498.0 million as of March 31, 2003 and March 31, 2002, respectively.

(6) Defined as annual net income for the period ended December 31, 2002 divided by total assets as of December 31, 2002 and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by total assets as of March 31, 2002 and March 31, 2003, respectively.
(7) Defined as annual net income for the period ended December 31, 2002 divided by total shareholders’ equity as of December 31, 2002 and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003, divided by total shareholders’ equity as of March 31, 2002 and March 31, 2003, respectively.
(8) Defined as E.Sun Financial’s unconsolidated long-term investments in subsidiaries divided by shareholders’ equity.
(9) Defined as E.Sun Financial’s net qualified capital divided by E.Sun Financial’s required capital, as defined by MOF.

Common Share Data (in millions): Shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares outstanding — period end . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average number of shares outstanding(2) . . . . . . . . . . . . . . . . .	As of and for the Period from January 28 (Date of Establishment) to December 31, 2002 2,470.0 2,120.2 2,120.2	As of and for the Period Ended March 31,	As of and for the Period Ended March 31,
		2002(1) 2,290.0 1,963.1 2,120.2	2003
			2,470.0 2,120.2 2,120.2

(1) As of and for the period from January 28 (date of establishment) to March 31, 2002.
(2) Weighted average number of shares outstanding as of and for the period ended March 31, 2002, retroactively adjusted to reflect the effects of the stock dividends distributed in 2002 for calculation of per share data.

Summary Financial and Other Data Relating to E.Sun Bank

The following table sets forth, as of and for the periods indicated, certain financial and other data for E.Sun Bank. Please see ‘‘Selected Financial and Other Data’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — E.Sun Bank’’ for more information concerning the financial condition and results of operations of E.Sun Bank.

Income Statement Data: Net interest income . . . . . . Net fee income . . . . . . . . . Net gain/loss on trading securities . . . . . . . . . . . Other operating income . . . Total operating revenue . . . Provisions for loan loss and other losses . . . . . . . . . Operating expense . . . . . . . Net income (loss) . . . . . . . Balance Sheet Data: Gross loans(1) . . . . . . . . . . Total loans(2) . . . . . . . . . . Total assets . . . . . . . . . . . Deposits(3) . . . . . . . . . . . . Total liabilities . . . . . . . . . Total shareholders’ equity . Other Data: Return on average assets(4) . Return on average equity(5). Operating expense/total operating revenue . . . . . Net interest margin(6). . . . . Net fee income/total operating revenue . . . . . NPLs/gross loans(7) . . . . . . Surveillance loans/gross loans(8) . . . . . . . . . . . . Allowance for loan loss/ gross loans . . . . . . . . . Allowance for loan loss/ NPLs . . . . . . . . . . . . . Gross loans/deposits . . . . . Shareholders’ equity/total assets . . . . . . . . . . . . . Capital adequacy ratio(9) . .		As of and for the Year Ended December 31,	As of and for the Year Ended December 31,	As of a	nd for the Period Ended March 31,
	2000	2001	2002	2002	2003
	NT$ 4,074.6 513.7 1,245.5 403.1 6,236.9 (1,718.5) (2,707.8) 1,419.6 NT$173,727.3 172,117.3 236,435.7 203,334.1 215,416.2 21,019.5 0.6% 6.9% (43.4%) 2.08% 8.2% 2.46% NA 0.93% 37.77% 85.4% 8.9% 10.56%	NT$ 5,279.7 477.8 1,456.2 424.3 7,638.0 (2,092.6) (2,963.3) 1,927.9 NT$180,859.2 179,345.2 265,873.8 225,029.2 243,070.3 22,803.5 0.8% 8.8% (38.8%) 2.47% 6.3% 2.83% NA 0.84% 29.55% 80.4% 8.6% 11.01%			NT$ 1,621.0 US$ 46.7 176.7 5.1 223.4 6.4 246.5 7.1 2,267.6 65.3 — — (965.2) (27.8) 1,042.0 30.0 NT$171,723.5 US$4,948.8 170,092.1 4,901.8 282,506.3 8,141.4 222,882.9 6,423.1 263,551.1 7,595.1 18,955.2 546.3 1.5% 22.6% (42.6%) 2.87% 7.8% 1.36% 1.03% 0.95% 69.61% 77.0% 6.7% NA

(1) Includes loans, discounts, bills purchased and overdue loans before the deduction of allowance for possible losses.
(2) Includes loans, discounts, bills purchased and overdue loans after the deduction of allowance for possible losses. (3) Includes deposits and remittances.
(4) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total assets balance for the preceding and current fiscal year, respectively, and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by the average total assets balance as of December 31 of the previous year and March 31 of the current year, respectively.
(5) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total shareholders’ equity balance for the preceding and current fiscal year, respectively, and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by the average total shareholders’ equity balance as of December 31 of the previous year and March 31 of the current year, respectively.
(6) Defined as net interest income divided by the average daily balances of interest-earning assets.
(7) Calculated by dividing the amount of NPLs by the amount of gross loans.
(8) Calculated by dividing the amount of surveillance loans by the amount of gross loans. Surveillance loans primarily include loans for which the principal or interest is overdue by three months or more, but less than six months overdue, which have yet to be classified as NPLs, as well as other impaired loans that are exempt from MOF classification of NPLs.
(9) Defined as net qualified capital divided by risk-weighted assets, as defined by MOF.

Summary Financial and Other Data Relating to E.Sun Bills Finance

The following table sets forth, as of and for the periods indicated, certain financial and other data of E.Sun Bills Finance. Please see ‘‘Selected Financial and Other Data’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — E.Sun Bills Finance’’ for more information concerning the financial condition and results of operations of E.Sun Bills Finance.

Income Statement Data:
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and loss on credits . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet Data:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for loss on guarantees and sale of government bonds . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Return on average assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average equity(2). . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense/total operating revenue . . . . . . . . . . . . . . .
Bonds sold under agreements to repurchase . . . . . . . . . . . . . .
Bonds purchased under agreements to resell . . . . . . . . . . . . . .
Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for guarantees/total guarantees(3) . . . . . . . . . . . . . . . .
Capital adequacy ratio(4) . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total assets balance for the preceding and current fiscal year, respectively.

(2) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total shareholders’ equity balance for the preceding and current fiscal year, respectively. (3) Defined as reserve for loss on guarantees divided by total guarantees.

(4) Defined as net qualified capital divided by risk-weighted assets, as defined by MOF.

RISK FACTORS

Investing in the Bonds and the Shares issuable upon conversion of the Bonds involves risks. You should carefully consider the risks described below before making an investment decision. You should also carefully consider all of the information contained in this Offering Memorandum, including our financial statements and related notes and those of our subsidiaries. You should note that we are governed in the ROC by a legal and regulatory environment that in some material respects may be different from that prevailing in other countries.

Risks Relating to E.Sun Financial

Our ability to service our debt and pay dividends depends on capital distributions from our subsidiaries which are subject to regulatory and other limits.

Since we are a holding company, we conduct no significant business operations on our own. As a result, we depend on dividends from our subsidiaries for substantially all of our revenues. We currently conduct all of our operations through our subsidiaries. Most of our assets are held by, and almost all of our earnings and cash flows are attributable to, such subsidiaries. Our liquidity, ability to pay interest and expenses and meet obligations, and ability to pay cash dividends on our Shares are dependent upon our ability to obtain a flow of funds from those subsidiaries.

Certain of our operating subsidiaries have a history of paying dividends in the past. Nevertheless, it is uncertain whether dividends will be paid to us from time to time, or at all. Whether or not dividends will be paid depends on various business considerations and regulatory limits. Generally, Taiwan corporations are required to set aside 10.0% of their annual income, less prior years’ losses, if any, and applicable income tax, as a legal reserve. As a result, Taiwan corporations may generally only declare up to 90.0% of their current earnings in any year as dividends to their shareholders. Further, our subsidiaries are governed by banking, bills finance or securities regulations and their articles of incorporation, respectively, which further restrict their ability to pay dividends, including the following:

. each of E.Sun Bank and E.Sun Bills Finance is restricted from paying a dividend unless (1) it has allocated, for the current year, a legal reserve of 30.0% of its net income; (2) the cash portion of such dividend does not exceed 15.0% of its authorized capital unless the legal reserve is 100.0% or more of its paid-in capital; and (3) it maintains a capital adequacy ratio of at least 8.0%; and
. E.Sun Securities is restricted from paying a dividend unless it has allocated 20.0% of its net income for the year to a special reserve.

There can be no assurance that these subsidiaries will generate sufficient earnings and cash flows to pay dividends or otherwise distribute sufficient funds to us to enable us to meet our obligations, pay interest and expenses or declare dividends.

In addition, our ability to service our debt and pay dividends may be further subject to restrictions under indentures, loan covenants, and loan agreements, in each case, governing indebtedness we may incur. Furthermore, our subsidiaries may incur substantial indebtedness to third parties, the terms of which may restrict our ability to obtain funds from the applicable subsidiaries. For more details, see ‘‘Regulation of the Taiwan Financial Services Industry’’ and ‘‘Description of the Shares — Dividends and Distributions.’’

We may not be successful in leveraging the financial holding company structure to promote cross-selling activities, in part due to the regulatory environment.

One of the benefits of our financial holding company structure is the opportunities it creates for crossselling activities that would enable us to expand our revenue and customer base. While we believe that E.Sun Bank provides a platform for us to successfully promote cross-selling activities, there can be no assurances that we will be successful. In addition, our ability to effectively use the information of one

subsidiary for cross-selling purposes may be limited by certain regulatory uncertainties. For example, there are regulations governing cross-selling that permit us to use only a portion of the information we have available about our customers and, except for certain basic information, only permit us to use that information for cross-selling purposes with the consent of our customers. However, such regulations are vague and allow for a high level of discretion on the part of the regulators to review our cross-selling activities. If we are considered to have violated any cross-selling regulations, we may be required to decrease or suspend our cross-selling activities, which may have an adverse effect on our revenue and results of operations.

We may be unsuccessful in completing future acquisitions or in establishing strategic alliances.

We intend to pursue selective acquisitions and strategic alliances that can benefit from our competitive strengths and enhance our competitive advantages. Our ability to grow by acquisition or strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates, our ability to negotiate acceptable terms and our assessment of the characteristics of potential acquisition targets or strategic partners such as financial condition and results of operations, attractiveness of products and services, suitability of distribution channels and management ability.

Completion of potential acquisitions is subject to a number of uncertainties, including access to capital once the proceeds of this Offering have been used, restrictions contained in our debt instruments and uncertainties of the ROC laws and regulations relating to mergers and acquisitions. The ROC Corporate Merger and Acquisition Law, the ROC Financial Institutions Merger Law and the amended ROC Securities and Exchange Law have only recently been enacted or amended and their application and interpretation have not yet been tested. As a result, any proposed acquisition by us or our subsidiaries may be delayed or prevented. See ‘‘Regulation of the Taiwan Financial Services Industry.’’ In addition, our strategy to pursue strategic alliances to broaden our customer base and expand into overseas markets, particularly in Hong Kong and the People’s Republic of China, may be subject to certain obstacles as a result of Taiwan’s unique position in international relations. See ‘‘Risks Relating to Taiwan — Our business may be adversely affected by political risks associated with doing business in Taiwan.’’

Acquisitions and strategic alliances involve risks that could have a material adverse effect on our results of operations, including difficulties in integrating the operations and personnel of the acquired companies, problems in implementing the business objectives of a strategic alliance and diversion of management attention from the operation of the existing businesses. We cannot assure you that we will be able to identify suitable acquisition or strategic alliance candidates or complete the acquisitions or strategic alliances on satisfactory terms.

We have broad discretion over a large portion of the use of the proceeds of this Offering.

Consistent with our application to the Securities and Futures Commission, we intend to use the proceeds of this Offering to invest in domestic financial institutions. Accordingly, subject to approval by our boards of directors and regulatory authorities, we and our subsidiaries will have broad discretion over a large portion of the use of the proceeds of this Offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Moreover, you will not have the opportunity to evaluate the economic, financial or other information on which we base future decisions on how to use the proceeds of this Offering. As a result, you may not agree with the use of the proceeds of this Offering. In addition, we will have wide flexibility in identifying and selecting prospective acquisition and investment candidates in the financial services industry in Taiwan. We do not intend to seek shareholder approval for any acquisition unless required by applicable law or regulations, and our shareholders may not have an opportunity to review financial information on an acquisition candidate prior to the consummation of the acquisition.

Interest rate volatility could significantly affect our financial condition and results of operations.

A significant portion of our assets consists of, and a significant portion of our revenue is derived from, assets that are subject to interest rate risks. For example, E.Sun Bank’s profitability depends to a large extent on its net interest income. Changes in interest rates, changes in the relationship between short-term and long-term interest rates, or changes in the relationship between different interest rate indices can affect the interest rate charged on interest-earning assets differently than the interest rate paid on interest-bearing liabilities. As of March 31, 2003, the total amount of interest-bearing liabilities of E.Sun Bank anticipated to be re-priced within one year exceeded the total amount of interest-earning assets anticipated to be re-priced in the same period by NT$47.6 billion, representing a negative cumulative one-year interest rate sensitivity gap equal to 27.0% of total interest-earning assets. Therefore, E.Sun Bank may experience decreases in net interest income in a rising interest rate environment. E.Sun Bank intends to offset the potential effects arising from a positive interest rate gap through proper management of its assets and liabilities. In addition, E.Sun Bills Finance’s profitability is dependent, to a large extent, on its trading activities in fixed-income instruments and its investment portfolio, which consists mostly of fixed-income instruments. Changes in market interest rates, or changes in the relationship between different interest rate indices, can affect E.Sun Bills Finance’s funding cost, the profitability of its trading activities and its portfolio returns. We are therefore subject to significant risk from changes in interest rates, which can affect our financial performance.

If we are not successful in competing in highly competitive markets, our results of operations may be adversely affected.

The financial services industry in Taiwan is highly competitive. We and each of our principal subsidiaries operate in highly competitive markets. Some of our competitors are better capitalized and have access to cheaper sources of funds. In the financial holding company industry, we compete against a total of 14 financial holding companies in Taiwan as of March 31, 2003. In addition, as a financial holding company, we compete through our subsidiaries with each of the monoline competitor operating companies in its various businesses. In the banking industry, there were 52 domestic banks and 37 credit co-operatives operating in Taiwan as of March 31, 2003. We compete principally with other commercial banks in the ROC as well as state-owned banks, specialized banks and branches of foreign banks operating in Taiwan. In the bills finance industry, we compete against the three oldest bills finance companies, which accounted for 47.8% of trading volume, as well as 10 other new bills finance companies and a number of qualified banks. The bills finance industry is particularly competitive for smaller institutions due to the competition for a relatively small number of customers.

We also compete against some of our foreign competitors who provide products that we, as a domestic financial services company, are not capable of providing or are otherwise precluded by law from providing. We compete across all of our businesses on the basis of price, product, geographic location and service. If we are unable to compete successfully in any of our principal businesses, our results of operations and financial condition would be materially adversely affected. In addition, due to the highly competitive and fragmented markets in which we and each of our subsidiaries compete, there has been, and will continue to be, a trend of consolidation in Taiwan’s financial services industry. There can be no assurances that either we or any of our subsidiaries will not be the target of mergers and acquisitions activities or that we or our subsidiaries will be able to remain independent.

Decisions made by the company with respect to related party transactions may not be considered by shareholders to be in their best interests.

We have engaged from time to time in a variety of transactions with our related parties. Our policy and the ROC Financial Holding Company Act provide that transactions with related parties will be conducted on terms at least as favorable to us as we could obtain in a comparable arm’s-length transaction with a person who is not a related party, and such transaction shall be approved by three-fourths of the board of directors in a board meeting in which two-thirds of the directors are present. We have entered into transactions with our related parties in the past and we may enter into additional transactions with our

related parties in the future. We cannot assure you as to the terms of those transactions or that all of our transactions will be considered by shareholders to be in their best interests. See ‘‘Transactions with Related Parties.’’

All of our businesses are highly regulated and we may be adversely affected by future regulatory changes.

Although there have been liberalization and deregulation initiatives in recent years, the financial services industry — including banking, bills finance and securities — remains highly regulated in Taiwan. Our subsidiaries’ principal business activities are regulated by various ROC government agencies, including the Securities and Futures Commission, the Bureau of Monetary Affairs of MOF and the Central Bank of China as well as numerous other government agencies. Compliance with all of the regulations places limitations on our activities. In addition, these laws and regulations may change from time to time and we cannot assure you that future legislative or regulatory changes, including deregulation, will not have a material adverse effect on our revenue and results of operations. Failure to comply with any of the laws and regulations to which we are subject could result in fines, suspension or expulsion, which could have a material adverse effect upon us. Additionally, deregulation could subject us to increased competitive pressures, which could have a material adverse effect upon us. Certain of the regulations to which each of our subsidiaries are subject to are described in the section entitled ‘‘Regulation of the Taiwan Financial Services Industry.’’

A downgrade in our credit ratings could limit our ability to market products, increase our borrowing costs and/or hurt our relationships with creditors or trading counterparties.

Our credit ratings, which are intended to measure our ability to meet our debt obligations, are an important factor affecting public confidence in most of our products and, as a result, our competitiveness. The interest rates of our borrowings are largely dependent on our credit ratings. A downgrade of our credit ratings would likely increase our cost of borrowing and adversely affect our results of operations. Downgrading of our credit ratings could also limit our ability to raise capital or our subsidiaries’ abilities to conduct business. For example, although E.Sun Bank has one of the highest credit ratings of all Taiwan domestic banks, a downgrade of its credit ratings may have a material adverse effect on its cost of borrowings and have a negative impact its results of operations.

Our risk management policies and procedures, and those of our subsidiaries, may leave us exposed to unidentified or unanticipated risks, which could negatively affect our businesses or result in losses.

Our hedging strategies and other risk management techniques, and those of our subsidiaries, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. Some methods of managing risk are based upon observed historical market behavior. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicated. Other risk management methods depend upon an evaluation of information regarding markets, clients or other matters. This information may not in all cases be accurate, complete, up-to-date or properly evaluated. Management of operational, legal or regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events. Although we have instituted these policies and procedures at the holding company and subsidiary levels, they may not be fully effective.

In addition, our risk management techniques, and those of our subsidiaries, may be subject to greater risks than financial institutions in other countries as a result of the fact that the Taiwan financial market lacks more advanced risk management instruments. As a result, active balance sheet management is difficult for E.Sun Bank. E.Sun Bank can only change its pricing strategy and reshape its portfolio gradually in response to market conditions. To the extent that this lack of advanced risk management instruments in the Taiwan financial market hinders E.Sun Bank in managing its risks, E.Sun Bank’s results of operations may be adversely affected and consequently may have a negative impact on our revenue and net income.

Forecasted financial information reported by us and certain of our subsidiaries pursuant to Securities and Futures Commission requirements may not be reliable.

As a financial holding company in Taiwan that was listed in 2002, we are required by the Securities and Futures Commission to report our annual financial forecasts until 2005 and may be required to report our annual financial forecasts subsequently if we are subject to the reporting requirements under certain circumstances pursuant to the rules and regulations of the Securities and Futures Commission. In addition, each of E.Sun Bank and E.Sun Bills Finance is required to publicly report unaudited monthly income statement data separately. To the extent there is any significant variance between our actual results in any period on a consolidated basis and the forecast for the corresponding period included in the annual forecast we have already published, we are required to revise our forecast and publish the revised forecasts as soon as practicable. To date, E.Sun Financial has not had to revise its financial forecasts.

We urge you not to rely on these forecasts as they are derived from many assumptions regarding our industries, investments and general market, political and economic conditions, many of which are beyond our control. In addition, we caution you that none of the information included in this Offering Memorandum has formed or will form the basis of our future forecasts. We do not expect to update you on any possible difference presented in the forecasts that we published in 2003, and plan to publish in the future, from the information included in this Offering Memorandum, including forward-looking statements.

An investor may not acquire beneficial ownership of more than specified percentages of our Shares, or otherwise gain control of us, without obtaining required regulatory approvals.

Under the ROC Financial Holding Company Act, any person or group of related persons proposing to hold more than 10%, 25%, 50% or 75% of a financial holding company must apply to MOF for approval. MOF may restrict the voting rights of the portions exceeding the above percentages if such approval is not obtained. A shareholder holding more than 10% of a financial holding company must meet the fit and proper requirements promulgated by MOF. A shareholder may not increase its shareholdings to exceed the percentages stated above unless the shareholder has been determined to be fit and proper by MOF. See ‘‘Description of the Shares — Shareholding Restrictions.’’

We have a continuing obligation to support the operation of our subsidiaries, which may have an adverse effect on our financial condition and results of operations.

We, under certain circumstances, are obligated under the ROC Financial Holding Company Act to support the financial condition of our subsidiaries. Under the ROC Financial Holding Company Act, if the business of a banking subsidiary (including banks and bills finance companies), insurance subsidiary or securities subsidiary of a financial holding company has deteriorated to an extent that is likely to cause the affected subsidiary to become insolvent, or result in any damage to the interests of the depositors of such subsidiary, then the financial holding company is required to assist the subsidiary to return to normal operations. If the financial condition of any of our subsidiaries deteriorates significantly, we may be obligated to, among other things, provide new funding or financial or other support to such affected subsidiary.

Risks Relating to E.Sun Bank

E.Sun Bank’s results of operations are significantly affected by the ability of its borrowers to repay their loans and the adequacy of its allowance for loan loss.

Lending money is an essential part of the banking business. Borrowers do not always repay their loans. The risk of non-payment is affected by credit risks of a particular borrower, changes in economic and industry conditions, the duration of the loan and, in the case of a collateralized loan, uncertainties as to the future value of the collateral. For the year ended December 31, 2002, E.Sun Bank wrote off NT$8,949.3 million in net loans. As of March 31, 2003, 1.36% of E.Sun Bank’s gross loans were classified as NPLs. As of such date, an additional 1.03% of E.Sun Bank’s gross loans were reported as loans under surveillance

(which primarily includes loans for which the principal or interest is overdue by three months or more but less than six months overdue that have yet to be classified as NPLs and other impaired loans that are exempted from MOF classification as NPLs). See ‘‘Description of Assets and Liabilities of E.Sun Bank — Asset Quality — Non-Performing Loans’’ for more information relating to loans under surveillance.

As of March 31, 2003, approximately 11.9% of E.Sun Bank’s total loans consisted of real estate and construction loans. In addition, 7.4% of E.Sun Bank’s total credit exposure was to credit card revolving debt. Generally, real estate and construction loans as well as credit card cash advances present a greater risk of non-payment by a borrower than other types of loans.

There is no precise method of predicting loan and credit loss. E.Sun Bank cannot assure you that its allowance for loan and credit loss is or will be sufficient to absorb actual loss. An increase in E.Sun Bank’s NPLs would have a material adverse effect on its financial condition and results of operations.

A decline in the real estate market may result in losses or decreased profitability.

Although E.Sun Bank has reduced its loan exposures to the real estate and construction sector in 2000, 2001 and 2002, a portion of E.Sun Bank’s loan portfolio is in real estate and construction loans. As of March 31, 2003, E.Sun Bank’s total real estate and construction loans outstanding accounted for 11.9% of its total loan portfolio. Declines in real estate values could have an adverse effect on the results of operations of E.Sun Bank. In a declining real estate market, E.Sun Bank may experience a higher loan delinquency rate and higher NPL ratios. The real property securing NPLs may also decrease in value, and as a result, E.Sun Bank may not be able to recover the full amount of the loans extended.

The real estate underlying many of E.Sun Bank’s commercial real estate and construction loans and the real estate securing the residential loans that it makes are concentrated in Taipei, Taiwan. Over the last several years, banks in Taiwan have increased their funding availability for commercial real estate projects in Taipei in response to the growth of Taipei’s real estate market. However, these increases could result in over-building and a decline in real estate values.

E.Sun Bank’s financial condition may be adversely affected if it is unable to attract sufficient deposits to fund its anticipated loan growth and to grow its business.

Most of E.Sun Bank’s funding requirements are met through short-term funding sources, primarily in the form of deposits of customers. As of March 31, 2003, 94.9% of E.Sun Bank’s deposits had current maturities of one year or less or were payable on demand. In the past, a substantial portion of such deposits has been rolled over upon maturity and has been, over time, a stable source of funding for E.Sun Bank. No assurance can be given, however, that this practice will continue. To the extent that it is unable to attract and maintain the level of deposits to fund its loan growth, E.Sun Bank would need to raise additional funds. No assurance can be given that E.Sun Bank will succeed in obtaining these deposits on favorable terms, or at all. In addition, E.Sun Bank has to compete with 51 other domestic banks and 37 credit cooperatives in the Taiwan market. No assurance can be given that in this highly competitive environment, E.Sun Bank will be able to grow its business at the same rate it has maintained in the past.

The trading positions taken by E.Sun Bank as part of its short-term investments and proprietary trading activities may adversely affect its financial condition and results of operations.

In managing its treasury operations, E.Sun Bank engages in proprietary trading, mainly through maintaining positions in the fixed-income, short-term investment and equity markets. E.Sun Bank also maintains proprietary trading positions in financial derivative instruments. These assets are subject to the normal risks associated with proprietary investing activities, including the risk resulting from a change in the level of one or more of market prices, rates, indices, volatilities, correlations, liquidity or other market factors which may result in losses for a specific position or portfolio.

For the three months ended March 31, 2003, net trading gain accounted for approximately 9.9% of E.Sun Bank’s total operating revenue. In addition, as of March 31, 2003, E.Sun Bank’s investments in trading securities included approximately NT$1.0 billion of listed securities of Taiwan companies, prices of which can be volatile and have recently fluctuated quite significantly. No assurance can be given that E.Sun Bank’s trading activities will continue to generate gain, or that those trading activities will not result in significant loss that would have an adverse effect on its financial condition and results of operations.

E.Sun Bank is subject to banking fraud, in particular, credit card fraud, from time to time, which may adversely affect its business.

Since mid-2000, banks in Taiwan have been faced with increased credit card fraud as a result of certain organized criminal activities involving credit card forgery. E.Sun Bank believes that its exposure to credit card fraud was less widespread as compared to its peer banks, suffering actual losses in the amount of NT$18.8 million, NT$68.1 million and NT$45.6 million for the years ended December 31, 2000, 2001 and 2002, respectively. Banks in Taiwan, including E.Sun Bank, have introduced anti-fraud measures such as E.Sun Bank’s in-house fraud detection program. Although to date E.Sun Bank’s anti-fraud measures have been effective, no assurance can be given that this measure will continue to be effective in the prevention of future credit card forgery. Although E.Sun Bank has taken steps to monitor and prevent credit card fraud, any widespread occurrence of credit card fraud may have a material adverse effect on the results of operations or financial condition of E.Sun Bank.

Credit risk exposes E.Sun Bank to losses caused by financial or other problems experienced by third parties.

E.Sun Bank is exposed to the risk that third parties that owe it money, securities or other assets will not perform their obligations. These parties include E.Sun Bank’s trading counterparties, customers, clearing agents, exchanges, clearing houses and other financial intermediaries, as well as issuers whose securities it holds. These parties may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. This risk may arise, for example, from:

. holding securities of third parties;
. entering into swap or other derivative contracts under which counterparties have long-term obligations to make payments to E.Sun Bank;
. executing securities, futures, currency or commodity trades that fail to settle at the required time due to non-delivery by the counterparty or system failures by clearing agents, exchanges, clearing houses or other financial intermediaries; and
. extending credit to E.Sun Bank’s customers through margin lending or other arrangements.

No assurance can be given that these arrangements will not have a material adverse effect on E.Sun Bank’s results of operations and financial condition.

Guidelines for loan classification and provisioning in Taiwan may be less stringent than those in other countries.

The practice in Taiwan with respect to loan classification and provisioning, in certain circumstances, may be less stringent than those applicable to banks in the United States and other countries. This may result in particular loans being classified as performing loans — or in a category reflecting a lower degree of risk — than in those other countries. Also, the amount of E.Sun Bank’s non-performing loans, as well as its reserves, may be lower than would be reported if E.Sun Bank were incorporated in another jurisdiction and were subject to more stringent requirements. See ‘‘Description of Assets and Liabilities of E.Sun Bank — Asset Quality — Non-Performing Loans.’’

Risks Relating to E.Sun Bills Finance

E.Sun Bills Finance’s results of operations are significantly affected by the ability of its customers to meet their obligations and the adequacy of its allowance for impaired assets.

Provisions of guarantees, underwriting of commercial paper and repurchase transactions are an essential part of the bills finance business. Borrowers do not always honor their obligations. The risk of nonpayment is affected by credit risks of a particular borrower, changes in economic and industry conditions, the duration of the receivables and, in the case of a collateralized receivable, uncertainties as to the future value of the collateral. As of March 31, 2003, E.Sun Bills Finance did not have any impaired credits for guarantees.

There is no precise method of predicting credit losses. E.Sun Bills Finance cannot assure you that its allowance for guarantee and credit losses is or will be sufficient to absorb actual losses. An increase in actual losses may have a material adverse effect on E.Sun Bills Finance’s financial condition and results of operations.

E.Sun Bills Finance relies largely on short-term repurchase transactions and interbank borrowing to fund its longer-term activities.

E.Sun Bills Finance relies on repurchase transactions and interbank borrowing as its major sources of funding. Repurchase transactions pay fixed interest rates and have a short maturity, typically less than 30 days. As of March 31, 2003, repurchase transactions amounted to NT$37.4 billion and accounted for 70.3% of E.Sun Bills Finance’s funding source. A large part of E.Sun Bills Finance’s repurchase transaction counterparties are corporations, investment funds and financial institutions. The quality of the bonds underlying the repurchase agreements is therefore important to ensure liquidity. As of March 31, 2003, 56.3% of E.Sun Bills Finance’s bills portfolio was guaranteed by other financial institutions. The regulatory limit for the aggregate outstanding balance of repurchase transactions and interbank borrowing is 14 times E.Sun Bills Finance’s net asset value. As of March 31, 2003, the ratio of E.Sun Bills Finance’s outstanding repurchase agreements relative to its net asset value was 7.04 times.

Risks Relating to Taiwan

Economic developments in Taiwan have a significant impact on the business of each of our subsidiaries.

Substantially all of our assets are located in Taiwan, and substantially all of our revenue is derived from our operations in Taiwan. Accordingly, our financial condition and results of operations and the market price of our Shares may be affected by changes in ROC governmental policies, taxation, inflation, interest rates, currency exchange rates, social instability and other political, economic, diplomatic or social developments in or affecting Taiwan that are not within our control. In particular, the economic and political environment in Taiwan is significantly affected by the economic and political environment throughout Asia. For example, in mid-1997, Taiwan, along with the rest of Asia, experienced a severe financial and economic downturn from which it has yet to fully recover. The downturn was evidenced by, among other things, significant corporate failures, instability in the financial sector, and liquidity concerns and volatility in the domestic financial and currency markets. Although Taiwan appears to have recovered from the Asian financial crisis in certain respects, there can be no assurance that Taiwan’s economy will achieve full recovery or be immune in the future to conditions similar to those prevalent during the Asian financial crisis, or that those conditions, should they recur, will not adversely affect our financial condition or results of operations.

In addition, a significant depreciation of the NT dollar versus other currencies could have a material adverse effect on the performance of Taiwan’s economy and industries, including the financial services industry. As a result, there can be no assurance that any significant depreciation in the value of the NT dollar would not have a material adverse effect on our financial condition or results of operations.

The recent outbreak of Severe Acute Respiratory Syndrome (‘‘SARS’’) in China, Hong Kong, Singapore, Vietnam, Taiwan and certain other countries has caused, and may continue to cause, substantial damages to the economies of these countries and as a result may adversely affect our results of operations.

Beginning in March 2003, China, Hong Kong, Taiwan, Singapore, Vietnam and certain other countries encountered an outbreak of SARS, a highly contagious disease. In response to the severity of the SARS outbreak, the World Health Organization issued a travel advisory recommending that persons traveling to certain affected areas consider postponing all but essential travel. In addition, most major airlines drastically reduced the number of flights to and from China, Hong Kong and Taiwan. As of the date of this Offering Memorandum, the SARS outbreak seems to be under control, although no assurances can be given that there will not be a recurrence of the outbreak. The SARS outbreak has already caused, and is expected to continue to cause, substantial damages to the trade and tourism industries as well as on the economies and financial markets of the affected countries. Any economic downturn as a result of the SARS outbreak may have an adverse effect on the ability of certain of our customers to make loan payments. In addition, the SARS outbreak may result in a decrease in the demand for our consumer banking products and services due to a decline in consumer confidence. Our results of operations may be adversely affected by any of these or similar events.

According to recent newspaper reports, the ROC government is implementing new policies to help businesses in Taiwan to overcome the negative economic effects of SARS on these businesses. These new policies were reported to include relaxation of lending and loan repayment guidelines by local banks. As of the date of this Offering Memorandum, the only policy we had been notified of by the ROC government is a program designed to provide financial relief to tourism-related industries, such as hotel, food and beverage and airline industries, by allowing extensions and rescheduling of loans to borrowers engaged in such businesses. Therefore, we do not expect this new policy to have a material adverse impact on our results of operations. However, if the ROC government expands the application of this program to other industries, the likelihood that we will be materially and adversely affected will increase.

The value of the Bonds and the Shares may be adversely affected by the volatility of the Taiwan securities market.

The Taiwan securities market is smaller and more volatile than the securities markets in the United States and in certain European and other countries. The Taiwan Stock Exchange and the GreTai Securities Market have experienced substantial fluctuations in the prices and trading volumes of listed securities, and there are currently limits on the range of daily price movements on the Taiwan Stock Exchange and the GreTai Securities Market. From time to time, the ROC regulatory agencies have intervened in the Taiwan stock market during periods of extreme volatility. In the past decade, the Taiwan Stock Exchange Index peaked at 10,393.59 in February 2000, and reached a low of 3,411.68 in September 2001. During 2002, the Taiwan Stock Exchange Index peaked at 6,462.3 on April 19, 2002, and reached a low of 3,850.0 on October 11, 2002. On June 20, 2003 the Taiwan Stock Exchange Index closed at 5,002.58, and the daily closing value of our Shares was NT$16.40 per share. In addition, the Taiwan Stock Exchange and the GreTai Securities Market have experienced problems such as market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could adversely affect the market price and liquidity of the securities of Taiwan companies, including our Shares. For more information, please see ‘‘Appendix A — The Securities Markets of the ROC.’’

Our business may be adversely affected by political risks associated with doing business in Taiwan.

The ROC has a unique international political status. The PRC asserts sovereignty over Taiwan. The government of the PRC does not recognize the legitimacy of the ROC government. Although significant economic and cultural relations have been established in the past decade between the ROC and the PRC, the PRC has refused to renounce the possibility that it may at some point use force to gain control over Taiwan. In recent years, relations between the ROC and the PRC have been strained. Certain past developments in

relations between the ROC and the PRC have had, from time to time, an adverse effect on the value of the Taiwan Stock Exchange Index. These relations may also affect our results of operations and the market price and liquidity of our Shares.

We intend to expand our banking business in the greater China region by providing financial services to clients in Hong Kong and the PRC as well as Taiwan. However, our ability to find a suitable acquisition candidate or strategic partner may be limited by the unique political status of the ROC. In addition, the ROC government currently restricts certain types of investments by ROC companies in the PRC, including investments in the financial services industry in the PRC. We do not know when or if such laws and policies governing investment in the PRC will be amended, and we cannot assure you that any such amendments to the ROC investment laws and policies will permit us to make an investment that we consider beneficial to us in the PRC. As a result, our growth prospects may be adversely affected if we are limited in our ability to find a strategic partner or make investments in the PRC due to the political situation between the ROC and the PRC.

Our principal customers in Taiwan are vulnerable to a variety of natural disasters.

Taiwan is susceptible to earthquakes, typhoons, water shortages and other types of natural disasters which could directly or indirectly affect our business adversely. In the past three years, natural disasters have caused significant property damage and loss of life in Taiwan. Although we did not suffer significant losses due to recent natural disasters, a major earthquake or other natural disasters could severely disrupt the business operations of our customers in Taiwan as well as ourselves. In addition, since a substantial portion of E.Sun Bank’s loans are secured by real estate located in Taipei, a major earthquake or the occurrence of other natural disasters in the Taipei metropolitan area could impair the value of the collateral and thereby negatively affect our financial condition and results of operations even if our operations are not directly affected.

Risks Relating to the Bonds

An active trading market for the Bonds may not develop.

The Bonds constitute a new issue of securities for which there is no existing market. Application has been made to list the Bonds on the Luxembourg Stock Exchange. Trading is expected to commence after the Bonds are first issued. There can be no assurance that such listing or eligibility (neither of which is a condition of issuance) will be received or, if received, will provide liquidity for the Bonds. Although the Initial Purchaser has advised us that it currently intends to make a market in the Bonds, it is not obligated to do so and any market-making activity with respect to the Bonds, if commenced, may be discontinued at any time.

There can be no assurance that a trading market for the Bonds will develop in the future. If such a market were to develop, the Bonds could trade at prices that may be higher or lower than the price you originally paid for them depending on many factors, including:

. prevailing interest rates;
. our financial condition;
. the price of our Shares;
. the financial condition and stability of the Taiwan and other Asian financial sectors;
. political, legal and economic developments in the United States, Taiwan and the rest of Asia; and
. the market conditions for similar securities.

Pursuant to the terms and conditions of the Bonds, we may under certain circumstances make capital distributions without an adjustment to the Conversion Price.

Pursuant to the terms and conditions of the Bonds, we may under certain circumstances make a capital distribution without an adjustment to the Conversion Price (which is the price at which Shares will be issued upon conversion of the Bonds). For example, we may pay a cash dividend of up to 5% of our market capitalization of E.Sun Financial on the date that our shareholders approve the dividend without an adjustment of the Conversion Price. In addition, we may pay a cash dividend of up to 110% of the aggregate amount of dividends (excluding stock dividends) and distributions on such class of capital charged or provided for the Company’s accounts for the immediately preceding fiscal year. If we make a capital distribution in excess of such limits, the Conversion Price would be adjusted by the amount in excess of such limits. Such distributions may dilute, or diminish the value of, your interest in our company.

Holders of the Bonds will bear the risk of fluctuations in the price of our Shares.

The market price of the Bonds at any time will be affected by fluctuations in the price of our Shares. It is impossible to predict whether the price of our Shares will rise or fall. Trading prices of our Shares will be influenced by, among other things, our results of operations and political, economic, financial and other factors that can affect the capital markets on which our Shares are traded and the financial services market in Taiwan. Any decline in the price of our Shares would adversely affect the secondary market price of the Bonds.

Fluctuations in the exchange rate between the NT dollar and the US dollar may have a material adverse effect on the value of the Bonds in US dollar terms.

Although the principal amount of the Bonds is denominated in US dollars, our Shares are listed on the Taiwan Stock Exchange, which quotes and trades our Shares in NT dollars. As a result, fluctuations in the exchange rate between the NT dollar and the US dollar will affect, among other things, the secondary market price of the Bonds and the US dollar equivalent of the Shares received upon conversion of the Bonds.

The imposition of foreign exchange restrictions may have an adverse effect on foreign investors’ ability to acquire ROC securities, including our Bonds and Shares, or repatriate the interest, dividends or sale proceeds from those securities.

The ROC government may impose foreign exchange restrictions in certain emergency situations, including situations where there are sudden fluctuations in interest rates or exchange rates, where the ROC government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan. These restrictions may require foreign investors to obtain the ROC government’s approval before acquiring ROC securities or repatriating the interest or dividends from those securities or the proceeds from the sale of those securities. No assurance can be given that these restrictions will not adversely affect, among other things, the secondary market price of the Bonds.

The Bonds and any Shares issuable upon conversion of the Bonds are subject to restrictions on transfer.

The Bonds and any Shares issuable upon conversion of the Bonds are subject to restrictions on transfer as described under ‘‘Transfer Restrictions.’’ These transfer restrictions may adversely affect the liquidity of the Bonds and Shares. To exercise the right of conversion with respect to a Bond, a holder must make certain representations and agreements in the Conversion Notice as described in ‘‘Description of the Bonds — Conversion.’’ In addition, non-ROC holders seeking to exercise their conversion rights and receive Shares will be required to first appoint a local agent, a custodian and a tax guarantor, and to establish a trading account with a local securities brokerage firm in accordance with applicable ROC laws and regulations. These requirements may further affect the liquidity of the Bonds and may limit a non-ROC holder’s ability to take advantage of short-term increases in the market price of our Shares.

The Bonds are structurally subordinated to the liabilities of our subsidiaries and not protected by restrictive covenants on our or our subsidiaries’ additional indebtedness.

Our Bonds and our Shares are effectively subordinated to all of the liabilities of our subsidiaries. Our right to participate in any distribution of assets of any of our subsidiaries, and thus your ability as a holder of our indebtedness or stock to benefit indirectly from such distribution, will be subject to the prior claims of creditors of that subsidiary. As of March 31, 2003, our subsidiaries had outstanding aggregate liabilities of approximately NT$279.8 billion, before consolidation adjustments.

Our subsidiaries are financially leveraged and the terms of the Bonds and the indenture do not limit or otherwise restrict our or our subsidiaries’ abilities to incur additional debt or guarantee, including any debt secured by our or our subsidiaries’ assets (except as described in ‘‘Description of the Bonds — Certain Covenants — Negative Pledge’’) and other indebtedness which is senior to the Bonds.

There are limitations on your ability to exercise conversion rights.

The Bonds are convertible into Shares at the option of the holders pursuant to the terms of the Bonds. Holders of the Bonds will be able to exercise their conversion right only within the Conversion Period and will not be able to exercise their conversion right during the Closed Periods. For example, the Conversion Period starts on or after November 24, 2003 up to and including December 12, 2004. As a result, holders of Bonds cannot convert for as long as 150 days from the date of the Closing. In addition, conversion rights may not be exercised beginning on the third Trading Day prior to the date of our notification to the Taiwan Stock Exchange of the record date for the determination of shareholders entitled to the receipt of dividends, subscription of new shares due to capital increase or other benefits and bonuses to such record date. Under the ROC Company Law, the Closed Period in connection with our general shareholders’ meeting may be as long as 60 days in any given year, and the Closed Period in respect to our special shareholders’ meeting may be as long as 30 days. See ‘‘Description of the Bonds — Conversion — Conversion Right.’’ As such, a holder’s ability to exercise conversion rights will be limited.

Under current ROC laws, regulations and policies, PRC persons are not permitted to hold or convert the Bonds or to register as our shareholder.

We have limited liquidity and may be unable to repurchase our Bonds or our other outstanding debt securities when requested by holders.

Under certain circumstances summarized in ‘‘Description of the Bonds’’ and set forth in the Indenture, the holders of the Bonds may require us to repurchase all or a portion of the Bonds. The terms of certain of our other outstanding debt securities contain similar provisions. We cannot assure you that we will have enough funds or would be able to arrange for sufficient funding to repurchase all of the Bonds or our other outstanding debt securities tendered by the holders. Our ability to repurchase the Bonds or our other outstanding debt securities may also be limited by applicable law as well as the terms of our outstanding indebtedness.

We may have to spend significant amounts of capital to repurchase the Bonds or our other outstanding debt securities as required by the terms of such securities. The obligation to purchase such securities may occur at a time when we do not have sufficient liquidity to make such purchases. Such purchases may require us to borrow funds to otherwise convert long-term investments to liquid funds, which could adversely affect our financial condition and the price of our Bonds or Shares.

Holders of the Bonds will have no rights as shareholders until they acquire the Shares upon conversion of the Bonds.

Unless and until the holders of the Bonds acquire the Shares upon conversion of the Bonds, the holders of the Bonds will have no rights with respect to our Shares, including any voting rights or rights to receive any regular dividends or other distributions with respect to the Shares. Pursuant to the Cash Settlement

Option, we may elect to make a cash settlement payment in respect of all or any portion of a holder’s Bonds deposited for conversion pursuant to exercise of a Conversion Right by delivering notice thereof to the tendering holder not more than three Trading Days after the Conversion Date. Holders of Bonds who acquire our Shares upon the exercise of a Conversion Right will be entitled to exercise the rights of holders of our Shares only as to actions for which the applicable record date occurs after the Conversion Date.

Upon your conversion of the Bonds, you will be required to appoint a tax guarantor and a local agent in Taiwan.

Any non-ROC holder exercising the conversion rights will be required to appoint an agent in Taiwan for filing tax returns and making tax payments. Such agent, or tax guarantor, will be required to meet the qualifications set by the MOF and to act as the guarantor of the converting holder’s tax payment obligations. You might not be able to appoint and obtain approval for a tax guarantor in a timely manner.

In addition, under current ROC laws, in exercising your conversion right, you will be required to appoint a local agent in Taiwan to, among other things, open a securities trading account with a local securities brokerage firm, remit funds or exercise shareholders’ rights. Furthermore, you must appoint a local bank to act as custodian for confirmation and settlement of trades, safekeeping of securities and cash proceeds, and reporting and declaration of information. Without satisfying these requirements and obtaining the prior approval from the Taiwan Stock Exchange, you will not be able to hold or sell or otherwise transfer your Shares on the Taiwan Stock Exchange. See ‘‘Description of the Bonds — Conversion — Conversion Right.’’

A holder of the Bonds or its designee requesting the conversion of the Bonds into the Shares may be required to provide certain information to us, and failure to provide such information may result in a delay of the conversion.

A holder of the Bonds or its designee requesting the conversion of the Bonds into the Shares may be required to provide certain information to us or the Conversion Agent, including the name and nationality of the person to be registered as the shareholder and the number of Shares to be acquired by such person and the number of Shares acquired by such person in the past through the date of the conversion of the Bonds. Under applicable ROC laws, we are required to report to the Securities and Futures Commission if the person to be registered as a shareholder (1) is a ‘‘related party’’ of ours as defined in the ROC Statement of Financial Accounting Standard No. 6, or (2) will hold, immediately following such conversion, more than 10% of the total number of our Shares outstanding. Failure to provide such information may result in a delay of the conversion of the Bonds.

Risks Relating to the Shares

Sales of a significant portion of our Shares may adversely affect the price of the Bonds and our Shares.

The market price of the Bonds and our Shares could decline as a result of the sale of a large number of our Shares after this Offering or the perception that such sales could occur. If our major shareholders sell a large number of our Shares after this Offering, the market price of the Bonds and our Shares may be depressed and the value of your investment could substantially decrease. See ‘‘Plan of Distribution.’’

As of March 31, 2003, the Cathay Financial Group owned approximately 270 million Shares, or 10.82% of our outstanding Shares, through its affiliates Cathay Life Insurance Co., Ltd., Wan Da Investment Co., Ltd. and Cathay Construction Co., Ltd. The Cathay Financial Group has indicated its intention to sell down its holding of E.Sun Financial shares. On May 2, 2003, Wan Da Investment Co., Ltd. filed an application with the Securities and Futures Commission to sell down 12 million shares of E.Sun Financial during the period from May 2, 2003 to June 2, 2003. Neither of the Cathay Financial Group nor each of its affiliates Cathay Life Insurance Co., Ltd., Wan Da Investment Co., Ltd. and Cathay Construction Co., Ltd. is subject to a lock-up agreement with Morgan Stanley & Co. International Limited. Pursuant to the terms and conditions of the Bonds, the sale by any member of the Cathay Financial Group will not result

in an adjustment of the Conversion Price. The sale by any member of the Cathay Financial Group of a large number of our Shares after this Offering, or the perception that such sales could occur, may adversely affect the market price of the Bonds and our Shares and the value of your investment.

Further issuance of our Shares, including pursuant to stock dividends and employee stock bonuses, could dilute your holdings and associated rights with respect to the Shares.

Our Articles of Incorporation provide that, after deducting prior year’s losses, paying outstanding taxes and setting aside legal reserves and special reserves (if any), the remaining portion of our net income, together with the retained earnings of previous years, shall be distributed to our shareholders as dividends, to our directors and supervisors as remuneration and to our employees as bonuses (including employees of our affiliated companies) in the manner and percentage prescribed in our Articles of Incorporation. See ‘‘Description of the Shares’’ and ‘‘Dividends.’’

Such distributions to our shareholders and employees may be made in the form of cash or stock. Such distributions, if in the form of new Shares, or further issuances of new Shares, will effectively dilute the holdings and associated rights of holders of the Bonds who convert the Bonds to Shares.

There has been a limited trading market for the Shares.

Our Shares have been trading on the Taiwan Stock Exchange since January 28, 2002. Information about trading in our Shares since that date is provided in the section entitled ‘‘Market Price Information.’’ No assurance can be given as to the liquidity of, or the trading market for, the Shares.

USE OF PROCEEDS

We estimate that the net proceeds from this Offering, after deducting the Initial Purchaser’s commissions and other estimated expenses of this Offering, will be no less than US$176,400,000. We intend to use the net proceeds to invest in domestic financial institutions.

We have no current understandings, agreements or commitments with respect to any acquisition or investment, but we are actively exploring opportunities. There can be no assurance that any of such acquisitions or investments will be made. See ‘‘Risk Factors — Risks Relating to E.Sun Financial — We may be unsuccessful in completing future acquisitions or in establishing strategic alliances.’’

We have broad discretion over a large portion of the use of the net proceeds and such use is subject to application by us and approval by our board of directors and, in some cases, by applicable regulatory authorities. We may use the net proceeds in excess of, or less than, the amount required for investment in domestic financial institutions or for other working capital and general corporate purposes, for which we may need to obtain the necessary approvals, including from our board of directors and relevant regulatory authorities. See ‘‘Risk Factors — Risks Relating to E.Sun Financial — We have broad discretion over a large portion of the use of the proceeds of this Offering.’’

EXCHANGE RATES

Fluctuations in the exchange rate between the NT dollar and the US dollar will affect the US dollar equivalent of the NT dollar price of our Shares on the Taiwan Stock Exchange.

The following table sets forth, for the periods indicated, information concerning the amount of NT dollars for which one US dollar could be exchanged based on the noon buying rate for cable transfers in NT dollars as certified for customs purposes by the Federal Reserve Bank of New York.

Period 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2003 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June (through June 20). . . . . . . . . . . . . . . . . . . . .	NT Dollar per US Dollar Noon Buying Rate	NT Dollar per US Dollar Noon Buying Rate	NT Dollar per US Dollar Noon Buying Rate
	Average 28.78(1) 33.55(1) 32.32(1) 31.26(1) 33.91(1) 34.53(1) 34.57(2) 34.73(2) 34.72(2) 34.82(2) 34.70(2) 34.65(2)	High Low (NT$ per US$) 33.25 27.34 35.00 32.05 33.40 31.39 33.20 30.35 35.13 32.23 35.16 32.85 34.76 34.40 34.82 34.61 34.80 34.58 34.98 34.79 34.85 34.60 34.70 34.52	Period End
			32.80 32.27 31.39 33.17 35.00 34.70 34.61 34.78 34.75 34.85 34.71 34.59

Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System.

(1) Annual averages are calculated from month-end rates. (2) Average of daily rates during the period.

We publish our financial statements in NT dollars. This Offering Memorandum contains translation of NT dollar amounts into US dollars at specific rates solely for your convenience. Unless otherwise noted, all translations from NT dollars to US dollars and from US dollars to NT dollars in this Offering Memorandum were made at a rate of NT$34.70 to US$1.00, the noon buying rate of the U.S. Federal Reserve Bank of New York on December 31, 2002. No representation is made that the NT dollar or US dollar amount referred to in this Offering Memorandum could have been or could be converted into US dollars or NT dollars, as the case may be, at any particular rate or at all. On June 20, 2003, the noon buying rate of the U.S. Federal Reserve Bank of New York was NT$34.59 to US$1.00.

For information relating to foreign exchange controls required in the ROC for the conversion by the holders of Bonds of dividends on Shares or proceeds from the sale of Shares from NT dollars into US dollars, see ‘‘Appendix B — Foreign Investment and Exchange Controls in the ROC.’’

DIVIDENDS

We were formed as a financial holding company in Taiwan on January 28, 2002. We paid a stock dividend of NT$0.80 per Share on September 16, 2002. Our dividend payments and distributions are generally governed by the ROC Company Law as well as our Articles of Incorporation. The ROC Company Law and our Articles of Incorporation restrict us from paying a dividend to holders of Shares unless we have current or retained earnings (excluding reserves). Our Articles of Incorporation provide that after we pay our income taxes, deduct prior year’s losses, set aside any legal and when necessary, any special reserve, the remaining portion of our net income, together with the retained earnings of the previous years, shall be distributed as follows:

(i) 96% shall be distributed to the shareholders as dividends;
(ii) 1% shall be distributed to the directors and supervisors as remuneration; and
(iii) 3% shall be distributed to the employees (including employees of our affiliated companies) as bonuses.

However, our shareholders’ meeting may, depending on our actual needs, determine to retain a part or the whole of such remaining portion from distribution. Dividends to holders of Shares will primarily be distributed in the form of stock. However, if our capital adequacy ratio is higher than the standard set by the competent authority, part of the distribution may be made in the form of cash; provided that cash dividends must not be less than 10% of the dividends distributed in the respective year. Nevertheless, if the cash dividends to be distributed is less than NT$0.1 per share, such dividends should be made in the form of stock.

We have to date not declared or paid any cash or stock dividends with respect to 2002 and do not intend to do so since we did not record a net income in 2002.

Pursuant to the rules and regulations issued by MOF under the ROC Financial Holding Company Act, we are required to maintain the group capital adequacy ratio of the financial holding company at not less than 100%. The definition of group capital adequacy ratio is complex. See ‘‘Regulation of the Taiwan Financial Services Industry — Regulation of the Company — Financial Requirements.’’ As a result, we may be subject to limitations on the payment of dividends. In addition, our operating subsidiaries in the banking, bills financing and securities businesses are subject to numerous regulatory restrictions and legal limitations on the payments of dividends. See ‘‘Risk Factors — Risks Relating to E.Sun Financial — Our ability to service our debt and pay dividends depends on capital distributions from our subsidiaries which are subject to regulatory and other limits.’’ There can be no assurance that we will have the necessary capital, by virtue of receiving dividends from our operating subsidiaries or otherwise, to make dividend payments at any time, or from time to time.

CAPITALIZATION

The following table sets forth our capitalization and total debt as of March 31, 2003 under ROC GAAP and as adjusted to give effect to the issuance of the Bonds in the aggregate principal amount of US$178,200,000. There have not been any material changes in our capitalization since March 31, 2003.

You should read this table in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our financial statements and related notes included elsewhere in this Offering Memorandum.

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . Debts Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . Total debts . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . Equity adjustments Unrealized loss on valuation of long-term investment . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative foreign currency translation . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholder’s equity . . . . . . . . . . . . . . . Total capitalization . . . . . . . . . . . . . . . . . . . . . .	As of March 31, 2003 Actual Adjusted (in millions) NT$12,998.3 US$ 374.6 NT$19,119.4 US$ 551.0 34,163.2 984.5 34,163.2 984.5 4,946.1 142.5 4,946.1 142.5 9,840.0 283.6 16,023.5 461.8 1,480.0 42.7 1,480.0 42.7 50,429.3 1,453.3 56,612.8 1,631.5 24,700.0 711.8 24,700.0 711.8 4,839.7 139.5 4,839.7 139.5 (1,929.6) (55.6) (1,929.6) (55.6) (96.9) (2.8) (96.9) (2.8) 2.7 0.1 2.7 0.1 (4,247.6) (122.4) (4,247.6) (122.4) 23,268.3 670.6 23,268.3 670.6 NT$73,697.6 US$2,123.9 NT$79,881.1 US$2,302.1
	NT$12,998.3 34,163.2 4,946.1 9,840.0 1,480.0 50,429.3 24,700.0 4,839.7 (1,929.6) (96.9) 2.7 (4,247.6) 23,268.3 NT$73,697.6

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Debts
Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds sold under agreements to repurchase . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debts . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . .
Equity adjustments
Unrealized loss on valuation of long-term
investment . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative foreign currency translation . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholder’s equity . . . . . . . . . . . . . . .
Total capitalization . . . . . . . . . . . . . . . . . . . . . .

As of March 31, 2003
Actual
Adjusted
(in millions)
NT$12,998.3
US$ 374.6
NT$19,119.4
US$ 551.0
34,163.2
984.5
34,163.2
984.5
4,946.1
142.5
4,946.1
142.5
9,840.0
283.6
16,023.5
461.8
1,480.0
42.7
1,480.0
42.7
50,429.3
1,453.3
56,612.8
1,631.5
24,700.0
711.8
24,700.0
711.8
4,839.7
139.5
4,839.7
139.5
(1,929.6)
(55.6)
(1,929.6)
(55.6)
(96.9)
(2.8)
(96.9)
(2.8)
2.7
0.1
2.7
0.1
(4,247.6)
(122.4)
(4,247.6)
(122.4)
23,268.3
670.6
23,268.3
670.6
NT$73,697.6
US$2,123.9
NT$79,881.1
US$2,302.1

NT$12,998.3
34,163.2
4,946.1
9,840.0
1,480.0
50,429.3
24,700.0
4,839.7
(1,929.6)
(96.9)
2.7
(4,247.6)
23,268.3
NT$73,697.6

MARKET PRICE INFORMATION

Our Shares commenced trading on the Taiwan Stock Exchange on January 28, 2002. The table below sets forth, for the periods indicated, the high and low closing prices and the average daily trading volume activity on the Taiwan Stock Exchange for our Shares and the highest and lowest of the daily closing values of the Taiwan Stock Exchange Index. On June 20, 2003, the closing price of our Shares on the Taiwan Stock Exchange was NT$16.40 (US$0.47) per Share.

2002 First Quarter (beginning January 28, 2002). . . . . . . . . . . . . . . . . . . . . Second Quarter . . . . . . . . . . . . . . . . Third Quarter . . . . . . . . . . . . . . . . . Fourth Quarter . . . . . . . . . . . . . . . . 2003 First Quarter. . . . . . . . . . . . . . . . . . Second Quarter April . . . . . . . . . . . . . . . . . . . . . May . . . . . . . . . . . . . . . . . . . . . June (through June 20, 2003) . . . .	Actual Closing Price Per Share High Low NT$12.73 NT$11.76 14.07 11.90 12.69 11.25 15.40 10.80 19.10 15.40 16.70 14.55 15.30 14.70 16.70 15.70	Average Daily Trading Volume (in thousands of shares) 5,904.2 10,157.8 2,454.7 12,138.0 34,384.7 16,871.2 7,490.3 25,826.2	Taiwan Stock Exchange Index	Taiwan Stock Exchange Index
	High NT$12.73 14.07 12.69 15.40 19.10 16.70 15.30 16.70		High 6,242.64 6,462.30 5,416.50 4,823.67 5,078.80 4,658.30 4,555.90 5,048.91	Low
				5,499.79 5,071.76 4,185.95 3,850.04 4,260.45 4,139.50 4,187.82 4,678.08

Source: Bloomberg, L.P.

The Taiwan Stock Exchange has experienced substantial fluctuations in the prices of listed securities and there are currently limits on the range of daily price movements. For more information about the Taiwan Stock Exchange, see ‘‘Appendix A — The Securities Markets of the ROC.’’

SELECTED FINANCIAL AND OTHER DATA

The following selected financial and other data for E.Sun Financial, E.Sun Bank and E.Sun Bills Finance should be read in conjunction with the financial statements of such entities, together with the related notes, included elsewhere in this Offering Memorandum.

The selected financial data for E.Sun Financial, E.Sun Bank and E.Sun Bills Finance have been derived from their respective financial statements without material adjustment. Solely for your convenience, these selected data are presented in a different format from the financial statements. Neither such data nor the format in which they are presented should be viewed as comparable to information prepared in accordance with US GAAP or generally accepted accounting principles elsewhere.

E.Sun Financial

Selected Financial and Other Data

The following table sets forth, as of and for the periods indicated, certain financial and other data of E.Sun Financial.

Income Statement Data:
Interest income . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . .
Fee income. . . . . . . . . . . . . . . . . . . . . . . .
Fee expense . . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . . .
Net other operating income(2) . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . .
Provisions for loan and other loss . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . .
Net operating income. . . . . . . . . . . . . . .
Net non-operating income (expense) . . . . . .
Income before tax . . . . . . . . . . . . . . . . . . .
Tax benefit (expense) . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . .
Less: net income of subsidiaries for the period
from January 1, 2002 to January 27, 2002
Net income (loss) . . . . . . . . . . . . . . . . .
Balance Sheet Data:
Total loans(3) . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . .
Deposits(4) . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . .
Treasury stock(5) . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . .

As of and for the Period from
January 28 (Date of
Establishment) to December 31,
As of and for the Period Ended March 31,
2002
2002(1)
2003
(in millions, except percentages and per share data)
NT$12,368.4
US$356.4
NT$3,126.1
NT$2,765.0
US$79.7
(5,719.5)
(164.8)
(1,711.8)
(1,120.0)
(32.3)
6,648.9
191.6
1,414.3
1,645.0
47.4
1,118.0
32.2
238.4
341.4
9.8
(320.7)
(9.2)
(48.7)
(119.7)
(3.4)
797.3
23.0
189.7
221.7
6.4
1,915.9
55.2
494.9
591.2
17.0
240.0
6.9
61.9
245.2
7.1
9,602.1
276.7
2,160.8
2,703.1
77.9
(9,614.6)
(277.1)
(494.2)
(47.6)
(1.4)
(3,974.2)
(114.5)
(808.1)
(1,062.2)
(30.6)
(3,986.7)
(114.9)
858.5
1,593.3
45.9
(58.4)
(1.7)
(9.7)
3.5
0.1
(4,045.1)
(116.6)
848.8
1,596.8
46.0
1,082.8
31.2
(156.1)
(435.0)
(12.5)
(2,962.3)
(85.4)
692.7
1,161.8
33.5
129.2
3.7
129.2
—
—
NT$ (3,091.5)
US$ (89.1)
NT$ 563.5
NT$1,161.8
US$33.5
NT$170,775.3
US$4,921.5
NT$175,242.0
NT$170,092.1
US$4,901.8
284,428.7
8,196.8
273,053.1
300,919.7
8,672.0
222,335.0
6,407.3
218,663.1
219,566.8
6,327.6
262,307.8
7,559.3
247,041.1
277,651.4
8,001.5
4,247.6
122.4
4,247.6
4,247.6
122.4
22,120.9
637.5
26,012.0
23,268.3
670.6

(1) As of and for the period from January 28 (date of establishment) to March 31, 2002.

(2) Includes investment income (loss) from long-term equity investments and bond investments (corporate bonds and bank debentures).

(3) Includes loans, discounts and bills purchased after the deduction of allowance for possible losses. (4) Includes deposits and remittances.

(5) Represents treasury stock relating to long-term equity investments of E.Sun Bank in E.Sun Financial as a result of the share exchange between E.Sun Bank and E.Sun Financial and treasury stock to be re-issued to employees. The carrying values of these treasury stocks, which were both held by E.Sun Bank, were NT$3,749.6 million and NT$498.0 million as of March 31, 2003 and March 31, 2002, respectively.

Other Data: Earnings per share. . . . . . . . . . . . . . . . . . . . Book value per share . . . . . . . . . . . . . . . . . . Return on assets(6). . . . . . . . . . . . . . . . . . . . Return on equity(7) . . . . . . . . . . . . . . . . . . . Operating expense/total operating revenue . . . Net interest income/total operating revenue. . . Net fee income/total operating revenue. . . . . . Double leverage ratio(8) . . . . . . . . . . . . . . . . Group capital adequacy ratio(9) . . . . . . . . . . . Consolidated shareholders’ equity/total assets . Common Share Data (in millions): Shares issued . . . . . . . . . . . . . . . . . . . . . . . Shares outstanding — period end . . . . . . . . . Weighted average number of shares outstanding(10) . . . . . . . . . . . . . . . . . . . .	As of and for the Period from January 28 (Date of Establishment) to December 31, As of and for the Period Ended March 31, 2002 2002(1) 2003 (in millions, except percentages and per share data) NT$ (1.46) NT$ 0.27 NT$ 0.55 NT$ 10.43 NT$ 13.25 NT$ 10.97 (1.1%) 0.8% 1.5% (14.0%) 8.7% 20.0% (41.4%) (37.4%) (39.3%) 69.2% 65.5% 60.9% 8.3% 8.8% 8.2% 106.6% 100.0% 105.4% 108.8% NA NA 7.8% 9.5% 7.7% 2,470.0 2,290.0 2,470.0 2,120.2 1,963.1 2,120.2 2,120.2 2,120.2 2,120.2	As of and for	the Period Ended March 31,
			2003

(6) Defined as annual net income for the period ended December 31, 2002 divided by total assets as of December 31, 2002 and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by total assets as of March 31, 2002 and March 31, 2003, respectively.

(7) Defined as annual net income for the period ended December 31, 2002 divided by total shareholders’ equity as of December 31, 2002 and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by total shareholders’ equity as of March 31, 2002 and March 31, 2003, respectively.

(8) Defined as E.Sun Financial’s unconsolidated long-term investments in subsidiaries divided by total shareholders’ equity.

(9) Defined as E.Sun Financial’s net qualified capital divided by E.Sun Financial’s required capital, as defined by MOF.

(10) Weighted average number of shares outstanding as of and for the period ended March 31, 2002, retroactively adjusted to reflect the effects of the stock dividends distributed in 2002 for calculation of per share data.

E.Sun Bank

Selected Financial and Other Data

The following table sets forth, as of and for the periods indicated, selected financial and other data for E.Sun Bank.

		As of and for	As of and for	the Year	Ended	December	31,	As of and for the Period Ended	As of and for the Period Ended	As of and for the Period Ended	As of and for the Period Ended	March 31,	March 31,
	2000		2001			2002		2002			2003
		(in millions, except percentages and number of credit						cards,	branches and employees data)
Income Statement Data:
Interest income . . . . . . . . . . . .	NT$	13,704.8	NT$	14,418.7	NT$	12,114.5	US$349.1	NT$	3,069.5	NT$	2,704.1	US$	77.9
Interest expense . . . . . . . . . . .		(9,630.2)		(9,139.0)		(5,580.9)	(160.8)		(1,696.8)		(1,083.1)		(31.2)
Net interest income . . . . . . . . .		4,074.6		5,279.7		6,533.6	188.3		1,372.7		1,621.0		46.7
Fee income. . . . . . . . . . . . . . .		759.4		679.8		902.6	26.0		184.2		293.7		8.5
Fee expense . . . . . . . . . . . . . .		(245.7)		(202.0)		(310.3)	(8.9)		(49.7)		(116.9)		(3.4)
Net fee income . . . . . . . . . . . .		513.7		477.8		592.3	17.1		134.5		176.7		5.1
Net gains/(loss) on trading
securities . . . . . . . . . . . . . .		1,245.5		1,456.2		1,068.9	30.8		373.2		223.4		6.4
Other operating income . . . . . .		403.1		424.3		221.5	6.4		50.8		246.5		7.1
Total operating revenue . . . . . .		6,236.9		7,638.0		8,416.3	242.6		1,931.2		2,267.6		65.3
Provisions for loan loss and
other losses . . . . . . . . . . . .		(1,718.5)		(2,092.6)		(9,414.0)	(271.3)		(489.4)		—		—
Operating expense . . . . . . . . . .		(2,707.8)		(2,963.3)		(3,667.8)	(105.7)		(730.4)		(965.2)		(27.8)
Total operating income (loss) . .		1,810.6		2,582.1		(4,665.5)	(134.4)		711.4		1,302.4		37.5
Net non-operating income/
(expense). . . . . . . . . . . . . .		(60.3)		4.2		(74.5)	(2.1)		(10.2)		3.3		0.1
Pre-tax income . . . . . . . . . . . .		1,750.3		2,586.2		(4,740.0)	(136.5)		701.2		1,305.7		37.6
Tax benefit (expense) . . . . . . .		(330.7)		(658.3)		1,229.2	35.4		(106.2)		(263.7)		(7.6)
Net income (loss) . . . . . . . . . .	NT$	1,419.6	NT$	1,927.9	NT$	(3,510.8)	US$ (101.1)	NT$	595.0	NT$	1,042.0	US$	30.0
Balance Sheet Data:
Gross loans(1) . . . . . . . . . . . . .	NT$173,727.3		NT$180,859.2		NT$172,316.0		US$4,965.9	NT$176,640.8		NT$171,723.5		US$4,948.8
Total loans(2) . . . . . . . . . . . . .		172,117.3		179,345.2		170,775.3	4,921.5		175,242.0		170,092.1		4,901.8
Non-accrual loans(3) . . . . . . . .		4,476.6		5,057.6		2,137.7	61.6		5,495.4		2,231.7		64.3
NPLs(4) . . . . . . . . . . . . . . . . .		4,262.6		5,123.5		2,382.9	68.7		5,074.6		2,343.7		67.5
Surveillance loans(5) . . . . . . . .		NA		NA		1,801.1	51.9		NA		1,762.7		50.8
Allowance for loan loss . . . . . .		1,610.0		1,514.0		1,540.8	44.4		1,398.9		1,631.4		47.0
Trading securities — net . . . . .		23,346.6		36,751.8		38,885.9	1,120.6		38,356.8		46,587.2		1,342.6
Total assets . . . . . . . . . . . . . .		236,435.7		265,873.8		272,643.5	7,857.2		265,689.2		282,506.3		8,141.4
Deposits(14) . . . . . . . . . . . . . .		203,334.1		225,029.2		225,739.6	6,505.5		220,553.2		222,882.9		6,423.1
Total liabilities . . . . . . . . . . . .		215,416.2		243,070.3		254,730.1	7,340.9		242,338.2		263,551.1		7,595.1
Total shareholders’ equity . . . .		21,019.5		22,803.5		17,913.4	516.2		23,351.0		18,955.2		546.3
Other Data:
Return on average assets(6) . . . . Return on average equity(7). . . .		0.6% 6.9%		0.8% 8.8%		(1.3%) (17.2%)			0.9% 10.3%		1.5% 22.6%
Operating expense/total
operating revenue . . . . . . . . Overall interest rate spread(8) . . Net interest margin(9). . . . . . . .		(43.4%) 2.43% 2.08%		(38.8%) 2.47% 2.47%		(43.6%) 2.19% 2.98%			(37.8%) 2.41% 2.50%		(42.6%) 1.42% 2.87%
Net fee income/total operating
revenue . . . . . . . . . . . . . . .		8.2%		6.3%		7.0%			7.0%		7.8%
NPLs/gross loans(10) . . . . . . . .		2.46%		2.83%		1.38%			2.87%		1.36%
Surveillance loans/gross loans(11) . . . . . . . . . . . . . .		NA		NA		1.05%			NA		1.03%
Allowance for loan loss/gross
loans. . . . . . . . . . . . . . . . .		0.93%		0.84%		0.89%			0.79%		0.95%
Allowance for loan loss/NPLs. .		37.77%		29.55%		64.66%			27.57%		69.61%
Gross loans/deposits . . . . . . . .		85.4%		80.4%		76.3%			80.1%		77.0%
Shareholders’ equity/total assets Capital adequacy ratio(12) . . . . .		8.9% 10.56%		8.6% 11.01%		6.6% 10.38%			8.8% NA		6.7% NA
Number of credit cards in force
(thousands) . . . . . . . . . . . . Credit card market share(13) . . .		836 4.57%		1,021 4.23%		1,709 5.41%			1,043 4.06%		1,737 5.25%
Number of branches and sub-
branches . . . . . . . . . . . . . .		45		50		51			50		52
Number of employees . . . . . . .		1,355		1,458		1,631			1,532		1,668

(1) Includes loans, discounts, bills purchased and overdue loans before the deduction of allowance for possible losses.

(2) Includes loans, discounts, bills purchased and overdue loans after the deduction of allowance for possible losses.

(3) Loans on which E.Sun Bank has stopped accruing interest and for which the most recent payment is overdue by more than six months.

(4) Primarily includes loans for which the principal is overdue by three months or more or the most recent interest payment is overdue by six months or more, as defined by MOF.

(5) Primarily includes loans for which the principal or interest is overdue by three months or more, but less than six months overdue, which have yet to be classified as NPLs, as well as other impaired loans that are exempt from MOF classification of NPLs.
(6) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total assets balance for the preceding and current fiscal year, respectively, and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by the average total assets balance as of December 31 of the previous year and March 31 of the current year, respectively.
(7) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total shareholders’ equity balance for the preceding and current fiscal year, respectively, and defined as annualized net income for the period ended March 31, 2002 and March 31, 2003 divided by the average total shareholders’ equity balance as of December 31 of the previous year and March 31 of the current year, respectively.
(8) Defined as the yield on the average daily balance of interest-earning assets less the cost of the average daily balance of interestbearing liabilities.
(9) Defined as net interest income divided by the average daily balance of interest-earning assets.
(10) Calculated by dividing the amount of NPLs by the amount of gross loans.
(11) Calculated by dividing the amount of surveillance loans by the amount of gross loans. Surveillance loans primarily include loans for which the principal or interest is overdue by three months or more, but less than six months overdue, which have yet to be classified as NPLs, as well as other impaired loans that are exempt from MOF classification of NPLs.
(12) Defined as net qualified capital divided by risk-weighted assets, as defined by MOF.
(13) Represents market share based on number of credit cards in force as reported by MOF. (14) Includes deposits and remittances.

E.Sun Bills Finance

Selected Financial and Other Data

Income Statement Data: Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions and loss on credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance Sheet Data: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from banks(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserve for loss on guarantees and sale of government bonds . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Data: Return on average assets(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return on average equity(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expense/total operating revenue . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . Bonds purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserve for guarantees/total guarantees(5) . . . . . . . . . . . . . . . . . . . . . . . Capital adequacy ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As of and for the Year Ended December 31, 2000 2001 2002 (in millions, except percentages) NT$ 15.9 NT$ 125.4 NT$ 46.6 US$ 1.3 121.2 150.3 160.9 4.6 590.8 1,002.4 820.9 23.7 18.9 4.4 0.1 — 746.8 1,282.5 1,028.5 29.6 (90.9) (405.2) (187.9) (5.4) (149.0) (153.9) (139.0) (4.0) 506.9 723.5 701.6 20.2 (79.4) (354.7) (130.7) (3.7) 427.5 368.8 570.9 16.5 NT$ 1,086.2 NT$ 4,775.8 NT$ 4,124.6 US$118.9 2,001.0 350.0 250.0 7.2 3,428.0 2,978.5 3,942.0 113.6 6,516.7 8,110.7 8,319.5 239.8 7,376.7 9,165.5 10,065.1 290.1 2,100.0 3,330.0 3,920.0 113.0 315.7 518.0 592.2 17.1 2,484.8 4,037.6 4,634.6 133.6 4,891.9 5,127.9 5,430.5 156.5 5.6% 4.5% 5.9% 9.0% 7.4% 10.8% (20.0%) (12.0%) (13.5%) NT$18,715.2 NT$15,783.9 NT$13,053.7 US$376.2 NT$ 7,444.5 NT$ 2,290.4 NT$ 2,045.4 US$ 58.9 NT$21,319.1 NT$17,647.5 NT$19,412.6 US$559.4 1.2% 2.2% 2.1% 18.05% 18.01% 17.21%
	2000 (in NT$ 15.9 121.2 590.8 18.9 746.8 (90.9) (149.0) 506.9 (79.4) 427.5 NT$ 1,086.2 2,001.0 3,428.0 6,516.7 7,376.7 2,100.0 315.7 2,484.8 4,891.9 5.6% 9.0% (20.0%) NT$18,715.2 NT$ 7,444.5 NT$21,319.1 1.2% 18.05%

Income Statement Data:
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and loss on credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet Data:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from banks(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for loss on guarantees and sale of government bonds . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Return on average assets(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on average equity(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense/total operating revenue . . . . . . . . . . . . . . . . . . . . . .
Bonds sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . .
Bonds purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . .
Total guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for guarantees/total guarantees(5) . . . . . . . . . . . . . . . . . . . . . . .
Capital adequacy ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of and for the Year Ended December 31,
2000
2001
2002
(in millions, except percentages)
NT$ 15.9
NT$ 125.4
NT$ 46.6
US$ 1.3
121.2
150.3
160.9
4.6
590.8
1,002.4
820.9
23.7
18.9
4.4
0.1
—
746.8
1,282.5
1,028.5
29.6
(90.9)
(405.2)
(187.9)
(5.4)
(149.0)
(153.9)
(139.0)
(4.0)
506.9
723.5
701.6
20.2
(79.4)
(354.7)
(130.7)
(3.7)
427.5
368.8
570.9
16.5
NT$ 1,086.2
NT$ 4,775.8
NT$ 4,124.6
US$118.9
2,001.0
350.0
250.0
7.2
3,428.0
2,978.5
3,942.0
113.6
6,516.7
8,110.7
8,319.5
239.8
7,376.7
9,165.5
10,065.1
290.1
2,100.0
3,330.0
3,920.0
113.0
315.7
518.0
592.2
17.1
2,484.8
4,037.6
4,634.6
133.6
4,891.9
5,127.9
5,430.5
156.5
5.6%
4.5%
5.9%
9.0%
7.4%
10.8%
(20.0%)
(12.0%)
(13.5%)
NT$18,715.2
NT$15,783.9
NT$13,053.7
US$376.2
NT$ 7,444.5
NT$ 2,290.4
NT$ 2,045.4
US$ 58.9
NT$21,319.1
NT$17,647.5
NT$19,412.6
US$559.4
1.2%
2.2%
2.1%
18.05%
18.01%
17.21%

2000
(in
NT$ 15.9
121.2
590.8
18.9
746.8
(90.9)
(149.0)
506.9
(79.4)
427.5
NT$ 1,086.2
2,001.0
3,428.0
6,516.7
7,376.7
2,100.0
315.7
2,484.8
4,891.9
5.6%
9.0%
(20.0%)
NT$18,715.2
NT$ 7,444.5
NT$21,319.1
1.2%
18.05%

(1) Includes call loans to banks and pledged time deposits.

(2) Includes short-term negotiable instruments and receivables.

(3) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total assets balance for the preceding and current fiscal year, respectively.

(4) Defined as annual net income for the year ended December 31, 2000, 2001 and 2002 divided by the average year-end total shareholders’ equity balance for the preceding and current fiscal year, respectively.

(5) Defined as reserve for loss on guarantees divided by total guarantees.

(6) Defined as net qualified capital divided by risk-weighted assets, as defined by MOF.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

E.Sun Financial

Overview

We were formed as a financial holding company on January 28, 2002 pursuant to the ROC Financial Holding Company Act. We have a limited operating history. Accordingly, the following discussion is presented with reference to the results of operations and financial condition of E.Sun Bank and E.Sun Bills Finance for the relevant historical periods, unless otherwise noted. Since the contribution of E.Sun Securities to the total revenue, total assets and shareholders’ equity of E.Sun Financial for the year ended December 31, 2002 was relatively immaterial, the results of operations and financial condition of E.Sun Securities have not been included in this discussion.

The following discussion is based upon, and should be read in conjunction with, (1) the audited consolidated financial statements of E.Sun Financial as of and for the period from its establishment on January 28, 2002 to December 31, 2002, (2) the unaudited consolidated financial statements of E.Sun Financial as of and for the three months ended March 31, 2003, (3) the audited unconsolidated financial statements of E.Sun Bank and E.Sun Bills Finance as of and for the years ended December 31, 2000, 2001 and 2002 and (4) the unaudited unconsolidated financial statements of E.Sun Bank as of and for the three months ended March 31, 2003, together with the independent accountants’ audit reports thereon, all of which are included elsewhere in this Offering Memorandum. Because we have a limited operating history, you should not place undue reliance on our financial statements.

Liquidity and Capital Resources

We currently conduct substantially all of our operations through our subsidiaries. Substantially all of our assets are held by, and substantially all of our net income and cash flows are attributable to, our subsidiaries. As a result, our liquidity and ability to pay expenses and meet obligations, as well as our ability to pay cash dividends on our Shares, are dependent upon our ability to receive dividends from our subsidiaries. See ‘‘Risk Factors — Risks Relating to E.Sun Financial — Our ability to service our debt and pay dividends depends on capital distributions from our subsidiaries which are subject to regulatory and other limits.’’

We intend to finance our capital requirements and investments primarily through a combination of capital contributions and dividends from E.Sun Bank, E.Sun Bills Finance, E.Sun Securities and our other subsidiaries, and from the proceeds from transactions in the international and domestic capital markets, including pursuant to this Offering. We believe that our existing cash balance, together with the proceeds from this Offering, as well as dividends provided by our subsidiaries and borrowings under committed credit lines from banks, will provide sufficient funds to meet our operating and capital requirements and implement our corporate strategy.

We had no outstanding short-term debt as of March 31, 2003. We have no significant capital expenditure requirements.

We intend to manage our liquidity by balancing the needs for capital of each of our subsidiaries with the capital requirements of our strategy. While we expect that our subsidiaries will contribute cash to us from time to time, their ability to do so is not only dependent on their profitability but also governed by a number of different regulations that are subject to changes.

Capital Adequacy Requirements

As a financial holding company organized under the ROC Financial Holding Company Act, we are currently subject to group capital adequacy requirements. The definition of group capital adequacy ratio is complex. See ‘‘Regulation of the Taiwan Financial Services Industry — Regulation of the Company — Financial Requirements.’’ Pursuant to the ROC Financial Holding Company Act, we are required to have a group capital adequacy ratio of not less than 100%. We expect to meet or exceed any capital requirements, including group capital adequacy requirements, that are applicable to us. See ‘‘Special Note Regarding Forward-Looking Statements.’’

Inflation

We do not believe that inflation in Taiwan has materially affected our results of operations. Inflation in Taiwan was approximately 1.26%, (0.01%) and (0.20%) for the years ended December 31, 2000, 2001 and 2002, respectively.

Market Risks

Market risk is usually defined as the risk of loss in a financial instrument from an adverse movement in market prices or rates. The broadly defined categories of market risks include, among others, exposures to interest rates, foreign exchange rates and equity prices. The nature of the market risks that we face varies depending on the nature of the business. For example, interest rate risk is a market risk that E.Sun Financial, E.Sun Bank, E.Sun Bills Finance and E.Sun Securities are subject to whereas foreign exchange risk is a market risk that principally affects E.Sun Bank and equity price risk is a market risk that principally affects E.Sun Securities. Set forth below is a brief overview of the types of market risks that our subsidiaries are subject to.

Interest Rate Risk. A significant portion of our assets consists of, and a significant portion of our revenue is derived from, monetary assets, which subjects us to significant risk from changes in interest rates. Changes in interest rates could significantly affect us across all our businesses. We may use interest rate swap contracts to exchange fixed interest rate obligations for floating rate obligations and vice versa for a portion of our total interest rate risk.

Foreign Exchange Risk. For the year ended December 31, 2002 and the period ended March 31, 2003, the percentage of our revenue and liabilities denominated in foreign currencies was immaterial. The primary currency to which we are exposed is the US dollar. We attempt to limit our foreign exchange risk exposure to various currencies by matching our foreign currency assets and liabilities.

Equity Price Risk. A portion of our assets consists of, and a portion of our revenue has been derived from, short-term investments, trading securities, repurchase transactions and long-term investments. The performance of these assets may materially affect our financial condition and results of operations. A substantial portion of these investment assets comprises common stock issued by listed Taiwan companies. Such stocks have experienced significant price volatility. As of March 31, 2003, the aggregate carrying value of these investments on our balance sheet was approximately NT$1.0 billion.

Forecasted Financial Condition

As a financial holding company in Taiwan that is listed in 2002, we are required by the Securities and Futures Commission to report our annual financial forecasts until 2005 and may be required to report our annual financial forecasts subsequently if we are subject to the reporting requirements under certain circumstances pursuant to the rules and regulations of the Securities and Futures Commission. In addition, each of E.Sun Bank and E.Sun Bills Finance is required to publicly report unaudited monthly income statement data. To the extent there is variance over certain prescribed limits between our actual results in any period and the forecast for the corresponding period included in the annual forecast we have published, we are required to revise our forecast and publish a revised forecast as soon as practicable.

E.Sun Bank

Overview

E.Sun Bank was established on January 16, 1992 and commenced its operations on February 21, 1992 as one of the 16 New Banks to receive banking licenses during the liberalization of the Taiwan financial services industry in the early 1990s. According to statistical data compiled by MOF, in the period from 1992 to 2001, E.Sun Bank was ranked first among the New Banks in Taiwan in terms of average earnings per share. E.Sun Bank also was ranked third in terms of total assets, total deposits and gross loans, respectively, among New Banks in Taiwan as of March 31, 2003. As of March 31, 2003, E.Sun Bank had 1.74 million credit cards in force, making it the sixth largest issuer of credit cards among all banks in Taiwan. As of and for the three months ended March 31, 2003, E.Sun Bank had total assets, total loans, total deposits, total shareholders’ equity and net income of NT$282.5 billion, NT$170.1 billion, NT$222.9 billion, NT$19.0 billion and NT$1.0 billion, respectively. As of March 31, 2003, E.Sun Bank had the lowest NPL ratio among all the domestic commercial banks in Taiwan with an NPL ratio of 1.36% as compared to the industry average NPL ratio of 6.11%, as reported to MOF.

Business and Operating Environment

E.Sun Bank’s profitability and financial condition are affected by a number of factors which influence the business environment in which it operates. These factors include general economic conditions in Taiwan, interest rates, competition, conditions in Taiwan’s securities markets, regulation, taxes and foreign exchange rates.

We expect that the following factors in particular could continue to affect the financial performance of E.Sun Bank:

. Economic Climate. Approximately 80% of E.Sun Bank’s assets are denominated in New Taiwan dollars. Accordingly, the financial performance of E.Sun Bank’s consumer and corporate business is closely linked to the state of the local economy in Taiwan. In particular, the economic environment in Taiwan is significantly affected by the economic environment throughout Asia. While there have been recent signs of an economic recovery in Taiwan, the local economy has generally been lagging since the Asian economic crisis began in mid-1997. Among other things, slowing economic growth rates, a sharp depreciation in the value of the New Taiwan dollar relative to the US dollar and other foreign currencies, a significant decline in Taiwan’s equity securities markets, and an increase in unemployment and bankruptcies may adversely affect our corporate and individual borrowers, which in turn could adversely affect the future results of operations and financial condition of E.Sun Bank.
. Interest Rates. A significant portion of E.Sun Bank’s assets consists of, and a significant portion of our revenue is derived from, assets that are subject to interest rate risks. E.Sun Bank’s profitability depends to a large extent on its net interest income. Changes in interest rates, changes in relationship between short-term and long-term interest rates, or changes in relationship between different interest rate indices can affect the interest rate charged on interest-earning assets differently than the interest rate paid on interest-bearing liabilities. As of March 31, 2003, the total amount of interest-bearing liabilities of E.Sun Bank anticipated to be re-priced within one year exceeded the total amount of interest-earning assets anticipated to be re-priced in the same period by NT$47.6 billion, representing a negative cumulative one-year interest rate sensitivity gap equal to 27.0% of total interest-earning assets. Although E.Sun Bank

is subject to significant risk from changes in interest rates which can affect its financial performance, E.Sun Bank does not believe that interest rates will rise significantly in the next one and a half years.

. Competition. Due to Taiwan’s highly competitive domestic banking industry and the increasing presence of foreign banks in Taiwan, E.Sun Bank has experienced an increase in pricing competition for products and services as other banks seek to build or maintain market share. Further price-based competition could adversely affect the profitability of E.Sun Bank, particularly if that competition erodes E.Sun Bank’s margins on high-yield products such as credit card revolving balances or prevents E.Sun Bank from grouping its portfolio of consumer loans.

Critical Accounting Policies

E.Sun Bank’s financial statements are prepared in accordance with ROC GAAP. E.Sun Bank makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expense as well as the disclosure of contingent liabilities as of the date of the financial statements. Actual results may differ from those estimates. E.Sun Bank has identified the following accounting policies as critical to an understanding of its business since the application of these policies requires significant management assumptions and estimates that could result in the reporting of materially different amounts if such assumptions and estimates prove to be unwarranted.

Non-Performing Loans

E.Sun Bank defines NPLs as overdue loans required to be reported to MOF in accordance with MOF guidelines, which include:

. in the case of short-term loans with bullet payments, loans with respect to which principal is three months or more overdue or interest is six months or more overdue;
. in the case of mid- and long-term installment loans, loans with respect to which interim payments of principal or interest are six months or more overdue or the final payment is three months or more overdue; and
. loans with respect to which E.Sun Bank has taken legal action for repayment or liquidation of collateral prior to the maturity of such loans.

In addition, MOF recently required banks in Taiwan to report the loans under surveillance, which include:

. in the case of mid- and long-term installment loans, loans with respect to which interim payments of principal or interest are more than three months (inclusive) but less than six months overdue;
. in the case of loans other than mid- and long-term installment loans, loans with respect to which payments of principal are three months or less overdue but the payments of interest are more than three months (inclusive) but less than six months overdue; or
. loans which meet the above criteria of NPLs to be reported to MOF but are exempt from such reporting requirement pursuant to MOF rules (which include, among others, restructured loans meeting the criteria set forth by MOF).

Non-accrual loans (‘‘NALs’’) are loans for which E.Sun Bank has stopped accruing interest. E.Sun Bank classifies its overdue loans as NALs if they are loans for which the most recent payment is overdue by more than six months.

From time to time, E.Sun Bank agrees, either alone or in conjunction with other lenders, to restructure the payment or other terms of a loan in order to assist customers to overcome temporary payment difficulties. The restructured terms usually include a reduction in the interest rate and, in certain cases, an extension of the payment schedule. As of March 31, 2003, total restructured loans meeting MOF criteria amounted to NT$417.0 million, consisting of NT$374.0 million corporate loans restructured and NT$43.0 million consumer loans restructured.

Provisions for Loan Loss

E.Sun Bank maintains a reserve for possible loan loss for exposures in its portfolio that represents the estimate of possible loss in the loan portfolio. Under MOF guidelines, the asset quality of the outstanding loans extended by banks is classified into four different categories: Class I (normal), Class II (substandard), Class III (doubtful) and Class IV (unrecoverable). Under MOF guidelines, E.Sun Bank must set aside a minimum specific allowance of 50.0% against loans of Class III and 100.0% against loans of Class IV. No specific allowance is required for Class II loans. For more information on loan classification guidelines of MOF, see ‘‘Description of Assets and Liabilities of E.Sun Bank — Asset Quality — Loan Classification’’ and ‘‘Regulation of the Taiwan Financial Services Industry’’.

Determining the classification of loans and the reserve for possible loan losses requires significant management judgment and the use of estimates. In classifying its loans and reserve for possible loan losses, E.Sun Bank considers relevant quantitative and qualitative factors, including the borrower’s financial condition and earnings capabilities, the borrower’s management and operation of business, the payment history of the loan, the status of any collateral or guarantees and the market conditions affecting the borrower. If actual events prove the estimates and assumptions used in determining the reserve for possible loan loss incorrect, E.Sun Bank may need to make additional provisions for loan loss.

E.Sun Bank reviews its reserve for loan loss monthly. Based on this review, it makes further provisions for loan loss which is charged to the current period. The amount of the provisions for any particular period is set at a level deemed prudent by management and is based on a number of factors, including the aggregate amount of E.Sun Bank’s NPLs for the period, the adequacy of existing collateral, the amount of the current reserve after taking write-offs and recoveries into account, and general economic conditions. Loans which are written off decrease the reserve, while subsequent recoveries are reflected in E.Sun Bank’s income in the current period.

E.Sun Bank makes both general and specific loan loss provisions. General provisions are made by applying historical write-off rates for corporate loans, secured retail loans and unsecured retail loans to the total amount of performing loans in each of those categories. Specific provisions are made for individual NPLs after a case-by-case evaluation of each loan.

E.Sun Bank believes that the accounting estimate related to its provisions for loan loss is a ‘‘critical accounting policy’’ because it is highly susceptible to change from period to period as it requires E.Sun Bank to make assumptions about future default rates and losses relating to its loan portfolio. Changes in the operating and financial performance of customers and general economic conditions of the market may have an impact on the ability of the borrowers to repay the loans. As a result, any significant difference between E.Sun Bank’s estimated loan loss (as reflected in the provisions for loan loss) and actual loan loss could require it to make additional provisions which, if significant, could have a material adverse effect on its net income.

E.Sun Bank’s loan loss reserve coverage ratio, which measures loan loss reserve as a percentage of total NPLs, was 64.66% as of December 31, 2002, compared to the industry average of 28.08% as of the same date.

Write-Off Policies

E.Sun Bank seeks to maintain the overall quality of its asset portfolio by taking what it believes to be a prudent approach to writing off loans and credit card receivables. The NPLs to be written off require the approval of the board of directors of E.Sun Bank.

E.Sun Bank’s write-off policies for certain retail products are as follows: (1) personal unsecured loans and second mortgage loans are written off after such loans remain overdue for 180 days; (2) credit card receivables are written off after such loans remain overdue for 180 days; and (3) cash card receivables are written off after such loans remain overdue for 180 days. Corporate loans are generally written off within two years after principal and interest payments are overdue if such loans are considered uncollectible. However, in cases where a corporate borrower is considered to be experiencing only temporary difficulties and where full repayment is expected, write-off of the loan may be deferred for up to two additional years.

NPLs and NALs meeting the following criteria will, after deducting the recoverable portions, be written off:

. the loans cannot be fully recovered by the reason of disappearance, dissolution, composition, declaration of bankruptcy, or other reason of the borrowers;
. the appraised value of the collaterals of the loans or the properties of the borrowers or guarantors is too low, and E.Sun Bank may not have actual benefit from foreclosure or compulsory execution of the collaterals or the properties;
. the collaterals of the loans or the properties of the borrowers or guarantors have been auctioned several times without success and E.Sun Bank has no actual benefit from assuming the auctioned collaterals and properties;
. such NPLs or NALs are two years overdue and are not recovered after enforcement; or
. the NPLs or NALs are overdue for a period over six months but less than two years and are not recovered after enforcement.

Income Recognition

Loans are recorded at principal amounts outstanding less allowances for loan loss. The interest income on loans is recognized on an accrual basis. When the loans become past due and are considered to be uncollectible, the principal and interest are transferred into NALs and the accrual of interest income ceases. Such interest income is recognized under ‘‘interest income’’ by E.Sun Bank when collected. Recovery of loans previously written off in the current period or prior year is recorded as a deduction of current provisions for loan loss.

Average Balance Sheets and Interest Rates

The following table sets forth, for the periods indicated, daily average balances and average interest rates of E.Sun Bank.

As of and for the Year Ended December 31,	As of and for the Year Ended December 31,	As of and for the Year Ended December 31,
2000 2001 2002 Average Balance(1) Rate Average Balance(1) Rate Average Balance(1) Rate (in millions, except percentages and ratios) NT$ 3,353.7 5.92% NT$ 3,258.7 3.74% NT$ 10,221.5 1.25% 2,912.4 5.44 10,080.9 3.76 5,836.6 1.63 6,165.2 3.57 6,356.2 3.69 5,210.7 2.46 19,870.6 6.32 28,251.0 6.85 32,947.5 4.14 163,671.4 7.61 166,169.4 6.89 165,292.9 4.98 NT$195,973.3 7.29% NT$214,116.2 6.59% NT$219,509.2 4.53% NT$ 5,248.3 5.66% NT$ 2,760.2 4.59% NT$ 5,950.8 1.84% 11,730.1 1.93 14,322.0 1.50 18,282.3 0.74 29,990.2 4.16 32,535.3 3.43 44,742.8 1.73 66,724.2 5.11 81,668.3 4.38 74,309.6 2.45 74,800.3 5.26 78,028.5 4.57 75,850.1 2.92 6,872.9 5.43 6,282.4 4.65 2,600.0 2.26 — — 2,027.4 3.91 7,700.7 3.34 NT$195,366.0 4.86% NT$217,624.1 4.12% NT$229,436.3 2.34% 1.00x 0.98x 0.96x 2.43% 2.47% 2.19% 2.46% 2.47% 2.21% 2.08% 2.47% 2.98%	2002
Average Balance(1) NT$ 3,353.7 2,912.4 6,165.2 19,870.6 163,671.4 NT$195,973.3 NT$ 5,248.3 11,730.1 29,990.2 66,724.2 74,800.3 6,872.9 — NT$195,366.0 1.00x 2.43% 2.46% 2.08%		Rate
		1.25% 1.63 2.46 4.14 4.98 4.53% 1.84% 0.74 1.73 2.45 2.92 2.26 3.34 2.34%

(1) Calculated based on balance sheet amounts at the end of the day.

(2) Includes the interest-earning portion of call loans and due from banks.

(3) Includes securities, principally government bonds and commercial paper.

(4) Defined as the average yield on interest-earning assets less the average cost of interest-bearing liabilities over the period.

(5) Defined as the average yield on interest-earning assets less the average cost of interest-bearing deposits over the period. (6) Defined as net interest income divided by average interest-earning assets over the period.

The following table sets forth, for the periods indicated, daily average balance, interest income and expense and average interest rates of E.Sun Bank.

Cash — negotiable certificates of deposits . . . . . . . . . . . . . . . . . . Due from banks(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Central Bank of China. . . . . . . . . . . . . . . . . . . . . . . . . Securities purchases(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans, bills and discounts purchase . . . . . . . . . . . . . . . . . . . . . . . Total interest-earning assets. . . . . . . . . . . . . . . . . . . . . . . . . . . Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . Average interest-earning assets/average interest-bearing liabilities . . Overall interest rate spread(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating interest rate spread(5). . . . . . . . . . . . . . . . . . . . . . . . . . Net interest margin(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As of and for the Period Ended March 31,	As of and for the Period Ended March 31,	As of and for the Period Ended March 31,
	2002 2003 Average Balance(1) Rate Average Balance(1) Rate (in millions, except percentages and ratios) NT$ 3,279.8 2.38% NT$ 16,764.4 0.04% 869.4 0.92 7,886.6 1.20 5,142.1 2.47 5,390.8 2.18 39,371.6 4.17 32,963.4 2.59 171,079.0 5.84 162,712.8 3.62 NT$219,741.9 5.40% NT$225,718.0 3.08% NT$ 7,011.1 2.11% NT$ 12,711.8 1.30% 10,476.3 1.18 20,387.1 0.42 42,601.9 2.26 48,744.9 1.00 53,728.7 3.18 71,702.8 1.77 77,841.2 3.51 77,523.9 2.13 2,453.1 3.20 1,101.6 1.16 5,000.0 3.94 10,000.0 3.63 NT$199,112.3 2.99% NT$242,172.1 1.66% 1.10x 0.93x 2.41% 1.42% 2.40% 1.48% 2.50% 2.87%	2003
			Rate

(1) Calculated based on balance sheet amounts at the end of the day.

(2) Includes the interest-earning portion of call loans and due from banks.

(3) Includes securities, principally government bonds and commercial paper.

(4) Defined as the average yield on interest-earning assets less the average cost of interest-bearing liabilities over the period.

(5) Defined as the average yield on interest-earning assets less the average cost of interest-bearing deposits over the period. (6) Defined as annualized net interest income divided by average interest-earning assets over the period.

Rate-Volume Analysis

E.Sun Bank’s interest income and interest expense are affected by fluctuations both in interest rates and in volume of activity. E.Sun Bank’s interest expense is also affected by the extent to which it funds its activities with low-interest or non-interest deposits (including the float on transactional services) and the extent to which it relies on borrowings.

The following table sets forth the effects of changing rates and volumes on interest income and expense of E.Sun Bank and therefore is not comparable to the other financial information provided in the tables set forth above in ‘‘Selected Financial and Other Data — E.Sun Bank.’’ Information is provided with respect to (1) effects attributable to changes in volume (changes in volume multiplied by current rate) and (2) effects attributable to changes in rate (changes in rate multiplied by prior volume). Changes attributable to the combined impact of changes in rate and volume have been allocated proportionately to the change due to volume and the change due to rate.

	For	the Year End	ed December 31,	ed December 31,		For the Period Ended March 31,	For the Period Ended March 31,	For the Period Ended March 31,
2001	Compared to	2000	2002 Compared to		2001	2003 Compared to		2002
Change Due to Rate	Change Due to Volume	Total Change	Change Due to Rate	Change Due to Volume	Total Change	Change Due to Rate	Change Due to Volume	Total Change
NT$ (816.5) (61.4) 19.2 595.2	NT$ 177.5 271.6 7.5 520.9	NT$(639.0) 210.2 26.7 1,116.1			NT$(2,645.1) (278.6) (67.7) 687.2	NT$(2,213.9) (101.2) (39.4) 681.5	NT$1,565.7 109.7 31.3 (399.2)	NT$(648.2) 8.5 (8.1) 282.3
(263.5) (98.7) (257.8) (969.1) (118.9) (83.4)	977.5 10.1 122.6 962.4 (78.3) 20.0	714.0 (88.6) (135.2) (6.7) (197.2) (63.4)	(2,861.7) (14.1) (541.9) (2,782.7) (191.8) (6.8)	557.5 18.2 198.9 (254.0) (7.4) 24.0	(2,304.2) 4.1 (343.0) (3,036.7) (199.2) 17.2	(1,673.0) 33.5 (696.2) (2,471.6) (188.5) 79.7	1,307.5 11.8 555.4 1,987.0 136.9 (62.0)	(365.5) 45.3 (140.8) (484.6) (51.6) 17.7
		(491.1) 1,205.1	(3,537.3) 675.6	(20.3) 577.8	(3,557.6) 1,253.4	(3,243.1) 1,570.1	2,629.1 (1,321.6)	(614.0) 248.5

The revenue of E.Sun Bank has been derived primarily from interest income and income and gains on trading securities. Expenses of E.Sun Bank consist primarily of interest expense, provisions for loan loss, personnel expense, rent and fees paid to other financial intermediaries such as credit card processors.

The profitability of E.Sun Bank could be affected by a number of factors, including the effectiveness of its management and the performance of the overall Taiwan economy. In addition, E.Sun Bank’s profitability and business could be affected by regulatory policies and constraints. For example, recent government interpretations of banking regulatory policies require E.Sun Bank, and other banks similarly situated, to adjust their treatment of NPLs.

The table below sets forth, for the periods indicated, certain financial data of E.Sun Bank.

Interest Income: Loans . . . . . . . . . . . . . . . Due from Banks(1). . . . . . . Due from Central Bank of China . . . . . . . . . . . . . Credit card lines . . . . . . . . Other(2) . . . . . . . . . . . . . . Total interest income. . . . . . Interest Expenses: Deposit . . . . . . . . . . . . . . Due to banks . . . . . . . . . . Others . . . . . . . . . . . . . . . Total interest expense . . . . . Net interest income . . . . . . . Non-interest income Service fee income — net(3) Net gain/(loss) on trading securities . . . Investment income — net. . Exchange gain — net. . . . . Other gain — net(4) . . . . . . Total non-interest income. . . Income before operating expenses . . . . . . . . . . . . . Operating expenses(5) Selling expense. . . . . . . . . General and administrative expense . . Other. . . . . . . . . . . . . . . . Total operating expense . . . . Provisions for loan loss and other losses . . . . . . . . . . . Operating income (loss) . . . .	For	the Year Ended December 31, 2001 2002 (in millions) NT$11,777.1 NT$ 9,145.8 US$263.6 382,.0 103.3 3.0 247.5 179.8 5.2 1,380.6 2,188.7 63.0 631.5 496.9 14.3 14,418.7 12,114.5 349.1 (8,870.5) (5,291.2) (152.5) (230.0) (234.1) (6.7) (38.5) (55.6) (1.6) (9,139.0) (5,580.9) (160.8) 5,279.7 6,533.6 188.3 477.8 592.3 17.1 1,456.2 1.068.9 30.8 257.0 70.1 2.0 172.5 157.8 4.6 (5.2) (6.4) (0.2) 2,358.3 1,882.7 54.3 7,638.0 8,416.3 242.6 (2,634.6) (3,334.6) (96.1) (315.4) (308.1) (8.9) (13.3) (25.1) (0.7) (2,963.3) (3,667.8) (105.7) (2,092.6) (9,414.0) (271.3) 2,582.1 (4,665.5) (134.6)	For the Period Ended March 31, 2002 2003 NT$2,484.5 NT$1,838.3 US$53.0 29.5 38.0 1.1 46.1 38.0 1.1 390.9 633.4 18.2 118.5 156.4 4.5 3,069.5 2,704.1 77.9 (1,649.6) (972.4) (28.0) (37.1) (82.3) (2.4) (10.1) (28.4) (0.8) (1,696.8) (1,083.1) (31.2) 1,372.7 1,621.0 46.7 134.5 176.7 5.1 373.2 223.4 6.4 32.4 25.2 0.7 19.0 68.8 2.0 (0.6) 152.5 4.4 558.5 646.6 18.6 1,931.2 2,267.6 65.3 (657.2) (899.1) (25.9) (71.3) (59.7) (1.7) (1.9) (6.4) (0.2) (730.4) (965.2) (27.8) (489.4) — — 711.4 1,302.4 37.5	For the Period Ended March 31, 2002 2003 NT$2,484.5 NT$1,838.3 US$53.0 29.5 38.0 1.1 46.1 38.0 1.1 390.9 633.4 18.2 118.5 156.4 4.5 3,069.5 2,704.1 77.9 (1,649.6) (972.4) (28.0) (37.1) (82.3) (2.4) (10.1) (28.4) (0.8) (1,696.8) (1,083.1) (31.2) 1,372.7 1,621.0 46.7 134.5 176.7 5.1 373.2 223.4 6.4 32.4 25.2 0.7 19.0 68.8 2.0 (0.6) 152.5 4.4 558.5 646.6 18.6 1,931.2 2,267.6 65.3 (657.2) (899.1) (25.9) (71.3) (59.7) (1.7) (1.9) (6.4) (0.2) (730.4) (965.2) (27.8) (489.4) — — 711.4 1,302.4 37.5
	2000 NT$12,414.5 171.8 220.8 754.3 143.4 13,704.8 (9,210.5) (318.7) (101.0) (9,630.2) 4,074.6 513.7 1,245.5 276.6 135.7 (9.2) 2,162.3 6,236.9 (2,381.2) (297.4) (29.2) (2,707.8) (1,718.5) 1,810.6	2001 NT$11,777.1 382,.0 247.5 1,380.6 631.5 14,418.7 (8,870.5) (230.0) (38.5) (9,139.0) 5,279.7 477.8 1,456.2 257.0 172.5 (5.2) 2,358.3 7,638.0 (2,634.6) (315.4) (13.3) (2,963.3) (2,092.6) 2,582.1	2002 NT$2,484.5 29.5 46.1 390.9 118.5 3,069.5 (1,649.6) (37.1) (10.1) (1,696.8) 1,372.7 134.5 373.2 32.4 19.0 (0.6) 558.5 1,931.2 (657.2) (71.3) (1.9) (730.4) (489.4) 711.4
				NT$1,838.3 38.0 38.0 633.4 156.4 2,704.1 (972.4) (82.3) (28.4) (1,083.1) 1,621.0 176.7 223.4 25.2 68.8 152.5 646.6 2,267.6 (899.1) (59.7) (6.4) (965.2) — 1,302.4

(1) Includes call-loans from banks.

(2) Includes interest income from foreign exchange, factoring, foreign currency interest rate swaps, foreign exchange margin trading and other derivative instruments.

(3) Re-classified to present service fee income on a net income basis solely for the convenience of readers and this presentation does not correspond to the presentation in the unconsolidated financial statements of E.Sun Bank included elsewhere in the Offering Memorandum.

(4) Re-classified to present other income on a net income basis solely for the convenience of readers and this presentation does not correspond to the presentation in the unconsolidated financial statements of E.Sun Bank included elsewhere in the Offering Memorandum.

(5) Re-classified to exclude interest expense (which has been presented separately), service fee expense (which has been netted off with service fee income) and provision for loan losses (which has been presented separately) solely for the convenience for readers and this presentation does not correspond to the presentation in the unconsolidated financial statements of E.Sun Bank included elsewhere in the Offering Memorandum.

Three Months Ended March 31, 2003 and March 31, 2002

Interest Income. Interest income decreased 11.9% to NT$2,704.1 million for the three months ended March 31, 2003 from NT$3,069.5 million for the three months ended March 31, 2002, primarily due to a decrease in the average yield on interest-earning assets as a result of the general decline in market interest rates despite of an increase in the volume of total interest-earning assets. Such decrease was partially offset by a substantial increase in interest income from credit card lines from the three months ended March 31, 2003 to the three months ended March 31, 2002. Average interest-earning assets increased 2.7% to NT$225.7 billion for the three months ended March 31, 2003 from NT$219.7 billion for the three months ended March 31, 2002. The yield on interest-earning assets decreased 232 basis points to 3.08% in the three months ended March 31, 2003 from 5.40% in the three months ended March 31, 2002.

Interest Expense. Interest expense decreased 36.2% to NT$1,083.1 million for the three months ended March 31, 2003 from NT$1,696.8 million for the three months ended March 31, 2002, primarily due to a decrease in the average cost of interest-bearing liabilities as a result of the general decline in market interest rates, partially offset by an increase in the deposit base primarily from demand deposits and time deposits. Average interest-bearing liabilities increased 21.6% to NT$242.2 billion for the three months ended March 31, 2003 from NT$199.1 billion for the three months ended March 31, 2002. The cost of interest-bearing liabilities decreased 133 basis points to 1.66% in the three months ended March 31, 2003 from 2.99% in the three months ended March 31, 2002, primarily due to a general decline in deposit interest rates.

Net Interest Income. As a result of the foregoing, the net interest income increased 18.1% to NT$1,621.0 million for the three months ended March 31, 2003 from NT$1,372.7 million for the three months ended March 31, 2002.

Net Interest Margin. Net interest margin increased 40 basis points to 2.9% for the three months ended March 31, 2003 from 2.5% for the three months ended March 31, 2002. The increase in net interest margin in the three months ended March 31, 2003 was primarily due to a decrease in interest rates paid to depositors, which more than offset a drop in yields on assets in a declining interest rate environment and a shift in E.Sun Bank’s product mix toward high-margin products such as credit cards and cash cards.

Net Fee Income. Net fee income increased 31.4% to NT$176.7 million for the three months ended March 31, 2003 from NT$134.5 million for the three months ended March 31, 2002, due to a substantial increase in fee income from credit card and fees on management small loans and increases from foreign exchange and acceptance fees and custodian fees, reflecting E.Sun Bank’s continued emphasis on promoting fee-based products. The increase in fee income from credit cards was primarily a result of the increase in the number of credit cards outstanding which increased 66.5% to 1.74 million credit cards in the three months ended March 31, 2003 from 1.04 million credit cards in the three months ended March 31, 2002. The increase in fee income was partially offset by an increase in service fee expense which increased 135.2% to NT$116.9 million for the three months ended March 31, 2003 from NT$49.7 million for the three months ended March 31, 2002 primarily due to an increase in credit card service costs in connection with increased number of credit cards in force. The net fee income to total operating revenue ratio increased to 7.79% for the three months ended March 31, 2003 from 6.96% for the three months ended March 31, 2002.

Net Gain/Loss on Trading Securities. Net gain on trading securities decreased 40.1% to NT$223.4 million for the three months ended March 31, 2003 from NT$373.2 million for the three months ended March 31, 2002, primarily due to the decline in interest rates resulting in a decrease in yield for certain fixed-income securities.

for the three months ended March 31, 2002. The increase in other operating income for the three months ended March 31, 2003 was primarily due to increases in gain from foreign exchange and gain from derivatives trading, partially offset by a decrease in income from long-term investments.

Operating Expense. Total operating expense increased 32.1% to NT$965.2 million for the three months ended March 31, 2003 from NT$730.4 million for the three months ended March 31, 2002, primarily due to the increase in marketing expenses in connection with the promotion of E.Sun Bank’s cobranded credit cards with certain department stores and retail banking businesses and an increase in the number of employees in connection with the growth of E.Sun Bank’s business. Such increase in operating expense was partially offset by a decrease in administrative expense which decreased 16.3% to NT$59.7 million in the three months ended March 31, 2003 from NT$71.3 million in the same period of 2002. The cost to total operating income ratio increased to 42.6% in the three months ended March 31, 2003 from 37.8% in the three months ended March 31, 2002.

Provisions for Loan and Other Losses. The provisions for loan and other losses decreased to nil for the three months ended March 31, 2003 from NT$489.4 million for the three months ended March 31, 2002, primarily due to the aggressive write-off of NPLs in 2002.

Net Non-Operating Income/Expense. E.Sun Bank generated a net non-operating income of NT$3.3 million in the three months ended March 31, 2003 compared to a net non-operating expense of NT$10.2 million in the three months ended March 31, 2002, due to an increase in non-operating income which increased 125.9% to NT$6.1 million in the three months ended March 31, 2003 from NT$2.7 million in the three months ended March 31, 2002, and a decrease in non-operating expense which decreased 78.5% to NT$2.8 million in the three months ended March 31, 2003 from NT$13.0 million in the three months ended March 31, 2002.

Income Before Tax. As a result of the foregoing, income before tax increased 86.2% to NT$1,305.7 million for the three months ended March 31, 2003 from NT$701.2 million for the three months ended March 31, 2002.

Taxation. E.Sun Bank had a tax expense of NT$263.7 million for the three months ended March 31, 2003 compared to a tax expense of NT$106.2 million for the three months ended March 31, 2002. The effective tax rate was 20.2% for the three months ended March 31, 2003 compared to 15.1% for the three months ended March 31, 2002.

Net Income. As a result of the foregoing, net income increased 75.1% to NT$1,042.0 million for the three months ended March 31, 2003 from NT$595.0 million for the three months ended March 31, 2002, resulting in an increase in the return on average assets to 1.5% in the three months ended March 31, 2003 from 0.9% in the three months ended March 31, 2002, and an increase in the return on average equity to 22.6% in the three months ended March 31, 2003 from 10.3% in the three months ended March 31, 2002.

Years Ended December 31, 2002 and December 31, 2001

Interest Income. Interest income decreased 16.0% to NT$12,114.5 million in 2002 from NT$14,418.7 million in 2001, due to a decrease in the average yield on interest-earning assets as a result of the general decline in market interest rates and partially offset by a substantial increase in interest income from credit card lines from 2001 to 2002. Average interest-earning assets increased 2.5% to NT$219,509.2 million in 2002 from NT$214,116.2 million in 2001. The yield on interest-earning assets decreased 206 basis points to 4.53% in 2002 from 6.59% in 2001.

Interest Expense. Interest expense decreased 38.9% to NT$5,580.9 million in 2002 from NT$9,139.0 million in 2001, primarily due to a decrease in the average cost of interest-bearing liabilities as a result of the general decline in market interest rates, partially offset by a slight increase in the deposit base primarily from demand deposits and savings demand deposits. Average interest-bearing liabilities

increased 5.43% to NT$229,436.3 million in 2002 from NT$217,624.1 million in 2001. The cost of interestbearing liabilities decreased 178 basis points to 2.34% in 2002 from 4.12% in 2001, primarily due to a general decline in deposit interest rates.

Net Interest Income. As a result of the foregoing, the net interest income increased 23.7% to NT$6,533.6 million in 2002 from NT$5,279.7 million in 2001.

Net Interest Margin. Net interest margin increased 50 basis points to 3.0% in 2002 from 2.5% in 2001. The increase in net interest margin in 2002 was primarily due to a decrease in interest rates paid to depositors, which more than offset a drop in yields on assets in a declining interest rate environment and a shift in E.Sun Bank’s product mix toward high-margin products such as credit cards and cash cards.

Net Fee Income. Net fee income increased 24.0% to NT$592.3 million in 2002 from NT$477.8 million in 2001, due to a substantial increase in fee income from credit cards and credit card penalties, and slight increases from foreign exchange fees, acceptance fees, fees on management small loans, guarantee fees, custodian fees and commissions on distribution of mutual funds and fees from referrals of life insurance products, reflecting E.Sun Bank’s continued emphasis on promoting fee-based products. The increase in fee income from credit cards was primarily a result of the increase in the volume of transactions. The increase in fee income was partially offset by an increase in service fee expense which increased to NT$310.3 million in 2002 from NT$202.0 million in 2001 due to an increase in credit card and cash card service costs in connection with an increased of the number of credit cards in force. The net fee to total operating revenue ratio increased to 7.04% in 2002 from 6.26% in 2001.

Net Gain/Loss on Trading Securities. Net gain on trading securities decreased 26.6% to NT$1,068.9 million in 2002 from NT$1,456.2 million in 2001, primarily due to a decline in interest rates resulting in a decrease in the yield for certain fixed-income securities.

Other Operating Income. Other operating income consists of gain from foreign exchange, income from long-term investments and income from derivatives trading. Other operating income decreased 47.8% to NT$221.5 million in 2002 from NT$424.3 million in 2001. The decrease in other operating income in 2002 was primarily due to the formation of the financial holding company in which E.Sun Bank, E.Sun Bills Finance and E.Sun Securities became subsidiaries. As a result, E.Sun Bank no longer recognized income from its long-term investments in E.Sun Bills Finance and E.Sun Securities in 2002.

Operating Expense. Total operating expense increased 23.8% to NT$3,667.8 million in 2002 from NT$2,963.3 million in 2001, primarily due to the increase in marketing expenses in connection with the promotion of E.Sun Bank’s co-branded credit cards with certain department stores and retail banking business and an increase in the number of employees in connection with the growth of E.Sun Bank’s businesses and the opening of a branch in Hong Kong and additional branches in Taiwan. The cost to total operating income ratio increased to 43.6% in 2002 from 38.8% in 2001.

Provisions for Loan and Other Losses. The provisions for loan and other losses increased 349.9% to NT$9,414.0 million in 2002 from NT$2,092.6 million in 2001, primarily due to E.Sun Bank’s effort to strengthen asset quality by increasing its reserve coverage on loans or by reducing NPL ratios further down from 2.83% in 2001 to 1.38% in 2002 through aggressive write-offs. E.Sun Bank views the higher than normal provisions in 2002 as an one-time event and anticipates regular provisions going forward. The allowance for loan loss to gross loans ratio increased to 0.9% in 2002 from 0.8% in 2001.

Net Non-Operating Income/Expense. E.Sun Bank generated a net non-operating expense of NT$74.5 million in 2002 compared to a net non-operating income of NT$4.2 million in 2001, primarily due to a loss on disposal of collaterals in connection with certain loans.

Income Before Tax. Income before tax decreased to a loss of NT$4,740.0 million in 2002 from an income before tax of NT$2,586.3 million in 2001.

Taxation. E.Sun Bank had a tax benefit of NT$1,229.2 million in 2002 from a tax expense of NT$658.3 million in 2001 due to tax benefits earned as a result of aggressive write-offs in 2002.

Net Income. Net income decreased to a net loss of NT$3,510.8 million in 2002 from NT$1,928.0 million in 2001, primarily due to the provision of NT$9,414.0 million. As a result, there was a decrease in the return on average assets to a negative 1.3% in 2002 from 0.8% in 2001. In addition, the return on average equity decreased to a negative 17.2% in 2002 from 8.8% in 2001.

Years Ended December 31, 2001 and December 31, 2000

Interest Income. Interest income increased by 5.2% to NT$14,418.7 million in 2001 from NT$13,704.8 million in 2000, due to an increase in average interest-earning assets and an increase in interest income from credit card lines, which was partially offset by a decrease in the yield on interestearning assets as a result of the general decline in market interest rates. The average interest-earning assets increased 9.3% to NT$214,116.2 million in 2001 from NT$195,973.3 million in 2000, primarily as a result of the general growth in E.Sun Bank’s consumer banking business. The yield on interest-earning assets decreased only 70 basis points to 6.59% in 2001 from 7.29% in 2000.

Interest Expense. Interest expense decreased 5.1% to NT$9,139.0 million in 2001 from NT$9,630.2 million in 2000, as E.Sun Bank paid lower rates on deposits because of a decline in market interest rates, offset by an increase in average interest-bearing liabilities. The cost of interest-bearing liabilities decreased 74 basis points to 4.12% in 2001 from 4.86% in 2000, as a result of the general decline in market interest rates, which was 83 basis points lower in 2001 compared to 2000. The average interest-bearing liabilities increased 11.4% to NT$217,624.1 million in 2001 from NT$195,366.1 million in 2000.

Net Interest Income. As a result of the foregoing, net interest income increased 29.6% to NT$5,279.7 million in 2001 from NT$4,074.6 million in 2000.

Net Interest Margin. Net interest margin increased 40 basis points to 2.5% in 2001 from 2.1% in 2000, primarily due to an improvement in E.Sun Bank’s product mix to high-margin products. The increase in net interest margin in 2001 was primarily due to the decrease in interest rates paid to depositors, which more than offset a drop in yields on assets in a declining interest rate environment.

Net Fee Income. Net fee income decreased 7.0% to NT$477.8 million in 2001 from NT$513.7 million in 2000, primarily due to a decrease in trust fees and an accounting policy change at E.Sun Bank which resulted in the reclassification of fees earned from revolving credit card balances from fee income to interest income. Fee expense decreased 17.8% to NT$202.0 million in 2001 from NT$245.7 million in 2000, primarily due to the fact that there was a higher fee expense incurred in connection with E.Sun Bank’s promotion of affinity cards in 2000.

Net Gain/Loss on Trading Securities. Net gain on trading securities increased 16.9% to NT$1,456.2 million in 2001 from NT$1,245.5 million, primarily due to a realized gain from the sale of fixed-income securities.

Other Operating Income. Other operating income increased 5.3% to NT$424.3 million in 2001 from NT$403.1 million in 2000, primarily due to substantial increase in foreign exchange and other gains.

Provisions for Loan and Other Losses. Provisions for loan loss and other losses increased 21.8% to NT$2,092.6 million in 2001 from NT$1,718.5 million in 2000, primarily due to E.Sun Bank’s efforts to write off NPLs in an effort to maintain the overall quality of its loan portfolio. A portion of the increase in provisions was also attributable to the downturn in the economy, which resulted in corporate borrowers experiencing greater difficulties in keeping current on loans. Despite the write-off, the NPL to gross loans ratio increased to 2.83% in 2001 from 2.46% 2000. The allowance for loan loss to gross loans ratio decreased to 0.8% in 2001 from 0.9% in 2000.

Operating Expense. Operating expense increased 9.4% to NT$2,963.3 million in 2001 from NT$2,707.8 million in 2000, primarily due to the increase in selling expense as a result of the increase in the promotion costs and increase in the number of employees in connection with the promotion of E.Sun Bank’s credit cards. Expenditures on technology and consulting fees increased in 2001 due to the growth in E.Sun Bank’s operations. The cost of total operating income ratio decreased to 38.8% in 2001 from 43.4% in 2000.

Net Non-Operating Income/Expense. Net non-operating income increased to NT$4.2 million in 2001 from a net non-operating expense of NT$60.3 million in 2000, primarily due to a decrease in realized loss on disposal of collaterals in connection with certain loans, partially offset by a decrease in leasing income.

Income Before Tax. As a result of the foregoing, income before tax increased 47.8% to NT$2,586.3 million in 2001 from NT$1,750.3 million in 2000.

Taxation. Tax expense increased 99.1% to NT$658.3 million in 2001 from NT$330.7 million in 2000, resulting in a higher effective tax rate of 25.5% in 2001 compared to 18.9% in 2000. The increase in the effective tax rate was primarily due to a tax expense incurred in 2001 as a result of a regulatory ruling by the ROC tax authorities that resulted in the incurrence of tax expense for interest income on government fixed-income treasuries held from 1994 to 2001.

Net Income. As a result of the foregoing, net income increased 35.8% to NT$1,928.0 million in 2001 from NT$1,419.6 million in 2000, resulting in an increase in the return on average assets ratio to 0.8% in 2001 from 0.6% in 2000, and an increase in the return on average equity ratio to 8.8% in 2001 from 6.9% in 2000.

Financial Condition

Assets

Total Assets. Total assets increased 2.5% to NT$272,643.5 million as of December 31, 2002 from NT$265,873.8 million as of December 31, 2001, primarily due to the growth in deposits with the Central Bank of China, partially offset by a slight decrease in loans. The increase in total assets in 2002 reflected a moderate increase in current assets, particularly cash and cash equivalents and account receivables.

Total assets increased 12.5% to NT$265,873.8 million as of December 31, 2001 from NT$236,435.7 million as of December 31, 2000. The increase in total assets in 2001 was primarily due to increases in loans and current assets, particularly deposits at interests with banks and marketable securities.

Loans and Allowance for Loan Loss. Gross loans decreased 4.7% to NT$172,316.0 million as of December 31, 2002 from NT$180,859.2 million as of December 31, 2001. This decrease was primarily due to the write off of NPLs in connection with E.Sun Bank’s aggressive write-off policy in 2002. Allowance for loan loss increased 1.8% to NT$1,540.8 million as of December 31, 2002 from NT$1,514.0 million as of December 31, 2001, reflecting increased efforts by E.Sun Bank to provision against potential losses in its loan portfolio. E.Sun Bank wrote off NT$8,949.3 million of net loans in 2002 compared to NT$2,081.6 million of loans in 2001.

Gross loans increased 4.1% to NT$180,859.2 million as of December 31, 2001 from NT$173,727.3 million as of December 31, 2000, reflecting growth in both the retail loan portfolio, particularly unsecured personal loans, and in the corporate loan portfolio. Allowance for loan loss decreased 6.0% to NT$1,514.0 million as of December 31, 2001 from NT$1,610.0 million as of December 31, 2000, reflecting the write-off of NT$2,040.7 million in 2001.

Liabilities

Total Liabilities. Total liabilities increased 4.8% to NT$254,730.1 million as of December 31, 2002 from NT$243,070.3 million as of December 31, 2001, primarily reflecting increases in interest-bearing deposits, interbank borrowings and the issuance of NT$5.0 billion in aggregate principal amount of financial debentures for the year ended December 31, 2002.

Total liabilities increased 12.8% to NT$243,070.3 million as of December 31, 2001 from NT$215,416.2 million as of December 31, 2000, primarily reflecting increases in interest-bearing deposits and interbank borrowings, partially offset by a decrease in account payables.

Deposits. Deposits increased slightly by 0.3% to NT$225,739.6 million as of December 31, 2002 from NT$225,029.2 million as of December 31, 2001. Of E.Sun Bank’s interest-bearing deposits as of December 31, 2002, consumer deposits accounted for 58.6%, and corporate deposits accounted for 41.4% and other deposits accounted for the remaining balance.

Deposits increased 10.7% to NT$225,029.2 million as of December 31, 2001 from NT$203,334.1 million as of December 31, 2000, primarily reflecting increased funding needs due to the growth in E.Sun Bank’s portfolio of loans. Of E.Sun Bank’s interest-bearing deposits as of December 31, 2001, consumer deposits accounted for 57.2%, and corporate deposits accounted for 42.8% and other deposits accounted for the balance.

E.Sun Bank’s policy is to maintain a loan-to-deposit ratio of less than 85.0%. The loan-to-deposit ratio for any period equals the sum of the daily average loans and credit card receivables for the period divided by the daily average deposits for the period. The gross loan-to-deposit ratio was 85.4%, 80.4% and 76.3% for 2000, 2001 and 2002, respectively.

Contingent Liabilities and Commitment

As of March 31, 2003, contingent liabilities and commitments included approximately NT$10.0 billion in commitments to repurchase bonds and securities NT$4.8 billion in guarantees issued and noncancellable loan commitment amounted to zero. We anticipate that not all of the above commitments will be utilized before the agreed upon expiration or other termination clauses. The amount of unused commitments therefore does not necessarily represent future funding requirements. For the year ended December 31, 2002, the majority of the credit commitments expired within one year. Further, E.Sun Bank’s guarantee agreements generally have expiration periods of up to one year.

E.Sun Bills Finance

E.Sun Bills Finance derives most of its revenue from (1) gains from the trading of fixed-income securities, such as corporate bonds, including convertible bonds, financial debentures and bills, which include commercial paper, negotiable certificates of deposit and treasury bills issued by the ROC government, (2) fee income from guaranteeing, underwriting and certifying bills and (3) interest income from investments in fixed-income securities. Expense generally consists of interest expense, fee expense, provisions for guarantee and trading loss, and operating expense.

The following table sets forth, as of and for the periods indicated, certain financial data of E.Sun Bills Finance.

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions and loss on credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As of and for the Year Ended December 31, 2000 2001 2002 (in millions) NT$ 15.9 NT$ 125.4 NT$ 46.6 US$ 1.3 121.2 150.3 160.9 4.6 590.8 1,002.4 820.9 23.7 18.9 4.4 0.1 — 746.8 1,282.5 1,028.5 29.6 (90.9) (405.2) (187.9) (5.4) (149.0) (153.9) (139.0) (4.0) 427.5 368.8 570.9 16.5
	2000 NT$ 15.9 121.2 590.8 18.9 746.8 (90.9) (149.0) 427.5

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions and loss on credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of and for the Year Ended
December 31,
2000
2001
2002
(in millions)
NT$ 15.9
NT$ 125.4
NT$ 46.6
US$ 1.3
121.2
150.3
160.9
4.6
590.8
1,002.4
820.9
23.7
18.9
4.4
0.1
—
746.8
1,282.5
1,028.5
29.6
(90.9)
(405.2)
(187.9)
(5.4)
(149.0)
(153.9)
(139.0)
(4.0)
427.5
368.8
570.9
16.5

2000
NT$ 15.9
121.2
590.8
18.9
746.8
(90.9)
(149.0)
427.5

Results of Operations

Years Ended December 31, 2002 and December 31, 2001

Total Operating Revenue. Total operating revenue decreased 19.8% to NT$1,028.5 million in 2002 from NT$1,282.5 million in 2001.

. Net Interest Income. Interest income decreased 39.8% to NT$170.4 million in 2002 from NT$282.9 million in 2001, primarily due to a decrease in the average yield on interest-earning assets as a result of the general decline in market interest rates. Interest expense decreased 21.4% to NT$123.8 million in 2002 from NT$157.5 million in 2001, primarily due to a general decline in deposit interest rates. As a result of the foregoing, the net interest income decreased 62.8% to NT$46.6 million in 2002 from NT$125.4 million in 2001.
. Net Fee Income. Fee income consists primarily of fee income on guarantee fee, fee income from underwriting activities and fee income on certification fee. Net fee income increased 7.1% to NT$160.9 million in 2002 from NT$150.3 million in 2001, primarily due to an increase in guarantee fee income, certification fee income and fee income from underwriting activities. Guarantee fee income increased 3.0% to NT$73.0 million in 2002 from NT$70.9 million in 2001, primarily due to an increase in the volume of guarantee transactions. Certification fee income increased 9.2% to NT$10.7 million in 2002 from NT$9.7 million in 2001. Fee income from underwriting activities increased 6.6% to NT$83.5 million in 2002 from NT$78.3 million in 2001, primarily due to an increase in underwriting activities, notwithstanding the decline of the general market conditions.
. Net Gain on Sale of Short-Term Negotiable Instruments. Net gain on sale of short-term negotiable instruments decreased 18.1% to NT$820.9 million in 2002 from NT$1,002.4 million in 2001, primarily due to the decrease in the volume of transactions of government bonds as a result of the slowdown in the market.

Provisions for Loan Loss and Other Losses. Provisions for loan loss and other losses consist primarily of provisions for guarantee and provisions for trading loss. Provisions for loan loss and other losses decreased 53.6% to NT$187.9 million in 2002 from NT$405.2 million in 2001, primarily due to lower trading gain in 2002. Pursuant to internal guidelines, E.Sun Bills Finance sets aside at least 1% of the amount guaranteed as provisions for guarantee, 10% of its net trading gain on bonds as provisions for trading loss until the balance of the provisions reaches an amount equal to NT$200 million. In addition, financial institutions are required to allocate the amount saved from the reduction in business tax rate from 5% to 2% (since July 1999) as provisions for losses.

Operating Expense. Operating expense consists of selling, general and administrative expense. Operating expense decreased 9.7% to NT$139.0 million in 2002 from NT$153.9 million in 2001. The decrease in operating expense was primarily due to the decrease in the business tax expense as a result of a decrease in operating revenue in 2002, and the decrease in employee costs as a result of a reduction in the numbers of employees.

Total Operating Income. As a result of the foregoing, total operating income decreased 3.0% to NT$701.6 million in 2002 from NT$723.4 million in 2001.

Taxation. Tax expense declined 63.2% to NT$130.7 million in 2002 from NT$354.7 million in 2001, primarily due to a substantial increase in tax expense in 2001 as a result of a change in tax treatment of interest on government fixed-income treasuries. The effective tax rate was 18.6% in 2002 compared to 49.0% in 2001.

Net Income. As a result of the foregoing, net income increased 54.8% to NT$570.9 million in 2002 from NT$368.8 million in 2001.

Years Ended December 31, 2001 and December 31, 2000

Total Operating Revenue. Total operating revenue increased 71.7% to NT$1,282.5 million in 2001 from NT$746.8 million in 2000.

. Net Interest Income. Net interest income increased 688.7% to NT$125.4 million in 2001 from NT$15.9 million in 2000, primarily due to an increase in interest income, which was partially offset by an increase in interest expense. Interest income increased 89.0% to NT$282.9 million in 2001 from NT$149.7 million in 2000, primarily due to a substantial increase in the holding of time deposits. Interest expense increased 17.7% to NT$157.5 million in 2001 from NT$133.8 million in 2000, primarily due to the increase in deposit base notwithstanding a general decline in market interest rates.
. Net Fee Income. Net fee income increased 24.0% to NT$150.3 million in 2001 from NT$121.2 million in 2000, primarily due to an increase in fee income from underwriting activities, which increased 66.1% to NT$78.3 million in 2001 from NT$47.1 million in 2000, partially offset by a decrease in guarantee fee income, which decreased slightly 4.1% to NT$70.9 million in 2001 from NT$73.9 million in 2000.
. Net Gain on Sale of Short-Term Negotiable Instruments. Net gain on sale of short-term negotiable instruments increased 69.7% to NT$1,002.4 million in 2001 from NT$590.8 million in 2000, primarily due to a substantial increase in income from trading of government bonds.

Provisions for Loan Loss and Other Losses. Provisions for loan loss and other losses increased 345.7% to NT$405.2 million in 2001 from NT$90.9 million in 2000 primarily due to an increase in guarantee fee income and trading gain and an increase in E.Sun Bills Finance reserve coverage ratio on guarantees.

Operating Expense. Operating expense increased 3.3% to NT$153.9 million in 2001 from NT$149.0 million in 2000, primarily due to an increase in business tax expense as a result of the increase in operating revenue in 2001.

Total Operating Income. As a result of the foregoing, total operating income increased 42.7% to NT$723.5 million in 2001 from NT$506.9 million in 2000.

Taxation. Tax expense increased 346.7% to NT$354.7 million in 2001 from NT$79.4 million in 2000, resulting in a higher effective tax rate of 49.0% in 2001 compared to 15.7% in 2000. The increase in tax expense in 2001 was primarily due to a change in tax treatment of interest on government fixed-income treasuries. As a result of the challenge by the ROC tax authorities on whether interest on government fixed-

income treasuries was taxable income, E.Sun Bills Finance recognized a tax expense in the amount of NT$354.7 million in 2001. If, as a result of a clarification issued by the ROC tax authorities, it is not necessary to treat interest on government fixed-income treasuries as taxable income, E.Sun Bills Finance will reverse a portion of the tax expense by recognizing an income in ‘‘other income.’’

Net Income. As a result of the foregoing, net income decreased 13.7% to NT$368.8 million in 2001 from NT$427.5 million in 2000.

Financial Condition

Assets

E.Sun Bills Finance had total assets of NT$10,065.1 million as of December 31, 2002, compared with total assets of NT$9,165.5 million as of December 31, 2001. The increase in total assets was primarily due to the growth in trading securities, particularly treasury bills and government bonds, and partially offset by a decrease in time deposits and pledged time deposits. Such increase in total assets in 2002 reflected a slight increase in current assets, which increased 2.6% to NT$8,319.5 million as of December 31, 2002 from NT$8,110.7 million as of December 31, 2001.

Total assets increased 24.2% to NT$9,165.5 million as of December 31, 2001 from NT$7,376.7 million as of December 31, 2000. The increase in total assets in 2001 was primarily due to a substantial increase in time deposits and an increase in long-term investments in corporate and financial institution bonds, and partially offset by a decrease in deposits at interests with banks. Such increase in total assets in 2001 reflected a moderate increase in current assets which increased 24.5% to NT$8,110.7 million as of December 31, 2001 from NT$6,516.7 million as of December 31, 2000.

Liabilities

E.Sun Bills Finance had total liabilities of NT$4,634.6 million as of December 31, 2002, compared with total liabilities of NT$4,037.6 million as of December 31, 2001. The increase was primarily due to an increase in bank loans, which increased to NT$3,920.0 million as of December 31, 2002 from NT$3,330 million as of December 31, 2001, and an increase in reserve for loss, which increased to NT$592.2 million as of December 31, 2002 from NT$518.0 million as of December 31, 2001.

E.Sun Bills Finance had total liabilities of NT$4,037.6 million as of December 31, 2001, compared with total liabilities of NT$2,484.8 million as of December 31, 2000. The increase was primarily due to an increase in bank loans, which increased to NT$3,330.0 million as of December 31, 2001 from NT$2,100.0 million as of December 31, 2000, and an increase in reserve for loss on guarantees and sale of government bonds, which increased to NT$518.0 million as of December 31, 2001 from NT$315.7 million as of December 31, 2000.

Contingent Liabilities and Commitment

As of March 31, 2003, contingent liabilities and commitments included NT$37.4 billion in commitments to repurchase bonds and securities and NT$18.0 billion in guarantees issued. We anticipate that not all of the above commitments will be utilized before the agreed upon expiration or other termination clauses. The amount of unused commitments therefore does not necessarily represent future funding requirements. As of March 31, 2003, the majority of the credit commitments expired within one year. Further, E.Sun Bills Finance’s guarantee agreements generally have expiration periods of up to one year.

DESCRIPTION OF ASSETS AND LIABILITIES OF E.SUN BANK

Total Credit Exposure

As of March 31, 2003, E.Sun Bank had total loans of NT$182.7 billion. Total consumer loans remained relatively constant at NT$96.1 billion as of March 31, 2003 as compared to NT$87.9 billion as of March 31, 2002. Total consumer loans remained relatively constant during the three year and three month period ended March 31, 2003 primarily due to a decrease in E.Sun Bank’s mortgage portfolio, which was partially offset by a substantial increase in revolving credit card debt. E.Sun Bank’s mortgage portfolio decreased during this period as a result of the stringent credit control policies it adopted for mortgage loans in response to a weak real estate market and its focus on expanding its credit card business. E.Sun Bank intends to increase its mortgage loan portfolio in the future as the real estate market in Taiwan recovers. Total corporate loan exposure remained relatively constant during the three year period ended December 31, 2002. Although the volume of corporate loans did not increase substantially, E.Sun Bank maintained banking relationships with corporate borrowers that were among the top 1,000 largest companies in Taiwan.

In addition to corporate loans, E.Sun Bank also extends credit to its corporate customers through guarantees and acceptances. In accordance with ROC GAAP, guarantees are recorded as off-balance sheet liabilities, while acceptances are recorded as on-balance sheet accounts receivable. Guarantees and acceptances decreased at a compounded annual rate of 8.04% between December 31, 2000 and December 31, 2002 to NT$5.3 billion. Guarantees and acceptances are both included in total credit exposure for MOF reporting purposes. In addition to guarantees, E.Sun Bank has other contingent liabilities that are recorded as off-balance sheet items, including letters of credit, repurchase agreements and bills for collection.

E.Sun Bank extends various forms of credit, including consumer and corporate loans, guarantees and acceptances, which collectively represent each of E.Sun Bank’s total credit exposure as reported to MOF. As of March 31, 2003, E.Sun Bank’s total credit exposure was NT$190.3 billion.

The following table sets forth, as of the dates indicated, certain data on E.Sun Bank’s total credit exposure as reported to MOF, including consumer loans by product, corporate loans, guarantees and acceptances, and the combined information.

	As of December
2000 NT$ 67,824 36.7% 1 — 23,489 12.7 5,049 2.7 96,363 52.1 62,979 34.1 14,280 7.7 77,259 41.8 173,622 93.9 4,477 2.7 178,099 96.6 5,881 3.2 329 0.2 6,210 3.4 NT$184,309 100.0%	2001 (in millions, except percentages) NT$ 64,083 33.0% NT$ 61,020 1 — — 20,664 10.6 19,842 6,929 3.6 12,776 91,677 47.2 93,638 74,630 38.4 65,010 15,826 8.2 23,178 90,456 46.6 88,188 182,133 93.8 181,826 5,058 2.6 2,138 187,191 96.4 183,964 6,503 3.3 4,912 509 0.3 340 7,012 3.6 5,252 NT$194,203 100.0% NT$189,216	2002
NT$ 67,824 1 23,489 5,049 96,363 62,979 14,280 77,259 173,622 4,477 178,099 5,881 329 6,210 NT$184,309		US$1,758.5 — 571.8 368.2 2,698.5 1,873.4 668.0 2,541.4 5,239.9 61.6 5,301.5 141.6 9.8 151.4 US$5,452.9	32.2% — 10.5 6.8
			49.5 34.4 12.2
			46.6
			96.1 1.1
			97.2 2.6 0.2 2.8
			100.0%

(1) Includes cash cards.

(2) Includes revolving credit card receivables, mail loans and other loan products for credit card customers, net of delinquent loans. Revolving credit card debt is accounted for as an accounts receivable on E.Sun Bank’s balance sheet and includes amounts from the current 30-day billing cycle that are not yet accruing interest.
(3) The amount of total loans and related numbers set out for the relevant periods does not correspond with the amount set out in the unconsolidated financial statements of E.Sun Bank as the amount expressed herein exclude the portion of NPLs attributable to credits and include revolving credit card debt.
(4) NALs as classified by E.Sun Bank are loans on which an interest or principal payment is overdue by more than six months.

As of March 31,	As of March 31,
2002 2003 (in millions, except percentages) NT$ 61,592 32.4% NT$ 61,598 US$1,775.1 18,793 9.9 20,357 586.7 7,480 3.9 14,112 406.7 87,865 46.2 96,067 2,768.5 74,046 38.9 62,518 1,801.7 16,110 8.5 24,151 696.0 90,156 47.4 86,669 2,497.7 178,021 93.6 182,736 5,266.2 5,495 2.9 2,232 64.3 183,516 96.5 184,968 5,330.5 6,243 3.3 4,843 139.6 392 0.2 470 13.5 6,635 3.5 5,313 153.1 NT$190,151 100.0% NT$190,281 US$5,483.6	2003
NT$ 61,592 18,793 7,480 87,865 74,046 16,110 90,156 178,021 5,495 183,516 6,243 392 6,635 NT$190,151		32.4% 10.7 7.4
		50.5 32.8 12.7
		45.5
		96.0 1.2
		97.2 2.5 0.3 2.8
		100.0%

(1) Includes cash cards.

(2) Includes revolving credit card receivables, mail loans and other loan products for credit card customers, net of delinquent loans. Revolving credit card debt is accounted for as an accounts receivable on E.Sun Bank’s balance sheet and includes amounts from the current 30-day billing cycle that are not yet accruing interest.

(3) The amount of total loans and related numbers set out for the relevant periods does not correspond with the amount set out in the unconsolidated financial statements of E.Sun Bank as the amount expressed herein exclude the portion of NPLs attributable to credits and include revolving credit card debt.

(4) NALs as classified by E.Sun Bank are loans on which an interest or principal payment is overdue by more than six months.

Interest Rates on Consumer Loans

The following table sets forth, for the periods indicated, the average interest rates charged on E.Sun Bank’s consumer loan portfolio.

Type of Consumer Loans: Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal loans (excluding cash cards) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revolving credit card debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Year Ended December 31, For the Period Ended March 31, 2001 2002 2002 2003 (percent per annum) 6.50% 4.42% 6.14% 3.79% 8.56 7.90 8.50 7.71 18.98 19.71 19.71 19.71 — 18.25 — 18.25	For the Period Ended March 31,	For the Period Ended March 31,
	2001 6.50% 8.56 18.98 —		2003
			3.79% 7.71 19.71 18.25

Customer Concentration

Under MOF’s policies pursuant to the ROC Banking Law, Taiwan banks are restricted from maintaining financial exposure to any single person or related persons in excess of certain prescribed percentages of the bank’s total net worth. The amount of the percentage limitation is based on whether the customer is a state-owned entity, corporate entity or an individual, and whether the loans are secured or unsecured. In addition to MOF’s exposure limits on customers, E.Sun Bank’s credit policies have prescribed limits, which are, in certain cases, stricter than those mandated by the MOF.

As of March 31, 2003, no loan exposure to a single customer exceeded 2.97% of total outstanding loans. In addition, E.Sun Bank’s ten largest loan exposures to a single customer, as of March 31, 2003, did not in the aggregate exceed 9.25% of total outstanding loans. As of March 31, 2003, no loan exposure to a single customer group, which is defined as a customer and all of its related persons, exceeded 2.97% of E.Sun Bank’s total outstanding loans. In addition, E.Sun Bank’s ten largest loan exposures to customer groups, as of March 31, 2003, did not in the aggregate exceed 10.67% of total outstanding loans.

E.Sun Bank extends loans of varying principal amounts. As of March 31, 2003, 40.3% of E.Sun Bank’s total loans comprised loans with principal amounts of less than NT$5.0 million. Loans under NT$5.0 million consist primarily of consumer loans, while loans greater than NT$5.0 million consist primarily of corporate loans.

The following table sets forth, as of the dates indicated, certain data on E.Sun Bank’s total loans (excluding NALs, bills and discounts) by principal amount.

	As of	December 31,	December 31,	December 31,		As of March 31,	As of March 31,
2000	2001	2002			2002		2003
NT$ 10,932 53,837 20,043 32,137 15,652 28,233 7,739	NT$ 12,437 51,038 17,016 30,607 14,617 34,424 15,064					NT$ 17,892 50,107 13,111 23,289 12,084 38,156 13,985	US$ 515.6 1,444.0 377.8 671.2 348.2 1,099.6 403.1	10.6% 29.7 7.8 13.8 7.2 22.6 8.3
NT$168,573	NT$175,203	NT$169,050	US$4,871.7	100.0%	NT$170,541	NT$168,624	US$4,859.5	100.0%

Loans by Maturity

As of March 31, 2003, approximately 35.2% of E.Sun Bank’s total loans had maturities of one year or less. Substantially all of E.Sun Bank’s short-term loans are renewed at maturity, subject to relevant loan review procedures. E.Sun Bank actively manages the maturity profile of its loan portfolio as part of the management of its exposure to changes in market interest rates and its funding and liquidity requirements. Although E.Sun Bank has a significant amount of loans with maturities of more than one year, substantially all of E.Sun Bank’s loans have been either floating rate loans or loans that re-price within a period of less than one year. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — E.Sun Bank.’’

The following table sets forth, as of the dates indicated, certain data on E.Sun Bank’s total loans (excluding NALs, bills and discounts) by maturity.

	As of	December 31,	December 31,	December 31,		As of March 31,	As of March 31,
2000	2001	2002			2002		2003
NT$ 29,609 19,786 16,966 102,212	NT$ 36,515 13,805 16,080 108,803					NT$ 35,605 8,864 14,841 109,314	US$1,026.1 255.4 427.7 3,150.3	21.1% 5.3 8.8 64.8
NT$168,573	NT$175,203	NT$169,050	US$4,871.7	100.0%	NT$170,541	NT$168,624	US$4,859.5	100.0%

Secured Loans by Collateral Type

As of March 31, 2003, the amount of E.Sun Bank’s total loans fully secured by collateral was NT$91.3 billion, or 54.1% of total loans. E.Sun Bank typically obtains a first priority security interest in collateral, although E.Sun Bank may, in limited circumstances, accept a junior ranked security interest. The types of collateral accepted by E.Sun Bank include real estate, marketable securities, deposits and other appraisable items, with real estate constituting the most prevalent type of collateral. Typically, E.Sun Bank uses a qualified in-house appraisal team, which applies various valuation methodologies to appraise collateral. For movable assets, E.Sun Bank may use external appraisers when necessary. In most cases, E.Sun Bank’s appraisal of real estate collateral is recorded at a discount to market, typically between 60% to 80% of market value. Publicly-traded securities used as collateral are usually valued at 60% of the lower of (x) the previous day’s closing price or (y) the average closing price of the last three months. Non-publicly traded securities used as collateral are usually valued no more than 60% of the par value of the securities if (x) the paid-in capital exceeds NT$100 million and the capital profit ratio exceeds 6% or (y) paid-in capital exceeds NT$2 billion.

E.Sun Bank monitors the value of its borrowers’ collateral and performs appraisal valuations to determine the value of such collateral. The frequency of such appraisal valuations depends on the collateral type. For example, listed equity securities are appraised on a daily basis whereas real estate properties are appraised every two years after the appraisal conducted at the time the borrower applies for extension of credit line or repayment schedule or applies for new loans secured by the same real estate properties. At any time when E.Sun Bank believes there has been a significant drop in the value of the collateral, E.Sun Bank will reassess and mark-to-market the value of the collateral. E.Sun Bank typically requires borrowers whose collateral value declines to a certain level to provide E.Sun Bank with additional collateral or to repay a portion or the entire amount of the loan.

The following table sets forth, for the periods indicated, certain data on the amount of E.Sun Bank’s loans secured by each type of collateral and the valuation of such collateral. Loans that are not secured by collateral are classified as unsecured whereas partially secured loans are reflected in the table to the extent of the loan amounts secured by the values of their respective collateral.

For the Year Ended December 31,	For the Year Ended December 31,	For the Year Ended December 31,	For the Period Ended March 31,	For the Period Ended March 31,	For the Period Ended March 31,	For the Period Ended March 31,
2002			2002		2003
Amount		%	Amount	%	Amount		%
NT$ 84,881 636 1,586 5,735	US$2,446.1 18.3 45.7 165.3					US$2,392.2 13.1 39.6 185.3	49.2% 0.3 0.8 3.8
92,838 76,212	2,675.4 2,196.3	54.9 45.1	102,666 67,875	60.2 39.8	91,266 77,358	2,630.2 2,229.3	54.1 45.9
NT$169,050	US$4,871.7	100.0%	NT$170,541	100.0%	NT$168,624	US$4,859.5	100.0%

(1) Includes collateral consisting of guarantees issued by companies and guarantees by the Small and Medium Business Credit Guarantee Fund.

Corporate Loan Exposure

Loans to the financial industry (which includes financial institutions and investment companies), real estate and construction and trading and retail sectors constitute E.Sun Bank’s three largest areas of concentration, representing 22.1%, 11.9% and 11.5%, respectively, of E.Sun Bank’s total corporate loans as of March 31, 2003. Although there are no MOF policies limiting industry concentration, E.Sun Bank has internal policies on maintaining a diversified portfolio. As a part of its diversification and risk management policy, E.Sun Bank has reduced its exposure to the real estate sector from 27.9% of total corporate loans in

2000 to 13.1% in 2002 and further down to 11.9% in the first quarter of 2003. However, due to an increase in credit link loan exposure to foreign banks, E.Sun Bank has steadily increased its exposure to the financial industry from 2000 to the first quarter of 2003. E.Sun Bank reports its industry concentration exposure to the Central Bank of China on a monthly basis. E.Sun Bank sets internal guidelines annually limiting its exposure to certain sectors and monitors such exposure periodically.

The following table sets forth, as of the dates indicated, certain data on each of E.Sun Bank’s total corporate loan exposure, classified in accordance with the Central Bank of China industry classification.

	As of December	31,
2000 Amount % NT$ 4,396 5.7% 20,653 26.7 6,049 7.8 1,213 1.6 3,772 4.9 1,693 2.2 7,926 10.2 41,042 53.1 10,647 13.8 21,548 27.9 617 0.8 8,230 10.6 11,168 14.5 NT$77,259 100.0%	2001 2002 Amount % Amount (in millions, except percentages) NT$13,420 14.8% NT$ 7,240 US$ 208.6 24,055 26.6 23,088 665.4 8,588 9.5 7,952 229.2 1,528 1.7 1,723 49.7 3,615 4.0 3,228 93.0 1,463 1.6 840 24.2 8,861 9.8 9,345 269.3 41,426 45.8 42,516 1,225.3 9,355 10.4 9,159 263.9 19,735 21.8 11,602 334.4 301 0.3 1,300 37.5 12,035 13.3 20,455 589.5 11,555 12.8 15,344 442.2 NT$90,456 100.0% NT$88,188 US$2,541.5	2002
Amount NT$ 4,396 20,653 6,049 1,213 3,772 1,693 7,926 41,042 10,647 21,548 617 8,230 11,168 NT$77,259			%
			8.2% 26.2 9.0 1.9 3.7 1.0 10.6 48.2 10.4 13.1 1.5 23.2 17.4
			100.0%

As of March 31,	As of March 31,
2002 2003 Amount % Amount (in millions, except percentages) NT$11,431 12.7% NT$ 6,178 US$ 178.0 23,187 25.7 25,621 738.4 7,980 8.8 8,466 244.0 1,515 1.7 2,049 59.0 3,392 3.8 3,562 102.7 1,466 1.6 783 22.6 8,834 9.8 10,761 310.1 41,486 46.0 40,241 1,159.7 9,094 10.1 9,981 287.6 17,731 19.7 10,325 297.6 1,000 1.1 798 23.0 13,661 15.1 19,137 551.5 14,052 15.6 14,629 421.6 NT$90,156 100.0% NT$86,669 US$2,497.7	2003
Amount NT$11,431 23,187 7,980 1,515 3,392 1,466 8,834 41,486 9,094 17,731 1,000 13,661 14,052 NT$90,156		%
		7.1% 29.6 9.8 2.4 4.1 0.9 12.4 46.4 11.5 11.9 0.9 22.1 16.9
		100.0%

Asset Quality

Loan Classification

Under MOF guidelines, the asset quality of the outstanding loans extended by banks is classified into four categories. These classifications are used for reporting purposes and to calculate the minimum amount for loan loss provisions. The four categories of loans and the criteria for each category are as follows:

Class	I	(Normal)	Normal loans with no payment difficulties.
Class	II	(Substandard)	Loans experiencing payment difficulties but can be recovered in
			full.
Class	III	(Doubtful)	Loans experiencing payment difficulties and the recovery of the
			total amount due is doubtful.
Class	IV	(Unrecoverable)	Loans experiencing payment difficulties and the recovery of the
			total amount due is extremely unlikely.

In classifying its loans, E.Sun Bank considers relevant quantitative and qualitative factors, including the borrower’s financial condition and earnings capabilities, the borrower’s management and operation of business, the payment history of the loan, the status of any collateral or guarantees and the market conditions affecting the borrower.

Under MOF guidelines, E.Sun Bank must set aside a minimum specific allowance of 50.0% against loans of Class III and 100.0% against loans of Class IV. No specific allowance is required for loans of Class II.

The following table sets forth, as of the dates indicated, the NT dollar amount of outstanding loans in each of the above Classes I, II, III and IV in E.Sun Bank.

	As of December	31,
2000 Amount % NT$165,330 95.2% 7,170 4.1 1,026 0.6 201 0.1 NT$173,727 100.0%	2001 2002 Amount % Amount (in millions, except percentages) NT$168,923 93.4% NT$168,138 US$4,845.5 10,052 5.6 4,006 115.4 1,616 0.9 135 3.9 268 0.1 37 1.1 NT$180,859 100.0% NT$172,316 US$4,965.9	2002
Amount NT$165,330 7,170 1,026 201 NT$173,727			%
			97.6% 2.3 0.1 —
			100.0%

(1) Includes loans, import and export negotiations and NPLs before the deductions of allowance for possible losses, and excludes revolving credit card debt.

The following table sets forth, as of the dates indicated, the NT dollar amount of outstanding loans in each of the above Classes I, II, III and IV in E.Sun Bank.

As of March 31,	As of March 31,
2002 2003 Amount % Amount (in millions, except percentages) NT$165,001 93.4% NT$167,617 US$4,830.5 9,544 5.4 3,872 111.6 1,768 1.0 206 5.9 328 0.2 29 0.8 NT$176,641 100.0% NT$171,724 US$4,948.8	2003
Amount NT$165,001 9,544 1,768 328 NT$176,641		%
		97.6% 2.3 0.1 —
		100.0%

(1) Includes loans, import and export negotiations and NPLs before the deductions of allowance for possible losses, and excludes revolving credit card debt.

As of March 31, 2003, 0.12% and 0.02% of E.Sun Bank’s total loans were classified in the Class III and Class IV loan categories, respectively. Specific allowance against Class III and Class IV loans decreased to NT$132 million as of March 31, 2003 from NT$1,212 million as of March 31, 2002.

Non-Performing Loans

E.Sun Bank defines NPLs as overdue loans required to be reported to MOF in accordance with MOF guidelines, which include:

. in the case of short-term loans with bullet payments, loans with respect to which principal is three months or more overdue or interest is six months or more overdue;
. in the case of mid- and long-term installment loans, loans with respect to which interim payments of principal or interest are six months or more overdue or the final payment is three months or more overdue; or
. loans with respect to which E.Sun Bank has taken legal action for repayment or liquidation of collateral prior to the maturity of such loans.

As of March 31, 2003, E.Sun Bank’s NPLs totaled NT$2.3 billion, or 1.36% of gross loans.

In 2002, in an attempt to further strengthen its assets quality and to reduce its NPL ratio, E.Sun Bank wrote off NT$8,949.3 million in loans.

In addition, MOF recently required banks in Taiwan to report the loans under surveillance, which include:

. in the case of mid- and long-term installment loans, loans with respect to which interim payments of principal or interest are more than three months (inclusive) but less than six months overdue;
. in the case of loans other than mid- and long-term installment loans, loans with respect to which payments of principal are three months or less overdue but the payments of interest are more than three months (inclusive) but less than six months overdue; or

. loans which meet the above criteria of NPLs to be reported to MOF but are exempt from such reporting requirement pursuant to MOF rules (which include, among others, restructured loans meeting the criteria set forth by MOF).

NALs are loans on which E.Sun Bank has stopped accruing interest. E.Sun Bank classifies its overdue loans as NALs if they are loans for which the most recent payment is overdue by more than six months. As of March 31, 2003, E.Sun Bank’s NALs totaled NT$2.2 billion, or 1.30% of gross loans.

E.Sun Bank’s write-off policies for certain consumer products are as follows: (1) personal unsecured loans and second mortgage loans are written off after such loans remain overdue for 180 days; (2) credit card receivables are written off after such loans remain overdue for 180 days; and (3) cash card receivables are written off after such loans remain overdue for 180 days. Corporate loans are generally written off within two years after principal and interest payments are overdue if such loans are considered uncollectible.

NPLs or NALs meeting the following criteria will, after deducting the recoverable portions, be written

off:

. the loans cannot be fully recovered by the reason of disappearance, dissolution, composition, declaration of bankruptcy, or other reason of the borrowers;
. the appraised value of the collateral of the loans or the properties of the borrowers or guarantors is too low, and E.Sun Bank may not have actual benefit from foreclosure or compulsory execution of the collateral or the properties;
. the collateral of the loans or the properties of the borrowers or guarantors have been auctioned several times without success and E.Sun Bank has no actual benefit from assuming the auctioned collateral and properties;
. such NPLs or NALs are two years overdue and are not recovered after enforcement; or
. the NPLs or NALs are overdue for a period over six months but less than two years and are not recovered after enforcement.

E.Sun Bank continually evaluates the asset quality of its loan portfolio and periodically provides allowance for potential loan loss. The following table sets forth, for the periods indicated, changes in E.Sun Bank’s allowance for loan and other losses and certain credit quality ratios for the periods indicated.

Asset Quality Data: Allowance for loan loss — beginning balance . . . . . . . . . Plus (less): (Reversal of provisions) Provisions for loan loss . . . . . . . . . . . . . Less: Gross write-offs . . . . . Plus: Recoveries . . . . . . . . . Allowance for loan loss — ending balance . . . . . . . . . . . . . . . . Allowance for receivables and reserve for guarantees(1) . . . . . Allowance for loan and other losses . . . . . . . . . . . . . . . Gross loans(2) . . . . . . . . . . . . . . Total credit exposure . . . . . . . . . NALs . . . . . . . . . . . . . . . . . . . NPLs. . . . . . . . . . . . . . . . . . . . Surveillance loans . . . . . . . . . . . Net write-offs(3) . . . . . . . . . . . . Asset Quality Ratios: NAL ratio(4) . . . . . . . . . . . . . . . NPL ratio(5) . . . . . . . . . . . . . . . Broad-based NPLs(6) . . . . . . . . . Surveillance loans ratio(7). . . . . . Provisions for loan loss to gross loans . . . . . . . . . . . . . . . . . . Gross write-offs to gross loans(8). Gross write-offs to NPLs(9). . . . . Allowance for loan loss to gross loans . . . . . . . . . . . . . . . . . . Allowance for loan and other losses to total credit exposure . Allowance for loan loss to NPLs .	As of and for the Year Ended December 31, As of and for the Period Ended March 31, 2000 2001 2002 2002 2003 (in millions, except percentages) NT$ 1,409 NT$ 1,610 NT$ 1,514 US$ 43.6 NT$ 1,514 NT$ 1,541 US$ 44.4 1,599 1,945 8,818 254.1 277 (294) (8.5) 1,428 2,082 8,949 257.9 408 253 7.3 30 41 158 4.6 16 637 18.4 1,610 1,514 1,541 44.4 1,399 1,631 47.0 230 277 398 11.5 439 370 10.7 NT$ 1,840 NT$ 1,791 NT$ 1,939 US$ 55.9 NT$ 1,838 NT$ 2,001 US$ 57.7 NT$173,727 NT$180,859 NT$172,316 US$4,965.9 NT$176,641 NT$171,724 US$4,948.8 184,309 194,203 189,216 5,452.9 190,151 190,281 5,483.6 4,477 5,058 2,138 61.6 5,495 2,232 64.3 4,263 5,123 2,383 68.7 5,075 2,344 67.5 NA NA 1,801 51.9 NA 1,763 50.8 1,398 2,041 8,791 253.3 392 (384) (11.1) 2.58% 2.80% 1.24% 3.11% 1.30% 2.46% 2.83% 1.38% 2.87% 1.36% NA NA 4,184 NA 4,107 NA NA 1.05% NA 1.03% 0.92% 1.08% 5.12% 0.16% -0.17% 0.89% 1.20% 4.95% 0.23% 0.15% 34.91% 48.84% 174.68% 7.96% 10.62% 0.93% 0.84% 0.89% 0.79% 0.95% 1.00% 0.92% 1.02% 0.97% 1.05% 37.77% 29.55% 64.66% 27.57% 69.61%	As of and for the Year Ended December 31, As of and for the Period Ended March 31, 2000 2001 2002 2002 2003 (in millions, except percentages) NT$ 1,409 NT$ 1,610 NT$ 1,514 US$ 43.6 NT$ 1,514 NT$ 1,541 US$ 44.4 1,599 1,945 8,818 254.1 277 (294) (8.5) 1,428 2,082 8,949 257.9 408 253 7.3 30 41 158 4.6 16 637 18.4 1,610 1,514 1,541 44.4 1,399 1,631 47.0 230 277 398 11.5 439 370 10.7 NT$ 1,840 NT$ 1,791 NT$ 1,939 US$ 55.9 NT$ 1,838 NT$ 2,001 US$ 57.7 NT$173,727 NT$180,859 NT$172,316 US$4,965.9 NT$176,641 NT$171,724 US$4,948.8 184,309 194,203 189,216 5,452.9 190,151 190,281 5,483.6 4,477 5,058 2,138 61.6 5,495 2,232 64.3 4,263 5,123 2,383 68.7 5,075 2,344 67.5 NA NA 1,801 51.9 NA 1,763 50.8 1,398 2,041 8,791 253.3 392 (384) (11.1) 2.58% 2.80% 1.24% 3.11% 1.30% 2.46% 2.83% 1.38% 2.87% 1.36% NA NA 4,184 NA 4,107 NA NA 1.05% NA 1.03% 0.92% 1.08% 5.12% 0.16% -0.17% 0.89% 1.20% 4.95% 0.23% 0.15% 34.91% 48.84% 174.68% 7.96% 10.62% 0.93% 0.84% 0.89% 0.79% 0.95% 1.00% 0.92% 1.02% 0.97% 1.05% 37.77% 29.55% 64.66% 27.57% 69.61%
	2000 NT$ 1,409 1,599 1,428 30 1,610 230 NT$ 1,840 NT$173,727 184,309 4,477 4,263 NA 1,398 2.58% 2.46% NA NA 0.92% 0.89% 34.91% 0.93% 1.00% 37.77%	2001 NT$ 1,610 1,945 2,082 41 1,514 277 NT$ 1,791 NT$180,859 194,203 5,058 5,123 NA 2,041 2.80% 2.83% NA NA 1.08% 1.20% 48.84% 0.84% 0.92% 29.55%

(1) Consists of allowance for accounts receivable and interest receivable and reserve for guarantees.

(2) Includes loans, discounts, bills purchased and overdue loans after the deduction of allowance for possible losses. (3) Represents gross write-offs, net of recoveries.

(4) Defined as NALs divided by gross loans.

(5) Defined as NPLs divided by gross loans.

(6) Defined as NPLs plus surveillance loans.

(7) Defined as surveillance loans divided by gross loans.

(8) Defined as gross write-offs for the period divided by the beginning balance of gross loans for the period.

(9) Defined as gross write-offs for the period divided by the beginning balance of NPLs for the period.

E.Sun Bank’s total NPLs decreased substantially to NT$2,383 million in 2002 from NT$5,123 million in 2001 primarily due to an one-time write-off of NT$8,949.3 million in loans in 2002. Consumer NPLs as a percentage of total NPLs has increased to 73.38% for the first quarter of 2003 from 70.38% for the first quarter in 2002, primarily due to E.Sun Bank’s decision to write off more of its corporate NPLs relative to consumer NPLs. The following table sets forth, for the periods indicated, certain data on E.Sun Bank’s NPLs by customer as categorized by corporate and consumer NPLs.

	As of December 31,	As of December 31,	As of December 31,
2000 Amount % NT$1,512 35.47% 2,751 64.53 NT$4,263 100.00%	2001		2002
Amount NT$1,512 2,751 NT$4,263		%		%
				31.72% 68.28
				100.00%

The following table sets forth, for the periods indicated, certain data on E.Sun Bank’s NPLs by customer as categorized by corporate and consumer NPLs.

As of March 31,	As of March 31,	As of March 31,
2002		2003
Amount NT$1,503 3,572 NT$5,075	%		%
			26.62% 73.38
	100.00%		100.00%

The following table sets forth, for the dates indicated, information on E.Sun Bank’s ten largest NPLs.

As of December 31, 2002	As of December 31, 2002	As of December 31, 2002	As of March 31, 2002	As of March 31, 2002	As of March 31, 2003	As of March 31, 2003	As of March 31, 2003
NPLs Outstanding		% of NPLs Outstanding	NPLs Outstanding	% of NPLs Outstanding	NPLs Outstanding		% of NPLs Outstanding
NT$196 120 118 82 56 50 45 44 35 31	US$ 5.6 3.5 3.4 2.4 1.6 1.4 1.3 1.3 1.0 0.9					US$ 3.4 3.4 2.4 2.3 1.7 1.5 1.5 1.3 0.9 0.9	5.12% 5.03 3.50 3.45 2.52 2.26 2.18 1.88 1.32 1.28
NT$777	US$22.4	32.61%	NT$718	14.15%	NT$669	US$19.3	28.54%

The following table sets forth, for the dates indicated, the types of property, if any, by which E.Sun Bank’s NPLs are collateralized. As of March 31, 2003, the value of the collaterals pledged in respect of the NPLs was equal to NT$1,907.0 million, or 81.36% of the NPL loan amount.

Breakdown of NPLs Based on Collateral: Real estate . . . . . . . . . . . Machinery . . . . . . . . . . . Securities . . . . . . . . . . . . Others . . . . . . . . . . . . . . Unsecured . . . . . . . . . . . Total NPLs . . . . . . . .	As of December 31, 2002 (in NT$1,866 US$53.8 78.30% — — — — — — 31 0.9 1.30 486 14.0 20.40 NT$2,383 US$68.7 100.00%	As of December 31, 2002 (in NT$1,866 US$53.8 78.30% — — — — — — 31 0.9 1.30 486 14.0 20.40 NT$2,383 US$68.7 100.00%	As of March 31, 2002 As of millions, except percentages) NT$3,800 74.88% NT$1,871 2 0.04 — 22 0.43 — 92 1.81 36 1,159 22.84 437 NT$5,075 100.00% NT$2,344	As of	March 31, 2003	March 31, 2003
	NT$1,866 — — 31 486 NT$2,383	US$53.8 — — 0.9 14.0 US$68.7			US$53.9 — — 1.1 12.6 US$67.6	79.82% — — 1.54 18.64
						100.00%

Aging Analysis of Loans

The following table sets forth, for the periods indicated, an aging schedule of E.Sun Bank’s loan portfolio indicating the number of days that either an interest or principal payment is overdue.

	As of December 31,	As of December 31,
2000 Amount % NT$166,948 96.10% 1,559 0.90 5,220 3.00 NT$173,727 100.00%	2001 2002 Amount % Amount (in millions, except percentages) NT$170,814 94.45% NT$169,107 US$4,873.4 2,175 1.20 1,046 30.2 7,870 4.35 2,163 62.3 NT$180,859 100.00% NT$172,316 US$4,965.9	2002
Amount NT$166,948 1,559 5,220 NT$173,727			%
			98.14% 0.61 1.25
			100.00%

The following table sets forth, for the periods indicated, an aging schedule of E.Sun Bank’s loan portfolio indicating the number of days that either an interest or principal payment is overdue.

As of March 31,	As of March 31,
2002 2003 Amount % Amount (in millions, except percentages) NT$166,833 94.45% NT$168,719 US$4,862.2 1,234 0.70 778 22.4 8,574 4.85 2,227 64.2 NT$176,641 100.00% NT$171,724 US$4,948.8	2003
Amount NT$166,833 1,234 8,574 NT$176,641		%
		98.25% 0.45 1.30
		100.00%

Restructured Loans

As of March 31, 2003, E.Sun Bank had NT$417.0 million of restructured loans which are currently not classified as NPLs.

The following table sets forth, as of the dates indicated, data on E.Sun Bank’s restructured and rescheduled loans.

As of December 31,	As of March 31, 2002 Amount Number of Accounts (in millions) NT$737 15 189 46 NT$926 61	As of March 31, 2003	As of March 31, 2003
Amount (in millions) NT$384 US$11.1 60 1.7 NT$444 US$12.8	Amount (in millions) NT$737 189 NT$926	Amount (in millions) NT$374 US$10.8 43 1.2 NT$417 US$12.0	Number of Accounts
(in millions) NT$384 60 NT$444			4 10
			14

Sale of Certain Loans

To further improve the asset quality of its loan portfolio and to better manage its NPLs, E.Sun Bank sold to Taiwan Asset Management Co. NPLs with an original face value of NT$1.4 billion. There can be no assurance that any of E.Sun Bank’s loans will be sold to in the future and, if NPLs are sold, there can be no assurance that the price received will not result in additional losses.

Short-term Investments

E.Sun Bank’s short-term investments increased 21.4% to NT$46.6 billion as of March 31, 2003 from NT$38.4 billion as of March 31, 2002. The increase in short-term investments was primarily due to increased investments in overseas securities and commercial paper to NT$16.2 billion and NT$10.8 billion, respectively, as of March 31, 2002 from NT$10.0 billion and NT$11.5 billion, respectively, as of March 31, 2002.

According to ROC GAAP, short-term investments are carried at the lower of amortized cost or market value. The following table sets forth, as of the dates indicated, certain data on E.Sun Bank’s short-term investment portfolio.

	As of December	31,
2000 Amount % NT$ 4,053 17.4% 6,131 26.3 4,690 20.1 2,716 11.6 6,168 26.4 — — 23,758 101.8 (412) (1.8) NT$23,346 100.0%	2001 2002 Amount % Amount (in millions, except percentages) NT$12,894 35.1% NT$ 6,526 US$ 188.1 9,300 25.3 12,000 345.8 3,799 10.3 1,426 41.1 3,460 9.4 3,715 107.0 7,420 20.2 15,305 441.1 — — — — 36,873 100.3 38,972 1,123.1 (122) (0.3) (86) (2.5) NT$36,751 100.0% NT$38,886 US$1,120.6	2002
Amount NT$ 4,053 6,131 4,690 2,716 6,168 — 23,758 (412) NT$23,346			%
			16.8% 30.9 3.7 9.5 39.3 — 100.2 (0.2)
			100.0%

(1) Includes common stock and mutual funds. (2) Includes bank acceptances and commercial paper.

The following table sets forth, as of the dates indicated, certain data on E.Sun Bank’s short-term investment portfolio.

As of March 31,	As of March 31,
2002 2003 Amount % Amount (in millions, except percentages) NT$ 9,840 25.7% NT$ 9,116 US$ 262.7 9,976 26.0 16,209 467.1 3,671 9.6 1,224 35.3 3,739 9.7 3,981 114.7 11,507 30.0 10,776 310.5 — — 5,300 152.8 38,733 101.0 46,606 1,343.1 (377) (1.0) (19) (0.5) NT$38,356 100.0% NT$46,587 US$1,342.6	2003
Amount NT$ 9,840 9,976 3,671 3,739 11,507 — 38,733 (377) NT$38,356		%
		19.6% 34.8 2.6 8.5 23.1 11.4 100.0 —
		100.0%

(1) Includes common stock and mutual funds.

(2) Includes bank acceptances and commercial paper.

Long-term Investments

In addition to trading securities portfolio, E.Sun Bank holds other securities for long-term investment. E.Sun Bank has acquired directly and indirectly significant and, in some instances, controlling interests in other companies. Long-term investment decisions are made by E.Sun Bank based on business factors as well as the prospects of the companies involved. Long-term investment decisions require the approval of the board of directors of E.Sun Bank.

As of March 31, 2003, E.Sun Bank’s long-term investments in stocks were NT$4,780.0 million.

Funding

As commercial banks were prohibited from issuing corporate bonds prior to the 2000 amendments to the ROC Banking Law, deposits have traditionally been the principal source of E.Sun Bank’s funding for use in lending and other general business purposes. E.Sun Bank’s other sources of funding include interbank placements (borrowings) from the interbank markets.

The following table sets forth, as of the dates indicated, certain data on the outstanding balances of E.Sun Bank’s deposits by type.

		As of December 31,	As of December 31,
2000	% 1.3% 7.6 3.7 15.2 35.8 36.4 — 100.0%	2001	2002
Amount NT$ 2,601 15,523 7,581 30,888 72,682 74,027 32 NT$203,334				%
				1.2% 10.6 0.6 20.9 32.6 34.1 —
				100.0%

The following table set forth, as of the dates indicated, certain data on the outstanding balances of E.Sun Bank’s deposits by type.

	As of March 31,	As of March 31,
2002	2003 % Amount (in millions, except percentages) 1.0% NT$ 2,260 US$ 65.1 7.7 21,587 622.1 1.1 1,056 30.4 20.4 49,420 1,424.2 35.1 70,139 2,021.3 34.7 78,385 2,258.9 — 36 1.1 100.0% NT$222,883 US$6,423.1	2003
Amount NT$ 2,089 17,083 2,369 44,901 77,466 76,563 82 NT$220,553			%
			1.0% 9.7 0.5 22.2 31.5 35.1 —
			100.0%

As of March 31, 2003, substantially all of E.Sun Bank’s deposits had current maturities of one year or less or were payable on demand. However, a substantial portion of such deposits has been rolled over upon maturity or has been maintained by E.Sun Bank. Deposits have been a stable source of funding for E.Sun Bank. There can be no assurance, however, that deposits will continue to be rolled over in the future, and, to the extent that such deposits are not rolled over, E.Sun Bank will be required to obtain other sources of funding. See ‘‘Risk Factors — Risks Relating to E.Sun Bank — E.Sun Bank’s financial condition may be adversely affected if it is unable to attract sufficient deposits to fund its anticipated loan growth and to grow its business.’’

The following table sets forth, as of the dates indicated, certain data on the respective amount of deposits of E.Sun Bank by maturity.

		As of December 31,	As of December 31,
2000	% 7.2% 59.1 29.1 4.6 100.0%	2001	2002
Amount NT$ 14,549 120,262 59,117 9,406 NT$203,334				%
				6.6% 61.0 28.0 4.4
				100.0%

The following table set forth, as of the dates indicated, certain data on the respective amount of deposits of E.Sun Bank’s by maturity.

	As of March 31,
2002 Amount NT$ 16,218 141,085 55,114 8,136 NT$220,553	2003 % Amount (in millions, except percentages) 7.3% NT$ 13,213 US$380.7 64.0 139,094 4,008.5 25.0 59,172 1,705.3 3.7 11,404 328.6 100.0% NT$222,883 US$6,423.1	%
		5.9% 62.4 26.6 5.1
		100.0%

Following the lifting of regulatory restrictions on the issuance of bonds by banking institutions, E.Sun Bank issued subordinated debt of NT$2 billion and senior debt of NT$3 billion in August 2001 and subordinated debts of NT$1.7 billion in June 2002, and subordinated debt of NT$1.3 billion and senior debt of NT$2 billion in August 2002 with maturity ranging between 5 and 7 years. As of December 31, 2002, NT$5 billion of subordinated debt remained outstanding.

E.Sun Bank’s board of directors has resolved in a meeting held on May 15, 2003 to, at its sole discretion, issue financial debentures in an amount up to NT$10 billion. The issuance of financial debentures is subject to MOF’s approval and E.Sun Bank may or may not issue the financial debentures even upon its receipt of MOF’s approval.

Capital Adequacy

Under MOF’s current regulations, effective January 1, 2002, capital adequacy is measured by riskweighted capital ratios. Risk-weighted capital ratios are calculated as the percentage of the amount of Tier I and qualified Tier II and qualified and used Tier III capital less the sum of the book value of: (1) the investment in other banks qualified as Tier I capital and qualified Tier II and qualified and used Tier III capital held by E.Sun Bank for more than one year and (2) long-term investments in other enterprises, divided by risk-weighted assets.

Tier I capital is the core capital, which is the sum of common shares, non-cumulative perpetual preferred shares, advanced capital surplus (excluding reserve for fixed asset revaluations), legal and special reserves, retained earnings and losses less operating revenue and insufficient provisions for NPLs, the sum of minority interests and adjusted equity minus goodwill and treasury stock.

Tier II capital is the sum of cumulative perpetual preferred shares, reserve on fixed assets revaluations, 45% of unrealized long-term equity investment gain, operating reserve and allowance for loan loss (excluding those for specific losses), certain long-term subordinated debt and non-perpetual preferred shares with a maturity of at least five years and convertible bonds.

Tier III capital comprises certain short-term subordinated debt and non-perpetual preferred shares with a maturity of at least two years.

Under the previous MOF regulations, E.Sun Bank was not required to deduct operating reserve and insufficient allowance for loss from its retained earnings as Tier I capital nor treasury stock from its sum of minority interest and adjusted equity as Tier I capital. In addition, under the previous MOF regulations, unrealized gain on investment of securities were classified as Tier III capital.

Under the ROC Banking Law and the Regulations Governing the Management of a Bank’s Capital Adequacy, all banks in the ROC are required to maintain a total capital adequacy ratio of at least 8.0%. When a bank’s capital adequacy ratio is above 6.0% but below 8.0%, distributions of dividends may not exceed 20% of net income after covering losses of prior years. When a bank’s capital adequacy ratio is under 6.0%, a bank’s distributions of dividends are prohibited. A fine of between NT$2 million and NT$10 million will be levied on banks with a capital adequacy ratio of below 8.0%. When a bank fails to correct its violations within the period specified by MOF, MOF may impose additional fines on a daily basis, remove the responsible person of the bank, or revoke its banking license, depending on the seriousness of the violation. As of December 31, 2002, E.Sun Bank’s capital adequacy ratio was 10.38%.

Under MOF guidelines, the risk-weighted capital adequacy ratio is the ratio of net qualified capital to risk-weighted assets. The total amount of the risk-weighted assets is the sum of (1) credit risk-weighted assets and (2) market risk capital assets, multiplied by 12.5. See ‘‘Regulation of the Taiwan Financial Services Industry’’ for a more detailed discussion of the regulations affecting E.Sun Bank.

The following table sets forth, as of the dates indicated, a summary of E.Sun Bank’s capital base and its capital adequacy ratios.

Tier I Capital: Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sum of minority interest and adjustment on equity . . . . . . . . . . . . . . . . Less: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tier I capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45% of unrealized gain in long-term investment securities . . . . . . . . . . . Allowance for loan loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred shares and subordinated debt. . . . . . . . . . . . . . . . . . . . . . . . . Tier II capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tier III capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Tier I, II, III capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Long-term investments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total qualified capital(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total risk-weighted assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital adequacy ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		As of December 31, 2001(1) 2002(2) millions, except percentages) NT$ 18,175 NT$ 18,175 US$ 523.8 326 326 9.4 2,535 3,113 89.7 109 31 0.9 2,189 (3,237) (93.3) (529) (495) (14.3) 0 0 0 22,805 17,913 516.2 0 0 0 555 1,694 48.8 2,000 5,000 144.1 2,555 6,694 192.9 0 0 0 25,360 24,607 709.1 4,665 4,755 137.0 20,695 19,852 572.1 20,695 19,852 572.1 NT$187,965 NT$191,279 US$5,512.4 11.01% 10.38%
	2000(1) (in NT$ 16,933 645 2,109 1 1,724 (392) 0 21,020 0 973 0 973 0 21,993 4,248 17,745 17,745 NT$168,040 10.56%

(1) Includes the data of E.Sun Bank and E.Sun Bank’s material long-term investments in the financial sector as permitted under MOF guidelines.

(2) Based on new capital adequacy guidelines effective on January 1, 2002.

(3) Represents the sum of the book value of: (1) the investment in other financial institutions qualified as Tier I capital and qualified Tier II and qualified and used Tier III capital held by E.Sun Bank for more than one year and (2) long-term investments in other enterprises.
(4) Excludes amounts of Tier II capital that are not qualified and Tier III capital that are not qualified and used.

Risk Management

The primary objective of E.Sun Bank’s risk management policies and practices is to maximize earnings and return on capital with acceptable and controllable levels of credit risk, liquidity risk, market risk, operational risk and legal risk. Risk management at E.Sun Bank is integrated with the management of risk in E.Sun Financial as a whole. The board of directors of E.Sun Bank places a high priority on risk management and risk control and seeks to maintain the highest quality of risk management and control and to apply to the most up-to-date and reliable methods available in order to protect itself and the interests of its clients and shareholders. We believe that the risk control system in use should allow management to effectively measure, monitor and report risks adequately and effectively. The principal risks relevant for E.Sun Bank that are discussed in the following are liquidity risk, credit risk, market risk, operational risk and legal risk.

Asset and Liability Management Committee

Currently, E.Sun Bank’s risk management process is overseen by E.Sun Bank’s Asset and Liability Management Committee. The functions of the Asset and Liability Management Committee include:

. evaluating domestic and overseas economic and financial markets and establishing corresponding strategies;
. reviewing and establishing the asset-liability structure and overall risk profile;
. reviewing and monitoring the asset and liability management and due performance; and
. reviewing other relevant major asset and liability management issues.

The chairman of the Asset and Liability Management Committee is served by E.Sun Bank’s President who is also responsible for selecting the other members of the committee. E.Sun Bank’s Asset and Liability Management Committee consists of one executive secretary, who is concurrently our executive Deputy President, and an executive group. The Asset and Liability Management Committee is empowered to establish various working groups as necessary, with the approval by the President of E.Sun Bank.

Liquidity Risk

The purpose of liquidity risk management is to provide E.Sun Bank with available funds to meet its present and future financial obligations and to take advantage of appropriate market opportunities as they arise. Liquidity obligations arise from withdrawals of deposits, repayments of borrowings at maturity, extensions of credit and working capital needs.

E.Sun Bank seeks to manage its liquidity risk across all classes of assets and liabilities with the goal that even under adverse conditions, it has access to necessary funds on a timely basis and at reasonable cost. Liquidity is maintained by holding sufficient quantities of liquid assets to meet actual or potential demands for funds from depositors and borrowers. Liquidity is also managed by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of the funds E.Sun Bank can confidently generate within that period. As part of its liquidity risk management, E.Sun Bank focuses on a number of components, including tapping available sources of liquidity, preserving necessary funds at reasonable cost and continuous contingency planning.

The liquidity policy of E.Sun Bank focuses on cash flow management, interbank funding capacity and the maintenance of sufficient liquid assets. The primary tool for monitoring liquidity is the maturity mismatch analysis. This analysis includes behavioral assumptions concerning, among other things, customer loans and advances, customer deposits and reserve assets.

In addition, E.Sun Bank seeks to maintain an adequate level of liquid assets it can use in the event of a liquidity crisis. Banks in Taiwan are required to maintain a cash reserve fund based on the amount of deposits received from customers. This reserve fund is placed on deposit with the Central Bank of China at a nominal interest rate. Borrowings from commercial banks and other financial institutions are made primarily at call rates in the interbank market for liquidity purposes. E.Sun Bank also borrows for this purpose from other financial institutions, whose lending rates are usually higher than those available in the interbank market. Liquid assets for this purpose include marketable securities, commercial paper and bank acceptances, treasury bills, government bonds and net short-term interbank loans.

E.Sun Bank has access to diverse funding sources, including customer deposits, borrowings in the domestic and foreign interbank markets and borrowings through the swap and repurchase markets. Additional foreign currency liquidity is available through foreign currency deposits from the offshore banking unit.

E.Sun Bank uses economic profit rather than accounting profit as the benchmark by which to price products, including loans, and to evaluate the performance of products, portfolios and business units. E.Sun Bank allocates revenue to products through funds transfer pricing that measures the cost of funds. It also allocates expense to products through an activity-based cost framework. E.Sun Bank is developing new models to allocate capital in line with risks in order to further strengthen its ability for risk-based pricing and risk-adjusted performance measurement.

Credit Risk

Credit risk represents the loss that E.Sun Bank would incur if a counterparty fails to perform its contractual obligations. The objectives of E.Sun Bank’s credit risk management are to improve its asset quality and generate stable profits while reducing risk through a diversified and balanced loan portfolio. The Chief Risk Officer of E.Sun Financial is also responsible for the counterparty credit limits for E.Sun Bank. E.Sun Bank has credit management systems to monitor current and potential credit exposure to individual counterparties and on an aggregate basis to counterparties and their affiliates. For more information on E.Sun Bank’s credit administration and policy, see ‘‘Business — E.Sun Bank — Credit Administration and Policy.’’

Market Risk

Market risk is the risk of loss due to adverse changes in the level of volatility or prices in financial markets. These risks are inherent to positions in foreign exchange, equity and interest rate markets. These risks can be a result of positions in the trading as well as the banking books of E.Sun Bank.

Interest Rate Risk. Exposure to interest rate movements arises where there is a mismatch among rate sensitive assets, liabilities and off-balance sheet items. The resultant gap may cause net interest income to be affected by changes in the prevailing level of interest rates. The primary sources of structural interest rate risk for E.Sun Bank are yield curve risks, which can be squared with third parties.

The risk management unit of the Treasury Division of E.Sun Bank is responsible for measuring and managing the interest rate exposure of the treasury portfolio. For structural interest rate risk, the primary focus is to achieve a desired overall interest rate profile, which may change over time based on management’s long-term view of interest rates and economic conditions. The risk manager reviews the composition of assets and liabilities, including interest rate mismatch positions (e.g., posted rate loans versus posted rate deposits, fixed-rate applications versus fixed-rate sources, and long-term applications

versus long-term sources), and uses simulations to project net interest income in a range of interest rate scenarios. From these scenarios, senior management can develop appropriate strategies to shape E.Sun Bank’s risk-return profile.

E.Sun Bank’s primary means of measuring its exposure to fluctuations in interest rates is gap and interest rate sensitivity analysis, which provides a static view of the re-pricing characteristics of balance sheet positions. An asset or liability is considered to be interest rate sensitive if re-pricing is required within a specified period of time. The interest rate gap is prepared by scheduling all assets and liabilities according to anticipated re-pricing. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities for that re-pricing period. A gap is considered negative where interest rate sensitive liabilities for a particular period exceed interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income; the opposite would be true during a period of falling interest rates.

Although gap analysis is useful in identifying possible interest rate exposure, it is a static measurement as of a particular date which does not precisely quantify the potential impact of interest rate changes on E.Sun Bank’s future earnings or cash flows. Moreover, gap analysis does not take into consideration (1) pre-payment tendencies of interest rate sensitive assets, (2) deposit, funding or borrowing preferences in fluctuating rate environments or (3) re-pricing time lags for floating rate assets and liabilities, among other items that affect earnings and cash flows.

The following table sets forth, for the date indicated, E.Sun Bank’s gap analysis.

	As of March 31, 2003
Interest- earning Assets NT$117,800 10,665 10,753 50,474 NT$189,692	Interest- bearing Liabilities Interest Gap (in millions, except percentages) NT$ 55,802 NT$61,998 91,158 (80,493) 46,351 (35,598) 20,506 29,968 NT$213,817 NT$(24,125)	Cumulative Gap as a Percentage of Total Interest-earning Assets (%)
		32.68% -42.43 -18.77 15.80
		-12.72%

Foreign Exchange Risk. E.Sun Bank manages its foreign exchange risk by matching its foreign currency assets and liabilities. E.Sun Bank trades in currencies and derivative instruments, primarily spot, forward exchange contracts and currency swaps, as part of its management of its asset and liability positions. The principal goal of these trading activities is to manage the impact of currency exchange fluctuations on E.Sun Bank’s financial position. Traders are subject to counterparty, per trade, stop loss and total exposure limits.

The risk management unit of the Treasury Division of E.Sun Bank monitors changes in and matches the foreign currency assets and liabilities in order to reduce exposure to currency fluctuations. The effect of exchange rate changes on foreign currency assets and liabilities is currently marked-to-market on a daily basis. Risks relating to exchange rate fluctuations are also managed through E.Sun Bank’s foreign exchange desk. Foreign exchange dealing is primarily in the NT dollar/US dollar market.

Operational Risk

Operational risk is the risk of loss resulting from employees’ negligence or from malfunctioned or inadequate internal operation systems. E.Sun Bank’s policy is to manage operational risks through clear governance, an embedded operational risk management system, and the implementation of comprehensive operational risk identification, measurement, monitoring and mitigation processes. All business managers are responsible for establishing specific internal policies, procedures and controls and for continuously

monitoring and controlling the operational risks. The operational risk management framework is further supported by various specialized departments such as the Legal Division of E.Sun Bank. In addition, E.Sun Bank’s Auditing Division performs independent periodic investigations to the quality of the system of internal controls and procedures of business units and recommends actions to solve any identified weaknesses.

Legal Risk

Legal risk represents the loss caused by the violation of applicable laws or regulations. E.Sun Bank attempts to manage legal risk by establishing clear internal governance procedures, and implementing legal risk identification, measurement and monitoring processes. The Legal Division of E.Sun Bank and the managers of various business units have the initial responsibility for supervising personnel for compliance with the applicable laws and regulations as well as implementing the control standards established by the Asset and Liability Management Committee of E.Sun Financial.

Value at Risk Analysis

E.Sun Bank uses daily ‘‘value at risk’’ (‘‘VaR’’) to measure market risk. The VaR is a statistically estimated maximum amount of loss that can occur for a day. E.Sun Bank uses a 99% confidence level to measure the daily VaR. VaR is a commonly used market risk management technique. However, this approach has its limitations. As a statistical model, VaR estimates possible losses over a certain period at a particular confidence level which are determined by using past market movement data. Past market movement, however, is not necessarily a good indicator of future events. Furthermore, the time periods used for the model, generally one or ten days, are assumed to be a necessary time period to liquidate the relevant underlying positions.

BUSINESS

Overview

We provide a broad range of financial services, including commercial banking, wealth management, bills finance, underwriting and brokerage services to individual and corporate customers through our three principal subsidiaries:

. E.Sun Bank. E.Sun Bank is the core operating entity of our company, representing approximately 93.9% of our total assets as of March 31, 2003. E.Sun Bank was founded as one of the 16 New Banks to receive banking licenses during the liberalization of the Taiwan financial services industry in the early 1990s. E.Sun Bank offers a broad range of banking services and financial products to its consumer and corporate customers, including commercial banking and wealth management. It has an extensive distribution and customer service network consisting of 52 branches (including 8 sub-branches), 2 overseas branches and 172 ATMs as well as 983 customer sales representatives. As of March 31, 2003, E.Sun Bank was the sixth largest credit card issuer in Taiwan in terms of the number of credit cards in force with 1.74 million cards in force, representing a market share of 5.25%.
. E.Sun Bills Finance. E.Sun Bills Finance acts as a broker or dealer for fixed-income securities such as government bonds, financial debentures and short-term bills. E.Sun Bills Finance also offers underwriting services for commercial paper and acts as a surety for its customers by issuing guarantees for commercial paper.
. E.Sun Securities. E.Sun Securities provides a broad range of brokerage and securities products and services primarily to individuals as well as to corporations and institutions. E.Sun Securities’ products and services include securities brokerage, margin trading, underwriting and financial products. In addition, E.Sun Securities engages in proprietary trading of equity and fixed-income securities.

Our goal is to become a leading financial institution in Taiwan renowned for superior customer service, strong asset quality, reliable operations, professionalism and integrity. We have chosen ‘‘E.Sun’’ or ‘‘Yushan’’ in Chinese, the highest mountain in Taiwan to represent our aspiration for excellence. We also place a strong emphasis on cultivating a corporate culture encouraging teamwork, leadership and the hiring of talented and well-qualified people.

Our Shares are listed on the Taiwan Stock Exchange and trade under the symbol ‘‘2884.’’ As of June 20, 2003, our market capitalization, based on the closing price of NT$16.40 (US$0.47) per Share on the Taiwan Stock Exchange, was NT$40.5 billion.

E.Sun Financial

Our Formation

We were formed on January 28, 2002 pursuant to the ROC Financial Holding Company Act. The ROC Financial Holding Company Act permits financial institutions to be reorganized under a single financial holding company structure so that the ownership of different operating companies can be consolidated. We were formed through a share exchange among E.Sun Bank, E.Sun Bills Finance, E.Sun Securities and E.Sun

Financial. The exchange ratio was 1.0 share of E.Sun Financial for 1.0 share of E.Sun Bank; 1.0 share of E.Sun Financial for 1.1 shares of E.Sun Bills Finance; and 1.0 share of E.Sun Financial for 1.25 shares of E.Sun Securities. The share exchanges were approved by the respective shareholders of each of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities on December 10, 2001.

As a financial holding company, we do not have any substantial operations but conduct our operations through our principal subsidiaries. E.Sun Bank is the core of the E.Sun Financial group with a strong consumer banking franchise. In addition, we also have operations in bills finance and the securities and brokerage businesses through E.Sun Bills Finance and E.Sun Securities. In order to become a diversified financial holding company, we intend to expand the scope of the E.Sun Financial group.

In October 2002, we established E.Sun Venture Capital Co., Ltd., our wholly owned subsidiary, to engage in venture capital investments. E.Sun Venture Capital’s current investments include domestic preIPO companies in a variety of industries. As of December 31, 2002, the total assets and shareholders’ equity of E.Sun Venture Capital was NT$1,003 million and NT$1,002 million, respectively.

We recently announced a share exchange agreement through which E.Sun Securities Investment Trust Co., Ltd. (‘‘E.Sun Securities Investment’’) will become our wholly owned subsidiary through a share exchange at a share exchange ratio of 1.18 shares of E.Sun Financial in exchange for one share of E.Sun Securities Investment. E.Sun Securities Investment was established in September 2001 to issue beneficiary certificates for raising securities investment trusts for the investments in various securities. We expect that the transaction will be completed by the end of August 2003 upon the approval of each of the respective shareholders of E.Sun Securities Investment and E.Sun Financial.

Competitive Strengths

Our competitive strengths include the following:

Strong brand recognition

We believe that a key to our success and growth has been our strong brand recognition. We believe the E.Sun brand is associated with professional and sound management and high-quality customer service. We believe the E.Sun brand is widely recognized in Taiwan even though E.Sun Bank is smaller in terms of total assets and has a relatively shorter operating history as compared to the other leading banks in Taiwan. In 1999, E.Sun Bank was awarded the ‘‘#1 Corporate Image Award’’ by Commonwealth Magazine among all domestic banks in Taiwan. We believe that we have been successful in building a strong brand due to E.Sun Bank’s focus on maintaining high standards of customer service. Since the founding of E.Sun Bank in 1992, customer service has been a key principle of our corporate culture. Our reputation for customer service has been recognized by the industry. In 2001, E.Sun Bank was awarded the National Quality Award, presented by the Executive Yuan of ROC. In 1999 and 2000, E.Sun Bank was ranked first among all Taiwan banks for service quality in the annual survey conducted by Taiwan’s Businessweekly.

Experienced and professional senior management team

Our senior management team is experienced, with a proven track record of sound management in the financial services industry. Our senior management team is led by our Chairman, Mr. Yung-Jen Huang, the founder of E.Sun Bank and a banker recognized in Taiwan for experience and achievement. In 1995, our Chairman was honored with the ‘‘Eminent Corporate Leadership Prize’’ for his professional management performance and contributions to society. In 2001, he was presented with the prestigious ‘‘Lee, Quo-Ding Management Prize’’, followed by ‘‘The National Quality Prize’’ in 2002. Our 20 member senior management team has an average of more than 25 years of experience in the financial services industry in Taiwan, and includes experts in credit evaluation, risk management, consumer banking products, information and technology and marketing. Our management team is committed to maximizing

shareholder value and our performance targets seek to meet this primary objective. In addition, many members of our senior management team have worked together at E.Sun Bank, which we believe will facilitate the integration of our subsidiaries under our financial holding company structure.

Sound financial structure and asset quality

In order to achieve and maintain strong asset quality, we have established a comprehensive risk management process and a diligent risk monitoring program for the holding company and operating subsidiaries. In addition, we have taken a number of measures to strengthen our credit approval process, including centralization of decision making and employee training. Our asset quality is reflected in E.Sun Bank’s NPL ratio, which in 2000, 2001 and 2002 was among the lowest NPL ratios of the New Banks in 2002. As of March 31, 2003, E.Sun bank had the lowest NPL ratio of any domestic commercial bank in Taiwan with an NPL ratio of 1.36% compared to the industry average NPL ratio of 6.11%, as reported to MOF. Consistent with its prudent credit risk management policy, E.Sun Bank has adopted a conservative NPL write-off policy. In 2002, E.Sun Bank wrote off NT$8.9 billion of NPLs in order to improve its asset quality. E.Sun Bank has attained one of the highest credit ratings among the New Banks with a long-term bank deposit rating of ‘‘Baa2’’ from Moody’s Investors Service, Inc. in 2002. In addition, E.Sun Bills Finance also maintained strong asset quality with no NPLs in 2002.

Distinctive and cohesive culture

We believe that the unique E.Sun corporate culture distinguishes us from other financial institutions in Taiwan. Since the founding of E.Sun Bank, the cultivation of the E.Sun corporate culture has been one of our foremost priorities. We aim to create and cultivate a corporate culture that encourages teamwork, leadership and the hiring of talented and well-qualified people. In addition, a unique and essential element of our corporate culture is the holistic principle that personal contentment and professional achievement are interlinked. As a result, we believe we have one of the lowest attrition rates in the industry, with an approximate average annual attrition rate of 5% for the past three years. Since we believe that customer satisfaction is best promoted by satisfied employees, we believe that our corporate culture has been an important factor in our ability to maintain a high degree of customer satisfaction.

Multi-product relationships with consumer banking customers

We have developed multi-product relationships with our customers. E.Sun Bank provides a wide range of banking products and services to its consumer customers. For example, many of our credit card customers are also customers for our deposit and mortgage products. E.Sun Bank’s wealth management customers are also customers of brokerage services offered by E.Sun Securities. In addition, we believe that the financial holding company structure provides opportunities for cross-selling products and services. With recruitment of specialists and retraining, relationship managers are being shifted from a traditional, single product focus to a multi-product focus. In addition, we believe our multi-product relationships with consumer banking customers can provide an efficient method to increase our revenues per customer.

Strategy

Our goal is to become one of the leading financial holding companies in Taiwan. We intend to pursue this goal through the following strategies:

Continue to build brand recognition and enhance customer satisfaction

We believe that our professional expertise is an essential factor in our ability to win the satisfaction and trust of our customers. We intend to continue to build the E.Sun brand to further increase our brand recognition in Taiwan. Our goal is to have the E.Sun brand widely recognized for credit worthiness and high-quality customer service. We believe that our efforts to continue to build brand recognition is most effective through E.Sun Bank, which is the core entity of the E.Sun Financial group. We also believe that our current target of increasing the number of consumer banking customers and increasing the number of

E.Sun Bank credit cards in force will further raise the profile of the E.Sun brand. In line with this, we will continue to pursue the three goals of brand recognition, quality and achievement. We will also actively pursue co-branding or strategic alliance arrangements to broaden our customer base and further expand our brand recognition. We believe an integral part of building brand recognition is to continue to focus on customer satisfaction. In connection with this, we have undertaken steps towards a customer-centric restructuring of our organization. We intend to further enhance customer satisfaction through effective customer data mining in order to tailor our products to the needs of our customers and the effective use of our new corporate and consumer banking centers.

Capture the benefits of operating as an integrated financial holding company

We intend to leverage the financial holding company structure to capture many of its benefits. We believe that our financial holding company structure has several benefits, including:

. Expand our revenue base. As a financial holding company, we are able to offer a wider range of financial products and services. We intend to expand our operations in the bills finance and securities business in order to diversify our revenue base.
. Improve our capital efficiency. We intend to raise core capital at the financial holding company level and to allocate capital where it can be used most efficiently within the group.
. Improve our cost efficiency. We intend to continue to integrate the back office operations of our wholly owned subsidiaries in order to achieve cost efficiencies and economies of scale.
. Facilitate cross-selling of financial products. We intend to leverage the solid customer base of E.Sun Bank to expand our offering of products and services through cross-selling. We believe, for example, that there are cross-selling opportunities to offer mortgage products to our deposit and credit card customers. We intend to offer wealth management products and services to our affluent banking customers. In addition, we believe we can expand our securities business by offering brokerage services to our banking customers.

Maintain and improve strong risk management

Our board of directors places a high priority on risk management and risk control. We believe prudent risk management control procedures and risk governance at all levels within the E.Sun Financial group are critical for long-term competitive advantages in the financial services industry. We have established an asset and liability management committee at the holding company level that is responsible for establishing and implementing risk management policies with a focus on enhancing asset quality. We intend to continue to enhance our credit risk management evaluation, rating methodology and credit risk pricing models. In addition, we intend to continue to cultivate relationships with high-quality borrowers. In connection with this strategy, we expect to use sophisticated information technology systems to help manage our market risks. In November 2002, E.Sun Bank entered into an agreement with Reuters to install a new risk and trade management system. We expect the Reuters’ system to be in place by the third quarter of 2003. We seek to maintain the highest quality of risk management and control by applying the most up-to-date and reliable methods available, not only to protect E.Sun Financial itself, but also its clients and shareholders.

Continue to expand the scope of E.Sun Financial

We intend to continue to expand the scope of the E.Sun Financial group of companies through the establishment of new subsidiaries, mergers and acquisitions and strategic alliances. In October 2002, we established E.Sun Venture Capital Co., Ltd. in order to invest in companies at the early stages of development. We established E.Sun Insurance Agency Co., Ltd. to provide access to insurance products by acting as a distributor of third-party insurance products and services. We also have recently announced plans to merge with one of our affiliates, E.Sun Securities Investment Trust Co., a fund management company, which we expect to be completed by August 2003. As a part of our growth strategy, we also

intend to make selective acquisitions from time to time that are value accretive. In January 2003, E.Sun Securities entered into an acquisition agreement with Yung Li Securities Co., Ltd. relating to the acquisition of the brokerage businesses of its head office and five branches, which we expect to be completed by the end of June 2003. In addition, we believe that we can effectively broaden the scope of E.Sun Financial group through strategic alliances, particularly in the banking and securities businesses.

Organizational Structure and Principal Subsidiaries

Set forth below is an organizational chart depicting our principal subsidiaries as of March 31, 2003.

==> picture [431 x 187] intentionally omitted <==

----- Start of picture text -----

E.Sun Financial
100% 100% 100% 100%
E.Sun E.Sun
E.Sun Bank E.Sun Securities
Bills Finance Venture Capital
79% 99% 45% 25%
E.Sun Insurance E.Sun Securities
E.Sun Leasing (1)
Agency Investment Trust
----- End of picture text -----

(1) Pursuant to a share exchange agreement, E.Sun Securities Investment Trust will become a wholly owned subsidiary of E.Sun Financial upon the approval of each of the respective shareholders. The transaction is expected to be completed by August 2003.

Asset and Liability and Risk Management of E.Sun Financial

Asset and Liability Management

We formed the Asset and Liability Management Committee of E.Sun Financial to establish centralized policies and procedures of asset and liability management for the holding company and operating subsidiaries. The duties of our Asset and Liability Management Committee include:

. analyzing domestic and overseas economic and financial markets and setting corresponding strategies;
. setting policies for the composition of assets and liabilities and the maximum range of risk at the financial holding company level and at the operating subsidiary level;
. monitoring the asset and liability management of our operating subsidiaries, principally E.Sun Bank, E.Sun Bills Finance and E.Sun Securities; and
. formulating policies for relevant significant asset and liability management issues.

The Asset and Liability Management Committee consists of the President, who acts as the chair of the committee, and members designated by our President, which typically includes our Senior Executive Vice President, our Executive Vice President and the head of each business unit of our operating subsidiaries.

The Asset and Liability Management Committee of E.Sun Financial meets with the asset and liability committees of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities on a monthly basis to discuss liquidity, cost of funding, trading, results of operations, market outlook and transfer pricing. Under certain circumstances, amendments to asset and liability management policies and procedures of the operating subsidiaries may require the approval of the Asset and Liability Management Committee of E.Sun Financial.

Risk Management

Our Risk Management Committee is responsible for the formulation and oversight of risk management policies and procedures. The Risk Management Committee is comprised of our President, our Chief Risk Officer, our Chief Financial Officer and the head of each business unit of our operating subsidiaries. The Risk Management Committee is responsible for establishing risk management policies for monitoring and evaluating risk exposures, both at the financial holding company level and at the operating subsidiary level. The primary areas of risk management include market risks, credit risks and liquidity risks. The implementation of such policies is overseen by our Chief Risk Officer and conducted by the risk management department of each of the operating subsidiaries. Each of the risk management departments of our operating subsidiaries is required to provide certain information to our Chief Risk Officer on a weekly basis. The information compiled by our Chief Risk Officer enables our Risk Management Committee to review the risk exposures of our operating subsidiaries.

Credit Ratings

We have attained the following long-term credit ratings:

Company E.Sun Financial. . . . . . . . . . E.Sun Bank . . . . . . . . . . . . E.Sun Bills Finance . . . . . . .	Rating Baa3 Baa2 twA twBBB-	Rating Agency
		Moody’s Investors Service, Inc. Moody’s Investors Service, Inc. Taiwan Ratings Corporation Taiwan Ratings Corporation

Credit ratings are not recommendations to buy, sell or hold the securities of the company. Ratings are subject to revision or withdrawal at any time by the ratings agencies.

E.Sun Bank

E.Sun Bank was established on January 16, 1992 and commenced its operations on February 21, 1992 as one of the 16 New Banks to receive banking licenses during the liberalization of the Taiwan financial services industry in the early 1990s. According to statistical data compiled by MOF, in the period from 1992 to 2001, E.Sun Bank was ranked first among the New Banks in Taiwan in terms of average earnings per share. E.Sun Bank was also ranked third in terms of total assets, total deposits and gross loans, among the New Banks as of March 31, 2003. As of March 31, 2003, E.Sun Bank had 1.74 million credit cards in force, making it the sixth largest issuer of credit cards among all banks in Taiwan. As of and for the three months ended March 31, 2003, E.Sun Bank had total assets, total loans, total deposits, total shareholders’ equity and net income of NT$282.5 billion, NT$170.1 billion, NT$222.9 billion, NT$19.0 billion and NT$1.0 billion, respectively. As of March 31, 2003, E.Sun Bank had a NPL ratio of 1.36%, which was the lowest of any domestic commercial bank in Taiwan, compared to the ROC banking industry average of 6.11%.

Competitive Strengths

E.Sun Bank’s competitive strengths include the following:

High-quality consumer banking franchise

As the flagship of E.Sun Financial group, E.Sun Bank is a leading commercial bank in Taiwan with a strong deposit-taking franchise with 52 branches (including 8 sub-branches) and 2 overseas branches and a client base of approximately 2.7 million distinct customer accounts as of March 31, 2003. E.Sun Bank is the sixth largest issuer of credit cards in Taiwan, with over 1.74 million credit cards in force as of March 31, 2003. E.Sun Bank’s Take-it cash card is one of the most recognized cash cards in Taiwan with approximately 158,000 cash cards in force as of March 31, 2003, making E.Sun Bank the fifth largest issuer of cash cards in Taiwan. E.Sun Bank’s distribution network is centered around the populous and affluent Taipei metropolitan area. We believe that E.Sun Bank provides a strong foundation for our future growth, particularly as a platform for cross-selling opportunities.

Superior asset quality and risk management

E.Sun Bank has been able to maintain sound asset quality through a comprehensive risk management process, diligent risk monitoring and diversification of its loan portfolio. E.Sun Bank’s asset quality is reflected in its NPL ratio, which in 2000, 2001 and 2002 was among the lowest NPL ratios of the New Banks. As of March 31, 2003, E.Sun bank had the lowest NPL of any the domestic commercial bank in Taiwan with an NPL ratio of 1.36%, compared to the ROC industry average NPL ratio of 6.11%, as reported to MOF. Consistent with its prudent credit risk management policy, E.Sun Bank has adopted a conservative NPL write-off policy. In 2002, E.Sun Bank wrote off NT$8.9 billion of NPLs in order to improve its asset quality. E.Sun Bank has also been successful in diversifying its loan portfolio. As of March 31, 2003, no loan exposure to a single customer or single customer group exceeded 2.97%. Moreover, E.Sun Bank has reduced its exposure to the real estate sector from 27.9% in 2000, which represented E.Sun Bank’s largest exposure to single industry in that year, to 13.1% and 11.9% in 2002 and the first quarter of 2003, respectively.

A track record of innovations

E.Sun Bank believes that its track record of product innovations has enabled it to maintain and attract new customers in a very competitive market. For example, E.Sun Bank successfully launched eCoin, an Internet-based deposit and payment system. The eCoin services provide customers with an online payment alternative to online credit card payment by enabling customers to make small online payments for products, content and services through a virtual bank account opened online with E.Sun Bank. E.Sun Bank was the first bank in Taiwan to obtain MOF approval for micropayment services. In March 2003, E.Sun Bank was among the first banks in Taiwan to begin offering adjustable rate mortgage loans with an interest rate cap, which provides customers with the advantage of electing to pay the negotiated maximum interest rate if the adjustable rate exceeds the cap. In addition, E.Sun Bank was among the first banks in Taiwan to issue inverse floater bank debentures.

Sophisticated user of information technology

E.Sun Bank believes that it has a sophisticated and efficient information technology system that provides it with significant competitive advantages. E.Sun Bank utilizes sophisticated applications and software that allow it to strengthen the management of credit risk and market risk. As a part of the initiative to enhance risk management systems, E.Sun Bank is currently in the process of installing Kondor Plus, a part of the Reuters risk and trade management solutions. In addition, E.Sun Bank is working with Mercer Oliver Wyman, an international consulting firm, to implement a customer value and risk analysis management system to further leverage its relationships with customers by utilizing statistics, econometrics, computer modeling and industry expertise. In recognition of her information technology capabilities, Ms. Yvonne H. Yang, our Chief Risk Officer of the Risk Management Division and Chief Information Officer of the Information System Division, was awarded the ‘‘Outstanding IT Award’’ by the President’s Office of the ROC in 1993.

Strategy

E.Sun Bank aims to become one of the top commercial banks in Taiwan. Elements of its strategy include the following:

Pursue customer-centric organizational restructuring

E.Sun Bank intends to restructure its organization to further enhance its customer-centric focus. E.Sun Bank has established 10 corporate banking and consumer banking centers. These centers will provide E.Sun Bank’s customers greater access to customer representatives and will better position E.Sun Bank to integrate its personnel and resources to better serve the needs of its customers. In addition, E.Sun Bank intends to extend the business hours of its branches and sub-branches to maximize customer satisfaction. E.Sun Bank also seeks to pursue a customer-centric strategy by offering customers ‘‘one stop shopping’’ for mortgages and related services. In addition, every corporate customer will have one account officer who acts as the client relations manager and serves as the interface between that customer and the various product and service providers within the E.Sun Financial group.

Maintain the current high standards for asset quality through disciplined risk management

E.Sun Bank has maintained a high-quality loan portfolio through careful targeting of its customer base, a comprehensive risk management process, diligent risk monitoring and remediation procedures. E.Sun Bank has also formed a Credit Review and Management Division to better monitor and manage the performance of doubtful credits. E.Sun Bank has also established a centralized collateral monitoring unit that aims to improve the delinquency rate of its mortgage portfolio. To further strengthen its risk management, E.Sun Bank engaged Mercer Oliver Wyman, an international consulting firm, to assist the bank in its efforts to improve its profitability by product line and credit scoring. E.Sun Bank believes that the engagement of Mercer Oliver Wyman will facilitate its transition to Basel II standards by 2006.

Continue to expand the consumer banking franchise

E.Sun Bank intends to continue to develop and expand its strong consumer banking franchise. E.Sun Bank expects to expand its market share in high-margin consumer products such as credit cards, cash cards and mortgages. E.Sun Bank intends to further expand its market share in the high-margin credit card and cash card businesses through effective marketing and co-branding arrangements. In addition, E.Sun Bank intends to expand its market share in the mortgage business to take advantage of the recovery in the Taiwan real estate market. With its comprehensive range of mortgage products and services, E.Sun Bank aims to offer its customers ‘‘one stop shopping’’ for mortgages and related services. The recent establishment of E.Sun Bank’s Wealth Management Division will further enable E.Sun Bank to penetrate the wealth management business. Through its customer-centric reorganization, E.Sun Bank intends to continue to expand its distribution network and thereby further raise the profile of its consumer banking franchise.

Expand the wealth management business

The wealth management business in Taiwan is highly concentrated and offers the potential for significant growth. E.Sun Bank formed its Wealth Management Division to focus exclusively on servicing affluent customers and to centralize the marketing, planning, product development and customer service functions of E.Sun Bank’s wealth management business. E.Sun Bank’s focus in the wealth management business is to expand and upgrade its personal banker network by providing specialized training to its existing consumer banking sales force as well as attracting talented and experienced professionals. E.Sun bank believes that its Wealth Management Division provides a strong platform for cross-selling opportunities that will enable it to offer brokerage services provided by E.Sun Securities and insurance products distributed by E.Sun Insurance Brokerage Co., Ltd.

Enter the PRC financial services industry and global markets

E.Sun Bank intends to expand its business by effectively leveraging its Hong Kong branch to expand its operations in the PRC. In June and May 2002, E.Sun Bank’s Hong Kong branch and its offshore banking unit, respectively, received permission from MOF to engage in financial operations with banks in the PRC. Through E.Sun Bank’s Hong Kong branch, E.Sun Bank established remittance relationships with the four largest PRC banks and 19 other financial institutions in the PRC with more than 720 locations for ‘‘SWIFT’’ remittance links. E.Sun Bank’s Hong Kong branch provides a platform to serve clients in the greater China area, in particular, to provide banking products and services to Taiwanese companies with operations in the PRC. In addition, E.Sun Bank seeks to use its product development capabilities to develop new financial products to accelerate its entry into the international financial services market. E.Sun Bank is actively evaluating opportunities for strategic alliances that would further expand E.Sun Bank’s geographic presence and complement its product and customer base.

Consumer Banking

E.Sun Bank offers a broad range of consumer banking products to its approximately 2.7 million distinct customers. E.Sun Bank believes its focus on high-margin consumer loan products such as credit card revolving loans and mortgages will further enhance its profitability because these loans typically carry higher interest rates than corporate loans. In 2002, E.Sun Bank’s credit card and cash card businesses grew significantly, as compared to 2001 and 2000, reflecting E.Sun Bank’s focus on expanding its business in these areas. E.Sun Bank offers a wide selection of mortgage loans and continues to develop new mortgage loan products to address the particular needs of its customers. For the three years ended December 31, 2002, E.Sun Bank’s mortgage portfolio remained relatively unchanged as a result of its stringent credit control policies for mortgage loans in response to a weak real estate market. E.Sun Bank intends to increase its mortgage loan portfolio in the future as the real estate market in Taiwan recovers. E.Sun Bank’s consumer products and services target the different needs of different segments of customers with features tailored to each segment’s financial profile and other characteristics. E.Sun Bank’s distribution channels include its branch network, ATM network, direct tele-marketing, sales, direct mail and the Internet, as well as through co-branding and other strategic alliances.

As of March 31, 2003, E.Sun Bank had NT$96.1 billion in consumer loans outstanding, representing 52.6% of its total loans. The Consumer Banking Division of E.Sun Bank has 415 employees, of which 259 are a dedicated sales force for consumer loan products. The Credit Card Division of E.Sun Bank has 294 employees.

Consumer Loan Products

Personal Loans. E.Sun Bank offers a range of personal loan products, including secured and unsecured loans and cash cards. As of March 31, 2003, E.Sun Bank had NT$20.3 billion of personal loans outstanding, which represented 11.1% of E.Sun Bank’s total loans.

. Secured Personal Loans. E.Sun Bank provides secured personal loans to select consumer customers, typically certain employees of E.Sun Bank’s corporate customers. Borrowers are required to provide security for such loans, which may include common stock of listed companies. The loan amount, which generally exceeds NT$1,200,000, is typically higher than other personal loan products. The interest rate charged for such loans, which was between 7% and 8% in 2002, is typically lower than other personal loan products.
. Unsecured Personal Loans. E.Sun Bank provides unsecured personal loans to meet its customers’ immediate funding needs. The unsecured personal loans provided by E.Sun Bank are marketed under the name Easy Loan. Borrowers may apply for Easy Loan for loan amounts between NT$100,000 and NT$300,000 without providing any security, or for loan amounts between NT$300,000 and NT$1,200,000 by obtaining credit insurance provided by a third-party credit insurance provider. Unsecured personal loan applications are typically processed in a

week and the funds are disbursed the following day after approval has been obtained. Unsecured personal loans have maturities ranging from five to seven years and are currently made at a fixed interest rate of up to 19.71% per annum. In 2002, the weighted average interest rate charged for unsecured personal loans was 10.9% per annum.

. Cash Cards. E.Sun Bank offers cash cards, with a focus on young customers with limited credit history. The cash cards are marketed under the name Take It. Unlike credit cards, cash cards cannot be used to make purchases in stores, but can only be used to withdraw cash from ATM machines. The cash cards offer up to a maximum credit limit of NT$300,000. E.Sun Bank charges a fixed fee for every withdrawal and interest starts to accrue at the time of the withdrawal. Cardholders are required to make minimum payments on a monthly basis. As of March 31, 2003, E.Sun Bank had 158,000 cash cards in force, which carried a balance of NT$2.7 billion, representing 1.5% of E.Sun Bank’s total loans.

Mortgage Loans. E.Sun Bank offers a range of mortgage loan products to finance the purchase of residential and small commercial properties, including traditional mortgage loans, adjustable rate mortgage loans, adjustable rate mortgage loans with an interest rate cap, revolving mortgage loans, single mortgage reducing term assurance and offset mortgage loans. As of March 31, 2003, E.Sun Bank had NT$61.6 billion of mortgage loans outstanding, which represented 33.7% of its total loans.

. Traditional Mortgage Loans. Traditional mortgage loans are secured by the property being purchased, which E.Sun Bank typically requires the owner to occupy. E.Sun Bank typically lends 70% of the appraised value of the property, subject to its evaluation of a particular customer’s credit and risk profile. These products carry a prime rate based on a variety of indices. Monthly payments are typically based on a 20-year amortization and maturity schedule. The weighted average interest rate charged on mortgage loans in 2002 was 4.42% per annum. Under certain circumstances, E.Sun Bank charges a pre-payment penalty for loans paid in full within a year of the initial drawdown. In addition, E.Sun Bank charges an origination fee on mortgage loans.
. Adjustable Rate Mortgage Loans. In September 2002, E.Sun Bank began offering adjustable rate mortgage loans. The adjustable rate is typically based on the average of time deposit rates quoted by ten major banks in Taiwan as the base index plus an interest rate spread which is determined based on the risk profile of the borrower and nature and use of the property. The base index is adjusted every three months. We believe adjustable rate mortgage loans have proven particularly attractive to our affluent customers since they are able to borrow at lower interest rates as a result of the risk-based pricing feature. As of March 31, 2003, E.Sun Bank had NT$35.28 billion of adjustable rate mortgage loans outstanding, which represented 57.3% of E.Sun Bank’s total mortgage loans.
. Adjustable Rate Mortgage Loans with an Interest Rate Cap. In March 2003, E.Sun Bank was among the first banks in Taiwan to begin offering adjustable rate mortgage loans with an interest rate cap, which provides customers with the advantage of electing to pay the negotiated maximum interest rate if the adjustable rate exceeds the cap. We believe this product is attractive to our customers who are particularly sensitive to interest rate fluctuations, since they are able to control their maximum interest rate exposure during the life of the loan.
. Revolving Mortgage Loans. E.Sun Bank also offers revolving mortgage loans to fulfill personal finance needs of its mortgage loan customers. The borrower of a revolving mortgage loan typically, in addition to the original mortgage loan, obtains a revolving personal loan, the credit line of which is equal to the amount of the repayment under the mortgage loans.

. Single Mortgage Reducing Term Assurance Loans. In April 2003, E.Sun Bank began to offer single mortgage reducing term assurance loans, aimed at providing life insurance on the repayment abilities of mortgage loan borrowers. The mortgage loan borrowers of E.Sun Bank may choose to purchase life insurance policies written by select insurance companies, including American International Group Inc., under which the insurance coverage and insurance premium payable by such customers decrease as the outstanding amount of mortgage loans decreases. We also provide personal loans utilizing the credit line provided under the mortgage loans to such customers for the payment of life insurance premiums under these insurance policies.
. Offset Mortgage Loans. In May 2003, we began to offer offset mortgage loans. Offset mortgage loans provide borrowers with the advantage of reducing the mortgage loan amount, which is subject to interest payments, by the amount deposited with E.Sun Bank. A borrower only pays interest on the net amount. This product is designed to give customers an incentive to deposit larger amounts with E.Sun Bank.

Credit Cards

Credit card operations have contributed significantly to the growth and profitability of E.Sun Bank’s consumer banking business in recent years. As of March 31, 2003, E.Sun Bank was ranked the sixth largest credit card issuer among all banks in Taiwan in terms of the number of credit cards, with 1.74 million cards in force representing a market share of 5.25%. For 2002, E.Sun Bank also ranked seventh in terms of total credit card spending, with a market share of 3.43%. As of March 31, 2003, E.Sun Bank had NT$14.5 billion of outstanding revolving credit card debt.

Extensive marketing and innovative product offerings have contributed to the growth of E.Sun Bank’s credit card business. The number of E.Sun Bank credit cards in force increased to 1.74 million as of March 31, 2003 from 0.8 million as of December 31, 2000. E.Sun Bank has successfully introduced a number of high-profile credit cards.

. E.Sun Bank was one of the earliest banks to introduce credit cards targeted at specific customer profiles. E.Sun Bank has launched a number of credit cards targeted at particular professionals, including civil engineers, teachers, nurses and police officers. E.Sun Bank has also launched a number of affinity card programs with retailers and other organizations to increase brand recognition and to capture new cardholders.
. In June 2000, E.Sun Bank launched the eSuncard, a credit card targeted at customers with intensive online shopping activities by providing guarantees for transactions conducted online. In August 2000, E.Sun Bank teamed up with Gamania, a leading online game developer, to offer the Gamania co-branded credit card targeted at online game players in Taiwan.
. In October 2001, E.Sun Bank introduced the E.Sun Platinum card targeted at affluent customers.
. In September 2002, E.Sun Bank was selected by the ROC Tourism Bureau as one of the five qualified banks to issue the ‘‘National Travel Card.’’ All ROC nationals can apply for this credit card with one of the five designated banks, including E.Sun Bank, to enjoy special discounts and other benefits relating to their travelling activities in Taiwan. E.Sun Bank has worked together with approximately 50 governmental agencies and has issued this card to nearly 120,000 governmental officials in Taiwan.
. Since March 2003, E.Sun Bank has participated in a trial government ‘‘purchase card’’ and ‘‘business card’’ program as part of the government’s efforts to simplify governmental procurement procedures and lower procurement costs. Under this program, a governmental entity can better monitor its expenditures and enjoy the benefit of deferred payments offered by these credit cards.

Revenue from credit card operations consists principally of interest paid by cardholders on revolving balances outstanding, fees paid by merchants in connection with purchases and fees paid by cardholders for cash advances. The weighted average of interest rate charged on revolving balances outstanding, including cash advances, was 18.98% per annum over the three years ended December 31, 2002. Cardholders also have the option to pay a fixed minimum payment and allow the balance on their accounts to revolve. Merchant fees range from 1.7% to 2.5% of each transaction amount. As of March 31, 2003, E.Sun Bank had NT$14.5 billion of revolving credit card debt, which represented 7.9% of E.Sun Bank’s total loans.

E.Sun Bank monitors the delinquency of all credit card accounts by the number of days overdue and, when necessary, seeks repayment with the assistance of outside collection agencies. Receivables 30-days to 120-days overdue are collected by E.Sun Bank while receivables more than 120 days overdue are outsourced to outside agents for collection. The 90-day delinquency rate on E.Sun Bank’s credit card debt was 2.1% as of March 31, 2003.

The following table sets forth, for the periods indicated, certain data relating to E.Sun Bank’s credit card operations.

Credit Card Data: Interest income . . . . . Fee income(1) . . . . . . Credit card transaction volume. . . . . . . . . Revolving credit card receivable . . . . . . . Revolving credit card debt(2) . . . . . . . . . Merchant receivable . Total credit card debt Interest rates on revolving balance . 90-day delinquency rate(3). . . . . . . . . . Net write-off ratio(4) . Number of credit cards in force (in thousands)(5) . . . . . Market share by cards in force (%)(6) . . . .	As of and for the Year Ended December 31,	As of and for the Year Ended December 31,	As of and for the Year Ended December 31,	As of and for the Period Ended March 31,	As of and for the Period Ended March 31,
	2000	2001	2002	2002	2003
	NT$ 754 431 22,559 5,115 5,292 1,913 7,205 18.25% 3.37% 1.06% 836 4.57%	NT$ 1,381 335 26,120 6,748 7,229 2,087 9,316 18.98% 3.22% 1.80% 1,021 4.23%			NT$ 633 US$ 18.2 200 5.8 10,310 297.1 11,464 330.4 14,475 417.1 2,718 78.3 17,193 495.5 19.71% 2.11% 1.85% 1,737 5.25%

(1) Includes merchant fees, cash advance fees, annual fees, mail order fees, late charge fees and other fees.

(2) Includes revolving credit card receivable, mail loan and other loan products for credit card customers.

(3) Calculated by dividing the balance of delinquent credit card debt over 90 days by the total credit card debt outstanding as of the end of the period.

(4) Represents net write-offs divided by the average monthly balance of total credit card debt.

(5) Represents the number of credit cards that are valid as of the end of the period.

(6) Represents market share based on number of credit cards in force as reported by MOF.

Deposit Products

E.Sun Bank offers five basic types of deposit products: checking, demand, savings, time and Postal savings deposits in NT dollars, US dollars and other foreign currencies. E.Sun Bank offers varying interest rates on its interest-bearing deposit products depending upon market interest rates, the rate of return on its interest-earning assets and interest rates offered by other commercial banks. As of March 31, 2003,

consumer banking deposits comprised approximately 60.55% of E.Sun Bank’s deposits. Interest rates on corporate deposit products are typically lower than those of consumer deposits. As of March 31, 2003, demanding deposits comprised approximately 31.86% of E.Sun Bank’s deposits.

Checking. Checking accounts do not bear interest and account holders may deposit or withdraw funds at any time without penalty. Checking accounts appear as demanding deposits, non-interest bearing in E.Sun Bank’s financial statements.

Demand Deposits. E.Sun Bank offers demand deposits that bear interest and account holders may withdraw funds at any time without penalty. Demand deposits accrue interest at a floating rate.

Savings Deposits. E.Sun Bank also offers two types of savings deposit products, ‘‘time’’ savings deposits and ‘‘demand’’ savings deposits. Time savings deposits require that the customer maintain a deposit for a fixed term, during which interest accrues at a fixed or floating rate and withdrawals are allowed prior to maturity only upon payment of a penalty. The minimum maturity for time savings deposits is one year. Demand savings deposits bear interest at a floating rate and account holders may withdraw funds at any time without a penalty.

Time Deposits. Time deposit accounts generally require that the customer maintain a deposit for a fixed term, during which interest accrues at a fixed or floating rate, and only allow withdrawals prior to maturity upon payment of a penalty. Currently, E.Sun Bank offers time deposit products with maturities of up to three years. E.Sun Bank’s time deposit products include certificates of deposit in NT dollars and certain foreign currencies.

Postal Deposits. The ROC Postal Bureau places deposits with ROC banks that meet certain credit requirements. These deposits are excluded from E.Sun Bank’s deposits for the purpose of meeting reserve requirements. See ‘‘Regulation of the Taiwan Financial Services Industry — Regulation of the Company — Financial Requirements — Deposit Reserve.’’ The terms and conditions of these deposits are consistent with those offered under time deposits to consumer banking customers. E.Sun Bank considers these deposits a stable source of funding.

Micropayment Services

E.Sun Bank was the first bank in Taiwan to receive approval from MOF for the provision of micropayment services. E.Sun Bank launched the micropayment ‘‘eCoin’’ services in January 2002. The eCoin services provide customers with the ability to make small online payments, typically between NT$1 to NT$10,000, for products, content and services through a virtual bank account opened online with E.Sun Bank. Customers can deposit or add value to their accounts using various methods, including by retail channels such as ATMs and convenient stores, by credit card payments and by using banking services through the Internet or mobile phones. E.Sun Bank charges a handling fee from online product vendors or Internet content providers (‘‘ICPs’’). This fee is based on the payment amounts made through eCoin services. As of March 31, 2003, E.Sun Bank signed up 110 online product vendors and ICPs to allow their customers to make online payments utilizing eCoin services. As of March 31, 2003, E.Sun Bank had more than 40,000 eCoin customers.

Corporate Banking

E.Sun Bank offers a broad range of products and services to Taiwan’s corporate entities, including loans, guarantees and acceptances, factoring, deposit products, overdraft facilities, bills discounting, traderelated financing, payment remittances, foreign exchange transactions, loan syndication and letters of credit.

E.Sun Bank has a separate Corporate Banking Division that enables E.Sun Bank to focus on serving the needs of corporate customers and to develop and maintain ‘‘prime bank’’ relationships with customers. As of March 31, 2003, E.Sun Bank maintained ten regional teams for purposes of corporate loan account

management and initial credit review. As of March 31, 2003, loans to corporate customers in the northern, central and southern regions accounted for approximately 85.9%, 4.1% and 10.0%, respectively, of E.Sun Bank’s total corporate loans.

As of March 31, 2003, the Corporate Banking Division had 215 employees, of whom 12 were involved in product development and 98 were client relations officers.

Loans

As of March 31, 2003, E.Sun Bank had NT$86.7 billion in corporate loans outstanding, representing 47.4% of E.Sun Bank’s total loans. Approximately 72.1% of these corporate loans were denominated in NT dollars, with the remainder denominated in foreign currencies, principally the US dollar.

In order to maintain its asset quality, E.Sun Bank has pursued a policy of diversification by lending to corporate borrowers in a wide range of industry sectors across different geographic regions in Taiwan. E.Sun Bank’s largest concentration of corporate loans as of March 31, 2003 was to companies in the financial industry (which includes financial institutions and investment companies), followed by the real estate and construction and trading and retail sectors, which accounted for 22.1%, 11.9% and 11.5%, respectively, of E.Sun Bank’s total corporate loans. See ‘‘Description of Assets and Liabilities of E.Sun Bank — Total Credit Exposure.’’

E.Sun Bank’s corporate loan products consist principally of floating prime rate-linked loans and shortterm fixed-rate indexed loans. Floating prime rate-linked loans and short-term fixed-rate indexed loans comprised approximately 74.3% and 25.7%, respectively, of E.Sun Bank’s corporate loans as of March 31, 2003.

. Prime Rate-linked Loans. Prime rate-linked loans bear interest at a rate based on a floating ‘‘prime rate’’ (fixed individually by banks in Taiwan) plus a spread and are typically offered to medium- and small-sized companies for general corporate purposes. Maturities are typically one year or less and most loans are rolled over upon maturity after a credit review. We also offer prime rate-linked loans with a higher spread for longer maturities, usually up to three years.
. Short-term Fixed-rate Indexed Loans. Indexed loans bear interest at a fixed-rate linked to an external index, such as the cost of funds in the interbank borrowing market and other indices plus a spread and are offered principally to E.Sun Bank’s most creditworthy corporate customers. These loans are usually unsecured and are typically used by customers to fund working capital needs. Maturities are typically 180 days or less. A significant portion of these loans are rolled over upon maturity at reset interest rates.

Deposit Products

E.Sun Bank offers corporate banking customers five basic types of deposit products: checking, demand, savings and time deposits in NT dollars, US dollars and other foreign currencies. See ‘‘— Consumer Banking — Deposit Products’’ for a description of the products. As of March 31, 2003, corporate banking deposits comprise approximately 39.4% of deposits.

Guarantees and Acceptances

E.Sun Bank acts as a surety for its corporate customers by issuing guarantees for commercial paper, corporate bonds, deferred payments for customs and duties on imported raw materials and machinery and repayments of loans from local and foreign banks. It also issues guarantees for bid bonds, performance bonds, down payment bonds and standby letters of credit. Fees earned on guarantees can range up to 1.0% of the guaranteed obligation per annum. Fees on acceptances are typically 1.0% of the draft amount per

annum. E.Sun Bank’s customers for these products are usually companies in Taiwan that have an existing lending relationship with E.Sun Bank. Guarantees are treated as off-balance sheet liabilities. As of March 31, 2003, E.Sun Bank had a total of NT$5.3 billion in guarantees and acceptances outstanding.

Cash Management

Cash management services enable customers to expedite the check collection process and make payments to suppliers more efficiently and thereby optimize liquidity and reduce operating costs. E.Sun Bank’s cash management services consist of an ‘‘e-collection’’ system, a web-based payment solution service through which corporate banking customers can direct E.Sun Bank to collect payments on their behalf for tuitions and other fees, management fees and capital increase payments. In addition, cash management services provide accounts receivable financing services to corporate banking customers by making payments to suppliers more efficiently.

Wealth Management

E.Sun Bank’s Wealth Management Division offers a variety of banking products and services to its affluent banking customers. Our aim in wealth management is to provide customized personal advisory services to individual clients to develop long-term beneficial relationships with our clients.

Wealth Management

E.Sun Bank’s affluent customers are invited to join E.Sun Club. To qualify as a customer for wealth management, customers must have investable assets (excluding equity securities held, for example, through brokerage accounts at E.Sun Securities) of more than NT$3.0 million. Services offered to these customers include deposit services, financial planning and customized services. Through E.Sun Securities, E.Sun Insurance Agency Co., Ltd. and E.Sun Securities Investment Trust Co., Ltd., E.Sun Bank’s affluent banking customers also have access to a broad range of financial products, including securities, insurance and mutual funds.

Trust

E.Sun Bank’s Trust Division offers a variety of trust products and services to its customers. Trust products and services include trust services, mutual funds, fixed-income and structured investment products and custodial services. As of March 31, 2003, E.Sun Bank had NT$13.2 billion of assets under management (defined as trust funds and mutual funds managed by E.Sun Bank and securities held under custody by E.Sun Bank).

. Trust Services. E.Sun Bank offers its consumer and corporate customers a broad range of trust services, including the establishment of employee trust savings funds. E.Sun Bank also acts as a trustee under indentures for the issuance of corporate debt instruments. E.Sun Bank receives a fee for acting as a trustee.
. Mutual Funds. E.Sun Bank acts as a distributor of third-party domestic and international mutual funds to its customers through arrangements with more than 27 mutual fund companies, including Fidelity. In addition, customers are offered an opportunity to invest in more than 327 third-party domestic and international mutual funds through our non-discretionary trust funds. E.Sun Bank earns a referral fee for acting as a distributor.
. Fixed-income and Structured Investment Products. E.Sun Bank makes available to its customers structured financial products such as structured notes on which it earns fees for both the insurance and investment features.

. Custodian Services. E.Sun Bank provides custodian services principally to domestic mutual funds, as well as to other financial institutions in Taiwan. These services include the safekeeping of securities and the collection of dividend and interest payments on securities. E.Sun Bank receives a fee for holding securities for the benefit of corporations and mutual funds and receives a commission for the execution of trades in respect of such securities.

Following the recent promulgation of the ROC Trust Enterprise Law, E.Sun Bank plans to provide various new trust services, including joint management and utilization of trust funds, public interest trusts, insurance trusts, financial asset securitization and real estate asset securitization.

Insurance Products

E.Sun Bank, through its subsidiary E.Sun Insurance Agency Co., Ltd., acts as a third-party distributor of insurance products underwritten by domestic and international insurance companies, including American International Group Inc. and CIGNA. E.Sun Insurance Agency Co., Ltd. earns a commission for acting as a third-party distributor. The range of insurance products E.Sun Bank distributes through E.Sun Insurance Agency Co., Ltd. includes term life insurance products, single mortgage reducing term assurance, home insurance, medical insurance, motor insurance and travel insurance.

Treasury Division

The Treasury Division is comprised of approximately 21 professionals and is divided into six functional teams:

. Risk Management Unit. The risk management unit monitors E.Sun Bank’s daily interbank lending, securities investments, foreign currency trades, discount paper trades with foreign banks, guarantees, acceptances, trust fund investments, unsettled positions, mid-day and overnight position limits, stop losses, funding sources for each business operation and funding shortages. The risk management unit monitors the risks following E.Sun Bank’s internal ‘‘Guideline for Trading, Investment and Funding Operations,’’ which sets forth, for example, counterparty, per trade, stop loss and total exposure limits for different risk-bearing products based on the credit rating of such products, and the delegation of trading authority within E.Sun Bank.
. Planning Department. The planning department is responsible for developing new financial products, establishing annual plans for the Treasury Division, updating relevant rules and procedures in connection with the operation of the Treasury Division, drafting and revising operational guidelines or manuals and planning and managing investment activities of E.Sun Bank.
. Money Market Department. The money market department is in charge of managing interbank lending for both local and foreign currencies, monitoring reserve positions, trading in various securities to meet funding requirements, setting interest rates for negotiable time deposit certificates and foreign currency lending and deposit and cooperating with the Central Bank of China for its open market operations.
. Trading Department. The trading department of the Treasury Division comprises four trading desks:
. Fixed-Income Trading Desk. The fixed-income trading desk’s activities principally involve trading for E.Sun Bank’s own account using the portion of E.Sun Bank’s liquidity reserve in excess of the minimum regulatory requirement. The purpose of such trading is to realize trading gains and to provide liquidity to E.Sun Bank’s reserve position. The desk typically trades in debt securities, such as commercial paper, government bonds and bond repurchase transactions.

. Foreign Exchange Trading Desk. The foreign exchange trading desk manages E.Sun Bank’s foreign exchange exposure and offers foreign exchange products to E.Sun Bank’s customers. The foreign exchange desk trades in currencies, primarily through spot and forward exchange contracts, as part of E.Sun Bank’s management of its asset and liability positions. The principal goal of these trading activities is to minimize the impact of currency exchange fluctuations on E.Sun Bank’s financial position.
. Equity Trading Desk. The equity trading desk operates exclusively to earn income through trading equity securities for E.Sun Bank’s own account. The equity trading desk invests in both mutual funds and equity securities.
. Derivative Trading Desk. E.Sun Bank offers financial derivative instruments to its customers, including foreign exchange forward contracts, currency swaps, interest rate swaps, cross currency swaps, currency options and forward agreements. The derivative trading desk also engages in hedging transactions relating to E.Sun Bank’s interest rate and exchange rate risks and in local and foreign currency derivative transactions. E.Sun Bank has applied to MOF for approval to offer foreign currency exchange rate options, New Taiwan dollar forward rate agreements, New Taiwan dollar asset swaps and structured deposits.
. Operation Department. The operation department is in charge of the confirmation, clearing and settlement matters in connection with trades in the money market, bond market, foreign exchange market and interbank lending market, the management of Real-Time Gross Settlement System maintained by the Central Bank of China, custody of short-term bills, other securities and local and foreign currencies, book entry of government bonds, clearing and settlement of bills and securities borrowings. The department also controls the use of trade-related signatures and corporate specimens.
. Marketing Department. The marketing department promotes new financial products to E.Sun Bank’s corporate banking customers as well as consumer banking and wealth management customers. The department focuses on assets and liabilities products to meet the investment, financing and hedging needs of E.Sun Bank’s customers. The department also provides consulting services to E.Sun Bank’s customers in connection with the banking services provided by E.Sun Bank.

Credit Administration and Policy

Consistent with its conservative financial management philosophy, E.Sun Bank has maintained stringent credit standards since its inception. As of the years ended December 31, 2000, 2001 and 2002, E.Sun Bank had an NPL ratio of 2.46%, 2.83% and 1.38%, respectively. As of March 31, 2003, E.Sun Bank had a NPL ratio of 1.36%, which was the lowest of any domestic commercial bank in Taiwan, compared to the ROC banking industry average of 6.11%.

E.Sun Bank’s credit risk management function is independent of its sales and marketing function. E.Sun Bank manages credit risk by lending to a diverse base of consumer and corporate customers in various industrial and geographic sectors. The credit function is organized into two distinct departments by customer type — consumer and corporate.

MOF has issued specific guidelines governing bank lending. E.Sun Bank strictly follows lending policies stipulated by MOF. The table sets forth MOF’s lending ceiling as a percentage of a bank’s total lending (defined as loan size divided by the bank’s net worth) and E.Sun Bank’s selected lending ceilings calculated based on MOF guidelines.

Borrower Profile: Single individual. . . . . . . . . . . . . . . . . . . . . . . . . . . Single legal entity . . . . . . . . . . . . . . . . . . . . . . . . . . Single government-owned enterprise . . . . . . . . . . . . . Related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	MOF’s Lending Percentage 3% 15% 100% 40%	E.Sun Bank’s Lending Ceiling
		(in millions) NT$ 641 3,209 21,390 8,556

As of March 31, 2003, no loan exposure to a single customer or single customer group exceeded 2.97%.

See ‘‘Regulation of the Taiwan Financial Services Industry — Asset Quality and Non-Performing Loans — Asset Quality — Restrictions on Credit Exposure to Non-Related Parties.’’

Consumer Credit Administration

The consumer banking units and the Credit Card Division are responsible for the consumer loan and credit card approval process, respectively. As of March 31, 2003, the Consumer Banking Division had 97 credit approval officers and 19 acceptance officers responsible for the review and approval of all consumer loan applications. As of the same date, the Credit Card Division had 17 credit approval officers and 1 acceptance officer responsible for the review and approval of all credit card applications. In addition, the Consumer Banking Division also has a separate team of 32 qualified appraisers responsible for appraising the value of collateral. Credit approval policy is based on written guidelines, which are periodically amended by E.Sun Bank’s board of directors. These guidelines require a review of a variety of factors, including customer type, customer’s ability to repay, use of proceeds, collateral requirements and the length of time a borrower has been a customer of E.Sun Bank.

E.Sun Bank utilizes computerized portfolio modeling and decision support tools to forecast credit risk and make credit policy adjustments. E.Sun Bank utilizes an automated ‘‘scoring system’’ to help manage its credit portfolio. This application uses a data-driven decision tool to determine risk-adjusted pricing and automated loan approvals, establish credit limits and manage applications for credit cards, personal loans and automobile loans. In addition, E.Sun Bank has implemented a credit scoring system developed by a financial institutions consulting company. In addition, all consumer credits are checked with the national credit bureau, the Joint Credit Information Center of Taiwan.

Corporate Credit Administration

The Corporate Banking Division and Loan and Credit Committee are responsible for the corporate credit administration. The Corporate Banking Division reviews and investigates loan applicants and passes cases to the Loan and Credit Committee for approval. The Loan and Credit Committee, whose members consist of the President, the Executive Vice President and the manager of the Consumer Banking Division and the Corporate Banking Division, meets weekly to review and approve large credit applications and review the status of E.Sun Bank’s credit exposure. From time to time, E.Sun Bank reviews credit policies to manage its exposure to different industries, groups and individual borrowers.

The application and approval procedures are generally undertaken in three stages. During the first stage, the applicant submits a standard loan application form and interviews with a loan officer. E.Sun Bank then conducts pre-screening (for new clients), credit check and credit analysis during the second stage. Pending the outcome of such check and analysis, the application is submitted to the Loan and Credit Committee for internal credit approval.

E.Sun Bank has instituted a set of lending guidelines for use in the review of corporate loan applications. These guidelines require a review of ‘‘5P’’ categories of information:

. People: the background and experience of key members of the applicant’s management team;
. Purpose: the proposed use of proceeds;
. Payment: the applicant’s ability to pay interest and repay principal based on an analysis of current and forecasted cash flow and other items;
. Protection: in the case of secured loans, the value of proposed collateral; and
. Perspective: the business prospects of the applicant and its industry.

E.Sun Bank also conducts on-going monitoring and quarterly formal reviews of its outstanding corporate loans. More extensive reviews are conducted for corporate loans with an inferior risk rating. Special reviews are conducted immediately for loans to borrowers whose creditworthiness has deteriorated due to changes in the market or industry conditions or whose financial status or business condition has reportedly declined. As a result of such reviews, E.Sun Bank may place certain performing loans on its watch list for monitoring purposes or other action.

Distribution

E.Sun Bank recognizes the importance of utilizing a broad network of distribution channels to increase its sources of income and enhance its reputation and brand recognition. E.Sun Bank’s distribution network consists of full branches, mini-branches, automatic service machines (including ATMs and deposit machines), phone banking and Internet banking. As part of its long-term strategy for developing and integrating both its traditional and technology-based channels, E.Sun Bank aims to offer customers convenient access while enhancing its overall operating efficiency.

As of March 31, 2003, E.Sun Bank maintained ten consumer banking centers and ten corporate banking centers with 432 sales agents for marketing purpose. These sales agents seek out new customers as well as coordinate E.Sun Bank’s cross-selling efforts to its 2.7 million customers through telemarketing, direct mailings and special promotions. These sales agent also work with customer relationship managers at other subsidiaries of E.Sun Financial to identify potential customers for E.Sun Bank. E.Sun Bank’s sales agents are compensated based on a salary plus a bonus if certain sales and operating objectives are achieved.

The following table sets forth the percentage of transactions conducted for the year ended December 31, 2002, through the different types of distribution channels measured in number of transactions.

Type ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phone banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internet banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Automatic bill payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total technology banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total branch walk-in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Transactions % of Total Transactions (in thousands, except percentages) 6,934 5.37% 2,031 1.57 3,263 2.52 65,483 50.66 77,711 60.12 51,552 39.88 129,263 100.00%	% of Total Transactions
		60.12 39.88
		100.00%

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Branch Network

E.Sun Bank has 52 branches (including 8 sub-branches) in Taiwan, approximately 50% of which are located in the greater Taipei metropolitan area. E.Sun Bank plans to increase the number of branches to 60 (including sub-branches) by the end of 2003. E.Sun Bank seeks to differentiate itself through the level of service and sales-orientation of its branches. It increasingly uses its branches to provide wealth management services to its affluent customers and to cross-sell different products.

ROC government regulations prohibit banks in Taiwan from opening more than five branches each year. In 2000, the ROC government began to allow banks to establish sub-branches, or ‘‘mini-branches,’’ which are smaller in size and staff numbers compared to regular branches, and are only equipped to perform simple and less time-intensive transactions. Sub-branches primarily cater to consumer customers and can also be used as marketing offices and service centers.

E.Sun Bank provides its employees with training courses and seminars on sales techniques for different distribution channels and financial products. E.Sun Bank also provides incentives for sales staff who exceed sales targets. Individual product promotions are typically run on a monthly basis, rather than on an ongoing basis, to promote focused selling efforts and variety and to allow business units to monitor and evaluate a range of products.

Technology-based Channels

E.Sun Bank believes that its technology-based distribution channels are an important part of its distribution network. E.Sun Bank is developing a number of technological solutions to improve customer service and lower operating costs. These technology based channels include automated service machines, call center, Internet banking and automated telephone banking.

Call Center. E.Sun Bank operates two centralized call centers for customer service and customer relationship management for banking and credit cards customers. The call centers are staffed with approximately 143 customer service representatives which handled 2.48 million calls in 2002.

E.Sun Bank’s automated service system supports telephone banking. Customers are able to use the automated system to access information about all of their account activities and contact customer service representatives with different skill sets, such as the ability to speak the Taiwanese dialect. This system logs requests, complaints and service records that become part of the customers’ account information. E.Sun Bank’s automated telephone banking service system handled 3.42 million calls in 2002.

Phone Banking. Phone banking provides customers with a convenient method of banking by allowing customers to transfer funds, make account inquiries and report missing account passbooks by telephone. Phone banking is an efficient distribution channel and reduces E.Sun Bank’s administrative costs. In addition, phone banking facilitates E.Sun Bank’s marketing strategy of offering its various products and services over the phone. The majority of the transactions over the phone are balance inquiries and consultations with E.Sun Bank’s customer representatives.

E.Sun Bank also provides mobile phone banking services through its ‘‘i-mode’’ offered through an alliance with NTT, a Japanese mobile phone service provider. E.Sun Bank currently offers mobile phone banking customers full account inquiry services (including balance inquiries and transaction history reports) and fund transfer services.

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Internet Banking. E.Sun Bank aims to provide premium Internet-based solutions to its customers. All of E.Sun Bank’s consumer operations, including consumer banking and credit card operations, have Internet platforms, allowing customers to access and change information, place requests and conduct transactions online. Internet banking not only provides convenience to customers, but also enables E.Sun Bank to provide a cost-efficient and scaleable method of processing financial services transactions.

E.Sun Bank has established a dedicated Internet banking team responsible for overseeing the development of a personal banking portal accessible through E.Sun Bank’s website. In 1996, E.Sun Bank established a website to provide information to consumer clients on deposits, loans, credit cards, mutual funds and other financial matters. This website also enables customers to conduct funds transfers through the Internet. Since 1996, the number of transactions conducted through the Internet by E.Sun Bank’s consumer customers has grown significantly. As of August 2000, customers could apply for credit cards through the Internet. As of March 31, 2003, E.Sun Bank had approximately 80,000 registered Internet banking customers.

Automated Service Machines. Our automated service machines include ATMs and other types of automated service machines, which include machines for making entries in savings passbooks, and kiosks, which allow customers to conduct online banking services. E.Sun Bank currently has 172 ATMs and plans to install more than 20 additional ATMs in 2003.

As part of E.Sun Bank’s distribution strategy, branches focus on cross-selling products to the most profitable customers, while less profitable customers are steered toward lower-cost channels such as automated service machines. E.Sun Bank sets up 24-hour automated service centers in its branches, which offer ATMs, machines for making entries in savings passbooks and other automated services. E.Sun Bank expects that the migration of transactions from traditional branches to automated channels such as ATMs and online channels will continue.

Industry

The Taiwan banking industry has grown rapidly over the last decade, fueled primarily by economic growth and the ongoing deregulation of the financial services industry. The total assets of financial institutions operating in Taiwan more than doubled to NT$30.8 trillion as of March 31, 2003, from NT$14.4 trillion as of December 31, 1992. Taiwan is now the second largest banking market in Asia (excluding Japan) measured by loan volume.

The Taiwan banking industry is comprised of banking institutions of various sizes and functions, including domestic commercial banks, domestic specialized banks, domestic medium business banks, foreign banks, credit cooperatives, credit departments of farmers’ and fishermen’s associations and bills finance companies. As of March 31, 2003, there were 420 banking institutions in Taiwan. Despite this highly fragmented market, domestic commercial banks control approximately 71.3% of the assets of Taiwan’s banking institutions. As of March 31, 2003, there were 52 domestic commercial banks in Taiwan.

The Taiwan banking industry has been gradually deregulated since the late 1980s, although many restrictions remain. First, the ROC government granted new licenses to a number of new financial institutions, allowing new domestic banks, bills finance companies and life insurance companies to be established as well as allowing foreign banks and life insurance companies full access to the financial market. The major development in the deregulation of Taiwan’s banking industry was the granting of new banking licenses which resulted in the establishment of the 16 New Banks, including E.Sun Bank, in the early 1990s. The New Banks were required to have initial paid-in capital of at least NT$10.0 billion. The establishment of the New Banks resulted in an increase of the total equity base of the Taiwan banking system. In addition, the New Banks increased their loans and assets quickly in order to deploy their relatively large initial capital bases more efficiently.

Second, in August 1997, the ROC government commenced the gradual privatization of state-owned banks. Since 1997, the ROC government’s ownership in all large commercial banks has steadily decreased.

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Third, the ROC government has fostered the rapid growth of the short-term money market and, to a lesser extent, long-term fixed-income debt markets. This was accomplished primarily through the licensing since 1994 of 13 new bills finance companies, including E.Sun Bills Finance, which specialize in underwriting, guarantees and secondary market trading of short-term bills.

Over the past three years, MOF and other regulatory authorities have implemented, or are in the process of implementing, a series of policy changes designed to strengthen the safety and solvency of the domestic banking system. As of June 30, 2002, the Taiwan banking industry had an average capital adequacy ratio of 10.2%, in excess of the minimum 8% required by the Bureau of Monetary Affairs of MOF and recommended by the Bank of International Settlements.

Competition

E.Sun Bank faces substantial competition in each of its product and service lines. E.Sun Bank competes principally with other domestic commercial banks in Taiwan, but also faces competition from a number of other financial institutions including foreign banks, and, to a lesser extent, various other types of domestic banking institutions.

Certain factors may significantly change the competitive landscape of the Taiwan banking industry. These factors include Taiwan’s entry (as the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu) into the World Trade Organization (‘‘WTO’’), existing and future strategic alliances between domestic and foreign financial institutions and the ROC government’s policy of encouraging cross-border mergers and acquisitions in the Taiwan banking industry and further opening up of the market for foreign competition. The ROC government has enacted laws to permit mergers of financial institutions and the establishment of financial holding companies to broaden the business scope and strengthen the competitiveness of domestic banks.

We do not believe that Taiwan’s entry into the WTO will pose an immediate threat to the domestic banking industry’s competitive position. We believe that, given their limited number of branches and sales personnel, most of the foreign banks do not compete effectively with domestic banks in Taiwan and that foreign banks in Taiwan are unlikely to match domestic banks in terms of the number of branches and the size of operations for a significant period of time after Taiwan’s entry into the WTO. However, the trend in cross-border strategic alliances and mergers and acquisitions and the government’s policy of further deregulating the market could change the competitive landscape in the long term.

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The table below sets forth, for the date indicated, a comparison of selected information for certain Taiwan banking institutions by type.

	As of March 31, 2003
Shareholders’ Equity Amount Market Share (in NT$ 19 1.3% 30 2.1 37 2.6 26 1.8 16 1.1 16 1.1 104 7.2 249 17.2 80 5.5 57 3.9 43 3.0 32 2.2 14 1.0 11 0.7 13 0.9 600 41.5 849 58.7 347 24.0 NT$1,446 100.0%	Assets Deposits Loans Amount Market Share Amount Market Share Amount Market Share billions, except percentages, branch and ATM numbers) NT$ 283 1.3% NT$ 212 1.3% NT$ 169 1.3% 269 1.2 196 1.2 141 1.1 484 2.2 325 2.0 337 2.6 351 1.6 246 1.5 189 1.4 213 1.0 156 1.0 144 1.1 187 0.9 147 0.9 128 1.0 1,726 7.9 1,272 7.9 1,111 8.5 3,513 16.0 2,553 15.9 2,219 17.0 853 3.9 635 3.9 525 4.0 644 2.9 516 3.2 379 2.9 356 1.6 272 1.7 165 1.3 339 1.5 249 1.5 213 1.6 326 1.5 274 1.7 210 1.6 261 1.2 206 1.3 152 1.2 229 1.0 205 1.3 132 1.0 9,324 42.5 6,563 40.8 5,467 41.8 12,331 56.2 8,921 55.4 7,244 55.4 6,083 27.7 4,628 28.7 3,609 27.6 NT$21,928 100.0% NT$16,102 100.0% NT$13,072 100.0%	Loans
Amount NT$ 19 30 37 26 16 16 104 249 80 57 43 32 14 11 13 600 849 347 NT$1,446			Market Share
			1.3% 1.1 2.6 1.4 1.1 1.0 8.5
			17.0 4.0 2.9 1.3 1.6 1.6 1.2 1.0 41.8
			55.4 27.6
			100.0%

(1) Data are from unaudited reports to the Bureau of Monetary Affairs of MOF and do not include business departments of each bank which perform the same functions as a branch. The data also excludes Dah An Bank, which was acquired by Taishin Bank in 2002.

E.Sun Bills Finance

Competitive Strengths

E.Sun Bills Finance believes its competitive strengths include the following:

Strong asset quality through disciplined risk management

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Strong brand recognition and corporate culture

Highly skilled workforce

Seasoned management

Strategy

E.Sun Bills Finance aims to be one of the leading bills finance companies in Taiwan. E.Sun Bills Finance’s strategy includes the following:

Cross-sell a diverse range of products

The business scope of bills finance overlaps with those of traditional banking and securities businesses, thereby creating significant cross-selling opportunities. E.Sun Bills Finance intends to leverage the cross-selling opportunities to broaden its customer base.

Continue to improve risk management

E.Sun Bills Finance intends to continue to develop and implement comprehensive policies and procedures to identify, monitor and manage risk. Through its close relationship with E.Sun Bank and the sharing of management personnel with E.Sun Bank, E.Sun Bills Finance has been able to establish an effective credit risk management system. In addition, E.Sun Bills Finance intends to continue to work with E.Sun Bank to train its credit officers. E.Sun Bills Finance believes that its continued efforts to improve risk management will further its ability to maintain its strong asset and credit quality.

Reduce cost and improve efficiency

E.Sun Bills Finance is seeking to reduce its costs relative to its income by further integrating its operations with those of E.Sun Financial. For example, E.Sun Bills Finance has lowered its cost for treasury services by utilizing the treasury services provided by E.Sun Financial. E.Sun Bills Finance has been able to lower its costs by sharing certain back office functions and by integrating its management information systems with those of E.Sun Financial.

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Continue to introduce new products and services

The new ROC Rules Governing Bills Finance Companies have expanded the scope of businesses in which bills finance companies are permitted to conduct. To take advantage of such liberalization, E.Sun Bills Finance has established a business planning and execution team aimed at developing new products and introducing new services to its customers. E.Sun Bills Finance intends to further improve its profitability by introducing new products and services.

Products and Services

Fixed-Income Trading

E.Sun Bills Finance trades fixed-income securities such as government bonds, corporate bonds, convertible bonds, financial debentures and short-term bills, which include commercial paper, negotiable certificates of deposit issued by banks and treasury bills issued by the ROC government. For 2000, 2001 and 2002 and the first quarter of 2003, net gain on trading securities was NT$590.8 million, NT$1,002.4 million, NT$820.9 million and NT$339.1 million, respectively, which represented 79.1%, 78.2%, 79.8% and 87.7% of the operating revenue of E.Sun Bills Finance, respectively. As of March 31, 2003, E.Sun Bills Finance’s trading position, net of bonds purchased to be resold, was NT$13.6 billion. Approximately 42.7% of E.Sun Bills Finance’s trading activities were conducted with financial institutions for the period ended March 31, 2003.

A portion of E.Sun Bills Finance’s tradings are carried out for investment purposes and for the purpose of meeting E.Sun Bills Finance’s liquidity needs. For 2000, 2001 and 2002 and the first quarter of 2003, net interest income from investments in fixed-income securities was NT$61.8 million, NT$57.2 million, NT$66.0 million and NT$21.3 million, respectively, which represented 6.9%, 4.0%, 5.7% and 5.1% of the operating revenue of E.Sun Bills Finance, respectively.

Guarantees

E.Sun Bills Finance provides guarantees for commercial paper on behalf of its corporate customers. The term of its guarantees is generally for periods less than 12 months. In Taiwan, all short-term bills issued by companies that do not have credit ratings may not be certified, underwritten, brokeraged, purchased or sold by bills finance companies unless they are guaranteed by financial institutions with credit ratings. Fees on guarantees are typically between .2% and 1.0% of the draft amount per annum, depending on the corporate customer’s credit rating and financial condition. E.Sun Bills Finance’s customers for these products are usually publicly traded companies in Taiwan. Guarantees are treated as off-balance sheet liabilities.

For 2000, 2001 and 2002 and the first quarter of 2003, fee income from guarantees was NT$73.9 million, NT$70.9 million, NT$73.0 million and NT$18.3 million, respectively, which represented 56.7%, 44.6%, 43.7% and 49.5% of the total fee income of E.Sun Bills Finance, respectively. As of March 31, 2003, E.Sun Bills Finance had a total of NT$18.0 billion in guarantees outstanding, which accounted for 3.6% of the total guarantees outstanding for all bills finance companies in Taiwan.

Certification and Underwriting

E.Sun Bills Finance provides certification and underwriting services of commercial paper. E.Sun Bills Finance provides certification services by authenticating signatures on commercial paper. This service is only provided in conjunction with E.Sun Bills Finance’s underwriting services.

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For the years ended December 31, 2000, 2001 and 2002, fee income from underwriting was NT$47.1 million, NT$78.3 million and NT$83.5 million, respectively, representing 36.2%, 49.2% and 49.9%, respectively, of the total fee income of E.Sun Bills Finance over the same period. E.Sun Bills Finance commenced its certification services in 2002. For 2002, fee income from certification was NT$10.7 million, which represented 6.4% of the total fee income of E.Sun Bills Finance.

Funding

Like most bills finance companies, E.Sun Bills Finance’s major source of funding is repurchase transactions where bonds are sold to a buyer who agrees to sell back the original short-term bills or bonds at an agreed price and date. Repurchase transactions are treated as an off-balance sheet liability since a repurchase transaction position is transferred to the counterparty. However, the market risk of the securities sold in a repurchase transaction remains with E.Sun Bills Finance.

For the years ended December 31, 2000, 2001 and 2002, repurchase transactions represented 85.7%, 82.3% and 80.1%, respectively, of E.Sun Bills Finance’s funding source. Other funding sources include short-term inter-bank borrowings, shareholders’ equity and operating reserves.

Risk Management

E.Sun Bills Finance faces credit risk and market risk. Credit risk represents the loss that E.Sun Bills Finance would incur if a counterparty fails to perform its contractual obligations. Market risk significant to E.Sun Bills Finance’s operations is primarily interest rate risk. E.Sun Bills Finance has developed and implemented comprehensive policies and procedures to identify, monitor and manage risk. E.Sun Bills Finance has established an effective credit risk management system, benefiting from its close relationship with E.Sun Bank, through sharing management with E.Sun Bank and obtaining training for its credit officers from E.Sun Bank. The board of directors of E.Sun Bills Finance is actively involved in E.Sun Bills Finance’s overall risk management profile, setting a framework for credit risk and market risk.

Credit Risk

Credit risk is the possibility of loss due to the failure of any counterparty to abide by the terms and conditions of any financial contract with E.Sun Bills Finance. E.Sun Bills Finance identifies and manages this risk by capping exposure to a specific industry sector and to a single business group, as well as having a stringent credit approval process, post-disbursement monitoring and remedial management procedures.

The credit risk of E.Sun Bills Finance is concentrated on commercial paper guarantees, which are denominated solely in NT dollars. As of March 31, 2003, E.Sun Bills Finance’s guarantee to equity ratio was 3.4 times compared to the industry average of 4.2 times.

The Credit Risk Management Committee of E.Sun Bills Finance holds weekly credit risk management meetings to review its credit risk exposure. Secured transactions over NT$100 million or unsecured transactions over NT$50 million must be approved by the board of directors of E.Sun Bills Finance. E.Sun Bills Finance has a similar internal grading system for evaluation of credit risks as that of E.Sun Bank.

Market Risk

Market risk is the possibility of loss due to changes in interest rates and liquidity of securities in the market. The objective of market risk management is to avoid excessive exposure of E.Sun Bills Finance’s earnings and equity to loss and to reduce its exposure to the volatility inherent in financial instruments.

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Market risk policies are set by the Asset and Liability Management Committee of E.Sun Bills Finance, but are implemented by the head of trading who also monitors E.Sun Bills Finance’s market risk position on a daily basis. The fixed-income trading portfolio is diversified in terms of the types of issuers, maturity and yields. Corporate bonds held for long-term investment purposes are recommended by the traders, reviewed and approved by the President of E.Sun Bills Finance. Trading limits are assigned to each dealer in accordance with experience. General and special audits are undertaken internally by the auditing department, which reports directly to the board of directors of E.Sun Bills Finance. At E.Sun Bills Finance, positions of bills and bonds of certain maturities are limited to a defined percentage of its total position to ensure the liquidity of its portfolio. Stop-loss limits are implemented to sell securities if market interest rates exceed yields by a defined number of basis points. The Asset and Liability Management Committee of E.Sun Bills Finance meets quarterly with the Asset and Liability Management Committee of E.Sun Financial to discuss market risk position of E.Sun Bills Finance.

Industry and Competition

The business environment in which E.Sun Bills Finance operates is very competitive for smaller financial institutions. In the 1970s, the ROC government created the ‘‘three old’’ bills finance companies in an attempt to develop the short-term money market in Taiwan. The three old bills finance companies originally formed an oligopoly that dominated the market for almost 20 years until deregulation took place in the early 1990s and the market was opened to qualified banks and new bills finance companies. Consequently, 13 new bills finance companies have been established over the past few years. As of December 31, 2002, there were 11 bills finance companies in Taiwan after Ta Chung Bills Finance was merged into Ta Chung Bank in May 2001, and Cosmos Bills Finance was merged into Cosmos Bank in October 2002.

In the primary market, E.Sun Bills Finance competes against the three old bills finance companies, the 10 other new bills finance companies and a number of qualified banks. In the secondary market, there are even more financial institutions competing directly with E.Sun Bills Finance, making for an intensely competitive environment. The failure of two bills finance companies in late 1998 reflected in part the intense competition in this industry.

E.Sun Securities

Founded in 2000, E.Sun Securities is a securities firm that provides a range of brokerage and securities products and services, primarily to individuals as well as to corporations and institutions. E.Sun Securities provides various services.

. Brokerage. Brokerage activities generate commissions and fee income from its client’s trading transactions.
. Margin Lending. E.Sun Securities began to offer its customers margin lending in April 2003. Margin lending is the business of extending loans to customers of securities brokerage firms in connection with customers’ purchases of securities. These loans are typically secured against the securities purchased with the loans. Margin lending generates interest income.
. Proprietary Trading. Proprietary trading activities include transactions in which E.Sun Securities maintains its own inventory of trading securities and effects transactions with counterparties as a principal. Other proprietary transactions are carried out for investment purposes and for the purposes of meeting E.Sun Securities’ liquidity needs. Proprietary trading activities also include transactions in which E.Sun Securities purchases securities underwritten in initial public offerings.

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. Underwriting. In 2002, E.Sun Securities commenced its underwriting business. E.Sun Securities acts as an underwriter for domestic initial public offerings, follow-on offerings and convertible bond offerings. For the year ended December 31, 2002, E.Sun Securities underwrote seven initial public offerings in Taiwan.
. Research. E.Sun Securities’ brokerage, proprietary trading and underwriting businesses are complemented by a dedicated research team comprised of 11 research analysts.

Distribution

As of March 31, 2003, E.Sun Securities had four branches and 33 brokers. In January 2003, E.Sun Securities entered into an acquisition agreement with Yung Li Securities to acquire the brokerage businesses of its head office and five branches. The Yung Li Securities acquisition is expected to be completed by the end of June 2003. Upon completion of the transaction, E.Sun Securities will have a distribution network of ten branches and 100 brokers. E.Sun Securities believes that it will be able to leverage the financial holding company structure to cross-sell its existing products to the customers of E.Sun Bank and to cross-sell some of E.Sun Bank’s products to E.Sun Securities’ customers. In particular, E.Sun Securities views E.Sun Bank’s wealth management customers as important to its retail brokerage business.

Risk Management

The Asset and Liability Management Committee of E.Sun Financial oversees the overall risk exposure. Risk at E.Sun Securities is evaluated based on various factors, including E.Sun Securities’ shareholders’ equity, existing value-at-risk and capital adequacy status. These factors are reviewed regularly by the Investment Committee of E.Sun Securities. E.Sun Securities holds monthly meetings with E.Sun Financial and other subsidiaries of E.Sun Financial to discuss issues relating to asset and liability management and market risk. E.Sun Securities has adopted prudent internal control and procedures for risk management for margin lending, proprietary trading and underwriting.

Industry and Competition

The equity market of Taiwan has grown to become the third largest in Asia after Japan and China in terms of trading volume, and the fourth largest in Asia after Japan, China and Hong Kong by market capitalization. Taiwan’s stock market is unique in its high proportion of retail participation. Retail investors account for more than 80.0% of total trading volume, a substantially higher proportion than in other major Asian markets. Active retail participation in the equity market has made equity investment and trading an integral part of providing personal financial services in Taiwan. The securities market in Taiwan is highly fragmented with 54 full service securities firms and 68 stand-alone brokerage houses as of December 31, 2002. The market share of the top ten firms rose from 34.0% to 46.4% from 1999 to 2002. Given the advantages of scale and scope in the securities industry, consolidation is expected to continue.

Information Technology

Our information technology system is located in our Sung Shan office in Taipei. The mainframe computer has dual processing units and a ‘‘mirror’’ disk, which functions as an alternative system in the event of a system failure. The Information Technology Service Division creates back-up tapes of computer files and databases on a daily basis. The back-up tapes are stored in IBM’s data service center in Linkou city, which also functions as our disaster recovery center.

Our principal categories of information technology relate to asset and liability management, customer value and risk analysis management and risk management.

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Asset and Liability Management

We have implemented a system designed to analyze and evaluate the liquidity and interest rate risk exposure of E.Sun Bank on a real-time basis. This system assists E.Sun Bank in monitoring and managing its funding position and liquidity status, pricing its interest rates for deposits and lending products, analyzing the combination of its asset and liability and planning its capital allocation.

E.Sun Bank relies heavily on its management information systems to process and analyze data relating to its asset and liability management. The data processed by its management information system are crucial in managing E.Sun Bank’s deposit, lending, foreign currency remittance and trust businesses. We expect our asset and liability management system will assist us in achieving the following goals:

. to closely monitor the funding sources and cash outflow of money market transactions by using the ‘‘maturity analysis’’ method, and to evaluate the cost and benefit ratios for increasing profits from such transactions;
. to obtain a quick evaluation on the potential effects on profits and losses upon fluctuations of interest rates by trial pricing calculations to enhance the accuracy of pricing adjustments;
. to avoid losses incurred by undue interest rate sensitivity gaps through the management of interest rate risk; and
. to monitor the costs and benefits of various funding sources to enhance the profitability of the banking business.

Customer Value and Risk Analysis Management

We are currently working with Mercer Oliver Wyman, our financial consultant, to implement a customer value and risk analysis management system to further leverage our relationships with our customers by utilizing statistics, econometrics, computer modeling and industry expertise. The goal of customer mining is to identify customer values by analyzing transactional, operational, customer and market data collected from all operating entities of E.Sun Financial. We believe that the ability to mine customer data through this project will enable us to:

. leverage new relationships with customers;
. improve new product acceptability rates;
. decrease time-to-market;
. increase advertising effectiveness;
. decrease marketing expenses; and
. better integrate with retailer incentive programs.

This project is expected to be completed by March 2004.

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Risk Management System

Reuters Risk and Trade Management Solutions. As a part of the initiative to enhance the risk management systems at E.Sun Bank, E.Sun Bank entered into an agreement with Reuters in November 2002 in connection with its risk and trade management solutions. We are currently in the process of installing Kondor Plus, a part of the Reuters risk and trade management solutions, at E.Sun Bank and later at the holding company. We also plan to install the following Reuters risk and trade management solutions:

. Kondor Trade Processing, a flexible and automated system designed to provide such functions as accounting entry generation, cash management and transaction settlement.
. Kondor Value at Risk, which integrates trading and risk information across systems and delivers comprehensive analysis on market and credit risks.
. Kondor Global Limits, which consolidates credit limit information through calculation, reporting and revaluation and enables the efficient limit monitoring and utilization across the enterprise.

Employees

We believe our employees are the most important element of our company and professional training is one of our key responsibilities. We have devoted significant attention and resources to recruit and train our employees in order to enhance their professional capabilities and to instill the qualities that are essential to enable us to realize our long-term goals. We provide on the job training as well as training in classrooms. In 2002, E.Sun Bank conducted 113 in-house training sessions and 157 outside training programs. We recruit from the top universities in Taiwan as well as from other financial institutions. We believe that a high degree of customer satisfaction can only be achieved by satisfied employees. We provide benefits that include staff loans and medical, educational and other allowances.

The following table sets forth, for the periods indicated, a breakdown of our employees by our principal subsidiaries as of March 31, 2003.

Period Ended March	Period Ended March	31,
2001 — 1,410 84 75 1,569	2002 39 1,532 79 138 1,788	2003
		40 1,610 79 166
		1,895

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Subsidiaries

We conduct substantially all of our operations through subsidiaries and associated companies. The following table sets forth information as of December 31, 2002 regarding certain of our subsidiaries and associated companies. All amounts due from us for ownership of the capital stock held by us in all of these subsidiaries have been paid in full.

Names E.Sun Commercial Bank, Ltd. (1) No. 77, Wuchang Street, Section 1 Taipei, Taiwan . . . . . E.Sun Securities Co., Ltd. 15th Floor, No. 178, Fushing North Road Taipei, Taiwan . . . . . E.Sun Bills Finance Corporation 5th Floor-3, No. 51, Kee-Lung Road, Section 2 Taipei, Taiwan . . . . . E.Sun Venture Capital Co., Ltd. No. 77 Wuchang Street, Section 1, Taipei, Taiwan . . . . . E.Sun Financial Leasing Corp. 4th Floor, No. 339 Tun-Hwa South Road, Section 1, Taipei, Taiwan . . . . . E.Sun Insurance Agency Co., Ltd. No. 64 Wuchang Street Section 1, Taipei, Taiwan . . . . . E.Sun Securities Investment Trust Co., Ltd. 8th Floor, No. 85 Yien- Ping South Road, Taipei, Taiwan . . . . .	Total Paid-in Capital NT$18.2 billion NT$3.06 billion NT$4.3 billion NT$1 billion NT$198 million NT$16.2 million NT$300 million	Issued Shares 1.82 billion shares 306 million shares 426 million shares 100 million shares 19.8 million shares 1.62 million shares 30 million shares	Percentage Interest Held by E.Sun Financial 100.0% 100.0% 100.0% 100.0% 99.0% 99.0% 70.0%	Principal Business Commercial banking and financing business and fixed-income securities Securities brokerage, margin lending, underwriting and proprietary trading of equity Propriety trading of short- term bills and the underwriting and guarantee of commercial paper Venture capital investments Lease of machinery equipment as well as lease and sale of tools and molds Insurance agency Offering securities investment trust	Net Income (Loss) of Current Period (NT$ millions) (3,511) 13 571 2 (3) 24 48

(1) As of March 31, 2003, E.Sun Bank had legal reserves in the amount of NT$3,112.9 million. As of the same date, the value of the shares of E.Sun Bank as recorded in E.Sun Financial’s account was in the amount of NT$15,085.3 million. As of March 31, 2003, all of the shares of E.Sun Bank held by E.Sun Financial have been paid for. E.Sun Financial has no debt outstanding to or from E.Sun Bank as of March 31, 2003.

We received cash dividends from each of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities in the amount of NT$1,272 million, NT$256 million and NT$42 million, respectively, with respect to 2001 earnings.

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Properties

Our headquarters are located in the E.Sun Bank building in Taipei, Taiwan. We and our subsidiaries have our registered offices at the following addresses:

E.Sun Financial Holding Company, Ltd. No. 77, Wuchang Street, Section 1 Taipei, Taiwan

E.Sun Commercial Bank, Ltd. No. 77, Wuchang Street, Section 1 Taipei, Taiwan

E.Sun Bills Finance Corporation 5th Floor-3, No. 51, Kee-Lung Road, Section 2 Taipei, Taiwan

E.Sun Securities Co., Ltd. 15th Floor, No. 178, Fushing North Road Taipei, Taiwan

In addition, our subsidiaries own or lease various pieces of land and buildings for their branches. The leased and owned properties of our subsidiaries as of December 31, 2002 are set forth below.

Major Properties: E.Sun Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.Sun Bills Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.Sun Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Leased Gross Floor Area 34,814.7 2,780.2 2,544.6 40,139.5	Owned Gross Floor Area (square meters) 30,815.4 870.9 0 31,686.3	Total Gross Floor Area
			65,630.1
			3,651.1
			2,544.6
			71,825.8

All of our and our subsidiaries’ owned and leased properties are covered by insurance covering risks, including fire, typhoon, earthquake and floods, up to their respective replacement values. We, E.Sun Bank, E.Sun Bills Finance and E.Sun Securities also maintain occupier’s liability insurance in relation to the respective properties. We believe that our leased and owned properties are adequate for conducting our businesses for the foreseeable future.

Legal Proceedings

We and our subsidiaries are involved in certain routine legal actions incidental to our businesses. Neither we, nor our subsidiaries, taken as a whole, are or have been involved in any litigation, arbitration or administrative proceedings, whether pending or threatened, which may have or have had during the previous 12 months a significant effect on our financial position or the financial position of our subsidiaries and us, taken as a whole.

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REGULATION OF THE TAIWAN FINANCIAL SERVICES INDUSTRY

Regulation of the Company

Regulatory Authority

We are regulated as a financial holding company under the ROC Financial Holding Company Act effective since November 1, 2001. The Ministry of Finance is currently responsible for supervising and regulating Taiwan’s banking, securities, bills finance and insurance industries, including financial holding companies. Different subordinated agencies under MOF (the Bureau of Monetary Affairs, the Securities and Futures Commission and the Department of Insurance) undertake the responsibility of regulating the banking, securities, bills finance and insurance industries separately.

We began reporting on January 28, 2002 to the Bureau of Monetary Affairs of MOF, our principal regulator, which is part of MOF. MOF has the right to inspect the financial statements, records and transactions as well as all our business matters at any time it deems appropriate. MOF may impose sanctions, fines or suspend our business license for any violation of the ROC Financial Holding Company Act.

However, the ROC government regards the existing arrangement of supervision as inadequate as financial institutions, particularly banks, have been gradually expanding into securities, insurance and investment banking activities following the industry trend towards providing universal financial services. To enhance supervision of financial holding companies, the Executive Yuan has formulated the draft Financial Supervision Committee Organizational Act to establish a single financial supervisory agency. This draft is currently under review by the Legislative Yuan and the delineation of the powers and responsibilities of a single financial supervisory agency for financial holding companies such as ours remains unclear.

Financial Requirements

The ROC Financial Holding Company Act requires that a financial holding company have a paid-in capital of at least NT$20 billion or more and that the group capital adequacy ratio of each financial holding company be not less than 100%. The group capital adequacy ratio is determined by dividing the group net qualified capital by the group required capital. The definitions of group net qualified capital and group required capital are complex, but in principle represent the sum of the qualified capital at the holding company and its subsidiaries divided by the sum of the required capital of the holding company and its subsidiaries. The required capital is calculated separately for each of the subsidiaries, depending on whether they operate as insurance, brokerage and securities, banking, bills finance companies or investment trust companies. A diagram of the calculation of group capital adequacy appears below.

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==> picture [409 x 304] intentionally omitted <==

----- Start of picture text -----

FHC Deductions
– FHC investments in subsidiaries at
book value
–
FHC’s long-term investments (other
than in subsidiaries)
–
Excess qualified capital for futures
brokerage and venture capital
FHC Gross Qualified subsidiaries at book value
Capital – Lower of (x) excess qualified
–
FHC qualified capital capital for banks or bills finance
comprised of Tier I, II and subsidiaries and (y) subordinated
III capital debt of such subsidiaries included
plus in such FHC qualified capital
– –
FHC proportional interest Lower of (x) FHC qualified capital
in subsidiary-held qualified – less FHC’s investments in
capital (as determined in subsidiaries less FHC’s long-term
accordance with relevant non-subsidiaries investments less
industry regulations sum of bank and bills finance
applicable to such subsidiaries’ excess qualified
Financial subsidiary) capital and (y) FHC’s subordinated
Holding FHC Net Qualified Capital debt (included in its qualified
Company capital)
(“FHC”)
Group = =
Capital
Adequacy FHC Required Capital Subsidiary Companies Required
FHC Required Capital FHC required capital = total Capital
Ratio=100% risk-weighted assets FHC proportional interest in
multiplied by required bank + subsidiary-held qualified capital as
capital adequacy ratio (8%) determined in accordance with relevant
(FHC deductions are not industry regulations applicable to such
included in total risk-weighted subsidiary
assets)
----- End of picture text -----

Each subsidiary of a financial holding company has to fulfill the capital adequacy ratio required by the specific law and regulation applicable to its industry.

If a financial holding company does not meet the minimum group capital adequacy ratio of 100%, MOF may fine the financial holding company an amount ranging from NT$2 million to NT$10 million and may prohibit the distribution of dividends. In addition, MOF may impose any of the following sanctions on the financial holding company depending on the seriousness of the violation:

. request the financial holding company to increase the capital or decrease the total amount of risk-based assets;
. restrict the payment of directors’ and supervisors’ remunerations and other compensation;
. restrict any further investments by the financial holding company;
. restrict the financial holding company’s ability to submit applications to open new branches;
. request the financial holding company to dispose of shares in invested companies within a certain period;
. discharge the directors and supervisors of their duties and request that new directors and supervisors be elected within a certain period; or
. replace the managers.

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Business Scope and Investment Limitation

The business of a financial holding company is limited to investment in, and management of, its subsidiaries. A financial holding company may only invest in companies operating in the financial industry, including banking, bills finance, insurance, credit card, trust, securities, futures, venture capital, foreign financial institutions and other financial industry-related enterprises recognized by MOF. In addition, a financial holding company may apply to invest in non-financial industry-related companies but may not participate in the management of such companies.

Regulations Relating to Merger and Acquisition Activity of Financial Holding Companies and Their Financial Institution Subsidiaries

The ROC government has recently enacted a number of laws relating to mergers and acquisitions to encourage such activities in Taiwan. The main changes applicable to us are set forth below and are derived from the ROC Financial Institutions Merger Law, the ROC Corporate Merger and Acquisition Law and the amended ROC Securities and Exchange Law.

The ROC Financial Institutions Merger Law, effective since December 13, 2000, and the ROC Corporate Merger and Acquisition Law, effective since February 2002, are both applicable to financial holding companies engaged in merger and acquisition activities. The ROC Corporate Merger and Acquisition Law has recently been enacted and certain provisions of the ROC Corporate Merger and Acquisition Law will therefore require further rulings and explanations by MOF or the ROC Ministry of Economic Affairs. We do not know how these rulings will affect the interpretation of the laws governing the merger and acquisition activities or the impact they will have on merger and acquisition activity in Taiwan.

The ROC Financial Institutions Merger Law applies to ‘‘financial institutions’’, which include institutions engaged in banking (including bills finance), securities, futures, insurance and other industries as designated by MOF. Pursuant to the ROC Financial Holding Company Act, certain provisions of the ROC Financial Institutions Merger Law are applicable to us and our subsidiaries. In addition, it also applies to us in the event that we engage in merger and acquisition activity. The ROC Financial Institutions Merger Law provides that once two financial institutions have obtained shareholders’ approval (or board of directors’ approval if shareholders’ approval is not required), 30 days’ notice must be provided to creditors and regulatory approval is to be sought from MOF for the proposed merger. The ROC Financial Institutions Merger Law has the following provisions, some of which are different from those applicable to nonfinancial institution mergers:

. goodwill arising from the merger may be amortized over five years;
. merger expenses may be amortized over ten years;
. losses on the sale of NPLs may be amortized over fifteen years;
. five-year tax loss carryforwards of the merged entity can be used by the surviving entity or the newly created entity following the merger;
. stamp and deed taxes are not payable;
. land value incremental tax is deferred until the land subject to the tax is transferred after the merger; and
. no duty is owed by the surviving entity or the newly created entity with respect to the registration of title transfers for properties, liens or collateral.

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Lastly, financial institutions in Taiwan may merge with financial institutions outside of Taiwan in a transaction in which either party may survive, provided that the tax loss carryforwards of the non-Taiwan financial institution may not be used by the surviving Taiwan entity or the newly created Taiwan entity.

The ROC Corporate Merger and Acquisition Law has only been in effect since February 6, 2002 and is available for all corporations in Taiwan. However, mergers between financial institutions should first apply the ROC Financial Institutions Merger Law and the ROC Financial Holding Company Act and then apply the ROC Corporate Merger and Acquisition Law in case the ROC Financial Institutions Merger Law and the ROC Financial Holding Company Act do not provide otherwise. Prior to February 2002, mergers and acquisitions were governed by the ROC Company Law. The provisions of the ROC Company Law are now supplemental to those of the ROC Corporate Merger and Acquisition Law with respect to mergers and acquisitions. The ROC Corporate Merger and Acquisition Law provides, among other things, various types of new merger and acquisition mechanisms, which were previously not available in Taiwan. These include:

. the use of share capital, cash or other assets as consideration in connection with the purchase of some or all of the shares of another company or the purchase of business or assets; the provision of a share exchange mechanism in the event the shareholders of a target company approve a transaction in which their company becomes a wholly owned subsidiary of an existing company or a newly created company. This provision may be applicable to financial holding companies, including us, when the share exchange mechanism of the ROC Financial Holding Company Act is not available. The ROC Financial Holding Company Act provides that share exchanges with financial holding companies are limited to share exchanges with banks, bills finance companies, insurance companies, integrated securities firms, securities finance companies and other entities designated by MOF. This provision of the ROC Corporate Merger and Acquisition Law may be used without such restriction by other corporations’ spin-off mechanisms, which allow a company to realign its business;
. a spin-off mechanism, which allows a company to realign its business. This provision is applicable to financial holding companies, including us and our subsidiaries to the extent not provided in the ROC Financial Holding Company Act;
. the elimination of the shareholder approval requirement for all participants in a merger in the event that the merger involves (1) a parent company with its 90% held subsidiary and (2) a corporation when the newly issued shares are less than 20% of the outstanding share capital of the surviving entity and the cash or other properties to be delivered to the shareholders of the extinguished entity is less than 2% of the net worth of the surviving entity; and
. recognition that in the context of mergers and acquisitions, a company and its shareholders and the shareholders among each other, may enter into shareholder agreements including agreements which provide for transfer restrictions, tag-along rights, drag-along rights, rights of first refusal, rights of first offer and voting arrangements.

Lastly, the ROC Corporate Merger and Acquisition Law provides for cross-border mergers and acquisitions. The ROC Ministry of Economic Affairs proposed to amend relevant laws and regulations in order to accommodate cross-border mergers and acquisitions with the mechanisms described above. The ROC Corporate Merger and Acquisition Law contains the following major tax incentives, which are available for all mergers, acquisitions and spin-offs:

. goodwill arising from the transaction may be amortized over fifteen years;
. transaction expenses may be amortized over ten years;
. a consolidated tax return may be filed (if the subsidiaries are 90% owned for more than one year) and retained earnings of one subsidiary can be offset against losses of another for purposes of the undistributed retained earnings tax; and

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. five-year tax loss carryforwards of the merged entity can be used by the surviving entity or the newly created entity following the merger in proportion to the percentage of shares in the surviving company or the newly created entity held by the shareholders of the merged entity.

The ROC Corporate Merger and Acquisition Law contains the following tax incentives which are available only for mergers, spin-offs and acquisitions in which more than 65% of the consideration is paid for in share capital with voting rights:

. securities transfer tax arising from the transaction is not payable;
. stamp and deed taxes are not payable;
. land value incremental tax is deferred until the land subject to the tax is transferred after the merger; and
. business tax on transfer of goods or services is not payable.

The ROC Securities and Exchange Law provides for tender offer procedures and private placement exemptions. A person or a group of persons acquiring more than 20% of shares of a public company in Taiwan in fifty consecutive days is required to tender for the shares of that public company. The ROC Securities and Exchange Law further provides that the offeror is free to set the terms within the scope of the tender offer set by the Securities and Futures Commission, but in the event the tender offer fails or the offeror is ordered to cease by the Securities and Futures Commission, the offeror is prohibited from engaging in a tender offer for the same target within one year of the failed or ceased tender offer unless with due cause and the approval is obtained from the Securities and Futures Commission.

Merger and acquisition activity in Taiwan is also expected to be stimulated by allowing public companies to privately place their securities with investors. Prior to the recent changes in the ROC Securities and Exchange Law which allow for such placements, public companies wishing to issue new shares had to reserve at least 10% of the amount of shares to be offered to the public and between 10% and 15% of such amount to their employees. In addition, the non-public portion of a new issuance was required to be first offered to existing shareholders. Under the new provisions of the ROC Securities and Exchange Law, a company, after obtaining shareholders’ approval, may privately place new shares to investors in the following categories, provided that the aggregate number of the investors in categories (2) and (3) does not exceed 35:

(1) companies engaged in banking, bills finance, trust, insurance, securities or other institutions designated by MOF;
(2) individuals, legal persons or funds which meet the criteria set by MOF; and
(3) directors, supervisors and managers of the company or its affiliates.

Shares issued in a private placement are restricted shares and may only be transferred as follows:

. if the owner is a company as described in (1) above, it may transfer the restricted shares to a company engaged in these activities provided that the same class of securities is not also traded on the Taiwan Stock Exchange or the GreTai Securities Market;
. after a one-year holding period and prior to the end of the third year, any holder may transfer the restricted shares subject to volume limitations with respect to transfers of shares to the persons or entities described in (1) and (2) above;
. after a three-year holding period, any holder may transfer the restricted shares freely;

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. in a direct private transfer between the parties where the amount is less than 1,000 shares and three months have passed since the last such transfer;
. in transfers by operation of law; and
. in other transfers approved by the Securities and Futures Commission.

Taxation of Financial Holding Companies

Generally, ROC corporations do not file consolidated income tax returns. However, financial holding companies may file consolidated income tax returns once they hold more than 90% of the share capital of their subsidiaries for more than one tax year. We will not be eligible to file a consolidated income tax return with our subsidiaries in tax year 2002. However, we will be able to file a consolidated income tax return with our subsidiaries in tax year 2003. Filing of a consolidated income tax return allows us and our subsidiaries to reduce our overall tax burden by:

. offsetting our net operating loss against current and future gain of our subsidiaries; and
. offsetting retained earnings of one subsidiary against potential losses of other subsidiaries for purposes of the undistributed retained earnings tax.

Financial Holding Company Share Purchase Restrictions

Financial holding company shares may not be purchased by:

. any of the subsidiaries of the financial holding company; or
. companies in which its subsidiaries either own more than 20% of the capital or have the right to directly or indirectly elect or appoint more than half of the directors.

Companies violating these purchase prohibitions may be fined in an amount ranging from NT$2 million to NT$10 million.

Shareholding Restriction

Any person or group of related persons (as defined in the ROC Financial Holding Company Act) proposing to hold more than 10%, 25%, 50% or 75% of the shares of a financial holding company must apply to MOF for approval. MOF will review whether the applicant is ‘‘fit and proper’’ to hold a certain amount of shares of a financial holding company. To fulfill the fit and proper requirement, the applicant must not have violated or committed any criminal acts that relate to the credit of the person or have other occurrences which, in the view of MOF, will not meet the fit and proper requirement. In addition, the applicant must disclose the source of funds to be used to purchase the shares of the financial holding company. Any person who purchases shares of a financial holding company exceeding the thresholds without obtaining the prior approval from MOF may be subject to restrictions on its voting rights with respect to the shares in excess of such thresholds and may be fined an amount between NT$2 million to NT$10 million.

Regulation of Cross-Selling

Cross-selling and sharing of customer information within a financial holding company is subject to the ROC Financial Holding Company Act and the regulations promulgated by the applicable self-regulatory organization on cross-selling and disclosure of the customer’s information. These regulations require that a financial holding company and its subsidiaries follow the laws and regulations on confidentiality of

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information or enter into agreements with customers in this regard. In addition, a financial holding company and its subsidiaries have to disclose to their customers the methods by which they will protect the confidentiality of customer information.

A financial holding company is authorized to create and maintain a central data collection and management system. This system may contain the names, dates of birth, telephone numbers, addresses, identification numbers and other basic information of all the customers of the financial holding company’s subsidiaries. In addition, once customers have provided consent, information relating to account activity, credit history, investment activity and insurance records may also be contained in this system. The exact use of this information is not provided for in the regulations and there is uncertainty as to the limitations financial holding companies face in using this data in cross-selling activities.

Cross-selling may also take place in branches of the subsidiaries of financial holding companies. Regulations stipulate that a branch may have counters selling insurance, banking and securities products of each of the subsidiaries provided that they are staffed by employees holding the required licenses or having the necessary expertise.

Regulation of E.Sun Bank

Regulatory Authorities

The banking industry in Taiwan is primarily subject to the legal framework under the ROC Banking Law. The ROC Banking Law sets forth the general regulations that govern the banking business, provides protection to depositors, facilitates the development of productive enterprises and coordinates the operation of bank credit with the national financial policy of Taiwan.

The Bureau of Monetary Affairs of MOF and the Central Bank of China supervise the banking industry under the ROC Banking Law as follows:

The Bureau of Monetary Affairs

The Bureau of Monetary Affairs is the primary regulatory authority regulating banks and is responsible for the development, regulation and supervision of the banks in Taiwan. It is also responsible for bank licensing and establishing and enforcing rules on lending, investment and other banking practices.

The Central Bank of China

The Central Bank of China regulates monetary and credit policy via open market operations, reserve ratios, and certain credit controls that are used to channel funds to particular economic sectors. The Central Bank of China also manages official foreign exchange reserves, issues currency, and acts as the fiscal agent of the government. Support can be extended to banks through a lender-of-last-resort facility provided by the Central Bank of China. The Governor of the Central Bank of China is appointed for a term of five years.

Licensing of Taiwan’s Commercial Banks

Under the ROC Banking Law, in order to commence a commercial banking business, an applicant must first obtain a special permit from MOF. After obtaining a special permit, an applicant then must incorporate as a company limited by shares and register with the ROC Ministry of Economic Affairs.

Subsequently, the applicant must apply to MOF for a commercial banking license, and finally the applicant must apply to the local government for a Certificate of Registration as a Profit-Seeking Enterprise. The Standards for the Establishment of Commercial Banks issued by MOF provide that commercial banks must have a minimum paid-in capital of NT$10 billion.

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Restrictions on Scope of Business

Under the ROC Banking Law, a bank may only engage in banking activities specifically permitted within its approved scope of business. In order to engage in other activities, such as foreign exchange business, offshore banking, trust business and securities business (as described below), the bank must obtain separate licenses or approval from MOF or the Central Bank of China, as the case may be. Pursuant to the ROC Banking Law, the businesses and accounts of a bank’s trust department and securities department must be segregated from those of its commercial banking business.

A commercial bank is authorized to invest in non-financial related businesses but may not engage in the operations of non-financial related businesses in which it invests. The aggregate amount of a commercial bank’s investment in financial related and non-financial related businesses is restricted to a maximum of 40% of its paid-in capital less cumulative losses, of which, the investment amount in nonfinancial related businesses is restricted to a maximum of 10% of the commercial bank’s paid-in capital, less cumulative losses.

However, if a financial holding company is converted from a bank, the ROC Financial Holding Company Act provides that the investment to be made by the bank shall therefore be made by the financial holding company. The bank may still hold the investment portfolios made before the establishment of the financial holding company but may not increase the investment portfolios.

Financial Requirements

Minimum Capital Requirement

The minimum capital requirement for commercial banks is NT$10 billion.

Capital Adequacy

Under the ROC Banking Law and the Regulations Governing the Management of a Bank’s Capital Adequacy, all banks in Taiwan are required to maintain a capital adequacy ratio of at least 8.0%. When a bank’s capital adequacy ratio is above 6.0% but below 8.0%, distributions of dividends may not exceed 20% of net income after covering losses of prior years. When a bank’s capital adequacy ratio is under 6.0%, a bank’s distributions of dividends are prohibited. A fine of between NT$2 million and NT$10 million will be levied on banks with a capital adequacy ratio of below 8.0%. When a bank fails to correct its violations within the period specified by MOF, MOF may impose additional fines on a daily basis, remove the responsible person of the bank, or revoke its banking license, depending on the seriousness of the violation. In addition, MOF may impose any of the following sanctions on a bank depending on the seriousness of the violation:

. restrict the payment of directors’ and supervisors’ remuneration and other compensation;
. restrict any further investments by the bank;
. restrict the bank’s ability to submit applications to open new branches;
. restrict the bank to apply or require the bank to cease operating any business likely to increase its risk-based assets;
. require the bank to dispose of shares in invested companies within a certain period; and
. require the bank to close certain of its branches within a certain period.

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Deposit Reserve

E.Sun Bank’s reserves against deposits must be in accordance with the ratios prescribed by the Central Bank of China. The current reserve ratios of deposits, other debts and trust funds adjusted on June 28, 2002 are as follows:

. Checking deposits: 10.75%
. Demand deposits: 9.775%
. Demand savings deposits: 5.50%
. Time savings deposits: 4.00%
. Time deposits: 5.00%
. Foreign currency deposits: 0.125%

Legal Reserve

Under the ROC Banking Law, a bank must set aside at least 30% of its earnings (less losses of the previous years and taxes) to a legal reserve, and may not distribute cash dividends in excess of 15% of its paid-in capital until such time as the legal reserve equals or exceeds its paid-in capital. As of December 31, 2002, E.Sun Bank’s legal reserve represented approximately 17.1% of its paid-in capital. Where a bank has a trust department, the bank must set aside separate legal reserves for each of its banking and trust departments.

Liquidity Reserve

Under the ROC Banking Law, the Central Bank of China is empowered, after consultation with MOF, to fix a minimum ratio of a bank’s current assets to total liabilities. The current minimum liquidity reserve ratio set by the Central Bank of China is 7%. As of December 31, 2002, E.Sun Bank’s liquidity reserve ratio was 19.30%.

Solvency Ratio

Under the ROC Banking Law, MOF may, when it deems necessary, consult with the Central Bank of China to prescribe a minimum ratio of a bank’s major assets to major liabilities as well as a minimum ratio of a bank’s major liabilities to net worth. To date, MOF has not prescribed such ratios for commercial banks.

Interest Rates

Under the ROC legal framework, commercial banks are free to set and adjust their own prime interest rates. However, pursuant to the ROC Civil Code, a creditor may not enforce payment of interest in excess of 20% and that bank may also be subject to criminal liability under the ROC Criminal Code.

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Asset Quality and Non-Performing Loans

Asset Quality

The asset quality of financial institutions is of great concern to the supervisory authorities. Generally, the evaluation process involves identifying and classifying problem assets and then assessing possible losses. Banks are required to make sufficient provisions against estimated potential losses. Banks failing to do so are subject to regulatory disciplinary actions. Banks must classify their credit assets into the following four categories based upon the MOF definitions:

Class I (Normal) Normal loans with no payment difficulties. Class II (Substandard) Loans experiencing payment difficulties but can be recovered in full. Class III (Doubtful) Loans experiencing payment difficulties and the recovery of the total amount due is doubtful.

Class IV (Unrecoverable) Loans experiencing payment difficulties and the recovery of the total amount due is extremely unlikely.

Source: Bureau of Monetary Affairs of MOF.

Definition of NPLs

Overdue loans as defined by, and which must be reported to, MOF are loans with respect to which:

. in the case of short-term loans with bullet payments, loans with respect to which principal is three months or more overdue or interest is six months or more overdue;
. in the case of mid- and long-term installment loans with respect to which interim payments of principal or interest are six months or more overdue or final payment is three months or more overdue; or
. loans with respect to which E.Sun Bank has taken legal action for repayment or liquidation of collateral prior to the maturity of such loans.

E.Sun Bank defines NPLs as the overdue loans required to be reported to MOF.

The NPL ratio is defined as the value of a banking institution’s NPLs divided by gross loans:

NPLs NPL ratio = Gross loans outstanding

Provision of Reserve

Under MOF guidelines, banks must set aside a minimum specific allowance of 50% against doubtful loans and 100% against unrecoverable loans. No specific allowance is required for substandard loans.

Restrictions on Credit Exposure

Under the ROC Banking Law, the ‘‘credit’’ extended by a bank includes loans, overdrafts, discounts, guarantees, bank acceptances and other business activities specified by MOF.

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Restrictions on Credit Exposure to Related Parties

In order to ensure the transparency of lending practices of Taiwan banks, the ROC Banking Law regulates the extension of credit by banks to their related parties. Subject to the exceptions described below, a bank may not extend unsecured credit to a company in which the bank holds 3% or more of such company’s paid-in capital, its responsible person, staff members, major shareholders, or any person who is an interested party of the responsible person or a credit officer of the bank.

Under the ROC Banking Law, the term ‘‘major shareholders’’ means any shareholder holding 1% or more of a bank’s outstanding shares. When such shareholder is an individual, then any shares held by his or her spouse and minor children are considered as shares held by that shareholder. In addition, the ‘‘responsible person’’ means the responsible person as defined under the ROC Company Law, including but not limited to, the directors, supervisors and managerial staff members. Finally, under the ROC Banking Law, the term ‘‘interested party’’ denotes one of the following categories of persons:

(1) spouse, a relative by blood within the third degree or a relative by marriage within the second degree of the responsible person or a credit officer of the bank;
(2) a sole proprietorship or partnership which is managed by the responsible person or by a credit officer of the bank or by an interested party referred to in (1) above;
(3) an enterprise of which the responsible person or a credit officer of the bank or an interested party referred to in (1) above, individually or in aggregate holds or owns 10% or more of its outstanding shares or its capital;
(4) an enterprise of which the responsible person or a credit officer of the bank or an interested party referred to in (1) above is a director, supervisor or manager, unless such office was acquired by virtue of an investment by the bank with the approval of MOF; or
(5) a corporate entity or other form of organization of which the responsible person or a credit officer of the bank or an interested party referred to in (1) above serves as a legal representative or administrator.

Consumer loans and loans to government enterprises are exempt from this rule. MOF prescribes a maximum amount under which a consumer loan or revolving credit card debt will be exempted. Currently, the maximum amount for such consumer loan, including the credit card revolving debt, is NT$1,000,000. Under the ROC Banking Law, when applying the 3% rule described above, the shares owned by its affiliated companies, which include companies with mutual investment with E.Sun Bank, companies under the control of E.Sun Bank and companies in control of E.Sun Bank, as defined under the ROC Company Law, will be taken into consideration.

Where a bank extends secured credit to its responsible person, staff members, major shareholders, any person considered to be an interested party in relation to its responsible person or credit officer or a company in which the bank holds 5% or more of the paid-in capital, the credit must be secured in full and in a total outstanding amount of not more than 150% of its net worth, and the terms and conditions of the credit may not be more favorable to the borrower than those extended to other customers under similar conditions. In addition, among the above secured credits to related parties, the secured credits to each legal entity may not exceed 10% of its net worth and to each individual may not exceed 2% of its net worth. Where the bank plans to extend to any of the above related parties a secured credit which would cause the aggregate credits to such person to equal or exceed the lower of NT$100 million or 1% of its net worth, then the bank must first obtain super-majority approval at a meeting of its board of directors attended by more than two-thirds of all directors and at which at least three-fourths of the votes held by the directors present are cast in favor of such proposed loan. Under the ROC Banking Law, when applying this 5% rule, the shares owned by its

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affiliated companies, which include companies with mutual investment with E.Sun Bank, companies under the control of E.Sun Bank and companies in control of E.Sun Bank, as defined under the ROC Company Law, will be included in the calculation.

Where a bank breaches the above restrictions on the extension of credit to related persons, the person responsible for the breaching act shall be subject to imprisonment of up to three years and/or a fine between NT$5 million and NT$25 million.

Restrictions on Credit Exposure to Non-Related Parties

In addition to provisions restricting bank loans to related parties, the ROC Banking Law, also provides restrictions on credits to non-related parties.

The aggregate outstanding balance of credit extended by a bank to any single individual may not exceed 3% of its net worth, of which unsecured credit may not exceed 1% of its net worth. The aggregate outstanding balance of credit extended by a bank to any single legal entity may not exceed 15% of its net worth, of which unsecured credit may not exceed 5% of its net worth. Credit extended by a bank to a government-owned enterprise is exempt from the above restriction, provided that such credit does not exceed the bank’s net worth. The aggregate outstanding balance of total credit extended by a bank to a single individual, together with that extended to the borrower’s spouse, relative by blood within the second degree, or a company in which the borrower or the borrower’s spouse is the responsible person, may not exceed 40% of the bank’s net worth, of which the aggregate credits extended to such individual, its spouse and relative by blood within the second degree may not exceed 6% of its net worth. Credit extended to government-owned enterprises is exempt from this restriction.

The aggregate outstanding balance of total unsecured credit extended by a bank to a single individual, together with that extended to the individual’s spouse, relative within the second degree, or a company in which the borrower or the borrower’s spouse is the responsible person, may not exceed 10% of its net worth, of which the aggregate credits extended to such individual, its spouse and relative by blood within second degree may not exceed 2% of its net worth. The aggregate outstanding balance of the total credits extended by a bank to a group of affiliated companies as defined under the ROC Company Law may not exceed 40% of its net worth, of which the unsecured credit may not exceed 15% of its net worth. Credit extended to government-owned enterprises is exempt from this restriction.

A bank that violates the rules described above will be subject to a fine between NT$2 million and NT$10 million. When a bank fails to comply within a period specified by MOF, MOF may impose an additional daily fine, remove the responsible person of the bank, or revoke its banking license, depending on the seriousness of the violation.

The above rule does not apply to credit extended to government agencies, government-owned enterprises, special loan projects of the government and loans specifically approved by MOF.

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The above ceilings for credit to non-related parties are outlined as follows:

Borrower profile Each individual. . . . . . . . . . . . . . . . Each legal entity . . . . . . . . . . . . . . . Each government-owned enterprise . . Each individual, together with those credits extended to his/her spouse, relatives by blood within second degree, or a company in which such individual or his/her spouse is the responsible person (excluding government-owned enterprise) . . . . Each legal entity, together with its affiliates defined under ROC Company Law (excluding government-owned enterprise) . . . .	Ceiling on Total Secured and Unsecured Credits to Net Worth of a Bank 3% 15% 100% 40% (provided that the aggregate credits extended to such individual, his/her spouse and relatives by blood within second degree shall be no more than 6% 40%	Ceiling on Unsecured Credits to Net Worth of a Bank
		1% 5% — 10% (provided that the aggregate unsecured credits extended to such individual, his/her spouse and relatives by blood within second degree shall be no more than 2%) 15%

Restrictions on Investments in Property

Under the ROC Banking Law, a bank may not invest in real property, except where the real property is to be used for its own business (with certain limited exceptions) and where the value of real properties (other than warehouses) does not exceed its net worth (its total assets less total liabilities) at the time of the investment. In addition, due to the wide use of warehouses by Taiwan banks for storage purposes, the ROC Banking Law specifically stipulates that a bank may invest in warehouses, provided that the total investment value does not exceed 5% of the total deposits of such bank at the time of the investment.

Under the ROC Banking Law, any real property acquired by a bank through foreclosures pursuant to mortgages must be disposed of within four years from the date of such acquisition.

Issuance of Preferred Shares and Debentures

Issuance of preferred stock by a bank must be approved by its shareholders at a shareholders’ meeting and be permitted under its articles of incorporation. Issuance of debentures by a bank must be approved by its board of directors. The period of the debenture shall be not less than two years and not more than twenty years. Subordinated debentures are allowed. The proposed issuance must then be approved by MOF.

Disclosure of Management Performance and Inspections

The ROC bank disclosure regime consists mainly of compulsory periodic reporting requirements. These requirements are mandated by various rules issued by MOF and the Central Bank of China pursuant to the ROC Banking Law. Under these rules, a bank must issue reports relating to various aspects of its operation at daily, weekly, monthly, quarterly and annual intervals to allow MOF and the Central Bank of China to monitor the operation and financial soundness of the bank.

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The ROC Banking Law authorizes MOF, or its designate, to inspect a bank from time to time to examine the business operations and financial conditions of the bank or its related parties, and to require the bank or its related parties to disclose financial statements and other information requested by MOF. MOF has currently designated the Central Bank of China and the Central Deposit Insurance Company (‘‘CDIC’’) to undertake such inspections. The Central Bank of China inspects the head office of a bank at least once every two years, and conducts sampling inspections of its branch offices in accordance with its findings at the head office.

In addition, a bank is required to disclose material information to the Securities and Futures Commission.

Deposit Insurance Requirement

The ROC Deposit Insurance Act stipulates that banks must obtain insurance for all deposits through a deposit insurance system. Under this system, banks are required to pay an insurance premium to the CDIC every six months at a rate determined by the CDIC in accordance with certain criteria. Currently, the annual rates range from 0.005% to 0.006% of a bank’s insurable deposits. The maximum insurance coverage for each depositor is NT$1 million.

Laws and Regulations Governing Other Business Activities

Foreign Exchange Activities

Under the Guidelines Governing the Handling of Foreign Exchange Business by Designated Foreign Exchange Banks issued by the Central Bank of China for conducting foreign exchange businesses, a bank must obtain a foreign exchange license from the Central Bank of China in addition to its banking license. Upon obtaining the foreign exchange license, the bank may, subject to other Central Bank of China regulations, conduct businesses involving the outward and inward remittance of foreign exchange, foreign deposits and foreign lending.

Banking Branches

Under rules issued by MOF, a commercial bank may establish up to five branches per year (including sub-branches, as mentioned below) within Taiwan. For each branch, a bank must obtain a special permit from MOF, a branch license from the ROC Ministry of Economic Affairs, a banking license from MOF and a Registration Certificate as a Profit-Seeking Enterprise from the local government of the region in which the branch is located. In addition, a bank may apply to establish only one new banking branch in each of Taipei City, Kaoshiung City and Taipei County per year. A sixth branch may be established subject to special approval from MOF.

In order to relocate any of its branches, a commercial bank must submit an application to, and obtain approval from, MOF. In the application, the bank must specify the purpose for its proposed relocation, the business plan of the branch and financial statements of the branch.

Under a new rule issued by MOF, a bank may apply to establish sub-branches which have no more than eight persons on their business staff. Under this new rule, the quota of new branches to be established by a bank in each year outlined above applies to both new branches and sub-branches. However, a bank may apply to MOF to convert each of its current domestic branches into two sub-branches; provided that: (1) the new branches (including sub-branches) to be established by a bank together with those sub-branches converted from current branches in each year may not exceed eight branches; and (2) where no new branches are established and all new sub-branches established are converted from current branches, not more than ten sub-branches may be converted from current branches in each year. The application for the establishment and relocation of sub-branches will be the same as those provided for branches.

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In order to establish overseas banking branches, a bank must first establish a foreign department by obtaining a special permit from MOF. Two years after the establishment of the foreign department, the bank may then apply to MOF, which will consult with the Central Bank of China, for the establishment of an overseas banking branch. An approval from MOF is required for each overseas banking branch.

Derivatives Transactions

Under the ROC Banking Law and the Guidelines Governing Derivatives Transactions by Financial Institutions issued by MOF, a bank may conduct derivatives transactions to the extent that such activities are within the business scope of that bank’s banking license, provided that the bank also obtains separate approval from MOF for each derivatives product. The bank must also obtain approval from the Central Bank of China for each type of foreign currency-related derivatives product.

Electronic Banking

Currently, the only rule regarding Internet banking is the Safe Administration of Electronic Banking Business by Financial Institutions issued by MOF, which provides for the monitoring of Internet banking operations. An approval from MOF is required for any proposed banking services offered over the Internet.

ATM

Under rules issued by MOF, a bank must apply to MOF to install new ATMs for any given year. The application must state the number of ATMs the bank plans to set up within that year and must be submitted to MOF by the end of November of the previous year. There is no quota on the number of ATMs which a bank may apply to set up.

In the event that the bank seeks to set up ATMs in excess of the number approved in its application of the previous November, the bank may apply to MOF for an approval for such additional ATMs. However, such application for additional ATMs may be made only once a year. There is no quota on the number of additional ATMs.

Prevention of Money Laundering

Banks are required to adopt anti-money laundering measures and keep records of transactions that the bank suspects may be money laundering transactions. In addition, the bank must have proof of identification of any customer that enters into a cash transaction of more than NT$1.5 million in any one business day, and make a record of such transaction.

Foreign Investor Participation

Except for the general regulations on Foreign Investment Approval, Qualified Foreign Institutional Investors and General Foreign Investors, there are no restrictions on foreign shareholdings of Taiwan banks.

Significant Deregulation Programs

In the past decade the government has adopted several measures to deregulate the banking sector. The most relevant measures, other than the ROC Financial Holding Company Act (which is discussed above), are outlined below.

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Latest Amendments to the ROC Banking Law

The latest amendments to the existing ROC Banking Law came into effect on November 1, 2000. In general, the new revisions institute prompt corrective actions, ease restrictions on banks’ investment and business activities, and require banks to enhance internal controls. These amendments are expected to bring Taiwan’s banking practice in line with international standards, and improve the asset quality of banks. Key provisions include:

. granting of additional administrative powers to MOF for dealing with financial institutions encountering difficulties;
. easing bank ownership restrictions (Article 25 of the amended ROC Banking Law eases the ceiling on direct ownership of a single individual or a single individual, together with his/her spouse, relative within the second degree, or a company in which the single individual or his/her spouse is the responsible person, in a bank from 15% to 25%; prior approval is required for ownership of between 15% to 25%; and 100% ownership will be allowed in the cases of shareholdings by financial holding companies, the government or for the purpose of dealing with insolvent banks); and
. allowing banks increased flexibility to invest in financial related and non-financial related businesses.

Draft Financial Supervision Committee Organizational Act

At present, MOF is responsible for supervising and regulating Taiwan’s banking, securities and insurance industries. Different subordinated agencies under MOF (the Bureau of Monetary Affairs, the Securities and Futures Commission and the Department of Insurance) undertake the responsibility of regulating the banking, securities and insurance industries separately. However, the existing arrangement of consolidated supervision is deemed inadequate. To enhance consolidated supervision, MOF has formulated a draft ROC Financial Supervision Committee Organizational Act to establish a single financial supervisory agency.

Regulation of E.Sun Bills Finance

Regulatory Authorities

The bills finance industry in Taiwan is primarily subject to the legal framework under the ROC Bills Finance Management Law and the ROC Banking Law. The ROC Bills Finance Management Law sets forth the general regulations that govern the bills finance business, coordinate the operation of bills finance industry with the national financial policy of the ROC, promote the development of money market, and protect the trader’s right over the bills finance market.

The Bureau of Monetary Affairs of MOF and the Central Bank of China supervise the bills finance industry under the ROC Bills Finance Management Law, as follows:

The Bureau of Monetary Affairs

The Bureau of Monetary Affairs is the primary regulatory authority regulating bills finance companies and is responsible for the development, regulation and supervision of the bills finance companies in Taiwan. It is also responsible for licensing and establishing and enforcing rules on the bills finance companies’ practices.

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The Central Bank of China

When promulgating administrative rules in relation to the business operation of the bills finance companies, MOF generally is required to consult with the Central Bank of China for such promulgation of the rules.

Licensing of Taiwan’s Bills Finance Companies

Under the ROC Bills Finance Management Law, in order to commence a bills finance business, an applicant must first obtain a special permit from MOF. After obtaining a special permit, an applicant then must incorporate as a company limited by shares and register with the ROC Ministry of Economic Affairs. Subsequently, the applicant must apply to MOF for a bills finance company license, and finally the applicant must apply to the local government for a Certificate of Registration as a Profit-Seeking Enterprise.

Restrictions on Scope of Business

Under the ROC Bills Finance Management Law, a bills finance company may only engage in bills finance activities specifically permitted within its approved business scope.

A bills finance company is not allowed to invest in other businesses unless the invested business is a financial-related business or a business having close connection with the bills finance business with the prior approval of MOF. The aggregate amount of a bills finance company’s investment in financial related businesses and businesses having close connection with the bills finance business is restricted to a maximum of 40% of its paid-in capital less cumulative losses. Within such aggregate investment amount limit, unless otherwise required by other applicable laws or MOF, the bills finance companies may decide themselves the investment amount for each individual financial related company. However, for investments in businesses having close connection with the bills finance business, the investment amount is restricted to a maximum of 5% of the invested company’s paid-in capital.

Financial Requirements

Minimum Capital Requirement

The minimum capital requirement for bills finance companies is NT$2 billion.

Capital Adequacy

Under the ROC Bills Finance Management Law and the Regulations Governing the Management of Bills Finance Companies’ Capital Adequacy, the bills finance companies are required to maintain a capital adequacy ratio of at least 8.0%. When a bills finance company’s capital adequacy ratio is above 6.0% but below 8.0%, distributions of dividends by such bills finance company may be required by MOF not to exceed 20% of net income after covering losses of prior years, and the application for establishment of new branches may be limited by MOF. In addition, MOF may request such bills finance company to increase capital within a certain period or decrease the aggregate amount of its risk assets.

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When a bills finance company’s capital adequacy ratio is below 6.0%, such bills finance company, in addition to being subject to the limitation mentioned in the preceding paragraph, may be subject to the following restrictions or requirements imposed by MOF:

. restriction on the payment of directors’ and supervisors’ remuneration and other compensation;
. restriction on the distribution of the profit either in cash or otherwise;
. restriction on any further investments by the bills finance company pursuant to the ROC Bills Finance Management Law;
. requirement to dispose of shares in invested companies within a certain period;
. requirement to close certain of its branches within a certain period; and
. requirement to cease operating any business likely to increase its risk-based assets.

A fine of between NT$2 million and NT$10 million will be imposed on bills finance companies violating the above capital adequacy ratio requirement. When a bills finance company fails to correct its violations within the period specified by MOF, MOF may impose additional fines on a daily basis, remove the responsible person of the bills finance company, or revoke its bills finance company license, depending on the gravity of the violation.

Legal Reserve

Under the ROC Bills Finance Management Law, a bills finance company must set aside at least 30% of its earnings (less losses of the previous years and taxes) to a legal reserve, and may not distribute cash dividends in excess of 15% of its paid-in capital until such time as the legal reserve equals or exceeds its paid-in capital. As of December 31, 2002, E.Sun Bills Finance’s legal reserve represented approximately 8.3% of its paid-in capital.

Business or Financial Ratio

Under the ROC Bills Finance Management Law, MOF may, when it deems necessary, consult with the Central Bank of China to prescribe minimum or maximum operating or finance ratios for a bills finance company. To date, MOF has not prescribed such ratios for bills finance companies.

Restrictions on Credit Exposure

Restrictions on Credit Exposure to Related Parties

In order to ensure the credit exposure of guarantee and endorsement practices of the bills finance companies is reasonably controlled, the ROC Bills Finance Management Law regulates the guarantee and endorsement practices by bills finance companies to their related parties.

Subject to the exceptions described below, a bills finance company may not extend unsecured credit to a company in which the bills finance company holds 3% or more of such company’s paid-in capital, its responsible person, staff members, major shareholders, or any person who is an interested party of the responsible person or a credit officer of the bills finance company.

Where a bills finance company extends secured credit to its responsible person, staff members, major shareholders, any person considered to be an interested party in relation to its responsible person or credit officer or a company in which the bills finance company holds 5% or more of the paid-in capital, the credit must be secured in full and in a total outstanding amount of not more than 150% of its net worth, and the terms and conditions of the credit may not be more favorable to the borrower than those extended to other

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customers under similar conditions. In addition, among the above secured credit to related parties, the secured credit to each person may not exceed 10% of its net worth. Where the bills finance company plans to extend to any of the above related parties a secured credit which would cause the aggregate credit to such person to equal or exceed the lower of NT$100 million or 1% of its net worth, then the bills finance company must first obtain super-majority approval at a meeting of its board of directors attended by more than two-thirds of all directors and at which at least three-fourths of the votes held by the directors present are cast in favor of such proposed credit.

Where a bills finance company breaches the above restrictions on the extension of credit to related persons, the person responsible for the breach shall be subject to imprisonment of up to three years and/or a fine ranging between NT$5 million and NT$25 million; provided, however, that where a bills finance company’s credit extension is not approved by a resolution adopted by the supermajority of the board of directors or exceeds the limit of outstanding credit amount, the foregoing penalties are not applicable but the persons attributable to such breaches would be subject to a fine ranging between NT$2 million and NT$10 million.

Restrictions on Credit Exposure to Non-related Parties

In addition to provisions restricting credit extended to related parties, the ROC Bills Finance Management Law also provides restrictions on credits to non-related parties.

The aggregate outstanding balance of credit extended by a bills finance company to any single legal entity may not exceed 12% of the net worth of the company guaranteed or endorsed, of which unsecured credit may not exceed 5% of the net worth of the company guaranteed or endorsed. The aggregate outstanding balance of total credit extended by a bills finance company to a single legal entity, together with that extended to the following persons, may not exceed 35% of the bills finance company’s net worth, of which the unsecured credit extended may not exceed 20% of its net worth:

. a company in which the borrower’s chairman or president or such chairman’s or president’s spouse, parents, grandparents, children or grandchildren is the chairman or president;
. the other legal entity, of which one or two of the guarantors or the collateral providers are identical to those of the borrower;
. the other legal entity which is the guarantor or the collateral providers of the borrower; and
. the affiliated companies as defined under the ROC Company Law.

Credit extended to the special guarantee projects approved by MOF is exempted from the above restriction.

A bills finance company that violates the rules described above will be subject to a fine ranging between NT$2 million and NT$10 million. When a bills finance company fails to comply within a period specified by MOF, MOF may impose an additional daily fine, remove the responsible person of the bills finance company, or revoke its bills finance business license, depending on the seriousness of the violation.

Restrictions on Credit Exposure

The aggregate outstanding amount of the short-term bills guaranteed or endorsed by the bills finance company shall not exceed 8 times of its net worth.

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Restrictions on Investments in Property

Under the ROC Bills Finance Management Law, with certain limited exceptions, a bills finance company may not invest in real property, except where the real property is to be used for its own business. The value of real properties invested by the bills finance company pursuant to the exception may not exceed 10% of its net worth and the aggregate investment amount in real properties (for or not for its own use) shall not exceed 30% its net worth at the time of the investment.

Where the bills finance company enters into real property transactions with its responsible person, staff, major shareholders or interested party of its responsible person or its more than 3% owned enterprise, such transaction shall be in line with business practice and the bills finance company must first obtain super-majority approval at a meeting of its board of directors attended by more than two-thirds of all directors and at which at least three-fourths of the votes held by the directors present are cast in favor of such proposed real properties transaction.

Disclosure of Management Performance and Inspections

The ROC bills finance company disclosure regime consists mainly of compulsory periodic reporting requirements. These requirements are mandated by various rules issued by MOF and Central Bank of China. Under these rules, a bills finance company must issue reports relating to various aspects of its operation at daily, weekly, monthly, quarterly and annual intervals to allow MOF and the Central Bank of China to monitor the operation and financial soundness of the bills finance company.

The ROC Bills Finance Management Law authorizes MOF, or its designate, to inspect a bills finance company from time to time to examine the business operations and financial condition of the bills finance company or its related parties, and to require the bills finance company or its related parties to disclose financial statements and other information requested by MOF.

In addition, a public bills finance company is required to disclose material information to the Securities and Futures Commission.

Regulation of E.Sun Securities

Regulatory Authorities

The Taiwan securities market is primarily subject to the legal framework under the ROC Securities and Exchange Law. The ROC Securities and Exchange Law sets forth the general regulations that govern the offering, issuance and sale of securities, the securities firms (including securities underwriters, proprietary traders and brokers), the securities associations and the stock exchanges. There are four regulatory authorities for the securities industry, three statutory and one self-regulatory, as described below:

Securities and Futures Commission

The primary regulatory authority of the Taiwan securities market is the Securities and Futures Commission. The Securities and Futures Commission is responsible for the development, regulation, and supervision of the capital markets and the futures industries. The Securities and Futures Commission is also responsible for licensing and inspection of securities firms, and may suspend the licenses of securities firms in breach of ROC laws.

Taiwan Stock Exchange Corporation

The Taiwan Stock Exchange Corporation is the primary regulatory authority of the Taiwan Stock Exchange. It reviews companies applying for Taiwan Stock Exchange listing, oversees trading activities and regulates listed companies and securities firms. To maintain an orderly market, the Taiwan Stock Exchange

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Corporation regularly dispatches inspectors to examine whether securities firms and the Taiwan Stock Exchange listed companies’ operations and financial status are in compliance with all applicable regulations.

ROC GreTai Securities Market

The GreTai Securities Market is the primary authority that reviews applications for companies seeking to trade their shares on the GreTai Securities Market, oversees the trading activities and regulates GreTai Securities Market traded companies and securities firms. To maintain an orderly market, the GreTai Securities Market regularly dispatches inspectors to examine whether securities firms and the GreTai Securities Market traded companies’ operations and financial status are in compliance with all applicable regulations.

Chinese Securities Association

All securities firms are required to be members of the Chinese Securities Association. The Chinese Securities Association is not a statutory body. The Chinese Securities Association establishes and enforces the self-regulatory rules applicable to proprietary trading, underwriting and brokerage activities.

Capital Adequacy Ratio Requirement

Unless concurrently operated by a financial institution and subject to the ROC Banking Law and unless the Securities and Futures Commission otherwise permits, all securities firms in Taiwan are required to maintain an appropriate capital adequacy ratio which is the ratio of the qualified net amount of selfowned capital to estimated operation risk amount. If the qualified net amount of self-owned capital maintained by a securities firm is less than 150%, 120% or 100% of the estimated operation risk amount, the Securities and Futures Commission may impose varying degrees of restrictions on the firm’s business.

Business Scope and Commission

Under the ROC Securities and Exchange Law, securities businesses can be categorized into underwriting, proprietary trading, and brokerage, each of which requires a separate license.

Underwriting

Underwriting can be conducted either on a firm commitment basis or on a best efforts basis. In the case of firm commitment underwriting, the total underwriting amount shall not exceed 15 times the balance of a securities firm’s current assets less current liabilities. If the capital adequacy ratio of a securities firm is less than 120% or 100%, the multiple shall be adjusted to 10 times or 5 times, respectively.

The maximum compensation for firm commitment underwriting and the maximum commission for best efforts underwriting shall not exceed 5% and 2%, respectively, of the total underwriting amount.

Proprietary Trading

A securities firm may buy and sell securities for the firm’s own account in the market. Unless concurrently operated by a financial institution and subject to the ROC Banking Law, a securities firm shall not hold more than 10% of the total issued and outstanding shares of any company for its own account. The Securities and Futures Commission has the authority to grant waivers to this provision on a case-by-case basis. If the aggregate of the securities acquired by a securities firm through underwriting and those traded for its own account exceeds the limit, the portion in excess shall be sold within one year of its acquisition.

A securities firm is not permitted to conduct short selling for proprietary trading purposes.

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Brokerage

A securities firm may place a customer’s buy or sell orders but it may not engage in discretionary securities trading on its customer’s account. The only financial companies that can engage in discretionary trading are securities investment consulting enterprises and securities investment trust enterprises with licenses from the Securities and Futures Commission.

A securities firm may charge up to 0.1425% of the transaction value as commission subject to certain reporting requirements of the Taiwan Stock Exchange.

Warrants Issuance

After obtaining an adequate credit rating from a credit rating agency as specified by the Securities and Futures Commission and a qualification certificate from the Securities and Futures Commission, an integrated securities firm (i.e., a securities firm conducting brokerage, underwriting and proprietary trading businesses) may issue warrants on the underlying securities of listed companies other than that securities firm’s own shares.

Margin Trading

The two types of margin trading include margin lending and short selling. A securities firm conducting margin trading must be approved by the Securities and Futures Commission and is required to state such approval in the firm’s license. For margin trading, a NT$50 million deposit is required. A securities firm is required to sign a margin trading agreement with the client, open a credit account for the client, and collect the margin based on the rate prescribed by the Securities and Futures Commission. Securities purchased with a margin loan must be retained as collateral. Proceeds from short sales must also be retained as collateral, in addition to a margin to be paid by the customer for the short sale.

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DIRECTORS, MANAGEMENT AND ORGANIZATION

General

The ROC Company Law and our Articles of Incorporation provide that our board of directors is to be elected by our shareholders in a shareholders’ meeting at which a quorum, consisting of a majority of all the issued shares having voting rights, is present. Our directors and supervisors are elected at the same time for a three-year term unless one-third or more of the directorships are vacant at which time a shareholders’ meeting is convened to elect directors to fill the vacancies. The current term of our directors and supervisors expires on January 27, 2005. Directors may serve any number of consecutive terms and may be removed from office at any time by a resolution adopted at a shareholders’ meeting. The Chairman is a director elected by the directors. The Chairman of our board of directors presides at meetings of our shareholders, meetings of our board of directors and also represents us in connection with external matters. The board of directors is responsible for the management of our business and the members of the board of directors have fiduciary duties to our company and our shareholders. The board of directors meets on average once per quarter.

Our Articles of Incorporation provide for three supervisors. In accordance with the ROC Company Law, our supervisors are elected by our shareholders and cannot concurrently serve as our directors or officers or have any staff position with us. Their duty is to oversee our activities and the activities of the board of directors and they have the power to, among other things, investigate our business and financial condition, inspect corporate records, verify statements prepared by the board of directors prior to the annual general shareholders’ meeting, call shareholders’ meetings if they deem necessary, and represent us in negotiations with directors. In addition, supervisors have the power to request the board of directors to cease acting in contravention of applicable laws or regulations or in contravention of the Articles of Incorporation or any resolution adopted by our shareholders. When conducting investigations, supervisors may engage independent experts at our cost.

Eleven out of thirteen directors and supervisors serve in their capacity as representatives of the corporate entities who hold the board or supervisor seats and do not serve in their individual capacity. Consequently, if any of the individuals who serve in their capacity as representatives of the corporate entities who hold the board or supervisor seat withdraws, dies or otherwise becomes unable to serve, the corporate entity he or she represents has the ability to replace that person with a different representative of its choice.

Our board of directors is currently comprised of thirteen board seats. We also have three supervisors. None of our directors and supervisors is independent. Directors and supervisors are deemed ‘‘independent’’ if they have five years of experience in business, legal or financial matters or in the company’s business, with one of the independent directors being an accounting or financial professional, and attend three hours of legal, financial or accounting training per year. In addition, directors and supervisors will be deemed ‘‘independent’’ only if, for at least one year prior to their election, they:

. do not serve as independent directors or supervisors on the boards of directors of five or more other companies;
. are not employed by the company or its affiliates and are not directors or supervisors of the company and the affiliates;
. do not directly or indirectly hold over 1% of the shares of the company and are not ranked among the top ten individual shareholders of the company;
. are not married or related within the second degree of employees of the company or its affiliates, directors and supervisors of company affiliates, holders (directly or indirectly) of over 1% of the outstanding shares of the company or shareholders who are ranked among the top ten individual shareholders of the company;

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. are not directors, supervisors or employees of corporate shareholders which directly or indirectly hold more than 5% of the shares of the company or ranked among the top five corporate shareholders of the company;
. are not directors, supervisors, managers or holders of more than 5% of the shares of a company or institution with which the company has a financial or business relationship; and
. are not a spouse of, partner, director, supervisor or manager of providers of financial, commercial or legal services to the company or its affiliates.

The requirement for independent directors and supervisors currently only applies to companies who apply to list their shares on the Taiwan Stock Exchange since 2002. We do not know whether this requirement will apply to us in the future. In addition, to be deemed as ‘‘independent,’’ directors and supervisors must be elected in their individual capacities.

Directors and Supervisors

The following table sets forth the name of each director and supervisor, and position held.

Name
Yung-Jen Huang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yung-Hsiung Hou(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shun-Yu Chung(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tai-Chi Lee(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jackson Mai(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chiu-Hsiung Huang(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fei-Long Tsai(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cheng-Tsung Lee(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S.C. Shue(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bor-I Huang(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yuh-Ming Ho(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chou-Tsai Lin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yung-Hui Chang(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chuan-Hsing Huang(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charles C. Yuan(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yu-Chen Yang(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Position

Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Supervisor
Supervisor
Supervisor

(1) Representative of E.Sun Foundation.
(2) Representative of Cathay Life Insurance Co., Ltd.
(3) Representative of Fullead Investment Co., Ltd.
(4) Representative of Hsin Tung Yang Co., Ltd.
(5) Representative of Allcan Investment Co., Ltd.
(6) Representative of Shang Chun Investment Co., Ltd.
(7) Representative of Hsing Ta Cement Co., Ltd.
(8) Representative of Shan Meng Investment Co., Ltd.
(9) Representative of Bowlead Investment Co., Ltd.
(10) Representative of Wan Ta Investment Co., Ltd.
(11) Representative of Hsin Kao Shan Investment Co., Ltd.
(12) Representative of Shi Yang Construction Co., Ltd.
(13) Representative of Ming Chuan Co., Ltd.

The business address of each director and supervisor is our registered office.

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Set forth below is a short biography of each director and supervisor of E.Sun Financial.

Yung-Jen Huang is our Chairman of the board of directors. He is also the Chairman of E.Sun Bank. He was previously the Senior Vice President of Hua Nan Commercial Bank. Mr. Huang has a Bachelor’s degree from National Chung Hsing University.

Yung-Hsiung Hou is one of our directors and our President. He is also the President of E.Sun Bank. He has been working in the financial services industry for 39 years. He was previously the Vice President of Hua Nan Commercial Bank. Mr. Hou has a Bachelor’s degree in commerce from National Taiwan University.

Shun-Yu Chung is one of our directors. He is also the financial analysis manager of Cathay Life Insurance Co., Ltd. Mr. Chung has a Bachelor’s degree in finance and tax from National Chengchi University.

Tai-Chi Lee is one of our directors. He is also the Chairman of the board of directors of Tidehold Development Co., Ltd. He was previously the Chairman of Yung Li Securities Co., Ltd. Mr. Lee has a Bachelor’s degree in business administration from Fu Jen Catholic University.

Jackson Mai is one of our directors. He is also the Chairman of the board of directors of Hsin Tung Yang Co., Ltd. and Rui Yang Co., Ltd. Mr. Mai graduated from National Taiwan Commercial Vocational Senior High School.

Chiu-Hsiung Huang is one of our directors. He is also an accountant. Mr. Huang has a Bachelor’s degree in accounting from Feng Chia University.

Fei-Long Tsai is one of our directors. He is also the Chairman of the board of directors of E.Sun Securities. He was previously the Vice President of E.Sun Bank. Mr. Tsai has a Bachelor’s degree in political science from Soochow University.

Cheng-Tsung Lee is one of our directors. He is also the manager of loans department of Cathay Life Insurance Co., Ltd. He was previously an analyst of the financial department of Cathay Life Insurance Co., Ltd. Mr. Lee has a Bachelor’s degree in business administration from National Chung Hsing University.

S.C. Shue is one of our directors. He is also the Chairman of the board of directors of E.Sun Bills Finance. He was previously the president of E.Sun Bills Finance. Mr. Shue has a Bachelor’s degree in accounting and statistics from National Chung Hsing University.

Bor-I Huang is one of our directors. He is also the Dean of Student Affairs of Shih Chien University. He was previously the President of E.Sun Securities. Mr. Huang has a Bachelor’s degree in economics from National Chung Hsing University.

Yuh-Ming Ho is one of our directors. He is also a Chief Doctor of Chiayi Christian Hospital. Mr. Ho has a Bachelor’s degree in medicine from National Taiwan University.

Chou-Tsai Lin is one of our directors. He is also the Chairman of Fu Yu Co., Ltd. He was previously a director of ROC Swimming Association. Mr. Lin graduated from Tamkang Junior College of English.

Yung-Hui Chang is one of our directors. He is also a fund manager of Cathay Life Insurance Co., Ltd. Mr. Chang has a Bachelor’s degree in economics from Tung Hai University.

Chuan-Hsing Huang is one of our supervisors. He is also an Associate Professor in the Department of Finance and Banking of Aletheia University. He was previously an assistant researcher and secretary of the Financial Training Institute. Mr. Huang has a Doctorate degree in economics from National Chung Hsing University.

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Charles C. Yuan is one of our supervisors. He is also a director of Chin-Ou Vocational School. He was previously the Chairman of the board of directors of E.Sun Bills Finance. Mr. Yuan has a Bachelor’s degree in economics from National Taiwan University.

Yu-Chen Yang is one of our supervisors. She is also an accountant. Ms. Yang has a Bachelor’s degree in accounting from National Cheng Kung University.

Executive Officers

The following table sets forth certain information relating to the executive officers of E.Sun Financial.

Name
Yung-Hsiung Hou . . . . . . . . . .
Jiaw-Hwang Shy . . . . . . . . . . .
Wu-Lin Duh . . . . . . . . . . . . . .
Cheng-Hsiung Chen. . . . . . . . .
Tung-Long Kuo . . . . . . . . . . .
Yvonne H. Yang . . . . . . . . . . .
Magi Chen
. . . . . . . . . . . . . .
Joseph N.C. Huang . . . . . . . . .
C.S. Huang . . . . . . . . . . . . . .
Yung-Ho Huang . . . . . . . . . . .

Position

President
Deputy President
Deputy President
Chief Auditor
Senior Vice President, Corporate Banking Division
Chief Risk Officer of Risk Management Division and Chief
Information Officer of Information System Division
Chief Financial Officer, Head of International & Treasury
Division
General Manager of Administration Division
Head of Asset Management Business Division
Head of Consumer Banking Business Division

The business address of each executive officer is our registered office.

Set forth below is a short biography of each executive officer of E.Sun Financial.

Yung-Hsiung Hou. See ‘‘— Directors and Supervisors.’’

Jiaw-Hwang Shy is our Deputy President. Mr. Shy joined us in 2002. He is also a Senior Executive Vice President of E.Sun Bank. He has been working in the financial services industry for 30 years. Mr. Shy has a Bachelor’s degree in business administration from National Chung Hsing University.

Wu-Lin Duh is our Deputy President. Mr. Duh joined us in 2002. He is also a Senior Executive Vice President of E.Sun Bank. He has been working in the financial services industry for 31 years. Mr. Duh graduated from Open Junior College of Commerce of National Cheng Kung University.

Cheng-Hsiung Chen is our Chief Auditor. Mr. Chen joined us in 2002. He is also the Chief Auditor of E.Sun Bank. He has been working in the financial services industry for 42 years. Mr. Chen graduated from National Taiwan Academy of Arts.

Tung-Long Kuo is our Senior Vice President of Corporate Banking Division. Mr. Kuo joined us in 2002. He is also the Senior Vice President of Corporate Finance Division of E.Sun Bank. He has been working in the financial services industry for 32 years. Mr. Kuo has a Bachelor’s degree in public administration from National Chung Hsing University.

Yvonne H. Yang is our Chief Risk Officer of Risk Management Division and Chief Information Officer of Information System Division. Ms. Yang joined us in 2002. She is also a Senior Vice President of E.Sun Bank. She has been working in the financial services industry for 27 years. Ms. Yang has a Bachelor’s degree in economics from Fu Jen Catholic University and an executive MBA degree in information management from the National Taiwan University.

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Magi Chen is our Chief Financial Officer and Head of International and Treasury Division. Ms. Chen joined us in 2002. She is also an Executive Vice President of E.Sun Bank. Ms. Chen holds an MBA degree from University of Tennessee.

Joseph N.C. Huang is our General Manager of Administration Division. Mr. Huang joined us in 2002. He holds an MBA degree from the City University of New York.

C.S. Huang is the Head of Asset Management Business Division. Mr. Huang joined us in 2002. He is also an Executive Vice President of E.Sun Bank. He has an MBA degree from Cheng-Chi University.

Yung-Ho Huang is the Head of Consumer Banking Business Division. Mr. Huang joined us in 2002. He is also an Executive Vice President of E.Sun Bank. He has a Bachelor’s degree in English from Tamkang University.

Compensation and Interests of Directors, Supervisors and Executive Officers

As of December 31, 2002, the aggregate remuneration and benefits in kind granted by us to our directors and supervisors was NT$95,000. No remuneration and benefits in kind were paid by E.Sun Financial to our executive officers in 2002.

Certain of our directors, supervisors and executive officers also serve as directors, supervisors or executive officers of companies with which we do business. These companies include our affiliates. See ‘‘Share Ownership’’, ‘‘Transactions with Related Parties’’ and Note 23 of Notes to Consolidated Financial Statements of E.Sun Financial and Note 23 of Notes to Unaudited Consolidated Interim Financial Statements of E.Sun Financial. We conduct these transactions on an arm’s-length commercial basis. For the year ended December 31, 2002, we did not grant any loans or provided any guarantees to any of our directors, supervisors and executive officers.

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SHARE OWNERSHIP

The following table sets forth, to the best of our knowledge, certain share ownership information as of March 31, 2003 with respect to the ten largest holders of record of our Shares and our board of directors, supervisors and executive officers as a group. As a result, the information below may not reflect the exact share ownership as of March 31, 2003.

Name E.Sun Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cathay Life Insurance Co., Ltd.(1) . . . . . . . . . . . . . . . . . . . . Wan Da Investment Co., Ltd.(1). . . . . . . . . . . . . . . . . . . . . . Hsin Kon Investment Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . HSBC Securities Asia nominee . . . . . . . . . . . . . . . . . . . . . . Konware Investment (BVI). . . . . . . . . . . . . . . . . . . . . . . . . King Sa International Investment Co., Ltd. . . . . . . . . . . . . . . Cathay Construction Co., Ltd.(1) . . . . . . . . . . . . . . . . . . . . . Jeng Shen Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Au Kon Investment Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . Total top 10 shareholders . . . . . . . . . . . . . . . . . . . . . . . . . Directors, supervisors and executive officers as a group . . . . .	Number of Shares 349,849,181 128,435,028 97,825,976 64,243,171 61,000,560 48,787,276 41,486,883 41,032,698 32,415,654 30,719,014 895,795,441 376,040,932	Percentage of Total Issued Shares
		14.16% 5.20 3.96 2.60 2.47 1.98 1.68 1.66 1.31 1.24
		36.26%
		15.22%

(1) An affiliate of the Cathay Financial Group.

Prior to the business combinations, E.Sun Bank held its own shares in the form of treasury shares and shares of E.Sun Bills Finance and E.Sun Securities as long-term equity investments. Upon the consummation of the business combinations through the share exchange, such treasury shares and E.Sun Bills Finance’s and E.Sun Securities’ shares (which are accounted for under the treasury stock method) were exchanged into our Shares in an amount that totaled approximately 1.62% and 11.39% of our Shares, respectively. The Shares (approximately 1.62% of our Shares) that were exchanged for such treasury shares are considered to be treasury shares of record held by our subsidiaries pursuant to the regulations of the Securities and Futures Commission and as a result are not entitled to vote or receive dividends. The Shares (approximately 12.54% of our Shares) that were exchanged for shares of E.Sun Bills Finance and E.Sun Securities currently held by E.Sun Bank are entitled to vote and receive dividends. We are required by MOF to either cancel or sell all Shares held by E.Sun Bank within three years of the effective date of the business combination.

None of the major holders of our Shares has different voting rights from those of the other holders of our Shares.

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TRANSACTIONS WITH RELATED PARTIES

General

We have from time to time engaged in a variety of transactions with our related parties (as defined under ROC GAAP). Under ROC GAAP, if one party, whether an organization or individual, can exercise control or significant influence over the operations or financing policies of another party, then these two parties are considered related parties. Entities under common ownership or control of the same organization or individual are also deemed to be related parties. In addition, any entity or person will be deemed to be a related party of a company (except where there is a showing that there is no control or significant influence) if:

. that entity is an investee of the company, accounted for by the equity method;
. that entity or person is an investor in the company, using the equity method to account for the investment in the company;
. the chairman of the board of directors or the president of that entity is also the chairman of the board of directors or the president of the company, or is the spouse or a member of the immediate or second immediate family of the chairman of the board of directors or the president of the company;
. that entity is a non-profit organization of which the funds donated from the company exceeds one third of the entity’s total funds;
. that person is the director, supervisor, president, vice-president, assistant vice-president or departmental head reporting to the president of the company;
. that person is the spouse of a director, a supervisor or the president of the company; or
. that person is a member of the immediate or second immediate family of the company’s chairman or president.

According to the ROC Financial Holding Company Act, the terms and conditions of the non-creditextension transactions entered into by a financial holding company (and/or its subsidiary) with the following persons shall not be more favorable than the transactions entered into with other customers of the same kind and such transactions shall be approved by our board of directors which at least two-thirds of the directors should be present and more than three-fourth of the directors present should vote in favor of:

. the responsible persons and major shareholders of the financial holding company;
. an enterprise in which the responsible person or the major shareholders of the financial holding company is the sole investor, a partner, or responsible person, or a group that the responsible person or the major shareholders of the financial holding company is the representative of such group;
. affiliates of the financial holding company and the responsible persons and major shareholders of such affiliates; or
. the banking (including bills finance), insurance, and securities subsidiaries of the financial holding company, and the responsible persons of such subsidiaries.

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Non-credit-extension transactions, according to the definition under the ROC Financial Holding Company Act, include:

. investing in or purchasing the securities issued by the persons described above;
. purchasing real properties from the persons described above;
. selling securities, real properties or other assets to the persons described above;
. signing agreement of paying money or providing labor service with the persons described above;
. engaging the persons described above to be the agent or broker of the financial holding company or its subsidiaries, or to provide any services to the financial holding company or its subsidiaries on a commission or fee basis; or
. entering into the above-mentioned transactions with any third party who is an interested party to the person described above, or entering into the above-mentioned transactions to which the person described above is a party.

We believe that the transactions entered into with our related parties have benefited our subsidiaries as well as our company and reduced our respective operating costs and improved our financial performance. We may enter into additional transactions with our related parties in the future. No assurance can be given as to the terms of such transactions or that all of such transactions with our related parties will be benefit to us.

Transactions with Related Parties for the Period from January 28, 2002 to December 31, 2002

Our related parties include (1) E.Sun Foundation, the funds of which are donated by E.Sun Bank, (2) E.Sun Venture Capital Co., Ltd., our wholly owned subsidiary, (3) E.Sun Finance & Leasing Co. and E.Sun Insurance Agency Co., the subsidiaries of E.Sun Bank, (4) E.Sun Securities Investment Trust Corp., a subsidiary of E.Sun Bank and E.Sun Securities, (5) E.Sun Technologies Co., a subsidiary of E.Sun Finance & Leasing Co., (6) Fu Bon Securities Finance Co., which appoints one of our directors and (7) certain of our directors, supervisors, managers and relatives of the chairman and general managers of E.Sun Bank.

We provided loans to certain related parties. The total outstanding amount of such loans was NT$792.5 million as of December 31, 2002. Interest derived from such loans amounted to NT$22.0 million for the period from January 28, 2002 to December 31, 2002.

We accepted deposits from certain related parties. The balance of deposits accepted from such related parties amounted to NT$1.0 billion as of December 31, 2002. The interest payment to such related parties amounted to NT$1.3 million for the period from January 28, 2002 to December 31, 2002.

We purchased bonds from certain related parties with an aggregate purchase price of NT$100 million as of December 31, 2002. We entered into transactions to sell bonds under agreements to repurchase with the mutual funds under the management of E.Sun Securities Investment Trust Corp. with an aggregate sales price of NT$458.0 million as of December 31, 2002. The expense derived from such transactions amounted to NT$12.1 million for the period from January 28, 2002 to December 31, 2002. We also entered into transactions with E.Sun Securities Investment Trust Corp. and mutual funds under the management of E.Sun Securities Investment Trust Corp., relating to the purchase or sale of negotiable instruments and bonds. We purchased such securities from E.Sun Securities Investment Trust Corp. and mutual funds under the management of E.Sun Securities Investment Trust Corp. with an aggregate purchase price of NT$201.7 million and NT$870.9 million, respectively. We sold such securities to E.Sun Securities Investment Trust Corp. and mutual funds under the management of E.Sun Securities Investment Trust Corp. with an aggregate sales price of NT$207.3 million and NT$1.8 billion, respectively.

For more information on the transactions with related parties, see note 23 of the audited consolidated financial statements for E.Sun Financial.

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DESCRIPTION OF THE BONDS

The following is a description of the Terms and Conditions (the ‘‘Conditions’’) of the Bonds (subject to amendment and except for the sentences in italics), which includes summaries of, and is subject to, the more detailed provisions of the Indenture referred to below.

The issue of Zero Coupon Convertible Bonds Due 2004 (the ‘‘Bonds’’, which shall include any Optional Bonds issued pursuant to the option to increase the principal amount of the Bonds described in the Indenture (as defined below)) of E.Sun Financial Holding Co., Ltd. (the ‘‘Company’’ or ‘‘we’’) was authorized by a resolution of our board of directors adopted on August 22, 2002. The Bonds are initially limited to US$178,200,000 aggregate principal amount (which includes US$19,800,000 aggregate principal amount of the Bonds to be issued pursuant to the exercise by the Initial Purchaser of an option granted by us to purchase Optional Bonds). The Company may from time to time, without notice to or consent of the holders of the Bonds, issue further bonds which will form a single series with the Bonds. Any such additional bonds will be identical in all respects to the Bonds, except the bonds issued in the future will have different issuance prices and issuance dates. The Bonds will be issued on or about June 27, 2003 (the ‘‘Issue Date’’) pursuant to an indenture (the ‘‘Indenture’’) dated the Issue Date between us and DB Trustees (Hong Kong) Limited, as trustee (the ‘‘Trustee’’, which term shall include all persons for the time being appointed as trustee or trustees under the Indenture) for the holders of the Bonds. We will also enter into a paying, conversion and transfer agency agreement (the ‘‘Agency Agreement’’) dated the Issue Date with the Trustee, Deutsche Bank AG, Hong Kong Branch as the registrar (the ‘‘Registrar’’) and as the principal paying, conversion and transfer agent (the ‘‘Principal Agent’’) and any other paying, conversion and transfer agent appointed thereunder (each a ‘‘Paying Agent’’, ‘‘Conversion Agent’’ and ‘‘Transfer Agent’’ and together with the Principal Agent and the Registrar, the ‘‘Agents’’) in relation to the Bonds. The registrar, principal paying, conversion and transfer agent, paying agents, conversion agents and transfer agents for the time being are referred to below as the ‘‘Registrar’’, the ‘‘Principal Agent’’, the ‘‘Paying Agents’’ (which expression shall include the Principal Agent), the ‘‘Conversion Agents’’ (which expression shall include the Principal Agent) and the ‘‘Transfer Agents’’ (which expression shall include Principal Agent and the Registrar), respectively and, so long as the Bonds are listed on the Luxembourg Stock Exchange, the ‘‘Agents’’ shall include the Paying, Conversion and Transfer Agent in Luxembourg. Copies of the Indenture and the Agency Agreement are available for inspection during normal business hours at the principal office of the Trustee and at the specified offices of each of the Agents. The holders of the Bonds are entitled to the benefit of the Indenture and are bound by, and are deemed to have notice of, all of the provisions of the Indenture and the Agency Agreement.

1. Status

The Bonds constitute direct, unconditional, unsubordinated and, subject to the provisions of Condition 3, unsecured obligations of the Company and shall at all times rank pari passu and without any preference or priority among themselves and, subject to the provisions of Condition 3, with all other present and future direct, unconditional, unsubordinated and unsecured obligations of the Company, except as may be required by mandatory provisions of law.

Because the Company is a holding company and conducts all of its operations through its subsidiaries, the Bonds will be effectively subordinated to the liabilities of these subsidiaries. As of March 31, 2003, the Company’s subsidiaries had aggregate liabilities of NT$279.8 billion, before consolidation adjustments, on a consolidated basis. The Bonds will also be effectively subordinated to all secured obligations of the Company with respect to claims against the assets securing such obligations (the ‘‘Secured Debt’’). As of March 31, 2003, the Company had no outstanding Secured Debt.

The Company’s subsidiaries are financial companies which may borrow short-term funds in their ordinary course businesses and the terms of the Bonds and the Indenture do not limit or otherwise restrict the Company’s or its subsidiaries’ abilities to incur additional debt or make any guarantee.

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2. Form, Denomination and Title

(A) Form and Denomination

The Bonds shall be issued in registered form, without coupons, and shall be offered, sold and transferred in the principal amount of US$1,000 or an integral multiple thereof. The Bonds shall initially be represented by a global certificate (the ‘‘Global Certificate’’), and only under the limited circumstances described in the Global Certificate and the Indenture shall definitive bond certificates (each a ‘‘Definitive Certificate’’) be issued to holders of the Bonds in respect of their individual holdings. Each Definitive Certificate, if issued, shall be serially numbered and shall have an identifying number which shall be recorded on the relevant certificate and in the register of holders of the Bonds, which the Company shall procure to be kept by the Registrar.

(B) Title

The Bonds shall be registered instruments, and title to the Bonds shall pass by transfer and registration of title in the register of holders of the Bonds. The holder of any Bond shall, except as otherwise required by law, be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Definitive Certificate issued in respect of it), and no person shall be liable for so treating the holder. In these Conditions, ‘‘holder of the Bonds’’ and ‘‘holder’’ in relation to a Bond mean the person in whose name a Bond is registered in the register of holders of the Bonds.

3. Certain Covenants

(A) Negative Pledge

So long as any of the Bonds remains outstanding, the Company will not, and will not permit any of its Principal Subsidiaries (as defined below) to create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest (‘‘Security’’) upon the whole or any part of the property, assets or revenues of the Company or such Principal Subsidiary, as the case may be, present or future, to secure for the benefit of the holders of any International Investment Securities (as defined below) any payment of any sum due in respect of or under any guarantee of or payment indemnity or other like obligation relating to any such International Investment Securities, unless, in any such case, at the same time or prior thereto, either (i) the same Security is granted to the holders of the Bonds or (ii) there is outstanding any guarantee, indemnity or other like obligation or such other security that is not materially less beneficial to the holders of the Bonds or as shall be approved by holders of the Bonds holding not less than 50% of the principal amount of the outstanding Bonds; provided, that the foregoing restriction shall not apply to Security on the property or assets of the Company or any of its Principal Subsidiaries for the benefit of the holders of International Investment Securities in aggregate principal amount no greater than US$10,000,000 issued by any of the Company’s Principal Subsidiary to be designated in writing by the Company to the Trustee.

For the purposes of these Conditions:

‘‘International Investment Securities’’ means bonds, debentures, notes, or other similar investment securities of the Company or any of its Principal Subsidiaries evidencing indebtedness with a maturity of not less than one year that (a) either (i) are by their terms payable, or confer a right to receive payment, in any currency other than NT dollars or (ii) are denominated or payable in NT dollars and more than 50% of the aggregate principal amount thereof is initially distributed outside the ROC by the Company or with its authorization; and (b) are for the time being, or are capable of being, quoted, listed, ordinarily dealt in or traded on any stock exchange, quotation system or over-the-counter or other similar securities market outside the ROC.

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‘‘Principal Subsidiary’’ means any corporation or other business entity, more than 50% of the outstanding voting stock of which is for the time being owned directly or indirectly by the Company and either (a) the net sales or net operating revenues of which, as shown by the accounts (consolidated in the case of an entity which itself has subsidiaries) of such entity upon which the most recent audited consolidated accounts of the Company have been based, are at least 10% of its consolidated net sales or net operating revenues, as the case may be, as shown by such audited consolidated accounts; or (b) the gross assets of which, as shown by the aforementioned accounts, are at least 10% of its consolidated gross assets as shown by such audited consolidated accounts; provided, however, with respect to the Company, that ‘‘Principal Subsidiary’’ shall be deemed to include (but not limited to) each of E.Sun Bank, E.Sun Bills Finance and E.Sun Securities and their successors.

(B) Mergers and Disposals

The Company shall not merge, amalgamate or consolidate with or into any other corporation or entity (if the Company is not the surviving entity) or sell or transfer all, or substantially all, of its assets, whether as a single transaction or a number of transactions, related or not, to any corporation, entity or person or to one or more members of any group under the common control of any corporation, entity or person unless:

(i) the Company has notified the holders of the Bonds of such event in accordance with Condition 14;
(ii) the Company and such corporation, entity or person have executed an indenture supplemental to the Indenture, in form and substance satisfactory to the Trustee, and the supplemental indenture includes the following: (a) the express assumption by such corporation, entity or person of the Company’s obligations under the Bonds, the Indenture and the Agency Agreement, including the covenants contained in this Condition 3(B) relating to subsequent mergers, amalgamations, consolidations, sales or transfers; (b) provisions for the convertibility of each Bond then outstanding into the class and amount of Shares and other securities, cash and other property receivable upon such consolidation, amalgamation, merger, sale or transfer by a holder of the number of Shares into which such Bonds would have been convertible immediately prior to such consolidation, amalgamation, merger, sale or transfer (assuming for such purpose that the Bonds were convertible at the time of such consolidation, amalgamation, merger, sale or transfer) at the Conversion Price as adjusted from time to time pursuant to the Indenture; and (c) provisions for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in the provisions of Condition 5(C); and
(iii) immediately after giving effect to any such consolidation, amalgamation, merger, sale or transfer, no default or Event of Default shall have occurred or be continuing or would result therefrom.

In the event of any such consolidation, amalgamation, merger, sale or transfer, the provisions described under Condition 7 (C) and Condition 8 will be applicable to the corporation formed by such consolidation, amalgamation or merger or the Person as defined in Condition 7(F) acquiring such assets as appropriate and the holders of the Bonds will be entitled to the benefits under Condition 7(F), if applicable.

So long as the Bonds are listed on the Luxembourg Stock Exchange, the Company shall submit a copy of the supplemental indenture to the Luxembourg Stock Exchange as soon as practicable and shall make such supplemental indenture available for inspection during normal business hours, at the specified offices of its Paying, Conversion and Transfer Agent in Luxembourg.

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4. Transfers of Bonds; Issue of Certificates

(A) Transfers

A Bond may be transferred as follows: (i) in the case of a Bond represented by a Definitive Certificate, by depositing such certificate during normal business hours at the specified offices of any Transfer Agent, with the form of transfer on the back of such certificate duly completed and signed, or (ii) in the case of a Bond represented by the Global Certificate, by delivery at such office of a form of transfer duly completed and executed, and any other evidence that such Transfer Agent may require.

The forms of transfer are available at the specified offices of any Transfer Agent during normal business hours. Transfers of interests in the Bonds evidenced by the Global Certificate shall be effected in accordance with the rules of Euroclear or Clearstream.

(B) Delivery of New Definitive Certificates

Each new Definitive Certificate to be issued upon transfer of the Bonds shall, within five Business Days of receipt by the Transfer Agent of the duly signed and completed form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Bonds to the address specified in the form of transfer.

Where some but not all of the Bonds in respect of which a Definitive Certificate is issued are to be transferred, converted or redeemed, a new Definitive Certificate in respect of the Bonds not so transferred, converted or redeemed shall, within five Business Days of deposit or surrender of the original certificate with or to the relevant Agent, be mailed by uninsured mail at the risk of the holder of the Bonds not so transferred, converted or redeemed to the address of such holder appearing on the register of holders of the Bonds.

For the purposes of this Condition 4:

‘‘Business Day’’ means a day (other than a Saturday or Sunday) on which commercial banks are open for business in the city in which the specified office of the Transfer Agent with whom a Definitive Certificate is deposited in connection with a transfer is located.

(C) Formalities Free of Charge

Registration of transfer of the Bonds shall be effected without charge by or on behalf of the Company or any of the Agents, subject to payment (and the giving of such indemnity as the Company or any of the Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to it.

(D) Restricted Transfer Period

No holder of the Bonds may require the transfer of a Bond to be registered (i) during the period of 15 days ending on (and including) the due date for any payment in respect of the Bond pursuant to Condition 6 and Condition 7(A), (ii) after the Bond has been selected for redemption pursuant to Condition 7(B) or Condition 7(C), (iii) following exercise by the holder of its option to require the Company to redeem the Bond pursuant to Condition 7(D) or Condition 7(F) or (iv) following exercise by the holder of its option to convert the Bond pursuant to Condition 5(A).

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(E) Provisions on Transfer

All transfers of the Bonds and entries on the register of holders of the Bonds shall be made subject to the detailed provisions concerning transfer of the Bonds set forth in the Agency Agreement. Such provisions may not be changed without the prior written approval of the Trustee and the Registrar. A copy of the current provisions shall be mailed (or sent via facsimile) by the Registrar upon written request.

5. Conversion

We have agreed in the Indenture that, within five Trading Days (as defined below) from each Conversion Date (as defined in Condition 5(B)(i)), we will issue and deliver the Shares, through book-entry or physical delivery, to the converting holder or its designee, subject to applicable law and the provisions of the Indenture relating to the conversion.

The Indenture provides that the term ‘‘Shares’’ means, when used to refer to the class or classes of our capital stock into which the Bonds are convertible and when used in certain other instances, only our Shares, NT$10 par value per Share, but when used elsewhere, including in Condition 5(C), such term also includes Shares of any other class or classes of our capital stock authorized after the date of the Indenture that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or winding-up.

(A) Conversion Right

(i) Conversion Period. Subject to the Company’s right to elect to pay converting holders cash in lieu of Shares under the circumstances set forth in Condition 5(B)(v), each holder of the Bonds has the right hereunder to convert any Bond into Shares subject to the terms set forth herein (the ‘‘Conversion Right’’). Subject to and upon compliance with the provisions of this Condition 5, the Conversion Right attaching to any Bond may be exercised, at the option of the holder of the Bonds and to the extent provided herein, at any time (i) on or after November 24, 2003 and prior to the close of business (at the place where such Bond is deposited for conversion) on December 12, 2004 (or if such day shall not be a Business Day (as defined below) at such place, on the immediately preceding Business Day at such place) or (ii) if such Bond shall have been called for redemption on a redemption date on or prior to June 27, 2004 (or if such day shall not be a Business Day at the place where such Bond is deposited for conversion, on the immediately preceding Business Day at such place), then up to the close of business (at the place aforesaid) on the seventh day prior to the date fixed for redemption thereof (or if such day shall not be a Business Day at such place, on the immediately preceding Business Day at such place) (the ‘‘Conversion Period’’); provided, however, that the Conversion Right during any Closed Period (as defined below) shall be suspended and the Conversion Period shall not include any such Closed Period. Holders of the Bonds shall be given not less than 7 and not more than 60 days notice in accordance with Condition 14 of the commencement of any Closed Period.

For the purposes of these Conditions:

‘‘Closed Period’’ means (i) the 60-day period prior to the date of any of the Company’s general shareholders’ meetings; (ii) the 30-day period prior to the date of any of the Company’s special shareholders’ meetings; (iii) the period from the date following the third Trading Day (as defined below) prior to the date of the Company’s notification to the Taiwan Stock Exchange of the record date for the determination of shareholders entitled to the receipt of dividends, subscription of new Shares due to capital increase or other

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benefits and bonuses to such record date; and (iv) such other periods during which the Company may be required to close its stock transfer books under ROC laws and regulations applicable from time to time.

‘‘Trading Day’’ means a day when the Taiwan Stock Exchange is open for business.

For the purposes of this Condition 5:

‘‘Business Day’’ means a day (other than a Saturday or Sunday) on which commercial banks are open for business in London and the city in which the specified office of the Conversion Agent with whom a Conversion Notice is deposited in connection with the conversion is located.

Under current ROC law, regulation and policy, PRC persons are not permitted to hold or convert the Bonds or to register as our shareholders. Under current ROC law, ‘‘PRC person’’ means an individual holding a passport issued by the PRC; a resident of any area of China under the effective control or jurisdiction of the PRC (but not including a special administrative region of the PRC such as Hong Kong or Macau, if so excluded by applicable laws of the ROC); any agency or instrumentality of the PRC; and any corporation, partnership or other entity organized under the laws of any such area or controlled or beneficially owned by any such person, resident, agency or instrumentality.

Under current ROC law, a non-ROC converting holder of the Bonds, when exercising its conversion right to convert the Bonds into Shares, is required to appoint a local agent, also referred to as a Tax Guarantor, in the ROC to file tax returns and make tax payments on its behalf. In addition, a non-ROC converting holder is required to appoint a local agent in the ROC with such qualifications as are set by the ROC Securities and Future Commission. Such local agent shall open a securities trading account with a local brokerage firm and a NT dollar bank account, pay ROC withholding taxes, remit funds, exercise shareholders’ rights and perform such other matters as may be designated by such converting holder on behalf of and as agent for such person. In addition, such non-ROC converting holder must also appoint a custodian bank to hold the securities for safekeeping, make confirmation and settlement of trades, and report all relevant information. Without first obtaining the approval of the Taiwan Stock Exchange and opening such accounts, the converting holder of the Bonds would not be able to hold or sell or otherwise transfer the Shares on the Taiwan Stock Exchange or otherwise. See ‘‘Appendix B — Foreign Investment and Exchange Controls in the ROC.’’

(ii) Number of Shares Issuable on Conversion. The number of Shares issuable upon conversion of any Bond shall be determined by dividing the principal amount of the Bond (translated into NT dollars at a fixed exchange rate of NT$34.661 = US$1.00, the ‘‘Fixed Exchange Rate’’) by the Conversion Price (as defined in Condition 5(A)(iii)) in effect on the Conversion Date (as defined in Condition 5(B)(i)). If more than one Bond shall be deposited for conversion at any one time by the same holder of the Bonds, the number of Shares to be issued upon conversion thereof shall be calculated on the basis of the aggregate principal amount of the Bonds so deposited. Fractions of Shares shall not be issued on conversion, and cash adjustments shall not be made in respect thereof by the Company. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Shares by operation of law or otherwise that occurs after the date of the original issuance of the Bonds, the Company shall upon conversion of the Bonds pay in US dollars a sum equal to such portion of the principal amount of the Bonds deposited for conversion as corresponds to any fraction of a Share not issued as aforesaid if such sum exceeds US$10. For the purpose of calculating the amount of such payment, the Company shall use the Fixed Exchange Rate.

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(iii) Initial Conversion Price. The price at which Shares shall be issued upon conversion (the ‘‘Conversion Price’’) shall initially be NT$19.716 per Share, but shall be subject to adjustment in the manner provided in Condition 5(C), Condition 5(D) and Condition 5(E).
(iv) Revival on Default. Notwithstanding the provisions of Condition 5(A)(i), if an Event of Default (as defined in Condition 9) occurs, the Conversion Right attaching to a Bond shall continue to be exercisable up to and including the close of business at the place where the relevant Conversion Notice (as defined in Condition 5(B)(i)) is deposited for conversion on the date upon which the full amount of the monies payable in respect of such Bond has been duly received by the Trustee or the Principal Agent and notice of such receipt has been duly given to the holders of the Bonds.

(B) Conversion Procedures

(i) Exercise Procedures; Conversion Notice; Deposit Date; Conversion Date. To exercise the Conversion Right attaching to any Bond, a holder of the Bond shall deposit the following at its own expense between 9: 00 a.m. and 3: 00 p.m. on any Business Day at which the Bond is presented for conversion during the Conversion Period at the specified office of a Conversion Agent outside the ROC:
(a) a notice of conversion (a ‘‘Conversion Notice’’) in duplicate, duly completed and signed, in the then-current form obtainable from the specified office of any Conversion Agent, together with the relevant Definitive Certificate, if issued, in respect of the relevant Bond;
(b) any certificates and other documents as may be required under the law of the ROC or the jurisdiction in which such Conversion Agent shall be located; and
(c) any amount required to be paid by the holder of the Bond referred to in Condition 5(B)(ii) below.

Any of the above items deposited after 3: 00 p.m. as specified above or on a day that is not a Business Day shall for all purposes be deemed to have been deposited with that Agent on the immediately succeeding Business Day. The Conversion Notice shall contain, among other things, (i) the appointment of a local agent; (ii) an irrevocable instruction to convert the Bonds into Shares; and (iii) other information required by ROC laws and regulations. Once deposited, the Conversion Notice may not be withdrawn without the Company’s consent in writing. Holders of the Bonds who deposit a Conversion Notice on the final Business Day prior to a Closed Period or who deposit a Conversion Notice during a Closed Period will not be permitted to convert their Bonds until the Trading Day following the last day of that Closed Period which (if all other conditions to conversion have been fulfilled) will be the Conversion Date for such Bonds. Subject to the Company’s right to elect to pay converting holders cash in lieu of Shares under the circumstances set forth in Condition 5(B)(v), such holders will not be registered as holders of the Shares until the Conversion Date. The price at which such Bond shall be converted shall be the Conversion Price in effect on the Conversion Date (as defined below).

We will covenant in the Indenture that we will send to the Trustee an officer’s certificate, which certificate the Trustee may exclusively rely on, certifying to the best knowledge of such officer, there has been no change in the laws or regulations of the ROC affecting the conversion of the Bonds, including the change in the ROC laws or regulations in connection with any certificates or other documents required for the conversion of the Bonds.

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For the purposes of these Conditions:

‘‘Deposit Date’’ means the Business Day on which (i) the Definitive Certificate, if issued, in respect of the Bond to be converted, (ii) a duly signed and completed Conversion Notice (in duplicate), (iii) any certificates or other documents, as may be required, relating thereto, and (iv) the payments referred to in Condition 5(B)(ii) below, as may be required, have all been deposited with a Conversion Agent.

‘‘Conversion Date’’ means the Business Day next following the Deposit Date that must be a Trading Date with respect to the Shares and must fall within the Conversion Period and is not within a Closed Period.

(ii) Taxes and Expenses. As conditions precedent to the exercise of the Conversion Right attaching to any Bond, together with the delivery of the Conversion Notice, the Definitive Certificate, if issued, and any certificates or other documents as may be required, the holder of the Bond must pay, when the Bond is deposited for conversion, to the relevant Conversion Agent all stamp, issue, registration and similar taxes or duties or transfer costs, if any, arising on conversion in the country in which the Bond is deposited for conversion, or all stamp, issue, registration and similar taxes or duties or transfer costs payable to the relevant authorities in any jurisdiction upon the issue or delivery of Shares or any other property or cash upon conversion to or to the order of a person other than the converting holder of the Bond. Except as aforesaid, the Company shall pay the expenses arising in the ROC on the issue of Shares upon conversion of the Bond and all charges of the Conversion Agents in connection therewith as provided in the Agency Agreement.
(iii) Holder of Record. With effect from the opening of business in the ROC on the Conversion Date, the Company shall, subject to Condition 5(B)(v), deem the converting holder of a Bond as indicated in the Conversion Notice to have become the holder of record of the number of Shares to be issued upon such conversion, disregarding any retroactive adjustment of the Conversion Price referred to below prior to the time such retroactive adjustment shall have become effective. At such time, subject to Condition 5(B)(iv) and Condition 5(B)(v), the rights of such converting holder with respect to the Bond deposited for conversion shall cease, except rights arising under Condition 5(B)(vi) and Condition 5(B)(v).
(iv) Delivery of Share. On the Conversion Date the Company shall, subject to Condition 5(B)(v), register the converting holder of a Bond or its designee in its register of shareholders as the owner of the number of Shares to be issued pursuant to Condition 5(B)(iii) upon conversion of such Bond. Subject to any applicable limitations then imposed by ROC laws and regulations and subject to the Company’s right to elect to pay converting holders cash in lieu of Shares under the circumstances set forth in Condition 5(B)(v), the Company shall deliver in accordance with the Indenture and the request made in the relevant Conversion Notice as soon as practicable, and in any event within five Trading Days (subject to applicable law) from the Conversion Date, for the benefit of the converting holder the following:
(a) the relevant Shares, through book-entry transfer to an account registered in the name of the converting holder or its designee at Taiwan Securities Central Depository Co., Ltd. or physical delivery;
(b) any other property or cash (including, without limitation, cash payable pursuant to Condition 5(A)(ii)) required to be delivered upon conversion; and
(c) such documents as may be required by law to effect the delivery thereof.

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(v) Cash Settlement Option. In lieu of delivery of some or all of the Shares required to be delivered upon the valid exercise of a Conversion Right, the Company may elect to make a cash settlement payment (the ‘‘Cash Settlement Option’’) in respect of all or any portion of a holder’s Bonds deposited for conversion (being US$1,000 in principal amount or an integral multiple thereof) pursuant to exercise of a Conversion Right by delivering notice thereof to the tendering holder not more than three Trading Days after the Conversion Date. Such cash settlement shall be in an amount equal to the Cash Settlement Market Price (as defined below) multiplied by the number of Shares to be issuable upon conversion pursuant to Condition 5(A) and the resulting figure shall be rounded to the second decimal place with 0.005 being rounded upwards. If the Company elects the Cash Settlement Option for more than one Bond of the same holder of the Bonds, the cash settlement amount shall be calculated on the basis of the aggregate principal amount of Bonds for which the Company elects such Cash Settlement Option. The Company shall pay such cash settlement amount in US dollars as promptly as practicable (but in no event later than 5 Business Days (as defined in Condition 6)) which shall also be a Trading Day after completion of the five Trading Day period used to determine the Cash Settlement Market Price.

‘‘Cash Settlement Market Price’’, in relation to the Shares, means the average of the Closing Price (as defined in Condition 5(C)) converted into US dollars at the Prevailing Rate (as defined in Condition 7(B)) on the same day for each of the five consecutive Trading Days commencing on the fourth Trading Day following the Conversion Date.

(vi) Retroactive Adjustment of Conversion Price. If (a) the Conversion Date in relation to any Bond shall be on or after a date with effect from which an adjustment to the Conversion Price takes retroactive effect pursuant to any of the provisions referred to in Condition 5(C) and the Indenture and (b) the relevant Conversion Date falls on a date when the relevant adjustment has not been reflected in the Conversion Price, the Company shall, within 20 days after the date of such adjustment of the Conversion Price, issue and deliver by book-entry or physical delivery to the local agent appointed by the converting holder of the Bond such number of Shares as is equal to the excess of (1) the number of Shares that would have been required to be issued on conversion of such Bond if the relevant retroactive adjustment had been made as of the said Conversion Date over (2) the number of Shares previously issued pursuant to such conversion (the ‘‘Excess Shares’’); and in such event and in respect of such number of Shares, references in Conditions 5(B)(iii) and 5(B)(iv) to the Conversion Date shall be deemed to refer to the date upon which such retroactive adjustment becomes effective disregarding the fact that it becomes effective retroactively. Fractions of Shares shall not be issued, and no cash adjustment shall be made in respect thereof. If the Company has elected to pay the converting holder of the Bond cash in lieu of Shares pursuant to the Cash Settlement Option set forth in Condition 5(B)(v), the number of Excess Shares shall be determined by assuming that the Company had not elected the Cash Settlement Option. In such case, the Company may satisfy its obligations under this Condition 5(B)(vi) by either delivering such number of Excess Shares or by paying, within 20 days after the date of such adjustment of the Conversion Price, to the converting holder an amount in US dollars equal to the Cash Settlement Market Price multiplied by such number of Excess Shares.
(vii) Dividend and Other Entitlement. The converting holder of a Bond shall be entitled to any annual dividend distributions of the Company if (a) the Conversion Date is prior to the relevant record date (and the relevant closure of the shareholders’ register) for determining the identity of shareholders who are entitled to such dividend distributions and (b) to the extent the Company has not elected with respect to such converting holders’ Bonds to pay cash in lieu of Shares pursuant to the Cash Settlement Option set forth in Condition 5(B)(v).

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(viii) Conversion Agents. The Company reserves the right, subject to the provisions of the Agency Agreement and with the prior written consent of the Trustee, to vary or terminate the appointment of any Conversion Agent and to appoint other Conversion Agents at any time; provided that so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of the exchange so require, the Company shall maintain a Conversion Agent having a specified office in Luxembourg. Notice of any such termination or appointment and of any changes in the specified offices of the Conversion Agents shall be given promptly by the Company to the holders of the Bonds and the Luxembourg Stock Exchange in accordance with Condition 14.
(ix) Depositary Receipts. The Company may, at its option, but is not required to, make arrangements satisfactory to the Trustee for the Bonds to be converted into depositary receipts or other scrip evidencing Shares. Any such arrangements shall be in addition to the provisions of these Conditions relating to conversion into Shares.
We have not, at the date of this Offering Memorandum, established or authorized the establishment of any depositary receipt facility. Accordingly, the option to convert Bonds into depositary receipts is not and may not be available in the foreseeable future. If in the future a depositary receipt facility is established or authorized by the Company, we may, at our option, but are not required to, to the extent permitted by applicable laws and regulations, make arrangements satisfactory to the Trustee for Shares issued on conversion of Bonds to be accepted for deposit (at the option of the converting holder of the Bonds) into such depositary receipt facility, subject always to the terms of such depositary receipt facility, which terms may include certification or other requirements as conditions to the acceptance for deposit of Shares issued on conversion of Bonds. In such an event, we will give notice of any such arrangements to holders of the Bonds in accordance with Condition 14. There can be no assurance that we will in the future establish or authorize any depositary receipt facility or that any arrangements for the deposit of Shares into such depositary receipt facility would be available to all holders of the Bonds.

(C) Adjustments to Conversion Price

The Conversion Price shall be subject to adjustment in the manner set forth in the Indenture upon the occurrence of certain events set out in the Indenture, including:

(i) the making of a free distribution of Shares, including distribution from retained earnings or capital reserve;
(ii) subdivisions, consolidations or reclassifications of Shares;
(iii) the declaration of a dividend in Shares;
(iv) the issue of (a) securities convertible into or exchangeable for Shares at less than the then Current Market Price or (b) options, rights or warrants to subscribe for or purchase Shares at less than the then Current Market Price or to subscribe for or purchase securities convertible into or exchangeable for Shares at less than the then Current Market Price;
(v) a Capital Distribution (as defined below) or other distribution to the holders of Shares of (a) evidences of indebtedness of the Company, (b) share of capital stock (other than Shares) of the Company, (c) assets (other than annual or interim dividends in cash not constituting a Capital Distribution) or (d) options, rights or warrants to subscribe for or purchase shares (other than Shares) or securities (other than those mentioned in (iv) above);

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(vi) the issue of Shares (other than (a) Shares issued upon conversion of the Bonds; (b) Shares issued to shareholders of any company that merges with the Company upon such merger in proportion to their shareholdings in such company immediately prior to such merger; and (c) Shares issued in any of the circumstances (i) through (v) described above), including Shares issued in any employee dividend or employee profit-sharing arrangements, at less than the then Current Market Price; and
(vii) any other event or circumstance that would have, in the Company’s determination, an analogous effect to any of the events in (i) to (vi) above.

The Trustee shall not be obligated to monitor whether any event has occurred that might fall within (i) to (vii) above and shall assume that no such event has occurred until it has actual knowledge by way of notice in writing from the Company to the contrary.

For the purposes of these Conditions:

‘‘Capital Distribution’’ means any cash dividend, distribution of cash, distribution of assets in specie or payment on redemption, or for the purchase of, capital stock of the Company made by the Company for any fiscal year which:

(a) exceeds (when taken together with all dividends, distributions by the Company of cash or assets and payments on redemption, or for the purchase, of capital stock previously made or paid in respect of such fiscal year) 5% of the market capitalization of the Company on the date that the shareholders of the Company approve the making of such dividend or distribution;
(b) exceeds 110% (when taken together with all other dividends or distributions by the Company of cash or assets and payments on redemption, or for the purchase, of capital stock made or paid in respect of such fiscal year) the aggregate amount of dividends (excluding stock dividends) of and distributions on such class of capital charged or provided for in the Company’s accounts for the immediately preceding fiscal year and in computing such amounts, the value of such dividends and distributions and adjustments as are in the Company’s auditor’s opinion appropriate to the circumstances shall be taken into account; or
(c) if any such payment is a payment on redemption, or for the purchase, of capital stock of the Company, the average price (before expenses) in any one day in respect of such purchase or redemption exceeds by more than 5% the then Current Market Price either (i) on that day or (ii) in a situation in which an announcement has been made of the intention to purchase or redeem Shares at some future date at a specified price, on the Trading Day immediately preceding the date of such announcement.

For avoidance of doubt, in the case of adjustment to the Conversion Price upon a Capital Distribution, the adjusted Conversion Price shall be calculated using the amount in excess of the limits set forth in paragraphs (a), (b) and (c) above.

‘‘Closing Price’’, in relation to the Shares for any Trading Day, means the last reported transaction price or, if no transaction takes place on such day, the last available reported transaction price of the Shares on the Taiwan Stock Exchange in effect on the Trading Day immediately preceding such day or, if the Shares are not at that time listed or admitted to trading on the Taiwan Stock Exchange, the average of the closing bid and offered prices of Shares for such day as furnished by a leading independent securities firm licensed to trade on the Taiwan Stock Exchange selected by the Company for that purpose.

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‘‘Current Market Price’’, in relation to the Shares, for any day means (a) the average of the Closing Prices for the 30 consecutive Trading Days commencing 45 Trading Days before such day and (b) when used with respect to any issuance or distribution, the average of the Closing Prices for the 30 consecutive Trading Days commencing not more than 45 Trading Days (with the commencement date selected by the Company) before the first day on which the Shares without the right to receive such issuance or distribution trade in a regular way on the Taiwan Stock Exchange, other applicable securities exchange or any applicable securities market; provided, however, if no Closing Price is available for one or more Trading Days, such day or days shall be disregarded in any relevant calculation and shall be deemed not to have existed when ascertaining any period of consecutive Trading Days.

(D) Standard Conversion Price Reset

If the average of the Closing Prices of the Shares, for any of the periods of 5, 10 or 15 consecutive Trading Days (the ‘‘Standard Average Closing Price’’) immediately prior to June 4, 2004 (the 15th Trading Day prior to the Holder’s Put Date (as defined in Condition 7(D)) (the ‘‘Standard Reset Date’’), converted into US dollars at the Prevailing Rate on the Standard Reset Date, is less than the Conversion Price then in effect converted into US dollars at the Fixed Exchange Rate, the Conversion Price may be adjusted, at the option and within the sole discretion of the Company, in accordance with the following formula:

Adjusted Conversion Price = Standard Average Closing Price x Fixed Exchange Rate Prevailing Rate

Such Adjusted Conversion Price shall be rounded upwards, if necessary, to the nearest NT$0.01.

Provided that:

(i) any adjustment to the Conversion Price pursuant to this Condition 5(D) shall be limited so that the Conversion Price so adjusted shall not be less than 80% of the initial Conversion Price (but adjusted to reflect any adjustments which may have occurred prior to the relevant Standard Reset Date pursuant to Condition 5(C));
(ii) the provisions of Condition 5(D) shall apply mutatis mutandis to the provisions relating to Condition 5(C) to ensure that appropriate adjustments shall be made to any Closing Price to reflect any adjustment made to the Conversion Price pursuant to Condition 5(C);
(iii) subject to 80% limitation in clause (i) above, any adjustment to the Conversion Price pursuant to this Condition 5(D) shall be based on the lowest Standard Average Closing Price of the 5, 10 or 15 day periods if more than one such price will permit an adjustment under this Condition 5(D); and
(iv) for the avoidance of doubt any adjustments to the Conversion Price made pursuant to this Condition 5(D) shall only be downward adjustments.

Any such adjustments shall become effective as of the Standard Reset Date and shall be notified to the holders of the Bonds in accordance with Condition 14 within two days of the Standard Reset Date.

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(E) Special Conversion Price Reset

If the average of the Closing Prices of the Shares, for any of the periods of 10, 15 and 20 consecutive Trading Days (‘‘Special Average Closing Price’’) immediately prior to November 15, 2004 (the 30th Trading Day prior to the Maturity Day (as defined in Condition 7(A)) (the ‘‘Special Reset Date’’), converted into US dollars at the Prevailing Rate on the Special Reset Date, is less than the Conversion Price then in effect converted into US dollars at the Fixed Exchange Rate, the Conversion Price may be adjusted, at the option and within the sole discretion of the Company, in accordance with the following formula, for a period of seven Trading Days beginning on the second Trading Day after the Special Reset Date:

Adjusted Conversion Price = 91.51% x Special Average Closing Price x Fixed Exchange Rate Prevailing Rate

Such Adjusted Conversion Price shall be rounded upwards, if necessary, to the nearest NT$0.01.

Provided that:

(i) the provisions of Condition 5(C) shall apply, mutatis mutandis, to this Condition 5(E) to ensure that appropriate adjustments shall be made to any Closing Price to reflect any adjustments made to the Conversion Price in accordance with Condition 5(C);
(ii) any adjustment to the Conversion Price pursuant to this Condition 5(E) shall be based on the lowest Special Average Closing Price of the 10, 15 or 20 periods if more than one such price would permit an adjustment under this Condition 5(E); and
(iii) for the avoidance of doubt, any adjustments to the Conversion Price made pursuant to this Condition 5(E) shall only be downward adjustments.

Any such adjustment shall be notified to the holders of the Bonds in accordance with Condition 14 within two days of the Special Reset Date.

(F) Provisions Applicable to All Conversions and Adjustments of Conversion Price

No adjustment shall be made where such adjustment would be less than 1% of the then Conversion Price, but any adjustment that otherwise would be required to be made shall be carried forward and taken into account in determining any subsequent adjustment. Any adjustment shall be notified promptly by the Company to the Luxembourg Stock Exchange, the Principal Agent, the Trustee, the Conversion Agents and the holders of the Bonds in accordance with Condition 14.

As a result of any adjustment required by this Condition 5, the Conversion Price may be reduced to an amount below the par value of the Shares to the extent permitted by ROC law, provided that any Shares issued upon the conversion of a Bond at such reduced Conversion Price will be legally issued, fully-paid and non-assessable.

We have covenanted in the Indenture not to take any action that would reduce the Conversion Price to an amount below the par value of the Shares unless the Bonds could be converted at such reduced Conversion Price into legally issued, fully-paid and non-assessable Shares.

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6. Payments

(A) Manner of Payment

Payment in respect of a Bond shall be made (i) by transfer to the registered account of the holder of the Bond or (ii) if such holder does not have a registered account, by a US dollar check mailed to its registered address. The registered account and address of a holder of the Bonds mean its account and address appearing on the register of holders of the Bonds at the close of business on the second Business Day (as defined below) before the due date for payment.

References in these Conditions, the Indenture and the Agency Agreement to payment in respect of a Bond shall, where the context so permits, be deemed to include not only a reference to the principal of, but also to any premium, interest and other amounts payable on, such Bond.

For the purposes of this Condition 6 and Condition 3(B) and Condition 7:

‘‘Business Day’’ means a day (other than a Saturday or Sunday) on which commercial banks are open for business in The City of New York, in London, in Hong Kong, in Luxembourg, in Taiwan and, in the case of the surrender of a Definitive Certificate, in the place where the Definitive Certificate is surrendered.

(B) Commissions and Expenses

All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the holders of the Bonds in respect of such payments.

(C) Date of Payment

Where payment is to be made by transfer to a registered account, payment instructions for value the due date (or, if that date is not a Business Day, for value on the next Business Day) shall be initiated. Where payment is to be made by check, the check shall be mailed (at the risk of the holders of the Bonds) on the Business Day preceding the due date for payment. Notwithstanding the above, payment of principal of a Bond represented by a Definitive Certificate shall not be made earlier than the Business Day on which the relevant Certificate is surrendered at the specified office of an Agent.

(D) Default Interest and Payment Delay

If the Company fails to pay any sum in respect of the Bonds when the same becomes due and payable under these Conditions, interest shall accrue on the overdue sum at the rate of 3.0% per annum from the due date and ending on the date that the Trustee determines to be the date on and after which payment is to be made to the holders of the Bonds in respect thereof (both dates inclusive) as stated in a notice given to the holders of the Bonds in accordance with Condition 14. Such default interest shall accrue on the basis of the actual number of days elapsed and a 360-day year consisting of 12 months of 30 days each.

A holder of the Bonds shall not be entitled to any interest or other payment for any delay in receiving the amount due if (i) the due date is not a Business Day, (ii) the Bond is represented by a Definitive Certificate and the holder is late in surrendering its Definitive Certificate (if required to do so) or (iii) a check mailed in accordance with this Condition 6 arrives after the due date for payment.

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7. Redemption, Repurchase and Cancellation

(A) Redemption at Maturity

Unless the Bonds have been previously redeemed, repurchased and cancelled, or converted as herein provided, the Company shall redeem the Bonds at 100% of their principal amount in US dollars on December 27, 2004 (the ‘‘Maturity Date’’) or if such day shall not be a Business Day, on the immediately preceding Business Day. The Bonds may be redeemed prior to that date only as provided in Conditions 7(B), (C), (D) and (F) below, but without prejudice to Condition 9.

(B) Redemption at the Option of the Company

At any time on or after June 27, 2004 and prior to November 27, 2004, the Company may, having given not less than 30 or more than 60 days notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(I) and Condition 14), redeem the Bonds in whole, or from time to time in part (being US$1,000 in principal amount or an integral multiple thereof), at 100% of their principal amount if the Closing Price (as defined in Condition 5(C)) of the Shares, translated into US dollars at the Prevailing Rate (as defined below) on the same day, for at least 20 out of 30 consecutive Trading Days immediately preceding the date of such notice of redemption, is at least 115% of the Conversion Price then in effect, translated into US dollars at the Fixed Exchange Rate. If an event giving rise to a change in the Conversion Price occurs during such 30 consecutive Trading Days, appropriate adjustments for the relevant days shall be made for the purpose of calculating the Closing Price for such days.

Notwithstanding the conditions to the Company’s right to redeem the Bonds set forth in the paragraph above, at any time, the Company may, having given not less than 30 or more than 60 days notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(I) and Condition 14), redeem the Bonds in whole, but not in part, at 100% of their principal amount if at least 90% in principal amount of the Bonds has already been redeemed, repurchased and cancelled or converted.

For the purposes of these Conditions:

‘‘Prevailing Rate’’ for any Trading Day means the last available buying rate for the purchase of US dollars against the sale of NT dollars quoted by Taipei Forex Inc. (or a replacement agency selected by the Company and approved by the Trustee) on such Trading Day or, if no buying rate is quoted on such Trading Day, the last available buying rate quoted on the immediately preceding Trading Day.

(C) Redemption for Taxation Reasons

At any time, the Company may, having given not less than 30 or more than 60 days notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(I) and Condition 14), redeem the Bonds in whole, but not in part (subject to the provisions of Condition 7(E) below), at 100% of their principal amount, provided that the Company satisfies the Trustee that, immediately prior to the giving of such notice:

(i) the Company has become obliged to pay Additional Amounts (as defined in Condition 8) as a result of any change in, or amendment to, the laws or regulations of the ROC or any political subdivision or any authority thereof or therein having power to tax, or any change in the general application or official interpretation of such laws or regulations, which change or amendment becomes effective after the date of the original issuance of the Bonds and would require the Company to gross up for payment of interest or premium, if any, at a rate greater than 20% or to gross up for the payment of principal, and

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(ii) such obligation cannot be avoided by the Company taking reasonable measures available to it.

Notwithstanding the foregoing, no such notice of redemption shall be given earlier than 30 days prior to the earliest date on which the Company would be obliged to pay such Additional Amounts.

Prior to the delivery of any notice of redemption pursuant to this Condition 7(C), the Company shall deliver to the Trustee (1) a certificate signed by two of its authorized officers stating that the obligation referred to in (i) above cannot be avoided by taking reasonable measures available to it, and the Trustee shall be entitled to accept such certificate as sufficient and conclusive evidence of the satisfaction of the condition precedent set out in clause (ii) above and (2) an opinion addressed to the Trustee by an independent law firm of recognized standing admitted to practice in the ROC or a written advice of a qualified tax expert addressed to the Trustee to the effect that the Company has or will become obliged to pay such Additional Amounts as a result of such change or amendment, and the Trustee shall be entitled to accept such certificate and opinion or advice as sufficient and conclusive evidence of the conditions precedent referred to in this Condition 7(C), in which event it shall be conclusive and binding on the holders of the Bonds. The Bonds in respect of which a notice of redemption has been given under Condition 7(B), 7(D) or 7(F) shall not be affected by any notice given subsequently under this Condition 7(C).

(D) Redemption at the Option of the Holders

Each holder of the Bonds shall have the right (the ‘‘Holders’ Put Right’’) to require the Company to redeem in whole, or in part only (being US$1,000 in principal amount or an integral multiple thereof), the Bonds held by such holder, on June 27, 2004 (the ‘‘Holders’ Put Date’’) at 100% of their principal amount. Not less than 30 or more than 60 days prior to this date, the Company shall notify the holders of the Holders’ Put Right which notice shall be delivered in accordance with Condition 7(I) and Condition 14.

In the event that the Shares cease to be listed or admitted to trading on the Taiwan Stock Exchange (a ‘‘Delisting’’) for a period of at least five consecutive Trading Days (as defined in Condition 5(A)), the Company shall notify the holders promptly (which notice shall be delivered in accordance with Condition 7(I) and Condition 14), and each holder of the Bonds shall have the right (the ‘‘Delisting Put Right’’) to require the Company to redeem such holder’s Bonds in whole, but not in part, at 100% of their principal amount on the 20th Business Day (as defined in Condition 6) after the date of such notice.

(E) Non-Redemption Option of the Holders

If the Company gives a notice of redemption of the Bonds under Condition 7(C), each holder of the Bonds shall have the right (the ‘‘Non-Redemption Right’’) to elect that all or a portion (being US$1,000 in principal amount or an integral multiple thereof) of its Bonds not be redeemed. Upon the exercise of the Non-Redemption Right with respect to such Bonds, no Additional Amounts referred to in Condition 8 shall be payable on the payments due after the relevant date in respect of such Bonds and, subject to Condition 8, such payments shall be made subject to the deduction or withholding required under the laws or regulations of the ROC. For the avoidance of doubt, any increased amounts that had been payable in respect of the Bonds under Condition 8 as a result of the laws or regulations of the ROC in effect on the original date of their issuance shall continue to be payable to such holders of the Bonds.

(F) Redemption of the Bonds in the Event of Change of Control

If a Change of Control, as defined below, occurs with respect to the Company, each holder of the Bonds shall have the right (the ‘‘Change of Control Put Right’’) at such holder’s option, to require the Company to repurchase all (or any portion of the principal amount thereof which is US$1,000 or

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any integral multiple thereof) of such holder’s Bonds on the date set by the Company for such repurchase (the ‘‘Change of Control Put Date’’), which shall not be less than 30 nor more than 60 days following the date on which the Company notifies the Trustee of the Change of Control, at a price equal to 100% of their principal amount.

The definitions of certain terms used in this section are listed below.

The term ‘‘Control’’ as used in this section means the right to appoint and/or remove all or the majority of the members of the Company’s board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise.

A ‘‘Change of Control’’ occurs when:

(1) any Person or Persons (as defined below) acting together acquires Control of the Company if such Person or Persons does not or do not have, and would not be deemed to have, Control of the Company on the Closing Date;
(2) the Company’s consolidates with or merges into or sells or transfers all or substantially all of the Company’s assets to any other Person, unless the consolidation, merger, sale or transfer will not result in the other Person or Persons acquiring Control over the Company or the successor entity; or
(3) one or more other Persons acquires the legal or beneficial ownership of all or substantially all of the Company’s total issued and outstanding Capital Stock (as defined below).

However, a Change of Control will not be deemed to have occurred (i) solely as a result of the issuance or transfer, with the Company’s cooperation, of any preferred shares in the Company’s capital or (ii) if the Closing Price per Share for any five Trading Days within the period of ten consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of the Change of Control equals or exceeds 110% of the Conversion Price in effect on each of those five Trading Days.

‘‘Capital Stock’’ means, with respect to any Person, any and all shares, ownership interests, participation or other equivalents (however designated), including all common stock and all preferred stock, of such Person.

‘‘Person’’ means any individual, limited liability company, corporation, company, firm, partnership, joint venture, tribunal, undertaking, association, organization, trust, government or political subdivision or agency or instrumentality thereof or any other entity or organization, in each case whether or not being a separate legal entity; provided, however, that ‘‘Person’’ does not include (a) the Company’s board of directors, supervisors or any other governing board or (b) the Company’s wholly owned direct or indirect subsidiaries.

(G) Repurchase and Cancellation

The Company or any Subsidiary (as defined below) may at any time and from time to time repurchase the Bonds in the open market or otherwise at any price. The Company shall surrender any Bonds so repurchased to the Principal Agent or the Registrar for cancellation. For the purpose of these Conditions:

‘‘Subsidiary’’ means any company or other business entity more than 50% of the issued share capital or other ownership interest of which is for the time being owned, directly or indirectly, by the Company.

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(H) Cancellation

All Bonds that are redeemed, repurchased or converted and surrendered to any Agent shall forthwith be cancelled. In the case of Bonds represented by Definitive Certificates, certificates in respect of all Bonds cancelled shall be forwarded to or to the order of the Registrar or the Principal Agent. Bonds cancelled may not be reissued or resold.

(I) Redemption Procedures

In the event that the Company is required to deliver a notice to the holders of the Bonds under this Condition 7, the Company shall provide, or procure the provision by the Principal Agent of, the notice to each holder of the Bonds in accordance with Condition 14 and the provisions of the Agency Agreement, which notice shall state, to the extent applicable:

(i) the date fixed for redemption;
(ii) in the case of a Delisting, the date of such Delisting and, briefly, the events resulted in such Delisting;
(iii) in the case of a Change of Control, the date of such Change of Control and, briefly, the events causing such Change of Control;
(iv) the date by which the Exercise Notice (as defined below) must be given by the holder;
(v) the applicable redemption price of a Bond on the redemption date and the method by which such redemption price will be paid;
(vi) the names and addresses of all Paying Agents;
(vii) the Conversion Price then in effect;
(viii) the procedures that holders must follow and the requirements they must satisfy in order to exercise their Holders’ Put Right, Delisting Put Right, Non-Redemption Right, Change of Control Put Right, and/or Conversion Right, as the case may be;
(ix) that an Exercise Notice, once validly given, may not be withdrawn; and
(x) in the case of a redemption of less than all of the Bonds then outstanding pursuant to Condition 7(B), the identifying numbers of the Bonds drawn for redemption.

So long as the Bonds are listed on the Luxembourg Stock Exchange, the Company shall submit a copy of the redemption notice to the Luxembourg Stock Exchange as soon as practicable.

To exercise its Holders’ Put Right, Delisting Put Right, Non-Redemption Right or Change of Control Put Right, as the case may be, a holder must deliver at its own expense a written irrevocable notice of the exercise of such right (an ‘‘Exercise Notice’’) in the form obtainable from any of the Agents, to any Paying Agent during normal business hours on any Business Day that is not fewer than ten (10) Business Days prior to the date fixed for redemption.

Payment of the redemption price upon exercise of the Holders’ Put Right, Delisting Put Right or Change of Control Put Right attaching to any Bond represented by a Definitive Certificate for which an Exercise Notice has been delivered is conditioned upon the delivery of such Definitive Certificate (together with any necessary endorsements) to any Paying Agent during normal business hours on any Business Day, together with the delivery of such Exercise Notice, and shall be made promptly following the later of the relevant redemption date and the time of delivery of such Definitive

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Certificate. If the Paying Agent holds on a redemption date money sufficient to pay the redemption price for a Bond for which an Exercise Notice has been delivered, then, whether or not the Definitive Certificate representing such Bond is delivered to the Paying Agent, on and after such redemption date (i) such Bond shall cease to be outstanding; (ii) such Bond shall be deemed paid; and (iii) all other rights of the holder shall terminate, other than the right to receive the redemption price.

(J) Partial Redemption

In the case of a redemption of less than all of the Bonds then outstanding pursuant to Condition 7(B), the Bonds to be redeemed shall, upon notification being given by the Company to the Principal Agent, be selected individually by lot by the Principal Agent, in such place as the Trustee shall approve and in such manner as the Trustee shall deem to be appropriate and fair, not more than 70 days or less than 40 days prior to the date fixed for redemption. Any such selection by the Principal Agent will be conclusive and binding on the Company and the holders of the Bonds. In case of partial redemption of Bonds in registered form represented by the Global Certificate, the Bonds to be redeemed shall be selected in accordance with the rules and procedures of Euroclear and Clearstream.

8. Taxation

Subject to Condition 7(E), all payments in respect of the Bonds by the Company shall be made free and clear of and without any deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature (‘‘Taxes’’) imposed, levied, collected, withheld or assessed by or on behalf of the government of the ROC or any authority thereof or therein having power to tax, provided that, in respect of any such deduction or withholding from any such payment, the Company shall pay such additional amounts (‘‘Additional Amounts’’) as will result in the receipt by the holders of the Bonds of the amounts that would have been receivable in the absence of any such deduction or withholding, except that no Additional Amounts shall be payable in respect of any Bond:

(i) to, or on behalf of, a holder who is subject to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of its being connected with the ROC otherwise than merely by holding such Bond or by the receipt of payments in respect of the Bond;
(ii) to or on behalf of a holder of the Bond or its beneficial owner to the extent that such holder or beneficial owner would not be liable for or subject to such deduction or withholding by making a declaration of non-residence or other claims for exemption or deduction to the relevant tax authorities if such holder or beneficial owner is eligible to make such declaration or claim and, such holder or beneficial owner fails to timely do so; or
(iii) if the Definitive Certificate, if issued, in respect of the Bond is presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder would have been entitled to such additional amount on surrendering the relevant certificate for payment on the last day of such 30-day period.

The Company will not pay Additional Amount if the registered holder of the Bond is a fiduciary, partnership or other than the sole beneficial owner of any payment to the extent that a beneficiary or settlor with respect to a fiduciary, a member of a partnership or the beneficial owner of that payment would not have been entitled to the Additional Amount if it had been the registered holder of the Bond.

References in these Conditions to payments in respect of the Bonds shall be deemed also to refer to any Additional Amounts that may be payable in respect thereof under this Condition 8.

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For the purposes of these Conditions:

‘‘Relevant Date’’ in relation to any Bonds means (a) the due date for payment in respect thereof, or (b) if the full amount of the monies payable on such due date has not been received by the Trustee or the Principal Agent on or prior to such due date, the date on which notice is duly given to the holders of the Bonds that such monies have been so received.

9. Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of the Bonds of not less than 25% in principal amount of the Bonds then outstanding shall (in each case subject to being indemnified and/or secured by the holders of the Bonds to its satisfaction), give notice in writing to the Company that the Bonds are immediately due and payable, if an Event of Default (as defined below) shall have occurred and be continuing. Upon any such notice being given to the Company, the Bonds shall immediately become due and payable at 100% of their principal amount plus any overdue interest payable in accordance with Condition 6(D). Notwithstanding the foregoing, if any of the events specified in clauses (vi), (vii) and (viii) shall have occurred, the Bonds shall forthwith become immediately due and payable at 100% of their principal amount, plus any overdue interest payable in accordance with Condition 6(D), without regard to the giving of any such notice. An ‘‘Event of Default’’ occurs if:

(i) the Company fails to pay the principal of, premium or interest, if any, on, any of the Bonds within seven days after the same shall become due and payable; or
(ii) the Company fails to deliver Shares as and when such Shares are required to be delivered upon the conversion of a Bond or cash (after giving notice of its option under Condition 5(B)(v)) which failure is not remedied within 2 Trading Days; or
(iii) the Company defaults in performance or observance of or compliance with any of its other obligations set out in the Bonds or the Indenture, which default is incapable of remedy or, if in the opinion of the Trustee such default is capable of remedy, such default is not remedied within 30 days after written notice of such default shall have been given to the Company by the Trustee; or
(iv) (a) any other present or future indebtedness of the Company or any of its Principal Subsidiaries (as defined in Condition 3) for or in respect of monies borrowed or raised becomes due and payable prior to its stated maturity by reason of an event of default, howsoever described, or any such indebtedness is not paid when due or, as the case may be, within any applicable grace period originally provided for or (b) the Company or any of its Principal Subsidiaries fails to pay when due any amount payable by the Company or such Principal Subsidiary, as the case may be, under any present or future guarantee or indemnity or arrangement or obligation having a like or similar effect, howsoever described, for any monies borrowed; provided that the aggregate amount of the relevant indebtedness or amount payable in respect of which one or more events mentioned above in this paragraph (iv) have occurred equals or exceeds US$15,000,000 or its equivalent in any other currency; or
(v) there shall have been entered against the Company or any of its Principal Subsidiaries a final judgment, decree or order by a court of competent jurisdiction for the payment of money in excess of US$20,000,000 with respect to the Company or any of its Principal Subsidiaries (or its equivalent in any other currency or currencies) and 60 days shall have passed since the entry of the order without it being bonded, satisfied, discharged or stayed; provided, that where two or more of the Company and/or its Principal Subsidiaries are liable for the payment of the same relevant debt, whether liable jointly and severally, by way of guarantee, surety or otherwise, any such amount shall be counted once without duplication; or

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(vi) a decree or order by a court having jurisdiction shall have been entered adjudging the Company or any of its Principal Subsidiaries bankrupt or insolvent, or approving a petition seeking the Company’s reorganization or that of any of its Principal Subsidiaries under any applicable bankruptcy, insolvency or reorganization law, or for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of, or all or substantially all of the business or assets of, or for the winding-up or liquidation of the affairs of, the Company or any of its Principal Subsidiaries; or
(vii) an effective resolution shall be passed for the winding-up or liquidation of the Company or that of any of its Principal Subsidiaries, or the Company or any of its Principal Subsidiaries shall institute proceedings to be adjudicated as a voluntary bankruptcy, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under any applicable bankruptcy, insolvency or reorganization law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of all or substantially all of its business or assets, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Company or any of its Principal Subsidiaries in furtherance of any of the aforesaid purposes; or
(viii) proceedings shall have been initiated against the Company or any of its Principal Subsidiaries under any applicable bankruptcy, insolvency, or reorganization law and such proceedings shall not have been discharged or stayed within a period of 90 days (or such longer period as the Trustee may consider appropriate on the advice of counsel); or
(ix) it is or will become unlawful for the Company to perform or comply with one or more of its obligations under any of the Bonds, the Indenture or the Agency Agreement.

10. Prescription

Claims against any payment in respect of the Bonds shall be prescribed unless made within six years from the relevant date of payment in respect thereof.

Under ROC laws, claims in respect of the (i) payment of principal would become unenforceable after 15 years and (ii) payment of interest and premium would become unenforceable after 5 years, each measured from the relevant date for payment in respect thereof.

11. Enforcement

At any time after the Bonds have become due and payable, the Trustee may, at its discretion and without further notice, take such proceedings against the Company as it may think fit to enforce payment in respect of the Bonds, including any premium and interest, and to enforce the provisions of the Indenture; provided, however, that the Trustee shall not be bound to take any such actions unless (a) it shall have been so requested in writing by the holders of at least 25% in principal amount of the Bonds then outstanding and (b) it shall have been indemnified and/or secured to its satisfaction. No holder of the Bonds shall be entitled to proceed directly against the Company, unless (i) such holder has previously given written notice to the Trustee of a continuing Event of Default; (ii) the holders of the Bonds of not less than 25% in aggregate principal amount of the Bonds then outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (iii) such holder of the Bonds or holders of the Bonds have offered to the Trustee indemnity and/or security to its satisfaction against the costs, expenses, and liabilities to be incurred in compliance with such request; (iv) the Trustee, having become bound to take proceedings against the Company, fails to do so and such failure shall have continued for a period of 60 days and (v) no direction inconsistent with the Trustee taking such proceedings has been given to the Trustee during such 60-day period by the holders of not less than a majority in principal amount of the Bonds then outstanding.

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12. Meetings of Holders of the Bonds, Modification and Waiver

(A) Meetings

The Indenture will contain provisions for convening meetings of holders of the Bonds to consider any matter affecting their interests, including the approval of amendments or modifications of the terms and conditions of the Bonds or the provisions of the Indenture upon either the written consent of the holders of not less than a majority in principal amount of the Bonds then outstanding or the approval at a meeting of holders duly called by persons entitled to vote not less than a majority in principal amount of the Bonds then outstanding, with a quorum of two or more persons, holding or representing over 50% in principal amount of the Bonds then outstanding; provided that no such modification of the terms and conditions of the Bonds or the provisions of the Indenture may, without the consent of each holder of the Bonds affected thereby:

(i) modify the Maturity Date;
(ii) reduce the principal, redemption price of, the rate of interest, if any, on, any Bond or increase the Conversion Price (as adjusted in accordance with the provisions of the Indenture);
(iii) change the place or currency of payment of principal of, or interest, if any, on, any Bond or the method of calculating any such payment;
(iv) impair the right to institute suit for the enforcement of any payment on any Bond;
(v) alter the Company’s obligations relating to the negative pledge, mergers and disposals, and the payment of Additional Amounts, as described in Conditions 3(A), 3(B) and 8, respectively;
(vi) except to the extent permitted by Condition 12(B) below, modify, cancel or adversely affect the Conversion Right, Holders’ Put Right, Delisting Put Right, Non-Redemption Right or the Change of Control Put Right;
(vii) reduce the above-stated percentage of outstanding Bonds the consent of whose holders of the Bonds is necessary to modify or amend the Indenture;
(viii) reduce the percentage or aggregate principal amount of outstanding Bonds the consent of whose holders of the Bonds is necessary for waiver of compliance with provisions of the Indenture or for waiver of certain defaults under the Indenture;
(ix) modify the provisions concerning the voting and quorum required at any meeting of holders of the Bonds; or
(x) release the Company from any obligation under the Indenture other than in accordance with the provisions of the Indenture, or amend or modify any provision relating to such release.

The Indenture will provide that, in determining whether the holders of the Bonds representing the requisite principal amount of Bonds then outstanding are present at a meeting of holders of the Bonds for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Bonds owned by the Company or any other obligor upon the Bonds or any affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any

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such determination as to the presence of a quorum or upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds as to which the Trustee has actually received written notice shall be so disregarded.

(B) Modification of Conversion Right

Notwithstanding Condition 12(A) above, the Trustee may agree to, without the consent of the holders of the Bonds, any modification to the Conversion Right that (i) is in the Trustee’s opinion necessary or desirable to effect or facilitate conversion as contemplated in these Conditions and (ii) is not materially prejudicial to the interests of the holders of the Bonds. The Trustee’s agreement may be subject to any condition which the Trustee requires, including but not limited to the delivery of an opinion of a financial or legal or other expert, and shall be binding on the holders of the Bonds. Unless the Trustee instructs the Company otherwise, any such modification shall be notified by the Company to the holders of the Bonds as soon as practicable thereafter in accordance with Condition 14 and, for so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, to the Luxembourg Stock Exchange.

(C) Other Modifications and Waivers

The Trustee may, in its sole discretion, also agree to, without the consent of the holders of the Bonds, (i) any modification of, or the waiver or authorization of any breach or proposed breach of, the Bonds, the Indenture or the Agency Agreement that is not, in the Trustee’s opinion, materially prejudicial to the interests of the holders of the Bonds or (ii) any modification of the Bonds or the Indenture that, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of law. In connection with such modification, waiver or authorization, the Trustee may require a certificate from the Company certifying, and a legal opinion advising the Trustee, that the modification, waiver or authorization is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provision of law. Any such modification, waiver or authorization shall be binding on the holders of the Bonds. Unless the Trustee instructs the Company otherwise, any such modification, waiver or authorization shall be notified by the Company to the holders of the Bonds as soon as practicable thereafter in accordance with Condition 14, and for so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, to the Luxembourg Stock Exchange.

(D) Exercise of Trustee’s Functions

Where the Trustee is required in connection with the exercise of its powers, trusts, authorities, duties and discretions to have regard to the interests of the holders of the Bonds, it shall have regard to the interests of the holders of the Bonds as a class and, in particular but without prejudice to the generality of the foregoing, the Trustee shall not have regard to, or be in any way liable for, the consequences of such exercise for any individual holder resulting from it being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. In connection with any such exercise, the Trustee shall not be entitled to require, and no holder of Bonds shall be entitled to claim, from the Company, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon such individual holder of the Bonds.

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13. Replacement of Certificates

Any replacement of mutilated, defaced, destroyed, stolen or lost Definitive Certificates shall take place at the specified offices of the Registrar and Paying Agents in accordance with the provisions of the Indenture, which provisions include the following:

(i) replacement certificates shall only be issued upon payment by the claimant of such costs as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Company and the Registrar may reasonably require;
(ii) mutilated or defaced certificates must be surrendered before replacements will be issued;
(iii) in the event any Bonds represented by a mutilated, destroyed, lost or stolen Definitive Certificate has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Definitive Certificate representing such Bonds, make payment as consideration for the cancellation of the Bonds represented thereby in accordance with the Conditions.

14. Notices

All notices to holders of the Bonds shall be validly given if (i) made in writing in English and mailed to them at their respective addresses in the register of holders of the Bonds maintained by the Registrar; (ii) published in a leading English language newspaper having general circulation in Europe (which is expected to be the Financial Times, UK Edition); and (iii) so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort). So long as the Bonds are represented in the form of a Global Certificate and held on behalf of Euroclear or Clearstream or the alternative clearing system (as defined in the form of the Global Certificate), notice to holders of the Bonds may alternatively be given by delivery of the relevant notice to Euroclear or Clearstream or the alternative clearing system, for communication by it to entitled account holders.

Any such notice shall be deemed to have been given on the later of the date of such publication and the seventh day after being so mailed.

15. Indemnification

The Indenture contains provisions for the indemnification of the Trustee and its directors, officers, employees or agents and for its and their relief from responsibility, including provisions relieving it and/or them from taking proceedings to enforce payment unless indemnified.

16. Agents

The Company reserves the right, subject to the provisions of the Agency Agreement, at any time to vary or terminate the appointment of Agents; provided that it shall at all times maintain an Agent having a specified office in a major financial center in Europe, which so long as the Bonds are listed on the Luxembourg Stock Exchange and the rules of that exchange so require, will be the Paying, Conversion and Transfer Agent in Luxembourg. Notice of any such termination or appointment, of any changes in the specified offices of the Agents, or of any change in the identity or specified office of any Paying, Conversion and Transfer Agent shall be given promptly by the Company to the holders of the Bonds in accordance with Condition 14 and to the Luxembourg Stock Exchange.

17. Governing Law and Jurisdiction

(A) Governing Law

The Indenture, the Agency Agreement and the Bonds are governed by and shall be construed in accordance with the laws of the State of New York.

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(B) Jurisdiction

The courts of the State of New York sitting in the Borough of Manhattan, The City of New York, and the federal courts of the United States sitting in the Borough of Manhattan, The City of New York, are to have jurisdiction to settle any disputes that may arise out of or in connection with the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Bonds (‘‘Proceedings’’) may be brought in such courts. The Company has in the Indenture irrevocably submitted to the jurisdiction of such courts.

(C) Agent for Service of Process

The Company has irrevocably appointed CT Corporation System, 111 Eighth Avenue, 13th Floor, New York, NY 10011, United States of America, as its agent in the State of New York to receive service of process in any Proceedings in the State of New York based on any of the Bonds.

(D) Disclosure Requirement

The Indenture provides that the Company may have certain disclosure and reporting obligations under ROC laws and regulations if:

. the person to be registered as a shareholder is a ‘‘related party’’ of the Company under Statement of Financial Accounting No. 6 of the ROC and such person beneficially owns Shares converted from the Bonds; or
. the person to be registered as a shareholder owns Shares converted from the Bonds and the Shares converted exceed 10% of the total number of the Shares expected to be converted based on the Conversion Price at the time of issuance of the Bonds.

Due to these obligations, if so instructed by the Company and/or Conversion Agent, the Trustee may ask the converting holders of the Bonds to disclose the name of the person to be registered as the shareholder and to provide proof of identity and authenticity of any signature and other documents before it will convert the Bonds. The conversion of the Bonds may be delayed until the Trustee receives the requested information and satisfactory evidence of the compliance with all laws and regulations by the holders of the Bonds. The information the holders of the Bonds are required to provide may include the name and nationality of the person to be registered as shareholder and the total number of Shares which such person has or will receive in connection with the Bonds such person is converting or has converted in the past.

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THE GLOBAL CERTIFICATE

Capitalized terms used in this section and not otherwise defined shall have the meanings given to them in ‘‘Description of the Bonds.’’

The Global Certificate

The Global Certificate will be deposited with, and registered in the name of a nominee for the Deutsche Bank AG London, as common depositary for Euroclear and Clearstream (the ‘‘Common Depositary’’) on or about June 27, 2003. Euroclear and Clearstream will credit their respective account holders with the respective principal amounts of the individual interests represented by the Global Certificate. Such accounts will be designated initially by or on behalf of the Initial Purchaser. Ownership of beneficial interests in the Global Certificate will be limited to persons who have accounts with Euroclear or Clearstream, or persons who hold interests through such account holders. Ownership of beneficial interests in the Global Certificate will be shown on, and the transfer of that ownership will be effected only through, the records maintained by Euroclear and Clearstream (with respect to interests of their respective account holders) and the records of such account holders (with respect to interests of persons with beneficial interests in the Global Certificate other than such account holders).

The laws of certain jurisdictions require that certain purchasers of Bonds take physical delivery of such Bonds in definitive form. Accordingly, the ability of beneficial owners to own, transfer or pledge beneficial interests in the Global Certificate may be limited by such laws.

Payments of the principal of, and any premium on, the Global Certificate will be made to the Common Depositary or its nominee as the registered owner thereof. None of us, the Trustee, the Common Depositary, the Agents, any custodian, any transfer agent or any other agent of ours will have any responsibility or liability for the accuracy of any of the records relating to, or payments made on account of, ownership interests in the Global Certificate or for any notice permitted or required to be given to persons with beneficial interests in the Global Certificate or any consent given or actions taken by such persons. We expect that upon receipt of any payment in respect of the Global Certificate representing any Bonds held by it or its nominee, the Common Depositary will promptly credit the accounts of the participants of Euroclear and Clearstream with payments proportionate to their respective interests in the amount of the principal of the Global Certificate as shown on its records.

Transfers between account holders in Euroclear and Clearstream will be effected through the records of Euroclear and Clearstream and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream and their respective direct and indirect participants.

Subject to the requirements of Euroclear and Clearstream, the Conversion Right attaching to the Bonds in respect of which the Global Certificate is issued may be exercised by the presentation of one or more Conversion Notices duly completed by or on behalf of a holder of a book-entry interest in such Bonds. Deposit of the Global Certificate with the Conversion Agent together with the relevant Conversion Notice shall not be required. The provisions of Condition 5 of the Bonds will otherwise apply.

Although Euroclear and Clearstream have agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Certificate among participants and account holders of Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of us, the Trustee, the Common Depositary, the Agents, any custodian, any transfer agent, any registrar or any other agents of ours will have any responsibility for the performance by Euroclear or Clearstream, or their respective participants, indirect participants or account holders, of their respective obligations under the rules and procedures governing their operations.

Euroclear and Clearstream each holds the Bonds for participating organizations and facilitates the clearance and settlement of Bond transactions between its respective participants through electronic bookentry changes in accounts of such participants. Euroclear and Clearstream provide to their respective

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participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Euroclear and Clearstream is also available to others, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or indirectly.

Definitive Certificates

We will issue Definitive Certificates in registered form in exchange for the Global Certificate if:

(i) the Common Depositary or any successor to the Common Depositary notifies us in writing that it is at any time unwilling or unable to continue as a depositary and a successor depositary is not appointed by us within 90 days; or
(ii) either Euroclear or Clearstream or a successor clearing system as shall have been designated by the Company and approved by the Trustee is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or
(iii) an Event of Default under the Bonds or the Indenture has occurred and is continuing.

Upon receipt of such notice from Euroclear, Clearstream or the Registrar, as the case may be, we will make arrangements for the exchange of interests in the Global Certificate for Definitive Certificates representing individual definitive Bonds and cause such Definitive Certificates to be executed and delivered to the Registrar in sufficient quantities and authenticated by the Registrar for delivery to the holders of the Bonds. Each person exchanging interests in the Global Certificate for one or more of these Definitive Certificates will be required to provide to the Registrar, through the relevant clearing system, written instructions and other information required by us and the Registrar to complete, execute and deliver the relevant certificates. Any Definitive Certificates delivered in exchange for the Global Certificate or beneficial interests therein will be registered in the names requested, and issued in any denominations approved, by the relevant clearing system.

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DESCRIPTION OF THE SHARES

Set forth below is a summary of information relating to our share capital including brief summaries of the relevant provisions of our Articles of Incorporation, the ROC Securities and Exchange Law and the ROC Company Law.

General

As of March 31, 2003, our authorized share capital was NT$50 billion and our paid-in share capital was NT$24.7 billion, divided into 2.47 billion Shares. The paid-in share capital is issued and outstanding and is held by the public shareholders and other investors in Taiwan and elsewhere in the world. Any change in the authorized share capital of a public company limited by shares, such as us, requires an amendment to our Articles of Incorporation (which requires approval at a shareholders’ meeting) and the approval of the Securities and Futures Commission, MOF and the Ministry of Economic Affairs.

Authorized but unissued shares may also be issued at such times and, subject to the provisions of the applicable laws and the approval of, or registration with, the Ministry of Economic Affairs, the Securities and Futures Commission and the Ministry of Finance.

Dividends and Distributions

Dividend payments and distributions are generally governed by the ROC Company Law as well as our Articles of Incorporation.

Except in limited circumstances, we are not permitted to distribute dividends or make other distributions to shareholders for any year in which we do not have current or retained earnings (excluding reserves). The ROC Company Law requires that 10% of our net income, less prior year’s losses and outstanding taxes, if any, be set aside as legal reserve until the accumulated legal reserve equals our paid-in capital. In addition, we may set aside a special reserve in accordance with applicable laws and regulations.

In addition to permitting dividends to be paid out of net income if we do not have losses, the ROC Company Law permits us to make distributions of additional Shares to our shareholders by capitalizing reserves, including the legal reserve and capital surplus of premium from issuing shares and earnings from gifts received. However, the capitalized portion payable out of our legal reserve is limited to 50% of the total accumulated legal reserve, and only if and to the extent the accumulated legal reserve exceeds 50% of our paid-in capital.

Our Articles of Incorporation further provide that after we pay our income taxes, deduct our prior year’s losses, set aside any legal and when necessary, any special reserve, the remaining portion of our net income, together with the retained earnings of the previous years, shall be distributed as follows:

(i) 96% shall be distributed to the shareholders as dividends;
(ii) 1% shall be distributed to the directors and supervisors as remuneration; and
(iii) 3% shall be distributed to the employees (including employees of our affiliated companies) as bonuses.

However, our shareholders, at our shareholders’ meeting, may depending on our actual needs, determine to retain a part or the whole of such remaining portion from distribution. Dividends to holders of Shares will primarily be distributed in the form of stock. However, if our capital adequacy ratio is higher than the standard set by the competent authority, part of the distribution may be made in the form of cash; provided that cash dividends must not be less than 10% of the dividends distributed in the respective year. Nevertheless, if the cash dividends to be distributed are less than NT$0.1 per share, such dividends should be made in the form of stock.

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Preemptive Rights

According to the ROC Company Law, when a company issues new common shares for cash, 10% to 15% of the issue must be offered to its employees. In addition, the ROC Securities and Exchange Law and the relevant securities regulations require that, if a public company listed on the Taiwan Stock Exchange or whose shares are traded on the GreTai Securities Market intends to offer new shares for cash, at least 10% of the issue must be offered to the public, except under certain circumstances or when exempted by the Securities and Futures Commission. This percentage can be increased by a resolution passed at a shareholders’ meeting, thereby reducing the number of new shares subject to the preemptive rights of existing shareholders. Unless the percentage of shares to be offered to the public is increased by the shareholders, existing shareholders who are listed on the shareholders’ register as of the record date have a preemptive right to acquire the remaining 75% to 80% of the issue. The shares not subscribed for by the employees and shareholders at the expiration of the period for the exercise of their rights may be sold to the public or specified persons at the direction of our board of directors. The preemptive rights provisions will not apply to offering of new shares through a private placement approved at a shareholders’ meeting. These preemptive rights do not apply to this Offering.

Meetings of Shareholders

Meetings of our shareholders may be ordinary or extraordinary. Ordinary meetings of our shareholders will generally be held in Taipei, Taiwan, within six months following the end of each fiscal year.

In contrast, extraordinary shareholders’ meetings may be convened by resolution of the board of directors or, under certain circumstances, by the shareholders or supervisors.

Notice in writing of meetings of shareholders of a public company, such as us, stating the place, time, date and agenda must be dispatched to each shareholder at least 30 days, in the case of ordinary meetings, and 15 days, in the case of extraordinary meetings, before the date set for each meeting.

Voting Rights

Our Articles of Incorporation provide that holders of Shares have one vote for each share. Except as otherwise provided by applicable laws, a resolution can be adopted by holders of a majority of the Shares represented at a shareholders’ meeting at which the holders of a majority of all issued and outstanding Shares are present. The election of directors and supervisors is by means of cumulative voting. Ballots for the election of directors are cast separately from those for the election of supervisors.

In order for us to approve certain major corporate actions, including any amendment to our Articles of Incorporation, entering into, modification or termination of any contracts regarding leasing of all business, outsourcing of operations or joint operations, the dissolution or amalgamation or spin-off of our company, the transfer of the whole or an important part of our business or our property, the taking over of a whole of the business or property of any other entity which would have a significant impact on our operations, or the distribution of any stock dividend, a meeting of the shareholders must be convened with a quorum of holders of at least two-thirds of all issued and outstanding Shares at which the holders of at least a majority of the shares represented at the meeting vote in favor of the resolution.

Alternatively, in the case of a public company, such as us, such a resolution may be adopted by the shareholders’ meeting convened with a quorum of holders of at least a majority of all issued and outstanding Shares at which the holder of at least two-thirds of the shares represented at the meeting vote in favor of the resolution.

A shareholder may be represented at an ordinary or extraordinary meeting by proxy if a valid proxy form is delivered to us five days before such meeting.

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Register of Shareholders Record Dates and Publication of Information

Our share registrar, the Administration Department of E.Sun Financial, maintains the register of our shareholders at its offices located at 1st Floor, 4 Wu-Chang Street, Section 1, Taipei, Taiwan, and enters transfers of shares in such register upon presentation of, among other documents, certificates representing the shares transferred.

We shall, by giving advance public notice, set a record date and close the register of shareholders for a specified period (60 days, 30 days and 5 days immediately before each ordinary meeting of the shareholders, extraordinary meeting of shareholders and relevant record date, respectively) in order for us to determine the shareholders and pledgees that are entitled to rights pertaining to the shares.

Annual Financial Statements

At least ten days before an annual shareholders’ meeting, our annual financial statements will be made available at our principal office in Taipei, Taiwan and at our share registrar for inspection by the shareholders.

Transfer of Shares

The transfer of shares in registered form is effected by endorsement and delivery of the related share certificates; however, in order to assert shareholder’s rights against us, the transferees must have their name and address registered on our register of shareholders. Shareholders are required to file their respective specimen seals, also known as chops, with us.

Repurchase of Shares by Us

With minor exceptions, we cannot acquire our own shares under the ROC Company Law, and any shares purchased by us must be sold at market price within six months from the purchase, otherwise they will be cancelled.

Under the ROC Securities and Exchange Law, we may, by resolution adopted by a majority of our board of directors at a meeting where more than two-thirds of the directors are present, repurchase our shares on the Taiwan Stock Exchange or by a tender offer in accordance with the Securities and Futures Commission procedures for the following purposes:

. for delivery upon conversion of bonds with warrants, preferred shares with warrants, convertible bonds and convertible preferred shares or certificates of warrants issued by us into capital stock;
. to transfer to our employees; or
. if necessary, to maintain our credit and our shareholders’ equity, provided that the shares so repurchased shall be cancelled thereafter.

The total shares repurchased by us may not exceed 10% of our total issued and outstanding shares. In addition, the total cost of the purchased shares may not exceed the aggregate amount of our retained earnings, any premium from share issuance and the realized portion of its capital reserve. Shares repurchased in the first two instances mentioned above are to be transferred to the intended transferees within three years from the repurchase, failing which they will be cancelled and we are required to complete an amended registration for the cancellation. In the third instance mentioned above, the shares repurchased by us must be cancelled within six months after the repurchase. The shares repurchased by us may not be pledged or hypothecated. In addition, we may not exercise any of the shareholder’s rights attached to these shares. Our affiliates, as defined in Article 369-1 of the ROC Company Law, directors, supervisors, managers and their respective spouses and minor children and nominees, are prohibited from selling our shares until our repurchase period has lapsed.

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Liquidation Rights

In the event of our liquidation, our remaining assets after payment of all debts, liquidation expenses and taxes will be distributed pro rata to the holders of Shares in accordance with the relevant provisions of applicable laws and our Articles of Incorporation.

Notices

All notices to our shareholders are delivered by post or published in newspapers with general circulation in the ROC or through a website designated by the Securities and Futures Commission as relevant ROC regulations may require.

Substantial Shareholders and Transfer Restrictions

Our directors, supervisors, managers and shareholders holding more than 10% of our shares are required to report to us, on a monthly basis, any changes in their shareholding in us. The number of shares that they may sell or transfer on the Taiwan Stock Exchange on any given day is limited by ROC laws. In addition, they may only sell or transfer such shares on the Taiwan Stock Exchange at least three days after they have filed a notification with the Securities and Futures Commission in connection with such sale or transfer, provided that such notification is not required if the number of shares to be sold or transferred does not exceed 10,000.

Shareholding Restrictions

Any person or related persons proposing to hold more than 10%, 25%, 50% or 75% of a financial holding company must apply to MOF for approval. MOF may restrict the voting rights of the portions exceeding the above percentages if such approval is not obtained. A shareholder holding more than 10% of a financial holding company must meet the fit and proper requirements promulgated by MOF. A shareholder holding more than 10% of our shares may not increase his or her holdings unless he or she has been determined to be fit and proper by the competent authority. In addition, such shareholder has to disclose the sources of funds to be used to purchase the shares of the financial holding company. Anyone who purchases shares of a financial holding company exceeding the thresholds without obtaining the prior approval from MOF will be fined in an amount from NT$2 million to NT$10 million.

Changes in Our Share Capital

The following table sets forth the changes in our issued share capital since January 28, 2002, our date of establishment.

Date of Issue January 28, 2002. . . . . . . . . . . . . . . September 16, 2002 . . . . . . . . . . . . .	Type of Issue Initial issuance of Shares through share exchange Distribution of stock dividends	Number of Shares Issued 2,290,000,000 180,000,000	Total Number of Issued Shares after the Issue
			2,290,000,000 2,470,000,000

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TAXATION

The following discussion is a summary of the material ROC income tax considerations relevant to an investment decision by certain non-ROC holders.

ROC Taxation

The following summary addresses the principal ROC tax consequences of the ownership and disposition of the Bonds or the Shares to a non-resident individual or non-resident entity that holds such Bonds or Shares (a ‘‘Non-ROC Holder’’). ‘‘Non-resident individual’’ (a ‘‘Non-ROC Individual Holder’’) is a foreign national individual who is not physically present in the ROC for 183 days or more during any calendar year in which he or she owns the Bonds or the Shares and a ‘‘non-resident entity’’ (a ‘‘Non-ROC Entity Holder’’) is a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC for profit-making purposes and does not have a fixed place of business or other permanent establishment in the ROC.

Bonds

Interest

Payments of stated interest or premium (if any) on a Bond to a Non-ROC Holder are subject to ROC withholding tax at the rate of 20% at the time of payment. We have agreed to pay additional amounts in respect of withholding taxes on the payment of interest or premium (if any).

Sale

Securities transaction tax will be imposed on the transfer of equity securities issued by ROC companies at the rate of 0.3%, which is payable by the seller. However, according to the amended Statute of Upgrading Industries effective on February 1, 2002, no securities transaction tax will be imposed on the transfer of corporate bonds and financial debentures, including the Bonds, until December 31, 2009.

However, securities transaction tax, gift tax and/or income tax may be imposed in relation to the converting holder’s designation of other persons to be the holder of Shares upon conversion of the Bonds.

Under current ROC laws, capital gains on transactions of securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of Bonds.

Conversion into Shares

ROC law currently provides no specific provisions regarding the ROC income tax consequences of a conversion of Bonds into Shares or cash. Without further clarification from the ROC tax authorities, it is impossible to conclude with certainty that gain on the conversion of Bonds into Shares or cash will not be deemed a taxable gain, additional interest income (subject to the 20% withholding tax) or otherwise be subject to other ROC tax.

Stamp Duty

There is no ROC stamp, issue or registration tax imposed on the delivery of Shares upon conversion of the Bonds.

Dividends

Dividends (whether in cash or shares) declared by us out of retained earnings and distributed to a NonROC Holder in respect of Shares are subject to ROC withholdings tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the par value of the Shares (in the case of stock dividends).

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Distributions of Shares declared by us out of capital reserves are not subject to ROC withholding tax.

Sale

Securities transaction tax will be withheld at the rate of 0.3% of the transaction price upon a sale of Shares.

Under current ROC laws, capital gains on transactions in securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of Shares.

Preemptive Rights

Distributions of statutory subscription rights for the Shares in compliance with the ROC Company Law are not subject to ROC tax. Proceeds derived from sales of statutory subscription rights evidenced by securities are currently exempted from income tax but are subject to securities transaction tax, currently at the rate of 0.3% of the gross sales amount. Proceeds derived from sales of statutory subscription rights which are not evidenced by securities are subject to capital gains tax at the rate of (1) 25% of the gains realized by Non-ROC Entity Holders and (2) 35% of gains realized by Non-ROC Individual Holders. Subject to compliance with ROC laws, we have the sole discretion to determine whether statutory subscription rights shall be evidenced by the issuance of securities.

Inheritance Tax and Gift Tax

ROC inheritance tax is payable on any property located within Taiwan of a deceased Non-ROC individual, and ROC gift tax is payable on any property located within Taiwan donated by such person. Inheritance tax is payable at rates ranging from 2% of the first NT$0.6 million to 50% of amounts over NT$100 million. Gift tax is payable at rates ranging from 4% of the first NT$0.6 million to 50% of amounts over NT$45 million. Under ROC inheritance and gift tax law, bonds and shares issued by ROC companies are deemed located within the ROC regardless of the location of the owner.

Tax Treaties

The United States does not have an income tax treaty with the ROC. At present, the ROC has income tax treaties with Australia, Gambia, Indonesia, Malaysia, Macedonia, the United Kingdom, the Netherlands, New Zealand, Singapore, South Africa, Swaziland and Vietnam, which limit the rate of withholding tax on dividends or interest paid with respect to shares or notes in ROC companies. It is unclear whether a NonROC Holder will be considered to own Bonds or Shares for the purposes of such income tax treaties. Accordingly, holders of Bonds or Shares who are otherwise entitled to the benefits of a relevant income tax treaty should consult their own tax advisors concerning their eligibility for benefits under the treaty with respect to the Bonds or Shares.

Tax Reform

In order to increase Taiwan’s competitiveness, an amendment to the ROC Income Tax Law (the ‘‘Amendment’’) was enacted on January 1, 1998 to integrate corporate income tax with shareholder dividend tax with the aim of eliminating the double taxation effect for resident shareholders of ROC companies. According to the Amendment, a 10% retained earnings tax is imposed on a company for its after-tax earnings generated after January 1, 1998 which are not distributed in the following year. The retained earnings tax so paid will further reduce the retained earnings available for further distribution. When we declare dividends out of our retained earnings, a maximum amount of 10% of the declared dividends will be credited against the ROC 20% withholding tax, so that the actual withholding tax imposed on the Non-ROC Holders may be less than 20%.

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PLAN OF DISTRIBUTION

Under the terms and subject to the conditions contained in a Purchase Agreement dated June 9, 2003, the initial purchaser named below (the ‘‘Initial Purchaser’’) has agreed to purchase, and we have agreed to sell to it, the principal amount of the Bonds set forth below.

Initial Purchaser of Bonds Morgan Stanley & Co. International Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Principal Amount
	US$178,200,000
	US$178,200,000

The Initial Purchaser has exercised the option granted to them by us to purchase an additional US$19,800,000 aggregate principal amount of the Bonds. These Optional Bonds are included in the total amount of Bonds to be purchased in the table above.

The Initial Purchaser is offering the Bonds subject to their acceptance of the delivery of the Bonds from us. The Purchase Agreement provides that the obligation of the Initial Purchaser to pay for and accept delivery of the Bonds are subject to approval of certain legal matters by its counsel and to certain other conditions and that the agreement may be terminated by the Initial Purchaser in certain circumstances prior to its payment for the Bonds to us.

The Initial Purchaser is obligated to take and pay for all of the Bonds offered by this Offering Memorandum if any such Bonds are taken. We have agreed to indemnify the Initial Purchaser against certain liabilities in connection with its offer and sale of the Bonds.

Each of the Company, E.Sun Bank and certain of our directors, supervisors and executive officers has agreed that it or he (as the case may be) will not, without the prior written consent of Morgan Stanley & Co. International Limited, during the period ending 90 days after the date of this Offering Memorandum, (i) offer, pledge, encumber, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, publicly announce an intention to do any of the foregoing, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise. The foregoing restrictions shall not apply to the (a) the sale of the Bonds to the Initial Purchaser pursuant to the Purchase Agreement and the issuance of Shares upon the conversion of the Bonds, (b) transactions relating to Shares or other securities acquired in open market transactions after the completion of this Offering and (c) the issuance and/or sale of Shares (including treasury shares) to the Company’s employee for consideration or in connection with the Company’s employee stock bonus plan.

The Bonds are a new issue of securities with no established trading market. Application has been made to list the Bonds on the Luxembourg Stock Exchange.

The Bonds and the Shares issuable upon conversion of the Bonds have not been and will not be registered under the Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with an applicable exemption from the registration requirements of the Securities Act. Accordingly, the Bonds are being offered and sold only outside the United States in reliance upon Regulation S.

The Initial Purchaser has represented and agreed that, except as permitted by the Purchase Agreement, it will not offer or sell the Bonds (i) as part of its distribution at any time or (ii) otherwise until 40 days after the later of the commencement of this Offering and the latest closing date of this Offering, only in accordance with Rule 903 of Regulation S. Accordingly, neither the Initial Purchaser, its affiliates nor any

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persons acting on its or their behalf have engaged or will engage in any directed selling efforts (with the meaning of Regulation S) with respect to the Bonds, and the Initial Purchaser, its affiliates and any such persons have complied and will comply with the offering restrictions requirement of Regulation S.

The Initial Purchaser has represented and agreed that (i) it has not offered or sold and, prior to the expiry of a period of six months from the date of issue of the Bonds, will not offer or sell any Bonds to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) with respect to anything done by it in relation to the Bonds or Shares in, from or otherwise involving the United Kingdom; and (iii) it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Bonds in circumstances in which section 21(1) of the FSMA does not apply to us.

The Initial Purchaser has represented and agreed that the Bonds have not been and will not be registered under the Securities and Exchange Law of Japan, and represents that it has not offered or sold, and agrees not to offer or sell, directly or indirectly, any Bonds in Japan or for the account of any resident thereof except pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of Japanese Law.

The Initial Purchaser has represented and agreed that (i) it has not offered or sold, and will not offer or sell in Hong Kong, by means of any document, any Bonds other than to persons whose ordinary business is to buy or sell shares or debentures whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong; and (ii) it has not issued or had in its possession and will not issue or have in its possession any document, invitation or advertisement relating to the Bonds in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Bonds which are intended to be disposed of to persons outside Hong Kong or only to persons whose business involves the acquisition, disposal, or holding of securities, whether as principal or agent.

This Offering Memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the Initial Purchaser has represented and agreed that it has not circulated or distributed nor will it circulate or distribute this Offering Memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of any Bonds nor has it offered or sold and nor will it offer or sell such Bonds or cause such Bonds to be made the subject of any invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor or other person specified in Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’), (ii) to a sophisticated investor, and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

The Initial Purchaser has represented and agreed that it has not offered or sold, and has agreed not to offer or sell any Bonds, directly or indirectly, into the ROC.

In order to facilitate the offering of the Bonds, the Initial Purchaser, to the extent permitted by applicable laws and regulations, may engage in transactions that stabilize, maintain or otherwise affect the price of the Bonds. Specifically, the Initial Purchaser may overallot the offering, creating a syndicate short position. In addition, the Initial Purchaser may, to the extent permitted by applicable laws and regulations, bid for and purchase Bonds in the open market to cover syndicate shorts or to stabilize the price of the Bonds. Any of these activities may stabilize or maintain the market price of the Bonds above independent market levels. The Initial Purchaser is not required to engage in these activities and may end any of these activities at any time.

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In connection with this Offering, the Initial Purchaser (or its affiliates) may, for its own accounts, enter into asset swaps, credit derivatives or other derivative transactions relating to the Bonds and/or the underlying Shares at the same time as the offer and sale of the Bonds or in secondary market transactions. Such transactions may be entered into with our affiliates. As a result of such transactions, the Initial Purchaser may hold long or short positions in such Bonds or derivatives or in the underlying Shares. No disclosure will be made of any such positions. In addition, the Initial Purchaser (or its affiliates) may purchase Bonds for proprietary purposes and not with a view to distribution. Such transactions or purchases may involve a substantial portion of the Bonds.

The Initial Purchaser and its affiliates may have performed certain investment banking, commercial banking or advisory services for us from time to time for which they have received customary fees and expenses. The Initial Purchaser may, from time to time, engage in transactions with and perform services for us in the ordinary course of its business.

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TRANSFER RESTRICTIONS

Because of the following restrictions, purchasers are advised to consult with legal counsel prior to making any resale, pledge or transfer of the Bonds or the Shares issuable upon conversion of the Bonds.

The Bonds may not be offered or sold directly or indirectly in the ROC. This Offering is being made pursuant to Regulation S under the Securities Act. The Bonds and the Shares issuable upon conversion thereof, have not been registered under the Securities Act or with any securities regulatory authority of any state in the United States or other jurisdiction and may only be offered, sold or delivered outside the United States (as defined in Regulation S under the Securities Act) to persons other than U.S. persons in offshore transactions in reliance on Regulation S, and in each case in accordance with any other applicable law.

In addition, no transfer of any interest in the Global Certificate and no issuance or transfer of Shares issuable upon conversion of the Bonds may be made to any U.S. person outside the United States or any person in the United States for a period of 40 days after the later of the commencement of this Offering and the latest closing date of this Offering. Terms used in this section are defined in Regulation S.

Except in certain limited circumstances, interests in the Bonds may only be held through interests in the Global Certificate. Such interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream and their respective direct and indirect participants. See ‘‘Description of the Bonds’’ and ‘‘The Global Certificate.’’

Each purchaser of the Bonds, by accepting delivery of this Offering Memorandum, will be deemed to have acknowledged and represented and agreed as follows:

The Bonds and Shares issuable upon conversion of the Bonds have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state of the United States and are subject to significant restrictions on transfer.
Each person purchasing the Bonds prior to the expiration of 40 days after the later of the commencement of the Offering and the latest closing date (the ‘‘Distribution Compliance Period’’) is purchasing such Bonds in an offshore transaction meeting the requirements of Rule 903 or 904 of Regulation S.
The Bonds and the Shares issuable upon conversion of the Bonds will not be sold, pledged or transferred to, or for the account or benefit of, any U.S. person outside the United States or any person in the United States during the Distribution Compliance Period.
Such purchaser will not offer, sell, pledge or otherwise transfer any interest in the Bonds or Shares issuable upon conversion of the Bonds except as permitted by the applicable legend set forth in paragraph 5 below.
The Bonds will bear legends to the following effect, which restrictions we will observe unless we determine otherwise in compliance with applicable law:

THE BONDS EVIDENCED HEREBY (THE ‘‘BONDS’’) OR THE SHARES OF E.SUN FINANCIAL HOLDING COMPANY, LTD. (THE ‘‘COMPANY’’) ISSUABLE UPON CONVERSION OF THE BONDS (THE ‘‘SHARES’’) HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), AND PRIOR TO THE EXPIRATION OF 40 DAYS AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING OF THE BONDS AND THE LATEST CLOSING DATE (THE ‘‘DISTRIBUTION COMPLIANCE PERIOD’’), THE BONDS AND THE SHARES ISSUABLE UPON CONVERSION OF THE BONDS MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED TO

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ANY U.S. PERSON OUTSIDE THE UNITED STATES OR ANY PERSON IN THE UNITED STATES. EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE BONDS EVIDENCED HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING AND FOLLOWING RESTRICTIONS.

THIS LEGEND WILL NO LONGER BE EFFECTIVE AFTER THE END OF THE DISTRIBUTION COMPLIANCE PERIOD, AFTER WHICH THE BONDS EVIDENCED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION OF THE BONDS WILL NO LONGER BE SUBJECT TO THE RESTRICTIONS SET FORTH IN THIS LEGEND, PROVIDED THAT AT SUCH TIME AND THEREAFTER THE OFFER OR SALE OF THE BONDS EVIDENCED HEREBY OR THE SHARES ISSUABLE UPON CONVERSION OF THE BONDS WOULD NOT BE RESTRICTED UNDER ANY APPLICABLE SECURITIES LAWS OF THE UNITED STATES OR OF THE STATES OR TERRITORIES OF THE UNITED STATES.

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LEGAL MATTERS

Certain legal matters will be passed upon for us by Lee and Li as to ROC law. Certain legal matters will be passed upon for the Initial Purchaser by Davis Polk & Wardwell as to United States law and New York law.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements of E.Sun Financial as of December 31, 2002, and for the period from January 28, 2002 (date of establishment) to December 31, 2002, and the unconsolidated financial statements of E.Sun Bank and E.Sun Bills Finance as of, and for the three years ended December 31, 2000, 2001 and 2002 included in this Offering Memorandum, have been audited by TN Soong & Co, an associate member firm of Deloitte Touche Tohmatsu, effective April 22, 2002 (formerly a member firm of Andersen Worldwide, SC), Taipei, Taiwan, the Republic of China, as stated in their audit reports appearing herein. T N Soong & Co and Deloitte & Touche (Taiwan) established Deloitte & Touche effective June 1, 2003.

With respect to the unaudited interim financial statements of E.Sun Financial and E.Sun Bank for the three months ended March 31, 2003 and 2002, respectively, prepared in accordance with ROC GAAP, included in this Offering Memorandum, the independent accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information in accordance with ROC Statement on Auditing Standards No. 36, ‘‘Review of Financial Statements’’. However, their separate review report included in this Offering Memorandum states that they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.

ROC GAAP differs from generally accepted accounting principles in the United States, and from International Accounting Standard. For more information, please see ‘‘Summary of Material Differences Between ROC GAAP and US GAAP.’’

WHERE YOU CAN FIND MORE INFORMATION

We are registered with the ROC Ministry of Economic Affairs. Our registration number is 70796305. According to Article 11 of our Articles of Incorporation, the scope of our business is to engage in investment of the businesses as specified under the ROC Financial Holding Company Act, to manage our investee companies and to invest in other related businesses approved by the competent authority and in accordance with relevant law and regulations.

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GENERAL INFORMATION

Approvals and Consents

This Offering of the Bonds was authorized and approved by our board of directors at a meeting held on August 22, 2002. All consents, approvals, authorizations or other orders required under the prevailing laws of the ROC have been given or obtained for the offer, issue and sale of the Bonds. A copy of this Offering Memorandum will be filed with the Securities and Futures Commission subsequent to the closing of this Offering.

Clearance System and Settlement

The Bonds have been accepted for clearance through the facilities of Euroclear and Clearstream under Common Code number 017057235 and the International Securities Identification number for the Bonds is XS0170572357.

Trades for the Bonds on the Luxembourg Stock Exchange will be effected through Clearstream and Euroclear in accordance with their respective rules and operating procedures. Only Bonds evidenced by a Global Certificate have been accepted for clearance through Clearstream and Euroclear and only such Bonds may trade on the Luxembourg Stock Exchange.

Listing

Application has been made to list the Bonds on the Luxembourg Stock Exchange. The legal notice relating to the issue of the Bonds and our Articles of Incorporation will be registered prior to the listing with a registration entity in Luxembourg called Registre de Commerce et des Socie´te´s, where such documents are available for inspection and where copies thereof can be obtained upon request. As long as the Bonds are listed on the Luxembourg Stock Exchange, we will maintain a Paying, Conversion and Transfer Agent in Luxembourg.

According to Chapter VI, Article 3, Point A/11/2 of the rules and regulations of the Luxembourg Stock Exchange, the Bonds shall be freely transferable and therefore no transaction made on the Luxembourg Stock Exchange shall be cancelled.

No Material Adverse Change

Except as disclosed in this Offering Memorandum, there has been no significant adverse change in our financial position or prospects since December 31, 2002, the date of our latest audited consolidated financial statements. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’

No Litigation

Neither we nor any of our subsidiaries are involved in any litigation or arbitration proceedings that may have, or have had during the 12 months preceding the date of this Offering Memorandum, a significant adverse effect on our financial position or those of our subsidiaries, nor are we or any of our subsidiaries aware that any such proceedings are pending or threatened.

Available Documents

A copy of our Articles of Incorporation and copies of the Indenture, Agency Agreement and the Purchase Agreement (or, pending execution thereof, drafts thereof subject to modification) will, for so long as the Bonds are listed on the Luxembourg Stock Exchange, be available for inspection during usual business hours on any weekday (except public holidays) at the office of the Paying, Conversion and Transfer Agent in Luxembourg. We are required to publish both our annual and interim financial

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statements. As long as any of the Bonds remain outstanding, copies of our most recent annual report in English containing our audited financial statements — both unconsolidated and consolidated — and our most recent unaudited quarterly interim report in English will be delivered to and be obtainable from the offices of the Paying, Conversion and Transfer Agents specified on the inside back cover of this Offering Memorandum and, so long as the Bonds are listed in Luxembourg, be available during normal business hours from the office of the Paying, Conversion and Transfer Agent in Luxembourg.

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SUMMARY OF MATERIAL DIFFERENCES BETWEEN ROC GAAP AND US GAAP

Certain differences between ROC GAAP and US GAAP, including but not limited to, the accounting for derivatives and bonuses to employees, directors and supervisors, could have a material impact on reported net income and shareholders’ equity. Given the number and nature of differences between ROC GAAP and US GAAP, users of ROC GAAP financial statements should never assume that they are at all comparable to financial statements prepared in accordance with US GAAP.

Our financial statements are prepared and presented in accordance with ROC GAAP. Certain principal differences between ROC GAAP applicable to us and US GAAP are summarized below. Such presentation should not be taken as inclusive of all differences between ROC GAAP and US GAAP. Additionally, no attempt has been made herein to identify all disclosure, presentation or classification differences that would affect the manner in which events and transactions are presented in the financial statements or notes thereto. Further, no attempt has been made to identify future differences between ROC GAAP and US GAAP as a result of prescribed changes in accounting standards.

Regulatory bodies that promulgate ROC GAAP and US GAAP have significant projects ongoing that could affect future comparisons such as this one.

Subject Presentation of non- consolidated financial statements . . . . . . . . . . . . Consolidation . . . . . . . . . . . .	ROC GAAP Under ROC GAAP, non-consolidated financial statements of a company are presented as the primary financial statements and consolidated financial statements as supplemental financial statements. Under ROC GAAP, a company is required to include in its annual consolidated financial statements only those subsidiaries that are directly or indirectly more than 50% owned. A company has the option not to consolidate directly owned subsidiaries (1) with total assets and operating revenue less than 10% of the company’s non- consolidated total assets and operating revenue, (2) with a negative equity position which is considered to be other than temporary and the company did not guarantee the obligations of the subsidiary or commit to provide additional financial support, or (3) with business activities which differ from that of the company. For purposes of applying the above test, the amounts are determined on the basis of each respective subsidiary’s non-consolidated financial statements. Under Securities and Futures Commission requirements, beginning in 1995, if the combined revenue and total assets of all non-consolidated subsidiaries exceed 30% of the company’s non-consolidated total assets and operating revenue, each individual subsidiary with total assets or operating revenue greater than three percent of the company’s respective non-consolidated amounts must be consolidated. Such subsidiaries must be included in the consolidated financial statements thereafter, unless the percentage of the combined total assets or operating revenues for all such subsidiaries decreases to less than 20% of the company’s applicable non-consolidated amount.	US GAAP
		Under US GAAP, parent-company-only non-consolidated financial statements are not allowed to be presented as the primary financial statements for any period. Under US GAAP, consolidation of controlled subsidiaries is required in the preparation of consolidated financial statements.

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US GAAP

Subject
Formation of a holding
company . . . . . . . . . . . . .
Derivative financial instrument
transactions . . . . . . . . . . .

ROC GAAP

Under ROC GAAP, the formation of a
holding company that includes the
combination of individual companies is
recorded at historical cost, so that the
aggregate book value of each individual
company’s net assets becomes the historical
cost of the new holding company.
There are no definitive accounting standards
under ROC GAAP that address accounting
for derivative financial instruments such as
interest rate or foreign currency options,
futures or swaps.

Investment in debt and equity securities of less than 20%

Short-term investments are stated at the lower of cost or market value, investments in debt securities are stated at the lower of amortized cost or market value and unrealized losses are reported in current earnings. Long-term investments in listed equity securities in respect of which the company does not exercise significant influence on operating and financial decisions of the investee are stated at the lower of cost or market value, and unrealized losses are deducted from shareholders’ equity. Investments in nonlisted equity securities in respect of which the company does not exercise significant influence on operating and financial decisions of the investee are stated at cost, subject to the permanent impairment test.

Under US GAAP, the formation of a holding company that combines subsidiary companies that were previously under common control is recorded at historical cost, except for the acquisitions of minority interests, which would be recorded at fair value similar to purchase accounting.

Under US GAAP, accounting for derivative financial instruments is in large part determined by the purpose for which the instrument was entered into. In general, derivative financial instruments that are entered into for speculative or trading purposes (or which do not meet the criteria for accounting for such items as hedges), rather than to hedge exposures to risks, are accounted for at fair value with all gains and losses recognized currently in earnings. Derivative financial instruments that (i) are entered into in order to hedge certain exposures and (ii) meet defined criteria in order to be classified as hedges, are accounted for in a manner so as to offset the gains and losses applicable to the derivative financial instrument against the gains and losses on transactions or commitments that are being hedged (i.e., either by recording the gains and losses on derivative financial instruments currently when they are used as hedges of existing (on-balance sheet) transactions or by deferring the gains and losses on derivative financial instruments in the equity section of the balance sheet when they are used as hedges of forecasted transactions). In addition, US Statement of Financial Accounting Standards (‘‘ US SFAS’’) No. 133 also defines the concept of embedded derivatives that may now exist due to a broader definition of a derivative instrument. Embedded derivatives are accounted for in the same manner as any other derivatives.

Investments in debt and marketable equity securities are classified in one of three categories: trading, held-to-maturity or available-for-sale. Debt and marketable equity securities classified as trading securities are reported at fair value with unrealized gains and losses included in earnings; debt securities classified as held-to maturity securities are reported at amortized cost; and debt and marketable equity securities classified as available-for-sale securities are reported at fair value with unrealized gains and losses reported in accumulated other comprehensive income.

186

US GAAP

Subject ROC GAAP Equity investments of at least Under ROC GAAP, equity investments 20% . . . . . . . . . . . . . . . . where a company has a voting rights of at least 20% are generally required to be accounted for under the equity method. However, when a company has not received the audited financial statements of the equity-method investee company in time to recognize its equity in the investee company’s income (loss), the company may delay the recognition of its equity in the investee company’s income (loss) until the subsequent year, unless the company meets the following criteria, in which case no delay in recognition is possible: (i) the beginning balance of the company’s longterm investment balance exceeds NT$50 million and 5% of the investor company’s paid-in capital; (ii) direct ownership of the investee company exceeds 30%, or direct ownership plus indirect ownership through directors, supervisors, and management exceeds 50%; and (iii) the investor company is one of the top three shareholders of the investee company or the investee company’s chairperson or general manager was appointed by the investor company. Under ROC GAAP, when an investee issues additional shares and the investor’s ownership interest changes as a result, any resulting difference between the investor’s investment balance and its proportionate share of the investee’s net equity is adjusted to its investment account with an offsetting entry to the investor’s capital reserve or retained earnings. Upon subsequent disposition of the investment, amounts previously recorded to capital reserve or retained earnings relating to the respective investment will be reversed and recorded as part of the gain or loss recorded on disposal. With respect to intercompany transactions between an investor company and an unconsolidated investee affiliate, ROC GAAP provides that any resulting profit on such transactions be eliminated in the investor company’s financial statements. In general, net intercompany profit on such transactions is deferred and offset against the long-term investment account, with the deferred net intercompany profit amortized to income over future periods based on the nature of the transaction which give rise to the deferred intercompany profit.

Under US GAAP, the equity method of accounting is generally required for investments with an ownership percentage of greater than 20% but less than 50%, unless (i) the investment is considered temporary, or (ii) the investor does not possess the ability to exercise significant influence over the investee. There are no provisions which allow the investor company to delay recognition of its equity in the investee company’s income (loss). Under US GAAP, when an investee issues additional shares at an amount over/under the carrying value of the shares held by the investor, and the investor’s ownership interest decreases as a result of not fully subscribing to the issue, the resulting difference between the investor’s investment balance and its proportionate share of the investee’s net equity is adjusted to its investment account with an offsetting entry either to (i) gain or loss to record the deemed disposition of shares or (ii) paid-in capital. If an adjustment has been made to paid-in capital to recognize investee capital transactions, US GAAP would not permit the adjustment of such amounts on the subsequent disposition of all or a part of the adjustment. Under US GAAP, the gross impact as well as the net intercompany profit arising from intercompany transactions between an investor company and an unconsolidated investee affiliate are generally eliminated in the investor company’s financial statements. This elimination is either complete or partial to the extent of the investor company’s interest in the investee affiliate.

187

US GAAP

Subject ROC GAAP Acquisition of business . . . . . Under ROC GAAP, if a financial holding company acquires an enterprise by issuing shares of its stock in exchange for 100% of the outstanding shares of the enterprise’s stock, the book value of the net assets acquired may be used to determine the fair value of the acquired enterprise. Under this method of accounting, the shares of stock issued by the acquirer are recorded at the book value of the net assets by the acquirer under this method. If a company, other than a financial holding company, acquires an enterprise using cash or an exchange of shares as the purchase consideration, the difference between the fair value of the purchase consideration and the reported book value of the net assets acquired with adjustments allowed for impairment of certain assets is accounted for as a consolidation debit asset (goodwill) and amortized to income over five to twenty years.

Under US GAAP, business combinations subsequent to July 1, 2001, are accounted for based on the purchase method.

The difference between purchase consideration and historical net assets acquired is allocated based on the fair values of the net assets and other identifiable intangible assets acquired is allocated based on the fair values of the net assets and other identifiable intangible assets acquired. No goodwill is recognized acquired, with any residual accounted for as goodwill. In an acquisition resulting in the exchange of shares of stock, the purchase consideration is measured based on the fair value of exchanged stock of either the acquirer or acquiree, whichever stock has a more readily determinable market value. The income of the acquirer includes the operations of the acquiree subsequent to the acquisition.

US GAAP requires goodwill to be recorded on the balance sheet as an intangible asset and not to be amortized but, rather, to be tested for impairment when events or circumstances indicate that goodwill of a reporting entity within a company might be impaired. A goodwill impairment loss would be charged to operations, if the implied fair value of a reporting unit’s goodwill is less than its carrying amount.

Bonuses to employees, directors	Bonuses to employees, directors	According to ROC regulations and our
and supervisors	. . . . . . . .	Articles of Incorporation, a portion of
		distributable earnings should be set aside as
		bonuses to employees, directors and
		supervisors are always paid in cash.
		However, bonuses to employees may be
		granted in cash or shares or both. All of
		these appropriations, including share
		bonuses which are valued at par value of
		NT$10, are charged against retained
		earnings under ROC GAAP, after such
		appropriations are formally approved by the
		shareholders in the following year.

Share dividends . . . . . . . . . . Share dividends are recorded as a reduction to retained earnings for the par value of the shares issued, and a like amount is recorded to the capital stock account.

All bonuses and remuneration are charged to current income in the year incurred. Shares issued as part of these bonuses are recorded at fair market value. Since the amount and form of such bonuses are not finally determinable until the shareholders’ meeting in the subsequent year, the total amount of the aforementioned bonuses is initially accrued based on management’s estimate regarding the amount to be paid based on the company’s articles of incorporation. Any difference between the initially accrued amount and the fair market value of the bonuses settled by the issuance of shares is recognized in the year of approval by shareholders.

Share dividends are recorded as a reduction to retained earnings based on the fair value of the shares issued, and a like amount is recorded to the capital stock and capital surplus accounts.

188

Subject Gains on disposition of property, plant and equipment . . . . . . . . . . . . Retained earnings tax . . . . . . Depreciation lives of fixed assets. . . . . . . . . . . . . . . . Economic dependency . . . . . .	ROC GAAP Gains on the dispositions of property, plant and equipment generated before 2001 are first credited to non-operating income and then transferred, after deducting the applicable income tax, to capital surplus in the applicable fiscal year. Starting in 2001, the treatment of gains on disposition of property, plant and equipment is the same under both ROC GAAP and US GAAP. Companies in the ROC are subject to a 10% tax on profits retained and earned after December 31, 1997. If the retained profits are distributed to the shareholders in the following fiscal year, the tax can be avoided. Under ROC GAAP, such tax is recorded in the statement of income in the following fiscal year if the earnings are not distributed to the shareholders. In practice, depreciation is generally provided using the guideline service lives as prescribed by ROC Tax Authorities plus one additional year as salvage value. Securities of Futures Commission regulations applicable to public companies require that when fixed assets have been fully depreciated over the prescribed service life and the underlying asset continues to be used, the remaining unamortized value (i.e. the salvage value portion) is depreciated over the asset’s remaining economic life. The estimated life of a building under ROC GAAP can be depreciated over a period of up to 55 years. ROC GAAP has no specific disclosure requirements concerning economic dependency.	US GAAP
		Any gains on the dispositions of property, plant and equipment is credited to operating income, with no transfer to capital surplus. Under US GAAP, income tax expense related to the 10% retained profit tax is recorded in the statement of income in the year that the profits were earned. In addition, all material temporary differences between the carrying amounts of assets and liabilities and their respective tax bases are recognized using a tax rate that includes the 10% retained profit tax. Depreciation is provided over the asset’s estimated useful life. No additional depreciation is provided on fully depreciated assets which continue to be used in the business. In general, 55 years would be considered too long a period over which to depreciate fixed assets. Disclosure of economic dependency on one or more parties, as appropriate, including such parties as sole/major customer,

Disclosure of economic dependency on one or more parties, as appropriate, including such parties as sole/major customer, supplier, franchiser, distributor, general agent, customer or lender is required.

189

US GAAP

Subject ROC GAAP Segment reporting . . . . . . . . ROC SFAS No. 20, ‘‘Disclosure of Segment Information,’’ establishes standards for reporting information about industry and foreign operating segments, and information on export sales and sales to major customers. ROC SFAS No. 20 defines industry segment as a revenue generating unit of an enterprise which sells certain products or provides services, or a group of related products or services to customers and a foreign operating segment as a revenue generating unit of an enterprise that operates outside Taiwan and sells products or services to customers located in its area of operation. The industry and foreign operating segments information to be provided includes primarily revenues, profits and losses, and book values of identifiable assets. Information on export sales by geographic area are required to be disclosed if they are at least 10% of the enterprise’s total sales. Similar threshold applies to the requirement regarding the disclosure of the information on sales to major customers. The segment information should be prepared using the same standards applied to the financial statements except that inter-segment sales and transfers should be recognized based on internal transfer pricing.

Under U.S. SFAS 131, a public business enterprise is required to present segment information based on operating segments. Several operating segments may, provided aggregation criteria are met, be aggregated to reportable segments for which the required information is disclosed. Disclosure is based on the management’s approach for reporting segments information to the company’s chief operating decisionmakers.

190

Subject Measurement of impaired loans by banks (allowance for loan losses) . . . . . . . . . . . . . .	ROC GAAP Under ROC GAAP, in determining the allowance for credit losses, the collectability of the loan portfolio and credit guarantees must be evaluated based on borrowers’/ clients’ payment history and the related loan classification as non-performing, in accordance with ‘‘The Rules for Bank Assets Evaluation, Loss Reserve Provision, and Disposal of Overdue Loans, Non- accrual Loans and Bad Debts’’ issued by the MOF. Under the MOF rules, an allowance for loan losses of at least a minimum of (i) 50% must be set aside against doubtful loans and (ii) 100% must be set aside against loss loans. No specific allowance is required for substandard loans. Write-offs of specific loans under MOF guidelines are First offset against the recorded allowance for loan losses. If the allowance is insufficient to cover write-offs, additional losses are recognized on loans in the statement of income for the current period. Amounts of bad debts recovered are accounted for as non-operating income in the statement of income.	US GAAP
		Under US GAAP, recognition of loan losses is provided by US SFAS No. 5, ‘‘Accounting for Contingencies,’’ and US SFAS No. 114, ‘‘Accounting by Creditors for Impairment of a Loan.’’ An estimated loss from a loss contingency, such as the collectability of receivables, should be accrued when, based on information available prior to the issuance of the financial statements, it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Loan loss allowance methodology generally should: . Include a detailed analysis of the loan portfolio, performed on a regular basis; . Consider all loans (whether on an individual or group basis); . Identify loans to be evaluated for impairment on an individual basis under US SFAS No. 114 and segment the remainder of the portfolio into groups of loans with similar risk characteristics for

. Identify loans to be evaluated for impairment on an individual basis under US SFAS No. 114 and segment the remainder of the portfolio into groups of loans with similar risk characteristics for evaluation and analysis under US SFAS No. 5;
. Consider all known relevant internal and external factors that may affect loan collectability;
. Be applied consistently but, when appropriate, be modified for new factors affecting collectability;
. Consider the particular risks inherent in different kinds of lending. Consider current collateral values (less costs to sell), where applicable;
. Require that analyses, estimates, reviews and other loan loss allowance methodology functions be performed by competent and well-trained personnel;
. Be based on current and reliable data;
. Be well documented, in writing, with clear explanations of the supporting analyses and rationale; and
. Include a systematic and logical method to consolidate the loss estimates and ensure the loan loss allowance balance is recorded in accordance with US GAAP.

Bonds purchased under agreements to resell and sold under agreements to repurchase . . . . . . . . . . . .

In compliance with a directive of the MOF, these transactions entered into by a bank are treated as outright sales and purchases.

Recorded as financing transactions (the financing method).

Minority interest in consolidated subsidiary companies . . . . . . . . . . . .

Under ROC GAAP, the minority interest in consolidated subsidiary companies can be presented either as part of liabilities, between liabilities and stockholders’ equity or in stockholders’ equity in the consolidated financial statements.

Under US GAAP, the minority interest in consolidated subsidiary companies is presented as a separate item between liabilities and stockholders’ equity in the consolidated financial statements.

191

Subject Comprehensive income . . . . . Transfers of financial assets in which the transferor surrenders control over the transferred assets . . . . . . . Disclosure of new accounting pronouncements. . . . . . . .	ROC GAAP There is no requirement to present comprehensive income. ROC GAAP has no specific standards that provide criteria to a seller of financial assets in which the transferor surrenders control over the transferred assets. Under ROC GAAP, disclosure of recently issued accounting standards not yet effective as of the balance sheet date is required.	US GAAP
		Effective for fiscal year beginning after December 31, 1997, comprehensive income and its components (revenues, expenses, gains and losses) must be presented in a full set of financial statements under US GAAP. Comprehensive income includes all changes in shareholders’ equity during a period, except changes resulting from investments by or distributions to owners, including certain items not included in the current results of operations. Under US SFAS No. 140, a transfer of financial assets in which the transferor surrenders control over the transferred assets is accounted for as a sale so long as consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control over transferred assets if and only if all the following conditions are met: (a) the transferred assets have been isolated from the transferor; (b) each transferee has the right to pledge or exchange the assets it received, and there is no condition that both constrains the transferee from exercising its right to pledge or exchange and provides more than a trivial benefit to the transferor; and (c) the transferor does not maintain effective control over the transferred assets through either (1) an agreement that both entities and obligations the transferor to repurchase or redeem before their maturity or (2) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call. US GAAP also requires that servicing assets and other retained interests in the transferred assets be measured by allocating the previous carrying amount between the assets sold, if any, and retained interests, if any, based on their relative fair values at the date of the transfer. US GAAP requires disclosure of the impact that recently issued accounting standards will have on the financial statements when adopted in the future.

The information set forth above does not in any way attempt to quantify the effects of the aforementioned differences between ROC GAAP and US GAAP and the impact such differences would have on net income or shareholders’ equity under US GAAP.

192

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of E.Sun Financial Holding Company, Ltd. Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Consolidated Balance Sheet as of December 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statement of Income for the Period from January 28, 2002 (Date of Establishment) to December 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6 Consolidated Statements of Changes in Stockholders’ Equity for the Period from January 28, 2002 (Date of Establishment) to December 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 Consolidated Statement of Cash Flows for the Period from January 28, 2002 (Date of Establishment) to December 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11 Unaudited Pro Forma Balance Sheets and Statements of Income Data of E.Sun Financial Holding Company, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-53 Unaudited Pro Forma Balance Sheet as of December 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . F-54 Unaudited Pro Forma Statement of Income for the Year Ended December 31, 2001. . . . . . . . . . . . F-55 Unaudited Pro Forma Balance Sheet as of December 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . F-56 Unaudited Pro Forma Statement of Income for the Year Ended December 31, 2002. . . . . . . . . . . . F-57 Notes to Unaudited Pro Forma Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-58 Unconsolidated Financial Statements of E.Sun Commercial Bank, Ltd. Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-59 Unconsolidated Balance Sheets as of December 31, 2000, 2001 and 2002. . . . . . . . . . . . . . . . . . . F-60 Unconsolidated Statements of Income for the Years Ended December 31, 2000, 2001 and 2002 . . . F-62 Unconsolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-63 Unconsolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65 Notes to Unconsolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67 Unconsolidated Financial Statements of E.Sun Bills Finance Corporation Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-98 Unconsolidated Balance Sheets as of December 31, 2000, 2001 and 2002. . . . . . . . . . . . . . . . . . . F-99 Unconsolidated Statements of Income for the Years Ended December 31, 2000, 2001 and 2002 . . F-101 Unconsolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-102 Unconsolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-104 Notes to Unconsolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-106 Unaudited Consolidated Interim Financial Statements of E.Sun Financial Holding Company, Ltd. Independent Auditors’ Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-123 Unaudited Consolidated Balance Sheets as of March 31, 2002 and 2003. . . . . . . . . . . . . . . . . . . F-124 Unaudited Consolidated Statements of Income for the Period from January 28, 2002 (Date of Establishment) to March 31, 2002 and for the Period from January 1, 2003 to March 31, 2003 . F-126 Unaudited Consolidated Statements of Cash Flows for the Period from January 28, 2002 (Date of Establishment) to March 31, 2002 and for the Period from January 1, 2003 to March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-127 Notes to Unaudited Consolidated Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . F-129 Unaudited Unconsolidated Interim Financial Statements of E.Sun Commercial Bank, Ltd. Independent Auditors’ Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-176 Unaudited Unconsolidated Balance Sheets as of March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . F-177 Unaudited Unconsolidated Statements of Income for the Three Months Ended March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-179 Unaudited Unconsolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-181 Notes to Unaudited Unconsolidated Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-183

F-1

English Translation of a Report Originally Issued in Chinese

INDEPENDENT AUDITORS’ REPORT

January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003

The Board of Directors and Stockholders

E.Sun Financial Holding Co., Ltd.

We have audited the accompanying consolidated balance sheet of E.Sun Financial Holding Co., Ltd. and its subsidiaries (the ‘‘Company’’) as of December 31, 2002, and the related statements of income, changes in stockholders’ equity and cash flows for the period from January 28, 2002 (date of establishment) to December 31, 2002, all expressed in New Taiwan Dollars. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements of the Company’s subsidiary, E.Sun Securities Corp. (‘‘E.Sun Securities’’), had been audited by other auditors, whose report was furnished to us, and our opinion expressed herein, insofar as it relates to the accounts of E.Sun Securities which are included in these consolidated financial statements, is based solely on the reports of such other auditors. The total assets of E.Sun Securities amounted to NT$8,278,655 thousand as of December 31, 2002, which represents 2.91% of the Company’s total consolidated assets. The operating income of E.Sun Securities for the year ended December 31, 2002 amounted to NT$218,191 thousand which represents 1.39% of the Company’s total consolidated operating income.

We conducted our audits in accordance with the Regulations for Auditing and Certification of Financial Statements of Financial Institutions by Certified Public Accountants, Rules Governing Auditing and Certification of Financial Statements 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 consolidated financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion based on our audit and the report of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated financial position of E.Sun Financial Holding Co., Ltd. and its subsidiaries as of December 31, 2002, and the results of its consolidated operations and its cash flows for the period from January 28, 2002 to December 31, 2002, in conformity with Criteria Governing the Preparation of Financial Reports by Financial Holding Companies, Criteria Governing the Preparation of Financial Reports by Securities Issuers, Criteria Governing the Preparation of Financial Reports by Securities Firms and accounting principles generally accepted in the Republic of China.

F-2

We have also reviewed the translations of New Taiwan dollar financial statements as of December 31, 2002 into U.S. dollars, which have been included solely for the reader’s convenience, on the basis stated in Note 2 to the financial statements and in our opinion, the U.S. dollars amounts have been properly translated on such basis. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

T N Soong & Co An Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002

(Formerly a Member Firm of Andersen Worldwide, SC) Taipei, Taiwan The Republic of China

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.

F-3

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2002

(In Thousands of Dollars, Except Par Value)

ASSETS CASH (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DUE FROM BANKS (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . DUE FROM CENTRAL BANK OF CHINA (Note 6). . . . . . . . . . . . . SECURITIES PURCHASED (Notes 2, 7, 24 and 25). . . . . . . . . . . . . RECEIVABLES — NET (Notes 2 and 8). . . . . . . . . . . . . . . . . . . . . PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LOANS, BILLS AND DISCOUNTS — NET (Notes 2, 9 and 23) . . . . LONG-TERM INVESTMENTS — NET (Notes 2, 10 and 24). . . . . . . PROPERTIES (Notes 2 and 11) Cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER — NET (Notes 2, 12, 18 and 25) . . . . . . . . . . . . . . . . . . . . TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	New Taiwan Dollars $ 14,883,515 8,080,741 12,117,374 49,120,651 18,299,238 48,029 170,775,271 3,146,898 2,868,893 1,586,920 1,281,417 178,451 658,386 6,574,067 (1,552,898) 5,021,169 157,796 5,178,965 2,778,056 $284,428,738	U.S. Dollars (Note 2) $ 428,920 232,874 349,204 1,415,581 527,355 1,384 4,921,477 90,689 82,677 45,732 36,928 5,143 18,974 189,454 (44,752) 144,702 4,548 149,250 80,059 $8,196,793

F-4

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Balance Sheet — Continued December 31, 2002

(In Thousands of Dollars, Except Par Value)

LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Due to banks (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase (Notes 2, 23 and 25) . . . . Payables (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and remittances (Notes 15 and 23) . . . . . . . . . . . . . . . . . . . Bonds (Notes 16 and 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debts (Note 17) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ EQUITY Capital stock — NT$10 par value Authorized 5,000,000 thousand shares and issued 2,470,000 thousand shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss on long-term equity investments . . . . . . . . . . . . . . . . Treasury stock — 349,849 thousand shares. . . . . . . . . . . . . . . . . . . . Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONTINGENCIES AND COMMITMENTS (Notes 2 and 25) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . .	New Taiwan Dollars $ 17,540,380 4,976,714 5,203,962 34,238 222,335,038 9,840,000 1,480,000 897,493 262,307,825 24,700,000 4,839,667 (3,091,451) 2,906 (82,606) (4,247,603) 22,120,913 $284,428,738	U.S. Dollars (Note 2) $ 505,486 143,421 149,970 987 6,407,350 283,574 42,651 25,864 7,559,303 711,815 139,472 (89,091) 84 (2,381) (122,409) 637,490 $8,196,793

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

(With T N Soong & Co audit report dated January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003)

F-5

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Statement of Income

For the Period from January 28, 2002 (Date of Establishment) to December 31, 2002 (Note 1) (In Thousands of Dollars, Except Loss Per Share)

		New Taiwan	New Taiwan			U.S. Dollars	U.S. Dollars
			Dollars				(Note 2)
OPERATING INCOME
Interest (Notes 2 and 23) . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .	$12,368,375					$356,437
Service fees (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		1,118,051				32,220
Gain on sales of securities — net (Note 2) . . . . . . . . . . . .	. . . . . . . .		1,915,947				55,215
Income on long-term equity investments (Notes 2 and 10) .	. . . . . . . .		82,555				2,379
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		166,871				4,809
Total Operating Income . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		15,651,799				451,060
OPERATING COSTS
Interest (Notes 2 and 23) . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		5,719,528				164,828
Service charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		320,749				9,243
Provisions (Notes 2, 8 and 9) . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		9,614,558				277,077
Operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		3,974,160				114,529
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		9,373				270
Total Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		19,638,368				565,947
LOSS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		(3,986,569)				(114,887)
NONOPERATING INCOME . . . . . . . . . . . . . . . . . . . . .	. . . . . . . .		42,238				1,217
NONOPERATING EXPENSES. . . . . . . . . . . . . . . . . . . .	. . . . . . . .		100,648				2,900
LOSS BEFORE INCOME TAX . . . . . . . . . . . . . . . . . . .	. . . . . . . .		(4,044,979)				(116,570)
INCOME TAX BENEFIT (Notes 2 and 18) . . . . . . . . . . .	. . . . . . . .		(1,082,761)				(31,203)
CONSOLIDATED NET LOSS FOR THE YEAR
ENDED DECEMBER 31, 2002 . . . . . . . . . . . . . . . . . .	. . . . . . . .		(2,962,218)				(85,367)
NET INCOME FROM SUBSIDIARIES FOR THE PERIOD
FROM JANUARY 1, 2002 TO JANUARY 27, 2002 . . .	. . . . . . . .		(129,233)				(3,724)
CONSOLIDATED NET LOSS FOR THE PERIOD
FROM JANUARY 28, 2002 TO DECEMBER 31, 2002 .	. . . . . . . .	($3,091,451)					($89,091)
Pre Tax		After Tax Pre Tax					After Tax
				U.S.		Dollars
	New Taiwan	Dollars			(Note 2)
LOSS PER SHARE (Note 21)
Basic loss per share. . . . . . . . . . . . . . . . . . . . . . . . .	($1.46)	($1.46) ($0.04)					($0.04)

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

(With T N Soong & Co audit report dated January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003)

F-6

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders’ Equity For the Period from January 28, 2002 (Date of Establishment) to December 31, 2002 (Note 1) (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 28, 2002 (UPON ESTABLISHMENT OF THE COMPANY) (Note 1) . . . . . Reclassification of shares held by subsidiary to treasury stock. . . . . . . . . Capital surplus transferred to capital stock –8% . . . . . . Appropriations for bonus to directors, supervisors and employees of subsidiaries before the establishment of the Company . . . . . . . . . Consolidated net loss from January 28, 2002 to December 31, 2002. . . . . . . Translation adjustment resulting from long-term equity investment accounted for by the equity method. . . . . . . . Unrealized loss on long-term equity investments resulting from the equity-accounted investee. . . . . . . . . . . . . . . BALANCE, DECEMBER 31, 2002 . . . . . . . . . . . . . . . . .	Capital	Stock Amount $22,900,000 — 1,800,000 — — — — $24,700,000	Capital Surplus (Notes 2 and 19) $6,796,125 — (1,800,000) (156,458) — — — $4,839,667	Deficit (Note 19) $ — — — — (3,091,451) — — ($3,091,451)	Cumulative Translation Adjustment (Note 2) $ — — — — — 2,906 — $2,906	Unrealized Loss on Long-Term Equity Investments (Note 2) $ — — — — — — (82,606) ($82,606)	Treasury Stock (Notes 2 and 20) ($ 498,017) (3,749,586) — — — — — ($4,247,603)	Total Stockholders’ Equity
	Shares (Thousands) 2,290,000 — 180,000 — — — — 2,470,000
								$29,198,108 (3,749,586) — (156,458) (3,091,451) 2,906 (82,606)
								$22,120,913

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

(With T N Soong & Co audit report dated January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003)

F-7

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders’ Equity For the Period from January 28, 2002 (Date of Establishment) to December 31, 2002 (Note 1) (In Thousands of U.S. Dollars — Note 2)

BALANCE, JANUARY 28, 2002 (UPON ESTABLISHMENT OF THE COMPANY) (Note 1) . . . . . Reclassification of shares held by subsidiary to treasury stock. . . . . . . . . Capital surplus transferred to capital stock –8% . . . . . . Appropriations for bonus to directors, supervisors and employees of subsidiaries before the establishment of the Company . . . . . . . . . Consolidated net loss from January 28, 2002 to December 31, 2002. . . . . . . Translation adjustment resulting from long-term equity investment accounted for by the equity method . . . Unrealized loss on long-term equity investments resulting from the equity-accounted investee. . . . . . . . . . . . . . . BALANCE, DECEMBER 31, 2002 . . . . . . . . . . . . . . . . .	Capital	Stock Amount $659,942 — 51,873 — — — — $711,815	Capital Surplus (Notes 2 and 19) $195,854 — (51,873) (4,509) — — — $139,472	Deficit (Note 19) $ — — — — (89,091) — — ($89,091)	Cumulative Translation Adjustment (Note 2) $— — — — — 84 — $84	Unrealized Loss on Long-Term Equity Investments (Note 2) $ — — — — — — (2,381) ($2,381)	Treasury Stock (Notes 2 and 20) ($ 14,352) (108,057) — — — — — ($122,409)	Total Stockholders’ Equity
	Shares (Thousands) 2,290,000 — 180,000 — — — — 2,470,000
								$841,444 (108,057) — (4,509) (89,091) 84 (2,381)
								$637,490

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

(With T N Soong & Co audit report dated January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003)

F-8

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Statement of Cash Flows

For the Period from January 28, 2002 (Date of Establishment) to December 31, 2002 (In Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income from subsidiaries for the period from January 1, 2002 to January 27, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net loss to net cash provided by operating activities: Reversal of allowance for losses on securities purchased . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on market value decline of foreclosed collaterals . . . . . . . . . . . Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sales of long-term investment . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in net income of investee companies, net of cash dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on sale of properties and foreclosed collaterals . . . . . . . . . . . . Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in securities purchased — held for trading purposes . . . . . . Increase in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in bonds sold under agreements to repurchase. . . . . . . . . . . Increase in accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by Operating Activities . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM INVESTING ACTIVITIES Increase in securities purchased-held for investing purposes . . . . . . . . Decrease in due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in due from Central Bank of China . . . . . . . . . . . . . . . . . . . Proceeds from sales of: Long-term equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of: Long-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in: Loans, bills and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Cash Used in Investing Activities . . . . . . . . . . . . . . . . . . . . . . .	New Taiwan Dollars ($3,091,451) 129,233 (26,508) 9,499,032 75,500 322,587 (5,526) 910 (67,211) 4,649 (1,337,028) 1,204,903 (6,420,447) 14,257 (968,415) 5,359 2,094,889 198 1,434,931 (7,276,022) 5,106,045 (4,048,604) 689,952 528 363,194 (2,575,730) (555,367) (450,948) (55,552) (8,802,504)	U.S. Dollars (Note 2) ($ 89,091) 3,724 (764) 273,747 2,176 9,296 (159) 26 (1,937) 134 (38,531) 34,724 (185,027) 411 (27,908) 154 60,371 6 41,352 (209,684) 147,148 (116,674) 19,883 15 10,467 (74,228) (16,005) (12,995) (1,601) (253,674)

F-9

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Consolidated Statement of Cash Flows — Continued For the Period from January 28, 2002 (Date of Establishment) to December 31, 2002 (In Thousands of Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increase in deposits and remittances . . . . . . . . . . . . . . . . . . . . . . . . Increase in due to banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of bonus to directors, supervisors and employees . . . . . . . . . Decrease in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in long-term debts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by Financing Activities . . . . . . . . . . . . . . . . . . . . EFFECTS OF EXCHANGE RATE CHANGES . . . . . . . . . . . . . . . . . NET INCREASE IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CASH, BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUPPLEMENTARY INFORMATION Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	New Taiwan Dollars $ 760,439 7,675,156 5,000,000 (156,457) (179,582) 1,480,000 14,579,556 (1,050) 7,210,933 7,672,582 $14,883,515 $ 6,565,520 $ 430,151	U.S. Dollars (Note 2) $ 21,915 221,186 144,092 (4,509) (5,175) 42,651 420,160 (30) 207,808 221,112 $428,920 $189,208 $ 12,396

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

(With T N Soong & Co audit report dated January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003)

F-10

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. Organization and Operations

E.Sun Financial Holding Company, Ltd. (the ‘‘Company’’) was established by E.Sun Commercial Bank Ltd. (‘‘E.Sun Bank’’), E.Sun Bills Finance Corporation (E.Sun Bills) and E.Sun Securities Corp. (‘‘E.Sun Securities’’) through a share swap on January 28, 2002 based on the Financial Holding Companies Law and related regulations in the Republic of China (the ‘‘ROC’’). On January 28, 2002, the Company issued 2,290,000 thousand shares to acquire all the issued shares of E.Sun Bank, E.Sun Bills and E.Sun Securities by means of the share swap. The swap ratio was 1 share of the Company stock for 1.0 share of E.Sun Bank, 1.10 shares of E.Sun Bills and 1.25 shares of E.Sun Securities. After the swap, E.Sun Bank, E.Sun Bills and E.Sun Securities became 100% subsidiaries of the Company.

The Company engages in investing in and managing the business of, its related subsidiary financial institutions.

The Company’s shares of stock have been traded on the Taiwan Stock Exchange (TSE) since January 28, 2002.

E.Sun Bank engages in commercial and savings banking activities permitted under the Banking Laws and regulations of Republic of China. The operations of the Bank’s Trust Department consist of planning, managing and operating a trust business. These operations are regulated under the Banking Law and Trust Law of the ROC. As of December 31, 2002, the Bank had a domestic banking department and international banking department, an offshore banking unit (OBU), 2 overseas branches (Los Angeles and Hong Kong) and 48 domestic branches.

The operations of E.Sun Bills are: (a) brokerage and dealing in commercial paper, bank acceptances, financial institution and government bonds; (b) underwriting and acting as registrar of commercial paper and financial institution bonds; (c) providing guarantees or endorsements on commercial paper and bank acceptances; (d) brokerage of call loans between financial institutions; (e) consultations on financial matters; and (f) other businesses approved by the Ministry of Finance. As of December 31, 2002, it had branches in Kaohsiung, Taichung, Taoyuan and Panchiau.

E.Sun Securities engages in underwriting, dealing and brokerage of securities.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies, which conform to accounting principles generally accepted in the Republic of China and with Criteria Governing the Preparation of Financial Reports by Financial Holding Companies, Securities Issuers and Securities Firms, are summarized below.

Consolidation

The consolidated financial statements include the accounts of the Company, E.Sun Bank, E.Sun Bills and E.Sun Securities. All significant inter-company transactions and balances have been eliminated for consolidation purpose.

The operating income and total assets of the Company’s other investees which the ownership is over 50% — E.Sun Venture Capital Co., Ltd., E.Sun Financial & Leasing Co., E.Sun Insurance Agent Co., and E.Sun Securities Investment Trust Corp. are individually less than 10%, and are in aggregate less than 30%, of those of the Company. Accordingly, their accounts were not included in these consolidated financial statements.

F-11

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Translations into U.S. dollar amounts

The Company maintains its accounts and expresses its financial statements in New Taiwan dollars. The translation of the New Taiwan dollars as of and for the year ended December 31, 2002 into U.S. dollars is solely for the convenience of the reader, using the noon buying rate of the U.S. Federal Reserve Bank of New York as of December 31, 2002, which was NT$34.70=US$1.00 at that date. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

Securities purchased

Securities purchased are carried at cost less any allowance for decline in value.

For E.Sun Bank and E.Sun Securities, costs of securities sold are determined by the following methods: Stock, mutual fund beneficiary certificates and government bonds — moving average; and others — specific identification.

For E.Sun Bills, short-term negotiable instruments are stated at cost (which approximates market price). Costs of instruments sold are determined by the moving-average method.

For E.Sun Bank and E.Sun Bills, under a directive of the Ministry of Finance, sales of bonds and other short-term securities under agreements to repurchase are treated as outright sales, and gains or losses on such transactions are recognized immediately, while purchases of bonds and other short-term securities under agreements to resell are recorded as assets at their acquisition cost, and gains or losses are recognized upon the actual execution of the ‘resell clause’ of the agreements. However, for E.Sun Securities, bonds purchased under agreements to resell are carried as assets at their acquisition costs while the selling prices on bonds sold under agreements to repurchase are recognized as a liability. The difference between the selling or purchase price and the contracted repurchase or resale price is accounted for as interest expense or interest income, respectively.

Overdue loans

Loans and other credits (including accrued interest) that are outstanding for at least six months are classified as overdue loans in accordance with the guideline issued by the Ministry of Finance.

Allowances for possible losses and reserve for losses on guarantees

The Company makes provision for bad debts and losses on guarantees based on the evaluation of loans, overdue loans, bills, discounts, receivables, guarantees and acceptances based on their specific risks or general risks.

Debts and guarantees with specific risks are evaluated internally for their collaterals, collectibility and customers’ overall credit. The Company makes full provisions for credits deemed uncollectible and makes provisions of at least 50% of credits with high uncollectibility in accordance with guidelines issued by the Ministry of Finance.

Based on guidelines issued by the Ministry of Finance, credits deemed uncollectible may be written off pursuant to a resolution issued by the Board of Directors.

F-12

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Long-term investments

Long-term bond investments are stated at cost less amortized premium.

Under a directive of the Accounting Research and Development Foundation of the R.O.C., a financial holding company should treat the investees’ net worth as paid-in capital if the holding company is incorporated through stock conversion. The stock issued by the holding company is accounted for as capital stock, and the amount in excess of the par value of the issued stock is accounted for as capital surplus.

Investments in shares of stock of companies in which the Company exercises significant influence on their operating and financial policy decisions are accounted for by the equity method. Under the equity method, the investments are initially carried at cost and subsequently adjusted for the Company’s proportionate share in the net income or loss of the investee companies. The proportionate share in the net income or loss is recognized as current income or loss, and any cash dividends received are reflected as a reduction in the carrying values of the investments. A capital increase of investee companies that results in the increase in the Company’s equity in its net assets is credited to capital surplus, and any decrease is charged to such capital surplus to the extent of the available balance, with the difference charged to unappropriated retained earnings. The Company recognizes the investees’ cumulative translation adjustments and unrealized losses on long-term equity investments proportionately.

Other investments in stocks with no quoted market price are accounted for at cost. The carrying amount of the investment is reduced to reflect an other than temporary decline in the value of the investments, with the related losses charged to current income. Investments in stock with a quoted market price is stated at the lower of cost or market. The reduction of an investment to reflect a lower market value and its write-up due to the subsequent recovery in market value are charged or credited to stockholders’ equity. Cash dividends received are recorded as investment income. Foreign-currency investments are recorded in New Taiwan dollars at the rate of exchange in effect when the transactions occur. At year-end, the balance of these investments are restated on the basis of the year-end exchange rate. If the restated amounts are lower than cost, the differences are recognized as translation adjustment under stockholders’ equity. Otherwise, the cost basis is maintained.

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

The cost of long-term equity investments sold is determined by the weighted-average method.

Properties

Properties are carried at cost less accumulated depreciation. The cost of betterments and renewals that extend the useful life of an item of property and equipment is also capitalized. The cost of repairs and maintenance is charged to expense as incurred.

Depreciation is calculated by the straight-line method over service lives estimated as follows: buildings, 10 to 55 years; computers, 3 to 8 years; transportation equipment, 5 to 8 years; and miscellaneous equipment, 5 to 10 years. If an asset is still in use beyond its estimated service life, its residual value is written off over its newly estimated service life.

The cost and accumulated depreciation are removed from the accounts when an item of property is disposed of or retired, and any gain or loss is credited or charged to income.

F-13

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Foreclosed collaterals

Foreclosed collaterals (part of other assets) are recorded at the lower of cost or net realizable value on the balance sheet dates.

Reserves for losses on sale of government bonds

Under the regulations of the Securities and Futures Commission of the ROC, reserves for losses on sale of government bonds (part of other liabilities) are computed at 10% of net gain on sale of government bonds until the balance of the reserve reaches $200,000. This reserve should be used only to offset actual losses on sale of the government bonds. Additional reserves for the year are reported as part of provisions expense.

Treasury stock

Pursuant to a directive issued by the Securities and Futures Commission (SFC), the financial institution, which repurchased its own capital stock pursuant to the Securities and Exchange Law, and become a wholly owned subsidiary of a financial holding company resulting in its treasury stocks converted to stocks of the financial holding company, presents the shares in the financial holding company as treasury stock. The financial holding company also presents the shares it issued in exchange for those capital stock as treasury stock. In cases that shares of the financial institutions with the same financial holding company were held among each other prior to the share swap, these shares, after the swap, are stated as equity investments. However, a financial holding company should start stating these shares as treasury stocks in 2002.

Pension costs

E.Sun Bank and E.Sun Bills recognize pension costs on the basis of actuarial calculations, and unrecognized net transition assets are amortized over 29 and 27 years, respectively.

E.Sun Securities maintains a pension fund, to which it makes monthly contributions equal to 4% of salaries and which is administered by the workers fund administration committee and deposited in its name in the Central Trust of China.

Recognition of interest revenue and service fees

Interest revenue is recorded on an accrual basis. Under regulations of the Ministry of Finance (MOF), no interest revenue is recognized on loans and other credits extended by the Company that are classified as overdue loans. The interest revenue on those loans is recognized upon collection on these loans and credits.

In addition, the unpaid interest on rescheduled loans should be recorded as deferred revenue, and the interest paid is recognized as interest revenue.

Service fees are recorded when the earnings process is completed upon rendering of such services.

Income tax

The provision for income tax is based on inter-period tax allocation. The tax effects of deductible temporary differences, unused tax credits and operating loss carryforwards are recognized as deferred income tax assets, and those of taxable temporary differences are recognized as deferred tax liabilities. A valuation allowance is provided for deferred tax assets that are not certain to be realized.

F-14

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Income tax on interest derived from short-term negotiable instruments, which is levied separately is accrued as part of income tax expense when such earnings are accrued.

Any adjustment of income taxes of prior years are added to or deducted from the current year’s tax provision.

Tax credits resulting from technology or equipment purchases, expenditures for research and development, employee training and stock investments are recognized in current period.

Income taxes (10%) on undistributed earnings are recorded as expenses in the year when the stockholders resolve to retain the earnings.

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. The loss is disclosed in the financial statements when the loss might have already occurred and the amount of loss cannot be reasonably estimated.

Foreign currency transactions

Foreign currency transactions (except forward contracts) are included in the financial statements at their equivalent New Taiwan dollars based on the following rates: Assets and liabilities — current exchange rates; income and expenses — rates prevailing on the date of each transaction. Exchange gains or losses are credited or charged to income.

Forward contracts

For forward contracts conducted for trading purposes, assets and liabilities are recorded at the contracted forward rate. Gains or losses resulting from the difference between the spot rate and the contracted forward rate on the settlement date are credited or charged to income. For contracts outstanding as of the balance sheet date, the gains or losses resulting from the difference between the contracted forward rates and the forward rates available for the remaining periods of the contracts are credited or charged to income. Receivables arising from forward exchange contracts are offset against the related payables as of balance sheet dates.

Foreign currency swap contracts

Foreign-currency spot-position assets or liabilities arising from foreign currency swap contracts, which are mainly to manage the Bank’s currency positions, are recorded at spot rates when the transactions occur, while the corresponding forward-position assets or liabilities are recorded at the contracted forward rates; with receivables netted against the related payables.

The related discount or premium is amortised by the straight-line basis over the contract period.

Asset swaps

The Company enters into agreements to swap the fixed interest on its investments in certain bonds and the premium received on the redemption of bonds for the floating interest rates. There is no exchange of notional principals (equal to the aggregate face values of the bonds). For swaps entered into for hedging purposes, the net interest upon each settlement is recorded as an adjustment to interest revenue or expense associated with the items being hedged.

F-15

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Cross-currency swap

Cross currency swap contracts, which are intended for hedging purpose, are recorded at their forward rates on the contract dates. The interest received or paid under the contract is recognized as interest income or expense.

3. Eliminations of Significant Transactions between Parent Company and Subsidiaries

Name of Corporation E.Sun Financial Holding Co., Ltd. (E.Sun Financial Holding) . . . . E.Sun Bank . . . . . . . . . . E.Sun Bills. . . . . . . . . . . E.Sun Securities . . . . . . .	Elimination Account Cash Bonds Deposits and remittances Interest revenue Interest expense Interest payable Operating and administrative expenses Cash Pledged time deposits Securities purchased Long-term bond investments Interest receivable Interest revenue Interest expenses Cash and cash equivalents Pledged time deposits Interest receivable Guarantee deposits Bonds sold under agreements to repurchase Interest revenue Non-operating income	Amount $ 13,876 160,000 3,404,562 1,056 73,982 4,737 1,920 2,104,185 50,000 150,000 160,000 2,817 47,683 1,056 586,501 510,000 1,920 140,000 150,000 26,299 1,920	Counterparties of Transactions
			E.Sun Bank E.Sun Bills E.Sun Financial Holding, E.Sun Bills and E.Sun Securities E.Sun Bills E.Sun Bills and E.Sun Securities E.Sun Bills and E.Sun Securities E.Sun Securities E.Sun Bank E.Sun Bank E.Sun Securities E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bills E.Sun Bank E.Sun Bank

F-16

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

4. Cash

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$ 2,113,849 10,369,560 2,400,106
	$14,883,515

5. Due from Banks

Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$3,014,271 5,066,470
	$8,080,741

6. Due from Central Bank of China

Reserves for deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$ 9,742,971 2,374,403
	$12,117,374

As required by law, the reserves for deposits, are calculated by applying the prescribed rates to the average monthly balances of various types of deposit accounts held by E.Sun Bank. Of these amounts, $5,268,678 as of December 31, 2002, were restricted from use by E.Sun Bank.

F-17

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

7. Securities Purchased

Overseas securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stocks and beneficiary certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds and bank debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating securities — dealing department . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating securities — underwriting department . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for decline in value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$11,999,757 10,662,495 7,840,917 4,640,022 1,571,669 7,011,115 2,188,385 3,246,473 55,278
	49,216,111 95,460
	$49,120,651

Receivables — Net

Credit cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$16,311,563 809,160 266,736 340,429 926,714
	18,654,602 355,364
	$18,299,238

9. Loans, Bills and Discounts — Net

Loans: Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medium-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bills and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$ 48,612,524 59,607,025 60,830,353 2,137,685 1,128,439
	172,316,026 1,540,755
	$170,775,271

F-18

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

As of December 31, 2002, the loan and credit balances for which accrual of interest revenues was discontinued amounted to $2,137,685. The Company’s unrecognized interest revenues on these loans and credits amounted to $315,806 for the year ended December 31, 2002.

For the years ended December 31, 2002, the Company carried out legal procedures required before the Company can write off credits.

The details of and changes in the allowance for credit losses on loans, discounts and bills purchased are summarized below:

For the Year Ended December 31, 2002	For the Year Ended December 31, 2002	For the Year Ended December 31, 2002
Specific Risk $1,075,932 7,820,012 (8,949,253) 157,902 $ 104,593	General Risk $ 438,066 998,096 — — $1,436,162	Total
		$1,513,998 8,818,108 (8,949,253) 157,902
		$1,540,755

Since the third quarter of 2000, the economic and financial environment has been beset by such factors as unstable domestic and foreign conditions. Thus, the country’s economic growth has decelerated, investment is reduced, unemployment has risen, the stock market is bearish, and the New Taiwan dollar has devaluated. Certain business enterprises, including conglomerates and listed companies, failed to meet their obligations when these obligations became due. To stabilize the situation, the government has taken various economy-boosting measures. Thus, the Company’s financial statements for the year ended December 31, 2002 included provisions for possible guarantee and other based on information available to the Company, including defaults to the extent they can be determined or estimated. These estimated provisions do not include any adjustments that might be required when related contingent liabilities become probable or determinable in the future.

10. Long-Term Investments

Long-term equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bond investments — corporate bonds and bank debentures . . . . . . . . .	December 31, 2002
	$2,046,925 1,099,973
	$3,146,898

F-19

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The detail of long-term equity investment are summarized below:

Equity method: E.Sun Venture Capital Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . E.Sun Finance & Leasing Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . E.Sun Securities Investment Trust Corp.. . . . . . . . . . . . . . . . . . . . . E.Sun Insurance Agent Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . Cost method: With quoted market prices United Microelectronic Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . With no quoted market prices Fu Bon Securities Finance Co. . . . . . . . . . . . . . . . . . . . . . . . . . Taiwan Asset Management Corporation . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid investment Lian Ding Venture Capital Co., Ltd. . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . . . . . .	December	31, 2002
	Amount $1,002,206 151,769 239,675 32,744 200,451 155,857 100,000 210,228 60,000 2,152,930 106,005 $2,046,925	% of Ownership
		100.0 99.0 70.0 79.0 — 2.6 0.6 — 6.0

The carrying value of the investments accounted for by the equity method and the related income are determined on the basis of audited financial statements of the investees, except for E. Sun Insurance Agent Co., Ltd. Management believes that the effect of adjustments, if any, arising from the audit of the accounts of E. Sun Insurance Agent Co., Ltd. are not significant.

11. Accumulated Depreciation

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$ 303,760
756,292
107,861
384,985

$1,552,898

F-20

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

12. Other Assets — Net

Collaterals assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refundable deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred charges — net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$ 181,364
804,417
296,345
89,981
1,357,095
48,854

$2,778,056

13. Due to Banks

Call loans from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$16,360,831 1,084,978 94,571
	$17,540,380

14. Payables

Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$2,400,106
1,151,436
350,661
574,353
727,406

$5,203,962

F-21

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

15. Deposits and Remittances

Deposits:
Savings — time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings — demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$ 76,890,277
70,441,337
47,282,144
23,807,532
1,254,600
2,608,516
50,632

$222,335,038

16. Bonds

Bonds issued on August 6, 2001 and bear annual interest at 3.76%, payable annually.
Principal will be repaid on maturity date (5 years after the issue date). . . . . . . .
Subordinated bonds issued on August 6, 2001 and bear annual interest at 4.2%,
payable annually. Principal will be repaid in five installments starting on the third
year from the issue date and will be fully repaid at the end of the seventh year.
Four types of subordinated bonds were issued on June 13, 2002 and bear annual
interest at 5%–8.6% minus the 90 days interest rate of commercial paper (below)
and is paid quarterly. The principal will be fully repaid on the maturity date
(5 years after the issue date).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four types of subordinated bonds were issued on August 16, 2002 and bear annual
interest at 5.94% minus a floating interest rate (below) and is paid semi-annually.
The principal will be repaid on the maturity date (5 years after the issue date). .
Five types of bonds were issued on August 23, 2002 and bear annual interest at 6%
minus a floating interest rate (below) and is paid semiannually. The principal will
be repaid on the maturity date (5.5 years after the issue date) . . . . . . . . . . . . .

December 31,
2002

$3,000,000
1,840,000
1,700,000
1,300,000
2,000,000

$9,840,000

The abovementioned 90 days interest rate of commercial paper and floating interest rate were based on the average quoted interest rate of Hong Kong’s Moneyline Telerate.

17. Long-Term Debts

The term of the debts, interest rates range from 2.219%–2.872%, is three years through by December 2005. Of these debts, $510,000 is repayable monthly in equal installments since the borrowing date. The remaining balance will be repaid as follows: 30% after one year, 30% after two years, and 40% on maturity. The Company has pledged 494,000 thousand shares of E.Sun Bank for the long-term debts.

F-22

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

18. Income Tax

a. Income tax benefit

Income tax expense — current before tax credits. . . . . . . . . . . . . . . . . . . .
Net change in deferred income tax:
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for possible losses on loans and receivables . . . . . . . . . . . . . .
Unrealized foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for losses on guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of prior year’s tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax on unappropriated earnings (10%) . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Period
Ended
December 31,
2002
$ 170,903
(10,139)
(1,305,242)
(33,631)
(1,986)
11,382
(5,468)
8,055
4,288
79,077
($1,082,761)

b. Deferred income tax assets (shown as part of ‘‘other assets’’):

Deferred income tax assets (liabilities)
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for possible losses on loans and receivables . . . . . . . . . . . . . .
Provision for losses on guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
Valuation allowances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002
$ 10,139
1,336,938
35,948
42,461
(66,263)
9,448
1,368,671
11,576
$1,357,095

F-23

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

c. Imputed tax credit

Balance of stockholders’ imputed tax credit Actual tax credit ratio for distributing earnings generated in 2001 . . . . . . . . . . Estimated tax credit ratio for distributing earnings generated in 2002 . . . . . . . . . .	E.Sun Financial Holdings $66,742 8.73% —	E.Sun Bank $43,303 16.1% —	E.Sun Bills $14,986 6.6% 12.87%	E.Sun Securities
				$12,782 5.34% 37.07%

For E.Sun Bills and E.Sun Securities, such estimated ratio may change depending on the balance of the ICA on the dividend distribution date. The estimated income tax credit rate for earnings as of December 31, 2002 may differ from the actual rate applicable on the date of the actual distribution of the dividends. For E.Sun Financial Holding and E.Sun Bank, there was a deficit in 2002. Thus, imputed tax credit shall be allocated corresponding actual rate when earnings generated in the future are appropriated.

d. The unappropriated earnings generated before January 1, 1998 as of December 31, 2002 are as follows:

The earning generated before January 1, 1998 . . . . . . . . . . . . . . . . . .	E.Sun Financial Holdings $—	E.Sun Bank $260,568	E.Sun Bills $91,777	E.Sun Securities
				$—

e. For E.Sun Bank, income tax returns through 1998, as well as 2000, and for E.Sun Bills and E.Sun Securities, income tax returns through 2000, have been examined by the tax authorities.
f. For E.Sun Bank, in the assessment of 1994, 1995, 1997, 1998 and 2000 tax returns, the tax authorities denied the creditability of 10% withholding tax on interest income on bonds pertaining to periods in which those bonds, totaling $239,690 were held by other investors. In addition, the 1996, 1999 and 2001 income tax returns included a reduction of $80,785 in income tax obligations, and the tax authorities have not yet examined those returns. The Bank had accrued liabilities and written off any assets recognized related to the foregoing withholding taxes as part of income tax expense in 2001. In August 2002, the Supreme Administrative Court decided that the Taipei National Tax Administration find another disciplinary action to deal with the withholding tax issue. The Bank has not recognized any asset related to these amounts previously written-off or expensed, pending further decision of the tax authorities
g. For E.Sun Bills, the tax authorities challenged the Corporation’s income tax refund claim of $277,515 (covering the period 1995 to 2000). The claim pertains to the tax withheld on interest income on bonds purchased for the periods when other investors held those bonds. In light of this tax issue, the Corporation might face similar questioning by the tax authorities on the tax of $56,771 withheld in 2001. In view of the tax authorities’ challenge, the Corporation wrote off in 2001 the related income tax refunds receivable of 334,286, recognized as assets in its accounts. The Corporation tax withheld in 2002 similar to above was $25,960, which was already included in the income tax expense — current. However, on December 31, 2002, the Supreme

F-24

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Administrative Court later decided the 1996 refund case in favor of the Corporation. The tax authorities are reexamining this case currently and the Corporation has not recognized any asset related to these amounts previously written-off, pending further decision of the tax authorities.

h. The statutory tax rates for 2002 were 25% in the ROC.

19. Stockholders’ Equity

When the Company appropriates it earnings, amounts for a legal reserve should be appropriated from the annual net income less any accumulated deficit. A special reserve may then be appropriated. Any remainder should be appropriated as follow:

a. 96% as dividends
b. 1% as bonus to directors and supervisors
c. 3% as bonus to employees.

Under the Company’s Articles of Incorporation, the stockholders may decide not to declare any dividends or declare only a portion of distributable earnings as dividends.

Under the Company’s dividend policy, the issuance of stock dividends takes precedence over the payment of cash dividends to strengthen the Company’s financial structure. This policy is also intended to improve the Company’s capital adequacy ratio and keep it at a level higher than the ratio set under relevant regulations. However, when dividends are declared, cash dividends must at least be 10% of total dividends declared unless the resulting cash dividend per share falls below NT$0.10.

Under the Company Law, the Company’s capital surplus arising from the issuance of shares in excess of par value and through donation can be appropriated as a transfer to common stock or to offset a deficit with the approval of the stockholders. The timing and amount of capital surplus arising from issuance of shares in excess of par value transferred to common stock are subject to restrictions by the SFC.

The component of any capital surplus arising from long-term equity investments accounted for by the equity method cannot not be distributed for any purpose.

Under the Financial Holding Company Law and related directives issued by the SFC, the distribution of the ex-conversion unappropriated earnings that are generated by the financial institutions (the subsidiaries) and become part of capital surplus of the financial holding company through stock conversion, is exempted from the appropriation restriction of the Securities and Exchange Law. These unappropriated earnings should be netted from the appropriation of legal reserves or special reserves.

The subsidiaries’ unappropriated retained earnings before the stock conversion amounted to $2,919,727 which was already stated as the Company’s capital surplus as of the Company’s establishment date. In 2002, the stockholders resolved to increase capital stock by $1,800,000 through the issuance of stock dividends from the capital surplus.

F-25

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

As of December 31, 2002, the capital surplus came from the issuance of shares in excess of par value. Capital surplus sources and uses were as follows:

Sources
From subsidiaries
Capital surplus (mainly paid-in capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on long-term equity investment. . . . . . . . . . . . . . . . . . . . . . .
Total capital stock of subsidiaries in excess of the Company’s issuance . . . . . . .
Balance on January 28, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uses
Bonus to directors, supervisors and employees of subsidiaries . . . . . . . . . . . . . .
Issuance of the Company’s stock dividends in 2002. . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 413,733
2,776,834
109,230
2,919,727
(23,399)
6,196,125
600,000
6,796,125
(156,458)
(1,800,000)
$4,839,667

Under the Company Law, the appropriation for legal reserves is made until the reserve equals the aggregate par value of the Company’s outstanding capital stock. This reserve is used only to offset a deficit, or, when its balance reaches 50% of the aggregate par value of the Company’s outstanding capital stock, up to 50% of the reserve can be distributed as stock dividends.

Under a SFC directive, a special reserve is appropriated from the balance of the retained earnings at an amount that is equal to the total debit balance of any stockholders’ equity account other than the deficit such as the ‘‘unrealized loss on long-term equity investment’’ and ‘‘cumulative translation adjustments’’ accounts. The balance of the special reserve is adjusted to reflect any changes in the debit balance of the related accounts at the balance sheet dates.

Under the Integrated Income Tax System, stockholders are allowed tax credits for the income tax paid by the Company.

The appropriation of retained earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of the year of approval.

F-26

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

20. Treasury Stock

Reissuance to employees — held by E.Sun Bank. . . . Treasury stock previously classified as long-term investments — held by E.Sun Bank . . . . . . . . . . .	Shares at Beginning of the Period 40,000 286,897 326,897	Share Increase During the Period — 22,952 22,952	Shares at End of the Period
			40,000 309,849
			349,849

On January 28, 2002, the treasury stock amounting to $4,247,603 pertained to long-term equity investments (shares of the Company held by E.Sun Bank as a result of the share swap as stated in Note 1) and treasury stock (reissued to employees); the carrying values of these treasury stocks, which are both held by E.Sun Bank, were $3,749,586 (market value at $4,049,729) and $498,017, respectively.

Under the Financial Holding Company Law, when a financial institution (a subsidiary) holds the shares of a financial holding company (FHC) as a result of a share swap, those shares should be sold to the FHC or the subsidiary’s employees or exchanged for other purposes — even sold on the Taiwan Stock Exchange or over-the-counter exchange — in three years from the swap date. If the shares are not sold in three years, they will be regarded as the FHC’s unissued capital, and the FHC may change the amount of its registered capital. Thus, E.Sun Bank should sell the 40,000 shares of the Company’s capital stock (reissuance to employee) by December 2004. However, the board of directors of E.Sun Bank has not yet resolved the manner of such treasury stock disposal.

Under the Securities and Exchange Law, the Company is not allowed to buy more than 10% of its issued and outstanding capital stock. In addition, the Company may not spend more than the sum of retained earnings, additional paid-in capital in excess of par value, capital surplus arising from donated capital for such purchases. The Company may not pledge any purchased capital stock.

The Company’s capital stock held by subsidiaries is treated as treasury stock. In addition, the Company may exercise stockholders’ rights attached to this capital stock except if the shares had been bought by subsidiaries before the Company’s establishment and the purchase was based on the requirement mentioned in the preceding paragraph.

Under SFC regulations, to maintain the stability of the Company’s financial structure and protect stockholders, the Company appropriated a special reserve from retained earnings at an amount equal to the carrying value of the treasury stock held by subsidiaries in excess of the market value at balance sheet date. The special reserve may be reversed if the market value recovers. Since the market value of the treasury stock held by subsidiaries was higher than its carrying value as of December 31, 2002, the special reserve was not appropriated.

F-27

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

21. Loss per Share

The numerators and denominators used in computing loss per shares are summarized as follows:

Basic loss per share. . . .	Amounts (Numerator) Pretax After-tax ($3,091,451) ($3,091,451)	Shares (Denominator in Thousands) 2,120,151	Loss Per Share (Dollars) Pretax After-tax ($1.46) ($1.46)
	Pretax ($3,091,451)		Pretax ($1.46)

22. Pension Plan

E.Sun Bank and E.Sun Bills have separate pension plans for all regular employees. Upon retirement, an employee of E.Sun Bank and E.Sun Bills will receive the contributions before May 1, 1997 and March 1, 1998, respectively, which were credited to his/her account, plus earnings thereof and an amount calculated based on length of service after May 1, 1997 and March 1, 1998, respectively, and monthly average basic pay for six months before retirement.

E.Sun Bank and E.Sun Bills make monthly contributions, equal to 5.54% and 4%, respectively, of salaries, to a pension fund (the ‘‘Fund’’). The Fund is managed by a workers fund administrative committee and deposited in its name in the Central Trust of China. The difference between the contributions and the pension costs based on actuarial calculations is deposited in E.Sun Bank in the name of the employees pension fund administrative committee.

Pension information for 2002 is as follows:

a. Pension cost

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Projected return on plan assets . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Period Ended	December 31, 2002 E.Sun Bills $3,733 677 (1,045) (158) $3,207
	E.Sun Bank $64,783 12,243 (15,134) (1,100) $60,792

F-28

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Reconciliation of the fund status of the plan and accrued pension cost

Benefit obligation: Vested benefit obligation . . . . . . . . . . . . . . . . . . . . Non-vested benefit obligation . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . Additional benefits based on projected future salaries Projected benefit obligation . . . . . . . . . . . . . . . . . . Fair value of plan assets. . . . . . . . . . . . . . . . . . . . . . . Fund status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrecognized net transitional assets. . . . . . . . . . . . . . . Unrecognized net gain or loss . . . . . . . . . . . . . . . . . . . Accrued pension cost (included in payables) . . . . . . . . . c. Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d. Actuarial assumptions Discount rate used to determine present values . . . . . . . Future salary increase rate . . . . . . . . . . . . . . . . . . . . . Expected rate of return on plan assets . . . . . . . . . . . . . e. Summary of changes in the pension funds Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of benefits. . . . . . . . . . . . . . . . . . . . . . . . . .	December	31, 2002 E.Sun Bills ($4,524) (11,263) (15,787) (6,626) (22,413) 29,288 6,875 (3,556) (1,089) $ 2,230 $4,524 3.5% 3.0% 3.5% December 31, 2002 E.Sun Bills $ 4,613 $ —
	E.Sun Bank ($16,646) (210,087) (226,733) (134,471) (361,204) 382,179 20,975 (25,504) 3,792 ($ 737) $16,646 3.5% 3.0% 3.5% For the Period Ended
	E.Sun Bank $ 60,488 $ 33,832

E.Sun Securities maintains a separate pension plan for its full time employees on a similar basis as the above. The amounts related to such plan are not deemed material for separate disclosure.

23. Related-Party Transactions

Significant related-party transactions pertain to (a) E.Sun Social Welfare Foundation (the funds of which are donated by E.Sun Bank); (b) investees accounted for under the equity method — E.Sun Venture Capital Co., Ltd., E.Sun Finance & Leasing Co., E.Sun Insurance Agent Co., E.Sun Securities Investment

F-29

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Trust Corp. (ESSIT) and E.Sun Technologies Co. (50% of shares owned by E.Sun Finance & Leasing Co.); (c) Fu Bon Securities Finance Co. (E.Sun Bank is its director); and (d) certain directors, supervisors, managers, and relatives of the Company’s chairman and general managers.

The transactions with the foregoing related parties are summarized as follows:

December 31, 2002 Amount % to Total $ 792,490 — $1,005,643 — $ 458,046 1 $ 100,000 3	Revenue (Expense)	Revenue (Expense)
Amount $ 792,490 $1,005,643 $ 458,046 $ 100,000	Interest Rate (%) 1.5–9.85 0–13 1.3–1.65 4.2	Amount
		$ 21,992
		($ 1,294
		($12,099
		($ 5,216

Purchases and sales of negotiable instruments and bonds with ESSIT and the funds managed by ESSIT for the period from January 28, 2002 to December 31, 2002:

Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ESSIT $201,683 207,373	Funds Under ESSIT
		$ 870,914 1,757,342

The interest rates shown above are similar to, or approximate, those offered to unrelated parties. However, the interest rates on deposits given to managers of the E. Sun Bank are the same as the interest rates on a certain amount of savings deposits of employees.

Under the Banking Law, except for consumer loans and government loans, credits extended by the Bank to any related party should be 100% secured, and the terms of credits extended to related parties should be similar to those extended to unrelated parties.

24. Pledged Assets

Securities purchased (face value). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bond investment (face value). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2002
	$7,114,400 200,000
	$7,314,400

As of December 31, 2002, certain certificates of deposit aggregating $5,000,000, which are included in the securities purchased account, have been provided as collateral for day-term overdraft to comply with the Central Bank’s clearing system of Real-time Gross Settlement (RTGS). The unused overdraft amount at the end of the day can also be treated as E.Sun Bank’s liquidity reserve.

F-30

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Other assets were mainly deposited in or pledged to the (a) Central Bank of China and National Credit Card Center to secure its potential obligations on its trust activities and credit card activities, respectively, and (b) financial institutions as collaterals for bank loans and credit lines and as court deposits for certain lawsuits.

E.Sun Bills and E.Sun Securities’ time deposits, which are not included in foregoing pledged assets with a face value of $50,000 and $510,000, have been eliminated on the basis of the consolidated financial statement preparation. (Please see Note 3)

25. Contingencies and Commitments as of December 31, 2002

a. E.Sun Bank
(1) Sales amounting to $6,979,034 before February 14, 2003 of short-term negotiable instruments acquired for $6,972,941 under agreements to resell; repurchases for $9,349,447 before May 20, 2003 of short-term negotiable instruments sold for $9,334,723 under agreements to repurchase.
(2) E.Sun Bank leases the premises occupied by its branches under renewable agreements expiring on various dates before 2012. Rentals are calculated on the basis of the leased areas and are payable monthly, quarterly or semiannually. Refundable deposits on these leases totaled $687,386 (shown as part of ‘‘other assets’’ account) as of December 31, 2002. Rentals for the next five years on such leases are as follows:

Year
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$210,701
182,295
123,426
93,731
52,072

Total rentals for 2008 to 2012 will aggregate to $165,484. The present value of these rentals is $148,128, based on an annual interest rate of 1.4%.

(3) E.Sun Bank has entered into agreements to acquire land and buildings, construct a building, and make various purchases to improve the of premises occupied by its branches. Total contract amounts for such agreements is approximately $647,728. As of December 31, 2002, the unpaid balance of these contracts was approximately $493,554.

F-31

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

(4) The balance sheet and property list of the trust activities of E.Sun Bank are as follows:

BALANCE SHEET OF TRUST ACTIVITIES December 31, 2002

Total Assets . . . . . . . . . . $12,467,504 Total Liabilities . . . . . . . $12,467,504

PROPERTY LIST OF TRUST December 31, 2002

Investment Items

Employee deposit trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security investment trust fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 1,702 10,735,390 1,533,806 196,606
	$12,467,504

b. E.Sun Bills

Contingencies and commitments resulting from business transactions were as follows:

Negotiable instruments and bonds sold under repurchase agreements . . . . . . . . . . . $39,998,073 Negotiable instruments and bonds purchased under resell agreements. . . . . . . . . . . 2,218,965 Guarantees on commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,412,600 Underwriting negotiable instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,000

c. E.Sun Securities

Sales amounting to $2,194,144 of bonds acquired for $2,188,385 under agreements to resell. Repurchase for $5,131,212 of sold for $5,126,714 under agreements to repurchase.

26. Subsequent Event of Subsidiary

In January 2003, the board of directors of E.Sun Securities resolved to have a part of Yung Li Securities Co., Ltd.’s business merge with their firm. The merged business included the broker department; five branches; and real estate located at No. 77 Wu Chang Street, Sec. 1, Taipei, Taiwan (floors: 3, 4, 5, 7-3, 8-2, 8-3 and B1, B2; total floor area: 714.86 pings; land area: 138.11 pings). The purchase price of the merged business and real estate was $355,000.

27. Capital Adequacy Ratio

Under the Financial Holding Company Law and related regulations, the Company should maintain a consolidated capital adequacy ratio (CAR) of at least 100%. If the ratio falls below 100%, the earnings will be restricted to appropriated as cash dividends or others assets, and the authority could discipline the Company depend on the situation. The consolidated CAR of the Company was 108.08% as of December 31, 2002.

The Banking Law and regulations require that bank maintain the CAR for both stand-alone and consolidated at a minimum of 8%. Should a bank’s CAR fall below the required minimum, it could be subjected to actions of the Ministry of Finance as allowed under current regulations, including restrictions

F-32

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

on the amount of cash dividends that bank can declare or, in certain conditions, totally prohibit a bank from declaring cash dividends. As of December 31, 2002, the consolidated and stand-alone CARs of E.Sun Bank were 10.51% and 10.38%, respectively.

Under the law governing bills finance companies and related regulations, a bills finance company should maintain a CAR of at least 8%. If the CAR falls below 8%, the authorities might subject a company’s earnings appropriations to certain restrictions. The CAR of E.Sun Bills was 17.21% as of December 31, 2002.

Under the Rules Governing Securities Firms and related regulations, the CAR of a securities firm should be at least 200% to ensure its stability as well as maintain the health of the security markets. If the ratio is below 200%, the authority may impose certain restrictions on a firm’s operations. The CAR of E.Sun Securities was 1097.98% as of December 31, 2002.

28. Average Amount and Average Interest Rate of Interest-Earning Assets and Interest-Bearing Liabilities

For E.Sun Bank, average balance is calculated at the daily average balance of interest-earning assets and interest-bearing liabilities.

Interest-earning assets Cash — negotiable certificates of deposit . . . . . . . . . . . . . . . . . . . . . Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from Central Bank of China. . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans, bills and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing liabilities Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Period December 31,	Ended 2002
	Average Balance $ 10,221,460 5,836,637 5,210,678 32,947,556 165,292,897 $ 5,950,803 18,282,262 44,742,793 74,309,578 75,850,097 2,600,000 7,700,733	Average Rate (%)
		1.25 1.63 2.46 4.14 4.98 1.84 0.74 1.73 2.45 2.92 2.26 3.34

F-33

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

29. Maturity Analysis of Assets and Liabilities

The maturity of assets and liabilities of E.Sun 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.

	December	31, 2002
Due in One Year $ 14,883,265 5,759,946 12,117,374 38,971,790 18,446,573 67,867,168 $158,046,116 $ 13,620,380 5,045,561 215,841,215 — $234,507,156	Due Between One Year and Seven Years $ — — — — — 45,651,540 $45,651,540 $ — — 9,898,385 10,000,000 $19,898,385	Due After Seven Years $ — — — — — 58,797,318 $58,797,318 $ — — — — $ —	Total
			$ 14,883,265 5,759,946 12,117,374 38,971,790 18,446,573 172,316,026
			$262,494,974
			$ 13,620,380 5,045,561 225,739,600 10,000,000
			$254,405,541

30. Financial Instruments

a. Derivative financial instruments

E.Sun Bank uses forward exchange and swap contracts as hedge instruments for foreign currency exposures primarily related to its clients’ import obligations and export receipts and remittances. It also uses these contracts to cover its own exposures. Furthermore, E.Sun Bank uses cross-currency swap contracts and asset swap contracts to hedge its exchange rate and interest rate exposures, respectively.

Credit risk represents the exposure of E.Sun Bank to potential losses due to defaults by counterparties. To manage this risk, E.Sun Bank reviews the credit history and credit rating of individual customers before entering into any derivative contracts with customers. The general terms of the acceptable arrangements (including maximum limits on contractual amounts and, if necessary, required guarantees) are approved by E.Sun Bank based on the results of the reviews. The transactions are carried out within the approved terms and limits.

The acceptability of doing business with another bank is evaluated on the basis of its world ranking and credit rating. The evaluation also covers determining the limits on contractual amounts with respect to the bank counter-parties, and the transactions are made within this limit.

F-34

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The contract (nominal) amounts, credit risks, and fair values of derivative transactions as of December 31, 2002 were as follows:

Trading purpose Forward exchange contract . . . . . . . . . . . . . . . . . . . Foreign currency swap contract. . . . . . . . . . . . . . . . Non-trading purpose Asset swap contract. . . . . . . . . . . . . . . . . . . . . . . . Cross-currency swap contract . . . . . . . . . . . . . . . . .	December 31, 2002	December 31, 2002	Fair Value $ 1,363 (46,417) (167,563) (187,326)
	Contract (Nominal) Amount $ 406,098 8,628,331 5,140,871 3,300,000	Credit Risk $ 4,715 28,623 3,258 —

E.Sun Bank calculates the fair value of each forward contract at the forward rate for the remaining term, quoted from Reuters or Telerate Information System.

The contract or notional amount is used to calculate the amounts for settlement with the counterparties, so it is neither the actual amount delivered nor the cash requirement for E.Sun Bank. Also, E.Sun Bank has ability to enter into derivative financial transactions at reasonable market terms. In addition, E.Sun Bank does not expect significant cash flow requirements to settle these transactions.

The gain and loss on the derivative transactions are as follows:

Trading purpose
Forward contract (under exchange gain) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency swap contract:
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-trading purposes
Asset swap contract (under ‘‘interest revenue’’) . . . . . . . . . . . . . . . . . . . . . .
Cross-currency swap contract:
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Period Ended
December 31, 2002
$3,836
$30,088
(14,767)
$15,321
$17,342
$45,424
(33,088)
$12,336

F-35

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Fair value of non-derivative financial instruments

Assets Assets fair value the same as the carrying value . . . . . . . . . Long-term equity investments . . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Liabilities fair value the same as the carrying value. . . . . . .	December	31, 2002
	Carrying Value $224,960,556 3,146,898 49,120,651 296,345 261,582,765	Fair Value
		$224,960,556 3,147,486 49,145,327 325,543 261,582,765

Methods and assumptions used in estimating the fair value of nonderivative financial instruments were as follows:

(1) The carrying values of cash, due from banks, due from Central Bank of China, receivables, due to banks, payables and remittances approximate fair values because of the short maturity of these instruments. The carrying value of other assets and other liabilities also approximate the expected cash inflows or outflows at settlement dates; thus, their carrying value also approximates its fair value.
(2) If market prices for securities purchased and long-term stock investments are available, the fair value of these financial instruments should be based on the market price. If market prices are unavailable, then their carrying value will represent current fair value.
(3) Loans, bills and discounts, deposits and bonds are interest-bearing financial assets and liabilities of a short term nature or the majority bear interest at adjustable rates. Thus, their carrying value is deemed to represents current fair value

Only the fair values of financial instruments were listed above, thus, the total of fair values listed above does not represent the fair value of the Company.

c. Financial instruments with off-balance-sheet credit risks

Under normal business operations, E.Sun Bank is a party to transactions involving financial instruments with off-balance-sheet risks, such as issuing credit cards, extending credit facilities and providing financial guarantee and obligations under letters of credit issued. Generally, these transactions are for one year. The interest rates for loans ranged from 1.5% to 18.25% in 2002. The highest interest rate for credit cards was 19.71% in 2002. There is no concentration of maturity dates in one particular period that would potentially result in liquidity problems to E.Sun Bank with respect to financial instruments with offbalance-sheet credit risks.

E.Sun Bills provides guarantee on commercial paper issued by other entities. The guarantee period is normally one year and the rate of guarantee service fees ranges from 0.1% to 1% of the amount guaranteed.

F-36

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The contractual amounts of financial contracts with off-balance-sheet credit risks as of December 31, 2002 were as follows:

Credit card commitments . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees and issuance of letter of credit . . . . . . . . . . . . . .	E.Sun Bank $138,459,413 7,267,006	E.Sun Bills
		$ — 19,412,600

Since many of the commitments are expected to expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. The total potential loss (without considering the value of any collateral) in case of default by counter-parties is equal to the above contractual amounts, if completely drawn upon.

The Company evaluates the creditworthiness of each credit application case by case, taking into account the applicant’s credit history, credit rating and financial condition. Collateral, mostly in the form of real estate, cash, inventories and marketable securities, may be required depending on the evaluation result. As of December 31, 2002, about 55%, of total loans granted and from 15% to 25.61% of the aggregate guarantees and letters of credit issued, were secured. No collateral is required credit card facilities but the credit status of each credit cardholder is closely monitored. Depending on the results of credit status monitoring, appropriate measures are adopted, including amending the credit limit and, if necessary, cancellation of the facility.

d. Information on concentrations of credit risks

The concentration of credit risk exists when a counter-parties to financial transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. For the Company, concentrations of credit risk do not involve individuals but industry groups, as follows:

Loans — by industries
Real estate and lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantees on commercial paper — by industries
Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic and mechanical equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The net position on foreign-currency transactions is shown below:
Currency
U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$10,781,117
6,594,000
2,705,000
1,401,000
December 31,
2002

$192,453

F-37

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

31. Condensed Financial Statements of Subsidiaries

a. Balance sheets

E.SUN COMMERCIAL BANK, LTD. Condensed Balance Sheet December 31, 2002

(In Thousands of New Taiwan Dollars)

Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from Central Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased — net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, bills and discounts — net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term equity investments — net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 14,883,265
5,759,946
12,117,374
38,885,871
18,096,974
42,264
170,775,271
4,755,205
5,018,224
2,309,086

$272,643,480

Liabilities and stockholders’ equity Liabilities Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .	$ 13,620,380 5,045,561 34,238 225,739,600 10,000,000 290,310
	254,730,089
	18,175,000 326,233 (92,731) 2,906 (498,017)
	17,913,391
	$272,643,480

F-38

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

E.SUN BILLS FINANCE CORPORATION

Condensed Balance Sheet December 31, 2002

(In Thousands of New Taiwan Dollars)

Amount

Assets

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Call loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term negotiable instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pledged time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term bond investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,124,620
200,000
3,790,635
50,000
151,402
2,842
1,259,973
103,852
381,790

$10,065,114

Liabilities and stockholders’ equity

Liabilities Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserve for loss on guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserve for loss on sale of government bonds. . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .	$ 3,920,000 122,377 406,551 185,670
	4,634,598
	4,265,000 87,500 1,078,016
	5,430,516
	$10,065,114

F-39

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

E.SUN SECURITIES CORP.

Condensed Balance Sheet December 31, 2002

(In Thousands of New Taiwan Dollars)

Assets Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities brokerage account — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and stockholders’ equity Liabilities Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	$7,864,394 145,105 56,889 211,662 605
	$8,278,655
	$5,167,256 14,476
	5,181,732
	3,060,000 36,923
	3,096,923
	$8,278,655

F-40

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Income statement

E.SUN COMMERCIAL BANK, LTD. Condensed Income Statement For the Year Ended December 31, 2002 (In Thousands of New Taiwan Dollars)

Item Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss from operating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss per share — after tax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	$14,315,778 15,313,456
	(997,678) 3,667,837
	(4,665,515) 26,107 100,648
	($4,740,056)
	($3,510,807)
	($2.61)
	($1.93)

E.SUN BILL FINANCE CORPORATION

Condensed Income Statement For the Year Ended December 31, 2002 (In Thousands of New Taiwan Dollars)

Item Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — after tax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	$1,158,668 457,043
	$ 701,625
	$ 570,941
	$1.65
	$1.34

F-41

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

E.SUN SECURITIES CORP. Condensed Income Statement For the Year Ended December 31, 2002

(In Thousands of New Taiwan Dollars)

Item Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — after tax (Dollars) . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	$277,660 249,331
	$ 28,329
	$ 12,525
	$0.14
	$0.06

32. Allocation of Revenue, Cost and Expense That Resulted From the Sharing of Resources Between the Company and Subsidiaries

Under cooperation arrangements, E.Sun Bank and E.Sun Securities shared some equipment and operating sites; thus, related expenses were apportioned as follows:

Item Rental expense . . . . Fixtures . . . . . . . . . Broadcasting and security systems. . Networking, monitoring and telephone systems Others . . . . . . . . . .	E.Sun Bank $ 180 7,950 73 667 181 $9,051	E.Sun Securities $ 90 6,410 73 1,949 498 $9,020	Total $ 270 14,360 146 2,616 679 $18,071	Apportionment Method
				E.Sun Bank: 2/3; E.Sun Securities: 1/3. Based on area actually occupied 50% each Based on actual number of equipment used. Signboard, telephone and miscellaneous expenses — based on actual usage Insurance and cleaning expenses — 50% each Utilities — based on the actual number of employees Building management expenses — based on space actually occupied

F-42

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Important Information on Subsidiaries’ Asset Quality, Management, Profitability, Liquidity and Sensitivity to Market Risk
a. Asset quality as of December 31, 2002

Items Nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonperforming loans ratios . . . . . . . . . . . . . . . . . . . . . . . Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delinquent loans ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for possible losses on loans or guarantees . . . . . . .	Subsidiaries	Subsidiaries
	E.Sun Bank $2,382,888 $2,137,685 1.38 $1,801,053 1.05 $1,540,755	E.Sun Bills
		$ — $ — — $ — — $406,551

b. Management information as of December 31, 2002
(1) Concentrations of credit risk

Items		Subsidiaries	Subsidiaries
			E.Sun Bills
Credit to related party . . . . . . . . . . . . . . . . . . . . . . . Credit to related party/Total credit. . . . . . . . . . . . . . . Credit with stock pledged/Total credit . . . . . . . . . . . . Loan concentration by industry . . . . . . . . . . . . . . . . . Type of Industry % Government-owned and private enterprise 45 a. Farm, forestry, fishery and animal husbandry — b. Mining — c. Manufacturing 15 d. Public utility 2 e. Construction 1 f. Wholesale, retail and catering 6 g. Transportation, warehousing, and communications 2 h. Finance, insurance and real estate 14 i. Individual service 5 Others 55

(2) Investees: Please see Table 2.
(3) Policies on allowances for losses on loans, overdue loans, and securities purchased: Please see Note 2.

F-43

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

(4) Special items

Penalties due to violation of the law, major weaknesses and action for reform in the past two years:

E.Sun Bank

Owners and employees are prosecuted for crime committed in the past year.	None
Penalties due to violation of the Banking Law and/or law governing bills finance
administration in the past year.	None
Major deficiencies rectified by the Ministry of Finance in the past year.	None
Major loss due to fraud, accident violation of security standard of financial
institutions, resulting in a loss of more than $50,000 in the past year.	None
Other information required by the authorities.	None

(5) Business information of a bills finance company

E. Sun Bills

Items
Guarantees and endorsements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guarantees and endorsements/stockholder’s equity. . . . . . . . . . . . . . .
Short-term negotiable instruments sold under agreements to repurchase.
Short-term negotiable instruments sold under agreements to repurchase/
stockholder’s equity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,
2002

$19,412,600
3.99
$29,944,400
6.16

c. Profitability in 2002

Unit: %

Items Return on assets (income before tax 7 average assets) . . . . . . . Return on equity (income before tax 7 average equities) . . . . . . Net income ratio (income before tax 7 operating revenue). . . . .	Subsidiaries	Subsidiaries
	E.Sun Bank (1.76) (23.28) (33.11)	E.Sun Bill
		7.30 13.29 60.56

F-44

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

d. Liquidity as of December 31, 2002
(1) Liquidity analysis of E.Sun Bank

Assets . . . . . . . . Liabilities. . . . . . Gap . . . . . . . . . . Accumulated gap.	Total $250,297,000 249,110,000 1,187,000 1,187,000		Period	Remaining until	Due Date
		0–30 Days 31–90 Days 91–180 Days 181–365 Days (In Thousands of New Taiwan Dollars) $50,153,000 $17,015,000 $16,937,000 $ 25,762,000 27,990,000 26,797,000 95,098,000 62,616,000 22,163,000 (9,782,000) (78,161,000) (36,854,000) 22,163,000 12,381,000 (65,780,000) (102,634,000)				Over 1 Year
						$140,430,000 36,609,000 103,821,000 1,187,000

Note: Listed amounts are in New Taiwan dollars (i.e., excluding foreign-currency amounts) of the head office and domestic branches.

(2) Liquidity analysis of E.Sun Bills

Items Usage of funds Bills . . . . . Bonds . . . . Deposits. . . Call Loans . R.S . . . . . . Total . . . . . Source of funds Borrowings. R.P . . . . . . Capital. . . . Total . . . . . Net flows . . . . . . . . . . . . . . . . Accumulated net flows. . . . . . .			Period
	1–30 Days $25,940,000 — 323,000 200,000 2,192,000 28,655,000 3,920,000 34,116,000 — 38,036,000 (9,381,000) (9,381,000)	31–90 Days 91–180 Days 181–365 Days (In Thousands of New Taiwan Dollars) $ 2,873,000 $ 874,000 $ 536,000 — — — 320,000 1,451,000 2,057,000 — — — 201,000 — — 3,394,000 2,325,000 2,593,000 — — — 5,308,000 469,000 105,000 — — — 5,308,000 469,000 105,000 (1,914,000) 1,856,000 2,488,000 (11,295,000) (9,439,000) (6,951,000)			Over 1 Year
					$ — 12,729,000 20,000 — — 12,749,000 — — — — 12,749,000 5,798,000

Note: R.S — securities purchased under agreement to resell. R.P — securities sold agreement to repurchase.

F-45

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

e. Sensitivity as of December 31, 2002

Unit: %

Items Ratio of interest-sensitive assets to liabilities . . . . . . . . . . . . Ratio of interest-sensitive gap to stockholders’ equity . . . . . .	Subsidiaries E.Sun Bank E.Sun Bills 71.77 84.17 (342.09) (128.00)
	E.Sun Bank 71.77 (342.09)

Notes:

Ratio of interest-sensitive assets to liabilities = Interest-sensitive assets 7 Interest sensitive liabilities
Interest-sensitivity gap = Interest-sensitive assets – Interest-sensitive liabilities

34. Additional Disclosures

Following are the additional disclosures required by the Securities and Futures Commission:

a. Related information of significant transaction and investees: The required information has been disclosed on Table 1 to 4.
b. Investment in Mainland China — None.

35. Segment Information

The Company and its subsidiaries engage in investing, banking, bills financing and the securities industry. The revenues, operating profits and identifiable assets related to the Company’s banking operations represent more then 90% of those of all the Company’s operations, and as such segment information is not required.

F-46

							Maximum	Collateral/	Guarantee	Amounts	Allowable	$2,000
				Ratio of	Accumulated	Amount of	Guarantee to	Net Asset Value	of the Latest	Financial	Statement	28%
							Value of	Collaterals,	Property,	Plant, or	Equipment	None
E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Endorsement/Guarantee Provided	For the Year Ended December 31, 2002	(Amounts in Thousands of U.S. Dollars)				Limits on	Individual	Counter-party Collateral or Maximum	Guarantee Balance for Ending Nature of	Amounts the Period Balance Name Relationship	E.Sun International Co. Affiliate $2,000 $1,234 $1,234
											Endorsement/Guarantee Provider	E.Sun Finance & Leasing Co.
											No.	1.

F-47

						Note		The 494,000 thousand shares
					Market Value or	Net Asset Value		$14,057,801	5,430,515	3,096,923	1,002,206		4,049,729	192,531	1,153	48,837	10,481	151,769	19,940	64,476	25,903	32,752	2,767	94,445	154,575	103,616	57,449		160,000	199,976	100,588	100,000	200,000	200,000	100,000	199,997
E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Marketable Securities Held	December 31, 2002	(In Thousands of New Taiwan Dollars)	December 31, 2002	Shares Carrying Percentage of	Marketable Securities Type and Name Relationshipwith the Company Financial Statement Account (Thousands) Value Ownership	Stock	E.Sun Commercial Bank, Ltd. Subsidiary Long-term investment 1,817,500 $14,057,801 100.00	E.Sun Bills Finance Corp. Subsidiary Long-term investment 426,500 5,430,515 100.00	E.Sun Securities Corp. Subsidiary Long-term investment 306,000 3,096,923 100.00	E.Sun Venture Capital Co., Ltd. Subsidiary Long-term investment 100,000 1,002,206 100.00	Stock	E.Sun Financial Holding Co., Ltd. Parent company Long-term equity investment 309,849 3,749,586 12.53	Fu Bon Securities Finance Co. — Long-term equity investment 16,148 155,857 2.56	Taipei Forex Inc. — Long-term equity investment 80 800 0.40	Apex Venture Capital Corp. — Long-term equity investment 5,000 50,000 4.67	Taiwan Futures Exchange Co., Ltd. — Long-term equity investment 900 9,000 0.45	E.Sun Finance & Leasing Co. Subsidiary Long-term equity investment 19,600 151,769 98.99	Gapura Incorporated — Long-term equity investment 750 23,428 4.90	Financial Information Service Co., Ltd. — Long-term equity investment 4,550 45,500 1.14	National Venture Capital Corp. — Long-term equity investment 2,700 27,000 4.99	E.Sun Insurance Agent Co., Ltd. Subsidiary Long-term equity investment 1,280 32,744 79.00	Bank-Pro E-Service Technology Co, Ltd. — Long-term equity investment 450 4,500 5.00	United Microelectronic Corporation — Long-term equity investment 3,957 200,451 0.03	E.Sun Securities Investment Trust Corp. Equity-accounted investee Long-term equity investment 13,500 154,570 45.00	Taiwan Asset Management Corporation — Long-term equity investment 10,000 100,000 0.57	Taiwan Financial Asset Service Corporation — Long-term equity investment 5,000 50,000 3.33	Corporate and financial institution bonds	E.Sun Commercial Bank Common parent company Long-term bond investments — 160,000 —	Taishin Bank — Long-term bond investments — 199,976 —	Chang Hwa Bank — Long-term bond investments — 100,000 —	Hua Nan Commercial Bank — Long-term bond investments — 100,000 —	The Farmers Bank of China — Long-term bond investments — 200,000 —	Sunny Bank — Long-term bond investments — 200,000 —	Union Bank — Long-term bond investments — 100,000 —	Hua Nan Financial Holding Company — Long-term bond investments — 199,997 —
						Held Company Name	E.Sun Financial Holding Co., Ltd.					E.Sun Commercial Bank, Ltd.. . .																E.Sun Bills Finance Corp. . . . . .

F-48

	Note																				Pledged for courts of justice	pursuant to collection case
Market Value or	Net Asset Value	$ 22,648	7,146		237,910	47,166	10,673		12,359	10	17,813	5,956	4,253	18,168	3,304	9,871	4,241	2,968	25,231		3,212	1,063		70,059	84,411	57,860	20,717	25,074	52,049	84,168	64,550	17,025	21,053	80,539	87,450	91,171	84,425
Carrying Percentage of	Value Ownership	$ 22,000 —	7,000 —		212,911 —	44,509 —	9,925 —		25,707 —	36 —	28,669 —	6,559 —	3,600 6.00	20,000 3.50	17,790 3.40	8,309 20.00	4,472 50.00	2,968 100.00	30,393 6.20		3,212 —	1,063 —		69,588 —	83,867 —	57,428 —	20,574 —	25,000 —	51,685 —	83,589 —	64,129 —	17,000 —	21,000 —	80,000 —	86,822 —	90,551 —	83,884 —
Shares	(Thousands)	—	—		—	—	—		518	—	2,284	424	300	2,000	857	324	500	300	950		—	—		5,303	5,915	5,550	1,613	2,259	4,334	7,793	4,681	1,599	2,076	5,849	8,532	6,371	7,041
	Financial Statement Account	Other assets	Other assets		Other assets	Other assets	Other assets		Short-term investment	Short-term investment	Short-term investment	Short-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment		Long-term investment	Long-term investment		Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment	Short-term investment
	Relationshipwith the Company	—	—		—	—	—		—	—	—	—	—	—	—	Equity-accounted investee	Subsidiary	Subsidiary	—		—	—		—	—	—	—	—	—	—	—	—	—	—	—	—	—
	Marketable Securities Type and Name	Chia Hsin Food & Synthetic Fiber Co., Ltd.	China Rebar Co., Ltd.	Government bonds	87103	86103	90102	Stock	United Microelectronic Corp.	Acer Computer Corp.	Taiwan International Securities Corp.	SinoPac Holding Co., Ltd.	Netplus Material Inc.	National Venture Capital Corp.	Gigarams Semiconductor Device Corp.	E.Sun Insurance Agent Co., Ltd.	E.Sun Technologies Co., Ltd.	E.Sun Marketing Consulting Co., Ltd.	Gapura Incorporated	Bonds	Central Government Bonds — 832	Central Government Bonds — 854	Funds	Home Run Bond Fund	Wan Pao Fund	Fuh-hwa Albatross Fund	Jih sun Bond Fund	Tai-Yi Long River Fund	Fu-Din Elishin Fund	Central International Diamond Fund	The Due Le II Bond Fund	Apollo B.B. Bond Fund	KGI Kai-xuan Fund	Prudential Yuan-fu Bond Fund	Dachong Proud House Bond Fund	International Wan-neng fund	Asia Pacific Bond Fund
	Held Company Name. . . . . . . .							E.Sun Finance & Leasing Co. . . .															E.Sun Securities Corp. . . . . . . . .

F-49

		Note
	Market Value or	Net Asset Value	$ 30,292	59,888		85,105	60,000	100,668
December 31, 2002	Carrying Percentage of	Value Ownership	$ 30,180 —	59,467 —		85,105 25	60,000 6	100,668 —
	Shares	(Thousands)	2,187	4,810		7,500	6,000	—
		Financial Statement Account	Short-term investment	Short-term investment		Long-term investment	Long-term investment	Long-term investment
		Relationshipwith the Company	—	—		Equity-accounted investee	—	Equity-accounted investor
		Marketable Securities Type and Name	Capital Save Income Fund	Fu-hwa Bond Fund	Stock	E.Sun Securities Investment Trust Corp.	Lian Ding Venture Capital Co.	Bonds — issued by E.Sun Bank
		Held Company Name. . . . . . . .						E.Sun Securities Investment Trust	Corp. . . . . . . . . . . . . . . . . .

F-50

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Marketable Securities Acquired and Disposed of at Costs or Prices of at least NT$100 Million or 20% of the Paid-in Capital	For the Year Ended December 31, 2002	(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Stated)	Beginning Balance Acquisition Disposal Ending Balance	Marketable Securities Financial Statement Nature of Shares Shares Shares Carrying Gain (Loss) Shares	Company Name Type and Name Account Counter-Party Relationship (Thousand) Amount (Thousand) Amount (Thousands) Amount Value on Disposal (Thousand) Amount	E.Sun Financial	Holding Co., Ltd. Common stock	E.Sun Securities Corp. Long-term investment E.Sun Securities Corp. Subsidiary 106,000 $1,137,819 200,000 $2,004,211 — $ — $ 45,107 $ — 306,000 $3,096,923	(Note 1) (Note 1)	E.Sun Venture Capital Long-term investment E.Sun Venture Capital Co., Subsidiary — — 100,000 1,002,206 — — — — 100,000 1,002,206	Co., Ltd. Ltd. (Note 2)	E.Sun Securities	Investment	Trust Corp.. . . . . Bond	Bonds — issued by Taishin Long-term investment E.Sun Bills Finance Corp. Affiliate — — — 200,000 — 200,000 200,000 — — —	Bank	Bonds — issued by E.Sun Long-term investment E.Sun Bills Finance Corp. Affiliate — — — 201,505 — 104,643 100,837 3,806 — 100,668	Bank	E.Sun Bills Finance	Corp. . . . . . . . . . E.Sun Commercial Bank Long-term bond investments E.Sun Securities Investment Affiliate — 360,000 — — — 201,505 200,000 1,505 — 160,000	Trust Corp.	Taishin Bank Long-term bond investments E.Sun Securities Investment Affiliate — — — 299,960 — 99,986 99,986 — — 199,976	Trust Corp. (Note 3)	Far Eastern Bank Long-term bond investments E.Sun Commercial Bank and — — — — 200,096 — 200,098 200,096 2 — —	SinoPac Securities	Chang Hua Bank Long-term bond investments Chang Hua Bank — — — — 100,000 — — — — — 100,000	Hua Nan Bank Long-term bond investments Hua Nan Bank — — — — 100,000 — — — — — 100,000	First Bank Long-term bond investments Citi Bank — — — — 100,000 — 104,020 100,000 4,020 — —	The Farmers Bank of China Long-term bond investments The Farmers Bank of China — — — — 200,000 — — — — — 200,000	Sunny Bank Long-term bond investments Sunny Bank — — — — 200,000 — — — — — 200,000	Union Bank Long-term bond investments Union Bank — — — — 100,000 — — — — — 100,000	Hua Nan Financial Holding Long-term bond investments Barits Securities and Hua — — — — 199,997 — — — — — 199,997	Nan Financial Holding	Notes:	1. The acquisition amount pertains to stocks bought for $2,000,000 and equity in net income of investee of $4,211 in 2002. The disposal carrying value of $45,107 consisted of subsidiary’s cash	dividend, bonus to directors, supervisors and employees.	2. The amount included equity in net income of investee of $2,206.	3. Including $2 premium amortization.

F-51

								Note
							Investment	Gain (Loss)	($3,609,010)	548,224		4,211		2,206	(2,784)		18,670	21,525			4,747	(1,646)		(32)		10,295
E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Names, Locations, and other Information of Investees on which the Company Exercises Significant Influence	For the Year Ended December 31, 2002		(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Stated)	Original Investment Amount Balance as of December 31, 2002 Net Income		(Loss) of the Shares Percentage	Investor Company Investee Company Location Main Businesses and Products Investee Dec. 31, 2002 Dec. 31, 2001 (Thousands) of Ownership Carrying Value	E.Sun Financial Holding Co., Ltd. E.Sun Commercial Bank, Ltd. Taipei Banking $19,160,117 $ — 1,817,500 100.00 $14,057,801 ($3,510,807)	E.Sun Bills Finance Corp. Taipei Dealing and brokering short-term 5,150,581 — 426,500 100.00 5,430,515 570,941	negotiable instruments	E.Sun Securities Corp. Taipei Dealing, underwriting and brokering 3,137,819 — 306,000 100.00 3,096,923 12,525	securities	E.Sun Venture Capital Co., Ltd. Taipei Investment 1,000,000 — 100,000 100.00 1,002,206 2,206	E.Sun Commercial Bank, Ltd. E.Sun Finance & Leasing Co. Taipei Leasing and sale of machinery and 196,000 196,000 19,600 98.99 151,769 (2,812)	equipment	E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 3,950 3,950 1,280 79.00 32,744 23,733	E.Sun Securities Investment Trust Taipei Investing funds under full 135,000 135,000 13,500 45.00 154,570 47,835	Corp. discretionary authorization from	customers	E.Sun Finance & Leasing Co. E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 1,800 1,800 324 20.00 8,309 23,733	E.Sun Technologies Co., Ltd. Taipei Provides information software and 5,000 5,000 500 50.00 4,472 (1,200)	computer installation services	E.Sun Marketing Consulting Co., Ltd. Taipei Agency of service and human 3,000 — 300 100.00 2,969 (32)	resource	E.Sun Securities Corp. E.Sun Securities Investment Trust Taipei Investing funds under full 60,000 60,000 7,500 25.00 85,105 47,835	Corp. discretionary authorization from	customers

F-52

UNAUDITED PRO FORMA BALANCE SHEETS AND STATEMENTS OF INCOME DATA OF E.SUN FINANCIAL HOLDING CO., LTD.

E.Sun Financial Holding Company, Ltd. (‘‘E.Sun Financial’’) was established by E.Sun Commercial Bank Ltd. (‘‘E.Sun Bank’’), E.Sun Bills Finance Corp. (‘‘E.Sun Bills’’) and E.Sun Securities Corp. (‘‘E.Sun Securities’’) through a share swap on January 28, 2002. The swap ratio was 1 share of E.Sun Financial’s stock for 1.0 share of E.Sun Bank, 1.10 shares of E.Sun Bills and 1.25 shares of E.Sun Securities. After the swap, E.Sun Bank, E.Sun Bills and E.Sun Securities became 100% subsidiaries of E.Sun Financial.

The following unaudited pro forma balance sheets and statements of income as of December 31, 2001 and 2002 have been prepared on an ROC GAAP basis based on the assumption that E.Sun Financial was established on January 1, 2001 and the share swap by which E.Sun Bank, E.Sun Bills and E.Sun Securities became subsidiaries of E.Sun Financial had taken place on January 1, 2001.

The unaudited pro forma balance sheets and statements of income of E.Sun Financial are based on, and derived from, and should be read in conjunction with the historical ROC GAAP financial statements of E.Sun Bank and E.Sun Bills, together with the related notes, included elsewhere in this Offering Memorandum. E.Sun Securities financial statements have not been included in the Offering Memorandum as its financial position and operating results are not deemed by management as material to the pro forma financial statements.

These unaudited pro forma balance sheets and statements of income are presented for illustrative purposes only. This information is not necessarily indicative of the financial position and operating results that might have occurred had the formation of E.Sun Financial occurred on January 1, 2001, nor is it necessarily indicative of the future financial position or operating results of E.Sun Financial.

F-53

					Total		8,107,502		14,422,350	8,068,770	42,337,990	0	12,463,869	62,286	179,345,170	1,595,128		4,934,874	1,714,878	273,052,817		9,865,224	2,793,825	6,130,598	28,879	222,725,080	4,640,000	420,000	1,076,354	247,679,960				25,372,857
				elimination entries (Note 8)	Debit Credit				1,584,081		448,000	610,000	41,779						110,000				88,000	41,779		2,304,081	360,000
					Total		8,107,502		16,006,431	8,068,770	42,785,990	610,000	12,505,648	62,286	179,345,170	1,595,128		4,934,874	1,824,878	275,846,677		9,865,224	2,881,825	6,172,377	28,879	225,029,161	5,000,000	420,000	1,076,354	250,473,820				25,372,857
					Credit		79,250	30,000								273,819	3,508,375											420,000			124,170
E.SUN FINANCIAL HOLDING CO., LTD	Unaudited pro forma balance sheet	December 31, 2001	(Amounts in thousands of New Taiwan Dollars)	E.Sun Bills E.Sun pro forma adjustments	Finance Securities Total Note Debit Note		0 100 7,672,582 1 124,170 2	3 420,000 4	4,975,828 112,772 16,006,431	0 0 8,068,770	2,865,830 3,168,313 42,785,990	150,000 460,000 610,000	112,713 61,498 12,505,648	6,297 1,337 62,286	0 0 179,345,170	574,241 59,133 5,298,072 2 79,250 5	6	108,530 38,489 4,934,874	372,066 173,720 1,824,878	9,165,505 4,075,362 279,114,701		3,330,000 0 9,865,224	0 2,881,825 2,881,825	189,634 57,369 6,172,377	0 0 28,879	0 0 225,029,161	0 0 5,000,000	0 0 0 3	518,006 6,664 1,076,354	4,037,640 2,945,858 250,053,820	5 273,819 1	6 3,508,375	4 30,000	5,127,865 1,129,504 29,060,881
					E.Sun Bank		7,672,482		10,917,831	8,068,770	36,751,847	0	12,331,437	54,652	179,345,170	4,664,698		4,787,855	1,279,092	265,873,834		6,535,224	0	5,925,374	28,879	225,029,161	5,000,000	0	551,684	243,070,322				22,803,512
						ASSETS	Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		Due from banks . . . . . . . . . . . . . . . . . . . . . . .	Due from Central Bank of China. . . . . . . . . . . .	Securities purchased . . . . . . . . . . . . . . . . . . . .	Pledged time deposits . . . . . . . . . . . . . . . . . . .	Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .	Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . .	Loans, bills and discounts-net . . . . . . . . . . . . . .	Long-term investments. . . . . . . . . . . . . . . . . . .		Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .	LIABILITIES	Due to banks . . . . . . . . . . . . . . . . . . . . . . . . .	Bonds sold under agreement to repurchase . . . . .	Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Deposits and remittances . . . . . . . . . . . . . . . . .	Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Long-term debts . . . . . . . . . . . . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Total Liabilities . . . . . . . . . . . . . . . . . . . . . . .				Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-54

					Total		14,728,728	862,953	2,564,202	(17,659)	183,055	18,321,279		(9,267,493)	(212,568)	(2,497,766)	(7,722)	(11,985,549)	6,335,730	(3,273,380)	3,062,350	27,453	(24,214)	3,065,589	(1,008,518)	2,057,071
				elimination entries (Note 8)	Debit Credit		123,290							123,290						1,920		1,920
					Total		14,852,018	862,953	2,564,202	(17,659)	183,055	18,444,569		(9,390,783)	(212,568)	(2,497,766)	(7,722)	(12,108,839)	6,335,730	(3,275,300)	3,060,430	29,373	(24,214)	3,065,589	(1,008,518)	2,057,071
					Credit
E.SUN FINANCIAL HOLDING CO., LTD	Unaudited pro forma statement of income	For the year ended December 31, 2001	(Amounts in thousands of New Taiwan Dollars)	E.Sun Bills E.Sun pro forma adjustments	Finance Securities Total Note Debit Note		282,913 150,356 14,852,018	158,992 24,153 862,953	1,002,372 105,631 2,564,202	0 (867) 256,160 5 273,819	4,430 3,630 183,055	1,448,707 282,903 18,718,388		(157,518) (94,247) (9,390,783)	(8,666) (1,869) (212,568)	(405,160) 0 (2,497,766)	0 0 (7,722)	(571,344) (96,116) (12,108,839)	877,363 186,787 6,609,549	(153,876) (129,156) (3,246,300) 4 29,000	723,487 57,631 3,363,249	0 2,034 29,373	0 0 (23,214) 4 1,000	723,487 59,665 3,369,408	(354,731) 4,504 (1,008,518)	368,756 64,169 2,360,890
					E.Sun Bank		14,418,749	679,808	1,456,199	257,027	174,995	16,986,778		(9,139,018)	(202,033)	(2,092,606)	(7,722)	(11,441,379)	5,545,399	(2,963,268)	2,582,131	27,339	(23,214)	2,586,256	(658,291)	1,927,965
						OPERATING REVENUE	Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Service fees . . . . . . . . . . . . . . . . . . . . . . . . . .	Gain on sales of securities . . . . . . . . . . . . . . . .	Income(loss) on long-term investments. . . . . . . .	Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Total operating revenue . . . . . . . . . . . . . . . . . .	OPERATING COST	Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Service charges. . . . . . . . . . . . . . . . . . . . . . . .	Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Total operating cost. . . . . . . . . . . . . . . . . . . . .	GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . .	Operating expense . . . . . . . . . . . . . . . . . . . . . .	INCOME FROM OPERATIONS . . . . . . . . . . . .	NON-OPERATING INCOME . . . . . . . . . . . . . .	NON-OPERATING EXPENSE . . . . . . . . . . . . .	INCOME BEFORE INCOME TAX . . . . . . . . . .	INCOME TAX BENEFIT (EXPENSE). . . . . . . .	NET INCOME . . . . . . . . . . . . . . . . . . . . . . . .

F-55

					Total		15,332,411		8,080,690	12,117,374	48,960,651	0	18,299,238	48,029	170,775,271	3,335,222			5,178,965	2,778,056	284,905,907		17,540,380		4,976,714	5,203,962	34,238	222,348,963	9,840,000	1,900,000	897,493	262,741,750					22,164,157
				E.SUN FHC	(Note 9)		13,976						197			896,200										705				1,480,000			(106,006)
				elimination entries (Note 8)	Debit Credit				2,690,637		310,000	560,000	4,737							140,000					150,000	4,737		3,390,637	160,000
					Total		15,318,435		10,771,327	12,117,374	49,270,651	560,000	18,303,778	48,029	170,775,271	2,439,022			5,178,965	2,918,056	287,700,908		17,540,380		5,126,714	5,207,994	34,238	225,739,600	10,000,000	420,000	897,493	264,966,419					22,734,489
E.SUN FINANCIAL HOLDING CO., LTD	Unaudited pro forma balance sheet	December 31, 2002	(Amounts in thousands of New Taiwan Dollars)	E.Sun pro forma adjustments	Securities Total Note Debit Note Credit		250 14,883,515 1 124,170 2 79,250	3 420,000 4 30,000	686,761 10,771,327	0 12,117,374	6,594,145 49,270,651	510,000 560,000	55,402 18,303,778	2,923 48,029	0 170,775,271	145,105 6,160,283 2 79,250 5 273,819	6 3,508,375	7 18,317	56,889 5,178,965	227,180 2,918,056	8,278,655 290,987,249		0 17,540,380		5,126,714 5,126,714	40,056 5,207,994	0 34,238	0 225,739,600	0 10,000,000	0 0 3 420,000	14,962 897,493	5,181,732 264,546,419	5 273,819 1 124,170	6 3,508,375	4 30,000	7 18,317	3,096,923 26,440,830
				E.Sun Bills	Finance		0		4,324,620	0	3,790,635	50,000	151,402	2,842	0	1,259,973			103,852	381,790	10,065,114		3,920,000		0	122,377	0	0	0	0	592,221	4,634,598					5,430,516
					E.Sun Bank		14,883,265		5,759,946	12,117,374	38,885,871	0	18,096,974	42,264	170,775,271	4,755,205			5,018,224	2,309,086	272,643,480		13,620,380		0	5,045,561	34,238	225,739,600	10,000,000	0	290,310	254,730,089					17,913,391
						ASSETS	Cash . . . . . . . . . . . . . . . . . . . .		Due from banks . . . . . . . . . . . .	Due from Central Bank of China.	Securities purchased . . . . . . . . .	Pledged time deposits . . . . . . . .	Receivable . . . . . . . . . . . . . . . .	Prepaid expenses. . . . . . . . . . . .	Loans, bills and discounts-net . . .	Long-term investments. . . . . . . .			Properties. . . . . . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . . . .	Total Assets . . . . . . . . . . . . . . .	LIABILITIES	Due to banks . . . . . . . . . . . . . .	Bonds sold under agreement to	repurchase . . . . . . . . . . . . . .	Payables . . . . . . . . . . . . . . . . .	Advances . . . . . . . . . . . . . . . . .	Deposits and remittances . . . . . .	Bonds . . . . . . . . . . . . . . . . . . .	Long-term debts . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . . . .	Total Liabilities . . . . . . . . . . . .					Net Assets . . . . . . . . . . . . . . . .

F-56

	Total		12,368,375	1,118,051	1,915,947		64,239	166,871	15,633,483		(5,706,176)	(320,749)	(9,614,558)	(9,373)	(15,650,856)	(17,373)	(4,130,617)		(4,147,990)	42,120	(113,882)		(4,219,752)		1,082,761	(3,136,991)
E.SUN FHC	(Note 9)						2,206										(23,848)				(13,234)
elimination entries (Note 8)	Debit Credit		75,038								75,038						156,457 1,920			1,920
	Total		12,443,413	1,118,051	1,915,947		62,033	166,871	15,706,315		(5,781,214)	(320,749)	(9,614,558)	(9,373)	(15,725,894)	(19,579)	(3,952,232)		(3,971,811)	44,040	(100,648)		(4,028,419)		1,082,761	(2,945,658)
pro forma adjustments	Debit Note Credit						18,317
	Note						7
	Total		12,443,413	1,118,051	1,915,947		80,350	166,871	15,724,632		(5,781,214)	(320,749)	(9,614,558)	(9,373)	(15,725,894)	(1,262)	(3,952,232)		(3,953,494)	44,040	(100,648)		(4,010,102)		1,082,761	(2,927,341)
E.SUN	FHC		0	0	0		0	0	0		0	0	0	0	0	0	0		0	0	0		0		0	0
E.Sun	Securities		158,461	48,226	26,119		10,295	7,085	250,186		(76,429)	(4,153)	(12,609)	(1,164)	(94,355)	155,831	(145,435)		10,396	17,933	0		28,329		(15,804)	12,525
E.Sun Bills	Finance		170,427	167,181	820,919		0	141	1,158,668		(123,847)	(6,307)	(187,929)	0	(318,083)	840,585	(138,960)		701,625	0	0		701,625		(130,684)	570,941
	E.Sun Bank		12,114,525	902,644	1,068,909		70,055	159,645	14,315,778		(5,580,938)	(310,289)	(9,414,020)	(8,209)	(15,313,456)	(997,678)	(3,667,837)		(4,665,515)	26,107	(100,648)		(4,740,056)		1,229,249	(3,510,807)
		OPERATING REVENUE	Interest . . . . . . . . . . . . . . . .	Service Fees . . . . . . . . . . . . .	Gain on sales of securities . . .	Income(loss) on long-term	investments . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . .	Total operating revenue . . . . .	OPERATING COST	Interest . . . . . . . . . . . . . . . .	Service charges. . . . . . . . . . .	Provisions . . . . . . . . . . . . . .	Other. . . . . . . . . . . . . . . . . .	Total operating cost. . . . . . . .	GROSS PROFIT (LOSS) . . . .	Operating expense . . . . . . . . .	INCOME (LOSS) FROM	OPERATIONS . . . . . . . . .	NON-OPERATING INCOME .	NON-OPERATING EXPENSE	INCOME (LOSS) BEFORE	INCOME TAX. . . . . . . . .	INCOME TAX BENEFIT	(EXPENSE) . . . . . . . . . . .	NET INCOME (LOSS) . . . . .

F-57

To record the cash dividend paid by E.Sun Bills as received in full by the E.Sun Financial. Under the assumptions of the pro forma financial statements, E.Sun Financial would have	To record the cash dividend paid by E.Sun Bills as received in full by the E.Sun Financial. Under the assumptions of the pro forma financial statements, E.Sun Financial would have	owned 100% of the outstanding shares of E.Sun Bills in 2001, and would have received the cash dividend from E.Sun Bills.	To reverse the cash dividend actually received by E.Sun Bank from E.Sun Bank’s equity accounted investee E.Sun Bills, in 2001 at the actual cash balance received (E.Sun Bank did not	hold 100% of the shares of E.Sun Bills) as related to Note 1 above. Under the assumptions of the pro forma financial statements, E.Sun Financial would have owned 100% of the	outstanding shares of E.Sun Bills in 2001 and E.Sun Bank and other shareholders would not have received the cash dividend in 2001.	In 2001, E.Sun Bank redeemed 40,000 thousand shares of its outstanding capital stock in the market, for reissuance to employees. Under the assumption of pro forma financial	statements, E.Sun Financial was assumed to be incorporated, and its shares traded on the Taiwan stock exchange on January 1, 2001. At the same time, public trading of E.Sun Bank’s	stock would have been terminated. Therefore, the stock reissued to employees is assumed to be E.Sun Financial shares, and E.Sun Financial would have had to borrow the funds to	redeem the shares.	To record an amount for operating expenses of E.Sun Financial for 2001 which was assumed to be incorporated on January 1, 2001.	To reverse the amount of current income recognized by E.Sun Bank’s proportionate share in the net income of E.Sun Bills and E.Sun Securities in 2001 of $244,943 and $28,876,	respectively. Under the assumption of the pro forma financial statements, E.Sun Financial has recognized that amount through the consolidation of these entities as wholly owned	subsidiaries for 2001.	Reclassification of the E.Sun Financial’s shares held by E.Sun Bank to treasury stock.	To reverse the amount of current income recognized by E.Sun Bank’s proportionate share in the net income of E.Sun Bills and E.Sun Securities for the period from January 1 to January	27, 2002 of $14,576 and $3,741, respectively. Under the assumption of the pro forma financial statements, E.Sun Financial has recognized that amount through the consolidation of	these entities as wholly owned subsidiaries for 2002.	To eliminate the inter-company transactions among E.Sun Bank, E.Sun Bills and E.Sun Securities in 2001 and 2002, as if E.Sun Financial was assumed to be incorporated on January 1,	2001 and these entities were wholly owned subsidiaries.	To include the separate assets, liabilities, and operating results of E.Sun Financial from its incorporation on January 28, 2002. (Excluding investment in E.Sun Bank, E.Sun Bills and	E.Sun Securities and the income which were recognized from them.)
1.			2.			3.				4.	5.			6.	7.			8.		9.

F-58

English Translation of a Report Originally Issued in Chinese

INDEPENDENT AUDITORS’ REPORT

January 24, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003

The Board of Directors and Stockholders

E.Sun Commercial Bank, Ltd.

We have audited the accompanying balance sheets of E.Sun Commercial Bank, Ltd. (the ‘‘Bank’’) as of December 31, 2000, 2001 and 2002 and the related statements of income, changes in stockholders’ equity and cash flows for the years then ended, all expressed in New Taiwan Dollars. These financial statements are responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Regulations for 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 E.Sun Commercial Bank, Ltd. as of December 31, 2000, 2001 and 2002, 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 Securities Issuers and accounting principles generally accepted in the Republic of China.

We have also reviewed the translations of New Taiwan dollar financial statements as of December 31, 2002 into U.S. dollars, which have been included solely for the reader’s convenience, on the basis stated in Note 2 to the financial statements and in our opinion, the U.S. dollars amounts have been properly translated on such basis. The convenience translations should not be construed as representations that the New Taiwan dollars amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

T N Soong & Co An Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002 (Formerly a Member Firm of Andersen Worldwide, SC) Taipei, Taiwan The Republic of China

Notice to Readers

F-59

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Unconsolidated Balance Sheets December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

ASSETS CASH (Note 3). . . . . . . . . . . . . . . . . . . . . DUE FROM BANKS (Notes 4 and 21) . . . . DUE FROM CENTRAL BANK OF CHINA (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . SECURITIES PURCHASED (Notes 2, 6, 21 and 22). . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES — NET (Notes 2 and 7). . . PREPAID EXPENSES . . . . . . . . . . . . . . . . LOANS, BILLS AND DISCOUNTS — NET (Notes 2, 8 and 21) . . . . . . . . . . . . . . . . LONG-TERM EQUITY INVESTMENTS — NET (Notes 2 and 9) . . . . . . . . . . . . . . . PROPERTIES (Notes 2 and 10) Cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . Total cost. . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation. . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . Net Properties. . . . . . . . . . . . . . . . . . . . . . OTHER — NET (Notes 2, 11, 16 and 23) . . TOTAL ASSETS . . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $ 8,540,851 $ 7,672,482 $ 14,883,265 4,205,914 10,917,831 5,759,946 9,184,852 8,068,770 12,117,374 23,346,605 36,751,847 38,885,871 9,213,619 12,331,437 18,096,974 37,582 54,652 42,264 172,117,301 179,345,170 170,775,271 4,247,634 4,664,698 4,755,205 2,702,331 2,804,945 2,818,737 1,288,300 1,362,755 1,554,335 967,676 1,099,271 1,216,840 128,526 146,210 163,506 526,974 562,733 587,990 5,613,807 5,975,914 6,341,408 1,160,041 1,321,316 1,480,561 4,453,766 4,654,598 4,860,847 54,944 133,257 157,377 4,508,710 4,787,855 5,018,224 1,032,609 1,279,092 2,309,086 $236,435,677 $265,873,834 $272,643,480	2002
		U.S. Dollars (Note 2) $ 428,913 165,993 349,203 1,120,630 521,527 1,218 4,921,478 137,038 81,232 44,793 35,067 4,712 16,945
		182,749 42,667
		140,082 4,535
		144,617
		66,544
		$7,857,161

F-60

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Unconsolidated Balance Sheets — Continued December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Due to banks (Note 12) . . . . . . . . . . . . . . . Payables (Note 13) . . . . . . . . . . . . . . . . . . Advances . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and remittances (Notes 14 and 21) . Bonds (Notes 15 and 21) . . . . . . . . . . . . . . Other (Notes 2 and 16) . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ EQUITY Capital stock Authorized and issued — 1,693,300 thousand shares in 2000, 1,817,500 thousand shares in 2001 and 2002 . . . . Capital surplus: Paid-in capital in excess of par value. . . . Gain on sale of properties . . . . . . . . . . . From treasury stock. . . . . . . . . . . . . . . . Total capital surplus . . . . . . . . . . . . . . . Retained earnings (deficit) Legal reserve . . . . . . . . . . . . . . . . . . . . Special reserve . . . . . . . . . . . . . . . . . . . Unappropriated earnings (deficit) . . . . . . Total retained earnings (deficit) . . . . . . . Cumulative translation adjustments . . . . . . . Unrealized loss on long-term equity investments . . . . . . . . . . . . . . . . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . Total Stockholders’ Equity . . . . . . . . . . . . . CONTINGENCIES AND COMMITMENTS (Notes 2 and 23) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $ 4,574,055 $ 6,535,224 $ 13,620,380 7,125,098 5,925,374 5,045,561 32,727 28,879 34,238 203,334,054 225,029,161 225,739,600 — 5,000,000 10,000,000 350,236 551,684 290,310 215,416,170 243,070,322 254,730,089 16,933,000 18,175,000 18,175,000 637,800 303,140 303,140 7,641 7,641 7,641 — 15,452 15,452 645,441 326,233 326,233 2,108,687 2,534,534 3,112,924 505 108,619 31,391 1,724,141 2,188,534 (3,237,046) 3,833,333 4,831,687 (92,731) — 4,404 2,906 (108,619) (35,795) - (283,648) (498,017) (498,017) 21,019,507 22,803,512 17,913,391 $236,435,677 $265,873,834 $272,643,480	2002 U.S. Dollars (Note 2) $ 392,518 145,405 987 6,505,464 288,185 8,366 7,340,925 523,775 8,736 220 445 9,401 89,709 905 (93,286) (2,672) 84 - (14,352) 516,236 $7,857,161

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

F-61

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unconsolidated Statements of Income

For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars, Except Per Share Amounts)

			2000		2001		2002		2002
			New		Taiwan Dollars			U.S. Dollars
								(Note 2)
OPERATING INCOME
Interest (Notes 2 and 21) . . . . . . . . . . . .	. .	$13,704,780		$14,418,749		$12,114,525			$349,121
Service fees (Notes 2 and 21). . . . . . . . .	. .		759,362		679,808		902,644		26,013
Gain on sales of securities — net (Notes 2
and 21). . . . . . . . . . . . . . . . . . . . . . .	. .		1,245,497		1,456,199		1,068,909		30,804
Income on long-term equity investments
(Notes 2 and 9) . . . . . . . . . . . . . . . . .	. .		276,639		257,027		70,055		2,019
Foreign exchange gain — net (Note 2). . .	. .		135,735		172,528		157,845		4,549
Other. . . . . . . . . . . . . . . . . . . . . . . . . .	. .		200		2,467		1,800		52
Total Operating Income . . . . . . . . . . . . .	. .	16,122,213			16,986,778		14,315,778		412,558
OPERATING COSTS
Interest (Notes 2 and 21) . . . . . . . . . . . .	. .		9,630,218		9,139,018		5,580,938		160,834
Service charges. . . . . . . . . . . . . . . . . . .	. .		245,673		202,033		310,289		8,942
Provisions (Notes 2, 7 and 8) . . . . . . . . .	. .		1,718,474		2,092,606		9,414,020		271,297
Other. . . . . . . . . . . . . . . . . . . . . . . . . .	. .		9,477		7,722		8,209		237
Total Operating Costs . . . . . . . . . . . . . .	. .	11,603,842			11,441,379		15,313,456		441,310
GROSS PROFIT (LOSS) . . . . . . . . . . . .	. .		4,518,371		5,545,399		(997,678)		(28,752)
OPERATING EXPENSES
Operating expenses . . . . . . . . . . . . . . . .	. .		2,381,194		2,634,563		3,334,566		96,097
General and administrative . . . . . . . . . . .	. .		297,404		315,404		308,073		8,878
Other. . . . . . . . . . . . . . . . . . . . . . . . . .	. .		29,213		13,301		25,198		726
Total Operating Expenses. . . . . . . . . . . .	. .		2,707,811		2,963,268		3,667,837		105,701
INCOME (LOSS) FROM OPERATIONS .	. .		1,810,560		2,582,131		(4,665,515)		(134,453)
NONOPERATING INCOME . . . . . . . . .	. .		38,887		27,339		26,107		752
NONOPERATING EXPENSES. . . . . . . .	. .		99,188		23,214		100,648		2,900
INCOME (LOSS) BEFORE INCOME TAX .			1,750,259		2,586,256		(4,740,056)		(136,601)
INCOME TAX EXPENSE (BENEFIT)
(Notes 2 and 16) . . . . . . . . . . . . . . . .	. .		330,693		658,291		(1,229,249)		(35,425)
NET INCOME (LOSS) . . . . . . . . . . . . .	. .	$	1,419,566	$ 1,927,965		($	3,510,807)	($101,176)
	2000		2001			2002		2002
		After			After		After		After
Pre Tax		Tax	Pre Tax		Tax Pre Tax		Tax Pre Tax		Tax
			New Taiwan		Dollars			U.S.	Dollars
								(Note 2)
EARNINGS (LOSSES) PER
SHARE (Note 19)
Basic earnings (losses) per share . . $0.96		$0.78 $1.44			$1.08 ($2.61) ($1.93) ($0.08) ($0.06)

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

F-62

										TOTAL	STOCKHOLDERS’	EQUITY	$20,023,743		—	—	—	(20,814)		(9,053)	—	1,419,566	—		505	(283,648)	(108,619)			(2,173)	21,019,507		—	—	—	(18,592)		(3,679)	—	—	1,927,965	72,824	(498,017)		299,100	4,404	22,803,512		—	(1,272,250)	(28,272)	(113,089)	—	35,795	(3,510,807)	(1,498)	$17,913,391
										TREASURY	STOCK (Notes 2	and 18)	$ —		—	—	—	—		—	—	—	—		—	(283,648)	—			—	(283,648)		—	—	—	—		—	—	—	—	—	(498,017)		283,648	—	(498,017)		—	—	—	—	—	—	—	—	($498,017)
								UNREALIZED	LOSS ON LONG-	TERM EQUITY	INVESTMENTS	(Note 2)	$ —		—	—	—	—		—	—	—	—		—	—	(108,619)			—	(108,619)		—	—	—	—		—	—	—	—	72,824	—		—	—	(35,795)		—	—	—	—	—	35,795	—	—	$ —
English Translation of Financial Statements Originally Issued in Chinese	E.SUN COMMERCIAL BANK, LTD.	Unconsolidated Statements of Changes in Stockholders’ Equity	For the Years Ended December 31, 2000, 2001 and 2002	(In Thousands of New Taiwan Dollars, Except Par Value)	CAPITAL STOCK	AUTHORIZED AND	ISSUED ($10 PAR	VALUE) CAPITAL SURPLUS (Notes 2 and 17) RETAINED EARNINGS (DEFICIT) (Notes 2 and 17)	CUMULATIVE Paid-in	TRANSLATION Capital in Gain on From Long- From Unappropriated	ADJUSTMENTS Shares Excess of Sale of term Equity Treasury Legal Special Earnings	(Note 2) (Thousands) Amount Par Value Properties Investments Stock Total Reserve Reserve (Deficit) Total	1,561,000 $15,610,000 $950,000 $7,567 $ 41 $ — $957,608 $1,655,125 $ — $1,801,515 $3,456,640 ($ 505)		— — — — — — — 453,562 — (453,562) — —	— — — — — — — — 505 (505) — —	93,660 936,600 — — — — — — — (936,600) (936,600) —	— — — — — — — — — (20,814) (20,814) —		7,420 74,200 — — — — — — — (83,253) (83,253) —	31,220 312,200 (312,200) — — — (312,200) — — — — —	— — — — — — — — — 1,419,566 1,419,566 —	— — — 74 — — 74 — — (74) (74) —		— — — — — — — — — — — 505	— — — — — — — — — — — —	— — — — — — — — — — — —			— — — — (41) — (41) — — (2,132) (2,132) —	1,693,300 16,933,000 637,800 7,641 — — 645,441 2,108,687 505 1,724,141 3,833,333 —		— — — — — — — 425,847 — (425,847) — —	— — — — — — — — 108,619 (108,619) — —	83,665 836,650 — — — — — — — (836,650) (836,650) —	— — — — — — — — — (18,592) (18,592) —		7,069 70,690 — — — — — — — (74,369) (74,369) —	33,466 334,660 (334,660) — — — (334,660) — — — — —	— — — — — — — — (505) 505 — —	— — — — — — — — — 1,927,965 1,927,965 —	— — — — — — — — — — — —	— — — — — — — — — — — —		— — — — — 15,452 15,452 — — — — —	— — — — — — — — — — — 4,404	1,817,500 18,175,000 303,140 7,641 — 15,452 326,233 2,534,534 108,619 2,188,534 4,831,687 4,404		— — — — — — — 578,390 — (578,390) — —	— — — — — — — — — (1,272,250) (1,272,250) —	— — — — — — — — — (28,272) (28,272) —	— — — — — — — — — (113,089) (113,089) —	— — — — — — — — (77,228) 77,228 — —	— — — — — — — — — — — —	— — — — — — — — — (3,510,807) (3,510,807) —	— — — — — — — — — — — (1,498)	1,817,500 $18,175,000 $303,140 $7,641 $ — $15,452 $326,233 $3,112,924 $31,391 ($3,237,046) ($ 92,731) $2,906
													BALANCE, JANUARY 1, 2000 . . . . . . . . . . . . . . . . . .	Appropriations of prior year’s earnings:	Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .	Stock dividends — 6% . . . . . . . . . . . . . . . . . . . . .	Bonus to directors and supervisors. . . . . . . . . . . . . .	Bonus to employees — 7,420 thousand shares and	$9,053 in cash . . . . . . . . . . . . . . . . . . . . . . . .	Capital surplus transferred to capital stock — 2% . . . . . .	Net income in 2000. . . . . . . . . . . . . . . . . . . . . . . . . . .	Reclassification of gain on sales of property and equipment	Equity in cumulative translation adjustment of the investee	company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Treasury stock purchased — 30,000 thousand shares . . . .	Unrealized loss on long-term equity investments . . . . . . .	Adjustments to equity accounts attributable bonus to	employee paid by equity — accounted investee	company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	BALANCE, DECEMBER 31, 2000 . . . . . . . . . . . . . . . .	Appropriations of prior year’s earnings:	Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .	Stock dividends — 5% . . . . . . . . . . . . . . . . . . . . .	Bonus to directors and supervisors. . . . . . . . . . . . . .	Bonus to employees — 7,069 thousand shares and	$3,679 in cash . . . . . . . . . . . . . . . . . . . . . . . .	Capital surplus transferred to capital stock — 2% . . . . . .	Reversal of special reserve . . . . . . . . . . . . . . . . . . . . . .	Net income in 2001. . . . . . . . . . . . . . . . . . . . . . . . . . .	Reversal of unrealized loss on long-term equity investment	Treasury stock purchased — 40,000 thousand shares . . . .	Re-issuance of treasury stock to employees — 30,000	thousand shares . . . . . . . . . . . . . . . . . . . . . . . . . .	Cumulative translation adjustments . . . . . . . . . . . . . . . .	BALANCE, DECEMBER 31, 2001 . . . . . . . . . . . . . . . .	Appropriations of prior year’s earnings:	Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Cash dividends — 7% . . . . . . . . . . . . . . . . . . . . . .	Bonus to directors and supervisors. . . . . . . . . . . . . .	Bonus to employees. . . . . . . . . . . . . . . . . . . . . . . .	Reversal of special reserve . . . . . . . . . . . . . . . . . . . . . .	Reversal of unrealized loss on long-term equity investments	Net loss in 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Cumulative translation adjustments . . . . . . . . . . . . . . . .	BALANCE, DECEMBER 31, 2002 . . . . . . . . . . . . . . . .

F-63

								TOTAL	STOCKHOLDERS’	EQUITY	$657,161		—	(36,664)	(814)	(3,259)	—		1,031	(101,176)	(43)	$516,236
								TREASURY	STOCK	(Notes 2 and 18)	($14,352)		—	—	—	—	—		—	—	—	($14,352)
						UNREALIZED	LOSS ON LONG-	TERM EQUITY	INVESTMENTS	(Note 2)	($1,031)		—	—	—	—	—		1,031	—	—	$ —
							CUMULATIVE	TRANSLATION	ADJUSTMENTS	(Note 2)	$127		—	—	—	—	—		—	—	(43)	$ 84
E.SUN COMMERCIAL BANK, LTD.	Unconsolidated Statements of Changes in Stockholders’ Equity	For the Year Ended December 31, 2002	(In Thousands of U.S. Dollars, Except Par Value — Note 2)	CAPITAL STOCK	AUTHORIZED AND	ISSUED ($0.29 PAR	VALUE) CAPITAL SURPLUS (Notes 2 and 17) RETAINED EARNINGS (DEFICIT) (Notes 2 and 17)	Paid-in Capital From	Shares in Excess of Par Gain on Sale Treasury Legal Special Unappropriated	(Thousands) Amount Value of Properties Stock Total Reserve Reserve Earnings (Deficit) Total	1,817,500 $523,775 $8,736 $220 $445 $9,401 $73,041 $3,130 $ 63,070 $139,241		— — — — — — 16,668 — (16,668) —	— — — — — — — — (36,664) (36,664)	— — — — — — — — (814) (814)	— — — — — — — — (3,259) (3,259)	— — — — — — — (2,225) 2,225 —		— — — — — — — — — —	— — — — — — — — (101,176) (101,176)	— — — — — — — — — —	1,817,500 $523,775 $8,736 $220 $445 $9,401 $89,709 $ 905 ($93,286) ($ 2,672)
											BALANCE, JANUARY 1, 2002 . . . . . . . . . . . . . . . . . .	Appropriations of prior year’s earnings	Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Cash dividends — 7% . . . . . . . . . . . . . . . . . . . . . .	Bonus to directors and supervisors. . . . . . . . . . . . . .	Bonus to employees. . . . . . . . . . . . . . . . . . . . . . . .	Reversal of special reserve . . . . . . . . . . . . . . . . . . . . . .	Reversal of unrealized loss on long-term	equity investments . . . . . . . . . . . . . . . . . . . . . . . .	Net loss in 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Cumulative translation adjustments . . . . . . . . . . . . . . . .	BALANCE, DECEMBER 31, 2002 . . . . . . . . . . . . . . . .

F-64

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unconsolidated Statements of Cash Flows For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision (reversal of allowance) for losses of securities purchased . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization. . . . . . . . . . Equity in net income of investee companies, net of cash dividends received . . . . . . . . Loss on securities purchase reclassified as long-term equity investment . . . . . . . . . Loss on long-term equity investment reclassified as securities purchased . . . . . Loss on sale of long-term equity investments Loss on sale of property and foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . . Loss on market value decline of foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . . Deferred income tax . . . . . . . . . . . . . . . . Decrease (increase) in securities purchased — held for trading purposes . . . . . . . . . Increase in receivables . . . . . . . . . . . . . . . Decrease (increase) in prepaid expenses . . . Increase (decrease) in payables . . . . . . . . . Increase (decrease) in advances. . . . . . . . . Net Cash Provided by (Used in) Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM INVESTING ACTIVITIES Increase in securities purchased -held for investing purposes . . . . . . . . . . . . . . . . . . Decrease (increase) in due from banks . . . . . . Decrease (increase) in due from Central Bank of China . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sales of: Long-term equity investments . . . . . . . . . . Property and equipment . . . . . . . . . . . . . . Foreclosed collaterals . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $1,419,566 $1,927,965 ($3,510,807) 265,043 (289,568) (36,049) 1,718,474 2,092,606 9,414,020 243,217 271,287 298,618 (205,599) (176,916) (54,711) 149,067 — — — 20,381 — 15,252 8,825 — 87,967 16,259 4,649 — — 75,500 25,226 18,258 (1,337,795) (3,342,550) (10,739,000) 5,178,047 (2,575,746) (3,397,459) (6,380,215) 9,041 (17,070) 12,388 480,639 (1,199,724) (879,813) 5,255 (3,848) 5,359 (1,705,148) (11,468,004) 2,789,191 (220,396) (2,277,794) (7,276,022) 2,509,844 (6,711,917) 5,157,885 (245,769) 1,116,082 (4,048,604) 99,700 21,259 — 148 3,072 443 200,655 195,124 363,194	2002 U.S. Dollars (Note 2) ($101,176) (1,039) 271,297 8,606 (1,576) — — — 134 2,176 (38,553) 149,223 (183,868) 357 (25,355) 154 80,380 (209,684) 148,642 (116,674) — 13 10,467

(Forward)

F-65

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unconsolidated Statements of Cash Flows — Continued For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

Acquisition of: Long-term equity investments . . . . . . . . Properties. . . . . . . . . . . . . . . . . . . . . . Increase in: Loans, bills and discounts . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . Net Cash Used in Investing Activities . . . CASH FLOWS FROM FINANCING ACTIVITIES Increase in due to banks. . . . . . . . . . . . . Increase in deposits and remittances . . . . Proceeds from issuance of bonds . . . . . . . Payment of bonus to directors, supervisors and employees. . . . . . . . . . . . . . . . . . Increase (decrease) in other liabilities . . . Acquisition of treasury stock . . . . . . . . . Proceeds from reissuance of treasury stock to employee . . . . . . . . . . . . . . . . . . . Cash dividends paid. . . . . . . . . . . . . . . . Net Cash Provided by Financing Activities EFFECTS OF EXCHANGE RATE CHANGES . . . . . . . . . . . . . . . . . . . . NET INCREASE (DECREASE) IN CASH CASH, BEGINNING OF YEAR . . . . . . . CASH, END OF YEAR . . . . . . . . . . . . . SUPPLEMENTARY INFORMATION Interest paid . . . . . . . . . . . . . . . . . . . . . Income tax paid . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars ($ 549,339) ($ 317,325) $ — (1,055,598) (546,101) (522,367) (15,228,689) (9,458,678) (450,948) (15,198) (51,533) (3,399) (14,504,642) (18,027,811) (6,779,818) 2,121,007 1,961,169 7,085,156 14,549,523 21,695,107 710,439 — 5,000,000 5,000,000 (37,915) (22,271) (141,361) 3,594 179,968 (179,524) (283,648) (498,017) — — 299,100 — — — (1,272,250) 16,352,561 28,615,056 11,202,460 — 12,390 (1,050) 142,771 (868,369) 7,210,783 8,398,080 8,540,851 7,672,482 $ 8,540,851 $ 7,672,482 $14,883,265 $ 9,697,928 $ 9,276,003 $ 6,425,365 $ 180,823 $ 399,867 $ 286,190	2002 U.S. Dollars (Note 2) $ — (15,054) (12,995) (98) (195,383) 204,183 20,474 144,092 (4,074) (5,174) — — (36,664) 322,837 (30) 207,804 221,109 $428,913 $185,169 $ 8,247

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

F-66

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. Organization and Operations

The Bank engages in commercial and savings banking permitted under the Banking Laws and regulations of the Republic of China ( the ‘‘ROC’’).

As of December 31, 2002, the Bank had a domestic banking department and international banking departments, an offshore banking unit (OBU), 2 overseas branches (Los Angeles and Hong Kong) and 48 domestic branches.

Additionally, the Bank had a Trust Department which consists of planning, managing and operating a trust business. These operations are regulated under the Banking Law and Trust Law.

On December 10, 2001, the stockholders of the Bank approved the establishment of E.Sun Financial Holding Company, Ltd. (ESFHC) to hold the shares of the Bank, E.Sun Bills Finance Corporation and E.Sun Securities Corp. The holding company structure was achieved through a share swap: 1 share of ESFHC for 1.0 share of the Bank, 1.10 shares of E.Sun Bills Finance Corp, and 1.25 shares of E.Sun Securities Corp. The board of directors designated January 28, 2002 as the effective date of the share swap. After the shares transfer, the Bank became a 100% subsidiary of ESFHC. Also on January 28, 2002, the trading of the Bank’s stock on the Taiwan Stock Exchange (TSE) was halted, and ESFHC’s stock began to be traded on the TSE.

2. Summary of significant accounting policies

The Bank’s accounting and reporting policies, which conform to practices of the banking industry, accounting principles generally accepted in the Republic of China and Criteria Governing the Preparation of Financial Reports by Securities Issuers, are summarized below.

Basis of financial statement preparation

The accompanying financial statements include the accounts of the Head Office, OBU, and all branches. All interoffice transactions and balances have been eliminated. The total assets and operating income of the Bank’s subsidiaries were individually less than 10%, and collectively less than 30%, of those of the Bank. Thus, the Bank did not prepare consolidated financial statements.

Translation of New Taiwan dollars into United State dollar amounts

The accompanying financial statements are stated in New Taiwan dollars. Translation of New Taiwan dollar amounts into U.S. dollars as of and for the year ended December 31, 2002 are included in the financial statements solely for the convenience of the readers, using the noon buying rate of the U.S. Federal Reserve Bank of New York on December 31, 2002 of NT$34.7=US$1. These translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

Securities purchased

Securities purchased are carried at cost less any allowance for decline in value. Costs of securities sold are determined by the following methods: Stock, mutual fund beneficiary certificates and government bonds — moving average; and others — specific identification.

F-67

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Under a directive of the Ministry of Finance, sales of bonds and other short-term securities under agreements to repurchase are treated as outright sales while purchases of bonds and other short-term securities under agreements to resell are recorded as assets at their acquisition cost. Gains or losses on such transactions are recognized upon sale in current operations.

Overdue loans

Loans and other credits (including accrued interest) that are outstanding for at least six months are classified as overdue loans in accordance with the guidelines issued by the Ministry of Finance.

Allowances for possible losses and reserve for losses on guarantees

The Bank makes provisions for bad debts and losses on guarantees based on the evaluation of loans, overdue loans, bills, discounts, receivables, guarantees and acceptances based on their specific risks or general risks.

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 with high uncollectibility in accordance with guidelines issued by the Ministry of Finance.

Based on guidelines issued by the Ministry of Finance, credits deemed uncollectible may be written off pursuant to a resolution issued by the Board of Directors. Recovery of amounts previously written off are credited to the allowance for loan losses.

Long-term equity investments

Investments in shares of stock of companies in which 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 initially carried at cost and subsequently adjusted for the Bank’s proportionate share in the net income or loss of the investee companies. The proportionate share in the net income or loss is recognized as current income or loss, and any cash dividends received are reflected as a reduction in the carrying values of the investments. The difference between the acquisition cost and the Bank’s proportionate equity in the net asset of the investee companies, is amortized over five years. A capital increase of investee companies that results in the increase in the Bank’s equity in its net assets is credited to capital surplus, and any decrease is charged to such capital surplus to the extent of the available balance, with the difference charged to unappropriated retained earnings.

Other investments in stocks with no quoted market price are accounted for at cost. The carrying amount of the investment is reduced to reflect an other than temporary decline in the value of the investments, with the related losses charged to current income. Investments in stock with quoted market prices is stated at the lower of cost or market. The reduction of an investment to reflect a lower market value and its write-up due to the subsequent recovery in market value are charged or credited to stockholders’ equity. Cash dividends received are recorded as investment income. Foreign-currency investments are recorded in New Taiwan dollars at the rate of exchange in effect when the transactions occur. At year-end, the balance of these investments are restated on the basis of the year-end exchange rate. If the restated amounts are lower than cost, the differences are recognized as a translation adjustment under stockholders’ equity. Otherwise, the cost basis is maintained.

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

F-68

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The cost of long-term equity investments sold is determined by the weighted-average method.

Properties

The cost and accumulated depreciation are removed from the accounts when an item of property is disposed of or retired, and any gain or loss is credited or charged to income. Before 2000, any gain on disposal (less the applicable income tax) was reclassified as capital surplus at year-end.

Foreclosed collaterals

Foreclosed collaterals (part of other assets) are recorded at the lower of cost or net realizable value on the balance sheet dates.

Treasury stock

Capital stock acquired is carried at cost and presented as a deduction to arrive at stockholders’ equity.

The reissuance of the treasury stocks is accounted for as follows: (a) reissue price higher than the acquisition cost — the excess is credited to paid-in capital on treasury stock; and (b) reissue price less than the acquisition cost — initially charged to paid-in capital on treasury stock, with any remaining deficiency charged to retained earnings.

Pursuant to a directive issued by the Securities and Futures Commission (SFC), the financial institution, which repurchased its own capital stock pursuant to the Securities and Exchange Law, and become a wholly owned subsidiary of a financial holding company resulting in its treasury stocks being converted to stocks of the financial holding company, presents the shares in the financial holding company as treasury stock. The financial holding company also presents the shares it issued in exchange for those capital stock as treasury stock. In cases that shares of the financial institutions with the same financial holding company were held among each other prior to the share swap, these shares, after the swap, are stated as equity investments.

Pension costs

The Bank recognizes pension costs on the basis of actuarial calculations. Unrecognized net transition asset is amortized over 29 years.

Recognition of interest revenue and service fees

Interest revenue on loans is recorded on an accrual basis. Under regulations of the Ministry of Finance, no interest revenue is recognized on loans and other credits extended by the Bank that are classified as overdue loans. The interest revenue on those loans is recognized upon collection on these loans and credits.

F-69

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

In addition, the unpaid interest on rescheduled loans should be recorded as deferred revenue, and the paid interest is recognized as interest revenue.

Service fees are recorded when the earnings process is completed upon rendering of such services.

Income tax

Tax credits resulting from technology or equipment purchases, expenditures for research and development, employee training and stock investments are recognized in current period.

Income tax on interest derived from short-term negotiable instruments, which is levied separately is accrued as part of income tax expense when such earning are accrued.

Any adjustment of income taxes of prior years are added to or deducted from the current year’s tax provision.

Income taxes (10%) on undistributed earnings are recorded as expenses in the year when the stockholders resolve to retain the earnings.

Contingencies

Foreign currency transactions

Forward contracts

F-70

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Foreign currency swap contracts

The related discount or premium is amortised by the straight-line basis over the contract period.

Asset swaps

The Bank enters into agreements to swap the fixed interest on its investments in certain bonds and the premium received on the redemption of bonds for floating interest rates. There is no exchange of notional principals (equal to the aggregate face values of the bonds). For swaps entered into for hedging purposes, the net interest upon each settlement is recorded as an adjustment to interest revenue or expense associated with the items being hedged.

Cross-currency swap

Cross currency swap contracts, which are intended for hedging purposes, are recorded at their forward rates on the contract dates. The interest received or paid under the contract is recognized as interest income or expense.

3. Cash

	December 31
2000 $2,132,965 2,550,992 3,856,894 $8,540,851	2001 $1,963,659 3,349,047 2,359,776 $7,672,482	2002
		$ 2,113,599 10,369,560 2,400,106
		$14,883,265

4. Due from Banks

	December 31
2000 $ 812,220 3,393,694 $4,205,914	2001 $ 834,155 10,083,676 $10,917,831	2002
		$ 693,476 5,066,470
		$5,759,946

F-71

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

5. Due from Central Bank of China

	December 31
2000 $9,061,302 123,550 $9,184,852	2001 $5,458,166 2,610,604 $8,068,770	2002
		$ 9,742,971 2,374,403
		$12,117,374

As required by law, the reserves for deposits, are calculated by applying the prescribed rates to the average monthly balances of various types of deposit accounts. Of these amounts, $6,387,435, $5,147,918 and $5,268,678 as of December 31, 2000, 2001 and 2002, respectively, were restricted from use by the Bank.

6. Securities Purchase

	December 31
2000 $ 6,131,421 6,167,720 4,052,525 2,716,153 4,690,322 — 23,758,141 411,536 $23,346,605	2001 $ 9,300,084 7,419,702 12,894,083 3,460,493 3,799,453 — 36,873,815 121,968 $36,751,847	2002
		$11,999,757 8,355,044 6,525,929 3,715,258 1,425,802 6,950,000
		38,971,790 85,919
		$38,885,871

7. Receivables — Net

	December 31
2000 $7,164,459 1,020,201 411,749 328,535 459,040 9,383,984 170,365 $9,213,619	2001 $ 9,237,928 1,413,106 582,421 509,164 803,200 12,545,819 214,382 $12,331,437	2002
		$16,311,563 782,373 266,736 340,429 745,472
		18,446,573 349,599
		$18,096,974

F-72

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

8 Loans, Bills and Discounts — Net

	December 31
2000 $ 60,455,963 53,190,141 54,926,712 4,476,562 677,938 173,727,316 1,610,015 $172,117,301	2001 $ 56,199,224 60,049,629 58,953,842 5,057,616 598,857 180,859,168 1,513,998 $179,345,170	2002
		$ 48,612,524 59,607,025 60,830,353 2,137,685 1,128,439
		172,316,026 1,540,755
		$170,775,271

As of December 31, 2000, 2001 and 2002, the loan and credit balances for which accrual of interest revenues was discontinued, amounted to $5,045,923, $5,057,616 and $2,137,685, respectively. The unrecognized interest revenues on these loans and credits amounted to $418,066, $350,663 and $315,806 for the years ended December 31, 2000, 2001 and 2002, respectively.

For the years ended December 31, 2000, 2001 and 2002, the Bank carried out legal procedures required before the Bank can write off credits.

The details of and changes in the allowance for credit losses on loans, bills and discounts are summarized below:

	2000					2002
Specific Risk	General Risk	Total	Specific Risk	Total	Specific Risk	General Risk	Total
							$1,513,998 8,818,108 (8,949,253) 157,902
$ 714,245	$895,770	$1,610,015	$1,075,932	$1,513,998	$ 104,593	$1,436,162	$1,540,755

Since the third quarter of 2000, the economic and financial environment has been beset by such factors as unstable domestic and foreign conditions. Thus, the country’s economic growth has decelerated, investment is reduced, unemployment has risen, the stock market is bearish, and the New Taiwan dollar has devaluated. Certain business enterprises, including conglomerates and listed companies, failed to meet their obligations when these obligations became due. To stabilize the situation, the government has taken various economy-boosting measures. Thus, the Bank’s financial statements for the year ended December 31, 2002 included provisions for possible guarantee and other based on information available to the Bank, including defaults to the extent they can be determined or estimated. These estimated provisions do not include any adjustments that might be required when related contingent liabilities become probable or determinable in the future.

F-73

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

9. Long-term Equity Investments

	December 31
2000 Carrying Value % of Ownership $ 176,316 99.0 — — 9,680 79.0 3,028,974 63.4 479,401 45.0 — — 200,451 — 102,265 — 47,081 — 155,857 2.6 — — 156,228 — 4,356,253 108,619 $4,247,634	2001 Carrying Value % of Ownership $ 154,553 99.0 133,045 45.0 15,090 79.0 3,222,992 64.2 508,277 45.0 — — 200,451 — — — — — 155,857 2.6 100,000 0.6 210,228 — 4,700,493 35,795 $4,664,698	2002
Carrying Value $ 176,316 — 9,680 3,028,974 479,401 — 200,451 102,265 47,081 155,857 — 156,228 4,356,253 108,619 $4,247,634	Carrying Value $ 154,553 133,045 15,090 3,222,992 508,277 — 200,451 — — 155,857 100,000 210,228 4,700,493 35,795 $4,664,698	Carrying Value $ 151,769 154,570 32,744 — — 3,749,586 200,451 — — 155,857 100,000 210,228 4,755,205 — $4,755,205	% of Ownership
			99.0 45.0 79.0 — — 12.5 — — — 2.6 0.6 —

10. Accumulated Depreciation

	December 31
2000 $ 180,050 609,562 74,582 295,847 $1,160,041	2001 $ 256,001 665,754 87,115 312,446 $1,321,316	2002
		$ 299,590 733,847 100,850 346,274
		$1,480,561

F-74

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

11. Other Assets — Net

	December 31
2000 $ 207,646 801,667 23,296 — $1,032,609	2001 $ 414,683 835,412 28,997 — $1,279,092	2002
		$ 181,364 793,511 64,665 1,269,546
		$2,309,086

12. Due to Banks

	December 31
2000 $2,967,672 1,525,443 80,940 $4,574,055	2001 $4,725,945 1,674,882 134,397 $6,535,224	2002
		$12,440,831 1,084,978 94,571
		$13,620,380

13. Payables

	December 31
2000 $3,856,894 2,135,828 338,506 186,455 207,977 399,438 $7,125,098	2001 $2,359,776 1,997,100 516,009 372,584 209,389 470,516 $5,925,374	2002
		$2,400,106 1,153,709 350,661 254,228 271,816 615,041
		$5,045,561

F-75

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

14. Deposits and Remittances

	December 31
2000 $ 74,026,518 72,681,701 30,887,578 15,523,410 7,581,100 2,601,441 32,306 $203,334,054	2001 $ 78,463,633 82,239,741 39,256,283 18,188,448 4,529,650 2,308,028 43,378 $225,029,161	2002
		$ 76,890,277 73,609,037 47,282,144 24,044,297 1,254,600 2,608,613 50,632
		$225,739,600

15. Bonds

	December 31
2000 $— — — — — $—	2001 $3,000,000 2,000,000 — — — $5,000,000	2002
		$ 3,000,000 2,000,000 1,700,000 1,300,000 2,000,000
		$10,000,000

The above mentioned 90 days interest rate of commercial paper and floating interest rate were based on the average quoted interest rate of Hong Kong’s Moneyline Telerate.

F-76

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

16. Income Tax

a. Income tax expense (benefit)

		For the	Years Ended	December 31	December 31	December 31
		2000	2001			2002
	Income tax expense — current before tax
	credits . . . . . . . . . . . . . . . . . . . . . . . . .	$308,440	$347,875		$	85,735
	Net change in deferred income tax:
	Tax credits . . . . . . . . . . . . . . . . . . . . . .	(1,758)		—		(10,139)
	Loss carryforwards . . . . . . . . . . . . . . . .	—		—	(1,290,305)
	Allowance for possible losses on loans and
	receivables . . . . . . . . . . . . . . . . . . . .	14,642		—		(35,365)
	Unrealized foreign exchange gain . . . . . .	13,650	18,258			(1,986)
	Adjustment of prior year’s tax . . . . . . . . . .	(4,281)	292,158			8,759
	Tax on unappropriated earnings (10%) . . . . .	—		—		14,052
		$330,693	$658,291		($1,229,249)
b.	A reconciliation of income tax expense — current	before tax credits is shown below:
		For the	Years Ended	December 31
		2000	2001			2002
	Income tax expense (benefit) on income (loss)
	before income tax at statutory rate (25%) .	$437,555	$646,554		($1,185,014)
	Permanent differences:
	Tax-exempt income . . . . . . . . . . . . . . . .	(81,155)	(268,780)			(126,152)
	Others . . . . . . . . . . . . . . . . . . . . . . . . .	(19,668)	(12,268)			59,106
	Temporary differences . . . . . . . . . . . . . . . .	(28,292)	(17,631)			1,337,795
	Income tax expense — current before tax
	credits . . . . . . . . . . . . . . . . . . . . . . . . .	$308,440	$347,875		$	85,735
c.	Deferred income tax assets (liabilities):
			December	31
		2000	2001			2002
	Deferred income tax assets (liabilities)
	Tax credits . . . . . . . . . . . . . . . . . . . . . .	$ —	$	—	$	10,139
	Loss carryforwards . . . . . . . . . . . . . . . .	—		—		1,290,305
	Allowance for possible losses on loans and
	receivables . . . . . . . . . . . . . . . . . . . .	—		—		35,365
	Unrealized foreign exchange gain . . . . . .	(49,991)	(68,249)			(66,263)
	Deferred income taxes assets (liabilities)
	(shown as part of ‘‘other assets’’ or ‘‘other
	liabilities’’ in the balance sheets) . . . . . . .	($49,991)	($68,249)		$1,269,546

F-77

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Tax credits (resulting from employee training expenditures) and loss carryforwards as of December 31, 2002 will expire in 2006 and 2007, respectively.

d. Imputed tax credit

Balance of stockholders’ imputed tax credit .		December 31
	2000 $149,055	2001 $160,128	2002
			$43,303

Actual tax credit ratio for distributing earnings generated in 2000 and 2001 were 25.38% and 16.10%, respectively.

There was a deficit in 2002. Thus, imputed tax credit shall be allocated corresponding actual rate when earnings generated in the future are appropriated.

e. The unappropriated earnings as of December 31, 2000, 2001 and 2002 consisted of earnings of $289,641, $260,568 and $260,568, respectively, which were generated before January 1, 1998.
f. The statutory corporate tax rates for 2000, 2001 and 2002 were about 25%.
g. Income tax returns through 1998, as well as 2000, have been examined by the tax authorities. In the assessment of 1994, 1995, 1997, 1998 and 2000 tax returns, the tax authorities denied the creditability of 10% withholding tax on interest income on bonds pertaining to periods in which those bonds, totaling $239,690 were held by other investors. In addition, the 1996, 1999 and 2001 income tax returns included a reduction of $80,785 in income tax obligations. The Bank had accrued liabilities and written off any assets recognized related to the foregoing withholding taxes as part of income tax expense in 2001. In August 2002, the Supreme Administrative Court decided that the Taipei National Tax Administration find another disciplinary action to deal with the withholding tax issue. The Bank has not recognized any asset related to these amounts previously written-off or expensed, pending further decision of the tax authorities

17. Stockholders’ Equity

The Bank’s Articles of Incorporation provide that the following should be appropriated from the annual net income less any accumulated deficit:

a. 30% as legal reserve;
b. Special reserve, if needed; and
c. From any Remainder
(1) The following appropriations based on the amendment of the Articles of Incorporation on June 20, 2002, to reflect the formation ESFHC.
- (a) 94% as dividends
- (b) 1% as bonus to directors and supervisors
- (c) 5% as bonus to employees

F-78

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Also under the Bank’s amended Articles of Incorporation, the stockholders can decide not to declare any dividends or decide to distribute only a portion of the distributable earnings.

Under the Bank’s policy, cash dividends are the major portion of the declared dividends. However, cash dividends should not be more than 15% of capital stock if legal reserve is less than the total amount of capital stock.

(2) Before the amendment of the articles of Incorporation on June 20, 2002, some of the appropriations were as follows:
(a) 90% as dividends
(b) 2% as bonus to directors and supervisors
(c) 8% as bonus to employees

The dividend policy of the Bank is that the issuance of stock dividends should have priority over the payment of cash dividends in order to strengthen its financial structure. This policy is also intended to improve the capital adequacy ratio of the Bank and keep this ratio higher than the ratio set under government regulations. However, when dividends are declared, cash dividends must be at least 10% of total dividends declared, except when the resulting cash dividend per share falls below NT$0.10.

Appropriations of earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of that year of approval.

On June 20, 2002, the stockholders resolved to appropriate from its earnings $113,089 as bonus for employees and $28,272 for directors and supervisors; these appropriations were the same as those stated in the board of directors’ resolution dated February 27, 2002. Assuming the bonus to employees, directors and supervisors was recognized as expense in 2001, the pro forma basic earnings per share for 2001 will decrease from NT$1.08 to NT$1.00. As of January 24, 2003, the Board of directors had not resolved the appropriations of earnings in 2002.

Information on the bonus for employees, directors and supervisors can be accessed through the web site of the Taiwan Stock Exchange.

Under the Company Law, the appropriation for legal reserve should be made until the reserve equals the aggregate par value of the Bank’s outstanding capital stock. This reserve should only be used to reduce or offset a deficit, or when the reserve reaches 50% of the aggregate par value of the Bank’s outstanding capital stock, up to 50% thereof can be declared as stock dividend. The Banking Law limits the appropriation for cash dividend and any bonuses to stockholders to 15% of aggregate par value of the Bank’s outstanding capital stock until the legal reserve equals the aggregate par value of the Bank’s outstanding capital stock.

Under related regulations, capital surplus can only be used to offset a deficit. However, capital surplus arising from the issuance of shares in excess of par value (issuance in excess of common stock par value, capital surplus from issuance of common stock for combination and treasury stock transactions) and through donation can be transferred to common stock in based on the percentage of shares of the stockholders. Any capital surplus transferred to common stock should be within a certain percentage prescribed by related regulations.

F-79

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Under a directive of the Securities and Futures Commission, the Bank has to make the special appropriation from current year’s earnings and the unappropriated earnings generated in prior years equal to the total debit balance of any stockholders’ equity account other than the deficit such as the ‘‘unrealized loss on long-term equity investments’’ and ‘‘cumulative translation adjustments’’ accounts. The special reserve should be adjusted accordingly on the basis of the debit balance of the foregoing stockholders’ equity account as of year-end.

Under the Integrated Income Tax System that became effective on January 1, 1998, stockholders are allowed a tax credit for the income tax paid by the Bank on earnings generated in 1998 and onwards.

Treasury stock

Reason for Redemption Year 2000 Reissuance to employees (Note) . . . . Year 2001 Reissuance to employees (Note) . . . . Year 2002 Reissuance to employees (Note) . . . .	Beginning of the Year — 30,000 40,000	Increase 30,000 40,000 —	Decrease — 30,000 —	End of the Year
				30,000 40,000 40,000

Note: Shares in thousands.

The Securities and Exchange Law provides for the following:

a. The total number of shares that can be held in treasury is limited to 10% of the number of total outstanding shares;
b. The maximum cost of reacquiring treasury shares is limited to the sum of the balances of the retained earnings, additional paid-in capital in excess of par value and capital surplus arising from donated capital;
c. Using treasury shares to secure any obligations or commitment of the Bank is prohibited;
d. The Bank is prohibited from exercising the shareholder rights with respect to the treasury shares.

In March and November 2001, the Bank reissued 30,000 thousand shares of treasury stock to employees. The reissuance price per share was NT$10.

Under a directive issued by the Securities and Futures Commission, if a financial institution repurchases its own capital stock pursuant to the Securities and Exchange Law and becomes a wholly owned subsidiary of a financial holding company, the shares in the financial institution are considered treasury stock.

F-80

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

19. Earnings Per Share

The calculation of earnings (loss) per share is as follows:

Basic earnings (loss) per share 2000 . . . . . . . . . . . . . . . . . . 2001 . . . . . . . . . . . . . . . . . . 2002 . . . . . . . . . . . . . . . . . .	Amount (Numerator) Pre Tax After Tax $ 1,750,259 $ 1,419,566 $ 2,586,256 $ 1,927,965 $(4,740,056) $(3,510,807)	Shares (Denominator) (Thousands) 1,813,802 1,793,179 1,814,541	Earnings (Loss) Per Share (Dollars) Pre Tax After Tax $0.96 $0.78 $1.44 $1.08 ($2.61) ($1.93)
	Pre Tax $ 1,750,259 $ 2,586,256 $(4,740,056)		Pre Tax $0.96 $1.44 ($2.61)

20. Pension Plan

The Bank has a pension plan for all regular employees. Upon retirement, an employee will receive the Bank’s contributions before May 1, 1997, which were credited to his/her account, plus earnings thereof and an amount calculated based on length of service after May 1, 1997 and monthly average basic pay for six months before retirement.

The Bank makes monthly contributions, equal to 5.54% of salaries, to a pension fund (the ‘‘Fund’’). The Fund is managed by a workers fund administrative committee and deposited in its name in the Central Trust of China. The difference between the Bank’s contributions and the pension costs based on actuarial calculations is deposited in the Bank in the name of the employees pension fund administrative committee.

Pension information for 2000, 2001 and 2002 is as follows:

a. Pension cost Service cost . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . Projected return on plan assets . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . Pension cost . . . . . . . . . . . . . . . . . . . . . . .	For the Years Ended December 31 2000 2001 2002 $59,356 $52,142 $64,783 12,928 13,196 12,243 (14,513) (15,984) (15,134) (734) (1,100) (1,100) $57,037 $48,254 $60,792	For the Years Ended December 31 2000 2001 2002 $59,356 $52,142 $64,783 12,928 13,196 12,243 (14,513) (15,984) (15,134) (734) (1,100) (1,100) $57,037 $48,254 $60,792
	2000 $59,356 12,928 (14,513) (734) $57,037	2001 $52,142 13,196 (15,984) (1,100) $48,254

F-81

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Reconciliation of the fund status of the plan and accrued pension cost

	December 31
2000 ($ 10,346) (117,178) (127,524) (92,403) (219,927) 244,115 24,188 (27,704) 3,484 ($ 32) $ 10,346 6.0% 4.0% 6.0%	2001 ($ 16,381) (178,792) (195,173) (110,912) (306,085) 348,357 42,272 (26,604) (16,101) ($ 433) $ 16,381 4.0% 3.0% 4.0%	2002
		($ 16,646) (210,087)
		(226,733) (134,471)
		(361,204) 382,179
		20,975 (25,504) 3,792
		($ 737)
		$ 16,646
		3.5% 3.0% 3.5%

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2000 $ 57,037 $ 11,274	2001 $ 47,853 $ 16,654	2002
		$ 60,488
		$ 33,832

21. Related-Party Transactions

Significant related-party transactions pertain to (a) E.Sun Financial Holding Company — parent company, with subsidiaries E.Sun Bills Finance Corporation (ESBF), E.Sun Securities Corp. (ESSC) and E.Sun Venture Capital Co., Ltd.; (b) E.Sun Social Welfare Foundation (the funds of which are donated by the Bank); (c) investees accounted for under the equity method — E.Sun Finance & Leasing Co., E.Sun Insurance Agent Co., E.Sun Securities Investment Trust Corp. and E.Sun Technologies Co. (50% of shares owned by E.Sun Finance & Leasing Co.); (d) Fu Bon Securities Finance Co. (the Bank is its director); and (e) certain directors, supervisors, managers, and relatives of the Bank’s chairman and general manager.

F-82

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The transactions with the foregoing related parties are summarized as follows:

Year Ended December 31, 2000

Call loans to bank — ESBF . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreements to repurchase Securities purchased under agreements to resell — ESBF . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . .	December 31, 2000 Amount % to Total $ — — $ 441,922 — $6,875,953 3 $ 81,400 1 $ 71,000 2 $ 786,532 15 $ 373,463 2	2000 Interest Rate (%) Revenue (Expense) 4.60–6.02 $ 4,193 4.90–10.21 $ 41,743 0–13.00 ($277,793) 0.40 $ 421 4.00–5.13 ($ 5,873) 4.25–4.85 $ 20,482
	Amount $ — $ 441,922 $6,875,953 $ 81,400 $ 71,000 $ 786,532 $ 373,463	Interest Rate (%) 4.60–6.02 4.90–10.21 0–13.00 0.40 4.00–5.13 4.25–4.85

F-83

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Year Ended December 31, 2001

Call loans to bank — ESBF . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreement to repurchase ESBF. . . . . . . . . . . . . . . . . . . . . . . . . . ESSC. . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . . Bonds payable . . . . . . . . . . . . . . . . . . . . .	December 31, 2001 Amount % to Total $ — — $ 808,573 — $8,157,595 4 $ 39,000 1 $ 149,000 1 1,526,275 11 $1,675,275 12 $ 199,464 4 $ 299,424 1 $ 360,000 7	2001 Interest Rate (%) Revenue (Expense) 2.42–4.9 $ 4,154 2.45–9.85 $ 31,356 0–13 ($400,127) 0.4 $ 219 2–4.7 ($ 3,420) 2–4.95 (34,517) ($ 37,937) 2.25–4.8 $ 24,078 4.2 ($ 6,100)
	Amount $ — $ 808,573 $8,157,595 $ 39,000 $ 149,000 1,526,275 $1,675,275 $ 199,464 $ 299,424 $ 360,000	Interest Rate (%) 2.42–4.9 2.45–9.85 0–13 0.4 2–4.7 2–4.95 2.25–4.8 4.2

F-84

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Year Ended December 31, 2002

Call loans to bank — ESBF . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreements to repurchase ESBF. . . . . . . . . . . . . . . . . . . . . . . . . . ESSC. . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under agreements to resell — ESBF . . . . . . . . . . . . . . . . . . . Bonds payable . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . .	December 31, 2002 Amount % to Total $ — — $ 792,490 — $4,410,205 2 $ 420,000 4 1,270,789 11 $1,690,789 15 $ 582,689 8 $ 260,000 4 $1,304,524 3	2002 Interest Rate (%) Revenue (Expense) 1.575–2.3 $ 1,056 1.5–9.85 $21,992 0–13 ($75,276) 1.225–1.8 ($ 608) 1.15–2.5 (18,758) — ($19,366) 1.15–2.285 $ 2,199 4.2 ($14,456)
	Amount $ — $ 792,490 $4,410,205 $ 420,000 1,270,789 $1,690,789 $ 582,689 $ 260,000 $1,304,524	Interest Rate (%) 1.575–2.3 1.5–9.85 0–13 1.225–1.8 1.15–2.5 — 1.15–2.285 4.2

The interest rates shown above are similar to, or approximate, those offered to unrelated parties. However, the interest rates on deposits given to managers of the Bank are the same as the interest rates on a certain amount of savings deposits of employees.

22. Pledged Assets

As of December 31, 2000, 2001 and 2002, certain investments in securities with an aggregate face value of $1,721,900, $779,300, and $676,900, respectively, were deposited in the (a) Central Bank of China to secure its potential obligations pertaining to its trust activities, (b) courts of justice pursuant to various collection cases on overdue loans, and (c) National Credit Card Center to secure its potential obligations arising from its credit card activities, (d) with other parties as refundable deposits.

As of December 31, 2002, certain negotiable certificates of deposit aggregating $5,000,000, which are included in the securities purchased account, have been provided as collateral for day-term overdraft to comply with the Central Bank’s clearing system of Real-time Gross Settlement (RTGS). The unused overdraft amount at the end of day can also be treated as the Bank’s liquidity reserve.

F-85

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

23. Contingencies and commitments

Except for those mentioned in Note 27, the contingencies and commitments as of December 31, 2002 were as follows:

a. Sales amounting to $6,979,034 before February 14, 2003 of short-term negotiable instruments acquired for $6,972,941 under agreements to resell; and repurchase for $9,349,447 before May 20, 2003 of short-term negotiable instruments sold for $9,334,723 under agreements to repurchase.
b. Renewable lease agreements on premises occupied by the Bank’s branches, which will expire on various dates before 2012. Rentals are calculated on the basis of the leased area and are paid monthly, quarterly or semiannually. As of December 31, 2002, refundable deposits on these leases totaled $687,386 (shown as part of ‘‘other assets’’ account). Rentals for the next five years on such leases are as follows:

Year
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$210,701
182,295
123,426
93,731
52,072

Total rentals for 2008 to 2012 will aggregate to $165,484. The present value of these rentals is $148,128 based on an annual interest rate of 1.4%.

c. The Bank has entered into agreements for the acquisition of land and building, construction of a building and various purchases related to the improvements of existing premises occupied by its branches. Total contract amounts for such agreements is approximately $647,728. As of December 31, 2002 the remaining unpaid amount was approximately $493,554.
d. The balance sheet and property list of the trust activities of the Bank are as follows:

Balance Sheet of Trust Activities December 31, 2002

Total Assets . . . . . . . . . . . $12,467,504 Total Liabilities . . . . . . . . $12,467,504

Property List of Trust December 31, 2002

Investment Items
Employee deposit trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security investment trust fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amounts

$ 1,702
10,735,390
1,533,806
196,606

$12,467,504

F-86

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

24. Capital Adequacy Ratio

The Banking Law and related regulations require that the Bank maintain its stand-alone and consolidated capital adequacy ratios (CAR) at a minimum of 8%. Should the Bank’s CAR fall below the required minimum, it could be subjected to actions of the Ministry of Finance as allowed under current regulations, including restrictions on the amount of cash dividends that the Bank can declare or, in certain conditions, totally prohibit the Bank from declaring cash dividends.

As of December 31, 2000, 2001 and 2002, the stand-alone CARs of the Bank were 10.56%, 11.01% and 10.38%, respectively. The consolidated CAR as of December 31, 2002 was 10.51%.

25. Average Amount and Average Interest Rate of Interest-Earning Assets and Interest-Bearing Liabilities

Average balance is calculated at the daily average balance of interest-earning assets and interestbearing liabilities.

	For the Years Ended	For the Years Ended	December 31,	December 31,	December 31,
2000	Average Rate (%) 5.92 5.44 3.57 6.32 7.61 5.66 1.93 4.16 5.11 5.26 5.43 —	2001	Average Rate (%) 3.74 3.76 3.69 6.85 6.89 4.59 1.50 3.43 4.38 4.57 4.65 3.91	2002
Average Balance $ 3,353,688 2,912,369 6,165,241 19,870,615 163,671,406 5,248,338 11,730,115 29,990,201 66,724,194 74,800,301 6,872,906 —		Average Balance $ 3,258,705 10,080,892 6,356,207 28,250,964 166,169,420 2,760,183 14,321,967 32,535,313 81,668,250 78,028,540 6,282,434 2,027,397		Average Balance $ 10,221,460 5,836,637 5,210,678 32,947,556 165,292,897 5,950,803 18,282,262 44,742,793 74,309,578 75,850,097 2,600,000 7,700,733	Average Rate (%)
					1.25 1.63 2.46 4.14 4.98 1.84 0.74 1.73 2.45 2.92 2.26 3.34

F-87

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

26. Maturity Analysis of Assets and Liabilities

The maturity of assets and liabilities of the Bank is based on the remaining period from the 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.

	December	31, 2000
Due in One Year $ 8,540,851 4,205,914 9,184,852 23,758,141 9,383,984 72,503,788 $127,577,530 $ 4,574,055 7,125,098 195,578,493 $207,277,646	Due Between One Year and Seven Years $ — — — — — 46,941,943 $46,941,943 $ — — 7,755,561 $ 7,755,561	Due After Seven Years $ — — — — — 54,281,585 $54,281,585 $ — — — $ —	Total
			$ 8,540,851 4,205,914 9,184,852 23,758,141 9,383,984 173,727,316
			$228,801,058
			$ 4,574,055 7,125,098 203,334,054
			$215,033,207

F-88

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

	December	31, 2001
Due in One Year $ 7,672,482 10,917,831 8,068,770 36,873,815 12,545,819 74,820,715 $150,899,432 $ 6,535,224 5,925,374 216,179,916 — $228,640,514	Due Between One Year and Seven Years $ — — — — — 48,369,393 $48,369,393 $ — — 8,849,245 5,000,000 $13,849,245	Due After Seven Years $ — — — — — 57,669,060 $57,669,060 $— — — — $—	Total
			$ 7,672,482 10,917,831 8,068,770 36,873,815 12,545,819 180,859,168
			$256,937,885
			$ 6,535,224 5,925,374 225,029,161 5,000,000
			$242,489,759

	December	31, 2002
Due in One Year $ 14,883,265 5,759,946 12,117,374 38,971,790 18,446,573 67,867,168 $158,046,116 $ 13,620,380 5,045,561 215,841,215 — $234,507,156	Due Between One Year and Seven Years $ — — — — — 45,651,540 $45,651,540 $ — — 9,898,385 10,000,000 $19,898,385	Due After Seven Years $ — — — — — 58,797,318 $58,797,318 $ — — — — $ —	Total
			$ 14,883,265 5,759,946 12,117,374 38,971,790 18,446,573 172,316,026
			$262,494,974
			$ 13,620,380 5,045,561 225,739,600 10,000,000
			$254,405,541

F-89

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Financial Instruments
a. Derivative financial instruments

The Bank uses forward exchange and swap contracts as hedge instruments for foreign currency exposures primarily related to its clients’ import obligations and export receipts and remittances. It also uses these contracts to cover its own exposures. Furthermore, the Bank uses cross-currency swap contracts and asset swap contracts to hedge its exchange rate and interest rate exposures, respectively.

Credit risk represents the exposure of the Bank to potential losses due to defaults by counter-parties. To manage this risk, the Bank reviews the credit history and credit rating of individual customers before entering into any derivative contracts with customers. The general terms of the acceptable arrangements (including maximum limits on contractual amounts and, if necessary, required guarantees) are approved by the Bank based on the results of the reviews. The transactions are carried out within the approved terms and limits.

The acceptability of doing business with another bank is evaluated on the basis of its world ranking and credit rating. The evaluation also covers determining the limits on contractual amounts with respect to the Bank’s counter-parties, and the transactions are made within this limit.

The contract (nominal) amounts, credit risks, and fair values of derivative transactions as of December 31, 2000, 2001 and 2002 were as follows:

Trading purpose Forward exchange contract . . . . . . . . Foreign currency swap contract . . . . . . . . Non-trading purpose Asset swap contract . . Cross-currency swap contract . . . . . . . .	December 31, 2000 Contract (Nominal) Amount Credit Risk Fair Value $978,756 $9,013 ($10,164) 4,014,087 46,693 (27,998) 1,979,520 1,914 (11,943) — — —	December 31, 2000 Contract (Nominal) Amount Credit Risk Fair Value $978,756 $9,013 ($10,164) 4,014,087 46,693 (27,998) 1,979,520 1,914 (11,943) — — —	December 31, 2001 Contract (Nominal) Amount Credit Risk Fair Value $822,602 $299 ($3,203) 5,109,436 22,196 (19,649) 2,316,063 24,549 (9,542) 690,000 — (16,294)	December 31, 2001 Contract (Nominal) Amount Credit Risk Fair Value $822,602 $299 ($3,203) 5,109,436 22,196 (19,649) 2,316,063 24,549 (9,542) 690,000 — (16,294)	December 31, 2002 Contract (Nominal) Amount Credit Risk Fair Value $406,098 $4,715 $1,363 8,628,331 28,623 (46,417) 5,140,871 3,258 (167,563) 3,300,000 — (187,326)	December 31, 2002 Contract (Nominal) Amount Credit Risk Fair Value $406,098 $4,715 $1,363 8,628,331 28,623 (46,417) 5,140,871 3,258 (167,563) 3,300,000 — (187,326)
	Contract (Nominal) Amount $978,756 4,014,087 1,979,520 —	Credit Risk $9,013 46,693 1,914 —	Contract (Nominal) Amount $822,602 5,109,436 2,316,063 690,000	Credit Risk $299 22,196 24,549 —	Contract (Nominal) Amount $406,098 8,628,331 5,140,871 3,300,000	Credit Risk $4,715 28,623 3,258 —

The Bank calculates the fair value of each forward contract at the forward rate for the remaining term, quoted from Reuters or Telerate Information System.

The contract or notional amount is used to calculate the amounts for settlement with the counterparties, so it is neither the actual amount delivered nor the cash requirement for the Bank. Also, the Bank has ability to enter into derivative financial transactions at reasonable market terms. In addition, the Bank does not expect significant cash flow requirements to settle these transactions.

F-90

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The gain and loss on the derivative transactions are as follows:

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2000 $ 2,884 $28,131 (98,288) ($70,157) $43,172	2001 $ 3,595 $23,900 (20,394) $ 3,506 $52,815 $ 9,554 (9,116) $ 438	2002
		$ 3,836
		$30,088 (14,767)
		$15,321
		$17,342
		$45,424 (33,088)
		$12,336

b. Fair value of non-derivative financial instruments

Assets Assets fair value the same as the carrying value. . . Long-term equity investment . . . . . Liabilities Liabilities fair value the same as the carrying value. . .	December	31, 2000 Fair Value $227,410,809 3,119,761 $215,274,302	December	31, 2001 Fair Value $255,922,949 4,550,339 $242,553,744	December	31, 2002
	Carrying Value $227,410,809 4,247,634 $215,274,302		Carrying Value $255,922,949 4,664,698 $242,553,744		Carrying Value $261,312,212 4,755,205 $254,612,212	Fair Value
						$261,312,212 4,949,343 $254,612,212

F-91

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Methods and assumptions used in estimating the fair value of nonderivative financial instruments were as follows:

(1) The carrying values of cash, due from banks, due from Central Bank of China, receivables, due to banks, payables and remittances approximate fair values because of the short maturity of these instruments. The carrying value of other assets and other liabilities also approximate the expected cash inflows or outflows at settlement dates; thus, their carrying value also approximates its fair value.
(2) If market prices for securities purchased and long-term stock investments are available, the fair value of these financial instruments should be based on the market price. If market prices are unavailable, then their carrying value has been determined by the management as the best representation of their fair value currently available.
(3) Loans, bills and discounts, deposits and bonds are interest-bearing financial assets and liabilities of a short term nature or the majority bear interest at adjustable rates. Thus, their carrying value is deemed to represents current fair value

Only the fair values of financial instruments were listed above, thus, the total of fair values listed above does not represent the fair value of the Bank.

c. Financial instruments with off-balance-sheet credit risks

Under normal business operations, the Bank is a party to transactions involving financial instruments with off-balance-sheet risks, such as issuing credit cards, extending credit facilities and providing financial guarantee and obligations under letters of credit issued. Generally, these transactions are for one year.

The interest rates for loans ranged from 4.48% to 18.25% in 2000, 2.5% to 18.25% in 2001 and 1.5% to 18.25% in 2002. The highest interest rate for credit cards was 18.25% in 2000, 19.71% in both 2001 and 2002.

There is no concentration of maturity dates in one particular period that would potentially result in liquidity problems to the Bank with respect to financial instruments with off-balance-sheet credit risks.

The contractual amounts of financial contracts with off-balance-sheet credit risks as of December 31, 2000, 2001 and 2002 were as follows:

Credit card commitments . . . . . . . . . . . . . . . . . . Guarantees and issuance of letters of credit . . . . .		December 31
	2000 $56,930,694 7,656,556	2001 $71,185,958 7,711,371	2002
			$138,459,413 7,267,006

The Bank evaluates the creditworthiness of each credit application case by case, taking into account the applicant’s credit history, credit rating and financial condition. Collateral, mostly in the form of real estate, cash, inventories and marketable securities, may be required depending on the evaluation result. As

F-92

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

of December 31, 2000, 2001 and 2002, approximately 73%, 61% and 55%, respectively, of total loans granted and from 15% to 20% of the aggregate guarantees and letters of credit issued, were secured. No collateral is required credit card facilities but the credit status of each credit cardholder is closely monitored. Depending on the results of credit status monitoring, appropriate measures are adopted, including amending the credit limit and, if necessary, cancellation of the facility.

d. Information on concentrations of credit risks

The concentration of credit risk exists when a counter-parties to financial transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. For the Bank, concentrations of credit risk do not involve individuals but industry groups, as follows:

		December 31	December 31
2000	% 11	2001	% 9	2002
Amount $18,459,186		Amount $17,054,580		Amount $10,781,117	%
					7

The net position on foreign-currency denominated assets and liabilities is shown below:

Currency U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		December 31
	2000 $140,551	2001 $268,504	2002
			$192,453

28. Additional Disclosures

Following are the additional disclosures required by the Securities and Futures Commission:

a. significant transaction and investees: The required information is shown in Tables 1 to 4.
b. Investment in mainland China — none.

29. Segment and Geographic Information

The Bank’s operations all belong to one business segment, namely, banking. Also, all overseas units individually represent less than 10% of the bank’s operating revenues and less than 10% of it total assets. Thus, no segment and geographic information is required to be disclosed.

F-93

							Maximum	Collateral/	Guarantee	Amounts	Allowable	$2,000
				Ratio of	Accumulated	Amount of	Guarantee to	Net Asset Value	of the Latest	Financial	Statement	28%
							Value of	Collaterals	Property,	Plant, or	Equipment	None
										Ending	Balance	$1,234
E.SUN COMMERCIAL BANK, LTD.	Endorsement/Guarantee Provided	For the Year Ended December 31, 2002	(Amounts in Thousands of U.S. Dollars)				Counter-Party Limits on Each	Counter-party’s	Endorsement/ Maximum	Guarantee Balance for Nature of	Endorsement/Guarantee Provider Amounts the Period Name Relationship	E.Sun Finance & Leasing Co. E.Sun International Co. Affiliate $2,000 $1,234

F-94

						Note																														Pledged for courts of justice	pursuant to collection case
					Market Value or	Net Asset Value		$4,049,729	192,531	1,153	48,837	10,481	151,769	19,940	64,476	25,903	32,752	2,767	94,445	154,575	103,616	57,449		12,359	10	17,813	5,956	4,253	18,168	3,304	9,871	4,241	2,968	25,231		3,212	1,063	100,668
				December 31, 2002	Carrying Percentage of	Value Ownership		$3,749,586 12.53	155,857 2.56	800 0.40	50,000 4.67	9,000 0.45	151,769 98.99	23,428 4.90	45,500 1.14	27,000 4.99	32,744 79.00	4,500 5.00	200,451 0.03	154,570 45.00	100,000 0.57	50,000 3.33		25,707 —	36 —	28,669 —	6,559 —	3,600 6.00	20,000 3.50	17,790 3.40	8,309 20.00	4,472 50.00	2,968 100.00	30,393 6.20		3,212 —	1,063 —	100,668 —
E.SUN COMMERCIAL BANK, LTD.	Marketable Securities Held	December 31, 2002	(Amounts in Thousands of New Taiwan Dollars)		Shares	Relationship with the Bank Financial Statement Account (Thousands)		Parent company Long-term equity investment 309,849	— Long-term equity investment 16,148	— Long-term equity investment 80	— Long-term equity investment 5,000	— Long-term equity investment 900	Subsidiary Long-term equity investment 19,600	— Long-term equity investment 750	— Long-term equity investment 4,550	— Long-term equity investment 2,700	Subsidiary Long-term equity investment 1,280	— Long-term equity investment 450	— Long-term equity investment 3,957	Equity-accounted investee Long-term equity investment 13,500	— Long-term equity investment 10,000	— Long-term equity investment 5,000		— Short-term investment 518	— Short-term investment —	— Short-term investment 2,284	— Short-term investment 424	— Long-term investment 300	— Long-term investment 2,000	— Long-term investment 857	Equity-accounted investee Long-term investment 324	Subsidiary Long-term investment 500	Subsidiary Long-term investment 300	— Long-term investment 950		— Long-term investment —	— Long-term investment —	Equity-accounted investor Long-term investment —
						Marketable Securities Type and Name	Stock	E.Sun Financial Holding Co., Ltd.	Fu Bon Securities Finance Co.	Taipei Forex Inc.	Apex Venture Capital Corp.	Taiwan Futures Exchange Co., Ltd.	E.Sun Finance & Leasing Co.	Gapura Incorporated	Financial Information Service Co., Ltd.	National Venture Capital Corp.	E.Sun Insurance Agent Co., Ltd.	Bank-Pro E-Service Technology Co, Ltd.	United Microelectronic Corporation	E.Sun Securities Investment Trust Corp.	Taiwan Asset Management Corporation	Taiwan Financial Asset Service Corporation	Stock	United Microelectronic Corp.	Acer Computer Corp.	Taiwan International Securities Corp.	SinoPac Holding Co., Ltd.	Netplus Material Inc.	National Venture Capital Corp.	Gigarams Semiconductor Device Corp.	E.Sun Insurance Agent Co., Ltd.	E.Sun Technologies Co., Ltd.	E.Sun Marketing Consulting Co., Ltd.	Gapura Incorporated	Bonds	Central Government Bonds — 832	Central Government Bonds — 854	Bonds — issued by E.Sun Bank
						Held Company Name	E.Sun Commercial Bank, Ltd.																E.Sun Finance & Leasing Co.															E.Sun Securities Investment Trust	Corp.

F-95

E.SUN COMMERCIAL BANK, LTD.	Marketable Securities Acquired and Disposed of at Costs or Prices of at Least NT$100 million or 20% of the Paid-in Capital	For the Year Ended December 31, 2002	(Amounts in Thousands of New Taiwan Dollars)	Beginning Balance Acquisition Disposal Ending Balance	Marketable Securities Financial Statement Nature of Shares Shares Shares Carrying Gain (Loss) Shares	Company Name Type and Name Account Counter-Party Relationship (Thousand) Amount (Thousand) Amount (Thousand) Amount Value on Disposal (Thousand) Amount	E.Sun Securities Bonds — issued by TaiShin Bank Long-term investment E.Sun Bills Finance Corp. Affiliate — $— — $200,000 — $200,000 $200,000 $ — — $ —	Investment Trust Corp.	Bonds — issued by E.Sun Bank Long-term investment E.Sun Bills Finance Corp. Affiliate — — — 201,505 — 104,643 100,837 3,806 — 100,668

F-96

						Note
					Investment	Gain (Loss)	$(2,784)		18,670	21,525			4,747	(1,646)			(32)
E.SUN COMMERCIAL BANK, LTD.	Names, Locations, and Other Information of Investees on which the Bank Exercises Significant Influence	For the Year Ended December 31, 2002	(Amounts in Thousands of New Taiwan Dollars)	Original Investment Amount Balance as of December 31, 2002 Net Income	(Loss) of the Shares Percentage	Investee Company Location Main Businesses and Products Investee Dec. 31, 2002 Dec. 31, 2001 (Thousands) of Ownership Carrying Value	E.Sun Finance & Leasing Co. Taipei Leasing and sale of machinery and $196,000 $196,000 19,600 98.99 $151,769 $(2,812)	equipment	E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 3,950 3,950 1,280 79.00 32,744 23,733	E.Sun Securities Investment Trust Taipei Fund for investment with full 135,000 135,000 13,500 45.00 154,570 47,835	Corp. discretionary authorization	received from customers	E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 1,800 1,800 324 20.00 8,309 23,733	E.Sun Technologies Co., Ltd. Taipei Provide service for information 5,000 5,000 500 50.00 4,472 (1,200)	software and computer	installation	E.Sun Marketing Consulting Co., Ltd. Taipei Agency of service and human 3,000 — 300 100.00 2,968 (32)	resource
						Investor Company	E.Sun Commercial Bank, Ltd.. . .						E.Sun Finance & Leasing Co. . . .

F-97

English Translation of a Report Originally Issued in Chinese

INDEPENDENT AUDITORS’ REPORT

January 9, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003

The Board of Directors and Stockholders

E.Sun Bills Finance Corporation

We have audited the accompanying balance sheets of E.Sun Bills Finance Corporation (the ‘‘Corporation’’) as of December 31, 2000, 2001 and 2002, and the related statements of income, changes in stockholders’ equity and cash flows for the years then ended, all expressed in New Taiwan dollars. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of E.Sun Bills Finance Corporation as of December 31, 2000, 2001 and 2002, 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 Securities Issuers and accounting principles generally accepted in the Republic of China.

We have also reviewed the translations of New Taiwan dollar financial statements as of December 31, 2002 into U.S. dollars, which have been included solely for the reader’s convenience, on the basis stated in Note 2 to the financial statements and in our opinion, the U.S. dollars amount have been properly translated on such basis. The convenience translations should not be construed as representations that the New Taiwan dollars amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

T N Soong & Co

An Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002

(Formerly a Member Firm of Andersen Worldwide, SC) Taipei, Taiwan The Republic of China

Notice to Readers

F-98

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Balance Sheets December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

ASSETS CASH (Notes 3 and 15). . . . . . . . . . . . . . . . . CALL LOANS TO BANKS (Note 15) . . . . . . . SHORT-TERM NEGOTIABLE INSTRUMENTS (Notes 2, 4, 15 and 16). . . . . . . . . . . . . . . . PLEDGED TIME DEPOSITS (Notes 15 and 16). . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES (Note 5). . . . . . . . . . . . . . . . PREPAID EXPENSES . . . . . . . . . . . . . . . . . . LONG-TERM BOND INVESTMENTS (Notes 2, 6, 15 and 16). . . . . . . . . . . . . . . . PROPERTIES (Notes 2 and 7) Cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . Total cost. . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation. . . . . . . . . . . . . . . . Net Properties. . . . . . . . . . . . . . . . . . . . . . . . OTHER ASSETS (Notes 8, 11, and 17) . . . . . . TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $1,086,217 $4,775,828 $ 4,124,620 1,051,000 200,000 200,000 3,083,128 2,865,830 3,790,635 950,000 150,000 50,000 344,873 112,713 151,402 1,520 6,297 2,842 443,403 574,241 1,259,973 50,156 50,156 50,156 32,585 32,585 32,585 17,869 21,603 22,652 10,852 11,421 12,071 34,882 37,789 37,801 146,344 153,554 155,265 40,652 45,024 51,413 105,692 108,530 103,852 310,883 372,066 381,790 $7,376,716 $9,165,505 $10,065,114	2002
		U.S. Dollars (Note 2) $118,865 5,764 109,240 1,441 4,363 82 36,310 1,445 939 653 348 1,089
		4,474 1,481
		2,993
		11,003
		$290,061

F-99

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Unconsolidated Balance Sheets — Continued December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Bank loans (Notes 9 and 15). . . . . . . . . . . . . . Payables (Note 10) . . . . . . . . . . . . . . . . . . . . Reserve for loss on guarantees (Note 2) . . . . . . Reserve for loss on sale of government bonds (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ EQUITY Capital stock . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . Retained earnings: Legal reserve . . . . . . . . . . . . . . . . . . . . . . . Unappropriated earnings. . . . . . . . . . . . . . . . Total retained earnings. . . . . . . . . . . . . . . . . Total Stockholders’ Equity . . . . . . . . . . . . . . . TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $2,100,000 $3,330,000 $ 3,920,000 69,055 189,634 122,377 257,557 391,846 406,551 58,182 126,160 185,670 2,484,794 4,037,640 4,634,598 4,139,000 4,265,000 4,265,000 87,500 87,500 87,500 113,752 241,993 352,620 551,670 533,372 725,396 665,422 775,365 1,078,016 4,891,922 5,127,865 5,430,516 $7,376,716 $9,165,505 $10,065,114	2002
		U.S. Dollars (Note 2) $112,968 3,527 11,716 5,351
		133,562
		122,910
		2,522
		10,162 20,905
		31,067
		156,499
		$290,061

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

F-100

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Statements of Income

For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars, Except Per Share)

REVENUES Interest (Note 15) . . . . . . . . . . . . . . . . . . . . . Service fees . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of short-term negotiable instruments (Note 2). . . . . . . . . . . . . . . . . . Reversal of reserve for loss on guarantees . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Revenues . . . . . . . . . . . . . . . . . . . . . . . EXPENSES Interest (Note 15) . . . . . . . . . . . . . . . . . . . . . Service charges. . . . . . . . . . . . . . . . . . . . . . . Provisions (Note 2) . . . . . . . . . . . . . . . . . . . . Administrative and other operating expenses (Notes 2 and 14) . . . . . . . . . . . . . . . . . . . . Total Expenses . . . . . . . . . . . . . . . . . . . . . . . INCOME BEFORE INCOME TAX . . . . . . . . . INCOME TAX (Notes 2 and 11). . . . . . . . . . . NET INCOME . . . . . . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $149,676 $ 282,913 $ 170,427 130,313 158,992 167,181 590,843 1,002,372 820,919 18,885 — — — 4,430 141 889,717 1,448,707 1,158,668 133,771 157,518 123,847 9,134 8,666 6,307 90,896 405,160 187,929 149,049 153,876 138,960 382,850 725,220 457,043 506,867 723,487 701,625 79,398 354,731 130,684 $427,469 $ 368,756 $ 570,941	2002
		U.S. Dollars (Note 2) $ 4,911 4,818 23,658 — 4
		33,391
		3,569 182 5,416 4,004
		13,171
		20,220 3,766
		$16,454

NET INCOME PER SHARE Basic earnings per share (Note 13) . . . . . . . . . . . . . . . .	2000 Income Before Income Tax Net Income $1.19 $1.00	2001 Income Before Income Tax Net Income New Taiwan Dollars $1.70 $0.86	2002 Income Before Income Tax Net Income $1.65 $1.34	2002	2002
	Income Before Income Tax $1.19		Income Before Income Tax $1.65	Income Before Income Tax Net Income U.S. Dollars (Note 2) $0.05 $0.04	Net Income

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

F-101

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of New Taiwan Dollars, Except Par Value and Per Share Amounts)

CAPITAL STOCK AUTHORIZED AND ISSUED ($10 PAR VALUE)	CAPITAL STOCK AUTHORIZED AND ISSUED ($10 PAR VALUE)	CAPITAL SURPLUS — PAID-IN CAPITAL IN EXCESS OF PAR VALUE (Note 12)	RETAINED EARNINGS	RETAINED EARNINGS	(Note 12)
Shares (Thousands)	Amount		Legal Reserve	Unappropriated Earnings	Total
393,900 — 19,695 — — 305 —	$3,939,000 — 196,950 — — 3,050 —	$87,500 — — — — — —	$ 74,123 39,629 — — — — —
413,900 — 12,417 — — 183 -	4,139,000 — 124,170 — — 1,830 —	87,500 — — — — — —	113,752 128,241 — — — — —
426,500 — — — — —	4,265,000 — — — — —	87,500 — — — — —	241,993 110,627 — — — —
426,500	$4,265,000	$87,500	$352,620	$725,396	$1,078,016

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

F-102

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Statements of Changes in Stockholders’ Equity For the Year Ended December 31, 2002

(In Thousands of U.S. Dollars, Except Par Value and Per Share Amounts — Note 2)

CAPITAL STOCK AUTHORIZED AND ISSUED ($0.29 PAR VALUE)	CAPITAL STOCK AUTHORIZED AND ISSUED ($0.29 PAR VALUE)	CAPITAL SURPLUS- PAID-IN CAPITAL IN EXCESS OF PAR VALUE (Note 12)	RETAINED EARNINGS	RETAINED EARNINGS	(Note 12)
Shares (Thousands)	Amount		Legal Reserve	Unappropriated Earnings	Total
426,500 — — — — —	$122,910 — — — — —	$2,522 — — — — —	$ 6,974 3,188 — — — —
426,500	$122,910	$2,522	$10,162	$20,905	$31,067

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

F-103

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Statements of Cash Flows For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Net income. . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization. . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . Recovery from loss on guarantees . . . . . . . . . Gain on sale of long-term bond investments . . Deferred income taxes . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in short-term negotiable instruments . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in receivables . . . . . . . . . Decrease (increase) in prepaid expenses . . . . . Increase (decrease) in payables . . . . . . . . . . . Net Cash Provided by (Used in) Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in call loans to banks. . . . . Decrease in pledged time deposits . . . . . . . . . . Increase in long-term bond investments . . . . . . Proceeds from sale of long-term bond investments Acquisition of properties . . . . . . . . . . . . . . . . Proceeds from sale of properties . . . . . . . . . . . Increase in other assets . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars $ 427,469 $ 368,756 $ 570,941 11,738 8,432 9,955 7,012 200,052 43,812 — — 42,583 — (12,687) (5,526) 2,109 (46,758) 7,880 1,282 1,497 910 1,884,066 219,952 (812,395) (75,142) 232,160 (50,868) 2,116 (4,777) 3,455 16,080 120,578 (67,257) 2,276,730 1,087,205 (256,510) (851,000) 851,000 — — 800,000 100,000 (50,000) (441,441) (1,500,053) — 319,187 689,952 (7,334) (10,563) (4,078) 90 151 85 (2,076) (13,115) (2,314) (910,320) 1,505,219 (716,408)	2002 U.S. Dollars (Note 2) $16,454 287 1,262 1,227 (159) 227 26 (23,412) (1,466) 100 (1,938) (7,392) — 2,882 (43,229) 19,883 (118) 2 (66) (20,646)

F-104

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Unconsolidated Statements of Cash Flows — Continued For the Years Ended December 31, 2000, 2001 and 2002

(In Thousands of Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in bank loans . . . . . . . . . . Dividend paid to stockholders . . . . . . . . . . . . . Bonus paid to directors, supervisors and employees. . . . . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . NET INCREASE (DECREASE) IN CASH . . . . CASH, BEGINNING OF YEAR . . . . . . . . . . . CASH, END OF YEAR . . . . . . . . . . . . . . . . . SUPPLEMENTAL INFORMATION Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . Income tax paid . . . . . . . . . . . . . . . . . . . . . .	2000 2001 2002 New Taiwan Dollars ($ 720,000) $1,230,000 $ 590,000 (118,170) (124,170) (255,900) (6,696) (8,643) (12,390) (844,866) 1,097,187 321,710 521,544 3,689,611 (651,208) 564,673 1,086,217 4,775,828 $1,086,217 $4,775,828 $4,124,620 $ 138,272 $ 158,076 $ 123,662 $ 166,781 $ 150,218 $ 129,795	2002 U.S. Dollars (Note 2) $ 17,003 (7,375) (357) 9,271 (18,767) 137,632 $118,865 $ 3,564 $ 3,740

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

F-105

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. Organization and Operations

E.Sun Bills Finance Corporation (the ‘‘Corporation’’) was incorporated on August 12, 1995 and started operations on October 12, 1995. As of December 31, 2002, it had branches in Kaohsiung, Taichung, Taoyuan and Panchiau.

The Corporation’s operations are: (a) brokerage and dealing in commercial paper, bank acceptances, financial institution and government bonds; (b) underwriting and acting as registrar of commercial paper and financial institution bonds; (c) providing guarantees or endorsements on commercial paper and bank acceptances; (d) brokerage of call loans between financial institutions; (e) consultations on financial matters; and (f) other businesses approved by the Ministry of Finance.

On December 10, 2001, the stockholders approved the establishment of E.Sun Financial Holding Company, Ltd. (ESFHC) to hold the shares of the Corporation, E.Sun Commercial Bank Ltd. and E.Sun Securities Corp. The holding company structure was achieved through the swapping of shares as follows: 1 share of ESFHC for 1.10 shares of the Corporation, 1.0 share of E.Sun Commercial Bank Ltd. and 1.25 shares of E.Sun Securities Corp. The board of directors designated January 28, 2002 as the effective date of the share swap. After the shares transfer, the Corporation became a 100% subsidiary of ESFHC.

Before January 28, 2002, the Corporation’s stock was traded on the Taiwan Over the Counter Securities Exchange. Upon the effective date of the establishment of ESFHC, its stock began to be traded on the Taiwan stock exchange.

2. Significant Accounting Policies

The Corporation’s significant accounting policies, which conform to generally accepted accounting principles in the Republic of China and Criteria Governing the Preparation of Financial Reports by Securities Issuers, are summarized as follows:

Translation of New Taiwan dollars into United State dollars amounts

Short-term negotiable instruments

Short-term negotiable instruments are stated at cost (which approximates market price). Costs of instruments sold are determined by the moving-average method.

Short-term negotiable instruments and bonds sold or purchased under agreements to repurchase or resale

Sales of short-term negotiable instruments and bonds under agreements to repurchase (‘‘repo’’) are recognized as outright sales, and gains or losses on such transactions are recognized immediately. Purchases with agreements to resell short-term negotiable instruments and bonds are recorded as assets at their acquisition cost, and gains or losses are recognized upon the actual execution of the ‘resell clause’ of the agreements. The accounting for these transactions are consistent with industry practice.

F-106

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Allowance for doubtful receivables

The allowance for doubtful receivables is provided on the basis of a review of the estimated collectibility of individual receivables.

Long-term investments in bonds

These investments are stated at cost less amortized premium.

Properties

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

Depreciation is computed by the straight-line method over service lives estimated as follows: building, 55 years; computers, 5 years; transportation equipment, 5 to 8 years and miscellaneous equipment, 5 to 10 years. If an asset is still in use beyond its estimated service life, its residual value is written off over its newly estimated service life.

Upon sale or disposal of an item of property, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is credited or charged to income.

Reserve for losses on guarantees

A reserve for losses on guarantees for commercial paper issued is provided for any possible losses on defaults by commercial paper issuers. Under the regulations of the Ministry of Finance of the Republic of China (ROC), the balance of this reserve should be at least 1% of the amount guaranteed. Additional reserves for the year are reported as part of provisions expense.

Reserves for losses on sale of government bonds

Under the regulations of the Securities and Futures Commission of the ROC, reserves for losses on sale of government bonds are computed at 10% of the net gain on sale of government bonds until the balance of the reserve reaches $200,000. This reserve should be used only to offset actual losses on sale of the government bonds. Additional reserves for the year are reported as part of provisions expense.

Pension cost

The Corporation recognizes pension cost based on actuarial calculations. The unrecognized net transition asset upon the adoption of current accounting treatment is amortized over 27 years, representing the remaining service lives of employees.

Interest and fee income

Interest is recorded on the accrual basis and service fee income is recorded when related services are provided.

F-107

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Income tax

The provision for income tax represents income tax paid and payable for the current year plus the changes in the deferred income tax assets and liabilities during the year. Deferred income taxes are recognized for tax effects of temporary differences and operating loss carryforwards. A valuation allowance is provided for deferred tax assets that are not certain to be realized (Note 11).

Tax credits resulting from equipment and technology purchased, research development, training and stock investments are utilized in the current year to the extent possible, and unused credits may be carried forward to offset future current taxes payable for up to a period of four years.

Income tax on interest derived from short-term negotiable instruments, which is levied separately, is accrued as part of income tax expense when such earnings are accrued. Any adjustment of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Income tax (10%) on undistributed earnings are recorded as expenses in the year when the stockholders resolve to retain the earnings.

3. Cash

	December 31
2000 $ 669,400 372,565 44,252 $1,086,217	2001 $4,500,100 264,546 11,182 $4,775,828	2002
		$3,807,300 309,060 8,260
		$4,124,620

4. Short-term Negotiable Instruments

	December 31
2000 $2,555,039 — 43,518 114,373 370,156 2,258 3,085,344 2,216 $3,083,128	2001 $2,399,267 — 8,900 19,755 401,511 36,397 2,865,830 — 2,865,830	2002
		$2,118,665 1,273,502 191,486 145,867 61,115 —
		3,790,635 —
		$3,790,635

F-108

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

5. Receivables

	December 31
2000 $320,232 20,924 — 3,717 344,873 — $344,873	2001 $36,897 27,831 53,000 3,985 121,713 9,000 $112,713	2002
		$ 39,417 29,145 — 82,840
		151,402 —
		$151,402

6. Long-term Bond Investments

These represent corporate and financial institution bonds with total face value of $443,000 in 2000, $572,800 in 2001 and $1,260,000 in 2002. The interest rate as of December 31, 2000, 2001 and 2002 ranged from 5.40% to 7.71%, 4.20% to 7.50% and 3.0% to 4.20%, respectively.

7. Accumulated Depreciation on Properties

	December 31
2000 $ 3,006 9,149 5,832 22,665 $40,652	2001 $ 3,588 10,442 5,858 25,136 $45,024	2002
		$ 4,170 12,850 6,013 28,380
		$51,413

8. Other Assets

	December 31
2000 $233,977 42,833 27,317 6,756 $310,883	2001 $237,130 42,324 74,075 18,537 $372,066	2002
		$251,836 44,509 66,195 19,250
		$381,790

F-109

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

9. Bank Loans

These represent call loans with interests ranging from 4.70% to 5.25% in 2000, from 2.30% to 2.41% in 2001 and from 1.5% to 1.6% in 2002 and are repayable before January 31, 2001, January 10, 2002 and January 17, 2003, respectively.

As of December 31, 2000, 2001 and 2002, the Corporation had unused credit lines of $26,200,000, $26,470,000 and $29,480,000, respectively.

10. Payables

	December 31
2000 $20,736 37,026 11,293 $69,055	2001 $ 23,555 62,165 103,914 $189,634	2002
		$ 19,439 89,907 13,031
		$122,377

11. Income Tax

a. Income tax expenses consisted of:

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2000 $71,196 (15,155) 17,264 4,471 1,622 $79,398	2001 $123,974 (2,139) (44,619) — 277,515 $354,731	2002
		$ 73,208 (5,619) 13,499 54,067 (4,471)
		$130,684

b. A reconciliation of income tax expense — current and income tax expense on ‘‘income before income tax’’ is shown below:

For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
2000 $126,717 (35,613) (17,799) (2,109) $ 71,196	2001 $180,872 (80,171) (16,801) 40,074 $123,974	2002
		$175,406 (119,002) 24,794 (7,990)
		$ 73,208

F-110

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

c. Deferred income taxes (part of other assets — Note 8) as of December 31, 2001 and 2002 consisted of the income tax effects of the following:

	December 31
2000 $ 250 126 — 11,091 15,976 27,443 126 $27,317	2001 $ — 126 2,117 53,843 18,115 74,201 126 $74,075	2002
		$ — 126 — 42,461 23,734
		66,321 126
		$66,195

As of December 31, 2002, the Corporation had loss carryforwards of $72,899 and $22,035, which can be used to offset any taxable income until 2005 and 2006, respectively.

d. Imputed tax credit

Balance of stockholders’ imputed tax credit . . .		December 31
	2000 $35,043	2001 $19,655	2002
			$14,986

The ratio of the balance of the ICA to the undistributed earnings as of December 31, 2001 was 6.6% on June 14, 2002 (the date the earnings as of December 31, 2001 were distributed). Management estimates that the ratio of the balance of the ICA as of the date of the distribution of the earnings as of December 31, 2002 to the undistributed earnings up to December 31, 2002 was 12.87%. However, estimated ratio may change depending on the balance of the ICA on the dividend distribution date.

Income tax returns through 2000 have been examined by the tax authorities. However, the tax authorities challenged the Corporation’s income tax refund claim of $277,515 (covering the period 1995 to 2000). The claim pertains to the tax withheld on interest income on bonds purchased for the periods when other investors held those bonds. In light of this tax issue, the Corporation might face similar questioning by the tax authorities on the tax of $56,771 withheld in 2001. In view of the tax authorities’ challenge, the Corporation wrote off, in 2001, the related income tax refunds receivable of $334,286, recognized as assets in its accounts. The Corporation tax withheld in 2002 similar to above was $25,960, which was already included in the income tax expense — current. However, on December 31, 2002, the Supreme Administrative Court decided the 1996 refund case in favor of the Corporation. The tax authorities are re-examing this case currently and the Corporation has not recognized any asset related to these amounts previously written-off, pending further decision of the tax authorities.

F-111

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Stockholders Equity

Capital surplus can only be used to offset a deficit or distributed as stock dividend. Paid-in capital in excess of par value may be capitalized once a year within a prescribed limit.

The Corporation’s Articles of Incorporation provide that the annual net income, less any deficit, should be appropriated as follows:

a. 30% as legal reserve.
b. Special reserve, if needed.
c. The remainder, if any:
(1) Bonus to directors and supervisors, 1%
(2) Bonus to employees, 2%–5%
(3) The remainder, should be decided by the board of directors.

The appropriation for cash dividends cannot exceed 15% of aggregate par value of the Corporation’s outstanding capital stock until the legal reserve equals the aggregate par value of the Corporation’s outstanding capital stock. The Articles also provide that the stockholders can decide that all or part of the net income may be retained. The dividend policy of the Corporation is to have cash dividends as the first priority. However, before the amendment of the Articles on May 17, 2002, the Articles prescribed that the Corporation distribute dividends in the form of shares of stock to keep the cash needed for its capital expenditure requirements.

The appropriations of earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of that year of approval.

The appropriation of the earnings in 2001 was resolved by the stockholders in their meeting on June 14, 2002. These appropriations were the same as that resolved by the Board of Director’s on January 28, 2002. Of the appropriations, a bonus to employees was approved of $9,809, and a bonus to directors and supervisors was approved of $2,581.

Assuming the bonus to employees, directors and supervisors was recognized as expense in 2001, the pro forma basic earnings per share for 2001 will decrease from NT$0.86 to NT$0.84.

As of January 9, 2003, the board of directors has still not decided the appropriations for earnings in 2002.

The information on the bonuses to employees and directors and supervisors is available online through the web site of the Taiwan Stock Exchange.

The Company Law provides that the appropriation for any legal reserve should be made until the reserve equals the aggregate par value of the Corporation’s outstanding capital stock. This reserve may only be used to offset a deficit, or when the reserve reaches 50% of aggregate par value of the Corporation’s outstanding capital stock, up to 50% thereof may be distributed as stock dividend.

F-112

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Under the Integrated Income Tax System, which took effect on January 1, 1998, stockholders are allowed a tax credit for the income tax paid by the Corporation on earnings generated in 1998 and onwards. An imputation credit account is maintained by the Corporation for the income tax and the tax credit allocated to each stockholder.

As of December 31, 2000, 2001 and 2002, the earnings generated before 1998, which were included in the balance of unappropriated earnings amounted to $91,777.

13. Earnings Per Share

The calculation of earnings per share is based on the weighted-average number of the Corporation’s common shares outstanding during the applicable periods. The details are as follows:

Amount Income Before Income Tax Net Income $506,867 $427,469 $723,487 $368,756 $701,625 $570,941	Earnings Per Share (Dollars)	Earnings Per Share (Dollars)
Income Before Income Tax $506,867 $723,487 $701,625	Income Before Income Tax $1.19 $1.70 $1.65	Net Income
		$1.00
		$0.86
		$1.34

14. Pension Plan

Before the Labor Standards Law (LSL) took effect on March 1, 1998, the Corporation had a contributory retirement plan for all its employees. Under this plan, employees and the Corporation made contributions every month to a fund managed by a pension fund administration committee. Upon retirement, the employees get back their contributions as well as the Corporation’s counterpart contributions, including all related earnings.

The LSL mandated the Corporation to establish a pension plan for qualified employees (‘‘LSL Plan’’). Under the LSL plan, employees should receive retirement benefits based on the length of service after March 1, 1998 and salary on the final month of employment under the LSL Plan. Also, the Corporation established a pension fund (the ‘‘LSL Fund’’) and has made monthly contributions to this fund at 4% of salaries of employees covered by such plan. The LSL Fund is administered by a workers fund administration committee and deposited in its name in the Central Trust of China.

The Corporation also has another pension plan for employees not covered by the LSL (‘‘non-LSL plan’’). The benefits under the non-LSL plan are similar to that under the LSL Plan. It also has a pension fund (‘‘non-LSL Fund’’) deposited in a financial institution in the name of the employees pension fund administration committee. Fund contributions are equivalent to 4% of the monthly salary of employees covered by such plan.

F-113

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Pension information for the above plans combined is summarized as follows:

a. Pension cost Net periodic pension cost Service cost . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . Projected return on plan assets . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . b. Changes in the pension fund Balance, beginning of year . . . . . . . . . . . . . . . Contributions . . . . . . . . . . . . . . . . . . . . . . . . Payment of benefits. . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . Balance, end of year . . . . . . . . . . . . . . . . . . .	For the Years Ended December 31 2000 2001 2002 $4,894 $3,521 $3,733 836 770 677 (1,249) (1,458) (1,045) (157) (248) (158) $4,324 $2,585 $3,207 $16,884 $22,133 $23,876 4,467 4,577 4,613 — (3,610) — 782 776 799 $22,133 $23,876 $29,288	For the Years Ended December 31 2000 2001 2002 $4,894 $3,521 $3,733 836 770 677 (1,249) (1,458) (1,045) (157) (248) (158) $4,324 $2,585 $3,207 $16,884 $22,133 $23,876 4,467 4,577 4,613 — (3,610) — 782 776 799 $22,133 $23,876 $29,288
	2000 $4,894 836 (1,249) (157) $4,324 $16,884 4,467 — 782 $22,133	2001 $3,521 770 (1,458) (248) $2,585 $22,133 4,577 (3,610) 776 $23,876

F-114

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Other pension information for 2000, 2001 and 2002 is as follows:

a. Reconciliation of the funded status of the plan and accrued pension cost

Vested benefit obligation . . . . . . . . . . . . . . . . Nonvested benefit obligation. . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . Additional benefits based on future salaries . . . Projected benefit obligation . . . . . . . . . . . . . . Fair value of plan assets. . . . . . . . . . . . . . . . . Fund status. . . . . . . . . . . . . . . . . . . . . . . . . . Unrecognized net transition assets . . . . . . . . . . Unrecognized net gain or loss . . . . . . . . . . . . . Prepaid pension cost . . . . . . . . . . . . . . . . . . . b. Vested benefits . . . . . . . . . . . . . . . . . . . . . . . c. Actuarial assumptions Discount rate used to determine present values . Future salary increase rate . . . . . . . . . . . . . . . Expected rate of return on plan assets . . . . . . .		December 31	2002 ($ 4,524) (11,263) (15,787) (6,626) (22,413) 29,288 6,875 (3,556) (1,089) $ 2,230 $ 4,524 3.50% 3.00% 3.50%
	2000 ($ 3,408) (4,920) (8,328) (4,498) (12,826) 22,133 9,307 (3,870) (4,613) $ 824 $ 3,408 6.0% 5.0% 6.0%	2001 ($ 3,737) (8,135) (11,872) (5,065) (16,937) 23,876 6,939 (3,713) (410) $ 2,816 $ 3,737 4.00% 3.25% 4.00%

F-115

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

15. Related Party Transactions

The Corporation had significant transactions with the following related parties: (a) E.Sun Commercial Bank, Ltd. (common subsidiary of parent company), (b) E.Sun Securities Corp. (common subsidiary of parent company), and (c) E.Sun Securities Investment Trust Corp. (major stockholders are E.Sun Commercial Bank, Ltd. and E.Sun Securities Corp.) These transactions are summarized as follows:

Year Ended December 31, 2000

Highest Balance During the Year a. Call loans payable — E.Sun Commercial Bank, Ltd. . . . . . . . . . . . . . . . . . . . . $750,000 b. Bank deposits and pledged time deposits — E.Sun Commercial Bank, Ltd.. . . . . 436,776 c. Purchase and sales of negotiable instruments and bonds:	Year-End Balance $ — 418,768	Range of Interest Rates 4.60–6.02% 0–5.75%	Interest Revenue (Expense)
			$(4,193) 6,404

Related Party E.Sun Commercial Bank, Ltd.. . . . . . . . . . . . . .	Purchase Amount % $5,892,669 —	Sales	% —	Sales under Agreements to Repurchase Amount % $10,869,103 —	Purchase under Agreements to Resell	Purchase under Agreements to Resell
	Amount $5,892,669	Amount $14,597,422		Amount $10,869,103	Amount $3,306,419	%
						—

Year Ended December 31, 2001

a. Call loans payable — E.Sun Commercial Bank, Ltd. . . . . . . . b. Bank deposits and pledged time deposits — E.Sun Commercial Bank, Ltd. . . . . . . . . . . . . . . . . c. Call loans receivable — E.Sun Commercial Bank, Ltd. . . . . . . .	Highest Balance During the Year $850,000 1,631,374 100,000	Year-End Balance $ — 1,631,374 —	Range of Interest Rates 2.415%–4.9% 0%–5.05% 2.40%–2.415%	Interest Revenue (Expense)
				($4,154) 50,268 20

F-116

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

d. Purchase and sales of negotiable instruments and bonds:

Related Party E.Sun Commercial Bank, Ltd.. . . . . . . . . . . . . .	Purchase Amount % $23,136,027 1	Sales	% 2	Sales under Agreements to Repurchase Amount % $12,717,030 1	Purchase under Agreements to Resell	Purchase under Agreements to Resell
	Amount $23,136,027	Amount $41,468,800		Amount $12,717,030	Amount $2,732,122	%
						—

Year Ended December 31, 2002

a. Call loans payable — E.Sun Commercial Bank, Ltd. . . . . . . . b. Bank deposits and pledged time deposits — E.Sun Commercial Bank, Ltd. . . . . . . . . . . . . . . . . c. Call loans receivable — E.Sun Commercial Bank, Ltd. . . . . . . . d. Long-term investment in bonds — E.Sun Commercial Bank, Ltd. . . .	Highest Balance During the Year $500,000 2,154,185 100,000 360,000	Year-End Balance $ — 2,154,185 — 160,000	Range of Interest Rates 1.575%–2.3% 0%–5.05% 2.275% 4.2%	Interest Revenue (Expense)
				($1,056 38,443 6 9,240

e. Purchases and sales of negotiable instruments and bonds:

Related Party E.Sun Commercial Bank, Ltd.. . . . . . . . . . . . . . E.Sun Securities Corp. . . . E.Sun Securities Investment Trust Corp.. . . . . . . . .	Purchase Amount % $30,213,280 0.90 1,870,546 0.06 201,683 0.01	Sales	% 0.84 0.06 0.01	Sales under Agreements to Repurchase Amount % $3,667,960 0.03 916,970 — — —	Purchase under Agreements to Resell	Purchase under Agreements to Resell
	Amount $30,213,280 1,870,546 201,683	Amount $28,257,490 2,080,699 207,373		Amount $3,667,960 916,970 —	Amount $1,770,321 417,000 —	%
						0.05 0.01 —

The terms of the aforementioned transactions are similar to or approximate those offered to or by nonrelated parties.

F-117

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

16. Pledged Assets

	December 31
2000 $ 950,000 74,000 300,000 $1,324,000	2001 $150,000 16,000 180,000 $346,000	2002
		$ 50,000 1,413,591 199,976
		$1,663,567

The foregoing assets were pledged to financial institutions as collateral for bank loans and credit lines (that is available for cashing of checks for clearing on the check issuance date) and as court deposits for certain lawsuits instigated by the Corporation. The time deposits as of December 31, 2000, 2001 and 2002 are due on December 4, 2001 (5.0%–5.3%), February 16, 2002 (5.05%–5.3% interest) and April 5, 2003 (2.4% interest), respectively.

17. Commitments and Contingent Liabilities as of December 31, 2002

a. Arising in the ordinary course of business

Negotiable instruments and bonds sold under agreements to repurchase . . . . Negotiable instruments and bonds purchased under agreements to resell . . . . Guarantees on commercial paper (Note 19). . . . . . . . . . . . . . . . . . . . . . . . Underwriting negotiable instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	$39,998,073 2,218,965 19,412,600 374,000

b. Leases

The Corporation leases certain properties under agreements expiring on various dates through April 30, 2007. The leases are payable every quarter. Refundable deposits on these leases aggregate to $3,551 (included in other assets — other). Future annual rentals are as follows:

Year
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$9,450
8,080
4,946
2,377
447

F-118

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION Notes to Unconsolidated Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Fair Value of Financial Instruments

	December 31
2000 Carrying Value Fair Value $3,434,702 $3,434,702 3,083,128 3,085,523 443,403 443,428 276,810 275,490 2,169,055 2,169,055	2001 Carrying Value Fair Value $5,241,361 $5,241,361 2,865,830 2,866,180 574,241 572,926 279,454 296,405 3,519,634 3,519,634	2002
Carrying Value $3,434,702 3,083,128 443,403 276,810 2,169,055	Carrying Value $5,241,361 2,865,830 574,241 279,454 3,519,634	Carrying Value $4,538,940 3,790,635 1,259,973 296,345 4,042,377	Fair Value
			$4,538,940 3,815,311 1,260,561 325,543 4,042,377

Fair values were determined on the basis of the following:

a. Short-term negotiable instruments, long-term bond investments and deposits with bonds — quoted market prices.
b. Other assets and liabilities — carrying values.

Only the fair values of financial instruments are listed above. Thus, the total of fair values listed above does not represent the Corporation’s fair value.

19. Off-balance Sheet Credit Risks

The Corporation provides guarantee on commercial paper issued by other entities. The guarantee period is normally one year and the rate of guarantee service fees ranges from 0.1% to 1% of the amount guaranteed. As of December 31, 2000, 2001 and 2002, the total amounts guaranteed were $21,319,100, $17,647,500 and $19,412,600, respectively.

Most of the guarantee contracts are expected to expire without any payment by the Corporation. Thus, the total amount guaranteed does not necessarily represent future cash payments. In addition, the potential total loss on each guarantee is equal to the amount guaranteed, without considering the value of any collateral.

The Corporation approves the arrangements involving guarantees on commercial paper (including the maximum amount to be guaranteed) after reviewing a customer’s credit history and credit rating. An appropriate collateral is required, and the transaction should be made within the approved maximum

F-119

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Notes to Unconsolidated Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

amount. As of December 31, 2000, 2001 and 2002, about 31.47%, 33.14% and 25.61%, respectively, of total amounts guaranteed were covered by securities or other properties. If a customer defaults, the Corporation can forcibly sell the related collateral.

20. Information on Credit Risk Concentrations

Credit risk concentrations exist when the counter-parties to financial-instrument transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Corporation’s credit risk concentration is not in its customer-financing activities with individuals but in the following industries:

Guarantees on commercial paper — by industry: Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electronical and mechanical equipment . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . .		December 31
	2000 $7,148,000 2,415,000 2,089,000	2001 $6,705,000 2,440,000 1,527,000	2002
			$6,594,000 2,705,000 1,401,000

The collateral policy is mentioned in Note 19. The Corporation’s maximum exposure to losses associated with credit guarantees, regardless of collateral involved, equals the total contract amount.

21. Additional Disclosures

The Securities and Futures Commission requires the following additional disclosures:

a. Significant transactions and investees: The required informations is shown in Tables 1, 2 and Note 18.
b. Investment in Mainland China: None.

22. Segment and Geographic Information

The Corporation is involved in only one business segment: Bills financing.

It operates entirely in the Republic of China.

F-120

					Note
				Market Value or	Net Asset Value			$160,000		199,976		100,588		100,000		200,000		200,000		100,000		199,997		22,648		7,146		237,910	47,166	10,673
				Percentage of	Ownership			—		—		—		—		—		—		—		—		—		—		—	—	—
					Carrying Value			$160,000		199,976		100,000		100,000		200,000		200,000		100,000		199,997		22,000		7,000		212,911	44,509	9,925
E.SUN BILLS FINANCE CORPORATION	Marketable Securities Held	December 31, 2002	(Amounts in Thousands of New Taiwan Dollars)	Marketable Securities Relationship with Financial Statement Shares	Type and Name the Corporation Account (Thousand)	Corporate and financial	institution bonds	E.Sun Commercial Bank Common parent Long-term bond —	company investments	Taishin Bank — Long-term bond —	investments	Chang Hwa Bank — Long-term bond —	investments	Hua Nan Commercial Bank — Long-term bond —	investments	The Farmers Bank of China — Long-term bond —	investments	Sunny Bank — Long-term bond —	investments	Union Bank — Long-term bond —	investments	Hua Nan Financial Holding — Long-term bond —	Company investments	Chia Hsin Food & Synthetic — Other assets —	Fiber Co., Ltd.	China Rebar Co., Ltd. — Other assets —	Government bonds	87103 — Other assets —	86103 — Other assets —	90102 — Other assets —
					Held Company Name	E.Sun Bills Finance Corporation

F-121

E.SUN BILLS FINANCE CORPORATION	Marketable Securities Acquired and Disposed at Cost or Prices at least NT$100 million or 20% of the Paid-in Capital	For the Year Ended December 31, 2002	(Amounts in Thousand New Taiwan Dollars)	Financial Beginning Balance Acquisition Disposal Ending Balance	Marketable Securities Statement Nature of Shares Amount Shares Amount Shares Amount Carrying Gain (Loss) Shares Amount	Type and Name Account Counter-Party Relationship (Thousand) (Thousand) (Thousand) Value on Disposal (Thousand)	E.Sun Commercial Bank Long-term E.Sun Securities Common parent — $360,000 — $ — — $201,505 $200,000 $1,505 — $160,000	investments Investment company	in bonds Trust Corp.	Taishin Bank Long-term E.Sun Securities Common parent — — 299,960 — 99,986 99,986 — — 199,976	investments Investment company (Note)	in bonds Trust Corp.	Far Eastern Bank Long-term E.Sun Commercial — — — 200,096 — 200,098 200,096 2 — —	investments Bank and	in bonds SinoPac	Securities	Chang Hua Bank Long-term Chang Hua Bank — — — 100,000 — — — — — 100,000	investments	in bonds	Hua Nan Bank Long-term Hua Nan Bank — — — 100,000 — — — — — 100,000	investments	in bonds	First Bank Long-term Citi Securities Co. — — — 100,000 — 104,020 100,000 4,020 — —	investments	in bonds	The Farmers Bank of China Long-term The Farmers Bank — — — 200,000 — — — — — 200,000	investments of China	in bonds	Sunny Bank Long-term Sunny Bank — — — 200,000 — — — — — 200,000	investments	in bonds	Union Bank Long-term Union Bank — — — 100,000 — — — — — 100,000	investments	in bonds	Hua Nan Financial Holding Long-term Barits Securities — — — 199,997 — — — — — 199,997	investments and Hua Nan	in bonds Financial	Holding
						Company Name	E.Sun Bills Finance	Corporation

F-122

English Translation of a Report Originally Issued in Chinese

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003

The Board of Directors and Stockholders

E.Sun Financial Holding Co., Ltd.

We have reviewed the accompanying consolidated balance sheets of E.Sun Financial Holding Co., Ltd. and its subsidiaries (the ‘‘Company’’) as of March 31, 2002 and 2003, and the related statements of income and cash flows for the period from January 28, 2002 (date of establishment) to March 31, 2002 and for the three months ended March 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews. The financial statements of the Company’s subsidiary, E.Sun Securities Corp. (‘‘E.Sun Securities’’) as of, and for the period ended, March 31, 2003, had been reviewed by other accountants, whose review report was furnished to us, and our review, insofar as it relates to the accounts of E.Sun Securities which are included in these consolidated financial statements, is based solely on the review report of such other accountants. The total assets of E.Sun Securities amounted to NT$8,399,210 thousand as of March 31, 2003, which represents 2.79% of the Company’s total consolidated assets. The operating income of E.Sun Securities for the three months ended March 31, 2003 amounted to NT$115,160 thousand, which represents 2.91% of the Company’s total consolidated operating income.

We conducted our reviews in accordance with Statement of Auditing Standards No. 36 ‘‘Review of Financial Statements’’ in the Republic of China. A review consists primarily of applying analytical procedures to financial data and making inquiries of the Company personnel responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review and the review report of other accountants as noted above, we are not aware of any material modifications, that should be made to the consolidated financial statements referred to in the first paragraph in order for them to be in conformity with Criteria Governing the Preparation of Financial Reports by Financial Holding Companies, Criteria Governing the Preparation of Financial Reports by Securities Issuers, Criteria Governing the Preparation of Financial Reports by Securities Firms and accounting principles generally accepted in the Republic of China.

We have also reviewed the translations of New Taiwan dollar financial statements as of March 31, 2003 into U.S. dollars, which have been included solely for the reader’s convenience, on the basis stated in Note 2 to the financial statements and in our opinion, the U.S. dollars amounts have been properly translated on such basis. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

T N Soong & Co

An Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002 (Formerly a Member Firm of Andersen Worldwide, SC) Taipei, Taiwan The Republic of China

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 review such financial statements are those generally accepted and applied in the Republic of China.

F-123

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Unaudited Consolidated Balance Sheets March 31, 2002 and 2003

(In Thousands of Dollars, Except Par Value)

ASSETS CASH (Note 4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . DUE FROM BANKS (Note 5) . . . . . . . . . . . . . . . . . . DUE FROM CENTRAL BANK OF CHINA (Note 6). . . SECURITIES PURCHASED (Notes 2, 7, 23, 24 and 25) RECEIVABLES — NET (Notes 2 and 8). . . . . . . . . . . PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . LOANS, BILLS AND DISCOUNTS — NET (Notes 2, 9 and 23) . . . . . . . . . . . . . . . . . . . . . . . . LONG-TERM INVESTMENTS — NET (Notes 2, 10 and 24) . . . . . . . . . . . . . . . . . . . . . . . PROPERTIES (Notes 2, 11 and 25) Cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . Total cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER — NET (Notes 2, 12, 18 and 25) . . . . . . . . . . TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 New Taiwan Dollars $ 12,882,067 8,516,060 9,415,948 45,993,727 12,862,967 195,800 175,241,952 1,491,040 2,855,101 1,395,340 1,160,373 162,350 495,414 6,068,578 (1,304,190) 4,764,388 167,293 4,931,681 1,521,837 $273,053,079	2003 New Taiwan Dollars U.S. Dollars $ 12,998,339 $ 374,592 12,603,928 363,226 11,174,527 322,032 62,403,619 1,798,375 20,382,458 587,391 70,696 2,037 170,092,140 4,901,791 3,164,269 91,189 2,868,893 82,677 1,588,600 45,781 1,319,802 38,035 185,971 5,359 675,117 19,456 6,638,383 191,308 (1,598,381) (46,063) 5,040,002 145,245 281,940 8,125 5,321,942 153,370 2,707,764 78,034 $300,919,682 $8,672,037
		New Taiwan Dollars $ 12,998,339 12,603,928 11,174,527 62,403,619 20,382,458 70,696 170,092,140 3,164,269 2,868,893 1,588,600 1,319,802 185,971 675,117 6,638,383 (1,598,381) 5,040,002 281,940 5,321,942 2,707,764 $300,919,682

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2 which is dated as of May 13, 2003)

F-124

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Unaudited Consolidated Balance Sheets — Continued March 31, 2002 and 2003

(In Thousands of Dollars, Except Par Value)

LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Due to banks (Note 13) . . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase (Notes 2, 23 and 25) . . . . . . . . . . . . . . . . . . . . . . . Payables (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and remittances (Notes 15 and 23) . . . . . . . . . Bonds (Notes 16 and 23) . . . . . . . . . . . . . . . . . . . . . . Long-term debts (Note 17) . . . . . . . . . . . . . . . . . . . . . Other (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ EQUITY (Notes 19 and 20) Capital stock — NT$10 par value Authorized 5,000,000 thousand shares; issued 2,290,000 thousand shares in 2002 and 2,470,000 thousand shares in 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustments . . . . . . . . . . . . . . . Unrealized loss on long-term equity investments . . . . . . Treasury stock — 326,897 thousand shares in 2002 and 349,849 thousand shares in 2003 . . . . Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . CONTINGENCIES AND COMMITMENTS (Notes 2 and 25) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	2002 New Taiwan Dollars $ 9,604,258 3,501,781 9,025,019 302,464 218,663,101 4,840,000 — 1,104,465 247,041,088 22,900,000 6,796,125 563,473 (4) — (4,247,603) 26,011,991 $273,053,079	2003 New Taiwan Dollars U.S. Dollars $ 34,163,229 $ 984,531 4,946,151 142,540 6,178,893 178,066 508,502 14,654 219,566,790 6,327,573 9,840,000 283,574 1,480,000 42,652 967,790 27,890 277,651,355 8,001,480 24,700,000 711,815 4,839,667 139,472 (1,929,619) (55,609) 2,732 79 (96,850) (2,791) (4,247,603) (122,409) 23,268,327 670,557 $300,919,682 $8,672,037
		New Taiwan Dollars $ 34,163,229 4,946,151 6,178,893 508,502 219,566,790 9,840,000 1,480,000 967,790 277,651,355 24,700,000 4,839,667 (1,929,619) 2,732 (96,850) (4,247,603) 23,268,327 $300,919,682

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2 which is dated as of May 13, 2003)

F-125

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Unaudited Consolidated Statements of Income

For the Period from January 28, 2002 (Date of Establishment) to March 31, 2002 and For the Period from January 1, 2003 to March 31, 2003 (Note 1)

(In Thousands of Dollars, Except Per Share Amounts)

2002 New Taiwan Dollars $3,126,142 238,424 494,868 33,612 30,019 3,923,065 1,711,844 48,724 494,234 808,077 1,682 3,064,561 858,504 3,272 12,951 848,825 129,233 719,592 156,119 $ 563,473	2003	2003	2003	2003
	New Taiwan Dollars $2,764,999 341,377 591,211 31,614 228,676 3,957,877 1,119,844 119,708 47,647 1,062,203 15,132 2,364,534 1,593,343 6,354 2,838 1,596,859 — 1,596,859 435,026 $1,161,833 2003		U.S. Dollars $ 79,683 9,838 17,038 911 6,590
				114,060
				32,272 3,450 1,373 30,611 436
				68,142
				45,918 183 82
				46,019 —
				46,019 12,537
				$ 33,482

Pre Tax After Tax New Taiwan Dollars $0.75 $0.55		Pre Tax After Tax U.S. Dollars $0.02 $0.01		After Tax

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2 which is dated as of May 13, 2003)

F-126

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows

For the Period from January 28, 2002 (Date of Establishment) to March 31, 2002 and For the Period from January 1, 2003 to March 31, 2003

(In Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . Net income from subsidiaries for the period from January 1, 2002 to January 27, 2002 . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision (reversal of allowance) for losses on securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization. . . . . . . . . . . . . . . . . . . Equity in net income of investee companies, net of cash dividends received . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on sale of properties and foreclosed collaterals Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . Increase in securities purchased — held for trading Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in receivables . . . . . . . . . . . . . . . . . . . . . . . . Increase in prepaid expenses. . . . . . . . . . . . . . . . . . . . Increase in payables . . . . . . . . . . . . . . . . . . . . . . . . . Increase in advances . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in bonds sold under agreements to Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in accrued pension cost . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Operating Activities. . . . . CASH FLOWS FROM INVESTING ACTIVITIES Increase in securities purchased-held for investing Purposes Decrease (increase) in due from banks . . . . . . . . . . . . . . . Decrease (increase) in due from Central Bank of China . . . Decrease (increase) in other assets. . . . . . . . . . . . . . . . . . Proceeds from sales of: Long-term equity investments . . . . . . . . . . . . . . . . . . . Property and equipment . . . . . . . . . . . . . . . . . . . . . . . Foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . . . .	2002 New Taiwan Dollars $ 563,473 129,233 283,948 494,234 77,364 (33,612) 183 11,129 14,348 (2,930,554) (321,903) (133,514) 2,852,316 273,585 619,956 58 1,900,244 (547,428) 6,220,239 (1,347,178) 35,569 50,000 5 103,078	2003 New Taiwan Dollars U.S. Dollars $ 1,161,833 $ 33,482 — — (58,322) (1,681) 47,647 1,373 88,700 2,556 (31,614) (911) 711 20 (2,493) (72) 234,282 6,752 (11,022,078) (317,639) (1,652,358) (47,618) (58,166) (1,676) 573,506 16,528 474,264 13,668 (180,563) (5,204) 49 1 (10,424,602) (300,421) (2,056,688) (59,271) (4,296,019) (123,805) 942,847 27,171 (184,293) (5,311) — — — — 27,725 799
		New Taiwan Dollars $ 1,161,833 — (58,322) 47,647 88,700 (31,614) 711 (2,493) 234,282 (11,022,078) (1,652,358) (58,166) 573,506 474,264 (180,563) 49 (10,424,602) (2,056,688) (4,296,019) 942,847 (184,293) — — 27,725

(Forward)

F-127

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows — Continued For the Period from January 28, 2002 (Date of establishment) to March 31, 2002 and For the Period from January 1, 2003 to March 31, 2003

(In Thousands of Dollars)

Acquisition of: Long-term equity investments . . . . . . . . . . . . . . . . . . Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in: Loans, bills and discounts . . . . . . . . . . . . . . . . . . . . Pledged time deposits . . . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Investing Activities . . . CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in due to banks . . . . . . . . . . . . . . . Decrease in deposits and remittances . . . . . . . . . . . . . . Increase in other liabilities . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Financing Activities. . . EFFECTS OF EXCHANGE RATE CHANGES . . . . . . . NET INCREASE (DECREASE) IN CASH . . . . . . . . . . CASH, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . CASH, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . SUPPLEMENTARY INFORMATION Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 New Taiwan Dollars ($ 100,000) (69,710) 3,545,063 100,000 7,989,638 (260,966) (4,475,927) 60,831 (4,676,062) (4,335) 5,209,485 7,672,582 $12,882,067 $ 1,697,418 $ 104,291	2003 New Taiwan Dollars U.S. Dollars ($ 10,000) ($ 288) (192,734) (5,554) 525,448 15,143 — — (5,243,714) (151,116) 16,622,849 479,045 (2,850,081) (82,135) 10,680 308 13,783,448 397,218 (308) (9) (1,885,176) (54,328) 14,883,515 428,920 $12,998,339 $374,592 $ 1,099,634 $ 31,690 $ 73,792 $ 2,126
		New Taiwan Dollars ($ 10,000) (192,734) 525,448 — (5,243,714) 16,622,849 (2,850,081) 10,680 13,783,448 (308) (1,885,176) 14,883,515 $12,998,339 $ 1,099,634 $ 73,792

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2 which is dated as of May 13, 2003)

F-128

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. Organization and Operations

E.Sun Financial Holding Company, Ltd. (the ‘‘Company’’) was established by E.Sun Commercial Bank Ltd. (‘‘E.Sun Bank’’), E.Sun Bills Finance Corporation (‘‘E.Sun Bills’’) and E.Sun Securities Corp. (‘‘E.Sun Securities’’) through a share swap on January 28, 2002 based on the Financial Holding Companies Law and related regulations in the Republic of China (the ‘‘ROC’’). On January 28, 2002, the Company issued 2,290,000 thousand shares to acquire all the issued shares of E.Sun Bank, E.Sun Bills and E.Sun Securities by means of the share swap. The swap ratio was 1 share of the Company stock for 1.0 share of E.Sun Bank, 1.10 shares of E.Sun Bills and 1.25 shares of E.Sun Securities. After the swap, E.Sun Bank, E.Sun Bills and E.Sun Securities became 100% subsidiaries of the Company.

The Company engages in investing in, and managing the business of, its related subsidiary financial institutions.

The Company’s shares of stock have been traded on the Taiwan Stock Exchange (TSE) since January 28, 2002.

E.Sun Bank engages in commercial and savings banking activities permitted under the Banking Laws and regulations of the Republic of China. The operations of the Bank’s Trust Department consist of planning, managing and operating a trust business. These operations are regulated under the Banking Law and Trust Law of the ROC. As of March 31, 2003, the Bank had a domestic banking department and international banking department, an offshore banking unit (OBU), 2 overseas branches (Los Angeles and Hong Kong) and 49 domestic branches.

The operations of E.Sun Bills are: (a) underwriting and acting as registrar of commercial paper and bank acceptances; (b) brokerage and dealing in commercial paper and bank acceptance; (c) providing guarantees or endorsements on commercial paper and bank acceptances; (d) brokerage of call loans between financial institutions; (e) consultations on financial matters; (f) brokerage and dealing in government bonds; (g) underwriting and acting as registrar of financial institution bonds;(h) brokerage and dealing in financial institution bonds. As of March 31, 2003, it had branches in Kaohsiung, Taichung, Taoyuan and Panchiau.

E.Sun Securities engages in underwriting, dealing and brokerage of securities.

As of March 2002 and 2003, the amount of employees in the Company and subsidiaries are 1,711 and 1,895, respectively.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies which conform to accounting principles generally accepted in the Republic of China and with Criteria Governing the Preparation of Financial Reports by Financial Holding Companies, Securities Issuers and Securities Firms, are summarized below:

Consolidation

F-129

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The operating revenues and total assets of the Company’s other investees which the ownership is over 50% — E.Sun Venture Capital Co., Ltd., E.Sun Financial & Leasing Co., E.Sun Insurance Agent Co., and E.Sun Securities Investment Trust Corp. are individually less than 10%, and are in aggregate less than 30%, of those of the Company. Accordingly, their accounts were not included in these consolidated financial statements.

Translations into U.S. dollar amounts

The Company maintains its accounts and expresses its financial statements in New Taiwan dollars. The translation of the New Taiwan dollars as of and for the three months ended March 31, 2003 into U.S. dollars is solely for the convenience of the reader using the noon buying rate of the Federal Reserve Bank of New York as of December 31, 2002, which was NT$34.70=US$1.00 at that date. The convenience translations should not be construed as representations that the New Taiwan dollar amount have been, could have been or could in the future be, converted into US dollars at this or any other exchange rate.

Securities purchased

Securities purchased are carried at cost less any allowance for decline in value.

For E.Sun Bills, short-term negotiable instruments are stated at cost (which approximates market price). Costs of instruments sold are determined by the moving-average method.

For E.Sun Bank and E.Sun Bills, under a directive of the Ministry of Finance, sales of bonds and other short-term securities under agreements to repurchase are treated as outright sales, and gains or losses on such transactions are recognized immediately, while purchases of bonds and other short-term securities under agreements to resell are recorded as assets at their acquisition cost, and gains or losses are recognized upon the actual execution of the ’resell clause’ of the agreements. However, for E.Sun Securities, bonds purchased under agreements to resell are carried as assets at their acquisition costs while the selling prices on bonds sold under agreements to repurchase are recognized as a liability. The difference between the selling or purchase price and the contracted repurchase or resale price is accounted for as interest expense or interest income, respectively.

Overdue loans

Loans and other credits (including accrued interest) that are outstanding for at least six months are classified as overdue loans in accordance with the guideline issued by the Ministry of Finance.

Allowances for possible losses and reserve for losses on guarantees

F-130

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Based on guidelines issued by the Ministry of Finance, credits deemed uncollectible may be written off pursuant to a resolution issued by the Board of Directors.

Long-term investments

Long-term bond investments are stated at cost less amortized premium.

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

The cost of long-term equity investments sold is determined by the weighted-average method.

Properties

F-131

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The cost and accumulated depreciation are removed from the accounts when an item of property is disposed of or retired, and any gain or loss is credited or charged to income.

Foreclosed collaterals

Foreclosed collaterals (part of other assets) are recorded at the lower of cost or net realizable value on the balance sheet dates.

Reserves for losses on sale of government bonds

Treasury stock

Pension costs

E.Sun Bank and E.Sun Bills recognize pension costs on the basis of actuarial calculations, and unrecognized net transition assets are amortized over 29 and 27 years, respectively.

Recognition of interest revenue and service fees

In addition, the unpaid interest on rescheduled loans should be recorded as deferred revenue, and the interest paid is recognized as interest revenue.

Service fees are recorded when the earnings process is completed upon rendering of such services.

F-132

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Income tax

Income tax on interest derived from short-term negotiable instruments, which is levied separately is accrued as part of income tax expense when such earnings are accrued.

Any adjustment of income taxes of prior years are added to or deducted from the current year’s tax provision.

Tax credits resulting from technology or equipment purchases, expenditures for research and development, employee training and stock investments are recognized in current period.

Income taxes (10%) on undistributed earnings are recorded as expenses in the year when the stockholders resolve to retain the earnings.

Contingencies

Foreign currency transactions

Forward contracts

Foreign currency swap contracts

Foreign-currency sport-position assets or liability arising from foreign currency swap contracts, which are mainly to manage the Bank’s currency positions, are recorded as spot rates when the transactions occur, while the corresponding forward-position assets or liabilities are recorded at the contracted forward rates; with receivables netted against the related payables.

The related discount or premium is amortised by the straight-line basis over the contract period.

F-133

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Asset swaps

Cross-currency swap

Interest rate swap contract

Interest rate swap contracts are intended for non-trading purposes. Because there is no actual money translated, the Bank just makes a memo journal when the contract is signed. The interest received or paid under the contract is recognized as interest income or expense.

F-134

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Eliminations of Significant Transactions Between Parent Company and Subsidiaries

Name of Corporation E.Sun Financial Holdings . . . E.Sun Bank . . . . . . . . . . . . E.Sun Bills. . . . . . . . . . . . . E.Sun Securities . . . . . . . . .	Elimination Account Cash Interest revenue Bonds Deposits and remittances Interest expense Interest payable Operating and administrative expenses Cash Pledged time deposits Securities purchased Long-term bond investments Interest receivable Interest revenue Cash and cash equivalents Pledged time deposits Interest receivable Guarantee deposits Bonds sold under agreements to repurchase Interest revenue Non-operating income	Amount $ 3,046 15 160,000 3,316,089 15,659 2,985 480 2,196,076 50,000 295,000 160,000 1,656 11,032 356,967 510,000 1,329 200,000 295,000 4,612 480	Counterparties of Transactions
			E.Sun Bank E.Sun Bank E.Sun Bills E.Sun Financial Holdings, E.Sun Bills and E.Sun Securities E.Sun Financial Holdings, E.Sun Bills and E.Sun Securities E.Sun Bills and E.Sun Securities E.Sun Securities E.Sun Bank E.Sun Bank E.Sun Securities E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bank E.Sun Bills E.Sun Bank E.Sun Bank

Cash

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . . . Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 1,894,162 5,639,488 5,348,417 $12,882,067	2003
		$ 2,109,584 8,383,250 2,505,505
		$12,998,339

F-135

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

5. Due from Banks

Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $2,806,226 5,709,834 $8,516,060	2003
		$ 3,853,697 8,750,231
		$12,603,928

6. Due from Central Bank of China

Reserves for deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $6,873,798 2,542,150 $9,415,948	2003
		$ 8,795,222 2,379,305
		$11,174,527

As required by law, the reserves for deposits, are calculated by applying the prescribed rates to the average monthly balances of various types of deposit accounts held by the Bank. Of these amounts, $5,136,281 and $5,414,059 as of March 31, 2002 and 2003, respectively, were restricted from use by the Bank.

7. Securities Purchased

Overseas securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stocks and beneficiary certificates. . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds and bank debentures . . . . . . . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds sold under agreements to repurchase . . . . . . . . . . . . . . . . . Operating securities — dealing department . . . . . . . . . . . . . . . . . . Operating securities — underwriting department . . . . . . . . . . . . . . Bank acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for decline in value. . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 9,976,108 14,865,791 10,040,798 4,131,466 3,690,611 211,168 2,232,601 1,201,165 109 20,870 46,370,687 376,960 $45,993,727	2003
		$16,208,500 16,976,533 9,515,570 7,288,342 1,369,615 5,000,000 1,767,107 3,974,701 38,013 305,771
		62,444,152 40,533
		$62,403,619

F-136

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

8. Receivables — Net

Credit cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 9,726,389 1,389,884 391,685 374,228 1,367,065 13,249,251 386,284 $12,862,967	2003
		$17,043,622 846,564 469,917 338,018 2,002,844
		20,700,965 318,507
		$20,382,458

9 Loans, Bills and Discounts — Net

Loans Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medium-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bills and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 52,273,023 60,229,453 58,038,895 5,495,370 604,085 176,640,826 1,398,874 $175,241,952	2003
		$ 48,157,062 57,244,296 63,222,638 2,231,114 868,397
		171,723,507 1,631,367
		$170,092,140

As of March 31, 2002 and 2003, the loan and credit balances for which accrual of interest revenues was discontinued amounted to $5,495,370 and $2,231,114. The Bank’s unrecognized interest revenues on these loans and credits amounted to $80,618 and $23,935 for the periods ended March 31, 2002 and 2003.

For the periods ended March 31, 2002 and 2003, the Bank carried out legal procedures required before the Bank can write off credits.

F-137

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The details of and changes in allowance for credit losses on loans, discounts and bills purchased are summarized below:

For the Three Months Ended March 31, 2002	For the Three Months Ended March 31, 2002	For the Three Months Ended March 31, 2002
Specific Risk General Risk Total $1,075,932 $438,066 $1,513,998 527,871 (250,834) 277,037 (407,999) — (407,999) 15,838 — 15,838 $1,211,642 $187,232 $1,398,874 For the Three Months Ended March 31, 2003		Total
		$1,513,998 277,037 (407,999) 15,838
		$1,398,874
Specific Risk $104,593 — (252,754) 637,340 $489,179	General Risk $1,436,162 (293,974) — — $1,142,188	Total
		$1,540,755 (293,974) (252,754) 637,340
		$1,631,367

Since the third quarter of 2000, the economic and financial environment has been beset by such factors as unstable domestic and foreign conditions. Thus, the country’s economic growth has decelerated, investment is reduced, unemployment has risen, the stock market is bearish, and the New Taiwan dollar has devaluated. Certain business enterprises, including conglomerates and listed companies, failed to meet their obligations when these obligations became due. To stabilize the situation, the government has taken various economy-boosting measures. Thus, the Company’s financial statements for the three months ended March 31, 2003 included provisions for possible guarantee and other based on information available to the Company, including defaults to the extent they can be determined or estimated. These estimated provisions do not include any adjustments that might be required when related contingent liabilities become probable or determinable in the future.

10. Long-term Investments

Long-term equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bond investments — corporate bonds and bank debentures .	March 31	March 31
	2002 $1,020,099 470,941 $1,491,040	2003
		$2,074,294 1,089,975
		$3,164,269

F-138

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The detail of long-term equity investment are summarized below:

March 31	March 31	March 31
2002 Amount % of Ownership $ — — 195,620 65.0 159,028 99.0 22,314 79.0 376,962 200,451 — 155,857 0.6 100,000 0.6 — — 210,228 — — — 666,536 23,399 643,137 $1,020,099	2003
Amount $ — 195,620 159,028 22,314 376,962 200,451 155,857 100,000 — 210,228 — 666,536 23,399 643,137 $1,020,099	Amount $1,003,044 255,239 161,474 38,249 1,458,006 200,451 155,857 100,000 60,000 210,228 10,000 736,536 120,248 616,288 $2,074,294	% of Ownership
		100.0 70.0 99.0 79.0 — 0.6 0.6 6.0 — 100.0

The carrying value of the investments accounted for by the equity method and the related income are not determined on the basis of reviewed financial statements of the investees, except for the financial statement as of March 31, 2003 of the E.Sun Securities Investment Trust Corp. Management believes that the effect of adjustments, if any, arising from the review of the accounts of the investees would not be significant.

11. Accumulated Depreciation

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 270,602 706,168 97,100 230,320 $1,304,190	2003
		$ 314,733 769,979 112,438 401,231
		$1,598,381

F-139

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

12. Other Assets — Net

Foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Refundable deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantee deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred charges — net of amortization . . . . . . . . . . . . . . . . . . . . Deferred income tax assets — net . . . . . . . . . . . . . . . . . . . . . . . . Settlement funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 308,135 840,666 288,005 36,847 17,610 30,302 272 $1,521,837	2003
		$ 268,887 902,160 294,744 71,747 1,122,813 41,170 6,243
		$2,707,764

13. Due to Banks Call loans from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14. Payables Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 2003 $7,924,117 $33,192,622 1,582,942 687,009 97,199 283,598 $9,604,258 $34,163,229 March 31	2003
		$33,192,622 687,009 283,598
		$34,163,229
	2002 $5,348,417 1,975,084 68,263 402,029 405,103 826,123 $9,025,019	2003
		$2,505,505 1,222,156 79,959 479,823 463,255 1,428,195
		$6,178,893

F-140

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

15. Deposits and Remittances

Deposits: Savings — time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 76,562,888 75,723,931 44,900,996 16,935,092 2,089,323 2,369,200 81,671 $218,663,101	2003
		$ 78,385,334 66,827,692 49,419,899 21,582,352 2,259,400 1,056,100 36,013
		$219,566,790

Bonds

Bonds issued on August 6, 2001 and bear annual interest at 3.76%, payable annually. Principal will be repaid on maturity date (5 years after the issue date). . . . . . . . . . . . . . . . Subordinated bonds issued on August 6, 2001 and bear annual interest at 4.2%, payable annually. Principal will be repaid in five installments starting on the third year from the issue date and will be fully repaid at the end of the seventh year. . . . . . . . Four types of subordinated bonds were issued on June 13, 2002; interest rate at 5%-8.6% minus the 90 days interest rate of commercial paper (below) and is paid quarterly. The principal will be fully repaid on the maturity date (5 years after the issue date). Four types of subordinated bonds were issued on August 16, 2002; interest rate at 5.94% minus floating interest rate (below) and is paid semi-annually. The principal will be repaid on the maturity date (5 years after the issue date). . . . . . . . . . . . . . . . . . . . . . Five types of bonds were issued on August 23, 2002; interest rate at 6% minus floating interest rate (below) and is paid semiannually. The principal will be repaid on the maturity date (5.5 years after the issue date) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $3,000,000 1,840,000 — — — $4,840,000	2003
		$3,000,000 1,840,000 1,700,000 1,300,000 2,000,000
		$9,840,000

The abovementioned 90 days interest rate of commercial paper and floating interest rate were based on the average quoted interest rate of Hong Kong’s Moneyline Telerate.

F-141

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

17. Long-term Debts

The term of the debts, interest rates range from 2.219%–2.615%, is three years through by December 2005. Of these debts, $510,000 is repayable monthly in equal installments since the borrowing date. The remaining balance will be repaid as follows: 30% after one year, 30% after two years, and 40% on maturity. The Company has pledged 494,000 thousand shares of E.Sun Bank for the long-term debts.

18. Income Tax

a. Income tax expense Income tax expense — current before tax credits. . . . . . . . . . . . Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax on unappropriated earnings (10%) . . . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $138,141 14,348 (431) 4,061 $156,119	2003
		$ 32,959 234,284 — 167,783
		$435,026

b. Deferred income tax assets (shown as part of ‘‘other assets’’):

Deferred income tax assets Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for possible losses on loans, receivables and guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gain . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Valuation allowances. . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ — 13,581 66,266 (68,311) 9,595 21,131 3,521 $17,610	2003
		$ 10,139 1,091,744 86,943 (66,001) 19,000
		1,141,825 19,012
		$1,122,813

Tax credits (resulting from employee training expenditures) and loss carryforwards as of March 31, 2003 will expire in 2006 and 2007, respectively.

F-142

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

c. Imputed tax credit

Balance of stockholders’ imputed tax credit March 31, 2002. . . . . . . . . . . . . . . . March 31, 2003. . . . . . . . . . . . . . . . Actual tax credit ratio for distributing earnings generated in 2001 . . . . . . . . Actual tax credit ratio for distributing earnings generated in 2002 . . . . . . . .	E.Sun Financial Holdings $ — 66,742 8.73% —	E.Sun Bank $157,776 85,966 16.1% —	E.Sun Bills $23,686 21,871 6.6% 3.49%	E.Sun Securities
				$ 2,138 12,900 5.34% 37.07% (Estimated)

For E.Sun Securities, such estimated ratio may change depending on the balance of the ICA on the dividend distribution date. The estimated income tax credit rate for distributing earnings generated in 2002 may differ from the actual rate applicable on the date of the actual distribution of the dividends. For E.Sun Financial Holding and E.Sun Bank, there was a deficit in 2002. Thus, imputed tax credit shall be allocated corresponding actual rate when earnings generated in the future are appropriated.

d. The unappropriated earnings as of March 31, 2003 is as follows:

The earning generated before 1998 . . . .	E.Sun Financial Holdings $—	E.Sun Bank $—	E.Sun Bills $91,777	E.Sun Securities
				$—

e. For E.Sun Bank, E.Sun Bills and E.Sun Securities, income tax returns through 2000, have been examined by the tax authorities.
f. For E.Sun Bank, in the assessment of 1994, 1995, 1997, 1998 and 2000 tax returns, the tax authorities denied the creditability of 10% withholding tax on interest income on bonds pertaining to periods in which those bonds, totaling $239,690 were held by other investors. In addition, the 1996, 1999 and 2001 income tax returns included a reduction of $80,785 in income tax obligations, and the tax authorities have not yet examined those returns. E.Sun Bank had accrued liabilities and written off any assets recognized related to the foregoing withholding taxes as part of income tax expense in 2001. In August 2002, the Supreme Administrative Court decided that the Taipei National Tax Administration find another disciplinary action to deal with the withholding tax issue. E.Sun Bank has not recognized any asset related to these amounts previously written-off or expensed, pending further decision of the tax authorities

F-143

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

g. For E.Sun Bills, the tax authorities challenged E.Sun Bills’ income tax refund claim of $277,515 (covering the period 1995 to 2000). The claim pertains to the tax withheld on interest income on bonds purchased for the periods when other investors held those bonds. In light of this tax issue, E.Sun Bill might face similar questioning by the tax authorities on the tax of $56,771 and $25,960 withheld in 2001 and 2002, respectively. In view of the tax authorities challenge, E.Sun Bills wrote off in 2001 and 2002 the related income tax refunds receivable of 334,286 and $25,960, respectively, recognized as assets in its accounts. However, on December 31, 2002, the Supreme Administrative Court later decided the 1996 refund case in favour of E.Sun Bills. The tax authorities are reexamining this case currently and E.Sun Bills has not recognized any assets related to these amounts previously written-off, pending further decision of the tax authorities.
h. The statutory corporate tax rates for 2002 and 2003 were approximately 25% in the ROC.

19. Stockholders’ Equity

a. 96% as dividends
b. 1% as bonus to directors and supervisors
c. 3% as bonus to employees.

Under the Company’s Articles of Incorporation, the stockholders may decide not to declare any dividends or declare only a portion of distributable earnings as dividends.

The component of any capital surplus arising from long-term equity investments accounted for by the equity method cannot not be distributed for any purpose.

F-144

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The capital surplus on March 31, 2003 came from the issuance of shares in excess of par value. Capital surplus sources and uses were as follows:

Sources
From subsidiaries
Capital surplus (mainly paid-in capital) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unappropriated retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on long-term equity investment. . . . . . . . . . . . . . . . . . . . . . . .

$ 413,733
2,776,834
109,230
2,919,727
(23,399)

Total capital stock of subsidiaries in excess of the Company’s issuance . . . . . . .
Balance on January 28, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uses
Bonus to directors, supervisors and employees of subsidiaries . . . . . . . . . . . . . .
Issuance of the Company’s stock dividends on March 31, 2003. . . . . . . . . . . . .
Balance on March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,196,125
600,000
6,796,125
(156,458)
(1,800,000)
$4,839,667

Under a SFC directive, a special reserve is appropriated from the balance of the retained earnings at an amount that is equal to the total debit balance of any stockholders’ equity account other than the deficit such as the ‘‘unrealized loss on long-term equity investments’’ and ‘‘Cumulative translation adjustments’’ accounts. The balance of the special reserve is adjusted to reflect any changes in the debit balance of the related accounts at the balance sheet dates.

Under the Integrated Income Tax System, stockholders are allowed tax credits for the income tax paid by the Company.

The appropriation of retained earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of the year of approval.

On March 13, 2003, the Company’s board of directors resolved to hold 100% shares of E.Sun Securities Investment Trust Corp. (ESSIT) by a share swap. The swap ratio was one share of ESSIT for 1.18 share of the Company and the Company expected to issue 35,400 thousand shares. After the swap, the outstanding capital stock increased to $25,054,000. Moreover, the board of directors resolved to use capital surplus $3,091,451 to offset a deficit. The deficit offset should be resolved by the stockholders in 2003 stockholders’ meeting.

F-145

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

20. Treasury Stock

For the period from January 28, 2002 to March 31, 2002 Reissuance to employees — held by E.Sun Bank. . . . . . . Treasury stock previously classified as long-term investments — held by E.Sun Bank . . . . . . . . . . . . . . For the three months ended March 31, 2003 Reissuance to employees — held by E.Sun Bank. . . . . . . Treasury stock previously classified as long-term investments — held by E.Sun Bank . . . . . . . . . . . . . .	Shares at Beginning of the Period 40,000 286,897 326,897 40,000 309,849 349,849	Share Increase During the Period — — — — — —	Shares at End of the Period
			40,000 286,897
			326,897
			40,000 309,849
			349,849

As of March 31, 2002 and 2003, the treasury stock pertained to long-term equity investments (shares of the Company held by E.Sun Bank as a result of the share swap as stated in Note 1) and treasury stock (reissued to employees); the carrying value of the treasury stock is $3,749,586 (the market values based on the average closing prices for the month of March are $3,700,976 in 2002 and $5,035,049 in 2003) and $498,017, respectively.

F-146

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The special reserve may be reversed if the market value recovers. Since the market value of the treasury stock held by subsidiaries was higher than its carrying value as of March 31, 2003, the special reserve was not appropriated.

21. Earnings Per Share

The numerators and denominators used in computing loss per shares are summarized as follows:

Amounts (Numerator) Pretax After-tax $719,592 $563,473 $719,592 $563,473 Amounts (Numerator) Pretax After-tax $1,596,859 $1,161,833 $1,596,859 $1,161,833	Loss Per Share (Dollars)	Loss Per Share (Dollars)
	Pretax After-tax $0.34 $0.27 $0.29 $0.23 Loss Per Share (Dollars)	After-tax
		$0.27
		$0.23
Pretax $1,596,859 $1,596,859	Pretax $0.75 $0.65	After-tax
		$0.55
		$0.47

The number of shares outstanding should be retroactively adjusted to reflect the effects of the stock dividends distributed subsequently (please see Note 19). Because stock dividends were distributed in 2002, the after-tax earnings per share for the period from January 28, 2002 to March 31, 2002 need to be retroactively adjusted from NT$0.29 to NT$0.27.

F-147

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

22. Pension Plan

E.Sun Bank and E.Sun Bills make monthly contributions, equal to 5.54% and 4%, respectively of salaries, to a pension fund (the ‘‘Fund’’). The Fund is managed by a workers fund administrative committee and deposited in its name in the Central Trust of China. The difference between the contributions and the pension costs based on actuarial calculations is deposited in E.Sun Bank in the name of the employees pension fund administrative committee.

Contributions For the three months ended March 31, 2002 . . . . . . . . . . . . . . . . . . . For the three months ended March 31, 2003 . . . . . . . . . . . . . . . . . . .	E.Sun Bank $14,292 $16,182	E.Sun Bills
		$1,159
		$1,118

E.Sun Securities maintains a separate pension plan for its full time employees on a similar basis as the above. The amounts related to such plan are not deemed material for separate disclosure.

23. Related-party Transactions

Significant related-party transactions pertain to (a) E.Sun Social Welfare Foundation (the funds of which are donated by E.Sun Bank); (b) investees under equity method — E.Sun Venture Capital Co., Ltd., E.Sun Finance & Leasing Co., E.Sun Insurance Agent Co., E.Sun Securities Investment Trust Corp. (ESSIT) and E.Sun Technologies Co. (50% of shares owned by E.Sun Finance & Leasing Co.); (c) Fu Bon Securities Finance Co. (E.Sun Bank is its director); and (d) certain directors, supervisors, managers, and relatives of the Company’s chairman and general managers.

F-148

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The transactions with the foregoing related parties are summarized as follows:

a. Loans, deposits and bonds payable:

For the three months ended March 31, 2002

Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . For the three months ended March 31, Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds payable . . . . . . . . . . . . . . . . . . . . . .	Balance $392,612 $169,394 2003 $273,616 $986,435 $100,000	% to Total — — — — 1	Interest Rate (%) 2.45–9.28 0–13 1.5–9.85 0–13 4.2	Revenue (Expense)
				$4,695
				($2,092)
				$4,111
				($ 940)
				($1,050)

b. Bonds sold under agreements to repurchase:

For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
2002 Amount % $120,000 3 . . . . . . . . . . . . . . . . .	2003
Amount $120,000 . . . . . . . . . .	Amount % $100,014 2 For the Three Months Ended March 31	% 2
	2002 $—	2003
		$114,079

The related-party transactions were conducted under normal terms.

F-149

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

24. Pledged Assets

Securities purchased (face value). . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bond investment (face value). . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $745,904 130,000 $875,904	2003
		$7,988,847 199,977
		$8,188,824

As of March 31, 2003, securities purchased aggregating $7,000,000 have been provided as collateral for day-term overdraft to comply with the Central Bank’s clearing system of Real-time Gross Settlement (RTGS). The unused overdraft amount at the end of day can also be treated as E.Sun Bank’s liquidity reserve.

E.Sun Bills and E.Sun Securities’ time deposits, which are not included in foregoing pledged assets with a face value of $50,000 and $510,000, have been eliminated on the basis of the financial statement preparation. (Please see Note 3)

25. Contingencies and Commitments as of March 31, 2003

a. E.Sun Bank
(1) Sales amounting to $6,349,399 before May 2, 2003 of short-term negotiable instruments acquired for $6,344,916 under agreements to resell; repurchases for $9,983,128 before August 11, 2003 of short-term negotiable instruments sold for $9,974,455 under agreements to repurchase.
(2) E.Sun Bank leases the premises occupied by its branches under renewable agreements expiring on various dates before March 31, 2013. Rentals are calculated on the basis of the leased areas and are payable monthly, quarterly or semiannually. Refundable deposits on these leases totaled $689,074 (shown as part of ‘‘other assets’’ account) as of March 31, 2003. Rentals for the next five years are as follows:

Year
For the period from April 1, 2003 to December 31, 2003 . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the period from January 1, 2008 to March 31, 2008 . . . . . . . . . . . . .

Amount

$163,756
195,584
134,633
100,367
60,568
10,238

Total rentals for April 1, 2008 to March 31, 2013 will total $165,641. The present value of these rentals is $152,999, based on 1.0% annual interest.

F-150

English Translation of Financial Statements Originally Issued in Chinese

(3) E.Sun Bank entered into agreements to acquire land and buildings, construct a building, and make various purchases to improve the of premises occupied by its branches. The total contract amount was approximately $651,637. As of March 31, 2003, the unpaid balance of these contracts was approximately $407,228.

b. E.Sun Bills

Contingencies and commitments resulting from business transactions were as follows:

Securities sold under repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under resell agreements . . . . . . . . . . . . . . . . . . . . . . Guarantees on commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31, 2003
	$37,397,469 926,264 18,038,100 1,185,000

c. E.Sun Securities

Sales amounting to $1,768,427 of bonds acquired for $1,767,107 under agreements to resell. Repurchase for $4,948,482 of sold for $4,946,151 under agreements to repurchase.

26. Personnel Expense, Depreciation and Amortization

Personnel expense Payroll expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $301,390 20,760 15,451 19,217 59,879 17,258	2003
		$342,766 25,710 17,300 10,855 68,270 20,430

27. Capital Adequacy Ratio

F-151

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The Banking Law and regulations require that the Bank maintain the CAR for both stand-alone and consolidated at a minimum of 8%. If the Bank’s CAR falls below 8%, the Ministry of Finance may impose certain restrictions on the amount of cash dividends that the Bank can declare or, in certain conditions, totally prohibit the Bank from declaring cash dividends. As of December 31, 2001 and 2002, the stand-alone CARs of E.Sun Bank was 11.01% and 10.38%, respectively. As of December 31, 2002, the consolidated CARs of E.Sun Bank was 10.51%.

Under the law governing bills finance companies and related regulations, a bills finance company should maintain a CAR of at least 8%. If the CAR falls below 8%, the authorities might subject the Company’s earnings appropriations to certain restrictions. The CAR of E.Sun Bills was 18.01% and 17.21% as of December 31, 2001 and 2002.

28. Average Amount and Average Interest Rate of Interest-earning Assets and Interest-bearing Liabilities

Average balance is calculated at the daily average balance of interest-earning assets and interestbearing liabilities.

For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
2002 Average Balance Average Rate (%) $ 3,279,772 2.38 869,395 0.92 5,142,100 2.47 39,371,561 4.17 171,078,964 5.84 7,011,054 2.11 10,476,348 1.18 42,601,936 2.26 53,728,651 3.18 77,841,225 3.51 2,453,118 3.20 5,000,000 3.94	2003
Average Balance $ 3,279,772 869,395 5,142,100 39,371,561 171,078,964 7,011,054 10,476,348 42,601,936 53,728,651 77,841,225 2,453,118 5,000,000	Average Balance $ 16,764,419 7,886,558 5,390,785 32,963,383 162,712,824 12,711,830 20,387,076 48,744,917 71,702,748 77,523,937 1,101,616 10,000,000	Average Rate (%)
		0.04 1.20 2.18 2.59 3.62 1.30 0.42 1.00 1.77 2.13 1.16 3.63

F-152

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

29. Maturity Analysis of Assets and Liabilities

			Marc	h 31
	20	02			20	03
Due in One Year	Due Between One Year and Seven Years	Due After Seven Years	Total	Due in One Year	Due Between One Year and Seven Years	Due After Seven Years	Total
$ 12,882,067 8,516,060 9,415,948 46,370,687 13,249,251 70,623,749 —	$ — — — — — 48,486,251 470,941	$ — — — — — 57,530,826 —	$ 12,882,067 8,516,060 9,415,948 46,370,687 13,249,251 176,640,826 470,941	$ 12,998,339 12,603,928 11,174,527 62,444,152 20,700,965 66,958,853 —	$ — — — — — 43,686,227 1,089,975	$ — — — — — 61,078,427 —	$ 12,998,339 12,603,928 11,174,527 62,444,152 20,700,965 171,723,507 1,089,975
$161,057,762	$48,957,192	$57,530,826	$267,545,780	$186,880,764	$44,776,202	$61,078,427	$292,735,393
$ 9,604,258 3,501,781 9,025,019 210,527,101 — —	$ — — — 8,136,000 4,840,000 —	$ — — — — — —	$ 9,604,258 3,501,781 9,025,019 218,663,101 4,840,000 —	$ 34,163,229 4,946,151 6,178,893 208,405,879 — 291,000	$ — — — 11,160,911 9,840,000 1,189,000	$ — — — — — —	$ 34,163,229 4,946,151 6,178,893 219,566,790 9,840,000 1,480,000
$232,658,159	$12,976,000	$ —	$245,634,159	$253,985,152	$22,189,911	$ —	$276,175,063

30. Financial Instruments

a. Derivative financial instruments

F-153

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The contract (nominal) amounts, credit risks, and fair values of derivative transactions as of March 31, 2002 and 2003 were as follows:

		March 31	March 31
	2002	Fair Value Contract (Nominal) Amount $ 813 $1,026,869 6,508 4,889,242 March 31		2003
Contract (Nominal) Amount $ 642,413 3,152,588	Credit Risk $ 1,055 15,892			Credit Risk $11,778 6,070
	2002	Fair Value 14,497 (20,483) —		2003
Contract (Nominal) Amount 2,561,624 690,000 —	Credit Risk 28,675 — —		Contract (Nominal) Amount 6,461,759 5,379,000 2,000,000	Credit Risk 7,609 84,491 15,920

E.Sun Bank calculates the fair value of each forward contract at the forward rate for the remaining term, quoted from Reuters or Telerate Information System.

F-154

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The gain and loss on the derivative transactions are as follows:

Trading purpose Forward contract (under exchange gain) . . . . . . . . . . . . . . . . . . . . . . Foreign currency swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nontrading purposes Asset swap contract (under ‘‘interest revenue’’) . . . . . . . . . . . . . . . . . Cross-currency swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $ 537 $5,471 (1,193) $4,278 $1,634 $5,428 (5,074) $354 $ — — $ —	2003
		($ 369)
		$10,241 (5,522)
		$ 4,719
		$ 3,242
		$19,884 (16,091)
		$ 3,793
		$38,830 (35,588)
		$ 3,242

b. Fair value of nonderivative financial instruments

March 31	March 31	March 31
2002 Carrying Value Fair Value $266,071,694 $266,071,694 1,491,040 1,489,676 245,732,100 245,732,100	2003
Carrying Value $266,071,694 1,491,040 245,732,100	Carrying Value $290,893,085 3,164,269 276,394,931	Fair Value
		$290,893,085 3,164,824 276,394,931

F-155

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Methods and assumptions used in estimating the fair value of nonderivative financial instruments were as follows:

(1) The carrying values of cash, due from banks, due from Central Bank of China, receivables, due to banks, payables and remittances approximate fair values because of the short maturity of these instruments. The carrying value of other assets and other liabilities also approximate the expected cash inflows or outflows at settlement dates; thus, their carrying value also approximates its fair value.
(2) If market prices for securities purchased and long-term stock investments are available, the fair value of these financial instruments should be based on the market price. If market prices are unavailable, then their carrying value will represent current fair value.
(3) Loans, bills and discounts, deposits and bonds are interest-bearing financial assets and liabilities. Thus, their carrying value represents current fair value.

Only the fair values of financial instruments were listed above, thus, the total of fair values listed above does not represent the fair value of the Bank.

c. Financial instruments with off-balance-sheet credit risks

Under normal business operations, E.Sun Bank is a party to transactions involving financial instruments with off-balance-sheet risks, such as issuing credit cards, extending credit facilities and providing financial guarantee and obligations under letters of credit issued. Generally, these transactions are for one year. The interest rates for loans ranged from 1.9% to 18.25% and from 1.3% to 8.25% on March 31, 2002 and 2003. The highest interest rate for credit cards was 19.71% in 2002 and 2003. There is no concentration of maturity dates in one particular period that would potentially result in liquidity problems to E.Sun Bank.

E.Sun Bills provides guarantee on commercial paper issued by other entities. The guarantee period is normally one year and the rate of guarantee service fees ranges form 0.1% to 1% of the amount guaranteed.

The contractual amounts of financial contracts with off-balance-sheet credit risks as of March 31, 2002 and 2003 were as follows:

March 31, 2002 Credit card commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees and issuance of letter of credit . . . . . . . . . . . . . . . . March 31, 2003 Credit card commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees and issuance of letter of credit . . . . . . . . . . . . . . . .	E.Sun Bank $ 75,599,025 8,053,840 141,410,486 7,328,256	E.Sun Bills
		$ — 17,061,500 — 18,038,100

F-156

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The Company evaluates the creditworthiness of each credit application case by case, taking into account the applicant’s credit history, credit rating and financial condition. Collateral, mostly in the form of real estate, cash, inventories and marketable securities, may be required depending on the evaluation result. As of March 31, 2002 and 2003, about 59.99% and 53.77%, of total loans granted and from 15% to 20% of the aggregate guarantees and letters of credit issued, were secured. No collateral is required credit card facilities but the credit status of each credit cardholder is closely monitored. Depending on the results of credit status monitoring, appropriate measures are adopted, including amending the credit limit and, if necessary, cancellation of the facility.

d. Information on concentrations of credit risks

Loans — by industries Real estate and lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees on commercial paper — by industries Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electronic and mechanical equipment. . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $14,809,059 6,163,000 2,805,000 1,351,000	2003
		$7,553,305 6,103,000 2,878,000 1,242,000

The net position on foreign-currency transactions is shown below:

Currency U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $76,947 ($31,891)	2003
		($198,972) $153,769

F-157

English Translation of Financial Statements Originally Issued in Chinese

Condensed Financial Statements of Subsidiaries
a. Balance sheets

E.SUN COMMERCIAL BANK, LTD. Condensed Balance Sheet March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from Central Bank . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased — net. . . . . . . . . . . . . . . . . . . . . . . .
Receivables — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, bills and discounts — net. . . . . . . . . . . . . . . . . . . .
Long-term equity investments — net . . . . . . . . . . . . . . . . .
Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and stockholders’ equity
Liabilities
Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and remittances . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on long-term equity investment. . . . . . . . . .
Cumulative translation adjustments . . . . . . . . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders’ equity . . . . . . . . . . . . . .

March 31
2002
2003
$ 12,881,967
$ 12,998,089
6,330,040
9,699,106
9,415,948
11,174,527
38,356,783
46,587,184
12,686,852
19,746,239
184,238
64,569
175,241,952
170,092,140
4,654,013
4,780,394
4,787,123
5,123,831
1,150,303
2,240,266
$265,689,219
$282,506,345
$ 6,974,258
$ 24,353,229
8,896,336
5,502,509
302,464
508,455
220,553,234
222,882,879
5,000,000
10,000,000
611,910
304,089
242,338,202
263,551,161
18,175,000
18,175,000
326,233
326,233
5,426,684
949,236
(78,879)
—
(4)
2,732
(498,017)
(498,017)
23,351,017
18,955,184
$265,689,219
$282,506,345

2002
$ 12,881,967
6,330,040
9,415,948
38,356,783
12,686,852
184,238
175,241,952
4,654,013
4,787,123
1,150,303
$265,689,219
$ 6,974,258
8,896,336
302,464
220,553,234
5,000,000
611,910
242,338,202
18,175,000
326,233
5,426,684
(78,879)
(4)
(498,017)
23,351,017
$265,689,219

F-158

English Translation of Financial Statements Originally Issued in Chinese

E.SUN BILLS FINANCE CORPORATION

Condensed Balance Sheet March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pledged time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term bond investments. . . . . . . . . . . . . . . . . . . . . . . Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and stockholders’ equity Liabilities Bond loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserve for loss on guarantees . . . . . . . . . . . . . . . . . . . . . Reserve for loss on sale of bonds . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . .	March 31	March 31
	2002 $3,184,798 200,000 3,810,743 50,000 124,452 5,816 630,941 107,500 369,523 $8,483,773 $2,630,000 91,491 415,610 130,186 3,267,287 4,265,000 87,500 863,986 5,216,486 $8,483,773	2003
		$ 4,810,404 200,000 9,306,418 50,000 164,239 3,022 1,249,975 101,037 382,640
		$16,267,735
		$ 9,810,000 503,224 439,126 200,065
		10,952,415
		4,265,000 87,500 962,820
		5,315,320
		$16,267,735

F-159

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

E.SUN SECURITIES CORP.

Condensed Balance Sheet March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Assets Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities brokerage account — net . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities and stockholders’ equity Liabilities Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $4,427,339 60,192 37,058 165,764 901 $4,691,254 $3,528,912 11,903 3,540,815 1,060,000 90,439 1,150,439 $4,691,254	2003
		$7,873,754 160,690 97,074 267,424 268
		$8,399,210
		$5,262,608 24,192
		5,286,800
		3,060,000 52,410
		3,112,410
		$8,399,210

F-160

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Income statement

E.SUN COMMERCIAL BANK, LTD. Condensed Income Statement

For the Three Months Ended March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-operating expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . Earnings per share — after tax (Dollars) . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $3,679,460 2,237,643 1,441,817 730,377 711,440 2,704 12,951 $ 701,193 $ 594,997 $ 0.39 $ 0.33	2003
		$3,468,715 1,201,201
		2,267,514 965,172
		1,302,342 6,143 2,838
		$1,305,647
		$1,041,967
		$ 0.72
		$ 0.57

F-161

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

E.SUN BILL FINANCE CORPORATION

Condensed Income Statement

For the Three Months Ended March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . Earnings per share — after tax (Dollars) . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $198,856 64,298 $134,558 $ 88,620 $ 0.32 $ 0.21	2003
		$419,159 115,209
		$303,950
		$282,643
		$ 0.71
		$ 0.66

E.SUN SECURITIES CORP. Condensed Income Statement

For the Three Months Ended March 31, 2002 and 2003

(In Thousands of New Taiwan Dollars)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share — pretax (Dollars) . . . . . . . . . . . . . . . . . . . Earnings per share — after tax (Dollars) . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $72,031 47,112 $24,919 $20,934 $ 0.24 $ 0.20	2003
		$115,160 104,082
		$ 11,078
		$15,487
		$ 0.04
		$ 0.05

F-162

English Translation of Financial Statements Originally Issued in Chinese

Allocation of Revenue, Cost and Expense That Resulted From the Sharing of Resources Between the Company and Subsidiaries

Under cooperation arrangements, E.Sun Bank and E.Sun Securities shared some equipment and operating sites; thus, related expenses were apportioned as follows:

Item Rental expense . . . . Fixtures . . . . . . . . . Broadcasting and security systems. . Networking, monitoring and telephone systems Others . . . . . . . . . .	E.Sun Bank $1,080 449 4,458 — 118 $6,105	E.Sun Securities $ 550 3,369 4,458 1,142 567 $10,086	Total $ 1,630 3,818 8,916 1,142 685 $16,191	Apportionment Method
				E.Sun Bank: 2/33; E.Sun Securities: 1/3. Based on area actually occupied 50% each Based on actual number of equipment used. Signboard, telephone and miscellaneous expenses — based on actual usage. Insurance and cleaning expenses — 50% each Utilities — based on the actual number of employees Building management expenses — based on space actually occupied

F-163

English Translation of Financial Statements Originally Issued in Chinese

Important Information on Subsidiaries’ Asset Quality, Management, Profit Ability, Liquidity and Sensitivity to Market Risk

a. Asset quality

(1) E.Sun Bank

Items Nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonperforming loans ratio . . . . . . . . . . . . . . . . . . . . . . . . Delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delinquent loans ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for possible losses on loans. . . . . . . . . . . . . . . .	March 31	March 31
	2002 $5,074,582 5,495,370 2.87 — — 1,398,874	2003
		$2,343,712 2,231,114 1.36 1,762,693 1.03 1,631,367

(2) E.Sun Bills

Items Nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonperforming loans ratio . . . . . . . . . . . . . . . . . . . . . . . . Reserve for loss on guarantees . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ — 38,000 0.22 424,610	2003
		$ — — — 439,126

F-164

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES

Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

b. Management information as of December 31, 2002
(1) Concentrations of credit risk

E.Sun Bank

Items Credit to related party . . . . . . . Credit to related party Total credit . . . . . . . . . . . . . Credit with stock pledged Total credit . . . . . . . . . . . . . Loan concentration by industry .	March 31, 2002 $2,635,002 1.48% 2.01% Type of Industry % Government-owned and private enterprise 45 a. Farm, forestry, fishery and animal husbandry — b. Mining — c. Manufacturing 15 d. Public utility 1 e. Construction 1 f. Wholesale, retail and catering 6 g. Transportation, warehousing, and communications 2 h. Finance, insurance and real estate 15 i. Individual service 5 Others 55	March 31, 2003
		$4,028,903 2.30% 1.17% Type of Industry % Government-owned and private enterprise 46 a. Farm, forestry, fishery and animal husbandry — b. Mining — c. Manufacturing 16 d. Public utility 1 e. Construction 1 f. Wholesale, retail and catering 7 g. Transportation, warehousing, and communications 2 h. Finance, insurance and real estate 14 i. Individual service 5 Others 54

F-165

English Translation of Financial Statements Originally Issued in Chinese

E.Sun Bills

Items Credit to related party . . . . . . . Credit to related party Total credit . . . . . . . . . . . . . . Credit with stock pledged Total credit . . . . . . . . . . . . . . Loan concentration by industry .	March 31, 2002 $1,047,300 6.14% 13.37% Type of Industry % Finance 36 Electronical and mechanical equipment 16 Real estate 8 Others 40	March 31, 2003
		$424,000 2.35% 7.79% Type of Industry % Finance 34 Electronical and mechanical equipment 16 Real estate 7 Others 43

(2) Investees: Please see Table 2.
(3) Policies on allowances for losses on loans, overdue loans, and securities purchased: Please see Note 2.
(4) Special items

Penalties due to violation of the law, major weaknesses and action for reform in the past year:

E.Sun Bank
Owners and employees are prosecuted for crime committed in
the past year.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	None
Penalties due to violation of the Banking Law and/or law governing
bills finance administration in the past year. . . . . . . . . . . . . . . . . . . .	None
Major deficiencies rectified by the Ministry of Finance in the past year. .	None
Major loss due to fraud, accident violation of security standard of financial
institutions, resulting in a loss of more than $50,000 in the past year.. .	None
Other information required by the authorities . . . . . . . . . . . . . . . . . . . .	None

F-166

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

(5) Business information of a bills finance company
E.Sun Bills

Items Guarantees and endorsements . . . . . . . . . . . . . . . . . . . . . . Guarantees and endorsements/stockholder’s equity. . . . . . . . Short-term negotiable instruments sold under agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term negotiable instruments sold under agreements to repurchase/ stockholder’s equity. . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 17,061,500 3.51 24,912,564 5.13	2003
		18,038,100 3.71 23,536,819 4.84

c. Profitability in 2002 (Unit: %)

(1) E.Sun Bank

Items Return on assets (income before tax 7 average assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return on equity (income before tax 7 average equities) . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income ratio (income before tax 7 operating revenue) . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 1.06 12.15 19.06	2003
		1.88 28.34 37.64

(2) E.Sun Bills

Items Return on assets (income before tax 7 average assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Return on equity (income before tax 7 average equities) . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income ratio (income before tax 7 operating revenue) . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 1.52 2.60 67.67	2003
		2.31 5.65 72.51

F-167

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

d. Liquidity as of March 31, 2003
(1) Liquidity analysis of E.Sun Bank

Assets . . . . . . . . . Liabilities. . . . . . . Gap . . . . . . . . . . . Accumulated gap. .	Total $ 71,111,000 225,378,000 (154,267,000) (154,267,000)		Period Remaining until Due Date
		0–30 Days 31–90 Days 91–180 Days 181–365 Days (In Thousands of New Taiwan Dollars) $34,967,000 $ 5,670,000 $ 3,037,000 $ 10,700,000 22,262,000 23,944,000 100,542,000 57,342,000 12,705,000 (18,274,000) (97,505,000) (46,642,000) 12,705,000 (5,569,000) (103,074,000) (149,716,000)		Over 1 Year
				$ 16,737,000 21,288,000 (4,551,000) (154,267,000)

Note: Listed amounts are in New Taiwan dollars (i.e., excluding foreign-currency amounts) of the head office and domestic branches.

(2) Liquidity analysis of E.Sun Bills

Items Usage of funds . . . Bills Bonds Deposits Call Loans R.S Total Source of funds. . . Borrowings R.P Capital Total Net flows . . . . . . . Accumulated net flows . . . . . . . .			Period
	1–30 Days $ 7,716,000 — 1,470,000 200,000 771,000 10,157,000 9,610,000 32,592,000 — 42,202,000 (32,045,000) (32,045,000)	31–90 Days 91–180 Days 181–365 Days (In Thousands of New Taiwan Dollars) $11,920,000 $ 9,215,000 $3,323,000 77,000 225,000 475,000 504,000 859,000 2,067,000 — — — — — — 12,501,000 10,299,000 5,865,000 200,000 — — 2,992,000 1,497,000 216,000 — — — 3,192,000 1,497,000 216,000 9,309,000 8,802,000 5,649,000 (22,736,000) (13,934,000) (8,285,000)			Over 1 Year
					$ — 14,386,000 — — — 14,386,000 — — — — 14,386,000 6,101,000

Note: R.S — securities purchased under agreement to resell. R.P — securities sold agreement to repurchase.

e. Sensitivity as of March 31, 2003 (Unit: %)

(1) E.Sun Bank

Items Ratio of interest-sensitive assets to liabilities . . . . . . . . . . . Ratio of interest-sensitive gap to stockholders’ equity . . . . .	March 31	March 31
	2002 82.02 (146.66)	2003
		88.60 (126.50)

F-168

English Translation of Financial Statements Originally Issued in Chinese

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES Notes to Unaudited Consolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

(2) E.Sun Bills

Items Ratio of interest-sensitive assets to liabilities . . . . . . . . . . . Ratio of interest-sensitive gap to stockholders’ equity . . . . .	March 31 2002 2003 79.37 82.41 (163.78) (155.27)
	2002 79.37 (163.78)

34. Additional Disclosures

Following are the additional disclosures required by the Securities and Futures Commission:

a. Related information of significant transaction and investees: The required information has been disclosed on Table 1 to 4.
b. Investment in Mainland China — None.

F-169

							Maximum	Collateral/	Guarantee	Amounts	Allowable	$2,000
				Ratio of	Accumulated	Amount of	Guarantee to	Net Asset Value	of the Latest	Financial	Statement	26%
							Value of	Collaterals	Property,	Plant or	Equipment	None
E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Endorsement/Guarantee Provided	For the Three Months Ended March 31, 2003	(Amounts in Thousands of U.S. Dollars)				Limits on	Individual	Counter-party Collateral or Maximum	Guarantee Balance for Ending Nature of	Amounts the Period Balance Name Relationship	E.Sun International Co. Affiliate $2,000 $1,234 $1,234
											Endorsement/Guarantee Provider	E.Sun Finance & Leasing Co.
											No.	1.

F-170

						Note		The 494,000 thousand shares						(Note 1)	(Note 1)	(Note 1)	(Note 1)		(Note 1)	(Note 1)	(Note 1)		(Note 1)			(Note 1)	(Note 1)
					Market Value or	Net Asset Value		$15,085,349	5,315,320	3,112,410	1,003,044		5,035,049	192,531	1,153	48,837	10,481	161,474	19,940	64,476	25,903	38,249	2,767	80,201	164,549	103,616	$57,449
E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Marketable Securities Held	March 31, 2003	(Amounts in Thousands of New Taiwan Dollars)	March 31, 2003	Marketable Securities Shares Carrying Percentage of	Type and Name Relationshipwith the Company Financial Statement Account (Thousands) Value Ownership	Stock	E.Sun Commercial Bank, Ltd. Subsidiary Long-term equity investment 1,817,500 $15,085,349 100.00	E.Sun Bills Finance Co., Ltd. Subsidiary Long-term equity investment 426,500 5,315,320 100.00	E.Sun Securities Co., Ltd. Subsidiary Long-term equity investment 306,000 3,112,410 100.00	E.Sun Venture Capital Co., Ltd. Subsidiary Long-term equity investment 100,000 1,003,044 100.00	Stock	E.Sun Financial Holding Co., Ltd. Parent company Long-term equity investment 309,849 3,749,586 12.53	Fu Bon Securities Finance Co. — Long-term equity investment 16,148 155,857 2.56	Taipei Forex Inc. — Long-term equity investment 80 800 0.40	Apex Venture Capital Corp. — Long-term equity investment 5,000 50,000 4.67	Taiwan Futures Exchange Co., Ltd. — Long-term equity investment 900 9,000 0.45	E.Sun Finance & Leasing Co. Subsidiary Long-term equity investment 19,600 161,474 98.99	Gapura Incorporated — Long-term equity investment 750 23,428 4.90	Financial Information Service Co., Ltd. — Long-term equity investment 4,550 45,500 1.14	National Venture Capital Corp. — Long-term equity investment 2,700 27,000 4.99	E.Sun Insurance Agent Co., Ltd. Subsidiary Long-term equity investment 1,280 38,249 79.00	Bank-Pro E-Service Technology Co, Ltd. — Long-term equity investment 450 4,500 5.00	United Microelectronic Corporation — Long-term equity investment 3,957 200,451 —	E.Sun Securities Investment Trust Corp. Equity-accounted investee Long-term equity investment 13,500 164,549 45.00	Taiwan Asset Management Corporation — Long-term equity investment 10,000 100,000 0.57	Taiwan Financial Asset Service Corporation — Long-term equity investment 5,000 $50,000 3.33
						Held Company Name	E.Sun Financial Holding Co., Ltd.					E.Sun Commercial Bank, Ltd.. . .

F-171

		Note
																							(Note 1)	(Note 1)	(Note 1)				(Note 1)
	Market Value or	Net Asset Value		$160,000		199,978	100,575	100,000	200,000	200,000	99,997	199,980		246,957		22,402	7,095		10,697	8	11,857	3,888	4,253	18,168	3,304	9,703	3,314	2,629	25,231
March 31, 2003	Carrying Percentage of	Value Ownership		$160,000 —		199,978 —	100,000 —	100,000 —	200,000 —	200,000 —	100,000 —	199,997 —		215,744 —		22,000 —	7,000 —		25,707 —	36 —	19,873 —	4,637 —	3,600 6.00	20,000 3.50	17,790 3.40	9,703 20.00	3,314 50.00	2,629 100.00	30,393 6.20
	Shares	(Thousands)		—		—	—	—	—	—	—	—		—		—	—		518	—	1,583	300	300	2,000	857	324	500	300	950
		Financial Statement Account		Long-term bond investments and	other assets	Long-term bond investments	Long-term bond investments	Long-term bond investments	Long-term bond investments	Long-term bond investments	Long-term bond investments	Long-term bond investments		Other assets		Other assets	Other assets		Short-term investment	Short-term investment	Short-term investment	Short-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment	Long-term investment
		Relationshipwith the Company		Common parent company		—	—	—	—	—	—	—		—		—	—		—	—	—	—	—	—	—	Equity-accounted investee	Subsidiary	Subsidiary	—
	Marketable Securities	Type and Name	Corporate and financial institution bonds	E.Sun Commercial Bank		Taishin Bank	Chang Hwa Bank	Hua Nan Commercial Bank	The Farmers Bank of China	Sunny Bank	Union Bank	Hua Nan Financial Holding Company	Government bonds	87103	Corporate bonds	China Hsin Food & Synthetic Fiber Co., Ltd.	China Rebar Co., Ltd.	Stock	United Microelectronic Corp.	Acer Computer Corp.	Taiwan International Securities Corp.	SinoPac Holding Co., Ltd.	Netplus Material, Inc.	National Venture Capital Corp.	Gigarams Semiconductor Device Corp.	E.Sun Insurance Agent Co., Ltd.	E.Sun Technologies Co., Ltd.	E.Sun Marketing Consulting Co., Ltd.	Gapura Incorporated
		Held Company Name. . . . . . . .	E.Sun Bills Finance Corp. . . . . .															E.Sun Finance & Leasing Co. . . .

F-172

		Note		Pledged for courts of justice	pursuant to collection case
	Market Value or	Net Asset Value		$ 3,212	1,064		$ 31,324	885	58,135	3,762	45,257	93,630	64,878	51,244	51,197	80,948	87,877	90,635	89,940	30,467	60,225		90,690	60,000	100,668
March 31, 2003	Carrying Percentage of	Value Ownership		$ 3,212 —	1,064 —		$ 31,318 —	84,853 —	58,133 —	3,760 —	45,248 —	92,589 —	834 —	51,225 —	51,180 —	80,928 —	87,835 —	90,572 —	89,835 —	30,452 —	60,201 —		90,690 25	60,000 6	100,668 —
	Shares	(Thousands)		—	—		2,361	5,915	5,500	291	4,055	8,530	4,681	4,646	5,024	5,849	8,532	6,298	7,458	2,187	4,810		7,500	6,000	—
	Marketable Securities	Held Company Name. . . . . . . . Type and Name Relationshipwith the Company Financial Statement Account	Bonds	Central Government Bonds — 832 — Long-term investments	Central Government Bonds — 854 — Long-term investments	E.Sun Securities Corp. . . . . . . . . Funds	Home Run Bond Fund — Short-term investment	Wan Pao Fund — Short-term investment	Fuh-hwa Albatross Fund — Short-term investment	Jih sun Bond Fund — Short-term investment	Tai-Yi Long River Fund — Short-term investment	Central International Diamond Fund — Short-term investment	The Due Le II Bond Fund — Short-term investment	Capital High Yield Fund — Short-term investment	KGI Kai-xuan Fund — Short-term investment	Prudential Yuan-fu Bond Fund — Short-term investment	Dachong Proud House Bond Fund — Short-term investment	International Wan-neng fund — Short-term investment	Asia Pacific Bond Fund — Short-term investment	Capital Save Income Fund — Short-term investment	Fu-hwa Bond Fund — Short-term investment	Stock	E.Sun Securities Investment Trust Corp. Investee under equity method Long-term investment	Lian Ding Venture Capital Co. — Long-term investment	E.Sun Securities Investment Trust Bonds — issued by E.Sun Bank Equity-accounted investor Long-term investments	Corp. . . . . . . . . . . . . . . . . .	Note 1: Net asset value is based on the investee’s financial statements as of December 31, 2002.

F-173

E.SUN FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES	Marketable Securities Acquired and Disposed of at Costs or Prices of at Least NT$100 Million or 20% of the Paid-in Capital	For the Three Months Ended March 31, 2003	(Amounts In Thousands of New Taiwan Dollars)	Financial Beginning Balance Acquisition Disposal Ending Balance	Marketable Securities Statement Nature of Shares Shares Shares Carrying Gain (Loss) Shares	Company Name Type and Name Account Counter-Party Relationship (Thousand) Amount (Thousand) Amount (Thousands) Amount Value on Disposal (Thousand) Amount	E.Sun Securities Investment Trust Corp.. Corporate and financial	institution bonds	Fu Bon Commercial Bank Long-term equity IBT Securities — — $— — $200,000 — $205,700 $200,000 $5,700 — $—	investment Co., Ltd.

F-174

					Note
				Investment	Gain (Loss)	$1,041,967	268,655		15,487		838	9,705		5,506	9,979			542	(213)		(213)		5,585
Names, Locations, and Other Information of Investees on which the Company Exercises Significant Influence	For the Three Months Ended March 31, 2003	(Amounts in Thousands of New Taiwan Dollars)	Original Investment Amount Balance as of March 31, 2003 Net Income	(Loss) of the Shares Percentage	Investor Company Investee Company Location Main Businesses and Products Investee March 31, 2003 March 31, 2002 (Thousands) of Ownership Carrying Value	E.Sun Financial Holding Co., Ltd. E.Sun Commercial Bank, Ltd. Taipei Banking $19,160,117 $19,136,329 1,817,500 100.00 $15,085,349 $1,041,967	E.Sun Bills Finance Corp. Taipei Dealing and brokering short-term 5,150,581 5,159,399 426,500 100.00 5,315,320 282,643	negotiable instruments	E.Sun Securities Corp. Taipei Dealing, underwriting and brokering 3,137,819 3,137,819 306,000 100.00 3,112,410 15,487	securities	E.Sun Venture Capital Co., Ltd. Taipei Investment 1,000,000 — 100,000 100.00 1,003,044 838	E.Sun Commercial Bank, Ltd.. . . E.Sun Finance & Leasing Co. Taipei Leasing and sale of machinery and 196,000 196,000 19,600 98.99 161,474 9,804	equipment	E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 3,950 3,950 1,280 79.00 38,249 6,970	E.Sun Securities Investment Trust Taipei Investing funds under full 135,000 135,000 13,500 45.00 164,549 22,175	Corp. discretionary authorization from	customers	E.Sun Finance & Leasing Co. . . . E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 1,800 1,800 324 20.00 9,703 6,970	E.Sun Technologies Co., Ltd. Taipei Provides information software and 5,000 5,000 500 50.00 3,314 (445)	computer installation services	E.Sun Marketing Consulting Co., Ltd. Taipei Agency of service and human 3,000 — 300 100.00 2,629 (213)	resources	E.Sun Securities Corp. . . . . . . . . E.Sun Securities Investment Trust Taipei Investing funds under full 75,677 60,000 7,500 25.00 90,690 22,175	Corp. discretionary authorization from	customers

F-175

English Translation of a Report Originally Issued in Chinese

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

April 18, 2003, except for translations into U.S. dollars

on the basis stated in Note 2, which is dated as of May 13, 2003.

The Board of Directors and Stockholders

E.Sun Commercial Bank, Ltd.

We have reviewed the accompanying balance sheets of E.Sun Commercial Bank, Ltd. (the ‘‘Bank’’) as of March 31, 2002 and 2003, and the related statements of income and cash flows for the three months ended March 31, 2002 and 2003. These financial statements are the responsibility of the Bank’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

We conducted our reviews in accordance with Statement of Auditing Standards No. 36 ‘‘Review of Financial Statements’’ in the Republic of China. A review consists primarily of applying analytical procedures to financial data and making inquiries of the Bank personnel responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to in the first paragraph in order for them to be in conformity with Criteria Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

We have also reviewed the translations of New Taiwan dollar financial statements as of March 31, 2003 into U.S. dollars, which have been included solely for the reader’s convenience, on the basis stated in Note 2 to the financial statements, the U.S. dollars amounts have been properly translated on such basis. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been or could in the future be, converted into U.S. dollars at this or any other exchange rate.

T N Soong & Co An Associate Member Firm of Deloitte Touche Tohmatsu Effective April 22, 2002

(Formerly a Member Firm of Andersen Worldwide, SC) Taipei, Taiwan The Republic of China

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 review such financial statements are those generally accepted and applied in the Republic of China.

F-176

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unaudited Unconsolidated Balance Sheets March 31, 2002 and 2003

(In Thousands of Dollars, Except Par Value)

ASSETS CASH (Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . DUE FROM BANKS (Note 4) . . . . . . . . . . . . . . . . . DUE FROM CENTRAL BANK OF CHINA (Note 5). . SECURITIES PURCHASED (Notes 2, 6, 22, 23 and 24) RECEIVABLES — NET (Notes 2 and 7). . . . . . . . . . PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . . . . . LOANS, BILLS AND DISCOUNTS — NET (Notes 2, 8 and 22) . . . . . . . . . . . . . . . . . . . . . . . LONG-TERM EQUITY INVESTMENTS — NET (Notes 2 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . PROPERTIES (Notes 2 and 10) Cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . . . . . Total cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER — NET (Notes 2, 11, 17 and 24) . . . . . . . . . TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 2003 New Taiwan Dollars $ 12,881,967 $ 12,998,089 6,330,040 9,699,106 9,415,948 11,174,527 38,356,783 46,587,184 12,686,852 19,746,239 184,238 64,569 175,241,952 170,092,140 4,654,013 4,780,394 2,804,945 2,818,737 1,362,755 1,556,015 1,109,618 1,257,723 148,055 171,663 439,618 601,570 5,864,991 6,405,708 1,244,562 1,525,923 4,620,429 4,879,785 166,694 244,046 4,787,123 5,123,831 1,150,303 2,240,266 $265,689,219 $282,506,345	2003
		U.S. Dollars (Note 2) $ 374,585 279,513 322,032 1,342,570 569,056 1,861 4,901,791 137,763 81,232 44,842 36,246 4,947 17,336
		184,603 43,975
		140,628 7,033
		147,661
		64,561
		$8,141,393

F-177

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unaudited Unconsolidated Balance Sheets — Continued March 31, 2002 and 2003

(In Thousands of Dollars, Except Par Value)

LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Due to banks (Note 12) . . . . . . . . . . . . . . . . . . . . . . Payables (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and remittances (Notes 14 and 22) . . . . . . . . Bonds (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (Notes 2 and 17) . . . . . . . . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ EQUITY (Notes 2, 18 and 19) Capital stock — NT$10 par value Authorized and issued 1,817,500 thousand shares . . Capital surplus: Paid-in capital in excess of par value. . . . . . . . . . . Gain on sale of properties . . . . . . . . . . . . . . . . . . From treasury stock. . . . . . . . . . . . . . . . . . . . . . . Total capital surplus . . . . . . . . . . . . . . . . . . . . . . Retained earnings Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . Unappropriated earnings (deficit) . . . . . . . . . . . . . Total retained earnings. . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustments . . . . . . . . . . . . . . Unrealized loss on long-term equity investments . . . . . Treasury stock — 40,000 thousand shares . . . . . . . . . Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . CONTINGENCIES AND COMMITMENTS (Notes 2 and 24) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 2003 New Taiwan Dollars $ 6,974,258 $ 24,353,229 8,896,336 5,502,509 302,464 508,455 220,553,234 222,882,879 5,000,000 10,000,000 611,910 304,089 242,338,202 263,551,161 18,175,000 18,175,000 303,140 303,140 7,641 7,641 15,452 15,452 326,233 326,233 2,534,534 3,112,924 108,619 31,391 2,783,531 (2,195,079) 5,426,684 949,236 (4) 2,732 (78,879) — (498,017) (498,017) 23,351,017 18,955,184 $265,689,219 $282,506,345	2003 U.S. Dollars (Note 2) $ 701,822 158,574 14,653 6,423,138 288,184 8,763 7,595,134 523,775 8,736 220 445 9,401 89,710 905 (63,259) 27,356 79 — (14,352) 546,259 $8,141,393

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003.)

F-178

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unaudited Unconsolidated Statements of Income

For the Three Months Ended March 31, 2002 and 2003

(In Thousands of Dollars, Except Per Share Amounts)

OPERATING INCOME Interest (Notes 2 and 22) . . . . . . . . . . . . . . . . . . . . . Service fees (Note 2). . . . . . . . . . . . . . . . . . . . . . . . Gain on sales of securities — net (Notes 2 and 22) . . . Income on long-term equity investments (Notes 2 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange gain — net (Note 2). . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Operating Income . . . . . . . . . . . . . . . . . . . . . . OPERATING COSTS Interest (Notes 2 and 22) . . . . . . . . . . . . . . . . . . . . . Service charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions (Notes 2, 7 and 8) . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Operating Costs . . . . . . . . . . . . . . . . . . . . . . . GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . OPERATING EXPENSES (Note 16) Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Operating Expenses. . . . . . . . . . . . . . . . . . . . . INCOME FROM OPERATIONS . . . . . . . . . . . . . . . . NONOPERATING INCOME . . . . . . . . . . . . . . . . . . NONOPERATING EXPENSES. . . . . . . . . . . . . . . . . INCOME BEFORE INCOME TAX . . . . . . . . . . . . . . INCOME TAX EXPENSE (Notes 2 and 17) . . . . . . . . . . . . . . . . . . . . . . . . . NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 2003 New Taiwan Dollars $3,069,532 $2,704,081 184,220 293,655 373,194 223,395 32,398 25,190 18,975 68,768 1,141 153,626 3,679,460 3,468,715 1,696,842 1,083,137 49,736 116,921 489,383 — 1,682 1,143 2,237,643 1,201,201 1,441,817 2,267,514 657,200 899,051 71,251 59,672 1,926 6,449 730,377 965,172 711,440 1,302,342 2,704 6,143 12,951 2,838 701,193 1,305,647 106,196 263,680 $ 594,997 $1,041,967	2003
		U.S. Dollars (Note 2) $77,927 8,463 6,438 726 1,982 4,427
		99,963
		31,214 3,370 — 33
		34,617
		65,346
		25,909 1,720 186
		27,815
		37,531 177 81
		37,627 7,599
		$30,028

F-179

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unaudited Unconsolidated Statements of Income — Continued

For the Three Months Ended March 31, 2002 and 2003

(In Thousands of Dollars, Except Per Share Amounts)

EARNINGS PER SHARE (Note 20) Basic earnings per share. . . . . . . . . . . . . . . .	2002 2003 Pre Tax After Tax Pre Tax After Tax New Taiwan Dollars $0.39 $0.33 $0.72 $0.57	2003	2003
	Pre Tax $0.39	Pre Tax After Tax U.S. Dollars (Note 2) $0.02 $0.02	After Tax

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003.)

F-180

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Unaudited Unconsolidated Statements of Cash Flows For the Three Months Ended March 31, 2002 and 2003

(In Thousands of Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (reversal of allowance) for losses on securities purchased . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization. . . . . . . . . . . . . . . . Equity in net income of investee companies, net of cash dividends received . . . . . . . . . . . . . . . . . . Loss (gain) on sale of foreclosed collaterals . . . . . . Deferred income tax . . . . . . . . . . . . . . . . . . . . . . Loss on sale of property. . . . . . . . . . . . . . . . . . . . Increase in securities purchased — held for trading purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in receivables . . . . . . . . . . . . . . . . . . . . . Increase in prepaid expenses. . . . . . . . . . . . . . . . . Increase in payables . . . . . . . . . . . . . . . . . . . . . . Increase in advances . . . . . . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Operating Activities. . CASH FLOWS FROM INVESTING ACTIVITIES Increase in securities purchased — held for investing purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in due from banks . . . . . . . . . . . . Decrease (increase) in due from Central Bank of China Decrease in loans, bills and discounts . . . . . . . . . . . . Acquisition of properties . . . . . . . . . . . . . . . . . . . . . Proceeds from sales of: Property and equipment . . . . . . . . . . . . . . . . . . . . Foreclosed collaterals . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in other assets. . . . . . . . . . . . . . . Net Cash Provided by (Used in) Investing Activities . .	2002 2003 New Taiwan Dollars $ 594,997 $1,041,967 489,383 — 254,992 (67,309) 71,830 81,613 (32,398) (25,190) 10,361 (3,441) (2,600) 241,587 768 948 (1,312,500) (5,577,316) (293,898) (1,606,991) (129,586) (22,305) 2,970,962 458,096 273,585 474,217 2,895,896 (5,004,124) (547,428) (2,056,688) 4,587,791 (3,939,160) (1,347,178) 942,847 3,545,063 525,448 (67,801) (184,281) 4 — 103,078 27,725 18,117 (90,252) 6,291,646 (4,774,361)	2003 U.S. Dollars (Note 2) $ 30,028 — (1,940) 2,352 (726) (99) 6,962 27 (160,729) (46,311) (643) 13,202 13,666 (144,211) (59,271) (113,520) 27,171 15,143 (5,311) — 799 (2,601) (137,590)

F-181

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Unaudited Unconsolidated Statements of Cash Flows — Continued For the Three Months Ended March 31, 2002 and 2003

(In Thousands of Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increase in due to banks. . . . . . . . . . . . . . . . . . . . . . Decrease in deposits and remittances . . . . . . . . . . . . . Increase in other liabilities . . . . . . . . . . . . . . . . . . . . Net Cash Provided by (Used in) Financing Activities. . EFFECTS OF EXCHANGE RATE CHANGES . . . . . . NET INCREASE (DECREASE) IN CASH . . . . . . . . . CASH, BEGINNING OF YEAR . . . . . . . . . . . . . . . . CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . SUPPLEMENTARY INFORMATION Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . .	2002 2003 New Taiwan Dollars $ 439,034 $10,732,849 (4,475,927) (2,850,081) 63,171 10,849 (3,973,722) 7,893,617 (4,335) (308) 5,209,485 (1,885,176) 7,672,482 14,883,265 $12,881,967 $12,998,089 $ 1,697,128 $ 1,065,724 $ 62,341 $ 41,748	2003 U.S. Dollars (Note 2) $309,304 (82,135) 313 227,482 (9) (54,328) 428,913 $374,585 $ 30,713 $ 1,203

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

(With T N Soong & Co review report dated April 18, 2003, except for translations into U.S. dollars on the basis stated in Note 2, which is dated as of May 13, 2003.)

F-182

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD. Notes to Unaudited Unconsolidated Interim Financial Statements

(Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. Organization and Operations

The Bank engages in commercial and savings banking activities as permitted under the Banking Laws and regulations of the Republic of China (the ‘‘ROC’’).

As of March 31, 2003, the Bank had a domestic banking department and international banking department, an offshore banking unit (OBU), 2 overseas branches (Los Angeles and Hong Kong) and 49 domestic branches.

Additionally, the Bank had a Trust Department which consists of planning, managing and operating a trust business. These operations are regulated under the Banking Law and Trust Law.

On December 10, 2001, the stockholders of the Bank approved the establishment of E.Sun Financial Holding Company, Ltd. (ESFHC) to hold the shares of the Bank, E.Sun Bills Finance Corp. and E.Sun Securities Corp. The holding company structure was achieved through a share swap: 1 share of ESFHC for 1.0 share of the Bank, 1.10 shares of E.Sun Bills Finance Corp, and 1.25 shares of E.Sun Securities Corp. The board of directors designated January 28, 2002 as the effective date of the share swap. After the shares transfer, the Bank became a 100% subsidiary of ESFHC. Also on January 28, 2002, the trading of the Bank’s stock on the Taiwan Stock Exchange (TSE) was halted, and ESFHC’s stock began to be traded on the TSE.

As of March 31, 2002 and 2003, the number of employees in the Bank are 1,532 and 1,668, respectively.

2. Summary of Significant Accounting Policies

Basis of financial statement preparation

Translation of New Taiwan dollars into United State dollar amounts

The accompanying financial statements are stated in New Taiwan dollars. Translation of New Taiwan dollar amounts into U.S. dollars as of and for the three months ended March 31, 2003 are included in the financial statements solely for the convenience of the readers, using the noon buying rate of the U.S. Federal Reserve Bank of New York on December 31, 2002 of NT$34.7=US$1. These translations should not be construed as a representation that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

Securities purchased

F-183

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Overdue loans

Loans and other credits (including accrued interest) that are outstanding for at least six months are classified as overdue loans in accordance with the guideline issued by the Ministry of Finance.

Allowances for possible losses and reserve for losses on guarantees

Long-term equity investments

Other investments in stocks with no quoted market price are accounted for at cost. The carrying amount of the investment is reduced to reflect an other than temporary decline in the value of the investments, with the related losses charged to current income. Investments in stock with quoted market prices is stated at the lower of cost or market. The reduction of an investment to reflect a lower market value and its write-up due to the subsequent recovery in market value are charged or credited to stockholders’ equity. Cash dividends received are recorded as investment income. Foreign-currency investments are recorded in New Taiwan dollars at the rate of exchange in effect when the transactions occur. At year-end, the balance of these investments are restated on the basis of the year-end exchange rate. If the restated amounts are lower than cost, the differences are recognized as a translation adjustment under stockholders’ equity. Otherwise, the cost basis is maintained.

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

F-184

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The cost of long-term equity investments sold is determined by the weighted-average method.

Properties

Foreclosed collaterals

Foreclosed collaterals (part of other assets) are recorded at the lower of cost or net realizable value on the balance sheet dates.

Treasury stock

Capital stock acquired is carried at cost and presented as a deduction to arrive at stockholders’ equity.

Pursuant to a directive issued by the SFC, the financial institution, which repurchased its own capital stock pursuant to the Securities and Exchange Law, and become a wholly owned subsidiary of a financial holding company resulting in its treasury stocks being converted to stocks of the financial holding company, presents the shares in the financial holding company as treasury stock. The financial holding company also presents the shares it issued in exchange for those capital stock as treasury stock. In cases that shares of the financial institutions with the same financial holding company were held among each other prior to the share swap, these shares, after the swap, are stated as equity investments.

Pension costs

The Bank recognizes pension costs on the basis of actuarial calculations. An unrecognized net transition asset is amortized over 29 years.

Recognition of interest revenue and service fees

Interest revenue on loans is recorded on an accrual basis. Under regulations of the Ministry of Finance (MOF), no interest revenue is recognized on loans and other credits extended by the Bank that are classified as overdue loans. The interest revenue on those loans is recognized upon collection on these loans and credits.

F-185

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

In addition, the unpaid interest on rescheduled loans should be recorded as deferred revenue, and the paid interest is recognized as interest revenue.

Service fee are recorded when the earnings process is completed upon rendering of such services.

Income tax

Tax credits resulting from technology or equipment purchases, expenditures for research and development, employee training and stock investments are recognized in current period.

Income tax on interest derived from short-term negotiable instruments, which is levied separately, is accrued as part of income tax expense when such earning are accrued.

Any adjustment of income taxes of prior years are added to or deducted from the current year’s tax provision.

Income taxes (10%) on undistributed earnings are recorded as expenses in the year when the stockholders resolve to retain the earnings.

Contingencies

Foreign currency transactions

Forward contracts

F-186

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Foreign currency swap contracts

The related discount or premium is amortised by the straight-line basis over the contract period.

Asset swaps

Cross-currency swap

Interest rate swap contract

3. Cash

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . . Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 1,894,062 5,639,488 5,348,417 $12,881,967	2003
		$ 2,109,334 8,383,250 2,505,505
		$12,998,089

F-187

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

4. Due from Banks

Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 820,206 5,509,834 $6,330,040	2003
		$ 948,875 8,750,231
		$9,699,106

5. Due from Central Bank of China

Reserves for deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $6,873,798 2,542,150 $9,415,948	2003
		$ 8,795,222 2,379,305
		$11,174,527

As required by law, the reserves for deposits, are calculated by applying the prescribed rates to the average monthly balances of various types of deposit accounts. Of these amounts, $5,136,281 and $5,414,059 as of March 31, 2002 and 2003, respectively, were restricted from use by the Bank.

6. Securities Purchased

Overseas securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stocks and beneficiary certificates. . . . . . . . . . . . . . . . . . . . . . Corporate bonds and bank debentures . . . . . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for decline in value. . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 9,976,108 11,507,192 9,840,447 3,739,140 3,670,856 — — 38,733,743 376,960 $38,356,783	2003
		$16,208,500 10,776,330 9,116,030 3,981,479 1,223,747 5,000,000 299,708
		46,605,794 18,610
		$46,587,184

F-188

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

7. Receivables — Net

Credit cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 9,726,389 1,356,657 374,228 391,685 1,215,177 13,064,136 377,284 $12,686,852	2003
		$17,043,622 812,171 338,018 469,917 1,401,018
		20,064,746 318,507
		$19,746,239

8. Loans, Bills and Discounts — Net

Loans: Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medium-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overdue loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bills and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less — allowance for possible losses . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 52,273,023 60,229,453 58,038,895 5,495,370 604,085 176,640,826 1,398,874 $175,241,952	2003
		$ 48,157,062 57,244,296 63,222,638 2,231,114 868,397
		171,723,507 1,631,367
		$170,092,140

As of March 31, 2002 and 2003, the loan and credit balances for which accrual of interest revenues was discontinued, amounted to $5,495,370 and $2,231,114, respectively. The unrecognized interest revenues on these loans and credits amounted to $80,618 and $23,935 for the years ended March 31, 2002 and 2003, respectively.

For the years ended March 31, 2002 and 2003, the Bank carried out legal procedures required before the Bank can write off credits.

F-189

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The details of and changes in the allowance for credit losses on loans, bills and discounts are summarized below:

Balance, January 1, 2002 . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . Recovery of written-off credits . . . . . . . . . . . . . Balance, March 31, 2002 . . . . . . . . . . . . . . . . . Balance, January 1, 2003 . . . . . . . . . . . . . . . . . Reversal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . Recovery of written-off credits . . . . . . . . . . . . . Balance, March 31, 2003 . . . . . . . . . . . . . . . . .	For the Three Months Ended March 31, 2002 Specific Risk General Risk Total $1,075,932 $438,066 $1,513,998 527,871 (250,834) 277,037 (407,999) — (407,999) 15,838 — 15,838 $1,211,642 $187,232 $1,398,874 For the Three Months Ended March 31, 2003 Specific Risk General Risk Total $104,593 $1,436,162 $1,540,755 — (293,974) (293,974) (252,754) — (252,754) 637,340 — 637,340 $489,179 $1,142,188 $1,631,367	For the Three Months Ended March 31, 2002 Specific Risk General Risk Total $1,075,932 $438,066 $1,513,998 527,871 (250,834) 277,037 (407,999) — (407,999) 15,838 — 15,838 $1,211,642 $187,232 $1,398,874 For the Three Months Ended March 31, 2003 Specific Risk General Risk Total $104,593 $1,436,162 $1,540,755 — (293,974) (293,974) (252,754) — (252,754) 637,340 — 637,340 $489,179 $1,142,188 $1,631,367
	Specific Risk $104,593 — (252,754) 637,340 $489,179	General Risk $1,436,162 (293,974) — — $1,142,188

Since the third quarter of 2000, the economic and financial environment has been beset by such factors as unstable domestic and foreign conditions. Thus, the country’s economic growth has decelerated, investment is reduced, unemployment has risen, the stock market is bearish, and the New Taiwan dollar has devaluated. Certain business enterprises, including conglomerates and listed companies, failed to meet their obligations when these obligations became due. To stabilize the situation, the government has taken various economy-boosting measures. Thus, the Bank’s financial statements for the three months ended March 31, 2003 included provisions for possible guarantee and other based on information available to the Bank, including defaults to the extent they can be determined or estimated. These estimated provisions do not include any adjustments that might be required when related contingent liabilities become probable or determinable in the future.

F-190

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

9. Long-term Equity Investments

March 31	March 31	March 31
2002 Carrying Value % of Ownership $ 135,428 45 159,028 99 22,314 79 316,770 3,749,586 12.5 200,451 — 155,857 2.6 100,000 0.6 210,228 — 4,416,122 78,879 4,337,243 $4,654,013	2003
Carrying Value $ 135,428 159,028 22,314 316,770 3,749,586 200,451 155,857 100,000 210,228 4,416,122 78,879 4,337,243 $4,654,013	Carrying Value $ 164,549 161,474 38,249 364,272 3,749,586 200,451 155,857 100,000 210,228 4,416,122 — 4,416,122 $4,780,394	% of Ownership
		45 99 79 12.5 — 2.6 0.6 —

10. Accumulated Depreciation

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 266,868 687,960 90,324 199,410 $1,244,562	2003
		$ 310,417 744,779 105,487 365,240
		$1,525,923

F-191

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

11. Other Assets — Net

Collaterals assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Refundable deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred charges — net of amortization . . . . . . . . . . . . . . . . . . Deferred income tax assets — net . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 308,135 817,295 24,873 — $1,150,303	2003
		$ 268,887 882,826 60,594 1,027,959
		$2,240,266

12. Due to Banks

Call loans from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $5,294,117 1,582,942 97,199 $6,974,258	2003
		$23,382,622 687,009 283,598
		$24,353,229

13. Payables

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Checks for clearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $1,976,363 5,348,417 402,029 393,103 55,759 720,665 $8,896,336	2003
		$1,224,777 2,505,505 479,823 308,788 71,332 912,284
		$5,502,509

F-192

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

14. Deposits and Remittances

Deposits: Savings — time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Savings — demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negotiable certificates of deposit. . . . . . . . . . . . . . . . . . . . . . Checking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $ 76,562,888 44,900,996 77,466,031 17,083,125 2,369,200 2,089,323 81,671 $220,553,234	2003
		$ 78,385,334 49,419,899 70,138,768 21,587,365 1,056,100 2,259,400 36,013
		$222,882,879

15. Bonds

Bonds issued on August 6, 2001 and bear annual interest rate at 3.76%, payable annually. Principal will be repaid on maturity date (5 years after the issue date). . . . . . . . . . . . . . . . . . . . . Subordinated bonds issued on August 6, 2001 and bear annual Interest rate at 4.2% , payable annually. Principal will be repaid in five installments starting on the third year from the issue date and will be fully repaid at the end of the seventh year. . . . . . . Four types of subordinated bonds were issued on June 13, 2002 and bear annual interest rate at 5%-8.6% minus the 90 days interest rate of commercial paper (below) and is paid quarterly. The principal will be fully repaid on the maturity date (5 years after the issue date). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Four types of subordinated bonds were issued on August 16, 2002 and bear annual interest rate at 5.94% minus a floating interest rate (below) and is paid semi-annually. The principal will be repaid on the maturity date (5 years after the issue date). . . . . Five types of bonds were issued on August 23, 2002 and bear annual interest rate at 6% minus a floating interest rate (below) and is paid semiannually. The principal will be repaid on the maturity date (5.5 years after the issue date). . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $3,000,000 2,000,000 — — — $5,000,000	2003
		$ 3,000,000 2,000,000 1,700,000 1,300,000 2,000,000
		$10,000,000

The abovementioned 90 days interest rate of commercial paper and floating interest rate were based on the average quoted interest rate of Hong Kong’s Moneyline Telerate.

F-193

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Personnel Expense, Depreciation and Amortization

	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002	Total $281,876 19,665 14,292 18,623 55,537 16,066		2001
Belong to operation $251,625 18,440 13,040 17,716 35,220 13,326	Belong to General and Administrative $30,251 1,225 1,252 907 20,317 2,740		Belong to operation $307,362 22,352 15,024 9,340 38,197 14,550	Belong to General and Administrative $15,918 2,160 1,158 939 24,203 4,663	Total
					$323,280 24,512 16,182 10,279 62,400 19,213

17. Income Tax

a. Income tax expense

Income tax expense — current before tax credits. . . . . . . . . Net change in deferred income tax: Loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gain . . . . . . . . . . . . . . . . . Allowance for possible losses on loans and receivables . . Tax on unappropriated earnings (10%) . . . . . . . . . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $104,736 — 61 (2,662) 4,061 $106,196	2003
		$ 22,092 238,720 (262) 3,130 —
		$263,680

b. A reconciliation of income tax expense — current before tax credits is shown below:

Income tax expense on income before income tax at statutory rate (25%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense — current before tax credits. . . . . . . . .	For the Three Months Ended March 31	For the Three Months Ended March 31
	2002 $175,288 (73,153) 2,601 $104,736	2003
		$326,402 (62,722) (241,588)
		$ 22,092

F-194

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

c. Deferred income tax assets (liabilities):

Deferred income tax assets (liabilities) Loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for possible losses on loans and receivables . . Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gain . . . . . . . . . . . . . . . . . Deferred income taxes assets (liabilities) (shown as part of ‘‘other assets’’ or ‘‘other liabilities’’ in the balance sheet) .	March 31	March 31
	2002 $ — 2,662 — (68,311) ($65,649)	2003
		$1,051,585 32,236 10,139 (66,001)
		$1,027,959

Tax credits (resulting from employee training expenditures) and loss carryforwards as of March 31, 2003 will expire in 2006 and 2007, respectively.

d. Imputed tax credit

Balance of stockholders’ imputed tax credit . . . . . . . . . . . .	March 31	March 31
	2002 $157,776	2003
		$85,966

Actual tax credit ratio for distributing earnings generated in 2001 was 16.10%.

There was a deficit in 2002. Thus, imputed tax credit shall be allocated corresponding actual rate when earnings generated in the future are appropriated.

e. The statutory corporate tax rates for March 31, 2002 and 2003 were about 25%.
f. Income tax returns through 2000, have been examined by the tax authorities. In the assessment of 1994, 1995, 1997, 1998 and 2000 tax returns, the tax authorities denied the creditability of 10% withholding tax on interest income on bonds pertaining to periods in which those bonds, totaling $239,690 were held by other investors. In addition, the 1996, 1999 and 2001 income tax returns included a reduction of $80,785 in income tax obligations. The Bank had accrued liabilities and written off any assets recognized related to the foregoing withholding taxes as part of income tax expense in 2001. In August 2002, the Supreme Administrative Court decided that the Taipei National Tax Administration find another disciplinary action to deal with the withholding tax issue. The Bank has not recognized any asset related to these amounts previously written-off or expensed, pending further decision of the tax authorities.

F-195

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

18. Stockholders’ Equity

The appropriation of 2001 earnings was resolved by the board of director on June 20, 2002 is shown as follow:

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$578,390
Special reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(77,228)
Cash dividends — NT$0.7 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1,272,250
Bonus to directors and supervisors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28,272
Bonus to employees — cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	113,089

On March 13, 2003, the board of director resolved to use legal reserve $3,112,924, special reserve $31,391 and capital surplus $92,731 to offset a deficit.

The Bank’s Articles of Incorporation provide that the following should be appropriated from the annual net income less any accumulated deficit:

a. 30% as legal reserve;
b. Special reserve, if needed; and
c. From any remainder
(1) The following appropriations based on the amendment of the Articles of Incorporation on June 20, 2002, to reflect the formation ESFHC.
- (a) 94% as dividends
- (b) 1% as bonus to directors and supervisors
- (c) 5% as bonus to employees

Also under the Bank’s amended Articles of Incorporation, the stockholders can decide not to declare any dividends or decide to distribute only a portion of the distributable earnings.

(2) Before the amendment of the articles of Incorporation on June 20, 2002, some of the appropriations were as follows:
(a) 90% as dividends
(b) 2% as bonus to directors and supervisors
(c) 8% as bonus to employees

F-196

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

the ratio set under government regulations. However, when dividends are declared, cash dividends must be at least 10% of total dividends declared, except when the resulting cash dividend per share falls below NT$0.10.

Appropriations of earnings should be resolved by the stockholders in the following year and given effect to in the financial statements of that year.

Under related regulations, capital surplus can only be used to offset a deficit. However, capital surplus arising from issuance of shares in excess of par value (issuance in excess of common stock par value, capital surplus from issuance of common stock for combination and treasury stock transactions) and donation can be transferred to common stock in based on the percentage of shares of the stockholders. Any capital surplus transferred to common stock should be within a certain percentage prescribed by related regulations.

Under a directive of the Securities and Futures Commission, the Bank has to make the special appropriation from current year’s earnings and the unappropriated earnings generated in prior years equal to the total debit balance of any stockholders’ equity account other than the deficit such as the ‘‘unrealized loss on long-term equity investments’’ and ‘‘cumulative translation adjustment’’ accounts. The special reserve should be adjusted accordingly on the basis of the debit balance of the foregoing stockholders’ equity account as of year-end.

Under the Integrated Income Tax System that became effective on January 1, 1998, stockholders are allowed a tax credit for the income tax paid by the Bank on earnings generated in 1998 and onwards.

19. Treasury Stock

Reason for Redemption Reissuance to employees (Note) For the three months ended March 31, 2002 . . . . . . . . . . . . . . . . For the three months ended March 31, 2003 . . . . . . . . . . . . . . . .	Beginning of the Period 40,000 40,000	Increase — —	Decrease — —	End of the Period
				40,000 40,000

Note: Shares in thousands.

F-197

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The Securities and Exchange Law provides for the following:

a. The total number of shares that can be held in treasury is limited to 10% of the number of total outstanding shares;
b. The maximum cost of reacquiring treasury shares is limited to the sum of the balances of the retained earnings, additional paid-in capital in excess of par value and capital surplus arising from donated capital;
c. Using treasury shares to secure any obligations or commitment of the Bank is prohibited;
d. The Bank is prohibited from exercising the shareholder rights with respect to the treasury shares.

20. Earnings per Share

The calculation of earnings per share is as follows:

For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
Amount (Numerator) Pre Tax After Tax $ 701,193 $ 594,997 $1,305,647 $1,041,967	Shares (Denominator) (Thousands) 1,805,500 1,817,500	Earnings Per Share (Dollars)
Pre Tax $ 701,193 $1,305,647		Pre Tax $0.39 $0.72	After Tax
			$0.33
			$0.57

21. Pension Plan

The pension expense for the three months ended March 31, 2002 and 2003 are $14,292 and $16,182, respectively.

F-198

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

22. Related-party Transactions

The transactions with the foregoing related parties are summarized as follows:

For the three months ended March 31, 2002 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreements to repurchase ESSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds payable . . . . . . . . . . . . . . . . . . . . . . . For the three months ended March 31, 2003 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreement to repurchase ESSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under agreements to resell ESBF. . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds payable . . . . . . . . . . . . . . . . . . . . . . . Securities purchased . . . . . . . . . . . . . . . . . . .	March 31, 2002 Amount % to Total $ 392,612 — $2,059,527 1 $ 336,602 2 $ 360,000 7 $ 273,616 — $4,302,524 2 $1,254,885 13 $ 99,885 2 $ 260,000 4 $ 519,525 1	Interest Rate (%) 2.45–9.28 0–13.00 2.45–2.50 4.20 1.50–9.85 0–13.00 0.89–1.25 1.12–1.35 4.20	Revenue (Expense) $ 4,695 ($25,460) ($335) ($3,780) $ 4,111 ($16,599) ($2,537) $ 489 ($2,730)
	Amount $ 392,612 $2,059,527 $ 336,602 $ 360,000 $ 273,616 $4,302,524 $1,254,885 $ 99,885 $ 260,000 $ 519,525

F-199

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

23. Pledged Assets

As of March 31, 2002 and 2003, certain investments in securities with an aggregate face value of $730,100 and $847,900, respectively, were deposited in the (a) Central Bank of China to secure its potential obligations pertaining to its trust activities, (b) courts of justice pursuant to various collection cases on overdue loans, and (c) National Credit Card Center to secure its potential obligations arising from its credit card activities, (d) with other parties as refundable deposits.

As of March 31, 2003, certain certificates of deposit aggregating $5,000,000, which are included in the securities purchased account, have been provided as collateral for day-term overdraft to comply with the Central Bank’s clearing system of Real-time Gross Settlement (RTGS). The unused overdraft amount at the end of day can also be treated as the Bank’s liquidity reserve.

24. Contingencies and Commitments

Except for those mentioned in Note 27, the contingencies and commitments as of March 31, 2003 were as follows:

a. Sales amounting to $6,349,399 before May 2, 2003 of short-term negotiable instruments acquired for $6,344,916 under agreements to resell; and repurchase for $9,983,128 before August 11, 2003 of short-term negotiable instruments sold for $9,974,455 under agreements to repurchase.
b. Renewable lease agreements on premises occupied by the Bank’s branches, which will expire on various dates before March 31, 2013. Rentals are calculated on the basis of the leased area and are paid monthly, quarterly or semiannually. As of March 31, 2003, refundable deposits on these leases totaled $689,074 (shown as part of ‘‘other assets’’ account). Rentals for the next five years on such leases are as follows:

Year
For the period from April 1, 2003 to December 31, 2003 . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the period from January 1, 2008 to March 31, 2008 . . . . . . . . . . . . . . .

Amount

$163,756
195,584
134,633
100,367
60,568
10,238

Total rentals for April 1, 2008 to March 31, 2013 will aggregate to $165,641. The present value of these rentals is $152,999 based on an annual interest rate of 1%.

c. The Bank has entered into agreements for the acquisition of land and building, construction of a building and various purchases related to the improvements of existing premises occupied by its branches. Total contract amounts for such agreements is approximately $651,637. As of March 31, 2003 the remaining unpaid amount was approximately $407,228.

F-200

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

25. Average Amount and Average Interest Rate of Interest-Earning Assets and Interest-Bearing Liabilities

Average balance is calculated at the daily average balance of interest-earning assets and interestbearing liabilities.

For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
2002 Average Balance Average Rate (%) $ 3,279,772 2.38 869,395 0.92 5,142,100 2.47 39,371,561 4.17 171,078,964 5.84 $ 7,011,054 2.11 10,476,348 1.18 42,601,936 2.26 53,728,651 3.18 77,841,225 3.51 2,453,118 3.20 5,000,000 3.94	2003
Average Balance $ 3,279,772 869,395 5,142,100 39,371,561 171,078,964 $ 7,011,054 10,476,348 42,601,936 53,728,651 77,841,225 2,453,118 5,000,000	Average Balance $ 16,764,419 7,886,558 5,390,785 32,963,383 162,712,824 $12,711,830 20,387,076 48,744,917 71,702,748 77,523,937 1,101,616 10,000,000	Average Rate (%)
		0.04 1.20 2.18 2.59 3.62 1.30 0.42 1.00 1.77 2.13 1.16 3.63

F-201

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

26. Maturity Analysis of Assets and Liabilities

	March 31, 2002	March 31, 2002
Due in One Year $ 12,881,967 6,330,040 9,415,948 38,733,743 13,064,136 70,623,749 $151,049,583 $ 6,974,258 8,896,336 212,417,234 — $228,287,828	Due Between One Year and Seven Years Due After Seven Years $ — $ — — — — — — — — — 48,486,251 57,530,826 $48,486,251 $57,530,826 $ — $ — — — 8,136,000 — 5,000,000 — $13,136,000 $ — March 31, 2003		Total
			$ 12,881,967 6,330,040 9,415,948 38,733,743 13,064,136 176,640,826
			$257,066,660
			$ 6,974,258 8,896,336 220,553,234 5,000,000
			$241,423,828

Due in One Year $ 12,998,089 9,699,106 11,174,527 46,605,794 20,064,746 66,958,853 $167,501,115	Due Between One Year and Seven Years $ — — — — — 43,686,227 $43,686,227	Due After Seven Years $ — — — — — 61,078,427 $61,078,427	Total
			$ 12,998,089 9,699,106 11,174,527 46,605,794 20,064,746 171,723,507
			$272,265,769

F-202

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

	March 31, 2003	March 31, 2003
Due in One Year $ 24,353,229 5,502,509 211,721,968 — $241,577,706	Due Between One Year and Seven Years $ — — 11,160,911 10,000,000 $21,160,911	Due After Seven Years $— — — — $—	Total
			$ 24,353,229 5,502,509 222,882,879 10,000,000
			$262,738,617

27. Financial Instruments

a. Derivative financial instruments

The Bank uses forward exchange and swap contracts as hedge instruments for foreign currency exposures primarily related to its clients’ import obligations and export receipts and remittances. It also uses these contracts to cover its own exposures. Furthermore, the Bank uses cross-currency swap contracts, interest rate swap contracts and asset swap contracts to hedge its exchange rate and interest rate exposures, respectively.

The acceptability of doing business with another bank is evaluated on the basis of its world ranking and credit rating. The evaluation also covers determining the limits on contractual amounts with respect to the Bank’s counter-parties, and the transactions are made within this limit.

F-203

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The contract (nominal) amounts, credit risks, and fair values of derivative transactions as of March 31, 2002 and 2003 were as follows:

Trading purpose Forward exchange contract . . . . . . . . . . Foreign currency swap contract . . . . . . . . . . Non-trading purpose Asset swap contract. . . . Cross-currency swap contract . . . . . . . . . . Interest rate swap contract			March 31,	March 31,		Fair Value $ 7,611 (24,727) (143,110) 84,491 15,920
		2002	Fair Value $ 813 6,508 14,497 (20,483) —		2003
	Contract (Nominal) Amount $ 642,413 3,152,588 2,561,624 690,000 —	Credit Risk $ 1,055 15,892 28,675 — —		Contract (Nominal) Amount $1,026,869 4,889,242 6,461,759 5,379,000 2,000,000	Credit Risk $11,778 6,070 7,609 84,491 15,920

The Bank calculates the fair value of each forward contract at the forward rate for the remaining term, quoted from Reuters or Telerate Information System.

The contract or notional amount is used to calculate the amounts for settlement with the counterparties, so it is neither the actual amount delivered nor the cash requirement for the Bank. Also, the Bank has ability to enter into derivative financial transactions at reasonable market terms. In addition, the Bank does not expect significant cash flow requirements to settle these transactions.

F-204

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

The gain and loss on the derivative transactions are as follows:

Trading purpose Forward contract (under exchange gain) . . . . . . . . . . . . . . . . . . Foreign currency swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-trading purposes Asset swap contract (under ‘‘interest revenue’’) . . . . . . . . . . . . . Cross-currency swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest rate swap contract: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	For the Three Moths Ended March 31	For the Three Moths Ended March 31
	2002 $ 537 $ 5,471 (1,193) $ 4,278 $1,634 $ 5,428 (5,074) $ 354 $ — — $ —	2003
		$ 475
		$10,241 (5,522)
		$ 4,719
		$ 3,242
		$19,884 (16,091)
		$ 3,793
		$38,830 (35,588)
		$ 3,242

b. Fair value of nonderivative financial instruments

Assets Assets fair value the same as the carrying value . . . . . . . . . . . . . . . Long-term equity investment . . . . . . Liabilities Liabilities fair value the same as the carrying value . . . . . . . . . . . . . . .	March 31	March 31	March 31
	2002 Carrying Value Fair Value $255,730,837 $255,730,837 4,654,013 4,654,013 241,647,706 241,647,706	2003
	Carrying Value $255,730,837 4,654,013 241,647,706	Carrying Value $271,180,111 4,780,394 262,958,486	Fair Value $271,180,111 5,115,250 262,958,486

F-205

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

Methods and assumptions used in estimating the fair value of nonderivative financial instruments were as follows:

(1) The carrying values of cash, due from banks, due from Central Bank of China, receivables, due to banks, payables and remittances approximate fair values because of the short maturity of these instruments. The carrying value of other assets and other liabilities also approximate the expected cash inflows or outflows at settlement dates; thus, their carrying value also approximates its fair value.
(2) If market prices for securities purchased and long-term stock investments are available, the fair value of these financial instruments should be based on the market price. If market prices are unavailable, then their carrying value will represent current fair value.
(3) Loans, bills and discounts, deposits and bonds are interest-bearing financial assets and liabilities of a short-term nature or the majority bear interest at adjustable rates. Thus, their carrying value represents current fair value.

Only the fair values of financial instruments were listed above, thus, the total of fair values listed above does not represent the fair value of the Bank.

c. Financial instruments with off-balance-sheet credit risks

The interest rates for loans ranged from 1.90% to 18.25% on March 31, 2002 and from 1.30% to 18.25% in 2003. The highest interest rate for credit cards was 19.71% in both 2002 and 2003.

The contractual amounts of financial contracts with off-balance-sheet credit risks as of March 31, 2002 and 2003 were as follows:

Credit card commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees and issuance of letter of credit . . . . . . . . . . . . . . . .	March 31	March 31
	2002 2003 New Taiwan Dollars $75,599,025 $141,410,486 8,053,840 7,328,256	2003

F-206

English Translation of Financial Statements Originally Issued in Chinese

E.SUN COMMERCIAL BANK, LTD.

Notes to Unaudited Unconsolidated Interim Financial Statements — Continued (Amounts Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

from 15% to 20% of the aggregate guarantees and letters of credit issued, were secured. No collateral is required credit card facilities but the credit status of each credit cardholder is closely monitored. Depending on the results of credit status monitoring, appropriate measures are adopted, including amending the credit limit and, if necessary, cancellation of the facility.

d. Information on concentrations of credit risks

The concentration of credit risk exists when a counter-parties to financial transactions are individuals or groups engaged in similar activities or activities in the same region, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. For the Bank, concentrations of credit risk do not involve individuals but industry groups, as follows:

Loans — by industries Real estate and lease . . . . . . . . . .		March 31	March 31
	2002 $14,809,059	% 9	2003 $7,553,305	% 5

The net position on foreign-currency denominated assets and liabilities is shown below:

U.S. Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31	March 31
	2002 $76,947 ($31,891)	2003
		($198,972)
		$153,769

28. Additional Disclosures

Following are the additional disclosures required by the Securities and Futures Commission:

a. Related information of significant transaction and investees: The required information has been disclosed on Table 1 to 4.
b. Investment in Mainland China — None.

F-207

							Maximum	Collateral/	Guarantee	Amounts	Allowable	$2,000
				Ratio of	Accumulated	Amount of	Guarantee to	Net Asset Value	of the Latest	Financial	Statement	26%
							Value of	Collaterals	Property,	Plant or	Equipment	None
										Ending	Balance	$1,234
E.SUN COMMERCIAL BANK, LTD.	Endorsement/Guarantee Provided	For the Three Months Ended March 31, 2003	(Amounts in Thousands of U.S. Dollars)				Limits on	Counter-party Individual	Collateral or Maximum	Guarantee Balance for Nature of	Amounts the Period Name Relationship	E.Sun International Co. Affiliate $2,000 $1,234
											Endorsement/Guarantee Provider	E.Sun Finance & Leasing Co.
											No.	1.

F-208

						Note
									(Note 1)	(Note 1)	(Note 1)	(Note 1)		(Note 1)	(Note 1)	(Note 1)		(Note 1)			(Note 1)	(Note 1)
					Market Value or	Net Asset Value		$5,035,049	192,531	1,153	48,837	10,481	161,474	19,940	64,476	25,903	38,249	2,767	80,201	164,549	103,616	57,449
				March 31, 2003	Carrying Percentage of	Value Ownership		$3,749,586 12.53	155,857 2.56	800 0.40	50,000 4.67	9,000 0.45	161,474 98.99	23,428 4.90	45,500 1.14	27,000 4.99	38,249 79.00	4,500 5.00	200,451 —	164,549 45.00	100,000 0.57	50,000 3.33
E.SUN COMMERCIAL BANK, LTD.	Marketable Securities Held	March 31, 2003	(Amounts in Thousands of New Taiwan Dollars)		Relationship with Shares	the Company Financial Statement Account (Thousands)		Parent company Long-term equity investment 309,849	— Long-term equity investment 16,148	— Long-term equity investment 80	— Long-term equity investment 5,000	— Long-term equity investment 900	Subsidiary Long-term equity investment 19,600	— Long-term equity investment 750	— Long-term equity investment 4,550	— Long-term equity investment 2,700	Subsidiary Long-term equity investment 1,280	— Long-term equity investment 450	— Long-term equity investment 3,957	Equity-accounted investee Long-term equity investment 13,500	— Long-term equity investment 10,000	— Long-term equity investment 5,000
					Marketable Securities	Type and Name	Stock	E.Sun Financial Holding Co., Ltd.	Fu Bon Securities Finance Co.	Taipei Forex Inc.	Apex Venture Capital Corp.	Taiwan Futures Exchange Co., Ltd.	E.Sun Finance & Leasing Co.	Gapura Incorporated	Financial Information Service Co., Ltd.	National Venture Capital Corp.	E.Sun Insurance Agent Co., Ltd.	Bank-Pro E-Service Technology Co, Ltd.	United Microelectronic Corporation	E.Sun Securities Investment Trust Corp.	Taiwan Asset Management Corporation	Taiwan Financial Asset Service Corporation
						Held Company Name	E.Sun Commercial Bank, Ltd.. . .

F-209

		Note						(Note 1)	(Note 1)	(Note 1)				(Note 1)		Pledged for courts of justice	pursuant to collection case
	Market Value or	Net Asset Value		$10,697	8	11,857	3,888	4,253	18,168	3,304	9,703	3,314	2,629	25,231		3,212	1,064	100,668
March 31, 2003	Carrying Percentage of	Value Ownership		$ 25,707 —	36 —	19,873 —	4,637 —	3,600 6.00	20,000 3.50	17,790 3.40	9,703 20.00	3,314 50.00	2,629 100.00	30,393 6.20		3,212 —	1,063 —	100,668 —
	Shares	(Thousands)		518	—	1,583	300	300	2,000	857	324	500	300	950		—	—	—
	Marketable Securities Relationship with	Held Company Name. . . . . . . . Type and Name the Company Financial Statement Account	E.Sun Finance & Leasing Co. . . . Stock	United Microelectronic Corp. — Short-term investment	Acer Computer Corp. — Short-term investment	Taiwan International Securities Corp. — Short-term investment	SinoPac Holding Co., Ltd. — Short-term investment	Netplus Material, Inc. — Long-term equity investment	National Venture Capital Corp. — Long-term equity investment	Gigarams Semiconductor Device Corp. — Long-term equity investment	E.Sun Insurance Agent Co., Ltd. Equity-accounted investee Long-term equity investment	E.Sun Technologies Co., Ltd. Subsidiary Long-term equity investment	E.Sun Marketing Consulting Co., Ltd. Subsidiary Long-term equity investment	Gapura Incorporated — Long-term equity investment	Bonds	Central Government Bonds — 832 — Long-term investments in bonds	Central Government Bonds — 854 — Long-term investments in bonds	E.Sun Securities Investment Trust Bonds — issued by E.Sun Bank Equity-accounted investor Long-term investments in bonds	Corp. . . . . . . . . . . . . . . . . .	Note 1: Net asset value is based on the investee’s financial statements as of December 31, 2002.

F-210

E.SUN COMMERCIAL BANK, LTD.	Marketable Securities Acquired and Disposed of at Costs or Prices of at Least NT$100 Million or 20% of the Paid-in Capital	For the Three Months Ended March 31, 2003	(Amounts In Thousands of New Taiwan Dollars)	Financial Beginning Balance Acquisition Disposal Ending Balance	Marketable Securities Statement Nature of Shares Shares Shares Carrying Gain (Loss) Shares	Company Name Type and Name Account Counter-Party Relationship (Thousand) Amount (Thousand) Amount (Thousands) Amount Value on Disposal (Thousand) Amount	E.Sun Securities Investment	Trust Corp. . . . . . . . . Corporate and financial	institution bonds	Fu Bon Commercial Bank Long-term equity IBT Securities — — $— — $200,000 — $205,700 $200,000 $5,700 — $—	Co., Ltd. investment Co., Ltd.

F-211

							Note
						Investment	Gain (Loss)	$9,705		5,506	9,979			542	(213)			(213)
E.SUN COMMERCIAL BANK, LTD.	Names, Locations, and other Information of Investees on which the Company Exercises Significant Influence	For the Three Months Ended March 31, 2003		(Amounts in Thousands of New Taiwan Dollars)	Original Investment Amount Balance as of March 31, 2003 Net Income	(Loss) of the Shares Percentage	Investor Company Investee Company Location Main Businesses and Products Investee March 31, 2003 March 31, 2002 (Thousands) of Ownership Carrying Value	E.Sun Commercial Bank, Ltd.. . E.Sun Finance & Leasing Co. Taipei Leasing and sale of machinery $196,000 $196,000 19,600 98.99 $161,474 $9,804	and equipment	E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 3,950 3,950 1,280 79.00 38,249 6,970	E.Sun Securities Investment Trust Taipei Investing funds under full 135,000 135,000 13,500 45.00 163,549 22,175	Corp. discretionary authorization	from customers	E.Sun Finance & Leasing Co. . . E.Sun Insurance Agent Co., Ltd. Taipei Life insurance agent 1,800 1,800 324 20.00 9,703 6,970	E.Sun Technologies Co., Ltd. Taipei Provides information software 5,000 5,000 500 50.00 3,314 (445)	and computer installation	services	E.Sun Marketing Consulting Co., Ltd. Taipei Agency of service and human 3,000 — 300 100.00 2,628 (213)	resource

F-212

APPENDIX A — THE SECURITIES MARKET OF THE ROC

The information presented in this section has been extracted from publicly available documents which have not been prepared or independently verified by us, the Initial Purchaser or any of our respective affiliates or advisors in connection with this Offering.

The Taiwan Stock Exchange

In 1961, the Securities and Futures Commission established the Taiwan Stock Exchange to provide a marketplace for securities trading. The Taiwan Stock Exchange is a corporation owned by government controlled and private banks and enterprises. The Taiwan Stock Exchange is independent of entities transacting business through it, each of which pays a user’s fee. Generally, all transactions in listed securities by brokers, traders and integrated securities firms must be made through the Taiwan Stock Exchange.

The Taiwan Stock Exchange commenced operations in 1962. During the early 1980s, the Securities and Futures Commission actively encouraged new listings on the Taiwan Stock Exchange and the number of listed companies grew from 119 in 1983 to 639 as of May 31, 2003. As of May 31, 2003, the market capitalization of companies listed on the Taiwan Stock Exchange was approximately NT$9.3 trillion.

Historically, ROC companies have listed only shares and bonds on the Taiwan Stock Exchange. However, the Securities and Futures Commission has encouraged companies to list other types of securities. In 1988, the Securities and Futures Commission permitted the issuance of Taiwan’s first convertible bonds. Since 1989, there have been offerings of domestic convertible bonds and convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in closed end investment funds and Dragon Bonds issued by Asian Development Bank are also listed on the Taiwan Stock Exchange or traded on the GreTai Securities Market. The Securities and Futures Commission also has regulations which permit foreign issuers to list their equity securities directly on the Taiwan Stock Exchange or through the use of depositary receipts. To date, four foreign issuers have listed their equity securities on the Taiwan Stock Exchange through the use of depositary receipts in accordance with these regulations.

The Taiwan Stock Exchange requirements for listing are based on the following company attributes:

. the number and distribution of shareholders, including the diversification of such shareholders;
. length of time in business;
. amount of paid-in capital; and
. profitability.

However, special listing criteria apply to technology companies and key businesses engaging in national economic development.

The ROC GreTai Securities Market

To complement the Taiwan Stock Exchange, the GreTai Securities Market was established in September 1982 on the initiative of the Securities and Futures Commission to encourage the trading of securities of companies who do not qualify for listing on the Taiwan Stock Exchange. As of May 31, 2003, 423 companies had listed equity securities on the GreTai Securities Market and the total market capitalization of those companies was approximately NT$0.89 trillion.

A-1

Taiwan Stock Exchange Index

The Taiwan Stock Exchange Index is calculated on the basis of a wide selection of listed shares weighted according to the number of shares outstanding. This weighted average method is also used for the Standard and Poor’s Index in the United States and the Nikkei Stock Average in Japan. The Taiwan Stock Exchange Index is compiled by dividing the market value by the base day’s total market value for the index shares. The Taiwan Stock Exchange Index is the oldest and most widely quoted market index in Taiwan.

The weighting of shares in the index is fixed as long as the number of shares outstanding remains constant. When the total number of shares outstanding changes, the weight of each stock is adjusted. Stock splits and stock dividends are adjusted automatically. Cash dividends are not included in the calculation.

The following table sets forth, for the periods indicated, information relating to the Taiwan Stock Exchange Index.

Period Ended December 31, 1990 . . . . . . . . . . . . . . . 1991 . . . . . . . . . . . . . . . 1992 . . . . . . . . . . . . . . . 1993 . . . . . . . . . . . . . . . 1994 . . . . . . . . . . . . . . . 1995 . . . . . . . . . . . . . . . 1996 . . . . . . . . . . . . . . . 1997 . . . . . . . . . . . . . . . 1998 . . . . . . . . . . . . . . . 1999 . . . . . . . . . . . . . . . 2000 . . . . . . . . . . . . . . . 2001 . . . . . . . . . . . . . . . 2002 . . . . . . . . . . . . . . . 2003 (until May 31, 2003)	Number of Listed Companies at the Period End 199 221 256 285 313 347 382 404 437 462 531 586 640 639	Stock Trading Values NT$ (in billions) 19,031.3 9,682.7 5,917.1 9,056.7 18,812.1 10,151.5 12,907.6 37,241.2 29,619.0 29,291.5 30,526.6 18,354.9 21,874.0 6,214.9	Index High 12,495.34 6,305.22 5,391.63 6,070.56 7,183.75 7,051.49 6,982.81 10,116.84 9,277.09 8,608.91 10,202.20 6,104.24 6,462.30 5,078.80	Index Low 2,560.47 3,316.26 3,327.67 3,135.56 5,194.63 4,503.37 4,690.22 6,820.35 6,251.38 5,474.79 4,614.63 3,446.26 3,850.04 4,139.50	Index at Period End
					4,530.16 4,600.67 3,377.06 6,070.56 7,124.66 5,173.73 6,933.94 8,187.27 6,418.43 8,448.84 4,739.09 5,551.24 4,452.45 4,555.90

Source: Taiwan Stock Exchange.

As indicated above, the performance of the Taiwan Stock Exchange has in recent years been characterized by extreme price volatility.

Price Limits, Commissions, Transaction Tax and Other Matters

The Taiwan Stock Exchange has placed limits on block trading and on the range of daily price movements. Fluctuations in the price of securities traded on the Taiwan Stock Exchange is restricted to 7% above and below the previous day’s closing price in the case of equity securities, and 5% in the case of debt securities. The price limit for movements below the previous day’s closing price has been modified from time to time by MOF based on market conditions.

Effective July 1, 2000, brokerage commission can be set at any rate not exceeding 0.1425% of the transaction price subject to reporting to the Taiwan Stock Exchange.

A-2

A securities transaction tax of 0.3% of the transaction price is payable by the seller of equity securities. These securities transaction taxes are withheld at the time of the transaction. According to the amended ROC Statute of Upgrading Industries, which became effective on February 1, 2002, no securities transaction tax will be imposed on the transfer of corporate bonds and financial debentures (including the Bonds) until December 31, 2009.

Sales of shares of listed companies on the Taiwan Stock Exchange are generally sold in ‘‘round lots’’ of 1,000 shares. Investors who desire to sell less than 1,000 shares of a listed company occasionally experience delays in making these sales. Transactions that involve 500 trading lots (500,000 shares) or more must be registered and executed in accordance with Taiwan Stock Exchange guidelines.

Regulation and Supervision

The Securities and Futures Commission has extensive regulatory authority over public companies. Public companies are generally required to obtain approval from, or registration with, the Securities and Futures Commission for all securities offerings. The Securities and Futures Commission requires periodic reporting of financial and operating information by all public companies. In addition, the Securities and Futures Commission establishes standards for financial reporting and carries out licensing and supervision of participants in the Taiwan securities market.

The Securities and Futures Commission has responsibility for implementing the ROC Securities and Exchange Law and for overall administration of governmental policies in the Taiwan securities market. It has extensive regulatory authority over the offering, issuance and trading of securities. In addition, the ROC Securities and Exchange Law specifically empowers the Securities and Futures Commission to promulgate necessary rules. The ROC Securities and Exchange Law prohibits market manipulation. For example, it permits an issuer to recover short-term trading profits made through purchases and sales within six months by directors, managerial personnel, supervisors, as well as the spouses, minor children and nominees of these parties, and shareholders who (together with their spouses, minor children and nominees) hold 10% or more of the shares of the issuer. The ROC Securities and Exchange Law prohibits trading by ‘‘insiders’’ based on non-public information that materially affects share price movement. ‘‘Insiders’’ include:

. directors, supervisors, managers, as well as the spouses, minor children and nominees of these parties, and shareholders (together with their spouses, minor children and nominees) who hold 10% or more of the issuing company’s shares;
. any person who has learned material, non public information due to an occupational or controlling relationship with the issuing company; and
. any person who has learned material, non-public information from any of the above.

Sanctions include imprisonment. In addition, damages may be awarded to persons injured by the transaction.

The ROC Securities and Exchange Law also imposes criminal liability on certified public accountants and lawyers who make false certifications in their examination and audit of an issuer’s contracts, reports and other documents related to securities transactions. The Securities and Futures Commission regulations require that financial reports of listed companies be audited by accounting firms consisting of at least three certified public accountants and be signed by at least two certified public accountants.

In addition, the ROC Securities and Exchange Law provides for civil liability for material misstatements or omissions made by issuers and regulation of tender offers.

A-3

The Securities and Futures Commission does not have criminal or civil enforcement powers under the ROC Securities and Exchange Law. Criminal actions may be pursued only by the government prosecutors. Civil actions may only be brought by plaintiffs who assert that they have suffered damages. The Securities and Futures Commission is empowered to curb abuses and violations of laws and regulations only through administrative measures including:

. issuance of warnings;
. temporary suspension of operation;
. imposition of administrative fines; and
. revocation of licenses.

In addition to providing a market for securities trading, the Taiwan Stock Exchange reviews applications by Taiwan issuers to list securities on the Taiwan Stock Exchange. If issuers of listed securities violate laws and regulations or encounter extended or severe negative results of operations, the Taiwan Stock Exchange may, with the approval of the Securities and Futures Commission, delist securities of these issuers.

A-4

APPENDIX B — FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN THE ROC

General

Historically, foreign investments in the securities market of Taiwan were restricted. However, commencing in 1983, the ROC government has from time to time enacted legislation and adopted regulations to make foreign investment in the Taiwan securities market possible. Initially, only overseas investment trust funds of authorized securities investment trust enterprises established in Taiwan were permitted to invest in the Taiwan securities market. Since January 1, 1991, qualified foreign institutional investors have been allowed to make investments in the Taiwan securities market. Since March 1, 1996, overseas Chinese, foreign institutional and foreign individual investors (other than qualified foreign institutional investors), called ‘‘general foreign investors’’, have been permitted to make direct investments in the Taiwan securities market.

Qualified Foreign Institutional Investors

The Executive Yuan has approved guidelines for direct investment in securities listed on the Taiwan Stock Exchange or the GreTai Securities Market in Taiwan by qualified foreign institutional investors. Qualified foreign institutional investors include:

. banks that hold securities assets of at least US$100 million;
. insurance companies that hold securities assets of at least US$100 million;
. fund management institutions that manage securities assets of at least US$100 million;
. offshore fund management companies more than 50% of the capital of which is owned by a Taiwan securities investment trust enterprise, provided that the funds to be invested are not derived from sources in Taiwan or mainland China or owned by these offshore fund management companies;
. general securities firms that have a net worth of at least US$50 million;
. offshore subsidiary securities firms that are more than 50% owned by a Taiwan securities firm, or other securities firms that are wholly owned by these offshore subsidiary securities firms;
. offshore subsidiary securities firms that are wholly owned by a Taiwan securities firm, or other securities firms that are more than 51% owned by these offshore subsidiary securities firms;
. foreign government-owned investment institutions, provided that all of the funds to be invested are owned by the foreign government;
. pension funds;
. mutual funds, unit trusts or investment trusts that have assets of at least US$100 million;
. trust companies that hold securities assets in trust of at least US$100 million;
. academic or charitable institutions that, according to their articles of incorporation, may invest their funds, provided that those investments are managed externally by a third-party manager; and

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. any other professional institutional investors that hold securities or assets of at least US$100 million.

Each qualified foreign institutional investor wishing to invest directly in the Taiwan securities market is required to apply for an investment permit from the Securities and Futures Commission. If the investment amount exceeds US$50 million, an approval from the Central Bank of China is also required. The application to the Securities and Futures Commission and the Central Bank of China requires, among other things:

. the appointment of a local agent and custodian;
. proof of qualification;
. a copy of the custodian contract; and
. an affidavit certifying that the foreign institutional investor will not enter into any quota-sharing arrangement with other foreign investors.

Qualified foreign institutional investors who receive a permit may apply to invest up to US$3 billion and are required to remit the full amount into Taiwan within two years of receiving the investment permit. Capital remitted into Taiwan for investments in the Taiwan securities market may be repatriated at any time. The repatriated capital may be returned to Taiwan at any time within the approved two-year period without Securities and Futures Commission approval, as long as its aggregate inward remittance after netting of its aggregate outward remittance does not exceed the investment amount approved by the Securities and Futures Commission and the Central Bank of China (if applicable). Capital gains and income on investments may also be repatriated at any time.

General Foreign Investors

General foreign investors may generally invest in Taiwan Stock Exchange listed securities or securities traded on the GreTai Securities Market up to a limit of US$50 million if they are institutional investors and US$5 million if they are individual investors, after obtaining the necessary approvals from the Taiwan Stock Exchange.

Foreign Ownership Limitations

Except for certain limits imposed by specific laws and regulations, there are generally no limits on the foreign ownership of the issued share capital in a Taiwan Stock Exchange listed company or a GreTai Securities Market traded company.

Foreign Investment Approval

Other than qualified foreign institutional investors, general foreign investors, and investors in overseas convertible bonds and depositary receipts, foreign investors who wish to make direct investments in the shares of ROC companies may submit a ‘‘foreign investment approval’’ application to the Investment Commission of the ROC Ministry of Economic Affairs or other governmental authority. Foreign investors who obtain this approval will be subject to the ROC Law Governing Investments by Foreigners. The Investment Commission or other governmental authority reviews each foreign investment approval application and approves or disapproves the application after consultation with other governmental agencies. Any non-ROC person possessing a foreign investment approval may repatriate annual net profits, interests and cash dividends attributable to an approved investment. Stock dividends, investment capital and capital gains attributable to the investment may be repatriated with approval of the Investment Commission or other governmental authority.

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In addition to the general restrictions against direct investment by non-ROC persons in Taiwan companies, non-ROC persons are currently prohibited from investing in prohibited industries in Taiwan which are listed under the Negative List, as amended. The prohibition on direct foreign investment in the prohibited industries in the Negative List is absolute and provides no specific exemption from its application. Under the Negative List, some industries are restricted so that non-ROC persons may directly invest only up to a specified level and with the specific approval of the relevant governmental authority. We are not in a restricted industry under the Negative List.

Depositary Receipts

In April 1992, the Securities and Futures Commission began allowing Taiwan companies listed on the Taiwan Stock Exchange to sponsor the issuance and sale of depositary receipts evidencing depositary shares. In December 1994, MOF began allowing companies whose shares are traded on the GreTai Securities Market also to sponsor the issuance and sale of depositary receipts evidencing depositary shares. Approvals for these issuances are still required.

No deposits of shares may be made in a depositary receipt facility and no depositary receipts may be issued against deposits without specific Securities and Futures Commission approval, unless they are:

. stock dividends;
. free distributions of shares;
. due to the exercise by depositary receipt holders of their preemptive rights in the event of capital increases for cash; or
. if permitted in the deposit agreement and the custody agreement, due to the purchase by depositary receipt holders, directly or through the depositary, of shares on the Taiwan Stock Exchange or the GreTai Securities Market for deposit in the depositary receipt facility. In this event, the total number of depositary receipts outstanding after an issuance cannot exceed the aggregate number of:
(1) the number of issued depositary receipts previously approved by the Securities and Futures Commission; and
(2) the number of depositary shares created from stock dividends, free distributions of shares and rights offerings.

These issuances of depositary receipts may only be made to the extent that previously issued depositary receipts have been cancelled and the shares have been sold on the Taiwan Stock Exchange or the GreTai Securities Market.

For depositary shares that represent new shares issued for cash, three months after the issuance of depositary receipts, and for depositary shares that represent previously existing shares, immediately after the issuance of depositary receipts, a holder may request the depositary to cause the underlying shares to be sold in Taiwan or to withdraw the shares and deliver the shares to the holder.

A depositary receipt holder wishing to withdraw shares represented by depositary receipts in order to hold the shares is required to appoint a qualified local agent to, among other things, open a securities account with a local securities brokerage firm, remit funds, exercise shareholders’ rights, and perform such other actions as may be designated by such depositary receipt holder. In addition, the withdrawing holder is also required to appoint a custodian bank to hold the securities and cash proceeds in safekeeping, make confirmations, settle trades and report all relevant information. Without making this appointment, opening these accounts and obtaining prior approval of the Taiwan Stock Exchange, the withdrawing holder would

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be unable to subsequently hold or sell the shares withdrawn from a depositary receipt facility on the Taiwan Stock Exchange or otherwise. The withdrawing holder is also required to appoint a tax guarantor for filing tax returns and making tax payments.

A depositary may, without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of Taiwan, convert NT dollars into other currencies, including US dollars, in respect of the following: (1) the proceeds of the sale of shares represented by depositary receipts; (2) the proceeds of the sale of shares received as stock dividends on the shares and deposited into the depositary receipt facility; or (3) any cash dividends or cash distributions received. In addition, a depositary may convert into NT dollars inward remittances of payments for purchases of underlying shares for deposit in the depositary facility against the creation of depositary shares. A depositary must obtain foreign exchange approval from the Central Bank of China on a payment-by-payment basis for conversion into foreign currencies from the proceeds from the sale of subscription rights for new shares. It is expected that the Central Bank of China will grant this approval as a routine matter. A depositary receipt holder may, after becoming a holder of shares, convert NT dollars into other currencies from proceeds from the sale of any underlying shares withdrawn from the depositary receipt facility. Proceeds from the sale of the underlying shares withdrawn from the depositary receipt facility may be used for reinvestment in securities listed on the Taiwan Stock Exchange or traded on the GreTai Securities Market. These reinvestments will need to comply with the limitations and restrictions which apply to qualified foreign institutional investors or general foreign investors discussed above.

Overseas Corporate Bonds

Since 1989, the Securities and Futures Commission has approved a series of overseas corporate bond issues by ROC companies listed on the Taiwan Stock Exchange and traded on the GreTai Securities Market. Under current ROC laws, these overseas corporate bonds (if their terms so provide), with Securities and Futures Commission approval, may be converted by non-ROC persons, other than mainland Chinese persons, into shares of ROC companies or may be converted into depositary receipts issued under the sponsorship of the same ROC company or the shares of other companies, in the case of exchangeable bonds. Public issuing companies may issue corporate debt in offerings outside Taiwan.

A non-ROC converting bondholder, when exercising the conversion right to convert the bonds into shares of a ROC company, is required to appoint a qualified local agent to:

. open a securities trading account with a local brokerage firm;
. remit funds;
. exercise shareholders’ rights; and
. perform other actions as may be designed by such converting bondholder.

In addition, the converting bondholder is also required to appoint a custodian bank to hold the securities and cash proceeds in safekeeping, make confirmations and settle trades and report all relevant information. Without making this appointment and opening these accounts, the converting bondholder would be unable to subsequently hold or sell the shares converted from the bonds on the Taiwan Stock Exchange or otherwise. The converting bondholder is also required to appoint a tax guarantor for filing tax returns and making tax payments. Without obtaining further approvals from the Central Bank of China or any other governmental authority or agency of Taiwan, the issuing company may convert NT dollars into other currencies for redemption of the bonds or the repayment of the principal or interest on the bonds. In addition, a converting bondholder may through its local agent convert NT dollars into other currencies for net proceeds realized from the sale of shares or any stock dividends on the shares. In addition, a bondholder may also convert through its local agent any cash distributions relating to the shares and, after becoming a shareholder, inward remittances of subscription payments in connection with a rights offering. The issuing

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company is required to obtain the approvals from the Central Bank of China on a payment-by-payment basis for conversion of NT dollars into other currencies for payment of the cash (instead of delivery of shares) upon conversion of the bonds.

In addition, any funds received by the converting bondholder may be used for reinvestment in Taiwan securities listed on the Taiwan Stock Exchange or traded on the GreTai Securities Market. These reinvestments will need to comply with the limitations and restrictions which apply to qualified foreign institutional investors or general foreign investors discussed above.

Exchange Controls

The ROC Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks designated by MOF and the Central Bank of China to handle foreign exchange transactions. Current regulations favor trade-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now be retained and used freely by exporters. All foreign currency needed for the importation of merchandise and services may be purchased freely from the designated foreign exchange banks.

Aside from trade-related foreign exchange transactions, ROC companies and residents may, without foreign exchange approval, remit to and from Taiwan foreign currencies of up to US$50 million, or its equivalent, and US$5 million, or its equivalent, respectively, each calendar year. These limits apply to remittances involving a conversion between NT dollars and US dollars or other foreign currencies. In addition, all private enterprises are required to register all medium and long-term foreign debt with the Central Bank of China.

In addition, a foreign person may, subject to certain requirements but without foreign exchange approval, remit to and from Taiwan foreign currencies of up to US$100,000 per remittance if the required documentation is provided to the ROC authorities. This limit applies only to remittances involving a conversion between NT dollars and US dollars or other foreign currencies.

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REGISTERED OFFICE OF THE COMPANY

E.Sun Financial Holding Company, Ltd. No. 77 Wuchang Street, Section 1 Taipei, Taiwan Republic of China

TRUSTEE

REGISTRAR AND PRINCIPAL PAYING, CONVERSION AND TRANSFER AGENT

DB Trustees (Hong Kong) Limited

55th Floor, Cheung Kong Center 2 Queen’s Road Central Central Hong Kong

Deutsche Bank AG, Hong Kong Branch 55th Floor, Cheung Kong Center 2 Queen’s Road Central Central Hong Kong

INDEPENDENT ACCOUNTANTS

Deloitte & Touche

(T N Soong & Co and Deloitte & Touche (Taiwan) Established Deloitte & Touche Effective June 1, 2003) 12th Floor, 156 Min Sheng East Road, Section 3 Taipei, Taiwan Republic of China

LEGAL ADVISORS

ROC Legal Advisors to the Company

U.S. Legal Advisors to the Initial Purchaser

Lee and Li 7th Floor, No. 201, Tun Hua North Road Taipei, Taiwan Republic of China

Davis Polk & Wardwell

18th Floor, The Hong Kong Club Building 3A Chater Road Central Hong Kong

Legal Advisors to the Trustee

Freshfields Bruckhaus Deringer 11th Floor, Two Exchange Square Central Hong Kong

LUXEMBOURG LISTING AGENT AND PAYING, CONVERSION AND TRANSFER AGENT

Deutsche Bank Luxembourg S.A.

2, Boulevard Konrad Adenauer L-1115 Luxembourg

Printed by ROMAN 8851-1

AI assistant

E.Sun Financial Holding Co., Ltd. — Capital/Financing Update 2014

52215_rns_2014-04-18_1ee38310-0672-42ad-ae17-a20f6f9f3930.pdf

US$178,200,000

E.Sun Financial Holding Company, Ltd.

ZERO COUPON CONVERTIBLE BONDS DUE 2004

ISSUE PRICE 101%

MORGAN STANLEY

TABLE OF CONTENTS

PRESENTATION OF INFORMATION

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

SUMMARY

E.Sun Financial Holding Company, Ltd.

Competitive Strengths

Strong brand recognition

Experienced and professional senior management team

Sound financial structure and asset quality

Distinctive and cohesive culture

Multi-product relationships with consumer banking customers

Strategy

E.Sun Commercial Bank, Ltd.

Competitive Strengths

High-quality consumer banking franchise

Superior asset quality and risk management

A track record of innovations

Sophisticated user of information technology

Strategy

E.Sun Bills Finance Corporation

Competitive Strengths

Strong asset quality through disciplined risk management

Strong brand recognition and corporate culture

Highly skilled workforce

Seasoned management

Strategy

Corporate and Other Information

The Offering

SUMMARY FINANCIAL AND OTHER DATA

Summary Pro Forma Financial and Other Data Relating to E.Sun Financial

Summary Financial and Other Data Relating to E.Sun Financial

Summary Financial and Other Data Relating to E.Sun Bank

Summary Financial and Other Data Relating to E.Sun Bills Finance

RISK FACTORS

Risks Relating to E.Sun Financial

We may not be successful in leveraging the financial holding company structure to promote cross-selling activities, in part due to the regulatory environment.

We may be unsuccessful in completing future acquisitions or in establishing strategic alliances.

We have broad discretion over a large portion of the use of the proceeds of this Offering.

Interest rate volatility could significantly affect our financial condition and results of operations.

All of our businesses are highly regulated and we may be adversely affected by future regulatory changes.

A downgrade in our credit ratings could limit our ability to market products, increase our borrowing costs and/or hurt our relationships with creditors or trading counterparties.

Our risk management policies and procedures, and those of our subsidiaries, may leave us exposed to unidentified or unanticipated risks, which could negatively affect our businesses or result in losses.

Forecasted financial information reported by us and certain of our subsidiaries pursuant to Securities and Futures Commission requirements may not be reliable.

An investor may not acquire beneficial ownership of more than specified percentages of our Shares, or otherwise gain control of us, without obtaining required regulatory approvals.

Risks Relating to E.Sun Bank

The trading positions taken by E.Sun Bank as part of its short-term investments and proprietary trading activities may adversely affect its financial condition and results of operations.

E.Sun Bank is subject to banking fraud, in particular, credit card fraud, from time to time, which may adversely affect its business.

Risks Relating to E.Sun Bills Finance

E.Sun Bills Finance relies largely on short-term repurchase transactions and interbank borrowing to fund its longer-term activities.

Risks Relating to Taiwan

Economic developments in Taiwan have a significant impact on the business of each of our subsidiaries.

Our business may be adversely affected by political risks associated with doing business in Taiwan.

Our principal customers in Taiwan are vulnerable to a variety of natural disasters.

Risks Relating to the Bonds

An active trading market for the Bonds may not develop.

The Bonds are structurally subordinated to the liabilities of our subsidiaries and not protected by restrictive covenants on our or our subsidiaries’ additional indebtedness.

There are limitations on your ability to exercise conversion rights.

We have limited liquidity and may be unable to repurchase our Bonds or our other outstanding debt securities when requested by holders.

Holders of the Bonds will have no rights as shareholders until they acquire the Shares upon conversion of the Bonds.

Risks Relating to the Shares

There has been a limited trading market for the Shares.

USE OF PROCEEDS

EXCHANGE RATES

DIVIDENDS

CAPITALIZATION

MARKET PRICE INFORMATION

SELECTED FINANCIAL AND OTHER DATA

Selected Financial and Other Data

Selected Financial and Other Data

E.Sun Bills Finance

Selected Financial and Other Data

E.Sun Financial Holding Co., Ltd. Capital/Financing Update 2014